10-12B

File No.                

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10

GENERAL FORM FOR REGISTRATION OF SECURITIES

Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934

SOUTHERN CALIFORNIA BANCORP

(Exact name of registrant as specified in its charter)

California	84-3288397
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
12265 El Camino Real, Suite 210 San Diego, California	92130
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (844) 265-7622

Copies to:

David I. Rainer Chief Executive Officer Southern California Bancorp 12265 El Camino Real, Suite 210 San Diego, California 92130 (844) 265-7622 Joshua A. Dean David J. Gershon Sheppard, Mullin, Richter & Hampton LLP 650 Town Center Drive, 10th Floor Costa Mesa, California 92626 (714) 424-8292

Securities to be registered pursuant to Section 12(b) of the Act:

Title of each class to be so registered	Name of each exchange on which each class is to be registered
Common Stock, no par value per share	The Nasdaq Stock Market LLC

Securities to be registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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:

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☒

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. ☒

TABLE OF CONTENTS

		Page
Item 1.	Business	4
Item 1A.	Risk Factors	25
Item 2.	Financial Information	51
Item 3.	Properties	86
Item 4.	Security Ownership of Certain Beneficial Owners and Management	87
Item 5.	Directors and Executive Officers	89
Item 6.	Executive Compensation	102
Item 7.	Certain Relationships and Related Transactions, and Director Independence	112
Item 8.	Legal Proceedings	114
Item 9.	Market Price of and Dividends on the Registrant’s Common Equity and Related Stockholder Matters	114
Item 10.	Recent Sales of Unregistered Securities	115
Item 11.	Description of Registrant’s Securities To Be Registered	116
Item 12.	Indemnification of Directors and Officers	120
Item 13.	Financial Statements and Supplementary Data	121
Item 14.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	181
Item 15.	Financial Statements and Exhibits	181

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Explanatory Note

Southern California Bancorp is filing this General Form for Registration of Securities on Form 10 to register its common stock, no par value per share, pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Once this registration statement is deemed effective, Southern California Bancorp will be required to file annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K, and to comply with all other obligations of the Exchange Act applicable to issuers filing registration statements pursuant to Section 12(b) of the Exchange Act.

We are an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and as defined in Section 2(a) of the Securities Act of 1933, as amended (the “Securities Act”). We are also a “smaller reporting company” as defined in Exchange Act Rule 12b-2. As such, we may elect to comply with certain reduced public company reporting requirements in future reports that we file with the Securities and Exchange Commission (the “SEC”).

Unless the context indicates otherwise, all references in this registration statement to “we,” “us,” “our,” or “the Company” refer to Southern California Bancorp and Bank of Southern California, N.A. collectively and on a consolidated basis, except that in the discussion of our capital stock and related matters, these terms refer solely to Southern California Bancorp. All references to the “Bank” refer to Bank of Southern California, N.A. only.

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained in this registration 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 our business, financial condition and results of operations from expected developments or events, our business, growth and strategies. 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 registration statement 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 can be found in the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this registration statement and elsewhere in this registration statement. These factors include, but are not limited to, the following:

● recent 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;

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● 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;

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● 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;

● 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” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under Item 2. “Financial Information” of 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 registration statement. 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.

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Item 1. Business

General Overview

Southern California Bancorp is a California corporation incorporated on October 2, 2019 and is headquartered in Del Mar, California. On May 15, 2020, we completed a reorganization whereby Bank of Southern California, N.A. became a wholly owned subsidiary of the Company. We are regulated as a bank holding company by the Board of Governors of the Federal Reserve System (“Federal Reserve”). The Bank operates under a national charter and is regulated by the Office of Comptroller of the Currency (“OCC”).

The Bank began business operations in December 2001 under the name Ramona National Bank in Ramona, California, a small community 45 miles inland from San Diego, to meet the financial needs of the local community. In November 2006, the Bank’s name was changed to First Business Bank, N.A. and its strategy was redirected towards the business and professional community in San Diego County. In May 2010, the Bank’s name was rebranded to Bank of Southern California, N.A., to better reflect our regional aspirations and goals. Since its founding, our franchise has experienced significant growth through our dedication to serving the communities in which we operate. As of December 31, 2022, our consolidated assets have grown to $2.28 billion and our branch footprint has been extended along the California coast from San Diego County to Ventura County and east to the Inland Empire.

Community support is integral to who we are, how we operate, and our success in each community we bank. We have deep roots in the communities in which we do business in, through our donations, our regional Advisory Boards, and our employee involvement in local nonprofits. We support our communities through philanthropic giving to nonprofit organizations with which we generally have a direct banking (including investments, deposits, and loans) and/or Community Reinvestment Act (“CRA”) service or referral relationship. Our Advisory Boards consist of leaders in the local business communities that offer insights into business conditions in the regional area and introduce us to prospective clients. Our employees are encouraged to volunteer their time to serve their communities in various capacities, including serving on the board of directors of non-profit organizations throughout Southern California.

As a relationship-focused community bank, we offer a range of financial products and services to individuals, professionals, and small- to medium-sized businesses, which we define as businesses with annual revenues of less than $100 million, through our 13 branch offices serving Orange, Los Angeles, Riverside, San Diego and Ventura counties. We have kept a steady focus on our solution-driven, relationship-based approach to banking, providing clients accessibility to decision makers and enhancing value through strong client partnerships. Our lending products consist primarily of construction and land development loans, commercial real estate (“CRE”) loans, commercial and industrial (“C&I”) loans, U.S. SBA loans, and consumer loans. Our deposit products consist primarily of demand, money market, and certificates of deposit accounts and we offer treasury management services including online banking, cash vault, sweep accounts, and lockbox services.

As of December 31, 2022, we had total consolidated assets of $2.28 billion, total loans, including loans held for sale, of $1.91 billion, total deposits of $1.93 billion and total shareholders’ equity of $260.4 million.

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Nasdaq Listing Application

Concurrently with filing this Registration Statement with the SEC, we will apply for approval to list the shares of our common stock on the Nasdaq Capital Market under our current symbol “BCAL.” Our common stock is currently quoted on the OTC Pink Open Market under the trading symbol “BCAL.”

Our Strategy

In late 2020, with the appointment of David I. Rainer as Executive Chairman of the Board of Directors of the Company (the “Board”), and the addition of a group of seasoned Southern California banking executives with demonstrated past performance, we began an aggressive plan to tailor our footprint to align with our expanded commercial banking strategy and position ourselves as the commercial bank of choice for small- to medium-sized businesses in Southern California. This resulted in the expansion of the franchise through the opening of regional banking offices and branches in key Southern California markets, with a focus on relationship-based commercial banking, including locations in West Los Angeles, the San Fernando Valley and Ventura.

The expansion also included our acquisition of Bank of Santa Clarita (“BSCA”), located in an attractive banking community north of Los Angeles, with a business model very complimentary to ours. The acquisition of BSCA was announced on April 27, 2021, and completed on October 1, 2021. Additionally, in a move designed to align our branch network to support our evolving commercial banking model, we announced the sale of our Orange, Redlands, and Santa Fe Springs retail branches on April 19, 2021, which was completed on September 24, 2021.

In late 2021, we hired a highly skilled lending production and related support team, a successful SBA lending team, and key strategic team members in the Finance and Accounting groups. In the future, with the expanded skilled infrastructure, our efforts will focus on organic growth while remaining opportunistic on strategic acquisitions that align with our business model.

Our management team is strongly aligned to execute the Company’s strategic vision and believes there is an extraordinary opportunity in Southern California for a commercial bank to provide excellent service and banking products to small and medium-sized businesses, as well as to commercial real estate owners and investors. Management’s confidence in this opportunity is based on the fact that the region has the highest concentration of small businesses in the nation, while the region has also experienced a 61% decrease in banks headquartered in the area over the last 22 years, according to regulatory data available as of December 31, 2022, from the Federal Deposit Insurance Corporation (“FDIC”), the OCC, and the Federal Reserve Bank. Our experience has shown us that small business owners will gravitate to a bank that offers them personalized, high-touch customer service that is generally unavailable to them from bigger banks. Our strategy is to grow the franchise in order to serve those customers, to increase value for our shareholders, to provide opportunities for employee development, and to serve the broader community.

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In serving our community, we participated in the U.S. Small Business Administration’s Paycheck Protection Program (“PPP”), which helped local businesses keep their work forces employed during the pandemic. We funded nearly 5,100 PPP loans for approximately $800 million and their associated new relationships considerably increased our customer base, as we were successful in converting many of these PPP transactions into full banking relationships.

We will continue to target small- to medium-sized businesses and their owners in the primary markets we serve.

Our Market Area

Headquartered in Del Mar, California, we currently operate 13 branch locations throughout Southern California, and have administrative offices in Cerritos, Downtown Los Angeles, Irvine, and San Diego. We define our target market as the counties of Orange, Los Angeles, Riverside, San Diego and Ventura.

In its December 2021 Quarterly Report, the UCLA Anderson School of Management estimated Southern California to be the 13^th largest economy in the world. The State of California Economic Development Department reports there are a total of 951,000 small to medium-sized businesses in our target market. We believe that the lack of community banks in Southern California offers us an extraordinary market opportunity.

Our business clientele is generally comprised of small to medium-sized businesses engaged in any of the following Southern California business sectors:

● Manufacturing

● Wholesale Distribution

● Professional Services

● Commercial Real Estate

● Healthcare

● Hospitality

● Non-Profit Organizations

Competition

The banking business is highly competitive, and we face competition in our market areas from many other local, regional, and national financial institutions. Competition among financial institutions is based on interest rates offered on deposit accounts, interest rates charged on loans, other credit and service products, charges relating to products and services, the quality and scope of the services rendered, and, in the case of loans to commercial borrowers, relative lending limits and timely decisions and responses to customer needs. We compete with commercial banks, credit unions, mortgage banking firms, finance companies, non-bank lenders, including “fintech” lenders, securities brokerage firms, insurance companies, money market funds and other mutual funds, as well as regional and national financial institutions that operate offices in our market areas and elsewhere. The competing major commercial banks have greater resources that may provide them a competitive advantage by enabling them to maintain numerous branch offices, mount extensive advertising campaigns and invest in new technologies. The increasingly competitive environment is the result of changes in regulation, changes in technology and product delivery systems, additional non-bank financial service providers, and the accelerating pace of consolidation among financial services providers.

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The financial services industry could become even more competitive as a result of legislative, regulatory and technological changes and continued consolidation. Banks, securities firms and insurance companies can merge under the umbrella of a financial holding company, which can offer most types of financial services, including banking, securities underwriting, insurance (both agency and underwriting) and merchant banking. Also, technology has lowered barriers to entry and made it possible for non-banks to offer products and services traditionally provided by banks, such as automatic transfer and automatic payment systems.

Some of our non-banking competitors, such as fintech lenders, have fewer regulatory constraints and may have lower cost structures. In addition, some of our competitors have assets, capital and lending limits greater than ours, have greater access to capital markets and offer a broader range of products and services than we do. These institutions may have the ability to finance wide-ranging advertising campaigns and may also be able to offer lower rates on loans and higher rates on deposits than we can offer. Some of these institutions offer services, such as international banking, which we do not offer, except for a limited suite of services such as international wires and currency exchange through a third party.

We compete with these institutions by focusing on our position as an independent, commercial business bank with strong knowledge of our markets through our local advisory boards. We support local community activities, and have personal relationships with our customers established by our officers, directors, and employees. We pride ourselves in providing specialized services tailored to meet the needs of the customers we serve. We actively cultivate relationships with our customers that extend beyond a single loan to a full suite of products and services that serve the needs of our commercial customers. Our goal is to develop long-standing connections with our customers and the communities that we serve. While our position varies by market, we believe that we can compete effectively as a result of local market knowledge, local decision making, and awareness of customer needs.

Our Business

General

We offer a full array of competitively priced commercial loan and deposit products, as well as other services delivered directly or through strategic alliances with other service providers. The products offered are aimed at both business and individual customers in our target market.

Credit Administration and Loan Review

The safety of a bank’s capital is dependent on the quality of its loan portfolio. We believe high quality loans are typically associated with a bank that has a simple but concise loan policy. Accordingly, our loan policies set out guidelines for the underwriting and extension of credit that are specific to us. These policies enable us to underwrite loans in a focused, efficient manner that incorporates our credit culture and strategic objectives.

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Lending is a dynamic process and is dependent on the assessment of the adequacy and reliability of a borrower’s cash flow, collateral, integrity and willingness to repay the loan according to normal and customary terms. We understand the nature of gathering information, assessing its value and then making a decision based on the testing of fact. Our policies are designed to help ensure that all loan applicants are credit-checked thoroughly and the decision to provide a credit extension is made only after all pertinent information is developed and analyzed.

Basic to developing mutually profitable relationships is flexibility and adaptability to our clients requirements, while adhering to sound lending principles and objectives. Our strategy for evaluating credit worthiness is to follow conservative loan policies and consistent underwriting practices.

The following are key objectives of our loan philosophy:

a. Sound and constructive extension of credit based on the adequacy and reliability of cash flow.

b. Structuring loan terms around the purpose of the loan and the corresponding primary repayment source.

c. Assessing management experience, track record and quality of the management team.

d. Relationship-based loan extensions that include a deposit relationship, and not solely transaction based. Loans are generally extended to individuals and businesses that have high integrity and benefit both us and the community.

e. We do not discriminate on the basis of color, race, national origin, religion, sexual orientation, marital status, disability, age or gender. We seek to provide credit to all borrowers who qualify, applying both the letter and spirit of all regulations relating to lending and credit.

Lending Limits

As a national bank, our ability to make aggregate loans-to-one-borrowing relationship is generally limited to 15% of unimpaired capital and surplus. If the loan is secured by readily marketable collateral, the limit is raised by 10%, bringing the total to 25% of unimpaired capital and surplus. At December 31, 2022, our limit on aggregate loans-to-one-borrower was $39.1 million for loans that are not fully secured. Our legal lending limit will increase or decrease as our level of capital increases or decreases. We may sell participations in our loans to other financial institutions to manage the risk involved in large dollar loans or to manage portfolio concentrations and to meet the lending needs of our customers requiring extensions of credit in excess of regulatory limits.

Lending Products

We offer a diversified mix of business loans primarily encompassing the following loan products: (i) construction and land development loans; (ii) real estate loans; (iii) C&I loans; (iv) SBA loans, guaranteed in part by the U.S. Government; and (v) consumer loans. We occasionally offer lines of credit, secured by a lien on real estate owned by our clients, which may include the primary personal residence of our clients; such lines of credit generally are requested to accommodate the business and investment needs of that customer. We encourage relationship banking, obtaining a substantial portion of each borrower’s banking business, including deposit accounts. We will engage in transactional-based lending only for borrowers with a history of successful track records who typically have worked with our employees here or at other banks and have a good record of repayment.

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The following table presents the composition of our loans held for investment portfolio at December 31, 2022.

(dollars in thousands)	Non SBA Loans		% of Total			SBA Loans			% of Total			Total		% of Total
Construction and land development	$	237,061		12.5	%	$	2,006			0.1	%	$	239,067		12.6	%
Real estate - other:
1-4 family residential		144,322		7.6	%		—			—	%		144,322		7.6	%
Multifamily residential		218,606		11.5	%		—			—	%		218,606		11.5	%
Commercial real estate and other		860,218		45.3	%		98,458			5.2	%		958,676		50.5	%
Commercial and industrial		312,097		16.5	%		19,547	(1)		1.0	%		331,644		17.5	%
Consumer		5,458		0.3	%		—			—	%		5,458		0.3	%
Loans held for investment(2)	$	1,777,762		93.7	%	$	120,011			6.3	%	$	1,897,773		100.0	%

(1) SBA loans include PPP loans with total outstanding principal of $3.6 million and net unearned fees of $76 thousand at December 31, 2022.

(2) Loans held for investment includes net unearned fees of $3.3 million and net unearned discount of $1.8 million at December 31, 2022.

Construction and Land Development Loans

We offer adjustable rate residential and commercial construction loan financing to builders, developers and consumers. Product type may be residential housing or commercial structures. The term of construction and development loans generally is limited to 12 to 36 months. Most loans require payment in full upon the sale or refinance of the property, unless the project is user-owned which would then convert to a conventional term loan. Management believes that construction and development loans generally carry a higher degree of risk than long-term financing of stabilized, rented, and owner-occupied properties because repayment depends on the ultimate completion of the project and usually on the subsequent sale or refinance of the property. Specific material risks may include:

● Unforeseen delays in the building or the project

● Cost overruns or inadequate contingency reserves

● Poor management of construction process

● Inferior or improper construction techniques

● Changes in the economic environment during the construction period

● A downturn in the real estate market

● Rising interest rates which may impact the sale of the property and its price

● Failure to sell or stabilize completed projects in a timely manner

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We attempt to reduce risks associated with construction and land development loans typically by obtaining personal guarantees and by keeping the maximum loan-to-value ratio at or below 75%, depending on the project type. Many of our loans will include interest reserves built into the loan commitment. Generally, for owner-occupied commercial construction loans, we will require periodic cash payments for interest from the borrower’s cash flow. As of December 31, 2022, we had $237.1 million of construction and development loans, or 12.5% of our loans held-for-investment portfolio, excluding SBA loans. There were no non-performing construction and land development loans at December 31, 2022, excluding non-performing SBA loans at December 31, 2022.

Real Estate Loans

A significant component of our loan portfolio is real estate loans. These loans are secured by single family residential properties (one to four units), multifamily residential properties (five or more units), owner-occupied CRE, and non-owner-occupied CRE. Real estate loans are subject to the same general risks as other loans and may also be impacted by changing demographics, collateral maintenance, and product supply and demand. Rising interest rates, as well as other factors arising after a loan has been made, could negatively affect not only property values but also a borrower’s cash flow, creditworthiness, and ability to repay the loan. Increasing interest rates can impact real estate values as rising rates generally cause a similar movement in capitalization rates which can cause real estate collateral values to decline. We usually obtain a security interest in real estate, in addition to any other available collateral, in order to increase the likelihood of the ultimate repayment of the loan. We do not underwrite closed-end term consumer loans secured by a borrower’s residence. Junior liens may be considered in connection with a consumer home equity line of credit (“HELOC”), or as additional collateral support for SBA and other business loans.

As of December 31, 2022, we had $1.22 billion of real estate loans, or 64.5% of our loans held for investment portfolio, excluding SBA loans. These included $612.5 million of loans secured by non-owner occupied CRE, $243.6 million of loans secured by owner-occupied CRE, $218.6 million of loans secured by multifamily residential properties, and $144.3 million of loans secured by single family residential properties, of which $24.0 million were HELOCs. There were $39 thousand non-performing real estate loans, excluding non-performing SBA loans, at December 31, 2022.

Our CRE loans generally have terms of 10 years or less, although payments may be structured on a longer amortization basis. Each borrower is evaluated on an individual basis with an emphasis on determining their business risks and credit profile. We work to reduce credit risk in the CRE portfolio by emphasizing loans on owner-occupied industrial, office, and multi-family buildings, where the loan-to-value ratio, established by independent appraisals, does not exceed 60-75% of cost or appraised value. Generally, we also require that a borrower’s cash flow exceed 125% of monthly debt service obligations. In order to provide secondary sources of repayment and liquidity to support a loan request, we typically review all of the personal financial statements of the principal owners and require their personal guarantees. Commercial real estate loans are generally viewed as having more risk of default than residential real estate loans. They are also typically larger than most residential real estate loans and consumer loans and depend on cash flows from the owner’s business or the property to service the debt. Because our loan portfolio contains a number of CRE loans with relatively large balances, the deterioration of one or a few of these loans could cause a significant increase in our levels of nonperforming assets.

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Commercial and Industrial Loans

Our C&I loans are generally made to businesses located in the Southern California region and surrounding communities. These loans are made to finance operations, to provide working capital, or for specific purposes such as to finance the purchase of assets or equipment or to finance accounts receivable and inventory. Our C&I loans may be secured (other than by real estate) or unsecured. They may take the form of single payment, installment, or lines of credit. These are generally based on the financial strength and integrity of the borrower and guarantor(s) and generally (with some exceptions) are collateralized by short-term assets such as accounts receivable, inventory, equipment, or a borrower’s other business assets. Commercial term loans are typically made to finance the acquisition of fixed assets, refinance short-term debt originally used to purchase fixed assets or, in rare cases, to finance the purchase of businesses. As of December 31, 2022, we had $312.1 million of C&I loans, or 16.5% of our loans held for investment portfolio, excluding SBA loans. There were no non-performing C&I loans, excluding non-performing SBA loans, at December 31, 2022.

Small Business Administration Loans

Small Business Administration Loans

We expanded our SBA division in late 2021. We are designated as a Preferred Lender under the SBA Preferred Lender Program. As an SBA Preferred Lender, we are able to offer SBA loans to our customers without the potentially lengthy SBA approval process for application, servicing or liquidation actions required for lenders that are not SBA Preferred Lenders. We offer both an SBA 7(a) loan program, generally at variable rates, and an SBA 504 loan program, generally with an initial fixed rate for a term of between five and seven years. These SBA loans are reported in construction and land loans, real estate loans, and C&I loans.

We originate SBA 7(a) loans with the intention of selling the guaranteed portion in the secondary market as soon as the loan is fully funded and the guaranteed portion may be sold. The SBA 7(a) loan program provides up to a 75% guaranty for loans greater than $150,000, an 85% guaranty for loans $150,000 or less and, in certain circumstances, up to a 90% guaranty. The maximum SBA 7(a) loan amount is $5 million and typically these loans are non-real estate secured loans and mature in 10 years or less. The guaranty is conditional and covers a portion of the risk of payment default by the borrower, but not the risk of improper underwriting and servicing by the lender. Consideration for the sale includes the cash received as well as the related servicing asset. We receive servicing fees ranging from 0.25% to 1.00% for the services provided. The portions of the SBA 7(a) loans not sold but collateralized by real estate are monitored by collateral type and are included in our loans held for investment portfolio.

The SBA 504 loan program is not guaranteed by the SBA, as there is a junior lien loan that is funded separately by the SBA. The SBA 504 loan program consists of real estate backed commercial mortgages where we have the first mortgage and the SBA has the second mortgage on the property. Generally, we have a 50% loan-to-value ratio on SBA 504 loan program loans at the origination date. Our SBA 504 loans are typically made to manufacturing companies, wholesalers and retailers, hotels/motels, and other service businesses for the purpose of purchasing real estate, refinancing real estate, and property improvements or business equipment needs. SBA 504 loans can have maturities of up to 25 years. In addition to real estate, collateral may also include inventory, accounts receivable and equipment. SBA loans are personally guaranteed.

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As of December 31, 2022, we had $116.5 million of SBA loans, excluding PPP loans, or 6.1% of total loans held for investment. There were $2 thousand non-performing SBA loans, excluding PPP loans at December 31, 2022.

SBA Paycheck Protection Program Loans

We participated in the PPP, which helped local businesses keep their work forces employed during the pandemic. We funded nearly 5,100 SBA PPP loans for approximately $800 million and their associated new relationships considerably increased our customer base, as we were successful in converting many of these SBA PPP transactions to full banking relationships. These loans are fully guaranteed by the SBA and carry a fixed rate of 1.00%. Borrowers who used the funds from their PPP loans to maintain payroll and for certain fixed expenses such as rent, occupancy, etc. are eligible to have 100% of their loans forgiven by the SBA. These SBA PPP loans are reported in C&I loans. As of December 31, 2022, we had $3.5 million SBA PPP loans, or 0.2% of total loans held for investment. There were no non-performing SBA PPP loans, at December 31, 2022.

Consumer Loans

We occasionally make loans to individuals for personal and household purposes, including secured and unsecured installment loans and revolving lines of credit. Consumer loans are underwritten based on the borrower’s income, current debt level, past credit history, and the availability and value of collateral. Consumer rates are both fixed and variable, with negotiable terms. Our installment loans typically amortize over periods up to 5 years. Although we typically require monthly payments of interest and a portion of the principal on our loan products, we will offer consumer loans with a single maturity date when a specific source of repayment is available. Consumer loans are generally considered to have greater risk than first or second mortgages on real estate because they may be unsecured, or, if they are secured, the value of the collateral may be difficult to assess and more likely to decrease in value than real estate. As of December 31, 2022, we had $5.5 million consumer loans, or 0.3% of total loans held for investment. There were no non-performing consumer loans at December 31, 2022.

Deposit Products

We offer comprehensive treasury services tools that are designed to improve our clients’ cash flow, minimize unnecessary fees, and maximize their earnings. These services are offered at our branch locations and include analyzed business checking accounts, remote deposit capture, ACH origination, cash vault services, courier service, and lockbox processing. Transaction accounts and time deposits are tailored to our customers and are relationship-based. Our customers primarily include businesses, business owners and their trusts, limited liability corporations, business partnerships, associations, organizations and governmental authorities. Our deposits are insured by the FDIC up to statutory limits of $250,000 per depositor. As of December 31, 2022, we had total deposits of $1.93 billion, including noninterest-bearing demand deposits of $923.9 million, or 47.8% of total deposits. Our total deposit cost was 0.23% for the year ended December 31, 2022.

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We also participate in the Insured Cash Sweep (“ICS Product”) deposit program, which allows us to offer our large deposit customers expanded FDIC insurance. Once a customer has established a transaction account under the ICS Product with us, we can then automatically allocate those customer deposits that exceed the FDIC insurance limits into smaller accounts and place those deposits at other participating FDIC insured institutions, effectively providing expanded FDIC insurance coverage. Through this ICS deposit program, we have the ability to place deposits through networks for which we receive matching deposits (“reciprocal” deposits). These reciprocal ICS deposits are not considered brokered deposits and are recorded as interest-bearing non-maturity deposits in the consolidated balance sheets.

Total interest-bearing non-maturity deposits at December 31, 2022 were $878.2 million, or 45.5% of total deposits. We participated in the Time Deposit Program administered by the California State Treasurer in 2022. As of December 31, 2022, time deposits from the State of California totaled $5.0 million. In connection with our participation in this program, we purchased $5.0 million in letters of credit issued by FHLB as collateral at December 31, 2022.

Well-capitalized institutions are not subject to limitations on brokered deposits. As of December 31, 2022, we had $20.7 million brokered time deposits, or 1.1% of total deposits. These brokered time deposits were acquired from BSCA on October 1, 2021.

Debt Securities

Our debt securities portfolio is classified as either “held-to-maturity” or “available-for-sale.” Debt securities are classified as held-to-maturity when we have the positive intent and ability to hold the securities to maturity. Debt securities classified as “available-for-sale” may be sold prior to maturity due to changes in interest rates, prepayment risks, availability of alternative investments, or to meet our liquidity needs.

The primary objective of our investing activities is to provide for the safety of the principal invested. Our secondary considerations include the maximization of earnings, liquidity and to help decrease our overall exposure to changes in interest rates. We generally invest in bonds with lower credit risk, primarily those secured by government agencies or highly-rated municipalities, to assist in the diversification of credit risk within our asset base.

Currently, we primarily invest in agency securities, municipal bonds, mortgage-backed securities, collateralized mortgage obligations securities, SBA loan pools securities, and U.S. Treasury securities.

Implications of Being an Emerging Growth Company

We qualify as an emerging growth company as that term is used in the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

● a requirement to have only two years of audited financial statements and only two years of related management’s discussion and analysis of financial condition and results of operations;

● exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002;

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● reduced disclosure about the emerging growth company’s executive compensation arrangements; and

● no non-binding advisory votes on executive compensation or golden parachute arrangements.

We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period. We have elected to take advantage of the reduced disclosure requirements described above regarding our executive compensation arrangements for purposes of this registration statement. In addition, we expect to take advantage of certain of the reduced reporting and other requirements of the JOBS Act with respect to the periodic reports we will file with the SEC and proxy statements that we use to solicit proxies from our shareholders.

In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards, however, we have irrevocably “opted out” of this provision, and we will comply with new or revised accounting standards to the same extent that compliance is required for nonemerging growth public companies. See our discussion in “Item 1A - Risk Factors”.

Employees

As of December 31, 2022, we had 200 full-time equivalent employees. None of our employees are represented by any collective bargaining unit or is party to a collective bargaining agreement. We consider our relationship with our employees to be good and have not experienced interruptions of operations due to labor disagreements.

We provide competitive compensation and benefits packages to our employees. In addition to salaries, we provide annual bonus opportunities to all employees, and we offer a 401(k) plan with an employer matching contribution, healthcare and insurance benefits, as well as flexible and health care savings accounts.

We have implemented a Diversity, Equity, and Inclusion (DEI) Policy. A company’s commitment to diversity and inclusion is demonstrated by its leadership, its diversity policies and practices. We foster a corporate culture that embraces DEI by (i) including DEI considerations as an important part of our strategic plan for recruiting, hiring, retention, and promotion; (ii) providing periodic progress reports to the Board; (iii) conducting regular training and education opportunities on equal employment opportunity and DEI; and (iv) taking proactive steps to promote a diverse pool of candidates. We do not and will not tolerate discrimination in any form with respect to any aspect of employment.

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General Corporate Information

Our principal executive offices are located at 12265 El Camino Real, Suite 210, San Diego, California 92130 and our telephone number at that address is (844) 265-7622. Additional information can be found on our website: www.banksocal.com. Information on our website or any other website is not incorporated by reference herein and does not constitute a part of this registration statement.

Public Information

After this registration statement becomes effective, we will file annual, quarterly and current reports, proxy statements and other documents with the SEC. Our SEC filings will be available to the public on the SEC’s Internet site at http://www.sec.gov. You may also obtain these documents, free of charge, from the investor relations section of our website at http://www.banksocal.com.

Supervision and Regulation

We are extensively regulated under federal and state law. As a bank holding company, the Company is subject to the Bank Holding Company Act of 1956, as amended (the “Bank Holding Company Act”), and its primary regulator is the Federal Reserve. As a national bank, the Bank is overseen by the OCC, which has responsibility to ensure safety and soundness of the national banking system; ensure fair and equal access to financial services; enforce anti-money and anti-terrorism finance laws; and for banks under $10 billion in assets to enforce consumer protection regulations. In addition, as an insured depository institution, we are subject to regulation by the FDIC.

Federal and state laws and regulations generally applicable to financial institutions regulate our scope of business, investments, reserves against deposits, capital levels, the nature and amount of collateral for loans, the establishment of branches, mergers, acquisitions, dividends, and other matters. This regulation and supervision by the federal banking agencies is intended primarily for the protection of clients and depositors, the stability of the U.S. financial system, and the Deposit Insurance Fund administered by the FDIC and not for the benefit of stockholders or debt holders.

The following discussion explains the major legislation and regulation affecting the banking industry and how that legislation and regulation affects our business. The following summary is qualified by reference to the statutory and regulatory provisions discussed. Changes in applicable laws or regulations may have a material effect on our business and prospects, and legislative changes and the policies of various regulatory authorities may significantly affect our operations. We cannot predict the effect that fiscal or monetary policies, or new federal or state legislation or regulation may have on our future business and earnings.

Capital Adequacy

Bank holding companies and depository institutions are generally required to maintain minimum levels of capital and are subject to consolidated risk-based and leverage capital rules. Under the Federal Reserve’s Small Bank Holding Company Policy Statement, qualifying bank holding companies with total consolidated assets of less than $3 billion, such as the Company, are exempt from these consolidated capital rules. Therefore, while these capital requirements apply to the Bank, they do not currently apply to the Company on a consolidated basis.

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The federal banking agencies have adopted minimum risk-based capital requirements (Tier 1 capital, common equity Tier 1 capital (“CET1”) and total capital) and leverage capital requirements, as well as guidelines that define components of the calculation of capital and the level of risk associated with various types of assets. Financial institutions are expected to maintain a level of capital commensurate with the risk profile assigned to their assets in accordance with the guidelines.

In addition to the minimum risk-based capital and leverage ratios, depository institutions must maintain a “capital conservation buffer” consisting of CET1 in an amount equal to 2.5% of risk-weighted assets in order to avoid restrictions on their ability to make capital distributions and to pay certain discretionary bonus payments to executive officers. In order to avoid those restrictions, the capital conservation buffer effectively increases the minimum CET1 capital, Tier 1 capital, and total capital ratios for U.S. banking organizations to 7.0%, 8.5%, and 10.5%, respectively. A depository institution with capital levels falling within the buffer may be required to limit dividends, share repurchases or redemptions (unless replaced within the same calendar quarter by capital instruments of equal or higher quality), and discretionary bonus payments.

The following table presents the minimum ratios of capital required to be categorized as well-capitalized and adequately capitalized applicable to the Bank:

	Minimum Capital Required
	To be			Capital			To be Well-
	Adequately			Conservation			Capitalized under
	Capitalized			Buffer Phase-In			PCA Provisions
As of December 31, 2022:
Total Capital (to Risk-Weighted Assets)		8.0	%		10.5	%		10.0	%
Tier 1 Capital (to Risk-Weighted Assets)		6.0	%		8.5	%		8.0	%
CET1 Capital (to Risk-Weighted Assets)		4.5	%		7.0	%		6.5	%
Tier 1 Capital (to Average Assets)		4.0	%		4.0	%		5.0	%

The capital rules require that goodwill and other intangible assets (other than mortgage servicing assets), net of associated deferred tax liabilities (“DTLs”), be deducted from CET1 capital. Additionally, deferred tax assets (“DTAs”) that arise from net operating loss and tax credit carryforwards, net of associated DTLs and valuation allowances, are fully deducted from CET1 capital. However, DTAs arising from temporary differences that could not be realized through net operating loss carrybacks, along with mortgage servicing assets and “significant” (defined as greater than 10% of the issued and outstanding common stock of the unconsolidated financial institution) investments in the common stock of unconsolidated “financial institutions” are partially included in CET1 capital, subject to deductions defined in the rules.

Banking regulators also consider interest rate risk (arising when the interest rate sensitivity of a bank’s assets does not match the sensitivity of its liabilities or its off-balance-sheet position) in the evaluation of the bank’s capital adequacy. Banks with excessive interest rate risk exposure are required to hold additional amounts of capital against their exposure to losses resulting from that risk. Through the risk-weighting of assets, the regulators also require banks to incorporate market risk components into their risk-based capital. Under these market risk requirements, capital is allocated to support the amount of market risk related to a bank’s lending and trading activities.

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Enforcement Powers

If a federal banking agency determines that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, or other aspects of a bank holding company, a bank or their operations are unsatisfactory or that it or its management was in violation of any law or regulation, the agency has the authority to take a number of different remedial actions as it deems appropriate under the circumstances. These actions include the power to enjoin any “unsafe or unsound” banking practices; to require that affirmative action be taken to correct any conditions resulting from any violation of law or unsafe or unsound practice; to issue an administrative order that can be judicially enforced; to require that it increase its capital; to restrict its growth; to assess civil monetary penalties against it or its officers or directors; to remove officers and directors of the bank; and if the federal banking agency concludes that such conditions at the bank holding company or the bank cannot be corrected or there is an imminent risk of loss to depositors, to terminate a bank’s deposit insurance, which would then require it to cease its banking operations.

Regulation of the Company

As a bank holding company, we are subject to supervision, regulation and examination by the Federal Reserve under the Bank Holding Company Act and the regulations of the Federal Reserve. We are required to file quarterly reports with the Federal Reserve and to provide additional information as the Federal Reserve may require. The Federal Reserve regularly examines us, may examine any of our subsidiaries and charges us for the cost of the examinations. The Federal Reserve also has extensive enforcement authority over bank holding companies, as discussed above, and may require that a holding company divest subsidiaries (including its bank subsidiaries).

Acquisitions of Banks. The Bank Holding Company Act requires every bank holding company to obtain the prior approval of the Federal Reserve before:

● acquiring direct or indirect ownership or control of any voting shares of any bank if, after the acquisition, the bank holding company will directly or indirectly own or control more than 5% of the bank’s voting shares;

● acquiring all or substantially all of the assets of any bank; or

● merging or consolidating with any other bank holding company.

Additionally, the Bank Holding Company Act provides that the Federal Reserve may not approve any of these transactions if it would result in or tend to create a monopoly, substantially lessen competition, or otherwise function as a restraint of trade, unless the anti-competitive effects of the proposed transaction are clearly outweighed by the public interest in meeting the convenience and needs of the communities to be served. The Federal Reserve is also required to consider the financial and managerial resources and future prospects of the bank holding companies and banks involved in the transaction. The Federal Reserve’s consideration of financial resources generally focuses on capital adequacy, which is discussed above.

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Change in Bank Control. Subject to various exceptions, the Bank Holding Company Act and the Change in Bank Control Act of 1978, as amended, together with related regulations, require Federal Reserve approval prior to any person or company acquiring “control” of a bank holding company. Control exists if an individual or company acquires 25% or more of any class of voting securities of the bank holding company. Control is generally presumed to exist if a person or company acquires 10% or more, but less than 25%, of any class of voting securities of the bank holding company, but the regulations set forth certain circumstances in which this presumption does not apply, and the regulations also provide a procedure for challenging presumptions of control.

Permitted Activities. The Bank Holding Company Act generally prohibits a bank holding company from engaging in activities other than banking, managing or controlling banks or other permissible subsidiaries, and from acquiring or retaining direct or indirect control of any company engaged in any activities other than those determined by the Federal Reserve to be so closely related to banking or managing or controlling banks as to be a proper incident thereto. The Gramm Leach Bliley Act (“GLBA”) expanded the permissible activities of a bank holding company that qualifies as a financial holding company to engage in activities that are financial in nature or incidental or complementary to financial activities. Those activities include, among other activities, certain insurance, advisory and securities activities. We have not elected to be a financial holding company.

Imposition of Liability for Undercapitalized Subsidiaries: Source of Strength. Under the Federal Deposit Insurance Act (the “FDIA”) federal banking agencies are required to take “prompt corrective action” should an insured depository institution fail to meet certain capital adequacy standards. In the event an institution becomes “undercapitalized,” it must submit a capital restoration plan. The capital restoration plan will not be accepted by the regulators unless each company “having control of” the undercapitalized institution “guarantees” the subsidiary’s compliance with the capital restoration plan until it becomes “adequately capitalized.” For purposes of this statute, the Company controls the Bank. The FDIA grants greater powers to bank regulators in situations where an institution becomes “significantly” or “critically” undercapitalized or fails to submit a capital restoration plan. For example, a bank holding company controlling such an institution can be required to obtain prior Federal Reserve approval of proposed distributions, or might be required to consent to a merger or to divest the troubled institution or other affiliates. See “Regulation of the Bank — Prompt Corrective Action” below.

Federal law and Federal Reserve policy require that the Company act as a source of financial and managerial strength to the Bank, committing capital resources to the Bank when needed, including at times when it may not be in a financial position to do so. As discussed above, the Company could be required to guarantee a capital plan of the Bank if it becomes undercapitalized for purposes of banking regulations. Any capital loans by a bank holding company to its subsidiary bank are subordinate in right of payment to deposits and to certain other indebtedness of such subsidiary bank. The Bank Holding Company Act provides that, in the event of a bank holding company’s bankruptcy, any commitment by the bank holding company to a federal bank regulatory agency to maintain the capital of a bank subsidiary will be assumed by the bankruptcy trustee and entitled to priority of payment.

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Restrictions on Dividends and Stock Repurchases. Our ability to pay dividends to our shareholders is limited by the regulations and policies of the Federal Reserve applicable to bank holding companies and general corporate law. It is the Federal Reserve’s policy that a bank holding company should generally pay dividends on common stock only out of current income available over the past year, and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition, and current Federal Reserve policy further calls for a bank holding company to consult with the Federal Reserve before repurchasing shares or paying dividends during a quarter in an amount that exceeds its earnings for the quarter. It is also the Federal Reserve’s policy that bank holding companies should not maintain dividend levels that undermine their ability to be a source of strength to their banking subsidiaries. The Federal Reserve has indicated that bank holding companies should carefully review their dividend policies and has discouraged payment ratios that are at maximum allowable levels unless both asset quality and capital are very strong.

Bank holding companies must consult with the Federal Reserve before redeeming any equity or other capital instrument included in regulatory capital prior to stated maturity if such redemption could have a material effect on the level or composition of the organization’s capital base. Bank holding companies experiencing financial weaknesses, or that are at significant risk of developing financial weaknesses, must consult with the Federal Reserve before redeeming or repurchasing common stock or other regulatory capital instruments.

As a California corporation, we are subject to California law, which permits California corporations to distribute cash or property to shareholders, including as a dividend or repurchase or redemption of shares, if the corporation meets either a retained earnings test or a “balance sheet” test. Under the retained earnings test, we may make a distribution from retained earnings to the extent that our retained earnings exceed the sum of the amount of the distribution plus the amount, if any, of dividends in arrears on shares with preferential dividend rights. We may also make a distribution if, immediately after the distribution, the value of our assets equals or exceeds the sum of our total liabilities plus the liquidation preference of any shares which have a preference upon dissolution over the rights of shareholders receiving the distribution. Indebtedness is not considered a liability if the terms of such indebtedness provide that payment of principal and interest thereon are to be made only if, and to the extent that, a distribution to shareholders could be made under the balance sheet test. In addition, we may not make distributions if we are, or as a result of the distribution would be, likely to be unable to meet our liabilities (except those whose payment is otherwise adequately provided for) as they mature.

The primary source of capital for the Company’s payment of any dividend or its repurchase of stock is expected to be the Bank, through the Bank’s payment of dividends or management fees to the Company. The ability of the Bank to pay cash dividends or fees to the Company is limited by law and regulation, as described in “Regulation of the Bank — Dividend Restrictions Applicable to the Bank,” below.

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Regulation of the Bank

The Bank is a national banking association chartered under the National Bank Act. As a national bank, the Bank is subject to supervision and regulation by the OCC, the chartering authority for national banks. The deposit accounts of the Bank are insured by the FDIC to the maximum extent provided under federal law and the Bank is therefore subject to certain FDIC regulations as well. The OCC regularly examines the Bank’s operations and has the authority to approve or disapprove mergers, the establishment of branches and similar corporate actions. The OCC also has the power to bring enforcement actions prohibiting the continuance or development of unsafe or unsound banking practices or other violations of law as discussed above. The Bank is also subject to numerous state and federal statutes and regulations that affect the Bank, its business, activities, and operations.

Prompt Corrective Action. The federal banking regulators are required to take “prompt corrective action” with respect to capital-deficient institutions. For this purpose, federal banking regulations define five capital categories: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” As of December 31, 2022, the Bank’s capital levels exceeded the minimum levels required to be considered “well capitalized”, which means it had a common equity Tier 1 capital ratio of 6.5% or higher; a Tier I risk-based capital ratio of 8.0% or higher; a total risk-based capital ratio of 10.0% or higher; and a leverage ratio of 5.0% or higher. The following table sets forth the minimum regulatory capital levels for each category:

Capital Category	Total Risk-Based Capital Ratio	Tier 1 Risk-Based Capital Ratio	Common Equity Tier 1 (CET1) Capital Ratio	Leverage Ratio	Tangible Equity to Assets	Supplemental Leverage Ratio
Well Capitalized	10% or greater	8% or greater	6.5% or greater	5% or greater	n/a	n/a
Adequately Capitalized	8% or greater	6% or greater	4.5% or greater	4% or greater	n/a	3% or greater
Undercapitalized	Less than 8%	Less than 6%	Less than 4.5%	Less than 4%	n/a	Less than 3%
Significantly Undercapitalized	Less than 6%	Less than 4%	Less than 3%	Less than 3%	n/a	n/a
Critically Undercapitalized	n/a	n/a	n/a	n/a	Less than 2%	n/a

An institution’s capital category is determined solely for the purpose of applying prompt corrective action regulations, and the capital category may not constitute an accurate representation of the institution’s overall financial condition or prospects for other purposes. An institution may be downgraded to a capital category that is lower than indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters. Failure to meet capital guidelines could subject a bank to a variety of enforcement remedies, including issuance of a capital directive, the termination of deposit insurance by the FDIC, a prohibition on accepting brokered deposits, and certain other restrictions on its business.

Federal banking regulators are required to take various mandatory supervisory actions and are authorized to take other discretionary actions with respect to institutions in the three undercapitalized categories: undercapitalized, significantly undercapitalized, and critically undercapitalized. The severity of the action depends upon the capital category in which the institution is placed. As an institution’s capital decreases, the regulators’ enforcement powers become more severe.

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In the event an institution becomes “undercapitalized,” it must submit a capital restoration plan. The federal banking regulators require that each company having control of the undercapitalized institution guarantees the subsidiary depository institution’s compliance with the capital restoration plan up to a certain specified amount. Any such guarantee from a depository institution’s holding company is entitled to a priority of payment in bankruptcy.

The bank regulators have greater power in situations where an institution becomes “significantly” or “critically” undercapitalized or fails to submit a capital restoration plan. In addition to requiring undercapitalized institutions to submit a capital restoration plan, bank regulations contain broad restrictions on certain activities of undercapitalized institutions including asset growth, acquisitions, branch establishment and expansion into new lines of business. With certain exceptions, an insured depository institution is prohibited from making capital distributions, including dividends, and is prohibited from paying management fees to control persons if the institution would be undercapitalized after any such distribution or payment.

A significantly undercapitalized institution is subject to mandated capital raising activities, restrictions on interest rates paid and transactions with affiliates, removal of management, and other restrictions. Generally, subject to a narrow exception, the banking regulator must appoint a receiver or conservator for an institution that is critically undercapitalized.

Banks with risk-based capital and leverage ratios below the required minimums may also be subject to certain administrative actions, including the termination of deposit insurance upon notice and hearing, or a temporary suspension of insurance without a hearing in the event the institution has no tangible capital.

Dividend Restrictions Applicable to the Bank. The primary source of funds for the Company is expected to be dividends paid by the Bank. OCC regulations impose various restrictions on the ability of a national bank to make capital distributions, including dividends, stock redemptions or repurchases, and certain other distribution. Generally, a national bank may make capital distributions during any calendar year equal to up to 100% of net income for the year-to-date plus retained net income for the two preceding years without prior OCC approval. However, the OCC may restrict dividends by an institution deemed to be in need of more than normal supervision. Dividends can also be restricted if the capital conservation buffer requirement is not met.

Acquisitions and Branching. The OCC must approve the Bank’s acquisition of other financial institutions and certain other acquisitions, such as the acquisition and assumption of the deposits of another depository institution.

Generally, the Bank may establish branches nationwide, but branching by acquisition may be restricted by applicable state law.

Lending Limits. Our ability to make aggregate loans-to-one-borrowing relationship is generally limited to 15% of unimpaired capital and surplus. If the loan is secured by readily marketable collateral, the limit is raised by 10%, bringing the total to 25% of unimpaired capital and surplus. Capital and surplus means Tier 1 and Tier 2 capital plus the amount of ACL not included in Tier 2 capital. We do not have loans in excess of our loans-to-one borrower limit.

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FDIC Insurance Assessments. Our deposits are insured by the Deposit Insurance Fund of the FDIC up to the maximum amount permitted by law. As an FDIC insured financial institution, we are subject to deposit insurance assessments as determined by the FDIC.

Under the FDIC’s risk-based deposit premium assessment system, the assessment rates for an insured depository institution are determined by an assessment rate calculator, which is based on a number of elements that measure the risk each institution poses to the Deposit Insurance Fund. As a result of the Dodd-Frank Act, the calculated assessment rate is applied to average consolidated assets less the average tangible equity of the insured depository institution during the assessment period to determine the dollar amount of the quarterly assessment. Premiums are assessed quarterly and could increase if, for example, criticized loans and leases and/or other higher risk assets increase or balance sheet liquidity decreases. In addition, the FDIC can impose special assessments in certain instances.

Concentrations in Commercial Real Estate Lending. The federal banking regulators have issued guidance to identify institutions that may be exposed to potential significant CRE lending risks and may therefore warrant greater supervisory scrutiny. The guidance includes the following numerical tests:

● total reported loans for construction, land development and other land represent 100% or more of the institution’s total risk-based capital, or

● total CRE loans represent 300% or more of the institution’s total risk-based capital, and the outstanding balance of the institution’s CRE loan portfolio has increased by 50% or more during the previous 36 months.

The guidance does not limit a bank’s levels of CRE lending activities, but rather guides institutions in developing risk management practices and levels of capital that are commensurate with the level and nature of their CRE concentrations. Banking regulators expect banks with concentrations of CRE loans to maintain appropriate underwriting discipline, risk-management and capital commensurate with the level and nature of their CRE risks.

Community Reinvestment Act. The CRA requires that the federal banking agencies evaluate the record of each financial institution in meeting the credit needs of its local community, including low- and moderate-income neighborhoods. Federal banking agencies must consider an institution’s CRA compliance in approving mergers, acquisitions, and applications to open a branch. Failure to adequately meet these criteria could impose additional requirements and limitations on the Bank. Additionally, the Bank must publicly disclose the terms of various CRA-related agreements.

Anti-Money Laundering and Suspicious Activity. Several federal laws, including the Bank Secrecy Act, the Money Laundering Control Act and the Patriot Act require all financial institutions, including banks, to implement policies and procedures relating to anti-money laundering, compliance, suspicious activities, and currency transaction reporting and due diligence on clients. The Bank Secrecy Act requires financial institutions to develop and maintain a program reasonably designed to ensure and monitor compliance with its requirements, to train employees to comply with and to test the effectiveness of the program. Any failure to meet the requirements of the Bank Secrecy Act can result in the imposition of substantial penalties and in adverse regulatory action against the noncompliant bank. The Patriot Act also requires federal bank regulators to evaluate the effectiveness of an applicant in combating money laundering when determining whether to approve a proposed bank acquisition.

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Transactions with Affiliates and Insiders. We are subject to the provisions of Regulation W promulgated by the Federal Reserve, which implements Sections 23A and 23B of the Federal Reserve Act. Regulation W places limits and conditions on the amount and terms of the Bank’s loans or extensions of credit to, investments in, or certain other transactions with the Company or any other affiliated entity. Regulation W also prohibits, among other things, a depository institution from engaging in certain transactions with certain affiliates unless the transactions are on terms substantially the same, or at least as favorable to such institution or its subsidiaries, as those prevailing at the time for comparable transactions with non-affiliated companies. Federal law also places restrictions on the Bank’s ability to extend credit to its executive officers, directors, principal shareholders and their related interests. These extensions of credit must be made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated third parties; and must not involve more than the normal risk of repayment or present other unfavorable features.

Data Privacy and Cybersecurity. The GLBA and the implementing regulations issued by federal regulatory agencies require financial institutions (including banks, insurance agencies, and broker-dealers) to adopt policies and procedures regarding the disclosure of nonpublic personal information about their customers to non-affiliated third parties. In general, financial institutions are required to explain to customers their policies and procedures regarding the disclosure of such nonpublic personal information and, unless otherwise required or permitted by law, financial institutions are prohibited from disclosing such information except as provided in their policies and procedures. The GLBA established certain information security guidelines that require each financial institution to maintain a comprehensive written information security program designed to ensure the security and confidentiality of customer information, to protect against anticipated threats or hazards to the security or integrity of such information, and to protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer.

Recent cyber-attacks against banks and other financial institutions that resulted in unauthorized access to confidential customer information have prompted the federal banking regulators to issue extensive guidance on cybersecurity. Among other things, financial institutions are expected to design multiple layers of security controls to establish lines of defense and ensure that their risk management processes address the risks posed by compromised customer credentials, including security measures to authenticate customers accessing internet-based services. A financial institution is expected to have a robust business continuity program to recover from a cyberattack and procedures for monitoring the security of third-party service providers that may have access to nonpublic data at the institution.

Consumer Laws and Regulations. We are subject to consumer laws and regulations intended to protect consumers in transactions with depository institutions, as well as other laws or regulations affecting customers of financial institutions generally. These laws and regulations include, among others, the Truth in Lending Act, the Truth in Savings Act, the Electronic Funds Transfer Act, the Expedited Funds Availability Act, the Equal Credit Opportunity Act, the Fair Housing Act, the Real Estate Settlement and Procedures Act, the Fair Credit Reporting Act and the Federal Trade Commission Act, among others.

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The Dodd-Frank Act centralized responsibility for federal consumer financial protection including implementing, examining and enforcing compliance with federal consumer financial laws with the Consumer Financial Protection Bureau (the “CFPB”). Depository institutions with less than $10 billion in assets, such as the Bank, are subject to rules promulgated by the CFPB but are examined and supervised by federal banking regulators for consumer compliance purposes. The Dodd-Frank Act also gives state attorneys general the ability to enforce federal consumer protection laws.

Effect of Environmental Laws and Regulation

Compliance with federal, state and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had a material effect upon our capital expenditures, earnings or competitive position. In the opinion of management, we do not have exposure to material costs associated with compliance with environmental laws and regulations or material expenditures related to environmental hazardous waste mitigation or cleanup. We believe our primary exposure to environmental risk is through the lending activities of the Bank. In cases where management believes environmental risk potentially exists at a property that the Bank intends to finance, the Bank mitigates its environmental risk exposure by requiring environmental site assessments at the time of loan origination. The environmental site assessment provides a detailed review of present and past uses of the subject property and adjacent sites to confirm any potential collateral contamination of commercial real estate parcels and identifies higher than normal potential for environmental impact to the specific real property collateral. If warranted, the site assessment will recommend more detailed investigation. Environmental assessments are also typically required prior to any foreclosure activity involving nonresidential real estate collateral.

Future Legislation and Regulation

Regulators have increased their focus on the regulation of the financial services industry in recent years, leading in many cases to greater uncertainty and compliance costs for regulated entities. Proposals that could substantially intensify the regulation of the financial services industry have been and may be expected to continue to be introduced in the United States Congress, in state legislatures, and by applicable regulatory authorities. These proposals may change banking statutes and regulations and our operating environment in substantial and unpredictable ways. If enacted, these proposals could increase or decrease the cost of doing business, limit or expand permissible activities or affect the competitive balance among banks, savings associations, credit unions, and other financial institutions. We cannot predict whether any of these proposals will be enacted and, if enacted, the effect that these proposals, or any implementing regulations, would have on our business, consolidated financial condition and consolidated results of operations.

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Item 1A. Risk Factors

Investing in our common stock involves a significant degree of risk. You should carefully consider the following risk factors which we have identified as being material to us, in addition to the other information contained in this registration statement, including our consolidated financial statements and related notes, before deciding to invest in our common stock. Any of the following risks, as well as risks that we do not know or that we currently deem immaterial, could have a material adverse effect on our business, consolidated financial condition, consolidated results of operations and future prospects. As a result, the trading price of our common stock could decline, and you could lose all or part of your investment.

Risk Factors Summary

This section summarizes some of the risks potentially affecting our business, consolidated financial condition, consolidated results of operations and future prospects. These risks and others are discussed in more detail further below in this section. You should consider this summary together with the more detailed information provided below.

Economic, Market and Investment Risks

● We face difficult market conditions relating to increasing interest rates and market volatility following the recent failures of some financial institutions.

● We may be adversely affected by the lack of soundness of other financial institutions.

● We have unrealized losses in our securities portfolio.

● We may be required to pay higher FDIC premiums.

● We continue to face risk related to the COVID-19 pandemic and risks related to natural disasters, acts of terrorism and global conflicts.

● We are particularly vulnerable to an economic downturn in Southern California.

● Increasing interest rates may reduce net interest income and otherwise negatively impact our consolidated financial condition and consolidated results of operations.

Risks Related to Lending and Credit

● We may not be able to measure and limit our credit risk adequately, which could lead to unexpected losses. Our allowance for credit losses may not be adequate to cover actual losses.

● Regulatory policies regarding commercial real estate loans could limit our ability to leverage our capital and limit our growth.

● The small- to medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair our borrowers’ ability to repay loans.

● In addition to general lending risks, we face particular risks related to our SBA, real estate, commercial real estate, construction, commercial and consumer lending.

● We have a significant number of loans secured by real estate, so we face risks related to a downturn in the real estate market and the impact of increasing interest rates on our real estate loans.

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Liquidity and Capital Risks

● A lack of liquidity, or an increase in the cost of liquidity could materially impair our ability to fund our operations and jeopardize our consolidated financial condition.

● We may need to raise additional capital, but additional capital may not be available.

● We rely on the dividends and return of capital from our subsidiary.

Strategic Risks

● We face risks related to our growth, expansion and any acquisitions we may pursue.

● Competition may limit our growth and profitability.

Regulatory and Compliance Risks

● We operate in a highly regulated environment and the laws and regulations regarding capital requirements, anti-money laundering, information security and many other aspects of our business. Our failure to so comply could adversely affect us and our future growth.

Technology Risks

● Our failure to keep up with the rapid technological changes in the financial services industry could have an adverse effect on our competitive position and profitability.

● We face risks related to network failures, cyberattacks and data security breaches, which could subject us to increased operating costs as well as litigation and other liabilities.

Operational Risks

● Our enterprise risk management framework may not be effective in mitigating risk, including those related to fraud or data processing errors.

● We depend on the use of data, modeling and estimates, yet the data, models and estimates we use may be inaccurate or incorrect.

● We rely on third-party service providers for key aspects of our operations.

● Climate change could have a material negative impact on us and our clients.

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Risks Related to an Investment in our Common Stock

● Our charter documents and banking laws may have an anti-takeover effect.

● As an emerging growth company and a smaller reporting company, we may take advantage of reduced regulatory and reporting requirements under the federal securities laws, which may make our common stock less attractive to investors.

● We may issue additional equity securities which may adversely affect existing holders of our common stock.

● Our common stock is not insured or guaranteed by the FDIC.

Risk Factors

ECONOMIC, MARKET AND INVESTMENT RISKS

Difficult market conditions are adversely affecting the banking industry.

The rapid rise in interest rates during 2022, the resulting industry-wide reduction in the fair value of securities portfolios, and the recent bank runs that led to the failures of some financial institutions in March of 2023, among other events, have resulted in a current state of volatility and uncertainty with respect to the health of the U.S. banking system, particularly around liquidity, uninsured deposits and customer concentrations.

If volatility and uncertainty continue, we may face the following risks:

a. depositor confidence may be shaken, which could lead to deposit outflows that could cause liquidity concerns;

b. market disruptions make valuation of our assets even more difficult and subjective, and our ability to measure the fair value of our assets could be adversely affected. If we determine that a significant portion of our assets have values significantly below their recorded carrying value, we could recognize a material charge to earnings in the quarter in which such determination was made, our capital ratios would be adversely affected and a rating agency might downgrade our credit rating or put us on credit watch;

c. increased regulation of the banking industry;

d. compliance with such regulation may increase our costs and limit our ability to pursue business opportunities; and

e. market developments and the resulting economic pressure on consumers may affect consumer confidence levels and may cause increases in delinquencies and default rates, which, among other effects, could affect our charge-offs and provision for credit losses. Competition in the industry could intensify as a result of the increasing consolidation of financial institutions in connection with the current market conditions.

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While we are unable to predict the full impact of this turmoil, it may result in, among other things, increased regulatory pressures, which could have material adverse effects on our business, consolidated financial condition, consolidated results of operations and growth prospects.

We may be adversely affected by the lack of soundness of other financial institutions

The recent failures of some depository institutions have raised concerns among depositors that their deposits may be at risk. While we believe the Bank is operated in a safe and sound manner, a market-wide loss of depositor confidence caused by the failures or the perceived unsoundness of other depository institutions could lead to deposit outflows at the Bank, potentially at levels that could require that we borrow funds or sell securities or other assets to address liquidity concerns, any of which could adversely affect our consolidated operating results, business prospects and capital.

Our ability to engage in routine funding transactions could be adversely affected by the actions and commercial soundness of other financial institutions. Financial services companies may be interrelated as a result of trading, clearing, counterparty, and other relationships. We have exposure to different industries and counterparties, and through transactions with counterparties in the financial services industry, including broker-dealers, commercial banks, investment banks, and other financial intermediaries. As a result, defaults by, declines in the financial condition of, or even rumors or questions about, one or more financial services companies, or the financial services industry generally, could lead to market-wide liquidity problems and losses or defaults by us or other institutions. These losses could have an adverse effect on our business, consolidated financial condition and consolidated results of operations.

We have unrealized losses in our securities portfolio. If required, recognizing these losses would reduce our net earnings and shareholders’ equity, possibly significantly.

Changes in the fair value of the securities in our securities portfolio may result from a number of circumstances that are beyond our control, such as changes in interest rates, the financial condition of municipalities, government sponsored enterprises or insurers of municipal bonds, changes in demand for these securities as a result of economic conditions, or reduced market liquidity.

Accounting principles generally accepted in the United States of America (“GAAP”) requires that we carry held-to-maturity debt securities at amortized cost, adjusted for accretion discounts and amortization of premiums. As a result, and in accordance with GAAP, our consolidated balance sheets do not reflect changes in the fair value of our held-to-maturity debt securities. To carry debt securities as held-to-maturity, we must have the intent and ability to hold the securities until maturity. Therefore, if we were to sell any held-to-maturity debt securities prior to maturity or determine that we need to do so for liquidity purposes, such as to cover withdrawals by our depositors that are greater than we anticipated, we would be required to realize a loss on those debt securities to the extent the amortized cost exceeds their fair value when the debt securities were sold or reclassified as available-for-sale. As of March 31, 2023 and December 31, 2022, in accordance with GAAP, our held-to-maturity debt securities had unrealized losses of $4.2 million and $6.0 million. Therefore, if we were required to sell or reclassify our held-to-maturity debt securities, we could be required to recognize losses that would materially reduce our net earnings and shareholders’ equity.

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GAAP requires that we carry our available-for-sale debt securities at fair value on our consolidated balance sheets. Unrealized gains or losses on these debt securities, reflecting the difference between the fair value and the amortized cost, net of its tax effect, are reported as a component of shareholders’ equity. In certain instances, GAAP requires recognition through earnings of declines in the fair value of securities that are deemed to be other than temporarily impaired. If our debt securities decline in fair value and other than temporary impairments of these assets results, we would be required to recognize a loss which could materially reduce our net income and capital levels.

We may be required to pay higher FDIC insurance premiums or special assessments which may adversely affect our earnings.

As the insurer of bank deposits, the FDIC maintains the Deposit Insurance Fund to cover the FDIC-insured portion of deposits accounts when a bank fails. The Deposit Insurance Fund is funded by FDIC insurance assessments paid by insured depository institutions, including the Bank. Following the recent bank failures in March 2023, the FDIC announced that it will use funds from the Deposit Insurance Fund to ensure that all depositors in the failed banks will be made whole at no cost to taxpayers. Accordingly, we anticipate that the FDIC will impose special assessments or increased premiums on all banks in order to replenish the Deposit Insurance Fund. Additional bank failures may prompt the FDIC to increase its premiums or to issue additional special assessments. We are generally unable to control the amount of premiums or special assessments that we are required to pay for FDIC insurance. Any future changes in the calculation or assessment of FDIC insurance premiums may have a material adverse effect on our consolidated financial condition and consolidated results of operations.

We face risks related to the COVID-19 pandemic.

Over the past three years, the COVID-19 pandemic and related government actions taken to reduce the spread of the virus have created significant economic uncertainty, reduced economic activity and resulted in changes in customer preferences and behaviors, including within our market areas.

Our business depends on the willingness and ability of our customers and employees to conduct banking and other financial transactions. Disruptions to our customers caused by the COVID-19 pandemic could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans, as well as reductions in loan demand, the liquidity of loan guarantors, loan collateral values (particularly in real estate), loan originations, interest and noninterest income and deposit availability. In addition to restrictions on travel and business operations, other governmental and regulatory actions in response to COVID-19 could affect us in substantial and unpredictable ways, such as the potential adverse impact on state and local moratoriums on evictions and our implementation of loan modifications and deferral programs consistent with recent regulatory guidance. While some of these measures have expired or been lifted, they could be implemented again.

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The risks and impact of the pandemic may remain prevalent for a significant period of time and may continue to adversely affect our business, consolidated financial condition and consolidated results of operations even as the COVID-19 pandemic subsides. The extent to which our business and results of operations could continue to be adversely affected by the lingering impact of the COVID-19 pandemic will depend on numerous evolving factors and future developments, including: (i) the continued spread and severity of the virus (ii) new variants and (iii) the availability, distribution, use and effectiveness of treatments and vaccines. Given the ongoing and dynamic nature of the COVID-19 pandemic, we cannot predict the full extent of its continuing impact on our business, our operations or the economy as a whole. However, its effects could have a material impact on our consolidated results of operations and heighten many of the other risk factors described in this document.

We face risks related to natural disasters, acts of terrorism and global conflicts.

Our business and most of the collateral securing our loans are concentrated in Southern California, which is prone to earthquakes, fires, mudslides, drought, flooding and other natural disasters. Natural disasters could negatively impact the values of collateral securing our borrowers’ loans and interrupt our borrowers’ abilities to conduct their business in a manner to support their debt obligations, either of which could result in losses and increased provisions for credit losses for us. Additionally, natural disasters could harm our operations through interference with communications, including the interruption or loss of our technology systems, which could prevent or impede us from gathering deposits, originating loans and processing and controlling our flow of business, as well as through the destruction of facilities and our operational, financial and management information systems.

Other events, such as acts of terrorism and, more broadly, global conflicts, may impact us negatively to the extent that they result in reduced capital markets activity, lower asset price levels, or disruptions in general economic activity in the United States or abroad, or in financial market settlement functions. Disruptions to our clients could result in increased risk of delinquencies, defaults, foreclosures and losses on our loans.

Our business is concentrated in Southern California and we are particularly vulnerable to an economic downturn in our primary market area.

We primarily serve businesses, organizations and individuals located in Southern California, which we define as including the California counties of Orange, Los Angeles, Riverside, San Diego and Ventura. As a result, we are exposed to risks associated with lack of geographic diversification. An economic downturn or decrease in property values in Southern California adverse changes in laws or regulations in California could impact the credit quality of our assets, the businesses of our customers and the ability to expand our business. Our success significantly depends upon the growth in population, income levels, commerce, deposits and housing in our market area. If the communities in which we operate do not grow or if prevailing economic conditions locally or nationally are unfavorable, our business may be negatively affected.

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We have a significant number of loans secured by real estate, and a downturn in the local real estate market could negatively impact our profitability.

The market value of the real estate securing loans as collateral could be adversely affected by unfavorable changes in market and economic conditions. Adverse developments affecting commerce or real estate values in the local economies in our primary market areas could increase the credit risk associated with our loan portfolio and have an adverse impact on our revenues and consolidated financial condition. Declines in the real estate market could hurt our business because if real estate values were to decline, the collateral for our loans would provide less security. As a result, our ability to recover on defaulted loans by selling the underlying real estate would be diminished, and we would be more likely to suffer losses on defaulted loans

Interest rates increased rapidly during 2022 and early 2023 and may continue to increase as the Federal Reserve combats inflation. Interest rate shifts may reduce net interest income and otherwise negatively impact our consolidated financial condition and consolidated results of operations.

The majority of our banking assets are monetary in nature and subject to risk from changes in interest rates. Like most banks, our earnings and cash flows depend to a great extent upon the level of our net interest income, or the difference between the interest income we earn on loans, investments and other interest-earning assets, and the interest we pay on interest-bearing liabilities, such as deposits and borrowings. Changes in interest rates can increase or decrease our net interest income, because different types of assets and liabilities may react differently, and at different times, to market interest rate changes.

When interest-bearing liabilities mature or reprice more quickly, or to a greater degree than interest-earning assets in a period, an increase in interest rates could reduce net interest income. Similarly, when interest-earning assets mature or reprice more quickly, or to a greater degree than interest-bearing liabilities, falling interest rates could reduce net interest income. An increase in interest rates may, among other things, reduce the demand for loans and our ability to originate loans and decrease loan repayment rates. Conversely, a decrease in the general level of interest rates may affect us through, among other things, increased prepayments on our loan portfolio and increased competition for deposits. Accordingly, changes in the level of market interest rates affect our net yield on interest-earning assets, loan origination volume and our overall results of operations. Although our asset-liability management strategy is designed to control and mitigate exposure to the risks related to changes in market interest rates, those rates are affected by many factors outside of our control, including governmental monetary policies, inflation, deflation, recession, changes in unemployment, the money supply, international disorder and instability in domestic and foreign financial markets.

We expect that we will periodically experience “gaps” in the interest rate sensitivities of our assets and liabilities, meaning that either our interest-bearing liabilities will be more sensitive to changes in market interest rates than our interest earning assets, or vice versa. In either case, if market interest rates should move contrary to our position, this gap will negatively impact our earnings. The impact on earnings is more adverse when the slope of the yield curve flattens; that is, when short-term interest rates increase more than long-term interest rates or when long-term interest rates decrease more than short-term interest rates.

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In March 2020, the Federal Reserve lowered the target range for the federal funds rate to a range from 0 to 0.25 percent in response to the COVID-19 pandemic. The federal funds rate remained in this range for all of 2021. After a period of low interest rates, the federal funds rate was increased rapidly to 4.25% - 4.50% at the end of 2022 and by an additional 25 basis points in February and another 25 basis points in March 2023. It is anticipated the Federal Reserve may continue with further rate increases in 2023. Further increases to prevailing interest rates could, among other things, (1) affect our ability to originate loans at competitive rates or reduce the demand for loans, which could limit our loan growth, (2) increase loans costs for existing borrowers with variable rate loans, potentially impacting credit quality, (3) make it more difficult or costly for us to obtain and retain deposits, which could reduce our net interest margin or our liquidity; (4) reduce the fair value of our financial assets and liabilities, which could result in losses or (5) change the average duration of our loan portfolios and other interest-earning assets. A prolonged period of extremely volatile and unstable market conditions could increase our funding costs and negatively affect market risk mitigation strategies. Any steps we may take to mitigate these risks could impact our growth, credit quality and overall profitability.

RISKS RELATED TO LENDING AND CREDIT

Our loan portfolio exposes us to credit risk, but we may not be able to measure and limit our credit risk adequately, which could lead to unexpected losses.

The primary component of our business involves making loans to our clients. The business of lending is inherently risky, including risks that the principal or interest on any loan will not be repaid in a timely manner or at all or that the value of any collateral supporting the loan will be insufficient to cover losses in the event of a default. Our risk management practices, such as managing the concentration of our loans within specific industries, loan types and geographic areas, and our credit approval practices may not adequately reduce credit risk. Further, our credit administration personnel, policies and procedures may not adequately adapt to changes in economic or any other conditions affecting clients and the quality of the loan portfolio. A failure to effectively measure and manage the credit risk, including non-performing assets, associated with our loan portfolio could lead to unexpected losses and have an adverse effect on our business, consolidated financial condition and consolidated results of operations.

Our allowance for credit losses may not be adequate to cover actual losses.

We maintain an allowance for loan losses (“ALL”), which is established to absorb future expected credit losses. We monitor the adequacy of our ALL and may need to increase it if, for example, economic conditions deteriorate, property values decrease or expected credit losses otherwise increase. The OCC reviews our ALL as an integral part of its examination process and may require that we increase it based on their judgment, which may be different than ours. Additional provisions to increase the ALL, should they become necessary, would decrease our net income and reduce our capital.

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Effective January 1, 2023, we adopted the Financial Accounting Standards Board, or FASB, Accounting Standards Update 2016-13, “Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” commonly referred to as the “Current Expected Credit Losses” standard, or “CECL.” CECL changes the ALL methodology from an incurred loss concept to an expected loss concept, which is more dependent on future economic forecasts, assumptions and models than previous accounting standards and could result in increases in, and add volatility to, our ALL and future provisions for credit losses. These forecasts, assumptions, and models are inherently uncertain and are based upon management’s reasonable judgment in light of information currently available. Our ALL may not be adequate to absorb actual credit losses, and future provisions for credit losses could materially and adversely affect our operating results. We adopted the provisions of ASC 326 through the application of the modified retrospective transition approach, and recorded a net decrease of approximately $3.9 million to the beginning balance of retained earnings as of January 1, 2023 for the cumulative effect adjustment, reflecting an initial adjustment to the allowance for credit losses (“ACL”) of $5.5 million, net of related deferred tax assets arising from temporary differences of $1.6 million, commonly referred to as the “Day 1” adjustment. The Day 1 adjustment to the ACL is reflective of expected lifetime credit losses associated with the composition of financial assets within in the scope of ASC 326 as of January 1, 2023, which is comprised of loans held for investment and off-balance sheet credit exposures at January 1, 2023, as well as management’s current expectation of future economic conditions.

Regulatory policies regarding loans secured by commercial real estate could limit our ability to leverage our capital and adversely affect our growth and profitability.

The federal banking agencies have issued guidance regarding concentrations in CRE lending for banks that are deemed to have particularly high concentrations of CRE loans within their lending portfolios. Under this guidance, a bank that has (i) total reported loans for construction, land development, and other land which represent 100% or more of the bank’s total risk-based capital; or (ii) total CRE representing 300% or more of the bank’s total risk-based capital, where the outstanding balance of the bank’s CRE loan portfolio has increased 50% or more during the prior 36 months, is identified as having potential CRE concentration risk. While the agencies’ guidance does not limit the levels of a bank’s CRE lending, banks with higher levels of CRE loans are generally expected to implement enhanced underwriting, internal controls, risk management policies and portfolio stress testing, as well as higher levels of allowances for credit losses and capital levels as a result of CRE lending growth and exposures.

As of December 31, 2022, our CRE loans for purposes of this guidance represented 555.7% of our total risk-based capital. As of December 31, 2022, total loans secured by CRE under construction and land development represented 92.1% of our total risk-based capital. As a result, the OCC, which is the Bank’s federal banking regulator, could view the Bank as having a high concentration of CRE loans under this guidance.

Although we actively work to manage our CRE concentration and believe that our underwriting policies, management information systems, independent credit administration process, and monitoring of real estate loan concentrations are appropriate to address our CRE concentration, we face heightened regulatory scrutiny as a result of our CRE loan concentrations. The OCC or other federal regulators could become concerned about our CRE loan concentrations and we could be required to reduce our levels of CRE lending, increase our capital, allocate greater resources to the management of CRE risks, or any combination of these actions. The OCC or other federal regulators could limit our ability to grow by, among other things, restricting their approvals for the establishment or acquisition of branches, or approvals of mergers or other acquisition opportunities. Further, we cannot guarantee that any risk management practices we implement will be effective to prevent losses relating to our CRE portfolio.

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Any of these risks could have an adverse effect on our business, consolidated financial condition and consolidated results of operations.

We may suffer losses in our loan portfolio despite our underwriting practices.

We mitigate the risks inherent in our loan portfolio by adhering to sound and proven underwriting practices, managed by experienced and knowledgeable credit professionals. These practices include analysis of a borrower’s prior credit history, financial statements, tax returns, cash flow projections, valuations of collateral based on reports of independent appraisers, and verifications of liquid assets. Although we believe that our underwriting criteria is appropriate for the various kinds of loans we make, we may incur losses on loans that meet our underwriting criteria, and these losses may exceed the amounts set aside as reserves in our ALL.

The small- to medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair our borrowers’ ability to repay loans.

We target our business development and marketing strategy to serve the banking and financial services needs of our community, including small- to medium-sized businesses and real estate owners. These small- to medium-sized businesses frequently have smaller market share than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete and may experience significant volatility in operating results. Any one or more of these factors may impair the borrower’s ability to repay a loan. In addition, the success of a small- to medium-sized business often depends on the management talents and efforts of one or two persons or a small group of persons, and the death, disability or resignation of one or more of these persons could have a material adverse impact on the business and its ability to repay a loan. Economic downturns and other events that negatively impact our market areas could cause us to incur substantial credit losses that could negatively affect our consolidated financial condition and consolidated results of operations.

Construction and land development loans are based upon estimates of costs and values associated with the completed project. These estimates may be inaccurate, and we may be exposed to significant losses on loans for these projects.

At December 31, 2022, our construction and land development loans totaled $237.1 million, or 12.5% of our loans held for investment portfolio, excluding SBA loans. These loans involve additional risks because funds are advanced upon the security of the project, which is of uncertain value prior to its completion, and costs may exceed realizable values in declining real estate markets. Because of the uncertainties inherent in estimating construction costs and the realizable market value of the completed project and the effects of governmental regulation of real property, it is relatively difficult to accurately evaluate the total funds required to complete a project and the related loan-to-value ratio. A downturn in the commercial real estate market could increase delinquencies, defaults and foreclosures, and significantly impair the value of our collateral and our ability to sell the collateral upon foreclosure. In addition, this type of lending also typically involves higher loan principal amounts. Some of the builders we deal with have more than one loan outstanding with us. Consequently, an adverse development with respect to one loan or one credit relationship can expose us to a significantly greater risk of loss. In addition, during the term of some of our construction loans, no payment from the borrower is required since the accumulated interest is added to the principal of the loan through an interest reserve. As a result, construction loans often involve the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project and the ability of the borrower to sell or lease the property, rather than the ability of the borrower or guarantor to repay principal and interest. Higher than anticipated development costs may cause actual results to vary significantly from those estimated. If our appraisal of the value of the completed project proves to be overstated, or market values or rental rates decline, we may have inadequate security for the repayment of the loan upon completion of construction of the project. In addition, construction loans involve additional cost as a result of the need to actively monitor the building process, including cost comparisons and on-site inspections.

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Properties under construction are often difficult to sell and typically must be completed in order to be successfully sold, which complicates the process of working with our problem construction loans. If we are forced to foreclose on a project prior to or at completion due to a default, we may not be able to recover all of the unpaid balance of, and accrued interest on, the loan as well as related foreclosure and holding costs. In addition, we may be required to fund additional amounts to complete the project and may have to hold the property for an unspecified period of time while we attempt to dispose of it. Further, in the case of speculative construction loans, there is the added risk associated with the borrower obtaining a take-out commitment for a permanent loan. Loans on land under development or held for future construction also pose additional risk because of the lack of income production by the property and the potential illiquid nature of the collateral.

For all of these reasons and uncertainties, construction and land development loans may represent greater risks than other types of loans.

Our real estate loans are subject to risks, including risks resulting from increasing interest rates.

At December 31, 2022, we had $1.22 billion of real estate loans, including commercial real estate loans, or 64.5% of our loans held for investment portfolio, excluding SBA loans. These real estate loans present certain risks, particularly in an environment of increasing interest rates. After a period of low interest rates, the Federal Reserve rapidly increased the federal funds rate during 2022 and the first quarter of 2023, and it is anticipated the Federal Reserve may continue with further rate increases in 2023. Rising interest rates, as well as other factors arising after a real estate loan has been made, could negatively affect not only property values but also a borrower’s cash flow, creditworthiness, and ability to repay the loan. Increasing interest rates may negatively impact real estate values because rising rates may cause real estate collateral values to decline, increasing the possibility that we will realize losses on our real estate loans.

Our loan portfolio includes a number of commercial real estate loans with relatively large balances.

Our loan portfolio contains a number of commercial real estate loans with relatively large balances. The deterioration of one or a few of these loans could cause a significant increase in nonperforming loans, which could result in a net loss of earnings, an increase in the provision for credit loan losses and an increase in loan charge-offs, all of which could have a material adverse effect on our consolidated financial condition and consolidated results of operations.

Our commercial real estate loans may increase our exposure to credit risk.

At December 31, 2022, our commercial real estate loans primarily consisted of loans secured by non-owner occupied CRE and loans secured by owner-occupied CRE, which together totaled $860.2 million, or 45.3%, of our total loans held for investment portfolio, excluding SBA loans. These loans are generally viewed as having more risk of default than loans secured by residential real estate or consumer loans because repayment of the loans often depends on the successful operation of the property and the income stream of the borrowers.

These loans often involve larger loan balances to single borrowers or groups of related borrowers compared with single-family residential mortgage loans. Therefore, the deterioration of one or a few of these loans could cause a significant decline in the related asset quality. If Southern California experiences an economic slowdown, these loans represent higher risk and could result in a sharp increase in loans charged off and could require the we significantly increase our allowance for credit losses, which could have a material adverse impact on our business, consolidated financial condition, consolidated results of operations, and cash flows.

Our commercial and industrial (C&I) loans are often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may fluctuate in value.

At December 31, 2022, we had $312.1 million of C&I loans, or 16.5% of our total loans held for investment portfolio, excluding SBA loans. Our C&I loans are originated primarily based on the anticipated cash flow and general liquidity of the borrower and secondarily on the underlying collateral provided by the borrower and the repayment capacity of any guarantor. A borrower’s cash flow may be unpredictable, however, and collateral securing these loans may fluctuate in value. Although these loans are often collateralized by equipment, inventory, accounts receivable, or other business assets, the liquidation of collateral in the event of default is often an insufficient source of repayment because accounts receivable may be uncollectible and inventories may be obsolete or of limited use. In addition, business assets may depreciate over time, may be difficult to appraise, and may fluctuate in value based on the success of the business. Accordingly, the repayment of C&I loans depends primarily on the cash flow and credit worthiness of the borrower and secondarily on the underlying collateral value provided by the borrower and liquidity of the guarantor.

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Small Business Administration lending is an increasingly important part of our business. Our SBA lending program is dependent upon the U.S. federal government, and we face specific risks associated with originating SBA loans.

Our SBA lending program is dependent upon the U.S. federal government. We are designated by the SBA as a Preferred Lender. As an SBA Preferred Lender, we are able to offer SBA loans to our customers without the potentially lengthy SBA approval process for application, servicing or liquidation actions required for lenders that are not SBA Preferred Lenders.

The SBA periodically reviews the lending operations of participating lenders to assess, among other things, whether the lender exhibits prudent risk management. When weaknesses are identified, the SBA may request corrective actions or impose enforcement actions, including the potential loss of the SBA Preferred Lender designation. If we lose our status as an SBA Preferred Lender, we may lose some or all of our SBA loan customers to lenders who are SBA Preferred Lenders, and as a result we could experience a material adverse effect on our consolidated financial results.

Any changes to the SBA program, including but not limited to changes to the level of guarantee provided by the federal government on SBA loans, changes to program specific rules impacting volume eligibility under the guaranty program, as well as changes to the program amounts authorized by Congress or funding for the SBA program may also have a material adverse effect on our business. In addition, any default by the U.S. government on its obligations or any prolonged government shutdown could, among other things, impede our ability to originate SBA loans or sell such loans in the secondary market, which could materially and adversely affect our business, consolidated financial condition and consolidated results of operations.

The SBA’s 7(a) Loan Program is the SBA’s primary program for helping small businesses, with financing guaranteed for a variety of general business purposes. Typically, we sell the guaranteed portion of our SBA 7(a) loans in the secondary market. These sales result in premium income for us at the time of sale and create a stream of future servicing income, as we retain the servicing rights to these loans. For the reasons described above, we may not be able to continue originating these loans or selling them in the secondary market. Furthermore, even if we are able to continue to originate and sell SBA 7(a) loans in the secondary market, we might not continue to realize premiums upon the sale of the guaranteed portion of these loans or the premiums may decline due to economic and competitive factors. When we originate SBA 7(a) loans, we incur credit risk on the non-guaranteed portion of the loans, and if a customer defaults on a loan, we share any loss and recovery related to the loan pro-rata with the SBA. If the SBA establishes that a loss on an SBA guaranteed loan is attributable to significant technical deficiencies in the manner in which the loan was originated, funded or serviced by us, the SBA may seek recovery of the principal loss related to the deficiency from us. Generally, we do not maintain reserves or loss allowances for such potential claims and any such claims could materially and adversely affect our business, consolidated financial condition or consolidated results of operations.

As of December 31, 2022, we had $116.5 million of SBA loans, excluding Paycheck Protection Program (“PPP”) loans, or 6.1% of total loans held for investment. The laws, regulations and standard operating procedures that are applicable to SBA loan products may change in the future. We cannot predict the effects of these changes on our business and profitability. Because government regulation greatly affects the business and financial results of all commercial banks and bank holding companies and especially our organization, changes in the laws, regulations and procedures applicable to SBA loans could adversely affect our ability to operate profitably.

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Our consumer loans generally carry greater risk than loans secured by owner-occupied, 1 - 4 family real estate.

At December 31, 2022, our consumer loans totaled $5.5 million, or 0.3% of our total loans held for investment portfolio, excluding SBA loans. Consumer loan collections are dependent on the borrower’s continuing financial stability and are therefore more likely to be affected by adverse personal circumstances, such as a loss of employment or unexpected medical costs. These loans may represent greater losses as compared to loans secured by owner-occupied, 1-4 family real estate loans, for example, because they may be unsecured or, if they are secured, the value of the collateral may be difficult to assess and is often more likely to decrease in value than real estate Furthermore, the application of various federal and state laws, including bankruptcy and insolvency laws, may limit our ability to recover on such loans.

LIQUIDITY AND CAPITAL RISKS

Liquidity, primarily through deposits, is essential to our business. A lack of liquidity, or an increase in the cost of liquidity could materially impair our ability to fund our operations and jeopardize our consolidated financial condition, consolidated results of operation and cash flows.

Liquidity represents an institution’s ability to provide funds to satisfy demands from depositors, borrowers and other creditors by either converting assets into cash or accessing new or existing sources of incremental funds. Liquidity risk arises from the possibility that we may be unable to satisfy current or future funding requirements and needs.

Liquidity is essential for the operation of our business. Market conditions, unforeseen outflows of funds or other events could have a negative effect on our level or cost of funding, affecting our ongoing ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, and fund new business transactions at a reasonable cost and in a timely manner. If our access to stable and low-cost sources of funding, such as client deposits, is reduced, we may need to use alternative funding, which could be more expensive or of limited availability. Any substantial, unexpected or prolonged changes in the level or cost of liquidity could affect our business adversely.

Deposit levels may be affected by several factors, including rates paid by competitors, general interest rate levels, returns available to customers on alternative investments, customers seeking to maximize deposit insurance by limiting their deposits at a single financial institution to $250,000, general economic and market conditions and other factors. Loan repayments are a relatively stable source of funds but are subject to the borrowers’ ability to repay loans, which can be adversely affected by a number of factors including changes in general economic conditions, adverse trends or events affecting business industry groups or specific businesses, declines in real estate values or markets, business closings or lay-offs, inclement weather, natural disasters and other factors.

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Furthermore, loans generally are not readily convertible to cash. From time to time, if our ability to raise funds through deposits, borrowings, the sale of investment securities and other sources are not sufficient to meet our liquidity needs, we may be required to rely on alternative funding sources of liquidity to meet growth in loans, deposit withdrawal demands or otherwise fund operations. Such alternative funding sources include FHLB advances, Federal Reserve borrowings, brokered deposits, unsecured federal funds lines of credit from correspondent banks and/or accessing the equity or debt capital markets. The availability of these alternative funding sources is subject to broad economic conditions, to regulation and to investor assessment of our financial strength and, as such, the cost of funds may fluctuate significantly and/or the availability of such funds may be restricted, thus impacting our net interest income, our immediate liquidity and/or our access to additional liquidity. Additionally, if we fail to remain “ well-capitalized” our ability to utilize brokered deposits may be restricted. We have somewhat similar risks to the extent high balance core deposits exceed the amount of deposit insurance coverage available.

We anticipate we will continue to rely primarily on deposits, loan repayments, and cash flows from our investment securities to provide liquidity. Additionally, when necessary, the alternative funding sources of borrowed funds described above will be used to augment our primary funding sources. In March 2023, the Federal Reserve announced the creation of a new Bank Term Funding Program in an effort to minimize the need for banks to sell securities at a loss in times of stress. We may use the Bank Term Funding Program on an as needed basis. An inability to maintain or raise funds (including the inability to access alternative funding sources) in amounts necessary to meet our liquidity needs would have a substantial negative effect, individually or collectively, on our liquidity. Our access to funding sources in amounts adequate to finance our activities, or on terms attractive to us, could be impaired by factors that affect us specifically or the financial services industry in general. For example, factors that could detrimentally impact our access to liquidity sources include our consolidated financial results, a decrease in the level of our business activity due to a market downturn or adverse regulatory action against us, a reduction in our credit rating, any damage to our reputation, counterparty availability, changes in the activities of our business partners, changes affecting our loan portfolio or other assets, or any other event that could cause a decrease in depositor or investor confidence in our creditworthiness and business. Those factors may lead to depositors withdrawing their deposits or creditors limiting our borrowings. Our access to liquidity could also be impaired by factors that are not specific to us, such as general business conditions, interest rate fluctuations, severe volatility or disruption of the financial markets, bank closures or negative views and expectations about the prospects for the financial services industry as a whole, or legal, regulatory, accounting, and tax environments governing our funding transactions. In addition, our ability to raise funds is strongly affected by the general state of the U.S. and world economies and financial markets as well as the policies and capabilities of the U.S. government and its agencies, and may remain or become increasingly difficult due to economic and other factors beyond our control. Any such event or failure to manage our liquidity effectively could affect our competitive position, increase our borrowing costs and the interest rates we pay on deposits, limit our access to the capital markets and have a material adverse effect on our consolidated financial condition and consolidated results of operations.

We may need to raise additional capital, but additional capital may not be available.

We may need to raise additional capital, in the future, to support our growth, strategic objectives or to meet regulatory or other internal requirements. Our ability to access the capital markets, if needed, will depend on a number of factors, including our consolidated financial condition, our business prospectus and the state of the financial markets. If capital is not available on favorable terms when we need it, we may have to either issue common stock or other securities on less than desirable terms or curtail our growth until market conditions become more favorable. Any diminished ability to raise additional capital, if needed, could restrict our ability to grow, require us to take actions that would affect our earnings negatively or otherwise affect our business and our ability to implement our business plan, capital plan and strategic goals adversely. Such events could have a material adverse effect on our business, consolidated financial condition and consolidated results of operations.

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The Company relies on the dividends and return of capital it receives from its subsidiary.

The Company is a separate and distinct legal entity from the Bank. As a holding company with no significant assets other than the Bank, the Company depends on dividends from the Bank to fund operating expenses, service debt and pay taxes. While the Company has not historically paid dividends or repurchased shares, its ability to do so would depend in large part upon the receipt of dividends or other capital distributions from the Bank. The ability of the Bank to pay dividends or make other capital distributions is subject to the restrictions of the National Bank Act. In addition, it is possible, depending upon the financial condition of the Bank and other factors, that the OCC could assert that payment of dividends or other payments is an unsafe or unsound practice. The amount that the Bank may pay in dividends is further restricted due to the fact that the Bank must maintain a certain minimum amount of capital to be considered a “well capitalized” institution as well as a separate capital conservation buffer. See “Supervision and Regulation - Capital Adequacy.”

In the event the Bank is unable to pay dividends to the Company, the Company could have difficulty meeting its other financial obligations and may need to seek other forms of liquidity, such as the sale of stock or indebtedness. The inability of the Bank to pay dividends to the Company could have a material adverse effect on our business, including the market price of our common stock.

STRATEGIC RISKS

Our growth and expansion may strain our ability to manage our operations and our financial resources.

Our financial performance and profitability depend on our ability to execute our corporate growth strategy. Continued growth, however, may present operating and other problems that could adversely affect our business, consolidated financial condition and consolidated results of operations and cash flows.

To successfully manage our growth, we may need to increase non-interest expenses through additional personnel, leasehold and data processing costs, among others. In order to successfully manage growth, we may need to adopt and effectively implement policies, procedures and controls to maintain credit quality, control costs and oversee our operations. We cannot assure you that we will be successful in this strategy. We may be challenged to successfully manage our business as a result of the strain on management and operations that may result from growth. Success will also depend on the ability of our officers and key employees to continue to implement and improve operational and other systems, to manage multiple, concurrent customer relationships and to hire, train and manage employees.

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Execution of our business strategies also may require certain regulatory approvals or consents, which may include approvals of the Federal Reserve, the OCC and other regulatory authorities. These regulatory authorities may impose conditions on the activities or transactions contemplated by our business strategies, which may negatively impact our ability to realize fully the expected benefits of certain opportunities.

Our failure to manage acquisitions may have a material adverse effect on our consolidated financial condition, and consolidated results of operations.

As part of our growth strategy, we intend to pursue prudent and commercially attractive acquisitions that will position us to capitalize on market opportunities. Over the last three years, we have grown rapidly through both organic growth and acquisitions.

Our future results of operations will depend in large part on our ability to successfully integrate the operations of any institutions we may acquire in the future and retain the customers of those institutions. If we are unable to successfully manage the integration of the separate cultures, customer bases and operating systems of the acquired institutions, our consolidated results of operations may be adversely affected. To be successful, we must successfully integrate the operations and retain the customers of acquired institutions, attract and retain the management required to successfully manage larger operations, and control costs.

Acquiring other banks or branches involves risks commonly associated with acquisitions including, among other things, the risk of incurring substantial expenses in pursuing potential acquisitions without completing such acquisitions, the risk that acquisition activity may divert our management’s attention from other aspects of our business, the difficulty in estimating the value of a target company, and the risk that an acquired business may not perform in accordance with our expectations. Our failure to manage acquisitions and other significant transactions successfully may have a material adverse effect on our consolidated financial condition and consolidated results of operations, and cash flows.

Our reputation is critical to the success of our business and our failure to maintain our reputation may materially adversely affect our performance.

Our reputation is one of the most valuable assets of our business. A key component of our business strategy is to rely on our reputation for customer service and knowledge of local markets to expand our presence by capturing new business opportunities from existing and prospective customers in our market area and contiguous areas. As such, if our reputation is negatively affected, by the actions of our employees or otherwise, our business and, therefore, our consolidated operating results may be materially adversely affected.

New lines of business, products, product enhancements or services may subject us to additional risk.

From time to time, we may implement new lines of business or offer new products and product enhancements as well as new services within our existing lines of business. In developing, implementing or marketing new lines of business, products, product enhancements or services, we may invest significant time and resources, yet our new products or product enhancements may not be successful or may require more resources or expertise than we anticipated. We may also face factors, such as regulatory compliance, competitive alternatives and shifting market preferences, any of which may impact the success of a new line of business or offerings of new products, product enhancements or services. Currently, we are not in the process of developing or implementing any new business lines, products, enhancements or services. However, our failure to successfully manage these risks in the development and implementation of new lines of business or offerings of new products, product enhancements or services could have a material adverse effect on our business, consolidated financial condition and consolidated results of operations.

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Competition may limit our growth and profitability.

Competition in the banking and financial services industry is intense. We compete with commercial banks, credit unions, mortgage banking firms, finance companies, non-bank lenders including ‘fintech” lenders, securities brokerage firms, insurance companies, money market funds and other mutual funds, as well as regional and national financial institutions that operate offices in our market areas and elsewhere. Many of these competitors have substantially greater name recognition, resources and lending limits than we do and may offer certain services or prices for services that we do not or cannot provide. Our profitability depends upon our continued ability to successfully compete in our markets.

KEY PERSONNEL RISKS

We rely heavily on our executive management team and other key personnel for our successful operation, and we could be adversely affected by the unexpected loss of their services.

Our success depends in large part on the performance of our key personnel that have substantial experience and tenure with us and in the markets that we serve. Our continued success and growth depend in large part on the efforts of these key personnel and ability to attract, motivate and retain highly qualified senior and middle management and other skilled employees to complement and succeed to our core senior management team. See “Management.”

If we are not able to attract, retain and motivate key personnel, our business could be negatively affected.

Our future success depends in large part on our ability to retain and motivate our existing employees and attract new employees. Competition for the best employees can be intense and has increased since the beginning of the COVID-19 pandemic. If we are not able to attract, retain and motivate key personnel, both in business line and corporate functions, could have a material adverse impact on our growth, consolidated results of operations and consolidated financial condition.

REGULATORY AND COMPLIANCE RISKS

We operate in a highly regulated environment and the laws and regulations that govern our operations, corporate governance, executive compensation and accounting principles, or changes in them, or our failure to comply with them, could adversely affect us and our future growth.

Bank holding companies and banks are highly regulated under federal and state law. As such, we are subject to extensive regulation, supervision and legal requirements from government agencies such as the Federal Reserve, the OCC and the FDIC, which govern almost all aspects of our operations. Compliance with laws and regulations can be difficult and costly, and changes to laws and regulations often impose additional operating costs. Our failure to comply with these laws and regulations, could subject us to restrictions on our business activities, enforcement actions and fines and other penalties, any of which could adversely affect our results of operations, regulatory capital levels and the price of our common stock.

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As part of the bank regulatory process, the OCC and the Federal Reserve periodically conduct examinations of our businesses, including compliance with laws and regulations. If, as a result of an examination, either of these banking agencies were to determine that our financial condition, capital adequacy, asset quality, earnings prospects, management capability, liquidity, asset sensitivity to market risks, asset management, risk management or other aspects of any of our operations have become unsatisfactory, or that we or our management were in violation of any law or regulation, our regulators may take a number of different remedial actions as they deem appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital levels, to restrict our growth, to assess civil monetary penalties against us, our officers or directors, to remove our officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, terminate our deposit insurance and our charter to operate. If we become subject to such regulatory actions, our business, consolidated financial condition and consolidated results of operations, and reputation could be adversely affected.

We are subject to laws regarding the privacy, information security and protection of personal information and any violation of these laws could damage our reputation or otherwise adversely affect our business.

Our business requires the collection and retention of volumes of customer data in various information systems that we maintain and in those maintained by third party service providers. We are subject to complex and evolving laws and regulations regarding privacy and data protection including the GLBA and the California Consumer Privacy Act. If personal, confidential or proprietary information of customers or others were to be mishandled or misused (in situations where, for example, such information was erroneously provided to parties who are not permitted to have the information or where such information was intercepted or otherwise compromised by third parties), we could be exposed to litigation or regulatory sanctions under privacy and data protection laws. Concerns regarding the effectiveness of our measures to safeguard data could cause us to lose customers or potential customers and reduce our revenue. Accordingly, any failure, or perceived failure, to comply with applicable privacy or data protection laws may subject us to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices or result in significant liabilities, fines or penalties, and could damage our reputation and otherwise adversely affect our operations, consolidated financial condition and consolidated results of operations.

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Our failure to comply with stringent capital requirements could result in regulatory criticism, requirements and restrictions.

We are subject to capital adequacy guidelines and other regulatory requirements specifying minimum amounts and types of capital which we must maintain. Our failure to meet applicable regulatory capital requirements could result in one or more of our regulators placing limitations or conditions on our activities, including our growth initiatives, or restricting the commencement of new activities, and could affect client and investor confidence, our costs of funds and FDIC insurance costs, our ability to pay dividends, our ability to make acquisitions, and our business, consolidated financial condition and consolidated results of operations. These limitations establish a maximum percentage of eligible retained income that could be utilized for these actions. See “Supervision and Regulation - Capital Adequacy.” Details regarding the Bank’s actual capital amounts and ratios and the amount of required capital are included in Note 15 — Regulatory Matters of the Notes to Consolidated Financial Statements included in Item 13.

We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations.

The Bank Secrecy Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA Patriot Act”), and other laws and regulations require financial institutions to institute and maintain an effective anti-money laundering program and file suspicious activity and currency transaction reports. There is also increased scrutiny of compliance with the sanctions programs and rules administered and enforced by the Treasury Department’s Office of Foreign Assets Control.

To comply with laws and guidelines in this area, we have dedicated significant resources to our anti-money laundering program. If our policies, procedures and systems are deemed deficient, we could be required to dedicate additional resources to our anti-money laundering program and could be subject to liabilities, including fines, and regulatory enforcement actions restricting our growth and restrictions on future acquisitions and de novo branching.

TECHNOLOGY RISKS

Failure to keep up with the rapid technological changes in the financial services industry could have an adverse effect on our competitive position and profitability.

The financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and reduce costs. Our future success will depend, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience, as well as to create additional efficiencies in our operations. Many of our competitors have substantially greater resources to invest in technological improvements than we have. As a result, competitors may be able to offer additional or superior products compared to those that we will be able to provide, which would put us at a competitive disadvantage. We may not be able to implement new technology-driven products and services effectively or be successful in marketing these products and services to our customers. Failure to keep pace successfully with technological change affecting the financial services industry could harm our ability to compete effectively and could have an adverse effect on our business, growth and consolidated results of operations.

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System failure or breaches of our network security, including as a result of cyber-attacks or data security breaches, could subject us to increased operating costs as well as litigation and other liabilities.

The computer systems and network infrastructure we use may be vulnerable to physical theft, fire, power loss, telecommunications failure or a similar catastrophic event, as well as security breaches, denial of service attacks, viruses, worms and other disruptive problems caused by hackers. Further, our remediation efforts in response to these events may not be successful. Any damage or failure that causes breakdowns or disruptions in our customer relationship management, general ledger, deposit, loan and other systems could damage our reputation, result in a loss of customer business, subject us to additional regulatory scrutiny for failure to comply with required information security standards, or expose us to civil litigation and possible financial liability, any of which could have a material adverse effect on us.

Computer break-ins, phishing and other disruptions could also jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure. Information security risks have generally increased in recent years in part because of the proliferation of new technologies, the use of the internet and telecommunications technologies to conduct financial transactions, and the increased sophistication and activities of organized crime, hackers, terrorists, activists, and other external parties. Our operations rely on the secure processing, transmission and storage of confidential information in our computer systems and networks. In addition, to access our products and services, our customers may use devices that are beyond our control systems. Although we believe we have robust information security procedures and controls, our technologies, systems, networks, and our customers’ devices may become the target of cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of our or our customers’ confidential, proprietary and other information, or otherwise disrupt our or our customers’ or other third parties’ business operations. As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.

We are under continuous threat of loss due to hacking and cyber-attacks especially as we continue to expand customer capabilities to utilize internet and other remote channels to transact business. Two of the most significant cyber-attack risks that we face are e-fraud and loss of sensitive customer data. Loss from e-fraud occurs when cybercriminals breach and extract funds directly from customer or our accounts. Attempts to breach sensitive customer data, such as account numbers and social security numbers, present significant reputational, legal and/or regulatory costs to us, if successful. Our risk and exposure to these matters remains heightened because of the evolving nature and complexity of these threats from cybercriminals and hackers, our plans to continue to provide internet banking and mobile banking channels, and our plans to develop additional remote connectivity solutions to serve our customers. We cannot assure that we will not be the victim of successful hacking or cyberattacks in the future that could cause us to suffer material losses or that our efforts to remediate any such attack will be successful. The occurrence of any cyber-attack or information security breach could result in potential liability to customers, reputational damage and the disruption of our operations, and regulatory concerns, all of which could adversely affect our business, consolidated financial condition and consolidated results of operations.

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OPERATIONAL RISKS

Our enterprise risk management framework may not be effective in mitigating risk and reducing the potential for losses.

Our enterprise risk management framework seeks to mitigate risk and loss to us. We have established comprehensive policies and procedures and an internal control framework designed to provide a sound operational environment for the types of risk to which we are subject, including credit risk, market risk (interest rate and price risks), liquidity risk, operational risk, compliance risk, legal risk, strategic risk, and reputational risk. However, as with any risk management framework, there are inherent limitations to our current and future risk management strategies, including risks that we have not appropriately anticipated or identified. In addition, our businesses and the markets in which we operate are continuously evolving. We may fail to adequately or timely enhance our enterprise risk framework to address those changes. If our enterprise risk framework is ineffective, either because it fails to keep pace with changes in the financial markets, regulatory requirements, our businesses, our counterparties, clients or service providers or for other reasons, we could incur losses, suffer reputational damage or find ourselves out of compliance with applicable regulatory or contractual mandates. In addition to management’s Asset Liability Committee (“ALCO”), the Directors Loan Committee of the Board (“DLC”), the Audit and Risk Committee of the Board (“ARC Committee”), as well as the Company’s Chief Risk Officer are all responsible for the “risk management framework” of the Company. Both ALCO and DLC meet monthly and the ARC Committee meets eight times a year, with the authority to convene additional meetings, as circumstances require.

We are subject to certain operational risks, including, but not limited to, internal or external fraud and data processing system failures and errors.

Employee errors and employee and customer misconduct could subject us to financial losses or regulatory sanctions and seriously harm our reputation. Misconduct by our employees could include hiding unauthorized activities from us, improper or unauthorized activities on behalf of our customers or improper use of confidential information. It is not always possible to prevent employee errors and misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases. Employee errors could also subject us to financial claims for negligence.

We maintain a system of internal controls and insurance coverage to mitigate against operational risks, including data processing system failures and errors and customer or employee fraud. If our internal controls fail to prevent or detect an occurrence, or if any resulting loss is not insured or exceeds applicable insurance limits, it could have a material adverse effect on our business, consolidated financial condition and consolidated results of operations.

This risk of loss also includes the potential legal actions that could arise as a result of operational deficiencies or as a result of non-compliance with applicable regulatory standards, adverse business decisions or their implementation, or customer attrition due to potential negative publicity.

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We depend on the use of data and modeling in our management’s decision-making, and faulty data or modeling approaches could negatively impact our decision-making ability or possibly subject us to regulatory scrutiny in the future.

The use of statistical and quantitative models and other quantitatively-based analyses is prevalent in bank decision making and regulatory compliance processes, and the use of such analyses is becoming increasingly widespread in our operations. Liquidity stress testing, interest rate sensitivity analysis, allowance for loan loss measurement, portfolio stress testing and the identification of possible violations of anti-money laundering regulations are examples of areas in which we are dependent on models and the data that underlie them. We anticipate that model-derived insights will be used more widely in our decision making in the future. While these quantitative techniques and approaches improve our decision making, they also create the possibility that faulty data or flawed quantitative approaches could yield adverse outcomes or regulatory scrutiny. Secondarily, because of the complexity inherent in these approaches, misunderstanding or misuse of their outputs could similarly result in suboptimal decision making, which could have an adverse effect on our business, consolidated financial condition and consolidated results of operations.

We may be subject to environmental liabilities in connection with the real properties we own and the foreclosure on real estate assets securing our loan portfolio.

A significant portion of our loan portfolio is secured by real estate. In the course of our business, we may foreclose and take title to real estate and could be subject to environmental liabilities with respect to these properties. We may be held liable to a government entity or to third parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to clean up hazardous or toxic substances, or chemical releases at a property. The costs associated with investigation and remediation activities could be substantial. In addition, if we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. These costs and claims could adversely affect our business, consolidated results of operations and prospects.

The obligations associated with being a public company may strain our resources and divert management’s attention from operating our business.

As a public company, we will be subject to the reporting requirements of the Exchange Act, and other applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs, make certain activities more difficult, time-consuming or costly and increase demand on our systems and resources. The obligations associated with being a public company will require significant additional resources and management oversight. As a result, management’s attention may be diverted from other business concerns, and our business and consolidated operating results may be adversely affected.

We may fail to maintain effective internal controls over financial reporting.

Our management is responsible for establishing and maintaining a system of internal controls over financial reporting that provides reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with generally accepted accounting principles and for evaluating and reporting on that system of internal control. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. We are also continuing to develop and refine our internal controls over financial reporting and have hired additional personnel in our accounting and financial reporting functions in connection with our transition from a private company to a public company. We expect that we will need to augment internal control resources to ensure we comply with the reporting obligations applicable to publicly traded companies and to ensure our internal controls and related procedures satisfy, and continue to satisfy, all applicable requirements for publicly traded companies. Maintaining and improving the effectiveness of our disclosure controls and procedures and internal controls over financial reporting will require that we continue to expend, significant resources, including accounting-related costs and significant management oversight.

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Nevertheless, these efforts may not be sufficient to result in an effective internal control environment. In addition, there are risks that individuals, either employees or contractors, consciously circumvent established control mechanisms by, for example, exceeding trading or investment management limitations, or committing fraud. If we fail to maintain effective internal controls over financial reporting, we may not be able to report our consolidated financial results accurately and in a timely manner, in which case our business may be harmed, investors may lose confidence in the accuracy and completeness of our consolidated financial reports, we could be subject to regulatory penalties and the price of our common stock may decline.

We rely on third-party service providers for key aspects of our operations.

We rely on third parties for certain services, including, but not limited to, our critical core banking, web hosting and other processing services. The failure of these systems, a cybersecurity breach involving any of our third-party service providers or the termination or change in terms of these services could interrupt our operations. Because our information technology and telecommunications systems interface depend on third-party systems, we could experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions. Replacing vendors or addressing issues with our third-party service providers could entail significant delay, expense and disruption of service. Even if we are able to replace third-party service providers, it may be at a higher cost to us. In addition, our failure to adequately oversee the actions of our third-party service providers could result in regulatory actions against us. Any of these factors could adversely affect our business, consolidated financial condition and consolidated results of operations.

Climate change could have a material negative impact on us and our clients.

Concerns over the long-term impact of climate change have led and will continue to lead to governmental efforts to mitigate those impact. Consumers and businesses also may change their behavior as a result of these concerns. We and our customers will need to respond to new laws and regulations as well as consumer and business preferences resulting from climate change concerns. We and our customers may face cost increases, asset value reductions and operating process changes. Among the impact to us could be a drop in demand for our products and services, particularly in certain sectors. In addition, we could face reductions in creditworthiness on the part of some customers or in the value of assets securing loans. Our efforts to take these risks into account in making lending and other decisions, may not be effective in protecting us from the negative impact of new laws and regulations or changes in consumer or business behavior.

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Our business, as well as the operations and activities of our clients, could be negatively impacted by climate change. Climate change presents both immediate and long-term risks to us and our clients, and these risks are expected to increase over time. Climate change presents multi-faceted risks, including: operational risk from the physical effects of climate events on us and our clients’ facilities and other assets; credit risk from borrowers with significant exposure to climate risk; transition risks associated with the transition to a less carbon- dependent economy; and reputational risk from stakeholder concerns about our practices related to climate change, our carbon footprint, and our business relationships with clients who operate in carbon-intensive industries.

The risks associated with climate change are rapidly changing and evolving in an escalating fashion, making them difficult to assess. Any of the risks associated with climate change could have a material negative impact on our business, consolidated financial condition and consolidated results of operations.

Our consolidated financial statements are based in part on assumptions and estimates which, if incorrect, could cause unexpected losses in the future.

We have made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities at the date of our consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period, to prepare these consolidated financial statements in conformity with GAAP. Actual results could differ from these estimates. Material estimates subject to change in the near term include, among other items, the ACL, particularly in light of the adoption of the CECL standard in 2023; the fair value of assets and liabilities acquired in business combinations and related purchase price allocation, the valuation of acquired loans, the valuation of goodwill and separately identifiable intangible assets associated with mergers and acquisitions, loan sales and servicing of financial assets and deferred tax assets and liabilities. These estimates may be adjusted as more current information becomes available, and any adjustment may be significant.

RISKS RELATED TO AN INVESTMENT IN OUR COMMON STOCK

Our charter documents and California law may have an anti-takeover effect, and there are substantial regulatory limitations on changes of control of bank holding companies.

Our articles of incorporation and bylaws contain a number of provisions relating to corporate governance and rights of shareholders that might discourage future takeover attempts. As a result, shareholders who might desire to replace or remove some or all of our Board of Directors or to participate in such transactions may not have an opportunity to do so. For example, our articles of incorporation authorize our Board of Directors to issue preferred stock, which could be issued as a defensive measure in response to a takeover proposal. Our bylaws provide that shareholders seeking to make nominations of candidates for election as directors, or to bring other business before an annual meeting of the shareholders, must provide timely notice of their intent in writing and follow specific procedural steps in order for nominees or shareholder proposals to be brought before an annual meeting.

The California General Corporation Law includes provisions that may have the effect of deterring hostile takeovers or delaying or preventing control of the Company. If an “interested party” offers to purchase the shares of some or all of our shareholders, we must obtain an affirmative opinion in writing as to the fairness of the offering price prior to completing the transaction and, if we subsequently receive another offer, we must afford our shareholders the opportunity to withdraw their consent to the “interested party” offer. California law considers a person to be an “interested party” if the person controls us, is controlled by one of our officers or directors, or in which one of our officers or directors has a material financial interest.

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In addition, under federal banking laws, as a general matter, no person or company, acting individually or in concert with others, may acquire more than 10 percent of our common stock without prior approval from our federal banking regulator. Federal regulators generally would prohibit any company that is not engaged in financial activities and activities that are permissible for a bank holding company or a financial holding company from acquiring control of the Company. In addition, any existing bank holding company would need the prior approval of the Federal Reserve before acquiring 5% or more of our voting stock.

These provisions of our charter documents and federal banking laws could have the effect of delaying or deferring the removal of our incumbent directors or delaying, deferring or discouraging another party from acquiring control of our Company (including an acquisition in which our shareholders could receive a premium for their shares), even if such removal or acquisition would be viewed by our shareholders to be in their best interests. These provisions could also discourage proxy contests and make it more difficult for holders of our common stock to elect directors other than the candidates nominated by our Board of Directors.

Our common stock currently has a limited trading market and is thinly traded, and a more liquid market for our common stock may not develop.

Our common stock is currently quoted on the OTC Pink Open Market under the trading symbol “BCAL,” but is thinly traded with limited liquidity. We have applied to have our common stock listed on the Nasdaq Stock Market under the symbol “BCAL,” concurrently with the effectiveness of this registration statement, but such listing is not guaranteed. Even if such listing is approved, there can be no assurance that an active, liquid trading market in our common stock will develop. If an active trading market does not develop, you may have difficulty selling your shares of common stock at an attractive price, or at all. An inactive market may also impair our ability to raise capital by selling our common stock and may impair our ability to expand our business by using our common stock as consideration in an acquisition. In addition, thinly traded stocks can be more volatile than more widely traded stocks. Our stock price has been volatile in the past and could be subject to wide fluctuations in price in response to various factors, some of which are beyond our control and may be unrelated to our actual operating performance.

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We are an emerging growth company and a smaller reporting company, and the reduced regulatory and reporting requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.

We are an emerging growth company, as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of reduced regulatory and reporting requirements that are otherwise generally applicable to public companies. These include, without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, reduced financial reporting requirements, reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding non-binding shareholder advisory votes on executive compensation or golden parachute payments. The JOBS Act also permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have irrevocably opted to decline this extended transition period, which means that any consolidated financial statements that we file in the future, will be subject to all new or revised accounting standards generally applicable to public companies. We may take advantage of some or all of these provisions for up to five years or such earlier time as we cease to qualify as an emerging growth company, which will occur if we have more than $1.235 billion in total annual gross revenue, if we issue more than $1.0 billion of non-convertible debt in a three-year period, or if we become a “large accelerated filer,” in which case we would no longer be an emerging growth company as of the following December 31. Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company,” as defined in Rule 12b-2 in the Exchange Act, which would allow us to take advantage of many of the same exemptions from disclosure requirements, including not being required to provide an auditor attestation of our internal control over financial reporting and reduced disclosure regarding our executive compensation arrangements in our periodic reports and proxy statements. Investors may find our common stock less attractive because we intend to rely on certain of these exemptions, which may result in a less active trading market and increased volatility in our stock price.

We may issue additional equity securities, or engage in other transactions, which could affect the priority of our common stock, which may adversely affect the market price of our common stock.

Our Board of Directors may determine from time to time that we need to raise additional capital by issuing additional shares of our common stock or other securities. Sales of substantial amounts of our common stock (including shares issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices of our common stock. We are not restricted from issuing additional shares of common stock, including securities that are convertible into or exchangeable for, or that represent the right to receive, common stock. We may also issue shares of preferred stock that will provide new investors with rights, preferences and privileges that are senior to, and that adversely affect, our then current common shareholders. We cannot predict or estimate the amount, timing or nature of any future offerings, or the prices at which such offerings may be completed. Any additional equity issuances may dilute the holdings of our existing shareholders or reduce the market price of our common stock, or both.

An investment in our common stock is not an insured deposit and is not guaranteed by the FDIC, so you could lose some or all of your investment.

An investment in our common stock is not a deposit account or other obligation of the Bank and, therefore, is not insured against loss or guaranteed by the FDIC, any other deposit insurance fund or by any other governmental, public or private entity. An investment in our common stock is subject to many risks, such as those described in this document and others. As a result, if you acquire our common stock, you could lose some or all of your investment.

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Item 2. Financial Information

Financial Highlights

The following table sets forth certain of our financial highlights as of and for each of the periods presented. This data should be read in conjunction with our consolidated financial statements and related notes included herein at Item 13 of this filing.

	Year Ended December 31,
($ in thousands except share and per share data)	2022			2021
EARNINGS
Net interest income	$	87,786		$	64,411
Provision for loan losses	$	5,450		$	1,200
Noninterest income	$	3,675		$	4,514
Noninterest expense	$	64,028		$	53,539
Income tax expense	$	5,870		$	3,477
Net income	$	16,113		$	10,709
Pre-tax pre-provision income (1)	$	27,433		$	15,386
Diluted earnings per share	$	0.88		$	0.72
Ending shares outstanding		17,940,283			17,707,737
PERFORMANCE RATIOS
Return on average assets		0.70	%		0.57	%
Return on average common equity		6.44	%		5.60	%
Yield on loans		5.02	%		4.88	%
Yield on earning assets		4.33	%		3.83	%
Cost of deposits		0.23	%		0.13	%
Cost of funds		0.29	%		0.20	%
Net interest margin		4.06	%		3.64	%
Efficiency ratio (1)		70.0	%		77.7	%
Net (charge-offs) recoveries to average loans held-for-investment		0.00	%		0.01	%
(1) Refer to Non-GAAP Financial Measures in the, Management’s Discussion and Analysis of Financial condition and Results of Operations, of this filing.
		December 31,
		2022			2021
CAPITAL
Tangible equity to tangible assets (1)		9.84	%		9.35	%
Book value (BV) per common share	$	14.51		$	13.92
Tangible BV per common share (1)	$	12.32		$	11.73
ASSET QUALITY
Allowance for loan losses (ALL)	$	17,099		$	11,657
ALL to total loans		0.90	%		0.77	%
ALL to total loans (excl PPP)		0.90	%		0.81	%
Nonperforming loans	$	41		$	809
Other real estate owned	$	—		$	—
Nonperforming assets to total assets		0.00	%		0.04	%
END OF PERIOD BALANCES
Total loans, including loans held for sale	$	1,906,800		$	1,504,748
Total assets	$	2,283,927		$	2,259,866
Deposits	$	1,931,905		$	1,973,098
Loans to deposits		98.7	%		76.3	%
Shareholders’ equity	$	260,355		$	246,528

(1) Refer to Non-GAAP Financial Measures, included in the, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this filing.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our consolidated financial condition and consolidated results of operations should be read in conjunction with our consolidated financial statements and related notes. Historical consolidated results of operations and the percentage relationships among any amounts included, and any trends that may appear, may not indicate trends in operations or consolidated results of operations for any future periods. We are a bank holding company and we conduct all of our material business operations through the Bank. As a result, the discussion and analysis below primarily relate to activities conducted at the Bank level.

Overview

Southern California Bancorp is a California corporation incorporated on October 2, 2019 and is headquartered in Del Mar, California. On May 15, 2020, we completed a reorganization whereby Bank of Southern California, N.A. became the wholly owned subsidiary of the Company. We are regulated as a bank holding company by the Board of Governors of the Federal Reserve System (“Federal Reserve”). The Bank operates under a national charter and is regulated by the Office of Comptroller of the Currency (“OCC”).

We are a relationship-focused community bank and we offer a range of financial products and services to individuals, professionals, and small- to medium-sized businesses through our 13 branch offices serving Orange, Los Angeles, Riverside, San Diego and Ventura counties. We have kept a steady focus on our solution-driven, relationship-based approach to banking, providing clients accessibility to decision makers and enhancing value through strong client partnerships. We are a Preferred SBA Lender. Our lending products consist primarily of construction and land development loans, real estate loans, C&I loans, SBA loans, and consumer loans. Our deposit products consist primarily of demand deposit, money market, and certificates of deposit. We also provide treasury management services including online banking, cash vault, sweep accounts and lock box services.

Recent Developments

Branch Sale and Acquisition

Effective at the close of business on September 24, 2021, the Orange, Redlands and Santa Fe Springs retail branches were sold to a third party financial institution which acquired certain branch assets and assumed certain branch liabilities including deposits. No loans were sold as part of the transaction. The assets and liabilities of these three branches primarily consisted of $146 thousand of cash and cash equivalents and $82.4 million of deposits. The transaction resulted in a net cash payment to the third party financial institution of $81.5 million, and a gain on sale of $726 thousand recorded as a component of noninterest income in the consolidated statements of income.

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We completed our acquisition of BSCA on October 1, 2021. The acquisition has been accounted for using the acquisition method of accounting and, accordingly, the operating results of BSCA have been included in the consolidated financial statements since October 2, 2021. On the acquisition date, we acquired total assets, loans and deposits of $424.6 million, $268.8 million, and $342.3 million, respectively. Goodwill in the amount of $18.1 million was recorded and represents the excess of the purchase consideration over the fair value of the net assets acquired and was primarily attributable to the expected synergies and economies of scale from combining our operations with BSCA. Refer to Note 2 – Business Combinations of the Notes to Consolidated Financial Statements included in Item 13 for more information about the BSCA acquisition.

Pandemic

The pandemic continues to recede and thus is becoming less disruptive to the economy. Concerns of a potential recession have increased as the Federal Reserve continues to increase interest rates to slow down inflation. The Federal Reserve raised interest rates by an aggregate of 425 basis points in 2022, to a range between 4.25% and 4.5% at December 31, 2022 and by an additional 25 basis points in February and another 25 basis points in March 2023, the highest level in 15 years. The Federal Reserve said the economy is seeing “modest” growth and that inflation “remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.” Future actions that may be taken by the Federal Reserve may continue to impact key macroeconomic variables. We continue to monitor macroeconomic variables related to increasing interest rates, inflation, the concerns of an economic downturn, and its effects on our business, customers, employees, communities and markets. The following challenges could have an impact on our business, consolidated financial condition or near- or longer-term financial or consolidated results of operations:

● Slower loan growth and declining deposits;

● Difficulty retaining and attracting deposit relationships;

● Credit quality deterioration of our loan portfolio resulting in additional provision for credit losses and impairment charges;

● Margin pressure as we increase deposit rates to attract funds to support sustained high loan growth;

● Increases in other comprehensive loss from the unrealized losses on available-for-sale debt securities; and

● Liquidity stresses to maintain sufficient levels of high-quality liquid assets and access to borrowing lines and other sources of funding.

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Difficult Market Conditions are Adversely Affecting the Banking Industry

The rapid rise in interest rates during 2022, the resulting industry-wide reduction in the fair value of securities portfolios, and the recent bank runs that led to the failures of some financial institutions in March of 2023, among other events, have resulted in a current state of volatility and uncertainty with respect to the health of the U.S. banking system, particularly around liquidity, uninsured deposits and customer concentrations. The situation is stabilizing due to strong actions taken by federal regulators in attempts to calm the markets. In March 2023, the Federal Reserve announced the creation of a new Bank Term Funding Program (“BTFP”) which provides an additional source of liquidity against high quality securities, in an effort to minimize the need for banks to quickly sell securities at a loss in times of stress. The BTFP offers advances for a term of up to one year to eligible borrowers that pledge U.S.Treasuries, agency debt, mortgage-backed securities, and other qualifying assets as collateral. The rate for term advances will be the one-year overnight index swap rate plus 10 basis points; the rate will be fixed for the term of the advance on the day the advance is made. Borrowers may prepay advances (including for purposes of refinancing) at any time without penalty.

Notwithstanding these recent market events and activities, we have not been materially impacted on our financial condition, operations, customer base, liquidity, capital position or risk profile. We have a strong consolidated balance sheet with very diversified deposit and loan portfolios, with very little sector or individual customer concentration. Our relationship-based banking model is founded on strong, ongoing relationships with our commercial clients, which represent a broad variety of commercial industries. The current uncertainty in the banking industry has provided us with an opportunity to attract new clients that have concerns about the banks they have been doing business with, based on the above events. We have no meaningful exposure to cryptocurrency or venture capital business models and our accumulated other comprehensive loss on our available-for-sale debt securities is manageable. However, in an abundance of caution, we have proactively responded to these events by reaching out to our deposit customers and explaining what differentiates us from the recently failed banks and assuring them that their deposits remain safe.

Given the nature of our commercial banking business, approximately 50% of our total deposits exceeded the FDIC deposit insurance limits at March 31, 2023. However, we offer large depositors access to the ICS Product, which allows us to divide customers deposits that exceed the FDIC insurance limits into smaller amounts, below the FDIC insurance limits, and place those deposits in other participating FDIC insured institutions, effectively providing expanded FDIC insurance coverage with the convenience of managing all deposit accounts through our Bank. Our total deposits in the ICS Product increased to $140.3 million, or 7% of total deposits at March 31, 2023, compared to $65.5 million, or 3% of total deposits at December 31, 2022. At March 31, 2023, total deposits increased $54.0 million, of which $63.7 million was from brokered time deposits that replaced the $50 million in overnight FHLB advances that were outstanding at December 31, 2022. Excluding brokered deposits, total deposits decreased $9.8 million, or 0.5% from total deposits at December 31, 2022.

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The following table presents the ending balance, percentage of deposits and spot rates at the periods indicated:

	March 31, 2023								December 31, 2022
			% of			Spot					% of			Spot
(dollars in thousands)	Amount		Total			Rate (1)			Amount		Total			Rate (1)
Noninterest-bearing demand	$	881,999		44	%		0.0	%	$	923,899		48	%		0.0	%
Interest-bearing deposits:
Interest-bearing NOW accounts		248,809		13	%		1.1	%		209,625		11	%		0.3	%
Money market and savings accounts		677,636		34	%		1.9	%		668,602		35	%		1.2	%
Time deposits		92,932		5	%		2.3	%		109,032		6	%		2.1	%
Brokered time deposits		84,479		4	%		3.8	%		20,747		1	%		1.1	%
	$	1,985,855		100	%		1.1	%	$	1,931,905		100	%		0.6	%

(1) Weighted average interest rates at March 31, 2023 and December 31, 2022.

We have a small investment portfolio of high-quality securities. As of March 31, 2023, the amortized cost of our held-to-maturity debt securities was $53.9 million, or approximately 2.3% of total assets. The fair value of our available-for-sale debt securities was $124.4 million, or approximately 5.4% of total assets. In 2022, we deployed our excess cash by purchasing held-to-maturity debt securities that are not marked to market, which means there is no unrealized loss recorded through the accumulated other comprehensive loss if their market value is impacted by changes in interest rates. We carry the held-to-maturity debt securities at amortized cost and available-for-sale debt securities at fair value on our consolidated balance sheets. The unrealized gains or losses, net of taxes, on our available-for-sale debt securities are reported as a separate component of other comprehensive income included in shareholders’ equity. At March 31, 2023, our accumulated other comprehensive loss, net of taxes, decreased to $5.0 million, compared to $6.4 million at December 31, 2022. If we realized all of our unrealized losses on both held-to-maturity and available-for-sale debt securities, our unrealized losses (net of taxes) would be $7.9 million at March 31, 2023. The results of our stress testing on our debt security portfolio at December 31, 2022, illustrated that we would continue to be “well-capitalized”, even in an up to 300 basis point rate shock scenario. At December 31, 2022, our tangible common equity (non-GAAP) was $221.0 million, Refer to Non-GAAP Financial Measures in the, Management’s Discussion and Analysis of Financial condition and Results of Operations, of this filing.

The amortized cost of held-to-maturity and available-for-sale debt securities and their approximate fair values at March 31, 2023 and December 31, 2022 were as follows:

	March 31, 2023							December 31, 2022
			Gross			Estimated				Gross			Estimated
	Amortized		Unrealized			Fair		Amortized		Unrealized			Fair
(dollars in thousands)	Cost		Gains/(Losses)			Value		Cost		Gains/(Losses)			Value
Held-to-maturity	$	53,864	$	(4,151	)	$	49,713	$	53,946	$	(6,040	)	$	47,906
Available-for-sale		131,550		(7,112	)		124,438		121,652		(9,072	)		112,580
	$	185,414	$	(11,263	)	$	174,151	$	175,598	$	(15,112	)	$	160,486

We continue to benefit from solid liquidity and stabilized deposit balances to maintain sufficient liquidity to meet our cash flow requirements as of March 31, 2023.

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Our liquidity position, with the following financial balances (unaudited) as of March 31, 2023, compared to December 31, 2022:

● Total cash and cash equivalents approximately $102 million, compared to $86.8 million.

● Total liquidity ratio approximately 11.6%, compared to 10.5%.

● Unpledged, liquid securities were approximately $132 million, compared to $122 million.

● Available borrowing capacity from Federal Home Loan Bank secured lines of credit approximately $453 million, compared to $374.4 million. There were no outstanding borrowings at March 31, 2023.

● Increased our available borrowing capacity from Federal Reserve Discount Window program to approximately $110 million, compared to $11.3 million. There were no outstanding borrowings at March 31, 2023.

● Available borrowing capacity from the three unsecured credit lines from correspondent banks totaling $75.0 million at both periods. There were no outstanding borrowings at March 31, 2023.

● Did not participate in Federal Reserve Bank Term Funding Program borrowings in March 2023.

Impact of Acquisition on Earnings

The comparability of financial information presented in Management’s Discussion and Analysis of Financial Condition and Results of Operations is affected by our acquisition of BSCA. We completed the acquisition on October 1, 2021. This acquisition has been accounted for using the acquisition method of accounting and, accordingly, BSCA’s operating results have been included in the consolidated financial statements for periods beginning after October 1, 2021.

Critical Accounting Policies and Estimates

Our accounting and reporting policies conform to accounting principles generally accepted in the United States of America (“GAAP”) and conform to general practices within the financial services industry, the most significant of which are described in Note 1 — Basis of Presentation and Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Item 13.

The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments based on available information. These estimates, assumptions and judgments affect the amounts reported in the financial statements and accompanying notes. While we base these estimates, assumptions and judgments on historical experience, current information available and other factors deemed to be relevant, actual results could differ from the estimates, assumptions and judgments reflected in the financial statements.

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Critical accounting policies are defined as those that require the most complex or subjective judgment and are reflective of significant uncertainties, and could potentially result in materially different results under different assumptions and conditions. In particular, management has identified several accounting policies that, due to the estimates, assumptions and judgments inherent in those policies, are critical in understanding our financial statements. The following is a discussion of these critical accounting policies and significant estimates that require us to make complex and subjective judgments.

Allowance for Loan Losses

The ALL is a valuation allowance for probable incurred credit losses. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off. Amounts are charged-off when available information confirms that specific loans or portions thereof are uncollectible. This methodology for determining charge-offs is consistently applied to each segment.

We determine a separate allowance for each portfolio segment. The allowance consists of specific and general reserves. Specific reserves relate to loans that are individually classified as impaired.

We consider a loan to be impaired when it is probable that we will not be able to collect all amounts due, principal and interest, according to the contractual terms of the loan agreement. Factors considered in determining impairment include payment status, collateral value and the probability of collecting all amounts when due. Measurement of impairment is based on the expected future cash flows of an impaired loan, which are to be discounted at the loan’s effective interest rate, or measured by reference to an observable market value, if one exists, or the fair value of the collateral for a collateral-dependent loan. We select the measurement method on a loan-by-loan basis, with the exception of collateral-dependent loans for which foreclosure is probable that are measured at the net realizable value of the collateral.

General reserves cover non-impaired loans and are based on historical loss rates for each portfolio segment, adjusted for the effects of qualitative or environmental factors that are likely to cause estimated credit losses as of the evaluation date to differ from the portfolio segment’s historical loss experience. We review the historical loss rates for each portfolio segment and utilize peer loss rates when we do not have sufficient historical experience or otherwise feel historical experience is not indicative of the current loan portfolio. Qualitative factors include consideration of the following: changes in lending policies and procedures; changes in economic conditions; changes in the nature and volume of the portfolio; changes in the experience, ability and depth of lending management and other relevant staff; changes in the volume and severity of past due, nonaccrual and other adversely graded loans; changes in the loan review system; the existence and effect of any concentrations of credit; the effect of other external factors such as competition and legal and regulatory requirements; the quality and effectiveness of the risk rating system; and the quality of regulatory and other external credit reviews.

Portfolio segments identified by us include construction and land development, real estate, C&I and consumer loans. Relevant risk characteristics for these portfolio segments generally include debt to income ratios or debt service coverage, credit scores, collateral type and loan-to-value ratios and financial performance.

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Effective January 1, 2023, we adopted the Financial Accounting Standards Board (“FASB”), Accounting Standards Update 2016-13, “Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments,” commonly referred to as the “Current Expected Credit Losses” standard, or “CECL.” CECL changes the ALL methodology from an incurred loss concept to an expected loss concept, which is more dependent on future economic forecasts, assumptions and models than previous accounting standards and could result in increases in, and add volatility to, our ALL and future provisions for loan losses. For additional information regarding the adoption of CECL, refer Note 1 – Basis of Presentation and Summary of Significant Accounting Policies – Recent Accounting Guidance Not Yet Effective included in Item 13 of this filing.

Business Combinations

Business combinations are accounted for using the acquisition method of accounting under ASC Topic 805 - Business Combinations. Under the acquisition method, identifiable assets acquired, including identifiable intangible assets, and liabilities assumed in a business combination are measured at fair value on the acquisition date. The excess of the fair value of the consideration transferred, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date is recognized as goodwill.

The estimates used to determine the fair values of assets and liabilities acquired in a business combination can be complex and require judgment. For example, we utilize a discounted cash flow approach to measure the fair value of core deposit intangible assets acquired in business combinations. This approach requires us to apply a number of critical estimates that include, but are not limited to, future expected cash flows from depositor relationships, expected “decay” rates, and the determination of discount rates. These critical estimates are difficult to predict and may result in impairment charges in future periods if actual results materially differ from those initially estimated.

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Non-GAAP Financial Measures

This filing contains certain non-GAAP financial measures in addition to results presented in accordance with GAAP. We believe the presentation of certain non-GAAP financial measures provides information useful to assess our consolidated financial condition and consolidated results of operations and to assist investors in evaluating our consolidated financial results relative to our peers. These non-GAAP financial measures complement our GAAP reporting and are presented below to provide investors and others with information that we use to manage the business each period. Because not all companies use identical calculations, the presentation of these non-GAAP financial measures may not be comparable to other similarly titled measures used by other companies. These non-GAAP measures should be taken together with the corresponding GAAP measures and should not be considered a substitute of the GAAP measures.

(1) Efficiency ratio is computed by dividing noninterest expense by total net interest income and noninterest income. We measure our success and the productivity of our operations through monitoring of the efficiency ratio.

(2) Pre-tax pre-provision income is computed by adding net interest income and noninterest income and subtracting noninterest expense. This non–GAAP financial measure provides a greater understanding of pre–tax profitability before giving effect to credit loss expense.

(3) Average tangible common equity is computed by subtracting goodwill and core intangible deposits, net from average shareholders’ equity.

(4) Return on average tangible common equity is computed by dividing net income by average tangible common equity. It helps us measure our performance of businesses consistently, whether they were acquired or developed internally.

(5) Tangible common equity and tangible assets are computed by subtracting goodwill and core intangible deposits, net from total shareholders’ equity and total assets.

(6) Tangible common equity to tangible assets ratio is computed by dividing tangible common equity by tangible assets.

(7) Tangible book value per share is computed by dividing tangible common equity by total common shares outstanding. We consider tangible book value per share a meaningful measure because it suggests what our common shareholders can expect to receive if we are in financial distress and are forced to liquidate our assets at the book value price. Intangible assets like goodwill are not a part of the process since they cannot be sold for cash during liquidation.

We consider average tangible common equity, tangible common equity, and tangible common equity to tangible asset ratio as useful additional methods to evaluate our capital utilization and adequacy to withstand unexpected market conditions. These ratios differ from the regulatory capital ratios principally in that the numerator excludes goodwill and other intangible assets.

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The following tables present a reconciliation of non-GAAP financial measures to GAAP measures for the periods indicated:

	For the Year Ended December 31,
(dollars in thousands)	2022			2021
Efficiency Ratio
Noninterest expense	$	64,028		$	53,539
Net interest income		87,786			64,411
Noninterest income		3,675			4,514
Total net interest income and noninterest income	$	91,461		$	68,925
(1) Efficiency ratio (non-GAAP)		70.0	%		77.7	%
Pre-tax pre-provision income
Net interest income	$	87,786		$	64,411
Noninterest income		3,675			4,514
Total net interest income and noninterest income		91,461			68,925
Less: Noninterest expense		64,028			53,539
(2) Pre-tax pre-provision income (non-GAAP)	$	27,433		$	15,386
Return on Average Assets, Equity, and Tangible Equity
Net income	$	16,113		$	10,709
Average assets	$	2,301,418		$	1,867,603
Average shareholders’ equity		250,054			191,145
Less: Average intangible assets		38,960			24,707
(3) Average tangible common equity (non-GAAP)	$	211,094		$	166,438
Return on average assets		0.70	%		0.57	%
Return on average equity		6.44	%		5.60	%
(4) Return on average tangible common equity (non-GAAP)		7.63	%		6.43	%

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	December 31,
(dollars in thousands, except per share amounts)	2022			2021
Tangible Common Equity Ratio/Tangible Book Value Per Share
Shareholders’ equity	$	260,355		$	246,528
Less: Intangible assets		39,387			38,806
(5) Tangible common equity (non-GAAP)	$	220,968		$	207,722
Total assets	$	2,283,927		$	2,259,866
Less: Intangible assets		39,387			38,806
(6) Tangible assets (non-GAAP)	$	2,244,540		$	2,221,060
Equity to asset ratio		11.40	%		10.91	%
(6) Tangible common equity to tangible asset ratio (non-GAAP)		9.84	%		9.35	%
Book value per share	$	14.51		$	13.92
(7) Tangible book value per share (non-GAAP)	$	12.32		$	11.73
Shares outstanding		17,940,283			17,707,737

Results of Operations

Net Income

Net income for the year ended December 31, 2022 was $16.1 million, or $0.88 per diluted share, compared to $10.7 million, or $0.72 per diluted share in the prior year. The operating results of 2022 were partly impacted by including the full year of BSCA’s operating results. The increase in net income in 2022 compared with 2021 was primarily due to a $23.4 million increase in net interest income, which was partially offset by a $10.5 million increase in noninterest expense, and a $4.3 million increase in the provision for loan losses, primarily related to strong loan growth in 2022. Pre-tax, pre-provision income for 2022 was $27.4 million, an increase of $12.0 million, or 78.3% compared to pre-tax, pre-provision income of $15.4 million for the full year of 2021.

Net Interest Income and Margin

Net interest income is our primary source of revenue, which is the difference between interest income on loans, debt securities and other investments (collectively, “interest-earning assets”) and interest expense on deposits and borrowings (collectively, “interest-bearing liabilities”). Net interest margin represents net interest income expressed as a percentage of interest-earning assets. Net interest income is affected by changes in volume, mix, and rates of interest-earning assets and interest-bearing liabilities, as well as days in a period.

We closely monitor both total net interest income and the net interest margin and seek to maximize net interest income without exposing us to an excessive level of interest rate risk through our asset and liability management policies.

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The following table presents interest income, average interest-earning assets, interest expense, average interest-bearing liabilities, and their corresponding yields and costs for the years indicated:

	Year Ended
	December 31, 2022							December 31, 2021
	Average Balance		Income/Expense		Yield/Cost			Average Balance		Income/Expense		Yield/Cost
Assets		($ in thousands)
Interest-earning assets:
Total non-PPP loans(1)	$	1,707,487	$	84,711		4.96	%	$	1,029,702	$	48,523		4.71	%
Total PPP loans(1)		13,073		1,655		12.66	%		326,064		17,690		5.43	%
Total loans(1)		1,720,560		86,366		5.02	%		1,355,766		66,213		4.88	%
Taxable debt securities		96,357		2,013		2.09	%		26,964		414		1.54	%
Tax-exempt debt securities (2)		54,744		1,372		3.17	%		1,787		41		2.90	%
Deposits in other financial institutions		210,467		1,509		0.72	%		358,905		453		0.13	%
Fed funds sold/resale agreements		65,172		1,388		2.13	%		15,559		17		0.11	%
Restricted stock investments and other bank stock		14,668		927		6.32	%		11,186		635		5.68	%
Total interest-earning assets		2,161,968		93,575		4.33	%		1,770,167		67,773		3.83	%
Total noninterest-earning assets		139,450							97,436
Total assets	$	2,301,418						$	1,867,603
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Interest-bearing NOW accounts	$	211,075	$	312		0.15	%	$	135,765	$	207		0.15	%
Money market and savings accounts		690,830		3,481		0.50	%		589,384		1,113		0.19	%
Time deposits		100,746		797		0.79	%		105,101		734		0.70	%
Total interest-bearing deposits		1,002,651		4,590		0.46	%		830,250		2,054		0.25	%
Borrowings:
FHLB advances		932		43		4.61	%		5,170		25		0.48	%
Paycheck Protection Program Liquidity Facility		—		—		—	%		17,150		60		0.35	%
Subordinated debt		17,723		1,086		6.13	%		17,628		1,083		6.14	%
Junior subordinated debentures		1,239		70		5.65	%		2,718		140		5.15	%
Total borrowings		19,894		1,199		6.03	%		42,666		1,308		3.07	%
Total interest-bearing liabilities		1,022,545		5,789		0.57	%		872,916		3,362		0.39	%
Noninterest-bearing liabilities:
Noninterest-bearing deposits (3)		1,006,795							783,754
Other liabilities		22,024							19,788
Shareholders’ equity		250,054							191,145
Total Liabilities and Shareholders’ Equity	$	2,301,418						$	1,867,603
Net interest spread						3.76	%						3.44	%
Net interest income and margin			$	87,786		4.06	%			$	64,411		3.64	%
Net interest income and margin excluding PPP loans			$	86,131		4.01	%			$	46,721		3.24	%
Cost of deposits						0.23	%						0.13	%
Cost of funds						0.29	%						0.20	%

(1)	Total loans are net of deferred loan origination fees/costs and discounts/premiums, and include average balances of loans held for sale and nonperforming loans. Interest income includes accretion of net deferred loan fees and net purchased discounts of $3.8 million and $7.4 million for the years ended December 31, 2022 and 2021 respectively.
(2)	Tax-exempt debt securities yields are presented on a tax equivalent basis using a 21% tax rate.
(3)	Average noninterest-bearing deposits represent 50.10%, and 48.56% of average total deposits for the years ended December 31, 2022 and 2021 respectively.

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Net interest income for the year ended December 31, 2022 was $87.8 million, compared to $64.4 million in the prior year. The increase was primarily due to a $25.8 million increase in total interest income, partially offset by a $2.4 million increase in total interest expense. During the year ended December 31, 2022, loan interest income increased $20.2 million, debt securities income increased $1.6 million, and interest and dividend income from other financial institutions increased $2.7 million. The increase in interest income was due to a number of factors: higher average non-PPP loans from organic loan growth and the acquisition of BSCA; a change in the interest-earning asset mix; and increases in yields on interest-earning assets resulting from increases in the target Fed fund rates. Average interest-earning assets increased $391.8 million, resulting from a $677.8 million increase in average non-PPP loans, a $49.6 million increase in average Fed funds sold/resale agreements, and a $69.4 million increase in average debt securities, partially offset by a $148.4 million decrease in average lower yielding deposits in other financial institutions, and a $313.0 million decrease in average PPP loans. The increase in interest expense for the year ended December 31, 2022 was primarily due to a $2.4 million increase in interest expense on money market and saving accounts resulting from the increase in target Fed fund rates, coupled with the increase in average balances between periods.

Net interest margin for the year ended December 31, 2022 was 4.06%, compared with 3.64% in the prior year. The increase was primarily related to a 50 basis point increase in the total interest-earning assets yield resulting from higher market interest rates and a change in our interest-earning asset mix, partially offset by a 9 basis point increase in the cost of funds. The yield on total earning assets during the year ended December 31, 2022 was 4.33%, compared with 3.83% in the prior year. The yield on average loans during the year ended December 31, 2022 was 5.02%, an increase of 14 basis points from 4.88% in the prior year.

Cost of funds for the year ended December 31, 2022 was 29 basis points, an increase from 20 basis points in the prior year. The increase was the net result of an increase in the cost of interest-bearing deposits from 25 basis points for the year ended December 31, 2021 to 46 basis points for the year ended December 31, 2022, partially offset by an increase in average noninterest-bearing deposits. Average noninterest-bearing demand deposits increased $223.0 million to $1.01 billion and represented 50.1% of total average deposits during the year ended December 31, 2022, compared with $783.8 million and 48.6%, respectively, for the prior year. The total cost of deposits for the year ended December 31, 2022 was 23 basis points, up from 13 basis points in the prior year.

Average total borrowings decreased $22.8 million to $19.9 million for the year ended December 31, 2022 resulting from payoffs of FHLB advances and the Paycheck Protection Program Liquidity Facility (“PPPLF”) borrowings in 2021, and the early extinguishment of the junior subordinated debentures. The average cost of total borrowings was 6.03% for the year ended December 31, 2022, an increase from 3.07% in the prior year.

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Rate/Volume Analysis

The following table presents the changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. Information is provided on changes attributable to (i) changes in volume multiplied by the prior rate and (ii) changes in rate multiplied by the prior volume. Changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

	Year Ended December 31, 2022 vs. 2021
	Increase (Decrease) Due to
	Volume			Rate		Net
Interest-earning assets:		($ in thousands)
Total non-PPP loans	$	33,500		$	2,688	$	36,188
Total PPP loans		(26,457	)		10,422		(16,035	)
Total loans		7,043			13,110		20,153
Taxable debt securities		1,405			194		1,599
Tax-exempt debt securities		1,326			5		1,331
Deposits in other financial institutions		(258	)		1,314		1,056
Fed fund sold/resale agreements		205			1,166		1,371
Restricted stock investments and other bank stock		213			79		292
Total interest-earning assets		9,934			15,868		25,802
Interest-bearing liabilities:
Interest-bearing NOW accounts		105			—		105
Money market and savings accounts		221			2,147		2,368
Time deposits		(31	)		94		63
Total interest-bearing deposits		295			2,241		2,536
Borrowings:
FHLB advances		(36	)		54		18
PPPLF		(60	)		—		(60	)
Subordinated debts		3			—		3
Junior subordinated debentures		(83	)		13		(70	)
Total borrowings		(176	)		67		(109	)
Total interest-bearing liabilities		119			2,308		2,427
Net interest income	$	9,815		$	13,560	$	23,375

Provision for Loan Losses

We recorded a loan loss provision of $5.5 million during the year ended December 31, 2022, compared to $1.2 million for the prior year. The increase in the provision is primarily related to strong organic loan growth from loans held for investment, excluding PPP loans, which grew $448.2 million during the year. We continue to monitor macroeconomic variables related to increasing interest rates, inflation and the concerns of an economic downturn and believe we are appropriately provisioned for the current environment.

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Noninterest Income

The following table sets forth the various components of our noninterest income for the periods indicated:

	Year Ended December 31,
(dollars in thousands)	2022			2021
Service charges and fees on deposit accounts	$	1,014		$	826
Interchange and ATM income		782			775
Gain on sale of loans		1,349			920
Income from bank-owned life insurance		1,490			786
Servicing and related income on loans, net		192			116
(Loss) gain on sale of debt securities		(994	)		46
Loss on sale and disposal of fixed assets		(768	)		(4	)
Gain on branch sale		—			726
Other charges and fees		610			323
Total noninterest income	$	3,675		$	4,514

Total noninterest income during the year ended December 31, 2022 was $3.7 million, a decrease of $839 thousand compared to total noninterest income of $4.5 million in the prior year. The decrease was due primarily to higher losses on the sale of debt securities and the disposal of fixed assets, and lower gain on branch sale, partially offset by higher gains on sale of loans, and higher income from bank-owned life insurance.

Gain on sale of loans was $1.3 million during the year ended December 31, 2022, compared to $920 thousand during the prior year. The $429 thousand increase was primarily due to the SBA 7(a) loan sales during the year ended December 31, 2022. During the year ended December 31, 2022, loan sales related to 17 SBA loans with a net carrying value of $20.0 million, resulted in a gain of $1.3 million, at an average premium of 6.5% and one non-SBA loan with a net carrying value of $360 thousand, resulting in a gain of $56 thousand. This compares to two acquired non-SBA loans with a gain on sale of $920 thousand during the year ended December 31, 2021.

Income from bank-owned life insurance was $1.5 million during the year ended December 31, 2022, compared to $786 thousand during the prior year. The $704 thousand increase between periods was primarily due to higher death benefit income.

During the year ended December 31, 2022, we sold $23.3 million of low-yielding available-for-sale debt securities in order to redeploy the proceeds into higher-yielding securities, resulting in a loss of $994 thousand, compared to sales of $2.8 million in the prior year, resulting in a gain of $46 thousand.

During the year ended December 31, 2022, we recorded a $768 thousand loss on sale of a building and related fixed assets that were acquired as part of the BSCA acquisition in 2021; there was no comparable transaction in the prior year.

During the year ended December 31, 2021, as part of our commercial banking strategy, we completed the sale of three retail branches and recorded a gain on branch sale of $726 thousand. There was no corresponding transaction in 2022.

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Noninterest Expense

The following table sets forth the various components of our noninterest expense for the periods indicated:

	Year Ended December 31,
(dollars in thousands)	2022		2021
Salaries and employee benefits	$	37,069	$	34,883
Occupancy and equipment		6,210		5,522
Data processing and communications		4,609		4,111
Legal, audit and professional		2,597		1,678
Regulatory assessments		1,550		990
Director and shareholder expenses		946		636
Merger and related expenses		1,177		2,450
Core deposit intangible amortization		438		364
Litigation settlements, net		5,525		—
Other expenses		3,907		2,905
Total noninterest expense	$	64,028	$	53,539

Total noninterest expense during the year ended December 31, 2022 was $64.0 million, an increase of $10.5 million compared with total noninterest expense of $53.5 million in the prior year. The increase was primarily due to increases in salaries and benefits, occupancy and equipment, data processing and communications, and other expenses due, in part, to a full year of activity related to the acquisition of BSCA in 2021, and litigation settlements, net of $5.5 million, partially offset by a decrease in merger and related expenses.

The litigation settlements in 2022 were primarily related to a comprehensive settlement of all litigation with PacWest Bancorp and Pacific Western Bank. On August 23, 2022, the Company entered into a Confidential Settlement Agreement and Release (the “Settlement”) to resolve a litigation matter filed in the Superior Court of California, under the caption PacWest Bancorp, et al. v. David I. Rainer, et al. Los Angeles, Case No. 20STCV46002. On December 1, 2020, PacWest Bancorp and Pacific Western Bank (collectively “PacWest”) had filed a complaint against David I. Rainer, the Executive Chairman of the Company alleging Mr. Rainer had “raided” PacWest’s clients and employees in violation of a consulting agreement and asserted causes of action against Mr. Rainer for breach of written contract and breach of the implied covenant of good faith and fair dealing. Over the next 18 months, PacWest amended its complaint multiple times to include the Company and additional officers as additional defendants, and to include additional causes of action. The Company, Mr. Rainer and all defendants asserted that the claims were without merit and subsequently filed a cross-complaint against PacWest and its Chariman, John Eggemeyer, for breach of contract, breach of the implied covenant of good faith and fair dealing, unfair competition, and declaratory relief. All parties subsequently agreed to the Settlement.

Salaries and employee benefits were $37.1 million during the year ended December 31, 2022, compared to $34.9 million during the prior year. The $2.2 million increase in salaries and benefits was due primarily to the full year impact of the BSCA acquisition and the expansion of our commercial banking strategy into Orange, Los Angeles and Ventura counties in late 2021 and early 2022, which was partially offset by an increase in deferred loan origination costs resulting from strong loan growth during 2022 and a decrease in stock compensation expense resulting from higher forfeitures in 2022 and accelerated stock compensation expenses of $2.4 million recorded in 2021 related to a preexisting employment contract for which there was no corresponding expense in 2022.

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Occupancy and equipment expenses were $6.2 million during the year ended December 31, 2022, compared to $5.5 million in the prior year. The $688 thousand increase was due primarily to an increase in lease expenses resulting from new and renewed leases, and an increase in depreciation and maintenance expenses related to new leased locations.

Data processing and communications expenses were $4.6 million during the year ended December 31, 2022, compared to $4.1 million during the prior year. The $498 thousand increase in data processing was due primarily to higher software amortization for new and upgraded technology.

Legal, audit and professional expenses were $2.6 million during the year ended December 31, 2022, compared to $1.7 million during the prior year. The $919 thousand increase was due primarily to higher legal expense, higher audit and compliance costs related to expanded internal audit services and higher consulting expense to assist with employment searches and other advisory services to support our growth.

Regulatory assessments were $1.6 million during the year ended December 31, 2022, compared to $990 thousand during the prior year. The $560 thousand increase was due primarily from the increase in the total assets from organic growth and the BSCA acquisition.

Director and shareholder expenses were $946 thousand during the year ended December 31, 2022, compared to $636 thousand in the prior year. The $310 thousand increase was due primarily to the increase in directors’ stock compensation expense resulting from a change in the directors’ compensation program approved in early 2022.

Merger and related expenses were $1.2 million during the year ended December 31, 2022, compared to $2.5 million in the prior year. The $1.3 million decrease was due primarily to (i) a $569 thousand decrease related to the completion of the acquisition of BSCA, (ii) a $325 thousand decrease related to the completion of the core system conversion for the legacy bank, and (iii) a $228 thousand decrease related to three branch sales.

During the year ended December 31, 2022, we had settlements of certain legal matters and recognized aggregate net losses of $5.5 million. There was no similar activity in the prior year.

Other expenses were $3.9 million during the year ended December 31, 2022, compared to $2.9 million in the prior year. The $1.0 million increase was primarily due to an increase in sundry losses of $235 thousand related to an increase in customer fraud activities, an increase in insurance expense of $140 thousand and an increase in travel expense of $101 thousand. Other expense also included a $347 thousand loss on an early extinguishment of the junior subordinated debentures acquired from CalWest Bancorp in 2022, for which there was no corresponding transaction in the prior year.

Our efficiency ratio for the full year of 2022 was 70.0%, compared to 77.7% in 2021.

Income Taxes

Income tax expense during the year ended December 31, 2022 was $5.9 million, compared $3.5 million in the prior year. The effective rate was 26.7% during the year ended December 31, 2022, compared to 24.5% for the prior year. The increase in effective tax rate between periods was primarily due to lower tax benefits associated with share-based compensation arrangements, partially offset by a decrease in the tax impact of merger and related costs, higher tax benefits associated with bank owned life insurance (“BOLI”) income and tax-exempt interest income.

For additional information, see Note 10 — Income Taxes of the Notes to Consolidated Financial Statements included in Item 13.

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Financial Condition

Summary

Total assets at December 31, 2022 were $2.28 billion, an increase of $24.1 million from $2.26 billion at December 31, 2021. The increase in total assets was primarily related to a $111.0 million increase in debt securities and a $393.0 million increase in loans held for investment, partially offset by a $493.2 million decrease in cash and cash equivalents.

Total liabilities were $2.02 billion at December 31, 2022, an increase of $10.2 million from $2.01 billion at December 31, 2021. The increase in total liabilities was driven by a $47.4 million increase in borrowings, partially offset by a $41.2 million decrease in deposits. Shareholders’ equity was $260.4 million at December 31, 2022, an increase of $13.8 million from $246.5 million at December 31, 2021. The increase in shareholders’ equity was driven by net income generated during the year and share-based compensation activity, partially offset by net unrealized losses on available-for-sale debt securities during the period.

Debt Securities

Our debt securities portfolio consists of both held-to-maturity and available-for-sale securities aggregating $166.5 million and $55.6 million at December 31, 2022 and 2021, respectively. The $111.0 million increase during the year was primarily related to purchases of $155.4 million, partially offset by sales of $24.2 million, and principal reductions and amortization of discounts and premiums aggregating to $11.2 million, and fair value market adjustments of $9.0 million.

At December 31, 2022, debt securities held-to-maturity and available-for-sale represented 2.36% and 4.93%, respectively, of total assets, compared to 0% and 2.46%, respectively, at December 31, 2021. In 2022, we deployed excess liquidity through purchases of debt securities.

The amortized cost of held-to-maturity debt securities and their approximate fair values at December 31, 2022 were as follows:

(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2022
Taxable municipals	$	550	$	—	$	(105	)	$	445
Tax exempt bank-qualified municipals		53,396		—		(5,935	)		47,461
	$	53,946	$	—	$	(6,040	)	$	47,906

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The amortized cost of available-for-sale debt securities and their approximate fair values at December 31, were as follows:

(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2022
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities	$	27,029	$	—	$	(3,734	)	$	23,295
SBA securities		7,988		16		(132	)		7,872
U.S. Treasury		6,652		—		(700	)		5,952
U.S. Agency		7,025		—		(842	)		6,183
Collateralized mortgage obligations		47,778		20		(3,375	)		44,423
Taxable municipal		4,403		36		(211	)		4,228
Tax exempt bank-qualified municipals		20,777		163		(313	)		20,627
	$	121,652	$	235	$	(9,307	)	$	112,580
December 31, 2021
U.S. government and agency securities:
Mortgage-backed securities	$	17,419	$	10	$	(114	)	$	17,315
SBA securities		11,421		37		(58	)		11,400
U.S. Treasury		2,863		—		(82	)		2,781
U.S. Agency		6,500		—		(21	)		6,479
Collateralized mortgage obligations		10,398		12		(122	)		10,288
Taxable municipals		5,314		228		(20	)		5,522
Tax exempt bank-qualified municipals		1,706		76		—			1,782
	$	55,621	$	363	$	(417	)	$	55,567

At December 31, 2022, net unrealized holding losses for available-for-sale debt securities were $9.1 million, an increase of $9.0 million from $54 thousand at December 31, 2021. When market interest rates increase, bond prices tend to fall and, consequently, the fair value of our securities may also decrease. Increases in longer-term market interest rates during 2022 have resulted in higher net unrealized losses in our debt securities. There may be further net unrealized losses on our debt securities classified as available–for-sale, which would negatively affect our total and tangible shareholders’ equity.

At December 31, 2022, 88 available-for-sale debt securities with an amortized cost basis and fair value of $106.3 million and $97.0 million, respectively, had unrealized holding losses. Of these debt securities, 43 with an amortized cost basis and fair value of $35.2 million and $30.2 million, respectively, have had unrealized holding losses for longer than twelve months. As of December 31, 2022, we did not have the current intent to sell these available-for-sale debt securities with a fair value below amortized cost, and it is more likely than not that we will not be required to sell such securities prior to the recovery of their amortized cost basis. At December 31, 2022, the total fair value of taxable municipal and tax exempt bank-qualified municipal securities was $4.2 million, and $20.6 million, respectively. At December 31, 2022, these securities were all rated AA and above.

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The amortized cost, estimated fair value and weighted average yield of held-to-maturity and available-for-sale debt securities as of December 31, 2022 are presented below by contractual maturities. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Held-to-Maturity							Available-for-Sale
(dollars in thousands)	Amortized Cost		Estimated Fair Value		Weighted Average Yield (1)			Amortized Cost		Estimated Fair Value		Weighted Average Yield (1)
Due in one year or less	$	—	$	—		—	%	$	1,638	$	1,616		3.18	%
Due after one year through five years		—		—		—	%		20,232		19,034		2.21	%
Due after five years through ten years		6,965		6,441		2.35	%		25,168		22,096		2.28	%
Due after ten years		46,981		41,465		2.26	%		74,614		69,834		3.14	%
	$	53,946	$	47,906		2.27	%	$	121,652	$	112,580		2.81	%

(1) Weighted average yields are computed based on the amortized cost of the individual underlying securities.

Loans Held for Sale

Loans held for sale consist of SBA 7(a) loans originated and held for sale in the secondary market. At December 31, 2022, loans held for sale totaled $9.0 million, compared to no loans held for sale at December 31, 2021.

During the year ended December 31, 2022, we originated $28.5 million of SBA 7(a) loans. During the year ended December 31, 2022, loan sales related to 17 SBA loans with a net carrying value of $20.0 million, resulted in a gain of $1.3 million, at an average premium of 6.5% and one non-SBA loan with a net carrying value of $360 thousand, resulting in a gain of $56 thousand. This compares to two acquired non-SBA loans with a gain on sale of $920 thousand during the year ended December 31, 2021.

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Loans

The composition of our loan portfolio at December 31, 2022 and 2021 was as follows:

(dollars in thousands)	2022			2021
Construction and land development	$	239,067		$	77,629
Real estate - other:
1-4 family residential		144,322			133,993
Multifamily residential		218,606			175,751
Commercial real estate and other		958,676			766,824
Commercial and industrial(1)		331,644			349,023
Consumer		5,458			1,528
Loans(2)		1,897,773			1,504,748
Allowance for loan losses		(17,099	)		(11,657	)
Net loans	$	1,880,674		$	1,493,091

(1) Includes PPP loans with total outstanding principal of $3.6 million and $60.3 million and net unearned fees of $76 thousand and $1.6 million at December 31, 2022 and 2021.

(2) Loans held for investment includes net unearned fees of $3.3 million and $2.8 million and net unearned discount of $1.8 million and $2.8 million at December 31, 2022 and 2021.

Total loans held for investment were $1.90 billion, or 83.1% of total assets, at December 31, 2022, an increase of $393.0 million from $1.50 billion, or 66.6% of total assets, at December 31, 2021. During the year ended December 31, 2022, we were able to deploy excess liquidity into our loan portfolio.

Loans secured by real estate, defined as construction and land development loans and real estate - other loans, increased by $406.5 million to $1.56 billion at December 31, 2022. The increase in loans secured by real estate was primarily driven by a $161.4 million increase in construction and land development loans, a $42.9 million increase in multifamily residential loans, and a $191.9 million increase in CRE and other loans.

Commercial and industrial loans were $331.6 million at December 31, 2022, a decrease of $17.4 million from $349.0 million at December 31, 2021. The decrease in C&I loans was primarily attributable to forgiveness and paydowns of $55.2 million of SBA PPP loans during the year, partially offset by portfolio growth. At December 31, 2022, there were $3.5 million of SBA PPP loans outstanding, net of unearned fees.

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Loan Maturities

The following table sets forth the amounts of gross loans, by maturity, at December 31, 2022:

	December 31, 2022
(dollars in thousands)	Due in One Year or Less		Due after One Year through Five Years		Due after Five Years through Fifteen Years		Due after Fifteen Years		Total
Construction and land development	$	83,167	$	145,976	$	9,924	$	—	$	239,067
Real estate:
1-4 family residential		23,689		44,637		45,854		30,142		144,322
Multifamily residential		3,530		94,628		97,449		22,999		218,606
Commercial real estate and other		18,141		239,178		614,294		87,063		958,676
Commercial and industrial		115,332		156,389		59,919		4		331,644
Consumer		610		4,204		635		9		5,458
	$	244,469	$	685,012	$	828,075	$	140,217	$	1,897,773

The following table sets forth the amounts of gross loans, due after one year, presented by fixed or floating interest rates at December 31, 2022:

	December 31, 2022
(dollars in thousands)	Fixed Rate		Floating Rate		Total
Construction and land development	$	61,836	$	94,064	$	155,900
Real estate:
1-4 family residential		36,085		84,548		120,633
Multifamily residential		96,351		118,725		215,076
Commercial real estate and other		354,363		586,172		940,535
Commercial and industrial		85,629		130,683		216,312
Consumer		853		3,995		4,848
	$	635,117	$	1,018,187	$	1,653,304

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Delinquent Loans

There were no loans past due at December 31, 2022. A summary of past due loans as of December 31, 2021 follows:

(dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Over 90 Days Past Due		Total Past Due
December 31, 2021
Construction and land development	$	—	$	—	$	—	$	—
Real estate:
1-4 family residential		—		569		—		569
Multifamily residential		—		—		—		—
Commercial real estate and other		—		—		—		—
Commercial and industrial		—		477		—		477
Consumer		—		—		—		—
	$	—	$	1,046	$	—	$	1,046

The $1.0 million decrease in total past due loans during the year ended December 31, 2022 was due to the payoffs of a $569 thousand 1-4 family residential loan and the migration back to accrual of a $477 thousand C&Il loan.

Non-performing Assets

We do not have any TDRs as of December 31, 2022 and 2021. Nonperforming assets consist of loans on which we have ceased accruing interest (nonaccrual loans), OREO, and other repossessed assets owned. Nonaccrual loans consist of all loans 90 days or more past due and on loans where, in the opinion of management, there is reasonable doubt as to the collection of principal and interest.

The following table presents a summary of nonperforming assets, along with corresponding nonperforming asset ratios, as of December 31, 2022 and 2021:

(dollars in thousands)	2022			2021
Nonaccrual loans:
Construction and land development	$	—		$	—
Real estate - other:
1-4 family residential		39			68
Multifamily residential		—			—
Commercial real estate and other		2			675
Commercial and industrial		—			58
Consumer		—			8
Total nonaccrual loans		41			809
Loans past due over 90 days or more and still on accrual		—			—
Total nonperforming loans		41			809
Other real estate owned		—			—
Total nonperforming assets	$	41		$	809
Allowance for loan losses to total loans		0.90	%		0.77	%
Nonaccrual loans to total loans		0.00	%		0.05	%
Allowance for loan losses to nonaccrual loans		417.05x			14.41x
Nonperforming assets to total assets		0.00	%		0.04	%

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Total non-performing assets decreased to $41 thousand or 0.002% of total assets at December 31, 2022, compared to $809 thousand or 0.04% of total assets at December 31, 2021. The decrease during the year ended December 31, 2022 was attributable to a $768 thousand decrease in nonaccrual loans.

At December 31, 2022, nonaccrual loans were $41 thousand or 0.002% of total loans, compared to $809 thousand or 0.05% at December 31, 2021. The decrease from December 31, 2021 was due primarily to $721 thousand in payoffs, note sale and charge-offs, partially offset by $9 thousand from one loan downgraded to nonaccrual during the year.

Allowance for Loan Losses

The following table presents a summary of the ALL, by loan class, along with the corresponding percentage of each loan class to total loans as of December 31:

	December 31, 2022					December 31, 2021
(dollars in thousands)	Amount		Percent of loans in each category to total loans			Amount		Percent of loans in each category to total loans
Construction and land development	$	2,301		12.6	%	$	666		5.2	%
Real estate:
1-4 family residential		972		7.6	%		897		8.9	%
Multifamily residential		1,331		11.5	%		1,124		11.7	%
Commercial real estate and other		9,388		50.5	%		6,420		51.0	%
Commercial and industrial		3,079		17.5	%		2,548		23.2	%
Consumer		28		0.3	%		2		—	%
	$	17,099		100.0	%	$	11,657		100.0	%

At December 31, 2022 and 2021, our ratio of ALL to total loans was 0.90% and 0.77%, respectively.

The following table presents a summary of the changes in the ALL for the years ended December 31 follows:

(dollars in thousands)	2022			2021
Balance, beginning of year	$	11,657		$	10,255
Provision for loan losses		5,450			1,200
Charge-offs		(21	)		—
Recoveries		13			202
Net (charge-offs) recoveries		(8	)		202
Balance, end of year	$	17,099		$	11,657

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The following table presents net (charge-offs) recoveries, average loans and net (charge-offs) recoveries as a percentage of average loans for the periods indicated:

	Year Ended December 31, 2022								Year Ended December 31, 2021
(dollars in thousands)	Net (Charge-off) Recovery			Average Loans		(Charge-off) Recovery Ratio			Amount		Average Loans		(Charge-off) Recovery Ratio
Construction and land development	$	—		$	147,423		—	%	$	—	$	38,123		—	%
Real estate:
1-4 family residential		—			134,844		—	%		18		109,221		0.02	%
Multifamily residential		—			187,145		—	%		—		124,719		—	%
Commercial real estate and other		—			920,868		—	%		3		530,037		—	%
Commercial and industrial		(8	)		326,424		0.00	%		177		549,567		0.03	%
Consumer		—			3,856		—	%		4		4,099		0.10	%
	$	(8	)	$	1,720,560		0.00	%	$	202	$	1,355,766		0.01	%

Net charge-offs increased to $8 thousand, or 0.00% of average loans for the year ended December 31, 2022 from net recoveries of $202 thousand, or 0.01% of average loans for the year ended December 31, 2021. The increase was primarily due to loan payoffs. During 2022, one loan was partially charged-off in the first half of the year and started receiving recoveries in the fourth quarter.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

We also maintain a separate allowance for off-balance sheet commitments, which is included in accrued interest and other liabilities in our consolidated balance sheets. Management estimates anticipated losses using historical data and utilization assumptions. The allowance for off-balance sheet commitments totaled $1.3 million and $804 thousand at December 31, 2022 and 2021, respectively. The change in the allowance for off-balance sheet commitments between periods was the result of increases in unfunded commitments between periods due to loan growth. During the years ended December 31, 2022 and 2021, we recognized a provision for credit losses on off-balance sheet commitments of $506 thousand and $600 thousand, respectively.

Servicing Asset and Loan Servicing Portfolio

We sell loans in the secondary market and, for certain loans, retain the servicing responsibility. The loans serviced for others are accounted for as sales and are therefore not included in the accompanying consolidated balance sheets. We receive servicing fees ranging from 0.25% to 1.00% for the services provided over the life of the loan; the servicing asset is initially recognized at fair value based on the present value of the estimated future net servicing income, incorporating assumptions that market participants would use in their estimates of fair value. The risks inherent in the SBA servicing asset relates primarily to changes in prepayments that result from shifts in interest rates and a reduction in the estimated future cash flows. The servicing asset activity includes additions from loan sales with servicing retained and acquired servicing rights and reductions from amortization as the serviced loans are repaid and servicing fees are earned. Loans serviced for others totaled $59.4 million and $29.6 million at December 31, 2022 and 2021, respectively. This includes SBA loans serviced for others of $30.3 million at December 31, 2022 and $17.9 million at December 31, 2021 for which there was a related servicing asset of $514 thousand and $170 thousand, respectively. The fair value of the servicing asset approximated its carrying value at December 31, 2022. Consideration for each SBA loan sale includes the cash received and the fair value of the related servicing asset. The significant assumptions used in the valuation of the SBA servicing asset at December 31, 2022 included a weighted average discount rate of 19.1% and a weighted average prepayment speed assumption of 17.0%.

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Goodwill and Core Deposit Intangibles

Goodwill totaled $37.8 million and $36.8 million at December 31, 2022 and 2021, respectively. The $1.0 million increase in goodwill during the year ended December 31, 2022 was the result of finalizing our allocation of purchase consideration to the net assets acquired from BSCA on October 1, 2021.

Core deposit intangibles totaled $1.6 million and $2.0 million at December 31, 2022 and 2021, respectively. The $438 thousand decrease in core deposit intangibles between periods was the result of amortization during the period. At December 31, 2022, core deposit intangibles had a weighted average remaining amortization period of 7 years.

Refer to Note 2 - Business Combinations and Note 7 - Goodwill and Other Intangible Assets of the Notes to Consolidated Financial Statements included in Item 13 of this filing for more information regarding business combinations and related activity.

Deposits

The following table presents the composition of deposits, and related percentage of total deposits, as of December 31, 2022:

	December 31, 2022					December 31, 2021
(dollars in thousands)	Amount		Percentage of Total Deposits			Amount		Percentage of Total Deposits
Noninterest-bearing demand	$	923,899		47.8	%	$	986,935		50.0	%
Interest-bearing NOW accounts		209,625		10.9	%		193,525		9.8	%
Money market and savings accounts		668,602		34.6	%		690,348		35.0	%
Time deposits		129,779		6.7	%		102,290		5.2	%
Total deposits	$	1,931,905		100.0	%	$	1,973,098		100.0	%

Total deposits were $1.93 billion at December 31, 2022, a decrease of $41.2 million from $1.97 billion at December 31, 2021. The decrease in total deposits was primarily driven by a $63.0 million decrease in noninterest-bearing demand deposits to $923.9 million and a $21.7 million decrease in money market and savings accounts at December 31, 2022 partially offset by increases of $16.1 million and $27.5 million in interest-bearing NOW accounts and time deposits, respectively.

At December 31, 2022, noninterest-bearing demand deposits represented 47.8% of total deposits, compared to 50.0% in the prior year. At December 31, 2022 and 2021, total deposits exceeding FDIC insured limits were $1.19 billion and $860.8 million, respectively.

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The following table sets forth the average balance of deposit accounts and the weighted average rates paid for the periods indicated:

	For the Year Ended December 31,
	2022					2021
(dollars in thousands)	Amount		Average  Rate Paid			Amount		Average Rate Paid
Noninterest-bearing demand	$	1,006,795		—	%	$	783,754		—	%
Interest-bearing NOW accounts		211,075		0.15	%		135,765		0.15	%
Money market and savings accounts		690,830		0.50	%		589,384		0.19	%
Time deposits		100,746		0.79	%		105,101		0.70	%
Total deposits	$	2,009,446		0.23	%	$	1,614,004		0.13	%

The increase in the weighted average rate on deposits was primarily due to increases in market interest rates during the year ended December 31, 2022. Beginning in March 2022 through December 2022, the Federal Reserve’s Federal Open Market Committee has raised the target Fed fund rate by 425 basis points. The following table sets forth the maturities of time deposits at December 31, 2022:

	December 31, 2022
(dollars in thousands)	Three Months of Less		Over Three Months through Six Months		Over Six Months through Twelve Months		Over Twelve Months		Total
Time deposits in amounts of $250,000 or less	$	9,166	$	11,025	$	8,795	$	16,236	$	45,222
Time deposits in amounts over $250,000		67,177		7,031		10,018		331		84,557
Total time deposits	$	76,343	$	18,056	$	18,813	$	16,567	$	129,779

Borrowings

Total borrowings increased $47.4 million to $67.8 million at December 31, 2022 from $20.4 million at December 31, 2021. The increase was primarily attributable to a $50.0 million increase in overnight borrowings, offset by a $2.7 million decrease from the early redemption of junior subordinated debentures in June 2022 (refer to Note 9 - Borrowing Arrangements of the Notes to Consolidated Financial Statements included in Item 13 of this filing). In connection with the early redemption of the junior subordinated debentures, we recorded a loss of $347 thousand which is included in other expenses in the consolidated statements of income for the year ended December 31, 2022.

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A summary of outstanding borrowings, and related information, as of December 31 follows:

(dollars in thousands)	2022			2021
FHLB Advances
Outstanding balance	$	50,000		$	—
Weighted average interest rate, end of period		4.65	%		—	%
Average balance outstanding	$	932		$	5,170
Weighted average interest rate during year		4.61	%		0.48	%
Maximum amount outstanding at any month-end during the year	$	50,000		$	10,000
Federal Reserve Discount Window
Outstanding balance	$	—		$	—
Weighted average interest rate, end of period		—	%		—	%
Average balance outstanding	$	—		$	—
Weighted average interest rate during year		—	%		—	%
Maximum amount outstanding at any month-end during the year	$	—		$	—
Federal Reserve PPP Liquidity Facility
Outstanding balance	$	—		$	—
Weighted average interest rate, end of period		—	%		—	%
Average balance outstanding	$	—		$	17,150
Weighted average interest rate during year		—	%		0.35	%
Maximum amount outstanding at any month-end during the year	$	—		$	54,663
Subordinated Notes
Outstanding balance	$	17,770		$	17,675
Weighted average interest rate, end of period		5.50	%		5.50	%
Average balance outstanding(1)	$	17,723		$	17,628
Weighted average interest rate during year(2)		6.13	%		6.14	%
Maximum amount outstanding at any month-end during the year	$	17,770		$	17,675
Junior Subordinated Debentures
Outstanding balance	$	—		$	2,734
Weighted average interest rate, end of period		—	%		3.02	%
Average balance outstanding(3)	$	1,239		$	2,718
Weighted average interest rate during year(4)		5.65	%		5.15	%
Maximum amount outstanding at any month-end during the year	$	2,746		$	2,734

(1)	Average balance outstanding includes average net unamortized issuance costs for the periods presented.
(2)	Weighted average interest rate includes issuance costs for the periods presented.
(3)	Average balance outstanding includes average acquisition-related discounts for the periods presented.
(4)	Weighted average interest rate includes amortization of acquisition-related discounts for the periods presented.

Shareholders’ Equity

Total shareholders’ equity was $260.4 million at December 31, 2022, compared to $246.5 million at December 31, 2021. The $13.8 million increase between periods was primarily due to net income of $16.1 million, stock-based compensation expense of $3.7 million and stock options exercised of $1.0 million, partially offset by unrealized losses on debt securities available-for-sale of $6.4 million.

Tangible book value per common share at December 31, 2022, was $12.32, compared with $11.73 at December 31, 2021. The $0.59 increase in tangible book value per common share was primarily the result of net income generated during the year, partially offset by the decrease in the other comprehensive loss related to unrealized losses, net of taxes on available-for-sale securities, the balance of which was $6.4 million at December 31, 2022, compared to $38 thousand at December 31, 2021. Tangible book value per common share is also impacted by certain other items, including stock-based compensation expense, the impact of business combinations (at related purchase accounting adjustments), amortization of intangibles, and share changes resulting from share-based compensation results.

The Bank’s leverage capital ratio and total risk-based capital ratio were 10.62% and 11.97%, respectively, at December 31, 2022.

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Liquidity and Market Risk Management

Liquidity

Liquidity is a measure of our ability to meet our cash flow requirements, including inflows and outflows of cash for depositors and borrowers, while at the same time meeting our operating, capital and strategic cash flow needs. Several factors influence our liquidity needs, including depositor and borrower activity, interest rate trends, changes in the economy, maturities, re-pricing and interest rate sensitivity of our debt securities, loan portfolio and deposits. We attempt to maintain a total liquidity ratio (liquid assets, including cash and due from banks, federal funds sold, fully disbursed loans held for sale, investments maturing one year or less, and available-for-sale debt securities not pledged as collateral expressed as a percentage of total deposits) above approximately 10.0%. Our total liquidity ratios were 10.5% at December 31, 2022 and 31.7% at December 31, 2021. During the year ended December 31, 2022, we deployed our excess liquidity into higher yielding assets and loan fundings from strong organic loan growth.

For additional information regarding our operating, investing, and financing cash flows, see “Consolidated Statements of Cash Flows” in our audited consolidated financial statements contained in Item 13 of this filing.

Bank of Southern California, N.A.

The Bank’s primary sources of liquidity are derived from deposits from customers, principal and interest payments on loans and debt securities, FHLB advances and other borrowings. The Bank’s primary uses of liquidity include customer withdrawals of deposits, extensions of credit to borrowers, operating expenses, and repayment of FHLB advances and other borrowings. While maturities and scheduled amortization of loans and debt securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and competition.

At December 31, 2022, we had a secured line of credit of $442.9 million from the FHLB, of which $374.4 million was available. This secured borrowing arrangement is collateralized under a blanket lien on qualifying real estate loans. and is subject to us providing adequate collateral and continued compliance with the Advances and Security Agreement and other eligibility requirements established by the FHLB. At December 31, 2022, we had pledged qualifying loans with an unpaid principal balance of $834.7 million for this line. In addition, at December 31, 2022, we used $18.5 million of our secured FHLB borrowing capacity by having the FHLB issue letters of credit to meet collateral requirements for deposits from the State of California and other public agencies.

At December 31, 2022, we had credit availability of $11.3 million at the Federal Reserve discount window to the extent of collateral pledged. At December 31, 2022, we had pledged qualifying loans with a book value of $12.7 million as collateral through the Borrower-in-Custody (“BIC”) program. We had no discount window borrowings at December 31, 2022 or 2021.

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We have three overnight unsecured credit lines from correspondent banks totaling $75.0 million. The lines are subject to annual review. There were no outstanding borrowings under these lines at December 31, 2022 and 2021.

Southern California Bancorp

The primary sources of liquidity of the Company, on a stand-alone holding company basis, are derived from dividends from the Bank, borrowings, and its ability to issue debt and raise capital. The Company’s primary uses of liquidity are operating expenses and payments of interest and principal on borrowings.

On May 28, 2020, we issued $18 million of 5.50% Fixed-to-Floating Rate Subordinated Notes Due 2030 (the “Notes”). The Notes which mature March 25, 2030 accrue interest at a fixed rate of 5.50% through the fixed rate period to March 26, 2025, after which interest accrues at a floating rate of 90-day SOFR plus 350 basis points, until maturity, unless redeemed early, at our option, after the end of the fixed rate period. Issuance costs of $475 thousand were incurred and are being amortized over the first 5-year fixed term of the Notes; unamortized issuance costs at December 31, 2022 and 2021, were $230 thousand and $325 thousand, respectively. The net unamortized issuance costs are netted against the balance and recorded in the borrowings in the consolidated balance sheets. The amortization expenses are recorded in interest expense on the consolidated statements of income. At December 31, 2022, we were in compliance with all covenants and terms of the Notes.

In the acquisition of CalWest Bancorp in 2020, we assumed $3.1 million of junior subordinated deferrable interest debentures (the “Junior Subordinated Debentures”) which were issued to CalWest Statutory Trust I (the “Trust”). The Junior Subordinated Debentures were scheduled to mature on September 17, 2033, and accrued interest at three-month LIBOR plus 2.95%. We also acquired a 3% common interest in the Trust, which was comprised of mandatorily redeemable preferred securities. At acquisition, the Junior Subordinated Debentures were valued at a premium of $408 thousand which was included in the initial carrying value, and was being amortized over the remaining term of the borrowing. In June of 2022, we fully redeemed the Junior Subordinated Debentures before the maturity date. We recorded a loss of $347 thousand related to the unamortized premium at the time of early redemption in the other expenses of the consolidated statements of income for the year ended December 31, 2022.

At December 31, 2022, consolidated cash and cash equivalents totaled $86.8 million, a decrease of $493.2 million from $580.0 million at December 31, 2021. The decrease in cash and cash equivalents is the result of $13.4 million in net cash provided by operating cash flows, $512.7 million net cash used in investing cash flows and $6.1 million of net cash flows provided by financing cash flows.

Our operating cash flows are comprised of net income, adjusted for certain non-cash transactions, including but not limited to, depreciation and amortization, provision for loan losses, loans originated for sale and related gains (losses) and proceeds from sales, stock-based compensation, and amortization of net deferred loan costs and premiums. Net cash flows from operating cash flows were $13.4 million for the year ended December 31, 2022, compared to $19.7 million in the prior year. The $6.3 million decrease was primarily due to a $7.1 million increase in net cash used in the origination and sale of loans for sale.

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Our investing cash flows are primarily comprised of cash inflows and outflows from our debt securities and loan portfolios, net cash used for business combinations, and to a lesser extent, purchases of stock investments, purchases and proceeds from bank-owned life insurance, and capital expenditures. Net cash used in investing activities was $512.7 million for the year ended December 31, 2022, compared to net cash provided by investing activities of $8.5 million in the prior year. The $521.2 million decrease in cash provided by investing activities was primarily due to increases in net loan fundings of $396.7 million, an increase in net investment securities purchased of $104.0 million, and lower cash acquired in business combinations of $115.4 million, partially offset by cash transferred for branch sale of $81.5 million.

Our financing cash flows are primarily comprised of inflows and outflows of deposits, borrowing activity, proceeds from the issuance of common shares, and to a lesser extent, repurchases of common shares and cash flows from share-based compensation arrangements. Net cash provided by financing activities was $6.1 million for the year ended December 31, 2022, compared to $301.0 million in the prior year. The $294.9 million decrease in financing cash flows was primarily due to a $559.7 million decrease in deposit cash flows, partially offset by a $260.8 million increase in borrowing-related cash flows from lower repayment activity in 2022.

We believe that our liquidity sources are stable and are adequate to meet our day-to-day cash flow requirements as of December 31, 2022.

Commitments and Contractual Obligations

The following table presents information regarding our outstanding commitments and contractual obligations as of December 31, 2022:

(Dollars in thousands)	Less than One Year		One Year to Three Years		Over Three Years to Five Years		More than Five Years		Total
Commitments to extend credit	$	245,999	$	80	$	294,255	$	56,015	$	596,349
Letters of credit issued to customers		3,950		555		289		—		4,794
Total commitments	$	249,949	$	635	$	294,544	$	56,015	$	601,143
FHLB advances	$	50,000	$	—	$	—	$	—	$	50,000
Subordinated notes		—		—		—		17,770		17,770
Certificates of deposit		113,212		12,482		4,085		—		129,779
Lease obligations		2,755		4,428		3,095		2,971		13,249
Total contractual obligations	$	165,967	$	16,910	$	7,180	$	20,741	$	210,798

At December 31, 2022, we also had unfunded commitments of $6.0 million for investments in other limited partnership investments.

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Regulatory Capital

Bank of Southern California, N.A. The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Banks considered to be “adequately capitalized” are required to maintain a minimum total capital ratio of 8.0%, a minimum Tier 1 capital ratio of 6.0%, a minimum common equity Tier 1 capital ratio of 4.5%, and a minimum leverage ratio of 4.0%. Banks considered to be “well capitalized” must maintain a minimum total capital ratio of 10.0%, a minimum Tier 1 capital ratio of 8.0%, a minimum common equity Tier 1 capital ratio of 6.5%, and a minimum leverage ratio of 5.0%. As of December 31, 2022 and 2021, the Bank’s regulatory capital ratios exceeded the regulatory capital requirements and the Bank is considered to be “well capitalized” under the regulatory framework for prompt corrective action (PCA). There are no changes to the Bank’s categories since December 31, 2022.

Management believes, as of December 31, 2022 and 2021, that the Bank met all capital adequacy requirements to which it is subject.

Basel III, the comprehensive regulatory capital rules for U.S. banking organizations, requires all banking organizations to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers. The capital conservation buffer is exclusively comprised of common equity Tier 1 capital, and it applies to each of the three risk-based capital ratios but not to the leverage ratio. Effective January 1, 2019, the capital conservation buffer increased by 0.625% to its fully phased-in 2.5%, such that the common equity Tier 1, Tier 1 and total capital ratio minimums inclusive of the capital conservation buffers were 7.0%, 8.5%, and 10.5% at December 31, 2022. At December 31, 2022, the Bank was in compliance with the capital conservation buffer requirements. To be categorized as well-capitalized, the Bank must maintain minimum ratios as set forth in the table below.

The following table also sets forth the Bank’s actual capital amounts and ratios:

						Amount of Capital Required
						To be					To be Well-
						Adequately					Capitalized under
	Actual					Capitalized					PCA Provisions
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2022:
Total Capital (to Risk-Weighted Assets)	$	260,788		11.97	%	$	174,256		8.0	%	$	217,820		10.0	%
Tier 1 Capital (to Risk-Weighted Assets)		242,379		11.13	%		130,692		6.0	%		174,256		8.0	%
CET1 Capital (to Risk-Weighted Assets)		242,379		11.13	%		98,019		4.5	%		141,583		6.5	%
Tier 1 Capital (to Average Assets)		242,379		10.62	%		91,297		4.0	%		114,122		5.0	%
As of December 31, 2021:
Total Capital (to Risk-Weighted Assets)	$	237,478		14.99	%	$	126,728		8.0	%	$	158,411		10.0	%
Tier 1 Capital (to Risk-Weighted Assets)		225,017		14.20	%		95,046		6.0	%		126,728		8.0	%
CET1 Capital (to Risk-Weighted Assets)		225,017		14.20	%		71,285		4.5	%		102,967		6.5	%
Tier 1 Capital (to Average Assets)		225,017		9.98	%		90,153		4.0	%		112,691		5.0	%

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Southern California Bancorp. At December 31, 2022 and 2021, we qualified for treatment under the Small Bank Holding Company Policy Statement (Regulation Y, Appendix C) and, therefore, we are not subject to consolidated capital rules at the bank holding company level.

Dividend Restrictions

The primary source of funds for the Company is dividends from the Bank. Under federal law, the Bank may not declare a dividend in excess of its undivided profits and, absent the approval of the OCC, the Bank’s primary banking regulator, if the total amount of dividends declared by the Bank in any calendar year exceeds the total of the Bank’s retained net income of that current period, year to date, combined with its retained net income for the preceding two years. The Bank also is prohibited from declaring or paying any dividend if, after making the dividend, the Bank would be considered “undercapitalized” (as defined by reference to other OCC regulations). Federal bank regulatory agencies have authority to prohibit banking institutions from paying dividends if those agencies determine that, based on the financial condition of the bank, such payment will constitute an unsafe or unsound practice.

During the year ended December 31, 2022, the Bank paid dividends to the Company of $3.0 million. The Bank did not pay dividends to the Company during the year ended December 31, 2021.

The Federal Reserve limits the amount of dividends that bank holding companies may pay on common stock to income available over the past year, and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. It is also the Federal Reserve’s policy that bank holding companies should not maintain dividend levels that undermine their ability to be a source of strength to its banking subsidiaries. Additionally, in consideration of the current financial and economic environment, the Federal Reserve has indicated that bank holding companies should carefully review their dividend policies.

During the years ended December 31, 2022 and 2021, there were no dividends declared to shareholders by the Company.

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Interest Rate Risk Management

Market risk represents the risk of loss due to changes in market values of assets and liabilities. We incur market risk in the normal course of business through exposures to market interest rates, equity prices, and credit spreads. Our primary market risk is interest rate risk, which is the risk of loss of net interest income or net interest margin resulting from changes in market interest rates.

Interest Rate Risk

Interest rate risk results from the following risks:

● Repricing risk — timing differences in the repricing and maturity of interest-earning assets and interest-bearing liabilities;

● Option risk — changes in the expected maturities of assets and liabilities, such as borrowers’ ability to prepay loans at any time and depositors’ ability to redeem certificates of deposit before maturity;

● Yield curve risk — changes in the yield curve where interest rates increase or decrease in a nonparallel fashion; and

● Basis risk — changes in spread relationships between different yield curves, such as U.S. Treasuries, U.S. Prime Rate, SOFR, and LIBOR.

Because our earnings are primarily dependent on our ability to generate net interest income, we focus on actively monitoring and managing the effects of adverse changes in interest rates on our net interest income. Our interest rate risk is overseen by our management Asset Liability Committee (“ALCO”). ALCO monitors our compliance with regulatory guidance in the formulation and implementation of our interest rate risk program. ALCO reviews the results of our interest rate risk modeling quarterly to assess whether we have appropriately measured our interest rate risk, mitigated our exposures appropriately and any residual risk is acceptable. In addition to our annual review of this policy, our Board of Directors explicitly reviews the interest rate risk policy limits at least annually.

Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints. Changes in interest rates may result in interest-earning assets and interest-bearing liabilities maturing or repricing at different times, on a different basis or in unequal amounts. In addition, it is not uncommon for rates on certain assets or liabilities to lag behind changes in the market rates of interest. Additionally, prepayments of loans and early withdrawals of certificates of deposit could cause interest sensitivities to vary.

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Our interest rate risk exposure is measured and monitored through various risk management tools, including a simulation model that performs interest rate sensitivity analysis under multiple scenarios. The simulation model is based on the actual maturities and re-pricing characteristics of the Bank’s interest-rate sensitive assets and liabilities. The simulated interest rate scenarios include an instantaneous parallel shift in the yield curve. In order to model and evaluate interest rate risk, we use two approaches: Net Interest Income at Risk (“NII at Risk”), and Economic Value of Equity (“EVE”). Under NII at Risk, the impact on net interest income from changes in interest rates on interest-earning assets and interest-bearing liabilities is modeled over the next 12 months from immediate and sustained changes in interest rates utilizing various assumptions for assets and liabilities. EVE measures the period end market value of assets minus the market value of liabilities and the change in this value as rates change. EVE is a period end measurement.

The following table presents the projected changes in NII at Risk and EVE that would occur upon an immediate change in interest rates based on independent analysis, but without giving effect to any steps that management might take to counteract that change at December 31, 2022 and December 31, 2021:

	Change in Interest Rates in Basis Points (bps)
	Market Value of Equity								Net Interest Income (NII)
(Dollars in thousands)	Amount		Change ($)			Change (%)			Amount		Change ($)			Change (%)
December 31, 2022
+300bps	$	509.4	$	55.3			12.2	%	$	103.8	$	(1.1	)		(1.0	)%
+200bps		498.2		44.1			9.7	%		104.2		(0.7	)		(0.7	)%
+100bps		480.7		26.6			5.9	%		104.7		(0.2	)		(0.2	)%
Base case		454.1								104.9
-100bps		411.6		(42.5	)		(9.4	)%		101.4		(3.5	)		(3.3	)%
-200bps		341.9		(112.2	)		(24.7	)%		97.4		(7.5	)		(7.1	)%
December 31, 2021
+300bps	$	435.6	$	144.5			49.6	%	$	81.3	$	18.7			29.9	%
+200bps		406.9		115.8			39.8	%		75.7		13.1			20.8	%
+100bps		363.7		72.6			24.9	%		67.6		5.0			8.0	%
Base case		291.1								62.6
-100bps		178.3		(112.8	)		(38.7	)%		61.8		(0.8	)		(1.3	)%
-200bps		73.2		(217.9	)		(74.9	)%		61.8		(0.8	)		(1.3	)%

December 31, 2022

The modeled NII results at December 31, 2022 indicate the Bank would sustain a moderate decrease in net interest income if interest rates declined due primarily to adjustable-rate loans repricing lower at a faster pace than the decline in deposit rates. In a rising rate environment, our NII results indicated there would be a slight decrease in net interest income if interest rates were to increase due primarily to the pace of deposits repricing consistent with or slightly higher than adjustable-rate loans. The decrease in NII in a rising rate environment is attributed to the higher interest rate environment and increasing liquidity and deposit pressure in the banking industry. EVE results at December 31, 2022 indicate the Bank would benefit from an increase in interest rates and would be adversely impacted by a decrease in interest rates. The results of these analyses do not contemplate all of the actions that we may undertake in response to changes in interest rates. In response to actual or anticipated changes in interest rates, we have various alternatives for managing and reducing exposure such as using FHLB Advances and/or certain derivatives such as swaps to align maturities and repricing terms. managing the percentage of fixed rate loans in our portfolio, managing the level of investments and duration of investment securities and managing our deposit relationships.

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December 31, 2021

The modeled NII and EVE results at December 31, 2021 indicated the Bank would sustain a significant increase in net interest income and EVE if interest rates increased and a slight decrease in net interest income and a significant decrease in EVE if interest rates decreased. This asset-liability mismatch in the EVE results was attributed to the lower interest rate environment and higher levels of liquidity in the banking system. The Bank had approximately 26% of assets being held in cash and cash equivalents at December 31, 2021 as compared to 4% at December 31, 2022. Cash and cash equivalents reprice immediately and therefore are more sensitive to interest rate changes. The significant decrease in cash and cash equivalents in 2022 was a result of the Bank’s strategy to deploy available liquidity into higher yielding debt securities and loans during the year. The impact of this strategy was to reduce volatility and to reduce the mismatch between assets and liabilities.

The projected changes are forecasts based on estimates of historical behavior and assumptions that may change over time and may turn out to be different. Factors affecting our estimates and assumptions include, but are not limited to competitor behavior, economic conditions both locally and nationally, actions taken by the Federal Reserve, customer behavior and our management’s responses. Changes that vary significantly from our assumptions and estimates significantly affect our earnings and EVE.

In addition to management ALCO, the DLC Committee of the Board, the ARC Committee of the Board, as well as the Company’s Chief Risk Officer are all responsible for the “risk management framework” of the Company. Both ALCO and DLC meet monthly and the ARC Committee meets eight times a year, with the authority to convene additional meetings, as circumstances require.

Item 3. Properties

Our principal executive offices are located in Del Mar, California. As of December 31, 2022, our properties included five administrative offices and 13 branches in Los Angeles, Orange, Riverside, San Diego and Ventura counties. We own three properties and lease the remaining properties and believe that, if necessary, we could secure suitable alternative properties on similar terms without materially adversely affecting operations. For information regarding our lease commitments, refer to Note 5 - Premises and Equipment to the Consolidated Financial Statements. The following table provides the physical location of our 13 branches at December 31, 2022.

Office	Address	Square Footage		Own
Principal Executive Office	12265 El Camino Real, Suite 220, San Diego, CA 92130		5,816
Branches:
Carlsbad	3142 Tiger Run Court, Suite 107, Carlsbad, CA 92010		1,404
Del Mar	12265 El Camino Real, Suite 100, San Diego, CA 92130		13,080
Downtown San Diego	1620 5th Avenue, Suite 120, San Diego, CA 92101		871
Encino	16255 Ventura Blvd., Ste 1100, Encino, CA 91436		2,873
Glendale	801 N. Brand Blvd., Suite 185, Glendale, CA 91203		8,284
Irvine	400 Spectrum Center Drive, Suite 100, Irvine, CA 92618		2,365
La Quinta	47-000 Washington, La Quinta, CA 92253		5,200		X
Ramona	1315 Main Street, Unit A, Ramona, CA 92065		1,476
Rancho Mirage	40101 Monterey Avenue, #H, Rancho Mirage, CA 92270		5,000		X
Rancho Santa Margarita	22342 Avenida Empresa, Suite 101A, Rancho Santa Margarita, CA 92688		2,971
Santa Clarita	23780 Magic Mountain Pkwy, Santa Clarita, CA 91355		15,240		X
West Los Angeles	1640 S. Sepulveda Blvd., Suite 130, Los Angeles, CA 90025		2,560
Westlake Village	875 S. Westlake Blvd., Suite 101, Westlake Village, CA 91361		3,427

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Item 4. Security Ownership of Certain Beneficial Owners and Management

We have determined beneficial ownership in accordance with the rules of the Securities and Exchange Commission. These rules generally provide that a person is the beneficial owner of securities if such person has or shares the power to vote or direct the voting of securities, or to dispose or direct the disposition of securities, or has the right to acquire such powers within 60 days. For purposes of calculating each person’s percentage ownership, common stock issuable pursuant to options that are currently exercisable or will become exercisable or restricted share units that will vest within 60 days are included as outstanding and beneficially owned for that person or group, but are not deemed outstanding for the purposes of computing the percentage ownership of any other person. Except as disclosed in the footnotes to this table and subject to applicable community property laws, we believe that each person identified in the table has sole voting and investment power over all of the shares shown opposite such person’s name.

The following table provides information regarding the beneficial ownership based on 17,940,283 shares of our common stock as of December 31, 2022, by those persons or entities known by us to beneficially own more than five percent of the outstanding shares of our common stock.

Name and Address of Greater than 5% Stockholders	Shares Beneficially Owned		Percent of Class Beneficially Owned
John Farkash, Director Bank of Southern California, N.A., 12265 El Camino Real, Suite 210, San Diego, CA 92130		3,030,003		16.85	%
Castle Creek Capital Partners VI LP 11682 El Camino Real, Suite 320, San Diego, CA 92130 (1)		2,340,719		13.05	%
AB Financial Services Opportunity Fund (c/o Alliance Bernstein L.P.) 1345 Avenue of the Americas, New York, NY 10105		1,606,856		8.96	%
Fourthstone LLC 575 Maryville Centre, Suite 110, St. Louis, MO 63141		1,414,245		7.88	%

(1)

Mr. Volk is a principal of Castle Creek Capital Partners VI LP, and shares voting and dispositive powers over all shares. Mr. Volk disclaims beneficial ownership of such shares held by Castle Creek Capital Partners VI LP, except to the extent of his pecuniary interest therein. Excludes 20,904 shares held by Castle Creek Advisors IV LLC.

(2)

Based on a Schedule 13G filed with the SEC on February 14, 2023, by Fourthstone LLC, Fourthstone Master Opportunity Fund Ltd, Fourthstone GP LLC, Fourthstone QP Opportunity Fund LP, Fourthstone Small-Cap Financials Fund LP, and L. Phillip Stone, IV, who report shared voting and dispositive power of 1,414,245 shares, 935,513 shares, 459,732 shares, 411,078 shares, 48,654 shares, and 1,414,245 shares of the Company’s common stock, respectively. L. Phillip Stone, IV is the Managing Member of Fourthstone LLC and Fourthstone GP LLC, and 1,414,245 shares of common stock are held on behalf of advisory clients.

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The following table provides information regarding the beneficial ownership based on 17,940,283 shares of our common stock outstanding as of December 31, 2022, for:

● each of our directors;

● each of our named executive officers; and

● all of our directors and executive officers as a group.

Name of Beneficial Owner (1)	Shares of Common Stock Beneficially Owned (2)			Shares Subject to Exercisable Options that will Vest Within 60 Days(3)		Shares Subject to RSUs that will Vest Within 60 Days (3)		Shares Beneficially Owned		Percent of Class Beneficially Owned (3)
Non-Employee Directors:
John Farkash		2,983,652	(4)		44,500		1,851		3,030,003		16.85	%
Irwin Golds		25,188	(5)		33,500		2,107		60,795		0.34	%
Lester Machado		56,868	(6)		14,000		1,226		72,094		0.40	%
Kaveh Varjavand		2,803			—		601		3,404		0.02	%
David Volk		2,344,597	(7)		16,000		1,226		2,361,823		13.15	%
Anita Wolman		1,888	(8)		—		601		2,489		0.01	%
Employee Directors:
Frank D. Di Tomaso Executive Director		406,532	(9)		—		—		406,532		2.27	%
David I. Rainer Director, Executive Chairman of the Board and Chief Executive Officer		125,001	(10)		—		—		125,001		0.70	%
Anne Williams Executive Vice President, Chief Credit Officer of the Bank		38,475	(11)		—		—		38,475		0.21	%
Named Executive Officers:
Thomas G. Dolan Executive Vice President Chief Financial Officer of the Company, and Chief Operating Officer of the Company and the Bank.		125,000	(12)		—		—		125,000		0.70	%
Richard Hernandez President of the Company and the Bank		35,534	(13)		—		—		35,534		0.20	%
Directors and Executive Officers as a Group (15 in Number) (14)		6,164,124	(14)		108,000		7,612		6,279,736		34.78	%

(1)	Unless otherwise stated, the address for each individual is c/o Bank of Southern California, N.A., 12265 El Camino Real, Suite 210, San Diego, CA 92130.
(2)	Except as otherwise noted, may include shares held by or with such person’s spouse and minor children; shares held by any other relative of such person who has the same home; shares held by a family trust as to which such person is a trustee with sole voting and investment power (or shared power with a spouse); or shares held in an Individual Retirement Account or pension plan as to which such person has pass-through voting rights and investment power. Does not include vested stock options.
(3)	Stock options or restricted share units that are exercisable or vest within 60 days after December 31, 2022, are treated as issued and outstanding for the purpose of computing the percent of class owned by such person but not for the purpose of computing the percent of class owned by any other person.

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(4)	Includes 2,404,262 shares held in a trust whereby Mr. Farkash is trustee and has voting rights with respect to such shares, and 579,390 shares held in a joint account of which he has voting rights. Includes 541,700 shares pledged as collateral to secure personal indebtedness of Mr. Farkash.
(5)	Includes 13,500 shares held in an IRA account for Mr. Golds’ benefit, and 11,688 shares held in a trust whereby Mr. Golds is the sole trustee and has voting rights with respect to these shares.
(6)	Includes 46,028 shares held in a trust whereby Mr. Machado is trustee and has voting rights with respect to such shares; and 10,000 shares held in a defined benefit plan to which Mr. Machado has voting rights with respect to such shares.
(7)	Mr. Volk is a principal of Castle Creek Advisors IV LLC and Castle Creek Capital Partners VI LP, which owns 3,678 shares and 2,340,719 shares of our common stock, respectively. Mr. Volk disclaims beneficial ownership of such shares held by Castle Creek Advisors IV LLC and Castle Creek Capital Partners VI LP, except to the extent of his pecuniary interest therein.
(8)	Includes 85 shares held in a joint account of which Ms. Wolman has voting rights.
(9)	Includes 231,971 shares held in a joint account of which Mr. Di Tomaso has voting rights; 153,336 shares held in an IRA account for Mr. Di Tomaso’s benefit, and 12,075 shares held in his spouse’s name and in her IRA account.
(10)	Includes 125,001 shares held in a trust whereby Mr. Rainer is trustee and has voting rights with respect to such shares.
(11)	Includes 38,475 shares held in a trust whereby Ms. Williams is trustee and has voting rights with respect to such shares.
(12)	Includes 125,000 shares held in a trust whereby Mr. Dolan is trustee and has voting rights with respect to such shares.
(13)	Includes 20,834 shares held in an IRA account for Mr. Hernandez’s benefit.
(14)	Included beneficial ownership of four additional executive officers totaled 18,586 shares.

Item 5. Directors and Executive Officers

Board of Directors

The following table sets forth certain information about our directors, including their names, ages and year in which they began serving as a director of the Company (or the Bank, if prior to the holding company reorganization on May 15, 2020).

Name	Age	Position	Director Since
Frank D. Di Tomaso	65	Director, Executive Director	2021
John Farkash	73	Director	2001
Irwin Golds	66	Director	2013
Lester Machado	67	Director	2001
David I. Rainer	65	Director, Executive Chairman of the Board and Chief Executive Officer	2022
Kaveh Varjavand	59	Director	2020
David Volk	45	Director	2016
Anne Williams	65	Director, Chief Credit Officer	2023
Anita Wolman	71	Director	2020

Each of the Company’s directors is also a director of the Bank. The business experience of each of the current directors is set forth below. No current director has any family relationship, as defined in Item 401 of Regulation S-K, with any other director or with any of our executive officers.

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Frank D. Di Tomaso

Mr. Di Tomaso joined our Board upon our acquisition of Bank of Santa Clarita in 2021. He was a founding member of Bank of Santa Clarita and served as its Vice Chairman (2004-2009), Chairman (2009-2021), Executive Vice President (2004-2011), and Chief Executive Officer (2012-2021). Previously, he held the positions of Senior Vice President and Business Development Officer at City National Bank (1997-2004) and Senior Vice President and Commercial Loan Team Leader (1996-1997). Before joining City National Bank, Mr. Di Tomaso was employed at Metrobank until it was acquired by Comerica Bank and served as the Senior Vice President and Manager of the Asset Based Loan Division of Metrobank (1990-1996). We first appointed Mr. Di Tomaso to our board under the terms of our merger agreement with Bank of Santa Clarita, in which we agreed to appoint one of Bank of Santa Clarita’s directors to the our board and to nominate that director for reelection at least once. In addition to serving on our Board, Mr. Di Tomaso serves as the Bank’s Executive Director and is responsible for matters relating to our integration of Bank of Santa Clarita’s business and the retention of its customers and employees.

Mr. Di Tomaso earned his Bachelor of Science degree in Accounting from California State University, Fresno.

Mr. Di Tomaso’s extensive experience as an executive and director of banking and financial institutions, as well as his knowledge and leadership capabilities make him a valuable member of the Board.

John Farkash

Mr. Farkash is a Founding Director of the Company and Bank. He is the Founder and President of Farkash Construction, Inc. since 1984, serving commercial clients in San Diego County. His experience spans the fields of architecture, interior space planning, construction, real estate development, and commercial real estate property management throughout Southern California. He has also been involved in San Diego’s rural planning issues and continues to oversee the family real estate portfolio.

Mr. Farkash received his bachelor’s degree from the University of California, Berkeley. Following graduation, he was a VISTA (Volunteers in Service to America) volunteer with the Community Design Center in Tucson, Arizona. He received his General Contracting “B” License in 1982.

Mr. Farkash’s extensive business and investment experience, as well as knowledge and involvement in the Bank’s local communities, makes him a valuable contributor to the Board.

Irwin Golds

Irwin Golds is our Lead Independent Director and the Chair of the Directors Loan Committee. He is the Co-Founder and Chief Executive Officer of Capitis Real Estate since 2009, a real estate brokerage, escrow and investment firm serving Southern California. Earlier in his career, Mr. Golds served as partner at law firms Best, Best & Krieger (1981-1988) and Criste, Pippin & Golds, which he cofounded (1994-2003), until retiring from the practice of law in 2003. In addition, he was an organizer and Founder of Desert Commercial Bank (2004-2005) and served as Director (2006-2012) and Interim President (2009-2010) of Palm Desert National Bank.

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Mr. Golds received his Bachelor of Arts degree from the University of California, Los Angeles and his Juris Doctor degree from the University of California Hastings College of the Law. He is an active member of the Coachella Valley business community and has also served as a Board member of several charitable organizations, including Shelter From the Storm, YMCA, the Coachella Valley Education Foundation, and the Desert Community Foundation.

Mr. Golds’ broad range of experience in law and financial services have enhanced the Board’s perspective.

Dr. Lester Machado, M.D., D.D.S., FRCS (Ed)

Dr. Machado is a Founding Director of the Company and the Bank and serves as Chair of the Compensation, Nominating and Governance Committee. He practiced Oral & Maxillofacial Surgery in San Diego for over 30 years from 1990-2021. Dr. Machado also served as Chairman of the Division of Maxillofacial Surgery at both Rady Children’s Hospital (2005-2020) and Scripps Mercy Hospital (2000-2021), and is a Fellow of the Royal College of Surgeons of Edinburgh. He is the owner of Lester Machado Fine Art (2018-present) and a partner in Gribardo Vineyards (2017-present), farming wine grapes in Northern California.

Dr. Machado received his bachelor’s degree from the University of California, Davis; his DDS degree from University of the Pacific; and his MD degree from Hahnemann University. He currently serves as a Trustee of the San Diego Museum of Art and previously served as Director for the San Diego Dental Society, San Diego Dental Foundation, Coming Together Foundation, and the Climate Action Campaign.

Dr. Machado’s extensive operational and business experience, as well as his passion for diversity and equality, make him a valuable contributor to the Board.

David I. Rainer

David I. Rainer has been our Executive Chairman and Chief Executive Officer since September 2022. He previously served as our Executive Chairman from November 2020 and our Executive Chairman, President and Chief Executive Officer from July 2021 to April 2022. Mr. Rainer took a temporary sabbatical from all positions with the Company and the Bank between April 2022 and September 2022. He is a proven leader in growing community banks and most recently served as a Founder, Chairman and Chief Executive Officer of CU Bancorp (Nasdaq: CUNB) and its wholly owned subsidiary California United Bank from 2005 through its sale in 2017. Thereafter, Mr. Rainer continued employment with Pacific Western Bank as a consultant from 2017-2020. Prior to that, he was the Executive Vice President of Commercial Banking for the Western US at US Bank (NYSE: USB) (2001-2004).

Mr. Rainer served two three-year terms on the Board of Directors of the Federal Reserve Bank of San Francisco, Los Angeles Branch (2011-2016). He is a member of the Price Board of Councilors at the USC Price School of Public Policy and former Director of InBank, a Denver-based community bank (2019-2020). He was also recognized as an Ernst & Young Regional Entrepreneur of the Year winner in 2008. Involved in the community, Mr. Rainer previously served on the board of directors for the Boys and Girls Club of the West Valley, Inner City Arts, Junior Achievement, and the LA Urban League.

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Mr. Rainer received his bachelor’s degree from California State University, Northridge, and his master’s in Business Administration from the University of Southern California.

Mr. Rainer’s extensive experience as an executive managing banks and bank holding companies and his proficiency in corporate strategy make him a valuable member of the Board.

Kaveh Varjavand

Mr. Varjavand has been a member of our Board since 2020 and serves as Chair of the Audit and Risk Committee. He is the Founder and President of AARCS, LLC (Accounting, Audit and Reporting Consulting Services), a boutique firm providing consulting services to the financial institutions industry, since 2013. In 2021, Mr. Varjavand founded MMK Ventures, Inc., which holds and operates several web-based assets. From 2006 to 2013, he served as the Partner-in-Charge of the Southern California Financial Services Group at Moss Adams LLP. Prior to that, he worked at KPMG LLP for 16 years, including serving as a Financial Services Audit Partner for more than seven years. He also served as a director and chair of the Audit Committee of CU Bancorp (Nasdaq: CUNB) from 2015 to 2017.

Mr. Varjavand received his bachelor’s degree from the University of Kentucky. He is a Certified Public Accountant (Retired) in the State of California. He is also a member of the American Institute of Certified Public Accountants and California Society of CPAs.

Mr. Varjavand’s significant experience serving the financial services industry, specifically in the areas of audit and risk management, has considerably strengthened the Board. He is one of the Company’s Board-designated “audit committee financial experts.”

David Volk

Mr. Volk has been a member of the Board since 2016. He is a principal at Castle Creek Capital, an alternative asset management firm focused on the community banking industry and located in San Diego, California. He started with Castle Creek Capital Partners VI LP in 2005, having led or supported investments in numerous recapitalization, distressed, and growth situations. Prior to joining the firm, he worked as an associate with TW Associates Capital, Inc. and Ernst & Young. Mr. Volk serves on our Board under an agreement that we made with Castle Creek Capital Partners VI LP in connection with its initial investment in the Company. The agreement grants Castle Creek Capital the right to designate a representative to serve on our Board for so long as it beneficially owns at least 5.0% and not less than 891,284 shares of our common stock.

Mr. Volk serves as a director of InBankshares Corp/Inbank (2022) in Colorado, Bank of Idaho/Bank of Idaho Holding Company (2019), Bridgewater Bancshares/Bridgewater Bank (2017) in Minnesota, and New Mexico First Financial (2017). Mr. Volk received his bachelor’s degree from Santa Clara University and his master’s degree from the University of Virginia.

Mr. Volk’s extensive experience in investment, transactional and financial analysis within the community banking industry and his service on multiple bank boards enables him to be a significant contributor to our Board as well as provides the perspective of a significant investor in the Company. He is one of the Company’s Board-designated “audit committee financial experts.”

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Anne Williams

Ms. Williams has been a member of our Board since 2023 and has been the Executive Vice President and Chief Credit Officer of the Bank since 2020. She is an accomplished credit risk professional with over 35 years of industry experience. Most recently and until her retirement, she was with California United Bank (Nasdaq: CUNB) where she served as EVP, Chief Credit Officer (2004-2017) and Chief Operating Officer (2008-2017) and was a bank director (2009-2014). Prior to that, Ms. Williams served as SVP Manager for US Bank’s Commercial Banking Market for the State of California (1999-2004) and was previously the EVP and Chief Credit Officer at California United Bank and its successor, Pacific Century Bank (1992-1999).

Active in the community, Ms. Williams previously served on the Board of the Valley Economic Development Center, Inc. and is a former board member of the Los Angeles Local Development Corporation, the California Economic Development Lending Initiative, and the Park Advisory Board for the Pan Pacific Recreation Complex.

Ms. Williams received her bachelor’s degree from Mount Holyoke College.

Ms. Williams’ extensive experience in developing and growing commercial banking platforms makes her a valuable member of the Board.

Anita Wolman

Ms. Wolman has been a member of our Board since 2020 and serves as Chair of the Strategic Planning Committee. She is an experienced Executive, having served in senior officer roles and as General Counsel for multiple financial institutions. Most recently and until her retirement, she was a Founder of and served as EVP, Chief Administrative Officer, General Counsel, and Corporate Secretary at California United Bank (2005-2017) and its holding company, CU Bancorp (Nasdaq: CUNB), from inception until its acquisition in 2017. Prior to that, she held General Counsel positions at California Commerce Bank and Pacific Century Bank. Ms. Wolman has also been an Advisory Board Member of Lowell Milken Center for Business Law (UCLA School of Law) since 2017.

Ms. Wolman received both her bachelors in political science and Juris Doctor degrees from the University of California, Los Angeles.

Ms. Wolman’s expansive background in law and corporate governance and her knowledge of compliance and regulatory matters has made her a particular valued member of the Board.

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Executive Officers

The following table sets forth certain information regarding our executive officers, including their names, ages and positions:

Name	Age	Position
David I Rainer	65	Chief Executive Officer of the Company and the Bank
Richard Hernandez	48	President of the Company and the Bank
Thomas Dolan	63	Executive Vice President Chief Financial Officer of the Company, and Chief Operating Officer of the Company and the Bank
Jean Carandang	58	Executive Vice President, Chief Financial Officer of the Bank
Martin Liska	54	Executive Vice President, Chief Risk Officer of the Bank
Manisha K. Merchant	47	Executive Vice President, Chief Legal Officer of the Company and the Bank
Anne Williams	65	Executive Vice President, Chief Credit Officer of the Bank
Joann Yeung	48	Senior Vice President, Chief Accounting Officer of the Company the Bank

The business experience of each of our executive officers, other than Mr. Rainer and Ms. Williams, is set forth below. No executive officer has any family relationship, as defined in Item 401 of Regulation S-K, with any other executive officer or any of our current directors. There are no arrangements or understandings between any of the officers and any other person pursuant to which he or she was selected as an officer.

Richard Hernandez

Mr. Hernandez has been our President since 2022 and previously served as our Executive Vice President and Chief Banking Officer since 2020. He is an accomplished banking professional with more than 24 years of industry experience within the Southern California market. Previously, he served as EVP for Pacific Western Bank (formerly California United Bank (Nasdaq: CUNB)), overseeing commercial banking in Los Angeles County and Ventura County (2005-2020). Prior to that, he served as VP Commercial Banking for US Bank (1999-2003).

Active in the community, Mr. Hernandez currently serves on the board of Casa Pacifica, a non-profit organization assisting adolescents and families that are victims of abuse (2011-2017; 2021- present).

Mr. Hernandez received his bachelor’s degree in International Finance from California Lutheran University.

Thomas G. Dolan

Mr. Dolan has been our Executive Vice President and Chief Financial Officer since 2020. He was appointed Chief Operating Officer in September 2022 and joined us in 2020 as our Executive Vice President, Chief Strategy Officer. He served as our Interim Chief Executive Officer from April to September 2022 while Mr. Rainer was on sabbatical. He has extensive experience providing strategic and operational leadership in highly entrepreneurial, growth-oriented financial institutions. Previously, he held the position of EVP and Chief Financial Officer at Los Alamos National Bank (2017-2020). Prior to that, he served as EVP and Chief Operating Officer at Anchor Bancorp Wisconsin Inc., and its successor Old National Bank (2011-2016).

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Mr. Dolan received his bachelor’s degree in Economics from Loyola University of Chicago and his MBA with a concentration in Finance from the University of Chicago.

Jean Carandang

Ms. Carandang has been the Bank’s Executive Vice President and Chief Financial Officer since 2022. She leads the Bank’s financial planning and analysis, accounting, treasury, and capital management. Previously, she was the Chief Financial Officer at Suncrest Bank (2016-2022). Prior to that, she was the Chief Financial Officer of Simplicity Bank (2008-2015), SVP and Controller at PFF Bank & Trust (2005-2008), and VP and Controller at Quaker City Bank (1993-2005).

Ms. Carandang earned her bachelor’s degree in Accounting from California State University, Los Angeles and is a Certified Public Accountant.

Martin Liska

Mr. Liska has served as the Executive Vice President and Chief Risk Officer of the Bank since 2020. He is responsible for all risk management strategies and operations, as well as supervising the Bank’s risk mitigation and identification procedures. Previously, he served as Chief Risk Officer for Preferred Bank (2017-2020). Prior to that, he served as SVP and BSA Officer for California United Bank (2016-2017) (Nasdaq:CUNB); VP and BSA/AML Officer for State Bank of India, California (2013-2016); AML Director for Las Vegas Sands Corporation (2012-2013); and VP- Operations and Compliance Risk Manager for City National Bank (2005-2012). Mr. Liska served in multiple positions, including as a bank examiner, for the Federal Reserve Bank (1991-2005).

Active in the community, Mr. Liska served as an Executive Board Member, Secretary and founding member of the U.S.A. Southern California Chapter of the Association of Anti-Money Laundering Specialists (ACAMS) (2011-2018).

Mr. Liska received his bachelor’s degree in Organizational Management from the University of La Verne and is a United States Army veteran.

Manisha K. Merchant

Ms. Merchant has served as our Executive Vice President, General Counsel and Corporate Secretary since 2022. She is responsible for the legal affairs of the Company and providing legal advice to our Board, Executive Chairman and Chief Executive Officer and senior management. Previously, she served as EVP, Deputy General Counsel for Banc of California, N.A. (2016-2022) (NYSE:BANC) after serving as SVP, Associate General Counsel (2014-2016). Prior to that, Ms. Merchant served as VP, Senior Counsel II for Union Bank (2009-2014); FVP, Senior Counsel for Washington Mutual and its successor, JPMorgan Chase (2007-2009); and Legal Counsel for Western Financial Bank and its successor, Wachovia Bank (2002-2007).

Active in the community, Ms. Merchant previously served as a member of the board of directors of Asian Americans Advancing Justice – LA (2009-2020).

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Ms. Merchant received her bachelor’s degree in Criminology, Law, and Society from the University of California, Irvine, and both her Juris Doctorate and Masters in Business Administration degrees from the University of Connecticut. She is licensed to practice law in California.

Joann Yeung

Ms. Yeung has served as the Bank’s Senior Vice President and Chief Accounting Officer since 2022. Most recently, she served as the Bank’s Director of Financial Reporting (2021-2022). Previously, she served as SVP and Director of Financial Reporting (2020-2021) and FVP and Finance Manager (2016-2020) for First Choice Bank and its successor, Enterprise Bank and Trust. Ms. Yeung was instrumental in preparing First Choice Bank for its public listing on Nasdaq.

Ms. Yeung received her bachelor’s degree in Accounting from the University of Southern California.

None of our directors or executive officers has been involved in any bankruptcy or criminal proceedings, nor have there been any judgments or injunctions brought against any of our directors or executive officers during the last ten years that we consider material to the evaluation of the ability and integrity of any director or executive officer.

Corporate Governance Principles and Board Matters

Our Board believes that sound governance policies and practices provide an important framework to assist it in fulfilling its duties to our shareholders. Our Board has adopted a number of policies and practices under which it has operated with concepts based on the suggestions of various authorities in corporate governance and the requirements that would be applicable to us when our common stock is listed on the Nasdaq Stock Market. Our Board members believe these policies and practices are essential to the performance of the Board’s oversight responsibilities and the maintenance of our integrity in the marketplace. The policies and practices include, among others, the following:

Principles of Business Conduct and Ethics Policy. We have adopted a Principles of Business Conduct and Ethics Policy (“Code of Conduct”) applicable to our directors, officers and employees. Our Code of Conduct provides fundamental ethical principles to which these individuals are expected to adhere. Our Code of Conduct operates as a tool to help our directors, officers, and employees understand and adhere to the high ethical standards required for employment by, or association with us. The Code of Conduct constitutes our “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act and is our “code of conduct” for purposes of satisfying Nasdaq’s listing standards.

The Code of Conduct is available on our website at https://investor.banksocal.com/governance. To the extent required by applicable SEC rules, Nasdaq’s listing standards or our Code of Conduct, we will disclose any waivers of the requirements of our Code of Conduct that may be granted to our executive officers, including our principal executive officer, principal financial officer, principal accounting officer or persons performing similar functions on our website.

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Related Party Transaction Policy. Our Board has adopted a Related Party Transaction Policy, which provides that subject to certain limited exceptions, we will not enter into or consummate a related party transaction unless our Compensation, Nominating, and Governance Committee (“CNG Committee”) determines it to be fair to the Company and on the same basis as would apply if the transaction did not involve a related party. A “related party transaction” is a transaction between the Company or any of its subsidiaries and any executive officer, director or owner of more than 5% of the outstanding shares of our common stock or persons related to them. Our Related Party Transaction Policy is described more detail below under Item 7. “Policies and Procedures for Approval of Related Person Transactions.”

Board Leadership Structure. Our Board does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman because our Board believes it is in the best interests of the Company to have the flexibility to select the persons holding those positions based on the business and governance needs and the membership of our Board. Our Board has determined that having our Chief Executive Officer serve as Chairman is in the best interest of our shareholders at this time. In addition, our Board considered that we have a Lead Director who is an independent director. This structure makes the best use of the Chief Executive Officer’s extensive knowledge of the Company and its industry, as well as fostering greater communication between our management and our Board.

Since the office of Chairman is not held by an independent director, we have appointed Irwin Golds, an independent director, to serve as Lead Director to ensure strong independent board oversight. Our Lead Director (i) presides at all meetings of the Board at which the Chairman is not present, including executive sessions of the independent directors; (ii) has the authority to call meetings of the independent directors; (iii) serves as a liaison between the Chairman and the independent directors; (iv) ensures that matters of concern or interest of the independent directors are appropriately scheduled for discussion at Board meetings; (v) has the authority to retain outside advisors and consultants who report directly to the Board on Board-wide issues; (vi) serves as a liaison for consultation and direct communication with shareholders, as appropriate; and (vii) performs such other duties, and exercises such powers, as from time to time as prescribed by our Board.

Director Independence. Our Board has adopted corporate governance guidelines and principles requiring, among other things, that a majority of the Board be composed of directors meeting the independence requirements established by Nasdaq’s listing standards and applicable SEC rules. These guidelines and our Board’s determination regarding director independence are described below under “Item 7. Certain Relationships And Related Transactions, and Director Independence - Director Independence.”

Stock Ownership Guidelines. The Company’s Corporate Governance Policy sets forth the Board’s stock ownership guidelines. Under the policy and time periods stated therein, our executive officers are expected to own Company common stock having a value equal to at least three times base salary in the case of the Chief Executive Officer and one times base salary in the case of the Company’s other executive officers. Non-employee directors will be expected to own Company common stock having a value equal to at least two times their annual cash retainer. New executive officers will be expected to meet the applicable threshold within three years of their appointment, and new non-employee directors will be expected to meet the threshold within five years of their election or appointment.

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Clawback Policy. Our Board has adopted a Clawback Policy. Under that policy, if any of our executive officers or employees receive incentive compensation as a result of our achievement of financial results measured on the basis of financial statements that are required to be restated, we generally will be obligated to recoup from those executive officers or employees, the amount by which the incentive compensation they had received based on those financial statements or the satisfaction of those metrics exceeds the incentive compensation they would have received had such incentive compensation been determined on the basis of the restated financial statements or revised metric results (“excess compensation”). The policy provides for the recoupment of excessive compensation paid to or received by any executive officer or employee during the three years immediately preceding the accounting restatement. The policy further provides that we may seek recovery of any gain realized on the vesting, exercise, settlement, sale, transfer or other disposition of any equity-based awards.

Anti-Hedging Policy. Our Anti-Hedging Policy prohibits our directors and executive officers from hedging the economic interest in Company securities that they own and from engaging in short sales or speculative transactions with respect to our stock. Our Policy Governing Insider Trading and Tipping allows a covered person to seek approval from our Chief Legal Officer to pledge shares of Southern California Bancorp stock for a specific loan. As of the date of this registration statement, John Farkash has pledged 541,700 shares of Company stock, and such pledge was approved in accordance with our Policy Governing Insider Trading and Tipping. As of the date of this registration statement, to the best of the Company’s knowledge, except as set forth above, none of our directors or executive officers have outstanding pledges with respect to any Company stock.

The Board’s Role in Risk Oversight

The Board’s responsibilities in overseeing our management and business include oversight of our key risk and management processes and controls. Management, in turn, is responsible for the day-to-day management of risk and implementation of appropriate risk management controls and procedures.

New products and services, third-party risk management and cybersecurity are critical sources of operational risk that financial institutions are expected to address in the current environment. The Board of Directors and its sub-committees (including through various management committees) oversee our consolidated enterprise risk management program that monitors the adequacy of policies, procedures, tolerance levels, risk measurement systems, monitoring processes, management information systems and internal controls.

The risk of incurring losses on loans is an inherent feature of the banking business and, if not effectively managed, such risks can materially affect our results of operations. Accordingly, the Board, as a whole, exercises oversight responsibility over the processes that our management employs to manage this risk. The Board fulfills that oversight responsibility by:

● Monitoring trends in our loan portfolio and Allowance for Credit Losses (“ACL”);

● Establishing internal limits related to industry concentrations in our lending portfolio;

● Receiving monthly and quarterly reports through its Directors’ Loan Committee relating to such matters as (i) risks in our loan portfolio, (ii) new, renewed, and paid loans, (iii) trend reporting on loan types, (iv) risk grading of loans, (v) past due loans, (vi) interest rates and maturities of loans, and (vii) loan concentrations and risk industry loans;

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● Reviewing, at least quarterly, management’s determinations with respect to the adequacy of, and any provisions required to be made to replenish or increase, the ACL;

● Reviewing quarterly reports from its management Problem Loan Committee regarding specific loans that have been classified as “special mention,” “substandard” or “doubtful” and, therefore, require increased attention from management; portfolio risk trends, and the collection efforts with respect to nonperforming loans; and

● Authorizing the retention of, reviewing the reports of, and meeting with external loan review consultants engaged to evaluate the risks in and the quality of the loan portfolio.

Although risk oversight permeates many elements of the work of the full Board and its committees, the ARC Committee is responsible for overseeing any other significant risk management processes. The ARC Committee oversees these risk management processes, periodically reporting its findings and making policy and other recommendations to the full Board.

Committees of our Board of Directors

Our Board has two standing committees: an ARC Committee, and a CNG Committee. The Board has adopted a written charter for each of those committees, and copies of those charters are available on our website at investor.banksocal.com/governance. In addition, from time to time, our Board may establish special committees to address specific issues when necessary.

The Audit and Risk Committee. Our Board has established a standing ARC Committee, the current members of which are Kaveh Varjavand, its Chairman, John Farkash, Lester Machado and Anita Wolman. Our Board also has determined that Mr. Varjavand meets the definition of “audit committee financial expert” adopted by the SEC and satisfies the financial sophistication requirements of applicable rules of the Nasdaq Stock Market.

The ARC Committee’s responsibilities include:

● Overseeing our financial reporting, including reviewing and discussing accounting and reporting issues, results of independent audits, the integrity of our financial statements and our systems of internal controls;

● Overseeing our internal audit process, including determining the scope and scheduling of audit activities, approving the scope of audit plans, and determining the independence, qualifications and performance of our independent auditors and internal audit function;

● Monitoring the open communication among the independent auditor, management, the internal audit function and the Board;

● Overseeing our significant risk management activities, including information security and cybersecurity;

● Reviewing and assessing the adequacy of its formal written charter on an annual basis; and

● Overseeing such other matters that the Board may delegate to the committee.

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The ARC Committee met eight times during 2022.

The Compensation, Nominating and Governance Committee. Our Board has established a standing CNG Committee, the current members of which are Lester Machado, its Chairman; Irwin Golds; Kaveh Varjavand; David Volk; and Anita Wolman.

The CNG Committee’s responsibilities include:

● Reviewing and approving the compensation plans, policies and programs for our Chief Executive Officer and other executive officers;

● Developing, reviewing and making recommendations to the Board with respect to the adoption or revision of cash and equity incentive plans, approving individual grants or awards thereunder and reporting to the Board regarding the terms of such individual grants or awards;

● Reviewing and discussing with our management the narrative discussion and tables regarding executive officer and director compensation to be included in our annual proxy statement, in accordance with applicable laws, rules and regulations;

● Producing and approving an annual report on executive compensation for inclusion in our annual proxy statement, in accordance with applicable laws, rules and regulations;

● Making recommendations to our Board regarding the type and amount of compensation be paid or awarded to members of our Board;

● Developing and recommending policies to our Board regarding the director nomination process;

● Identifying and recommending to the Board candidates for election as directors;

● Recommending to the Board specific selection qualifications and criteria for Board membership;

● Evaluating the independence of our directors and recommending to the Board our director’s committee assignments;

● Developing and recommending, for the Board’s approval, corporate governance principles and policies;

● Reviewing and assessing the adequacy of our Code of Conduct, interpreting non-audit related portions of the Code of Conduct, and making final decisions concerning disciplinary actions relating to those portions of the Code of Conduct;

● Reviewing and making recommendations to our Board concerning our management succession plans;

● Reporting to the Board its annual review of the performance of the Board and its committees, as applicable;

● Annually reviewing and assessing the adequacy of its formal written charter; and

● Overseeing any other matters that our Board specifically delegates to the CNG Committee.

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The CNG Committee met seven times during 2022.

Selection and Nomination of Candidates for Election to the Board of Directors

Our Board has delegated to the CNG Committee the responsibility for developing the specific qualifications and criteria for prospective director candidates as it deems necessary or advisable. The CNG Committee is also charged with recommending to our Board specific candidates for election as directors. The CNG Committee considers nominees recommended by directors, officers, employees, shareholders and others using the same criteria to evaluate all candidates. In identifying prospective director candidates, the CNG Committee may consider all facts and circumstances, including among other things, the specific experience, qualifications, attributes and skills of the prospective director candidate, his or her independence, and the our particular needs and the needs of our Board. The CNG Committee is authorized to engage consultants or third party search firms to assist in identifying and evaluating potential nominees at our expense.

Any shareholder may submit, for consideration and nomination by the CNG Committee, any candidate or candidates for election to the board at any annual meeting of our shareholders by following the notice procedures and providing the information required our bylaws. To nominate a candidate for election as a director at an annual meeting of shareholders, our bylaws require a shareholder to provide us with written notice no earlier 120 days and no later than 90 days before the date such annual meeting is to be held. If the current year’s annual meeting is called for a date that is not within 30 days of the anniversary of the previous year’s annual meeting, the notice must be received not later than 10 calendar days following the day on which public announcement of the date of the annual meeting is first made. Our bylaws require that the nominating shareholder’s notice include information regarding the nominating shareholder, including the name and address of the nominating shareholder and the classes and number of shares of our capital stock held and beneficially owned by such nominating shareholder. In addition, the notice must include information regarding the candidate for election as director, including the full name, age and date of birth of each candidate; the business and residence address and telephone numbers of each candidate; the education background and business/occupational experience of each candidate including a list of positions held for at least the preceding five years; the class and number of shares of the corporation beneficially owned by the candidate; and a signed representation by the candidate that the candidate will timely provide any other information that we reasonably request for the purpose of preparing our disclosures regarding to the solicitation of proxies for the election of directors. If we request, any candidate proposed by a shareholder must complete a director questionnaire that we provide. In addition, if the nominating shareholder intends that the candidate or candidates be included on our universal proxy card under SEC Rule 14a-19, the shareholder must undertake to comply with Rule 14a-19 and the SEC’s other proxy rules and confirm that they have so complied at least 10 days prior to the shareholder meeting, and provide the candidate’s or candidates’ consent(s) to be named in our proxy materials. The name of each candidate for director must be placed in nomination at the annual meeting by a shareholder present in person and the candidate must be present in person at the meeting for the election of directors. Shareholders are advised to carefully review our bylaws, which contain a description of the information required to be submitted, as well as the advance notice and other requirements that apply to nominations by shareholder of candidates for election to the Board.

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Item 6. Executive Compensation

The goal of our executive compensation program is to attract and retain highly skilled and motivated executive officers that will significantly contribute to the Company’s success. The executive officers are expected to grow and manage the Company, and to increase shareholder value while mitigating risk. Thus, the compensation program is designed to provide levels of compensation that reflect the executive’s role in the Company and reward the executive’s performance within the overall performance of the Company. The principal components of our executive compensation program are as follows:

Base Salary. Our base pay generally falls within the established salary range for the executive’s position and we typically pay base salaries in the middle to high end of the salary range. We consider peer salary data and market studies when determining the salary range and believe that base salaries are set at levels that enable us to hire and retain individuals.

Short-Term Incentives. Our annual bonus program is primarily based on the Company meeting or exceeding pre-established annual performance targets, such as return on average assets and asset quality. The Company has entered into a Management Incentive Plan (described below) with certain executive officers that determines their short-term incentives.

Long-Term Incentives. We grant equity awards to certain employees in an effort to attract, retain, and motivate key employees on building long-term profitability and shareholder value by closely aligning the interests of management with those of our shareholders. Awards are granted at the discretion of the CNG Committee. The Company has entered into a Management Incentive Plan (described below) with certain executive officers that determines their long-term incentives.

Other Compensation. Our executives also receive benefits that are generally available to all our employees. We believe our overall compensation package is competitive within the marketplace and consistent with our compensation philosophy.

We have a Management Incentive Plan in place with certain executive officers that is designed to align the interest of management and shareholders. This plan (i) provides a compensation environment that will attract, retain, and motivate key employees of the Company; (ii) aligns corporate goals and strategy to executive compensation strategy; and (iii) recognizes outstanding performers who have contributed significantly to the Company’s success and to the success of such performers’ respective business units. We assess our executive officers’ performance both objectively and subjectively using both financial (e.g., pre-tax, pre-provision revenue and asset quality) and non-financial measures (e.g., strategic objectives and risk management). The CNG Committee of our Board believes that evaluating performance using these metrics aligns the interests of our executive officers with the achievement of sustainable financial performance and results in an increase in shareholder value.

Our CNG Committee performs an annual review of the total compensation of executive officers reporting to the Chief Executive Officer. Through this review, the CNG Committee determines whether the Company adequately compensates our executive officers for both individual and Company results, relative to external compensation benchmarks. The CNG Committee considers the Company’s internal objectives (financial and non-financial), the individual executive’s contribution to Company objectives, and external peer compensation levels in making annual compensation decisions for the Company’s executive officers. The CNG Committee also receives annual assessments prepared by the Chief Executive Officer regarding the performance of executive officers that directly report to him.

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The following table sets forth an overview of the compensation for David Rainer, Executive Chairman & Chief Executive Officer; Thomas Dolan, Executive Vice President and Chief Financial Officer and, during a portion of 2022, our Interim Chief Executive Officer; Richard Hernandez, President; and Anne Williams, Executive Vice President and Chief Credit Officer. Mr. Rainer, Mr. Dolan, Mr. Hernandez, and Ms. Williams are our named executive officers for the year ended December 31, 2022. The compensation of the named executive officers is not necessarily indicative of how we will compensate our named executive officers in the future. Evaluation and changes, as needed, are made to our compensation structure to ensure compensation packages remain competitive and align with our compensation philosophy.

	Annual Compensation								Long Term Compensation
	Fiscal		Salary		Bonus (1)		Other Annual Compensation (2)		Stock Awards (3)		Total
Name	Year		($)		($)		($)		($)		($)
David I. Rainer (4)		2022	$	333,333	$	407,292	$	879,554	$	262,500	$	1,882,679
		2021		479,167		—		573,293		500,008		1,552,468
Thomas G. Dolan (5)		2022		356,400		192,500		39,576		310,008		898,484
		2021		268,333		170,000		43,045		480,016		961,394
Richard Hernandez		2022		357,875		377,344		67,700		250,005		1,052,924
		2021		311,458		220,000		151,556		175,006		858,020
Anne Williams		2022		327,600		158,620		42,138		173,040		701,398
		2021		318,032		180,000		87,206		120,012		705,250

(1)	Bonus to our named executive officers for services in a particular year are paid no later than in March of the immediately following year.
(2)	Refer to “Other Annual Compensation” table below.
(3)	Long-term compensation – stock awards – represents the aggregate grant date fair value of awards granted during the applicable fiscal year as computed in accordance with FASB ASC Topic 718, and does not include the vesting of previously granted stock options or restricted share units. Restricted share units typically vest ratably over two to five years.
(4)	Mr. Rainer was on unpaid sabbatical leave from April 29, 2022 through September 1, 2022. His other annual compensation was also frozen for the sabbatical period.
(5)	Mr. Dolan also served as our Interim Chief Executive Officer from April 29, 2022 through September 1, 2022 while Mr. Rainer was out on sabbatical.

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			Other Annual Compensation
					Life		Health
	Fiscal		401(k)		Insurance		Insurance		Car
Name	Year		Match		Premium		Premium		Allowance		Other			Total
David I. Rainer		2022	$	12,200	$	2,690	$	21,894	$	12,000	$	830,770	(1)	$	879,554
		2021		11,600		2,690		34,061		17,250		507,692	(1)		573,293
Thomas G. Dolan		2022		12,200		2,772		12,604		12,000		—			39,576
		2021		11,464		2,690		17,391		11,500		—			43,045
Richard Hernandez		2022		12,200		630		39,120		15,750		—			67,700
		2021		11,397		611		53,048		11,500		75,000	(2)		151,556
Anne Williams		2022		12,200		5,334		12,604		12,000		—			42,138
		2021		1,067		2,690		11,949		11,500		60,000	(2)		87,206

(1)	Includes special payment in connection with loss of consulting fees of $831 thousand and $508 thousand in 2022 and 2021.
(2)	Represents compensation paid as part of the executive’s sign-on bonus.

Agreements with Company Officers

We have entered into an Amended and Restated Employment Agreement with our Executive Chairman and Chief Executive Officer, David I. Rainer, and an Employment Agreement with the Bank’s Executive Director, Mr. Di Tomaso. We have entered into change in control severance agreements with our other executive officers, including Mr. Dolan, Mr. Hernandez, and Ms. Williams. We have also entered into Supplemental Executive Retirement Plans with Mr. Dolan and Mr. Hernandez.

Employment Agreement with David I. Rainer

On January 18, 2023, we entered into an Amended and Restated Employment Agreement with Mr. Rainer pursuant to which he serves as Executive Chairman and Chief Executive Officer of the Company and Chief Executive Officer of the Bank. We have also agreed that Mr. Rainer will serve as a director of the Company and the Bank, and that a failure to nominate, appoint or elect him as director of the Company or the Bank or as Executive Chairman will be treated as a termination without cause under his employment agreement. The employment agreement terminates on December 31, 2025 and, unless terminated by either party, automatically renews for successive one year terms until December 31, 2028.

Under the employment agreement, Mr. Rainer is entitled to an annual base salary of $610,000, which is subject to review from time to time by our Board for increase, but not decrease. Mr. Rainer may also receive a discretionary bonus as determined by the Board, which may include his participation in an executive incentive bonus plan adopted by the Board. Mr. Rainer is eligible to receive benefits under any employee benefit plans we make available to senior executives or employees of the Bank generally, including any pension plans, profit sharing plans, 401(k) plan, medical, dental, disability and life insurance plans. We also pay Mr. Rainer a monthly automobile allowance of $1,500. Mr. Rainer has agreed to be bound to our executive compensation clawback policy.

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Mr. Rainer’s employment agreement provides for certain severance benefits upon his involuntary termination without “cause” or if he resigns for “good reason,” in each case as defined in his employment agreement. Following such event of termination or such resignation, Mr. Rainer would be entitled to his accrued salary and benefits and a lump sum severance payment equal to his base salary as in effect on the date of termination. Additionally, the Company will continue to cover Mr. Rainer and his covered dependents under its group healthcare coverage until the earlier of 12 months or the date on which he becomes eligible to receive medical benefits under another group health plan.

If Mr. Rainer is terminated without cause or resigns for good reason after the Company publicly announces an anticipated “change of control” as defined in his employment agreement, that is eventually completed, or during the 12 months subsequent to a “change in control,” then he is entitled to receive, in addition to his accrued benefits, a lump sum payment equal to three times the sum of his base salary in effect as of the date of his termination plus the average of his annual bonuses for the previous three years (including the fair market value of any equity grants included in his annual bonuses). Additionally, the Company will pay Mr. Rainer an amount equal to six months of COBRA health insurance premiums for him and his covered dependents.

Mr. Rainer’s employment agreement includes a Section 280G “best-net cutback” provision that provides in the event any payment or benefit provided under the employment agreement or any other arrangement with our Company or its affiliates constitutes “parachute payments” within the meaning of Section 280G of the Internal Revenue Code, then such payments and/or benefits will either be (i) provided in full or (ii) be reduced to the extent necessary to avoid the excise tax imposed by Section 4999 of the Internal Revenue Code, whichever results in Mr. Rainer receiving a greater amount on an after-tax basis.

The payment of all such severance amounts and benefits is contingent upon Mr. Rainer’s timely execution and non-revocation of a release of all claims in a form provided by the Company.

Change in Control Agreements with Executive Officers

On January 18, 2023, we entered into change in control agreements with our executive officers other than Mr. Rainer. These agreements provide that if the executive is terminated during the 12 months subsequent to a “change in control” of the Company, as defined in the agreements, by the Company without “cause” or by the executive for “good reason,” in each case as defined in the executive’s agreement, the executive will be entitled to receive a lump sum severance payment equal to the sum of the executive’s annual base salary, average annual bonus for the previous three years and the average value of the equity awards granted over the previous three years or, in the case of Mr. Dolan and Mr. Hernandez, two times the sum of those amounts. In addition, the executive would also be entitled to a pro-rated (through the date of termination) portion of his or her bonus for the then-current year, whether payable in cash or property and calculated as if all performance metrics for the maximum bonus were met, and all of the executive’s equity incentive awards will vest, with performance based awards vesting at target. Each change in control agreement includes a Code Section 280G “best-net cutback” provision similar to the provision described Mr. Rainer’s employment agreement immediately above. The payment of all such severance amounts and benefits is contingent upon the executive’s timely execution and non-revocation of a release of all claims. The change of control agreements expire on December 31, 2028, but our obligations to the executives will survive with respect to any change of control that occurs during the term.

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Supplemental Executive Retirement Plans with certain Executive Officers

In July 2021, the Bank entered into supplemental executive retirement agreements (each, a “SERP”) with Mr. Dolan and Mr. Hernandez providing that a specified annual benefit ($50,000 for Mr. Dolan and $75,000 for Mr. Hernandez) is payable for ten years following his normal retirement at age 67. Each SERP is a nonqualified deferred compensation arrangement with benefits vesting 20% annually over five years for Mr. Dolan and 10% annually over ten years for Mr. Hernandez. If the executive voluntarily resigns or is terminated without cause, as defined in his SERP, before age 67, each SERP provides a lump sum early termination benefit in an amount equal to the product of the then-accrued liability balance and the executive’s vesting percentage. Upon the executive’s permanent disability, death or a termination without cause before age 67, each SERP provides the executive or his beneficiaries a lump sum benefit in an amount equal to then-accrued liability balance. If an executive is terminated without “cause” or resigns for “good reason” during the 12 months following a “change in control,” each as defined in his SERP, before age 67, each SERP provides a lump sum benefit in an amount equal to the accrued liability balance calculated as of the executive’s ordinary retirement discounted for present value. As of December 31, 2022, the present values of the vested accrued benefit were $110,300 for Mr. Dolan and $26,066 for Mr. Hernandez. The SERPs constitute unfunded, unsecured promises by the Bank to make payments in the future.

Employment Agreement with Frank Di Tomaso

On April 26, 2021, the Bank entered into an employment agreement with Mr. Di Tomaso. Mr. Di Tomaso’s employment agreement provides that he will serve as the Bank’s Executive Director for annual salary of $200,000 and such benefits as the Bank provides to similarly situated employees. As the Bank’s Executive Director, Mr. Di Tomaso reports to the Bank’s Executive Chairman and is responsible for assisting with the integration of Bank of Santa Clarita’s business, the retention of its customers and employees and such other matters as the Bank may request. While Mr. Di Tomaso’s employment is “at will,” if the Bank terminates his employment without “cause” or Mr. Di Tomaso terminates his employment for “good reason,” as defined in the agreement, prior to April 26, 2023, the Bank will continue to pay Mr. Di Tomaso’s salary and provide him medical benefits through such date.

Southern California Bancorp 2019 Omnibus Equity Compensation Plan

General. The 2019 Omnibus Equity Compensation Plan (the “2019 Plan”) was first adopted by our Board of Directors on November 20, 2019 and approved by our shareholders on April 22, 2020. Our Board subsequently amended the 2019 Plan on October 26, 2020 and June 26, 2021 to increase the number shares of common stock available for awards. The 2019 Plan will terminate on November 19, 2029. The 2019 Plan was designed to ensure the continued availability of equity awards that will assist us in attracting, retaining and rewarding key employees and directors. The 2019 Plan is intended to promote the growth and profitability of the Company by providing our key employees and directors with incentive compensation opportunities in the form of stock options and restricted shares, thereby aligning their interests with those of our shareholders.

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Shares Available for Awards. Up to 3,400,000 shares of common stock, which includes any shares of common stock underlying awards that expire or are otherwise terminated or forfeited at any time after the effective date of the 2019 Plan, will be available for issuance to participants (including individuals who may become participants due to acquisitions) under the 2019 Plan. In addition, there are outstanding stock options to purchase totaled 869,600 shares and outstanding unvested restricted shares totaled 35,625 shares of common stock outstanding under the 2019 Plan that were originally issued by the Bank and which we assumed when we completed the bank holding company reorganization. Shares of common stock delivered to or withheld by the Company pursuant to the exercise of an award or applied to the satisfaction of any tax withholding obligation become available for re-grant under the 2019 Plan. Shares subject to awards issued in substitution or replacement of awards issued by another entity do not count against the 2019 Plan’s share grant limits. The 2019 Plan does not have an evergreen provision.

Administration. The CNG Committee administers the 2019 Plan. Among other powers, the CNG Committee has full and exclusive power to interpret the 2019 Plan, grant awards, and to determine the number of shares of common stock that will be subject to the awards. The CNG Committee may delegate to one or more persons other than members of the CNG Committee certain day-to-day administrative duties with respect to the 2019 Plan.

Eligibility for Participation. All officers, employees, directors and consultants of the Company and its subsidiaries are eligible to participate in the 2019 Plan. Subject to the provisions of the 2019 Plan, the CNG Committee has the authority to select from the eligible individuals to whom awards are granted and to determine the nature and amount of each award.

Types of Awards. The CNG Committee may grant incentive awards in the form of stock options and restricted stock. Each award will be reflected in an agreement between the Company and the recipient and will be subject to the terms of the 2019 Plan, together with any other terms or conditions contained therein that are consistent with the 2019 Plan and that the CNG Committee deems appropriate.

Stock Options. The CNG Committee may grant stock options intended to qualify as incentive stock options, or ISOs, within the meaning of Section 422 of the Internal Revenue Code, and “nonqualified stock options” that are not intended to so qualify as incentive stock options or any combination of ISOs and nonqualified stock options.

The CNG Committee will determine the term of each option and the exercise price per share for options on the date of grant, provided that the exercise price of any option granted under the 2019 Plan can never be less than the fair market value of the underlying shares of common stock on the date of grant. The CNG Committee may impose in an award agreement such restrictions on the shares deliverable upon exercise of a stock option as it deems appropriate, including that such shares will constitute “restricted shares” subject to restrictions on transfer.

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Restricted Stock. An award of restricted stock involves the immediate transfer by the Company to the participant of a specific number of shares of common stock which are subject to a risk of forfeiture and a restriction on transferability. This restriction will lapse following a stated period of time or subject to any stated conditions. The participant does not pay for the restricted stock and has all the rights of a holder of a share of common stock of the Company (except for the restriction on transferability), including the right to vote and receive dividends unless otherwise determined by the CNG Committee and set forth in the award agreement. Except as provided otherwise in an award agreement, if a participant’s employment with the Company or its subsidiaries is terminated for any reason at any time during which any portion of an award of restricted stock remains subject to restrictions, that portion will automatically be forfeited and returned to the Company.

Modification and Substitutions of Awards. Subject to applicable law and the terms of the 2019 Plan, the CNG Committee may: (i) modify, extend and renew awards to modify the terms of an award agreement, provided that no modification, extension or renewal may have the effect of lowering the exercise price of any award except for adjustments related to capitalization and other corporate changes as described above; and/or (ii) accept the surrender of awards granted under the 2019 Plan or under any other equity compensation plan of the Company and replace them with new awards pursuant to the 2019 Plan.

Amendment and Termination. Our Board may, at any time and from time to time and in any respect, terminate, amend or modify the 2019 Plan, including to provide that the 2019 Plan and each award granted under the 2019 Plan complies with applicable law, regulations and stock exchange rules provided that no amendment (other than an adjustment upon a change in capitalization) may adversely affect any outstanding award, without the written consent of the participant holding such outstanding award. Such termination, amendment or modification may be without shareholder approval except to the extent that such approval is required by the Internal Revenue Code, or under any other applicable laws or stock exchange rules.

The CNG Committee may, at any time and in its sole discretion, determine that any outstanding stock options granted under the 2019 Plan, whether or not exercisable, will be canceled and terminated and the holders of such stock options may receive for each share of common stock subject to such stock option award a cash payment (or the delivery of shares of stock, other securities or a combination of cash, stock and securities equivalent to such cash payment) equal to the difference, if any, between the fair market value of our common stock and the stock option’s exercise price per share multiplied by the number of shares of common stock subject to such stock option; provided that if such product is zero or less, the stock option may be canceled without consideration.

Effect of Termination and Change in Control. Unless otherwise provided in an award agreement, if a “terminating event” (as defined in the 2019 Plan) occurs, the 2019 Plan will terminate and all stock options and restricted stock awards will vest in full, with holders of stock options given at least 30 days to elect to exercise, subject to the completion of the terminating event. Under the 2019 Plan, a “terminating event” includes (1) the consummation of a plan of liquidation or dissolution of the Company, (2) a merger or reorganization in which the Company is not the surviving corporation or (3) a sale of all or substantially all of the Company’s assets, unless all outstanding awards that are not exercised or paid at the time of the change in control will be assumed by, or replaced with awards that have comparable terms by, a successor corporation (or a parent or subsidiary of the successor corporation).

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Outstanding Equity Awards

The following table provides information for each of our named executive officers regarding outstanding stock options and restricted share units held by our named executive officers as of December 31, 2022.

				Number of		Number of						Number		Market Value
				Underlying		Underlying		Option				of Shares or		of Shares or
				Unexercised		Unexercised		Exercise		Option		Units of stock		Units of Stock
	Grant			Options-		Options-		Price		Expiration		that Have		that Have
Name	Date			Exercisable		Unexercisable		($)		Date		Not Vested		Not Vested (1)
David I. Rainer		11/5/2020	(2)		—		—	$	—		—		211,765	$	3,564,005
		11/5/2020	(3)		—		—		—		—		141,176	$	2,375,992
		3/29/2022	(4)		—		—		—		—		32,363	$	544,669
Thomas G. Dolan		10/26/2020	(2)		—		—		—		—		42,353	$	712,801
		10/26/2020	(5)		—		—		—		—		28,235	$	475,195
		8/25/2021	(2)		—		—		—		—		21,053	$	354,322
		3/4/2022	(6)		—		—		—		—		11,689	$	196,726
		5/5/2022	(7)		—		—		—		—		6,730	$	113,266
Richard Hernandez		11/2/2020	(8)		—		—		—		—		33,708	$	567,306
		3/4/2022	(9)		—		—		—		—		11,364	$	191,256
		5/5/2022	(10)		—		—		—		—		16,824	$	283,148
Anne Williams		3/4/2022	(11)		—		—		—		—		7,793	$	131,156

(1)	Based on the closing price of the Company’s common stock of $16.83 on December 31, 2022.
(2)	Represents a performance-based award vesting on December 31, 2023, subject to confirmation that the Company achieved specified performance conditions not later than such date. The performance conditions included return on average assets of 0.9%; record growth in net deposits not less than $1.0 billion from the Bank’s deposit balance as of September 30, 2020; achievement and maintenance of a ratio of classified loans to tier 1 capital plus our allowance for loan and lease losses of less than 25%; and the absence of any formal regulatory enforcement orders. On March 1, 2023, the Board confirmed that all performance conditions have been satisfied and accelerated vesting in full.
(3)	Represents restricted stock granted pursuant to Mr. Rainer’s employment agreement, which will vest in equal installments over a two-year period beginning on December 1, 2024.
(4)	Represents restricted stock that will vest in equal installments over a two-year period beginning on March 29, 2023.
(5)	Represents restricted stock that will vest in equal installments over a two-year period beginning on December 1, 2024.
(6)	Represents restricted stock that will vest in equal installments over a two-year period beginning on March 4, 2023.
(7)	Represents restricted stock that will vest in equal installments over a two-year period beginning on May 5, 2023.
(8)	Represents restricted stock that will vest in equal installments over a five-year period beginning on December 1, 2021.
(9)	Represents restricted stock that will vest in equal installments over a three-year period beginning on March 4, 2023.
(10)	Represents restricted stock that will vest in equal annual installments over a five-year period beginning on May 5, 2023.
(11)	Represents restricted stock that will vest in two equal installments on March 4, 2023 and November 2, 2023.

Director Compensation

The CNG Committee evaluates director compensation and recommends to the Board compensation for non-employee directors and the Board approves the director compensation for each fiscal year. The Company reimburses its directors for reasonable travel, food, accommodation and other business-related expenses incurred in relation to their service on the Board and committees.

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Each of the directors of the Company also serves as a director on the Bank’s Board of Directors. During 2022, we paid our non-employee directors a monthly cash fee of $3,000. The Lead Director received an additional monthly cash fee of $2,000, and the Chair of a Board Committee or a Committee of the Board of Directors of the Bank received a Chair Fee of $2,000 per month. In addition to cash compensation, each of the non-employee directors was granted a number of restricted shares having a fair market value equal to the aggregate of the monthly cash fee with a one-year vesting term. Bank-owned life insurance (“BOLI”) represents the taxable fringe benefit of purchased BOLI by the Bank with the directors as the insured party, whereby the benefit to each director is 100% of the death benefit in excess of the investment in BOLI. Group-term life insurance represents the taxable fringe benefit associated with $250,000 term life insurance for each director at December 31, 2022.

The following table sets forth the compensation to each of our directors for services during 2022 other than Mr. Rainer, our Chief Executive Officer, who received no additional compensation for his service as a director.

	Fees Earned				All
	or Paid in		Stock		Other
Name	Cash		Awards (1)		Compensation (6)		Total
Frank D. Di Tomaso (2)	$	—	$	—	$	319,058	$	319,058
John Farkash		36,000		36,012		7,567		79,579
Irwin Golds (3)		194,000		76,023		3,711		273,734
Lester Machado		40,000		36,012		4,252		80,264
Jan Lynn Owen (4)		50,000		27,009		4,120		81,129
Kaveh Varjavand		60,000		36,012		1,032		97,044
David Volk (5)		36,000		36,012		809		72,821
Anita Wolman		60,000		36,012		4,944		100,956

(1)	Restricted shares were granted to non-employee directors for their service provided during 2022. The dollar value of restricted stock units represents the aggregate grant date fair value of awards granted during the applicable fiscal year as computed in accordance with FASB ASC Topic 718, disregarding for this purpose the estimate of forfeitures related to service-based vesting conditions.
(2)	Represents amounts paid to Mr. Di Tomaso pursuant to his employment agreement with the Bank. See “Item 6. Executive Compensation
	– Agreements with Executive Officers.” In addition, Mr. Di Tomaso will be paid a cash bonus of $80 thousand for his service provided during 2022. Such cash bonus will be paid in March of 2023.
(3)	Mr. Golds received additional fees and restricted shares when was appointed as an interim Chairman from April through September of 2022.
(4)	Ms. Owen, who served as a Director and Chair of the CNG Committee until her resignation from our Board effective October 18, 2022.
(5)	Mr. Volk’s Board fees are paid directly to Castle Creek Advisors IV LLC. Mr. Volk’s restricted shares were issued to Castle Creek Advisors IV LLC at vesting.
(6)	Other compensation includes the taxable fringe benefit of purchased BOLI by the Bank with directors as the insured party and group-term life insurance premiums.

The following table presents: (a) the number of stock awards granted to each non-employee director during 2022 (all of which were in the form of restricted stock units(“RSUs”), the grant date fair values of which are reflected in the table above; (b) the aggregate number of outstanding unvested RSUs held by each non-employee director as of December 31, 2022; and (c) the aggregate number of outstanding options (both vested and unvested) held by each non-employee director at December 31, 2022. The RSUs granted to the non-employee directors during 2022 will vest in full on May 12, 2023.

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	Stock Awards in the 2022 Summary Table of Director Compensation Above		Aggregate Awards Outstanding as of December 31, 2022 Aggregate Number of
Name	Number of Stock Awards (a)		Unvested RSUs Outstanding (b)		Options Outstanding (c)
Frank D. Di Tomaso		—		—		—
John Farkash (1)		2,404		601		47,500
Irwin Golds (2)		5,045		1,482		35,000
Lester Machado (3)		2,404		601		15,500
Jan Lynn Owen (4)		1,803		—		—
Kaveh Varjavand		2,404		601		—
David Volk (5)		2,404		601		17,500
Anita Wolman		2,404		601		—

(1)	Options outstanding included unvested stock options totaled 6,000 shares, of which 3,0000 shares will be vested on February 20, 2023 and 2024.
(2)	Options outstanding included unvested stock options totaled 3,000 shares, of which 1,5000 shares will be vested on February 20, 2023 and 2024.
(3)	Options outstanding included unvested stock options totaled 3,000 shares, of which 3,0000 shares will be vested on February 20, 2023 and 2024.
(4)	Ms. Owen, who served as a Director and Chair of the CNG Committee until her resignation from our Board effective October 18, 2022.
(5)	Options outstanding included unvested stock options totaled 3,000 shares, of which 3,0000 shares will be vested on February 20, 2023 and 2024.

Compensation Committee Interlocks and Insider Participation

In 2022, the CNG Committee was comprised entirely of five independent directors: Mr. Machado (its Chairman), Mr. Golds, Mr. Varjavand, Mr. Volk, and Ms. Wolman. No member of the CNG Committee is a current, or during 2022 was a former, executive officer or employee of the Company or any of its subsidiaries. During 2022, no member of the CNG Committee had a relationship that must be described under the SEC rules relating to disclosure of related person transactions. In 2022, none of our executive officers served on the board of directors or compensation committee of any entity that had one or more of its executive officers serving on our Board or its CNG Committee.

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Item 7. Certain Relationships And Related Transactions, and Director Independence

Policies and Procedures for Approval of Related Person Transactions

Our Board of Directors has adopted a written Related Party Transactions Policy. The policy describes the procedures used to identify, review, approve and disclose, if necessary, any transaction occurring since the beginning of our last fiscal year, or any currently proposed transaction, involving the Company where the amount involved exceeds $120,000 and in which any of the following persons had or will have a direct or indirect material interest: (i) a director or director nominee; (ii) an executive officer; (iii) a person known by the Company to be the beneficial owner of more than 5% of the Company’s common stock; or (iv) a person known by the Company to be an immediate family member of any of the foregoing. Each such transaction is referred to as a “Related Party Transaction.”

The Company does not allow for loans to be made to its employee base; therefore no officers of the Company have loans with us. Loans made to directors and their related parties must comply with Regulation O of the Federal Reserve.

Under the policy, each of our directors and executive officers is required to inform the General Counsel of any potential Related Party Transaction. In addition, on an annual basis, each director and executive officer completes a questionnaire designed to elicit information about any potential Related Party Transactions. Once a transaction has been identified and is determined to constitute a Related Party Transaction, the CNG Committee will be provided with a summary of material facts of the transaction. The CNG Committee will then review the transaction and determine whether it should be permitted or prohibited. In making its determination, the CNG Committee will consider all relevant factors, including but not limited to (i) whether the terms of the Related Party Transaction are fair to the Company and on the same basis as would apply if the transaction did not involve a related party, (ii) whether there are business reasons for us to enter into the Related Party Transaction, (iii) whether the Related Party Transaction would impair the independence of an outside director, and (iii) whether the Related Party Transaction would present an improper conflict of interest for any director or executive officer. A committee member having an interest in a Related Party Transaction will not participate in any discussion, approval or ratification of the transaction.

Certain Transactions with Related Persons

Banking Transactions

Some of our officers and directors and the business organizations with which they are associated, have been customers of, and have engaged in banking transactions with, the Bank in the ordinary course of business, and we expect that they will continue to engage in such banking transactions in the future. All of the banking transactions described in this paragraph are made in the ordinary course of business, on substantially the same terms, including interest rates and collateral (where applicable), as those prevailing at the time for comparable transactions with persons not related to us, and do not involve more than normal risk of collectability or present other features unfavorable to us. As of the date of this registration statement, no related party loans were categorized as nonaccrual, past due, restructured or potential problem loans. Further, the Bank is restricted as to the extent and amount of loans it can make to our officers and directors. All of the banking transactions described in this paragraph have complied with said restrictions.

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Lease Relationship

The Bank leases a branch office located in Ramona, California from an entity of which one of our directors, John Farkash, is a majority beneficial owner. The Bank first entered into this lease in 2000 and, as amended, the lease covers approximately 1,476 usable square feet. Total lease expense for each of 2022 and 2021 was $43 thousand and $40 thousand and future minimum lease payments under the lease were $193 thousand as of December 31, 2022.

Certain Investor Rights

In connection with a capital offering in 2016, we entered into a Securities Purchase Agreement and letter agreement with Castle Creek Capital Partners VI LP (“Castle Creek”) in which we agreed to provide Castle Creek certain investor rights. When Castle Creek made additional purchases of our common stock in 2018 and 2019, we entered into new side letters with Castle Creek confirming that its investor rights would apply to all of the shares it purchased. Under these agreements, for so long as Castle Creek and its affiliates own at least 5.0% of our outstanding common stock and not less than 891,284 shares, we must nominate for election, recommend that our shareholders elect, and use our reasonable best efforts to take all action required to elect, a representative of Castle Creek to our Board at our annual meeting each year. If Castle Creek’s representative ceases to be director, Castle Creek is permitted to designate a replacement. We also agreed to provide Castle Creek and its permitted transferees “piggyback” registration rights with respect to registration statements we may file, subject to certain exceptions, and to permit them to sell their shares in any underwritten offering we may pursue to the extent the inclusion of their shares would not, in the opinion of the underwriters, adversely affect the marketability of the offering. We will bear certain expenses incurred in connection with the filing of any such registration statements.

Certain Investments

The Company invested in Castle Creek Launchpad Fund I (“Launchpad”) in 2022. Launchpad is a financial technology venture capital fund on which our director, Mr. Volk, serves on the investment committee. The Company’s total commitment is $2.0 million, and the Company contributed an aggregate of $315 thousand during the year ended December 31, 2022.

Director Independence

Our Board annually evaluates the independence of its members based on Item 407(a) of Regulation S-K and NASDAQ Rule 5605(a)(2). In addition, our Board annually evaluates the independence of its ARC Committee and CNG Committee members based on the Nasdaq Rules 5605(c)(2) and (d)(2), respectively. Our corporate governance policy requires that a majority of the Board be composed of directors who meet the requirements for independence established by these standards. Our Board has concluded that the Company has a majority of independent directors and that our Board meets the standards of Nasdaq Rules 5605(a)(2). Our Board has also concluded that the members of the ARC Committee meet the standards of the Nasdaq Rule 5605(c)(2) and that the members of the CNG Committee meet the standards of the Nasdaq Rule 5605(d)(2).

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Our Board has determined that each of our directors, other than Mr. Rainer, Mr. Di Tomaso and Ms. Williams, are independent, taking into account the matters discussed above. Mr. Rainer, the Company’s Chief Executive Officer, is not independent because he is an executive officer of the Company and the Bank. Mr. Di Tomaso, the Company’s Executive Director, is not independent because he is an officer of the Company and the Bank. Ms. Williams, the Executive Vice President, Chief Credit Officer of the Bank, is not independent because she is an executive officer of the Bank.

Item 8. Legal Proceedings

The Company and its subsidiaries are parties to various claims and lawsuits arising in the course of their normal business activities. Although the ultimate outcome of these suits cannot be ascertained at this time, it is the opinion of management that none of these matters, even if it resolved adversely to the Company, will have a material adverse effect on the Company’s consolidated financial position.

Item 9. Market Price of And Dividends on The Registrant’s Common Equity And Related Stockholder Matters

Market Information; Holders of Record

Our common stock is quoted on the OTC Pink Open Market under the symbol “BCAL”. Upon effectiveness of this registration statement, we expect our common stock will be traded on NASDAQ.

As of February 27, 2023, the last reported trade of the Company’s common stock on the OTC Pink Open Market was quoted at $16.95 per share. As of such date, there were 17,955,585 shares of common stock issued and outstanding and approximately 370 holders of record.

Dividends

Our shareholders are entitled to receive dividends only if, when and as declared by our Board of Directors and out of funds legally available. We have paid no cash dividends to common shareholders since our inception and we have no present intent to commence the payment of dividends in the foreseeable future. We anticipate that all of our future earnings will be retained to support our operations and finance the growth and development of our business. Whether or not dividends, either cash or stock, will be paid in the future will be determined by our Board of Directors in its sole discretion, subject to the satisfaction of any regulatory requirements. Our profitability and regulatory capital ratios, in addition to other financial conditions, will be key factors in determining the payment of dividends.

As a California corporation, we are subject to certain restrictions on dividends under the California General Corporation Law. We are also subject to certain restrictions on the payment of cash dividends as a result of banking laws, regulations and policies. See “Item 1. Business—Supervision and Regulation—Regulation of the Company” and “Item 1. Business—Supervision and Regulation—Regulation of the Bank”

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Securities Authorized For Issuance Under Equity Compensation Plans

The following table provides information concerning securities authorized for issuance under equity compensation plans, the weighted average price of such securities and the number of securities remaining available for future issuance, as of December 31, 2022.

Equity Compensation Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options and Awards		Weighted-Average Exercise Price of Outstanding Options and Awards		Number of Securities to Remaining and Available for Future Issuance
Plans approved by shareholders						1,406,407
Stock Options		326,868	$	9.53
Restricted Shares		959,337	$	—
		1,286,205	$	2.42		1,406,407
Plans not approved by shareholders		—	$	—		—
Total		1,286,205	$	2.42		1,406,407

Item 10. Recent Sales of Unregistered Securities

Issues of Securities as Equity Incentive Plan Awards

We issue from time to time restricted stock units and stock options to our directors, officers and employees under our equity plans. Copies of our equity plans are attached to this registration statement as exhibits. Since we completed the holding company reorganization on May 15, 2020, we have issued 1,910,426 shares of restricted share units to our employees, executives and directors, and we did not issue any stock options. After May 15, 2020, we have issued an aggregate of 490,200 shares of our common stock upon exercise of outstanding stock options with a weighted average exercise price of $7.70, and 773,903 shares of our common stock upon vesting of outstanding restricted stock units with a weighted average grant date fair value of $9.32. The issuances of these securities were exempt from the registration requirements of the Securities Act pursuant to Rule 701. We also issued stock options and restricted stock units in connection with the bank holding company reorganization described below.

Issuance of Securities in Bank Holding Company Reorganization

In connection with the bank holding company reorganization that we completed on May 15, 2020, we issued 9,424,565 shares of our common stock to the Bank’s shareholders in exchange for all of their shares of common stock of the Bank on a one-for-one basis. Additionally, we assumed stock options to purchase totaled 869,600 shares of common stock of the Bank with a weighted exercise price of $9.16, and restricted stock units of the Bank totaled 35,625 shares with a weighted grant price of $12.96, on a one-for-one basis. These shares, stock options and restricted stock units were not registered under the Securities Act, and were offered and sold in reliance upon the exemption from registration provided by Section 3(a)(10) of the Securities Act of 1933, as amended, and the public fairness hearing process afforded by Section 25142 of the California Corporations Code.

115

Issuance of Securities in Acquisition of Bank of Santa Clarita

On October 1, 2021, we issued 4,102,254 shares of our common stock to the former shareholders of Bank of Santa Clarita (“BSCA”) in connection with our acquisition of BSCA. The shares were valued at approximately $64.6 million in the aggregate at issuance. Additionally, we assumed unexercised BSCA stock options totaled 90,731 shares with a total fair value of $832 thousand on a one-for-one basis. These shares and stock options were not registered under the Securities Act, and were offered and sold in reliance upon the exemption from registration provided by Section 3(a)(10) of the Securities Act of 1933, as amended, and the public fairness hearing process afforded by Section 25142 of the California Corporations Code.

Item 11. Description of Registrant’s Securities to Be Registered

The following is a summary description of the material terms of our common stock and the related portions of our articles of incorporation (the “Articles of Incorporation”), our bylaws (the “Bylaws”) and applicable California law. The description is not complete and is qualified by reference to our Articles of Incorporation and Bylaws, copies of which will are filed with the SEC as exhibits to this registration statement, and applicable California law.

Our authorized capital stock consists of 100,000,000 shares, of which 50,000,000 shares are serial preferred stock without par value and 50,000,000 shares are common stock without par value. As of December 31, 2022, we had 17,940,283 shares of common stock issued and outstanding and no shares of preferred stock issued and outstanding. All shares of our common stock outstanding at that date were fully paid, validly issued and nonassessable.

Our common stock is quoted on the OTC Pink Open Market under the trading symbol “BCAL.”

Common Stock

Each share of common stock has the same rights, privileges and preferences as every other share of common stock, and there are no preemptive, conversion, redemption rights or sinking fund provisions applicable to our common stock. The designations and powers, preferences and rights and the qualifications, limitations or restrictions of the common stock are described below.

Dividend Rights. Subject to the rights of any preferred stock we may use in the future, each share of common stock will participate equally in dividends, which are payable when and as declared by our Board of Directors. Our common stock ranks junior with respect to dividend rights of any other securities or indebtedness of the Company.

116

Liquidation and Dissolution. Our common stock ranks junior to all other securities and indebtedness of the Company with respect to rights upon liquidation, dissolution or winding up of the Company. Upon any voluntary or involuntary liquidation, dissolution or winding up of the Company, the holders of our common stock are entitled to share equally, on a per share basis, in all of our assets available for distribution, after payment to creditors and subject to any prior distribution rights granted to holders of any then outstanding shares of preferred stock.

Voting Rights. Each holder of common stock is entitled to one vote per share on any issue requiring a vote, except in the election of directors. Shareholders may cumulate votes in the election of directors. Under cumulative voting, as to any candidates whose names are placed in nomination prior to voting, a shareholder has the right to vote the number of shares owned for as many persons as there are directors to be elected, or to cumulate such votes and give one candidate as many votes as the number of directors multiplied by the number of shares owned equals, or to distribute such number of votes on the same principle among as many candidates as the shareholder deems appropriate. However, cumulative voting will be dispensed with unless a shareholder gives notice at the shareholders’ meeting of the intention to cumulate votes. If any shareholder gives notice of an intention to cumulate votes, then all shareholders may cumulate their votes for candidates in nomination.

Absence of Preemptive Rights. Our common stock does not have preemptive rights or other rights to subscribe for additional shares.

Stock Exchange Listing Application. We have applied and received approval to list our common stock on the Nasdaq Capital Market under the trading symbol “BCAL.”

Preferred Stock

Upon authorization of our Board, we may issue shares of one or more series of our preferred stock from time to time, which may be senior in right to our common stock with respect to dividends and distributions on liquidation. Our Board may, without any action by holders of common stock (subject to Nasdaq shareholder approval rules), fix the designations, voting powers, preferences, participation, redemption, sinking fund, conversion, dividend and other relative rights, qualifications, limitations and restrictions of any such series of preferred stock.

Anti-Takeover Considerations and Special Provisions of Our Articles of Incorporation, Bylaws and California Law

California law and certain provisions of our Articles of Incorporation and Bylaws could have the effect of delaying or deferring the removal of incumbent directors or delaying, deferring or discouraging another party from acquiring control of us, even if such removal or acquisition would be viewed by our shareholders to be in their best interests. These provisions, summarized below, are intended to encourage persons seeking to acquire control of us to first negotiate with our Board. These provisions also serve to discourage hostile takeover practices and inadequate takeover bids. We believe that these provisions are beneficial because the negotiation they encourage could result in improved terms of any unsolicited proposal.

117

Authorized but Unissued Capital Stock. At December 31, 2022, we had 30,773,512 shares of authorized but unissued shares of common stock, including 1,286,205 shares of common stock reserved for issuance upon the exercise of outstanding stock options, and other stock awards. We also have 50,000,000 shares of authorized but unissued shares of preferred stock, and our Board may authorize the issuance of one or more series of preferred stock without shareholder approval, the terms of which might:

● Adversely affect voting or other rights evidenced by, or amounts otherwise payable with respect to, the common stock or other series of preferred stock;

● Discourage an unsolicited proposal to acquire us; or

● Facilitate a particular business combination involving us.

Any of these actions could have an anti-takeover effect and discourage a transaction that some or a majority of our shareholders might believe to be in their best interests or in which our shareholders might receive a premium for their stock over our then market price.

Limitation on Right to Call a Special Meeting of Shareholders. Our Bylaws provide that special meetings of shareholders may only be called by our Chairman of the Board, our President, the Board of Directors or by a holder or holders of not less than 10% of our outstanding shares of capital stock entitled to vote for the purpose or purposes for which the meeting is being called.

Advance Notice Provisions. Our Bylaws require that any business to be proposed by a shareholder at an annual meeting and any shareholder nominations for director must be made in accordance with the provisions of our Bylaws, which generally require, among other things, that a shareholder notify us in writing of their intent to make proposal or nominate a candidate for election as a director not less than 90 days nor more than 120 days prior to the shareholder meeting. The notice must include the information specified in our Bylaws and the proposing or nominating shareholder and any nominee(s) are required to follow the procedures set forth in our Bylaws. See “Item 5. Directors and Executive Officers - Selection and Nomination of Candidates for Election to the Board of Directors.”

Filling of Board Vacancies; Removals. Any vacancies in our Board and any directorships resulting from any increase in the number of directors may be filled by a majority of the remaining directors, or if the number of directors then in office is less than a quorum, by (i) unanimous written consent of the directors then in office, (ii) the affirmative vote of a majority of the directors then in office at a meeting held pursuant to notice or waivers of notice, or (iii) a sole remaining director. However, a vacancy created by the removal of a director by the vote or written consent of the shareholders or by court order may be filled only by the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present, or by the unanimous written consent of all shares entitled to vote thereon.

New or Amendment of the Bylaws. New bylaws may be adopted or the Bylaws may be amended or repealed by the vote or written consent of holders of a majority of the outstanding shares entitled to vote. Our Bylaws also provide that except for changing the authorized number of directors or providing for the approval by the Board, acting alone, of a loan or guarantee to any officer or an employee benefit plan providing for the same, our Bylaws may be altered, amended or repealed by our Board without prior notice to or approval by our shareholders. Accordingly, our Board could take action to amend our Bylaws in a manner that could have the effect of delaying, deferring or discouraging another party from acquiring control of us.

118

Voting Provisions. Our Articles of Incorporation do not provide for certain heightened voting thresholds needed to consummate a change in control transaction, such as a merger, the sale of substantially all of our assets or other similar transaction. Accordingly, under the California General Corporations Law (the “CGCL”), a reorganization requiring shareholder approval or a sale of all or substantially all of our assets would require the affirmative approval of the holders of shares of our capital stock having at least a majority of the voting power of all outstanding capital stock entitled to vote thereon.

Elimination of Liability and Indemnification. Our Articles of Incorporation provide that a director or officer of the Company will not incur any personal liability to us or our shareholders for monetary damages for certain breaches of fiduciary duty owed to us. A director or officer’s liability, however, is not eliminated with respect to (i) any breach of the duty of loyalty, (ii) acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) paying a dividend or approving a stock repurchase which is illegal under certain provisions of state law, or (iv) any transaction from which the director derived an improper personal benefit. Our Articles of Incorporation allow and Bylaws require, the indemnification of our directors, officers and agents to the extent permitted by law. We have obtained director and officer liability insurance covering all of our officers and directors. See “Item 12 – Indemnification of Directors and Officers.”

California and Federal Banking Law. Section 1203 of the CGCL includes provisions that may have the effect of deterring hostile takeovers or delaying or preventing control or management of the Company. If an “interested party” makes an offer to purchase the shares of some or all of our shareholders, we must obtain an affirmative opinion in writing as to the fairness of the offering price prior to completing the transaction. California law considers a person to be an “interested party” if the person directly or indirectly controls our Company, if the person is directly or indirectly controlled by one of our officers or directors, or if the person is an entity in which one of our officers or directors holds a material financial interest. If after receiving an offer from such an “interested party” we receive a subsequent offer from a neutral third party, then we must notify our shareholders of this offer and afford each of them the opportunity to withdraw their consent to the “interested party” offer.

Under the California Financial Code, no person may directly or indirectly, acquire control of a California state bank or its holding company unless the Commissioner of Financial Protection and Innovation has approved such acquisition of control. A person would be deemed to have acquired control of the Company if such person, directly or indirectly, has the power (i) to vote 25% or more of the voting power of the Company or (ii) to direct or cause the direction of the management and policies of the Company. For purposes of this law, a person who directly or indirectly owns or controls 10% or more of our outstanding common stock is presumed to control the Company.

The Bank Holding Company Act of 1956, as amended, generally would prohibit any company that is engaged in operations other than financial activities and activities that are permissible for a bank holding company or a financial holding company from acquiring control of the Company. “Control” is generally defined as ownership of 25% or more of any class of voting stock of a company or other having a controlling influence. In addition, any existing bank holding company would need the prior approval of the Federal Reserve before acquiring 5% or more of our voting stock. The Change in Bank Control Act of 1978, as amended, prohibits a person or group of persons from acquiring control of a bank holding company unless the Federal Reserve has been notified and has not objected to the transaction. In certain circumstances, control is rebuttably presumed to exist if a person or company acquires 10% or more, but less than 25%, of any class of voting securities of the Company.

119

The foregoing provisions of California and federal law could make it more difficult for a third party to acquire a majority of our outstanding voting stock, by discouraging a hostile bid, or delaying, preventing or deterring a merger, acquisition or tender offer in which our shareholders could receive a premium for their shares, or effect a proxy contest for control of our Company or other changes in our management.

Transfer Agent

The transfer agent and registrar for our common stock is Computershare, located at P.O. Box 43078, Providence, RI 02940-3078. Computershare’s phone number is (800) 962-4284.

Item 12. Indemnification of Directors and Officers

As a California corporation, the Company’s authority to indemnify directors and officers is subject to the CGCL. Under Section 317 of the CGCL, a California corporation has the authority to indemnify any person, including a director or officer, who was or is a party, or is threatened to be made a party to any proceeding by reason, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he or she is or was an agent of the corporation, against expenses (including attorneys’ fees), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with the proceeding if that person acted in good faith and in a manner he or she reasonably believed to be in the best interests of the corporation and, in the case of a criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. In cases of derivative suits or claims, the CGCL provides that a corporation may indemnify such a person against expenses incurred in such a proceeding, provided such person acted in good faith and in a manner he or she reasonably believed to be in the best interests of the corporation and its shareholders, provided further that indemnification is not available in derivative actions (1) for amounts paid or expenses incurred in connection with a matter that is settled or otherwise disposed of without court approval or (2) with respect to matters for which the agent has been adjudged to be liable to the corporation unless the court determines that such person is entitled to indemnification.

Section 317 of the CGCL also provides that to the extent an agent of a corporation has been successful on the merits in defense of any proceeding referred to above or in defense of any claim, issue, or matter therein, the agent will be indemnified against expenses actually and reasonably incurred by the agent in connection therewith. Otherwise, any indemnification under Section 317 will be made by the corporation only if authorized in the specific case, upon a determination that indemnification of the agent is proper in the circumstances because the agent has met the applicable standard of conduct set forth above, by any of the following: (1) a majority vote of a quorum consisting of directors who are not parties to such proceeding, (2) if such a quorum of directors is not obtainable, by independent legal counsel in a written opinion, (3) approval of the shareholders of the corporation, with the shares owned by the person to be indemnified not being entitled to vote thereon, or (4) the court in which the proceeding is or was pending upon application made by the corporation or the agent or the attorney or other person rendering services in connection with the defense, whether or not the application by the agent, attorney or other person is opposed by the corporation.

Our Articles of Incorporation authorize us to, and our Bylaws provide that we must, indemnify our directors and officers to the fullest extent authorized by the CGCL and may also pay expenses incurred in defending a proceeding in advance of its final disposition subject to the delivery of an undertaking, by or on behalf of the director or officer, to repay all amounts so advanced if it should be determined ultimately that he or she is not entitled to indemnification.

We have entered into indemnification agreements with our directors and executive officers. These agreements require us to, among other things, (i) indemnify the directors and officers against certain liabilities that may arise by reason of their status or service as directors or officers, subject to certain exceptions and limitations and (ii) advance the expenses such directors or executive officers may incur as a result of or in connection with the defense of any proceeding brought against them as to which they could be indemnified, subject to an undertaking by the indemnified party to repay such advances if it is ultimately determined that he or she is not entitled to indemnification. The form of this indemnification agreement is filed as an exhibit to this registration statement.

We have insurance policies covering our officers and directors with respect to certain liabilities, including liabilities arising under the Securities Act and otherwise.

120

Item 13. Financial Statements and Supplementary Data

CONTENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON THE CONSOLIDATED FINANCIAL STATEMENTS (Eide Bailly LLP, Laguna Hills, California - Auditor Firm ID: 286)	122
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets	124
Consolidated Statements of Income	125
Consolidated Statements of Comprehensive Income	126
Consolidated Statements of Changes in Shareholders’ Equity	127
Consolidated Statements of Cash Flows	128
Notes to Consolidated Financial Statements	129

121

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

Southern California Bancorp and Subsidiary

San Diego, California

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Southern California Bancorp and Subsidiary (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB and in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risk of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

122

Allowance for Loan Losses

As discussed in Note 4 to the Company’s consolidated financial statements, the Company has a gross loan portfolio of $1.9 billion and related allowance for loan losses of $17.1 million as of December 31, 2022. The Company’s allowance for loan losses is a material and complex estimate requiring significant management judgment in the evaluation of the credit quality and the estimation of inherent losses within the loan portfolio. The allowance for loan losses includes a general reserve which is determined based on the results of a quantitative and a qualitative analysis of all loans not measured for impairment at the reporting date.

The Company’s general reserves cover non-impaired loans and are based on historical loss rates for each portfolio. In calculating the allowance for loan losses, the Company considers relevant credit quality indicators for each loan segment, stratifies loans by risk rating, and estimates losses for each loan type based upon their nature and risk profile. This process requires significant management judgment in the review of the loan portfolio and assignment of risk ratings based upon the characteristics of loans. In addition, estimation of losses inherent within the portfolio requires significant management judgment, particularly where the Company has not incurred sufficient historical losses and has utilized industry data in forming its estimate.

Auditing these complex judgments and assumptions involves especially challenging auditor judgment due to the nature and extent of audit evidence and effort required to address these matters, including the extent of specialized skill or knowledge needed.

The primary procedures we performed to address this critical audit matter included:

● Gaining an understanding of the design, implementation and operating effectiveness of controls relating to management’s timely identification of problem loans, appropriate application of loan rating policy, consistency of application of accounting policies and appropriateness of assumptions used in the allowance for loan losses calculation.

● Evaluating the reasonableness of assumptions and sources of data used by management in forming historical loss factors by performing a retrospective review of loan loss experience and analyzing the historical data used in developing the assumptions.

● Evaluating the appropriateness of inputs and factors that the Company used in forming the qualitative loss factors and assessing whether such inputs and factors were relevant, reliable, and reasonable for the purpose used. We also evaluated the period-to-period consistency with which qualitative loss factors are determined and applied.

● Testing the mathematical accuracy and computation of the allowance for loan losses.

/s/ Eide Bailly LLP

We have served as the Company’s auditor since 2019. Vavrinek, Trine, Day & Co., LLP, who joined Eide Bailly LLP in 2019, had served as the Company’s auditor since 2007.

Laguna Hills, California

March 1, 2023

123

SOUTHERN CALIFORNIA BANCORP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

December 31, 2022 and 2021

(dollars in thousands, except share data)

	December 31
	2022			2021
ASSETS
Cash and due from banks	$	60,295		$	22,435
Federal funds and interest-bearing balances		26,465			557,571
Total cash and cash equivalents		86,760			580,006
Debt securities available for sale		112,580			55,567
Debt securities held to maturity (fair value of $47,906 at December 31, 2022)		53,946			—
Loans held for sale		9,027			—
Loans held for investment		1,897,773			1,504,748
Allowance for loan losses		(17,099	)		(11,657	)
Loans held for investment, net		1,880,674			1,493,091
Restricted stock, at cost		14,543			12,493
Premises and equipment		14,334			19,639
Right-of-use asset		8,607			8,069
Goodwill		37,803			36,784
Core deposit intangible, net		1,584			2,022
Bank owned life insurance		37,972			37,849
Deferred taxes, net		10,699			5,069
Accrued interest and other assets		15,398			9,277
Total assets	$	2,283,927		$	2,259,866
LIABILITIES
Noninterest-bearing demand	$	923,899		$	986,935
Interest-bearing NOW accounts		209,625			193,525
Money market and savings accounts		668,602			690,348
Time deposits		129,779			102,290
Total deposits		1,931,905			1,973,098
Borrowings		67,770			20,409
Operating lease liability		11,055			9,002
Accrued interest and other liabilities		12,842			10,829
Total liabilities		2,023,572			2,013,338
Commitments and contingencies (Notes 6 and 13)
SHAREHOLDERS’ EQUITY
Preferred stock - 50,000,000 shares authorized, no par value; no shares issued and outstanding at December 31, 2022 and 2021		—			—
Common stock - 50,000,000 shares authorized, no par value; issued and outstanding 17,940,283 and 17,707,737 at December 31, 2022 and 2021		218,280			214,163
Retained earnings		48,516			32,403
Accumulated other comprehensive loss - net of taxes		(6,441	)		(38	)
Total shareholders’ equity		260,355			246,528
Total liabilities and shareholders’ equity	$	2,283,927		$	2,259,866

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

124

SOUTHERN CALIFORNIA BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME

For the Years Ended December 31, 2022 and 2021

(dollars in thousands, except per share data)

	Year Ended December 31,
	2022			2021
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	86,366		$	66,213
Interest on debt securities		2,013			414
Interest on tax-exempted debt securities		1,372			41
Interest on deposits at other financial institutions		2,897			470
Interest and dividends on other interest-earning assets		927			635
Total interest and dividend income		93,575			67,773
INTEREST EXPENSE
Interest on NOW, money market and savings accounts		3,793			1,320
Interest on time deposits		797			734
Interest on borrowings		1,199			1,308
Total interest expense		5,789			3,362
Net interest income		87,786			64,411
Provision for loan losses		5,450			1,200
Net interest income after provision for loan losses		82,336			63,211
NONINTEREST INCOME
Service charges and fees on deposit accounts		1,014			826
Interchange and ATM income		782			775
Gain on sale of loans		1,349			920
Income from bank owned life insurance		1,490			786
Servicing and related income on loans, net		192			116
(Loss) gain on sale of available-for-sale debt securities		(994	)		46
Loss on sale and disposal of fixed assets		(768	)		(4	)
Gain on branch sale		—			726
Other charges and fees		610			323
Total noninterest income		3,675			4,514
NONINTEREST EXPENSE
Salaries and employee benefits		37,069			34,883
Occupancy and equipment		6,210			5,522
Data processing and communications		4,609			4,111
Legal, audit and professional		2,597			1,678
Regulatory assessments		1,550			990
Director and shareholder expenses		946			636
Merger and related expenses		1,177			2,450
Core deposit intangible amortization		438			364
Litigation settlements, net		5,525			—
Other expenses		3,907			2,905
Total noninterest expense		64,028			53,539
Income before income taxes		21,983			14,186
Income tax expense		5,870			3,477
Net income	$	16,113		$	10,709
Earnings per share:
Basic	$	0.90		$	0.74
Diluted	$	0.88		$	0.72

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

125

SOUTHERN CALIFORNIA BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

For the Years Ended December 31, 2022 and 2021

(dollars in thousands)

	Year Ended December 31,
	2022			2021
Net income	$	16,113		$	10,709
Other comprehensive loss, net of tax:
Unrealized loss on securities available for sale:
Change in net unrealized loss		(10,014	)		(423	)
Reclassification of loss (gain) recognized in net income		994			(46	)
		(9,020	)		(469	)
Income tax benefit (expense):
Change in net unrealized loss		(2,905	)		(123	)
Reclassification of loss (gain) recognized in net income		288			(13	)
		(2,617	)		(136	)
Total other comprehensive loss, net of tax		(6,403	)		(333	)
Total comprehensive income, net of tax	$	9,710		$	10,376

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

126

SOUTHERN CALIFORNIA BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

For the Years Ended December 31, 2022 and 2021

(dollars in thousands, except share data)

	Common Stock						Retained		Accumulated Other Comprehensive			Total Shareholders’
	Shares			Amount			Earnings		Income (Loss)			Equity
Balance at December 31, 2020		13,267,380		$	146,896		$	21,694	$	295		$	168,885
Stock-based compensation		—			5,501			—		—			5,501
Issuance of common stock in business combination		4,102,254			65,267			—		—			65,267
Stock options exercised		303,100			172			—		—			172
Restricted stock units vested, net of tax withholding		257,795			(2,893	)		—		—			(2,893	)
Repurchase of shares to cover stock option proceeds and tax liabilities		(222,792	)		(780	)		—		—			(780	)
Net income		—			—			10,709		—			10,709
Other comprehensive loss		—			—			—		(333	)		(333	)
Balance at December 31, 2021		17,707,737			214,163			32,403		(38	)		246,528
Stock-based compensation		—			3,682			—		—			3,682
Stock options exercised		136,100			1,009			—		—			1,009
Restricted stock units vested, net of tax withholding		96,446			(574	)		—		—			(574	)
Net income		—			—			16,113		—			16,113
Other comprehensive loss		—			—			—		(6,403	)		(6,403	)
Balance at December 31, 2022		17,940,283		$	218,280		$	48,516	$	(6,441	)	$	260,355

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

127

SOUTHERN CALIFORNIA BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 2022 and 2021

(dollars in thousands)

	Year Ended December 31,
	2022			2021
OPERATING ACTIVITIES
Net income	$	16,113		$	10,709
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation on premises and equipment		1,563			1,358
Core deposit intangible amortization		438			364
Amortization of premiums of debt securities		823			314
Gain on sale of loans		(1,349	)		(920	)
Gain on branch sale		—			(726	)
Loss on sale and disposal of fixed assets		768			4
Loss on early debt extinguishment		347			—
Loans originated for sale		(28,470	)		—
Proceeds from loans originated for sale		21,366			—
Provision for loan losses		5,450			1,200
Deferred income tax (benefit) expense		(2,550	)		137
Impairment charges of right-of-use assets		136			287
Stock-based compensation		3,682			5,501
Increase in cash surrender value of bank owned life insurance		(869	)		(591	)
Income from bank owned life insurance		(621	)		(195	)
Loss (gain) on sale of debt securities		994			(46	)
Accretion of net discounts and deferred loan fees		(3,793	)		(7,370	)
Provision for losses - unfunded commitments		506			600
Net (decrease) increase in other items		(1,182	)		9,026
Net cash provided by operating activities		13,352			19,652
INVESTING ACTIVITIES
Net cash acquired in business combination		—			115,420
Net cash transferred for branch sale		—			(81,467	)
Purchase of bank owned life insurance		—			(10,773	)
Proceeds from bank owned life insurance death benefits		1,366			586
Proceeds from sale of debt securities available for sale		22,455			2,840
Proceeds from maturities and paydowns of debt securities available for sale		11,184			5,601
Proceeds from maturities and paydowns of debt securities held to maturity		74			—
Purchases of debt securities available for sale		(101,092	)		(26,044	)
Purchases of debt securities held to maturity		(54,267	)		—
Net purchase of stock investments		(5,010	)		(2,323	)
Net (fundings) repayment of loans		(390,686	)		5,343
Proceeds from sale of loans held for investment		450			1,092
Proceeds from sales of premises and equipment		3,911			—
Purchases of premises and equipment		(1,081	)		(1,753	)
Net cash (used in) provided by investing activities		(512,696	)		8,522
FINANCING ACTIVITIES
Net (decrease) increase in deposits		(41,244	)		518,450
Proceeds of Federal Home Loan Bank advances		50,000			—
Repayment of Federal Home Loan Bank advances		—			(44,551	)
Repayment of other borrowings		(3,093	)		(169,383	)
Proceeds from exercise of stock options		1,009			172
Repurchase of common shares		(574	)		(3,673	)
Net cash provided by financing activities		6,098			301,015
Net change in cash and cash equivalents		(493,246	)		329,189
Cash and cash equivalents at beginning of year		580,006			250,817
Cash and cash equivalents at end of year	$	86,760		$	580,006
Supplemental Disclosures of Cash Flow Information:
Interest paid	$	5,552		$	3,587
Taxes paid		7,954			1,033
Reduction of right-of-use assets from branch sale		—			1,242
Reduction of lease liabilities from branch sale		—			1,801
Lease liability arising from obtaining right-of-use assets		4,349			3,463
Net assets acquired in business combination (Note 2):
Fair value of stock and equity award consideration		—			65,267
Cash consideration		—			—
Fair value of net assets acquired		(1,019	)		48,206
Goodwill adjustments		1,019			—

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

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NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

Southern California Bancorp is a California corporation incorporated on October 2, 2019 and is registered with the Board of Governors of the Federal Reserve System as a bank holding company for Bank of Southern California, N.A. under the Bank Holding Company Act of 1956, as amended. On May 15, 2020, the Company completed a reorganization whereby Bank of Southern California, N.A. became a wholly-owned subsidiary of the Company. Bank of Southern California, N.A. began business operations in December 2001 under the name Ramona National Bank. The Bank changed its name to First Business Bank, N.A. in 2006 and to Bank of Southern California, N.A. in 2010. The Bank operates under a federal charter and its primary regulator is the Office of the Comptroller of the Currency (“OCC”). The words “we,” “us” “our,” or the “Company” refer to Southern California Bancorp, and Bank of Southern California, N.A. collectively and on a consolidated basis. References herein to “Southern California Bancorp,” “SCB”, “Bancorp” or the “holding company,” refer to Southern California Bancorp on a stand-alone basis. References to the “Bank” refer to Bank of Southern California, N.A.

As a relationship-focused community bank, the Bank offers a range of financial products and services to individuals, professionals, and small- to medium-sized businesses through its 13 branch offices serving Orange, Los Angeles, Riverside, San Diego and Ventura counties. Many of the banking offices have been acquired through a number of acquisitions.

Effective at the close of business on September 24, 2021, the Orange, Redlands and Santa Fe Springs branches were sold to a third party financial institution who acquired certain branch assets and assumed certain branch liabilities including deposits. No loans were sold as part of the transaction. The assets and liabilities of these three branches primarily consisted of $146 thousand of cash and cash equivalents and $82.4 million of deposits. The transaction resulted in a net cash payment to the third party financial institution of $81.5 million, and a gain on sale of $726 thousand recorded as a component of noninterest income in the consolidated statements of income.

The Company completed the acquisition of BSCA on October 1, 2021. The acquisition has been accounted for using the acquisition method of accounting and, accordingly, the operating results of BSCA have been included in the consolidated financial statements from October 2, 2021 through December 31, 2022. Refer to Note 2 – Business Combinations for more information about the BSCA acquisition.

Shares of the Company common stock are quoted on the OTC Pink Open Market under the trading symbol “BCAL.”

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Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company, and its wholly owned subsidiary, the Bank., and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Certain prior period amounts have been reclassified to conform to current period presentation.

All significant intercompany balances and transactions have been eliminated in consolidation.

Certain reclassifications have been made to the December 31, 2021 consolidated financial statements to conform to the 2022 presentation. These reclassifications included: (i) $41 thousand of interest on tax-exempted debt securities previously reported in interest on debt securities; and (ii) $678 thousand of marketing, advertising and public relations expense previously reported separately is now included in other expenses; and (iii) combined time deposits under $250,000 and time deposits $250,000 and over into time deposits.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, the Bank. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change are the determination of the ALL, the fair value of assets and liabilities acquired in business combinations and related purchase price allocation, the valuation of acquired loans, the valuation of goodwill and separately identifiable intangible assets associated with mergers and acquisitions, loan sales and servicing of financial assets and deferred tax assets and liabilities.

Operating Segments

We operate one reportable segment — commercial banking. The factors considered in making this determination include all of the banking products and services offered by the Company are available in each branch of the Company, all branches are located within the same economic environment, management does not allocate resources based on the performance of different lending or transaction activities and how information is reviewed by the chief executive officer and other key decision makers. As a result, we determined that all services we offer relate to commercial banking.

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Cash and Cash Equivalents

Cash and cash equivalents include cash and due from banks, and federal funds and interest-bearing balances represent primarily cash held at the Federal Reserve Bank of San Francisco, Pacific Coast Bankers’ Bank and Federal Home Loan Bank of San Francisco. The Board of Governors of the Federal Reserve System (“Federal Reserve”) has cash reserve requirements for depository institutions based on the amount of deposits held. At December 31, 2022, the Bank had no required cash balance held by the Federal Reserve. The Company maintains amounts due from banks that exceed federally insured limits. The Company has not experienced any losses in such accounts.

Debt Securities

Debt securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Debt securities classified as held-to-maturity securities are carried at amortized cost. Debt securities classified as “available-for-sale” may be sold prior to maturity due to changes in interest rates, prepayment risks, and availability of alternative investments, or to meet our liquidity needs. Debt securities not classified as held-to-maturity securities nor as available-for-sale securities are classified as trading securities. Available-for-sale debt securities and trading debt securities are recorded at fair value. Unrealized gains or losses on available-for-sale securities are excluded from net income and reported as an amount net of taxes as a separate component of other comprehensive income included in shareholders’ equity. Premiums or discounts on held-to-maturity and available-for-sale securities are amortized or accreted into income using the interest method. Realized gains or losses on sales of held-to-maturity or available-for-sale securities are recorded using the specific identification method.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows: OTTI related to credit loss, which must be recognized in the income statement and OTTI related to other factors, which is recognized in other comprehensive income (loss). The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. The related write-downs are included in earnings as realized losses.

Restricted Stock Investments

The Bank is a member of the Federal Home Loan Bank (“FHLB”) system. Members are required to own a certain amount of stock based on the level of borrowings and other factors. In addition, the Bank is a member of its regional Federal Reserve. FHLB and Federal Reserve stock are carried at cost, classified as a restricted stock, at cost, in the consolidated balance sheets and periodically evaluated for impairment based on the ultimate recovery of par value. Both cash and stock dividends are reported as interest and dividends on other interest-earning assets in the accompanying consolidated statements of income.

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Other Equity Securities Without A Readily Determinable Fair Value

The Company also has restricted securities in the form of capital stock invested in two different banker’s bank stocks and other limited partnership investments. These investments do not have a readily determinable fair value, and they are measured at equity method of accounting when its ownership interest in such investments exceed 5% or carried at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investments of the same issuer. Investments in tax credit are recorded net of accumulated amortization, using the proportional amortization method. Any impairment will be recorded through earnings. These investments are included in other assets in the accompanying consolidated balance sheets.

Loans Held for Sale

Loans held for sale are comprised of SBA loans originated and intended for sale in the secondary market. These loans are carried at the lower of cost or estimated market value in the aggregate. Net unrealized losses are recognized through a valuation allowance by charges to income. Gains or losses realized on the sales of SBA loans are recognized at the time of sale and are determined by the difference between the net sales proceeds and the carrying value of the loans sold, adjusted for any servicing asset or liability. Gains and losses on sales of SBA loans are included in gain on sale of loans in the accompanying consolidated statements of income.

Loans Held for Investment

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding unpaid principal balances reduced by any charge-offs and net of any deferred fees or costs on originated loans, or unamortized premiums or discounts on purchased loans. Purchase discounts and premiums and net deferred loan origination fees and costs on loans are accreted or amortized in interest income as an adjustment of yield, using the interest method, over the expected life of the loans. Amortization of deferred loan fees and costs are discontinued when a loan is placed on nonaccrual status.

Impaired Loans

Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. The accrual of interest on loans is generally discontinued when principal or interest is past due 90 days based on the contractual terms of the loan or earlier when, in the opinion of management, there is reasonable doubt as to collectability. On a case-by-case basis, loans past due 90 days may remain on accrual, if the loan is well collateralized, actively in process of collection and, in the opinion of management, likely to be paid current within the next payment cycle. When loans are placed on nonaccrual status, all interest previously accrued but not collected is generally 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. Interest accruals are resumed on such loans only when they are brought current with respect to interest and principal and when, in the judgment of management, the loans are estimated to be fully collectable as to all principal and interest.

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Troubled Debt Restructurings (“TDR”)

A loan is classified as a TDR when the Company grants a concession to a borrower experiencing financial difficulties that it otherwise would not consider under our normal lending policies. These concessions may include a reduction of the interest rate, principal or accrued interest, extension of the maturity date or other actions intended to minimize potential losses. All modifications of criticized loans are evaluated to determine whether such modifications are TDR as outlined under ASC Subtopic 310-40, Troubled Debt Restructurings by Creditors. Loans restructured with an interest rate equal to or greater than that of a new loan with comparable market risk at the time the loan is modified may be excluded from certain restructured loan disclosures in years subsequent to the restructuring if the loans are in compliance with their modified terms. The Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act) and the Consolidated Appropriations Act, 2021 (CAA) provided guidance around the modification of loans as a result of the COVID-19 pandemic, which outlined, among other criteria, that short-term modifications made on a good faith basis to borrowers who were current as defined under the CARES Act prior to any relief, are not TDRs. This includes short-term (e.g. six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or other delays in payment that are insignificant. Borrowers are considered current under the CARES Act and regulatory guidance if they are less than 30 days past due on their contractual payments at the time a modification program is implemented. The CAA extended relief offered under the CARES Act related to TDRs as a result of COVID-19 through January 1, 2022.

A loan that has been placed on nonaccrual status that is subsequently restructured will usually remain on nonaccrual status until the borrower is able to demonstrate repayment performance in compliance with the restructured terms for a sustained period of time, typically for six months. A restructured loan may return to accrual status sooner based on other significant events or mitigating circumstances. A loan that has not been placed on nonaccrual status may be restructured and such loan may remain on accrual status after such restructuring. In these circumstances, the borrower has made payments before and after the restructuring. Generally, this restructuring involves maturity extensions, a reduction in the loan interest rate and/or a change to interest-only payments for a period of time. The restructured loan is considered impaired despite the accrual status and a specific reserve is calculated based on the present value of expected cash flows discounted at the loan’s original effective interest rate or based on the fair value of the collateral if the loan is collateral-dependent.

Purchased Credit Impaired Loans

Purchased credit impaired loans (“PCI loans”) are accounted for in accordance with ASC Subtopic 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality. A purchased loan is deemed to be credit impaired when there is evidence of credit deterioration since its origination and it is probable at the acquisition date that collection of all contractually required payments is unlikely. These PCI loans are recorded at the amount paid, such that there is no carryover of the seller’s ALL.

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Such purchased credit impaired loans are accounted for individually or aggregated into pools of loans based on common risk characteristics such as credit score, loan type, and date of origination.

As of December 31, 2022, there were no loans being accounted for as PCI loans. As of December 31, 2021, the total carrying value of purchased credit impaired loans was approximately $414 thousand, net of discounts to contractual value of approximately $118 thousand, which was accreted to income.

Allowance for Loan Losses

The allowance for loan losses (“ALL”) is a valuation allowance for probable incurred credit losses. Loan charge-offs are recognized when management believes the collectability of the principal balance outstanding is unlikely. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management’s judgment, should be charged-off. Amounts are charged-off when available information confirms that specific loans or portions thereof, are uncollectible. This methodology for determining charge-offs is consistently applied to each segment.

The Company determines a separate allowance for each portfolio segment. The allowance consists of specific and general reserves. Specific reserves relate to loans that are individually classified as impaired. The Company considers a loan to be impaired when it is probable that the Company will not be able to collect all amounts due, principal and interest, according to the contractual terms of the loan agreement. Factors considered in determining impairment include payment status, collateral value and the probability of collecting all amounts when due. Measurement of impairment is based on the expected future cash flows of an impaired loan, which are to be discounted at the loan’s effective interest rate, or measured by reference to an observable market value, if one exists, or the fair value of the collateral for a collateral-dependent loan. The Company selects the measurement method on a loan-by-loan basis except that collateral-dependent loans for which foreclosure is probable are measured at the net realizable value of the collateral. Loans for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered TDR and classified as impaired with measurement of impairment as described above.

If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral. TDRs are separately identified for impairment disclosures and are measured at the present value of estimated future cash flows using the loan’s effective interest rate at inception. If a TDR is considered to be a collateral dependent loan, the loan is reported, net, at the fair value of the collateral. For TDRs that subsequently default, the Company determines the amount of reserve in accordance with the accounting policy for the ALL.

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General reserves cover non-impaired loans and are based on historical loss rates for each portfolio segment, adjusted for the effects of qualitative or environmental factors that are likely to cause estimated credit losses as of the evaluation date to differ from the portfolio segment’s historical loss experience.

The Company reviews the historical loss rates for each portfolio segment and utilizes peer loss rates when the Company does not have sufficient historical experience or otherwise feels historical experience is not indicative of the current loan portfolio. Qualitative factors include consideration of the following: changes in lending policies and procedures; changes in economic conditions, changes in the nature and volume of the portfolio; changes in the experience, ability and depth of lending management and other relevant staff; changes in the volume and severity of past due, nonaccrual and other adversely graded loans; changes in the loan review system; the existence and effect of any concentrations of credit; the effect of other external factors such as competition and legal and regulatory requirements; the quality and effectiveness of the risk rating system; and the quality of regulatory and other external credit reviews.

Portfolio segments identified by the Company include construction and land development, real estate, C&I and consumer loans. Relevant risk characteristics for these portfolio segments generally include debt to income ratios or debt service coverage, credit scores, collateral type and loan-to-value ratios and financial performance.

Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

The Company also maintains a separate allowance for off-balance sheet commitments. Management estimates anticipated losses using historical data and utilization assumptions. The allowance for off-balance sheet commitments totaled $1.3 million and $804 thousand at December 31, 2022 and 2021. Provisions for allowance for off-balance sheet commitments are included in other expenses in the consolidated statements of income and added to the allowance for off-balance sheet commitments, which is included in accrued interest payable and other liabilities in the consolidated balance sheets.

Other Real Estate Owned

Real estate acquired by foreclosure or deed in lieu of foreclosure is recorded at fair value less costs to sell at the date of foreclosure, establishing a new cost basis by a charge to the ALL, if necessary. Subsequent to foreclosure, OREO is carried at the lower of the Company’s carrying value of the property or its fair value, less estimated carrying costs and costs of disposition. Fair value is generally based on current appraisals, which are frequently adjusted by management to reflect current conditions and estimated selling costs. Write-downs are expensed and recognized as a valuation allowance. Operating expenses of such properties, net of related income, and gains and losses on their disposition are included in other operating expenses. There were no foreclosures in process as of December 31, 2022 and 2021.

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Bank Owned Life Insurance

Bank owned life insurance is recorded at the amount that can be realized under insurance contracts at the date of the consolidated balance sheets, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when: (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before maturity.

Loan Sales and Servicing of Financial Assets

The Company originates SBA loans that may be sold in the secondary market. Servicing rights are recognized separately when they are acquired through sale of loans. Servicing rights are initially recorded at fair value with the income statement effect recorded in gain on sale of loans. Fair value is based on a valuation model that calculates the present value of estimated future cash flows from the servicing assets. The valuation model uses assumptions that market participants would use in estimating cash flows from servicing assets, such as the cost to service, discount rates and prepayment speeds. The Company compares the valuation model inputs and results to published industry data in order to validate the model results and assumptions. Servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.

Servicing fee income, which is reported in the consolidated statements of income with servicing and related income on loans, net, is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal and recorded as income when earned. The amortization of servicing rights and changes in the valuation allowance are netted against loan servicing income.

Premises and Equipment

Land is carried at cost. Premises and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives, which ranges from three to seven years for furniture and equipment and forty-five to fifty-five years for premises. Leasehold improvements are amortized using the straight-line method over the estimated useful lives of the improvements or the remaining lease term, whichever is shorter. Expenditures for betterments or major repairs are capitalized and those for ordinary repairs and maintenance are charged to operations as incurred.

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Right-of-Use (“ROU”) Assets and Lease Liabilities

The Company has operating leases for its branches and administrative facilities. The Company determines if an arrangement contains a lease at contract inception and recognizes a ROU asset and operating lease liability based on the present value of lease payments over the lease term. While operating leases may include options to extend the term, the Company does not take into account the options in calculating the ROU asset and lease liability unless it is reasonably certain such options will be exercised. The present value of lease payments is determined based on the discount rate implicit in the lease or the Company’s estimated incremental borrowing rate if the rate is not implicit in the lease. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets. Lease expense is recognized on a straight-line basis over the lease term. The Company accounts for lease agreements with lease and non-lease components as a single lease component.

Employee Benefit Plans

The Company has a retirement savings 401(k) plan in which substantially all employees may participate. Pursuant to the Company’s safe harbor election, matching contributions up to 4.0% of salary are made to the plan. Total contribution expense for the plan was $875 thousand in 2022 and $705 thousand in 2021 and is included in salaries and employee benefits expense in the consolidated statements of income. Deferred compensation and supplemental retirement plan expense is recognized over the years of service.

Advertising Costs

The Company expenses the costs of advertising in the period incurred. Total advertising costs were $31 thousand and $188 thousand for the years ended December 31, 2022 and 2021.

Income Taxes

Deferred income taxes are computed using the asset and liability method, which recognizes a liability or asset representing the tax effects, based on current tax law, of future deductible or taxable amounts attributable to events that have been recognized in the financial statements. A valuation allowance is established to reduce the deferred tax asset to the level at which it is “more likely than not” that the tax asset or benefits will be realized. Realization of tax benefits of deductible temporary differences and operating loss carryforwards depend on having sufficient taxable income of an appropriate character within the carryforward periods.

The Company has adopted guidance issued by the Financial Accounting Standards Board (“FASB”) that clarifies the accounting for uncertainty in tax positions taken or expected to be taken on a tax return and provides that the tax effects from an uncertain tax position can be recognized in the financial statements only if, based on its merits, the position is more likely than not to be sustained on audit by the taxing authorities. Management believes that all tax positions taken to date are highly certain and, accordingly, no accounting adjustment has been made to the consolidated financial statements. Interest and penalties related to uncertain tax positions are recorded as part of income tax expense.

We reclassify stranded tax effects from accumulated other comprehensive income to retained earnings in periods in which there is a change in corporate income tax rates.

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Comprehensive Income

Changes in unrealized gains and losses, net of tax on available-for-sale securities is the only component of other comprehensive income (loss) for the Company. The amount reclassified out of other comprehensive income (loss) relating to realized losses on sales of securities was $994 thousand and realized gains of $46 thousand, with a related tax benefit of $288 thousand and tax expense of $13 thousand for December 31, 2022 and 2021.

Financial Instruments

In the ordinary course of business, the Company has entered into off-balance sheet financial instruments consisting of commitments to extend credit, commercial letters of credit, and standby letters of credit. Such financial instruments are recorded in the financial statements when they are funded, or related fees are incurred or received.

Earnings Per Share (“EPS”)

Earnings per share present the net income or loss per common share, after consideration of the preferred shareholders interest in the net income or loss. Basic EPS excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

Business Combinations

Business combinations are accounted for using the acquisition method of accounting under ASC Topic 805 - Business Combinations. Under the acquisition method, the Company measures the identifiable assets acquired, including identifiable intangible assets, and liabilities assumed in a business combination at fair value on acquisition date. Goodwill is generally determined as the excess of the fair value of the consideration transferred, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. The Company accounts for merger-related costs, which may include advisory, legal, accounting, valuation, other professional fees, data conversion fees, contract termination charges and branch consolidation costs, as expenses in the periods in which the costs are incurred and the services are received.

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Goodwill and Other Intangible Assets

Goodwill and other intangible assets acquired in a purchase business combination and determined to have indefinite useful lives are not amortized but tested for impairment no less than annually or when circumstances arise indicating impairment may have occurred. Goodwill is the only intangible asset with an indefinite life recorded in the Company’s consolidated balance sheets. The determination of whether impairment has occurred, includes the considerations of a number of factors including, but not limited to, operating results, business plans, economic projections, anticipated future cash flows, and current market data. Any impairment identified as part of this testing is recognized through a charge to net income. The Company has selected to perform its annual impairment test in the fourth quarter of each fiscal year. There was no impairment recognized related to goodwill for the years ended December 31, 2022 and 2021.

Core deposit intangible (“CDI”) is a measure of the value of depositor relationships resulting from whole bank acquisitions. Intangible assets with definite useful lives are amortized over their estimated useful lives to their estimated residual values. CDI is amortized on an accelerated method over an estimated useful life of seven to ten years.

Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable, and the amount or range of loss can be reasonably estimated. Management does not believe there are any such matters that will have a material effect on the consolidated financial statements.

During the year ended December 31, 2022, the Company had settlements of certain litigations and recognized a net loss of $5.5 million, which is reflected as litigation settlement, net in the accompanying consolidated statements of income.

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Revenue Recognition – Noninterest Income

The core principle of Topic 606, Revenue from Contracts with Customers, is that an entity recognize revenue at an amount that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to a customer. Topic 606 requires entities to exercise more judgment when considering the terms of a contract than under Topic 605, Revenue Recognition. Topic 606 applies to all contracts with customers to provide goods or services in the ordinary course of business, except for contracts that are specifically excluded from its scope. Topic 606 does not apply to revenue associated with interest income on financial instruments, including loans and securities. Additionally, certain noninterest income streams, such as income from BOLI and gain and losses on sales of investment securities and loans, are out of scope of Topic 606.

Topic 606 is applicable to noninterest revenue streams such as (i) service charges and fees on deposit accounts, including account maintenance, transaction-based and overdraft services, and (ii) interchange fees, which represent fees earned when a debit card issued by the Company is used. These revenue streams are largely transaction-based and revenue is recognized upon completion of a transaction.

All of the Company’s revenue from contracts with customers within the scope of ASC 606 is recognized in non-interest income in the consolidated statements of income.

Gains/losses on the sale of OREO are included in non-interest income/expense in the consolidated statements of income and are generally recognized when the performance obligation is complete. This is typically at delivery of control over the property to the buyer at the time of each real estate closing.

Stock-Based Compensation

Compensation cost is recognized for stock options, time-based restricted stock unit awards and performance-based restricted stock unit awards issued to employees and directors, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options, while the market price of the Company’s common stock at the date of grant is used for time-based and performance-based restricted stock unit awards. Performance-based restricted stock unit awards contain vesting conditions which are based on predetermined performance targets that impact the number of shares that ultimately vest based on the level of targets achievement. These costs are recognized over the period in which the awards are expected to vest, on a straight-line basis. The costs for performance-based restricted unit awards are recognized over the period in which the awards are expected to vest as the Company believes the predetermined performance targets are probable to be fulfilled. For performance-based awards that do not vest because the predetermined performance targets are not fulfilled, no compensation cost is recognized, and any previously recognized compensation is reversed. The Company has elected to account for forfeitures of stock-based awards as they occur. Excess tax benefits and tax deficiencies relating to stock-based compensation are recorded as income tax expense or benefit in the consolidated statements of income when incurred.

140

Fair Value Measurement

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Current accounting guidance establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value:

Level 1:	Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2:	Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3:	Significant unobservable inputs that reflect a Company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Recent Accounting Guidance Not Yet Effective

In June 2016, the FASB issued ASU No. 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326). This ASU significantly changes how entities will measure credit losses for most financial assets and certain other instruments that aren’t measured at fair value through net income. In issuing the standard, the FASB is responding to criticism that today’s guidance delays recognition of credit losses. The standard will replace today’s “incurred loss” approach with an “expected loss” model. The new model, referred to as the current expected credit loss (“CECL”) model, will apply to: (1) financial assets subject to credit losses and measured at amortized cost, and (2) certain off-balance sheet credit exposures. This includes, but is not limited to, loans, leases, held-to-maturity securities, loan commitments, and financial guarantees. The CECL model does not apply to available-for-sale (“AFS”) debt securities. ASU 2016-13 also expands the disclosure requirements regarding an entity’s assumptions, models, and methods for estimating the allowance for loan and lease losses. In addition, public business entities will need to disclose the amortized cost balance for each class of financial asset by credit quality indicator, disaggregated by the year of origination. ASU No. 2016-13 is effective for interim and annual reporting periods beginning after December 15, 2022 for all entities, other than SEC filers that do not qualify as a Smaller Reporting Company as defined by the SEC. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (i.e., modified retrospective approach). Management established a cross functional committee to oversee the project and selected a third-party software and modeling solution to implement the new guidance and engaged the same third-party service provider to assist with the implementation and has subscribed to a third-party application vendor for economic forecasts. The Company completed data gap analyses, developed initial modeling assumptions, ran multiple sensitivity analyses and completed the model validation by an independent third-party. The Company has determined the potential impact of the adoption of ASU 2016-13 to the consolidated financial statements. The Company will adopt the provisions of ASC 326 through the application of the modified retrospective transition approach, and recorded a net decrease of approximately $3.9 million to the beginning balance of retained earnings as of January 1, 2023 for the cumulative effect adjustment, reflecting an initial adjustment to the ACL of $5.5 million, net of related deferred tax assets arising from temporary differences of $1.6 million, commonly referred to as the “Day 1” adjustment. The Day 1 adjustment to the ACL is reflective of expected lifetime credit losses associated with the composition of financial assets within in the scope of ASC 326 as of January 1, 2023, which is comprised of loans held for investment and off-balance sheet credit exposures at January 1, 2023, as well as management’s current expectation of future economic conditions.

141

In May 2019, the FASB issued ASU 2019-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instrument (ASU 2019-05) which grants entities with transition relief upon the adoption of ASU 2016-13 by providing an option to elect the fair value option on certain financial instruments measured at amortized cost. This ASU will be effective upon adoption of ASU 2016-13 (Topic 326). The impact of adopting the Topic 326 amendments is included within the impact of adoption of ASU 2016-13. The Company does not expect the adoption of these amendments will have a material impact to the consolidated financial statements.

In March 2022, the FASB issued ASU 2022-02, Financial Instruments—Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures. The amendments in this Update address areas identified by the FASB as part of its post-implementation review of the credit losses standard (ASU 2016-13) that introduced CECL. The amendments eliminate the accounting guidance for TDR by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require a public business entity to disclose current-period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted if an entity has adopted ASU 2016-13. The Company does not expect the adoption of ASU 2022-02 will have a material impact to the consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles – Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment. This guidance removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation, and goodwill impairment will simply be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance will remain largely unchanged. Entities will continue to have the option to perform a qualitative assessment to determine if quantitative impairment test is necessary. The amendments in this Update are required for public business entities and other entities that have goodwill reported in their financial statements and have not elected the private company alternative for the subsequent measurement of goodwill. ASU No. 2017-04 is effective for interim and annual reporting periods beginning after December 15, 2022 for public business entities who are not SEC filers and one year later for all other entities. The Company is currently evaluating the effects of ASU 2017-04 on its financial statements and disclosures.

142

In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. These updates made several clarifications and improvements to various topics. Topic A: Codification Improvements Resulting from the June and November 2018 Credit Losses Transition Resource Group (“TRG”) Meetings; Topic B: Codification Improvements to ASU 2016-13; Topic C: Codification improvements to ASU 2017-12, Derivatives and Hedging; Topic D: Codification improvements to ASU 2016-01 Financial Instruments Overall; and Topic E: Codification Improvements Resulting from the November 2018 Credit Losses TRG Meeting. Topics A, B and E, in ASU 2019-04 impact CECL implementation by clarifying guidance related to accrued interest receivable, recoveries, the effect of prepayments in determining the effective interest rate, vintage disclosure requirements related to line-of-credit arrangements and others. Transition requirements for these amendments are the same as ASU 2016-13, and will be adopted by the Company with ASU 2016-13. Topics C and D are not applicable to the Company, and therefore had no impact to the Company’s consolidated financial results.

On March 12, 2020, the FASB issued ASU 2020-04, Facilitation of the Effects of Reference Rate Reform on Financial Reporting (ASU 2020-04), which provides optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments are effective for all entities as of March 12, 2020 and may be adopted through December 31, 2022. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company is currently evaluating the impact of ASU 2020-04 to the consolidated financial statements.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), which clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. Specifically, certain provisions in Topic 848, if elected by an entity, apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. Amendments in this Update to the expedients and exceptions in Topic 848 capture the incremental consequences of the scope clarification and tailor the existing guidance to derivative instruments affected by the discounting transition. The amendments in ASU 2021-01 are elective and apply to all entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform. The amendments also optionally apply to all entities that designate receive-variable-rate, pay-variable-rate cross-currency interest rate swaps as hedging instruments in net investment hedges that are modified as a result of reference rate reform. The amendments in ASU 2021-01 are effective immediately for all entities. The Company is currently identifying loans and other financial instruments that are impacted by the discontinuance of LIBOR, reviewing the contracts of our LIBOR-based products to ensure that our credit documentation provides for the flexibility to move to alternative reference rates, and choosing the substitute index. The Company does not expect the adoption of ASU 2021-01 will have a material impact to the consolidated financial statements.

143

In October 2021, the FASB issued ASU 2021-08, Business Combinations - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (Update). The amendments in this Update address how to determine whether a contract liability is recognized by an acquirer in a business combination. In addition, the Update addresses inconsistencies in the recognition and measurement of acquired contract assets and contract liabilities from revenue contracts in a business combination. The amendments in this Update are effective for the Company in fiscal years beginning after December 15, 2022 as well as all interim periods within those years. Early adoption is permitted. An entity that early adopts in an interim period should apply the amendments (1) retrospectively to all business combinations for which the acquisition date occurs on or after the beginning of the fiscal year that includes the interim period of early application, and (2) prospectively to all business combinations that occur on or after the date of initial application. The Company has not yet adopted the provisions of this Update. The Company does not currently anticipate the adoption of this Update will have a material impact on the Company’s consolidated financial statements.

NOTE 2 – BUSINESS COMBINATIONS

Bank of Santa Clarita Acquisition

Following receipt of all necessary regulatory and shareholder approvals, on October 1, 2021, the Company completed its merger with BSCA, a California state-chartered bank headquartered in Santa Clarita, California, which operated one full-service branch in Santa Clarita. The acquisition of BSCA provides the Company with the opportunity to expand its footprint in Southern California.

Under the terms and conditions of the merger, each share of BSCA common stock was converted into the right to receive one (1) share of BCAL common stock. The Company issued 4,102,254 shares of BCAL common stock in exchange for the outstanding shares of BSCA’s common stock. In addition, the Company assumed each outstanding, unexercised option to acquire shares of BSCA common stock held by BSCA officers and employees who continued to be employed by the Company immediately following the merger, other than any stock options held by BSCA’s Chairman & Chief Executive Officer (BSCA CEO). Total unexercised stock options were 90,731, of which 65,261 shares were vested and 25,470 shares were unvested. Total fair value of the assumed stock options was $832 thousand, of which $692 thousand for the vested stock options was included in the consideration and $141 thousand for the unvested stock options was considered unrecognized compensation cost and is being amortized over the remaining life of the stock options. BSCA’s former CEO is a continuing employee and his unvested stock options were not part of the assumed awards as BSCA’s former CEO negotiated that such unvested options would become fully vested as a result of the merger. The Company recognized $84 thousand of compensation cost attributed to the accelerated vesting of his unvested awards upon the closing of the merger.

144

The following table represents the final fair value of assets acquired and liabilities assumed of BSCA, as of October 1, 2021, recorded using the acquisition method of accounting:

(dollars in thousands)	Fair Value
Assets acquired:
Cash and cash equivalents	$	115,420
Securities available-for-sale		14,005
Loans held for investment:		268,811
Investments in restricted stocks		1,585
Other equity securities		62
Premises and equipment, net(1)		11,561
Prepaid expenses		29
Income tax receivable		1,138
Deferred taxes, net(1)		(762	)
Accrued interest receivable		689
Cash surrender value of bank owned life insurance		8,884
Core deposit intangible		802
Other assets		2,368
Total assets acquired		424,592
Liabilities assumed:
Deposits		342,263
FHLB advances		34,551
Accrued interest payable		20
Accrued expenses		419
Reserve for unused commitments		59
Other liabilities		93
Total liabilities assumed		377,405
Net assets acquired	$	47,187
Purchase consideration:
Fair value of shares of BCAL issued in the merger	$	64,596
Fair value of unvested stock options assumed		692
Less: repurchase of dissenter’s rights		(21	)
Total purchase consideration		65,267
Goodwill recognized(1)	$	18,080

(1) During the year ended December 31, 2022, the Bank finalized its allocation of purchase consideration to the net assets acquired from BSCA. As a result, the Bank reduced its preliminary valuation of premises and equipment, net by $1.6 million, with an increase of $464 thousand to deferred taxes based on the change in the allocated fair value of premises and equipment, net and the finalization of initial accounting for income taxes. These adjustments resulted in a $1.0 million increase to goodwill (See Note 7 - Goodwill and Other Intangible Assets).

145

Goodwill represents the excess of the purchase consideration over the fair value of the net assets acquired and was primarily attributable to the expected synergies and economies of scale expected from combining the operations of the Company and BSCA. Goodwill is not deductible for U.S. income tax purposes and is not amortized. Rather, goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be impaired, by comparing its carrying value to the reporting unit’s fair value.

The core deposit intangible will be amortized over the expected account retention period, which was originally estimated at approximately 10 years or 120 months. The core deposit intangible will be evaluated periodically to determine the reasonableness of the projected amortization period by comparing actual deposit retention to projected retention.

The following table presents the amounts that comprise the fair value of loans acquired, excluding PCI loans, from BSCA at October 1, 2021:

(dollars in thousands)	Loans
Contractual amounts receivable	$	323,047
Contractual cash flows not expected to be collected		(2,625	)
Expected cash flows, net		320,422
Interest component of expected cash flows		(51,611	)
Fair value of acquired loans	$	268,811

There were no PCI loans acquired from BSCA at October 1, 2021.

The following table presents the total revenue and net income amounts related to BSCA’s operations included in the Company’s consolidated statements of income from the acquisition date of October 1, 2021 through December 31, 2021:

	Year Ended December 31,
(dollars in thousands)	2021
Net interest income and noninterest income	$	3,058
Net income	$	1,832

The following supplemental pro forma information presents certain financial results for the years ended December 31, 2021 as if the acquisition of BSCA was effective as of January 1, 2021. The supplemental unaudited pro forma financial information included in the table below is based on various estimates and is presented for informational purposes only and does not indicate the financial condition or results of operations of the combined company that would have been achieved for the periods presented had the transactions been completed as of the date indicated or that may be achieved in the future.

146

Supplemental unaudited pro forma financial information:	Year Ended December 31,
(dollars in thousands)	2021
Net interest income and noninterest income	$	77,839
Net income		11,427
Net income per share:
Basic	$	0.79
Diluted	$	0.77

NOTE 3 - INVESTMENT SECURITIES

Debt Securities

Debt securities have been classified as either held-to-maturity or available-for-sale securities in the consolidated balance sheets according to management’s intent.

There were no held-to-maturity debt securities at December 31, 2021. The amortized cost of held-to-maturity debt securities and their approximate fair values at December 31, 2022 were as follows:

(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2022
Taxable municipal	$	550	$	—	$	(105	)	$	445
Tax exempt bank-qualified municipals		53,396		—		(5,935	)		47,461
	$	53,946	$	—	$	(6,040	)	$	47,906

The amortized cost of available-for-sale debt securities and their approximate fair values at December 31 were as follows:

(dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
December 31, 2022
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities	$	27,029	$	—	$	(3,734	)	$	23,295
SBA securities		7,988		16		(132	)		7,872
U.S. Treasury		6,652		—		(700	)		5,952
U.S. Agency		7,025		—		(842	)		6,183
Collateralized mortgage obligations		47,778		20		(3,375	)		44,423
Taxable municipal		4,403		36		(211	)		4,228
Tax exempt bank-qualified municipals		20,777		163		(313	)		20,627
	$	121,652	$	235	$	(9,307	)	$	112,580
December 31, 2021
U.S. government and agency securities:
Mortgage-backed securities	$	17,419	$	10	$	(114	)	$	17,315
SBA securities		11,421		37		(58	)		11,400
U.S. Treasury		2,863		—		(82	)		2,781
U.S. Agency		6,500		—		(21	)		6,479
Collateralized mortgage obligations		10,398		12		(122	)		10,288
Taxable municipals		5,314		228		(20	)		5,522
Tax exempt bank-qualified municipals		1,706		76		—			1,782
	$	55,621	$	363	$	(417	)	$	55,567

147

The amortized cost and estimated fair value of all held-to-maturity and available-for-sale debt securities as of December 31, 2022 by contractual maturities are shown below. Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

	Held-to-Maturity				Available-for-Sale
(dollars in thousands)	Amortized Cost		Estimated Fair Value		Amortized Cost		Estimated Fair Value
Due in one year or less	$	—	$	—	$	1,638	$	1,616
Due after one year through five years		—		—		20,232		19,034
Due after five years through ten years		6,965		6,441		25,168		22,096
Due after ten years		46,981		41,465		74,614		69,834
	$	53,946	$	47,906	$	121,652	$	112,580

At December 31, 2022, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of our shareholders’ equity.

During the years ended December 31, 2022 and 2021, proceeds received from sales of available-for-sale debt securities totaled $22.5 million and $2.8 million and the associated gross realized loss was $994 thousand and gross realized gain was $46 thousand. Total proceeds received from maturities and paydowns of available-for-sale debt securities were $11.2 million and $5.6 million during the years ended December 31, 2022 and 2021. Total proceeds received from maturities and paydowns of held-to-maturity debt securities were $74 thousand during the year ended December 31, 2022. There were $101.1 million and $26.0 million in purchases of available-for-sale debt securities during the years ended December 31, 2022 and 2021. There were $54.3 million in purchases of held-to-maturity during the year ended December 31, 2022. The Company did not have any held-to-maturity securities as of and for the year ended December 31, 2021. The Company acquired $14.0 million of available-for-sale debt securities from the merger with BSCA in 2021.

148

The gross unrealized losses and related estimated fair values of all available-for-sale debt securities and held-to-maturity debt securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2022 and 2021 are summarized as follows:

	Less than 12 Months					12 Months or Longer					Total
(dollars in thousands)	Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Estimated Fair Value
December 31, 2022:
Available-for-sale debt securities:
Mortgage-backed securities:	$	(1,337	)	$	9,888	$	(2,397	)	$	13,407	$	(3,734	)	$	23,295
SBA securities		(1	)		202		(131	)		2,258		(132	)		2,460
U.S. Treasury		(277	)		3,563		(423	)		2,389		(700	)		5,952
Agency		(51	)		474		(791	)		5,709		(842	)		6,183
Collateralized mortgage obligations		(2,169	)		35,331		(1,206	)		6,029		(3,375	)		41,360
Taxable Municipals		(75	)		3,318		(136	)		373		(211	)		3,691
Tax Exempt Bank-Qualified Municipals		(313	)		14,081		—			—		(313	)		14,081
Other Debt Securities		—			—		—			—		—			—
	$	(4,223	)	$	66,857	$	(5,084	)	$	30,165	$	(9,307	)	$	97,022
Held-to-maturity debt securities:
Taxable Municipals	$	—		$	—	$	(105	)	$	445	$	(105	)	$	445
Tax Exempt Bank-Qualified Municipals		(5,935	)		47,461		—			—		(5,935	)		47,461
	$	(5,935	)	$	47,461	$	(105	)	$	445	$	(6,040	)	$	47,906
December 31, 2021:
U.S. government and agency securities:
Mortgage-backed securities:	$	(114	)	$	14,834	$	—		$	—	$	(114	)	$	14,834
SBA securities		(58	)		6,406		—			—		(58	)		6,406
U.S. Treasury		(82	)		2,781		—			—		(82	)		2,781
Agency		(21	)		6,479		—			—		(21	)		6,479
Collateralized mortgage obligations		(122	)		7,856		—			—		(122	)		7,856
Taxable Municipals		(20	)		490		—			—		(20	)		490
Tax Exempt Bank-Qualified Municipals		—			—		—			—		—			—
Other Debt Securities		—			—		—			—		—			—
	$	(417	)	$	38,846	$	—		$	—	$	(417	)	$	38,846

As of December 31, 2022, the Company had a total of 61 held-to-maturity debt securities in a gross unrealized loss position, including one security with total unrealized losses of $105 thousand that had been in a continual loss position for twelve months and over.

As of December 31, 2022, the Company had a total of 88 available-for-sale debt securities in a gross unrealized loss position, consisting 43 securities with total unrealized losses of $5.1 million that had been in a continual loss position for twelve months and over. As of December 31, 2021, the Company had a total of 40 available-for-sale debt securities in a gross unrealized loss position. There were no securities that had been in a continual loss position for twelve months and over. Such unrealized losses on these investment securities have not been recognized into income.

149

Management evaluates debt securities for other-than-temporary impairment, taking into consideration the extent and length of time the fair value has been less than cost, the financial condition of the issuer and whether the Company has the intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value. As of December 31, 2022 and 2021, no unrealized losses are deemed to be other-than-temporary.

There were no debt securities pledged at December 31, 2022. There were debt securities with a carrying value of $7.9 million were pledged to secure credit facilities at the FHLB at December 31, 2021.

Restricted Stock

As a member of the Federal Reserve System, the Company must hold stock of the Federal Reserve Bank of San Francisco in an amount equal to 3% of the Company’s common stock and additional paid-in capital. An investment in the equity stock of the FHLB of San Francisco is required for membership; the amount of the required investment is a function of the Company’s outstanding mortgage assets and outstanding advances from the FHLB.

The table below summarizes the Company’s restricted stock investments at December 31:

(dollars in thousands)	2022		2021
Federal Reserve Bank	$	7,318	$	5,268
Federal Home Loan Bank		7,225		7,225
	$	14,543	$	12,493

During the year ended December 31, 2022, the Company purchased $2.1 million of Federal Reserve Bank stock, and there were no purchases of FHLB stock. During the year ended December 31, 2021, the Company acquired $1.6 million in FHLB stock in the BSCA merger and purchased $1.3 million of Federal Reserve Bank stock and $1.0 million of FHLB stock.

Other Equity Securities Without A Readily Determinable Fair Value

The Company also has equity securities in the form of capital stock invested in two different banker’s bank stocks which totaled $351 thousand and $350 thousand at December 31, 2022 and 2021. These equity securities are reported in other assets in the consolidated balance sheets. During the years ended December 31, 2022 and 2021, the Company evaluated the carrying value of these equity securities and determined that they were not impaired, and no loss related to changes in the fair value of these equity securities was recognized.

150

The Company has other equity investments, including affordable housing investments and an investment in a technology venture capital fund focused on the intersection of the Fintech and Community Banking. At December 31, 2022 and 2021, the balance of these investments, which is included in other assets in the consolidated balance sheets, was $4.6 million and $1.8 million, respectively. These equity securities are measured using the equity method of accounting when the Company’s ownership interest in such investments exceeds 5%, or carried at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar investments of the same issuer. Cash distributions from the investments that are considered earnings are recorded in noninterest income in the consolidated statements of income, while distributions considered return of capital are recorded as a reduction of the Company’s investment. During the year ended December 31, 2022, there were $2.8 million capital contributions made to these equity investments and there was $95 thousand of cash distributions that were recorded in noninterest income. During the year ended December 31, 2021, there were no capital contributions made to these equity investments and there was a $9 thousand cash distribution that was recorded in noninterest income. At December 31, 2022 and 2021, the Company evaluated the carrying value of these equity investments and determined they were not impaired, and no loss was recognized related to changes in the fair value.

The Company has also invested in a limited partnership that operates affordable housing projects that qualify for and have received an allocation of federal and/or state low-income housing tax credits. This tax credit investment is reported in other assets in the consolidated balance sheets, and is recorded net of accumulated amortization, using the proportional amortization method. The unfunded portion of these investments is included in other liabilities in the consolidated balance sheets. The aggregate funding commitment for this investment was $2.0 million, of which $122 thousand was funded during the year ended December 31, 2022. At December 31, 2022, the net tax credit investment totaled $2.0 million, and the remaining unfunded commitment was $1.9 million. The Company’s maximum loss exposure to this investment is limited to the Company’s investment balance, which was $2.0 million at December 31, 2022. At December 31, 2022, the Company evaluated the carrying value of this tax credit equity investment and determined it was not impaired, and no loss was recognized related to changes in the fair value.

NOTE 4 - LOANS

Loans Held for Investment

The Company’s loan portfolio consists primarily of loans to borrowers within its Southern California markets in San Diego, Orange, Ventura, Los Angeles, and Riverside counties, as well as the Inland Empire. Although the Company seeks to avoid concentrations of loans to a single industry or based upon a single class of collateral, real estate and real estate associated businesses are among the principal industries in the Company’s market area. The Company’s loan portfolio in real estate secured credit represented 82% of total loans at December 31, 2022. The Company also originates SBA loans either for sale to institutional investors or for retention in the loan portfolio. Loans identified as held for sale are carried at the lower of carrying value or market value and separately designated as such in the consolidated financial statements. A portion of the Company’s revenues are from origination of loans guaranteed by the SBA under its various programs and sale of the guaranteed portions of the loans. Funding for these loans depends on annual appropriations by the U.S. Congress.

151

The composition of the Company’s loan portfolio at December 31, 2022 and 2021 was as follows:

(dollars in thousands)	2022			2021
Construction and land development	$	239,067		$	77,629
Real estate - other:
1-4 family residential		144,322			133,993
Multifamily residential		218,606			175,751
Commercial real estate and other		958,676			766,824
Commercial and industrial (1)		331,644			349,023
Consumer		5,458			1,528
Loans (2)		1,897,773			1,504,748
Allowance for loan losses		(17,099	)		(11,657	)
Net loans	$	1,880,674		$	1,493,091

1. Includes PPP loans with total outstanding principal of $3.6 million and $60.3 million and net unearned fees of $76 thousand and $1.6 million at December 31, 2022 and 2021.

2. Loans held for investment includes net unearned fees of $3.3 million and $2.8 million and net unearned discount of $1.8 million and $2.8 million at December 31, 2022 and 2021.

The Company has pledged $1.34 billion of loans with FHLB under a blanket lien, of which an unpaid principal balance of $834.7 million was considered as eligible collateral under this secured borrowing arrangement and loans with unpaid principal balance of $12.7 million were pledged as collateral under a secured borrowing arrangement with the Federal Reserve as of December 31, 2022. See Note 9 – Borrowing Arrangements for additional information regarding the FHLB and Federal Reserve secured lines of credit.

A summary of the changes in the ALL as of December 31 follows:

(dollars in thousands)	2022			2021
Balance, beginning of year	$	11,657		$	10,255
Provision for loan losses		5,450			1,200
Charge-offs		(21	)		—
Recoveries		13			202
Net (charge-offs) recoveries		(8	)		202
Balance, end of year	$	17,099		$	11,657

152

A summary of allowance of loan losses and loan balance disclosed by portfolio segment and also by loans individually evaluated and loans collectively evaluated for impairment as of December 31, 2022 and 2021 and for the years then ended follows:

(dollars in thousands)	Construction and Land Development		Real Estate - Other		Commercial & Industrial			Consumer			Total
December 31, 2022
Allowance for loan losses:
Beginning of year	$	666	$	8,441	$	2,548		$	2		$	11,657
Provisions		1,635		3,250		539			26			5,450
Charge-offs		—		—		(21	)		—			(21	)
Recoveries		—		—		13			—			13
End of year	$	2,301	$	11,691	$	3,079		$	28		$	17,099
Specific reserves	$	—	$	7	$	—		$	—		$	7
General reserves		2,301		11,684		3,079			28			17,092
	$	2,301	$	11,691	$	3,079		$	28		$	17,099
Loans evaluated for impairment:
Individually	$	—	$	41	$	—		$	—		$	41
Collectively		239,067		1,321,563		331,644			5,458			1,897,732
	$	239,067	$	1,321,604	$	331,644		$	5,458		$	1,897,773
December 31, 2021
Allowance for loan losses:
Beginning of year	$	443	$	7,356	$	2,413		$	43		$	10,255
Provisions (reversals)		223		1,064		(42	)		(45	)		1,200
Charge-offs		—		—		—			—			—
Recoveries		—		21		177			4			202
End of year	$	666	$	8,441	$	2,548		$	2		$	11,657
Specific reserves	$	—	$	15	$	16		$	—		$	31
General reserves		666		8,426		2,532			2			11,626
	$	666	$	8,441	$	2,548		$	2		$	11,657
Loans evaluated for impairment:
Individually	$	—	$	743	$	58		$	8		$	809
Collectively		77,629		1,075,825		348,965			1,520			1,503,939
	$	77,629	$	1,076,568	$	349,023		$	1,528		$	1,504,748

153

The Company’s methodology for estimating the ALL results in a range of potential reserves, including an estimate primarily based on the Company’s historical loss factors for collective impairment and also a high and low range based on analysis of peer data for collective impairment factors.

The Company categorizes loans using risk ratings based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. Larger, non-homogeneous loans such as CRE and C&I loans are analyzed individually for risk rating assessment. For purposes of risk classification, 1-4 Family Residential loans for investment purposes are evaluated with CRE loans. This analysis is performed on an ongoing basis as new information is obtained. The Company uses the following definitions for risk ratings:

Pass - Loans classified as pass include loans not meeting the risk ratings defined below.

Special Mention - Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard - Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Impaired - A loan is considered impaired, when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Additionally, all loans classified as TDRs are considered impaired.

Based on the most recent analysis performed, the risk category of loans by class of loans as of December 31, 2022 and 2021 follows:

(dollars in thousands)	Pass		Special Mention		Substandard		Impaired		Total
December 31, 2022
Construction and land development	$	238,965	$	—	$	102	$	—	$	239,067
Real estate - other:
1-4 family residential		143,284		999		—		39		144,322
Multifamily residential		218,606		—		—		—		218,606
Commercial real estate and other		956,649		—		2,025		2		958,676
Commercial and industrial		323,999		6,057		1,588		—		331,644
Consumer		5,458		—		—		—		5,458
	$	1,886,961	$	7,056	$	3,715	$	41	$	1,897,773

154

(dollars in thousands)	Pass		Special Mention		Substandard		Impaired		Total
December 31, 2021
Construction and land development	$	77,519	$	—	$	110	$	—	$	77,629
Real estate - other:
1-4 family residential		133,872		—		53		68		133,993
Multifamily residential		175,751		—		—		—		175,751
Commercial real estate and other		764,864		39		1,246		675		766,824
Commercial and industrial		346,702		1,775		488		58		349,023
Consumer		1,520		—		—		8		1,528
	$	1,500,228	$	1,814	$	1,897	$	809	$	1,504,748

A summary of past due loans, loans still accruing and nonaccrual loans as of December 31, 2022 and 2021 follows:

	Still Accruing
(dollars in thousands)	30-89 Days Past Due		Over 90 Days Past Due		Nonaccrual
December 31, 2022
Construction and land development	$	—	$	—	$	—
Real estate:
1-4 family residential		—		—		39
Multifamily residential		—		—		—
Commercial real estate and other		—		—		2
Commercial and industrial		—		—		—
Consumer		—		—		—
	$	—	$	—	$	41

	Still Accruing
(dollars in thousands)	30-89 Days Past Due		Over 90 Days Past Due		Nonaccrual
December 31, 2021
Construction and land development	$	—	$	—	$	—
Real estate:
1-4 family residential		569		—		68
Multifamily residential		—		—		—
Commercial real estate and other		—		—		675
Commercial and industrial		477		—		58
Consumer		—		—		8
	$	1,046	$	—	$	809

155

Below is a summary of the Company’s recorded investment in impaired loans disclosed by loan type outstanding at December 31, 2022 and 2021.

(dollars in thousands)	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
December 31, 2022
Construction and land development	$	—	$	—	$	—	$	—	$	—
Real estate:
1-4 family residential		86		39		7		43		—
Multifamily residential		—		—		—		—		—
Commercial real estate and other		13		2		—		2		—
Commercial and Industrial		—		—		—		—		—
Consumer		—		—		—		—		—
	$	99	$	41	$	7	$	45	$	—

(dollars in thousands)	Unpaid Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
December 31, 2021
Construction and land development	$	—	$	—	$	—	$	—	$	—
Real estate:
1-4 family residential		182		68		15		77		—
Multifamily residential		—		—		—		—		—
Commercial real estate and other		1,023		675		—		172		—
Commercial and industrial		992		66		16		99		—
Consumer		—		—		—		—		—
	$	2,197	$	809	$	31	$	348	$	—

There were no additional funds committed to be advanced on impaired loans at December 31, 2022.

The Company did not have any loans that have been modified in TDRs as of December 31, 2022 and 2021. There were no loans modified during 2022 and 2021 which resulted in a TDR.

Loans Held for Sale

During the year ended December 31, 2022, the Company expanded the SBA division. At December 31, 2022, the Company had loans held for sale, consisting of SBA 7(a) loans totaling $9.0 million. The Company accounts for loans held for sale at the lower of carrying value or fair value. At December 31, 2022, the fair value of loans held for sale totaled $9.6 million. There were no loans held for sale at December 31, 2021.

156

NOTE 5 - TRANSFERS AND SERVICING OF FINANCIAL ASSETS

The Company has originated loans that are serviced for others, including loans partially guaranteed by the SBA, some of which have been sold in the secondary market, as well as CRE loans, C&I loans participated with various other financial institutions and the special purpose vehicle (“SPV”) participations for the Main Street loans. The loans serviced for others are accounted for as sales and are therefore not included in the accompanying consolidated balance sheets. Loans serviced for others totaled $59.4 million and $29.6 million at December 31, 2022 and 2021. This includes SBA loans serviced for others of $30.3 million at December 31, 2022, and $17.9 million at December 31, 2021, for which there was a related servicing asset of $514 thousand and $170 thousand, respectively.

Consideration for each SBA loan sale includes the cash received and a related servicing asset. The Company receives servicing fees ranging from 0.25% to 1.00% for the services provided over the life of the loan. The servicing asset is based on the estimated fair value of these future cash flows to be collected. The risks inherent in SBA servicing assets primarily relates to accelerated prepayment of loans in excess of what was originally modeled driven by changes in interest rates and a reduction in the estimated future cash flows.

The servicing asset activity includes additions from loan sales with servicing retained, and reductions from amortization as the serviced loans are repaid and servicing fees are earned. A summary of change in the SBA servicing asset as of December 31 follows:

(dollars in thousands)	2022			2021
Balance, beginning of year	$	170		$	306
Additions		422			—
Amortization (1)		(78	)		(136	)
Balance, end of year	$	514		$	170

(1) Included accelerated amortization of $40 thousand and $47 thousand for the years ended December 31, 2022 and 2021.

SBA 7(a) loans sold during the years ended December 31, 2022 totaled $20.0 million resulting in total gains on sale of SBA loans of $1.3 million. There were no SBA 7(a) loans sold during the year ended December 31, 2021.

The fair value of the servicing asset approximated its carrying value at December 31, 2022. The significant assumptions used in the valuation of the SBA servicing asset at December 31, 2022 included a weighted average discount rate of 19.1%, ranging from 13.9% to 34.3% and a weighted average prepayment speed assumption of 17.0%, ranging from 9.7% to 41.2%.

Net servicing fees, a component of noninterest income, represent contractually specified servicing fees reported net of the servicing asset amortization. Net servicing fees totaled $124 thousand and $82 thousand for the years ended December 31, 2022 and 2021 including contractually specified servicing fees of $202 thousand and $218 thousand, offset by the servicing rights amortization of $78 thousand and $136 thousand.

157

NOTE 6 - PREMISES AND EQUIPMENT AND LEASES

A summary of premises and equipment as of December 31 follows:

(dollars in thousands)	2022			2021
Land	$	5,386		$	8,916
Building		4,766			7,536
Leasehold improvements		5,351			3,774
Furniture & fixtures		2,228			1,900
Computer & other equipment		3,648			3,046
		21,379			25,172
Less: Accumulated depreciation and amortization		(7,045	)		(5,533	)
Total	$	14,334		$	19,639

Depreciation and amortization expense on premises and equipment was $1.6 million and $1.4 million for the years ended December 31, 2022 and 2021. During the year ended December 31, 2022, the Company sold a building and related fixed assets that were acquired as part of the BSCA acquisition in 2021, and recorded a loss on sale of $768 thousand.

Substantially all leases are operating leases for corporate offices and branch locations and loan production offices. The amount of the lease liability and ROU asset is impacted by the lease term and the discount rate applied to determine the present value of future lease payments. The remaining terms of operating leases range from 4 months to 10.5 years. Most leases include one or more options to renew, with renewal terms that can extend the lease term by varying amounts. The exercise of renewal options is at the sole discretion of the Company. Renewal option periods were not included in the measurement of ROU assets and lease liabilities as they are not considered reasonably certain of exercise.

During the year ended December 31, 2022, the Company recognized $136 thousand additional impairment of ROU assets for the branch office in La Jolla, California. Management decided to halt the opening of a new branch office in La Jolla, California and the Company recognized a $287 thousand impairment of the ROU assets during the year ended December 31, 2021. The impairment of the ROU assets was based on a discounted cash flow of lease payments net of sublease income. The impairment charges are included in occupancy and equipment expenses in the consolidated statements of income for the years ended December 31, 2022 and 2021.

158

The ROU assets, lease liabilities and supplemental information at December 31 are shown below.

(dollars in thousands)	2022			2021
Operating lease ROU assets	$	8,607		$	8,069
Operating lease liability	$	11,055		$	9,002
Weighted average remaining lease term, in years		5.69			5.04
Weighted average discount rate		5.6	%		5.5	%

The Company’s lease expense is recorded in premises and occupancy expense in the consolidated statements of income. The following table presents the components of lease expense for the years ended December 31:

(dollars in thousands)	2022		2021
Lease costs:
Operating lease	$	2,569	$	2,247
Short-term lease		177		157
Total lease costs	$	2,746	$	2,404
Other information:
Cash paid for amounts included in lease liabilities	$	2,615	$	2,404
ROU assets obtained for new operating lease obligations	$	4,349	$	3,463

Lease liabilities as of December 31, 2022, mature as indicated below:

(dollars in thousands)	Amount
Twelve months ending December 31:
2023	$	2,755
2024		2,611
2025		1,817
2026		1,614
2027		1,481
Thereafter		2,971
Total future minimum lease payments		13,249
Less: imputed interest		2,194
Present value of net future minimum lease payments	$	11,055

159

NOTE 7 - GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill is the excess purchase price over the fair value of all identifiable assets and liabilities acquired and totals $37.8 million and $36.8 million at December 31, 2022 and 2021, which included $18.1 million recognized in the BSCA acquisition (refer to Note 2 – Business Combinations). Current accounting standards require that goodwill be reviewed for impairment at least annually. The Company has performed a qualitative assessment for potential impairment as of December 31, 2022 and 2021, and as a result of that assessment has determined that there has been no impairment to the goodwill that was recorded as a result of fair value accounting for business combinations. The following table presents changes in the carrying amount of goodwill for the periods indicated:

(dollars in thousands)	2022		2021
Beginning of the year	$	36,784	$	19,723
Goodwill from business combination		—		17,061
Adjustments to goodwill(1)		1,019		—
End of year	$	37,803	$	36,784

(1) During the year ended December 31, 2022, the Bank finalized its allocation of purchase consideration to the net assets acquired from BSCA resulting in a $1.0 million increase to goodwill.

As a result of three acquisitions completed from 2010 through 2014, each of which included branch offices in the Coachella Valley, the Company recorded core deposit intangibles totaling $1.1 million. In 2018, the Company recorded $2.5 million of core deposit intangibles for the branch offices located in the Los Angeles market as a result of the Americas United Bank acquisition. In 2020, the Company acquired CalWest Bank and recorded core deposit intangibles of $47 thousand related to branch offices primarily in Orange County. In 2021, the Company acquired BSCA and recorded core deposit intangibles of $802 thousand. Core deposit intangibles are being amortized over periods of seven to ten years. As of December 31, 2022, the weighted-average remaining amortization period for core deposit intangibles was approximately 7 years.

For the years ended December 31, 2022 and 2021, the Company recognized the CDI amortization indicated in the table below.

(dollars in thousands)	2022			2021
Gross balance, beginning of year	$	4,185		$	3,675
Additions		—			802
Reduction from branch sale		—			(292	)
Gross balance, end of year	$	4,185		$	4,185
Accumulated amortization:
Balance, beginning of year	$	(2,163	)	$	(1,799	)
Amortization		(438	)		(364	)
Balance, end of period		(2,601	)		(2,163	)
Net core deposit intangible, end of year	$	1,584		$	2,022

160

Future estimated amortization expense for each of the next five years is as follows:

(dollars in thousands)	Amount
2023	$	355
2024		271
2025		248
2026		227
2027		205
Thereafter		278
	$	1,584

NOTE 8 - DEPOSITS

Time deposits that exceeded the FDIC insurance limit of $250,000 amounted to $84.6 million and $35.7 million as of December 31, 2022 and 2021. The Company participates in a state public deposits program that allows it to receive deposits from the state or from political subdivisions within the state in amounts that would not be covered by the FDIC. This program provides a stable source of funding to the Company. As of December 31, 2022, total collateralized deposits, including the deposits of State of California and their public agencies, were $14.4 million and were collateralized by letters of credit issued by the FHLB under the Company’s secured line of credit with the FHLB. See Note 9 – Borrowing Arrangements for additional information regarding the FHLB secured line of credit.

At December 31, 2022, the scheduled maturities of time deposits are as follows:

(dollars in thousands)	Amount
2023	$	113,212
2024		10,313
2025		2,169
2026		4,012
2027		73
	$	129,779

161

NOTE 9 - BORROWING ARRANGEMENTS

A summary of outstanding borrowings as of December 31 follows:

(dollars in thousands)	2022		2021
FHLB advances	$	50,000	$	—
Subordinated notes		17,770		17,675
Junior Subordinated Debentures		—		2,734
Total borrowings	$	67,770	$	20,409

Federal Home Loan Bank Secured Line of Credit

At December 31, 2022, the Company had a secured line of credit of $442.9 million from the FHLB, of which $374.4 million was available. This secured borrowing arrangement is collateralized under a blanket lien on qualifying real estate loans and is subject to the Company providing adequate collateral and continued compliance with the Advances and Security Agreement and other eligibility requirements established by the FHLB. At December 31, 2022, the Company had pledged qualifying loans with an unpaid principal balance of $834.7 million for this line. In addition, at December 31, 2022, the Company used $18.5 million of its secured FHLB borrowing capacity by having the FHLB issue letters of credit to meet collateral requirements for deposits from the State of California and other public agencies.

The Company had an overnight borrowing of $50 million with an interest rate of 4.65% at December 31, 2022. There were no outstanding FHLB borrowings at December 31, 2021.

Federal Reserve Bank Secured Line of Credit

The Company has credit availability of $11.3 million at the Federal Reserve discount window to the extent of collateral pledged. At December 31, 2022, the Company had pledged qualifying loans with a book value of $12.7 million as collateral through the Borrower-in-Custody (“BIC”) program. The Company had no discount window borrowings at December 31, 2022 or 2021.

Federal Funds Unsecured Lines of Credit

The Company has three overnight unsecured credit lines from correspondent banks totaling $75.0 million. The lines are subject to annual review. There were no outstanding borrowings under these lines at December 31, 2022 and 2021.

Fixed-to-Floating Rate Subordinated Notes

On May 28, 2020, the Company issued $18 million of 5.50% Fixed-to-Floating Rate Subordinated Notes Due 2030 (the “Notes”). The Notes mature March 25, 2030 and accrue interest at a fixed rate of 5.50% through the fixed-rate period to March 26, 2025, after which interest accrues at a floating rate of 90-day SOFR plus 350 basis points, until maturity, unless redeemed early, at the Company’s option, after the end of the fixed-rate period. Issuance costs of $475 thousand were incurred and are being amortized over the first 5-year fixed term of the Notes; unamortized issuance costs at December 31, 2022 and 2021, were $230 thousand and $325 thousand, respectively. The net unamortized issuance costs are netted against the balance and recorded in borrowings in the consolidated balance sheets. The amortization expenses are recorded in the interest expense on the consolidated statements of income. At December 31, 2022, the Company was in compliance with all covenants and terms of the Notes.

162

Junior Subordinated Debentures

In the acquisition of CalWest Bancorp, the Company assumed $3.1 million of junior subordinated deferrable interest debentures (the “Junior Subordinated Debentures”) which were issued to CalWest Statutory Trust I (the “Trust”). The Company also acquired a 3% common interest in the Trust, which was comprised of mandatorily redeemable preferred securities. At acquisition, the Junior Subordinated Debentures were valued at a premium of $408 thousand which was included in the initial carrying value of subordinated securities, which was being amortized over the remaining term of the borrowing. The Junior Subordinated Debentures mature September 17, 2033. In June of 2022, the Company decided to fully redeem the Junior Subordinated Debentures before the maturity date. The Company recorded a loss of $347 thousand related to the unamortized premium at the time of early redemption in the other expenses of the consolidated statements of income for the year ended December 31, 2022.

NOTE 10 - INCOME TAXES

The income tax expense for the years ended December 31, is comprised of the following:

(dollars in thousands)	2022			2021
Current tax expense:
Federal	$	5,257		$	2,152
State		3,163			1,188
Total current tax expense		8,420			3,340
Deferred taxes:
Federal		(1,631	)		58
State		(919	)		79
Total deferred taxes		(2,550	)		137
Total income tax expense	$	5,870		$	3,477

163

A comparison of the federal statutory income tax rates to the Company’s effective income tax rates at December 31 follows:

	2022						2021
(dollars in thousands)	Amount			Rate			Amount			Rate
Statutory federal income tax provision	$	4,617			21.0	%	$	2,979			21.0	%
State taxes		1,819			8.3	%		1,246			8.8	%
Employee stock-based compensation		(163	)		(0.8	)%		(876	)		(6.2	)%
Merger expenses		—			0.0	%		185			1.3	%
Bank owned life insurance		(313	)		(1.4	)%		(165	)		(1.2	)%
Other		(90	)		(0.4	)%		108			0.8	%
	$	5,870			26.7	%	$	3,477			24.5	%

For the years ended December 31, 2022 and 2021, income tax expense was $5.9 million and $3.5 million resulting in an effective income tax rate of 26.7% and 24.5%. Our effective tax rate is slightly lower than the statutory rate of 29.6% for the years ended December 31, 2022 and 2021 due primarily to the tax effect of stock-based compensation, BOLI income, and tax-exempt interest income.

The Company is subject to federal income and California franchise tax. Income tax returns for the years ended after December 31, 2018 are open to audit by federal authorities and income tax returns for the years ending after December 31, 2017 are open to audit by California authorities. There were no interest and penalties related to unrecognized tax benefits in income tax expense at December 31, 2022 and 2021. The total amount of unrecognized tax benefits was zero at December 31, 2022 and 2021.

164

Deferred taxes are a result of differences between income tax accounting and generally accepted accounting principles with respect to income and expense recognition. The following is a summary of the components of the net deferred tax asset accounts recognized in the accompanying consolidated balance sheets at December 31:

(dollars in thousands)	2022			2021
Deferred tax assets:
Allowance for loan losses	$	5,036		$	3,449
Organizational expenses		85			92
Stock-based compensation		1,203			582
Fair value adjustment on acquired loans		298			464
Net operating loss carryforward		1,544			1,643
Accrued expenses		718			812
California franchise tax		674			250
Operating Lease liabilities		3,268			2,661
Unrealized loss on securities available for sale		2,633			16
Other		388			982
Total deferred tax assets		15,847			10,951
Deferred tax liabilities:
Deferred loan costs		(1,202	)		(954	)
Core deposit intangibles		(649	)		(750	)
Depreciation differences		(361	)		(1,098	)
Right of use asset		(2,544	)		(2,385	)
Other		(392	)		(695	)
Total deferred tax liabilities		(5,148	)		(5,882	)
Net deferred tax assets	$	10,699		$	5,069

Section 382 of the Internal Revenue Code imposes an annual limitation on a corporation’s ability to use any net unrealized built-in losses and other tax attributes, such as net operating loss and tax credit carryforwards, when it undergoes a greater than 50% ownership change over a designated testing period not to exceed three years.

On June 29, 2020, California Assembly Bill 85 (A.B. 85) was signed into law. A.B. 85 suspends the use of the net operating loss (“NOL”) for the 2020, 2021, and 2022 tax years. For NOL incurred in tax years before 2020 for which a deduction is denied, the carryover period is extended by three years. On February 9, 2022, Senate Bill 113 (“S.B. 113”) S.B. 113 was signed into law, and among other changes, S.B. 113 reinstates the California NOL deductions for tax years beginning in 2022, in effect shortening the suspension period for NOL deductions from A.B. 85 by one year.

As a result of the acquisition of CalWest, the Company has federal and California Section 382 limited net operating loss carryforwards of approximately $5.0 million and $5.7 million at December 31, 2022, which are scheduled to begin expiring in 2029 for federal and 2031 for California. The federal and California net operating loss carryforwards are subject to annual limitations of $381 thousand each year. The Company expects to fully utilize the recorded federal and California net operating loss carryforwards before they expire.

165

NOTE 11 - EARNINGS PER SHARE (“EPS”)

The following is a reconciliation of net income and shares outstanding to the income and number of shares used to compute EPS:

(dollars in thousands, except share and per share data)	2022		2021
Net income	$	16,113	$	10,709
Weighted average common shares outstanding - basic		17,821,545		14,404,767
Dilutive effect of outstanding:
Stock options and unvested stock grants		406,742		507,773
Weighted average common shares outstanding - diluted		18,228,287		14,912,540
Earnings per common share - basic	$	0.90	$	0.74
Earnings per common share - diluted	$	0.88	$	0.72

A total of 275,171 unvested performance based restricted stock grants have been excluded from the computation of diluted EPS for 2022 and 2021 because the performance conditions had not been met as of December 31, 2022 and 2021. At December 31, 2022 and 2021, there were 160,809 and 85,858 restricted stock units and 24,842 and 180,804 stock options, respectively, that were not included in the computation of diluted earnings per share, because they were anti-dilutive.

NOTE 12 - RELATED PARTY TRANSACTIONS

In the ordinary course of business, the Company has granted loans to certain directors and their related interests with which they are associated. In the Company’s opinion, all loans and loan commitments to such parties are made on substantially the same terms including interest rates, and collateral, as those prevailing at the time for comparable transactions with unrelated clients.

The balance of these loans outstanding and activity in related party loans for the periods ended December 31, 2022 and 2021 follows:

(dollars in thousands)	2022			2021
Balance at beginning of year	$	10,259		$	7,033
New credit granted		—			3,324
Repayments (1)		(2,186	)		(98	)
Balance at end of year	$	8,073		$	10,259

(1) During the year ended December 31, 2022, one loan with outstanding balance of $636 thousand was paid off.

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Directors and related interests deposits at December 31, 2022 and 2021, amounted to approximately $4.7 million and $5.6 million.

The Company leases the Ramona branch office from a principal shareholder and member of our Board of Directors under an operating lease expiring in 2027 on terms considered to be prevailing in the market at the time of the lease. Total lease expense for each of 2022 and 2021 was $43 thousand and $40 thousand and future minimum lease payments under the lease were $193 thousand as of December 31, 2022.

The holding company committed to a $2.0 million investment in the Castle Creek Launchpad Fund I (“Launchpad”). Director David Volk is a member of the Investment Committee for Castle Creek Launchpad Fund I. At December 31, 2022, total capital contributions made to this investment were $315 thousand.

NOTE 13 - COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, the Company enters into financial commitments to meet the financing needs of its customers. These financial commitments include commitments to extend credit and standby letters of credit. Those instruments involve to varying degrees, elements of credit and interest rate risk not recognized in the Company’s financial statements.

Commitments to extend credit are agreements to lend to a client as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. The Company evaluates each client’s credit worthiness on a case-by-case basis. Collateral may or may not be required based on management’s credit evaluation of the customer. The majority of the Company’s commitments to extend credit and standby letters of credit are secured by real estate.

The Company’s exposure to loan loss in the event of nonperformance on commitments to extend credit and standby letters of 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 reflected in the consolidated financial statements.

167

The Company had the following outstanding financial commitments whose contractual amount represents potential credit risk at December 31:

(dollars in thousands)	2022		2021
Commitments to extend credit	$	596,349	$	405,507
Letters of credit issued to customers		4,794		12,210
Commitments to contribute capital to other equity investments		6,041		5,000
	$	607,184	$	422,717

The Company evaluates the loss exposure for unfunded loan commitments to extend credit following the same principles used for the ALL, with consideration for experienced utilization rates on client credit lines and the inherently lower risk of unfunded loan commitments relative to disbursed commitments. The Company recognized a provision for unfunded loan commitments of $506 thousand and $600 thousand for the years ended December 31, 2022 and 2021. The provision for unfunded loan commitments is included in other expense in the consolidated statements of income. The reserve for unfunded loan commitments was $1.3 million and $804 thousand at December 31, 2022 and 2021. The reserve for unfunded loan commitments is included in other liabilities in the consolidated balance sheets.

At December 31, 2022, the Company had unfunded commitments of $6.0 million for affordable housing partnerships that qualify for low income housing tax credits and other tax benefits.

In 2016 and 2021, the Company entered into deferred compensation agreements with certain key officers. Under these agreements, the Company is obligated to provide, upon retirement, a 10-year benefit to the officers. The annual benefits range from $20 thousand to $75 thousand. The estimated present value of future benefits to be paid is being accrued over the period from the effective date of the agreements until the expected retirement dates of the participants. The expense incurred for these agreements in 2022 and 2021 was $328 thousand and $311 thousand, respectively. The Company is a beneficiary of life insurance policies that have been purchased as a method of financing the obligated benefits under these agreements.

In the normal course of business, the Company is named or threatened to be named as a defendant in various lawsuits. The Company is from time to time engaged in various litigation matters including the defense of claims of improper or fraudulent loan practices or lending violations, and other matters, and the Company has a number of unresolved claims pending. In addition, as part of the ordinary course of business, the Company is party to litigation involving claims to the ownership of funds in particular accounts, the collection of delinquent accounts, challenges to security interests in collateral, and foreclosure interests that are incidental to our regular business activities. While the ultimate liability with respect to these other litigation matters and claims cannot be determined at this time, the Company believes that damages, if any, and other amounts relating to pending matters are not likely to be material to the consolidated balance sheets or consolidated statements of income.

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NOTE 14 - STOCK-BASED COMPENSATION PLAN

In contemplation of the holding company reorganization, in November 2019 the Company’s Board of Directors adopted the Southern California Bancorp 2019 Omnibus Equity Incentive Plan (the “2019 Plan”). The 2019 Plan was approved by shareholders in April 2020 with a maximum number of shares of common stock that may be issued or paid out under the plan of 2,200,000. In addition, upon the completion of the bank holding company reorganization in 2020, the Bank’s 2001 Stock Option Plan and 2011 Omnibus Equity Incentive Plan were terminated and all outstanding and unexpired stock options and all shares of restricted stock outstanding under the terminated plans became equivalent awards of the Company under the 2019 Plan.

In October 2020, the Company’s Board of Directors approved increasing the maximum number of shares under the 2019 Plan by 300,000 to 2,500,000. In June 2021, the Company’s Board of Directors approved increasing the maximum number of shares under the 2019 Plan by 900,000 to 3,400,000.

In addition, the 2019 Plan permits the Company to grant additional stock options and restricted share units. The Plan provides for the granting to eligible participants such incentive awards as the Board of Directors or a committee established by the Board (the “Committee”), in its sole discretion, to administer the Plan. The Board has the power to determine the terms of the awards, including the exercise price, the number of shares subject to each award, the vesting and exercisability of the awards and the form of consideration payable upon exercise. Stock options expire no later than ten years from the date of the grant. The 2019 Plan provides for accelerated vesting if there is a change of control, as defined in the Plan. Restricted stock units generally vest over a period of one to five years.

In connection with the BSCA merger, the Company assumed each outstanding, unexercised option to acquire shares of BSCA common stock held by BSCA officers and employees who continue to be employed by the Company immediately following the merger, other than any stock options held by BSCA’s former chief executive officer. Total unexercised stock options were 90,731, of which 65,261 shares were vested and 25,470 shares were unvested. The remaining term on the assumed stock options ranges from 2.4 years to 9.2 years. Each such option assumed by the Company, immediately following the merger, represented a stock option to purchase the same number of shares as immediately prior to the merger, except that the assumed options represented the right to purchase shares of the Company’s stock instead of shares of BSCA stock. Each assumed option has the same exercise price and is subject to substantially the same terms and conditions as immediately prior to merger, including the original vesting schedule and conditions. All outstanding unexercised options to acquire shares of BSCA common stock held by employees who are not continuing employees or by BSCA’s former chief executive officer were canceled and terminated at the effective time of the merger.

Total stock-based compensation cost related to stock options and restricted shares units was $3.7 million and $5.5 million in 2022 and 2021, respectively, and related tax benefits were approximately $1.1 million and $1.6 million in 2022 and 2021, respectively.

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Stock Options

As of December 31, 2022, there was $166 thousand of total unrecognized compensation cost related to the outstanding stock options. The intrinsic value of stock options exercised was approximately $1.1 million and $1.7 million in 2022 and 2021, respectively.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model. There were no options granted during the years ended December 31, 2022 and 2021.

A summary of changes in outstanding stock options during the years ended December 31, 2022 and 2021 are presented below:

(dollars in thousands, except share data)	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
December 31, 2022
Outstanding at beginning of year		536,651		$	9.36
Granted		—		$	—
Exercised		(136,100	)	$	7.41
Forfeited		(73,683	)	$	12.18
Outstanding at end of year		326,868		$	9.53		4.3 Years	$	2,385
Options exercisable		279,213		$	9.13		3.9 Years	$	2,151

(dollars in thousands, except share data)	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
December 31, 2021
Outstanding at beginning of year		783,000		$	9.22
Granted		—		$	—
Rollover options (1)		90,731		$	7.40
Exercised		(303,100	)	$	8.06
Forfeited		(33,980	)	$	12.51
Outstanding at end of year		536,651		$	9.36		5.0 Years	$	3,021
Options exercisable		391,661		$	8.51		4.3 Years	$	2,538

(1) Amounts relate to rollover stock options issued to BSCA officers and employees in connection with the BSCA acquisition.

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Restricted Stock Units

A summary of the changes in outstanding unvested restricted stock units during the years ended December 31, 2022 and 2021 is presented below:

December 31, 2022	Restricted Shares			Weighted Average Grant Date Fair Value
Unvested at beginning of year		1,010,501		$	10.55
Granted		257,378		$	15.31
Vested		(131,269	)	$	11.69
Forfeited		(177,273	)	$	11.20
Unvested at end of year		959,337		$	11.55

December 31, 2021	Restricted Shares			Weighted Average Grant Date Fair Value
Unvested at beginning of year		1,276,106		$	9.37
Granted		232,347		$	14.16
Vested		(466,164	)	$	8.97
Forfeited		(31,788	)	$	12.91
Unvested at end of year		1,010,501		$	10.55

As of December 31, 2022, there was $7.4 million of total unrecognized compensation expense related to the outstanding restricted stock units that will be recognized over the weighted-average period of 2.2 years. The total grant date fair value of restricted stock units vested during 2022 and 2021 was $1.5 million and $4.2 million, respectively.

Of the total unvested restricted stock units outstanding as of December 31, 2022, vesting related to 275,171 shares is subject to various financial performance conditions being met by December 31, 2023, which the Company has assumed will be achieved for purposes of recognizing compensation cost. The associated cost is being charged to expense ratably over the requisite service period which extends to December 31, 2023. If the performance conditions are not achieved by 2023, the previously recognized compensation cost will be fully reversed. For the year ended December 31, 2022, stock-based compensation for performance-based restricted stock units totaled $843 thousand. For the year ended December 31, 2021, stock-based compensation for performance-based restricted stock units totaled $2.4 million, of which $1.7 million related to the accelerated stock-based compensation expense for the settlement of a former executive’s preexisting employment contract.

171

Future levels of compensation cost recognized related to stock-based compensation awards may be impacted by new awards and/or modifications, repurchases and cancellations of existing awards. Under the terms of the 2019 Plan, vested options generally expire ninety days after the director or employee terminates the service affiliation with the Company.

NOTE 15 - REGULATORY MATTERS

At December 31, 2022 and 2021, the Company qualified for treatment under the Small Bank Holding Company Policy Statement (Regulation Y, Appendix C) and, therefore, is not subject to consolidated capital rules at the bank holding company level.

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

Banks considered to be “adequately capitalized” are required to maintain a minimum total capital ratio of 8.0%, a minimum Tier 1 capital ratio of 6.0%, a minimum common equity Tier 1 capital ratio of 4.5%, and a minimum leverage ratio of 4.0%. Banks considered to be “well capitalized” must maintain a minimum total capital ratio of 10.0%, a minimum Tier 1 capital ratio of 8.0%, a minimum common equity Tier 1 capital ratio of 6.5%, and a minimum leverage ratio of 5.0%. As of December 31, 2022 and 2021, the Bank is “well capitalized” under the regulatory framework for prompt corrective action (PCA). There are no conditions or events that management believes have changed the Bank’s categories. Management believes, as of December 31, 2022 and 2021, that the Bank met all capital adequacy requirements to which we are subject.

Basel III, the comprehensive regulatory capital rules for U.S. banking organizations, requires all banking organizations to maintain a capital conservation buffer above the minimum risk-based capital requirements in order to avoid certain limitations on capital distributions, stock repurchases and discretionary bonus payments to executive officers. The capital conservation buffer is exclusively comprised of common equity Tier 1 capital, and it applies to each of the three risk-based capital ratios but not to the leverage ratio. Effective January 1, 2019, the capital conservation buffer increased by 0.625% to its fully phased-in 2.5%, such that the common equity Tier 1, Tier 1 and total capital ratio minimums inclusive of the capital conservation buffers were 7.0%, 8.5%, and 10.5% at December 31, 2022. At December 31, 2022, the Bank was in compliance with the capital conservation buffer requirements. To be categorized as well-capitalized, the Bank must maintain minimum ratios as set forth in the table below.

172

The following table also sets forth the Bank’s actual capital amounts and ratios:

						Amount of Capital Required
						To be					To be Well-
						Adequately					Capitalized under
	Actual					Capitalized					PCA Provisions
(dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
As of December 31, 2022:
Total Capital (to Risk-Weighted Assets)	$	260,788		11.97	%	$	174,256		8.0	%	$	217,820		10.0	%
Tier 1 Capital (to Risk-Weighted Assets)		242,379		11.13	%		130,692		6.0	%		174,256		8.0	%
CET1 Capital (to Risk-Weighted Assets)		242,379		11.13	%		98,019		4.5	%		141,583		6.5	%
Tier 1 Capital (to Average Assets)		242,379		10.62	%		91,297		4.0	%		114,122		5.0	%
As of December 31, 2021:
Total Capital (to Risk-Weighted Assets)	$	237,478		14.99	%	$	126,728		8.0	%	$	158,411		10.0	%
Tier 1 Capital (to Risk-Weighted Assets)		225,017		14.20	%		95,046		6.0	%		126,728		8.0	%
CET1 Capital (to Risk-Weighted Assets)		225,017		14.20	%		71,285		4.5	%		102,967		6.5	%
Tier 1 Capital (to Average Assets)		225,017		9.98	%		90,153		4.0	%		112,691		5.0	%

The primary source of funds for the Company is dividends from the Bank. Under federal law, the Bank may not declare a dividend in excess of its undivided profits and, absent the approval of the OCC, the Bank’s primary banking regulatory, if the total amount of dividends declared by the Bank in any calendar year exceeds the total of the Bank’s retained net income of that current period, year to date, combined with its retained net income for the preceding two years. The Bank also is prohibited from declaring or paying any dividend if, after making the dividend, the Bank would be considered “undercapitalized” (as defined by reference to other OCC regulations). Federal bank regulatory agencies have authority to prohibit banking institutions from paying dividends if those agencies determine that, based on the financial condition of the bank, such payment will constitute an unsafe or unsound practice.

The Federal Reserve limits the amount of dividends that bank holding companies may pay on common stock to income available over the past year, and only if prospective earnings retention is consistent with the organization’s expected future needs and financial condition. It is also the Federal Reserve’s policy that bank holding companies should not maintain dividend levels that undermine their ability to be a source of strength to its banking subsidiaries. Additionally, in consideration of the current financial and economic environment, the Federal Reserve has indicated that bank holding companies should carefully review their dividend policies.

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NOTE 16 - FAIR VALUE

The fair value of a financial instrument is the amount at which the asset or obligation could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular financial instrument. Because no market value exists for a significant portion of the financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature, involve uncertainties and matters of judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Fair value of financial instruments

Fair value estimates are based on financial instruments both on and off the balance sheet without attempting to estimate the value of anticipated future business, and the value of assets and liabilities that are not considered financial instruments. Additionally, tax consequences related to the realization of the unrealized gains and losses can have a potential effect on fair value estimates and have not been considered in many of the estimates. The following methods and assumptions were used to estimate the fair value of significant financial instruments:

Cash and Due from Banks: The carrying amounts of cash and short-term instruments approximate fair values because of the liquidity of these instruments.

Fed Funds and Interest-Bearing Balances: The carrying amount is assumed to be the fair value given the short-term nature of these deposits.

Debt Securities Held to Maturity and Available for Sale: The fair values of securities held to maturity and available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities.

Loans Held for Sale: The fair value of loans held-for-sale is based on commitments outstanding from investors as well as what secondary market investors are currently offering for portfolios with similar characteristics.

Loans Held for Investment, net: The fair value of loans, which is based on an exit price notion, is generally determined using an income based approach based on discounted cash flow analysis. This approach utilizes the contractual maturity of the loans and market indications of interest rates, prepayment speeds, defaults and credit risk in determining fair value. For impaired loans, an asset-based approach is applied to determine the estimated fair values of the underlying collateral. This approach utilizes the estimated net sales proceeds to determine the fair value of the loans when deemed appropriate. The implied sales proceeds value provides a better indication of value than using an income-based approach as these loans are not performing or exhibit strong signs indicative of non-performance.

174

Restricted Stock Investments: Investments in FHLB and Federal Reserve stocks are recorded at cost and measured for impairment. Ownership of FHLB and Federal Reserve stocks are restricted to member banks and the securities do not have a readily determinable market value. Purchases and sales of these securities are at par value with the issuer. The fair value of investments in FHLB and Federal Reserve stock is equal to the carrying amount.

Other Equity Securities: The fair value of equity securities is based on quoted prices in active markets for identical assets to determine the fair value. If quoted prices are not available to determine fair value, the Company estimates the fair values by using independent pricing models, quoted prices of securities with similar characteristics, or discounted cash flows.

Other Real Estate Owned: Nonrecurring adjustments to certain commercial and residential real estate properties classified as OREO are measured at the lower of the carrying amount or fair value, less costs to sell. The fair value of OREO is generally based on recent real estate appraisals or broker opinions, obtained from independent third parties, which are frequently adjusted by management to reflect current conditions and estimated selling costs.

Accrued Interest Receivable: The fair value of accrued interest receivable approximates their carrying amounts.

Deposits: The fair values disclosed for demand deposits, including interest and non-interest demand accounts, savings, and certain types of money market accounts are, by definition based on carrying value. Fair value for fixed-rate certificates of deposit is estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregate expected monthly maturities on time deposits. Early withdrawal of fixed-rate certificates of deposit is not expected to be significant.

Borrowings: The fair values of the Company’s overnight borrowings from Federal Home Loan Bank approximates their carrying value as the advances were recently borrowed at market rate. The fair value of fixed-rated term borrowings is estimated using a discounted cash flow through the remaining maturity dates based on the current borrowing rates for similar types of borrowing arrangements. The fair values of subordinated debt are based on rates currently available to the Company for debt with similar terms and remaining maturities.

Accrued Interest Payable: The fair value of accrued interest payable approximates their carrying amounts.

Off-Balance Sheet Financial Instruments: The fair value of commitments to extend credit and standby letters of credit is estimated using the fees currently charged to enter into similar agreements. The fair value of these financial instruments is not material.

175

The estimated fair value hierarchy level and estimated fair value of financial instruments at December 31, is summarized as follows:

			2022				2021
					Estimated				Estimated
	Fair Value		Carrying		Fair		Carrying		Fair
(dollars in thousands)	Hierarchy		Value		Value		Value		Value
Financial assets:
Cash and due from banks		Level 1	$	60,295	$	60,295	$	22,435	$	22,435
Fed funds and interest-bearing balances		Level 1		26,465		26,465		557,571		557,571
Debt securities available for sale		Level 2		112,580		112,580		55,567		55,567
Debt securities held to maturity		Level 2		53,946		47,906		—		—
Loans held for sale		Level 2		9,027		9,616		—		—
Loans held for investment, net		Level 3		1,880,674		1,836,782		1,493,091		1,498,804
Restricted stock, at cost		Level 2		14,543		14,543		12,493		12,493
Other equity securities		Level 2		5,096		5,096		2,136		2,136
Accrued interest receivable		Level 2		6,868		6,868		4,137		4,137
Financial liabilities:
Deposits		Level 2		1,931,905		1,929,947		1,973,098		1,972,610
Borrowings		Level 2		67,770		67,387		20,409		21,580
Accrued interest payable		Level 2		215		215		67		67

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Recurring fair value measurements

The following table provides the hierarchy and fair value for each major category of assets and liabilities measured at fair value on a recurring basis at the periods indicated:

	Recurring Fair Value Measurements
(dollars in thousands)	Level 1		Level 2		Level 3		Total
December 31, 2022
Securities available for sale:
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities	$	—	$	23,295	$	—	$	23,295
SBA securities		—		7,872		—		7,872
U.S. Treasury		—		5,952		—		5,952
U.S. Agency		—		6,183		—		6,183
Collateralized mortgage obligations		—		44,423		—		44,423
Taxable municipal		—		4,228		—		4,228
Tax exempt bank-qualified municipals		—		20,627		—		20,627
	$	—	$	112,580	$	—	$	112,580
December 31, 2021
Securities available for sale:
U.S. government and agency and government sponsored enterprise securities:
Mortgage-backed securities	$	—	$	17,315	$	—	$	17,315
SBA securities		—		11,400		—		11,400
U.S. Treasury		—		2,781		—		2,781
U.S. Agency		—		6,479		—		6,479
Collateralized mortgage obligations		—		10,288		—		10,288
Taxable municipal		—		5,522		—		5,522
Tax exempt bank-qualified municipals		—		1,782		—		1,782
	$	—	$	55,567	$	—	$	55,567

Nonrecurring fair value measurements

Certain assets and liabilities may be required to be measured at fair value on a nonrecurring basis in periods subsequent to their initial recognition. These assets and liabilities are not measured at fair value on an ongoing basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence of impairment. At December 31, 2022, the Company determined the amounts measured at fair value on a nonrecurring basis were immaterial and the Company did not have any nonrecurring fair value measurements at December 31, 2021.

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NOTE 17 - CONDENSED FINANCIAL INFORMATION OF PARENT COMPANY ONLY

Southern California Bancorp was organized in 2020 to serve as the holding company for Bank of Southern California, N.A., its wholly owned subsidiary. The earnings of the subsidiary are recognized using the equity method of accounting. The following tables present the parent company only condensed balance sheets at December 31, 2022 and 2021 and the related condensed statements of income and condensed statements of cash flows for the years ended December 31, 2022 and 2021.

Southern California Bancorp (Parent Company Only)

CONDENSED BALANCE SHEETS

	December 31,
(dollars in thousands)	2022			2021
ASSETS
Cash	$	3,177		$	2,838
Investment in Bank of Southern California		274,714			263,605
Other investments		315			93
Accrued interest and other assets		214			443
Total assets	$	278,420		$	266,979
LIABILITIES
Subordinated debt and other borrowings	$	17,770		$	20,409
Accrued interest and other liabilities		295			42
Total liabilities		18,065			20,451
SHAREHOLDERS’ EQUITY
Common stock		218,280			214,163
Retained earnings		48,516			32,403
Accumulated other comprehensive loss		(6,441	)		(38	)
Total shareholders’ equity		260,355			246,528
Total liabilities and shareholders’ equity	$	278,420		$	266,979

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Southern California Bancorp (Parent Company Only)

CONDENSED STATEMENTS OF INCOME

	Year Ended December 31,
(dollars in thousands)	2022		2021
INCOME
Other interest and dividends	$	2	$	3
Dividends from bank subsidiary		3,000		—
Total income		3,002		3
EXPENSES
Interest on borrowings		1,155		1,224
Merger and related expenses		1		347
Other noninterest expense		655		86
Total expenses		1,811		1,657
Income (loss) before income tax benefit		1,191		(1,654	)
Income tax benefit		519		436
Income (loss) before equity in undistributed earnings (dividends in excess of equity in earnings) of subsidiary		1,710		(1,218	)
Equity in undistributed earnings (dividends in excess of equity in earnings) of subsidiary		14,403		11,927
Net income	$	16,113	$	10,709

179

Southern California Bancorp (Parent Company Only)

CONDENSED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
(dollars in thousands)	2022			2021
OPERATING ACTIVITIES
Net Income	$	16,113		$	10,709
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Amortization of debt issuance costs		95			95
Amortization of junior subordinated debentures fair value adjustment		12			49
Loss on early debt extinguishment		347			—
(Equity in undistributed earnings) dividends in excess of equity in earnings of subsidiary		(14,403	)		(11,927	)
Other Items		481			(207	)
Net cash provided by (used in) operating activities		2,645			(1,281	)
INVESTING ACTIVITIES
Proceeds from junior subordinated debentures investment		93			—
Net purchase of other equity investments		(315	)		—
Cash paid in business combination		—			(21	)
Net cash used in investing activities		(222	)		(21	)
FINANCING ACTIVITIES
Repayment of other borrowings		(3,093	)		—
Issuance of common stock, net of costs		—			—
Proceeds from exercise of stock options		1,009			172
Net cash provided by financing activities		(2,084	)		172
Increase (decrease) in cash and cash equivalents		339			(1,130	)
Cash and cash equivalents, beginning of year		2,838			3,968
Cash and cash equivalents, end of year	$	3,177		$	2,838

NOTE 18 - SUBSEQUENT EVENTS

The Company has evaluated subsequent events for recognition and disclosure through March 1, 2023, the date the consolidated financial statements were available to be issued.

180

Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 15. Financial Statements and Exhibits

(a) FINANCIAL STATEMENTS. The following financial statements are included in this report:

The financial statements and financial statement schedules are filed as part of this registration statement and begin on page 121 and an index thereto is included in Item 13.

(b) EXHIBITS. The following exhibits are included as part of this report:

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated as of April 26, 2021, by and among Southern California Bancorp, Bank of Southern California, N.A., and Bank of Santa Clarita
3.1	Articles of Incorporation of Southern California Bancorp
3.2	Bylaws of Southern California Bancorp
4.1	Form of Certificate of Common Stock of Southern California Bancorp
4.2	Long-term borrowing instruments are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The Company undertakes to furnish copies of such instruments to the Securities and Exchange Commission upon request.
10.1	Form of Indemnification Agreement by and between Southern California Bancorp and its directors and executive officers
10.2	Southern California Bancorp 2019 Omnibus Equity Incentive Plan, as amended*
10.3	Form of Restricted Shares Award Agreement under the Southern California Bancorp 2019 Omnibus Equity Incentive Plan, as amended*
10.4	Form of Stock Option Award Agreement under the Southern California Bancorp 2019 Omnibus Equity Incentive Plan, as amended*
10.5	Restricted Shares Award Agreement (Performance Based), dated October 26, 2020, with David I. Rainer under the Southern California Bancorp 2019 Omnibus Equity Incentive Plan, as amended*
10.6	Restricted Shares Award Agreement (Performance Based), dated October 26, 2020, with Thomas G. Dolan, under the Southern California Bancorp 2019 Omnibus Equity Incentive Plan, as amended*
10.7	Bank of Southern California 2011 Omnibus Equity Incentive Plan*
10.8	Form of Stock Option Award Agreement under the Bank of Southern California 2011 Omnibus Equity Incentive Plan*
10.9	Amended and Restated Employment Agreement, dated as of January 18, 2023, by and among Southern California Bancorp, Bank of Southern California, N.A. and David I. Rainer*
10.10	Form of Change in Control Agreement by and among Southern California Bancorp, Bank of Southern California, N.A. and each of Thomas Dolan and Richard Hernandez*
10.11	Form of Change in Control Agreement, by and among Southern California Bancorp, Bank of Southern California, N.A. and certain of its executive officers*
10.12	Supplemental Executive Retirement Agreement, dated as of July 14, 2021, by and between Bank of Southern California, N.A. and Thomas Dolan*
10.13	Supplemental Executive Retirement Agreement, dated as of July 14, 2021, by and between Bank of Southern California, N.A. and Richard Hernandez*
10.14	Southern California Bancorp Management Incentive Plan*
10.15	Employment Agreement, dated as of April 16, 2021, by and between Bank of Southern California, N.A. and Frank D. Di Tomaso*
10.16	Stock Purchase Agreement, dated September 22, 2016, by and between Bank of Southern California, N.A. and Castle Creek Capital Partners VI, LP.
10.17	Side Letter, dated October 16, 2019, by and between Bank of Southern California, N.A. and Castle Creek Capital Partners, VI, LP.
21.1	Subsidiaries of Southern California Bancorp
*	Indicates a management contract or compensatory plan.

181

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

	SOUTHERN CALIFORNIA BANCORP
Date: April 6, 2023	/s/ David I. Rainer
	David I. Rainer
	Chief Executive Officer
	(Duly Authorized Representative)

182

EX-2.1

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

DATED AS OF APRIL 26, 2021

BY AND AMONG

SOUTHERN CALIFORNIA BANCORP,

BANK OF SOUTHERN CALIFORNIA, NATIONAL ASSOCIATION

AND

BANK OF SANTA CLARITA

TABLE OF CONTENTS

			Page
ARTICLE I CERTAIN DEFINITIONS			2
	1.1	Certain Definitions	2
	1.2	Rules of Construction	12
ARTICLE II THE MERGER AND RELATED MATTERS			12
	2.1	The Merger; Surviving Entity	12
	2.2	Filing of Notice of Consummation	13
	2.3	Rights and Liabilities	13
ARTICLE III EFFECT OF THE MERGER ON CAPITAL STOCK			14
	3.1	Effect on Capital Stock	14
	3.2	Outstanding Options	15
	3.3	Exchange of Certificates	15
	3.4	Withholding Rights	17
	3.5	Additional Actions	18
	3.6	Alternative Structure	18
ARTICLE IV ACTIONS PENDING THE MERGER			18
	4.1	Forbearances by BSCA	18
	4.2	Forbearances of SCB and BOSC	23
ARTICLE V REPRESENTATIONS AND WARRANTIES			24
	5.1	Disclosure Schedules	24
	5.2	Representations and Warranties of BSCA	25
	5.3	Representations and Warranties of SCB and BOSC	41
ARTICLE VI COVENANTS			52
	6.1	Commercially Reasonable Efforts	52
	6.2	Regulatory Filings	52
	6.3	Press Releases	53
	6.4	Access; Information	53
	6.5	No Solicitation	54
	6.6	Shareholder Recommendation	56
	6.7	Requisite Shareholder Approvals	57
	6.8	Post-Merger SCB and BOSC Boards	58

i

	6.9	Notification of Certain Matters	58
	6.10	Consents	59
	6.11	Antitakeover Statutes	59
	6.12	Notice to BSCA Customers	59
	6.13	Indemnification; Directors and Officers Insurance	59
	6.14	California Permit	60
	6.15	Benefit Plans	61
	6.16	Certain Policies	63
	6.17	Updated Schedules	63
	6.18	Tax Matters	63
	6.19	Confidentiality	64
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE TRANSACTION			65
	7.1	Conditions to Each Party’s Obligation to Effect the Transactions Contemplated Hereby	65
	7.2	Conditions to Obligations of BSCA	66
	7.3	Conditions to Obligations of SCB and BOSC	67
ARTICLE VIII TERMINATION			70
	8.1	Termination	70
	8.2	Liabilities and Remedies; Liquidated Damages; Expense Reimbursement	72
ARTICLE IX MISCELLANEOUS			73
	9.1	Survival of Representations, Warranties and Agreements	73
	9.2	Waiver; Amendment	73
	9.3	Counterparts	73
	9.4	Governing Law and Venue	74
	9.5	Expenses	74
	9.6	Notices	74
	9.7	Entire Understanding; No Third-Party Beneficiaries	75
	9.8	Severability	75
	9.9	Interpretation	75
	9.10	Assignment	75

ii

EXHIBITS

Exhibit A	Form of BSCA Shareholder Agreement
Exhibit A-1	List of BSCA Shareholders Entering into BSCA Shareholder Agreements
Exhibit B	Form of Non-Solicitation and Confidentiality Agreement
Exhibit B-1	List of BSCA Directors Entering into Non-Solicitation Confidentiality Agreement
Exhibit C	Non-Solicitation, Non-Competition and Confidentiality Agreement with Frank D. Di Tomaso, Jr.
Exhibit C-1	Employment Agreement with Frank D. Di Tomaso, Jr.
Exhibit D	Form of SCB Shareholder Agreement
Exhibit D-1	List of SCB Shareholders Entering into SCB Shareholder Agreements
Exhibit E	Form of Articles of Merger
Exhibit F	Form of Separation and Release Agreement
Exhibit F-1	Form of Executive Officer Separation and Release Agreement

iii

AGREEMENT AND PLAN OF MERGER

This Agreement and Plan of Merger, dated as of April 26, 2021 (this “Agreement”), is made and entered into by and among Southern California Bancorp, a California corporation (“SCB”), Bank of Southern California, National Association, a national banking association and a wholly-owned subsidiary of SCB (“BOSC”), and Bank of Santa Clarita, a California state- chartered commercial bank (“BSCA”), with reference to the following recitals:

RECITALS

WHEREAS, each of the Boards of Directors of SCB, BOSC and BSCA: (i) have unanimously determined that this Agreement and the business combination and related transactions contemplated hereby are in the best interests of their respective institutions and shareholders; (ii) have determined that this Agreement and the transactions contemplated hereby are consistent with and in furtherance of their respective business strategies; and (iii) have adopted resolutions approving this Agreement and declaring its advisability;

WHEREAS, subject to the terms and conditions of this Agreement, BSCA will merge with and into BOSC (the “Merger”), with BOSC surviving the Merger and continuing operations under its national bank charter;

WHEREAS, the parties intend that the Merger will be treated as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Code”), and this Agreement will constitute a “plan of reorganization” for purposes of Sections 354 and 361 of the Code and Section 1.368-2(g) of the Treasury Regulations, for U.S. federal income Tax purposes;

WHEREAS, as a condition to the willingness of SCB and BOSC to enter into this Agreement and simultaneously with the execution of this Agreement, each shareholder of BSCA listed in Exhibit A-1 hereto has entered into an agreement in the form attached hereto as Exhibit A (the “BSCA Shareholder Agreement”) pursuant to which each such shareholder has agreed, upon the terms and conditions set forth therein, among other things, to vote his or her shares of BSCA Common Stock in favor of the principal terms of this Agreement;

WHEREAS, as a condition to and simultaneously with the execution of this Agreement, each director of BSCA listed in Exhibit B-1 hereto has entered into an agreement in substantially the form attached hereto as Exhibit B (the “Non-Solicitation and Confidentiality Agreement”) pursuant to which each such director has agreed, upon the terms and conditions set forth therein, among other things, to restrict his or her activities after consummation of the Merger;

WHEREAS, as a condition to and simultaneously with the execution of this Agreement, Mr. Frank D. Di Tomaso, Jr., SCB and BOSC have entered into a Non-Solicitation, Non- Competition, and Confidentiality Agreement in the form attached hereto as Exhibit C and the Employment Agreement in the form attached hereto as Exhibit C-1 (the “Employment Agreement”) with the Employment Agreement to be effective at and after consummation of the Merger;

WHEREAS, as a condition to the willingness of BSCA to enter into this Agreement and simultaneously with the execution of this Agreement, each shareholder of SCB listed in Exhibit D-1 hereto has entered into an agreement in the form attached hereto as Exhibit D (the “SCB Shareholder Agreement”) pursuant to which each such shareholder has agreed, upon the terms and conditions set forth therein, among other things, to vote his or her shares of SCB Common Stock in favor of the principal terms of this Agreement; and

WHEREAS, the parties desire to make certain representations, warranties and agreements in connection with the business transactions described in this Agreement and to prescribe certain conditions thereto.

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements herein contained, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

AGREEMENT

ARTICLE I
CERTAIN DEFINITIONS

1.1 Certain Definitions. The following terms are used in this Agreement with the meanings set forth below:

“Acquisition Proposal” means any inquiry, offer or proposal, other than by SCB or BOSC, whether or not in writing, contemplating, relating to, or that could reasonably be expected to lead to: (i) any transaction or series of transactions involving any merger, consolidation, recapitalization, share exchange, liquidation, dissolution or similar transaction involving BSCA; (ii) any transaction pursuant to which any third party or group acquires or would acquire (whether through sale, lease or other disposition), directly or indirectly, assets of BSCA representing, in the aggregate, ten percent (10.0%) or more of the assets of BSCA; (iii) the issuance, sale or other disposition of (including by way of merger, consolidation, share exchange or any similar transaction) securities (or options, rights or warrants to purchase or securities convertible into, such securities) representing ten percent (10%) or more of the votes attached to the outstanding securities of BSCA; (iv) any tender offer or exchange offer that, if consummated, would result in any third party or group beneficially owning ten percent (10%) or more of any class of equity securities of BSCA; or (v) any transaction which is similar in form, substance or purpose to any of the foregoing transactions, or any combination of the foregoing.

“Adverse Recommendation Change” means: (i) a withdrawal, modification or qualification in any manner that is adverse to SCB or BOSC of the approval, recommendation or declaration of advisability by the BSCA Board, or any such committee thereof with responsibility for the negotiation or oversight to the extent permitted by law of the transactions contemplated by this Agreement, the Merger or any of the other transactions contemplated hereby; (ii) the adoption, approval, recommendation, endorsement or declaration of advisability of the adoption of any Acquisition Proposal; (iii) the resolution, agreement or proposal by the BSCA Board to take any such actions described in clauses (i) or (ii); or (iv) the submission of this Agreement to BSCA Shareholders without recommendation of approval.

-2-

“Affiliate” means, with respect to a Person, any Person that, directly or indirectly, controls, is controlled by or is under common control with such Person. For purposes of this definition, “control” (including, with correlative meanings, the terms “controlled by” or “under common control with”), as applied to any Person, means the possession, directly or indirectly, of:

(i)  ownership, control or power to vote ten percent (10%) or more of the outstanding shares of any class of voting securities of such Person; (ii) control, in any manner, over the election of a majority of the directors, trustees or general partners (or individuals exercising similar functions) of such Person; or (iii) the power to exercise a controlling influence over the management or policies of such Person.

“Agreement” means this Agreement and Plan of Merger, as amended or modified from time to time in accordance with Section 9.2.

“Alternative Acquisition Agreement” means any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or other contract constituting or related to, or which is intended to or is reasonably likely to lead to, any Acquisition Proposal.

“AML Act” means the Anti-Money Laundering Act of 2020.

“Ancillary Agreements” has the meaning set forth in Section 9.7.

“Antitakeover Law” has the meaning set forth in Section 4.1(w).

“Assumed Option” has the meaning set forth in Section 3.2

“Bank Holding Company Act” means any the Bank Holding Company Act of 1956, as amended.

“Bank Secrecy Act” means the Bank Secrecy Act of 1970, as amended, including, without limitation, the USA PATRIOT Act and the Anti-Money Laundering Act of 2020.

“BOSC” has the meaning set forth in the preamble to this Agreement.

“BOSC Articles” means the Articles of Association of BOSC, as amended.

“BOSC Board” means the Board of Directors of BOSC.

“BOSC Bylaws” means the Bylaws of BOSC, as amended.

“BSCA” has the meaning set forth in the preamble to this Agreement.

“BSCA Adjusted Shareholders’ Equity” means the total shareholders’ equity of BSCA determined in accordance with GAAP, consistently applied, (reflecting the payment of or accrual for all BSCA Transaction Expenses, on a pro forma basis if expected to be expensed after the Closing Date), plus the sum of the following (each on a tax-adjusted basis, to the extent such expense is a tax-deductible expense): (a) all BSCA Transaction Expenses (to the extent they have been paid or accrued or reflected in the pro forma) up to a maximum aggregate of $3,700,000; (b) all amounts paid or accrued in connection with any actions taken pursuant to Section 6.16; (c) attorneys’ fees arising directly and exclusively from any actions, claims, suits or hearings brought by shareholders of BSCA or SCB with respect to this Agreement or the transactions contemplated hereby (but only to the extent they were actually deducted in arriving at the BSCA total shareholders’ equity); and (d) any amounts paid or accrued in connection with (i) the termination of employee benefits or programs, and (ii) retention payments or bonuses approved by SCB and BSCA in accordance with this Agreement (but specifically not including payments under change of control agreements, change of control payments under employment agreements or other similar payments or agreements).

-3-

“BSCA Articles” means the Articles of Incorporation of BSCA, as amended.

“BSCA Benefit Plans” has the meaning set forth in Section 5.2(n)(i).

“BSCA Board” means the Board of Directors of BSCA.

“BSCA Bylaws” means the Bylaws of BSCA, as amended.

“BSCA Common Stock” means the common stock, no par value, of BSCA.

“BSCA Financial Statements” means: (i) the audited statements of financial condition (including related notes and schedules, if any) of BSCA as of December 31, 2020 and 2019, and the statements of operations and comprehensive income, shareholders’ equity and cash flows (including related notes and schedules, if any) of BSCA for each of the years ended December 31, 2020 and 2019 accompanied by the audit report of Crowe LLP; and (ii) the statements of financial condition of BSCA (including related notes and schedules, if any) and the statements of operations and comprehensive income and shareholders’ equity (including related notes and schedules, if any) of BSCA with respect to the monthly, quarterly and annual periods ending subsequent to December 31, 2020.

“BSCA Loan Participation” has the meaning set forth in Section 4.1(s).

“BSCA Loan Property” has the meaning set forth in Section 5.2(p).

“BSCA Material Contracts” has the meaning set forth in Section 5.2(l)(i).

“BSCA Shareholders Meeting” has the meaning set forth in Section 6.7(b).

“BSCA Transaction Expenses” means all of the following expenses incurred or reasonably expected to be incurred, whether before or after the Closing Date: (i) all payments under change of control agreements, change of control payments under employment agreements or similar payments or agreements; (ii) all retention payments and bonuses (not otherwise agreed to by SCB and BOSC); (iii) all fees, commissions and expenses of all attorneys, accountants financial advisors, investment bankers, and brokers of BSCA (the “Advisors”) for services rendered solely in connection with the Merger and the transactions contemplated by this Agreement (inclusive of reasonable costs incurred or advanced by the Advisors); (iv) all BSCA’s costs and expenses in connection with obtaining the Requisite BSCA Shareholder Approval, including the preparation, printing and mailing of the Proxy Statement-Offering Circular, soliciting proxies for and holding and conducting the BSCA Shareholders Meeting; (v) premiums and other expenses relating to the purchase of the D&O Insurance; and (vi) termination fees and other expenses incurred in connection with the termination of BSCA Material Contracts, including conversion costs of BSCA’s data processing system.

-4-

“Burdensome Condition” has the meaning set forth in Section 7.1(a).

“Business Day” means Monday through Friday of each week, except a legal holiday recognized as such by the United States government or any day on which banking institutions in the State of California are authorized or obligated to close.

“CARES Act” has the meaning set forth in Section 5.2(s)(iii).

“Certificate” has the meaning set forth in Section 3.1(a)(ii).

“CFC” means the California Financial Code.

“CGCL” means the California General Corporation Law.

“Closing Date” means the date on which the Effective Time occurs.

“Closing” has the meaning set forth in Section 7.1.

“Code” has the meaning set forth in the preamble to this Agreement.

“Commissioner” means the Commissioner of the California Department of Financial Protection and Innovation.

“Community Reinvestment Act” means the Community Reinvestment Act of 1977, as amended.

“Confidential Information” has the meaning set forth in Section 6.19(d).

“Consents” has the meaning set forth in Section 6.10.

“COVID-19” has the meaning set for in Section 5.2(bb).

“COVID-19 Regulations” has the meaning set for in Section 5.2(bb).

“D&O Insurance” has the meaning set forth in Section 6.13(c).

“Deposit” means a “Deposit,” as defined in 12 U.S.C. Section 1813(l), including, without limitation, outstanding cashier’s checks and other official checks and all uncollected items included in the depositor’s balances and credited on the books and records of a party.

“Derivatives Contracts” means any swap transaction, option, warrant, forward purchase or sale transaction, futures transaction, cap transaction, floor transaction or collar transaction relating to one or more currencies, commodities, bonds, equity securities, loans, interest rates, credit-related events or conditions or any indexes, or any other similar transaction or combination of any of these transactions, including collateralized mortgage obligations or other similar instruments or any debt or equity instruments evidencing or embedding any such types of transactions, and any related credit support, collateral or other similar arrangements related to such transactions.

-5-

“DFPI” means the California Department of Financial Protection and Innovation.

“DFPI Permit” has the meaning set forth in Section 6.14(a).

“Disclosure Schedule” has the meaning set forth in Section 5.1.

“Dissenting Shares” has the meaning set forth in Section 3.1(d).

“DOL” has the meaning set forth in Section 5.2(n)(i).

“Effective Time” has the meaning set forth in Section 2.2.

“Employment Agreement” has the meaning set forth in the preamble to this Agreement.

“Environmental Laws” means any applicable Law or agreement with any Governmental Authority relating to: (i) the protection, preservation or restoration of the environment (including without limitation, air, water vapor, surface water, groundwater, drinking water supply, surface soil, subsurface soil, plant and animal life or any other natural resource); and/or (ii) the use, storage, recycling, treatment, generation, transportation, processing, handling, labeling, production, release or disposal of Hazardous Substance. The term Environmental Law includes without limitation: (a) the Comprehensive Environmental Response, Compensation and Liability Act, as amended, 42 U.S.C. § 9601, et seq.; the Resource Conservation and Recovery Act, as amended, 42 U.S.C. § 6901, et seq.; the Clean Air Act, as amended, 42 U.S.C. § 7401, et seq; the Federal Water Pollution Control Act, as amended, 33 U.S.C. § 1251, et seq; the Toxic Substances Control Act, as amended, 15 U.S.C. § 2601, et seq; the Emergency Planning and Community Right to Know Act, 42 U.S.C. § 11001, et seq; the Safe Drinking Water Act, 42 U.S.C. § 300f, et. seq.; and all comparable state and local Laws; and (iii) any common law (including without limitation common law that may impose strict liability) that may impose liability or obligations for injuries or damages due to the presence of or exposure to any Hazardous Substance.

“Equal Credit Opportunity Act” means the Equal Credit Opportunity Act, as amended.

“Equity Investment” means: (i) an Equity Security; and (ii) an ownership interest in any company or other entity, any membership interest that includes a voting right in any company or other entity, any interest in real estate, and any investment or transaction which in substance falls into any of these categories even though it may be structured as some other form of investment or transaction.

“Equity Security” means any stock, certificate of interest or participation in any profit- sharing agreement, collateral-trust certificate, preorganization certificate or subscription, transferable share, investment contract, or voting-trust certificate; any security convertible into such a security; any security carrying any warrant or right to subscribe to or purchase any such security; and any certificate of interest or participation in, temporary or interim certificate for, or receipt for any of the foregoing.

-6-

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“ERISA Affiliate” has the meaning set forth in Section 5.2(n)(iii).

“ESOP” has the meaning set forth in Section 6.15(a).

“Exchange Agent” has the meaning set forth in Section 3.3(a).

“Exchange Fund” has the meaning set forth in Section 3.3(a).

“Excluded Shares” means shares of BSCA Common Stock owned by SCB, BOSC, or BSCA, in each case not held: (i) in trust accounts, managed accounts and the like, or otherwise held in a fiduciary or agency capacity, that are beneficially owned by third parties; or (ii) in respect of a debt previously contracted, as held immediately prior to the Effective Time.

“Fair Housing Act” means the Fair Housing Act, as amended.

“FDIC” means the Federal Deposit Insurance Corporation.

“Federal Reserve Act” means the Federal Reserve Act, as amended.

“FHLB” means the Federal Home Loan Bank of San Francisco.

“FIRPTA” means the Foreign Investment in Real Property Tax Act of 1980.

“Former BSCA Employees” has the meaning set forth in Section 6.15(b).

“FRB” means the Board of Governors of the Federal Reserve System or the Federal Reserve Bank of San Francisco.

“GAAP” means generally accepted accounting principles and practices as in effect from time to time in the United States.

“Governmental Authority” means any federal, territorial, state or local court, administrative agency or commission or other governmental authority or instrumentality or self- regulatory organization.

“Hazardous Substance” means any substance that is: (i) listed, classified or regulated pursuant to any Environmental Law; (ii) any petroleum, petroleum product or by-product, asbestos-containing material, lead-containing paint or plumbing, polychlorinated biphenyls, radioactive materials, radon or urea-formaldehyde insulation; or (iii) any other substance which is the subject of regulatory action by any Governmental Authority in connection with any Environmental Law.

-7-

“Home Mortgage Disclosure Act” means the Home Mortgage Disclosure Act, as amended.

“Indemnified Parties” has the meaning set forth in Section 6.13.

“IRS” has the meaning set forth in Section 5.2(n)(i).

“Interim Statements” has the meaning set forth in Section 6.4(c).

“Knowledge” as used with respect to a Person (including references to such Person being aware of a particular matter) means those facts that are known or should have been known after reasonable investigation by the executive officers and directors of such Person, and includes any facts, matters or circumstances set forth in any written notice from any Governmental Authority. For purposes of this definition, a “reasonable investigation” by a Person shall mean a review by the executive officers and directors of such Person of documents and/or such other information that is reasonably related to the performance of the job functions or oversight responsibilities of such executive officer and/or director.

“Law(s)” means any federal, state, local or foreign law (including common law), statute, ordinance, rule, code, regulation, order, judgment, injunction, decree or other legally enforceable requirement.

“Liens” means any charge, mortgage, pledge, security interest, restriction, claim, lien or encumbrance.

“Liquidated Damages” has the meaning set forth in Section 8.2(a)(iii).

“Loan Package” has the meaning set forth in Section 4.1(s).

“Loans” has the meaning set forth in Section 4.1(s).

“Material Adverse Effect” means with respect to any party, any effect, change, development or occurrence, individually or in the aggregate, that is material and adverse to the condition (financial or otherwise), assets, Deposits, results of operations, prospects, liabilities or business of such party, and its Subsidiaries, taken as a whole or would materially impair the ability of a party to perform its respective obligations under this Agreement or otherwise materially threaten or materially impede the consummation of the Merger and the other transactions contemplated by this Agreement; provided, however, that a Material Adverse Effect shall not be deemed to include any effect on the referenced party which is caused by: (i) changes in Laws and regulations or interpretations thereof, by Governmental Authorities, that are applicable to banks and bank holding companies; (ii) changes in GAAP or regulatory accounting principles that are applicable to the banks and bank holding companies; (iii) changes in global, national or regional political conditions or general economic (including interest rates) or market conditions in the United States and the State of California, including changes in credit availability and liquidity, currency exchange rates, and price levels or trading volumes in the United States or foreign securities markets affecting other companies in the financial services industry; (iv) general changes in the credit markets or general downgrades in the credit markets; (v) actions or omissions of a party with the prior consent of the other, in contemplation of this Agreement as required or permitted hereunder, as required under any regulatory approval received in connection with this Agreement or which have been waived in writing by the other party; (vi) the public announcement or consummation of the transactions contemplated hereby, including the impact of such transactions on relationships with customers and employees; (vi) any modifications or changes to valuation policies and practices in connection with the transactions contemplated by this Agreement or restructuring charges taken in connection with the transactions contemplated by this Agreement, in each case in accordance with GAAP; (viii) changes in the market price of such party’s common stock; (ix) any failure, in and of itself, to meet internal projections or forecasts of revenue, net income or any other measures of financial performance to be achieved in the future (but not including any underlying causes thereof); (x) epidemics, pandemics, quarantine restrictions, COVID-19 related events such as freight embargoes, lack of transportation, travel restrictions or business closures; or (xi) any outbreak or escalation of hostilities, declared or undeclared acts of war or terrorism; except to the extent that the effects of such change (a) disproportionately affect such party and its Subsidiaries, taken as a whole, as compared to other similarly situated companies in the industry in which such party operates; or (b) would materially impede the ability of such party to perform its obligations under this Agreement or otherwise materially impede the consummation of the transactions contemplated hereby.

-8-

“Maximum Amount” has the meaning set forth in Section 6.2(c).

“Measurement Date” has the meaning set forth in Section 7.3(k).

“Merger” has the meaning set forth in the preamble to this Agreement.

“National Labor Relations Act” means the National Labor Relations Act, as amended.

“NBA” means the National Bank Act, as codified at 12 U.S.C. Chapter 2.

“NDA” means the confidentiality letter agreement dated February 25, 2021, between SCB and BSCA.

“Non-Solicitation and Confidentiality Agreement” has the meaning set forth in the preamble to this Agreement.

“OCC” means the Office of the Comptroller of the Currency.

“Ordinary Course of Business” means the ordinary course of business of the Party consistent with past custom and practice (including with respect to nature, scope, magnitude, quantity and frequency).

“OREO” means other real estate owned.

“Pension Plan” has the meaning set forth in Section 5.2(n)(ii).

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“Permitted Encumbrances” means: (i) Encumbrances for Taxes and other governmental charges and assessments that are not yet due and payable or which are being contested in good faith by appropriate proceedings (provided required payments have been made and adequate accruals or reserves have been established in connection with any such contest); (ii) Encumbrances of carriers, warehousemen, mechanics’ and materialmen and other like Encumbrances arising in the Ordinary Course of Business (provided lien statements have not been filed as of the Closing Date); (iii) easements, rights of way and restrictions, zoning ordinances and other similar Encumbrances affecting real property owned or leased by such party and which do not unreasonably restrict the use thereof in the Ordinary Course of Business; (iv) statutory Encumbrances in favor of lessors arising in connection with any property leased to such party; (v) Encumbrances reflected in the Financial Statements or arising under Material Contracts; and (vi) Encumbrances that will be removed prior to or in connection with the Closing.

“Per Share Merger Consideration” has the meaning set forth in Section 3.1(a)(i).

“Person” means any individual, bank, corporation, partnership, association, joint-stock company, business trust, limited liability company or unincorporated organization.

“Proxy Statement-Offering Circular” has the meaning set forth in Section 6.7(a).

“Record Holder” has the meaning set forth in Section 3.3(b).

“Regulatory Approvals” means the approval, non-disapproval and/or non-objection of any bank regulator or other Governmental Authority that is necessary in connection with the consummation of the Merger, and the related transactions contemplated by this Agreement.

“Representatives” has the meaning set forth in Section 6.5(a).

“Requisite BSCA Shareholder Approval” has the meaning set forth in Section 7.1(c).

“Requisite SCB Shareholder Approval” has the meaning set forth in Section 7.1(c).

“Rights” means, with respect to any Person, warrants, options, rights, convertible securities and other arrangements or commitments of any character that obligate the Person to sell, purchase, issue or dispose of any of its capital stock or other ownership interests or other securities representing the right to purchase or otherwise receive any of its capital stock or other ownership interests.

“SCB” has the meaning set forth in the preamble to this Agreement.

“SCB Articles” means the Articles of Incorporation of SCB, as amended.

“SCB Benefit Plans” has the meaning set forth in Section 6.15(b).

“SCB Board” means the Board of Directors of SCB.

“SCB Bylaws” means the Bylaws of SCB, amended.

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“SCB Common Stock” means the common stock, no par value, of SCB.

“SCB Financial Statements” means: (i) the audited consolidated statements of financial condition (including related notes and schedules, if any) of BOSC as of December 31, 2019, 2018 and 2017 and the consolidated statements of operations and comprehensive income, shareholders’ equity and cash flows (including related notes and schedules, if any) of BOSC for each of the three years ended December 31, 2019, 2018 and 2017; (ii) the unaudited consolidated statements of financial condition (including related notes and schedules, if any) of SCB as of December 31, 2020 and the unaudited consolidated statements of operations and comprehensive income and shareholders’ equity (including related notes and schedules, if any) of SCB for the twelve months ended December 31, 2020; and (iii) the unaudited consolidated statements of financial condition of SCB (including related notes and schedules, if any) and the unaudited consolidated statements of operations and comprehensive income and shareholders’ equity (including related notes and schedules, if any) of SCB with respect to the monthly, quarterly and annual periods ending subsequent to December 31, 2020.

“SCB Material Contracts” has the meaning set forth in Section 5.3(l)(i).

“SCB Shareholders Meeting” has the meaning set forth in Section 6.7(b).

“SCB Plan” means the SCB 2019 Omnibus Equity Incentive Plan.

“SEC” means the U.S. Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations thereunder.

“Separation and Release Agreements” has the meaning set forth in s Section 7.3(g).

“Shareholder Agreement” has the meaning set forth in the preamble to this Agreement.

“Shares” has the meaning set forth in Section 3.1(a)(i).

“Subsidiary” has the meaning ascribed to such term in Rule l-02 of Regulation S-X of the SEC.

“Superior Proposal” means any unsolicited, bona fide binding written Acquisition Proposal that is not obtained in breach of this Agreement and that the BSCA Board determines in good faith after consultation with outside counsel and its financial advisor, taking into account the identity of the Person making the proposal, all legal, financial, regulatory and other aspects of the Acquisition Proposal and this Agreement (including any proposal to adjust the terms and conditions of this Agreement) including any breakup fees, expense reimbursement provisions, conditions to and expected timing and risks of consummation and the form of consideration offered and the ability of the Person making such proposal to obtain financing and whether such financing is then fully committed for such Acquisition Proposal, and after taking into account all other legal, financial, strategic, regulatory and other aspects of such proposal: (i) is more favorable from a financial point of view to its shareholders than the Merger; (ii) is reasonably likely to receive all necessary Regulatory Approvals for the consummation of the transactions contemplated by the Superior Proposal; (iii) does not contain any condition to closing or similar contingency related to the ability of the Person making such proposal to obtain financing; and (vi) is reasonably likely of being completed on the terms proposed on a timely basis.

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“Tax” and “Taxes” mean: (i) any federal, state, local, or foreign income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), custom duties, capital stock, franchise, profits, net worth, margin, capital production, withholding, social security (or similar excises), unemployment, disability, ad valorem, real property, personal property, sales, use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition thereto, whether or not disputed, by any Governmental Authority responsible for imposition of any such tax (domestic or foreign); (ii) liability for the payment of any amount of the type described in clause (i) as a result of being or having been on or before the Closing Date a member of an affiliated, consolidated, combined or unitary group, or a party to any agreement or arrangement, as a result of which liability of a Person to a Governmental Authority is determined or taken into account with reference to the liability of any other Person; and (iii) liability for the payment of any amount as a result of being party to any tax sharing agreement or with respect to the payment of any amount of the type described in (i) or (ii) as a result of any existing express or implied obligation (including an indemnification obligation).

“Tax Returns” means any return (including any amended return), declaration or other report (including elections, declarations, claims for refund, schedules, estimates and information returns) with respect to any Taxes (including estimated taxes).

“Termination Fee” has the meaning set forth in Section 8.2(a)(ii).

“Third Party Loan Participation” has the meaning set forth in Section 4.1(s).

“Treasury Regulations” means the Tax regulations promulgated by the Department of Treasury pursuant to the Code.

“USA PATRIOT Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, as amended.

1.2 Rules of Construction. Unless the context otherwise specifies and requires, each of the terms defined in this Article I shall, for all purposes of this Agreement, have the meaning set forth herein and be equally applicable to both the singular and the plural forms and to the masculine and the feminine forms of the terms defined.

ARTICLE II
THE MERGER AND RELATED MATTERS

2.1 The Merger; Surviving Entity.

(a) The Merger. Subject to the terms and conditions of this Agreement, and pursuant to the applicable provisions of the NBA, the CGCL, the CFC, federal law and, to the extent applicable, the rules and regulations promulgated by the OCC, the DFPI, and the FRB, at the Effective Time BSCA shall be merged with and into BOSC, with BOSC as the surviving bank. The Merger will be effected pursuant to the provisions of, and with the effects provided in, Chapter 11 of the CGCL, Division 1.6, Chapter 4, Article 3 of the CFC and 12 U.S.C. Section 215a of the NBA.

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(b) Surviving Entity. Upon the consummation of the Merger, the separate corporate existence of BSCA shall cease and BOSC shall continue as the surviving entity under the NBA. The name of the surviving entity of the Merger shall remain “Bank of Southern California, National Association.” From and after the Effective Time, BOSC, as the surviving entity of the Merger, shall possess all of the properties and rights and be subject to all of the liabilities and obligations of BSCA. BOSC, in its capacity as the entity surviving the Merger, is sometimes referred to herein as the “Surviving Bank.”

(c) Articles of Association and Bylaws of the Surviving Bank. The Articles of Association and Bylaws of BOSC, as in effect immediately prior to the Effective Time, shall be the Articles of Association and Bylaws of BOSC, as the Surviving Bank of the Merger, until either is thereafter amended in accordance with applicable Law.

(d) Directors and Officers of SCB and BOSC. Subject to Section 6.8, the directors and officers of SCB and BOSC immediately prior to the Effective Time shall be the directors and officers of SCB and BOSC after the Effective time until their respective successors shall be duly elected and qualified or otherwise duly selected

2.2 Filing of Notice of Consummation. As soon as practicable, but in no event later than the tenth (10^th) calendar day after which each of the conditions set forth in Article VII hereof has been satisfied or waived (other than those conditions that by their nature are to be satisfied at Closing) or such other time as the parties may agree, BOSC and BSCA will file, or cause to be filed a written notice (the “Notice of Consummation”): (i) advising the OCC of the parties’ intent to consummate the Merger at such time as the parties shall mutually agree (the “Effective Time”); and (ii) including with such Notice of Consummation, an Articles of Merger substantially in the form attached hereto as Exhibit E (the “Bank Merger Agreement”), together with a certificate of the secretary of BSCA certifying the approval of the Agreement and the Bank Merger Agreement by the BSCA Board and the Requisite BSCA Shareholder Approval; (iii) including with such Notice of Consummation, a certificate of the secretary of BOSC certifying the approval of the Agreement and the Bank Merger Agreement by the BOSC Board and by SCB as the sole shareholder of BOSC; and (iv) requesting such authorizations for any banking offices of BSCA that will become banking offices of BOSC following the Effective Time. The Bank Merger Agreement shall concurrently or thereafter be filed with the California Secretary of State.

2.3 Rights and Liabilities. At the Effective Time and thereafter the Surviving Bank will be responsible and liable for all the liabilities, indebtedness and obligations of BSCA and the Surviving Bank will possess all the rights, privileges, immunities and franchises of a public as well as of a private nature, of BSCA and the Surviving Bank in the Merger; all property, real, personal and mixed and all indebtedness due on whatever account, and all and every other interest, of or belonging to or due to BSCA and the Surviving Bank will be taken and be deemed transferred to and vested in the Surviving Bank without further act or deed; and the title to any real estate or any interest therein, vested in BSCA and the Surviving Bank will not revert or be in any way impaired by reason of the Merger.

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ARTICLE III
EFFECT OF THE MERGER ON CAPITAL STOCK

3.1 Effect on Capital Stock.

(a) Effect on BSCA Common Stock. At the Effective Time, as a result of the Merger and without any action on the part of the holder of any capital stock of BSCA:

(i) Each share of BSCA Common Stock issued and outstanding immediately prior to the Effective Time (collectively, the “Shares”), other than Excluded Shares and Dissenting Shares, shall be converted into the right to receive one (1) share of SCB Common Stock (the “Per Share Merger Consideration”) (the total number of shares of SCB Common Stock resulting from multiplying (a) the Per Share Merger Consideration by (b) the number of Shares (other than Excluded Shares and Dissenting Shares) is hereinafter referred to as the “Merger Consideration”); and

(ii) All of the Shares shall cease to be outstanding, shall be cancelled and shall cease to exist subject to the rights of Dissenting Shares, and each certificate (each, a “Certificate,” it being understood that any reference herein to “Certificate” shall be deemed, as appropriate, to include reference to book-entry account statements relating to the ownership of shares of BSCA Common Stock, and it being further understood that provisions herein relating to Certificates shall be interpreted in a manner that appropriately accounts for book-entry shares, including that, in lieu of delivery of a Certificate and a letter of transmittal as specified herein, shares held in book-entry form may be transferred by means of an “agent’s message” to the Exchange Agent or such other evidence of transfer as the Exchange Agent may reasonably request) formerly representing any of the Shares (other than Excluded Shares and Dissenting Shares) shall thereafter represent only the right to receive the Per Share Merger Consideration, without interest.

(b) Effect on SCB and BOSC Common Stock. The shares of SCB and BOSC Common Stock issued and outstanding immediately prior to the Effective Time shall remain issued and outstanding and shall not be converted or otherwise affected by the Merger.

(c) Cancellation of Excluded Shares. Each Excluded Share shall, as a result of the Merger and without any action on the part of the holder thereof, cease to be outstanding, be cancelled without payment of any consideration therefor and cease to exist.

(d) Dissenting Shares. Each share of BSCA Common Stock and SCB Common Stock issued and outstanding immediately prior to the Effective Time, the holder of which is entitled to demand, and who properly demands, the fair market value of such shares pursuant to, and who complies in all respects with, Chapter 13 of the CGCL with respect to the Merger is referred to herein as a “Dissenting Share.” Dissenting Shares owned by a BSCA shareholder who has not exchanged his or her Certificates representing shares of BSCA Common Stock for certificates representing shares of SCB Common Stock and otherwise has not effectively withdrawn or lost his or her dissenter’s rights, shall not be converted into or represent the right to receive the Per Share Merger Consideration pursuant to Section 3.1(a)(i) hereof and shall be entitled only to such rights as are available to such holder pursuant to Chapter 13 of the CGCL. Each holder of Dissenting Shares shall be entitled to receive the value of such Dissenting Shares held by him or her in accordance with the applicable provisions of Chapter 13 of the CGCL, provided such holder timely complies with the procedures contemplated by and set forth in the applicable provisions of Chapter 13 of the CGCL. If any holder of BSCA Common Stock shall effectively withdraw or lose his or her dissenter’s rights under the applicable provisions of Chapter 13 of the CGCL, then the Dissenting Shares held by such BSCA shareholder shall be converted into the right to receive the Per Share Merger Consideration in accordance with the provisions of Section 3.1(a)(i) hereof.

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(e) Adjustments. Notwithstanding any provision herein to the contrary, if, during the period from the date of this Agreement to the Effective Time, the shares of SCB Common Stock shall be changed into a different number or class of shares by reason of any reclassification, recapitalization, split-up, combination, exchange of shares or readjustment, or a stock dividend thereon shall be declared with a record date within said period, appropriate adjustments shall be made, if necessary, to provide the BSCA shareholders with the equivalent value of the Per Share Merger Consideration set forth in this Section 3.1.

3.2 Outstanding Options. At the Effective Time, each outstanding unexercised option to acquire shares of BSCA Common Stock held by Former BSCA Employees other than Frank D. Di Tomaso, Jr. (the “BSCA Outstanding Options”), shall survive the Merger without cancellation and, following the Effective Time, shall represent a stock option to purchase the same number of shares SCB Common Stock with the same exercise price per share of SCB Common Stock as subject to such option as of immediately prior to the Effective Time (such option after the Effective Time, an “Assumed Option”). Each Assumed Option will have, and be subject to, substantially the same terms and conditions of such BSCA Outstanding Option immediately prior to the Effective Time, including vesting terms and conditions. To the extent the Assumed Option was an “incentive stock option” within the meaning of Section 422 of the Code immediately prior to the Effective Time, then, following the Effective Time, it shall remain an incentive stock option to the maximum extent permitted under applicable Law. Notwithstanding the foregoing, all outstanding unexercised options to acquire shares of BSCA Common Stock held by: (i) persons other than Former BSCA Employees; and (ii) Frank D. Di Tomaso, Jr. shall be canceled and terminate at the Effective Time.

3.3 Exchange of Certificates.

(a) Exchange Agent. At the Effective Time, SCB shall make available or cause to be made available to an exchange agent selected by SCB with BSCA’s prior approval, which shall not be unreasonably withheld (the “Exchange Agent”), a sufficient number of shares of SCB Common Stock in order for the Exchange Agent to distribute the Merger Consideration (the “Exchange Fund”).

(b) Exchange Procedures. As soon as practicable after the Effective Time, SCB shall cause the Exchange Agent to mail to each Person that was, immediately prior to the Effective Time, a holder of shares of BSCA Common Stock (a “Record Holder”) (other than holders of Excluded Shares) represented by Certificates: (i) a letter of transmittal specifying that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates (or affidavits of loss in lieu of the Certificates as provided in Section 3.3(g)) to the Exchange Agent, such customary letter of transmittal to be in such form and have such other provisions as SCB and BSCA may reasonably agree; and (ii) instructions for use in effecting the surrender of the Certificates (or affidavits of loss in lieu of the Certificates as provided in Section 3.3(g)) in exchange for the Per Share Merger Consideration. Upon surrender of the Certificates for exchange and cancellation to the Exchange Agent, together with such letter of transmittal duly completed and executed, the Record Holder shall be entitled to promptly receive in exchange for each share of BSCA Common Stock represented by such surrendered Certificates the Per Share Merger Consideration which such Record Holder has the right to receive pursuant to Section 3.1(a)(i) hereof. Certificates so surrendered shall be cancelled. SCB shall be entitled to rely upon the stock transfer books of BSCA to establish the identity of those Persons entitled to receive the Per Share Merger Consideration specified in this Agreement, which books shall be conclusive with respect thereto. In the event of a dispute with respect to ownership of stock represented by any Certificate, SCB shall be entitled to deposit the Per Share Merger Consideration in respect thereof in escrow with an independent third party and thereafter be relieved with respect to any claims thereto.

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(c) Distributions with Respect to Unexchanged Shares. All shares of SCB Common Stock to be issued pursuant to the Merger shall be deemed issued and outstanding as of the Effective Time and, whenever a dividend or other distribution is declared by SCB in respect of the SCB Common Stock, the record date for which is at or after the Effective Time, that declaration shall include dividends or other distributions in respect of all shares issuable pursuant to this Agreement. No dividends or other distributions in respect of the SCB Common Stock shall be paid to any holder of any unsurrendered Certificate until such Certificate (or affidavits of loss in lieu of the Certificate as provided in Section 3.3(g)) is surrendered for exchange in accordance with this Article III. Subject to the effect of applicable Laws, following surrender of any such Certificate (or affidavits of loss in lieu of the Certificate as provided in Section 3.3(g)), there shall be issued and/or paid to the holder of the Certificate, without interest, (A) at the time of such surrender, the dividends or other distributions with a record date at or after the Effective Time theretofore payable with respect to such shares of SCB Common Stock and not paid and (B) at the appropriate payment date, the dividends or other distributions payable with respect to such shares of SCB Common Stock with a record date at or after the Effective Time and a payment date subsequent to the time of such surrender.

(d) Transfers. The Per Share Merger Consideration delivered in accordance with the terms of this Article III upon the surrender of the Certificates shall be deemed to have been delivered in full satisfaction of all rights pertaining to such Shares (other than the right to receive the payments and deliveries contemplated by this Article III). At the Effective Time, holders of Certificates shall cease to have rights with respect to BSCA Common Stock previously represented by such Certificates, and such holders’ sole rights (other than the holders of Certificates representing Dissenting Shares) shall be to exchange such Certificates for the Per Share Merger Consideration in respect of the Shares represented thereby. From and after the Effective Time, there shall be no further registration of transfers on the stock transfer books of BSCA of the Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, any Certificate is presented to SCB or the Exchange Agent for transfer, it shall be cancelled and exchanged for the Per Share Merger Consideration to which the holder of the Certificate is entitled pursuant to this Article III.

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(e) Fractional Shares. Notwithstanding any other provision of this Agreement, no fractional shares of SCB Common Stock will be issued in respect of a holder’s Shares. In lieu thereof, any holder of Shares entitled to receive a fractional share of SCB Common Stock but for this Section 3.3(e) shall be entitled to receive a cash payment, which payment shall be calculated by the Exchange Agent as an amount equal to the product of (i) such fractional share interest times (ii) $13.00. All fractional shares to which a single record holder of Shares would otherwise be entitled to receive hereunder shall be aggregated and calculations shall be rounded to four decimal places.

(f) Termination of Exchange Fund. Any portion of the Exchange Fund that remains unclaimed by the shareholders of BSCA for 180 days after the Effective Time (or such other time as shall be expressly provided in the agreement with the Exchange Agent with respect to the Exchange Fund) may be delivered to SCB. Any holder of Shares (other than Excluded Shares and Dissenting Shares) that has not theretofore complied with this Article III shall, after any remaining portion of the Exchange Fund has been delivered to SCB, thereafter look only to SCB for payment of the Per Share Merger Consideration (after giving effect to any required tax withholdings as provided in Section 3.4) upon due surrender of his/her/its Certificates (or affidavits of loss in lieu of the Certificates), without any interest thereon. Notwithstanding the foregoing, none of SCB, the Exchange Agent or any other Person shall be liable to any former holder of Shares for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar Laws.

(g) Lost, Stolen or Destroyed Certificates. In the event any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed and, if required by SCB, the posting by such Person of a bond in customary amount and upon such terms as may be reasonably required by SCB as indemnity against any claim that may be made against it with respect to such Certificate, the Exchange Agent will distribute the Per Share Merger Consideration with respect to each Share represented by such lost, stolen or destroyed Certificate.

3.4 Withholding Rights. The parties intend that no withholding shall be required with respect to the Merger. However, SCB and Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of shares of BSCA Common Stock such amounts as it is required to deduct and withhold with respect to the making of such payments under the Code, or any other applicable state, local or foreign Tax Law. Before making any such deduction or withholding, SCB or the Exchange Agent, as applicable, shall use commercially reasonable efforts to give the holder of shares of BSCA Common Stock notice of the intention to make such deduction or withholding and such notice, which shall include the authority, basis, and method of calculation for the proposed deduction or withholding, before such deduction or withholding is required, in order for the holder of shares of BSCA Common Stock to obtain reduction of or relief from such deduction or withholding. To the extent that amounts are so withheld by SCB or the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of shares of BSCA Common Stock in respect of which such deduction and withholding was made by SCB or the Exchange Agent.

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3.5 Additional Actions. If, at any time after the Closing, SCB or BOSC will consider or be advised that any deeds, bills of sale, assignments or assurances or any other acts or things are necessary, desirable or proper to: (a) vest, perfect or confirm, of record or otherwise, in SCB and BOSC their right, title or interest in or to or under any of the rights, privileges, powers, franchises, properties or assets of any of BSCA; or (b) otherwise carry out the purposes of this Agreement, SCB and BOSC and their proper officers and directors or their designees will be authorized to execute and deliver, in the name and on behalf of any of BSCA all such deeds, bills of sale, assignments and assurances and to do, in the name and on behalf of any of BSCA, all such other acts and things as may be necessary, desirable or proper to vest, perfect or confirm SCB’s and BOSC’s, as applicable, right, title or interest in or to or under any of the rights, privileges, powers, franchises, properties or assets of BSCA and otherwise to carry out the purposes of this Agreement.

3.6 Alternative Structure. Notwithstanding any provision of this Agreement to the contrary, SCB and BOSC may, after providing BSCA at least twenty (20) Business Days’ written notice, modify the structure of the acquisition of BSCA set forth herein, provided that: (ii) the consideration to be paid to the holders of BSCA Common Stock is not (x) thereby changed in kind or reduced in amount as a result of such modification or (y) negatively impacted from a Tax perspective; and (ii) the change in structure does not materially delay the transaction or cause any of the conditions in Article VII not capable of being fulfilled unless duly waived by the party entitled to the benefits thereof. In the event SCB and BOSC elect to make such a change, the parties agree to execute appropriate documents to reflect the change.

ARTICLE IV
ACTIONS PENDING THE MERGER

4.1 Forbearances by BSCA. From the date hereof and until the Effective Time, except as expressly contemplated or permitted by this Agreement or required by a Governmental Authority of competent jurisdiction, without the prior written consent of SCB (which such consent shall not be unreasonably withheld or delayed), BSCA shall not:

(a) Ordinary Course. Conduct its business other than in the ordinary and usual course consistent with past practice and in compliance with all Laws and prudent business and banking practices, or fail to use commercially reasonable best efforts to preserve its business organization, keep available the present services of its employees and preserve for itself and the other party hereto, the goodwill of its customers and others with whom business relations exist.

(b) Capital Stock. (i) Except as set forth on Schedule 4.1 of the BSCA Disclosure Schedule, issue, sell or otherwise permit to become outstanding, or authorize the issuance of or creation of, any additional shares of capital stock or any Rights or other Rights (other than the issuance of the BSCA Common Stock upon exercise of stock options identified on Schedule 4.1 of the BSCA Disclosure Schedule in accordance with their respective terms);

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(i) adjust, split, combine or reclassify any capital stock; (iii) enter into any agreement, understanding or arrangement with respect to the sale or voting of the BSCA Common Stock; or

(ii) directly or indirectly redeem, purchase or otherwise acquire any shares of capital stock or equity interests or any securities or obligations convertible (whether currently convertible or convertible only after the passage of time or the occurrence of certain events) into or exchangeable for any shares of capital stock or equity interests.

(c) Dividends. Make, declare, pay or set aside for payment any dividend on or in respect of, or declare or make any distribution on, any shares of its capital stock.

(d) Compensation; Employment Agreements; Etc. Except as set forth on Schedule 4.1(d)(i) of the BSCA Disclosure Schedule, enter into, amend, renew, or accelerate the vesting or payment under, or cease accruing and/or paying salaries, incentives, bonuses and benefits under any employment, consulting, severance, change in control, bonus, salary continuation or other similar agreements, arrangements or benefit plans with any current or former director, officer or employee, including without limitation, changing the termination provisions of any employment arrangement which provides for at-will termination to an arrangement which is not at-will, or grant any salary or wage increase or award any incentive or other bonus payment or increase any employee benefit, except: (1) for changes that are required by applicable Law; (2) to satisfy contractual obligations existing as of the date hereof as set forth on Schedule 4.1(d)(ii) of the BSCA Disclosure Schedule; or (3) for normal annual salary increases made in the Ordinary Course of Business consistent in amount and timing with past practices to employees, provided, however, that no such annual salary increase shall be greater than 103% of the annual salary in effect for such employee as of December 31, 2020.

(e) Hiring. Hire any person as an employee or promote any employee, except: (i) to satisfy contractual obligations existing as of the date hereof as set forth on Schedule 4.1(e) of the BSCA Disclosure Schedule; or (ii) to fill any vacancies arising after the date hereof and whose employment is terminable at will and who are not subject to or eligible for any severance or similar benefits or payments that would become payable as a result of the transactions contemplated hereby or the consummation thereof.

(f) Benefit Plans. Enter into, establish, adopt, amend, or terminate, or make any contributions to, except (i) as may be required by applicable Law or any BSCA Benefit Plan, (ii) to satisfy contractual obligations existing as of the date hereof as set forth on Schedule 4.1(f) of the BSCA Disclosure Schedule, or (iii) with respect to any action permitted under Sections 4.1(d) or (e), any pension, retirement, stock option, stock purchase, savings, profit sharing, deferred compensation, consulting, bonus, group insurance or other employee benefit, incentive or welfare contract, plan, grant, award or arrangement, or any trust agreement (or similar arrangement) related thereto, in respect of any current or former director, officer or employee.

(g) Dispositions. Except in the Ordinary Course of Business: (i) sell, transfer, mortgage, license, encumber or otherwise dispose of or discontinue any of its assets, rights, Deposits, business or properties outside the Ordinary Course of Business in a transaction that, in the aggregate, exceeds $50,000; or (ii) sell, transfer, mortgage, license, encumber or otherwise dispose of any assets, rights, Deposits, business or properties at a price that is less than the book value.

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(h) Acquisitions. Acquire (other than by way of foreclosures or acquisitions of control in a bona fide fiduciary capacity or in satisfaction of debts previously contracted in good faith, in each case in the Ordinary Course of Business), including by merger or consolidation, purchasing any equity interest in or making any investment in a partnership or joint venture, all or any portion of the assets, business, securities (other than by way of foreclosures or acquisitions in a bona fide fiduciary capacity or in satisfaction of debts previously contracted in good faith, in each case in the Ordinary Course of Business), Deposits or properties of any other Person.

(i) Capital Expenditures. Other than: (i) in accordance with binding commitments existing on the date hereof as set forth on Schedule 4.1(i)(A) of the BSCA Disclosure Schedule; and (ii) capital expenditures set forth on Schedule 4.1(i)(B) of the BSCA Disclosure Schedule, make any capital expenditures in amounts exceeding $30,000 per project or $75,000 in the aggregate, except for emergency repairs or replacements.

(j) Governing Documents. Amend the BSCA Articles or the BSCA Bylaws or any other governing documents or enter into a plan of consolidation, merger, share exchange or reorganization with any Person, or a letter of intent or agreement in principle with respect thereto, except as provided in Section 6.5.

(k) Accounting Methods. Implement or adopt any change in its accounting principles, practices or methods, other than: (i) as may be required by changes in Laws, regulations or GAAP; (ii) for tax purposes; or (iii) to take advantage of any beneficial tax or accounting methods.

(l) Contracts. Enter into, cancel, fail to renew or terminate any BSCA Material Contract, amend or modify in any material respect any of its existing BSCA Material Contracts or real or personal property leases or waive, release, relinquish or assign any BSCA Material Contract or real or personal property lease (or any rights thereunder), other than: (i) as otherwise permitted under this Agreement; (ii) in the Ordinary Course of Business; or (iii) to replace any existing contractual arrangement on substantially the same terms as the original agreement, including with respect to pricing and termination.

(m) Claims. Enter into any settlement or similar agreement with respect to any action, suit, proceeding, order or investigation to which it is or becomes a party after the date of this Agreement, which settlement, agreement or action involves payment of an amount which exceeds $20,000 in excess of amounts contributed by insurance and/or would impose any material restriction on its business.

(n) Banking Operations. Enter into any new line of business; introduce any significant new products or services; materially change its lending, investment, underwriting, pricing, servicing, risk and asset liability management and other material banking and operating policies, except as required by applicable Law, regulation or policies imposed by any Governmental Authority; materially change the manner in which its investment securities or loan portfolio is classified or reported; or file any application or enter into any contract with respect to the opening, relocating or closing of, or open, relocate or close, any branch, office, servicing center or other facility.

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(o) Marketing. Introduce any marketing campaigns or any new sales compensation or incentive programs or arrangements.

(p) Derivatives Contracts. Enter into any Derivatives Contract.

(q) Indebtedness. Incur any indebtedness for borrowed money (other than Deposits, escrow balances, federal funds purchased, cash management accounts, FHLB advances, in each case in the Ordinary Course of Business); or assume, guarantee, endorse or otherwise as an accommodation become responsible for the obligations of any other Person, other than with respect to the collection of checks and other negotiable instruments in the Ordinary Course of Business.

(r) Investment Securities. Except as set forth on Schedule 4.1(r) of the BSCA Disclosure Schedule, acquire or otherwise invest in (other than by way of foreclosures or acquisitions in a bona fide fiduciary capacity or in satisfaction of debts previously contracted in good faith, in each case in the Ordinary Course of Business) any (i) Equity Investment, or (ii) debt security, in each case other than in the Ordinary Course of Business.

(s) Loans. Except to satisfy contractual obligations existing as of the date hereof as set forth on Schedule 4.1(s) of the BSCA Disclosure Schedule: (i) make, renew or otherwise modify any loan, loan commitment, letter of credit or other extension of credit originated or to be originated (collectively, “Loans”) in a manner that is inconsistent with its Ordinary Course of Business, inconsistent with its lending policies and procedures in effect as of the date of this Agreement, or in the case of a modification or renewal would reduce the outstanding unpaid principal and interest owed under the Loan prior to its modification or renewal; (ii) take any action that would result in any discretionary release of collateral or guarantees or otherwise restructure the respective amounts set forth in clause (i) above; (iii) make or commit to make any Loan to, or enter into any transaction with, any directors, officers, employees or any of its Affiliates; (iv) enter into any Loan securitization or create any special purpose funding entity; (v) enter into any commitment or agreement to purchase any participation interest in any Loan being originated or renewed by a party other than BSCA or BOSC (whether for the entire principal amount of such Loan or a portion thereof) (a “Third Party Loan Participation”) without having first provided BOSC with a copy of the loan underwriting analysis and credit memo of BSCA with respect to such Loan (the “Loan Package”) and BOSC interposing no objection to BSCA’s purchasing such Third Party Loan Participation; or (vi) entering into any commitment or agreement to sell any participation interest in any Loan being originated or renewed by BSCA (whether for the entire the principal amount of such Loan or a portion thereof) (a “BSCA Loan Participation”) without having first provided BOSC with a copy of the Loan Package for such Loan (identifying therein the party(ies) other than BOSC to which BSCA will offer the right to purchase the BSCA Loan Participation) and offering BOSC the right of first refusal to purchase such BSCA Loan Participation and BOSC not exercising that right of first refusal. For any new Loan to be originated by BSCA in a principal amount such that the total loans outstanding to such borrower, including unfunded commitments would be, in excess of $500,000, and for any renewal of a Loan in a principal amount such that the total loans outstanding to such borrower, including unfunded commitments would be, in excess of $1,000,000, prior to committing to extend or renew such Loan, BSCA shall provide BOSC with a copy of the Loan Package with respect to the proposed Loan. BSCA shall consider any comments that may be raised by BOSC within forty-eight (48) hours of BOSC’s receipt of the Loan Package. If BOSC fails to respond to BSCA within forty-eight (48) hours after receipt by BOSC of the Loan Package for such Loan, BOSC shall be deemed to have no comments on such Loan. For any Third Party Loan Participation, if BOSC fails to object to BSCA purchasing such Third Party Loan Participation within forty-eight (48) hours after receipt by BOSC of the Loan Package for such Third Party Loan Participation, BOSC shall be deemed to have interposed no objection to BSCA’s purchasing such Third Party Loan Participation. For any BSCA Loan Participation, if BOSC fails to exercise its right of first refusal to purchase the BSCA Loan Participation within forty-eight (48) hours after receipt by BOSC of the Loan Package for such BSCA Loan Participation, BOSC shall be deemed to have not exercised the right of first refusal for such BSCA Loan Participation and BSCA may thereafter complete the sale of the BSCA Loan Participation to the party(ies) other than BOSC identified in the Loan Package.

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(t) Investments in Real Estate. Make any investment or commitment to invest in real estate or in any real estate development project (other than by way of foreclosure, acquisition by receipt of a deed-in-lieu of foreclosure or other acquisitions in a bona fide fiduciary capacity or in satisfaction of a debt previously contracted in good faith, in each case in the Ordinary Course of Business); provided, however, that if BSCA obtains an interest in any real estate or in any real estate development project by way of foreclosure, acquisition by receipt of a deed in lieu of foreclosure or acquisitions in a bona fide fiduciary capacity or in satisfaction of a debt previously contracted in good faith, BSCA shall have obtained a Phase I Environmental Site Assessment (in compliance, at a minimum, with ASTM E1527-13 or ASTM E2247-16, as applicable) prior to having completed such foreclosure or other acquisition.

(u) Adverse Actions. Knowingly take or fail to take any action: (i) that is intended or may reasonably be expected to result in (A) any of its representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time at or prior to the Effective Time or (B) any of the conditions to the transactions contemplated set forth in Section 7.2 not being satisfied or (ii) which would reasonably be expected to materially and adversely impair or delay consummation of the transactions contemplated hereby beyond the time period contemplated by this Agreement, except, in each case, as may be required by applicable Law or regulation.

(v) Tax Elections. Make or change any material Tax election, settle or compromise any of its material Tax liabilities, agree to an extension or waiver of the statute of limitations with respect to the assessment or determination of a material amount of its Taxes, enter into any closing agreement with respect to any material amount of its Taxes or surrender any right to claim a material amount of its Tax refund, adopt or change any method of accounting with respect to its Taxes, or file any amended Tax Return.

(w) Antitakeover Statutes. Take any action: (i) that would cause this Agreement or the transactions contemplated hereby to be subject to the provisions of any state antitakeover law or state or territorial law that purports to limit or restrict business combinations or the ability to acquire or vote shares (“Antitakeover Law”); or (ii) to exempt or make not subject to the provisions of any Antitakeover Law or state Law that purports to limit or restrict business combinations or the ability to acquire or vote shares, any Person or any action taken thereby, which Person or action would have otherwise been subject to the restrictive provisions thereof and not exempt therefrom.

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(x) Affiliate Transactions. Enter into any transaction, commitment, arrangement or other activity with a related entity, Affiliate or Subsidiary other than(i) compensation in the Ordinary Course of Business, or (ii) Deposit transactions.

(y) Interest on Deposits. Increase the rate of interest paid on interest-bearing Deposits or on certificates of Deposit, except in a manner and pursuant to policies and the Ordinary Course of Business and consistent with general economic and competitive conditions in BSCA’s market area.

(z) Commitments. Enter into any contract with respect to, or otherwise agree, authorize or commit to take, or publicly recommend, propose or announce an intention to take, any of the foregoing actions.

4.2 Forbearances of SCB and BOSC. From the date hereof and until the Effective Time, except as expressly contemplated or permitted by this Agreement, required by a Governmental Authority of competent jurisdiction, without the prior written consent of BSCA (which such consent shall not be unreasonably withheld or delayed), SCB and BOSC shall not:

(a) Ordinary Course. Except as set forth on Schedule 4.2(a) of the SCB Disclosure Schedule, conduct its respective business other than in the Ordinary Course of Business and in compliance with all Laws and prudent business and banking practices, or fail to use commercially reasonable best efforts to preserve its respective business organization, keep available the present services of its employees and preserve for itself and the other party hereto the goodwill of its customers and others with whom business relations exist.

(b) Capital Stock. (i) Adjust, split, combine or reclassify any capital stock, or (ii) directly or indirectly redeem, purchase or otherwise acquire any shares of capital stock or equity interests or any securities or obligations convertible (whether currently convertible or convertible only after the passage of time or the occurrence of certain events) into or exchangeable for any shares of capital stock or equity interests. Notwithstanding the foregoing, SCB shall be permitted to issue capital stock or equity interests in connection with the issuance of the SCB Common Stock upon the grant of restricted stock awards and/or the exercise of stock options issued or to be issued by SCB and BOSC shall be permitted to issue capital stock or equity interests to SCB.

(c) Dividends. Make, declare, pay or set aside for payment any dividend on or in respect of, or declare or make any distribution on, any shares of its capital stock.

(d) Governing Documents. Amend, in any material manner, the SCB Articles or the SCB Bylaws or any other governing documents.

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(e) Accounting Methods. Implement or adopt any change in its accounting principles, practices or methods, other than: (i) as may be required by changes in Laws, regulations or GAAP; (ii) for tax purposes; or (iii) to take advantage of any beneficial tax or accounting methods.

(f) Adverse Actions. Knowingly take or fail to take any action: (i) that is intended or may reasonably be expected to result in (A) any of its respective representations and warranties set forth in this Agreement being or becoming untrue in any material respect at any time at or prior to the Effective Time or (B) any of the conditions to the transactions contemplated set forth in Section 7.3 not being satisfied; or (ii) which would reasonably be expected to materially and adversely impair or delay consummation of the transactions contemplated hereby beyond the time period contemplated by this Agreement, except, in each as may be required by applicable or regulation.

(g) Tax Elections. Make or change any material Tax election, settle or compromise any of its material Tax liabilities, agree to an extension or waiver of the statute of limitations with respect to the assessment or determination of a material amount of its Taxes, enter into any closing agreement with respect to any material amount of its Taxes or surrender any right to claim a material amount of its Tax refund, adopt or change any method of accounting with respect to its Taxes, or file any amended Tax Return.

(h) Antitakeover Statutes. Take any action: (i) that would cause this Agreement or the transactions contemplated hereby to be subject to the provisions of any Antitakeover Law or (ii) to exempt or make not subject to the provisions of any Antitakeover Law or state Law that purports to limit or restrict business combinations or the ability to acquire or vote shares, any Person or any action taken thereby, which Person or action would have otherwise been subject to the restrictive provisions thereof and not exempt therefrom.

(i) Acquisitions. Acquire (other than by way of foreclosures or acquisitions of control in a bona fide fiduciary capacity or in a satisfaction of debts previously contracted in good faith, in each case in the Ordinary Course of Business), including by merger or consolidation, purchasing any equity interest in or making any investment in a partnership or joint venture, all or any portion of the assets, business, securities (other than by way of foreclosures or acquisitions of control in a bona fide fiduciary capacity or in a satisfaction of debts previously contracted in good faith, in each case in the Ordinary Course of Business), Deposits or properties of any other Person.

(j) Commitments. Enter into any contract with respect to, or otherwise agree, authorize or commit to take, or publicly recommend, propose or announce an intention to take, any of the foregoing actions.

ARTICLE V
REPRESENTATIONS AND WARRANTIES

5.1 Disclosure Schedules. On or prior to the date hereof, BSCA has delivered to SCB and BOSC, and SCB has delivered to BSCA, a confidential schedule (the “Disclosure Schedule”) setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof or as an exception to one or more representations or warranties contained in Article V or to one or more of its covenants contained in Article IV or Article VI. Any information disclosure in any section of such party’s Disclosure Schedule shall apply only to the indicated section of this Agreement except to the extent that it is reasonably apparent from the face of such disclosure that such disclosure is relevant to another section of this Agreement.

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5.2 Representations and Warranties of BSCA. BSCA hereby represents and warrants to SCB and BOSC that, except as set forth in the BSCA Disclosure Schedule:

(a) Organization, Standing and Authority. BSCA is a California state- chartered commercial bank duly organized and validly existing under the Laws of the State of California and it is duly authorized by the DFPI to conduct business as a state-chartered bank. BSCA is duly licensed or qualified to do business and is in good standing in each jurisdiction where its ownership or leasing of property or assets or the conduct of its business requires it to be so licensed or qualified, except where the failure to be so licensed or qualified would not reasonably be expected to have a Material Adverse Effect, materially impair the ability of BSCA to perform its obligations under this Agreement or otherwise materially impede the consummation of the transactions contemplated hereby. BSCA has in effect all federal, state, local and foreign governmental authorizations necessary for it to own or lease its properties and assets and to carry on its business as it is now conducted, except where the failure to be so authorized would not reasonably be expected to have a Material Adverse Effect, materially impair the ability of BSCA to perform its obligations under this Agreement or otherwise materially impede the consummation of the transactions contemplated hereby. The copies of the BSCA Articles, the BSCA Bylaws, and the other governing documents of BSCA which have been previously made available to BOSC are true, complete and correct copies of such documents as in effect on the date of this Agreement.

(b) BSCA Capital Structure.

(i) The authorized capital stock of BSCA consists of (i) 12,500,000 shares of BSCA Common Stock, no par value per share, of which 3,757,344 shares are issued and outstanding as of the date hereof, and 10,000,000 of serial preferred stock, of which no shares are issued and outstanding. BSCA also has 437,351 shares of BSCA Common Stock reserved for issuance pursuant to outstanding awards under the BSCA Benefit Plans, and does not have any other shares of capital stock authorized, designated, issued or outstanding. All outstanding shares of BSCA’s capital stock: (i) have been duly authorized and validly issued and are fully paid, non-assessable and not subject to preemptive rights or similar rights created by statute, the BSCA Articles, the BSCA Bylaws or any agreement to which BSCA is a party; and (ii) have been offered, sold, issued and delivered by BSCA in all material respects in compliance with all applicable Laws. There are no declared or accrued but unpaid dividends with respect to any shares of BSCA capital stock.

(ii) Other than the BSCA Benefit Plans, BSCA does not have any other plans or agreements providing for equity compensation to any Person.

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(iii) Section 5.2(b)(iii) of the BSCA Disclosure Schedule lists, in reasonable detail, all options for shares of BSCA Common Stock, the names of the grantees, the grant date, the exercise prices, and the termination dates thereof. Other than options for 437,351 shares of BSCA Common Stock as set forth on Section 5.2(b)(iii) of the BSCA Disclosure Schedule, there are no Rights or agreements obligating BSCA to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any BSCA capital stock or any capital stock or equity or other ownership interest of BSCA or obligating BSCA to grant, extend, accelerate the vesting of, change the price of, otherwise amend or enter into any such Right. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or other similar rights with respect to BSCA.

(iv) Except for the Shareholder Agreements, there are no (A) voting trusts, proxies, or other agreements or understandings with respect to the voting stock of BSCA to which BSCA or any of its current directors or executive officers is a party, by which BSCA is bound, or of which BSCA has Knowledge, or (B) agreements or understandings to which BSCA is a party, by which BSCA is bound, or of which BSCA has Knowledge relating to the registration, sale or transfer (including agreements relating to rights of first refusal, “co-sale” rights or “drag-along” rights) of any BSCA capital stock. Except with respect to the outstanding options set forth in clause (iii) immediately above, there are no Rights or agreements obligating BSCA to issue, deliver, sell, repurchase or redeem, or causing BSCA to issue, deliver, sell, repurchase or redeem, any BSCA capital stock or any capital stock or equity or other ownership interest of BSCA or obligating BSCA to grant, extend, accelerate the vesting of, change the price of, otherwise amend or enter into any such Right.

(c) Subsidiaries. BSCA does not have any Subsidiaries.

(d) Corporate Power. BSCA has the requisite corporate power and authority to carry on its business as it is now being conducted and to own all its properties and assets; and BSCA has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby, in each case, subject to receipt of the Requisite BSCA Shareholder Approval and all necessary approvals of Governmental Authorities.

(e) Corporate Authority.

(i) Subject to receipt of the Requisite BSCA Shareholder Approval, this Agreement and the transactions contemplated hereby have been authorized and approved by all necessary corporate action of BSCA on or prior to the date hereof and will remain in full force and effect through the earlier of the Closing or termination of this Agreement. Other than the Requisite BSA Shareholder Approval, no other corporate or shareholder action is necessary or required to authorize and approve this Agreement or the transactions contemplated hereby. This Agreement has been duly executed and delivered by BSCA and, assuming due authorization, execution and delivery by SCB and BOSC, this Agreement is a valid and legally binding obligation of BSCA, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar Laws of general applicability relating to or affecting creditors’ rights, by general equity principles, or by Section 8(b)(6)(D) of the Federal Deposit Insurance Act, 12 U.S.C. § 1818(b)(6)(D)).

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(ii) The BSCA Board, by a unanimous vote thereof, has adopted resolutions: (A) determining that this Agreement and the transactions contemplated herein, including the Merger, are fair to, and in the best interests of, BSCA and its shareholders; (B) approving and declaring advisable this Agreement and the transactions contemplated hereby; and (C) recommending that BSCA’s shareholders approve and adopt this Agreement.

(f) Regulatory Approvals. No consents or approvals of, or waivers by, or filings or registrations with, any Governmental Authority or with any third party are required to be made or obtained by BSCA or any of its Affiliates in connection with the execution, delivery or performance by BSCA of this Agreement or to consummate the transactions contemplated hereby, except for: (A) filings of applications or notices with, and approvals or waivers by the OCC, FRB and the DFPI, as required; (B) the filing of an application for, and the issuance of, a permit as contemplated by Section 6.14 herein; (C) filings of applications and notices with certain states and the receipt of all necessary state securities and “Blue Sky” permits or approvals, and (D) the filing of the Bank Merger Agreement with the California Secretary of State and the DFPI with respect to the Merger.

(g) No Conflict. The execution and delivery by BSCA of this Agreement and the consummation of the transactions provided for in this Agreement: (i) do not violate any provision of the BSCA Articles, the BSCA Bylaws, or any provision of applicable federal or state Law or any governmental rule or regulation (assuming receipt of the required approval of any Governmental Authority and receipt of the Requisite BSCA Shareholder Approval and the Requisite SCB Shareholder Approval); and (ii) except as set forth in Schedule 5.2(g) of the BSCA Disclosure Schedule, do not require any consent of any Person under, conflict with or result in a breach of, or accelerate the performance required by any of the terms of, any material debt instrument, lease, license, covenant, agreement or understanding to which BSCA is a party or by which it is bound, or any order, ruling, decree, judgment, arbitration award or stipulation to which BSCA is subject, or constitute a default thereunder or result in the creation of any Lien, restriction or right of any third party of any kind whatsoever upon any of the properties or assets of BSCA.

(h) Financial Statements; Material Adverse Effect.

(i) BSCA has previously made available to SCB and BOSC accurate and complete copies of the BSCA Financial Statements. The BSCA Financial Statements fairly present in all material respects the financial condition of BSCA as of and for the respective dates set forth therein (subject, in the case of unaudited statements, to normal year-end adjustments).

(ii) The BSCA Financial Statements have been, and are being, prepared in accordance with GAAP consistently applied during the periods involved, except as stated therein.

(iii) Since December 31, 2020, BSCA has not incurred any liabilities that are required to be reflected on a balance sheet in accordance with GAAP, except: (A) as disclosed on Schedule 5.2(h)(iii) of the BSCA Disclosure Schedule; (B) liabilities properly accrued or reserved against in the balance sheet of BSCA as of December 31, 2020; (C) liabilities and obligations incurred since December 31, 2020 in the Ordinary Course of Business; (D) liabilities and obligations that are not material to BSCA; and (E) any liabilities and obligations incurred with respect to the transactions contemplated by this Agreement.

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(iv) Since December 31, 2020: (A) BSCA has conducted its business in the Ordinary Course Business; and (B) no event has occurred or circumstance arisen that, individually or taken together with all other facts, circumstances and events (described in any paragraph of this Section 5.2 or otherwise), has had or is reasonably likely to have a Material Adverse Effect with respect to BSCA.

(v) Except as set forth on Schedule 5.2(h)(v) of the BSCA Disclosure Schedule, no agreement pursuant to which any loans or other assets have been or shall be sold by BSCA entitled the buyer of such loans or other assets to cause BSCA to repurchase such loan or other asset or the buyer to pursue any other form of recourse against BSCA. No cash, stock or other dividends or any other distribution with respect to the capital stock of BSCA has been declared, set aside or paid since December 31, 2018. Since December 31, 2020, no shares of capital stock of BSCA have been purchased, redeemed or otherwise acquired, directly or indirectly, by BSCA and no agreements have been made by BSCA to do any of the foregoing.

(i) Legal Proceedings. Except as set forth in Schedule 5.2(i) of the BSCA Disclosure Schedule, no litigation, arbitration, claim or other proceeding before any court or governmental agency is pending against BSCA, individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect with respect to BSCA and, to the Knowledge of BSCA, no such litigation, arbitration, claim or other proceeding has been threatened and there are no facts which could reasonably give rise to such litigation, arbitration, claim or other proceeding. Neither BSCA, nor any of the properties owned by BSCA, is a party to or subject to any order, judgment, decree or regulatory restriction that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect with respect to BSCA.

(j) Regulatory Matters.

(i) BSCA has duly filed with the appropriate Governmental Authorities in substantially the correct form the monthly, quarterly and annual reports required to be filed by it under applicable Laws and regulations, and such reports were in all material respects complete and accurate and in compliance with the requirements of applicable Laws and regulations. Except as set forth on Section 5.2(j)(i) of the BSCA Disclosure Schedule, in connection with the most recent examinations of BSCA by the appropriate Governmental Authorities, BSCA was not required to correct or change any action, procedure or proceeding which BSCA believes in good faith has not been now corrected or changed, other than corrections or changes which, if not made, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect on BSCA.

(ii) Except as set forth in Section 5.2(j)(ii) of the BSCA Disclosure Schedule, BSCA is not a party to or subject to any order, decree, directive, agreement, memorandum of understanding or similar arrangement with, or a commitment letter or similar submission to, or extraordinary supervisory letter from, nor, except in the normal course of business, has BSCA adopted any policies, procedures or board resolutions at the request or suggestion of, any Governmental Authority. Since December 31, 2018, no assessments have been made or imposed by any Governmental Authority on BSCA.

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(iii) Except as set forth in Section 5.2(j)(iii) of the BSCA Disclosure Schedule, since December 31, 2018, no Governmental Authority has initiated or has pending any proceeding, enforcement action or, to the Knowledge of BSCA, investigation or inquiry into the business, operations, policies, practices or disclosures of BSCA (other than normal examinations conducted by a Governmental Authority in the Ordinary Course of Business of BSCA), or, to the Knowledge of BSCA, threatened any of the foregoing.

(iv) BSCA is “well-capitalized” as defined by applicable Laws and regulations. The most recent regulatory rating given to BSCA as to compliance with the Community Reinvestment Act is “Satisfactory” or better. Since the last regulatory examination of BSCA with respect to Community Reinvestment Act compliance, BSCA has not received any complaints as to Community Reinvestment Act compliance, and no proceedings are pending, nor to the Knowledge of BSCA, threatened with respect to any violations of consumer fair lending Laws or regulations.

(k) Compliance with Laws. Except as set forth in Schedule 5.2(k) of the BSCA Disclosure Schedule, BSCA:

(i) is and at all times since December 31, 2018 has been in material compliance with all applicable federal, state, local and foreign statutes, Laws, codes, regulations, ordinances, rules, judgments, injunctions, orders, decrees or policies and/or guidelines of any Governmental Authority applicable thereto or to the employees conducting such businesses, including, without limitation, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act, the Bank Secrecy Act, the USA PATRIOT Act, the AML Act, and all other applicable fair lending Laws and other Laws relating to discriminatory business practices;

(ii) has and at all times since December 31, 2018 has had all permits, licenses, franchises, authorizations, orders and approvals of, and has made all filings, applications and registrations with, all Governmental Authorities (and has paid all fees and assessments due and payable in connection therewith) that are required in order to permit it to own or lease its properties and to conduct its business as presently conducted, except where the failure to do so would not have a Material Adverse Effect on BSCA; and all such permits, licenses, franchises, certificates of authority, orders and approvals are in full force and effect and, to the Knowledge of BSCA, no suspension or cancellation of any of them is pending or threatened;

(iii) has not received, since December 31, 2018, any notification or communication from any Governmental Authority (A) asserting that BSCA is not in compliance with any of the statutes, regulations or ordinances which such Governmental Authority enforces or (B) threatening to revoke any license, franchise, permit or governmental authorization (nor, to the Knowledge of BSCA, do any grounds for any of the foregoing exist);

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(iv) has devised and maintains a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of its financial statements, has designed disclosure controls and procedures to ensure that material information is made known to the management of BSCA on no less than a quarterly basis, and has disclosed, based on its most recent evaluation prior to the date hereof, to its auditors (A) any significant deficiencies in the design or operation of internal controls which could adversely affect in any material respect its ability to record, process, summarize and report financial data and has identified for its auditors any material weaknesses in internal controls and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in its internal controls; and

(v) is and at all times since December 31, 2018 has been in material compliance with all applicable federal, state, local and foreign statutes, Laws, codes, regulations, ordinances, rules, judgments, injunctions, orders, decrees or policies and/or guidelines of any Governmental Authority relating to abandoned property, escheat or similar laws.

(l) BSCA Material Contracts; Defaults.

(i) Except as set forth in Schedule 5.2(l) of the BSCA Disclosure Schedule, BSCA is not a party to, bound by or subject to any agreement, contract, arrangement, commitment or understanding (whether written or oral): (A) with respect to the employment of any of its directors, officers, employees or consultants; (B) which would entitle any present or former director, officer, employee or agent of BSCA to indemnification from BSCA; (C) which is an agreement (including data processing, software programming, consulting and licensing contracts) not terminable on 60 days or less notice and involving the payment or value of more than $50,000 per annum; (D) which is with or to a labor union or guild (including any collective bargaining agreement); (E) which relates to the incurrence of indebtedness (other than Deposit liabilities, advances and loans from the FHLB, and sales of securities subject to repurchase, or similar obligation, in each case, in the Ordinary Course of Business); (F) which grants any Person a right of first refusal, right of first offer or similar right with respect to any material properties, rights, assets or business of BSCA; (G) which involves the purchase or sale of assets with a purchase price of $50,000 or more in any single case or $100,000 in all such cases, other than purchases and sales of investment securities and loans in the Ordinary Course of Business; (H) which is a consulting agreement, license or service contract (including data processing, software programming and licensing contracts and outsourcing contracts) which involves the payment of $50,000 or more in annual fees; (I) which provides for the payment by BSCA of payments upon a change of control thereof; (J) which is a lease for any real or material personal property owned or presently used by BSCA; (K) which materially restricts the conduct of any business by BSCA or limits the freedom of BSCA to engage in any line of business in any geographic area (or would so restrict BSCA after consummation of the transactions contemplated hereby) or which requires exclusive referrals of business or requires BSCA to offer specified products or services to their customers or depositors on a priority or exclusive basis; (L) which is with respect to, or otherwise commits BSCA to do, any of the foregoing; or (M) which is a material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC) (all of the foregoing collectively, “BSCA Material Contracts”).

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(ii) Each BSCA Material Contract is valid and binding on BSCA, is in full force and effect (other than due to the ordinary expiration thereof), and to the Knowledge of BSCA, is valid and binding on the other parties thereto. To the Knowledge of BSCA, there is no material default under any BSCA Material Contract and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default. Except as previously disclosed, no power of attorney or similar authorization given directly or indirectly by BSCA is currently outstanding.

(iii) All outstanding Loans from BSCA to its current and former officers and directors are set forth on Section 5.2(l)(iii) of the BSCA Disclosure Schedule, and except as set forth thereon, there has been no default on, or forgiveness or waiver of, in whole or in part, any such Loan during the two years immediately preceding the date hereof.

(m) No Brokers. Other than for financial advisory services performed for BSCA by MJC Partners, LLC pursuant to an agreement dated March 2, 2021 and provided to BOSC, no action has been taken by BSCA that would give rise to any valid claim against any party hereto for a brokerage commission, finder’s fee or other like payment with respect to the transactions contemplated hereby. The BSCA Board has received the opinion (which, if initially rendered verbally, has been or will be confirmed by a written opinion, dated the same date) of MJC Partners, LLC, to the effect that, as of the date of such opinion, and based upon and subject to the factors, assumptions, and limitations set forth therein, the Per Share Merger Consideration to be received by the holders of BSCA Common Stock in the Merger is fair, from a financial point of view, to such holders.

(n) Employee Benefit Plans.

(i) Section 5.2(n)(i) of the BSCA Disclosure Schedule lists all benefit and compensation plans, contracts, policies or arrangements covering current or former employees of BSCA and current or former directors or independent contractors of BSCA, including, but not limited to, “employee benefit plans” within the meaning of Section 3(3) of ERISA, and severance, employment, change in control, fringe benefit, deferred compensation, stock option, stock purchase, stock appreciation rights, stock based, incentive and bonus plans, agreements, programs, policies or other arrangements (the “BSCA Benefit Plans”). BSCA has made available to BOSC true and complete copies of: (A) all BSCA Benefit Plans including, but not limited to, any trust instruments and insurance contracts forming a part of any BSCA Benefit Plans and all amendments thereto; (B) the most recent annual report (Form 5500), together with all schedules, as required, filed with the Internal Revenue Service (“IRS”) or Department of Labor (the “DOL”), as applicable, and any financial statements and accountants’ opinions required to be filed with such annual report; (C) the most recent determination or opinion letter issued by the IRS with respect to each BSCA Benefit Plan that is intended to be “qualified” under Section 401(a) of the Code; (D) the most recent summary plan description and any summary of material modifications, as required, for each BSCA Benefit Plan; (E) the most recent actuarial report, if any relating to each BSCA Benefit Plan; and (F) the most recent actuarial valuation, study or estimate of any retiree medical and life insurance benefits plan or supplemental retirement benefits plan.

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(ii) Each BSCA Benefit Plan has been established and administered to date in all material respects in accordance with the applicable provisions of ERISA, the Code and applicable Law and with the terms and provisions of all documents, contracts or agreements pursuant to which such BSCA Benefit Plan is maintained. Each BSCA Benefit Plan which is an “employee pension benefit plan” within the meaning of Section 3(2) of ERISA (a “Pension Plan”) and which is intended to be qualified under Section 401(a) of the Code, has either received a favorable determination letter from the IRS, or is the subject of a favorable opinion letter on the pre-approved plan document upon which such Pension Plan is based and upon which BSCA may rely, and BSCA is not aware of any circumstances likely to result in revocation of any such favorable determination or opinion letter or the loss of the qualification of such Pension Plan under Section 401(a) of the Code. BSCA has not received any written correspondence from the IRS, DOL, any other governmental agency, any participant in or beneficiary of, an BSCA Benefit Plan, or any agent representing any of the foregoing that brings into question the qualification of any such BSCA Benefit Plan. Other than routine claims for benefits under the BSCA Benefit Plans in accordance with administrative claims and appeals procedures, there is no material pending or, to BSCA’s Knowledge, threatened litigation relating to the BSCA Benefit Plans. BSCA has not engaged in a transaction with respect to any BSCA Benefit Plan or Pension Plan that could subject it to a tax or penalty imposed by either Section 4975 of the Code or Section 502(i) of ERISA in an amount which would be material. Since December 31, 2018 through the date hereof, there are no matters pending before the IRS, DOL or other governmental agency with respect to the audit, examination or investigation involving any BSCA Benefit Plan.

(iii) Except as set forth on Schedule 5.2(n)(iii) of the BSCA Disclosure Schedule, neither BSCA nor any other Person that would be considered a single employer with BSCA under Section 414 of the Code or Section 4001 of ERISA (an “ERISA Affiliate”) at any relevant time has ever maintained or has or could have any liability, contingent or otherwise, with respect to (A) a plan that is or was subject to Title IV of ERISA or Sections 412 or 430 of the Code, (B) a Multiemployer Plan (as defined in 4001(a)(3) of ERISA), or (C) a “multiple employer plan” subject to Section 413(c) of the Code, and, with respect to each of the foregoing, no liability, contingent or otherwise, is reasonably expected to be incurred by BSCA. No notice of a “reportable event,” within the meaning of Section 4043 of ERISA for which the 30-day reporting requirement has not been waived, has been required to be filed for any Pension Plan or by any ERISA Affiliate or will be required to be filed in connection with the transactions contemplated hereby.

(iv) All contributions required to be made under the terms of any BSCA Benefit Plan have been timely made in all material respects. Neither any Pension Plan nor any single-employer plan of an ERISA Affiliate has an “accumulated funding deficiency” (whether or not waived) within the meaning of Section 412 of the Code or Section 302 of ERISA and no ERISA Affiliate has an outstanding funding waiver. BSCA has not provided, nor is required to provide, security to any Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code.

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(v) Except as set forth on Schedule 5.2(n)(v) of the BSCA Disclosure Schedule, BSCA does not have any obligations for retiree health and life benefits under any BSCA Benefit Plan, other than coverage as may be required under Section 4980B of the Code or Part 6 of Subtitle B of Title I of ERISA, or under the continuation of coverage provisions of the Laws of any state or locality or under any disability benefit plan or severance arrangement. BSCA may amend or terminate any such BSCA Benefit Plan in accordance with and to the extent permitted by its terms at any time without incurring any additional liability thereunder. No event or condition exists with respect to any BSCA Benefit Plan that could subject BSCA to a material tax under Section 4980B of the Code.

(vi) Except as set forth on Schedule 5.2(n)(vi) of the BSCA Disclosure Schedule, neither the execution of this Agreement nor consummation of the transactions contemplated hereby, either alone or in connection with a subsequent event: (A) entitle any employees or any current or former director or independent contractor of BSCA to severance pay or any increase in severance pay upon any termination of employment after the date hereof; (B) accelerate the time of payment or vesting or trigger any payment or funding (through a grantor trust or otherwise) of compensation or benefits under, increase the amount payable or trigger any other material obligation pursuant to, any of the BSCA Benefit Plans; (C) result in any payment that would be an “excess parachute payment” to a “disqualified individual” as those terms are defined in Section 280G of the Code, without regard to whether such payment is reasonable compensation for personal services performed or to be performed in the future; or (D) result in any payment or portion of any payment that would not be deductible by BSCA under Section 162(m) of the Code when paid.

(vii) All required reports and descriptions (including but not limited to Form 5500 annual reports and required attachments, Forms 1099-R, summary annual reports, Forms PBGC-1 and summary plan descriptions) have been filed or distributed appropriately with respect to each BSCA Benefit Plan. All required tax filings with respect to each BSCA Benefit Plan have been made, and any taxes due in connection with such filings have been paid.

(viii) No BSCA Benefit Plan is or has been funded by, associated with, or related to a “voluntary employee’s beneficiary association” within the meaning of Section 501(c)(9) of the Code, a “welfare benefit fund” within the meaning of Section 419 of the Code, a “qualified asset account” within the meaning of Section 419A of the Code or a “multiple employer welfare arrangement” within the meaning of Section 3(40) of ERISA.

(ix) Each BSCA Benefit Plan which is a “nonqualified deferred compensation plan” (within the meaning of Section 409A of the Code) has been operated in compliance with Section 409A of the Code and the guidance issued by the IRS with respect to such plans.

(o) Labor Matters. Except as set forth on Schedule 5.2(o) of the BSCA Disclosure Schedule, BSCA is not a party to and is not bound by any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization, nor is BSCA the subject of a proceeding asserting that it has committed an unfair labor practice (within the meaning of the National Labor Relations Act) or seeking to compel BSCA to bargain with any labor organization as to wages or conditions of employment, nor is there any strike or other labor dispute involving it pending or, to BSCA’s Knowledge, threatened, nor, to BSCA’s Knowledge, are any employees of BSCA seeking to certify a collective bargaining unit or engaging in other organizational activity. Since December 31, 2018, BSCA has paid in full all wages, salaries, commissions, bonuses, benefits and other compensation due to its employees or otherwise arising under any policy, practice, agreement, plan, program, statute or other law.

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(p) Environmental Matters. To the Knowledge of BSCA, there are no legal, administrative, arbitral or other proceedings, claims, actions, causes of action, private environmental investigations, remediation activities or governmental investigations of any nature seeking to impose on BSCA any liability or obligation arising under any Environmental Laws pending or threatened against BSCA, which liability or obligation could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on BSCA. To the Knowledge of BSCA, there is no reasonable basis for any such proceeding, claim, action, environmental remediation or investigation that could impose any liability or obligation that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on BSCA. To the Knowledge of BSCA, BSCA is in compliance in all material respects with applicable Environmental Laws. To the Knowledge of BSCA, no real property (including buildings or other structures) currently or formerly owned or operated by BSCA or any property in which BSCA has held a security interest, Lien or a fiduciary or management role (“BSCA Loan Property”), has been contaminated with, or has had any release of, any Hazardous Substance that has resulted, or could reasonably be expected to result, in a Material Adverse Effect with respect to BSCA. BSCA could not be deemed the owner or operator of, nor has either participated in the management regarding Hazardous Substances of, any BSCA Loan Property or any property of BSCA which has been contaminated with, or has had any release of, any Hazardous Substance that has resulted, or could reasonably be expected to result, in a Material Adverse Effect with respect to BSCA. To the Knowledge of BSCA, BSCA does not have any liability for any Hazardous Substance disposal or contamination on any third party property. To the Knowledge of BSCA, neither BSCA nor any Person whose liability BSCA has assumed whether contractually or by operation of law, has received any notice, demand letter, claim or request for information alleging any material violation of, or material liability under, any Environmental Law. BSCA is not subject to any order, decree, injunction or other agreement with any Governmental Authority or any third party relating to any Environmental Law. To the Knowledge of BSCA, there are no circumstances or conditions (including the presence of asbestos, underground storage tanks, lead products, polychlorinated biphenyls, prior manufacturing operations, dry-cleaning, or automotive services) involving BSCA, any currently or formerly owned or operated property, any BSCA Loan Property, or, to BSCA’s Knowledge, any Person whose liability BSCA has assumed whether contractually or by operation of law, that could reasonably be expected to result in any material claims, liability or investigations against BSCA, result in any material restrictions on the ownership, use, or transfer of any property pursuant to any Environmental Law, or adversely affect the value of any BSCA Loan Property or property of BSCA. BSCA has made available to BOSC true and correct copies of all environmental reports or studies, sampling data, correspondence and filings in its possession relating to BSCA and any currently or formerly owned or operated property.

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(q) Tax Matters. Except as set forth in Schedule 5.2(q) of the BSCA Disclosure Schedule:

(i) BSCA has timely filed all Tax Returns required to have been filed, taking into account any properly granted extensions of time to file, with the appropriate taxing authorities, such Tax Returns are true, correct and complete in all material respects and none of such Tax Returns has been amended.

(ii) All material Taxes required to be paid or remitted by BSCA on or before the date hereof have been so paid or remitted, including all Taxes shown as due and owing on all Tax Returns, all Taxes assessed or reassessed by any Governmental Authority, all Taxes held in trust or deemed to be held in trust for a Governmental Authority and all installments on account of Taxes for the current year or, where payment is not yet due, are sufficiently reserved in the BSCA Financial Statements in accordance with GAAP.

(iii) BSCA and its respective officers, directors or any employee responsible for Tax matters have complied in all material respects with all rules and regulations relating to the withholding of Taxes and the remittance of withheld Taxes in connection with any amounts paid or owing to any employee, independent contractor, creditor, shareholder or other third party.

(iv) BSCA has not waived any statute of limitations in respect of its Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

(v) BSCA has not engaged in any transaction that would constitute a “reportable transaction” within the meaning of Treasury Regulations Section 1.6011-4(b).

(vi) The unpaid Taxes of BSCA (A) do not exceed the reserve for Tax liability (excluding any reserve for deferred Taxes established to reflect temporary difference between book and Tax income) as shown on BSCA’s balance sheet dated December 31, 2020 and (B) will not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of BSCA in filing its Tax Returns.

(vii) BSCA is not currently the beneficiary of any extension of time within which to file any Tax Returns.

(viii) There are no Liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of BSCA.

(ix) No Tax actions by any Governmental Authority are pending or being conducted with respect to BSCA.

(x) BSCA has not received from any taxing authority (including jurisdictions in which BSCA has filed Tax Returns) any written: (A) notice indicating an intent to open an audit or other review; (B) request for information related to Tax matters; or (C) notice of deficiency or proposed adjustment for any amount of Tax, proposed, asserted or assessed by any Governmental Authority against BSCA.

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(xi) BSCA is not a party to or bound by any tax sharing, tax allocation or tax indemnity agreement.

(xii) BSCA has never been a member of a group of corporations with which it has filed (or been required to file) consolidated, combined or unitary Tax Returns other than any such group of which BSCA was parent.

(xiii) BSCA is not currently liable, nor does BSCA have any potential liability, for the Taxes of another Person: (A) under Treasury Regulations Section 1.1502-6 (or comparable provision of state, local or foreign law); (B) as transferee or successor; or (C) by contract (other than a contract entered into in the ordinary course of business the primary purpose of which is not related to Taxes) or indemnity.

(xiv) In the past two (2) years, BSCA has not been either a “distributing corporation” or a “controlled corporation” in connection with a distribution of stock qualifying for tax-free treatment, in whole or in part, under Section 355 of the Code.

(xv) BSCA has not been nor will be a “United States real property holding corporation” within the meaning of Section 897 of the Code during the five-year period ending on the Closing Date.

(xvi) BSCA will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) beginning after the Closing Date, as a result of any: (A) change in method of accounting for a taxable period ending on or prior to the Closing Date under Section 481 of the Code or similar state and local Tax Law; (B) any “closing agreement” as described in Section 7121 of the Code or similar state or local Tax Law executed on or prior to the Closing Date; (C) installment sale or open transaction disposition made on or prior to the Closing Date; (D) prepaid amount received on or prior to the Closing Date; or (E) improper method of accounting used on or prior to the Closing Date.

(xvii) BSCA has (i) properly complied with all applicable Laws with respect to the deferral of the amount of the employer’s share of any “applicable employment taxes” under Section 2302 of the CARES Act (or any similar provision of state, local or foreign Legal Requirements), (ii) properly complied with all applicable Laws and duly accounted for any available Tax credits under Sections 7001 through 7005 of the Families First Coronavirus Response Act and Section 2301 of the CARES Act and (iii) not deferred any Taxes pursuant to the Presidential Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster, issued August 8, 2020.

(xviii) BSCA has not taken or agreed to take any action, and is not aware of any fact or circumstance, that would prevent the Merger from qualifying as a reorganization pursuant to Section 368(a) of the Code.

(r) Risk Management Instruments. BSCA is not a party to, nor has it agreed to enter into, a Derivatives Contract.

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(s) Loans; Nonperforming and Classified Assets.

(i) Except as set forth in Schedule 5.2(s)(i) of the BSCA Disclosure Schedule, each Loan on the books and records of BSCA was made and has been serviced in all material respects in accordance with its customary lending standards in the Ordinary Course of Business, is evidenced in all material respects by appropriate and sufficient documentation and, to the Knowledge of BSCA, constitutes the legal, valid and binding obligation of the obligor named therein, subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar Laws of general applicability relating to or affecting creditor’s rights or by general equity principles.

(ii) Schedule 5.2(s)(ii) of the BSCA Disclosure Schedule sets forth, as of the latest practicable date prior to the date of this Agreement: (A) any Loan under the terms of which the obligor is 30 or more days delinquent in payment of principal or interest, or to the Knowledge of BSCA, in default of any other material provision thereof; (B) each Loan which has been classified as “substandard,” “doubtful,” “loss” or “special mention” (or words of similar import) by BSCA, or an applicable regulatory authority; (C) a listing of the OREO acquired by foreclosure or by deed-in-lieu thereof, including the book value thereof; and (D) each Loan with any current or former director or executive officer of BSCA or an Affiliate of BSCA.

(iii) Schedule 5.2(s)(iii) of the BSCA Disclosure Schedule sets forth a list and description of all loan participations entered into between BSCA and any third party which are reflected on the books and records of BSCA. A true and complete copy of each document relating to each loan participation has been made available to SCB and BOSC, with the exception of loan files for loans guaranteed by the SBA or another Governmental Authority and sold in the Ordinary Course of Business, other than loans originated by BSCA under the Coronavirus Aid, Relief, and Economic Security Act, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (the “CARES Act”), and Main Street Lending Program established by the FRB.

(t) Properties. Schedule 5.2(t) of the BSCA Disclosure Schedule lists all real property owned or leased by BSCA. With respect to such real property that is owned by BSCA, BSCA has good and marketable and insurable title, free and clear of all Liens, leases or other imperfections of title or survey, except: (i) Liens for current Taxes and assessments not yet due and payable and for which adequate reserves have been established; (ii) Liens set forth in policies for title insurance of such properties delivered to SCB and BOSC; (iii) survey imperfections set forth in surveys of such properties delivered to SCB and BOSC; or (iv) as set forth on Schedule 5.2(t)(A) of the BSCA Disclosure Schedule. With respect to such real property that is leased by BSCA, BSCA has a good and valid leasehold estate in and to such property. Except as set forth on Schedule 5.2(t)(B) of the BSCA Disclosure Schedule, BSCA has delivered true, correct and complete copies of such lease(s), together with all amendments thereto, to SCB and BOSC, and all such lease(s) are in full force and effect and will not lapse or terminate prior to the Closing Date. Neither BSCA, nor to the Knowledge of BSCA any landlord thereunder, is in default of any of their respective obligations under any such lease(s) and any such lease(s), to the Knowledge of BSCA, constitute the valid and enforceable obligations of the parties thereto. Other than as set forth on Schedule 5.2(t)(C) of the BSCA Disclosure Schedule, the transactions contemplated hereby will not require the consent of any landlord under any such lease. All real and material personal property owned by BSCA or presently used by BSCA in its business is in good condition (ordinary wear and tear excepted) and is sufficient to carry on its business in the Ordinary Course of Business. BSCA has good and marketable title, free and clear of all Liens to all of its owned material properties and assets, other than real property, except: (i) pledges to secure Deposits and FHLB advances incurred in the Ordinary Course of Business; (ii) such imperfections of title and encumbrances, if any, as are not material in character, amount or extent; or (iii) as set forth on Schedule 5.2(t)(D) of the BSCA Disclosure Schedule. All personal property which is material to BSCA’s business and leased or licensed by BSCA is held pursuant to leases or licenses which are valid and enforceable in accordance with their respective terms and such leases will not terminate or lapse prior to the Effective Time.

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(u) Intellectual Property.

(i) Schedule 5.2(u) of the BSCA Disclosure Schedule sets forth all of the material patents, copyrights, trade names, service marks, trademarks and other intellectual property rights owned and/or used in BSCA’s business. Except as set forth on Schedule 5.2(u) of the BSCA Disclosure Schedule, BSCA owns or possesses valid and binding licenses and other rights to use without payment of any material amount all material patents, copyrights, trade secrets, trade names, service marks, trademarks and other intellectual property rights used in its business, free and clear of any material Liens, and BSCA has not received any notice of conflict or allegation of invalidity with respect thereto or that asserts the intellectual property rights of others. To the Knowledge of BSCA, the operation of the business of BSCA does not infringe or violate the intellectual property of any third party. BSCA has performed in all material respects all the obligations required to be performed by it and it is not in default under any contract, agreement, arrangement or commitment relating to any of the foregoing.

(ii) Schedule 5.2(u) of the BSCA Disclosure Schedule lists all computer software (other than off-the-shelf commercial software programs) currently used by BSCA or stored on any BSCA computer (collectively, the “Software”). BSCA owns and possesses all right, title and interest in and to, or has a valid license to use, and following completion of the transactions contemplated herein, will own or have a valid license or right to use, all of the Software. No proceeding by any third Person against BSCA contesting the validity, enforceability, use or ownership of any such Software has been made, is currently outstanding or is, to BSCA’s Knowledge, threatened, and to BSCA’s Knowledge, there is no reasonable basis for any such proceeding. Neither BSCA nor any registered agent of BSCA, has received any notices of, or has any Knowledge of, any reasonable basis for an allegation of any infringement or misappropriation by, or conflict with, any third Person with respect to the Software. BSCA’s use of the Software has not infringed, misappropriated or otherwise violated any intellectual property rights of any third Person and BSCA has no Knowledge of any infringement, misappropriation or conflict which will occur as a result of the continued use of the Software as presently used by BSCA.

(v) Fiduciary Accounts. BSCA does not have trust powers and has not and does not act as a fiduciary, trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in any capacity.

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(w) Books and Records.

(i) The books and records of BSCA are complete and correct in all material respects and have been maintained in accordance with sound business practices. Each transaction is properly and accurately recorded on the books and records of BSCA, and each document upon which entries in books and records of BSCA are complete and accurate in all material respects.

(ii) Since December 31, 2018, (A) to the Knowledge of BSCA, BSCA has not received notice (written or oral) or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of BSCA or its internal accounting controls, including any material complaint, allegation, assertion or claim that BSCA has engaged in questionable accounting or auditing practices, and (B) no accountant or attorney engaged by BSCA, whether or not employed by BSCA, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation by BSCA or its respective officers, directors, members, employees or agents to the BSCA Board or other any committee thereof or, to the Knowledge of BSCA, to any officer or director of BSCA.

(iii) The minute books and stock or equity records of BSCA, all of which have been made available to SCB and BOSC, are correct in all material respects. The minute books of BSCA contain records, accurate in all material respects, of all meetings held and actions taken by the holders of stock or other equity interests, the BSCA Board and committees of the BSCA Board (except to the extent minutes have not yet been approved or finalized by the BSCA Board or committees), and no meeting of any such holders, the BSCA Board or committees has been held for which minutes are not contained in such minute books (except to the extent such minutes have not been approved or finalized by the BSCA Board or committees). At the Closing, all such books and records will be in the possession of BSCA and delivered to SCB and BOSC pursuant to Section 7.3(m).

(x) Insurance. Schedule 5.2(x) of the BSCA Disclosure Schedule sets forth all of the material insurance policies, binders, or bonds currently maintained by BSCA as well as a list of all claims or notices made by BSCA under any such insurance policy since December 31, 2018. BSCA is insured with reputable insurers against such risks and in such amounts as the management of BSCA has reasonably determined to be prudent in accordance with industry practices; all of the material insurance policies, binders, or bonds currently maintained by BSCA are in full force and effect and all premiums therefor have been paid current as of the date hereof and will be paid current as of the Effective Time; BSCA is not in material default thereunder; and all claims thereunder have been filed in due and timely fashion.

(y) Allowance For Loan Losses. BSCA’s allowance for loan losses is, and will be as of the Effective Time, in compliance with BSCA’s existing methodology for determining the adequacy of its allowance for loan losses as well as the standards established by GAAP, the Financial Accounting Standards Board and applicable bank regulatory agencies and, in the opinion of management of BSCA, is adequate under all such standards. Since December 31, 2018, BSCA has not been notified by any Governmental Entity or independent auditor of BSCA, in writing or otherwise, that: (a) such allowances are inadequate; (b) the practices and policies of BSCA in establishing such allowances and in accounting for non- performing and classified assets generally fail to comply with applicable accounting or regulatory requirements; or (c) such allowances are inadequate or inconsistent with the historical loss experience of BSCA.

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(z) Deposits. All of the deposits held by BSCA (including the records and documentation pertaining to such deposits) have been established and are held in compliance in all material respects with all (a) applicable policies, practices and procedures of BSCA, and applicable Law, including anti-money laundering, anti-terrorism or embargoed Persons requirements. Except as set forth Schedule 5.2(z) of the BSCA Disclosure Schedule, no deposit of BSCA is: (a) a Brokered Deposit (as defined in 12 C.F.R. § 337.6(a)(2)); (b) subject to any Encumbrance, legal restraint or other legal process (other than garnishments, pledges, set-off rights, escrow limitations and similar actions taken in the Ordinary Course of Business; or (c) a deposit from a Person that cultivates, manufactures, distributes, sells or services cannabis, hemp or related products. All of the Deposit accounts of BSCA are insured up to the applicable limits through the Deposit Insurance Fund as administered by the FDIC to the fullest extent permitted by applicable Law, and all premiums and assessments required to be paid for such insurance have been paid when due. No legal action or proceeding for the termination or revocation of such insurance is pending, or, to the Knowledge of BSCA, threatened.

(aa) Transactions With Affiliates. Except as set forth on Schedule 5.2(aa) of the BSCA Disclosure Schedule, there are no existing or pending transactions, nor are there any agreements or understandings, with any current or former shareholders, directors, officers or employees of BSCA or any Affiliate of BSCA, relating to, arising from or affecting BSCA, including without limitation, any transactions, arrangements or understandings relating to the purchase or sale of goods or services, the lending of monies or the sale, lease or use of any assets of BSCA, with or without adequate compensation, in any amount whatsoever.

(bb) Health and Safety.

(i) Except as set forth on Schedule 5.2(bb) of the BSCA Disclosure Schedule, to the Knowledge of BSCA, none of the real property owned or leased by BSCA contains: (A) underground improvements, including treatment or storage tanks, used currently or in the past for the management of Hazardous Substances; (B) a dump, landfill, filled in lands or wetlands; or (C) PCBs, toxic mold, asbestos containing materials.

(ii) BSCA is, and since March 31, 2020, has been, in compliance in all material respects with all federal, state, county, city and other local executive and public health orders and guidance published by any Governmental Authority related or referring to the coronavirus (“COVID-19”) (such orders and guidance, “COVID-19 Regulations”). BSCA has taken commercially reasonable steps to maintain its workplace in accordance with COVID-19 Regulations applicable to its office operations including, but not limited to, the safety of its premises and employees, contractors, vendors, customers, and clients.

(iii) No event has occurred and, to BSCA’s Knowledge, no condition or circumstance exists, that is reasonably likely to constitute, or result directly or indirectly in, a violation of, or a failure to comply, in any material respect, with any COVID-19 Regulations. BSCA currently maintains, and will continue until the Effective Time to maintain, policies, practices and procedures to comply in all material respects with all COVID- 19 Regulations now and as they may then be in effect. Neither BSCA nor any of its directors or executive officers have received any claim (formal or informal, written or unwritten) or other communication from any Governmental Authority or any other person that BSCA is not in compliance in any material respect with any COVID-19 Regulation applicable to it.

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5.3 Representations and Warranties of SCB and BOSC. SCB and BOSC represent and warrant to BSCA that, except as set forth in the SCB Disclosure Schedule:

(a) Organization, Standing and Authority.

(i) SCB is a corporation duly organized, validly existing and in good standing under the laws of the State of California. SCB is duly licensed or qualified to do business and is in good standing in each jurisdiction where its ownership or leasing of property or assets or the conduct of its business requires it to be so licensed or qualified, except where failure to be so licensed or qualified would not reasonably be expected to have a Material Adverse Effect, materially impair the ability of SCB to perform its obligations under this Agreement or otherwise materially impede the consummation of the transactions contemplated hereby. SCB is registered as a bank holding company under the Bank Holding Company Act. The copies of the SCB Articles, the SCB Bylaws, and other governing documents of SCB which have been previously made available to BSCA are true, complete, and correct copies of such documents as in effect on the date of this Agreement.

(ii) BOSC is a national banking association duly organized and validly existing under the Laws of the United States of America and it is duly authorized by the OCC to conduct business as a commercial bank. BOSC is duly licensed or qualified to do business and is in good standing in each jurisdiction where its ownership or leasing of property or assets or the conduct of its business requires it to be so licensed or qualified, except where failure to be so licensed or qualified would not reasonably be expected to have a Material Adverse Effect, materially impair the ability of BOSC to perform its obligations under this Agreement or otherwise materially impede the consummation of the transactions contemplated hereby. BOSC has in effect all federal, state, local and foreign governmental authorizations necessary for it to own or lease its properties and assets and to carry on its business as it is now conducted, except where the failure to be so authorized would not reasonably be expected to have a Material Adverse Effect, materially impair the ability of BOSC to perform its obligations under this Agreement or otherwise materially impede the consummation of the transactions contemplated hereby. The Deposit accounts of BOSC are insured by the FDIC, in the manner and to the maximum extent provided by applicable Law, and BOSC has paid all Deposit insurance premiums and assessments required by applicable Laws and regulations. The copies of the BOSC Articles, the BOSC Bylaws, and other governing documents of BOSC which have been previously made available to BSCA are true, complete, and correct copies of such documents as in effect on the date of this Agreement.

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(b) Capital Structure.

(i) The authorized capital stock of SCB consists of (i) 50,000,000 shares of SCB common stock, no par value per share (“SCB Common Stock”), of which 13,278,005 shares are issued and outstanding, and (ii) 50,000,000 shares of serial preferred stock, no par value, of which no shares are issued and outstanding. SCB does not have any other shares of capital stock authorized, designated, issued or outstanding. All outstanding shares of SCB’s capital stock: (i) have been duly authorized and validly issued and are fully paid, non- assessable and not subject to preemptive rights or similar rights created by statute, the SCB Articles or the SCB Bylaws or any agreement to which SCB is a party, and (ii) have been offered, sold, issued and delivered by SCB in all material respects in compliance with all applicable Laws. There are no declared or accrued but unpaid dividends with respect to any shares of SCB capital stock. SCB also has 2,500,000 shares of SCB Common Stock reserved for issuance under the SCB Benefit Plans, and does not have any other shares of capital stock authorized, designated, issued or outstanding.

(ii) The authorized capital stock of BOSC consists of (i) 20,000,000 shares of BOSC Common Stock, $5.00 par value per share, of which 9,412,690 shares are issued and outstanding and all held by SCB, and (ii) 10,000,000 shares of serial preferred stock, no par value, of which no shares are issued and outstanding. BOSC does not have any other shares of capital stock authorized, designated, issued or outstanding All outstanding shares of BOSC’s capital stock: (i) have been duly authorized and validly issued and are fully paid, non-assessable (except as provided in 12 U.S.C § 55) and not subject to preemptive rights or similar rights created by statute, the BOSC Articles, the BOSC Bylaws or any agreement to which BOSC is a party, and (ii) have been offered, sold, issued and delivered by BOSC in all material respects in compliance with all applicable Laws. There are no declared or accrued but unpaid dividends with respect to any shares of BOSC capital stock.

(iii) Schedule 5.3(b)(iii) of the SCB Disclosure Schedule lists, in reasonable detail, each restricted stock grant and the terms thereof outstanding under the SCB Plans and lists, in reasonable detail, all options for shares of SCB Common Stock outstanding under the SCB Plans, the names of the grantees, the grant date, the exercise prices, and the termination dates thereof. Other than as set forth on Schedule 5.3(b)(iii) of the SCB Disclosure Schedule, there are no Rights or agreements obligating SCB to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any SCB capital stock or any capital stock or equity or other ownership interest of SCB or obligating SCB to grant, extend, accelerate the vesting of, change the price of, otherwise amend or enter into any such Right. Other than as set forth on Schedule 5.3(b)(iii) of the SCB Disclosure Schedule, there are no outstanding or authorized stock option, stock appreciation, phantom stock, profit participation, or other similar rights with respect to SCB.

(c) Subsidiaries. SCB does not have any Subsidiaries other than BOSC. BOSC does not have any Subsidiaries.

(d) Corporate Power. Each of SCB and BOSC has the corporate power and authority to carry on its businesses as they are now being conducted and to own all of its properties and assets; Each of SCB and BOSC has the corporate power and authority to execute, deliver and perform its obligations under this Agreement and to consummate the transactions contemplated hereby, in each case, subject to receipt of the Requisite SCB Shareholder Approval and all necessary approvals of Governmental Authorities.

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(e) Corporate Authority.

(i) Subject to the receipt of the Requisite SCB Shareholder Approval, this Agreement and the transactions contemplated hereby have been authorized and approved by all necessary corporate action of SCB and BOSC on or prior to the date hereof and will remain in full force and effect through the earlier of the Closing or termination of this Agreement. Except for the Requisite SCB Shareholder Approval, no other corporate or shareholder action is necessary or required to authorize and approve this Agreement or the transactions contemplated hereby. This Agreement has been duly executed and delivered by each of SCB and BOSC and, assuming due authorization, execution and delivery by BSCA, this Agreement is a valid and legally binding agreement of SCB and BOSC, enforceable in accordance with its terms (except as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar Laws of general applicability relating to or affecting creditors’ rights, by general equity principles, or by Section 8(b)(6)(D) of the Federal Deposit Insurance Act, 12 U.S.C. § 1818(b)(6)(D)).

(ii) The SCB Board, by unanimous votes thereof, has adopted resolutions: (A) determining that this Agreement and the transactions contemplated herein, including the Merger, are fair to, and in the best interests of, SCB and its shareholders; (B) approving this Agreement and the transactions contemplated hereby; (C) recommending that SCB’s shareholders approve and adopt this Agreement; and (D) authorizing its President to act as its duly authorized representative as BOSC’s sole shareholder to approve this Agreement and the transactions contemplated herein.

(iii) SCB, as BOSC’s sole shareholder, has taken action by unanimous written consent to approve this Agreement and the transactions contemplated herein.

(iv) The BOSC Board, by unanimous vote thereof, has adopted resolutions: (A) determining that this Agreement and the transactions contemplated herein, including the Merger, are fair to, and in the best interests of, BOSC and its shareholder; and (B) approving this Agreement and the transactions contemplated herein.

(f) Regulatory Approvals. No consents or approvals of, or waivers by, or filings or registrations with, any Governmental Authority or with any third party are required to be made or obtained by SCB or BOSC in connection with the execution, delivery or performance by SCB and BOSC of this Agreement or to consummate the transactions contemplated hereby, except for: (A) filings of applications or notices with, and approvals or waivers by the OCC, FRB and the DFPI, as required; (B) the filing of an application for, and the issuance of, a permit as contemplated by Section 6.14 herein; (C) filings of applications and notices with certain states and the receipt of all necessary state securities and “Blue Sky” permits or approvals, and (D) the filing of the Bank Merger Agreement with the California Secretary of State and the DFPI with respect to the Merger.

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(g) No Conflict. The execution and delivery by each of SCB and BOSC of this Agreement and the consummation of the transactions provided for in this Agreement: (i) do not violate any provision of the SCB Articles, the SCB Bylaws, the BOSC Articles, the BOSC Bylaws, any provision of federal or state Law or any governmental rule or regulation (assuming receipt of the required approval of any Governmental Authority and receipt of the Requisite SCB Shareholder Approval and the Requisite BSCA Shareholder Approval); and (ii) except as set forth in Schedule 5.3(g) of the SCB Disclosure Schedule, do not require any consent of any Person under, conflict with or result in a breach of, or accelerate the performance required by any of the terms of, any material debt instrument, lease, license, covenant, agreement or understanding to which SCB is a party or by which SCB is bound, or any order, ruling, decree, judgment, arbitration award or stipulation to which SCB is subject, or constitute a default thereunder or result in the creation of any Lien, restriction or right of any third party of any kind whatsoever upon any of the properties or assets of SCB or BOSC.

(h) Financial Statements; Material Adverse Effect.

(i) SCB has previously made available to BSCA accurate and complete copies of the SCB Financial Statements. The SCB Financial Statements fairly present in all material respects the financial condition of SCB as of and for the respective dates set forth therein.

(ii) The SCB Financial Statements have been, and are being, prepared in accordance with GAAP consistently applied during the periods involved, except as stated therein.

(iii) Since December 31, 2020, SCB has not incurred any liabilities that are required to be reflected on a balance sheet in accordance with GAAP, except: (A) as set forth on Schedule 5.3(h)(iii) of the SCB Disclosure Schedule; (B) liabilities properly accrued or reserved against in the balance sheet of SCB as of December 31, 2020; (C) liabilities and obligations incurred since December 31, 2020 in the Ordinary Course of Business; (D) liabilities and obligations that are not material to SCB; and (E) any liabilities and obligations incurred with respect to the transactions contemplated by this Agreement.

(iv) Except as set forth on Schedule 5.3(h)(iv) of the SCB Disclosure Schedule, since December 31, 2020: (A) SCB has conducted its businesses in the Ordinary Course Business; and (B) no event has occurred or circumstance arisen that, individually or taken together with all other facts, circumstances and events (described in any paragraph of this Section 5.3 or otherwise), has had or is reasonably likely to have a Material Adverse Effect with respect to SCB.

(v) No agreement pursuant to which any loans or other assets have been or shall be sold by BOSC entitled the buyer of such loans or other assets to cause BOSC to repurchase such loan or other asset or the buyer to pursue any other form of recourse against BOSC. All cash, stock or other dividends or any other distribution with respect to the capital stock of SCB has been declared, set aside or paid since December 31, 2020, except as set forth on Schedule 5.3(h)(v) of the SCB Disclosure Schedule. Since December 31, 2020, no shares of capital stock of SCB has been purchased, redeemed or otherwise acquired, directly or indirectly, by SCB and no agreements have been made by SCB to do any of the foregoing.

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(i) Legal Proceedings. Except as set forth in Schedule 5.3(i) of the SCB Disclosure Schedule, no litigation, arbitration, claim or other proceeding before any court or governmental agency is pending against SCB or BOSC, individually or in the aggregate, that has had or could reasonably be expected to have a Material Adverse Effect with respect to SCB and, to the Knowledge of SCB, no such litigation, arbitration, claim or other proceeding has been threatened and there are no facts which could reasonably give rise to such litigation, arbitration, claim or other proceeding. Neither SCB nor BOSC, or any of its respective properties, is a party to or subject to any order, judgment, decree or regulatory restriction that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect with respect to SCB.

(j) Regulatory Matters.

Each of SCB and BOSC has duly filed with the appropriate Governmental Authorities in substantially the correct form the monthly, quarterly and annual reports required to be filed by it under applicable Laws and regulations, and such reports were in all material respects complete and accurate and in compliance with the requirements of applicable Laws and regulations. Except as set forth on Schedule 5.3(j) of the SCB Disclosure Schedule, in connection with the most recent examination of SCB and BOSC by the appropriate Governmental Authorities, neither SCB nor BOSC was required to correct or change any action, procedure or proceeding which SCB and BOSC believe in good faith has not been now corrected or changed, other than corrections or changes which, if not made, either individually or in the aggregate, would not have a Material Adverse Effect on either of SCB or BOSC.

(i) Except as set forth on Schedule 5.3(j)(i) of the SCB Disclosure Schedule, neither SCB nor BOSC is a party to or is subject to any order, decree, directive, agreement, memorandum of understanding or similar arrangement with, or a commitment letter or similar submission to, or extraordinary supervisory letter from, nor, except in the normal course of business, has either SCB or BOSC adopted any policies, procedures or board resolutions at the request or suggestion of, any Governmental Authority. SCB and BOSC have paid all assessments made or imposed by any Governmental Authority except where the failure to pay any such assessments is not reasonably expected to have individually or in the aggregate, a Material Adverse Effect on SCB.

(ii) Except as set forth on Schedule 5.3(j)(ii) of the SCB Disclosure Schedule, since December 31, 2018, no Governmental Authority has initiated or has pending any proceeding, enforcement action or, to the Knowledge of SCB, investigation or inquiry into the business, operations, policies, practices or disclosures of SCB or BOSC (other than normal examinations conducted by a Governmental Authority in the Ordinary Course of Business of SCB and BOSC), or, to the Knowledge of SCB, threatened any of the foregoing.

(iii) BOSC is “well-capitalized” as defined in applicable Laws and regulations. The most recent regulatory rating given to BOSC as to compliance with the Community Reinvestment Act is “Satisfactory” or better. Since the last regulatory examination of BOSC with respect to Community Reinvestment Act compliance, BOSC has not received any complaints as to Community Reinvestment Act compliance, and no proceedings are pending, nor to the Knowledge of SCB, threatened with respect to any violations of consumer fair lending Laws or regulations.

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(k) Compliance With Laws. Except as set forth on Schedule 5.3(k) of the SCB Disclosure Schedule, BOSC:

(i) is and at all times since December 31, 2018, has been in material compliance with all applicable federal, state, local and foreign statutes, Laws, codes, regulations, ordinances, rules, judgments, injunctions, orders, decrees or policies and/or guidelines of any Governmental Authority applicable thereto or to the employees conducting such businesses, including, without limitation, the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure Act, the Bank Secrecy Act, the USA PATRIOT Act, the AML Act all other applicable fair lending Laws and other Laws relating to discriminatory business practices;

(ii) has and at all times since December 31, 2018, has had all permits, licenses, franchises, authorizations, orders and approvals of, and have made all filings, applications and registrations with, all Governmental Authorities (and have paid all fees and assessments due and payable in connection therewith) that are required in order to permit it to own or lease its properties and to conduct its business as presently conducted, except where the failure to do so would not have a Material Adverse Effect on SCB; all such permits, licenses, franchises, certificates of authority, orders and approvals are in full force and effect and, to the Knowledge of SCB, no suspension or cancellation of any of them is pending or threatened;

(iii) has not received, since December 31, 2018, any notification or communication from any Governmental Authority (A) asserting that BOSC is not in compliance with any of the statutes, regulations or ordinances which such Governmental Authority enforces or (B) threatening to revoke any license, franchise, permit or governmental authorization (nor, to the Knowledge of SCB, do any grounds for any of the foregoing exist);

(iv) has devised and maintains a system of internal accounting controls sufficient to provide reasonable assurances regarding the reliability of financial reporting and the preparation of its financial statements, have designed disclosure controls and procedures to ensure that material information is made known to the management of SCB on no less than a quarterly basis, and have disclosed, based on its most recent evaluation prior to the date hereof, to their auditors (A) any significant deficiencies in the design or operation of internal controls which could adversely affect in any material respect their ability to record, process, summarize and report financial data and have identified for their auditors any material weaknesses in internal controls and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in its internal controls; and

(v) is and at all times since December 31, 2018 has been in material compliance with all applicable federal, state, local and foreign statutes, Laws, codes, regulations, ordinances, rules, judgments, injunctions, orders, decrees or policies and/or guidelines of any Governmental Authority relating to abandoned property, escheat or similar laws.

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(l) SCB Material Contracts; Defaults.

(i) Except as set forth in Schedule 5.3(l) of the SCB Disclosure Schedule, neither SCB nor BOSC is a party to, bound by or subject to any agreement, contract, arrangement, commitment or understanding (whether written or oral): (A) with respect to the employment of any of its respective current directors, officers, employees or consultants; (B) which would entitle any present or former director, officer, employee or agent of SCB or BOSC to indemnification from SCB or BOSC; (C) which is an agreement (including data processing, software programming, consulting and licensing contracts) not terminable on 60 days or less notice and involving the payment or value of more than $300,000 per annum; (D) which is with or to a labor union or guild (including any collective bargaining agreement); (E) which relates to the incurrence of indebtedness (other than Deposit liabilities, advances and loans from the FHLB, leases, and sales of securities subject to repurchase, or similar obligation, in each case, in the Ordinary Course of Business); (F) which grants any Person a right of first refusal, right of first offer or similar right with respect to any material properties, rights, assets or business of SCB or BOSC; (G) which involves the purchase or sale of assets with a purchase price of $150,000 or more in any single case or $300,000 in all such cases, other than purchases and sales of investment securities and loans in the Ordinary Course of Business; (H) which is a consulting agreement, license or service contract (including data processing, software programming and licensing contracts and outsourcing contracts) which involves the payment of $300,000 or more in annual fees; (I) which provides for the payment by SCB or BOSC of payments upon a change of control thereof; (J) which materially restricts the conduct of any business by SCB or BOSC or limits the freedom of SCB or BOSC to engage in any line of business in any geographic area (or would so restrict SCB or BOSC after consummation of the transactions contemplated hereby) or which requires exclusive referrals of business or requires SCB or BOSC to offer specified products or services to their customers or depositors on a priority or exclusive basis; (K) which is with respect to, or otherwise commits SCB or BOSC to do, any of the foregoing; or (L) which is a material contract (as defined in Item 601(b)(10) of Regulation S-K of the SEC) (all of the foregoing collectively, “SCB Material Contracts”).

(ii) To the Knowledge of SCB, each SCB Material Contract is valid and binding on SCB or BOSC, as applicable, and is in full force and effect (other than due to the ordinary expiration thereof) and is valid and binding on the other parties thereto. Neither SCB, BOSC, nor to the Knowledge of SCB, any other parties thereto, is in material default under any SCB Material Contract and there has not occurred any event that, with the lapse of time or the giving of notice or both, would constitute such a default. Except as previously disclosed, no power of attorney or similar authorization given directly or indirectly by either SCB or BOSC is currently outstanding.

(iii) All outstanding Loans from BOSC to its officers and directors are set forth on Schedule 5.3(l)(iii) of the SCB Disclosure Schedule, and except as set forth thereon, there has been no default on, or forgiveness or waiver of, in whole or in part, any such Loan during the two years immediately preceding the date hereof.

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(m) No Brokers. The SCB Board has received the opinion (which, if initially rendered verbally, has been or will be confirmed by a written opinion, dated the same date) of Raymond James & Associates, Inc. to the effect that, as of the date of such opinion, and based upon and subject to the factors, assumptions, and limitations set forth therein, the Per Share Merger Consideration is fair, from a financial point of view, to SCB. No action has been taken by SCB that would give rise to any valid claim against any party hereto for a brokerage commission, finder’s fee or other like payment with respect to the transactions contemplated by this Agreement.

(n) Environmental Matters. To the Knowledge of SCB, there are no legal, administrative, arbitral or other proceedings, claims, actions, causes of action, private environmental investigations, remediation activities or governmental investigations of any nature seeking to impose on SCB or BOSC any liability or obligation arising under any Environmental Laws pending or threatened against SCB or BOSC, which liability or obligation could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on SCB. To the Knowledge of SCB, there is no reasonable basis for any such proceeding, claim, action, environmental remediation or investigation that could impose any liability or obligation that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on SCB. To the Knowledge of SCB, SCB and BOSC are in compliance in all material respects with applicable Environmental Laws. To the Knowledge of SCB, no real property (including buildings or other structures) currently or formerly owned or operated by SCB or BOSC, or any property in which BOSC has held a security interest, Lien or a fiduciary or management role (“BOSC Loan Property”), has been contaminated with, or has had any release of, any Hazardous Substance that has resulted, or could reasonably be expected to result, in a Material Adverse Effect with respect to SCB, BOSC could be deemed the owner or operator of, nor has either participated in the management regarding Hazardous Substances of, any BOSC Loan Property or any property of SCB or BOSC which has been contaminated with, or has had any release of, any Hazardous Substance that has resulted, or could reasonably be expected to result, in a Material Adverse Effect with respect to BOSC. To the Knowledge of SCB, neither SCB nor BOSC has any liability for any Hazardous Substance disposal or contamination on any third party property. To the Knowledge of SCB, neither SCB nor BOSC, nor any Person whose liability SCB or BOSC has assumed whether contractually or by operation of law, has received any notice, demand letter, claim or request for information alleging any material violation of, or material liability under, any Environmental Law. Neither SCB nor BOSC is subject to any order, decree, injunction or other agreement with any Governmental Authority or any third party relating to any Environmental Law. To the Knowledge of SCB, there are no circumstances or conditions (including the presence of asbestos, underground storage tanks, lead products, polychlorinated biphenyls, prior manufacturing operations, dry-cleaning, or automotive services) involving SCB or BOSC, any currently or formerly owned or operated property, any BOSC Loan Property, or, to SCB’s Knowledge, any Person whose liability SCB or BOSC has assumed whether contractually or by operation of law, that could reasonably be expected to result in any material claims, liability or investigations against SCB or BOSC, result in any material restrictions on the ownership, use, or transfer of any property pursuant to any Environmental Law, or adversely affect the value of any BOSC Loan Property or property of SCB or BOSC. SCB has made available to BSCA true and correct copies of all environmental reports or studies, sampling data, correspondence and filings in its possession or reasonably available to it relating to SCB or BOSC and any currently or formerly owned or operated property.

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(o) Tax Matters. Except as set forth on Schedule 5.3(o) of the SCB Disclosure Schedule:

(i) SCB has timely filed all Tax Returns required to have been filed, taking into account any properly granted extensions of time to file, with the appropriate taxing authorities, such Tax Returns are true, correct and complete in all material respects and none of such Tax Returns has been amended.

(ii) All material Taxes required to be paid or remitted by SCB on or before the date hereof have been so paid or remitted, including all Taxes shown as due and owing on all Tax Returns, all Taxes assessed or reassessed by any Governmental Authority, all Taxes held in trust or deemed to be held in trust for a Governmental Authority and all installments on account of Taxes for the current year or, where payment is not yet due, are sufficiently reserved in the SCB Financial Statements in accordance with GAAP.

(iii) SCB has not waived any statute of limitations in respect of its Taxes or agreed to any extension of time with respect to a Tax assessment or deficiency.

(iv) SCB has not engaged in any transaction that would constitute a “reportable transaction” within the meaning of Treasury Regulations Section 1.6011-4(b).

(v) There are no Liens for Taxes (other than Taxes not yet due and payable) upon any of the assets of SCB.

(vi) No Tax actions by any Governmental Authority are pending or being conducted with respect to SCB.

(vii) SCB has not taken or agreed to take any action, and is not aware of any fact or circumstance, that would prevent the Merger from qualifying as a reorganization pursuant to Section 368(a) of the Code.

(p) Loans; Nonperforming and Classified Assets.

(i) Except as set forth on Schedule 5.3(p)(i) of the SCB Disclosure Schedule, each Loan on the books and records of BOSC was made and has been serviced in all material respects in accordance with its customary lending standards in the ordinary course of business, is evidenced in all material respects by appropriate and sufficient documentation and, to the Knowledge of SCB, constitutes the legal, valid and binding obligation of the obligor named therein, subject to bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and similar Laws of general applicability relating to or affecting creditor’s rights or by general equity principles.

(ii) Schedule 5.3(p)(ii) of the SCB Disclosure Schedule sets forth, as of the latest practicable date prior to the date of this Agreement: (A) any Loan under the terms of which the obligor is 90 or more days delinquent in payment of principal or interest, or to the Knowledge of SCB, in default of any other material provision thereof; (B) each Loan which has been classified as “substandard,” “doubtful,” “loss” or “special mention” (or words of similar import) by BOSC, or an applicable regulatory authority; (C) a listing of the OREO acquired by foreclosure or by deed-in-lieu thereof, including the book value thereof; and (D) each Loan with any director or executive officer of BOSC or an Affiliate of BOSC.

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(q) Properties. Schedule 5.3(q) of the SCB Disclosure Schedule lists all real property owned or leased by SCB or BOSC. With respect to such real property that is owned by SCB or BOSC has good and marketable and insurable title, free and clear of all Liens, leases or other imperfections of title or survey, except: (i) Liens for current taxes and assessments not yet due and payable and for which adequate reserves have been established; (ii) Liens set forth in policies for title insurance of such properties delivered to BSCA; (iii) survey imperfections set forth in surveys of such properties delivered to BSCA; or (iv) as set forth Schedule 5.3(q)(A) of the SCB Disclosure Schedule. With respect to such real property that is leased by BOSC has a good and valid leasehold estate in and to such property. Any such lease is in full force and effect and will not lapse or terminate prior to the Closing Date. Neither SCB nor BOSC, nor to the Knowledge of SCB any landlord thereunder, is in default of any of its obligations under any such lease and any such lease constitutes the valid and enforceable obligations of the parties thereto. The transactions contemplated hereby will not require the consent of any landlord under any such lease. All real and personal property owned by SCB or BOSC or presently used by SCB or BOSC in its businesses is in good condition (ordinary wear and tear excepted) and is sufficient to carry on its business in the ordinary course of business consistent with its past practices. SCB and BOSC have good and marketable title, free and clear of all Liens to all of their owned material properties and assets, other than real property, except: (i) pledges to secure Deposits and FHLB advances incurred in the ordinary course of BOSC’s banking business consistent with past practice; and (ii) such imperfections of title and encumbrances, if any, as are not material in character, amount or extent. All personal property which is material to SCB’s and BOSC’s businesses and leased or licensed by SCB or BOSC is held pursuant to leases or licenses which are valid and enforceable in accordance with its terms and such leases will not terminate or lapse prior to the Effective Time.

(r) Intellectual Property. Except as set forth on Schedule 5.3(r) of the SCB Disclosure Schedule, SCB or BOSC owns or possesses valid and binding licenses and other rights to use all material patents, copyrights, trade secrets, trade names, service marks, trademarks and other intellectual property rights used in its business, free and clear of any material Liens. Neither SCB nor BOSC has received any notice of conflict or allegation of invalidity with respect thereto or that asserts the intellectual property rights of others. To the Knowledge of SCB, the operation of the businesses of SCB and BOSC do not infringe or violate the intellectual property of any third party. Each of SCB and BOSC has performed in all material respects all the obligations required to be performed by it and is not in default under any contract, agreement, arrangement or commitment relating to any of the foregoing.

(s) Fiduciary Accounts. BOSC has properly administered all accounts for which it acts as a fiduciary, including but not limited to accounts for which it serves as a trustee, agent, custodian, personal representative, guardian, conservator or investment advisor, in accordance with the terms of the governing documents and applicable Laws, regulations and common Laws. To the Knowledge of SCB, neither BOSC nor any of its directors, officers or employees, has committed any breach of trust with respect to any fiduciary account and the records for each such fiduciary account are true and correct and accurately reflect the assets of such fiduciary account.

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(t) Books and Records.

(i) The books and records of SCB and BOSC are complete and correct in all material respects and have been maintained in accordance with sound business practices. Each transaction is properly and accurately recorded on the books and records of SCB and BOCS, and each document upon which entries in books and records of SCB and BOSC are complete and accurate in all material respects.

(ii) Since December 31, 2018, (A) to the Knowledge of SCB, neither SCB nor BOSC has received notice (written or oral) or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of SCB or BOSC or its internal accounting controls, including any material complaint, allegation, assertion or claim that SCB or BOSC has engaged in questionable accounting or auditing practices, and (B) no accountant or attorney engaged by SCB or BOSC, whether or not employed by SCB or BOSC, has reported evidence of a material violation of securities Laws, breach of fiduciary duty or similar violation by SCB or BOSC or their respective officers, directors, members, employees or agents to the SCB Board or BOSC Board or other any committee thereof or, to the Knowledge of SCB, to any officer or director of SCB.

(iii) The minute books and stock or equity records of SCB and BOSC, all of which have been made available to BSCA, are correct in all material respects. The minute books of SCB and BOSC contain records, accurate in all material respects, of all meetings held and actions taken by the holders of stock or other equity interests, the SCB Board, the BOSC Board and committees thereof (except to the extent minutes have not yet been approved or finalized by the respective board or committees), and no meeting of any such holders, the SCB Board or the BOSC Board or committees thereof has been held for which minutes are not contained in such minute books (except to the extent such minutes have not been approved or finalized by the respective board or committees).

(u) Allowance For Loan Losses. BOSC’s allowance for loan losses is in compliance with BOSC’s existing methodology for determining the adequacy of its allowance for loan losses as well as the standards established by GAAP, the Financial Accounting Standards Board and applicable bank regulatory agencies and, in the opinion of management of BOSC, is adequate under all such standards. Since December 31, 2018, BOSC has not been notified by any Governmental Entity or independent auditor of SCB or BOSC, in writing or otherwise, that: (a) such allowances are inadequate; (b) the practices and policies of BOSC in establishing such allowances and in accounting for non-performing and classified assets generally fail to comply with applicable accounting or regulatory requirements; or (c) such allowances are inadequate or inconsistent with the historical loss experience of BOSC.

(v) Transactions with Affiliates. Except as set forth on Schedule 5.3(v) of the SCB Disclosure Schedule, there are no existing or pending transactions, nor are there any agreements or understandings, with any shareholders, directors, officers or employees of SCB or BOSC or any Affiliate of thereof, relating to, arising from or affecting SCB or BOSC, including without limitation, any transactions, arrangements or understandings relating to the purchase or sale of goods or services, the lending of monies or the sale, lease or use of any assets of SCB or BOSC, with or without adequate compensation, in any amount whatsoever.

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ARTICLE VI
COVENANTS

6.1 Commercially Reasonable Efforts. Subject to the terms and conditions of this Agreement, each of SCB, BOSC and BSCA agrees to use its commercially reasonable efforts in good faith, to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or desirable, or advisable under applicable Laws, so as to permit consummation of the transactions contemplated hereby as promptly as practicable and otherwise to enable consummation of the transactions contemplated hereby, including the satisfaction of the conditions set forth in Article VII hereof, and shall cooperate fully with the other party hereto to that end.

6.2 Regulatory Filings.

(a) Subject to the other provisions of this Agreement, SCB, BOSC and BSCA shall cooperate and use their respective commercially reasonable efforts to prepare all documentation, to effect all filings and to obtain all permits, consents, approvals and authorizations of all third parties and Governmental Authorities necessary to consummate the transactions contemplated hereby; and SCB and BOSC shall use its commercially reasonable efforts to make any necessary filings with Governmental Authorities, as soon as reasonably practicable following the date of this Agreement, and in any event within 45 days of the date hereof.

(b) Each party agrees, upon request, to furnish the other party with all information concerning itself and its directors, officers and shareholders and such other matters as may be reasonably necessary or advisable in connection with any filing, notice or application made by or on behalf of such other party to any third party or Governmental Authority.

(c) Except as to any material or information that is confidential or proprietary to SCB or BOSC (or for which SCB or BOSC is subject to a confidentiality obligation or undertaking), each party shall have the right to review in advance, and, to the extent practicable, each will consult the other on, in each case subject to applicable Laws relating to the confidentiality of information, all the information relating to SCB, BOSC or BSCA, as the case may be, that appear in any filing made with, or written materials submitted to, any Governmental Authority in connection with the transactions contemplated by this Agreement. In exercising the foregoing right, each of the parties shall act reasonably and as promptly as practicable. The parties shall consult with each other with respect to the obtaining of all permits, consents, approvals and authorizations of all Governmental Authorities necessary or advisable to consummate the transactions contemplated by this Agreement and each party will keep the other apprised of the status of matters relating to completion of the transactions contemplated by this Agreement.

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(d) Each party shall promptly advise the other party upon receiving any communication from any Governmental Authority the consent or approval of which is required for consummation of the transactions contemplated by this Agreement that causes such party to believe that there is a reasonable likelihood that any approval will not be obtained or that the receipt of any such approval may be materially delayed.

6.3 Press Releases. SCB, BOSC and BSCA shall consult with each other before issuing any press release with respect to the transactions contemplated hereby or this Agreement and shall not issue any such press release or make any such public statements without the prior consent of the other party, which shall not be unreasonably withheld or delayed; provided, however, that either party may, without the prior consent of the other party (but after such consultation, to the extent practicable under the circumstances), issue such press release or make such public statements as may upon the advice of outside counsel be required by Law or the rules or regulations of the securities exchange on which it trades, to the extent applicable.

6.4 Access; Information.

(a) Upon reasonable notice from SCB and subject to applicable Laws relating to the exchange of information, BSCA shall afford SCB and its officers, employees, counsel, accountants and other authorized representatives such access during normal business hours throughout the period prior to the Effective Time to the books, records (including, without limitation, Tax Returns and work papers of independent auditors), properties, personnel and advisors of BSCA and to such other information relating to BSCA as SCB may reasonably request and, during such period, BSCA shall furnish to SCB and BOSC all information concerning the business, properties and personnel of BSCA as SCB may reasonably request. Such access to the books, records, properties, personnel, advisors, and information of BSCA shall permit SCB and BOSC and their duly authorized representatives access for all purposes in connection with the Merger, including, without limitation: (i) meeting with, interviewing, and assessing the qualifications of employees of BSCA to be employed by SCB and/or BOSC from and after the Effective Time; (ii) assessing and confirming the timely conversion of the data processing systems and processes of BSCA in connection with the Merger; (iii) assessing and measuring the assets and liabilities of BSCA for purposes of fair value accounting in connection with the Merger; and (iv) otherwise confirming the accuracy and completeness of the information being provided by BSCA to SCB and BOSC under this Agreement.

(b) Upon reasonable notice from BSCA and subject to applicable Laws relating to the exchange of information, SCB and BOSC shall afford BSCA and its officers, employees, counsel, accountants and other authorized representatives such access during normal business hours throughout the period prior to the Effective Time to the books, records (including, without limitation, Tax Returns and work papers of independent auditors), properties, personnel and advisors of SCB and BOSC and to such other information relating to SCB or BOSC as BSCA may reasonably request and, during such period, it shall furnish to BSCA all information concerning the business, properties and personnel of SCB and BOSC as BSCA may reasonably request.

(c) BSCA shall cooperate, and use its commercially reasonable efforts to cause its independent auditor to cooperate, at BSCA’s expense, with SCB and BOSC and their independent auditor in order to enable SCB and its Affiliates to prepare financial statements, including, without limitation, pro forma financial information, for BSCA that may be required by SCB and/or BOSC in connection with the filing of regulatory applications with Governmental Authorities or otherwise required in connection with the transactions contemplated by this Agreement. Without limiting the generality of the foregoing, BSCA agrees that it will execute and deliver, and cause its officers to execute and deliver (including former officers of BSCA after the Closing,) such “representation” letters as are customarily delivered in connection with audits and as the independent auditors of SCB or BOSC may respectively reasonably request under the circumstances.

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(d) All information furnished pursuant to this Section 6.4 shall be subject to the provisions of Section 6.19 of this Agreement. None of SCB, BOSC or BSCA shall be required to provide access or disclose information where such access or disclosure would the jeopardize such party’s attorney-client privilege (after giving due consideration to the existence of any common interest, joint defense or similar agreement between the parties), provided that that in any event, a party asserting such privilege will work with the other parties in good faith to make appropriate substitute disclosure arrangements.

(e) Not later than the earlier of (i) the day immediately following the monthly BSCA Board meeting each calendar month or (ii) thirty (30) days after each calendar month end during the period from the date of this Agreement until the Closing Date or termination of this Agreement in accordance with its terms, BSCA shall prepare in good faith and deliver to SCB: (A) a balance sheet of BSCA as of such month end and related statements of income prepared on a basis consistent with GAAP and the BSCA Financial Statements (each such statement, an “Interim Statement”); (B) a copy of all reports to the BSCA Board for such month, including without limitation, reports regarding the deposits, Loans, any Loan under the terms of which the obligor is 90 or more days delinquent in payment of principal or interest, or to the Knowledge of BSCA, in default of any other material provision thereof, each Loan which has been classified as “substandard,” “doubtful,” “loss” or “special mention” (or words of similar import) by BSCA, or an applicable regulatory authority, the ALLL report (including the analysis of the adequacy thereof), a listing of the OREO acquired by foreclosure or by deed-in-lieu thereof, including the book value thereof, and each Loan with any director or executive officer of BSCA; (C) confirmation of BSCA’s accrual and/or payment of all expenses related to the Merger, including all accountant fees, attorneys’ fees, investment advisor and broker fees, employee and consultant salaries, fees, bonuses (including retention bonuses), change in control payments, and other compensation, conversion costs, and contract termination fees.

(f) No investigation by any of the parties or their respective representatives shall affect the representations, warranties, covenants or agreements of the other party set forth herein.

6.5 No Solicitation.

(a) BSCA shall not, and shall not permit or authorize any of its Affiliates, directors, officers, employees, agents and representatives (including without limitation any investment banker, financial advisor, attorney, accountant or other representatives retained by BSCA) (all of the foregoing, collectively “Representatives”), directly or indirectly, to: (i) solicit, initiate, encourage or knowingly facilitate any inquiry, proposal or offer with respect to, any Acquisition Proposal, or any inquiry, proposal or offer that is reasonably likely to lead to any Acquisition Proposal; or (ii) enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish to any Person any information or data with respect to, or otherwise cooperate in any way with, any Acquisition Proposal.

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(b) BSCA shall: (i) immediately cease and cause to be terminated all existing discussions or negotiations with any Person conducted heretofore with respect to any Acquisition Proposal; and (ii) not terminate, waive, amend, release or modify any provision of any confidentiality or standstill agreement to which it or any of its Affiliates or Representatives is a party with respect to any Acquisition Proposal, and shall enforce the provisions of any such agreement.

(c) Notwithstanding the foregoing, if at any time following the date of this Agreement and prior to obtaining the Requisite BSCA Shareholder Approval: (i) BSCA receives a written Acquisition Proposal that the BSCA Board believes in good faith to be bona fide; such Acquisition Proposal was unsolicited and did not otherwise result from a breach of Section 6.5(a); and (iii) the BSCA Board determines in good faith that such Acquisition Proposal constitutes or is more likely than not to result in a Superior Proposal; and (iv) the BSCA Board determines in good faith (and based on the advice of outside counsel) that the failure to take the actions referred to in clause (x) or (y) below would reasonably likely constitute a breach of its fiduciary duties to the shareholders of BSCA under applicable Law, then BSCA may (x) furnish information with respect to BSCA to the Person making such Acquisition Proposal and (y) participate in discussions or negotiations with the Person making such Acquisition Proposal regarding such Acquisition Proposal; provided that prior to providing any nonpublic information permitted to be provided pursuant to clause (x) or engaging in any discussions or negotiations pursuant to clause (y), BSCA shall have entered into a confidentiality agreement with such third party on terms substantially similar to, and no less favorable to BSCA than the Confidentiality Agreement and provided that any non-public information provided to any Person given access shall have been previously provided to SCB or shall be provided to SCB prior to or concurrently with the time it is provided to such Person.

(d) In the event BSCA receives or negotiates (to the extent permitted by Section 6.5(c)) an unsolicited bona fide Acquisition Proposal that the BSCA Board concludes in good faith constitutes a Superior Proposal, BSCA may take any of the actions set forth above in Section 6.5(c), but only after: (i) BSCA promptly notifies SCB in writing at least five (5) Business Days before taking that action of its intention to do so, and specifying the reasons therefor, including the terms and conditions of, and the identity of any Person making, such Superior Proposal, and contemporaneously furnishing a copy of the Superior Proposal or relevant Alternative Acquisition Agreement and any other relevant transaction documents (it being understood and agreed that any amendment to the financial terms or any amendment to any other material term of such Superior Proposal shall require a new written notice by BSCA and a new five (5) Business Day period); and (ii) prior to the expiration of such five (5) Business Day period, SCB does not make a proposal to adjust the terms and conditions of this Agreement that the BSCA Board determines in good faith (after consultation with outside counsel and its financial advisor) after giving effect to, among other things, the payment of the Termination Fee set forth in Section 8.2(a)(ii), that such action is no longer required by its fiduciary duties to the shareholders of BSCA under applicable Law.

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(e) During the five (5) Business Day period prior to its effecting any action referred to above, BSCA shall, and shall cause its financial and legal advisors to, negotiate with SCB in good faith (to the extent SCB seeks to negotiate) regarding any revisions to the terms of the transactions contemplated by this Agreement proposed by SCB.

(f) BSCA agrees that it will promptly (and, in any event, within 24 hours) notify SCB if any inquiries, proposals or offers with respect to an Acquisition Proposal are received by, any such information is requested from, or any such discussions or negotiations are sought to be initiated or continued with, BSCA, or any of its Representatives indicating, in connection with such notice, the name of such Person and the material terms and conditions of any proposals or offers (including, if applicable, copies of any written requests, proposals or offers, including proposed agreements) and thereafter shall keep SCB informed, on a current basis, of the status and terms of any such proposals or offers (including amendments thereto) and

the status of any such discussions or negotiations, including any change in BSCA’s intentions as previously notified.

(g) BSCA agrees that any violation of the restrictions set forth in this Section 6.5 by any Representative of BSCA, whether or not such Person is purporting to act on behalf of BSCA, shall be deemed to be a material breach of this Agreement by BSCA.

(h) BSCA shall not prior to the termination of this Agreement, take any action to exempt any Person (other than SCB and its Affiliates) from the restrictions on “business combinations” or any similar provision contained in any Antitakeover Law or otherwise cause such restrictions not to apply, or agree to do any of the foregoing.

(i) BSCA agrees that, prior to the termination of this Agreement, it shall not submit to the vote of its shareholders any Acquisition Proposal (whether or not a Superior Proposal) or propose to do so.

6.6 Shareholder Recommendation.

(a) BSCA, through the BSCA Board, shall: (i) recommend to the BSCA shareholders that they approve this Agreement; (ii) include such recommendation in the Proxy Statement-Offering Circular; and (iii) publicly reaffirm such recommendation within 48 hours after a request to do so by SCB. Without limiting the generality of the foregoing, unless BSCA terminates this Agreement pursuant to Section 8.1(j), BSCA agrees that its obligations to convene and hold the BSCA Shareholders Meeting as soon as practicable under Section 6.7(b) shall not be affected by the commencement, public proposal, public disclosure or communication to BSCA or any other Person of any Acquisition Proposal. In any case in which the BSCA Board submits this Agreement to its shareholders after an Adverse Change in Recommendation the Proxy Statement-Offering Circular and any and all accompanying materials including the proxy card shall be identical in form and content to the Proxy Statement-Offering Circular that would have been prepared by BSCA had no Adverse Recommendation Change occurred, except for appropriate changes to the disclosure in the Proxy Statement-Offering Circular stating that such Adverse Recommendation Change has been made and, if applicable, describing matters relating to the Superior Proposal or other event giving rise to the Adverse Recommendation Change.

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(b) Notwithstanding Section 6.6(a), in the event the BSCA Board determines that the Acquisition Proposal is a Superior Proposal pursuant to Section 6.5(c) and BSCA has complied with all of the provisions of Section 6.5, the BSCA Board may effectuate an Adverse Recommendation Change and/or cause or permit BSCA to enter into an Alternate Acquisition Agreement.

(c) SCB, through the SCB Board, shall: (i) recommend to the SCB shareholders that they approve this Agreement; (ii) include such recommendation in the Proxy Statement-Offering Circular; and (iii) publicly reaffirm such recommendation within 48 hours after a request to do so by BSCA.

6.7 Requisite Shareholder Approvals.

(a) Proxy Statement-Offering Circular. For the purposes of holding the BSCA Shareholders Meeting and the SCB Shareholders Meeting, SCB shall draft and prepare, and BSCA shall cooperate in the preparation of a proxy statement and offering circular satisfying all applicable requirements of applicable state and federal securities Laws, and the rules and regulations thereunder (such proxy statement-offering circular in the form mailed to the shareholders of BSCA and SCB, together with any and all amendments or supplements thereto and accompanying materials, including proxy cards, being herein referred to as the “Proxy Statement-Offering Circular”). SCB shall file a draft of the Proxy Statement-Offering Circular, with the DFPI in connection with the permit application as described in Section 6.14. SCB shall use its best efforts to have the Proxy Statement-Offering Circular approved by the DFPI as promptly as practicable after such filing, and following receipt of the DFPI Permit, BSCA shall thereafter promptly mail the Proxy Statement-Offering Circular to BSCA’s shareholders and SCB shall thereafter promptly mail the Proxy Statement-Offering Circular to SCB’s shareholders. SCB shall also use its commercially reasonable efforts to obtain all necessary state securities law or “Blue Sky” permits and approvals required to carry out the transactions contemplated by this Agreement, and BSCA shall furnish all information concerning BSCA, and the holders of BSCA Common Stock, as may be reasonably requested in connection with any such action. BSCA shall provide SCB with any information concerning itself that SCB may reasonably request in connection with the drafting and preparation of the Proxy Statement- Offering Circular, and SCB shall notify BSCA promptly of the receipt of any comments of the DFPI or any blue sky administrator with respect to the Proxy Statement-Offering Circular and of any requests by the DFPI or any blue sky administrator for any amendment or supplement thereto or for additional information and shall promptly provide to BSCA copies of all correspondence between SCB or any of its representatives and the DFPI. SCB shall give BSCA and its counsel the opportunity to review and comment on the Proxy Statement-Offering Circular prior to its being filed with the DFPI and shall give BSCA and its counsel the opportunity to review and comment on all amendments and supplements to the Proxy Statement-Offering Circular and all responses to requests for additional information and replies to comments prior to their being filed with, or sent to, the DFPI. SCB and BSCA agree to use commercially reasonable efforts, after consultation with the other party hereto, to respond promptly to all such comments of and requests by the DFPI and to cause the Proxy Statement-Offering Circular and all required amendments and supplements thereto to be mailed to the holders of BSCA Common Stock entitled to vote at the BSCA Shareholders Meeting and the holders of SCB Common Stock entitled to vote at the SCB Shareholders Meeting at the earliest practicable time. BSCA and SCB shall promptly notify the other party if at any time it becomes aware that the Proxy Statement- Offering Circular contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements contained therein, in light of the circumstances under which they were made, not misleading. In such event, BSCA shall cooperate with SCB in the preparation of a supplement or amendment to such Proxy Statement- Offering Circular that corrects such misstatement or omission, and SCB shall file an amended Proxy Statement-Offering Circular with the DFPI, as required, and shall mail such supplement or amendment to holders of BSCA Common Stock entitled to vote at the BSCA Shareholders Meeting and to the holders of SCB Common Stock entitled to vote at the SCB Shareholders Meeting at the earliest practicable time.

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(b) Shareholder Meetings and Approval. As promptly as practicable after the receipt of the DFPI Permit, BSCA shall take all steps necessary to give notice of, convene and hold a meeting of its shareholders (the “BSCA Shareholders Meeting”) and SCB shall take all steps necessary to give notice of, convene and hold a meeting of its shareholders (the “SCB Shareholders Meeting”), for the purpose of considering this Agreement, and for such other purposes as may be, in their reasonable judgment, necessary or desirable. Notwithstanding anything to the contrary contained in this Agreement, neither BSCA nor SCB shall be required to hold a shareholders meeting if this Agreement is terminated pursuant to Section 8.1 prior to the scheduled time of their respective shareholders meeting.

6.8 Post-Merger SCB and BOSC Boards. No later than immediately prior to the Effective Time, each of SCB and BOSC shall take all action necessary to appoint or elect, effective as of the Effective Time, one member of the BSCA Board as a new director to each of the SCB Board and the BOSC Board, to serve until the first annual meeting of shareholders of each of SCB and BOSC, following the Effective Time and until his or her successor is elected and qualified. SCB shall include such individual on the list of nominees for director presented by the SCB and for which the SCB Board shall solicit proxies at the first annual meeting of shareholders of SCB following the Effective Time and shall cause such individual to be reelected to the BOSC Board at the first annual meeting of shareholders of BOSC following the Effective Time, provided that such nomination, solicitation and reelection would not violate the fiduciary duties of the SCB Board. As a director of SCB and BOSC, such individual shall be entitled to the same compensation, benefit and indemnification arrangements as other non-employee directors of SCB and BOSC. Such individual shall be Frank D. Di Tomaso or, if Mr. Di Tomaso is unable or unwilling to serve on the SCB Board and BOSC Board as of the Effective Time, then another member of the BSCA Board who is mutually agreeable to BOSC and SCB, in their sole and absolute discretion.

6.9 Notification of Certain Matters. BSCA shall give prompt notice to SCB and SCB shall give prompt notice to BSCA, of any fact, event or circumstance known to it that: (i) is reasonably likely, individually or taken together with all other facts, events and circumstances known to such party, to result in any Material Adverse Effect with respect to such party; (ii) would cause or constitute a material breach of any of its representations, warranties, covenants or agreements contained herein; or (iii) lead to litigation or regulatory action that would delay or prevent the consummation of the transactions contemplated by this Agreement.

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6.10 Consents. BSCA shall use commercially reasonable efforts to obtain the waiver, approval and/or consents to assignment for all BSCA Material Contracts so identified as requiring consent on the Schedule 5.2(l) of the BSCA Disclosure Schedule (the “Consents”). Where required by law or by agreements with third parties, BSCA shall use commercially reasonable efforts to obtain from third parties, prior to the Closing Date, all other consents to the transactions contemplated by this Agreement.

6.11 Antitakeover Statutes. SCB, BOSC and BSCA and their respective Boards of Directors shall, if any Antitakeover Law or similar statute becomes applicable to this Agreement and the transactions contemplated hereby, take all action reasonably necessary to ensure that the transactions contemplated hereby may be consummated as promptly as practicable on the terms contemplated hereby and otherwise to minimize the effect of Antitakeover Law or similar statute on this Agreement and the transactions contemplated hereby.

6.12 Notice to BSCA Customers. On and after the receipt of all Regulatory Approvals and shareholder approvals required to consummate the transactions contemplated hereby, BSCA shall permit BOSC to provide one or more written notices (which may be joint notices from BSCA and BOSC) to customers of BSCA to describe the proposed transactions, the effect on customers and planned transition procedures. BSCA shall have the right to review and approve the substance of any such communications, provided that BSCA shall not unreasonably withhold, delay or condition its approval.

6.13 Indemnification; Directors and Officers Insurance.

(a) For a period of six (6) years from and after the Effective Time, SCB shall indemnify and hold harmless, to the fullest extent permitted under applicable Law and the BSCA Articles and the BSCA Bylaws (and shall also advance expenses as incurred to the fullest extent permitted under applicable Law and the BSCA Articles and the BSCA Bylaws), each present and former director and officer of BSCA (in each case, when acting in such capacity) determined as of the Effective Time (collectively, the “Indemnified Parties”) against any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of matters existing or occurring at or prior to the Effective Time regarding BSCA and such Person’s service as a director or officer of BSCA, including the transactions contemplated by this Agreement; provided that the Indemnified Party to whom expenses are advanced provides an undertaking to repay such advances if it is ultimately determined that such Indemnified Party is not entitled to indemnification by SCB.

(b) Any Indemnified Party wishing to claim indemnification under Section 6.13(a), upon learning of any claim, action, suit, proceeding or investigation described above, must promptly notify SCB; provided that failure to so notify will not affect the obligations of SCB under Section 6.13(a) unless and to the extent that SCB is actually and materially prejudiced as a consequence, including to the extent the failure to so notify impacts D&O Insurance (as defined below) coverage.

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(c) Prior to the Effective Time, BSCA shall, or if BSCA is unable to, SCB as of the Effective Time shall, obtain at the cost and expense of BSCA, “tail” directors & officers and cyber & privacy liability combined insurance (providing only for the Side A coverage for Indemnified Parties where the existing policies also include Side B coverage for BSCA) with a claims period of six (6) years from and after the Effective Time with respect to directors’ and officers’ liability insurance and fiduciary liability insurance (collectively, “D&O Insurance”) with benefits and levels of coverage at least as favorable to the Indemnified Parties as BSCA’s existing policies with respect to matters existing or occurring at or prior to the Effective Time (including in connection with this Agreement or the transactions or actions contemplated hereby); provided, however, that in no event shall BSCA expend for “tail” insurance policies a premium amount in excess of 250% of the annual premium amount in effect for such coverage as of the Effective Time (the “Maximum Amount”); provided, further, that if the premium for such insurance coverage exceeds the Maximum Amount BSCA and SCB shall obtain a policy with the greatest coverage available for a cost not exceeding the Maximum Amount.

(d) The provisions of this Section 6.13 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party as if he or she was a party to this Agreement, and shall be binding upon the assigns and successors of SCB.

6.14 California Permit.

(a) Preparation and Filing of Permit Application. SCB and BSCA contemplate that all shares of SCB Common Stock exchanged for shares of BSCA Common Stock in the Merger shall be exempt from the Securities Act under the provisions of Section 3(a)(10) of such act. SCB shall promptly prepare and file an appropriate application with the Commissioner for a permit to issue and exchange securities as described in Section 25142 of the CGCL and as will be in compliance with the California Corporate Securities Law of 1968 (the “DFPI Permit”). The DFPI Permit shall approve the issuance of a sufficient number of shares of SCB Common Stock to complete the exchange of shares of BSCA Common Stock for shares of SCB Common Stock pursuant to Article III of this Agreement. SCB and BSCA shall cooperate in all reasonable respects with regard to the preparation of the related Proxy Statement-Offering Circular in preliminary form so it can be filed with the Commissioner for purposes of a permit application under Section 25142 of the CGCL. The Proxy Statement-Offering Circular shall constitute a disclosure document for the offer and issuance of the shares of SCB Common Stock to be received by holders of BSCA Common Stock in the Merger and, a proxy statement with respect to the solicitation of the shareholders of BSCA and the shareholders of SCB with respect to approval of this Agreement and the transactions contemplated hereby (including the Merger), and shall include (i) statements to the effect that the BSCA Board has unanimously recommended that holders of BSCA Common Stock vote in favor of the approval of this Agreement and the transactions contemplated hereby (including the Merger) and the SCB Board has unanimously recommended that holders of SCB Common Stock vote in favor of the approval of this Agreement and the transactions contemplated hereby (including the Merger); and (ii) such other information as BSCA and SCB may agree is required or advisable to be included therein. SCB and BSCA shall each provide promptly to the other such information concerning its business and financial condition and affairs as may be required or appropriate for inclusion in the application for the DFPI Permit or in the Proxy Statement-Offering Circular (or other proxy or solicitation materials), and shall cause its legal counsel, financial advisors and independent auditors to cooperate with the other party’s legal counsel, financial advisors and independent auditors in the preparation of the permit application and the Proxy Statement-Offering Circular (and any other proxy or solicitation materials).

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(b) Issuance of Permit. SCB and BSCA shall use their best efforts to have the DFPI Permit (and any necessary or appropriate amendments or supplements thereto) issued by the Commissioner under the California Corporate Securities Law of 1968 as soon as practicable.

6.15 Benefit Plans.

(a) Termination of BSCA Benefit Plans. Prior to the Closing Date, BSCA shall take all action necessary to terminate: (i) all options to purchase BSCA Common Stock and all stock option agreements corresponding thereto that have not been exercised prior to the Closing Date in accordance with the terms of the respective BSCA Benefit Plan or assumed by SCB for BSCA Former Employees pursuant to Section 3.2; and (ii) any other BSCA Benefit Plans that SCB may specify; provided, however, that SCB must give prior advance written notice of any such request for termination at least thirty (30) days prior to the Closing Date. Prior to the Closing Date, BSCA shall take all action necessary to terminate all BSCA 401(k) Plans. As soon as reasonably practicable following the Effective Time, SCB or its Affiliates shall use commercially reasonable efforts to provide that a defined contribution qualified retirement plan with a cash or deferred arrangement established and maintained by SCB or its Affiliates shall accept rollovers from any terminated BSCA 401(k) Plans to the extent elected by any employees of BSCA who continue to be employed by BOSC after the Effective Time, including the rollover of any participant 401(k) loans. The parties hereto agree to cooperate as reasonably necessary so as not to place any participant 401(k) loan with respect to a BSCA employee’s rollover account into default during the period from the Effective Time until the rollover is completed; provided, that such employee continues making loan repayments on a timely basis during such period as may be required to prevent a loan default. Prior to the Closing Date, BSCA shall take all action necessary to terminate the Bank of Santa Clarita Employee Stock Ownership Plan (the “ESOP”) and distribute in-kind the BSCA stock allocated to the account each participant in the ESOP.

(b) Participation in SCB Benefit Plans. As of and following the Effective Time, the employees of BSCA as of the Effective Time who continue to be employed by BOSC after the Effective Time (collectively, the “Former BSCA Employees”) shall be eligible to participate in health, vacation and other non-equity based employee benefit plans of SCB or BOSC, as applicable in which the similarly situated employees of BOSC participate (the “SCB Benefit Plans”), to the same extent as such similarly situated employees of BOSC participate. With respect to each SCB Benefit Plan, SCB and BOSC agree that for purposes of determining eligibility to participate, vesting and benefits (other than benefit accruals under any defined benefit pension plan), service with BSCA shall be treated as service with BOSC; provided, however, that such service shall not be recognized to the extent that such recognition would result in a duplication of benefits. To the extent permitted by any insurer of an SCB Benefit Plan, SCB or BOSC shall cause, to the extent permissible, such SCB Benefit Plan to waive: (i) any pre-existing condition restriction that did not apply under the terms of any analogous BSCA Benefit Plan immediately prior to the Effective Time; and (ii) any waiting period limitation or evidence of insurability requirement which would otherwise be applicable to a Former BSCA Employee on or after the Effective Time to the extent such Former BSCA Employee had satisfied any similar limitation or requirement under an analogous BSCA Benefit Plan prior to the Effective Time. In addition, to the extent permitted by any insurer of a SCB Benefit Plan, SCB or BOSC shall cause, to the extent permissible, deductibles, co-payments and out-of-pocket maximums paid on or before the Closing Date by any Former BSCA Employee (or covered dependent thereof) to be taken into account for purposes of satisfying the corresponding deductible, co-payments and out-of-pocket maximum provisions as though such amounts had been paid in accordance with the terms and conditions of the SCB Benefit Plan.

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(c) Severance Program/Retention Program.

(i) Other than as set forth on Schedule 6.15(c) of the BSCA Disclosure Schedule, any former employee of BSCA (excluding any such employee who is party to an employment agreement, change-in-control agreement or retention bonus agreement which provides for severance payments) whose employment is terminated other than for cause, (with “cause” defined as willful breach of a policy of BOSC, willful material failure to perform such employee’s duties and obligations to BOSC or such employee’s fraud, gross negligence, personal material dishonesty in connection with performance of duties to BOSC or willful misconduct in the course of performing such employee’s duties) by BOSC within six (6) months following the Closing Date, shall be entitled to receive severance payments in an amount equal to two (2) weeks base pay for the first full year of service plus one (1) week base pay for each full year of service thereafter, based upon the employee’s date of hire by BSCA (plus a prorated amount for each partial year of service, such service determined by taking into account service with BSCA and BOSC), with a minimum of four (4) weeks of base pay; provided, however, that for purposes of this Section 6.15 an employee shall also be considered to be terminated by BOSC if such individual resigns after: (i) any reduction in base salary or incentive compensation in excess of ten percent (10%) from that paid or made available immediately prior to the Closing Date; or (ii) being required to be based at any office or location more than twenty (20) miles from where the individual was based on the date immediately preceding the Closing Date, except for travel reasonably required in the performance of such employee’s responsibilities.

(ii) Prior to the Effective Time, SCB and BOSC will consider, in consultation with BSCA, establishing an employee retention program and allocating pursuant to such program cash awards to certain BSCA employees to remain in the employ of BSCA through the Closing and/or upon completion of the system integration process between BSCA, on the one hand, and SCB and BOSC, on the other hand.

(d) Nothing contained herein, express or implied, is intended to or shall (i) confer upon any current or former employee or independent contractor of BSCA (A) any third- party beneficiary or other rights to enforce the provisions of this Section 6.15 or (B) any right to employment or continued employment for any period or continued receipt of any specific employee benefit or other term or condition of employment with BOSC or any of its Affiliates, or (ii) constitute an amendment to or any other modification of any SCB Benefit Plan. Notwithstanding the foregoing, nothing herein shall prevent SCB and BOSC from adjusting the compensation or benefits of any employee if SCB and BOSC (as applicable) deems, in its reasonable judgment, that such adjustments are necessary due to the business impact of COVID- 19.

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6.16 Certain Policies. Prior to the Closing Date and after receipt of all Regulatory Approvals, BSCA shall, consistent with GAAP and applicable banking Laws and regulations, to the extent requested by SCB, modify or change any of its accounting policies and practices (including loan classifications and levels of reserves) and make accounting adjustments, if any, so as to be applied on a basis that is consistent with that of SCB; provided, however, that no such modifications or changes need be made prior to the satisfaction of the condition set forth in Section 7.1(a); and further provided that in any event, no accrual or reserve made by BSCA pursuant to this Section 6.16 shall constitute or be deemed to be a breach, violation of or failure to satisfy any representation, warranty, covenant, agreement, condition or other provision of this Agreement or otherwise be considered in determining whether any such breach, violation or failure to satisfy shall have occurred. The recording of any such adjustments shall not be deemed to imply any misstatement of previously furnished financial statements or information and shall not be construed as concurrence of BSCA or its management with any such adjustments.

6.17 Updated Schedules. On a date five (5) Business Days prior to the proposed Closing Date, SCB and BOSC on the one hand and BSCA on the other hand, shall each modify any Disclosure Schedule to this Agreement which such party has provided in connection with this Agreement or add any Schedule or Schedules for the purpose of making the representations and warranties to which any such Schedule relates true and correct in all material respects as of such date, whether to correct any misstatement or omission in any Schedule or to correct any additional information obtained by such party subsequent to the date any Schedule was previously delivered by the party to the other party or parties. Notwithstanding the foregoing, any updated Schedule will not have the effect of making any representation or warranty contained in this Agreement true and correct in any respect for the purposes of Section 7.2(a) or Section 7.3(a), as applicable.

6.18 Tax Matters. It is intended that the Merger shall constitute a reorganization pursuant to Section 368(a) of the Code, and that this Agreement shall constitute a “plan of reorganization” as that term is used in Sections 354 and 361 of the Code and Section 1.368-2(g) of the Treasury Regulations. From and after the date of this Agreement and until the Closing, each party hereto shall use commercially reasonable efforts to cause the Merger to qualify as a reorganization pursuant to Section 368(a) of the Code. Each of the parties agrees to prepare and file all U.S. federal income Tax Returns in accordance with this Section 6.18 and shall not take any position inconsistent therewith in the course of any audit, litigation, or other legal proceeding with respect to U.S. federal income Taxes; provided that nothing contained herein shall prevent any party from settling any proposed deficiency or adjustment by any Governmental Authority based upon or arising out of such treatment, and no party shall be required to litigate before any court any proposed deficiency or adjustment by any Governmental Authority challenging such treatment.

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6.19 Confidentiality.

(a) SCB, BOSC and BSCA agree that from and after the date of this Agreement, the terms of this Section 6.19 shall govern the obligations, duties and responsibilities of the parties to this Agreement regarding the confidentiality and use of all information provided or furnished in connection with this Agreement, including all information contained in the Disclosure Schedules.

(b) From the date of this Agreement until the later of: (i) the second anniversary of the Closing Date; (ii) the second anniversary of the date of termination of this Agreement in accordance with its terms; or (iii) such date as is required by applicable Law (the “Confidentiality Period”), BSCA agrees to: (x) treat and hold confidentially and not to disclose any Confidential Information of SCB or BOSC; (y) refrain from using any of the Confidential Information of SCB or BSCA except in connection with this Agreement or otherwise for the benefit of SCB or BOSC; and (z) deliver promptly to SCB and BOSC or destroy, at the written request and option of SCB and BOSC, all tangible embodiments (and all copies) of the Confidential Information of SCB or BOSC which are in BSCA’s possession, except as otherwise permitted herein. If BSCA is requested or required (by oral question or written request for information or documents in any proceeding) by any Governmental Authority of competent jurisdiction to disclose any Confidential Information of SCB or BOSC, to the extent permitted by applicable Law, BSCA will notify and consult with SCB and BOSC promptly upon receipt of the request or becoming aware of the requirement; provided that BSCA shall not be required to provide such notification or consult with SCB and BOSC in the event of any such requested or required disclosure in connection with a routine audit or examination by a bank examiner or auditor of BSCA that does not specifically target SCB, BOSC or the transactions contemplated hereby.

(c) During the Confidentiality Period, SCB and BOSC agree to: (i) treat and hold confidentially and not to disclose any Confidential Information of BSCA; (ii) refrain from using any of the Confidential Information of BSCA except in connection with this Agreement and the Merger; and (iii) deliver promptly to BSCA or destroy, at the written request and option of BSCA, all tangible embodiments (and all copies) of the Confidential Information of BSCA which are in SCB’s or BOSC’s possession, except as otherwise permitted herein. If SCB or BOSC is requested or required (by oral question or written request for information or documents in any proceeding) by any Governmental Authority of competent jurisdiction to disclose any Confidential Information of BSCA, to the extent permitted by applicable Law, SCB and BOSC will notify and consult with BSCA promptly upon receipt of the request or becoming aware of the requirement; provided that SCB and BOSC shall not be required to provide such notification or consult with BSCA in the event of any such requested or required disclosure in connection with a routine audit or examination by a bank examiner or auditor of SCB or BOSC or any of its Affiliates that does not specifically target BSCA or the transactions contemplated hereby.

(d) For purposes of this Agreement, “Confidential Information” means all of the following information of the respective party, whether received before or during the period from the date of this Agreement until the earlier of the Closing of the Merger or the termination of this Agreement in accordance with Article VIII: (i) confidential information and trade secrets, including any of the same comprising the identity, lists or descriptions of any customers (including any confidential information of customers), referral sources or organizations; (ii) financial statements, cost reports or other financial information; (iii) contract proposals, or bidding information; (iv) business plans and training and operations methods and manuals; (v) personnel records; (vi) information concerning fee structures; (vii) management systems, policies or procedures, including related forms and manuals; (viii) minute books, Tax records, papers and records relating to the assets, stock, properties, operations, liabilities, regulatory filings, shareholder meetings, shareholder lists, and litigation; and (ix) all books and records not already included in clauses (i) through (viii) of this definition. Confidential Information shall not include any information: (A) which is disclosed pursuant to subpoena or other legal process; (B) which is disclosed by any Person not in violation or breach of an obligation or agreement regarding confidentiality; or (C) which is or becomes readily ascertainable from publicly available sources. Notwithstanding anything to the contrary contained herein, subject to the foregoing, Confidential Information relating to BSCA shall be deemed BSCA’s Confidential Information until such time, if ever, as the Closing occurs and shall be deemed the Confidential Information of SCB and BOSC at such time, if ever, as the Closing does occur.

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(e) Notwithstanding the foregoing provisions of this Section 6.19: (i) Confidential Information that is contained in an archived computer system backup in accordance with a security and/or disaster recovery procedure need not be returned or destroyed; (ii) the party obligated to return Confidential Information need not return the Confidential Information if retention is required by applicable law (such as during pending litigation); and (C) the party’s accountants and attorneys shall be entitled to retain for their records a copy of any work product produced by them in connection with this Agreement and the Merger; provided, however, that in each case such Confidential Information shall remain subject to the confidentiality provisions of this Agreement.

ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE TRANSACTION

7.1 Conditions to Each Party’s Obligation to Effect the Transactions Contemplated Hereby. The respective obligation of each of the parties hereto to consummate the transactions contemplated hereby (the “Closing”) is subject to the fulfillment or, to the extent permitted by applicable Law, written waiver by the parties hereto prior to the Closing Date, of each of the following conditions:

(a) Regulatory Approvals. All Regulatory Approvals required to consummate the transactions contemplated hereby, including but not limited to the Merger, shall have been obtained and shall remain in full force and effect and all statutory waiting periods in respect thereof shall have expired, and no such approvals shall contain any non-standard conditions, restrictions or requirements which SCB or BSCA reasonably determine in good faith would, individually or in the aggregate, materially reduce the benefits of the transactions contemplated hereby to such a degree that SCB or BSCA, as the case may be, would not have entered into this Agreement had such conditions, restrictions or requirements been known at the date hereof (any such condition, restriction or requirement, a “Burdensome Condition”).

(b) No Injunction. No Governmental Authority of competent jurisdiction shall have enacted, issued, promulgated, enforced or entered any statute, rule, regulation, judgment, decree, injunction or other order (whether temporary, preliminary or permanent) which is in effect and prohibits or makes illegal consummation of the transactions contemplated hereby.

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(c) Requisite Shareholder Approvals. This Agreement shall have been duly approved by the affirmative vote of at least two-thirds of the number of the outstanding shares of BSCA Common Stock in accordance with Section 215a(a)(2) of the NBA (the “Requisite BSCA Shareholder Approval”), by the affirmative vote of at least two-thirds of the number of outstanding shares of BOSC Common Stock in accordance with Section 215a(a)(2) of the NBA and a majority of the outstanding shares of SCB Common Stock in accordance with Section 1202 of the CGCL (the “Requisite SCB Shareholder Approval”).

(d) Issuance of Permit. The DFPI Permit (and any necessary or appropriate amendments or supplements thereto) shall have been issued by the Commissioner, after a hearing before the DFPI upon the fairness of the terms and conditions of the issuance and exchange of shares of SCB Common Stock for shares of BSCA Common Stock, no stop order denying effectiveness to, or suspending or revoking the effectiveness of such qualification shall be in effect and no proceedings for such purpose shall have been initiated or threatened by or before the Commissioner, and the shares of SCB Common Stock qualified under the DFPI Permit shall have received all state securities and “Blue Sky” permits or approvals required to consummate the transactions contemplated by this Agreement.

7.2 Conditions to Obligations of BSCA. The obligations of BSCA to consummate the transactions contemplated hereby are also subject to the fulfillment or written waiver by BSCA prior to the Closing Date of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of SCB and BOSC set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except that representations and warranties that by their terms speak as of the date of this Agreement or some other date shall be true and correct as of such date), except where the failure to be so true and correct (without giving effect to any limitation as to “materiality” or “Material Adverse Effect” set forth therein), individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on SCB or BOSC; provided that the representations and warranties of SCB and BOSC: (i) set forth in Section 5.3(a), Section 5.3(d), Section 5.3(e) and Section 5.3(g) shall be true and correct as of such dates in all respects; and (ii) set forth in Section 5.3(b) and Section 5.3(h) shall be true and correct as of such dates in all respects other than for such failures to be true and correct as are de minimis in effect, and BSCA shall have received a certificate, dated the Closing Date and signed on behalf of SCB by the President and Chief Executive Officer and the Chief Financial Officer of SCB to such effect.

(b) Performance of Obligations of SCB and BOSC. SCB and BOSC shall have performed in all material respects all obligations required to be performed by them under this Agreement at or prior to the Closing Date, and BSCA shall have received a certificate, dated the Closing Date, signed on behalf of SCB and BOSC by the President and Chief Executive Officer and the Chief Financial Officer of SCB and BOSC, as applicable, to such effect.

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(c) No Material Adverse Effect. There shall not have occurred any event, circumstance, change, occurrence or state of facts that, individually or in the aggregate with all such other events, circumstances, changes occurrences or states of facts, has resulted in or would reasonably be expected to result in, a Material Adverse Effect on SCB.

(d) Payment of Merger Consideration. SCB shall have delivered the Merger Consideration to the Exchange Agent and the Exchange Agent shall have provided BSCA with a certificate evidencing such delivery.

(e) Appointment of BSCA Director to the SCB and BOSC Boards. SCB and BOSC shall have resolved to appoint Frank Di Tomaso, Jr. (or such other person as provided in Section 6.8 hereof) to serve on the SCB Board and the BOSC Board immediately following the Effective Time.

(f) Other Actions. SCB shall have furnished BSCA with such certificates of its officers or others and such other documents to evidence fulfillment of the conditions set forth in Sections 7.1 and 7.2 as BSCA may reasonably request.

7.3 Conditions to Obligations of SCB and BOSC. The obligations of SCB and BOSC to consummate the Merger and the other transactions contemplated hereby are also subject to the fulfillment or written waiver by SCB prior to the Closing Date of each of the following conditions:

(a) Representations and Warranties. The representations and warranties of BSCA set forth in this Agreement shall be true and correct as of the date of this Agreement and as of the Closing Date as though made on and as of the Closing Date (except that representations and warranties that by their terms speak as of the date of this Agreement or some other date shall be true and correct as of such date), except where the failure to be so true and correct (without giving effect to any limitation as to “materiality” or “Material Adverse Effect” set forth therein), individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on SCB, BOSC or BSCA, provided that the representations and warranties of BSCA: (i) set forth in Section 5.2(a), Section 5.2(d), Section 5.2(e), Section 5.2(g) and Section 5.2(m) shall be true and correct as of such dates in all respects; and (ii) set forth in Section 5.2(b) shall be true and correct as of such dates in all respects other than for such failures to be true and correct as are de minimis in effect, and SCB and BOSC shall have received a certificate, dated the Closing Date and signed on behalf of BSCA by the President and Chief Executive Officer and the Chief Financial Officer of BSCA to such effect.

(b) Performance of Obligations of BSCA. BSCA shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and SCB and BOSC shall have received a certificate, dated the Closing Date and signed on behalf of BSCA by the President and Chief Executive Officer and the Chief Financial Officer of BSCA to such effect.

(c) Consents. BSCA shall have delivered fully executed Consents as required by Section 6.10.

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(d) FIRPTA Certificate. BSCA shall have delivered to SCB and BOSC a properly executed statement from BSCA that meets the requirements of Treasury Regulations Sections 1.1445-2(c)(3) and 1.897-2(h)(1), dated as of the Closing Date and in form and substance reasonably satisfactory to SCB.

(e) Dissenters’ Rights. Dissenters’ rights shall not have been exercised and perfected by more than ten percent (10%) of the outstanding BSCA Common Stock.

(f) Resignations. SCB shall have received a written resignation from each of the directors of BSCA, effective as of the Effective Time.

(g) Separation and Release Agreements. Not later than 30 days prior to the Closing Date, BSCA shall have delivered the Separation and Release Agreement in the form of Exhibit F to Frank D. Di Tomaso, Jr (the “Separation and Release Agreement”) and the Separation and Release Agreement in the form of Exhibit F-1 (the “Executive Officer Separation and Release Agreement”) to the executive officers of BSCA as specified by SCB and BOSC, in writing, Mr. Di Tomaso shall have entered into, executed and delivered to BSCA, SCB, and BOSC the Separation and Release Agreement with BSCA and the executive officers of BSCA so identified by SCB and BOSC shall each have entered into, executed and delivered to BSCA, SCB, and BOSC an Executive Officer Separation and Release Agreement, which agreements shall have become irrevocable and shall not have been rescinded or amended without SCB’s and BOSC’s prior written approval, in their sole and absolute discretion.

(h) Change in Control Payments. BSCA shall have accrued the amounts and expenses to be made under its employment agreements and change in control agreements identified on Schedule 5.2(l) of the BSCA Disclosure Schedule, BSCA shall have received duly executed waiver and release agreements from each recipient of any such payments in such form as is reasonably acceptable to SCB and BOSC, and such payments will, to the extent permissible under applicable Law, be made concurrently with the Effective Time or as soon thereafter as such agreements shall have become irrevocable and shall not have been rescinded or amended without SCB’s or BOSC’s prior written approval, in their sole and absolute discretion..

(i) Termination of BSCA Stock Options. BSCA shall have terminated all stock option agreements that have not been exercised prior to the Closing Date in accordance with the terms of the respective BSCA Benefit Plan or are not Assumed Options.

(j) Non-Solicitation and Confidentiality Agreements. The Non-Solicitation and Confidentiality Agreements in the form of Exhibit B hereto shall have been executed and delivered by each director listed in Exhibit B-1 hereto simultaneously with the execution of this Agreement and such agreement shall continue to be in full force and effect as of the Closing Date. The Non-Solicitation, Non-Competition and Confidentiality Agreement in the form of Exhibit C hereto shall have been executed and delivered by Frank D. Di Tomaso Jr. simultaneously with the execution of this Agreement and shall continue to be in full force and effect as of the Closing Date.

(k) Closing Financial Statements. At least five (5) Business Days prior to the Closing Date, BSCA shall have provided SCB and BOSC with BSCA’s financial statements presenting the financial condition of BSCA as of the close of business on the last day of the month ended prior to the Effective Time (“Measurement Date”) and its results of operations for the period from January 1, 2021 through the close of business on the Measurement Date (which shall be prepared in all material respects in accordance with GAAP and regulatory accounting principles and other applicable legal and accounting requirements) and shall be accompanied by a certificate of BSCA’s Chief Financial Officer, dated as of the day immediately prior to the delivery of such BSCA financial statements, that such financial statements continue to reflect accurately as of the date of the certificate, the financial condition of BSCA in all material respects. In addition, on the day immediately prior to the Closing Date, BSCA shall deliver to SCB and BOSC a certificate of BSCA’s Chief Financial Officer, dated as of the delivery date, that: (i) BSCA has expensed, in full, all BSCA Transaction Expenses; and (ii) no material adverse change in the financial condition of BSCA has occurred between the Measurement Date and the day immediately prior to the Closing Date.

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(l) No Material Adverse Effect. There shall not have occurred any event, circumstance, change, occurrence or state of facts that, individually or in the aggregate with all such other events, circumstances, changes occurrences or states of facts, has resulted in or would reasonably be expected to result in, a Material Adverse Effect on BSCA or SCB.

(m) Minutes Books. BSCA shall have delivered to SCB and BOSC the minute books, stock transfer records, corporate seal and other materials and documents related to the corporate administration of BSCA.

(n) Taxes. BSCA shall have delivered to SCB and BOSC certificate(s) dated as of a date not earlier that the fifth (5^th) Business Day prior to the Closing Date executed by the appropriate officials of the State of California as to the payment of all applicable state Taxes by BSCA.

(o) Corporate Status. SCB and BOSC shall have received certificate(s) as of a date not earlier than the fifth (5^th) Business Day prior to the Closing executed by appropriate officials for the State of California as to the good standing (corporate status) of BSCA.

(p) Employment Agreement. The Employment Agreement in the form of Exhibit C-1 hereto that was executed and delivered by Frank D. Di Tomaso Jr. simultaneously with the execution of this Agreement, shall be in full force and effect as of the Closing Date and shall not have been rescinded or amended without SCB’s and BOSC’s prior written approval, in their sole an absolute discretion.

(q) ESOP Termination. The ESOP shall have been terminated, shares of BSCA Common Stock properly distributed to the account of each participant in the ESOP, and BSCA shall have delivered to SCB and BOSC a certificate of BSCA’s Chief Financial Officer dated as of the Closing Date, in a form reasonably acceptable to SCB and BOSC, confirming that all such action has been fully and lawfully completed.

(r) Financial Condition. On the day immediately prior to the Closing Date the BSCA Adjusted Shareholders’ Equity shall not be less than $40,774,000.

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(s) Other Actions. BSCA shall have furnished SCB and BOSC with such certificates of its officers or others and such other documents to evidence fulfillment of the conditions set forth in Sections 7.1 and 7.3, as SCB and BOSC may reasonably request.

ARTICLE VIII
TERMINATION

8.1 Termination. This Agreement may be terminated, and the transactions contemplated hereby may be abandoned, at any time prior to the Effective Time:

(a) Mutual Consent. By the mutual consent in writing of SCB, BOSC and BSCA.

(b) Breach.

(i) By BSCA, if SCB or BOSC shall have breached or failed to perform any of its representations, warranties, covenants or agreements contained herein or if any representation or warranty of SCB or BOSC shall have become untrue, which breach or failure to perform or to be true, either individually or in the aggregate, if occurring or continuing at the Effective Time (A) would result in the failure of any of the conditions set forth in Sections 7.1 or 7.2 and (B) cannot be or has not been cured by the earlier of (X) the Outside Date (as hereinafter defined) and (Y) 30 days after the giving of written notice to SCB and BOSC of such breach or failure; provided, that BSCA shall not have the right to terminate this Agreement pursuant to this Section 8.1(b)(i) if BSCA is then in material breach of any of its covenants or agreements set forth in this Agreement; or

(ii) By SCB or BOSC, if BSCA shall have breached or failed to perform any of its representations, warranties, covenants or agreements set forth in this Agreement (other than with respect to a breach of Section 6.5 or 6.6 as to which Section 8.1(d) shall apply), or if any representation or warranty of BSCA shall have become untrue, which breach or failure to perform or to be true, either individually or in the aggregate, if occurring or continuing at the Effective Time (A) would result in the failure of any of the conditions set forth in Section 7.1 or 7.3 and (B) cannot be or has not been cured by the earlier of (X) the Outside Date and (Y) 30 days after the giving of written notice to BSCA of such breach or failure; provided, that SCB and BOSC shall not have the right to terminate this Agreement pursuant to this Section 8.1(b)(ii) if SCB or BOSC is then in material breach of any of its covenants or agreements set forth in this Agreement.

(c) No Regulatory Approval. By SCB or BOSC or BSCA in the event SCB, BOSC or BSCA receives written notice from or is otherwise advised by a Governmental Authority that it will not grant (or intends to rescind or revoke if previously approved) any Regulatory Approval or the approval of any Governmental Authority required for consummation of the transactions contemplated hereby shall have been denied by final nonappealable action of such Governmental Authority or an application therefor shall have been permanently withdrawn at the request of a Governmental Authority, or in the event the approval of any Governmental Authority required for consummation of the transactions contemplated hereby will not be granted without the imposition of a Burdensome Condition; provided, however, that no party shall have the right to terminate this Agreement pursuant to this Section 8.1(c) if such denial shall be due to the failure of such party seeking to terminate this Agreement to perform or observe the covenants of such party set forth herein.

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(d) Breach of No Solicitation or Negotiation. By SCB or BOSC, if BSCA shall have breached any covenant contained in Section 6.5 or Section 6.6.

(e) Material Adverse Change.

(i) By SCB or BOSC in the event that any material adverse change or matter exists or is identified that would reasonably be expected to result in a Material Adverse Effect to BSCA, SCB or BOSC.

(ii) By BSCA in the event that any material adverse change or matter exists or is identified that would reasonably be expected to result in a Material Adverse Effect to SCB.

(f) Outside Date. By SCB or BOSC or BSCA if the Merger shall not have been consummated by December 31, 2021 (the “Outside Date”); provided, however, that neither party shall have the right to terminate this Agreement pursuant to this Section 8.1(f) if the failure of such party to perform or comply in all material respects with the covenants and agreements of such party set forth in this Agreement shall have been the direct cause of, or resulted directly in, the failure of the Merger to be consummated by the Outside Date.

(g) Requisite Shareholder Approvals. By SCB or BOSC or BSCA if the Requisite BSCA Shareholder Approval and the Requisite SCB Shareholder Approval shall not have been obtained.

(h) Actions. By SCB or BOSC or BSCA if any court of competent jurisdiction or other Governmental Entity shall have issued a judgment, order, injunction, rule or decree, or taken any other action restraining, enjoining or otherwise prohibiting any of the transactions contemplated by this Agreement and such judgment, order, injunction, rule, decree or other action shall have become final and nonappealable; provided, however, that the party seeking to terminate this Agreement pursuant to this Section 8.1(h) shall have used its reasonable best efforts to contest, appeal and remove such judgment, order injunction, rule, decree, ruling.

(i) No Solicitation; Recommendation. By SCB or BOSC if: (A) there is an Adverse Recommendation Change; (B) BSCA enters into an Alternative Acquisition Agreement relating to an Acquisition Proposal; or (C) BSCA fails publicly to reaffirm its recommendation of the Merger within five (5) Business Days after the date any Acquisition Proposal or any material modification thereto is first communicated, published or sent or given to BSCA’s shareholders (which reaffirmation must also include, with respect to an Acquisition Proposal, an unconditional rejection of such Acquisition Proposal, it being understood that taking no position with respect to the acceptance of such Acquisition Proposal or modification thereto shall constitute a failure to reject such Acquisition Proposal.

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(j) Superior Proposal. By BSCA, if BSCA enters into an Alternative Acquisition Agreement with respect to a Superior Proposal.

(k) Notice of Termination. In the event a party elects to effect any termination pursuant to Sections 8.1(b) through (j) above, it shall give written notice to the other party hereto specifying the basis for such termination.

8.2 Liabilities and Remedies; Liquidated Damages; Expense Reimbursement.

(a) Fees and Expenses.

(i) Except as otherwise provided in this Section 8.2(a), all fees and expenses incurred in connection with this Agreement, the Merger and the other transactions contemplated hereby shall be paid by the party incurring such fees or expenses, whether or not the Merger is consummated.

(ii) In the event this Agreement is terminated: (A) by BSCA pursuant to Section 8.1(j); or (B) by SCB and BOSC pursuant to Section 8.1(d) or Section 8.1(i), BSCA shall pay to SCB a termination fee of $2,500,000 (the “Termination Fee”). Payment of the Termination Fee shall be made by wire transfer of same day funds to the account or accounts designated by SCB as promptly as reasonably practicable after termination, but in no event later than three (3) Business Days after termination. The payment by BSCA of the Termination Fee pursuant to this Section 8.2(a)(ii) shall be the sole and exclusive remedy of SCB and BOSC with respect to the termination of this Agreement pursuant to the sections of the Agreement enumerated above in this Section 8.2(a)(ii).

(iii) In the event that this Agreement is terminated by BSCA pursuant to Section 8.1(b)(i), or by SCB or BOSC pursuant to Sections 8.1(b)(ii), or by SCB or BOSC pursuant to Section 8.1(g) because any shareholder of BSCA listed in Exhibit A-1 breaches his or her obligations in the Shareholder Agreement to vote his or her shares of BSCA Common Stock in favor of this Agreement and the Merger, then the breaching party shall pay the non- breaching party liquidated damages equal to $1,000,000 (the “Liquidated Damages”). Payment of the Liquidated Damages shall be made by wire transfer of same day funds to the account or accounts designated by the party entitled to the Liquidated Damages hereunder as promptly as reasonably practicable after termination, but in no event later than three (3) Business Days after termination.

(iv) In the event this Agreement is terminated by SCB or BOSC pursuant to Section 8.1(g) because any shareholder of BSCA listed in Exhibit A-1 breaches his or her obligations in the Shareholder Agreement to vote his or her shares of BSCA Common Stock in favor of this Agreement and the Merger, and within twelve (12) months after the date of such termination BSCA enters into any agreement in respect of an Acquisition Proposal, BSCA shall pay SCB the difference between the Termination Fee and the Liquidated Damages by wire transfer of same day funds to the account or accounts designated by SCB as promptly as reasonably practicable after entering into the Acquisition Proposal, but in no event later than three (3) Business Days after entering into the Acquisition Proposal.

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(b) Each of BSCA, SCB and BOSC acknowledges that the agreements contained in this Section 8.2 are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, BSCA, SCB and BOSC would not enter into this Agreement. Accordingly, if any party fails promptly to pay any amounts due to the other party pursuant to this Section 8.2, and, in order to obtain such payment, the party to which any amount under this Section 8.2 is due and owing from the other party commences a suit that results in a judgment against such other party for the amounts set forth in this Section 8.2, the non-prevailing party shall pay to the prevailing party its costs and expenses (including reasonable attorneys’ fees and expenses) in connection with such suit, together with interest on the amounts due pursuant to this Section 8.2 from the date such payment was required to be made until the date of payment at the prime lending rate as published in The Wall Street Journal in effect on the date such payment was required to be made.

(c) Specific Performance. The parties agree that irreparable damage, for which monetary damages, even if available, would not be an adequate remedy, would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached (including failing to take such actions as are required of them hereunder to consummate this Agreement). Accordingly, except as otherwise set forth in Section 8.2(a)(ii), each of the parties shall be entitled to specific performance of the terms hereof, including an injunction or injunctions to prevent breaches or threatened breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any state or federal court, this being in addition to any other remedy to which such party is entitled at law or in equity. Each of the parties hereby further waives any defense in any action for specific performance that a remedy at law would be adequate.

ARTICLE IX
MISCELLANEOUS

9.1 Survival of Representations, Warranties and Agreements. No representations, warranties, covenants and agreements of the parties hereto set forth in this Agreement shall survive the Effective Time (other than agreements or covenants contained herein that by their terms are to be performed in whole or in part after the Effective Time) or the termination of this Agreement if this Agreement is terminated prior to the Effective Time (other than this Article IX, Section 6.4(d) and Section 8.2(a), which shall survive such termination).

9.2 Waiver; Amendment. Prior to the Effective Time, any provision of this Agreement may be (i) waived, by the party benefited by the provision or (ii) amended or modified at any time, by an agreement in writing among the parties hereto executed in the same manner as this Agreement.

9.3 Counterparts. This Agreement may be executed in one or more counterparts, any of which may be executed and transmitted by facsimile or other electronic method, and each of which shall be deemed an original, but all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each of the parties and delivered to the other party, it being understood that each party need not sign the same counterpart.

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9.4 Governing Law and Venue. This Agreement shall be governed by, and interpreted in accordance with, the Laws of the State of California applicable to contracts made and entirely to be performed within such state, the National Bank Act and the other laws of the United States of America applicable to national banking associations, without regard to any applicable conflicts of law principles that would require the application of the Laws of any other jurisdiction. The parties hereto agree that any disputes, claims, disagreements, lawsuits, actions or controversies of any type or nature whatsoever that, directly or indirectly, arise from or relate to this Agreement, including, without limitation, claims relating to the inducement, construction, performance or termination of this Agreement, shall be brought in the state superior court located in San Diego County, California or Federal district courts located in San Diego County, California, and the parties hereto agree not to challenge the selection of that venue in any such proceeding for any reason, including, without limitation, on the grounds that such venue is an inconvenient forum.

9.5 Expenses. Except as otherwise provided for in Section 8.2, all expenses incurred by SCB, BOSC and BSCA in connection with or related to the authorization, preparation and execution of this Agreement, the solicitation of shareholder approvals and all other matters related to the Closing of the transactions contemplated hereby, including, without limitation of the generality of the foregoing, all fees and expenses of agents, representatives, counsel, and accountants employed by either of the parties or their respective Affiliates, shall be borne solely and entirely by the party which has incurred the same, including, but not limited to, any costs and/or expense associated with the mailing of the Proxy Statement-Offering Circular to the BSCA shareholders and the soliciting of the approval of its shareholders shall be paid by BSCA and those expenses associated with the mailing of the Proxy Statement-Offering Circular to the SCB Shareholders and the soliciting of the approval of its shareholders shall be paid by SCB.

9.6 Notices. All notices, requests and other communications hereunder to a party shall be in writing and shall be deemed given if personally delivered, e-mailed (with confirmation) or mailed by registered or certified mail (return receipt requested), or delivered by an overnight courier (with confirmation) to such party at its address set forth below or such other address as such party may specify by notice to the parties hereto.

If to BSCA:

Bank of Santa Clarita

23780 Magic Mountain Parkway

Santa Clarita, California 91355

Attention: Frank Di Tomaso, Jr., Chairman and CEO

Email: fditomaso@bkofsc.com

With a copy to:

Sheppard, Mullin, Richter & Hampton, LLP

650 Town Center Drive, 10th Floor

Costa Mesa, California, 92626

Attention: Josh Dean, Esq.

Email: jdean@sheppardmullin.com

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If to SCB or BOSC:

Southern California Bancorp

12265 El Camino Real, Suite 100

San Diego, California 92130

Attention: Nathan L. Rogge, President and CEO

Email: nrogge@banksocal.com

With a copy to:

Duane Morris, LLP

865 South Figueroa Street, Suite 3100

Los Angeles, California 90017

Attention: Arthur A. Coren, Esq.

Email: acoren@duanemorris.com

9.7 Entire Understanding; No Third-Party Beneficiaries. This Agreement and the BSCA Non-Solicitation and Confidentiality Agreements, the BSCA Shareholder Agreements, the Non-Solicitation, Non-Competition, and Confidentiality Agreement with Frank D. Di Tomaso, Jr., the SCB Shareholder Agreements, the Severance and Release Agreements, and the Employment Agreement (collectively, the “Ancillary Agreement”) represent the entire understanding of the parties hereto and thereto with reference to the transactions contemplated hereby, and this Agreement and the Ancillary Agreements supersede any and all other oral or written agreements heretofore made. Except for the provisions of Sections 6.8, 6.13 and 6.15, nothing in this Agreement, expressed or implied, is intended to confer upon any Person, other than the parties hereto or their respective successors any rights, remedies, obligations or liabilities under or by reason of this Agreement.

9.8 Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions, or the application of such provision to Persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and will in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party hereto. Upon such determination, the parties will negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties.

9.9 Interpretation. When a reference is made in this Agreement to Sections, Annexes or Schedules, such reference shall be to a Section of, or Annex or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and are not part of this Agreement. Words such as “herein,” “hereinafter,” “hereof, “hereto,” “hereby,” and words of like import, unless the context requires otherwise, refer to this Agreement (including Exhibits and Schedules hereto). Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” Whenever the words “as of the date hereof” are used in this Agreement, they shall be deemed to mean the day and year first above written. “Writing,” “written,” and comparable terms refer to printing, typing and other means of reproduction words (including electronic media) in a visible form. Any reference to any money or currency or use of “$” refers to U.S. Dollars. Except as the context may otherwise require, references to any contract are to that contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; provided that with respect to any contract listed on any Schedule hereto, all such amendments, modifications or supplements must also be listed on the appropriate Schedule. References to a statute will be to such statue, as amended from time to time, and to the rules and regulations promulgated thereunder. References to any Person include the successors and permitted assigns of that Person. References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.

9.10 Assignment. No party may assign either this Agreement or any of its rights, interests or obligations hereunder without the prior written approval of the other party. Subject to the preceding sentence, this Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

[SIGNATURES APPEAR ON THE IMMEDIATELY FOLLOWING PAGE]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in counterparts by their duly authorized officers, all as of the day and year first above written.

SOUTHERN CALIFORNIA BANCORP
By:	/S/ Nathan L. Rogge
Print Name: Nathan L. Rogge
Its:	President and Chief Executive Officer
By:	/S/ Lester Machado
Print Name: Lester Machado
Its:	Corporate Secretary
BANK OF SOUTHERN CALIFORNIA,
NATIONAL ASSOCIATION
By:	/S/ Nathan L. Rogge
Print Name: Nathan L. Rogge
Its:	President and Chief Executive Officer
By:	/S/ Lester Machado
Print Name: Lester Machado
Its:	Corporate Secretary
BANK OF SANTA CLARITA,
NATIONAL ASSOCIATION
By:	/S/ Frank Di Tomaso, Jr.
Print Name: Frank Di Tomaso, Jr.
Its:	Chairman and Chief Executive Officer
By:	/S/ John Vescovo
Print Name: John Vescovo
Its:	Corporate Secretary

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*Exhibits have been omitted. The Company will furnish copies to the SEC upon request.*

EX-3.1

Exhibit 3.1

ARTICLES OF INCORPORATION
OF
SOUTHERN CALIFORNIA BANCORP

Article One. NAME: The name of this Corporation is:

Southern California Bancorp

Article Two. PURPOSE: The purpose of this Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code.

Article Three. BUSINESS ADDRESS: The initial street and mailing address of this Corporation is:

12265 El Camino Real, Suite 100
San Diego, California 92130

Article Four. INITIAL AGENT: The name and address in this state of this Corporation’s initial agent for service of process is:

Jim Burgess
12265 El Camino Real, Suite 100
San Diego, California 92130

Article Five. AUTHORIZED STOCK: This Corporation is authorized to issue two (2) classes of shares of stock: one class of shares to be called “Common Stock”; the second class of shares to be called “Serial Preferred Stock.” The total number of shares of stock which this Corporation shall have authority to issue is one hundred million (100,000,000), of which fifty million (50,000,000) shall be Common Stock and fifty million (50,000,000) shall be Serial Preferred Stock.

The designations and the powers, preferences, and rights and the qualifications, limitations or restrictions thereof, of each .class of stock of this Corporation shall be as follows:

(a) Serial Preferred Stock. The Serial Preferred Stock may be issued from time to time in one or more series. The Board of Directors is hereby authorized to fix or alter the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of preferred shares, and the number of shares constituting any such series and a designation thereof, or any of them; and to increase or decrease the number of shares of any series subsequent to the issue of shares of that series, but not below the number of shares of such series then outstanding. In case the number of shares of any series shall be so decreased, the shares constituting such decrease shall resume the status which they had prior to the adoption of the resolution originally fixing the number of shares of such series.

(b) Common Stock.

(1) After the requirements with respect to preferential dividends upon all classes and series of stock entitled thereto shall have been paid or declared and set apart for payment and after this Corporation shall have complied with all requirements, if any, with respect to the setting aside of sums as a sinking fund or for a redemption account on any class of stock, then and not otherwise, the holders of Common Stock shall be entitled to receive, subject to the applicable provisions of the Corporations Code of the State of California, such dividends as may be declared from time to time by the Board of Directors.

(2) After distribution in full of the preferential amounts to be distributed to the holders of all classes and series of stock entitled thereto in the event of a voluntary or involuntary liquidation, dissolution, or winding up of this Corporation, the holders of the Common Stock shall be entitled to receive all the remaining assets of the Corporation.

(3) Each holder of Common Stock shall have one (1) vote in respect of each share of such stock held by such holder, subject, however, to such special voting rights by class as are or may be granted to holders of Serial Preferred Stock.

Article Six. DIRECTOR LIABILITY: The liability of directors of this Corporation for monetary damages shall be eliminated to the fullest extent permissible under California law. Any amendment, repeal or modification of the provisions of this Article shall not adversely affect any right or protection of a director of the Corporation existing at the time of such amendment, repeal or modification.

Article Seven. INDEMNIFICATION OF AGENTS: This Corporation is authorized to provide indemnification of agents ( as defined in Section 317 of the General Corporation Law of the State of California) for breach of duty to this Corporation and its shareholders through bylaw provision, agreements with the agents, or otherwise, in excess of the indemnification otherwise permitted by Section 317 of the General Corporation Law of the State of California, subject to the limits on such excess indemnification set forth in Section 204 of the General Corporation Law of the State of California. Any amendment, repeal or modification of the provisions of this Article shall not adversely affect any right or .protection of an agent of this Corporation existing at the time of such amendment, repeal or modification.

IN WITNESS WHEREOF, for the purpose of forming this Corporation under the laws of the State of California, the undersigned, constituting the incorporator of this Corporation, has executed these Articles of Incorporation.

Dated: October 2, 2019

/s/ Alan Rosen

S. Alan Rosen, Sole Incorporator

EX-3.2

Exhibit 3.2

BYLAWS OF

SOUTHERN CALIFORNIA BANCORP

Amended and Restated as of January 18, 2023

TABLE OF CONTENTS

			Page
ARTICLE I OFFICES			1
	Section 1.	Principal Offices	1
	Section 2.	Other Offices	1
ARTICLE II MEETINGS OF SHAREHOLDERS			1
	Section 1.	Place of Meetings	1
	Section 2.	Annual Meetings	1
	Section 3.	Special Meetings	1
	Section 4.	Notice of Shareholders’ Meetings	2
	Section 5.	The Record Date	3
	Section 6.	Quorum	3
	Section 7.	Adjourned Meeting and Notice Thereof	4
	Section 8.	Voting	4
	Section 9.	Waiver of Notice or Consent by Absent Shareholders	4
	Section 10.	Shareholder Action by Written Consent Without a Meeting	5
	Section 11.	Proxies	5
	Section 12.	Inspectors of Election	5
	Section 13.	Shareholder Proposals	6
	Section 14.	Shareholder Nominations	7
	Section 15.	Conduct of Shareholder Meetings	10
ARTICLE III DIRECTORS			10
	Section 1.	Powers	10
	Section 2.	Number of Directors	11
	Section 3.	Election and Term of Office of Directors	12
	Section 4.	Resignation	12
	Section 5.	Removal	12
	Section 6.	Vacancies	12
	Section 7.	Meetings of Directors	12
	Section 8.	Electronic Participation	13
	Section 9.	Quorum	13
	Section 10.	Waiver of Notice	13

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	Section 11.	Adjournment	14
	Section 12.	Notice of Adjournment	14
	Section 13.	Action Without Meeting	14
	Section 14.	Fees and Compensation of Directors	14
	Section 15.	Committees of Directors	14
ARTICLE IV OFFICERS			15
	Section 1.	Officers	15
	Section 2.	Election of Officers	15
	Section 3.	Subordinate Officers, Etc.	15
	Section 4.	Removal and Resignation of Officers	15
	Section 5.	Vacancies in Offices	16
	Section 6.	Chair of the Board	16
	Section 7.	President	16
	Section 8.	Vice Presidents	16
	Section 9.	Secretary	16
	Section 10.	Chief Financial Officer	17
ARTICLE V INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE CORPORATION; PURCHASE OF LIABILITY INSURANCE			17
	Section 1.	Indemnification Against Expenses	17
	Section 2.	Indemnification Against Losses	17
	Section 3.	Definitions	17
	Section 4.	Non-Exclusivity Rights	18
	Section 5.	Insurance	18
ARTICLE VI RECORDS			18
	Section 1.	Records	18
	Section 2.	Inspection of Books and Records	18
	Section 3.	Copy of Bylaws	18
	Section 4.	Annual Reports	18
ARTICLE VII GENERAL CORPORATE MATTERS			19
	Section 1.	Share Certificates	19
	Section 2.	Transfers of Shares	19
	Section 3.	Registered Shareholders	19
	Section 4.	Lost, Stolen, or Destroyed Certificates	19
	Section 5.	Checks, Drafts, Etc.	20
	Section 6.	Fiscal Year	20
	Section 7.	Conflict with Applicable Law or Articles of Incorporation	20
	Section 8.	Invalid Provisions	20
ARTICLE VIII AMENDMENTS			20
	Section 1.	Amendment by Shareholders	20
	Section 2.	Amendment by Directors	20

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BYLAWS

OF

SOUTHERN CALIFORNIA BANCORP

ARTICLE I
OFFICES

Section 1. Principal Offices. The board of directors shall fix the location of the principal executive office of the Corporation at any place within or outside the State of California. If the principal executive office is located outside this state, and the Corporation has one or more business offices in this state, the board of directors shall likewise fix and designate a principal business office in the State of California.

Section 2. Other Offices. The board of directors may at any time establish branch or subordinate offices at any place or places where the Corporation is qualified to do business.

ARTICLE II
MEETINGS OF SHAREHOLDERS

Section 1. Place of Meetings. Meetings of shareholders shall be held at any place within or without the State of California designated by the board of directors. In the absence of any such designation, shareholders’ meetings shall be held at the principal executive office of the Corporation. At the sole discretion of the board of directors, and subject to applicable provisions under the California Corporations Code and any guidelines and procedures that the board of directors may adopt, a meeting of the shareholders may be conducted in whole or in part by electronic transmission by and to the Corporation, electronic video screen communication, conference telephone, or other means of remote communication.

Section 2. Annual Meetings. The annual meeting of shareholders shall be held each year on a date and at a time designated by the board of directors. The date so designated shall be within fifteen (15) months after the last annual meeting. At each annual meeting directors shall be elected, and any other proper business may be transacted.

Section 3. Special Meetings. A special meeting of the shareholders, for any purpose or purposes whatsoever, may be called at any time by the board of directors, or by the chair of the board of directors, or by the president, or by one or more shareholders holding shares in the aggregate entitled to cast not less than 10% of the votes at any such meeting.

If a special meeting is called by any person or persons other than the board of directors, the request shall be in writing, specifying the time of such meeting and the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by electronic transmission or other facsimile transmission to the chairperson of the board, the president, or the secretary of the Corporation. The officer receiving the request shall cause notice to be promptly given to the shareholders entitled to vote, in accordance with the provisions of Sections 4 and 5 of this Article II, that a meeting will be held at the time requested by the person or persons calling the meeting, not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within twenty (20) days after receipt of the request, the person or persons requesting the meeting may give the notice. Nothing contained in this paragraph of this Section 3 shall be construed as limiting, fixing or affecting the time when a meeting of shareholders called by action of the board of directors may be held.

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Section 4. Notice of Shareholders’ Meetings. Written notice stating the place, day, and hour of the meeting, shall be given not less than ten (10) days (or, if sent by third class mail, thirty (30) days) and not more than sixty (60) days before the meeting. In the case of an annual meeting, the notice shall state the matters the board of directors intends, at the time the notice is given, to present to the shareholders for action; provided, however, that unless the notice of the meeting, or the waiver of notice of such meeting, sets forth the general nature of any proposal to (a) approve or ratify a transaction in which a director has a material financial interest under Section 310 of the California Corporations Code, (b) amend the articles of incorporation of this Corporation (the “Articles of Incorporation”) under Section 902 of the California Corporations Code, (c) approve a conversion or reorganization or elect to wind up and dissolve under Sections 1152, 1201, or 1900 of the California Corporations Code, or (d) effect a plan of distribution upon liquidation inconsistent with the liquidation rights of the preferred shares under Section 2007 of the California Corporations Code, no such proposal may be approved at an annual meeting. In the case of a special meeting, the notice shall state the general nature of the business to be transacted. If directors are to be elected at a meeting, the notice shall include the names of the intended nominees at the time the notice is given. If remote participation in a meeting is authorized by the board of directors, the notice shall state the means of electronic transmission by and to the Corporation or electronic video screen communication by which shareholders may participate.

Proof of notice by mail or electronic transmission may be made by affidavit of the secretary or assistant secretary or the Corporation’s transfer agent, and, if made, shall be filed as part of the minutes of the meeting.

Notice shall be given by personal delivery, by electronic transmission consented to by the shareholder, or by mail, by or at the direction of the secretary or the officer or person calling the meeting, to each shareholder entitled to vote at the meeting. If a shareholder has not provided an address, notice may be given as provided by Section 601 of the California Corporations Code.

Notice by mail shall be deemed to have been given when deposited in the United States mail addressed to the shareholder at the shareholder’s address as it appears on the share transfer records of the Corporation, with postage thereon prepaid. Notice by electronic transmission shall be deemed to have been given when:

● Transmitted to a facsimile number provided by the shareholder for the purpose of receiving notice.

● Transmitted to an electronic mail address provided by the shareholder for the purpose of receiving notice.

● Posted on an electronic network, with a separate notice to the shareholder of the posting.

● Delivered to by any other form of electronic communication consented to by the shareholder.

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Notice shall not be given by electronic transmission to a shareholder after either (i) the Corporation is unable to deliver two consecutive notices to such shareholder by such means or (ii) the inability to deliver such notices to such shareholder becomes known to any person responsible for giving such notices.

A shareholder may waive notice of a meeting by providing the secretary, in writing, either before or after the time of the meeting, waiver of notice, consent to holding the meeting, or approval of the minutes of the meeting. The attendance of a shareholder at a meeting constitutes waiver of notice, unless the shareholder objects, at the beginning of the meeting, to the transaction of any business at the meeting because the meeting was not lawfully called or objects, at the meeting, to the consideration of any business that was required to be, but was not, included in the notice of the meeting.

Section 5. The Record Date. For the purpose of determining the shareholders entitled to notice of and to vote at any meeting of the shareholders, to give written consent to any action taken without a meeting, to receive payment of any dividend or other distribution or allotment of rights, or to exercise any other rights, the board of directors may fix a date as the record date for any such determination.

A record date fixed under this Section may not be more than sixty (60) days or less than ten (10) days before the meeting or more than sixty (60) days before any other action. If any meeting of the shareholders is adjourned for more than forty-five (45) days from the date set for the original meeting, the board of directors shall fix a new record date for determining the shareholders entitled to notice of and to vote at such adjourned meeting.

If no record date has been fixed, then (a) the record date for determining shareholders entitled to notice of and to vote at a shareholders’ meeting shall be the business day before the day on which notice is given, or, if notice is properly waived, the business day before the day on which the meeting is held, (b) the record date for determining shareholders entitled to give written consent to action taken without a meeting, where no prior board action was taken, shall be the day on which the first written consent is given, and (c) the record date for determining shareholders for any other purpose shall be the later of (i) the day on which the board of directors adopts the resolution relating thereto or (ii) the sixtieth (60^th) day prior to the date of the action.

Section 6. Quorum. The presence in person or by proxy of the holders of a majority of the shares entitled to vote constitutes a quorum for a meeting of the shareholders. Except as otherwise provided by the California Corporations Code or the Articles of Incorporation:

● The affirmative vote of a majority of the shares represented at a meeting at which a quorum is present shall be the act of the shareholders.

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● The shareholders present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment notwithstanding the withdrawal of any number of shareholders that leaves less than a quorum, if any action taken, other than adjournment, is approved by at least a majority of the shares required to constitute a quorum.

If a quorum is not present, the meeting may be adjourned by the vote of a majority of the shares present in person or by proxy.

Section 7. Adjourned Meeting and Notice Thereof. Any shareholders’ meeting, annual or special, may be adjourned from time to time by a vote of the majority of the shares present, in person or proxy. If the meeting is adjourned for more than forty-five (45) days, or if the board of directors fixes a new record date for the adjourned meeting, notice of the adjourned meeting shall be given to each shareholder of record, as of the new record date, entitled to notice of the adjourned meeting. If the meeting is adjourned for not more than forty-five (45) days, and the board of directors does not fix a new record date for the adjourned meeting, notice need not be given of the adjourned meeting if the time and place (or the means of electronic transmission or electronic video screen communication, if any, by which shareholders may participate) of the meeting are announced at the meeting at which the adjournment is taken, and any business may be transacted at the adjourned meeting that might have been transacted at the original meeting.

Section 8. Voting. Each outstanding share, regardless of class or series, shall be entitled to one vote on each matter submitted to a vote of the shareholders, except as otherwise provided herein and to the extent that the Articles of Incorporation provide for more or less than one vote per share or limit or deny voting rights to the holders of the shares of any class or series.

A shareholder entitled to vote on any matter may vote part of such shares in favor of the proposal and refrain from voting the remaining shares or, other than in elections of directors, vote the remaining shares against the proposal. If a shareholder fails to specify the number of shares the shareholder is voting affirmatively, the shareholder will be deemed to have affirmatively voted all shares the shareholder is entitled to vote.

In any election of directors, each shareholder entitled to vote shall, subject to the satisfaction of all statutory conditions precedent to the exercise of such rights, have the right to cumulate the number of votes equal to the number of directors to be elected multiplied by the number of votes to which such shareholder’s shares are entitled, and distribute those votes among one or more candidates. This right may be exercised by giving written notice of intent to cumulate those votes to any officer of the Corporation before the meeting or to the presiding officer at the meeting at any time before the election of directors.

The directors receiving the highest number of votes of the shares entitled to vote in the election, up to the number of director positions to be filled, shall be elected.

Section 9. Waiver of Notice or Consent by Absent Shareholders. The transactions of any meeting of shareholders, however called or noticed, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, signs a written waiver of notice, or a consent to the holding of such meeting, or an approval of the minutes thereof. The waiver, notice, or consent need not specify the business transacted or purpose of the meeting, except as required by Section 601 of the California Corporations Code. All such waivers, consents, or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.

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Section 10. Shareholder Action by Written Consent Without a Meeting. Any action required or permitted to be taken at an annual or special meeting of the shareholders may be taken without a meeting and without prior notice if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes necessary to authorize or take such action at a meeting at which all shares are entitled to vote thereon were present and voted; provided, however, that unless the consents of all shareholders entitled to vote have been solicited in writing, notice shall be given (in the same manner as notice of meetings is to be given and within the time limits prescribed by law) of such action to all shareholders entitled to vote who did not consent in writing to such action; and provided further, that directors may be elected by written consent only if such consent is unanimously given by all shareholders entitled to vote, except that action taken by shareholders to fill one or more vacancies on the board other than a vacancy created by the removal of a director, may be taken by written consent of a majority of the outstanding shares entitled to vote.

Section 11. Proxies. A shareholder may vote either in person or by written proxy executed by the shareholder or the shareholder’s attorney in fact and filed with the secretary of the Corporation. A proxy is not valid after the expiration of eleven (11) months from the date of its execution, unless otherwise provided in the proxy. A proxy continues in full force and effect until revoked, either by a written revocation delivered to the Corporation, by a subsequent proxy presented to the meeting, or by attending a meeting of the shareholders and voting the shares in person. A proxy is revocable unless the proxy states that it is irrevocable and the proxy is coupled with an interest. A proxy is not revoked by the death or incapacity of the shareholder appointing the proxy unless the Corporation receives written notice of such death or incapacity before the vote by proxy is counted.

Any shareholder soliciting proxies from other shareholders must use a proxy card color other than white, which shall be reserved for the exclusive use of the board of directors.

Section 12. Inspectors of Election. Before any meeting of shareholders, the board of directors may appoint any persons other than nominees for office to act as inspectors of election at the meeting or its adjournment. If no inspectors of election are appointed, the chair of the meeting may, and on the request of any shareholder or his proxy shall, appoint inspectors of election at the meeting. The number of inspectors shall be either one (1) or three (3). If inspectors are appointed at a meeting on the request of one or more shareholders or proxies, the holders of a majority of shares or their proxies present at the meeting shall determine whether one (1) or three (3) inspectors are to be appointed. If any person appointed as inspector fails to appear or fails or refuses to act, the vacancy may be filled by appointment by the board of directors before the meeting, or by the chair at the meeting.

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The duties of these inspectors shall be as follows:

● Determine the number of shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;

● Receive votes, ballots, or consents;

● Hear and determine all challenges and questions in any way arising in connection with the right to vote;

● Count and tabulate all votes or consents;

● Determine the election result; and

● Do any other acts that may be proper to conduct the election or vote with fairness to all shareholders.

Section 13. Shareholder Proposals. At any meeting of shareholders, business will only be conducted if it is brought before the meeting (1) by or at the direction of the board of directors, (2) in accordance with Rule 14a-8 under the Securities Exchange Act of 1934 (the “Exchange Act”), or (3) by a shareholder of record entitled to vote at such meeting who complies with the requirements set forth in this Section.

For business (other than director nominations, which are governed by the following Section 14 of this Article II) to be properly brought before an annual meeting by a shareholder, the shareholder or shareholders of record intending to propose the business (the “proposing shareholder”) must have given written notice of the proposing shareholder’s proposal either by personal delivery or by United States mail to the secretary of the Corporation no earlier than one hundred twenty (120) calendar days and no later than ninety (90) calendar days before the date such annual meeting is to be held. If the current year’s annual meeting is called for a date that is not within thirty (30) days of the anniversary of the previous year’s annual meeting, notice must be received not later than ten (10) calendar days following the day on which public announcement of the date of the annual meeting is first made. In no event will an adjournment or postponement of an annual meeting of shareholders begin a new time period for giving a proposing shareholder’s notice as provided above.

For business to be properly brought before a special meeting of shareholders, the notice of the meeting sent by or at the direction of the person calling the meeting must set forth the nature of the business to be considered. A shareholder or shareholders making a written request for a special meeting pursuant to Section 3 of Article II shall provide the information required for notice of a shareholder proposal under this Section simultaneously with the written request for the meeting submitted to the secretary or within ten (10) calendar days after delivery of the written request for the meeting to the secretary.

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A proposing shareholder’s notice of a proposal shall include as to each matter the proposing shareholder proposes to bring before either an annual or special meeting:

(a) the name and address of the proposing shareholder and the classes and number of shares of capital stock of the Corporation held and beneficially owned (as defined in Rule 13d-3 under the Exchange Act) by the proposing shareholder and (ii) if different, the name an address of the proposing shareholder, as they appear in the Corporation’s books, of the shareholder proposing such business;

(b) a brief description of the business and the reasons for conducting such business at the meeting; and

(c) the material interests of the proposing shareholder in such business.

Notwithstanding the foregoing provisions, unless brought under Rule 14a-9 under the Exchange Act and included in the Corporation’s notice of meeting, as required by law, or as otherwise determined by the board of directors, if the proposing shareholder or a qualified representative of the proposing shareholder does not appear at the meeting of shareholders to present its proposal (including virtually in the case of a meeting conducted solely by electronic transmission by and to the Corporation, electronic video screen communication, conference telephone, or other means of remote communication), the proposal shall be disregarded, and no vote on such shareholder proposal shall occur, notwithstanding that proxies in respect of such vote may have been received by the Corporation.

The foregoing provisions of this Section do not relieve any shareholder of any obligation to comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated under the Exchange Act.

Section 14. Shareholder Nominations. At any meeting of shareholders at which directors are to be elected, a proposed nominee (other than a nominee nominated by the board of directors or by a person or committee authorized by the board of directors) shall only be eligible for election to the board of directors if nominated by a shareholder of record entitled to vote at such meeting who complies with the requirements and procedures set forth in this Section.

For a director nomination(s) to be properly brought before any meeting of shareholders at which one or more directors are to be elected, the shareholder or shareholders of record intending to nominate a candidate or candidates (the “nominating shareholder”) must have given written notice of the nominating shareholder’s nomination(s) either by personal delivery or by United States mail to the secretary of the Corporation no earlier than one hundred twenty (120) calendar days and no later than ninety (90) calendar days before the date such annual meeting is to be held. If the current year’s annual meeting is called for a date that is not within thirty (30) days of the anniversary of the previous year’s annual meeting, notice must be received not later than ten (10) calendar days following the day on which public announcement of the date of the annual meeting is first made. In no event will an adjournment or postponement of an annual meeting of shareholders begin a new time period for giving a proposing shareholder’s notice as provided above. A shareholder or shareholders making a written request for a special meeting pursuant to Section 3 of Article II shall provide the information required for notice of any director nomination(s) under this Section simultaneously with the written request for the meeting submitted to the secretary.

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A nominating shareholder’s notice of a director nomination shall include:

(a) The name and address of the nominating shareholder and the classes and number of shares of capital stock of the Corporation held and beneficially owned (as defined in Rule 13d-3 under the Exchange Act) by the nominating shareholder; and (ii) if different, the name and address of the proposing shareholder, as they appear in the Corporation’s books; and

(b) (i) the full name, age and date of birth of each candidate; (ii) the business and residence address and telephone numbers of each candidate; (iii) the education background and business/occupational experience of each candidate including a list of positions held for at least the preceding five (5) years; (iv) the class and number of shares of the Corporation beneficially owned by the candidate; and (v) a signed representation by each such candidate that the candidate will timely provide any other information reasonably requested by the Corporation for the purpose of preparing its disclosures in regard to the solicitation of proxies for the election of directors.

If a nominating shareholder will solicit proxies for a nominee or nominees other than the Corporation’s nominees in accordance with Rule 14a-19 under the Exchange Act, the nominating shareholder’s notice must additionally provide: (i) all other information required by Rule 14a-19; (ii) a written representation and undertaking that such shareholder intends to deliver a proxy statement and/or form of proxy to holders of shares representing at least 67% of the voting power of the stock entitled to vote generally in the election of directors in accordance with Rule 14a-19, and that a statement to such effect will be included in such shareholder’s proxy statement; (iii) a written representation and undertaking that such shareholder will comply with all requirements of the Exchange Act and the regulations promulgated thereunder, including but not limited to Rule 14a-19 and all other requirements of Regulation 14A (as such rule and regulations may be amended or interpreted from time to time by the Securities and Exchange Commission (the “SEC”), including through any SEC staff interpretations related thereto); and (iv) each proposed director nominee’s written consent to being named in the Company’s proxy statement for the applicable meeting and the associated proxy card. In addition, such nominating shareholder shall provide the Corporation a written certification within ten (10) days prior to the meeting for the election of directors (or any adjournment, postponement or rescheduling thereof) with reasonable documentary evidence that such nominating shareholder has complied with the representations and undertakings made pursuant to the foregoing subsections (ii) and (iii).

In addition to the foregoing, upon the Corporation’s request, any nominee proposed by a shareholder must promptly (but in any event within ten (10) days of the Corporation’s request) complete and return a director questionnaire to be provided by the Corporation.

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A nominating shareholder shall promptly provide notice to the Corporation of any changes to any of the information submitted to the Corporation pursuant to this Section.

The name of each such candidate for director must be placed in nomination at the annual meeting by the nominating shareholder or a qualified representative of the nominating shareholder present in person and the nominating shareholder’s candidate(s) must be present in person at the meeting for the election of directors, provided that a nominating shareholder, qualified representative or candidate may appear virtually in the case of a meeting conducted solely by electronic transmission by and to the Corporation, electronic video screen communication, conference telephone, or other means of remote communication.

No person nominated by a shareholder shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth in these Bylaws. Further, if a nominating shareholder provides notice under these Bylaws or pursuant to Rule 14a-19 and subsequently fails to comply with the procedures set forth in these Bylaws or the applicable requirements of Rule 14a-19, then the Corporation shall disregard any proxies solicited or votes cast for such shareholder’s nominee(s). The board of directors (and any other person or committee authorized by the board of directors) shall have the power and duty to determine whether a nomination was made in accordance with the procedures and other requirements set forth in these Bylaws and, if any proposed nomination was not made in compliance with these Bylaws, to declare that such nomination shall be disregarded, in each case, acting in good faith; provided that, if any determination must be made at a meeting of the shareholders, the chair of the meeting shall have the power and duty, acting in good faith, to make such determination, unless otherwise determined by the board of directors. Any determination adopted in good faith by the board of directors (or any other person or committee authorized by the board of directors) or the chair of the meeting, as the case may be, shall be binding on all persons, including the Corporation and its shareholders (including any beneficial owners).

Notwithstanding the foregoing provisions, unless otherwise required by law or otherwise determined by the board of directors, if (1) the nominating shareholder or a qualified representative of the nominating shareholder does not appear at the meeting of shareholders (including virtually in the case of a meeting conducted solely by electronic transmission by and to the Corporation, electronic video screen communication, conference telephone, or other means of remote communication) to present its nomination(s) or (2) the election of a nominating shareholder’s nominee would cause the Corporation to be in violation of the Articles of Incorporation, these Bylaws, or any applicable state or federal law, rule, regulation, or stock exchange listing standard, then such nomination or nominations shall be disregarded, and no vote on such shareholder nominee(s) shall occur, notwithstanding that proxies in respect of such vote may have been received by the Corporation.

The foregoing provisions of this Section do not relieve any shareholder of any obligation to comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated under the Exchange Act.

This Section or a summary of this Section shall be set forth in either the notice or related proxy statement concerning any shareholders’ meeting at which the election of directors is to be considered.

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Section 15. Conduct of Shareholder Meetings. The board of directors may adopt by resolution such rules, regulations, and procedures for the conduct of any meeting of shareholders as it deems appropriate. Except to the extent inconsistent with rules, regulations, and procedures adopted by the board of directors, the chair of the meeting shall have the right to prescribe such rules, regulations, and procedures and to do all such acts, as, in the judgment of such chair, are necessary, appropriate, or convenient for the proper conduct of the meeting. Such rules, regulations, or procedures, whether adopted by the board of directors or the chair of the meeting, may include, without limitation, the following: (a) the establishment of an agenda for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present at the meeting; (c) limitations on attendance at or participation in the meeting to shareholders of record of the Corporation, their duly authorized and constituted proxies or representatives, or such other persons as the chair of the meeting shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; (e) the determination of the circumstances in which any person may make a statement or ask questions and limitations on the time allotted to questions or comments; (f) the determination of when the polls shall open and close for any given matter to be voted on at the meeting; (g) the exclusion or removal of any shareholders or any other individual who refuses to comply with meeting rules, regulations, or procedures; (h) restrictions on the use of audio and video recording devices, cell phones, and other electronic devices; (i) rules, regulations, and procedures for compliance with any federal, state, or local laws or regulations (including those concerning safety, health, or security); (j) procedures (if any) requiring attendees to provide the Corporation advance notice of their intent to attend the meeting; and (k) rules, regulations, or procedures regarding the participation by means of remote communication of shareholders and proxy holders not physically present at a meeting, whether such meeting is to be held at a designated place or solely by means of remote communication. Unless and to the extent determined by the board of directors or the chair of the meeting, the chair of the meeting shall not be obligated to follow any technical, formal, or parliamentary rules or principles of procedure.

ARTICLE III
DIRECTORS

Section 1. Powers. Subject to the provisions of the California General Corporation Law and any limitations in the Articles of Incorporation and these Bylaws relating to action required to be approved by the shareholders or by the outstanding shares, the business and affairs of the Corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors.

Without limiting the generality of the foregoing, and subject to the same limitations, it is hereby expressly declared that the directors shall have the power and, to the extent required by law, the duty to:

● Appoint and remove, at the pleasure of the board, all officers, managers, management companies, agents, and employees of the Corporation, prescribe their duties in addition to those prescribed in these Bylaws, supervise them, fix their compensation, and require from them security for faithful service. Such compensation may be increased or diminished at the pleasure of the directors.

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● Conduct, manage, and control the affairs and business of the Corporation; make rules and regulations not inconsistent with the Articles of Incorporation or applicable law or these Bylaws; make all lawful orders on behalf of the Corporation; and prescribe the manner of executing the same.

● Incur indebtedness and borrow money on behalf of the Corporation and designate from time to time the person or persons who may sign or endorse checks, drafts, or other orders of payment of money, notes, or other evidences of indebtedness, issued in the name of, or payable to, the Corporation, and prescribe the manner of collecting or depositing funds of the Corporation, and the manner of drawing checks thereon.

● Appoint an executive committee and other committees of the board, in accordance with the provisions of Section 15.

● Authorize the issuance of stock of the Corporation from time to time, upon such terms as may be lawful.

● Prepare an annual report to be sent to the shareholders after the close of the fiscal or calendar year of the Corporation, which report shall comply with the requirements of law. To the extent permitted by law, the requirements that an annual report be sent to shareholders and the time limits for sending such reports are hereby waived; the directors, nevertheless, shall have the authority to cause such report to be sent to shareholders.

Section 2. Number of Directors. The authorized number of directors shall be not less than six (6) nor more than eleven (11) (which in no case shall be greater than two times the stated minimum minus one). The exact number of authorized directors shall be fixed, within the limits specified above, by a resolution amending such exact number, duly adopted by the board of directors or by the shareholders. The minimum and maximum number of directors may be changed, or a definite number may be fixed without provision for an indefinite number, by a duly adopted amendment to the Articles of Incorporation of the Corporation or by an amendment to this Bylaw duly adopted by the vote or written consent of holders of a majority of the outstanding shares entitled to vote; provided, however, that an amendment reducing the fixed number or the minimum number of directors to a number less than five (5) cannot be adopted if the votes cast against its adoption at a meeting, or the shares not consenting in the case of an action by written consent, are equal to more than sixteen and two-thirds percent (16-2/3%) of the outstanding shares entitled to vote thereon. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

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Section 3. Election and Term of Office of Directors. At the first annual meeting of the shareholders and at each annual meeting thereafter, the shareholders entitled to vote in the election of directors shall elect directors, each of whom shall hold office until the next annual meeting of the shareholders or until the director’s earlier death, resignation, disqualification, or removal. Despite the expiration of a director’s term, the director shall continue to serve until the director’s successor is elected and qualified.

Section 4. Resignation. A director may resign by providing written notice to the chair of the board, the president, the secretary, or the board of directors. The resignation shall be effective upon the later of the date of receipt of the notice or the effective date specified in the notice.

Section 5. Removal. The board of directors may declare vacant the office of a director who has been declared of unsound mind by an order of court or convicted of a felony, or otherwise in a manner provided by law.

Any or all of the directors may be removed from office at any time with or without cause by a vote of the shareholders entitled to elect them. If one or more directors are so removed at a meeting of shareholders, the shareholders may elect new directors at the same meeting. If less than the entire board of directors is removed, no director may be removed by the shareholders if the votes cast against removal would be sufficient to elect the director if cumulatively voted at an election of all of the directors (as of the date of the director’s most recent election) at which the same total number of votes were cast. No reduction of the authorized number of directors shall have the effect of removing any director before his term of office expires.

Section 6. Vacancies. A vacancy on the board of directors occurs upon of any of the following events: (a) the death, resignation, or removal of any director; (b) the removal or declaration of vacancy by the board of directors of a director who has been declared of unsound mind by an order of court or convicted of a felony; (c) the authorized number of directors is increased; or (d) at any meeting of the shareholders at which directors are elected, the shareholders fail to elect the full authorized number of directors to be elected at the meeting.

Vacancies in the board of directors, other than vacancies created by removal of a director, may be filled by the board of directors in accordance with Section 305 of the California Corporations Code. The shareholders may, at any time and in accordance with Section 305 of the California Corporations Code, elect a director to fill any vacancy not filled by the directors. A director elected to fill a vacancy shall hold office until the next annual meeting and until the director’s successor is elected and qualified (or until the director’s earlier death, resignation, disqualification, or removal). If any resignation of a director will take effect at a future time, a successor may be elected to take office when the resignation becomes effective. A reduction of the authorized number of directors does not remove any director prior to the expiration of the director’s term of office.

Section 7. Meetings of Directors. A regular meeting of the newly-elected board of directors shall be held without other notice immediately following and at the place of each annual meeting of shareholders, at which meeting the board shall elect officers and transact any other business as shall come before the meeting. Regular meetings of the board of directors shall be held at such other times and places as may from time to time be fixed by resolution of the board of directors and, unless the Articles of Incorporation provide otherwise, regular meetings may be held without notice of the date, time, place, or purpose of the meeting.

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Meetings of the board of directors, including special meetings, may be called by the chair of the board, the president, the secretary, or any two directors.

Notice of the time and place of special meetings shall be given to each director. If notice is mailed, it shall be deposited in the United States mail, addressed to the director at the address shown on the records of the Corporation, at least four days before the time of the meeting. If notice is delivered personally, by telephone, or by electronic transmission, it shall be delivered at least forty-eight (48) hours before the time of the meeting. The notice need not specify the purpose of the meeting.

Meetings of the board of directors may be held at any place within or without the State of California that is designated in the notice of the meeting. If no place is stated in the notice, meetings shall be held at the principal executive office of the Corporation unless another place has been designated by a resolution duly adopted by the board of dire.

Section 8. Electronic Participation. Members of the board of directors may participate in a meeting through conference telephone, electronic video screen communication, or electronic transmission by and to the Corporation. Participation in a meeting by conference telephone or electronic video screen communication constitutes presence in person if all participating directors can hear one another. Participation by electronic transmission by and to the Corporation (other than conference telephone or electronic video screen communication) constitutes presence in person if each participating director can communicate concurrently with all other participating directors and each director has the means to participate in all matters before the board, including the ability to propose or object to a specific action proposed to be taken.

Section 9. Quorum. A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as hereinafter provided. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the board of directors, subject to the provisions of Section 310 of the Corporations Code of California (approval of contracts or transactions which a director has a direct or indirect material financial interest), Section 311 (appointment of committees), and Section 317(e) (indemnification of directors). A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting.

Section 10. Waiver of Notice. The transactions of any meeting of the board of directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice if a quorum be present and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, a consent to holding the meeting or an approval of the minutes thereof The waiver of notice or consent need not specify the purpose of the meeting. All such waiver, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. Notice of a meeting shall also be deemed given to any director who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such director.

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Section 11. Adjournment. A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place.

Section 12. Notice of Adjournment. Notice of the time and place of holding an adjourned meeting need not be given, unless the meeting is adjourned for more than twenty-four (24) hours, in which case notice of such time and place shall be given prior to the time of the adjourned meeting, in the manner specified in Section 8 of this Article III, to the directors who were not present at the time of the adjournment.

Section 13. Action Without Meeting. Any action required or permitted to be taken by the board of directors may be taken without a meeting, if all members of the board shall individually or collectively consent in writing to such action. Such action by written consent shall have the same force and effect as a unanimous vote of the board of directors. Such written consent or consents shall be filed with the minutes of the proceedings of the board.

Section 14. Fees and Compensation of Directors. Directors and members of committees may receive such compensation, if any, for their services, and such reimbursement of expenses, as may be fixed or determined by resolution of the board of directors. Nothing herein contained shall be construed to preclude any director from servicing the Corporation in any other capacity as an office, agent, employee, or otherwise, and receiving compensation for such services.

Section 15. Committees of Directors. The board of directors, by resolution adopted by a majority of the authorized number of directors, may designate one or more committees, each consisting of two or more directors, to serve at the pleasure of the board of directors and to exercise the authority of the board of directors to the extent provided in the resolution establishing the committee and as permitted by the provisions of the California Corporations Code.

No committee of the board of directors shall have the authority to:

● Approve actions that require shareholder approval.

● Fill vacancies on the board or on any committee.

● Fix the compensation of the directors for serving on the board or on any committee.

● Amend or repeal bylaws or adopt new bylaws.

● Amend or repeal any resolution of the board of directors that by its terms is not so amendable or repealable.

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● Make distributions to shareholders, except at a rate, in a periodic amount, or within a range set forth in the Articles of Incorporation or determined by the board of directors.

● Appoint other committees of the board of directors or the members thereof.

The board of directors, by vote of a majority of the authorized number of directors, may designate one or more directors as alternate members of any committee who may replace any absent member at any meeting of the committee.

The designation of a committee of the board of directors and the delegation thereto of authority shall not operate to relieve the board of directors, or any member thereof, of any responsibility imposed by law.

ARTICLE IV
OFFICERS

Section 1. Officers. The officers of the Corporation shall be a chair of the board, a president, a secretary and a chief financial officer. The Corporation may also have, at the discretion of the board of directors, a chair of the board, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article IV. Any two or more offices may be held by the same person.

Section 2. Election of Officers. The officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article IV, shall be chosen by the board of directors, and such shall serve at the pleasure of the board, subject to the rights, if any, of an officers under any contract of employment.

Section 3. Subordinate Officers, Etc. The board of directors may appoint, and may empower the president to appoint, such other officers as the business of the Corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as are provided in the Bylaws or as the board of directors may from time to time determine.

Section 4. Removal and Resignation of Officers. Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the board of directors, at any regular or special meeting thereof, or, except in case of an officer chosen by the board of directors, by any officer upon whom such power or removal may be conferred by the board of directors.

Any officer may resign at any time by giving written notice to the chair of the board, president, the secretary or the board of directors. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Any such resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party.

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Section 5. Vacancies in Offices. A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these Bylaws for regular appointments to such office.

Section 6. Chair of the Board. The chair of the board, if such an officer be elected, shall, if present, preside at all meetings of the board of directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the board of directors or prescribed by the Bylaws. If there is no president, the chair of the board shall in addition be the chief executive officer of the Corporation and shall have the powers and duties prescribed in Section 7 of this Article IV.

Section 7. President. Subject to such supervisory powers, if any, as may be given by the board of directors to the chair of the board, if there be such an officer, the president shall be the chief executive officer of the Corporation and shall, subject to the control of the board of directors, have general supervision, direction and control of the business and the officers of the Corporation. The President shall preside at all meetings of the shareholders and, in the absence of the chair of the board, or if there be none, at all meetings of the board of directors. The President shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the board of directors or the Bylaws.

Section 8. Vice Presidents. In the absence or disability of the president, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors shall perform all the duties of the president, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors or the Bylaws, the president or the chair of the board.

Section 9. Secretary. The secretary shall keep or cause to be kept, at the principal executive office or such other place as the board of directors may order, a book of minutes of all meetings of directors, committees of directors and shareholders, with the time and place of holding, whether regular or special, and, if special, how authorized, the notice thereof given, the names of those present at directors’ and committee meetings, the number of shares present or represented at shareholders’ meetings, and the proceedings thereof.

The secretary shall keep, or cause to be kept, at the principal executive office or at the office of the Corporation’s transfer agent or registrar, as determined by resolution of the board of directors, a share register, or a duplicate share register, showing the names of all shareholders and their addresses, the number and classes of shares held by each, the number and date of certificates issued for the same, and the number and date of cancellation of every certificate surrendered for cancellation.

The secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the board of directors required by the Bylaws or bylaw to be given, and he shall keep the seal of the Corporation in safe custody, as may be prescribed by the board of directors or by the Bylaws.

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Section 10. Chief Financial Officer. The chief financial officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, retained earnings and shares. The books of account shall at all reasonable times be open to inspection by any director.

The chief financial officer shall deposit all moneys and other valuables in the name and to the credit of the Corporation with such depositaries as may be designated by the board of directors. The chief financial officer shall disburse the funds of the Corporation as may be ordered by the board of directors, shall render to the president and directors, whenever they request it, an account of all of his transactions as chief financial officer and of the financial condition of the Corporation, and shall have other powers and perform such other duties as may be prescribed by the board of directors or the Bylaws.

ARTICLE V
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE CORPORATION; PURCHASE OF LIABILITY INSURANCE

Section 1. Indemnification Against Expenses. The Corporation to the extent permitted by the California General Corporation Law, (a) shall indemnify any Agent of the Corporation against expenses, including reasonable attorney’s fees, actually and reasonably incurred in defense of any Proceeding in which the Agent was, is, or is threatened to be made a party by reason of being or having been an Agent of the Corporation, to the extent that the Agent was successful on the merits in the defense and shall have the power to advance to such Agent such expenses incurred by such Agent in defending any such Proceeding upon receipt of an undertaking by such Agent to repay such amounts if such Agent is not entitled to be indemnified for such amounts and (b) shall indemnify any person who was, is, or is threatened to be made a party to any Proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of being or having been an Agent of the Corporation, against expenses, including reasonable attorney’s fees, actually and reasonably incurred in defense or settlement of the Proceeding, if the person acted in good faith and in a manner the person believed to be in the best interests of the Corporation and the shareholders.

Section 2. Indemnification Against Losses. The Corporation shall, to the extent permitted by the California General Corporation Law and the Articles of Incorporation, indemnify any person who was, is, or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Corporation) by reason of being or having been an Agent of the Corporation, against expenses, including reasonable attorney’s fees, judgments, fines, settlements, and other amounts actually and reasonably incurred in connection with the Proceeding if the person (a) acted in good faith and in a manner the person believed to be in the best interests of the Corporation and the shareholders and (b) had no reasonable cause to believe the conduct of the person was unlawful, in the case of a criminal Proceeding.

Section 3. Definitions. For purposes of this Article V, (a) “Agent” means any person who (i) is or was a director, officer, employee, or other agent of the Corporation, or (ii) is or was serving at the Corporation’s request as a director, officer, employee, or agent of another corporation, partnership, joint venture, trust, or other enterprise, or (iii) was a director, officer, employee, or agent of a corporation which was a predecessor corporation of the Corporation or of another enterprise at the request of such predecessor corporation, and (b) “Proceeding” means any threatened, pending, or completed action or proceeding, whether civil, criminal, administrative, or investigative.

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Section 4. Non-Exclusivity Rights. The foregoing rights of indemnification and advancement of expenses shall be in addition to and not exclusive of any other rights to which any director or officer may be entitled by applicable law, the Articles of Incorporation, action or resolution of the shareholders or disinterested directors, or any agreement with the Corporation.

Section 5. Insurance. The Corporation may, subject to the provisions of Section 317 of the California Corporations Code, purchase and maintain insurance to indemnify any Agent against any liability asserted against or incurred by an Agent in that capacity or arising out of the Agent’s status as an Agent, whether or not the Corporation would have the power indemnify the Agent against that liability under Section 317 of the California Corporations Code.

ARTICLE VI
RECORDS

Section 1. Records. The Corporation shall maintain adequate and correct books and records of account, minutes of the proceedings of the shareholders, board of directors, and committees of the board of directors, and a record of its shareholders, including names and addresses of all shareholders and the number and class of shares held, along with any other records required by law. The Corporation shall keep such record of its shareholders at its principal executive office, as fixed by the board of directors from time to time, or at the office of its transfer agent or registrar. The Corporation shall keep its books and records of account and minutes of the proceedings of the shareholders, board of directors, and committees of the board of directors at its principal executive office, or such other location as shall be designated by the board of directors from time to time.

Section 2. Inspection of Books and Records. The Corporation’s accounting books and records and minutes of proceedings of the shareholders, board of directors, and committees of the board of directors shall, to the extent provided by law, be open to inspection of directors, shareholders, and voting trust certificate holders, in the manner provided by law.

Section 3. Copy of Bylaws. The Corporation shall furnish to any shareholder, on written request, a copy of these Bylaws as amended or otherwise altered to date.

Section 4. Annual Reports. During any time that the Corporation has fewer than one hundred (100) shareholders of record, the Corporation expressly waives the requirement set forth in Section 1501 of the California Corporations Code of sending an annual report to the shareholders; provided, that the board of directors may issue annual or other reports at its discretion. Upon the request of any shareholder made more than one hundred twenty (120) days after the close of the Corporation’s fiscal year, the Corporation shall, within thirty (30) days, deliver to such shareholder the financial statements required by Section 1501 of the California Corporations Code to be included in an annual report to shareholders.

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ARTICLE VII
GENERAL CORPORATE MATTERS

Section 1. Share Certificates. Every owner of shares of the Corporation shall be entitled to a certificate, in such form, consistent with the Articles of Incorporation or any law, as shall be prescribed by the board of directors, certifying the number and class or series of shares owned by such shareholder. Shareholders can request and obtain a statement of rights, restrictions, preferences, and privileges regarding classified shares or a class of shares with two or more series, if any, from the Corporation’s principal executive office. Each certificate issued shall bear all statements or legends required by law or the Articles of Incorporation to be affixed thereto, and shall be signed by (a) the chair of the board, any vice chair of the board, the president, or any vice president and (b) the chief financial officer, any assistant treasurer, the secretary, or any assistant secretary. No share shall be issued until the consideration therefor, fixed as provided by law, has been fully paid.

Section 2. Transfers of Shares. Shares of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws. Transfers of shares of the Corporation shall be made on the books of the Corporation only by the registered holder thereof or by such other person as may under law be authorized to endorse such shares for transfer, or by such shareholder’s attorney thereunto authorized by power of attorney duly executed and filed with the secretary or transfer agent of the Corporation. Except as otherwise provided by law, upon surrender to the Corporation or its transfer agent of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment, or authority to transfer, the Corporation shall issue a new certificate to the person entitled thereto, cancel the old certificate, and record the transaction upon its books. No transfer of shares shall be valid as against the Corporation for any purpose until it shall have been entered in the share transfer records of the Corporation by an entry showing from and to what person those shares were transferred.

Section 3. Registered Shareholders. The Corporation may treat the holder of record of any shares issued by the Corporation as the holder in fact thereof, for purposes of voting those shares, receiving distributions thereon or notices in respect thereof, transferring those shares, exercising rights of dissent with respect to those shares, exercising or waiving any preemptive right with respect to those shares, entering into agreements with respect to those shares in accordance with the laws of the State of California, or giving proxies with respect to those shares.

Section 4. Lost, Stolen, or Destroyed Certificates. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates previously issued by the Corporation alleged to have been lost, stolen, or destroyed; provided, that the owner of the lost, stolen, or destroyed certificate (or the owner’s legal representative) shall give the Corporation a bond or other adequate security sufficient to indemnify the Corporation against any claim against the Corporation on account of the alleged loss, theft, or destruction of any such certificate or the issuance of such new certificate.

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Section 5. Checks, Drafts, Etc. All checks, drafts, or other instruments for payment of money or notes of the Corporation shall be signed by an authorized officer or officers or any other person or persons as shall be determined from time to time by the board of directors.

Section 6. Fiscal Year. The fiscal year of the Corporation shall be as determined by the board of directors.

Section 7. Conflict with Applicable Law or Articles of Incorporation. Unless the context requires otherwise, the general provisions, rules of construction, and the definitions of the California General Corporation Law shall govern the construction of these Bylaws. These Bylaws are adopted subject to any applicable law and the Articles of Incorporation. Whenever these Bylaws may conflict with any applicable law or the Articles of Incorporation, such conflict shall be resolved in favor of such law or the Articles of Incorporation.

Section 8. Invalid Provisions. If any one or more of the provisions of these Bylaws, or the applicability of any provision to a specific situation, shall be held invalid or unenforceable, the provision shall be modified to the minimum extent necessary to make it or its application valid and enforceable, and the validity and enforceability of all other provisions of these Bylaws and all other applications of any provision shall not be affected thereby.

ARTICLE VIII
AMENDMENTS

Section 1. Amendment by Shareholders. New bylaws may be adopted or these Bylaws maybe amended or repealed by the affirmative vote of a majority of the outstanding shares entitled to vote, or by the written assent of shareholders entitled to vote such shares, except as otherwise provided by law or by the Articles of Incorporation.

Section 2. Amendment by Directors. Subject to the rights of the shareholders as provided in Section 1 of this Article, Bylaws other than a bylaw or an amendment thereof changing the authorized number of directors may be adopted, amended or repealed by the board of directors.

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EX-4.1

Exhibit 4.1

 

 

EX-10.1

Exhibit 10.1

INDEMNIFICATION AGREEMENT

This Indemnification Agreement, dated as of , is made by and between Southern California Bancorp, a California corporation (the “Company”), and (the “Indemnitee”).

WHEREAS, it is essential to the Company to retain and attract as directors, officers and employees the most capable persons available;

WHEREAS, the Indemnitee is an “agent” (as such term is defined in Section 317 of the California Corporations Code) of the Company;

WHEREAS, the Company and the Indemnitee recognize the increased risk of litigation and other claims being asserted against directors, officers and employees of companies;

WHEREAS, Section 317 of the California Corporations Code, the Company’s Articles of Incorporation (“Articles of Incorporation”) and the Company’s Bylaws (“Bylaws”) authorize the Company to indemnify and advance expenses to its agents to the extent provided therein, and the Indemnitee serves as an agent of the Company, in part, in reliance on such provisions;

WHEREAS, the Company has determined that its inability to retain and attract as directors, officers and employees the most capable persons would be detrimental to the interests of the Company, and that the Company therefore should seek to assure such persons that indemnification and insurance coverage will be available in the future; and

WHEREAS, in recognition of the Indemnitee’s need for substantial protection against personal liability in order to enhance the Indemnitee’s continued service to the Company in an effective manner and the Indemnitee’s reliance on the Company’s Articles of Incorporation and Bylaws, and in part to provide the Indemnitee with specific contractual assurance that the protection promised by the Company’s Articles of Incorporation and Bylaws will be available to the Indemnitee (regardless of, among other things, any amendment to or revocation of the applicable provisions of the Company’s Articles of Incorporation and Bylaws or any change in the composition of the governing bodies of the Company or any acquisition transaction relating to the Company), the Company wishes to provide in this Agreement for the indemnification of and the advancing of expenses to the Indemnitee to the fullest extent (whether partial or complete) permitted by law and as set forth in this Agreement, and, to the extent insurance is maintained, for the continued coverage of the Indemnitee under the directors’ and officers’ liability insurance policy of the Company.

NOW, THEREFORE, in consideration of the premises and of the Indemnitee continuing to serve the Company directly or, on its behalf or at its request, as an officer, director, manager, member, partner, fiduciary or trustee of, or in a similar capacity with, another Person (as defined below) or any employee benefit plan, and intending to be legally bound hereby, the parties hereto agree as follows:

1. Certain Definitions. In addition to terms defined elsewhere herein, the following terms have the following meanings when used in this Agreement:

(a) Agreement: means this Indemnification Agreement, as amended from time to time hereafter.

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(b) Board of Directors: means the Board of Directors of the Company.

(c) Claim: means any threatened, asserted, pending or completed civil, criminal, administrative, investigative or other action, suit or proceeding of any kind whatsoever, including any arbitration or other alternative dispute resolution mechanism, or any appeal of any kind thereof, or any inquiry or investigation, whether instituted by the Company, any governmental agency or any other party, that the Indemnitee in good faith believes might lead to the institution of any such action, suit or proceeding, whether civil, criminal, administrative, investigative or other, including any arbitration or other alternative dispute resolution mechanism.

(d) Indemnifiable Expenses: means: (i) all expenses and liabilities, including judgments, fines, penalties, interest, amounts paid in settlement with the approval of the Company, and counsel fees and disbursements (including, without limitation, experts’ fees, court costs, retainers, transcript fees, duplicating, printing and binding costs, as well as telecommunications, postage and courier charges) paid or incurred in connection with investigating, defending, being a witness in or participating in (including on appeal), or preparing to investigate, defend, be a witness in or participate in, any Claim relating to any Indemnifiable Event by reason of the fact that Indemnitee is, was or has agreed to serve as a director, officer, employee or agent of the Company, or is, was or has agreed to serve on behalf of or at the request of the Company as a director, officer, manager, member, partner, fiduciary, trustee or in a similar capacity of another Person, or by reason of any action alleged to have been taken or omitted in any such capacity, whether occurring before, on or after the date of this Agreement (any such event, an “Indemnifiable Event”); (ii) any liability pursuant to a loan guaranty (other than a loan guaranty given in a personal capacity) or otherwise, for any indebtedness of the Company or any subsidiary of the Company, including, without limitation, any indebtedness which the Company or any subsidiary of the Company has assumed or taken subject to; and (iii) any liabilities which an Indemnitee incurs as a result of acting on behalf of the Company (whether as a fiduciary or otherwise) in connection with the operation, administration or maintenance of an employee benefit plan or any related trust or funding mechanism (whether such liabilities are in the form of excise taxes assessed by the United States Internal Revenue Service, penalties assessed by the United States Department of Labor, restitutions to such a plan or trust or other funding mechanism or to a participant or beneficiary of such plan, trust or other funding mechanism, or otherwise).

(e) Indemnitee-Related Entities: means any corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise (other than the Company or any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise Indemnitee has agreed, on behalf of the Company or at the Company’s request, to serve as a director, officer, employee or agent and which service is covered by the indemnity described in this Agreement) from whom an Indemnitee may be entitled to indemnification or advancement of expenses with respect to which, in whole or in part, the Company may also have an indemnification or advancement obligation (other than as a result of obligations under an insurance policy).

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(f) Jointly Indemnifiable Claim: means any Claim for which the Indemnitee shall be entitled to indemnification from both an Indemnitee-Related Entity and the Company pursuant to applicable law, any indemnification agreement or the articles of incorporation, bylaws, partnership agreement, operating agreement, certificate of formation, certificate of limited partnership or comparable organizational documents of the Company and an Indemnitee-Related Entity.

(g) Losses: means all losses, Claims, damages, fines, or penalties, including, without limitation, any legal or other expenses (including, without limitation, any legal fees, judgments, fines, appeal bonds or related expenses) incurred in connection with defending, investigating or settling any Claim, fine, penalty or similar action.

(h) Person: means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity.

2. Basic Indemnification Arrangement; Advancement of Indemnifiable Expenses.

(a) In the event that the Indemnitee was, is or becomes subject to, a party to or witness or other participant in, or is threatened to be made subject to, a party to or witness or other participant in, a Claim by reason of (or arising in part out of) an Indemnifiable Event, the Company shall indemnify the Indemnitee, or cause such Indemnitee to be indemnified, to the fullest extent permitted by the laws of the State of California in effect on the date hereof and as amended from time to time, and shall hold the Indemnitee harmless from and against all Losses that arise by reason of (or arising in part out of) an Indemnifiable Event; provided, however, that no change in the laws of the State of California shall have the effect of reducing the benefits available to the Indemnitee hereunder based on the laws of the State of California as in effect on the date hereof or as such benefits may improve as a result of amendments after the date hereof. The rights of the Indemnitee provided in this Section 2 shall include, without limitation, the rights set forth in the other sections of this Agreement. Payments of Indemnifiable Expenses shall be made as soon as practicable but in any event no later than twenty (20) calendar days after written demand is presented to the Company, against any and all Indemnifiable Expenses.

(b) Upon request by the Indemnitee, the Company shall advance, or cause to be advanced, any and all Indemnifiable Expenses incurred by the Indemnitee (an “Expense Advance”) on the terms and subject to the conditions of this Agreement, as soon as practicable but in any event no later than twenty (20) calendar days after written demand, together with supporting documentation, is presented to the Company. The Company shall, in accordance with such request (but without duplication), either: (i) pay, or cause to be paid, such Indemnifiable Expenses on behalf of the Indemnitee; or (ii) reimburse, or cause the reimbursement of, the Indemnitee for such Indemnifiable Expenses. The Indemnitee’s right to an Expense Advance is absolute and shall not be subject to any condition that the Board of Directors shall not have determined that the Indemnitee is not entitled to be indemnified under applicable law. However, the obligation of the Company to make an Expense Advance pursuant to this Section 2(b) shall be subject to the condition that, if, when and to the extent that a final judicial determination is made (as to which all rights of appeal therefrom have been exhausted or lapsed) that the Indemnitee is not entitled to be so indemnified under applicable law, the Company shall be entitled to be reimbursed by the Indemnitee (who hereby agrees to reimburse the Company) for all such amounts theretofore paid (it being understood and agreed that the foregoing agreement by the Indemnitee shall be deemed to satisfy any requirement that the Indemnitee provide the Company with an undertaking to repay any Expense Advance if it is ultimately determined that the Indemnitee is not entitled to indemnification under applicable law). The Indemnitee’s undertaking to repay such Expense Advances shall be unsecured and interest-free.

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(c) Notwithstanding anything in this Agreement to the contrary, the Indemnitee shall not be entitled to indemnification or advancement of Indemnifiable Expenses pursuant to this Agreement in connection with any Claim initiated by the Indemnitee unless: (i) the Company has joined in or the Board of Directors of the Company has authorized or consented to the initiation of such Claim; or (ii) the Claim is one to enforce the Indemnitee’s rights under this Agreement (including an action pursued by the Indemnitee to secure a determination that the Indemnitee should be indemnified under applicable law).

(d) The indemnification obligations of the Company under Section 2(a) shall be subject to the condition that the Board of Directors shall not have determined (by majority vote of directors who are not parties to the applicable Claim) that the indemnification of the Indemnitee is not proper in the circumstances because the Indemnitee is not entitled to be indemnified under applicable law. If the Board of Directors determines that the Indemnitee is not entitled to be indemnified in whole or in part under applicable law, the Indemnitee shall have the right to commence litigation in any court in the State of California having subject matter jurisdiction thereof and in which venue is proper, seeking an initial determination by the court or challenging any such determination by the Board of Directors or any aspect thereof, including the legal or factual bases therefor, and the Company hereby consents to service of process and to appear in any such proceeding. If the Indemnitee commences legal proceedings in a court of competent jurisdiction to secure a determination that the Indemnitee should be indemnified under applicable law, any determination made by the Board of Directors that the Indemnitee is not entitled to be indemnified under applicable law shall not be binding, the Indemnitee shall continue to be entitled to receive Expense Advances, and the Indemnitee shall not be required to reimburse the Company for any Expense Advance, until a final judicial determination is made in the Claim (as to which all rights of appeal therefrom have been exhausted or lapsed) that the Indemnitee is not entitled to be so indemnified under applicable law. Any determination by the Board of Directors otherwise shall be conclusive and binding on the Company and the Indemnitee.

(e) To the extent that the Indemnitee has been successful on the merits or otherwise in defense of any or all Claims relating in whole or in part to an Indemnifiable Event or in defense of any issue or matter therein, including dismissal without prejudice, the Indemnitee shall be indemnified against all Indemnifiable Expenses actually and reasonably incurred in connection therewith, notwithstanding an earlier determination by the Board of Directors that the Indemnitee is not entitled to indemnification under applicable law.

(f) Notwithstanding anything to the contrary herein, the Company shall not be obligated pursuant to the terms of this Agreement to indemnify Indemnitee for any acts or omissions or transactions from which a director, officer, employee or agent may not be relieved of liability under applicable law.

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(g) Notwithstanding any other provisions contained herein, this Agreement and the rights and obligations of the parties hereto are subject to the requirements, limitations and prohibitions set forth in state and federal laws, rules, regulations, and orders regarding indemnification and prepayment of expenses, legal or otherwise, and liabilities, including, without limitation, Section 317 of the California Corporations Code, Section 18(k) of the Federal Deposit Insurance Act and Part 359 of the Federal Deposit Insurance Corporation’s Rules and Regulations and any successor regulations thereto.

3. Indemnification for Additional Expenses. The Company shall indemnify, or cause the indemnification of, the Indemnitee against any and all Indemnifiable Expenses and, if requested by the Indemnitee, shall advance such Indemnifiable Expenses to the Indemnitee subject to and in accordance with Section 2, which are incurred by the Indemnitee in connection with any action brought by the Indemnitee, the Company or any other Person with respect to the Indemnitee’s right to: (i) indemnification or an Expense Advance by the Company under this Agreement or any provision of the Company’s Articles of Incorporation and/or Bylaws; and/or (ii) recovery under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether the Indemnitee ultimately is determined to be entitled to such indemnification, Expense Advance or insurance recovery, as the case may be; provided that the Indemnitee shall be required to reimburse such Indemnifiable Expenses in the event that a final judicial determination is made in the Claim (as to which all rights of appeal therefrom have been exhausted or lapsed) that such action brought by the Indemnitee, or the defense by the Indemnitee of an action brought by the Company or any other Person, as applicable, was frivolous or in bad faith.

4. Partial Indemnity, Etc. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the Indemnifiable Expenses in respect of a Claim but not, however, for all of the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion thereof to which the Indemnitee is entitled.

5. Burden of Proof. In connection with any determination by the Board of Directors, any court or otherwise as to whether the Indemnitee is entitled to be indemnified hereunder, the Board of Directors or court shall presume that the Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the burden of proof shall be on the Company or its representative to establish, by clear and convincing evidence, that the Indemnitee is not so entitled.

6. Reliance as Safe Harbor. The Indemnitee shall be entitled to indemnification for any action or omission to act undertaken: (a) in good faith reliance upon the records of the Company, including its financial statements, or upon information, opinions, reports or statements furnished to the Indemnitee by the officers or employees of the Company or any of its subsidiaries in the course of their duties, or by committees of the Board of Directors, or by any other Person as to matters the Indemnitee reasonably believes are within such other Person’s professional or expert competence; or (b) on behalf of the Company in furtherance of the interests of the Company in good faith in reliance upon, and in accordance with, the advice of legal counsel or accountants, provided such legal counsel or accountants were selected with reasonable care by or on behalf of the Company. In addition, the knowledge and/or actions, or failures to act, of any other director, officer, agent or employee of the Company shall not be imputed to the Indemnitee for purposes of determining the right to indemnity hereunder.

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7. No Other Presumptions. For purposes of this Agreement, the termination of any Claim, action, suit or proceeding, by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, shall not create a presumption that the Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. In addition, neither the failure of the Board of Directors to have made a determination as to whether the Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Board of Directors that the Indemnitee has not met such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by the Indemnitee to secure a judicial determination that the Indemnitee should be indemnified under applicable law shall be a defense to the Indemnitee’s claim or create a presumption that the Indemnitee has not met any particular standard of conduct or did not have any particular belief.

8. Nonexclusivity, Etc. The rights of the Indemnitee hereunder shall be in addition to any other rights the Indemnitee may have under the Company’s Articles of Incorporation and Bylaws, the laws of the State of California, or otherwise. To the extent that a change in the laws of the State of California or the interpretation thereof (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under the Company’s Articles of Incorporation and Bylaws, it is the intent of the parties hereto that the Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. To the extent that there is a conflict or inconsistency between the terms of this Agreement and the Company’s Articles of Incorporation or Bylaws, it is the intent of the parties hereto that the Indemnitee shall enjoy the greater benefits regardless of whether contained herein, in the Company’s Articles of Incorporation or Bylaws. No amendment or alteration of the Company’s Articles of Incorporation or Bylaws or any other agreement shall adversely affect the rights provided to Indemnitee under this Agreement.

9. Liability Insurance. The Company shall use its reasonable best efforts to purchase and maintain a policy or policies of insurance, including a directors and officers insurance policy, with reputable insurance companies with A.M. Best ratings of “A” or better, providing Indemnitee with coverage for claims asserted against, and liability incurred by, Indemnitee or on Indemnitee’s behalf by reason of the fact that Indemnitee is or was or has agreed to serve as a director, officer, employee or agent of the Company, or is or was serving or has agreed to serve on behalf of or at the request of the Company as a director, officer, employee or agent (which, for purposes hereof, shall include a trustee, fiduciary, partner or manager or similar capacity) of another corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other enterprise, or arising out of Indemnitee’s status as such, whether or not the Company would have the power to indemnify Indemnitee against such liability under the provisions of this Agreement. Such insurance policies shall have coverage terms and policy limits at least as favorable to Indemnitee as the insurance coverage provided to any other director or officer of the Company, including, if reasonably available, coverage for claims arising out of negligent acts and errors and omissions of Indemnitee. If the Company has such insurance in effect at the time the Company receives from Indemnitee any notice of the commencement of an action, suit or proceeding, the Company shall give prompt notice of the commencement of such action, suit or proceeding to the insurers in accordance with the procedures set forth in the policy. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policy.

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10. Amendments, Etc. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. In the event the Company or any of its subsidiaries enters into an indemnification agreement with another director, officer, agent, fiduciary or manager of the Company or any of its subsidiaries containing a term or terms more favorable to the indemnitee than the terms contained herein (as determined by the Indemnitee), the Indemnitee shall be afforded the benefit of such more favorable term or terms and such more favorable term or terms shall be deemed incorporated by reference herein as if set forth in full herein.

11. Subrogation. Subject to Section 12, in the event of payment by the Company under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee with respect to any insurance policy. Indemnitee shall execute all papers reasonably required and shall do everything that may be reasonably necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. The Company shall pay or reimburse all expenses actually and reasonably incurred by Indemnitee in connection with such subrogation.

12. Jointly Indemnifiable Claims. Given that certain Jointly Indemnifiable Claims may arise due to the relationship between the Indemnitee-Related Entities and the Company and the service of the Indemnitee as a director and/or officer of the Company at the request of the Indemnitee-Related Entities, the Company acknowledges and agrees that the Company shall be fully and primarily responsible for the payment to the Indemnitee in respect of indemnification and advancement of Indemnifiable Expenses in connection with any such Jointly Indemnifiable Claim, pursuant to and in accordance with the terms of this Agreement, irrespective of any right of recovery the Indemnitee may have from the Indemnitee-Related Entities. Under no circumstance shall the Company be entitled to any right of subrogation or contribution by the Indemnitee-Related Entities and no right of recovery the Indemnitee may have from the Indemnitee-Related Entities shall reduce or otherwise alter the rights of the Indemnitee or the obligations of the Company hereunder. In the event that any of the Indemnitee-Related Entities shall make any payment to the Indemnitee in respect of indemnification or advancement of expenses with respect to any Jointly Indemnifiable Claim, the Indemnitee-Related Entity making such payment shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee against the Company under the terms of this Agreement, and the Indemnitee shall execute all papers reasonably required and shall do all things that may be reasonably necessary to secure such rights, including the execution of such documents as may be necessary to enable the Indemnitee-Related Entities effectively to bring suit to enforce such rights. Each of the Indemnitee-Related Entities shall be third-party beneficiaries with respect to this Section 12, entitled to enforce this Section 12 against the Company as though each such Indemnitee-Related Entity were a party to this Agreement.

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13. No Duplication of Payments. Subject to Section 12 hereof, the Company shall not be liable under this Agreement to make any payment in connection with any Claim made against the Indemnitee to the extent the Indemnitee has otherwise actually received payment (under any insurance policy, any provision of the Company’s Articles of Incorporation and Bylaws, or otherwise) of the amounts otherwise indemnifiable hereunder.

14. Defense of Claims. The Company shall be entitled to participate in the defense of any Claim relating to an Indemnifiable Event or to assume the defense thereof, with counsel reasonably satisfactory to the Indemnitee; provided that if the Indemnitee reasonably believes, after consultation with counsel selected by the Indemnitee, that: (i) the use of counsel chosen by the Company to represent the Indemnitee would present such counsel with an actual or potential conflict of interest; (ii) the named parties in any such Claim (including any impleaded parties) include both (A) the Company or any subsidiary of the Company and (B) the Indemnitee, and the Indemnitee concludes that there may be one or more legal defenses available to Indemnitee that are different from or in addition to those available to the Company or any subsidiary of the Company; or (iii) any such representation by such counsel would be precluded under the applicable standards of professional conduct then prevailing, then the Indemnitee shall be entitled to retain separate counsel (but not more than one law firm plus, if applicable, local counsel in respect of any particular Claim) at the Company’s expense. The Company shall not be liable to the Indemnitee under this Agreement for any amounts paid in settlement of any Claim relating to an Indemnifiable Event effected without the Company’s prior written consent. The Company shall not, without the prior written consent of the Indemnitee, effect any settlement of any Claim relating to an Indemnifiable Event which the Indemnitee is or could have been a party unless such settlement solely involves the payment of money and includes a complete and unconditional release of the Indemnitee from all liability on all claims that are the subject matter of such Claim. Neither the Company nor the Indemnitee shall unreasonably withhold its or Indemnitee’s consent to any proposed settlement; provided that the Indemnitee may withhold consent to any settlement that does not provide a complete and unconditional release of the Indemnitee. To the fullest extent permitted by California law, the Company’s assumption of the defense of a Claim pursuant to this Section 14 will constitute an irrevocable acknowledgement by the Company that any Indemnifiable Expenses incurred by or for the account of Indemnitee incurred in connection therewith are indemnifiable by the Company under Section 2 of this Agreement.

15. Binding Effect, Etc. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business and/or assets of the Company), assigns, spouses, heirs, executors, trustees, and personal and legal representatives notwithstanding the absence of a written assumption as described below. The Company shall require and cause any successor(s) (whether directly or indirectly, whether in one or a series of transactions, and whether by purchase, merger, consolidation, or otherwise) to all or a significant portion of the business and/or assets of the Company and/or its subsidiaries (on a consolidated basis), by written agreement in form and substance reasonably satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place; provided that no such assumption, or lack of ability to obtain such assumption, shall relieve the Company from its obligations hereunder and any obligations shall thereafter be joint and several. This Agreement shall continue in effect regardless of whether the Indemnitee continues to serve as a director or officer of the Company and/or on behalf of or at the request of the Company as a director, officer, manager, member, partner, fiduciary, trustee or in a similar capacity of another Person. Except as provided in this Section 15, neither party shall, without the prior written consent of the other, assign or delegate this Agreement or any rights or obligations hereunder.

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16. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby; and (b) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to the terms of this Agreement.

17. Specific Performance, Etc. The parties recognize that if any provision of this Agreement is violated by the parties hereto, the Indemnitee may be without an adequate remedy at law. Accordingly, in the event of any such violation, the Indemnitee shall be entitled, if the Indemnitee so elects, to institute proceedings, either in law or at equity, to obtain damages, to enforce specific performance, to enjoin such violation, or to obtain any relief or any combination of the foregoing as the Indemnitee may elect to pursue.

18. Notices. All notices, requests, consents and other communications hereunder to any party shall be deemed to be sufficient if contained in a written document delivered in person or sent by electronic mail, nationally recognized overnight courier or personal delivery, addressed to such party at the address set forth below or such other address as may hereafter be designated in writing by such party to the other parties:

(a) If to the Company, to:

Bank of Southern California, N.A
355 S. Grand Ave., Suite 1200
Attn: Manisha Merchant, EVP-General Counsel
E-mail: mmerchant@banksocal.com

(b) If to the Indemnitee, to the address set forth on the signature page hereto.

All such notices, requests, consents and other communications shall be deemed to have been given or made if and when received (including by overnight courier) by the parties at the above addresses or sent by electronic transmission, to the email address specified above (or at such other address or email address for a party as shall be specified by like notice). Any notice delivered by any party hereto to any other party hereto shall also be delivered to each other party hereto simultaneously with delivery to the first party receiving such notice.

19. Counterparts. This Agreement may be executed in counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

20. Headings. The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.

21. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of California applicable to contracts made and to be performed in such state without giving effect to the principles of conflicts of laws.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have executed this Indemnification Agreement as of the date first above written.

SOUTHERN CALIFORNIA BANCORP	INDEMNITEE
By:	Name:
Its:	Date:

EX-10.2

Exhibit 10.2

SOUTHERN CALIFORNIA BANCORP

2019 OMNIBUS EQUITY INCENTIVE PLAN

TABLE OF CONTENTS

			Page
ARTICLE I GENERAL			1
	1.1	Purpose	1
	1.2	Definitions of Certain Terms	1
	1.3	Administration	5
	1.4	Persons Eligible for Awards	6
	1.5	Types of Awards Under the Plan	6
	1.6	Shares Available for Awards	6
	1.7	Adjustments Upon Changes in Capitalization	7
	1.8	Award Agreements	7
	1.9	Rights of Participants	8
	1.10	Award Period	8
	1.11	No Rights as a Shareholder	8
	1.12	Compliance with Law	8
	1.13	Agreements and Representations of Participants.	9
ARTICLE II AWARDS OF RESTRICTED SHARES UNDER THE PLAN			10
	2.1	Terms and Conditions	10
	2.2	Restricted Shares Award Agreement	10
	2.3	Restricted Share Grants	10
	2.4	Awards Subject To Performance Criteria	11
	2.5	Time-Based Awards	11
	2.6	Acceleration of Vesting Upon Occurrence of a Terminating Event	11
	2.7	Restriction Period	12
	2.8	Restricted Shares	12
	2.9	Issuance of Share Certificates	12
	2.10	Deferred Payments	12
	2.11	Forfeiture of Unvested Shares	12
ARTICLE III AWARDS OF STOCK OPTIONS UNDER THE PLAN			13
	3.1	Terms and Conditions	13
	3.2	Stock Option Agreement	13
	3.3	Grant of Stock Options	13
	3.4	Shareholder-Employees	13
	3.5	Maximum Value of Stock Options	14
	3.6	Substituted Stock Options	14
	3.7	Non-Qualified Stock Options	14
	3.8	Stock Option Exercise Price	14
	3.9	Exercise of Stock Options	15
	3.10	Cancellation and Termination of Stock Options	17
	3.11	Regulatory Law Compliance; Notice of Sale	17
ARTICLE IV MISCELLANEOUS			17
	4.1	Effective Date of the Plan	17
	4.2	Amendment of the Plan; Modification of Awards	17
	4.3	Terminating Events	18
	4.4	Tax Withholding	18
	4.5	Restrictions	18
	4.6	Nonassignability	19
	4.7	Requirement of Notification of Election Under Section 83(b) of the Code	19
	4.8	Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of the Code	19
	4.9	No Right to Employment	20
	4.10	Nature of Payments	20
	4.11	Non-Uniform Determinations	20
	4.12	Other Payments or Awards	20
	4.13	Limitation on Obligations of the Company	20
	4.14	Limitation of Rights	20
	4.15	Notices	21
	4.16	Section Headings	21
	4.17	Effective Date and Term of Plan	21
	4.18	Governing Law	21
	4.19	Severability; Entire Agreement	21
	4.20	No Third Party Beneficiaries	22
	4.21	Successors and Assigns	22
	4.22	Section 409A	22

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Article I
GENERAL

1.1 Purpose

This Southern California Bancorp 2019 Omnibus Equity Incentive Plan (the “Plan”) is intended to replace the Bank of Southern California, N.A. 2001 Stock Option Plan (the “2001 Plan”) and the Bank of Southern California, N.A. 2011 Omnibus Equity Incentive Plan (the “2011 Plan”), such replacement thereof to be subject to and effective as of the effective time of the holding company reorganization of Bank of Southern California, N.A. (the “Bank”). As the result of the holding company reorganization of the Bank, all outstanding and unexpired stock options granted under the 2001 Plan and the 2011 Plan and all outstanding shares of restricted stock granted under the 2011 Plan shall be deemed to be Stock Options (as hereinafter defined) and Restricted Shares (as hereinafter defined) granted under this Plan.

The purpose of the Plan is to strengthen Southern California Bancorp (the “Company”) and those banks and corporations which are or hereafter become Subsidiaries by providing additional means of attracting and retaining competent managerial personnel and by providing to participating directors, officers, Key Employees and Consultants added incentive for high levels of performance and for unusual efforts to increase the earnings of the Company and any Subsidiaries. The Plan is intended to promote the long-term success of the Company and any Subsidiaries by: (i) encouraging key personnel to focus on critical long-range objectives; (ii) increasing the ability of the Company and Subsidiaries to attract and retain key personnel; and (iii) linking key personnel directly to shareholder interests through increased stock ownership.

The Plan seeks to accomplish these purposes and to achieve these results by providing such directors, officers, Key Employees and Consultants with a proprietary interest in maximizing the growth, profitability, and overall success of the Company and its Subsidiaries through the grant of Awards of Restricted Shares, which Awards may be either time based or performance based. In addition, the Plan provides such directors, officers, key employees and Consultants with a means to purchase shares of the Common Stock of the Company pursuant to Awards of Stock Options granted in accordance with the Plan. Stock Options granted pursuant to this Plan are intended to be Incentive Stock Options or Non-Qualified Stock Options, as shall be determined and designated by the Committee upon the grant of each Stock Option hereunder.

1.2 Definitions of Certain Terms

(a) “Affiliation,” “Affiliate,” or “Affiliated” mean services as a director or a Consultant to the Company or any Subsidiary.

(b) “Award” means an award of Restricted Shares or the grant of Stock Options to a Participant under the Plan.

(c) “Award Agreement” means a Restricted Shares Award Agreement evidencing the Award of Restricted Shares hereunder or a Stock Option Agreement evidencing the grant of Stock Options hereunder.

(d) “Award Date” means the date the Committee makes its final determination to grant an Award hereunder; provided however, the Board or the Committee may fix the Award Date as any date on or after the date of its final determination to grant the Award. The Award Date shall be as set forth in the applicable Award Agreement.

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(e) “Award Period” means the period beginning on an Award Date and ending on the expiration date of such Award.

(f) “Bank” means Bank of Southern California, N.A., a national banking association.

(g) “Board” means the Board of Directors of the Company, as constituted from time to time.

(h) “Code” means the Internal Revenue Code of 1986, as in effect and as amended from time to time, or any successor statute thereto, together with any rules, regulations, and interpretations promulgated thereunder or with respect thereto.

(i) “Committee” means the committee of the Board established from time to time in the sole discretion of the Board to administer the Plan, as described in Section 1.3 of the Plan. Any Committee established by the Board shall be comprised solely of three (3) or more Non-Employee Directors (as defined in Rule 16b-3 promulgated under the Exchange Act) or such greater number of directors as may be required under applicable law.

(j) “Common Stock” means the common stock, no par value, of the Company.

(k) “Company” means Southern California Bancorp, a California corporation.

(l) “Consultant” means those individuals, including but not limited to attorneys, accountants and other professionals who provide services to the Company or any Subsidiary, but only to the extent that an Award is granted as fair compensation for services rendered.

(m) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(n) “Fair Market Value” means on, or with respect to, any given date(s), the closing market price of the Common Stock, as reported on the Nasdaq Small Cap or National Market for such date(s) or, if the Common Stock was not traded on such date(s), on the next preceding day or days on which the Common Stock was traded. If at any time the Common Stock is not traded on such exchange, the Fair Market Value of a share of the Common Stock shall be determined in good faith by the Board or the Committee by the reasonable application of a reasonable valuation method. Notwithstanding the foregoing, no Award under the Plan is intended to provide for a deferral of compensation within the meaning of Section 409A of the Code and, as such, the Fair Market Value shall be determined in all respects in a manner consistent with that intention.

(o) “Incentive Stock Option” means a Stock Option that is intended to qualify for special federal income tax treatment pursuant to Sections 421 and 422 of the Code (or a successor provision thereof) and which is so designated in the applicable Award Agreement. Under no circumstances shall any Stock Option that is not specifically designated as an Incentive Stock Option be considered an Incentive Stock Option.

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(p) “Key Employee” means an employee of the Company or any Subsidiary as determined by the Committee from time to time.

(q) “Non-Qualified Stock Option” means a Stock Option which is not an Incentive Stock Option.

(r) “Option Exercise Price” means the amount payable by a Participant on the exercise of a Stock Option.

(s) “Option Shares” means the shares of Common Stock covered by and subject to any outstanding unexercised Stock Option granted pursuant to this Plan.

(t) “Participant” means any individual who is selected from time to time to receive an Award under the Plan.

(u) “Performance-Based Award” means an Award granted under Article II that vest based upon the achievement of Performance Criteria rather than vesting based upon the passage of time. Performance-Based Awards are further defined in Section 2.4.

(v) “Performance Criteria” means the attainment of performance goals relating to one or more business criteria within the meaning of Section 162(m) of the Code, as determined by the Board or the Committee in its sole discretion at the Award Date. Performance Criteria may be stated in absolute terms or relative to comparison companies or indices to be achieved during a period of time. Any Performance Criteria may be used to measure the performance of the Company as a whole or any business unit of the Company. Any Performance Criteria may include or exclude extraordinary items such as extraordinary, unusual and / or non-recurring items of gain or loss, gains or losses on the disposition of a business, changes in tax or accounting regulations or laws, or the effects of a merger or acquisition. Performance Criteria generally shall be established by the Board or the Committee and shall be derived from the Company’s audited financial statements, including footnotes, or any other measure of performance desired by the Board or the Committee.

(w) “Restricted Shares” means the restricted shares of Common Stock awarded pursuant to the provisions of Article II of the Plan and the relevant Restricted Shares Award Agreement.

(x) “Restricted Shares Award Agreement” means a written agreement between the Participant and the Company evidencing the Award of Restricted Shares under the Plan.

(y) “Restriction Period” means the period of time commencing on the Award Date of Restricted Shares and ending on the date all restrictions, limitations, and criteria associated with such Restricted Shares lapse or are achieved, as applicable.

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(z) “Rule 16b-3” means Rule 16b-3, as amended from time to time, as promulgated by the Securities and Exchange Commission pursuant to the Exchange Act.

(aa) “Securities Act” means the Securities Act of 1934, as amended.

(bb) “Stock Option” means the right to purchase a specified number of shares of Common Stock under the Plan, at a price and upon the terms and conditions determined by the Committee and evidenced by a Stock Option Agreement.

(cc) “Stock Option Agreement” means a written agreement between the Participant and the Company evidencing the grant of Stock Options under the Plan.

(dd) “Subsidiary” means each “subsidiary corporation” (treating the Company as the employer corporation) as defined in Section 424(f) of the Code, including but not limited to the Bank.

(ee) “Terminating Event” means: (i) the consummation of a plan of dissolution or liquidation of the Company; (ii) a plan of reorganization, merger or consolidation of the Company with one or more corporations, as a result of which the Company is not the surviving entity; or (iii) the sale of all or substantially all the assets of the Company to another corporation; provided however, that if provision is made in connection with such transaction for assumption of Awards theretofore granted (in which case such Awards shall be converted into awards for a like number and kind for shares of the surviving entity), or substitution for such Awards with new awards covering stock of a successor employer corporation, or a parent or Subsidiary thereof, solely at the discretion of such successor corporation, or parent or Subsidiary, with appropriate adjustments as to number and kind of shares and prices, then the consummation of such transaction shall not be deemed a Terminating Event for purposes of the Plan or the applicable Award Agreement.

(ff) “Time-Based Awards” means the Award of Restricted Shares granted under the Plan that vest based upon the passage of time rather than vesting based upon the achievement of Performance Criteria.

(gg) “Total Disability” means a “permanent and total disability” within the meaning of Section 22(e)(3) of the Code and such other disabilities, infirmities, afflictions or conditions as the Board or the Committee determine.

(hh) “Vesting Date” means the date that Restricted Shares under an Award become fully vested, unrestricted, and non-forfeitable following:

(i) the applicable passage of time (for Time-Based Awards);

(ii) the achievement of the applicable Performance Criteria (for Performance- Based Awards);

(iii) the occurrence of an event triggering immediate vesting as described in the Plan; or

(iv) the decision of the Board or the Committee that such restricted Shares shall become fully vested, unrestricted, and non-forfeitable.

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1.3 Administration

(a) This Plan shall be administered by the Committee. Members of the Committee serve at the pleasure of the Board and the Board shall have the right, in its sole and absolute discretion, to remove or replace any person from or on the Committee at any time for any reason whatsoever. All Awards to Participants shall be authorized by the Committee.

(b) The Committee shall have the authority (i) to exercise all of the powers granted to it under the Plan, (ii) to construe, interpret and implement the Plan and any Award Agreements, (iii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules governing its own operations, (iv) to make all determinations necessary or advisable in administering the Plan, (v) to correct any defect, supply any omission and reconcile any inconsistency in the Plan, (vi) to amend the Plan to reflect changes in applicable law, (vii) to determine whether, to what extent and under what circumstances Awards may be settled or exercised in cash, shares of Common Stock, other securities, other Awards or other property, or canceled, forfeited or suspended and the method or methods by which Awards may be settled, canceled, forfeited or suspended, and (viii) to determine whether, to what extent and under what circumstances cash, shares of Common Stock, other securities, other Awards or other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee.

(c) Actions of the Committee shall be taken by the vote of a majority of its members. Any action may be taken by a written instrument signed by a majority of the Committee members, and action so taken shall be fully as effective as if it had been taken by a vote at a meeting.

(d) The Committee may designate persons other than members of the Board to carry out the day-to-day ministerial administration of the Plan under such conditions and limitations as it may prescribe. The Committee’s determinations under the Plan need not be uniform and may be made selectively among Participants, whether or not such Participants are similarly situated. The determination of the Committee on all matters relating to the Plan or any Award Agreement shall be final, binding and conclusive on all persons.

(e) No member of the Committee or any employee of the Company or any of its Subsidiaries or Affiliates (each such person a “Covered Person”) shall have any liability to any person (including, without limitation, any Participant in the Plan) for any action taken or omitted to be taken or any determination made in good faith with respect to the Plan or any Award. Each Covered Person shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense (including attorneys’ fees) that may be imposed upon or incurred by such Covered Person in connection with or resulting from any action, suit or proceeding to which such Covered Person may be a party or in which such Covered Person may be involved by reason of any action taken or omitted to be taken under the Plan and against and from any and all amounts paid by such Covered Person, with the Company’s approval, in settlement thereof, or paid by such Covered Person in satisfaction of any judgment in any such action, suit or proceeding against such Covered Person, provided that the Company shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and, once the Company gives notice of its intent to assume the defense, the Company shall have sole control over such defense with counsel of the Company’s choice. The foregoing right of indemnification shall not be available to a Covered Person to the extent that a court of competent jurisdiction in a final judgment or other final adjudication, in either case, not subject to further appeal, determines that the acts or omissions of such Covered Person giving rise to the indemnification claim resulted from such Covered Person’s bad faith, fraud or willful criminal act or omission. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which Covered Persons may be entitled under the Company’s Articles of Incorporation or Bylaws, as a matter of law, or otherwise, or any other power that the Company may have to indemnify such persons or hold them harmless.

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(f) Notwithstanding anything to the contrary contained herein, the Board may, in its sole discretion, at any time and from time to time, grant Awards or resolve to administer the Plan. In the foregoing event, the Board shall have all of the authority and responsibility granted to the Committee herein.

1.4 Persons Eligible for Awards

Awards under the Plan may be made to directors, officers and Key Employees of the Company or any Subsidiary, and to Consultants to the Company or any Subsidiary, as the Committee shall select in its discretion.

1.5 Types of Awards Under the Plan

Awards may be made under the Plan in the form of Restricted Shares and/or Stock Options, including Incentive Stock Options, as more particularly described in Articles II and III.

1.6 Shares Available for Awards

Subject to adjustment as provided in Section 1.7, the maximum number of shares of Common Stock that may be issued or paid out in connection with an Award of Restricted Shares or upon exercise of all Stock Options granted under this Plan shall not exceed the lesser of 25% of the issued and outstanding shares at time of the holding company reorganization referenced in Section 1.1, or 2,200,000 shares, each of which may be issued as incentive stock options. Such shares may be authorized but unissued Common Stock or authorized and issued Common Stock held in the Company’s treasury or acquired by the Company for the purposes of the Plan. The Board or Committee may direct that any stock certificate evidencing shares of Common Stock issued pursuant to the Plan shall bear a legend setting forth such restrictions on transferability as may apply to such shares of Common Stock pursuant to the Plan. If any Award is forfeited or otherwise terminates or is canceled without the delivery of shares of Common Stock, shares of Common Stock are surrendered or withheld from any Award to satisfy a Participant’s income tax withholding obligations, or shares of Common Stock owned by a Participant are tendered to pay the exercise price of Stock Options granted under the Plan, then the shares of Common Stock covered by such forfeited, terminated or canceled Award or which are equal to the number of shares of Common Stock surrendered, withheld or tendered shall again become available for issuance pursuant to Awards granted or to be granted under this Plan. Any shares of Common Stock delivered by the Company, any shares of Common Stock with respect to which Awards are made by the Company and any shares of Common Stock with respect to which the Company becomes obligated to make Awards, through the assumption of, or in substitution for, outstanding Awards previously granted by an acquired entity, shall not be counted against the shares of Common Stock available for Awards under this Plan.

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1.7 Adjustments Upon Changes in Capitalization

In the event of any change in the number of issued shares of Common Stock (or issuance of shares other than Common Stock) by reason of any forward or reverse share split, or share dividend, recapitalization, reclassification, merger, consolidation, split-up, spin-off, reorganization, combination, exchange of shares of Common Stock, the issuance of warrants or other rights to purchase shares of Common Stock or other securities, or any other change in corporate structure or in the event of any extraordinary distribution (whether in the form of cash, shares of Common Stock, other securities or other property) (each, an “Adjustment Event”), then the Committee shall equitably adjust the number or kind of shares of Common Stock that may be issued under the Plan, and any or all of the terms of an outstanding Award (including the number of shares of Common Stock covered by such outstanding Award, the type of property to which the Award is subject and the option or reference price of such Award), and such adjustments will be final, conclusive and binding for all purposes of the Plan. In determining adjustments to be made under this Section 1.7, the Board or the Committee may take into account such factors as it determines to be appropriate, including: (i) the provisions of applicable law, (ii) the potential tax or accounting consequences of an adjustment (including, as applicable, under Section 162(m) of the Code and/or Section 409A of the Code), and (iii) the preservation of the benefits or potential benefits intended to be made pursuant to Awards and, in light of such factors or others, may make adjustments that are not uniform or proportionate among outstanding Awards. In connection with any adjustment pursuant to this Section 1.7, the Committee may provide, in its sole discretion, for the cancellation of any outstanding Awards in exchange for payment in cash or other property equal to the Fair Market Value of the shares of Common Stock covered by such Awards, reduced by the option or reference price, if any. After any adjustment made pursuant to this Section 1.7, the number of shares subject to each outstanding Award will be rounded down to the nearest whole number.

1.8 Award Agreements

Awards of Restricted Shares granted under the Plan shall be evidenced by a written agreement in substantially the form of Exhibit “A” and Awards of Stock Options granted under the Plan shall be evidenced by a written agreement in substantially the form of Exhibit “B” hereto. Each Award Agreement shall contain such provisions as the Committee in its discretion deems necessary or desirable. A Participant shall have no rights with respect to an Award unless such Participant accepts the Award within such period as the Committee shall specify by executing an Award Agreement and, if the Board or Committee shall so require, makes payment to the Company in such amount as the Board or Committee may determine.

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No Award shall be enforceable until the Award Agreement has been signed by the Participant and, on behalf of the Company, by an executive officer (other than the recipient). By executing the Award Agreement, a Participant shall be deemed to have accepted and consented to the terms of this Plan and any action taken in good faith under this Plan by and within the discretion of the Board or the Committee or their delegates. Unless the Award Agreement otherwise expressly provides, there shall be no third party beneficiaries of the obligations of the Company to the Participant under the Award Agreement.

Each Award Agreement shall also specify the effect of a termination of employment or a cessation of Affiliation on the rights and benefits under the applicable Award Agreement, and in so doing may make distinctions based upon the cause of termination of employment or cessation of Affiliation (e.g., retirement, early retirement, cause, Total Disability, or death). The Committee shall provide each Participant with a copy of the Plan upon the grant of an initial Award or at any other time requested by a Participant.

1.9 Rights of Participants

The determination of the Board or the Committee to grant an Award shall not in any way constitute or be deemed to constitute an obligation of the Company, or a right of the Participant who is the proposed subject of the Award, and shall not constitute or be deemed to constitute the grant of an Award hereunder unless and until both the Company and the Participant have executed and delivered to the other an Award Agreement evidencing the grant of the Award, together with such other instrument or instruments as may be required by the Committee pursuant to this Plan.

1.10 Award Period

Each Award and all rights and obligations thereunder shall expire on such date as the Committee may determine, but not later than ten (10) years from the Award Date, and shall be subject to earlier termination as provided elsewhere in this Plan.

1.11 No Rights as a Shareholder

No Participant shall have, with respect to the shares of Common Stock underlying a grant of an Award, rights as a shareholder of the Company, including but not limited to the right to vote the shares or receive cash dividends on the shares, until the issuance of a stock certificate to such person for such shares. Except as otherwise provided in Section 1.7, no adjustment shall be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities or other property) for which the record date is prior to the date such stock certificate is issued.

1.12 Compliance with Law

The issuance of the Common Stock pursuant to an Award Agreement shall be subject to, and shall comply with, any applicable requirements of any federal and state securities laws, rules, and regulations (including, without limitation, the provisions of the Securities Act of 1933, the Exchange Act, and the respective rules and regulations promulgated thereunder) and any other law or regulation applicable thereto. No shares of Common Stock shall be issued pursuant to any Award Agreement and a Participant shall have no right or claim to such shares, unless and until: (i) payment in full as provided hereinabove has been received by the Company if required to be paid by the applicable Award Agreement; (ii) in the opinion of the counsel for the Company, all applicable requirements of law and of regulatory bodies having jurisdiction over such issuance and delivery have been fully complied with; and (iii) if required by federal or state law or regulation, the Participant shall have paid to the Company the amount, if any, required to be withheld on the amount deemed to be compensation to the Participant as a result of the exercise of his or her rights to receive shares of Common Stock under an Award Agreement, or made other arrangements satisfactory to the Company, in its sole discretion, to satisfy applicable income tax withholding requirements.

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1.13 Agreements and Representations of Participants.

Unless the shares of Common Stock covered by this Plan have been registered with the Securities and Exchange Commission pursuant to the registration requirements under the Securities Act, each Participant shall represent and warrant to the Company and acknowledge and agree, and each Award Agreement shall contain the representations, warranties, acknowledgments and agreements of the Participant, substantially as follows:

(a) The shares of Common Stock to be acquired pursuant to this Award Agreement will be acquired by Participant in good faith and for Participant’s own personal account, and not with a view to distributing the Common Stock to others or otherwise reselling the Common Stock in violation of the Securities Act or the rules and regulations promulgated thereunder;

(b) (i) the shares of Common Stock to be acquired pursuant to this Award Agreement have not been registered and that there is no obligation on the part of the Company to register such Common Stock under the Securities Act and the rules and regulations thereunder; and (ii) the shares Common Stock to be acquired pursuant to this Award Agreement will not be freely tradeable unless they are either registered under the Securities Act or the holder presents a legal opinion acceptable to the Company that the transfer will not violate the federal securities laws;

(c) Participant acknowledges and agrees that the Company, at its sole discretion, to assure itself that any sale or distribution by the Participant complies with the Plan and any applicable federal or state securities laws, may take all reasonable steps, including placing stop transfer instructions with the Company’s transfer agent prohibiting transfers in violation of the Plan and affixing the following legend (and/or such other legend or legends as the Company shall require) on certificates evidencing the Common Stock:

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THEM UNDER THE ACT OR A WRITTEN OPINION OF COUNSEL FOR THE HOLDER THEREOF, WHICH OPINION SHALL BE ACCEPTABLE TO SOUTHERN CALIFORNIA BANCORP, THAT REGISTRATION IS NOT REQUIRED.”

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(d) Participant understands that the Company is relying upon the truth and accuracy of the representations and agreements contained herein in determining to award such Common Stock, grant such Stock Option and/or issue such shares of Common Stock upon the exercise of such Stock Option, to Participant without the Company first registering the same under the Securities Act;

(e) Participant agrees that at any time that Participant contemplates the disposition of any of the Common Stock (whether by sale, exchange, gift or other form of transfer), Participant shall first notify the Company of such proposed disposition and shall thereafter cooperate with the Company in complying with all applicable requirements of law which, in the opinion of counsel for the Company, must be satisfied prior to the making of such disposition and, before consummating such disposition, Participant shall provide to the Company an opinion of Participant’s counsel, of which both such opinion and such counsel shall be satisfactory to the Company, that such disposition will not result in a violation of any state or federal securities laws or regulations; and

(f) Participant hereby agrees to indemnify the Company and to hold the Company harmless against all liability, cost, or expenses (including reasonable attorney’s fees) arising out of or as a result of any distribution or resale of the Common Stock issued by the Company in violation of the securities laws and that this agreement to indemnify the Company shall inure to the benefit of and be binding upon the respective legal representatives, successors and assigns of the Participant and the Company.

Article II
AWARDS OF RESTRICTED SHARES UNDER THE PLAN

2.1 Terms and Conditions

Awards of Restricted Shares shall be subject to the terms and conditions set forth in this Article II and any additional terms and conditions, not inconsistent with the express terms and provisions of the Plan, as the Committee shall set forth in the relevant Restricted Shares Award Agreement, including Performance Criteria, if any. Subject to the terms of the Plan, the Committee shall determine the number of Restricted Shares to be granted to a Participant and the Board may provide or impose different terms and conditions on any particular Award of Restricted Shares made to any Participant.

2.2 Restricted Shares Award Agreement

Each Participant receiving an Award of Restricted Shares under the Plan shall enter into a Restricted Shares Award Agreement in substantially the form of Exhibit “A” attached hereto. Each such Participant shall agree to the restrictions, terms, criteria, and conditions of the Award set forth therein and in the Plan.

2.3 Restricted Share Grants

A grant of Restricted Shares is an Award of shares of Common Stock granted to a Participant, subject to such restrictions, terms, and conditions as the Committee deems appropriate, including, without limitation:

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(a) restrictions on the sale, assignment, transfer, hypothecation or other disposition of such shares of Common Stock; and

(b) the requirement that such shares of Common Stock be forfeited upon termination of employment on cessation of Affiliation for specified reasons within a specified period of time or for other reasons including, without limitation, the failure to achieve designated Performance Criteria.

2.4 Awards Subject To Performance Criteria

Awards of Restricted Shares under the Plan may be granted as Awards that satisfy the requirements for “performance-based compensation” within the meaning of Code Section 162(m) (“Performance-Based Awards”), the grant, vesting, or payment of which depends on the degree of achievement of the Performance Criteria. An Award that is intended to satisfy the requirements of this Section 2.4 shall be designated as a Performance-Based Award at the time of grant.

The specific Performance Criteria relative to each Performance-Based Award must be established by the Committee in advance of the deadlines applicable under Code Section 162(m) and while the performance relating to the Performance Criteria remains substantially uncertain.

Performance Criteria may include, but are not limited to, Bank results for net income, return on average assets, return on average equity, efficiency ratio, and various measures of credit quality such as the ratio of non-performing assets to total assets.

Before any Performance-Based Award is paid, the Board or the Committee must certify in writing (by resolution or otherwise) that the applicable Performance Criteria and any other material terms of the Performance-Based Award were satisfied; provided, however, that a Performance- Based Award may be paid without regard to the satisfaction of the applicable Performance Criteria upon the occurrence of a Terminating Event as provided in Section 2.6.

2.5 Time-Based Awards

Time-Based Awards of Restricted Shares under the Plan may be granted as Awards that vest with the passage of time.

The specific Vesting Dates relative to each Time-Based Award must be established by the Committee at the time of the grant of a Time-Based Award.

2.6 Acceleration of Vesting Upon Occurrence of a Terminating Event

Anything in the Plan or in a Restricted Shares Award Agreement to the contrary notwithstanding, if a Terminating Event occurs, all restrictions, terms, criteria, and conditions applicable to all Restricted Shares then outstanding shall be deemed lapsed and satisfied, as applicable, and each Participant shall become 100% vested with respect to all Awards of Restricted Shares granted to such Participant under this Plan as of the date of the Terminating Event. The immediately preceding sentence shall apply to only those Participants who are employed by or are serving as directors of the Company and / or one of its Subsidiaries as of the date of the Terminating Event.

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2.7 Restriction Period

In accordance with Sections 2.1, 2.2, 2.3, 2.4, 2.5 and 2.6 of the Plan and unless otherwise determined by the Committee (in its sole discretion) at any time and from time to time, Restricted Shares shall only become unrestricted and vested in the Participant in accordance with such vesting schedule and other criteria relating to such Restricted Shares, if any, as the Committee may establish in the relevant Restricted Shares Award Agreement. During the Restriction Period, such Restricted Shares shall be and remain unvested and a Participant may not sell, assign, transfer, pledge, encumber, or otherwise dispose of or hypothecate such Restricted Shares. Upon satisfaction of the vesting schedule and any other applicable restrictions, terms, criteria, and conditions, the Participant shall be entitled to receive payment of the Restricted Shares or a portion thereof, as the case may be, as provided in Section 2.9 of the Plan.

2.8 Restricted Shares

The Award of Restricted Shares shall be evidenced by a duly executed Restricted Share Award Agreement only and no stock certificate evidencing Restricted Shares shall be issued.

2.9 Issuance of Share Certificates

After the satisfaction and / or lapse of the restrictions, terms, criteria, and conditions established by the Committee in respect of an Award of Restricted Shares, a certificate for the number of shares of Common Stock which are no longer subject to such restrictions, terms, criteria, and conditions shall, as soon as practicable thereafter, be issued by the Company and delivered to the Participant.

2.10 Deferred Payments

The Committee may authorize for the benefit of any Participant, except Consultants, the deferral of any payment of cash or shares of Common Stock that may become due or of cash otherwise payable under this Plan, and provide for accreted benefits thereon based upon such deferment, at the election or at the request of such Participant, subject to the other terms of this Plan. Such deferral shall be subject to such further conditions, restrictions, or requirements as the Committee may impose, subject to any then vested rights of Participants. Any such deferral of payment shall comply in all respects with the requirements of Code Section 409A, including with respect to the timing of election and timing of distribution, so as to avoid the imposition of any tax in addition to ordinary income tax or capital gains tax, as applicable.

2.11 Forfeiture of Unvested Shares

Unless the Board or the Committee otherwise expressly provides, Restricted Shares that are subject to restrictions at the time of termination of employment or cessation of Affiliation or are subject to other conditions to vest that have not been satisfied by the time specified in the applicable Restricted Shares Award Agreement shall not vest and shall be forfeited.

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Article III
AWARDS OF STOCK OPTIONS UNDER THE PLAN

3.1 Terms and Conditions

Awards of Stock Options shall be subject to the terms and conditions set forth in this Article III and any additional terms and conditions, not inconsistent with the express terms and provisions of the Plan, as the Committee shall set forth in the relevant Stock Option Agreement. Subject to the terms of the Plan, the Committee shall determine the number of Option Shares issuable upon the exercise of Stock Options to be granted to a Participant and the Board may provide or impose different terms and conditions on any particular Stock Option granted to any Participant.

3.2 Stock Option Agreement

Each Stock Option granted under the Plan shall be evidenced by a written Stock Option Agreement in substantially the form of Exhibit “B” attached hereto, executed by the Company and the Participant, and shall contain each of the provisions and agreements herein specifically required to be contained therein, and such other terms and conditions as are deemed desirable by the Committee and are not inconsistent with this Plan.

3.3 Grant of Stock Options

Subject to the express provisions of the Plan, the Committee, in its sole and absolute discretion, may grant Stock Options for a number of shares of Common Stock, at the price(s) and time(s), and on the terms and conditions as it deems advisable and specifies in the applicable Stock Option Agreements.

The terms upon which and the times at which, or the periods within which, the Option Shares subject to such Stock Options may become acquired or such Stock Options may be acquired and exercised shall be as set forth in the Plan and the related Stock Option Agreements.

Subject to the limitations and restrictions set forth in the Plan, a Participant who has been granted a Stock Option may, if otherwise eligible, be granted additional Stock Options if the Committee shall so determine. The Committee shall designate in each Stock Option Agreement evidencing the grant of a Stock Option whether the Stock Option is an Incentive Stock Option or a Non-Qualified Stock Option.

3.4 Shareholder-Employees

A Stock Option granted hereunder to a Participant who is also an officer or Key Employee of the Company or any Subsidiary and who owns, directly or indirectly, at the Award Date of the Stock Option, more than ten percent (10%) of the total combined voting power of all classes of capital stock of the Company or a Subsidiary shall not qualify as an Incentive Stock Option unless: (i) the purchase price of the Option Shares subject to said Stock Option is at least one hundred ten percent (110%) of the Fair Market Value of the Option Shares, determined as of the date said Stock Option is granted; and (ii) the Stock Option by its terms is not exercisable after five (5) years from the date that it is granted. The attribution rules of Section 424(d) of the Code shall apply in the determination of indirect ownership of stock.

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3.5 Maximum Value of Stock Options

No grant of Incentive Stock Options hereunder may be made when the aggregate Fair Market Value of Option Shares with respect to which Incentive Stock Options (pursuant to this Plan or any other Incentive Stock Option Plan of the Company or any Subsidiary) are exercisable for the first time by the Participant during any calendar year exceeds One Hundred Thousand Dollars ($100,000).

3.6 Substituted Stock Options

If all of the outstanding shares of common stock of another corporation are changed into or exchanged solely for the Company’s Common Stock in a transaction to which Section 424(a) of the Code applies, then, subject to the approval of the Committee, Stock Options under the Plan may be substituted (“Substituted Options”) in exchange for valid, unexercised and unexpired stock options of such other corporation. Substituted Options shall qualify as Incentive Stock Options under the Plan, provided that (and to the extent) the stock options exchanged for the Substituted Options were Incentive Stock Options within the meaning of Section 422 of the Code.

3.7 Non-Qualified Stock Options

Stock Options and Substituted Options granted by the Committee shall be deemed Non- Qualified Stock Options under this Plan if they: (i) are designated at the time of grant as Incentive Stock Options but do not so qualify under the provisions of Section 422 of the Code or any regulations or rulings issued by the Internal Revenue Service for any reason; (ii) are not granted in accordance with the provisions of Section 3.4; (iii) are in excess of the Fair Market Value limitations set forth in Section 3.5; (iv) are granted to a Participant who is not an officer or Key Employee of the Company or any Subsidiary; or (v) are designated at the time of grant as Non- Qualified Stock Options. Non-Qualified Stock Options granted or substituted hereunder shall be so designated in the Stock Option Agreement.

3.8 Stock Option Exercise Price

(a) Minimum Price. The exercise price of any Option Shares shall be determined by the Committee, in its sole and absolute discretion, upon the grant of a Stock Option. Except as provided elsewhere herein, said exercise price shall not be less than one hundred percent (100%) of the Fair Market Value of the Common Stock on the Award Date.

(b) Substituted Options. The exercise price of the Option Shares subject to each Substituted Option may be fixed at a price less than one hundred percent (100%) of the Fair Market Value of the Common Stock at the time such Substituted Option is granted if said exercise price has been computed to be not less than the exercise price set forth in the stock option of the other corporation for which it was exchanged immediately before substitution, with appropriate adjustment to reflect the exchange ratio of the shares of stock of the other corporation into the shares of the Common Stock.

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3.9 Exercise of Stock Options

(a) Exercise. Except as otherwise provided elsewhere herein, each Stock Option shall be exercisable in such increments, which need not be equal, and upon such contingencies as the Committee shall determine at the time of grant of the Stock Option; provided, however, that if a Participant shall not in any given period exercise any part of a Stock Option which has become exercisable during that period, the Participant’s right to exercise such part of the Stock Option shall continue until expiration of the Stock Option or any part thereof as may be provided in the related Stock Option Agreement; and provided further, that in no case may an Option vest at a rate: (i) greater than approximately equal percentages each year over three years from the date the Option is granted; or (ii) less than 20 percent per year over five years from the date the option is granted, with vesting to occur initially on the first anniversary of grant, and subsequently on each following anniversary until fully vested, subject to Section 3.9(e). No Stock Option or part thereof shall be exercisable except with respect to whole shares of Common Stock, and fractional share interests shall be disregarded except that they may be accumulated. The Committee may accelerate, in whole or in part, a Stock Option not otherwise immediately exercisable in full, at any time after three years from the date the Stock Option is granted; provided that in the case of an Incentive Option, any such acceleration of the Stock Option would not cause the Stock Option to fail to comply with the provisions of Section 422 of the Code, unless the Participant consents to the acceleration.

(b) Prior Outstanding Incentive-Stock Options. Incentive Stock Options granted (or substituted) to a Participant under the Plan may be exercisable while such Participant has outstanding and unexercised any Incentive Stock Option previously granted (or substituted) to him pursuant to this Plan or any other Incentive Stock Option Plan of the Company or any Subsidiary. An Incentive Stock Option shall be treated as outstanding until it is exercised in full or expires by reason of lapse of time.

(c) Notice and Payment. Stock Options granted hereunder shall be exercised by written notice delivered to the Company specifying the number of Option Shares with respect to which the Stock Option is being exercised, together with concurrent payment in full of the exercise price as hereinafter provided. If the Stock Option is being exercised by any person or persons other than the Participant, said notice shall be accompanied by proof, satisfactory to the counsel for the Company, of the right of such person or persons to exercise the Stock Option. The Bank’s receipt of a notice of exercise without concurrent receipt of the full amount of the exercise price shall not be deemed an exercise of a Stock Option by a Participant, and the Company shall have no obligation to a Participant for any Option Shares unless and until full payment of the exercise price is received by the Company and all of the terms and provisions of the Plan and the related Stock Option Agreement have been fully complied with.

(d) Payment of Exercise Price. The exercise price of any Option Shares purchased upon the proper exercise of a Stock Option shall be paid in full at the time of each exercise of a Stock Option in cash (or bank, cashier’s or certified check) and/or, with the prior written approval of the Committee at or before the time of exercise, by:

(i) delivery of Common Stock of the Company which, when added to the cash payment, if any, has an aggregate Fair Market Value equal to the full amount of the exercise price of the Stock Option, or part thereof, then being exercised;

(ii) a “net exercise” of the Stock Option (as further described below);

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(iii) delivery to the Company of a cash payment made pursuant to a “cashless” exercise program (as further described below); or

(iv) any other form of legal consideration that may be acceptable to the Committee.

Payment by a Participant as provided herein shall be made in full concurrently with the Participant’s notification to the Company of his intention to exercise all or part of a Stock Option. If all or any part of a payment is made in shares of Common Stock as heretofore provided, such payment shall be deemed to have been made only upon receipt by the Company of all required share certificates, and all stock powers and all other required transfer documents necessary to transfer the shares of Common Stock to the Company.

In the case of a “net exercise” of a Stock Option, the Company will not require a payment of the Option Exercise Price of the Stock Option from the Participant but will reduce the number of Option Shares issued upon the exercise by the largest number of whole shares that have a Fair Market Value that does not exceed the aggregate Option Exercise Price. With respect to any remaining balance of the aggregate Option Exercise Price, the Company will accept a cash payment from the Participant.

The number of Option Shares underlying a Stock Option will decrease following the exercise of such Stock Option to the extent of (i) shares of Common Stock used to pay the Option Exercise Price of a Stock Option under the “net exercise” feature, (ii) shares of Common Stock actually delivered to the Participant as a result of such exercise and (iii) shares of Common Stock withheld for purposes of tax withholding.

Subject to compliance with applicable law and regulation, including but not limited to Section 402 of the Sarbanes-Oxley Act of 2002, if the Common Stock is traded on an established market, payment of any Option Exercise Price may also be made through and under the terms and conditions of any formal “cashless” exercise program authorized by the Company entailing the sale of the Option Shares in a brokered transaction (other than to the Company). Receipt by the Company of such notice and payment in any authorized or combination of authorized means shall constitute the exercise of the Stock Option. Within 30 days thereafter but subject to the remaining provisions of the Plan, the Company shall deliver or cause to be delivered to the Participant or his or her agent a certificate or certificates for the number of Option Shares then being purchased. Option Shares issued and paid for pursuant to this section shall be fully paid and nonassessable.

(e) Acceleration Upon Occurrence of Terminating Event. Notwithstanding any provision in any Stock Option Agreement pertaining to the time of exercise of a Stock Option, or part thereof, upon adoption by the requisite holders of the outstanding shares of Common Stock of any plan to consummate any transaction which would, upon consummation, result in a Terminating Event, all Stock Options previously granted shall become immediately exercisable, whether or not vested under the Plan or Stock Option Agreement, as to all unexercised Option Shares for such period of time as may be determined by the Stock Option Committee, but in any event not less than thirty (30) days, on the condition that such transaction is consummated. If such transaction is not consummated, Stock Options granted pursuant to the Plan shall be exercisable in accordance with the terms of their respective Stock Option Agreements.

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3.10 Cancellation and Termination of Stock Options

The Committee may, at any time and in its sole discretion, determine that any outstanding Stock Options granted under the Plan, whether or not exercisable, will be canceled and terminated and that in connection with such cancellation and termination the holder of such Stock Options may receive for each share of Common Stock subject to such Stock Option Award a cash payment (or the delivery of shares of stock, other securities or a combination of cash, stock and securities equivalent to such cash payment) equal to the difference, if any, between the Fair Market Value of the Common Stock and the exercise price per share multiplied by the number of shares of Common Stock subject to such Stock Option; provided that if such product is zero or less or to the extent that the Stock Option is not then exercisable, the Stock Options will be canceled and terminated without payment therefor.

3.11 Regulatory Law Compliance; Notice of Sale

No Option Shares may be purchased upon the exercise of a Stock Option unless and until all then applicable requirements of all regulatory agencies having jurisdiction and all applicable requirements of the securities exchanges upon which securities of the Company are listed (if any) shall have been fully complied with. The Participant shall, not more than ten (10) days after each sale or other disposition of shares of Common Stock acquired pursuant to the exercise of Stock Options, give the Company notice in writing of such sale or other disposition.

Article IV
MISCELLANEOUS

4.1 Effective Date of the Plan

The Plan shall be deemed adopted as of November 20, 2019 and shall be effective immediately; provided, however, the Plan shall be approved by the holders of at least a majority of the Company’s outstanding shares of Common Stock prior to November 20, 2020 for Stock Options to qualify as Incentive Stock Options.

4.2 Amendment of the Plan; Modification of Awards

(a) The Board may from time to time suspend, discontinue, revise or amend the Plan in any respect whatsoever, except that no such amendment shall materially impair any rights or materially increase any obligations of the Participant under any Award theretofore made under the Plan without the consent of the Participant (or, after the Participant’s death, the person having the right to exercise or receive payment of the Award). For purposes of the Plan, any action of the Board or the Committee that alters or affects the tax treatment of any Award shall not be considered to materially impair any rights of any Participant.

(b) Shareholder approval of any amendment shall be obtained to the extent necessary to comply with Section 422 of the Code (relating to Incentive Stock Options) or any other applicable law, regulation or stock exchange listing requirements.

(c) The Committee may amend any outstanding Award Agreement, including, without limitation, by amendment which would accelerate the time or times at which the Award becomes unrestricted or may be exercised, or waive or amend any goals, restrictions or conditions set forth in the Award Agreement. However, any such amendment (other than an amendment pursuant to paragraphs (a) or (d) of this Section 4.2 that materially impairs the rights or materially increases the obligations of a Participant under an outstanding Award shall be made only with the consent of the Participant (or, upon the Participant’s death, the person having the right to exercise the Award).

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(d) Notwithstanding anything to the contrary in this Section 4.2, the Board or the Committee shall have full discretion to amend the Plan to the extent necessary to preserve fixed accounting treatment with respect to any Award and any outstanding Award Agreement shall be deemed to be so amended to the same extent, without obtaining the consent of any Participant (or, after the Participant’s death, the person having the right to exercise or receive payment of the affected Award), without regard to whether such amendment adversely affects a Participant’s rights under the Plan or such Award Agreement.

4.3 Terminating Events

This Plan shall automatically terminate and all Awards theretofore granted shall be terminated upon the occurrence of a Terminating Event.

4.4 Tax Withholding

(a) As a condition to the receipt of any shares of Common Stock pursuant to any Award or the lifting of restrictions on any Award, or in connection with any other event that gives rise to a federal or other governmental tax withholding obligation on the part of the Company relating to an Award (including, without limitation, FICA tax), the Company shall be entitled to require that the Participant remit to the Company an amount sufficient in the opinion of the Company to satisfy such withholding obligation.

(b) If the event giving rise to the withholding obligation is a transfer of shares of Common Stock, then, to the extent specified in the applicable Award Agreement and unless otherwise permitted by the Committee, the Participant may satisfy only the minimum statutory withholding obligation imposed under paragraph (a) above by electing to have the Company withhold shares of Common Stock having a Fair Market Value equal to the amount of tax to be withheld. For this purpose, Fair Market Value shall be determined as of the date on which the amount of tax to be withheld is determined (and any fractional share amount shall be settled in cash).

4.5 Restrictions

(a) If the Committee shall at any time determine that any consent (as hereinafter defined) is necessary or desirable as a condition of, or in connection with, the granting of any Award, the issuance or purchase of shares of Common Stock or other rights thereunder, or the taking of any other action thereunder (a “Plan Action”), then no such Plan Action shall be taken, in whole or in part, unless and until such consent shall have been effected or obtained to the full satisfaction of the Committee.

(b) The term “consent” as used herein with respect to any action referred to in paragraph (a) means (i) any and all listings, registrations or qualifications in respect thereof upon any securities exchange or under any federal, state or local law, rule or regulation, (a) (ii) any and all written agreements and representations by the Participant with respect to the disposition of shares, or with respect to any other matter, which the Committee shall deem necessary or desirable to comply with the terms of any such listing, registration or qualification or to obtain an exemption from the requirement that any such listing, qualification or registration be made, (iii) any and all consents, clearances and approvals in respect of a Plan Action by any governmental or other regulatory bodies, and (iv) any and all consents or authorizations required to comply with, or required to be obtained under, applicable local law or otherwise required by the Committee. Nothing herein shall require the Company to list, register or qualify the shares of Common Stock on any securities exchange.

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4.6 Nonassignability

Except to the extent otherwise provided herein and/or in the applicable Award Agreement, no Award or right granted to any person under the Plan shall be assignable or transferable other than by will or by the laws of descent and distribution, and all such Awards and rights shall be exercisable during the life of the Participant only by the Participant or the Participant’s legal representative, or the Participant’s assignee as provided further in this Section. Notwithstanding the immediately preceding sentence: (i) Participants may transfer any Stock Option which is not an Incentive Stock Option to one or more of the Participant’s immediate family members or to trusts established in whole or in part for the benefit of the Participant and/or one or more of such immediate family members; and (ii) Participants may transfer any Award to a third party not described in part (i) of this Section with the prior approval of the Committee (and on such terms, conditions and limitations as the Committee determines) in its sole discretion, in each case for no consideration and only to the extent permissible by law and, in the case of an Incentive Stock Option, to the extent permissible under Section 422 of the Code. For purposes of the Plan, (i) the term “immediate family” shall mean the Participant’s spouse and issue (including adopted and step children), and (ii) the phrase “immediate family members or to trusts established in whole or in part for the benefit of the Participant and/or one or more of such immediate family members” shall be further limited, if necessary, so that neither the transfer of a Nonqualified Stock Option to such immediate family member or trust, nor the ability of a Participant to make such a transfer shall have adverse consequences to the Company or the Participant.

4.7 Requirement of Notification of Election Under Section 83(b) of the Code

If a Participant, in connection with the acquisition of shares of Common Stock under the Plan, is permitted under the terms of the Award Agreement to make the election permitted under Section 83(b) of the Code (i.e., an election to include in gross income in the year of transfer the amounts specified in Section 83(b) of the Code notwithstanding the continuing transfer restrictions) and the Participant makes such an election, the Participant shall notify the Company of such election within ten (10) days of filing notice of the election with the Internal Revenue Service, in addition to any filing and notification required pursuant to regulations issued under Section 83(b) of the Code.

4.8 Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of the Code

If any Participant shall make any disposition of shares of Common Stock issued pursuant to the exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Participant shall notify the Company of such disposition within ten (10) days thereof.

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4.9 No Right to Employment

Nothing in the Plan or in any Award Agreement shall confer upon any Participant the right to continue in the employ of or association with the Company or affect any right which the Company may have to terminate such employment or association at any time (with or without cause).

4.10 Nature of Payments

Any and all grants of Awards and issuances of shares of Common Stock under the Plan shall constitute a special incentive payment to the Participant and shall not be taken into account in computing the amount of salary or compensation of the Participant for the purpose of determining any benefits under any pension, retirement, profit-sharing, bonus, life insurance or other benefit plan of the Company or under any agreement with the Participant, unless such plan or agreement specifically provides otherwise.

4.11 Non-Uniform Determinations

The Committee’s determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, Awards (whether or not such persons are similarly situated). Without limiting the generality of the foregoing, the Committee shall be entitled, among other things, to make non-uniform and selective determinations, and to enter into non-uniform and selective Award Agreements, as to the persons to receive Awards under the Plan, and the terms and provisions of Awards under the Plan.

4.12 Other Payments or Awards

Nothing contained in the Plan shall be deemed in any way to limit or restrict the Company from making any Award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect.

4.13 Limitation on Obligations of the Company

All obligations of the Company arising under or as a result of this Plan or Awards granted hereunder shall constitute the general unsecured obligations of the Company, and not of the Board of Directors of the Company, any member thereof, the Committee, any member thereof, any officer of the Company, or any other person or any Subsidiary, and none of the foregoing, except the Company, shall be liable for any debt, obligation, cost or expense hereunder.

4.14 Limitation of Rights

The Committee, in its sole and absolute discretion, is entitled to determine who, if anyone, is eligible to participate under this Plan, and which, if any, Participant shall receive any Award under this Plan. No oral or written agreement by any person on behalf of the Company relating to this Plan or any Award granted hereunder is authorized, and such may not bind the Company or the Committee to grant any Award to any person.

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4.15 Notices

All notices and demands of any kind which the Committee, any Participant, or other person may be required or desires to give under the terms of this Plan shall be in writing and shall be delivered in hand to the person or persons to whom addressed (in the case of the Committee, with the Chief Executive Officer, Cashier or Secretary of the Company), by leaving a copy of such notice or demand at the address of such person or persons as may be reflected in the records of the Company, or by mailing a copy thereof, properly addressed as above, by certified or registered mail, postage prepaid, with return receipt requested. Delivery by mail shall be deemed made upon receipt by the notifying party of the return receipt request acknowledging receipt of the notice or demand.

4.16 Section Headings

The section headings contained herein are for the purpose of convenience only and are not intended to define or limit the contents of the sections.

4.17 Effective Date and Term of Plan

Unless sooner terminated by the Board, the Plan, including the provisions respecting the grant of Incentive Stock Options, shall terminate the day before the tenth anniversary of the adoption of the Plan by the Board. All Awards made under the Plan prior to its termination shall remain in effect until such Awards have been satisfied or terminated in accordance with the terms and provisions of the Plan and the applicable Award Agreements.

4.18 Governing Law

All rights and obligations under the Plan shall be construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflict of laws.

4.19 Severability; Entire Agreement

If any of the provisions of this Plan or any Award Agreement is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such provision shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining provisions shall not be affected thereby; provided, that if any of such provisions is finally held to be invalid, illegal, or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such provision shall be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder. The Plan and any Award Agreements contain the entire agreement of the parties with respect to the subject matter thereof and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties between them, whether written or oral with respect to the subject matter thereof.

4.20 No Third Party Beneficiaries

Except as expressly provided therein, neither the Plan nor any Award Agreement shall confer on any person other than the Company and the grantee of any Award any rights or remedies thereunder.

4.21 Successors and Assigns

The terms of this Plan shall be binding upon and inure to the benefit of the Company and its successors and assigns.

4.22 Section 409A

If the Committee determines that an Award may be subject to Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the Effective Date), the Committee may take any action that the Committee determines to be necessary or appropriate to: (i) exempt the Award from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Award; or (ii) comply with the requirements of Section 409A of the Code and related Department of Treasury guidance and thereby avoid the application of any penalty taxes under Section 409A of the Code.

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AMENDMENT TO
SOUTHERN CALIFORNIA BANCORP
2019 OMNIBUS EQUITY INCENTIVE PLAN

This Amendment to Southern California Bancorp 2019 Omnibus Equity Incentive Plan (this “Amendment”) is adopted with reference to the following:

RECITALS

WHEREAS, Southern California Bancorp (the “Company”) has previously adopted the Southern California Bancorp 2019 Omnibus Equity Incentive Plan (the “Plan”), which provides for the grant by the Company of awards of stock options and restricted shares;

WHEREAS, the authorized maximum number of shares of common stock that may be issued or paid out under the Plan is 2,200,000, prior to any adjustment for the vesting of restricted share awards and the exercise of vested stock options;

WHEREAS, the Board of Directors of the Company believes it is in the best interests of the Company and its shareholders to increase the authorized maximum number of shares of common stock that may be issued or paid out under the Plan by 300,000 to a total authorized maximum number of shares of 2,500,000, before adjustment; and

WHEREAS, pursuant to, and subject to the restrictions set forth in, Section 4.2(a) of the Plan, the Board of Directors of the Company may from time to time suspend, discontinue, revise or amend the Plan in any respect whatsoever;

NOW, THEREFORE, the Plan is hereby amended pursuant to Section 4.2(a) of the Plan as follows:

AMENDMENT

1. Defined Terms. Except as expressly defined in this Amendment, capitalized terms used in this Amendment shall have the meanings ascribed to them in the Plan.

2. Amendment. Section 1.6 of the Plan is amended and restated in its entirety to read as follows:

“1.6 Shares Available for Awards

Subject to adjustment as provided in Section 1.7, the maximum number of shares of Common Stock that may be issued or paid out in connection with an Award of Restricted Shares or upon exercise of all Stock Options granted under this Plan shall not exceed 2,500,000 shares, each of which may be issued as incentive stock options. Such shares may be authorized but unissued Common Stock or authorized and issued Common Stock held in the Company’s treasury or acquired by the Company for the purposes of the Plan. The Board or Committee may direct that any stock certificate evidencing shares of Common Stock issued pursuant to the Plan shall bear a legend setting forth such restrictions on transferability as may apply to such shares of Common Stock pursuant to the Plan. If any Award is forfeited or otherwise terminates or is canceled without the delivery of shares of Common Stock, shares of Common Stock are surrendered or withheld from any Award to satisfy a Participant’s income tax withholding obligations, or shares of Common Stock owned by a Participant are tendered to pay the exercise price of Stock Options granted under the Plan, then the shares of Common Stock covered by such forfeited, terminated or canceled Award or which are equal to the number of shares of Common Stock surrendered, withheld or tendered shall again become available for issuance pursuant to Awards granted or to be granted under this Plan. Any shares of Common Stock delivered by the Company, any shares of Common Stock with respect to which Awards are made by the Company and any shares of Common Stock with respect to which the Company becomes obligated to make Awards, through the assumption of, or in substitution for, outstanding Awards previously granted by an acquired entity, shall not be counted against the shares of Common Stock available for A wards under this Plan.”

3. No further amendment. Except as expressly amended by this amendment, the plan shall Remain in full force and effect.

4. Governing law. This amendment shall be governed by and interpreted in accordance with The provisions of section 4.18 of the plan.

5. Effective date. This amendment shall be effective only upon approval by the company’s Board of directors and shareholders.

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SECOND AMENDMENT TO
SOUTHERN CALIFORNIA BANCORP
2019 OMNIBUS EQUITY INCENTIVE PLAN

This Second Amendment to Southern California Bancorp 2019 Omnibus Equity Incentive Plan (this “Amendment”) is adopted with reference to the following:

RECITALS

WHEREAS, Southern California Bancorp (the “Company”) has previously adopted the Southern California Bancorp 2019 Omnibus Equity Incentive Plan (the “Plan”), which provides for the grant by the Company of awards of stock options and restricted shares;

WHEREAS, the authorized maximum number of shares of common stock that may be issued or paid out under the Plan, as amended, is 2,500,000, prior to any adjustment for the vesting of restricted share awards and the exercise of vested stock options;

WHEREAS, the Board of Directors of the Company believes it is in the best interests of the Company and its shareholders to increase the authorized maximum number of shares of common stock that may be issued or paid out under the Plan by 900,000 to a total authorized maximum number of shares of 3,400,000, before adjustment; and

WHEREAS, pursuant to, and subject to the restrictions set forth in, Section 4.2(a) of the Plan, the Board of Directors of the Company may from time to time suspend, discontinue, revise or amend the Plan in any respect whatsoever;

NOW, THEREFORE, the Plan is hereby amended pursuant to Section 4.2(a) of the Plan as follows:

AMENDMENT

1. Defined Terms. Except as expressly defined in this Amendment, capitalized terms used in this Amendment shall have the meanings ascribed to them in the Plan.

2. Amendment. Section 1.6 of the Plan is amended and restated in its entirety to read as follows:

“1.6 Shares Available for Awards

Subject to adjustment as provided in Section 1.7, the maximum number of shares of Common Stock that may be issued or paid out in connection with an Award of Restricted Shares or upon exercise of all Stock Options granted under this Plan shall not exceed 3,400,000 shares, each of which may be issued as incentive stock options. Such shares may be authorized but unissued Common Stock or authorized and issued Common Stock held in the Company’s treasury or acquired by the Company for the purposes of the Plan. The Board or Committee may direct that any stock certificate evidencing shares of Common Stock issued pursuant to the Plan shall bear a legend setting forth such restrictions on transferability as may apply to such shares of Common Stock pursuant to the Plan. If any Award is forfeited or otherwise terminates or is canceled without the delivery of shares of Common Stock, shares of Common Stock are surrendered or withheld from any Award to satisfy a Participant’s income tax withholding obligations, or shares of Common Stock owned by a Participant are tendered to pay the exercise price of Stock Options granted under the Plan, then the shares of Common Stock covered by such forfeited, terminated or canceled Award or which are equal to the number of shares of Common Stock surrendered, withheld or tendered shall again become available for issuance pursuant to A wards granted or to be granted under this Plan. Any shares of Common Stock delivered by the Company, any shares of Common Stock with respect to which Awards are made by the Company and any shares of Common Stock with respect to which the Company becomes obligated to make Awards, through the assumption of, or in substitution for, outstanding Awards previously granted by an acquired entity, shall not be counted against the shares of Common Stock available for Awards under this Plan.”

3. No Further Amendment. Except as expressly amended by this Amendment, the Plan shall remain in full force and effect.

4. Governing Law. This Amendment shall be governed by and interpreted in accordance with the provisions of Section 4.18 of the Plan.

5. Effective Date. This Amendment shall be effective upon approval by the Company’s Board of Directors.

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EX-10.3

Exhibit 10.3

UNLESS OTHERWISE STATED, ALL TERMS DEFINED IN THE PLAN SHALL HAVE THE SAME MEANING HEREIN AS SET FORTH IN THE PLAN.

RESTRICTED SHARES AWARD AGREEMENT

SOUTHERN CALIFORNIA BANCORP

2019 OMNIBUS EQUITY INCENTIVE PLAN

☐ Director

☐ Officer

☐ Key Employee

☐ Consultant

		Total
	Award	Shares
Participant	Date	Granted
____________	___________	_________

Type of Award: ☐ Time Based ☐ Performance Based

THIS RESTRICTED SHARES AWARD AGREEMENT (this “Award Agreement”), granted on __________, to be effective as of commencement of employment, __________, hereinafter the “Award Date,” is entered into by and between Southern California Bancorp (the “Company”) and the Participant specified above, pursuant to the Southern California Bancorp 2019 Omnibus Equity Incentive Plan as in effect and as amended from time to time (the “Plan”), with reference to the following:

WHEREAS, it has been determined under the Plan that it would be in the best interests of the Company to grant the shares specified above (the “Restricted Shares”) to the Participant;

NOW, THEREFORE, in consideration of the mutual covenants and premises hereinafter set forth and for other good and valuable consideration, the parties hereto hereby mutually covenant and agree as follows:

1. Incorporation By Reference; Plan Document Receipt. This Award Agreement is subject in all respects to the terms and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the award provided hereunder), all of which terms and provisions are made a part of and incorporated in this Award Agreement as if they were expressly set forth herein. Any capitalized term not defined in this Award Agreement shall have the same meaning as is ascribed thereto in the Plan. The Participant hereby acknowledges receipt of a true copy of the Plan and that the Participant has read the Plan carefully and fully understands its content. In the event of a conflict between the terms of this Award Agreement and the terms of the Plan, the terms of the Plan shall control.

2. Grant of Restricted Share Award. The Company hereby grants to the Participant, effective as of the Award Date specified above, the number of Restricted Shares specified above. Except as otherwise provided by Section 1.7 of the Plan, the Participant agrees and understands that nothing contained in this Award Agreement provides, or is intended to provide, the Participant with any protection against potential future dilution of the Participant’s shareholder interest in the Company for any reason.

3. Vesting.

3.1 If this is a Time-Based Award, the Restricted Shares subject to this Award Agreement shall become unrestricted, fully vested, and non-forfeitable in the numbers and on the Vesting Dates presented below, provided:

a.	if, on the Award Date, the Participant is an employee of the Company and / or one of its Subsidiaries, the Participant is employed on the Vesting Date, as presented below, by the Company and / or one of its Subsidiaries, or
b.	if, on the Award Date, the Participant is a director of the Company and / or one of its Subsidiaries, the Participant is serving as a director on the Vesting Date, as presented below, of the Company and / or one of its Subsidiaries.

	Number of
Vesting	Restricted
Date	Shares
__________	__________
__________	__________
__________	__________
__________	__________
__________	__________
TOTAL	__________

3.2 If this is a Performance-Based Award, the Restricted Shares subject to this Award Agreement shall become unrestricted, fully vested, and non-forfeitable in the numbers and on the Vesting Dates presented below, provided:

a. if, on the Award Date, the Participant is an employee of the Company and / or one of its Subsidiaries, the Participant is employed on the Vesting Date, as presented below, by the Company and / or one of its Subsidiaries, or

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b. if, on the Award Date, the Participant is a director of the Company and / or one of its Subsidiaries, the Participant is serving as a director on the Vesting Date, as presented below, of the Company and / or one of its Subsidiaries.

AND

the Performance Criteria specified below are achieved.

		Number of
Vesting	Performance	Restricted
Date	Criteria	Shares
xx/xx/20__		xxx
xx/xx/20__		xxx
xx/xx/20__		xxx
xx/xx/20__		xxx
xx/xx/20__		xxx
TOTAL		x,xxx

3.3 If a Terminating Event of the Company occurs, all restrictions, terms, criteria, and conditions applicable to all Restricted Shares then outstanding under this Award Agreement shall be deemed lapsed and satisfied, as applicable, and each Participant shall become 100% vested with respect to all Awards granted to such Participant under the Plan as of the date of the Terminating Event. The immediately preceding sentence shall apply to only those Participants who are employed by or are serving as directors of the Company and / or one of its Subsidiaries as of the date of the Terminating Event.

3.4 If the Participant’s employment by or Affiliation with the Company and / or its Subsidiaries, as applicable, terminates for any reason other than a Terminating Event prior to the vesting of all or any portion of the Restricted Shares awarded under this Award Agreement, such Restricted Shares shall immediately be cancelled and the Participant (and the Participant’s estate, designated beneficiary, or other legal representative) shall forfeit any rights or interests in and with respect to any such Restricted Shares. The Board or the Committee, in its sole discretion, may determine, prior to or within ninety (90) days after the date of any such termination, that all or a portion of any the Participant’s unvested Restricted Shares shall not be so cancelled and forfeited.

3.5 If the Participant’s employer ceases to be a Subsidiary of the Company, that event shall be deemed to constitute a termination of employment under Section 3.4 above.

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4. Non-transferability. Restricted Share Awards, and any rights and interests with respect thereto, issued under this Award Agreement and the Plan shall not, prior to vesting, be sold, exchanged, transferred, assigned, or otherwise disposed of in any way by the Participant (or any beneficiary(ies) of the Participant), other than by testamentary disposition by the Participant or the laws of descent and distribution. Any such Restricted Shares, and any rights and interests with respect thereto, shall not, prior to vesting, be pledged, encumbered, or otherwise hypothecated in any way by the Participant (or any beneficiary(ies) of the Participant) and shall not, prior to vesting, be subject to execution, attachment, or similar legal process. Any attempt to sell, exchange, transfer, assign, pledge, encumber, or otherwise dispose of or hypothecate in any way any of the Restricted Shares, or the levy of any execution, attachment, or similar legal process upon the Restricted Shares, contrary to the terms and provisions of this Award Agreement and / or the Plan shall be null and void and without legal force or effect.

5. Designation of Beneficiary. Participant may designate a beneficiary or beneficiaries to receive any payment which under the terms of this Award Agreement may become payable on or after the Participant’s death by completing the form of Beneficiary Designation attached hereto. If the Participant designates someone other than Participant’s spouse as a beneficiary, such designation shall not be valid absent written approval from Participant’s spouse. At any time, and from time to time, any such designation may be changed or cancelled by the Participant without the consent of any such beneficiary, except for the aforementioned requirement for spousal consent.

Any beneficiary designation, change, or cancellation must be on a form provided for that purpose by the Board or the Committee and shall not be effective until received by the Board or the Committee.

If no beneficiary has been designated by a deceased Participant, or if the designated beneficiaries have predeceased the Participant, the beneficiary shall be the Participant’s spouse, or, if none, the Participant’s estate. If the Participant designates more than one beneficiary, any payments under the Plan to such beneficiaries shall be made in equal Shares or amounts unless the Participant has expressly designated otherwise, in which case the payments shall be made in the shares or amounts designated by the Participant.

6. Entire Agreement; Amendment. This Award Agreement, including the Plan, contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. The rights of Participant are subject to modification as proved in Section 4.2 of the Plan.

7. Employment. This Award Agreement shall not obligate the Company or a Subsidiary to employ Participant for any period, nor shall it interfere in any way with the right of the Company or a Subsidiary to increase or reduce Participant’s compensation.

8. Privileges of Stock Ownership. Participant shall have no rights as a shareholder with respect to the Restricted Shares unless and until said Restricted Shares are issued to Participant as provided in the Plan. Except as provided in Section 1.7 of the Plan, no adjustment will be made for dividends or other rights in respect of which the record date is prior to the date such stock certificates are issued.

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9. Approvals. This Agreement and the issuance of Restricted Shares hereunder are expressly subject to the approval of the Plan and the form of this Award Agreement by the holders of not less than a majority of the voting stock of the Company. Restricted Shares subject to this Award Agreement will not be issued unless and until all applicable requirements of all regulatory agencies having jurisdiction with respect thereto, and of the securities exchanges upon which securities of the Company are listed, if any, have been complied with.

10. Incorporation of Plan. All of the provisions of the Plan are incorporation herein by reference as if set forth in full in this Award Agreement. In the event of any conflict between the terms of the Plan and any provision contained herein, the terms of the Plan shall be controlling and the conflicting provisions contained herein shall be disregarded.

11. Notices. All notices to the Company provided for in this Award Agreement shall be addressed to it in care of its Chief Executive Officer, Chief Financial Officer or Secretary at its main office and all notices to Participant shall be addressed to Participant’s address on file with the Company or a Subsidiary, or to such other address as either may designate to the other in writing, all in compliance with the notice provisions set forth in Section 4.14 of the Plan.

12. Binding Agreement; Assignment. This Award Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns. Other than upon death, Total Disability, or pursuant to a domestic relations order under applicable state law, no rights or interests under this Award Agreement may be assigned, transferred, sold, exchanged, encumbered, pledged, or otherwise hypothecated or disposed of by the Participant or any beneficiary(ies) of the Participant.

13. Compliance with Laws. The issuance of the Common Stock pursuant to this Award Agreement shall be subject to, and shall comply with, any applicable requirements of any federal and state securities laws, rules, and regulations (including, without limitation, the provisions of the Securities Act of 1933, the Exchange Act, and the respective rules and regulations promulgated thereunder) and any other law or regulation applicable thereto. The Company shall not be obligated to issue any of the Common Stock pursuant to this Award Agreement if such

issuance would violate any such requirements.

14. Agreement and Representations of Participant. To the extent the Common Stock covered by this Award Agreement has not been registered with the Securities and Exchange Commission pursuant to the registration requirements under the Securities Act of 1933, as amended (the “Securities Act”), Participant hereby represents and warrants to the Company and acknowledges and agrees as follows:

(a) Participant hereby represents and warrants that the Common Stock to be acquired pursuant to this Award Agreement will be acquired by Participant in good faith and for Participant’s own personal account, and not with a view to distributing the Common Stock to others or otherwise reselling the Common Stock in violation of the Securities Act or the rules and regulations promulgated thereunder;

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(b) Participant acknowledges and agrees that: (i) the Common Stock to be acquired pursuant to this Award Agreement have not been registered and that there is no obligation on the part of the Company to register such Common Stock under the Securities Act and the rules and regulations thereunder; and (ii) the Common Stock will not be freely tradeable unless they are either registered under the Securities Act or the holder presents a legal opinion acceptable to the Company that the transfer will not violate the federal securities laws;

(c) Participant acknowledges and agrees that the Company, at its sole discretion, to assure itself that any sale or distribution by the Participant complies with the Plan and any applicable federal or state securities laws, may take all reasonable steps, including placing stop transfer instructions with the Company’s transfer agent prohibiting transfers in violation of the Plan and affixing the following legend (and/or such other legend or legends as the Company shall require) on certificates evidencing the Common Stock:

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THEM UNDER THE ACT OR A WRITTEN OPINION OF COUNSEL FOR THE HOLDER THEREOF, WHICH OPINION SHALL BE ACCEPTABLE TO SOUTHERN CALIFORNIA BANCORP, THAT REGISTRATION IS NOT REQUIRED.”

(d) Participant understands that the Company is relying upon the truth and accuracy of the representations and agreements contained herein in determining to award such Common Stock to Participant without the Company first registering the same under the Securities Act;

(e) Participant agrees that at any time that Participant contemplates the disposition of any of the Common Stock (whether by sale, exchange, gift or other form of transfer), Participant shall first notify the Company of such proposed disposition and shall thereafter cooperate with the Company in complying with all applicable requirements of law which, in the opinion of counsel for the Company, must be satisfied prior to the making of such disposition and, before consummating such disposition, Participant shall provide to the Company an opinion of Participant’s counsel, of which both such opinion and such counsel shall be satisfactory to the Company, that such disposition will not result in a violation of any state or federal securities laws or regulations; and

(f) Participant hereby agrees to indemnify the Company and to hold the Company harmless against all liability, cost, or expenses (including reasonable attorney’s fees) arising out of or as a result of any distribution or resale of the Common Stock issued by the Company in violation of the securities laws and that this agreement to indemnify the Company shall inure to the benefit of and be binding upon the respective legal representatives, successors and assigns of the Participant and the Company.

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15. Further Assurances. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Award Agreement and the Plan and the consummation of the transactions contemplated hereunder.

16. Headings. The titles and headings of the various sections of this Award Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Award.

17. Severability. The invalidity or unenforceability of any provisions of this Award Agreement in any jurisdiction shall not affect the validity, legality, or enforceability of the remainder of this Award Agreement in such jurisdiction or the validity, legality, or enforceability of any provision of this Award Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed by its duly authorized officer, and the Participant has hereunto set his hand, effective as of the Award Date specified above.

SOUTHERN CALIFORNIA BANCORP	PARTICIPANT
Name:	Name:
Title:

ACKNOWLEDGMENT:

I hereby acknowledge receipt of a copy of this Agreement as well as a copy of the Southern California Bancorp 2019 Omnibus Equity Incentive Plan.

PARTICIPANT

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REGISTRATION OF RESTRICTED SHARES (WHEN VESTED):

When the restricted shares vest in accordance with the terms of this agreement, please register the shares as follows (these instructions may be amended during the term of this Agreement):

Name:

(e.g. Your name, Joint w Spouse, Your Living Trust – vesting to a third party not permitted)

Address:

Tax ID Number:

Please indicate (X) how you would like your Stock registered:

☐ Physical stock certificate delivered to above address (CUS)

☐ Book entry with Computershare (the transfer agent) (BUS)

Attachment: Beneficiary Designation

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BENEFICIARY DESIGNATION

RESTRICTED SHARE AWARD AGREEMENT

SOUTHERN CALIFORNIA BANCORP 2019

OMNIBUS EQUITY INCENTIVE PLAN

Pursuant to the provisions of the Restricted Share Award Agreement permitting the designation of a beneficiary or beneficiaries, I hereby designate the following person or persons as the primary and secondary beneficiaries for any benefits under the Award Agreement to which this Beneficiary Designation is attached payable by reason of my death. If I am married at the time of this Beneficiary Designation and my primary beneficiary is not my spouse, I have obtained my spouse’s consent, below, to the naming of a primary beneficiary other than my spouse.

Primary Beneficiary:

		Social		Percentage
		Security		of
Name	Address	Number	Relationship	Benefit

Secondary Beneficiary:

		Social		Percentage
		Security		of
Name	Address	Number	Relationship	Benefit

Spousal Consent:

As of the Award Date, I am the spouse of the Participant under the Award Agreement to which this Beneficiary Designation is attached. I hereby consent to the beneficiary designations presented above.

PARTICIPANT	SPOUSE
Name	Name
Date	Date

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EX-10.4

Exhibit 10.4

PARTICIPANTS TO WHOM INCENTIVE STOCK OPTIONS ARE GRANTED MUST MEET CERTAIN HOLDING PERIOD AND EMPLOYMENT REQUIREMENTS FOR FAVORABLE TAX TREATMENT AND THE SOUTHERN CALIFORNIA BANCORP 2019 OMNIBUS EQUITY INCENTIVE PLAN SHALL HAVE FIRST BEEN APPROVED BY THE SHAREHOLDERS OF THE COMPANY BEFORE _______________, 2020.

UNLESS OTHERWISE STATED, ALL TERMS DEFINED IN THE PLAN SHALL HAVE THE SAME MEANING HEREIN AS SET FORTH IN THE PLAN.

STOCK OPTION AGREEMENT

SOUTHERN CALIFORNIA BANCORP

2019 OMNIBUS EQUITY INCENTIVE PLAN

☐ Incentive Stock Option

☐ Non-Qualified Stock Option for:

☐ Director

☐ Officer

☐ Key Employee

☐ Consultant

THIS STOCK OPTION AGREEMENT (this “Stock Option”), dated as of the ____ day of ________, 20___ is entered into by and between Southern California Bancorp (the “Company”) and ________________________________ (“Participant”) pursuant to the Southern California Bancorp 2019 Omnibus Equity Incentive Plan as in effect and as amended from time to time (the “Plan”) with reference to the following:

WHEREAS, it has been determined under the Plan that it would be in the best interests of the Company to grant to Participant a Stock Option to purchase all or any part of _______________ (____________) authorized but unissued shares of the Company’s Common Stock at the price of _________________ Dollars ($_________) per share, such Stock Option to be for the term and upon the terms and conditions hereinafter stated;

NOW, THEREFORE, it is hereby agreed:

1. Grant of Stock Option. Pursuant to said action of the Committee and pursuant to authorizations granted by all appropriate regulatory and governmental agencies, the Company hereby grants to Participant the option to purchase, upon and subject to the terms and conditions of the Plan, which is incorporated in full herein by this reference, all or any part of Common Stock at the price of _______________ Dollars ($_______) per share. For purposes of this Agreement and the Plan, the date of grant shall be ____________________ (the “Award Date”). At the Award Date, Participant ____ does not own / ____ owns stock possessing more than 10% of the total combined voting power of all classes of capital stock of the Company or any Subsidiary.

The Stock Option granted hereunder ____ is / ____ is not intended to qualify as an Incentive Stock Option within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended.

2. Exercisability. This Stock Option shall be exercisable as to ________ Option Shares on ____________________; as to ________ Option Shares on ____________________; as to ________ Option Shares on _____________________; as to ________ Option Shares on _____________________; and as to ________ Option Shares on _____________________. This Stock Option shall remain exercisable as to all of such Option Shares until _________, 20___ (but not later than ten (10) years from the date hereof), at which time it shall expire in its entirety, unless this Stock Option has expired or terminated earlier in accordance with the provisions hereof or of the Plan. Option Shares as to which this Stock Option become exercisable may be purchased at any time prior to expiration of this Stock Option.

3. Exercise of Stock Option. This Stock Option may be exercised by written notice substantially in the form of Exhibit “1” hereto delivered to the Company stating the number of Option Shares with respect to which this Stock Option is being exercised, together with payment as provided in Section 3.9 of the Plan. Upon exercise, Participant shall make appropriate arrangements and shall be responsible for the withholding of all federal and state income taxes then due, if any.

4. Agreement and Representations of Participant. To the extent the Option Shares covered by this Stock Option have not been registered with the Securities and Exchange Commission pursuant to the registration requirements under the Securities Act of 1933, as amended (the “Securities Act”), Participant hereby represents and warrants to the Company and acknowledges and agrees as follows:

(a) Participant hereby represents and warrants that the Option Shares to be acquired pursuant to this Stock Option will be acquired by Participant in good faith and for Participant’s own personal account, and not with a view to distributing the Option Shares to others or otherwise reselling the Option Shares in violation of the Securities Act or the rules and regulations promulgated thereunder;

(b) Participant acknowledges and agrees that: (i) the Option Shares to be acquired pursuant to this Stock Option have not been registered and that there is no obligation on the part of the Company to register such Option Shares under the Securities Act and the rules and regulations thereunder; and (ii) the Option Shares will not be freely tradeable unless they are either registered under the Securities Act or the holder presents a legal opinion acceptable to the Company that the transfer will not violate the federal securities laws;

(c) Participant acknowledges and agrees that the Company, at its sole discretion, to assure itself that any sale or distribution by the Participant complies with the Plan and any applicable federal or state securities laws, may take all reasonable steps, including placing stop transfer instructions with the Company’s transfer agent prohibiting transfers in violation of the Plan and affixing the following legend (and/or such other legend or legends as the Company shall require) on certificates evidencing the Option Shares:

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“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THEM UNDER THE ACT OR A WRITTEN OPINION OF COUNSEL FOR THE HOLDER THEREOF, WHICH OPINION SHALL BE ACCEPTABLE TO SOUTHERN CALIFORNIA BANCORP, THAT REGISTRATION IS NOT REQUIRED.”

(d) Participant understands that the Company is relying upon the truth and accuracy of the representations and agreements contained herein in determining to grant such Stock Option to Participant and upon subsequently issuing any Option Shares pursuant to the Plan without the Company first registering the same under the Securities Act;

(e) Participant agrees that at any time that Participant contemplates the disposition of any of the Option Shares (whether by sale, exchange, gift or other form of transfer), Participant shall first notify the Company of such proposed disposition and shall thereafter cooperate with the Company in complying with all applicable requirements of law which, in the opinion of counsel for the Company, must be satisfied prior to the making of such disposition and, before consummating such disposition, Participant shall provide to the Company an opinion of Participant’s counsel, of which both such opinion and such counsel shall be satisfactory to the Company, that such disposition will not result in a violation of any state or federal securities laws or regulations; and

(f) Participant hereby agrees to indemnify the Company and to hold the Company harmless against all liability, cost, or expenses (including reasonable attorney’s fees) arising out of or as a result of any distribution or resale of the Option Shares issued by the Company in violation of the securities laws and that this agreement to indemnify the Company shall inure to the benefit of and be binding upon the respective legal representatives, successors and assigns of the Participant and the Company.

5. Prior Outstanding Stock Options. An Incentive Stock Option held by Participant may be exercisable while the Participant has outstanding and unexercised any Incentive Stock Option previously granted to him or her by the Company, or a bank or corporation which (at the time of grant) is a parent or Subsidiary of the Company, or a predecessor corporation of any such entity.

6. Cessation of Affiliation. Except as provided in Paragraph 7 hereof, if, for any reason other than Participant’s Total Disability or death, Participant ceases to be employed by or Affiliated with the Company or a Subsidiary, this Stock Option shall expire ninety (90) days thereafter or on the date specified in Paragraph 2 hereof, whichever is earlier. During such period after cessation of employment or Affiliation, this Stock Option shall be exercisable only as to those increments, if any, which had become exercisable as of the date on which the Participant ceased to be employed by or Affiliated with the Company or Subsidiary, and any Stock Options or increments which had not become exercisable as of such date shall expire and terminate automatically on such date. The provisions of this Paragraph 6 shall not apply to an Participant whose Stock Option was granted on the basis of such Participant’s status as a Consultant.

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7. Termination for Cause. If Participant’s employment by or Affiliation with the Company or a Subsidiary is terminated for cause, this Stock Option shall automatically expire unless reinstated by the Committee within thirty (30) days of such termination by giving written notice of such reinstatement to Participant. In the event of such reinstatement, Participant may exercise this Stock Option only to such extent, for such time, and upon such terms and conditions as if Participant had ceased to be employed by or Affiliated with the Company or a Subsidiary upon the date of such termination for a reason other than cause, Total Disability or death. Termination for cause shall include, but shall not be limited to, termination for malfeasance or gross misfeasance in the performance of duties or conviction of illegal activity in connection therewith, or any conduct detrimental to the interests of the Company or a Subsidiary, and, in any event, the determination of the Committee with respect thereto shall be final and conclusive.

8. Disability or Death of Participant. If Participant becomes subject to a Total Disability or dies before the expiration date of this Stock Option, including the ninety (90)-day period referred to in Paragraph 6 hereof, this Stock Option shall automatically expire and terminate one (1) year after the date of Participant’s Total Disability or death or on the expiration day specified in Paragraph 2 hereof, whichever is earlier. After Participant’s Total Disability or death but before such expiration, the person or persons to whom Participant’s rights under this Stock Option shall have passed by order of a court of competent jurisdiction or by will or the applicable laws of descent and distribution, or the executor, administrator or conservator of Participant’s estate, subject to the provisions of Paragraph 14 hereof, shall have the right to exercise this Stock Option to the extent that increments, if any, had become exercisable as of the date on which Participant died or became disabled.

9. Nontransferability. This Stock Option shall not be transferable except by will or by the laws of descent and distribution, and shall be exercisable during Participant’s lifetime only by Participant.

10. Employment. This Stock Option shall not obligate the Company or a Subsidiary to employ Participant for any period, nor shall it interfere in any way with the right of the Company or a Subsidiary to increase or reduce Participant’s compensation.

11. Privileges of Stock Ownership. Participant shall have no rights as a shareholder with respect to the Option Shares unless and until said Option Shares are issued to Participant as provided in the Plan. Except as provided in Section 1.7 of the Plan, no adjustment will be made for dividends or other rights in respect of which the record date is prior to the date such stock certificates are issued.

12. Entire Agreement; Amendment. This Stock Option, including the Plan, contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. The rights of Participant are subject to modification as proved in Section 4.2 of the Plan.

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13. Notification of Sale. Participant agrees that Participant, or any person acquiring Option Shares upon exercise of this Stock Option, will notify the Company in writing not more than ten (10) days after any sale or other disposition of such Shares.

14. Approvals. To the extent this Stock Option is intended to qualify as an Incentive Stock Option, then this Stock Option and the issuance of Option Shares hereunder are expressly subject to the approval of the Plan and the form of this Stock Option by the holders of not less than a majority of the voting stock of the Company. This Stock Option may not be exercised unless and until all applicable requirements of all regulatory agencies having jurisdiction with respect thereto, and of the securities exchanges upon which securities of the Company are listed, if any, have been complied with.

15. Incorporation of Plan. All of the provisions of the Plan are incorporation herein by reference as if set forth in full in this Stock Option. In the event of any conflict between the terms of the Plan and any provision contained herein, the terms of the Plan shall be controlling and the conflicting provisions contained herein shall be disregarded.

16. Notices. All notices to the Company provided for in this Stock Option shall be addressed to it in care of its Chief Executive Officer, Cashier or Secretary at its main office and all notices to Participant shall be addressed to Participant’s address on file with the Company or a Subsidiary, or to such other address as either may designate to the other in writing, all in compliance with the notice provisions set forth in Section 4.15 of the Plan.

17. Binding Agreement; Assignment. This Stock Option shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns. Other than upon death, Total Disability, or pursuant to a domestic relations order under applicable state law, no rights or interests under this Stock Option may be assigned, transferred, sold, exchanged, encumbered, pledged, or otherwise hypothecated or disposed of by the Participant or any beneficiary(ies) of the Participant.

18. Compliance with Laws. The issuance of the Common Stock pursuant to this Stock Option shall be subject to, and shall comply with, any applicable requirements of any federal and state securities laws, rules, and regulations (including, without limitation, the provisions of the Securities Act, the Securities Exchange Act of 1934, as amended, and the respective rules and regulations promulgated thereunder) and any other law or regulation applicable thereto. The Company shall not be obligated to issue any of the Common Stock pursuant to this Stock Option if such issuance would violate any such requirements.

19. Further Assurances. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Stock Option and the Plan and the consummation of the transactions contemplated hereunder.

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20. Headings. The titles and headings of the various sections of this Stock Option have been inserted for convenience of reference only and shall not be deemed to be a part of this Award.

21. Severability. The invalidity or unenforceability of any provisions of this Stock Option in any jurisdiction shall not affect the validity, legality, or enforceability of the remainder of this Stock Option in such jurisdiction or the validity, legality, or enforceability of any provision of this Stock Option in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

IN WITNESS WHEREOF, the Company has caused this Stock Option to be executed by its duly authorized officer, and the Participant has hereunto set his hand, all as of the Award Date specified above.

SOUTHERN CALIFORNIA BANCORP	PARTICIPANT
Name:	Name:
Title:

ACKNOWLEDGMENT:

I hereby acknowledge receipt of a copy of this Stock Option and I acknowledge and agree that, on a timely basis, the Company delivered to me the following: (i) a copy of the Plan; (ii) a summary of the material terms of the Plan; (iii) information about the risks associated with investment in the Company’s securities; and (iv) current financial statements of the Company.

PARTICIPANT

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EXHIBIT “1”

NOTICE OF EXERCISE OF STOCK OPTION

Southern California Bancorp

12265 El Camino Real, Suite 100
San Diego, California 92130
Attention: President

Ladies and Gentlemen:

Pursuant to a Stock Option Agreement dated __________, 20___, Southern California Bancorp granted to me an option covering __________ shares of its Common Stock at a price of ___________ per share. Taking into account all appropriate adjustments for stock splits and dividends and the like, as well as for option shares already exercised, if any, that Stock Option Agreement presently covers ________ shares at approximately $__________ per share.

By executing this Notice, I hereby exercise the option as to ___________ shares (the “Shares”), for an aggregate purchase price of $__________, which Shares are currently vested and exercisable pursuant to the terms of the Option Shares Option Agreement. The exercise of the stock options effected hereby is subject to and pursuant to the terms of the Southern California Bancorp 2019 Omnibus Equity Incentive Plan (the “Plan”) and the Stock Option Agreement by and between me and the Company.

In accordance with the terms of the Plan and my Stock Option Agreement, I hereby tender payment for, and the amount to be withheld for taxes upon, the purchase of the Shares as follows:

1. Purchase Price Paid: $___________

	Form(s) of Payment:	☐	cash;
		☐	bank, cashier’s or certified
		☐	check;
		☐	funds transfer from account ____________;
		☐	______ shares of the Company’s
			common stock (requires special approvals);
		☐	“net exercise” pursuant to Section 3.9(d)(ii) of the Plan (requires special approvals); or
		☐	“cashless” exercise program pursuant to Section 3.9(d)(iii) of the Plan (requires special approvals).
2.	Withholding taxes:	☐	submitted herewith is $_______; or
		☐	I have instructed Southern California Bancorp not to deposit with the Internal Revenue Service and the California Franchise Tax Board any amount required to be withheld, as I will personally assume responsibility for the amounts and timing of my estimated tax withholding.

As reported to me by ______________, an officer of Southern California Bancorp, the fair market value per share of Southern California Bancorp’s common stock as of this date is $_______________.

Please register the Shares in the following manner:

_____________________________________

Print or Type Name

Please mail certificate to the following address:

_____________________________________

_____________________________________

_____________________________________

In consideration of the issuance by the Company to me of said Shares of its Common Stock:

1. I hereby represent and warrant to you that the Shares are being acquired by me in good faith for my own personal account, and not with a view to distributing the Shares to others or otherwise reselling the Shares in violation of the Securities Act of 1933, as amended (the “Securities Act”), or the rules and regulations promulgated thereunder.

2. I hereby acknowledge and agree that: (a) the Shares being acquired by me pursuant to the Plan have not been registered and that there is no obligation on the part of the Company to register such Shares under the Securities Act and the rules and regulations promulgated thereunder; and (b) the Shares being acquired by me are not freely tradeable and must be held by me for investment purposes unless the Shares are either registered under the Securities Act or transferred pursuant to an exemption from such registration, as accorded by the Securities Act and under the rules and regulations promulgated thereunder. I further represent and acknowledge that I have been informed by legal counsel in connection with said Plan of the restrictions on my ability to transfer the Shares and that I understand the scope and effect of those restrictions.

3. I understand that the effects of the above representations are the following: (i) that the undersigned does not presently intend to sell or otherwise dispose of all or any part of the Shares to any person or entity except in compliance with the terms described above, in the Plan and in the Agreement; and (ii) that the Company is relying upon the truth and accuracy of the representations and agreements contained herein in issuing the Shares to me without first registering the same under the Securities Act.

4. I hereby agree that the certificate evidencing the Shares may contain the following legend stamped upon the face thereof to the effect that the Shares are not registered under the Securities Act and that the Shares have been acquired pursuant to the representations and restrictions in this letter, the Plan and in the Agreement.

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THEM UNDER THE ACT OR A WRITTEN OPINION OF COUNSEL FOR THE HOLDER THEREOF, WHICH OPINION SHALL BE ACCEPTABLE TO SOUTHERN CALIFORNIA BANCORP, THAT REGISTRATION IS NOT REQUIRED.”

5. I hereby agree and understand that the Company will place a stop transfer notice with its stock transfer agent to ensure that the restrictions on transfer described herein will be observed.

6. In further consideration of the issuance of the Shares, I hereby agree to indemnify the Company and to hold the Company harmless against all liability, costs, or expenses (including reasonable attorney’s fees) arising out of or as a result of any distribution or resale by me of any of the Shares. The Agreements contained herein shall inure to the benefit of and be binding upon the respective legal representatives, successors and assigns of the undersigned and the Company.

	Signature
Dated:
	Print or Type Name

EX-10.5

Exhibit 10.5

UNLESS OTHERWISE STATED, ALL TERMS DEFINED IN THE PLAN SHALL HAVE THE SAME MEANING HEREIN AS SET FORTH IN THE PLAN.

RESTRICTED SHARES AWARD AGREEMENT

SOUTHERN CALIFORNIA BANCORP
2019 OMNIBUS EQUITY INCENTIVE PLAN

☐ Director

☒ Officer

☐ Key Employee

☐ Consultant

Participant	Award Date	Total Shares Granted
David Rainer	11/05/2020	211,765

Type of Award: ☐ Time Based ☒ Performance Based

THIS RESTRICTED SHARES AWARD AGREEMENT (this “Award Agreement”), granted on October 26, 2020, to be effective as of commencement of employment, 11/05/2020, hereinafter the “Award Date,” is entered into by and between Southern California Bancorp (the “Company”) and the Participant specified above, pursuant to the Southern California Bancorp 2019 Omnibus Equity Incentive Plan as in effect and as amended from time to time (the “Plan”), with reference to the following:

WHEREAS, it has been determined under the Plan that it would be in the best interests of the Company to grant the shares specified above (the “Restricted Shares”) to the Participant;

NOW, THEREFORE, in consideration of the mutual covenants and premises hereinafter set forth and for other good and valuable consideration, the parties hereto hereby mutually covenant and agree as follows:

1. Incorporation By Reference; Plan Document Receipt. This Award Agreement is subject in all respects to the terms and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the award provided hereunder), all of which terms and provisions are made a part of and incorporated in this Award Agreement as if they were expressly set forth herein. Any capitalized term not defined in this Award Agreement shall have the same meaning as is ascribed thereto in the Plan. The Participant hereby acknowledges receipt of a true copy of the Plan and that the Participant has read the Plan carefully and fully understands its content. In the event of a conflict between the terms of this Award Agreement and the terms of the Plan, the terms of the Plan shall control.

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2. Grant of Restricted Share Award. The Company hereby grants to the Participant, as of the Award Date specified above, the number of Restricted Shares specified above. Except as otherwise provided by Section 1.7 of the Plan, the Participant agrees and understands that nothing contained in this Award Agreement provides, or is intended to provide, the Participant with any protection against potential future dilution of the Participant’s shareholder interest in the Company for any reason.

3. Vesting.

3.1 If this is a Time-Based Award, the Restricted Shares subject to this Award Agreement shall become unrestricted, fully vested, and non-forfeitable in the numbers and on the Vesting Dates presented below, provided:

a.	if, on the Award Date, the Participant is an employee of the Company and / or one of its Subsidiaries, the Participant is employed on the Vesting Date, as presented below, by the Company and / or one of its Subsidiaries, or
b.	if, on the Award Date, the Participant is a director of the Company and / or one of its Subsidiaries, the Participant is serving as a director on the Vesting Date, as presented below, of the Company and / or one of its Subsidiaries.

Vesting Date Number of Restricted Shares

3.2 If this is a Performance-Based Award, the Restricted Shares subject to this Award Agreement shall become unrestricted, fully vested, and non-forfeitable in the numbers and on the Vesting Dates presented below, provided:

a.	if, on the Award Date, the Participant is an employee of the Company and / or one of its Subsidiaries, the Participant is employed on the Vesting Date, as presented below, by the Company and / or one of its Subsidiaries, or
b.	if, on the Award Date, the Participant is a director of the Company and / or one of its Subsidiaries, the Participant is serving as a director on the Vesting Date, as presented below, of the Company and / or one of its Subsidiaries.

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AND

the Performance Criteria specified below are achieved.

Voting Date	Performance Criteria	Number of Restricted Shares
Per Performance Criteria	Based on the audited consolidated financial statements for the year ended December 31, 2021, December 31, 2022 or December 31, 2023, but not any subsequent year, the Company achieves in the same year at least a 0.9% ROAA, records growth in net deposits of not less than $1.0 billion from the deposit balance as of September 30, 2020, achieves and thereafter maintains a ratio of criticized loans to Tier 1 equity plus the Allowance for Loan Loss of less than 25.0%, and has no formal regulatory enforcement orders. Vesting to be all or nothing and to occur on December 31, 2023 if the performance criteria have been confirmed achieved in either the year ended December 31,2021 or the year ended December 31,2022. If the performance criteria have been confirmed achieved for the year ended December 31, 2023, vesting shall be upon issuance of the audited consolidated financial statements for the year ended December 31, 2023.	211,765
TOTAL		211,765

3.3 If a Terminating Event of the Company occurs, all restrictions, terms, criteria, and conditions applicable to all Restricted Shares then outstanding under this Award Agreement shall be deemed lapsed and satisfied, as applicable, and each Participant shall become 100% vested with respect to all Awards granted to such Participant under the Plan as of the date of the Terminating Event. The immediately preceding sentence shall apply to only those Participants who are employed by or are serving as directors of the Company and / or one of its Subsidiaries as of the date of the Terminating Event.

3.4 If the Participant’s employment by or Affiliation with the Company and / or its Subsidiaries, as applicable, terminates for any reason other than a Terminating Event prior to the vesting of all or any portion of the Restricted Shares awarded under this Award Agreement, such Restricted Shares shall immediately be cancelled and the Participant (and the Participant’s estate, designated beneficiary, or other legal representative) shall forfeit any rights or interests in and with respect to any such Restricted Shares. The Board or the Committee, in its sole discretion, may determine, prior to or within ninety (90) days after the date of any such termination, that all or a portion of any the Participant’s unvested Restricted Shares shall not be so cancelled and forfeited.

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3.5 If the Participant’s employer ceases to be a Subsidiary of the Company, that event shall be deemed to constitute a termination of employment under Section 3.4 above.

4. Non-transferability. Restricted Share Awards, and any rights and interests with respect thereto, issued under this Award Agreement and the Plan shall not, prior to vesting, be sold, exchanged, transferred, assigned, or otherwise disposed of in any way by the Participant (or any beneficiary(ies) of the Participant), other than by testamentary disposition by the Participant or the laws of descent and distribution. Any such Restricted Shares, and any rights and interests with respect thereto, shall not, prior to vesting, be pledged, encumbered, or otherwise hypothecated in any way by the Participant (or any beneficiary(ies) of the Participant) and shall not, prior to vesting, be subject to execution, attachment, or similar legal process. Any attempt to sell, exchange, transfer, assign, pledge, encumber, or otherwise dispose of or hypothecate in any way any of the Restricted Shares, or the levy of any execution, attachment, or similar legal process upon the Restricted Shares, contrary to the terms and provisions of this Award Agreement and / or the Plan shall be null and void and without legal force or effect.

5. Designation of Beneficiary. Participant may designate a beneficiary or beneficiaries to receive any payment which under the terms of this Award Agreement may become payable on or after the Participant’s death by completing the form of Beneficiary Designation attached hereto. If the Participant designates someone other than Participant’s spouse as a beneficiary, such designation shall not be valid absent written approval from Participant’s spouse. At any time, and from time to time, any such designation may be changed or cancelled by the Participant without the consent of any such beneficiary, except for the aforementioned requirement for spousal consent.

Any beneficiary designation, change, or cancellation must be on a form provided for that purpose by the Board or the Committee and shall not be effective until received by the Board or the Committee.

If no beneficiary has been designated by a deceased Participant, or if the designated beneficiaries have predeceased the Participant, the beneficiary shall be the Participant’s spouse, or, if none, the Participant’s estate. If the Participant designates more than one beneficiary, any payments under the Plan to such beneficiaries shall be made in equal Shares or amounts unless the Participant has expressly designated otherwise, in which case the payments shall be made in the shares or amounts designated by the Participant.

6. Entire Agreement; Amendment. This Award Agreement, including the Plan, contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. The rights of Participant are subject to modification as proved in Section 4.2 of the Plan.

7. Employment. This Award Agreement shall not obligate the Company or a Subsidiary to employ Participant for any period, nor shall it interfere in any way with the right of the Company or a Subsidiary to increase or reduce Participant’s compensation.

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8. Privileges of Stock Ownership. Participant shall have no rights as a shareholder with respect to the Restricted Shares unless and until said Restricted Shares are issued to Participant as provided in the Plan. Except as provided in Section 1.7 of the Plan, no adjustment will be made for dividends or other rights in respect of which the record date is prior to the date such stock certificates are issued.

9. Approvals. This Agreement and the issuance of Restricted Shares hereunder are expressly subject to the approval of the Plan and the form of this Award Agreement by the holders of not less than a majority of the voting stock of the Company. Restricted Shares subject to this Award Agreement will not be issued unless and until all applicable requirements of all regulatory agencies having jurisdiction with respect thereto, and of the securities exchanges upon which securities of the Company are listed, if any, have been complied with.

10. Incorporation of Plan. All of the provisions of the Plan are incorporation herein by reference as if set forth in full in this Award Agreement. In the event of any conflict between the terms of the Plan and any provision contained herein, the terms of the Plan shall be controlling and the conflicting provisions contained herein shall be disregarded.

11. Notices. All notices to the Company provided for in this Award Agreement shall be addressed to it in care of its Chief Executive Officer, Chief Financial Officer or Secretary at its main office and all notices to Participant shall be addressed to Participant’s address on file with the Company or a Subsidiary, or to such other address as either may designate to the other in writing, all in compliance with the notice provisions set forth in Section 4.14 of the Plan.

12. Binding Agreement; Assignment. This Award Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns. Other than upon death, Total Disability, or pursuant to a domestic relations order under applicable state law, no rights or interests under this Award Agreement may be assigned, transferred, sold, exchanged, encumbered, pledged, or otherwise hypothecated or disposed of by the Participant or any beneficiary(ies) of the Participant.

13. Compliance with Laws. The issuance of the Common Stock pursuant to this Award Agreement shall be subject to, and shall comply with, any applicable requirements of any federal and state securities laws, rules, and regulations (including, without limitation, the provisions of the Securities Act of 1933, the Exchange Act, and the respective rules and regulations promulgated thereunder) and any other law or regulation applicable thereto. The Company shall not be obligated to issue any of the Common Stock pursuant to this Award Agreement if such issuance would violate any such requirements.

14. Agreement and Representations of Participant. To the extent the Common Stock covered by this Award Agreement has not been registered with the Securities and Exchange Commission pursuant to the registration requirements under the Securities Act of 1933, as amended (the “Securities Act”), Participant hereby represents and warrants to the Company and acknowledges and agrees as follows:

(a) Participant hereby represents and warrants that the Common Stock to be acquired pursuant to this Award Agreement will be acquired by Participant in good faith and for Participant’s own personal account, and not with a view to distributing the Common Stock to others or otherwise reselling the Common Stock in violation of the Securities Act or the rules and regulations promulgated thereunder;

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(b) Participant acknowledges and agrees that: (i) the Common Stock to be acquired pursuant to this Award Agreement have not been registered and that there is no obligation on the part of the Company to register such Common Stock under the Securities Act and the rules and regulations thereunder; and (ii) the Common Stock will not be freely tradeable unless they are either registered under the Securities Act or the holder presents a legal opinion acceptable to the Company that the transfer will not violate the federal securities laws;

(c) Participant acknowledges and agrees that the Company, at its sole discretion, to assure itself that any sale or distribution by the Participant complies with the Plan and any applicable federal or state securities laws, may take all reasonable steps, including placing stop transfer instructions with the Company’s transfer agent prohibiting transfers in violation of the Plan and affixing the following legend (and/or such other legend or legends as the Company shall require) on certificates evidencing the Common Stock:

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THEM UNDER THE ACT OR A WRITTEN OPINION OF COUNSEL FOR THE HOLDER THEREOF, WHICH OPINION SHALL BE ACCEPTABLE TO SOUTHERN CALIFORNIA BANCORP, THAT REGISTRATION IS NOT REQUIRED.”

(d) Participant understands that the Company is relying upon the truth and accuracy of the representations and agreements contained herein in determining to award such Common Stock to Participant without the Company first registering the same under the Securities Act;

(e) Participant agrees that at any time that Participant contemplates the disposition of any of the Common Stock (whether by sale, exchange, gift or other form of transfer), Participant shall first notify the Company of such proposed disposition and shall thereafter cooperate with the Company in complying with all applicable requirements of law which, in the opinion of counsel for the Company, must be satisfied prior to the making of such disposition and, before consummating such disposition, Participant shall provide to the Company an opinion of Participant’s counsel, of which both such opinion and such counsel shall be satisfactory to the Company, that such disposition will not result in a violation of any state or federal securities laws or regulations; and

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(f) Participant hereby agrees to indemnify the Company and to hold the Company harmless against all liability, cost, or expenses (including reasonable attorney’s fees) arising out of or as a result of any distribution or resale of the Common Stock issued by the Company in violation of the securities laws and that this agreement to indemnify the Company shall inure to the benefit of and be binding upon the respective legal representatives, successors and assigns of the Participant and the Company.

15. Further Assurances. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Award Agreement and the Plan and the consummation of the transactions contemplated hereunder.

16. Headings. The titles and headings of the various sections of this Award Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Award.

17. Severability. The invalidity or unenforceability of any provisions of this Award Agreement in any jurisdiction shall not affect the validity, legality, or enforceability of the remainder of this Award Agreement in such jurisdiction or the validity, legality, or enforceability of any provision of this Award Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

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IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed by its duly authorized officer, and the Participant has hereunto set his hand, all as of the Award Date specified above.

SOUTHERN CALIFORNIA BANCORP		PARTICIPANT
/s/ Nathan L. Rogge		/s/ David Rainer
Name:	Nathan L. Rogge	Name:	David Rainer
Title:	President & CEO

ACKNOWLEDGMENT:

I hereby acknowledge receipt of a copy of this Agreement as well as a copy of the Southern California Bancorp 2019 Omnibus Equity Incentive Plan.

PARTICIPANT

/s/ David Rainer

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EX-10.6

Exhibit 10.6

UNLESS OTHERWISE STATED, ALL TERMS DEFINED IN THE PLAN SHALL HAVE THE SAME MEANING HEREIN AS SET FORTH IN THE PLAN.

RESTRICTED SHARES AWARD AGREEMENT

SOUTHERN CALIFORNIA BANCORP
2019 OMNIBUS EQUITY INCENTIVE PLAN

☐	Director
☒	Officer
☐	Key Employee
☐	Consultant

Participant	Total Date	Award Shares Granted
Tom Dolan	10/26/2020	42,353

Type of Award: ☐ Time Based ☒ Performance Based

THIS RESTRICTED SHARES AWARD AGREEMENT (this “Award Agreement”), dated as of the Award Date specified above, is entered into by and between Southern California Bancorp (the “Company”) and the Participant specified above, pursuant to the Southern California Bancorp 2019 Omnibus Equity Incentive Plan as in effect and as amended from time to time (the “Plan”), with reference to the following:

WHEREAS, it has been determined under the Plan that it would be in the best interests of the Company to grant the shares specified above (the “Restricted Shares”) to the Participant;

NOW, THEREFORE, in consideration of the mutual covenants and premises hereinafter set forth and for other good and valuable consideration, the parties hereto hereby mutually covenant and agree as follows:

1. Incorporation By Reference; Plan Document Receipt. This Award Agreement is subject in all respects to the terms and provisions of the Plan (including, without limitation, any amendments thereto adopted at any time and from time to time unless such amendments are expressly intended not to apply to the award provided hereunder), all of which terms and provisions are made a part of and incorporated in this Award Agreement as if they were expressly set forth herein. Any capitalized term not defined in this Award Agreement shall have the same meaning as is ascribed thereto in the Plan. The Participant hereby acknowledges receipt of a true copy of the Plan and that the Participant has read the plan carefully and fully understands its content. In the event of a conflict between the terms of this Award Agreement and the terms of the Plan, the terms of the Plan shall control.

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2. Grant of Restricted Share Award. The Company hereby grants to the Participant, as of the Award Date specified above, the number of Restricted Shares specified above. Except as otherwise provided by Section 1.7 of the Plan, the Participant agrees and understands that nothing contained in this Award Agreement provides, or is intended to provide, the Participant with any protection against potential future dilution of the Participant’s shareholder interest in the Company for any reason.

3. Vesting.

3.1 If this is a Time-Based Award, the Restricted Shares subject to this Award Agreement shall become unrestricted, fully vested, and non-forfeitable in the numbers and on the Vesting Dates presented below, provided:

(a) if, on the Award Date, the Participant is an employee of the Company and / or one of its Subsidiaries, the Participant is employed on the Vesting Date, as presented below, by the Company and / or one of its Subsidiaries, or

(b) if, on the Award Date, the Participant is a director of the Company and / or one of its Subsidiaries, the Participant is serving as a director on the Vesting Date, as presented below, of the Company and / or one of its Subsidiaries.

Vesting
Date Number of Restricted
Shares

3.2 If this is a Performance-Based Award, the Restricted Shares subject to this Award Agreement shall become unrestricted, fully vested, and non-forfeitable in the numbers and on the Vesting Dates presented below, provided:

(a)	if, on the Award Date, the Participant is an employee of the Company and / or one of its Subsidiaries, the Participant is employed on the Vesting Date, as presented below, by the Company and / or one of its Subsidiaries, or
(b)	if, on the Award Date, the Participant is a director of the Company and / or one of its Subsidiaries, the Participant is serving as a director on the Vesting Date, as presented below, of the Company and / or one of its Subsidiaries.

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AND

the Performance Criteria specified below are achieved.

Vesting Date	Performance Criteria	Number of Restricted Shares
Per Performance Criteria	Based on the audited consolidated financial statements for the year ended December 31, 2021, December 31, 2022 or December 31, 2023, but not any subsequent year, the Company achieves in the same year at least a 0.9% ROAA, records growth in net deposits of not less than $1.0 billion from the deposit balance as of September 30, 2020, achieves and thereafter maintains a ratio of criticized loans to Tier 1 equity plus the Allowance for Loan Loss of less than 25.0%, and has no formal regulatory enforcement orders. Vesting to be all or nothing and to occur on December 31, 2023 if the performance criteria have been confirmed achieved in either the year ended December 31, 2021 or the year ended December 31, 2022. If the performance criteria have been confirmed achieved for the year ended December 31, 2023, vesting shall be upon issuance of the audited consolidated financial statements for the year ended December 31, 2023.		42,353
TOTAL			42,353

3.3 If a Terminating Event of the Company occurs, all restrictions, terms, criteria, and conditions applicable to all Restricted Shares then outstanding under this Award Agreement shall be deemed lapsed and satisfied, as applicable, and each Participant shall become 100% vested with respect to all Awards granted to such Participant under the Plan as of the date of the Terminating Event. The immediately preceding sentence shall apply to only those Participants who are employed by or are serving as directors of the Company and / or one of its Subsidiaries as of the date of the Terminating Event.

3.4 If the Participant’s employment by or Affiliation with the Company and / or its Subsidiaries, as applicable, terminates for any reason other than a Terminating Event prior to the vesting of all or any portion of the Restricted Shares awarded under this Award Agreement, such Restricted Shares shall immediately be cancelled and the Participant (and the Participant’s estate, designated beneficiary, or other legal representative) shall forfeit any rights or interests in and with respect to any such Restricted Shares. The Board or the Committee, in its sole discretion, may determine, prior to or within ninety (90) days after the date of any such termination, that all or a portion of any the Participant’s unvested Restricted Shares shall not be so cancelled and forfeited.

3.5 If the Participant’s employer ceases to be a Subsidiary of the Company, that event shall be deemed to constitute a termination of employment under Section 3.4 above.

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4. Non-transferability. Restricted Share Awards, and any rights and interests with respect thereto, issued under this Award Agreement and the Plan shall not, prior to vesting, be sold, exchanged, transferred, assigned, or otherwise disposed of in any way by the Participant (or any beneficiary(ies) of the Participant), other than by testamentary disposition by the Participant or the laws of descent and distribution. Any such Restricted Shares, and any rights and interests with respect thereto, shall not, prior to vesting, be pledged, encumbered, or otherwise hypothecated in any way by the Participant (or any beneficiary(ies) of the Participant) and shall not, prior to vesting, be subject to execution, attachment, or similar legal process. Any attempt to sell, exchange, transfer, assign, pledge, encumber, or otherwise dispose of or hypothecate in any way any of the Restricted Shares, or the levy of any execution, attachment, or similar legal process upon the Restricted Shares, contrary to the terms and provisions of this Award Agreement and / or the Plan shall be null and void and without legal force or effect.

5. Designation of Beneficiary. Participant may designate a beneficiary or beneficiaries to receive any payment which under the terms of this Award Agreement may become payable on or after the Participant’s death by completing the form of Beneficiary Designation attached hereto. If the Participant designates someone other than Participant’s spouse as a beneficiary, such designation shall not be valid absent written approval from Participant’s spouse. At any time, and from time to time, any such designation may be changed or cancelled by the Participant without the consent of any such beneficiary, except for the aforementioned requirement for spousal consent.

Any beneficiary designation, change, or cancellation must be on a form provided for that purpose by the Board or the Committee and shall not be effective until received by the Board or the Committee.

If no beneficiary has been designated by a deceased Participant, or if the designated beneficiaries have predeceased the Participant, the beneficiary shall be the Participant’s spouse, or, if none, the Participant’s estate. If the Participant designates more than one beneficiary, any payments under the Plan to such beneficiaries shall be made in equal Shares or amounts unless the Participant has expressly designated otherwise, in which case the payments shall be made in the shares or amounts designated by the Participant.

6. Entire Agreement; Amendment. This Award Agreement, including the Plan, contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. The rights of Participant are subject to modification as proved in Section 4.2 of the Plan.

7. Employment. This Award Agreement shall not obligate the Company or a Subsidiary to employ Participant for any period, nor shall it interfere in any way with the right of the Company

8. Privileges of Stock Ownership. Participant shall have no rights as a shareholder with respect to the Restricted Shares unless and until said Restricted Shares are issued to Participant as provided in the Plan. Except as provided in Section 1.7 of the Plan, no adjustment will be made for dividends or other rights in respect of which the record date is prior to the date such stock certificates are issued.

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9. Approvals. This Agreement and the issuance of Restricted Shares hereunder are expressly subject to the approval of the Plan and the form of this Award Agreement by the holders of not less than a majority of the voting stock of the Company. Restricted Shares subject to this Award Agreement will not be issued unless and until all applicable requirements of all regulatory agencies having jurisdiction with respect thereto, and of the securities exchanges upon which securities of the Company are listed, if any, have been complied with.

10. Incorporation of Plan. All of the provisions of the Plan are incorporation herein by reference as if set forth in full in this Award Agreement. In the event of any conflict between the terms of the Plan and any provision contained herein, the terms of the Plan shall be controlling and the conflicting provisions contained herein shall be disregarded.

11. Notices. All notices to the Company provided for in this Award Agreement shall be addressed to it in care of its Chief Executive Officer, Chief Financial Officer or Secretary at its main office and all notices to Participant shall be addressed to Participant’s address on file with the Company or a Subsidiary, or to such other address as either may designate to the other in writing, all in compliance with the notice provisions set forth in Section 4.14 of the Plan.

12. Binding Agreement; Assignment. This Award Agreement shall inure to the benefit of, be binding upon, and be enforceable by the Company and its successors and assigns. Other than upon death, Total Disability, or pursuant to a domestic relations order under applicable state law, no rights or interests under this Award Agreement may be assigned, transferred, sold, exchanged, encumbered, pledged, or otherwise hypothecated or disposed of by the Participant or any beneficiary(ies) of the Participant.

13. Compliance with Laws. The issuance of the Common Stock pursuant to this Award Agreement shall be subject to, and shall comply with, any applicable requirements of any federal and state securities laws, rules, and regulations (including, without limitation, the provisions of the Securities Act of 1933, the Exchange Act, and the respective rules and regulations promulgated thereunder) and any other law or regulation applicable thereto. The Company shall not be obligated to issue any of the Common Stock pursuant to this Award Agreement if such issuance would violate any such requirements.

14. Agreement and Representations of Participant. To the extent the Common Stock covered by this Award Agreement has not been registered with the Securities and Exchange Commission pursuant to the registration requirements under the Securities Act of 1933, as amended (the “Securities Act”), Participant hereby represents and warrants to the Company and acknowledges and agrees as follows:

(a) Participant hereby represents and warrants that the Common Stock to be acquired pursuant to this Award Agreement will be acquired by Participant in good faith and for Participant’s own personal account, and not with a view to distributing the Common Stock to others or otherwise reselling the Common Stock in violation of the Securities Act or the rules and regulations promulgated thereunder;

(b) Participant acknowledges and agrees that: (i) the Common Stock to be acquired pursuant to this Award Agreement have not been registered and that there is no obligation on the part of the Company to register such Common Stock under the Securities Act and the rules and regulations thereunder; and (ii) the Common Stock will not be freely tradeable unless they are either registered under the Securities Act or the holder presents a legal opinion acceptable to the Company that the transfer will not violate the federal securities laws;

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(c) Participant acknowledges and agrees that the Company, at its sole discretion, to assure itself that any sale or distribution by the Participant complies with the Plan and any applicable federal or state securities laws, may take all reasonable steps, including placing stop transfer instructions with the Company’s transfer agent prohibiting transfers in violation of the Plan and affixing the following legend (and/or such other legend or legends as the Company shall require) on certificates evidencing the Common Stock:

“THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THEM UNDER THE ACT OR A WRITTEN OPINION OF COUNSEL FOR THE HOLDER THEREOF, WHICH OPINION SHALL BE ACCEPTABLE TO SOUTHERN CALIFORNIA BANCORP, THAT REGISTRATION IS NOT REQUIRED.”

(d) Participant understands that the Company is relying upon the truth and accuracy of the representations and agreements contained herein in determining to award such Common Stock to Participant without the Company first registering the same under the Securities Act;

(e) Participant agrees that at any time that Participant contemplates the disposition of any of the Common Stock (whether by sale, exchange, gift or other form of transfer), Participant shall first notify the Company of such proposed disposition and shall thereafter cooperate with the Company in complying with all applicable requirements of law which, in the opinion of counsel for the Company, must be satisfied prior to the making of such disposition and, before consummating such disposition, Participant shall provide to the Company an opinion of Participant’s counsel, of which both such opinion and such counsel shall be satisfactory to the Company, that such disposition will not result in a violation of any state or federal securities laws or regulations; and

(f) Participant hereby agrees to indemnify the Company and to hold the Company harmless against all liability, cost, or expenses (including reasonable attorney’s fees) arising out of or as a result of any distribution or resale of the Common Stock issued by the Company in violation of the securities laws and that this agreement to indemnify the Company shall inure to the benefit of and be binding upon the respective legal representatives, successors and assigns of the Participant and the Company.

15. Further Assurances. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Award Agreement and the Plan and the consummation of the transactions contemplated hereunder.

16. Headings. The titles and headings of the various sections of this Award Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of this Award.

17. Severability. The invalidity or unenforceability of any provisions of this Award Agreement in any jurisdiction shall not affect the validity, legality, or enforceability of the remainder of this Award Agreement in such jurisdiction or the validity, legality, or enforceability of any provision of this Award Agreement in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

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IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed by its duly authorized officer, and the Participant has hereunto set his hand, all as of the Award Date specified above.

SOUTHERN CALIFORNIA BANCORP		PARTICIPANT
/s/ Nathan L. Rogge		/s/ Tom Dolan
Name:	Nathan L. Rogge	Name:	Tom Dolan
Title:	President & CEO

ACKNOWLEDGMENT:

I hereby acknowledge receipt of a copy of this Agreement as well as a copy of the Southern California Bancorp 2019 Omnibus Equity Incentive Plan.

PARTICIPANT

/s/ Tom Dolan

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EX-10.7

Exhibit 10.7

BANK OF SOUTHERN CALIFORNIA, N.A.

2011 OMNIBUS EQUITY INCENTIVE PLAN

TABLE OF CONTENTS

ARTICLE I			1
GENERAL			1
	1.1	Purpose	1
	1.2	Definitions of Certain Terms	1
	1.3	Administration	5
	1.4	Persons Eligible for Awards	6
	1.5	Types of Awards Under the Plan	7
	1.6	Shares Available for Awards	7
	1.7	Adjustments Upon Changes in Capitalization	7
	1.8	Award Agreements	8
	1.9	Rights of Participants	8
	1.10	Award Period	9
	1.11	No Rights as a Stockholder	9
	1.12	Compliance with Law	9
ARTICLE II			9
AWARDS OF RESTRICTED SHARES UNDER THE PLAN			9
	2.1.	Terms and Conditions	9
	2.2.	Restricted Shares Award Agreement	10
	2.3.	Restricted Share Grants	10
	2.4.	Awards Subject To Performance Criteria	10
	2.5.	Time-Based Awards	11
	2.6.	Acceleration of Vesting Upon Occurrence of a Terminating Event	11
	2.7.	Restriction Period	11
	2.8.	Restricted Shares	11
	2.9.	Issuance of Share Certificates	11
	2.10.	Deferred Payments	12
	2.11.	Forfeiture of Unvested Shares	12
ARTICLE III			12
AWARDS OF STOCK OPTIONS UNDER THE PLAN			12
	3.1.	Terms and Conditions	12
	3.2.	Stock Option Agreement	12
	3.3.	Grant of Stock Options	13
	3.4.	Shareholder-Employees	13
	3.5.	Maximum Value of Stock Options	13
	3.6.	Substituted Stock Options	13
	3.7.	Non-Qualified Stock Options	14
	3.8.	Stock Option Exercise Price	14
	3.9.	Exercise of Stock Options	14
	3.10.	Cancellation and Termination of Stock Options	16
	3.11.	Regulatory Law Compliance; Notice of Sale	16
ARTICLE IV			16
MISCELLANEOUS			16
	4.1.	Effective Date of the Plan	16
	4.2.	Amendment of the Plan; Modification of Awards	16
	4.3.	Terminating Events	17
	4.4.	Tax Withholding	17
	4.5.	Restrictions	18
	4.6.	Nonassignability	18
	4.7.	Requirement of Notification of Election Under Section 83(b) of the Code	18
	4.8.	Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of the Code	19
	4.9.	No Right to Employment	19
	4.10.	Nature of Payments	19
	4.11.	Non-Uniform Determinations	19
	4.12.	Other Payments or Awards	19
	4.13.	Limitation on Obligations of the Bank	20
	4.14.	Limitation of Rights	20
	4.15.	Agreement and Representations of Participant	20
	4.16.	Notices	21
	4.17.	Section Headings	21
	4.18.	Effective Date and Term of Plan	21
	4.19.	Governing Law	22
	4.20.	Severability; Entire Agreement	22
	4.21.	No Third Party Beneficiaries	22
	4.22.	Successors and Assigns	22

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ARTICLE I

GENERAL

1.1 Purpose

The purpose of the Bank of Southern California, N.A. 2011 Omnibus Equity Incentive Plan (the “Plan”) is to strengthen Bank of Southern California, N.A.(the “Bank”) and those banks and corporations which are or hereafter become Subsidiaries by providing additional means of attracting and retaining competent managerial personnel and by providing to participating directors, officers, Key Employees and Consultants added incentive for high levels of performance and for unusual efforts to increase the earnings of the Bank and any Subsidiaries. The Plan seeks to accomplish these purposes and to achieve these results by providing such directors, officers, Key Employees and Consultants with a proprietary interest in maximizing the growth, profitability, and overall success of the Bank and its Subsidiaries through the grant of Awards of Restricted Shares, which Awards may be either time based or performance based.

In addition, the Plan provides such directors, officers, key employees and Consultants with a means to purchase shares of the Common Stock of the Bank pursuant to Awards of Stock Options granted in accordance with the Plan. Stock Options granted pursuant to this Plan are intended to be Incentive Stock Options or Non-Qualified Stock Options, as shall be determined and designated by the Committee upon the grant of each Stock Option hereunder.

1.2 Definitions of Certain Terms

(a) “Affiliation,” “Affiliate,” or “Affiliated” mean services as a director or a Consultant to the Bank or any Subsidiary.

(b) “Award” means, individually or collectively, an award of Restricted Shares or a grant of Stock Options to a Participant under the Plan.

(c) “Award Agreement” means a Restricted Shares Award Agreement evidencing the Award of Restricted Shares hereunder or a Stock Option Agreement evidencing the grant of Stock Options hereunder.

(d) “Award Date” means the date the Committee makes its final determination to grant an Award hereunder; provided however, the Board or the Committee may fix the Award Date as any date on or after the date of its final determination to grant the Award. The Award Date shall be as set forth in the applicable Award Agreement.

(e) “Award Period” means the period beginning on an Award Date and ending on the expiration date of such Award.

(f) “Bank” means Bank of Southern California, N.A., a national banking association.

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(g) “Board” means the Board of Directors of the Bank, as constituted from time to time.

(h) “Code” means the Internal Revenue Code of 1986, as in effect and as amended from time to time, or any successor statute thereto, together with any rules, regulations, and interpretations promulgated thereunder or with respect thereto.

(i) “Committee” means the committee of the Board established from time to time in the sole discretion of the Board to administer the Plan, as described in Section 1.3 of the Plan. Any Committee established by the Board shall be comprised solely of three (3) or more Non-Employee Directors (as defined in Rule 16b-3 promulgated under the Exchange Act) or such greater number of directors as may be required under applicable law.

(j) “Common Stock” means the $5.00 par value common stock of the Bank.

(k) “Consultant” means those individuals, including but not limited to attorneys, accountants and other professionals who provide services to the Bank or any Subsidiary, but only to the extent that an Award is granted as fair compensation for services rendered.

(l) “EESA” means the Emergency Economic Stabilization Act of 2008, as may be amended from time to time.

(m) “EESA Regulations” means the regulations of the United States Department of Treasury promulgated pursuant to EESA.

(n) “Exchange Act” means the Securities Exchange Act of 1934, as amended.

(o) “Fair Market Value” means on, or with respect to, any given date(s), the closing market price of the Common Stock, as reported on the Nasdaq Small Cap or National Market for such date(s) or, if the Common Stock was not traded on such date(s), on the next preceding day or days on which the Common Stock was traded. If at any time the Common Stock is not traded on such exchange, the Fair Market Value of a share of the Common Stock shall be determined in good faith by the Board or the Committee by the reasonable application of a reasonable valuation method. Notwithstanding the foregoing, no Award under the Plan is intended to provide for a deferral of compensation within the meaning of Section 409A of the Code and, as such, the Fair Market Value shall be determined in all respects in a manner consistent with that intention.

(p) “Incentive Stock Option” means a Stock Option that is intended to qualify for special federal income tax treatment pursuant to Sections 421 and 422 of the Code (or a successor provision thereof) and which is so designated in the applicable Award Agreement. Under no circumstances shall any Stock Option that is not specifically designated as an Incentive Stock Option be considered an Incentive Stock Option.

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(q) “Key Employee” means an employee of the Bank or any Subsidiary as determined by the Committee from time to time.

(r) “Most-Highly Compensated Employee” means an Eligible Employee whose annual compensation is determined to be the highest among all employees in accordance with EESA and the EESA Regulations.

(s) “Non-Qualified Stock Option” means a Stock Option which is not an Incentive Stock Option.

(t) “Option Exercise Price” means the amount payable by a Participant on the exercise of a Stock Option.

(u) “Option Shares” means the shares of Common Stock covered by and subject to any outstanding unexercised Stock Option granted pursuant to this Plan.

(v) “Participant” means any individual who is selected from time to time to receive an Award under the Plan.

(w) “Performance-Based Award” means an Award granted under Article II that vest based upon the achievement of Performance Criteria rather than vesting based upon the passage of time. Performance-Based Awards are further defined in Section 2.4.

(x) “Performance Criteria” means business criteria determined by the Board or the Committee, in its sole discretion, at the Award Date to be applicable to a Participant with respect to an Award in order to qualify Awards of Restricted Shares as “performance based compensation” within the meaning of Section 162(m) of the Code. Performance Criteria may be stated in absolute terms or relative to comparison companies or indices to be achieved during a period of time. Any Performance Criteria may be used to measure the performance of the Bank as a whole or any business unit of the Bank. Any Performance Criteria may include or exclude extraordinary items such as extraordinary, unusual and / or non-recurring items of gain or loss, gains or losses on the disposition of a business, changes in tax or accounting regulations or laws, or the effects of a merger or acquisition. Performance Criteria generally shall be established by the Board or the Committee and shall be derived from the Bank’s audited financial statements, including footnotes, or any other measure of performance desired by the Board or the Committee.

(y) “Restricted Shares” means the restricted shares of Common Stock awarded pursuant to the provisions of Article II of the Plan and the relevant Restricted Shares Award Agreement.

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(z) “Restricted Shares Award Agreement” means a written agreement between the Participant and the Bank evidencing the Award of Restricted Shares under the Plan.

(aa) “Restriction Period” means the period of time commencing on the Award Date of Restricted Shares and ending on the date all restrictions, limitations, and criteria associated with such Restricted Shares lapse or are achieved, as applicable.

(bb) “Rule 16b-3” means Rule 16b-3, as amended from time to time, as promulgated by the Securities and Exchange Commission pursuant to the Exchange Act.

(cc) “Stock Option” means the right to purchase a specified number of shares of Common Stock under the Plan, at a price and upon the terms and conditions determined by the Committee and evidenced by a Stock Option Agreement.

(dd) “Stock Option Agreement” means a written agreement between the Participant and the Bank evidencing the grant of Stock Options under the Plan.

(ee) “Subsidiary” means each “subsidiary corporation” (treating the Bank as the employer corporation) as defined in Section 424(f) of the Code.

(ff) “TARP” means the Troubled Asset Relief Program – Capital Purchase Program of the United States Department of Treasury promulgated under EESA.

(gg) “TARP Period” means the period commencing with the Bank’s receipt of any financial assistance from the United States Treasury under TARP and ending on the last date upon which any obligation arising from such financial assistance remains outstanding.

(hh) “Terminating Event” means: (i) the consummation of a plan of dissolution or liquidation of the Bank; (ii) a plan of reorganization, merger or consolidation of the Bank with one or more corporations, as a result of which the Bank is not the surviving entity; or (iii) the sale of all or substantially all the assets of the Bank to another corporation; provided however, that if provision is made in connection with such transaction for assumption of Awards theretofore granted (in which case such Awards shall be converted into awards for a like number and kind for shares of the surviving entity), or substitution for such Awards with new awards covering stock of a successor employer corporation, or a parent or Subsidiary thereof, solely at the discretion of such successor corporation, or parent or Subsidiary, with appropriate adjustments as to number and kind of shares and prices, then the consummation of such transaction shall not be deemed a Terminating Event for purposes of the Plan or the applicable Award Agreement.

(ii) “Time-Based Awards” means the Award of Restricted Shares granted under the Plan that vest based upon the passage of time rather than vesting based upon the achievement of Performance Criteria.

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(jj) “Total Disability” means a “permanent and total disability” within the meaning of Section 22(e)(3) of the Code and such other disabilities, infirmities, afflictions or conditions as the Board or the Committee determine.

(kk) “Vesting Date” means the date that Restricted Shares under an Award become fully vested, unrestricted, and non-forfeitable following:

(i) the applicable passage of time (for Time-Based Awards);

(ii) the achievement of the applicable Performance Criteria (for Performance-Based Awards);

(iii) the occurrence of an event triggering immediate vesting as described in the Plan; or

(iv) the decision of the Board or the Committee that such restricted Shares shall become fully vested, unrestricted, and non-forfeitable.

1.3 Administration

(a) This Plan shall be administered by the Committee. Members of the Committee serve at the pleasure of the Board and the Board shall have the right, in its sole and absolute discretion, to remove or replace any person from or on the Committee at any time for any reason whatsoever. All Awards to Participants shall be authorized by the Committee.

(b) The Committee shall have the authority: (i) to exercise all of the powers granted to it under the Plan; (ii) to construe, interpret and implement the Plan and any Award Agreements; (iii) to prescribe, amend and rescind rules and regulations relating to the Plan, including rules governing its own operations; (iv) to make all determinations necessary or advisable in administering the Plan; (v) to correct any defect, supply any omission and reconcile any inconsistency in the Plan; (vi) to amend the Plan to reflect changes in applicable law; (vii) to determine whether, to what extent and under what circumstances Awards may be settled or exercised in cash, shares of Common Stock, other securities, other Awards or other property, or canceled, forfeited or suspended and the method or methods by which Awards may be settled, canceled, forfeited or suspended; and (viii) to determine whether, to what extent and under what circumstances cash, shares of Common Stock, other securities, other Awards or other property and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee.

(c) Actions of the Committee shall be taken by the vote of a majority of its members. Any action may be taken by a written instrument signed by a majority of the Committee members, and action so taken shall be fully as effective as if it had been taken by a vote at a meeting.

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(d) The Committee may designate persons other than members of the Board to carry out the day-to-day ministerial administration of the Plan under such conditions and limitations as it may prescribe. The Committee’s determinations under the Plan need not be uniform and may be made selectively among Participants, whether or not such Participants are similarly situated. The determination of the Committee on all matters relating to the Plan or any Award Agreement shall be final, binding and conclusive on all persons.

(e) No member of the Committee or any employee of the Bank or any of its Subsidiaries or Affiliates (each such person a “Covered Person”) shall have any liability to any person (including, without limitation, any Participant in the Plan) for any action taken or omitted to be taken or any determination made in good faith with respect to the Plan or any Award. Each Covered Person shall be indemnified and held harmless by the Bank against and from any loss, cost, liability or expense (including attorneys’ fees) that may be imposed upon or incurred by such Covered Person in connection with or resulting from any action, suit or proceeding to which such Covered Person may be a party or in which such Covered Person may be involved by reason of any action taken or omitted to be taken under the Plan and against and from any and all amounts paid by such Covered Person, with the Bank’s approval, in settlement thereof, or paid by such Covered Person in satisfaction of any judgment in any such action, suit or proceeding against such Covered Person, provided that the Bank shall have the right, at its own expense, to assume and defend any such action, suit or proceeding and, once the Bank gives notice of its intent to assume the defense, the Bank shall have sole control over such defense with counsel of the Bank’s choice. The foregoing right of indemnification shall not be available to a Covered Person to the extent that a court of competent jurisdiction in a final judgment or other final adjudication, in either case, not subject to further appeal, determines that the acts or omissions of such Covered Person giving rise to the indemnification claim resulted from such Covered Person’s bad faith, fraud or willful criminal act or omission. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which Covered Persons may be entitled under the Bank’s Articles of Association or Bylaws, as a matter of law, or otherwise, or any other power that the Bank may have to indemnify such persons or hold them harmless.

(f) Notwithstanding anything to the contrary contained herein, the Board may, in its sole discretion, at any time and from time to time, grant Awards or resolve to administer the Plan. In the foregoing event, the Board shall have all of the authority and responsibility granted to the Committee herein.

1.4 Persons Eligible for Awards

Awards under the Plan may be made to directors, officers and Key Employees of the Bank or any Subsidiary, and to Consultants of the Bank or any Subsidiary, as the Committee shall select in its discretion.

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1.5 Types of Awards Under the Plan

Awards may be made under the Plan in the form of Restricted Shares and/or Stock Options, including Incentive Stock Options, as more particularly described in Articles II and III.

1.6 Shares Available for Awards

Subject to adjustment as provided in Section 1.7, the maximum number of shares of Common Stock that may be issued or paid out in connection with any individual and all Awards of Restricted Shares or upon exercise of any individual and all Stock Options granted under this Plan shall not exceed 544,907 shares in the aggregate. Such shares may be authorized but unissued Common Stock or authorized and issued Common Stock held in the Bank’s treasury or acquired by the Bank for the purposes of the Plan. The Board or Committee may direct that any stock certificate evidencing shares of Common Stock issued pursuant to the Plan shall bear a legend setting forth such restrictions on transferability as may apply to such shares of Common Stock pursuant to the Plan or otherwise pursuant to the law. If any Award is forfeited or otherwise terminates or is canceled without the delivery of shares of Common Stock, shares of Common Stock are surrendered or withheld from any Award to satisfy a Participant’s income tax withholding obligations, or shares of Common Stock owned by a Participant are tendered to pay the exercise price of Stock Options granted under the Plan, then the shares of Common Stock covered by such forfeited, terminated or canceled Award or which are equal to the number of shares of Common Stock surrendered, withheld or tendered shall again become available for issuance pursuant to Awards granted or to be granted under this Plan. Any shares of Common Stock delivered by the Bank, any shares of Common Stock with respect to which Awards are made by the Bank and any shares of Common Stock with respect to which the Bank becomes obligated to make Awards, through the assumption of, or in substitution for, outstanding Awards previously granted by an acquired entity, shall not be counted against the shares of Common Stock available for Awards under this Plan.

1.7 Adjustments Upon Changes in Capitalization

In the event of any change in the number of issued shares of Common Stock (or issuance of shares other than Common Stock) by reason of any forward or reverse share split, or share dividend, recapitalization, reclassification, merger, consolidation, split-up, spin-off, reorganization, combination, exchange of shares of Common Stock, the issuance of warrants or other rights to purchase shares of Common Stock or other securities, or any other change in corporate structure or in the event of any extraordinary distribution (whether in the form of cash, shares of Common Stock, other securities or other property) (each, an “Adjustment Event”), then the Committee shall equitably adjust the number or kind of shares of Common Stock that may be issued under the Plan, and any or all of the terms of an outstanding Award (including the number of shares of Common Stock covered by such outstanding Award, the type of property to which the Award is subject and the option or reference price of such Award), and such adjustments will be final, conclusive and binding for all purposes of the Plan. In determining adjustments to be made under this Section 1.7, the Board or the Committee may take into account such factors as it determines to be appropriate, including: (i) the provisions of applicable law; (ii) the potential tax or accounting consequences of an adjustment (including, as applicable, under Section 162(m) of the Code and/or Section 409A of the Code); and (iii) the preservation of the benefits or potential benefits intended to be made pursuant to Awards and, in light of such factors or others, may make adjustments that are not uniform or proportionate among outstanding Awards. In connection with any adjustment pursuant to this Section 1.7, the Committee may provide, in its sole discretion, for the cancellation of any outstanding Awards in exchange for payment in cash or other property equal to the Fair Market Value of the shares of Common Stock covered by such Awards, reduced by the option or reference price, if any. After any adjustment made pursuant to this Section 1.7, the number of shares subject to each outstanding Award will be rounded down to the nearest whole number.

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1.8 Award Agreements

Awards of Restricted Shares granted under the Plan shall be evidenced by a written agreement in substantially the form of Exhibit “A” and Awards of Stock Options granted under the Plan shall be evidenced by a written agreement in substantially the form of Exhibit “B” hereto. Each Award Agreement shall contain such provisions as the Committee in its discretion deems necessary or desirable. A Participant shall have no rights with respect to an Award unless such Participant accepts the Award within such period as the Committee shall specify by executing an Award Agreement and, if the Board or Committee shall so require, makes payment to the Bank in such amount as the Board or Committee may determine.

No Award shall be enforceable until the Award Agreement has been signed by the Participant and, on behalf of the Bank, by an executive officer (other than the recipient). By executing the Award Agreement, a Participant shall be deemed to have accepted and consented to the terms of this Plan and any action taken in good faith under this Plan by and within the discretion of the Board or the Committee or their delegates. Unless the Award Agreement otherwise expressly provides, there shall be no third party beneficiaries of the obligations of the Bank to the Participant under the Award Agreement.

Each Award Agreement shall also specify the effect of a termination of employment or a cessation of Affiliation on the rights and benefits under the applicable Award Agreement, and in so doing may make distinctions based upon the cause of termination of employment or cessation of Affiliation (e.g., retirement, early retirement, cause, Total Disability, or death). The Committee shall provide each Participant with a copy of the Plan upon the grant of an initial Award or at any other time requested by a Participant.

1.9 Rights of Participants

The determination of the Board or the Committee to grant an Award shall not in any way constitute or be deemed to constitute an obligation of the Bank, or a right of the Participant who is the proposed subject of the Award, and shall not constitute or be deemed to constitute the grant of an Award hereunder unless and until both the Bank and the Participant have executed and delivered to the other an Award Agreement evidencing the grant of the Award, together with such other instrument or instruments as may be required by the Committee pursuant to this Plan.

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1.10 Award Period

Each Award and all rights and obligations thereunder shall expire on such date as the Committee may determine, but not later than ten (10) years from the Award Date, and shall be subject to earlier termination as provided elsewhere in this Plan.

1.11 No Rights as a Stockholder

No Participant shall have, with respect to the shares of Common Stock underlying a grant of an Award, rights as a stockholder of the Bank, including but not limited to the right to vote the shares or receive cash dividends on the shares, until the issuance of a stock certificate to such person for such shares. Except as otherwise provided in Section 1.7, no adjustment shall be made for dividends, distributions or other rights (whether ordinary or extraordinary, and whether in cash, securities or other property) for which the record date is prior to the date such stock certificate is issued.

1.12 Compliance with Law

The issuance of the Common Stock pursuant to an Award Agreement shall be subject to, and shall comply with, any applicable requirements of any federal and state securities laws, rules, and regulations (including, without limitation, the provisions of the Securities Act of 1933, the Exchange Act, and the respective rules and regulations promulgated thereunder) and any other law or regulation applicable thereto. No shares of Common Stock shall be issued pursuant to any Award Agreement and a Participant shall have no right or claim to such shares, unless and until: (i) payment in full as provided hereinabove has been received by the Bank if required to be paid by the applicable Award Agreement; (ii) in the opinion of the counsel for the Bank, all applicable requirements of law and of regulatory bodies having jurisdiction over such issuance and delivery have been fully complied with; and (iii) if required by federal or state law or regulation, the Participant shall have paid to the Bank the amount, if any, required to be withheld on the amount deemed to be compensation to the Participant as a result of the exercise of his or her rights to receive shares of Common Stock under an Award Agreement, or made other arrangements satisfactory to the Bank, in its sole discretion, to satisfy applicable income tax withholding requirements.

ARTICLE II

AWARDS OF RESTRICTED SHARES UNDER THE PLAN

2.1. Terms and Conditions

Awards of Restricted Shares shall be subject to the terms and conditions set forth in this Article II and any additional terms and conditions, not inconsistent with the express terms and provisions of the Plan, as the Committee shall set forth in the relevant Restricted Shares Award Agreement, including Performance Criteria, if any. Subject to the terms of the Plan, the Committee shall determine the number of Restricted Shares to be granted to a Participant and the Board may provide or impose different terms and conditions on any particular Award of Restricted Shares made to any Participant.

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2.2. Restricted Shares Award Agreement

Each Participant receiving an Award of Restricted Shares under the Plan shall enter into a Restricted Shares Award Agreement in substantially the form of Exhibit “A” attached hereto. Each such Participant shall agree to the restrictions, terms, criteria, and conditions of the Award set forth therein and in the Plan.

2.3. Restricted Share Grants

A grant of Restricted Shares is an Award of shares of Common Stock granted to a Participant, subject to such restrictions, terms, and conditions as the Committee deems appropriate, including, without limitation:

(a) restrictions on the sale, assignment, transfer, hypothecation or other disposition of such shares of Common Stock; and

(b) the requirement that such shares of Common Stock be forfeited upon termination of employment on cessation of Affiliation for specified reasons within a specified period of time or for other reasons including, without limitation, the failure to achieve designated Performance Criteria.

2.4. Awards Subject To Performance Criteria

Awards of Restricted Shares under the Plan may be granted as Awards that satisfy the requirements for “performance-based compensation” within the meaning of Code Section 162(m) (“Performance-Based Awards”), the grant, vesting, or payment of which depends on the degree of achievement of the Performance Criteria. An Award that is intended to satisfy the requirements of this Section 2.4 shall be designated as a Performance-Based Award at the time of grant.

The specific Performance Criteria relative to each Performance-Based Award must be established by the Committee in advance of the deadlines applicable under Code Section 162(m) and while the performance relating to the Performance Criteria remains substantially uncertain.

Performance Criteria may include, but are not limited to, Bank results for net income, return on average assets, return on average equity, efficiency ratio, and various measures of credit quality such as the ratio of non-performing assets to total assets.

Before any Performance-Based Award is paid, the Board or the Committee must certify in writing (by resolution or otherwise) that the applicable Performance Criteria and any other material terms of the Performance-Based Award were satisfied; provided, however, that a Performance-Based Award may be paid without regard to the satisfaction of the applicable Performance Criteria upon the occurrence of a Terminating Event as provided in Section 2.6.

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2.5. Time-Based Awards

Time-Based Awards of Restricted Shares under the Plan may be granted as Awards that vest with the passage of time.

The specific Vesting Dates relative to each Time-Based Award must be established by the Committee at the time of the grant of a Time-Based Award.

2.6. Acceleration of Vesting Upon Occurrence of a Terminating Event

Anything in the Plan or in a Restricted Shares Award Agreement to the contrary notwithstanding, if a Terminating Event occurs, all restrictions, terms, criteria, and conditions applicable to all Restricted Shares then outstanding shall be deemed lapsed and satisfied, as applicable, and each Participant shall become 100% vested with respect to all Awards of Restricted Shares granted to such Participant under this Plan as of the date of the Terminating Event; provided, however, that no Participant shall become vested as to any Awards granted to such Participant where such vesting violates any applicable law, rule and/or regulation including, without limitation, EESA and the EESA Regulations. The immediately preceding sentence shall apply to only those Participants who are employed by or are serving as directors of the Bank and/or one of its Subsidiaries as of the date of the Terminating Event.

2.7. Restriction Period

In accordance with Sections 2.1 through 2.6 of the Plan and unless otherwise determined by the Committee (in its sole discretion) at any time and from time to time, Restricted Shares shall only become unrestricted and vested in the Participant in accordance with such vesting schedule and other criteria relating to such Restricted Shares, if any, as the Committee may establish in the relevant Restricted Shares Award Agreement, including but not limited to any criteria required to be imposed upon the grant of Restricted Shares to the Most-Highly Compensated Employee under EESA during the TARP Period by reason of the Bank’s receipt of financial assistance under TARP. During the Restriction Period, such Restricted Shares shall be and remain unvested and a Participant may not sell, assign, transfer, pledge, encumber, or otherwise dispose of or hypothecate such Restricted Shares. Upon satisfaction of the vesting schedule and any other applicable restrictions, terms, criteria, and conditions, the Participant shall be entitled to receive payment of the Restricted Shares or a portion thereof, as the case may be, as provided in Section 2.9 of the Plan.

2.8. Restricted Shares

The Award of Restricted Shares shall be evidenced by a duly executed Restricted Share Award Agreement only and no stock certificate evidencing Restricted Shares shall be issued.

2.9. Issuance of Share Certificates

After the satisfaction and/or lapse of the restrictions, terms, criteria, and conditions established by the Committee in respect of an Award of Restricted Shares, a certificate for the number of shares of Common Stock which are no longer subject to such restrictions, terms, criteria, and conditions shall, as soon as practicable thereafter, be issued by the Bank and delivered to the Participant.

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2.10. Deferred Payments

The Committee may authorize for the benefit of any Participant, except Consultants, the deferral of any payment of cash or shares of Common Stock that may become due or of cash otherwise payable under this Plan, and provide for accreted benefits thereon based upon such deferment, at the election or at the request of such Participant, subject to the other terms of this Plan. Such deferral shall be subject to such further conditions, restrictions, or requirements as the Committee may impose, subject to any then vested rights of Participants. Any such deferral of payment shall comply in all respects with the requirements of Code Section 409A, including with respect to the timing of election and timing of distribution, so as to avoid the imposition of any tax in addition to ordinary income tax or capital gains tax, as applicable.

2.11. Forfeiture of Unvested Shares

Unless the Board or the Committee otherwise expressly provides, Restricted Shares that are subject to restrictions at the time of termination of employment or cessation of Affiliation or are subject to other conditions to vest that have not been satisfied by the time specified in the applicable Restricted Shares Award Agreement shall not vest and shall be forfeited.

ARTICLE III

AWARDS OF STOCK OPTIONS UNDER THE PLAN

3.1. Terms and Conditions

Awards of Stock Options shall be subject to the terms and conditions set forth in this Article III and any additional terms and conditions, not inconsistent with the express terms and provisions of the Plan, as the Committee shall set forth in the relevant Stock Option Agreement. Subject to the terms of the Plan, the Committee shall determine the number of Option Shares issuable upon the exercise of Stock Options to be granted to a Participant and the Board may provide or impose different terms and conditions on any particular Stock Option granted to any Participant.

3.2. Stock Option Agreement

Each Stock Option granted under the Plan shall be evidenced by a written Stock Option Agreement in substantially the form of Exhibit “B” attached hereto, executed by the Bank and the Participant, and shall contain each of the provisions and agreements herein specifically required to be contained therein, and such other terms and conditions as are deemed desirable by the Committee and are not inconsistent with this Plan.

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3.3. Grant of Stock Options

Subject to the express provisions of the Plan, the Committee, in its sole and absolute discretion, may grant Stock Options for a number of shares of Common Stock, at the price(s) and time(s), and on the terms and conditions as it deems advisable and specifies in the applicable Stock Option Agreements.

The terms upon which and the times at which, or the periods within which, the Option Shares subject to such Stock Options may become acquired or such Stock Options may be acquired and exercised shall be as set forth in the Plan and the related Stock Option Agreements.

Subject to the limitations and restrictions set forth in the Plan, a Participant who has been granted a Stock Option may, if otherwise eligible, be granted additional Stock Options if the Committee shall so determine. The Committee shall designate in each Stock Option Agreement evidencing the grant of a Stock Option whether the Stock Option is an Incentive Stock Option or a Non-Qualified Stock Option.

3.4. Shareholder-Employees

A Stock Option granted hereunder to a Participant who is also an officer or Key Employee of the Bank or any Subsidiary and who owns, directly or indirectly, at the Award Date of the Stock Option, more than ten percent (10%) of the total combined voting power of all classes of capital stock of the Bank or a Subsidiary shall not qualify as an Incentive Stock Option unless: (i) the purchase price of the Option Shares subject to said Stock Option is at least one hundred ten percent (110%) of the Fair Market Value of the Option Shares, determined as of the date said Stock Option is granted; and (ii) the Stock Option by its terms is not exercisable after five (5) years from the date that it is granted. The attribution rules of Section 424(d) of the Code shall apply in the determination of indirect ownership of stock.

3.5. Maximum Value of Stock Options

No grant of Incentive Stock Options hereunder may be made when the aggregate Fair Market Value of Option Shares with respect to which Incentive Stock Options (pursuant to this Plan or any other Incentive Stock Option Plan of the Bank or any Subsidiary) are exercisable for the first time by the Participant during any calendar year exceeds One Hundred Thousand Dollars ($100,000).

3.6. Substituted Stock Options

If all of the outstanding shares of common stock of another corporation are changed into or exchanged solely for the Common Stock in a transaction to which Section 424(a) of the Code applies, then, subject to the approval of the Committee, Stock Options under the Plan may be substituted (“Substituted Options”) in exchange for valid, unexercised and unexpired stock options of such other corporation. Substituted Options shall qualify as Incentive Stock Options under the Plan, provided that (and to the extent) the stock options exchanged for the Substituted Options were Incentive Stock Options within the meaning of Section 422 of the Code.

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3.7. Non-Qualified Stock Options

Stock Options and Substituted Options granted by the Committee shall be deemed Non-Qualified Stock Options under this Plan if they: (i) are designated at the time of grant as Incentive Stock Options but do not so qualify under the provisions of Section 422 of the Code or any regulations or rulings issued by the Internal Revenue Service for any reason; (ii) are not granted in accordance with the provisions of Section 3.4; (iii) are in excess of the Fair Market Value limitations set forth in Section 3.5; (iv) are granted to a Participant who is not an officer or Key Employee of the Bank or any Subsidiary; or (v) are designated at the time of grant as Non-Qualified Stock Options. Non-Qualified Stock Options granted or substituted hereunder shall be so designated in the Stock Option Agreement.

3.8. Stock Option Exercise Price

(a) Minimum Price. The exercise price of any Option Shares shall be determined by the Committee, in its sole and absolute discretion, upon the grant of a Stock Option. Except as provided elsewhere herein, said exercise price shall not be less than one hundred percent (100%) of the Fair Market Value of the Common Stock on the Award Date.

(b) Substituted Options. The exercise price of the Option Shares subject to each Substituted Option may be fixed at a price less than one hundred percent (100%) of the Fair Market Value of the Common Stock at the time such Substituted Option is granted if said exercise price has been computed to be not less than the exercise price set forth in the stock option of the other corporation for which it was exchanged immediately before substitution, with appropriate adjustment to reflect the exchange ratio of the shares of stock of the other corporation into the shares of the Common Stock.

3.9. Exercise of Stock Options

(a) Exercise. Except as otherwise provided elsewhere herein, each Stock Option shall be exercisable in such increments, which need not be equal, and upon such contingencies as the Committee shall determine at the time of grant of the Stock Option; provided, however, that if a Participant shall not in any given period exercise any part of a Stock Option which has become exercisable during that period, the Participant’s right to exercise such part of the Stock Option shall continue until expiration of the Stock Option or any part thereof as may be provided in the related Stock Option Agreement. No Stock Option or part thereof shall be exercisable except with respect to whole shares of Common Stock, and fractional share interests shall be disregarded except that they may be accumulated.

(b) Prior Outstanding Incentive-Stock Options. Incentive Stock Options granted (or substituted) to a Participant under the Plan may be exercisable while such Participant has outstanding and unexercised any Incentive Stock Option previously granted (or substituted) to him pursuant to this Plan or any other Incentive Stock Option Plan of the Bank or any Subsidiary. An Incentive Stock Option shall be treated as outstanding until it is exercised in full or expires by reason of lapse of time.

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(c) Notice and Payment. Stock Options granted hereunder shall be exercised by written notice substantially in the form of Exhibit “1” to Exhibit “B” delivered to the Bank specifying the number of Option Shares with respect to which the Stock Option is being exercised, together with concurrent payment in full of the exercise price as hereinafter provided. If the Stock Option is being exercised by any person or persons other than the Participant, said notice shall be accompanied by proof, satisfactory to the counsel for the Bank, of the right of such person or persons to exercise the Stock Option. The Bank’s receipt of a notice of exercise without concurrent receipt of the full amount of the exercise price shall not be deemed an exercise of a Stock Option by a Participant, and the Bank shall have no obligation to a Participant for any Option Shares unless and until full payment of the exercise price is received by the Bank and all of the terms and provisions of the Plan and the related Stock Option Agreement have been fully complied with.

(d) Payment of Exercise Price. The exercise price of any Option Shares purchased upon the proper exercise of a Stock Option shall be paid in full at the time of each exercise of a Stock Option in cash (or bank, cashier’s or certified check) and/or, with the prior written approval of the Committee at or before the time of exercise, in Common Stock of the Bank which, when added to the cash payment, if any, which has an aggregate Fair Market Value equal to the full amount of the exercise price of the Stock Option, or part thereof, then being exercised. Payment by a Participant as provided herein shall be made in full concurrently with the Participant’s notification to the Bank of his intention to exercise all or part of a Stock Option. If all or any part of a payment is made in shares of Common Stock as heretofore provided, such payment shall be deemed to have been made only upon receipt by the Bank of all required share certificates, and all stock powers and all other required transfer documents necessary to transfer the shares of Common Stock to the Bank.

(e) Minimum Exercise. Not less than ten (10) Option Shares may be purchased at any one time upon exercise of a Stock Option unless the number of shares purchased is the total number which remains to be purchased under the Stock Option.

(f) Acceleration Upon Occurrence of Terminating Event. Notwithstanding any provision in any Stock Option Agreement pertaining to the time of exercise of a Stock Option, or part thereof, upon adoption by the requisite holders of the outstanding shares of Common Stock of any plan to consummate any transaction which would, upon consummation, result in a Terminating Event, all Stock Options previously granted shall become immediately exercisable, whether or not vested under the Plan or Stock Option Agreement, as to all unexercised Option Shares for such period of time as may be determined by the Stock Option Committee, but in any event not less than thirty (30) days, on the condition that such transaction is consummated. If such transaction is not consummated, Stock Options granted pursuant to the Plan shall be exercisable in accordance with the terms of their respective Stock Option Agreements.

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3.10. Cancellation and Termination of Stock Options

The Committee may, at any time and in its sole discretion, determine that any outstanding Stock Options granted under the Plan, whether or not exercisable, will be canceled and terminated and that in connection with such cancellation and termination the holder of such Stock Options may receive for each share of Common Stock subject to such Stock Option Award a cash payment (or the delivery of shares of stock, other securities or a combination of cash, stock and securities equivalent to such cash payment) equal to the difference, if any, between the Fair Market Value of the Common Stock and the exercise price per share multiplied by the number of shares of Common Stock subject to such Stock Option; provided that if such product is zero or less or to the extent that the Stock Option is not then exercisable, the Stock Options will be canceled and terminated without payment therefor.

3.11. Regulatory Law Compliance; Notice of Sale

No Option Shares may be purchased upon the exercise of a Stock Option unless and until all then applicable requirements of all regulatory agencies having jurisdiction and all applicable requirements of the securities exchanges upon which securities of the Bank are listed (if any) shall have been fully complied with. The Participant shall, not more than ten (10) days after each sale or other disposition of shares of Common Stock acquired pursuant to the exercise of Stock Options, give the Bank notice in writing of such sale or other disposition.

ARTICLE IV

MISCELLANEOUS

4.1. Effective Date of the Plan

The Plan shall be deemed adopted as of December 21, 2011 and shall be effective immediately; provided, however, the Plan shall be approved by the holders of at least a majority of the Bank’s outstanding shares of Common Stock represented and voting at a meeting of shareholders prior to December 21, 2012 for Stock Options to qualify as Incentive Stock Options.

4.2. Amendment of the Plan; Modification of Awards

(a) The Board may from time to time suspend, discontinue, revise or amend the Plan in any respect whatsoever, except that no such amendment shall materially impair any rights or materially increase any obligations of the Participant under any Award theretofore made under the Plan without the consent of the Participant (or, after the Participant’s death, the person having the right to exercise or receive payment of the Award). For purposes of the Plan, any action of the Board or the Committee that alters or affects the tax treatment of any Award shall not be considered to materially impair any rights of any Participant.

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(b) Stockholder approval of any amendment shall be obtained to the extent necessary to comply with Section 422 of the Code (relating to Incentive Stock Options) or any other applicable law, regulation or stock exchange listing requirements.

(c) The Committee may amend any outstanding Award Agreement, including, without limitation, by amendment which would accelerate the time or times at which the Award becomes unrestricted or may be exercised, or waive or amend any goals, restrictions or conditions set forth in the Award Agreement. However, any such amendment (other than an amendment pursuant to paragraphs (a) or (d) of this Section 4.2 that materially impairs the rights or materially increases the obligations of a Participant under an outstanding Award shall be made only with the consent of the Participant (or, upon the Participant’s death, the person having the right to exercise the Award).

(d) Notwithstanding anything to the contrary in this Section 4.2, the Board or the Committee shall have full discretion to amend the Plan to the extent necessary to preserve fixed accounting treatment with respect to any Award and any outstanding Award Agreement shall be deemed to be so amended to the same extent, without obtaining the consent of any Participant (or, after the Participant’s death, the person having the right to exercise or receive payment of the affected Award), without regard to whether such amendment adversely affects a Participant’s rights under the Plan or such Award Agreement.

4.3. Terminating Events

This Plan shall automatically terminate and all Awards theretofore granted shall be terminated upon the occurrence of a Terminating Event.

4.4. Tax Withholding

(a) As a condition to the receipt of any shares of Common Stock pursuant to any Award or the lifting of restrictions on any Award, or in connection with any other event that gives rise to a federal or other governmental tax withholding obligation on the part of the Bank relating to an Award (including, without limitation, FICA tax), the Bank shall be entitled to require that the Participant remit to the Bank an amount sufficient in the opinion of the Bank to satisfy such withholding obligation.

(b) If the event giving rise to the withholding obligation is a transfer of shares of Common Stock, then, to the extent specified in the applicable Award Agreement and unless otherwise permitted by the Committee, the Participant may satisfy only the minimum statutory withholding obligation imposed under paragraph (a) above by electing to have the Bank withhold shares of Common Stock having a Fair Market Value equal to the amount of tax to be withheld. For this purpose, Fair Market Value shall be determined as of the date on which the amount of tax to be withheld is determined (and any fractional share amount shall be settled in cash).

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4.5. Restrictions

(a) If the Committee shall at any time determine that any consent (as hereinafter defined) is necessary or desirable as a condition of, or in connection with, the granting of any Award, the issuance or purchase of shares of Common Stock or other rights thereunder, or the taking of any other action thereunder (a “Plan Action”), then no such Plan Action shall be taken, in whole or in part, unless and until such consent shall have been effected or obtained to the full satisfaction of the Committee.

(b) The term “consent” as used herein with respect to any action referred to in paragraph (a) means: (i) any and all listings, registrations or qualifications in respect thereof upon any securities exchange or under any federal, state or local law, rule or regulation; (ii) any and all written agreements and representations by the Participant with respect to the disposition of shares, or with respect to any other matter, which the Committee shall deem necessary or desirable to comply with the terms of any such listing, registration or qualification or to obtain an exemption from the requirement that any such listing, qualification or registration be made; (iii) any and all consents, clearances and approvals in respect of a Plan Action by any governmental or other regulatory bodies; and (iv) any and all consents or authorizations required to comply with, or required to be obtained under, applicable local law or otherwise required by the Committee. Nothing herein shall require the Bank to list, register or qualify the shares of Common Stock on any securities exchange.

4.6. Nonassignability

Except to the extent otherwise provided herein and/or in the applicable Award Agreement, no Award or right granted to any person under the Plan shall be assignable or transferable other than by will or by the laws of descent and distribution, and all such Awards and rights shall be exercisable during the life of the Participant only by the Participant or the Participant’s legal representative. Notwithstanding the immediately preceding sentence, the Committee may permit a Participant to transfer any Stock Option which is not an Incentive Stock Option to one or more of the Participant’s immediate family members or to trusts established in whole or in part for the benefit of the Participant and/or one or more of such immediate family members. For purposes of the Plan, the term “immediate family” shall mean the Participant’s spouse and issue (including adopted and step children), and the phrase “immediate family members or to trusts established in whole or in part for the benefit of the Participant and/or one or more of such immediate family members” shall be further limited, if necessary, so that neither the transfer of a Nonqualified Stock Option to such immediate family member or trust, nor the ability of a Participant to make such a transfer shall have adverse consequences to the Bank or the Participant by reason of Section 162(m) of the Code.

4.7. Requirement of Notification of Election Under Section 83(b) of the Code

If a Participant, in connection with the acquisition of shares of Common Stock under the Plan, is permitted under the terms of the Award Agreement to make the election permitted under Section 83(b) of the Code (i.e., an election to include in gross income in the year of transfer the amounts specified in Section 83(b) of the Code notwithstanding the continuing transfer restrictions) and the Participant makes such an election, the Participant shall notify the Bank of such election within ten (10) days of filing notice of the election with the Internal Revenue Service, in addition to any filing and notification required pursuant to regulations issued under Section 83(b) of the Code.

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4.8. Requirement of Notification Upon Disqualifying Disposition Under Section 421(b) of the Code

If any Participant shall make any disposition of shares of Common Stock issued pursuant to the exercise of an Incentive Stock Option under the circumstances described in Section 421(b) of the Code (relating to certain disqualifying dispositions), such Participant shall notify the Bank of such disposition within ten (10) days thereof.

4.9. No Right to Employment

Nothing in the Plan or in any Award Agreement shall confer upon any Participant the right to continue in the employ of or association with the Bank or affect any right which the Bank may have to terminate such employment or association at any time (with or without cause).

4.10. Nature of Payments

Any and all grants of Awards and issuances of shares of Common Stock under the Plan shall constitute a special incentive payment to the Participant and shall not be taken into account in computing the amount of salary or compensation of the Participant for the purpose of determining any benefits under any pension, retirement, profit-sharing, bonus, life insurance or other benefit plan of the Bank or under any agreement with the Participant, unless such plan or agreement specifically provides otherwise.

4.11. Non-Uniform Determinations

The Committee’s determinations under the Plan need not be uniform and may be made by it selectively among persons who receive, or are eligible to receive, Awards (whether or not such persons are similarly situated). Without limiting the generality of the foregoing, the Committee shall be entitled, among other things, to make non-uniform and selective determinations, and to enter into non-uniform and selective Award Agreements, as to the persons to receive Awards under the Plan, and the terms and provisions of Awards under the Plan.

4.12. Other Payments or Awards

Nothing contained in the Plan shall be deemed in any way to limit or restrict the Bank from making any Award or payment to any person under any other plan, arrangement or understanding, whether now existing or hereafter in effect.

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4.13. Limitation on Obligations of the Bank

All obligations of the Bank arising under or as a result of this Plan or Awards granted hereunder shall constitute the general unsecured obligations of the Bank, and not of the Board of Directors of the Bank, any member thereof, the Committee, any member thereof, any officer of the Bank, or any other person or any Subsidiary, and none of the foregoing, except the Bank, shall be liable for any debt, obligation, cost or expense hereunder.

4.14. Limitation of Rights

The Committee, in its sole and absolute discretion, is entitled to determine who, if anyone, is eligible to participate under this Plan, and which, if any, Participant shall receive any Award under this Plan. No oral or written agreement by any person on behalf of the Bank relating to this Plan or any Award granted hereunder is authorized, and such may not bind the Bank or the Committee to grant any Award to any person. Furthermore, if the Bank’s capital falls below minimum regulatory requirements or the existence of outstanding Awards impairs the Bank’s ability to raise capital, as determined by any federal banking regulator, that federal banking regulator may direct the Bank to require Participants to exercise or forfeit some or all of their Awards.

4.15. Agreement and Representations of Participant

Unless the shares of Common Stock covered by this Plan have been registered with the Office of the Comptroller of the Currency pursuant to the registration requirements under the Securities Act of 1933, each Participant shall: (i) by and upon accepting an Award, represent and agree in writing, in the form of the letter attached as Exhibit “2” to the form of Award Agreement for himself or herself and his or her transferees by will or the laws of descent and distribution, that the Option Shares or the Restricted Shares will be acquired for investment purposes and not for resale or distribution; and (ii) by and upon the exercise of a Stock Option, or a part thereof, or upon the vesting of any Restricted Shares, furnish evidence satisfactory to counsel for the Bank, including written and signed representations in the form of the letter attached Exhibit “3” to the form of Award Agreement to the effect that the Common Stock is being acquired for investment purposes and not for resale or distribution, and that the Common Stock being acquired shall not be sold or otherwise transferred by the Participant except in compliance with the registration provisions under the Securities Act of 1933, as amended, or an applicable exemption therefrom. Furthermore, the Bank, at its sole discretion, to assure itself that any sale or distribution by the Participant complies with this Plan and any applicable federal or state securities laws, may take all reasonable steps, including placing stop transfer instructions with the Bank’s transfer agent prohibiting transfers in violation of the Plan and affixing the following legend (and/or such other legend or legends as the Committee shall require) on certificates evidencing the shares:

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THEM UNDER THE ACT OR A WRITTEN OPINION OF COUNSEL FOR THE HOLDER THEREOF, WHICH OPINION SHALL BE ACCEPTABLE TO BANK OF SOUTHERN CALIFORNIA, N.A., THAT REGISTRATION IS NOT REQUIRED.”

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At any time that a Participant contemplates the disposition of any of the shares of Common Stock (whether by sale, exchange, gift or other form of transfer), he or she shall first notify the Bank of such proposed disposition and shall thereafter cooperate with the Bank in complying with all applicable requirements of law which, in the opinion of counsel for the Bank, must be satisfied prior to the making of such disposition. Before consummating such disposition, the Participant shall provide to the Bank an opinion of counsel, at the Bank’s expense, of which both such opinion and such counsel shall be satisfactory to the Bank, that such disposition will not result in a violation of any state or federal securities laws or regulations. The Bank shall remove any legend affixed to certificates for the shares of Common Stock pursuant to this Section if and when all of the restrictions on the transfer of the shares of Common Stock, whether imposed by this Plan or federal or state law, have terminated.

4.16. Notices

All notices and demands of any kind which the Committee, any Participant, or other person may be required or desires to give under the terms of this Plan shall be in writing and shall be delivered in hand to the person or persons to whom addressed (in the case of the Committee, with the Chief Executive Officer, Cashier or Secretary of the Bank), by leaving a copy of such notice or demand at the address of such person or persons as may be reflected in the records of the Bank, or by mailing a copy thereof, properly addressed as above, by certified or registered mail, postage prepaid, with return receipt requested. Delivery by mail shall be deemed made upon receipt by the notifying party of the return receipt request acknowledging receipt of the notice or demand.

4.17. Section Headings

The section headings contained herein are for the purpose of convenience only and are not intended to define or limit the contents of the sections.

4.18. Effective Date and Term of Plan

Unless sooner terminated by the Board, the Plan, including the provisions respecting the grant of Incentive Stock Options, shall terminate the day before the tenth anniversary of the adoption of the Plan by the Board. All Awards made under the Plan prior to its termination shall remain in effect until such Awards have been satisfied or terminated in accordance with the terms and provisions of the Plan and the applicable Award Agreements.

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4.19. Governing Law

All rights and obligations under the Plan shall be construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflict of laws.

4.20. Severability; Entire Agreement

If any of the provisions of this Plan or any Award Agreement is finally held to be invalid, illegal or unenforceable (whether in whole or in part), such provision shall be deemed modified to the extent, but only to the extent, of such invalidity, illegality or unenforceability and the remaining provisions shall not be affected thereby; provided, that if any of such provisions is finally held to be invalid, illegal, or unenforceable because it exceeds the maximum scope determined to be acceptable to permit such provision to be enforceable, such provision shall be deemed to be modified to the minimum extent necessary to modify such scope in order to make such provision enforceable hereunder. The Plan and any Award Agreements contain the entire agreement of the parties with respect to the subject matter thereof and supersede all prior agreements, promises, covenants, arrangements, communications, representations and warranties between them, whether written or oral with respect to the subject matter thereof.

4.21. No Third Party Beneficiaries

Except as expressly provided therein, neither the Plan nor any Award Agreement shall confer on any person other than the Bank and the grantee of any Award any rights or remedies thereunder.

4.22. Successors and Assigns

The terms of this Plan shall be binding upon and inure to the benefit of the Bank and its successors and assigns.

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EX-10.8

Exhibit 10.8

PARTICIPANTS TO WHOM INCENTIVE STOCK OPTIONS ARE GRANTED MUST MEET CERTAIN HOLDING PERIOD AND EMPLOYMENT REQUIREMENTS FOR FAVORABLE TAX TREATMENT AND THE BANK’S 2011 OMNIBUS EQUITY INCENTIVE PLAN SHALL HAVE FIRST BEEN APPROVED BY THE SHAREHOLDERS OF THE BANK BEFORE DECEMBER 21, 2012.

UNLESS OTHERWISE STATED, ALL TERMS DEFINED IN THE PLAN SHALL HAVE THE SAME MEANING HEREIN AS SET FORTH IN THE PLAN.

BANK OF SOUTHERN CALIFORNIA, N.A.

STOCK OPTION AGREEMENT

2011 OMNIBUS EQUITY INCENTIVE PLAN

☐ Incentive Stock Option

☐ Non-Qualified Stock Option for:

☐ Director

☐ Officer

☐ Key Employee

☐ Consultant

THIS STOCK OPTION AGREEMENT (this “Stock Option”), dated as of the _______ day of____________, 20____ is entered into by and between Bank of Southern California, N.A. (the “Bank”) and ________________________________ (“Participant”) pursuant to the Bank of Southern California, N.A. 2011 Omnibus Equity Incentive Plan as in effect and as amended from time to time (the “Plan”) with reference to the following:

WHEREAS, it has been determined under the Plan that it would be in the best interests of the Bank to grant to Participant a Stock Option to purchase all or any part of _______________ (____________) authorized but unissued shares of the Bank’s Common Stock at the price of _________________ Dollars ($_________) per share, such Stock Option to be for the term and upon the terms and conditions hereinafter stated;

NOW, THEREFORE, it is hereby agreed:

1. Grant of Stock Option. Pursuant to said action of the Committee and pursuant to authorizations granted by all appropriate regulatory and governmental agencies, the Bank hereby grants to Participant the option to purchase, upon and subject to the terms and conditions of the Plan, which is incorporated in full herein by this reference, all or any part of Common Stock at the price of _______________ Dollars ($_______) per share. For purposes of this Agreement and the Plan, the date of grant shall be ____________________ (the “Award Date). At the Award Date, Participant ____ does not own / ____ owns stock possessing more than 10% of the total combined voting power of all classes of capital stock of the Bank or any Subsidiary.

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The Stock Option granted hereunder ____ is / ____ is not intended to qualify as an Incentive Stock Option within the meaning of Section 422A of the Internal Revenue Code of 1986, as amended.

2. Exercisability. This Stock Option shall be exercisable as to __________ Option Shares on ____________________; as to ___________ Option Shares on ____________________; as to ___________ Option Shares on _____________________; as to ___________ Option Shares on _____________________; and as to ___________ Option Shares on _____________________. This Stock Option shall remain exercisable as to all of such Option Shares until _________, 20___ (but not later than ten (10) years from the date hereof), at which time it shall expire in its entirety, unless this Stock Option has expired or terminated earlier in accordance with the provisions hereof or of the Plan. Option Shares as to which this Stock Option become exercisable may be purchased at any time prior to expiration of this Stock Option.

3. Exercise of Stock Option. This Stock Option may be exercised by written notice substantially in the form of Exhibit “1” hereto delivered to the Bank stating the number of Option Shares with respect to which this Stock Option is being exercised, together with cash (or bank, cashier’s or certified check) and/or, if permitted at or before the time of exercise by the Committee, shares of Common Stock of the Bank which when added to the cash payment, if any, have an aggregate Fair Market Value equal to the full amount of the purchase price of such Option Shares. If the shares of Common Stock have not been registered with the Office of the Comptroller of the Currency pursuant to the registration requirements of the Securities Act of 1933, Participant must also deliver a written representation letter substantially in the form of Exhibit “3” hereto. Not less than ten (10) Option Shares may be purchased at any one time unless the number purchased is the total number which remains to be purchased under this Stock Option and in no event may the Stock Option be exercised with respect to fractional shares. Upon exercise, Participant shall make appropriate arrangements and shall be responsible for the withholding of all federal and state income taxes then due, if any.

4. Prior Outstanding Stock Options. An Incentive Stock Option held by Participant may be exercisable while the Participant has outstanding and unexercised any Incentive Stock Option previously granted to him or her by the Bank, or a bank or corporation which (at the time of grant) is a parent or Subsidiary of the Bank, or a predecessor corporation of any such entity.

5. Cessation of Affiliation. Except as provided in Paragraph 6 hereof, if, for any reason other than Participant’s Total Disability or death, Participant ceases to be employed by or Affiliated with the Bank or a Subsidiary, this Stock Option shall expire ninety (90) days thereafter or on the date specified in Paragraph 2 hereof, whichever is earlier. During such period after cessation of employment or Affiliation, this Stock Option shall be exercisable only as to those increments, if any, which had become exercisable as of the date on which the Participant ceased to be employed by or Affiliated with the Bank or Subsidiary, and any Stock Options or increments which had not become exercisable as of such date shall expire and terminate automatically on such date. The provisions of this Paragraph 5 shall not apply to an Participant whose Stock Option was granted on the basis of such Participant’s status as a Consultant.

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6. Termination for Cause. If Participant’s employment by or Affiliation with the Bank or a Subsidiary is terminated for cause, this Stock Option shall automatically expire unless reinstated by the Committee within thirty (30) days of such termination by giving written notice of such reinstatement to Participant. In the event of such reinstatement, Participant may exercise this Stock Option only to such extent, for such time, and upon such terms and conditions as if Participant had ceased to be employed by or Affiliated with the Bank or a Subsidiary upon the date of such termination for a reason other than cause, Total Disability or death. Termination for cause shall include, but shall not be limited to, termination for malfeasance or gross misfeasance in the performance of duties or conviction of illegal activity in connection therewith, or any conduct detrimental to the interests of the Bank or a Subsidiary, and, in any event, the determination of the Committee with respect thereto shall be final and conclusive.

7. Disability or Death of Participant. If Participant becomes subject to a Total Disability or dies before the expiration date of this Stock Option, including the ninety (90)-day period referred to in Paragraph 5 hereof, this Stock Option shall automatically expire and terminate one (1) year after the date of Participant’s Total Disability or death or on the expiration day specified in Paragraph 2 hereof, whichever is earlier. After Participant’s Total Disability or death but before such expiration, the person or persons to whom Participant’s rights under this Stock Option shall have passed by order of a court of competent jurisdiction or by will or the applicable laws of descent and distribution, or the executor, administrator or conservator of Participant’s estate, subject to the provisions of Paragraph 13 hereof, shall have the right to exercise this Stock Option to the extent that increments, if any, had become exercisable as of the date on which Participant died or became disabled.

8. Nontransferability. This Stock Option shall not be transferable except by will or by the laws of descent and distribution, and shall be exercisable during Participant’s lifetime only by Participant.

9. Employment. This Stock Option shall not obligate the Bank or a Subsidiary to employ Participant for any period, nor shall it interfere in any way with the right of the Bank or a Subsidiary to increase or reduce Participant’s compensation.

10. Privileges of Stock Ownership. Participant shall have no rights as a stockholder with respect to the Option Shares unless and until said Option Shares are issued to Participant as provided in the Plan. Except as provided in Section 1.7 of the Plan, no adjustment will be made for dividends or other rights in respect of which the record date is prior to the date such stock certificates are issued.

11. Entire Agreement; Amendment. This Stock Option, including the Plan, contains the entire agreement between the parties hereto with respect to the subject matter contained herein, and supersedes all prior agreements or prior understandings, whether written or oral, between the parties relating to such subject matter. The rights of Participant are subject to modification as proved in Section 4.2 of the Plan.

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12. Notification of Sale. Participant agrees that Participant, or any person acquiring Option Shares upon exercise of this Stock Option, will notify the Bank in writing not more than ten (10) days after any sale or other disposition of such Option Shares.

13. Approvals. To the extent this Stock Option is intended to qualify as an Incentive Stock Option, then this Stock Option and the issuance of Option Shares hereunder are expressly subject to the approval of the Plan and the form of this Stock Option by the holders of not less than a majority of the voting stock of the Bank. This Stock Option may not be exercised unless and until all applicable requirements of all regulatory agencies having jurisdiction with respect thereto, and of the securities exchanges upon which securities of the Bank are listed, if any, have been complied with.

14. Incorporation of Plan. All of the provisions of the Plan are incorporation herein by reference as if set forth in full in this Stock Option. In the event of any conflict between the terms of the Plan and any provision contained herein, the terms of the Plan shall be controlling and the conflicting provisions contained herein shall be disregarded.

15. Notices. All notices to the Bank provided for in this Stock Option shall be addressed to it in care of its Chief Executive Officer, Chief Financial Officer or Corporate Secretary at its main office and all notices to Participant shall be addressed to Participant’s address on file with the Bank or a Subsidiary, or to such other address as either may designate to the other in writing, all in compliance with the notice provisions set forth in Section 4.16 of the Plan.

16. Binding Agreement; Assignment. This Stock Option shall inure to the benefit of, be binding upon, and be enforceable by the Bank and its successors and assigns. Other than upon death, Total Disability, or pursuant to a domestic relations order under applicable state law, no rights or interests under this Stock Option may be assigned, transferred, sold, exchanged, encumbered, pledged, or otherwise hypothecated or disposed of by Participant or any beneficiary(ies) of Participant.

17. Compliance with Laws. The issuance of the Option Shares pursuant to this Stock Option shall be subject to, and shall comply with, any applicable requirements of any federal and state securities laws, rules, and regulations (including, without limitation, the provisions of the Securities Act of 1933, the Exchange Act, and the respective rules and regulations promulgated thereunder) and any other law or regulation applicable thereto. The Bank shall not be obligated to issue any of the Option Shares pursuant to this Stock Option if such issuance would violate any such requirements. If the shares of Common Stock have not been registered with the Office of the Comptroller of the Currency pursuant to the registration requirements of the Securities Act of 1933 at the time this Stock Option is granted, Participant must also deliver a written representation letter substantially in the form of Exhibit “2” hereto at the time this Stock Option is executed.

18. Further Assurances. Each party hereto shall do and perform (or shall cause to be done and performed) all such further acts and shall execute and deliver all such other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Stock Option and the Plan and the consummation of the transactions contemplated hereunder.

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19. Headings. The titles and headings of the various sections of this Stock Option have been inserted for convenience of reference only and shall not be deemed to be a part of this Award.

20. Severability. The invalidity or unenforceability of any provisions of this Stock Option in any jurisdiction shall not affect the validity, legality, or enforceability of the remainder of this Stock Option in such jurisdiction or the validity, legality, or enforceability of any provision of this Stock Option in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

IN WITNESS WHEREOF, the Bank has caused this Stock Option to be executed by its duly authorized officer, and the Participant has hereunto set his hand, all as of the Award Date specified above.

BANK OF SOUTHERN CALIFORNIA, N.A.	PARTICIPANT
Name:	Name:
Title:

ACKNOWLEDGMENT:

I hereby acknowledge receipt of a copy of this Stock Option as well as a copy of the Bank of Southern California, N.A. 2011 Omnibus Equity Incentive Plan.

PARTICIPANT

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EXHIBIT “1”

NOTICE OF EXERCISE OF STOCK OPTION

Bank of Southern California, N.A.

12265 El Camino Real, Suite 100

San Diego, CA 92130

Attention: President

Gentlemen:

Pursuant to a Stock Option Agreement dated __________, 20___, Bank of Southern California, N.A. granted to me an option covering __________ shares of its Common Stock at a price of ___________ per share. Taking into account all appropriate adjustments for stock splits and dividends and the like, as well as for option shares already exercised, if any, that Stock Option Agreement presently covers ________ shares at approximately $__________ per share.

By executing this Notice, I hereby exercise the option as to ___________ shares (the “Shares”), for an aggregate purchase price of $__________, which Shares are currently vested and exercisable pursuant to the terms of the Stock Option Agreement. The exercise of the stock options effected hereby is subject to and pursuant to the terms of the Bank of Southern California, N.A. 2011 Omnibus Equity Incentive Plan and the Stock Option Agreement by and between me and Bank of Southern California, N.A.

In accordance with the terms of the 2011 Omnibus Equity Incentive Plan and my Stock Option Agreement, I hereby tender payment for, and the amount to be withheld for taxes upon, the purchase of the Shares as follows:

1.	Purchase Price Paid: $___________
	Form(s) of Payment:	☐	cash;
		☐	bank, cashier’s or certified
		☐	check;
		☐	funds transfer from account ____________; or
		☐	______ shares of the Bank’s common stock (requires special approvals)
2.	Withholding taxes:	☐	submitted herewith is $_______; or
		☐	I have instructed Bank of Southern California, N.A. not to deposit with the Internal Revenue Service and the California Franchise Tax Board any amount required to be withheld, as I will personally assume responsibility for the amounts and timing of my estimated tax withholding.

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As reported to me by ___________________, an officer of Bank of Southern California, N.A., the fair market value per share of Bank of Southern California, N.A.’s common stock as of this date is $_______________.

Please register the Shares in the following manner:

_____________________________________

Print or Type Name

Please mail certificate to the following address:

_____________________________________

_____________________________________

_____________________________________

	Signature
Dated:
	Print or Type Name

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EXHIBIT “2”

___________, _____

Bank of Southern California, N.A.

12265 El Camino Real, Suite 100

San Diego, CA 92130

Attention: President

Dear ______________:

On this _____ day of ___________________, 20___, the undersigned has received, pursuant to the Bank of Southern California, N.A. 2011 Omnibus Equity Incentive Plan (the “Plan”) and the Stock Option Agreement (the “Agreement”) by and between Bank of Southern California, N.A. (the “Bank”) and the undersigned dated ___________________, 20___, an option to purchase ___________ shares of the Bank’s common stock (the “Stock”).

In consideration of the grant of such option by the Bank:

1. I hereby represent and warrant to you that the Stock to be acquired pursuant to the option will be acquired by me in good faith and for my own personal account, and not with a view to distributing the Stock to others or otherwise reselling the Stock in violation of the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder.

2. I hereby acknowledge and agree that: (a) the Stock to be acquired by me pursuant to the Plan has not been registered and that there is no obligation on the part of the Bank to register such Stock under the Securities Act of 1933, as amended, and the rules and regulations thereunder; and (b) the Stock to be acquired by me will not be freely tradeable unless the Stock is either registered under the Securities Act of 1933, as amended, or the holder presents a legal opinion acceptable to the Bank that the transfer will not violate the federal securities laws.

3. I understand that the Bank is relying upon the truth and accuracy of the representations and agreements contained herein in determining to grant such option to me and upon subsequently issuing any Stock pursuant to the Plan and the Agreement without the Bank first registering the same under the Securities Act of 1933, as amended.

4. I understand that the certificate evidencing the Stock to be issued pursuant to the Plan will contain a legend upon the face thereof to the effect that the Stock is not registered under the Securities Act of 1933 and that stop transfer orders will be placed against the shares with the Bank’s transfer agent.

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5. In further consideration for the grant of an option to purchase Stock of the Bank the undersigned hereby agrees to indemnify the Bank and hold the Bank harmless against all liability, cost, or expenses (including reasonable attorney’s fees) arising out of or as a result of any distribution or resale of shares of the Stock by the undersigned in violation of the securities laws. The agreements contained herein shall inure to the benefit of and be binding upon the respective legal representatives, successors and assigns of the undersigned and the Bank.

Very truly yours,

(Signature)

(Type or Print Your Name)

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EXHIBIT “3”

___________, _____

Bank of Southern California, N.A.

12265 El Camino Real, Suite 100

San Diego, CA 92130

Attention: President

Dear ______________:

On this _____ day of __________________, 20___, the undersigned has acquired, pursuant to the Bank of Southern California, N.A., 2011 Omnibus Equity Incentive Plan (the “Plan”) and the Stock Option Agreement (the “Agreement”) by and between Bank of Southern California, N.A. (the “Bank”) and the undersigned dated __________________, 20___, _____________ shares of the Bank’s common stock (the “Stock”). In consideration of the issuance by the Bank to the undersigned of said shares of the Stock:

1. I hereby represent and warrant to you that the Stock is being acquired by me in good faith for my own personal account, and not with a view to distributing the Stock to others or otherwise reselling the Stock in violation of the Securities Act of 1933, as amended, or the rules and regulations promulgated thereunder.

2. I hereby acknowledge and agree that: (a) the Stock being acquired by me pursuant to the Plan has not been registered and that there is no obligation on the part of the Bank to register such Stock under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder; and (b) the Stock being acquired by me is not freely tradeable and must be held by me for investment purposes unless the Stock is either registered under the Securities Act of 1933 or transferred pursuant to an exemption from such registration, as accorded by the Securities Act of 1933 and under the rules and regulations promulgated thereunder. I further represent and acknowledge that I have been informed by legal counsel in connection with said Plan of the restrictions on my ability to transfer the Stock and that I understand the scope and effect of those restrictions.

3. I understand that the effects of the above representations are the following: (i) that the undersigned does not presently intend to sell or otherwise dispose of all or any part of the shares of the Stock to any person or entity except in compliance with the terms described above, in the Plan and in the Agreement; and (ii) that the Bank is relying upon the truth and accuracy of the representations and agreements contained herein in issuing said shares of the Stock to me without first registering the same under the Securities Act of 1933, as amended.

4. I hereby agree that the certificate evidencing the Stock may contain the following legend stamped upon the face thereof to the effect that the Stock is not registered under the Securities Act of 1933, as amended, and that the Stock has been acquired pursuant to the representations and restrictions in this letter, the Plan and in the Agreement:

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“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT TO THEM UNDER THE ACT OR A WRITTEN OPINION OF COUNSEL FOR THE HOLDER HEREOF, WHICH OPINION SHALL BE ACCEPTABLE TO BANK OF SOUTHERN CALIFORNIA, N.A., THAT REGISTRATION IS NOT REQUIRED.”

5. I hereby agree and understand that the Bank will place a stop transfer notice with its stock transfer agent to ensure that the restrictions on transfer described herein will be observed.

6. In further consideration of the issuance of the Stock, the undersigned does hereby agree to indemnify the Bank and hold the Bank harmless against all liability, costs, or expenses (including reasonable attorney’s fees) arising out of or as a result of any distribution or resale by the undersigned or any of the Stock. The Agreements contained herein shall inure to the benefit of and be binding upon the respective legal representatives, successors and assigns of the undersigned and the Bank.

Very truly yours,

(Signature)

(Type or Print Your Name)

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EX-10.9

Exhibit 10.9

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement (this “Agreement”) is made on this 18th day of January, 2023 (the “Effective Date”), by and among Southern California Bancorp, a California corporation (“Bancorp”), Bank of Southern California, N.A., a national banking association (the “Bank”, and together with Bancorp, the “Company”), and David I. Rainer (the “Executive”), with reference to the following:

RECITALS

WHEREAS, Executive is currently employed by the Company pursuant to that certain Employment Agreement dated November 5, 2020 (the “Prior Agreement”); and

WHEREAS, the Company desires to continue to employ Executive, and Executive desires to continue to be employed by the Company, upon the terms and subject to the conditions set forth in this Agreement, which amends and restates the Prior Agreement in its entirety.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

AGREEMENT

A. Term of Employment

The Company hereby agrees to employ Executive and Executive hereby accepts employment with the Company for the period commencing with the Effective Date and terminating on December 31, 2025 (the “Employment Term”); subject, however, to prior termination of this Agreement and Executive’s employment as provided herein. Unless this Agreement is terminated earlier, commencing on January 1, 2026, and on each anniversary of January 1, 2026 (each January 1st on or after January 1, 2026, the “Renewal Date”), the Employment Term shall be extended for one (1) additional year (a “Renewal Term”), unless either party notifies the other party at least ninety (90) days prior to the applicable Renewal Date that the Employment Term shall not be so extended; provided, however, that in no event shall the Employment Term be extended beyond December 31, 2028, except by written agreement of the parties. Where used herein, “Employment Term” shall refer to the entire period of employment of Executive by the Company hereunder, whether for the period provided above, or whether terminated earlier as hereinafter provided.

B. Duties of Executive

1. Duties. Subject to the terms and conditions of this Agreement, during the Employment Term, Executive shall serve as the Executive Chairman of the Board of Directors and Chief Executive Officer (“CEO”) of Bancorp and of the Bank, and shall report directly and exclusively to the Board. References herein to the “Board” are the boards of directors of both the Bancorp and the Bank, as applicable. As Executive Chairman and CEO, Executive shall exercise such authority, perform such executive duties and functions, and discharge such responsibilities as are reasonably associated with such position, subject to the powers by law vested in the Board and shareholders of Bancorp. Executive shall be responsible for providing strategic and financial leadership for the Company and shall be responsible for the management of the business of the Company’s day-to-day operations. The duties of Executive may be changed from time to time by the Board without resulting in a rescission of this Agreement; provided, however, that any material change in the duties of Executive shall require the consent of Executive. Notwithstanding any such change from the duties originally assigned and specified above, or hereafter assigned, the employment of Executive shall be construed as continuing under this Agreement as modified, subject to the terms of this Agreement.

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2. Faithful Performance. During the Term, Executive shall perform exclusively the services herein contemplated to be performed by Executive faithfully, diligently and to the best of Executive’s ability, consistent with the highest and best standards of the banking industry and in compliance with all applicable laws and Bancorp’s Articles of Incorporation and Bylaws and the Bank’s Articles of Association and Bylaws, as applicable.

3. Code of Ethics. Executive shall conduct himself at all times with due regard to the Company’s Principles of Business Conduct and Ethics Policy (receipt of a copy of which Executive hereby acknowledges) (“Code of Ethics”), and other written employment policies of the Company, as amended by them from time to time.

4. Conflicts of Interests. Executive shall devote substantially all of Executive’s full business time, ability and attention to the business of the Company during the Employment Term. Notwithstanding the foregoing, however, and subject to the Code of Ethics, Executive may pursue other appropriate civic, charitable or religious activities so long as such activities do not interfere with Executive’s performance of his duties hereunder. In addition, subject to the Code of Ethics, Executive shall be permitted to make passive investments in other business ventures provided such investments are not in businesses that compete with the Company and which are fully disclosed to the Board prior to the time of such investment (other than investments representing less than five percent (5.0%) of the securities of publicly-traded companies. Executive shall also be permitted to serve on the board of directors (but not as an officer) of any non-profit entity, subject to prior full disclosure to and approval by the Board. Executive may not serve on the board of directors (or as an officer) of any for-profit entity without the express prior approval of the Board, as determined in its sole discretion.

5. Board Appointment. At any meeting of shareholders of Bancorp or the sole shareholder of the Bank during the Employment Term at which Executive is subject to election as a member of the Board, the Board shall, to the extent consistent with its fiduciary duties, nominate and recommend for election Executive as a director and shall use its reasonable best efforts to cause Executive to be elected to serve as a director. A failure to nominate, appoint or elect Executive as a member of and as the Executive Chairman of the Board, at any time during the Employment Term under this Agreement, shall constitute a termination without cause under Paragraph F.1. Executive shall fulfill all duties required of a member of the respective Board and any committees without any additional compensation during the Employment Term of this Agreement, with compensation for board and committee service for any remaining periods at the end of the Employment Term established by the Board in the usual course.

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C. Compensation

1. Base Salary. For Executive’s services hereunder, during the Employment Term the Bank shall pay or cause to be paid as base salary to Executive the amount of Fifty Thousand Eight Hundred Thirty-Three Dollars and Thirty-Three Cents ($50,833.33) per month, prorated for any partial months of service. Said base salary shall be payable in conformity with the Bank’s normal payroll periods. The Board from time to time may review Executive’s base salary, at its discretion, and Executive shall receive such base salary increases, if any, as the Board in its sole and absolute discretion (or as may be recommended by the Compensation, Nominating, and Governance Committee of the Board (“CNG Committee”), shall determine. Said base salary shall in no event be decreased (unless agreed to by Executive) from the level set forth above or from its then-existing level during the Employment Term.

2. Discretionary Bonus.

(a) During the Employment Term, Executive may receive such discretionary bonuses, if any, as the Bank’s Board of Directors or the CNG Committee, in its sole and absolute discretion, shall determine, which discretionary bonus may include Executive’s participation in any executive incentive bonus plan as may be adopted and implemented by the Board during the Employment Term. Any such discretionary bonus may be payable in cash and/or in the form of an equity grant with or without vesting conditions, in each case as determined by the Bank’s Board of Directors or the CNG Committee in its sole and absolute discretion.

(b) Subject to any restrictions which may be imposed by any regulatory banking agency with authority over Bancorp or the Bank, Executive (or his heirs) shall be entitled to receive payment of any discretionary bonus if and when approved by the Board or the CNG Committee for the fiscal year in which Executive’s employment is terminated, if terminated pursuant to: (i) Paragraph F.1 by the Company without “Cause” or by Executive for “Good Reason,” as defined is Subparagraph F.5(f); (ii) Paragraph F.3 upon death or disability of Executive; or (iii) Paragraph F.5 upon a “CIC Termination,” as defined in Subparagraph F.5(c), in which case Executive (or his heirs) shall be entitled to receive such discretionary bonus that would be due and payable for such year if the date of determination of such bonus was deemed the date of termination of Executive’s employment and this Agreement; provided the amount of such discretionary bonus shall be prorated for the period of such year actually worked. Any such discretionary bonus shall be paid to Executive (or his heirs), in the form of a lump sum cash payment, on or before the day that is sixty (60) days following the date of Executive’s termination of employment.

3. Executive’s Reimbursement to the Bank. Executive agrees to be bound the Bancorp’s Clawback Policy dated as of October 20, 2022, as such policy may be amended and/or restated from time to time, and any other clawback or similar policy adopted by the Bancorp or the Bank.

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D. Executive Benefits

1. Vacation; Sick Leave. Executive shall be entitled to that number of vacation days per year during the Employment Term as provided for an officer of Executive’s level and shall accrue vacation, shall be required to take any minimum vacation, and shall be entitled to pay in lieu of vacation all in accordance with the Bank’s applicable policies contained in its Employee Handbook. Such vacation days may be scheduled in Executive’s discretion, subject to and taking into account applicable banking laws and regulations and business needs. Sick leave is not part of salary or wages. Executive is not entitled to be paid for unused sick leave. Executive shall be allowed to accrue unused sick leave in accordance with the Bank’s applicable policies contained in its Employee Handbook.

2. Group Medical and Life Insurance Benefits. The Bank shall provide for Executive’s participation in the Bank’s group medical and life insurance benefits, in accordance with the Bank’s Employee Benefits Policy.

3. Club Membership. The Bank shall pay for all monthly dues and reimburse Executive for all reasonable business-related expenses at the Jonathan Club and the El Caballero Country Club.

4. Automobile Allowance. During the Employment Term, the Bank shall provide Executive with a monthly allowance for automobile ownership or leasing expenses of One Thousand Five Hundred Dollars ($1,500), whether or not used for such expenses. Executive shall acquire or otherwise make available for Executive’s business and personal use an automobile suitable to Executive’s position and maintain it in good condition and repair it at Executive’s expense. Executive shall obtain and maintain an appropriate automobile insurance policy, including personal injury and property damage coverage, with an insurer(s) acceptable to the Company and with coverage in such amounts as may be acceptable to Company from time to time. Such insurance policy shall, if and when requested by the Company, but without any obligation to so request, name the Company as additional insureds, subject to the requirement that the automobile allowance described above shall be increased in an amount equal to the additional premium expense, if any, resulting from the Company being named as additional insureds. The Company may maintain such additional insurance on the automobile including, without limitation, liability for personal injury and property damage, as the Company shall from time to time reasonably require to protect itself against any loss which may arise from Executive’s use of the automobile while working for the Company.

5. Additional Benefits. Executive shall be entitled to participate in all programs, rights, and benefits for which Executive is otherwise entitled under any bonus plan, incentive plan, participation plan, deferred or extra compensation plan, pension plan, profit sharing plan, savings plan, 401(k) plan, life, medical, dental, other health care, disability, or other insurance plan or policy or other plan or benefit the Bank may provide for senior executives or for employees of the Bank generally, from time to time, in effect during the Term. For the avoidance of doubt, the rights granted or afforded to Executive under any such plans shall not be less than the most favorable rights and highest amounts granted to employees of similar or lower position with the Bank and on terms at least as favorable.

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E. Business Expenses and Reimbursement

1. Business Expenses. Executive shall be entitled to reimbursement by the Company for any ordinary and necessary business expenses incurred by Executive in the performance of Executive’s duties and in acting for the Company during the Term, which types of expenditures shall be determined by the Board of Directors of the Company, in their respective capacities, provided that:

(a) Each such expenditure is of a nature qualifying it as a proper deduction on the federal and state income tax returns of the Company as a business expense and not as deductible compensation to Executive;

(b) Executive furnishes to the Company adequate records, including receipts for any expenditures and other documentary evidence required by federal and state statutes and regulations issued by the appropriate taxing authority for the substantiation of such expenditures as deductible business expenses of the Company and not as deductible compensation to Executive; and

(c) Executive agrees to submit his expense reimbursement requests to the Chief Financial Officer for approval. Executive will be entitled to business expense reimbursement in accordance with the Company’s policies.

2. Reimbursement. Notwithstanding anything contained in Paragraph E.1 to the contrary, Bancorp or the Bank shall reimburse Executive for the fees and expenses in an amount not to exceed $5,000 in connection with the negotiation of this Agreement. Payment will be made to Executive within fifteen (15) days of Executive’s submission of applicable invoices.

F. Termination

1. Termination by the Company Without Cause or by Executive. The Company and Executive acknowledge that the Company may terminate Executive’s employment at any time without “Cause” upon thirty (30) days’ written notice of termination to Executive. Similarly, Executive may terminate his employment with the Company at any time, for any reason, upon thirty (30) days’ written notice of termination to the Company, except that termination by Executive for “Good Reason” shall be effected in accordance with Subparagraph F.5(f) below. Except as expressly set forth in this Agreement or required by applicable law, upon termination of Executive’s employment with the Company for any reason, the Company’s obligations to Executive (and/or Executive’s estate) shall terminate.

2. Termination for Cause. The Company may terminate this Agreement and Executive’s employment at any time without further obligation or liability to Executive, by action of the Board, for “Cause” provided that the following notice and opportunity to cure periods have been exhausted. It shall be a condition precedent to the Company’s right to terminate Executive’s employment for Cause that: (1) the Company first give Executive written notice stating with specificity the circumstances constituting Cause (“Breach”), and (2) if such Breach is susceptible of cure or remedy, a period of thirty (30) days from and after the giving of such written notice to cure the Breach. “Cause” is defined as one of the following below. No cure period will be required for the Cause reasons contained in subparts (a)(iii) or (a)(iv) below.

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(a) (i) the material breach of duty by Executive in the course of his employment; (ii) Executive’s willful and material violation of any applicable statutes, rules or regulations of any appropriate state or Federal banking agency, as defined in Section 3 of the Federal Deposit Insurance Act (“FDI Act”) (12 USC § 1813); (iii) Executive’s removal and/or permanent prohibition from participating in the conduct of Bancorp or the Bank’s affairs by an order issued under Section 8(e)(3) or 8(g)(1) of the FDI Act (12 U.S.C. § 1818(e)(3) or (g)(1)); (iv) Executive’s conviction of any felony or a crime involving moral turpitude or commission of a fraudulent or dishonest act, including a breach of trust or misappropriation, or if Executive has entered a plea of nolo contendere to such an act or offense; (v) Executive’s willful misfeasance or gross negligence in the performance of his material employment duties; (vi) the repeated non- prescription use of any controlled substance or the repeated use of alcohol or any other non- controlled substance that the Company reasonably determines renders the Executive unfit to serve as an employee of the Company or its Affiliates; or (vii) Executive’s engagement in an activity that could materially and adversely affect the Company’s reputation in the community, which evidences personal dishonesty, immoral behavior, or the lack of Executive’s fitness or ability to perform Executive’s duties, as determined by the Board, in good faith.

(b) For purposes of this provision, no act or failure to act on the part of Executive shall be considered “willful” unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive’s action or omission was in the best interests of the Company as determined by the Board, in the exercise of its business judgement. Any act, or failure to act, based upon direction given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. Such termination shall not prejudice any remedy that the Company may have at law, in equity, or under this Agreement. Termination pursuant to this Paragraph F.2 shall become effective after the delivery of the required written notice period and the expiration of the cure period described above, where applicable.

3. Termination upon Death or Disability.

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

(b) The Company may terminate this Agreement and Executive’s employment at any time, if Executive is determined by the Board, in good faith and consistent with applicable law, to be physically or mentally incapable of performing Executive’s material duties under this Agreement, with or without reasonable accommodation, for a period of at least one hundred twenty (120) consecutive days or one hundred eighty (180) days within any twelve (12) month period.

4. Action by Supervisory Authority. This Agreement and Executive’s employment shall terminate immediately without further liability or obligation to Executive:

(a) If the Bank is closed or taken over by the Office of the Comptroller of the Currency or other supervisory authority, including the Board of Governors of the Federal Reserve System; or

(b) If any such supervisory authority should exercise its statutory cease and desist powers to remove Executive from office.

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5. Effect of Termination.

(a) In the event of termination of this Agreement and Executive’s employment prior to the completion of the Employment Term for any of the reasons specified in Paragraphs F.1 through F.4, Executive shall be entitled to the salary and other benefits earned by Executive prior to the date of termination as provided for in this Agreement, computed pro rata up to and including that date, Executive’s discretionary bonus, if any, subject to the provisions of Subparagraph C.2(b), and accrued but unused vacation; but Executive shall be entitled to no further salary after the date of termination.

(b) In the event the Company elects to terminate this Agreement and Executive’s employment without Cause, or in the event Executive elects to terminate this Agreement for Good Reason, in each case pursuant to the provisions of Paragraph F.1, then in addition to the items in Subparagraph F.5(a), Executive shall be entitled to:

(i) severance compensation equal to twelve (12) months’ then current base salary, payable in a lump sum on the sixtieth (60th) day after the date of Executive’s termination of employment; and

(ii) for the period beginning on the date of Executive’s termination of employment and ending on the date which is twelve (12) full months following the date of Executive’s termination of employment (or, if earlier, (1) the date on which the applicable continuation period under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”) expires or (2) the date Executive becomes eligible to receive the equivalent or increased healthcare coverage from a subsequent employer) (such period, the “COBRA Coverage Period”), the Bank, at Bank’s cost, shall provide Executive and/or his covered dependents who were covered under the Bank’s health plans as of the date of Executive’s termination of employment, as applicable, with continuation coverage under the Bank’s health plans (including, if applicable, pursuant to COBRA) for Executive and/or such eligible dependents. If any of the Bank’s health benefits are self-funded as of the date of Executive’s termination of employment, or if the Bank cannot provide the foregoing benefits in a manner that is exempt from Section 409A (as defined below) or that is otherwise compliant with applicable law (including, without limitation, Section 2716 of the Public Health Service Act), instead of providing the continuation of coverage as set forth above, the Bank shall instead pay to Executive the monthly COBRA premium payable by Executive as a taxable monthly payment for the COBRA Coverage Period (or any remaining portion thereof) (calculated by reference to the premium in effect as of the date of termination). After the expiration of the COBRA Coverage Period, Executive will be entitled to self-pay COBRA continuation benefits for as long as legally available.

(c) Notwithstanding anything to the contrary contained in Subparagraph F.5(b) above, in the event of a CIC Termination (as defined below), then in addition to the items in Subparagraph F.5(a), and in lieu of any further salary and bonus payments or severance or other payments that would otherwise be due to Executive under this Agreement or otherwise for periods subsequent to the Vesting Date (as defined below), Executive shall be entitled to:

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(i) severance compensation equal to the sum of (x) thirty-six (36) months’ then current base salary, plus (y) three (3) times the average of the aggregate annual bonus, if any, paid or payable to Executive for each of the three (3) full calendar years preceding the calendar year in which Executive’s termination of employment occurs (or such fewer number of fiscal years for which Executive was eligible to receive a bonus and/or incentive award); provided, however, that if any portion of the aggregate annual bonus is received by Executive in the form of an equity grant, the amount of such bonus shall be determined using the fair market value of such equity grant as of the grant date, with such amount payable in a lump sum on the sixtieth (60th) day after the Vesting Date, provided that if such termination occurs prior to the date of consummation of Change in Control, the portion of such payments which would have been payable under Section F.5(b) if such termination was not a CIC Termination, instead be paid at the same time as it would have been paid under Section F.5(b) and the remainder shall be paid on the sixtieth (60th) day after the Vesting Date; and

(ii) (A) an amount equal to the COBRA premium payable by Executive for himself and/or his covered dependents (calculated by reference to the premium as in effect on the date of termination) for a period of six (6) months, payable in a lump sum on the sixtieth (60th) day after the date of Executive’s termination of employment; and (B) the COBRA Coverage Period shall be increased to the earlier of: (x) eighteen (18) months following the date of termination or (y) as long as legally available (but in no event shall Bancorp or the Bank be obligated to pay any insurance premiums for the COBRA or other health insurance coverage for Executive and/or his covered dependents from and after the date of termination).

For purposes of this Agreement, a “CIC Termination” means (i) the termination of Executive’s employment due to either termination by the Company without Cause or by Executive for Good Reason and (ii) Executive’s last day of employment occurs on or after the initial public announcement by the Company of an intended or anticipated Change in Control (provided that such Change in Control actually is consummated) and before the first anniversary of the Change in Control; and “Vesting Date” means the later to occur of the CIC Termination or the Change in Control.

(d) In the event Executive elects to terminate this Agreement and Executive’s employment other than for Good Reason or the Company terminates this Agreement and Executive’s employment for Cause, Executive shall not be entitled to any severance compensation, or continuation of Executive’s group medical insurance or any other benefits except as required by law. For purposes of this Agreement, “Affiliate” shall mean any partnership, firm, corporation, association, joint-stock company, unincorporated association, or other entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Company, including any member of an affiliated group of which the Company is a common parent corporation as provided in Section 1504 of the Internal Code of 1986, as amended (the “Code”).

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(e) For purposes of this Agreement, a “Change in Control” shall mean the occurrence of any of the following events with respect to Bancorp or the Bank: (i) a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); (ii) any merger, consolidation or reorganization of Bancorp or the Bank in which Bancorp or the Bank does not survive; except for purposes of this clause (ii) the following shall not constitute a change in control: a merger, consolidation or reorganization where the beneficial owners, directly or indirectly, of securities of Bancorp or the Bank, representing more than fifty percent (50.0%) of the combined voting power of Bancorp’s or the Bank’s then outstanding securities, remain as the beneficial owners, directly or indirectly, of at least fifty percent (50.0%) of the combined voting power of the surviving corporation; (iii) any sale, lease, exchange, mortgage, pledge, transfer, or other disposition (in one transaction or a series of transactions) of any assets of Bancorp or the Bank having an aggregate fair market value of fifty percent (50.0%) or more of the total value of assets of Bancorp or the Bank, reflected in the most recent month end balance sheet; (iv) an acquisition whereby any “person” (as such term is used in the Exchange Act or any individual, corporation, partnership, trust, or any other entity, except for Executive) is or becomes the beneficial owner, directly or indirectly, of securities of Bancorp or the Bank representing more than fifty percent (50.0%) of the combined voting power of the then outstanding securities; except for purposes of this clause (iv) the following acquisition shall not constitute a change in control: (1) any acquisition directly from Bancorp; (2) any acquisition by Bancorp; or (3) any acquisition by any employee benefit plan sponsored or maintained by Bancorp or the Bank; (v) if in any one year period, individuals who at the beginning of such period constitute the Board of Directors of Bancorp cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by Bancorp’s shareholders, of each new director is approved by a vote of at least three-quarters of the directors then still in office who were directors at the beginning of the period; or (vi) a majority of the members of the Board of Directors of Bancorp in office prior to the happening of any event determines in its sole discretion that as a result of such event there has been a change in control. Notwithstanding the foregoing, to the extent required by Section 409A of the Code, if a Change in Control would give rise to a payment or settlement event with respect to any payment or benefit hereunder that constitutes “nonqualified deferred compensation,” the transaction or event constituting the Change in Control must also constitute a “change in control event” (as defined in Treasury Regulation §1.409A-3(i)(5)) in order to give rise to the payment or benefit, to the extent required by Section 409A.

(f) For purposes of this Agreement, “Good Reason” shall mean that, without Executive’s consent, there occurs: (i) a loss of Executive’s title or material diminution in Executive’s authority, duties, or responsibilities; (ii) a material diminution in Executive’s base compensation (for this purpose, a reduction of five percent (5.0%) or more shall constitute a material diminution); (iii) a material diminution in the authority, duties or responsibilities of the supervisor to whom Executive is required to report (i.e., other than to the Board; (iv) a material change in the geographic location at which Executive must perform services, it being acknowledged and agreed by Executive, and the Company, that in the performance of Executive’s duties for the Company, Executive will be working out of offices located in San Diego County and Los Angeles County as well as the branch and/or loan production offices of the Company wherever located and that all such activity shall not be deemed a material change in the geographic location at which Executive must perform services; or (vi) any other action or inaction that constitutes a material breach by the Company of the terms of this Agreement. Notwithstanding the foregoing, “Good Reason” shall only exist if Executive shall have provided the Board with written notice within ninety (90) days of the initial occurrence of any of the foregoing events or conditions which specifically identifies the circumstances constituting Good Reason (provided such circumstances are capable of correction), and the Company, fails to eliminate the conditions constituting Good Reason within thirty (30) days after receipt of written notice of such event or condition from Executive. Executive’s resignation from employment with the Company must occur within thirty (30) days following the expiration of the foregoing cure period, upon Executive’s notice of resignation.

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(g) Section 280G Excess Parachute Payments.

(i) If all or any amount paid to Executive by the Bank (or any subsidiary or Affiliate thereof), whether under this Agreement or otherwise (all such payments and benefits being hereinafter referred to as the “Total Payments”), otherwise would be subject to any tax under Section 4999 of the Code, or any similar federal or state law (an “Excise Tax”), then the Total Payments shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (A) the net amount of such Total Payments, as so reduced (after subtracting the amount of federal, state and local income taxes on such reduced Total Payments) is greater than or equal to (B) the net amount of such Total Payments without such reduction (after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Executive would be subject in respect of such unreduced Total Payments). The Total Payments shall be reduced in the following order: (1) reduction of any cash severance payments otherwise payable to Executive that are exempt from Section 409A of the Code, (2) reduction of any other cash payments or benefits otherwise payable to Executive that are exempt from Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting or payment with respect to any equity award with respect to Bancorp’s common stock that is exempt from Section 409A of the Code, (3) reduction of any other payments or benefits otherwise payable to Executive on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting and payment with respect to any equity award with respect to Bancorp’s common stock that is exempt from Section 409A of the Code, and (4) reduction of any payments attributable to the acceleration of vesting or payment with respect to any equity award with respect to Bancorp’s common stock that is exempt from Section 409A of the Code. The foregoing reductions shall be made in a manner that results in the maximum economic benefit to Executive and, to the extent economically equivalent, in a pro rata manner.

(ii) For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account, (ii) no portion of the Total Payments shall be taken into account which, in the written opinion of an accounting firm or compensation consulting firm with nationally recognized standing and substantial expertise and experience on Section 280G matters (the “280G Firm”) selected by the Bank, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of the 280G Firm, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the Base Amount (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation, and the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the 280G Firm in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.

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(iii) The 280G Firm will be directed to submit its determination and detailed supporting calculations to both Executive and the Bank within fifteen (15) days after notification from either the Company on the one hand or Executive on the other hand that Executive may receive payments which may be “parachute payments.” Executive and the Company will each provide the 280G Firm access to and copies of any books, records, and documents in their possession as may be reasonably requested by the 280G Firm, and otherwise cooperate with the 280G Firm in connection with the preparation and issuance of the determinations and calculations contemplated by this letter agreement. The fees and expenses of the 280G Firm for its services in connection with the determinations and calculations contemplated by this letter agreement will be borne by the Company. Upon request of Executive, the Company will provide Executive with sufficient tax and compensation data to enable Executive or his tax advisor to independently make the calculations described in Subparagraph F.5(g)(i) above, and the Company, will reimburse Executive for reasonable fees and expenses incurred for any such verification.

(iv) If Executive provides written notice to the Company of any objection to the results of the 280G Firm’s calculations within sixty (60) days after Executive’s receipt of written notice thereof, the Company will refer that dispute for determination to tax counsel selected by the independent auditors of Bancorp or the Bank, and Bancorp or the Bank, as applicable, will pay all fees and expenses of that tax counsel.

6. Restriction on Timing of Distributions. In the event that Code Section 409A applies to any compensation with respect to Executive’s “separation from service,” as defined in Treasury Regulation Section 1.409A-1(h) (“Separation from Service”), payment of that compensation shall be delayed if Executive is a “specified employee,” as defined in Section 409A(a)(2)(B)(i), and such delayed payment is required by Section 409A. Such delay shall last six (6) months from the date of Separation from Service (or as required by Section 409A). On the day following the end of such six (6)-month period, the Bank shall make a catch-up payment to Executive equal to the total amount of such payments that would have been made during the six (6)-month period but for this Paragraph F.6.

7. Mitigation. Executive shall not be required to mitigate severance compensation due to Executive pursuant to the provisions of Subparagraph F.5(b) or (c), as applicable, by seeking employment or otherwise.

8. Resignation from Board of Directors. In the event Executive’s employment is terminated in accordance with this Agreement or Executive resigns as Chief Executive Officer of the Company or otherwise becomes unaffiliated with the Company, Executive shall, and does hereby agree to, tender his written resignation from the Board effective on the date of termination, resignation or non-affiliation.

9. Release of All Claims. As a condition for receiving any severance payments or benefits under Paragraph F.5 of this Agreement, Executive hereby agrees to execute a full and complete release of any and all claims against the Company and its officers, agents, directors, attorneys, insurers, employees and successors in interest arising from or in any way related to Executive’s employment with the Company or the termination thereof, in a form reasonably acceptable to the Bank substantially similar to Exhibit A attached hereto (the “Release Agreement”). In the event the Release Agreement does not become effective within the fifty-five (55) day period following the date of Executive’s termination of employment, Executive shall not be entitled to the aforesaid severance payments and benefits. To the extent any severance payments or benefits are deferred compensation under Section 409A of the Code, and are not otherwise exempt from the application of Section 409A of the Code, then, if the period during which Executive may consider and sign the Release Agreement spans two calendar years, the payment of severance or benefits will not be made or begin until the later calendar year.

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G. General Provisions

1. Trade Secrets.

(a) Executive agrees that, during the Term, Executive will have access to, and become acquainted with, confidential, trade secret, and proprietary information concerning the Company, which may include information on its operations and business, the identity of its customers, including knowledge of their financial condition and financial needs, as well as such customers’ methods of doing business. Executive will not use or disclose any of such trade secrets, proprietary, or confidential information during the Term or for a period of two (2) years thereafter, without the Company’s prior written consent; provided, however, that non-public information about the customers, whether characterized as consumer information or customer information, as all such terms are defined in the Interagency Guidelines Establishing Information Security Standards implementing Section 501(b) of the Gramm-Leach-Bliley Act and Section 628 of the Fair Credit Reporting Act, as amended, shall be kept confidential for an unlimited period of time. This limitation shall not apply to information, which is or becomes public, or in the public domain, without the fault of Executive, is or becomes available to Executive or his representatives on a non-confidential basis from a person other than the Company.

(b) In accordance with 18 U.S.C. § 1833, the Bank hereby notifies Executive that, notwithstanding anything to the contrary herein:

(i) Executive shall not be in breach of this Agreement, and shall not be held criminally or civilly liable under any Federal or State trade secret law (A) for the disclosure of a trade secret that is made in confidence to a Federal, State, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (B) for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

(ii) If Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Executive may disclose the trade secret to Executive’s attorney, and may use the trade secret information in the court proceeding, if Executive files any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.

2. Employee Proprietary and Confidential Information. In consideration of the Company entering into this Agreement and in accordance with its policies and procedures, Executive, as of the Effective Date, is acknowledging receipt of and is agreeing to comply with and be bound by the terms and conditions of that certain Employee Proprietary and Confidential Information and Assignment of Employee Inventions Agreement, as it may be amended, modified or revised by Bank from time to time.

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3. Return of Documents. Executive expressly agrees that all manuals, documents, files, reports, studies, instruments or other materials used and/or developed by Executive during Executive’s employment with the Company, are solely the property of the Company, as applicable, and that Executive has no right, title or interest therein. Upon termination of Executive’s employment, Executive or Executive’s representative shall promptly deliver possession of all said property to the Bank in good condition without retaining any copies thereof.

4. Notices. Any notice, request, demand or other communication required or permitted hereunder shall be in writing and shall be deemed to be properly given when personally delivered or sent by facsimile, provided that the facsimile contains a notation of the date and time of transmission, or when delivered by overnight courier, with a receipt obtained therefor, or three (3) business days after mailed by United States certified or registered mail, return receipt requested and postage prepaid, addressed to the Company at the address appearing at the beginning of this Agreement or to Executive at his most recent address in the Bank’s personnel records. Any party may change his or its address by written notice in accordance with this Paragraph G.4.

5. Benefit of Agreement. This Agreement may be assigned or transferred to and shall be binding upon and shall inure to the benefit of, any successor, subsidiary, or Affiliate the Company, and any such successor, subsidiary, or Affiliate of Bancorp or the Bank shall be deemed substituted for all purposes for “Bancorp” or “the Bank” under the terms of this Agreement. As used in this Agreement, the term “successor” shall mean any person, firm, corporation, or business entity which at any time, whether by merger, purchase, or otherwise, acquires all or substantially all the assets, stock, or business of Bancorp and/or the Bank. Executive acknowledges that Bancorp and/or the Bank has/have the right to sell, assign, or otherwise transfer any portion or substantially all or all of the capital stock, assets, or business of Bancorp or the Bank and that any such sale, assignment, or transfer shall not be deemed to be a termination of the employment of Executive. Executive shall not assign or transfer this Agreement or any rights or obligations pursuant to this Agreement, wholly or partially, without the consent of Bancorp and the Bank, other than by will or the laws of descent and distribution.

6. Governing Law and Venue. The laws of the State of California, other than those laws denominated as choice of law rules, shall govern the validity, construction, and effect of this Agreement. Any action which may be brought under this Agreement shall be brought in the Courts of the State of California in the County in which Executive then resides.

7. Captions and Paragraph Headings. Captions and paragraph headings used herein are for convenience only and are not a part of this Agreement and shall not be used in construing it.

8. Invalid Provisions. Should any provisions of this Agreement for any reason be declared invalid, void, or unenforceable by a court of competent jurisdiction, the validity and binding effect of any remaining portion shall not be affected, and the remaining portions of this Agreement shall remain in full force and effect as if this Agreement had been executed with said provision eliminated.

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9. Arbitration. Any dispute, controversy or claim arising out of or relating to this Agreement (or its validity, interpretation or enforcement), the employment relationship or the subject matter hereof shall, at the request of either party, be settled by binding arbitration by JAMS in the county in which Executive is residing at the time of the dispute, in accordance with the then existing JAMS Arbitration Rules and Procedures for Employment Disputes (the “Rules”). The Rules can be found online at www.jamsadr.org. In the event of such an arbitration proceeding, Executive on the one hand and Bancorp and the Bank on the other hand shall select a mutually acceptable neutral arbitrator from among JAMS panel of arbitrators. In the event Executive, Bancorp and the Bank cannot agree on an arbitrator, the Administrator of JAMS’ will appoint an arbitrator. None of Executive, Bancorp, the Bank or the arbitrator shall disclose the existence, content, or results of any arbitration hereunder without the prior written consent of all parties. The arbitration of such issues, including the determination of any amounts of damages suffered, shall be final and binding upon the parties to the maximum extent permitted by law. Any such judgement shall be subject to full appellate review by a court of law. The parties shall have rights to discovery as provided in Section 1283.05 of the California Code of Civil Procedure, including without limitation Section 1283.1 thereof. The arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the State of California, or federal law, or both, as applicable, and the arbitrator is without jurisdiction to apply any different substantive law. The arbitrator shall render an award and a written, reasoned opinion in support thereof. Judgment upon the award may be entered in any court having jurisdiction thereof. The parties shall each bear their own costs and attorneys’ fees incurred in conducting the arbitration and, except with respect to disputes where Executive asserts a claim under a state or federal statute prohibiting discrimination, harassment or retaliation in employment, a violation of public policy, the failure to pay wages or unless required otherwise by applicable law (collectively referred to as a “Statutory Claim”), shall split equally the fees and administrative costs charged by the arbitrator and the applicable arbitration service. In disputes where Executive asserts a Statutory Claim against Bancorp or the Bank, or where otherwise required by law, Executive shall be required to pay only the applicable arbitration service filing fee to the extent such filing fee does not exceed the fee to file a complaint in state or federal court. Bancorp and the Bank shall pay the balance of the arbitrator’s fees and administrative costs. To the extent permissible under applicable law, however, and following the arbitrator’s ruling on the matter, the arbitrator may rule that the arbitrator’s fees and costs be distributed in an alternative manner, which in the case of a Statutory Claim shall be permitted only to the extent that such fee or cost award is permitted by the underlying statute upon which the Statutory Claim is based. In any arbitration brought under this Section, and only to the extent permissible under applicable law, including the law upon which the claim is based, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and costs. The arbitrator shall apply the same standard with respect to the awarding of fees and costs, including whether such award is permitted, and against which party, as would be awarded if such claim had been asserted in state or federal court. This Paragraph G.9 is intended to be the exclusive method for resolving any and all claims by the parties against each other related to any disagreement, dispute, controversy or claim arising out of or relating to this Agreement or the interpretation of this Agreement or any arrangements relating to this Agreement or contemplated in this Agreement or the breach, termination or invalidity thereof; provided, however, that Executive shall retain the right to file administrative charges with or seek relief through any government agency of competent jurisdiction, and to participate in any government investigation, including but not limited to (a) claims for workers’ compensation, state disability insurance or unemployment insurance; (b) claims for unpaid wages or waiting time penalties brought before the California Division of Labor Standards Enforcement; provided, however, that any appeal from an award or from denial of an award of wages and/or waiting time penalties shall be arbitrated pursuant to the terms of this Paragraph G.9; and (c) claims for administrative relief from the United States Equal Employment Opportunity Commission and/or the California Department of Fair Employment and Housing (or any similar agency in any applicable jurisdiction other than California). Notwithstanding the foregoing, this Paragraph G.9 shall not limit any party’s right to obtain any provisional remedy, including, without limitation, injunctive or similar relief, from any court of competent jurisdiction as may be necessary to protect their rights and interests pending the outcome of arbitration, including without limitation injunctive relief, in any court of competent jurisdiction pursuant to California Code of Civil Procedure § 1281.8 or any similar statute of an applicable jurisdiction, including, without limitation, Bancorp’s and the Bank’s rights to enforce Executive’s obligations under this Agreement to the extent the Bancorp and the Bank is entitled to seek specific performance thereunder. Seeking any such relief shall not be deemed to be a waiver of such party’s right to compel arbitration. Each of Executive and the Bank hereby expressly waive their right to a jury trial.

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10. Entire Agreement. Except for stock option agreements and participation in other compensation, bonus, supplemental executive retirement agreement, salary continuation or severance plans and agreements or benefit arrangements which may be entered into by and between Bancorp, the Bank and Executive, employment and operating policies of Bancorp and/ the Bank and the Employee Proprietary and Confidential Information and Assignment or Employee Invention Agreement as it may be amended, modified or revised from time to time, this Agreement contains the entire agreement of the parties and supersedes any and all other agreements, either oral or in writing, between the parties hereto with respect to the employment of Executive by Bancorp and the Bank, including the Prior Agreement. Each party to this Agreement acknowledges that no 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 embodied herein, and that no other agreement, statement, or promise not contained in this Agreement, or in any stock option agreement or other compensation, bonus, supplemental executive retirement agreement, salary continuation or severance agreement or benefit arrangement, shall be valid or binding.

11. Amendments and Waivers. This Agreement may not be modified or amended by oral agreement, but only by an agreement in writing signed by Bancorp, the Bank and Executive. Any waiver of any provision of this Agreement shall be effective only if in writing and signed by the parties hereto. Any waiver of a breach of any provision hereof shall not operate as or be construed as a waiver of any subsequent breach of the same provision or any other provision hereof.

12. Interpretation. If any claim is made by any party hereto relating to any conflict, omission or ambiguity of this Agreement, no presumption or burden of proof or persuasion shall be implied by reason of the fact that this Agreement was prepared by or at the request of any particular party hereto or such party’s counsel.

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13. Executive Acknowledgment. Executive acknowledges that he has had the opportunity to consult legal counsel in regard to this Agreement, that he has read and understands this Agreement, that he is fully aware of its legal effect, and that he has entered into it freely and voluntarily and based on his own judgment and not on any representations or promises other than those contained in this Agreement.

14. Counterparts. This Agreement may be executed in one or more counterparts, any of which may be executed and transmitted by facsimile or electronic transmission or other electronic method, and each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

15. Section 409A of the Code. Notwithstanding anything contained in this Agreement to the contrary, to the maximum extent permitted by applicable law, amounts payable to Executive pursuant to this Agreement shall be made in reliance upon Treas. Reg. Section 1.409A- 1(b)(9) (Separation Pay Plans) or Treas. Reg. Section 1.409A-1(b)(4) (Short-Term Deferrals). This Agreement is intended to be written, administered, interpreted and construed in a manner such that no payment or benefits provided under the Agreement become subject to (a) the gross income inclusion set forth within Code Section 409A(a)(1)(A) or (b) the interest and additional tax set forth within Code Section 409A(a)(1)(B) (together, referred to herein as the “Section 409A Penalties”), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of Section 409A Penalties. To the extent that any amount payable to Executive pursuant to this Agreement is subject to Section 409A of the Code, and Executive or the Bank reasonably believes, at any time, that such amount payable does not comply with Section 409A of the Code, it will promptly advise the other and each party hereby agrees to negotiate reasonably and in good faith to amend the terms of this Agreement such that it so complies. For purposes of this Agreement, all references to Executive’s “termination of employment” shall mean Executive’s Separation from Service. For purposes of Section 409A of the Code (including, without limitation, for purposes of Treasury Regulation Section 1.409A- 2(b)(2)(iii)), each payment that Executive may be eligible to receive under this Agreement shall be treated as a separate and distinct payment. Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided under this Agreement during any tax year of Executive shall not affect in-kind benefits or reimbursements to be provided in any other tax year of Executive and are not subject to liquidation or exchange for another benefit. Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by Executive and, if timely submitted, reimbursement payments shall be made to Executive as soon as administratively practicable following such submission, but in no event later than the last day of Executive’s taxable year following the taxable year in which the expense was incurred. In no event shall Executive be entitled to any reimbursement payments after the last day of Executive’s taxable year following the taxable year in which the expense was incurred. This section shall only apply to in-kind benefits and reimbursements that would result in taxable compensation income to Executive.

Signature page immediately follows

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

DAVID I. RAINER	SOUTHERN CALIFORNIA BANCORP
/s/ David I. Rainer	By:	/s/ Irwin Golds
	Name:	Irwin Golds
	Title:	Lead Director
	BANK OF SOUTHERN CALIFORNIA, N.A.
	By:	/s/ Irwin Golds
	Name:	Irwin Golds
	Title:	Lead Director

S- 1

EXHIBIT A

RELEASE AGREEMENT

This RELEASE AGREEMENT (the “Agreement”), is entered into and effective by and among Southern California Bancorp, a California corporation (“Bancorp”), Bank of Southern California, N.A., a national banking association (the “Bank”) and _________________, an individual resident of the state of California (the “Executive”), with reference to the following:

RECITALS

WHEREAS, Executive, Bancorp and the Bank entered into an Employment Agreement effective as of __________________ (the “Employment Agreement”); and

WHEREAS, the Executive acknowledges that Executive will receive a [Payment or Severance Payment] as defined in the Employment Agreement under certain conditions;

NOW, THEREFORE, in consideration of these Recitals and the mutual promises, agreements, and covenants contained herein, and for good and valuable consideration, the receipt and sufficiency of which are expressly acknowledged, Executive, Bancorp and the Bank agree as follows:

AGREEMENT

1. Release and Waiver

a. In full consideration for the [Payment or Severance Payment] (as that term is defined in the Employment Agreement), Executive hereby knowingly and voluntarily, fully and finally releases, acquits, and forever discharges Bancorp and the Bank and their respective parent, subsidiaries and affiliated corporations, and each of their respective present and future officers, directors, members, shareholders, employees, agents, consultants, insurance companies, and attorneys, and the successors or assigns of said persons and entities (the “Released Parties”), from any and all claims, charges, complaints, causes of action, obligations, promises, agreements, controversies, liens, demands, attorneys’ fees, damages and liabilities of any nature, whatsoever, known or unknown, suspected or unsuspected, which Executive or Executive’s executors, administrators, successors or assigns ever had, now have, or may hereafter claim to have against any of the Released Parties from the beginning of time through the date the Executive executes this Agreement (the “Claims”) including, without limitation, any Claims associated with Executive’s employment with Bancorp and the Bank, and to the fullest extent permitted by law.

Exhibit A-1

b. Executive’s general release specifically extends to, without limitation, Claims for wrongful termination, discrimination, retaliation, impairment of ability to compete in the open labor market, breach of an express or implied contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, fraud, misrepresentation, defamation, slander, infliction of emotional distress, disputed wages and related penalties, loss of future earnings, and any Claims under the California constitution, the United States Constitution, or applicable state and federal fair employment laws, federal equal employment opportunity laws, and federal and state labor statutes and regulations, including, without limitation, the Age Discrimination in Employment Act (42 U.S.C. § 621-634) (age discrimination), as amended, the Civil Rights Act of 1964, as amended, , the Americans With Disabilities Act of 1990, as amended, the Rehabilitation Act of 1973, as amended, the Family Medical Leave Act of 1993, as amended, the Executive Retirement Income Security Act of 1967, as amended, the California Fair Employment and Housing Act, as amended, the California Family Rights Act, as amended, the California Whistleblower Protection Act, as amended, California Labor Code section 6310 et seq., and Claims pursuant to any other local, state and federal laws and regulations relating to employment to the fullest extent permitted by law.

c. The only Claims that are not being released by Executive are: (i) Executive’s right, if any, to COBRA health benefits; (ii) vested rights Executive has with respect to any benefit or equity or stock plan or agreement, including, without limitation, the Bank’s 401(k) Plan; (iii) Executive’s rights to indemnification for work for Bancorp and the Bank; (iv) Executive’s coverage under the Bank’s insurance policies, including, without limitation, Directors and Officers Insurance; (v) social security, unemployment, and/or state disability insurance benefits pursuant to the terms of applicable law; (vi) rights Executive may have under the Age Discrimination in Employment Act which arise after the date Executive signs and dates this Agreement; (vii) Claims for events/acts after this Agreement is executed; (viii) workers’ compensation insurance benefits under the terms of any workers’ compensation insurance policy of the Bank; or (ix) any other rights or Claims which are not subject to waiver or are not subject to an unsupervised waiver as a matter of law. Moreover, this Agreement does not limit any party’s right, where applicable, to file a complaint or charge with or participate in any investigative proceeding of any federal, state, or local governmental agency. Notwithstanding the foregoing, Executive agrees and hereby waives Executive’s right to recover monetary damages in such proceeding and in no event shall Executive be entitled to receive a payment as a result of any proceeding initiated by or on Executive’s behalf with respect to the Claims released herein. Additionally, this Agreement does not limit any party from instituting legal action for the purpose of enforcing this Agreement. Finally, this Agreement shall not preclude Executive from bringing a charge or suit to challenge the validity or enforceability of this Agreement under the Age Discrimination in Employment Act as amended by the Older Workers Benefit Protection Act.

d. Executive expressly waives all rights afforded by Section 1542 of the Civil Code of the State of California (“Section 1542”) with respect to the Released Parties. Section 1542 states as follows:

“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.”

Exhibit A-2

e. Notwithstanding the provisions of Section 1542, and for the purpose of implementing a full and complete release, Executive understands and agrees that this Agreement is intended to include and does include all Claims if any, which Executive may have and which Executive does not now know or suspect to exist in Executive’s favor against the Released Parties, and this Agreement extinguishes those Claims.

f. Executive acknowledges and agrees that, except for any legal action to determine the validity of the Age Discrimination in Employment Act release provisions of this Agreement, this Agreement may be pled as a complete bar to any action or suit before any court or adjudicative body or tribunal with respect to any of the released Claims. Executive further represents and agrees that Executive has not commenced or joined in any litigation, claim, charge, action, demand, grievance, administrative proceeding, arbitration or other legal proceeding against the Released Parties arising out of or relating in any way to the Claims released by this Agreement.

g. To the extent that Executive is identified as a putative or actual member of a class action or a representative, collective, or multi-party action seeking recovery based on one or more released Claims, Executive must opt-out of the class action lawsuit when first given an opportunity to do so and/or must otherwise decline to participate in a representative, collective, or multi-party action.

h. Executive acknowledges that before signing this Agreement, Executive is advised to and has been encouraged by Bancorp and the Bank to consult with an attorney about this Agreement’s terms, and Executive understands that whether or not to do so is Executive’s sole decision. If Executive does consult an attorney, Executive agrees to pay attorneys’ fees and costs, if any, arising out of or in connection with this Agreement or its subject matter.

i. By signing this Agreement, Executive is knowingly and voluntarily releasing and waiving any rights or Claims Executive has or may have of discrimination under the Age Discrimination in Employment Act in exchange for the Payment or Severance Payments described above, to which Executive would not otherwise be entitled.

2. Review Period

Executive has twenty-one (21) days from receipt of this Agreement to consider the waiver of any Claims Executive has or may have under law, including any rights under the Age Discrimination in Employment Act. Although the deadline for signing and dating this Agreement is twenty-one (21) days from the date of receipt, Executive may sign, date, and return the Agreement sooner. The Executive has seven (7) days from the date this Agreement is signed to revoke Executive’s signature. Any payment which is due will not be made until after the seven (7) day period has expired without revocation by Executive and then only in accordance with the terms of the Employment Agreement.

3. Non-Admission of Liability

Nothing in this Agreement shall be construed as an admission of liability by any party; rather, Bancorp, the Bank and Executive are resolving all outstanding matters between them and Bancorp and the Bank specifically deny any wrongdoing in connection with Executive’s employment.

Exhibit A-3

4. Governing Law

This Agreement shall be governed by and construed and enforced pursuant to the laws of the State of California, without regard to its conflict of laws rules.

5. Counterparts, Electronic Signatures, and Use of Copies in Lieu of Originals

This Agreement may be executed in two or more counterparts, either by original signature or electronic signature, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. The parties also agree that, so long as all of the parties execute this Agreement, copies of this Agreement, including photocopies or facsimile copies (including copies generated by scanning this Agreement to a portable document format (.pdf), or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document), including signed counterparts, shall be deemed to constitute an original and may be used in lieu of an original for any purpose, and shall be fully enforceable against a signing party.

6. Voluntary Agreement; No Inducements

Executive represents that Executive: (a) has fully and carefully read this Agreement prior to signing it; (b) has been, or has had the opportunity to be, advised by independent legal counsel of Executive’s own choice as to the legal effect and meaning of each of the terms and conditions of this Agreement; and (c) is signing and entering into this Agreement as a free and voluntary act without duress or undue pressure or influence of any kind or nature whatsoever and has not relied on any promises, representations or warranties regarding the subject matter hereof other than as set forth in this Agreement.

7. Attorney Fees for Enforcement

Except for any legal action to determine the validity of the Age Discrimination in Employment Act release provisions of this Agreement, for which no attorney fees will be awarded, if Executive, Bancorp, the Bank, or any of the Released Parties, bring any claim, action, or suit or initiate any arbitration relating to or arising out of this Agreement or any alleged breach of this Agreement (including one seeking to recover based on any released Claim), the prevailing party shall be entitled to reimbursement from the non-prevailing party for his, her, or its costs, expenses, and reasonable attorneys’ fees incurred in such claim, suit, action, or arbitration, as well as all other remedies.

Exhibit A-4

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the dates indicated below.

Southern California Bancorp	Executive
By:
Name:
Title:
Date	Date
Bank of Southern California, N.A.
By:
Name:
Title:
Date

Exhibit A-5

EX-10.10

Exhibit 10.10

CHANGE IN CONTROL AGREEMENT

This Change in Control Agreement (“Agreement”) is entered into between Bank of Southern California, N.A, a national banking association (“Bank”), and Bank’s parent corporation Southern California Bancorp (the “Company”, and with Bank collectively and individually, “Employer”) with their principal offices in San Diego, CA and ______________ (“Employee”).

WHEREAS, Employee is currently employed by both Bank and the Company as _______________; and

WHEREAS, Bank and the Company deem it appropriate to grant certain protections to Employee in the event of a change in control of Bank or the Company.

NOW, THEREFORE, in consideration of the promises and the mutual agreements contained herein, the adequacy and sufficiency of which are hereby acknowledged, Bank, the Company and Employee agree as follows:

1. Defined Terms. Wherever used in this Agreement, the following words and phrases shall have the meaning set forth below unless the context plainly requires a different meaning:

(a) “Affiliate” shall mean any partnership, firm, corporation, association, joint-stock company, unincorporated association, or other entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, Bank or the Company , including any member of an affiliated group of which the Company is a common parent corporation as provided in Section 1504 of the Code.

(b) “Cause” shall mean: (i) the willful, intentional, and material breach of duty by Employee in the course of his/her employment; (ii) the habitual and continued neglect by Employee of his/her employment duties and obligations; (iii) Employee’s willful and intentional violation of any State of California or federal banking laws, or of the Bylaws, rules, policies, or resolutions of Bank or the Company, or of the rules or regulations of the Office of the Comptroller of the Currency (the “OCC”), the Federal Deposit Insurance Corporation (the “FDIC”) or the Board of Governors of the Federal Reserve System (“FRB”), or other regulatory agency or governmental authority having jurisdiction over Bank or the Company; (iv) Employee’s refusal to comply in any material respect with the legal directives of any regulatory authority or governmental entity having jurisdiction over Bank or the Company; (v) the determination by a state or federal banking agency or governmental authority having jurisdiction over Bank or the Company that Employee is not suitable to act in the capacity for which he/she is then employed by Bank or the Company; (vi) Employee’s conviction of any felony or a crime involving moral turpitude or commission of a fraudulent or dishonest act, including a breach of trust or misappropriation, or if Employee has entered a plea of nolo contendere to such an act or offense: (vii) Employee’s willful misfeasance or negligence in the performance of his/her duties based on the sole discretion of the Employer’s Board of Directors; (viii) Employee’s conduct that is demonstrably and significantly harmful, or will likely have, or has had a material adverse effect on Employer or an Affiliate, as reasonably determined by Employer’s Board of Directors; (ix) Employee cannot be covered under a fidelity bond issued by an insurance company reasonably acceptable to Employer; (x) Employee’s disclosure without authority or unauthorized use of any secret or confidential information concerning Employer or an Affiliate or any employee of Employer or any of Employer’s customers; or (xi) Employee taking any action which Employer’s Board of Directors determines, in its sole discretion and subject to good faith, fair dealing, and reasonableness, constitutes unfair competition with, or induces any customer to breach any contract with, Employer or an Affiliate.

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(c) “Change in Control” shall mean the occurrence of any of the following events with respect to Employer or the Company: (i) any merger, consolidation or reorganization of Bank or the Company in which Bank or the Company, as applicable, does not survive; except for purposes of this clause (i) the following shall not constitute a change in control: a merger, consolidation or reorganization where the beneficial owners, directly or indirectly, of securities of Bank or the Company, representing fifty percent (50.0%) or more of the combined voting power of Bank’s or the Company’s then outstanding securities, remain as the beneficial owners, directly or indirectly, of at least fifty percent (50.0%) of the combined voting power of the surviving corporation; (ii) any sale, lease, exchange, mortgage, pledge, transfer, or other disposition (in one transaction or a series of transactions) of any assets of Bank or the Company having an aggregate fair market value of fifty percent (50.0%) or more of the total value of assets of Bank or the Company, reflected in the most recent month end balance sheet of Bank or the Company; (iii) an acquisition whereby any -person” (as such term is used in the Exchange Act, including any individual, corporation, partnership, trust, or any other entity) is or becomes the beneficial owner, directly or indirectly, of securities of Bank or the Company representing more than fifty percent (50.0%) of the combined voting power of Bank’s or the Company’s then outstanding securities; except for purposes of this clause (iii) the following acquisition shall not constitute a change in control: (1) any acquisition directly from Bank or the Company; (2) any acquisition by Bank or the Company; or (3) any acquisition by any employee benefit plan sponsored or maintained by Bank or the Company; (iv) if in any one year period, individuals who at the beginning of such period constitute the Board of Directors of Bank or the Company cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by Bank’s or the Company’s shareholders, of each new director is approved by a vote of at least three-quarters of the directors then still in office who were directors at the beginning of the period; or (v) a majority of the members of the Board of Directors of Bank or the Company in office prior to the happening of any event determines in its sole discretion that as a result of such event there has been a change in control. Notwithstanding the foregoing, to the extent required by Section 409A of the Code, if a Change in Control would give rise to a payment or settlement event with respect to any payment or benefit hereunder that constitutes “nonqualified deferred compensation.” the transaction or event constituting the Change in Control must also constitute a “change in control event” (as defined in Treasury Regulation § 1.409A-3(i)(5)) in order to give rise to the payment or benefit, to the extent required by Section 409A.

(d) “Change in Control Separation Benefit” shall mean the sum of the following:

(1) Two (2) times Employee’s annual base salary as in effect immediately prior to the occurrence of a Change in Control or the termination of Employee’s employment, whichever is greater; plus

(2) Two (2) times the sum of “Average Bonus” and the “Average Equity Grant” (as such terms are defined herein); plus

(3) Unless such equity awards by their terms expire upon consummation of a Change in Control (e.g., because performance with respect to such equity awards is measured on the date of the Change in Control and was not met), all outstanding equity incentive awards granted to the Employee prior to the Change in Control will vest (with performance-vesting awards vesting at target) (provided, that this provision should not apply to any equity awards that are issuable under any annual bonus plan or agreement to the extent such termination occurs prior to the determination of the amount of the applicable annual performance under such bonus plan or agreement);

(4) Without duplication of any payments to be made under any applicable bonus plan or agreement of the Company (in which event, this prong will only be interpreted as providing for payment of amounts in excess of amounts payable under such bonus plan or agreement), one (1) times the bonus (the “Current Year Bonus”) that would have been paid (irrespective of the manner or form (i.e., whether cash or other property) of payment of such Current Year Bonus) to Employee with respect to the calendar year in which Employee’s employment with the Employer is terminated as calculated in accordance with the Bank’s Management Incentive Plan (or any successor management and/or incentive plan), pro-rated through the date of Employee’s termination of employment following or in connection with the Change in Control. The Current Year Bonus shall be calculated assuming that all performance metrics or other vesting requirements for the maximum bonus payment are achieved in accordance with such plan notwithstanding the Company’s performance or projected or anticipated performance through such date. If any part of the Current Year Bonus would have been payable in the form of an equity grant, including but not limited to the grant of stock options, restricted stock, restricted stock units or otherwise (an “equity grant”) under the terms of the applicable bonus plan or agreement, the Current Year Bonus for purposes of this clause (3) shall include the cash value of such equity grant on the grant date. For the avoidance of doubt, the Current Year Bonus payable pursuant to this provision shall not include any sign-on, retention, or other discretionary bonus awards.

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As used herein, the term “Average Bonus” means the average of the aggregate annual bonus, if any, paid or payable to Employee for each of the three (3) full Company’s fiscal years preceding the fiscal year in which Employee’s termination of employment occurs (or such fewer number of fiscal years for which Employee was eligible to receive a bonus and/or incentive award)); provided, however, that if any portion of the aggregate annual bonus is received by Employee in the form of an equity grant, the amount of such bonus shall be determined using the fair market value of such equity grant as of the grant date. For purposes of clarity, “annual bonus” shall not include any signing bonus or extraordinary bonus, and an annual bonus shall be considered paid or payable for a calendar year if paid or payable in the next calendar year for performance (personal or corporate) in the applicable (prior) calendar year.

As used herein, the term “Average Equity Grant” means the average fair market value of any equity grants (determined as of the grant date), if any, received by Employee in connection with Employee’s annual evaluation (and not under any Company bonus plan or agreement) with respect to Employee’s and/or Company’s performance during each of the three (3) full Company’s fiscal years preceding the fiscal year in which Employee’s termination of employment occurs (or such fewer number of fiscal years for which Employee was eligible to receive such equity grants based on evaluation of Employee’s performance (e.g., including because the Employee became eligible to receive equity grants under the Company’s bonus plan)). For purposes of clarity, for purposes of “Average Equity Grants,” “equity grants” shall not include any signing equity grants or extraordinary equity grants, and an equity grant shall be considered paid or payable for a calendar year if paid or payable in the next calendar year for performance (personal or corporate) in the applicable (prior) calendar year.

(e) “Code” shall mean the Internal Revenue Code, as amended.

(f) “Disability” and “Disabled” shall mean that Employee has been unable to perform the essential functions of his/her job, with or without reasonable accommodation, for a period of three (3) consecutive months as the result of his/her incapacity due to physical or mental illness. In determining whether Employee is disabled, Employer may rely on a written statement of a licensed physician acceptable to the Employer.

(g) “Good Reason” shall mean without Employee’s consent, which consent may be given or withheld in the Employee’s sole discretion, there occurs: (i) a material diminution in Employee’s authority, duties, or responsibilities, as determined on an enterprise-wide level and not with respect to any specific region, corporate entity or geographic location; (ii) a material diminution in Employee’s then annual base salary (including any fixed amount periodic allowances, but excluding any bonus or incentive payments) on the date Employee provides Employer with the written notice required hereunder (for this purpose, a reduction of five percent (5.0%) or more shall constitute a material diminution); (iii) a material diminution in the budget over which Employee retains authority; (iv) a material change in the principal geographic location at which Employee must perform the services (for this purpose, a change in Employee’s location of employment that is within twenty-five (25) miles of Employee’s current location shall not constitute Good Reason); or (v) any other action or inaction that constitutes a material breach of the terms of this Agreement by Employer. Notwithstanding the foregoing, ‘‘Good Reason” shall only exist if Employee shall have provided the Employer with written notice within ninety (90) days of the initial occurrence of any of the foregoing events or conditions which specifically identifies the circumstances constituting Good Reason, and Employer fails to eliminate the conditions constituting Good Reason within thirty (30) days after Employer’s receipt of written notice of such event or condition from Employee. Employee’s resignation from employment with Employer for Good Reason must occur within thirty (30) days following the expiration of the foregoing cure period.

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2. Term and Termination. This Agreement is effective as of January 18, 2023 and shall terminate on December 31, 2028, unless automatically renewed. This Agreement shall automatically renew for additional periods of one (1) year each unless written notice is provided by Employer to Employee of Employer’s election not to renew this Agreement at least sixty (60) calendar days prior to the end of the original or any extended term (including any automatic renewals, the “Term”). Employer agrees that its obligations under this Agreement shall survive the expiration or termination of this Agreement following any Change in Control occurring during the Term. For the avoidance of doubt, any Change in Control that occurs after termination or non-renewal of this Agreement shall not trigger any payments or obligations by Employer to Employee under this Agreement.

3. Change in Control Separation Benefit. If upon or within the twelve (12) months following a Change in Control either (i) Employee’s employment with Employer is terminated by Employer for other than Cause, death, or Disability, or (ii) Employee terminates his employment with Employer for Good Reason, and provided that the Change in Control is announced or occurs during the Term and Employee has delivered to Employer a signed and irrevocable General Release and Confidentiality Agreement in the form attached hereto as Exhibit “A” (the “Release Agreement”) that has become irrevocable within sixty (60) days of the date of termination of employment with Employer, then Employee shall be entitled to the Change in Control Separation Benefit. The Change in Control Separation Benefit shall be paid to Employee in a lump sum on the Employer’s first regular payroll date following expiration of the sixty (60) period, subject to Sections 5, 6, 7 and 8. In the event Employee’s employment with Employer is terminated within twelve (12) months following a Change in Control as a result of Cause, death, Disability, or resignation or retirement (in both cases, if after the effectiveness of the Change in Control, without Good Reason), then Employee shall not be entitled to the Change in Control Separation Benefit.

4. Release of All Claims. As a condition for receiving the Change in Control Separation Benefit hereunder, Employee hereby agrees to execute a full and complete release of any and all claims against Employer and its officers, agents, directors, attorneys, insurers, employees and successors in interest arising from or in any way related to Employee’s employment with Employer or the termination thereof, in a form substantially similar to the Release Agreement attached hereto. In the event the Release Agreement does not become effective and irrevocable within the sixty (60) day period following the date of Employee’s termination of employment, Employee shall not be entitled to the Change in Control Separation Benefit.

5. Section 280G Excess Parachute Payments.

(a) If all or any amount paid to Employee by Employer (or any subsidiary or Affiliate thereof), whether under this Agreement or otherwise (all such payments and benefits being hereinafter referred to as the “Total Payments”), is subject to any tax under Section 4999 of the Code, or any similar federal or state law (an “Excise Tax”), then the Total Payments shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (i) the net amount of such Total Payments, as so reduced (after subtracting the amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Employee would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). The Total Payments shall be reduced in the following order: (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 Employee that are exempt from Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting or payment with respect to any equity award with respect to Employer’s common stock that is exempt from Section 409A of the Code, (C) reduction of any other payments or benefits otherwise payable to Employee on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting and payment with respect to any equity award with respect to Employer’s common stock that is exempt from Section 409A of the Code, and (D) reduction of any payments attributable to the acceleration of vesting or payment with respect to any equity award with respect to Employer’s common stock that is exempt from Section 409A of the Code. The foregoing reductions shall be made in a manner that results in the maximum economic benefit to Employee and, to the extent economically equivalent, in a pro rata manner.

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(b) An accounting firm or compensation consulting firm with nationally recognized standing and substantial expertise and experience on Section 280G matters (the “280G Firm”) selected by Employer prior to the closing of the Change in Control will be directed to submit its determination and detailed supporting calculations to both Employee and Employer within fifteen (15) days after notification from either Employer or Employee that Employee may receive payments which may be “parachute payments.” Employee and Employer will each provide the 280G Firm access to and copies of any books, records, and documents in their possession as may be reasonably requested by the 280G Firm, and otherwise cooperate with the 280G Firm in connection with the preparation and issuance of the determinations and calculations contemplated by this Agreement. The fees and expenses of the 280G Firm for its services in connection with the determinations and calculations contemplated by this Agreement will be borne by Employer. Upon request of Employee, Employer will provide Employee with sufficient tax and compensation data to enable Employee or his tax advisor to independently make the calculations described in Section 6(a) above, and Employer will reimburse Employee for reasonable fees and expenses incurred for any such verification.

6. 409A Provisions.

(a) Notwithstanding anything contained in this Agreement to the contrary, to the maximum extent permitted by applicable law, amounts payable to Employee pursuant to this Agreement shall be made in reliance upon Treas. Reg. Section 1.409A-1(b)(9) (Separation Pay Plans) or Treas. Reg. Section 1.409A-1(b)(4) (Short-Term Deferrals). This Agreement is intended to be written, administered, interpreted and construed in a manner such that no payment or benefits provided under the Agreement become subject to (a) the gross income inclusion set forth within Code Section 409A(a)(1)(A) or (b) the interest and additional tax set forth within Code Section 409A(a)(1)(B) (together, referred to herein as the “Section 409A Penalties”), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of Section 409A Penalties. To the extent that any amount payable to Employee pursuant to this Agreement is subject to Section 409A of the Code, and Employer or Employee reasonably believes, at any time, that such amount payable does not comply with Section 409A of the Code, it will promptly advise the other and each party hereby agrees to negotiate reasonably and in good faith to amend the terms of this Agreement such that it so complies. For purposes of this Agreement, all references to Employee’s “termination of employment” shall mean Employee’s “separation from service.” as defined in Treasury Regulation Section 1.409A-1(h) (“Separation from Service”). For purposes of Section 409A of the Code (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), each payment that Employee may be eligible to receive under this Agreement shall be treated as a separate and distinct payment. Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided under this Agreement during any tax year of Employee shall not affect in-kind benefits or reimbursements to be provided in any other tax year of Employee and are not subject to liquidation or exchange for another benefit. Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by Employee and, if timely submitted, reimbursement payments shall be made to the Employee as soon as administratively practicable following such submission, but in no event later than the last day of Employee’s taxable year following the taxable year in which the expense was incurred. In no event shall Employee be entitled to any reimbursement payments after the last day of Employee’s taxable year following the taxable year in which the expense was incurred. This section shall only apply to in-kind benefits and reimbursements that would result in taxable compensation income to Employee.

(b) In the event that Code Section 409A applies to any compensation with respect to Employee’s Separation from Service, payment of that compensation shall be delayed if Employee is a “specified employee,” as defined in Section 409A(a)(2)(B)(i), and such delayed payment is required by Section 409A. Such delay shall last six (6) months from the date of Separation from Service (or as required by Section 409A). On the day following the end of such six (6)-month period, Employer shall make a catch-up payment to Employee equal to the total amount of such payments that would have been made during the six (6)-month period but for this Section 7(b).

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7. Limitation on Benefits. Notwithstanding any other provision in this Agreement, Employer shall make no payment to Employee provided for herein to the extent that such payment would be prohibited by the provisions of Part 359 of the regulations of the FDIC as the same may be amended from time to time; and if such payment shall be so prohibited, Employer shall use it commercially reasonable best efforts to secure consent of the FDIC, the OCC, the FRB or other applicable banking regulatory agencies to make such payments in the highest amount permissible, up to the amount provided for in this Agreement.

8. Notices. Any notices to be given hereunder by either party to the other shall be in writing and may be transmitted by a personal delivery or by U.S. mail, registered or certified, postage prepaid with return receipt requested. Mailed notices shall be addressed to the parties at the addresses listed as follows:

Employer:	Principal place of business
Employee:	Principal place of business as shown in Employer’s Personnel Records and Employee’s personal file.

Each party may change the address for receipt of notices by written notice in accordance with this Section 9. Notices delivered personally shall be deemed communicated as of the date of actual receipt; mailed notices shall be deemed communicated as of three (3) days after the date of mailing.

9. Dispute Resolution.

(a) Employer’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which Employer may have against Employee or others. In no event shall Employee be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Employee under any of the provisions of this Agreement and, except as provided in Section 7, such amounts shall not be reduced if Employee obtains other employment.

(b) The parties recognize that there may be disputes between them arising as to whether the circumstances of Employee’s termination are covered by Section 3 so as to entitle Employee to the Change in Control Separation Benefit. In the event of such a dispute, there may be a need for a binding ruling by a neutral decision maker. In such an event, the following procedures shall apply:

(1) If Employee delivers a written Termination Notice (the “Termination Notice”) to Employer based on Section 1(g) “Good Reason”, Employer must pay the benefits provided in Section 3, as and when set forth in Section 3, unless Employer initiates the arbitration process to resolve the dispute, as provided by the American Arbitration Association’s Employment Rules, within 60 calendar days of the receipt of such Termination Notice from Employee. Failure by Employer to commence arbitration within the time stated by filing the required notice with the American Arbitration Association (“AAA”) will be deemed an admission by Employer as to Employee’s reason for termination.

(2) If Employer delivers a Termination Notice based on Termination for “Cause”, pursuant to Section 1(b), or Termination for Disability pursuant to Section 1(f), Employee must initiate the arbitration process to dispute the terms of such termination, as provided by the American Arbitration Association’s Employment Rules, within 60 calendar days of the receipt of such Termination Notice from Employer. Failure by Employee to commence arbitration within the time stated by filing the required notice with the AAA will be deemed an admission by Employee as to Employer’s reason for termination.

(3) Arbitration shall be conducted before a single arbitrator sitting in a location mutually selected by the Parties within twenty-five (25) miles from the Employee’s job location with Employer, in accordance with the Employment Rules of the AAA then in effect. The arbitrator shall be mutually selected by the Employer and Employee. Judgment may be entered on the award of the arbitrators in any court having proper jurisdiction.

(4) Employer shall be responsible for the fees and costs associated with the arbitrator and AAA as prescribed by the Employment Rules of AAA. Each party shall be responsible for the party’s own attorneys’ fees and costs. The arbitrator shall also have the discretion to award appropriate interest on any judgment, consistent with applicable law and the Employment Rules of AAA.

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(c) The arbitration shall occur in the county in California in which Employee is employed by Employer. Neither Employee nor Employer shall disclose the existence, content, or results of any arbitration hereunder without the prior written consent of all parties. The arbitration of such issues, including the determination of any amounts of damages suffered, if applicable, shall be final and binding upon the parties to the maximum extent permitted by law, subject to the right of appeal as provided by applicable law. The parties shall have rights to discovery as provided in Section 1283.05 of the California Code of Civil Procedure including, without limitation, Section 1283.1 thereof. The arbitrator shall apply the substantive law of the State of California, or federal law, or both, as applicable, and the arbitrator will be without jurisdiction to apply any different substantive law. The arbitrator shall render its judgement and/or award and a written, reasoned opinion in support of such judgment within 30 calendar days of the end of the arbitration hearing.

10. No Guarantee of Employment. Nothing contained in this Agreement shall be construed as a contract of employment or deemed to give Employee the right to be retained in the employ of Employer or any Affiliate or any equity or other interest in the assets, business, or affairs or Employer or any Affiliate, or modify or enlarge Employee’s employment rights.

11. Entire Agreement. This Agreement supersedes any and all other agreements, either oral or in writing, between the parties with respect to any severance or separation pay payable by Employer other than those benefits payable under the Employer’s Supplemental Executive Retirement Plans, the Management Incentive Plan or any such compensatory plans as approved by the Company’s Board of Directors from time to time to the extent of Employee’s participation in such plans, and contains all of the covenants and agreements between the parties with respect to any severance or separation pay payable by Employer, including but not limited to that certain Severance and Change in Control Agreement, effective February 1, 2022, by and between Employer and Employee (the “prior agreement”), which prior agreement is terminated in all respects effective as of the effective date of this Agreement. 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, that no other agreement, statement, or promise not contained in this Agreement shall be valid or binding on either party, and that this Agreement, when executed by the parties, will govern the terms and conditions of the payments and benefits payable or due to be payable to Employee in connection with a Change in Control of Employer.

12. Successors and Assigns. This Agreement may be assigned or transferred to, and shall be binding upon and shall inure to the benefit of, any successor, subsidiary, or Affiliate of Employer, and any such successor, subsidiary, or Affiliate shall be deemed substituted for all purposes for “Employer” under the terms of this Agreement. Upon the occurrence of a Change in Control, Employer shall require any successor to Employer to expressly assume and agree in writing to perform all obligations of Employer under this Agreement, including obligations for payment of the Change in Control Separation Benefit. As used in this Agreement, the term “successor” shall mean any person, firm, corporation, or business entity which at any time, whether by merger, purchase, or otherwise, acquires all or substantially all of the assets, stock, or business of Employer. Employee acknowledges that Employer has the right to sell, assign, or otherwise transfer any portion or substantially all or all of the capital stock, assets, or business of Employer and that any such sale, assignment, or transfer shall not be deemed to be a termination of the employment of Employee. Employee shall not assign or transfer any of Employee’s rights pursuant to this Agreement, wholly or partially, to any other person, other than by will or the laws of descent and distribution.

13. Withholding Taxes on Benefits. Any benefits payable under this Agreement shall be subject to any applicable federal, state, and / or local tax withholding requirements and as authorized by law.

14. Modifications. Any modification of this Agreement will be effective only if it is in writing and signed by each party or its authorized representative.

15. Waiver. The failure of either party to insist on strict compliance with any of the terms, provisions, covenants, or conditions of this Agreement by the other party shall not be deemed a waiver of any term, provision, covenant, or condition, individually or in the aggregate, unless such wavier is in writing signed by the party or the authorized representative of the party to be bound; nor shall any waiver or relinquishment of any right or power, nor any delay or forbearance at any one time or times be deemed a waiver or relinquishment of that right or power or authorize any delay or forbearance for all or any other times.

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16. Partial Invalidity. If any provision in this Agreement is held by an arbitrator or arbitrators, or a court of competent jurisdiction 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, If any provision in this Agreement is held by an arbitrator or arbitrators, or by a court of competent jurisdiction to be invalid, void, or unenforceable as written, it shall be enforced to the maximum extent allowed by applicable law.

17. 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 either party, but according to the application of other rules of contract interpretation, if an ambiguity or uncertainty exists. Employee acknowledges that, in executing this Agreement, Employee has had the opportunity to seek the advice of independent legal counsel, and has read and understood all of the terms and provisions of this Agreement.

18. Governing Law and Venue. The laws of the State of California, other than those laws denominated as choice of law rules, and federal law, where applicable, shall govern the validity, construction, and effect of this Agreement. Any action which may be brought under this Agreement shall be brought in the State of California in Los Angeles County.

19. Counterparts. This Agreement may be executed in multiple counterparts and by facsimile signature and, when fully executed, each counterpart or facsimile signature shall constitute an original Agreement. The parties agree and consent to the use of electronic signatures solely for the purposes of executing this Agreement. Such electronic signature shall be deemed to have the same full and binding effect as a handwritten signature.

20. At-Will Employment. Employer and Employee acknowledge that Employee’s employment is and shall continue to be at-will, as defined under applicable law, and that Employee’s employment with Employer may be terminated by either party at any time for any or no reason, with or without notice. If’ Employee’s employment terminates for any reason during the Term, Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided in this Agreement or as required by applicable law.

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IN WITNESS WHEREOF, the parties have executed this Agreement in the City of Los Angeles, Los Angeles County, State of California.

BANK OF SOUTHERN CALIFORNIA, N.A.	EMPLOYEE
By:	By:
Its:	Its:
Date:	Date:
SOUTHERN CALIFORNIA BANCORP
By:
Its:
Date:

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Exhibit “A”

GENERAL RELEASE AND CONFIDENTIALITY AGREEMENT

This General Release and Confidentiality Agreement (this “Release Agreement”) is entered into by and between _______________ (“Employee”) and Bank of Southern California, N.A., and Southern California Bancorp on each of its behalf and on behalf of its parents, subsidiaries, affiliates and successors-in-interest (collectively, the “Employer), with reference to the following:

A, Employee and Employer have entered into that certain Change in Control Agreement dated as of ____________________ (the “Agreement”).

B. A condition precedent to certain of Employer’s obligations under the Agreement is the execution of this Release Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties, intending to be legally bound, agree and covenant as follows:

1. In consideration for the payment of the Change in Control Separation Benefit, as defined in the Agreement (the “Separation Benefit”), Employee agrees unconditionally and forever to release and discharge the Employer, its parents, subsidiaries, affiliates, successors-in-interest, and their respective officers, directors, managers, employees, members, shareholders, representatives, attorneys, agents and assigns from any and all claims, actions, causes of action, demands, rights or damages of any kind or nature which Employee may now have, or ever have, whether known or unknown, that arise out of or in any way relate to Employee’s employment with, or separation from, the Employer on or before the date of execution of this Release Agreement; provided, however, that this release does not apply to any unreimbursed expenses incurred in connection with Employee’s employment with Employer, any deposit accounts Employee may have at Employer, and any rights or benefits of Employee pursuant to the Agreement, including the right to enforce the collection of the Separation Benefit.

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2. This release specifically includes, but is not limited to, any claims under federal, state, local or other authority law, rule or regulation pertaining to conditions of employment, wages, or discrimination in employment based on age, sex, disability, sexual orientation, medical condition, genetic characteristics, pregnancy, race, color, national origin, religion, family or medical leave, veteran status, or any other protected classification including, but not limited to, to the fullest extent permitted by law, the Civil Rights Act of 1964 (including Title VII of that Act), the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Employee Retirement Income Security Act of 1974, the California Fair Employment and Housing Act, as amended, the California Labor Code, the California Family Rights Act of 1991, the Vietnam Era Veterans Readjustments Assistance Act of 1974, the Americans with Disabilities in Employment Act, the Family and Medical Leave Act, Older Workers’ Benefit Protection Act, the Equal Pay Act of 1963, the Uniformed Services Employment and Reemployment Rights Act, the Rehabilitation Act of 1973, the Occupational Safety and Health Act, the Worker Adjustment and Retaining Notification Act, the Racketeer Influenced and Corrupt Organizations Act, the Financial Reform Recovery and Enforcement Act of 1989, the Fair Labor Standards Act, and Section 1981 of Title 42 of the United States Code, and all similar federal, state and local laws and regulations.

3. Employee acknowledges that, unless this Release Agreement becomes effective within sixty (60) clays following Employee’s termination of-employment. he/she is not otherwise entitled to receive the Separation Benefit referenced in paragraph 1 above.

4. Employee understands and acknowledges that his/her execution of this Release Agreement is voluntary, and that if he/she does not accept the Separation Benefit, he/she will not lose any other rights that he/she may have under other policies or programs of the Employer.

5. Employee agrees that this release is meant to be as general as possible and covers all claims of any nature whether or not he/she knows the claims exist at this time, including but not limited to contract claims, tort claims, and claims under any state, federal, or local law and from any and all claims statutory or common law arising out of his/her employment by Employer and any legal restrictions on an employer’s right to discharge an employee, including but not limited to, intentional infliction of emotional distress and wrongful discharge. However, nothing in this release is intended to bar any claim that, by statute, may not be waived, or prohibits him/her from filing a charge of discrimination or cooperating in any proceeding before the California Department of Fair Employment and Housing (“CDFEIF”) or the Equal Employment Opportunity Commission (“EEOC”).

6. Employee hereby waives all rights under Section 1542 of the Civil Code of the State of California, or any analogous state law, federal law or regulation. Section 1542 provides as follows:

“A general release does not extend to claims which 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 understands and acknowledges that the significance and consequence of this waiver of California Civil Code Section 1542 relates to all facts and circumstances that occurred during or prior to, his/her employment with the Employer (including but not limited to my separation from the Employer), whether known or unknown, and that even if he/she should eventually suffer injury arising out of or pertaining to the employment relationship or its termination, he/she will not be able to make any claim for those injuries. Furthermore, Employee acknowledges that he/she consciously intends these consequences even as to claims that may exist as of the date of this Release Agreement but which he/she does not know exist and which, if known, would materially affect his/her decision to execute this Release Agreement, regardless of whether the lack of knowledge is the result of ignorance, oversight, error, negligence or any other cause.

7. In further consideration for the Separation Benefit, Employee agrees and warrants that at all times after the termination of his/her employment with Employer, other than for the benefit of Employer, Employee will keep confidential and will make no use of Confidential Information, or any part thereof, for the benefit of any other person or entity. Employee further agrees and warrants that all Employer files, papers and property that have been in his/her possession, custody or control during his/her employment have been returned to the Employer or destroyed and will not be copied or removed from Employer’s premises. Employee further agrees that he/she will not disclose the terms of this Release Agreement except to his/her immediate family, attorney or tax consultant, or as required by law. For purposes of this Release Agreement, “Confidential Information- includes all secrets and other confidential information, ideas, knowledge, know-how, techniques, secret processes, improvements, discoveries, methods, inventions, sales, financial information, lists of customers and prospective customers, business, financial and other information received from a customer or prospective customer or any other third party that the Employer is obligated to treat as confidential, plans, concepts, strategies or products, as well as all documents, reports, drawings, designs, plans and proposals otherwise pertaining to same or relating to the business and properties of the Employer of which the Employee has acquired, or may hereafter acquire, knowledge and possession as an employee of Employer.

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In accordance with 18 U.S.C. § 1833, the Bank hereby notifies Employee that, notwithstanding anything to the contrary herein or in the Agreement:

a. Employee shall not be in breach of the Agreement or this Release Agreement, and shall not be held criminally or civilly liable under any Federal or State trade secret law (i) for the disclosure of a trade secret that is made in confidence to a Federal, State, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (ii) for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

b. If Employee files a lawsuit for retaliation by Employer for reporting a suspected violation of law, Employee may disclose the trade secret to Employee’s attorney, and may use the trade secret information in the court proceeding, if Employee files any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.

8. This Release Agreement is subject to the terms of the Older Workers Benefit Protection Act of 1990 (“OWBPA”). The OWBPA provides that an individual cannot waive a right or claim under the Age Discrimination in Employment Act (“ADEA”) unless the waiver is knowing and voluntary. Pursuant to the terms of the OWBPA, Employee acknowledges and agrees that he/she has executed this Release Agreement voluntarily, and with full knowledge of its consequences. In addition, Employee hereby acknowledges and agrees as follows:

a. This Release Agreement has been written in a manner that is calculated to be understood, and is understood, by Employee;

b. The release provisions of this Release Agreement apply to any rights Employee may have under the ADEA;

c. The release provisions of this Release Agreement do not apply to any rights or claims Employee may have under the ADEA that arise after the date he/she executes this Release Agreement;

d. Employer hereby advises Employee to consult with an attorney prior to executing this Release Agreement;

e. Employer is giving Employee a period of [twenty-one (21)] [forty-five (45)] calendar days to consider this Release Agreement. Employee may accept and sign this Release Agreement before the expiration of the [twenty-one (21)] [forty-five (45)] calendar day time-period, but Employee is not required to do so by Employer; and

f. Employee acknowledges that this offer is revoked if Employee fails to return this Release Agreement within the [twenty-one (21)] [forty-five (45)] calendar day time period specified in paragraph 8(e) above.

9. This Release Agreement is revocable by Employee for a period of seven (7) calendar days following Employee’s execution of this Release Agreement. The revocation by Employee of this Release Agreement must be in writing, must specifically revoke this Release Agreement and must be received by the Employer prior to the eighth (8th) day following the execution of this Release Agreement by Employee. This Release Agreement becomes effective, enforceable and irrevocable on the eighth (8th) day following Employee’s execution of this Release Agreement. No Separation Benefit payment will be made to the Employee until such date.

10. The amounts provided under this Release Agreement are not offered in connection with any specific exit incentives or other employment termination program.

11. Employee agrees not to disparage the Employer, its officers, employees or agents of the Employer either within the Employer or externally in any way.

12. Employee warrants that he/she has not assigned any right or claim released in this Release Agreement.

13. This Release Agreement is binding on Employee’s heirs and assigns.

14. In executing this Release Agreement, Employee is not relying on any representations made to him/her by the Employer. It is expressly understood that this Release Agreement, and any consideration for it, do not in any way constitute an admission of liability or wrongdoing on the part of the Employer. Any such liability is expressly denied.

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15. Employee hereby expressly assumes any risk that the facts and law concerning this Release Agreement may be other than as presently known to him/her.

16. This Release Agreement constitutes the sole and entire agreement between Employer and Employee with respect to the subject matter hereof and supersedes any and all understandings and agreements made prior to the date of this Release Agreement.

17. This Release Agreement shall be subject to the arbitration provisions set forth in Section 9 of the Agreement. This Release Agreement shall be governed in all respects by the laws of the State of California. No action involving this Release Agreement or Employee’s employment by the Employer may be brought except in the State of California in San Diego County.

The undersigned agree to the terms of this Release Agreement and voluntarily enter into it with the intent to be bound hereby.

BANK OF SOUTHERN CALIFORNIA, N.A.	EMPLOYEE
By:	By:
Its:	Its:
Date:	Date:
SOUTHERN CALIFORNIA BANCORP
By:
Its:
Date:

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EX-10.11

Exhibit 10.11

CHANGE IN CONTROL AGREEMENT

This Change in Control Agreement (“Agreement”) is entered into between Bank of Southern California, N.A, a national banking association (“Bank”), and Bank’s parent corporation Southern California Bancorp (the “Company”, and with Bank collectively and individually, “Employer”) with their principal offices in San Diego, CA and _______________ (“Employee”).

WHEREAS, Employee is currently employed by both Bank and the Company as ______________________; and

WHEREAS, Bank and the Company deem it appropriate to grant certain protections to Employee in the event of a change in control of Bank or the Company.

NOW, THEREFORE, in consideration of the promises and the mutual agreements contained herein, the adequacy and sufficiency of which are hereby acknowledged, Bank, the Company and Employee agree as follows:

1. Defined Terms. Wherever used in this Agreement, the following words and phrases shall have the meaning set forth below unless the context plainly requires a different meaning:

(a) “Affiliate” shall mean any partnership, firm, corporation, association, joint-stock company, unincorporated association, or other entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, Bank or the Company , including any member of an affiliated group of which the Company is a common parent corporation as provided in Section 1504 of the Code.

(b) “Cause” shall mean: (i) the willful, intentional, and material breach of duty by Employee in the course of his/her employment; (ii) the habitual and continued neglect by Employee of his/her employment duties and obligations; (iii) Employee’s willful and intentional violation of any State of California or federal banking laws, or of the Bylaws, rules, policies, or resolutions of Bank or the Company, or of the rules or regulations of the Office of the Comptroller of the Currency (the “OCC”), the Federal Deposit Insurance Corporation (the “FDIC”) or the Board of Governors of the Federal Reserve System (“FRB”), or other regulatory agency or governmental authority having jurisdiction over Bank or the Company; (iv) Employee’s refusal to comply in any material respect with the legal directives of any regulatory authority or governmental entity having jurisdiction over Bank or the Company; (v) the determination by a state or federal banking agency or governmental authority having jurisdiction over Bank or the Company that Employee is not suitable to act in the capacity for which he/she is then employed by Bank or the Company; (vi) Employee’s conviction of any felony or a crime involving moral turpitude or commission of a fraudulent or dishonest act, including a breach of trust or misappropriation, or if Employee has entered a plea of nolo contendere to such an act or offense: (vii) Employee’s willful misfeasance or negligence in the performance of his/her duties based on the sole discretion of the Employer’s Board of Directors; (viii) Employee’s conduct that is demonstrably and significantly harmful, or will likely have, or has had a material adverse effect on Employer or an Affiliate, as reasonably determined by Employer’s Board of Directors; (ix) Employee cannot be covered under a fidelity bond issued by an insurance company reasonably acceptable to Employer; (x) Employee’s disclosure without authority or unauthorized use of any secret or confidential information concerning Employer or an Affiliate or any employee of Employer or any of Employer’s customers; or (xi) Employee taking any action which Employer’s Board of Directors determines, in its sole discretion and subject to good faith, fair dealing, and reasonableness, constitutes unfair competition with, or induces any customer to breach any contract with, Employer or an Affiliate.

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(c) “Change in Control” shall mean the occurrence of any of the following events with respect to Employer or the Company: (i) any merger, consolidation or reorganization of Bank or the Company in which Bank or the Company, as applicable, does not survive; except for purposes of this clause (i) the following shall not constitute a change in control: a merger, consolidation or reorganization where the beneficial owners, directly or indirectly, of securities of Bank or the Company, representing fifty percent (50.0%) or more of the combined voting power of Bank’s or the Company’s then outstanding securities, remain as the beneficial owners, directly or indirectly, of at least fifty percent (50.0%) of the combined voting power of the surviving corporation; (ii) any sale, lease, exchange, mortgage, pledge, transfer, or other disposition (in one transaction or a series of transactions) of any assets of Bank or the Company having an aggregate fair market value of fifty percent (50.0%) or more of the total value of assets of Bank or the Company, reflected in the most recent month end balance sheet of Bank or the Company; (iii) an acquisition whereby any -person” (as such term is used in the Exchange Act, including any individual, corporation, partnership, trust, or any other entity) is or becomes the beneficial owner, directly or indirectly, of securities of Bank or the Company representing more than fifty percent (50.0%) of the combined voting power of Bank’s or the Company’s then outstanding securities; except for purposes of this clause (iii) the following acquisition shall not constitute a change in control: (1) any acquisition directly from Bank or the Company; (2) any acquisition by Bank or the Company; or (3) any acquisition by any employee benefit plan sponsored or maintained by Bank or the Company; (iv) if in any one year period, individuals who at the beginning of such period constitute the Board of Directors of Bank or the Company cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by Bank’s or the Company’s shareholders, of each new director is approved by a vote of at least three-quarters of the directors then still in office who were directors at the beginning of the period; or (v) a majority of the members of the Board of Directors of Bank or the Company in office prior to the happening of any event determines in its sole discretion that as a result of such event there has been a change in control. Notwithstanding the foregoing, to the extent required by Section 409A of the Code, if a Change in Control would give rise to a payment or settlement event with respect to any payment or benefit hereunder that constitutes “nonqualified deferred compensation.” the transaction or event constituting the Change in Control must also constitute a “change in control event” (as defined in Treasury Regulation § 1.409A-3(i)(5)) in order to give rise to the payment or benefit, to the extent required by Section 409A.

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(d) “Change in Control Separation Benefit” shall mean the sum of the following:

(1) One (1) times Employee’s annual base salary as in effect immediately prior to the occurrence of a Change in Control or the termination of Employee’s employment, whichever is greater; plus

(2) One (1) times the sum of “Average Bonus” and “Average Equity Grant” (as such terms are defined herein); plus

(3) Unless such equity awards by their terms expire upon consummation of a Change in Control (e.g., because performance with respect to such equity awards is measured on the date of the Change in Control and was not met), all outstanding equity incentive awards granted to the Employee prior to the Change in Control will vest (with performance-vesting awards vesting at target) (provided, that this provision should not apply to any equity awards that are issuable under any annual bonus plan or agreement to the extent such termination occurs prior to the determination of the amount of the applicable annual performance under such bonus plan or agreement);

(4) Without duplication of any payments to be made under any applicable bonus plan or agreement of the Company (in which event, this prong will only be interpreted as providing for payment of amounts in excess of amounts payable under such bonus plan or agreement), one (1) times the bonus (the “Current Year Bonus”) that would have been paid (irrespective of the manner or form (i.e., whether cash or other property) of payment of such Current Year Bonus) to Employee with respect to the calendar year in which Employee’s employment with the Employer is terminated as calculated in accordance with the Bank’s Management Incentive Plan (or any successor management and/or incentive plan), pro-rated through the date of Employee’s termination of employment following or in connection with the Change in Control. The Current Year Bonus shall be calculated assuming that all performance metrics or other vesting requirements for the maximum bonus payment are achieved in accordance with such plan notwithstanding the Company’s performance or projected or anticipated performance through such date. If any part of the Current Year Bonus would have been payable in the form of an equity grant, including but not limited to the grant of stock options, restricted stock, restricted stock units or otherwise (an “equity grant”) under the terms of the applicable bonus plan or agreement, the Current Year Bonus for purposes of this clause (3) shall include the cash value of such equity grant on the grant date. For the avoidance of doubt, the Current Year Bonus payable pursuant to this provision shall not include any sign-on, retention, or other discretionary bonus awards.

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As used herein, the term “Average Bonus” means the average of the aggregate annual bonus, if any, paid or payable to Employee for each of the three (3) full Company’s fiscal years preceding the fiscal year in which Employee’s termination of employment occurs (or such fewer number of fiscal years for which Employee was eligible to receive a bonus and/or incentive award)); provided, however, that if any portion of the aggregate annual bonus is received by Employee in the form of an equity grant, the amount of such bonus shall be determined using the fair market value of such equity grant as of the grant date. For purposes of clarity, “annual bonus” shall not include any signing bonus or extraordinary bonus, and an annual bonus shall be considered paid or payable for a calendar year if paid or payable in the next calendar year for performance (personal or corporate) in the applicable (prior) calendar year.

As used herein, the term “Average Equity Grant” means the average fair market value of any equity grants (determined as of the grant date), if any, received by Employee in connection with Employee’s annual evaluation (and not under any Company bonus plan or agreement) with respect to Employee’s and/or Company’s performance during each of the three (3) full Company’s fiscal years preceding the fiscal year in which Employee’s termination of employment occurs (or such fewer number of fiscal years for which Employee was eligible to receive such equity grants based on evaluation of Employee’s performance (e.g., including because the Employee became eligible to receive equity grants under the Company’s bonus plan)). For purposes of clarity, for purposes of “Average Equity Grants,” “equity grants” shall not include any signing equity grants or extraordinary equity grants, and an equity grant shall be considered paid or payable for a calendar year if paid or payable in the next calendar year for performance (personal or corporate) in the applicable (prior) calendar year.

(e) “Code” shall mean the Internal Revenue Code, as amended.

(f) “Disability” and “Disabled” shall mean that Employee has been unable to perform the essential functions of his/her job, with or without reasonable accommodation, for a period of three (3) consecutive months as the result of his/her incapacity due to physical or mental illness. In determining whether Employee is disabled, Employer may rely on a written statement of a licensed physician acceptable to the Employer.

(g) “Good Reason” shall mean without Employee’s consent, which consent may be given or withheld in the Employee’s sole discretion, there occurs: (i) a material diminution in Employee’s authority, duties, or responsibilities, as determined on an enterprise-wide level and not with respect to any specific region, corporate entity or geographic location; (ii) a material diminution in Employee’s then annual base salary (including any fixed amount periodic allowances, but excluding any bonus or incentive payments) on the date Employee provides Employer with the written notice required hereunder (for this purpose, a reduction of five percent (5.0%) or more shall constitute a material diminution); (iii) a material diminution in the budget over which Employee retains authority; (iv) a material change in the principal geographic location at which Employee must perform the services (for this purpose, a change in Employee’s location of employment that is within twenty-five (25) miles of Employee’s current location shall not constitute Good Reason); or (v) any other action or inaction that constitutes a material breach of the terms of this Agreement by Employer. Notwithstanding the foregoing, ‘‘Good Reason” shall only exist if Employee shall have provided the Employer with written notice within ninety (90) days of the initial occurrence of any of the foregoing events or conditions which specifically identifies the circumstances constituting Good Reason, and Employer fails to eliminate the conditions constituting Good Reason within thirty (30) days after Employer’s receipt of written notice of such event or condition from Employee. Employee’s resignation from employment with Employer for Good Reason must occur within thirty (30) days following the expiration of the foregoing cure period.

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2. Term and Termination. This Agreement is effective as of January 18, 2023 and shall terminate on December 31, 2028, unless automatically renewed. This Agreement shall automatically renew for additional periods of one (1) year each unless written notice is provided by Employer to Employee of Employer’s election not to renew this Agreement at least sixty (60) calendar days prior to the end of the original or any extended term (including any automatic renewals, the “Term”). Employer agrees that its obligations under this Agreement shall survive the expiration or termination of this Agreement following any Change in Control occurring during the Term. For the avoidance of doubt, any Change in Control that occurs after termination or non-renewal of this Agreement shall not trigger any payments or obligations by Employer to Employee under this Agreement.

3. Change in Control Separation Benefit. If upon or within the twelve (12) months following a Change in Control either (i) Employee’s employment with Employer is terminated by Employer for other than Cause, death, or Disability, or (ii) Employee terminates his employment with Employer for Good Reason, and provided that the Change in Control is announced or occurs during the Term and Employee has delivered to Employer a signed and irrevocable General Release and Confidentiality Agreement in the form attached hereto as Exhibit “A” (the “Release Agreement”) that has become irrevocable within sixty (60) days of the date of termination of employment with Employer, then Employee shall be entitled to the Change in Control Separation Benefit. The Change in Control Separation Benefit shall be paid to Employee in a lump sum on the Employer’s first regular payroll date following expiration of the sixty (60) period, subject to Sections 5, 6, 7 and 8. In the event Employee’s employment with Employer is terminated within twelve (12) months following a Change in Control as a result of Cause, death, Disability, or resignation or retirement (in both cases, if after the effectiveness of the Change in Control, without Good Reason), then Employee shall not be entitled to the Change in Control Separation Benefit.

4. Release of All Claims. As a condition for receiving the Change in Control Separation Benefit hereunder, Employee hereby agrees to execute a full and complete release of any and all claims against Employer and its officers, agents, directors, attorneys, insurers, employees and successors in interest arising from or in any way related to Employee’s employment with Employer or the termination thereof, in a form substantially similar to the Release Agreement attached hereto. In the event the Release Agreement does not become effective and irrevocable within the sixty (60) day period following the date of Employee’s termination of employment, Employee shall not be entitled to the Change in Control Separation Benefit.

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5. Section 280G Excess Parachute Payments.

(a) If all or any amount paid to Employee by Employer (or any subsidiary or Affiliate thereof), whether under this Agreement or otherwise (all such payments and benefits being hereinafter referred to as the “Total Payments”), is subject to any tax under Section 4999 of the Code, or any similar federal or state law (an “Excise Tax”), then the Total Payments shall be reduced to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (i) the net amount of such Total Payments, as so reduced (after subtracting the amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which Employee would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments). The Total Payments shall be reduced in the following order: (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 Employee that are exempt from Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting or payment with respect to any equity award with respect to Employer’s common stock that is exempt from Section 409A of the Code, (C) reduction of any other payments or benefits otherwise payable to Employee on a pro-rata basis or such other manner that complies with Section 409A of the Code, but excluding any payment attributable to the acceleration of vesting and payment with respect to any equity award with respect to Employer’s common stock that is exempt from Section 409A of the Code, and (D) reduction of any payments attributable to the acceleration of vesting or payment with respect to any equity award with respect to Employer’s common stock that is exempt from Section 409A of the Code. The foregoing reductions shall be made in a manner that results in the maximum economic benefit to Employee and, to the extent economically equivalent, in a pro rata manner.

(b) An accounting firm or compensation consulting firm with nationally recognized standing and substantial expertise and experience on Section 280G matters (the “280G Firm”) selected by Employer prior to the closing of the Change in Control will be directed to submit its determination and detailed supporting calculations to both Employee and Employer within fifteen (15) days after notification from either Employer or Employee that Employee may receive payments which may be “parachute payments.” Employee and Employer will each provide the 280G Firm access to and copies of any books, records, and documents in their possession as may be reasonably requested by the 280G Firm, and otherwise cooperate with the 280G Firm in connection with the preparation and issuance of the determinations and calculations contemplated by this Agreement. The fees and expenses of the 280G Firm for its services in connection with the determinations and calculations contemplated by this Agreement will be borne by Employer. Upon request of Employee, Employer will provide Employee with sufficient tax and compensation data to enable Employee or his tax advisor to independently make the calculations described in Section 6(a) above, and Employer will reimburse Employee for reasonable fees and expenses incurred for any such verification.

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6. 409A Provisions.

(a) Notwithstanding anything contained in this Agreement to the contrary, to the maximum extent permitted by applicable law, amounts payable to Employee pursuant to this Agreement shall be made in reliance upon Treas. Reg. Section 1.409A-1(b)(9) (Separation Pay Plans) or Treas. Reg. Section 1.409A-1(b)(4) (Short-Term Deferrals). This Agreement is intended to be written, administered, interpreted and construed in a manner such that no payment or benefits provided under the Agreement become subject to (a) the gross income inclusion set forth within Code Section 409A(a)(1)(A) or (b) the interest and additional tax set forth within Code Section 409A(a)(1)(B) (together, referred to herein as the “Section 409A Penalties”), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of Section 409A Penalties. To the extent that any amount payable to Employee pursuant to this Agreement is subject to Section 409A of the Code, and Employer or Employee reasonably believes, at any time, that such amount payable does not comply with Section 409A of the Code, it will promptly advise the other and each party hereby agrees to negotiate reasonably and in good faith to amend the terms of this Agreement such that it so complies. For purposes of this Agreement, all references to Employee’s “termination of employment” shall mean Employee’s “separation from service.” as defined in Treasury Regulation Section 1.409A-1(h) (“Separation from Service”). For purposes of Section 409A of the Code (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), each payment that Employee may be eligible to receive under this Agreement shall be treated as a separate and distinct payment. Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided under this Agreement during any tax year of Employee shall not affect in-kind benefits or reimbursements to be provided in any other tax year of Employee and are not subject to liquidation or exchange for another benefit. Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by Employee and, if timely submitted, reimbursement payments shall be made to the Employee as soon as administratively practicable following such submission, but in no event later than the last day of Employee’s taxable year following the taxable year in which the expense was incurred. In no event shall Employee be entitled to any reimbursement payments after the last day of Employee’s taxable year following the taxable year in which the expense was incurred. This section shall only apply to in-kind benefits and reimbursements that would result in taxable compensation income to Employee.

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(b) In the event that Code Section 409A applies to any compensation with respect to Employee’s Separation from Service, payment of that compensation shall be delayed if Employee is a “specified employee,” as defined in Section 409A(a)(2)(B)(i), and such delayed payment is required by Section 409A. Such delay shall last six (6) months from the date of Separation from Service (or as required by Section 409A). On the day following the end of such six (6)-month period, Employer shall make a catch-up payment to Employee equal to the total amount of such payments that would have been made during the six (6)-month period but for this Section 7(b).

7. Limitation on Benefits. Notwithstanding any other provision in this Agreement, Employer shall make no payment to Employee provided for herein to the extent that such payment would be prohibited by the provisions of Part 359 of the regulations of the FDIC as the same may be amended from time to time; and if such payment shall be so prohibited, Employer shall use it commercially reasonable best efforts to secure consent of the FDIC, the OCC, the FRB or other applicable banking regulatory agencies to make such payments in the highest amount permissible, up to the amount provided for in this Agreement.

8. Notices. Any notices to be given hereunder by either party to the other shall be in writing and may be transmitted by a personal delivery or by U.S. mail, registered or certified, postage prepaid with return receipt requested. Mailed notices shall be addressed to the parties at the addresses listed as follows:

Employer:	Principal place of business
Employee:	Principal place of business as shown in Employer’s Personnel Records and Employee’s personal file.

Each party may change the address for receipt of notices by written notice in accordance with this Section 9. Notices delivered personally shall be deemed communicated as of the date of actual receipt; mailed notices shall be deemed communicated as of three (3) days after the date of mailing.

9. Dispute Resolution.

(A) Employer’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which Employer may have against Employee or others. In no event shall Employee be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Employee under any of the provisions of this Agreement and, except as provided in Section 7, such amounts shall not be reduced if Employee obtains other employment.

(B) The parties recognize that there may be disputes between them arising as to whether the circumstances of Employee’s termination are covered by Section 3 so as to entitle Employee to the Change in Control Separation Benefit. In the event of such a dispute, there may be a need for a binding ruling by a neutral decision maker. In such an event, the following procedures shall apply:

(i) If Employee delivers a written Termination Notice (the “Termination Notice”) to Employer based on Section 1(g) “Good Reason”, Employer must pay the benefits provided in Section 3, as and when set forth in Section 3, unless Employer initiates the arbitration process to resolve the dispute, as provided by the American Arbitration Association’s Employment Rules, within 60 calendar days of the receipt of such Termination Notice from Employee. Failure by Employer to commence arbitration within the time stated by filing the required notice with the American Arbitration Association (“AAA”) will be deemed an admission by Employer as to Employee’s reason for termination.

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(ii) If Employer delivers a Termination Notice based on Termination for “Cause”, pursuant to Section 1(b), or Termination for Disability pursuant to Section 1(f), Employee must initiate the arbitration process to dispute the terms of such termination, as provided by the American Arbitration Association’s Employment Rules, within 60 calendar days of the receipt of such Termination Notice from Employer. Failure by Employee to commence arbitration within the time stated by filing the required notice with the AAA will be deemed an admission by Employee as to Employer’s reason for termination.

(iii) Arbitration shall be conducted before a single arbitrator sitting in a location mutually selected by the Parties within twenty-five (25) miles from the Employee’s job location with Employer, in accordance with the Employment Rules of the AAA then in effect. The arbitrator shall be mutually selected by the Employer and Employee. Judgment may be entered on the award of the arbitrators in any court having proper jurisdiction.

(iv) Employer shall be responsible for the fees and costs associated with the arbitrator and AAA as prescribed by the Employment Rules of AAA. Each party shall be responsible for the party’s own attorneys’ fees and costs. The arbitrator shall also have the discretion to award appropriate interest on any judgment, consistent with applicable law and the Employment Rules of AAA.

(C) The arbitration shall occur in the county in California in which Employee is employed by Employer. Neither Employee nor Employer shall disclose the existence, content, or results of any arbitration hereunder without the prior written consent of all parties. The arbitration of such issues, including the determination of any amounts of damages suffered, if applicable, shall be final and binding upon the parties to the maximum extent permitted by law, subject to the right of appeal as provided by applicable law. The parties shall have rights to discovery as provided in Section 1283.05 of the California Code of Civil Procedure including, without limitation, Section 1283.1 thereof. The arbitrator shall apply the substantive law of the State of California, or federal law, or both, as applicable, and the arbitrator will be without jurisdiction to apply any different substantive law. The arbitrator shall render its judgement and/or award and a written, reasoned opinion in support of such judgment within 30 calendar days of the end of the arbitration hearing.

10. No Guarantee of Employment. Nothing contained in this Agreement shall be construed as a contract of employment or deemed to give Employee the right to be retained in the employ of Employer or any Affiliate or any equity or other interest in the assets, business, or affairs or Employer or any Affiliate, or modify or enlarge Employee’s employment rights.

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11. Entire Agreement. This Agreement supersedes any and all other agreements, either oral or in writing, between the parties with respect to any severance or separation pay payable by Employer other than those benefits payable under the Employer’s Supplemental Executive Retirement Plans, the Management Incentive Plan or any such compensatory plans as approved by the Company’s Board of Directors from time to time to the extent of Employee’s participation in such plans, and contains all of the covenants and agreements between the parties with respect to any severance or separation pay payable by Employer, including but not limited to that certain Severance and Change in Control Agreement, effective February 1, 2022, by and between Employer and Employee (the “prior agreement”), which prior agreement is terminated in all respects effective as of the effective date of this Agreement. 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, that no other agreement, statement, or promise not contained in this Agreement shall be valid or binding on either party, and that this Agreement, when executed by the parties, will govern the terms and conditions of the payments and benefits payable or due to be payable to Employee in connection with a Change in Control of Employer.

12. Successors and Assigns. This Agreement may be assigned or transferred to, and shall be binding upon and shall inure to the benefit of, any successor, subsidiary, or Affiliate of Employer, and any such successor, subsidiary, or Affiliate shall be deemed substituted for all purposes for “Employer” under the terms of this Agreement. Upon the occurrence of a Change in Control, Employer shall require any successor to Employer to expressly assume and agree in writing to perform all obligations of Employer under this Agreement, including obligations for payment of the Change in Control Separation Benefit. As used in this Agreement, the term “successor” shall mean any person, firm, corporation, or business entity which at any time, whether by merger, purchase, or otherwise, acquires all or substantially all of the assets, stock, or business of Employer. Employee acknowledges that Employer has the right to sell, assign, or otherwise transfer any portion or substantially all or all of the capital stock, assets, or business of Employer and that any such sale, assignment, or transfer shall not be deemed to be a termination of the employment of Employee. Employee shall not assign or transfer any of Employee’s rights pursuant to this Agreement, wholly or partially, to any other person, other than by will or the laws of descent and distribution.

13. Withholding Taxes on Benefits. Any benefits payable under this Agreement shall be subject to any applicable federal, state, and / or local tax withholding requirements and as authorized by law.

14. Modifications. Any modification of this Agreement will be effective only if it is in writing and signed by each party or its authorized representative.

15. Waiver. The failure of either party to insist on strict compliance with any of the terms, provisions, covenants, or conditions of this Agreement by the other party shall not be deemed a waiver of any term, provision, covenant, or condition, individually or in the aggregate, unless such wavier is in writing signed by the party or the authorized representative of the party to be bound; nor shall any waiver or relinquishment of any right or power, nor any delay or forbearance at any one time or times be deemed a waiver or relinquishment of that right or power or authorize any delay or forbearance for all or any other times.

16. Partial Invalidity. If any provision in this Agreement is held by an arbitrator or arbitrators, or a court of competent jurisdiction 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, If any provision in this Agreement is held by an arbitrator or arbitrators, or by a court of competent jurisdiction to be invalid, void, or unenforceable as written, it shall be enforced to the maximum extent allowed by applicable law.

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17. 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 either party, but according to the application of other rules of contract interpretation, if an ambiguity or uncertainty exists. Employee acknowledges that, in executing this Agreement, Employee has had the opportunity to seek the advice of independent legal counsel, and has read and understood all of the terms and provisions of this Agreement.

18. Governing Law and Venue. The laws of the State of California, other than those laws denominated as choice of law rules, and federal law, where applicable, shall govern the validity, construction, and effect of this Agreement. Any action which may be brought under this Agreement shall be brought in the State of California in Los Angeles County.

19. Counterparts. This Agreement may be executed in multiple counterparts and by facsimile signature and, when fully executed, each counterpart or facsimile signature shall constitute an original Agreement. The parties agree and consent to the use of electronic signatures solely for the purposes of executing this Agreement. Such electronic signature shall be deemed to have the same full and binding effect as a handwritten signature.

20. At-Will Employment. Employer and Employee acknowledge that Employee’s employment is and shall continue to be at-will, as defined under applicable law, and that Employee’s employment with Employer may be terminated by either party at any time for any or no reason, with or without notice. If’ Employee’s employment terminates for any reason during the Term, Employee shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided in this Agreement or as required by applicable law.

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IN WITNESS WHEREOF, the parties have executed this Agreement in the City of Los Angeles, Los Angeles County, State of California.

BANK OF SOUTHERN CALIFORNIA, N.A.		EMPLOYEE
	By:		By:
	Its:		Its:
Date:		Date:
SOUTHERN CALIFORNIA BANCORP
	By:
	Its:
Date:

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EXHIBIT “A”

GENERAL RELEASE AND CONFIDENTIALITY AGREEMENT

This General Release and Confidentiality Agreement (this “Release Agreement”) is entered into by and between ______________ (“Employee”) and Bank of Southern California, N.A., and Southern California Bancorp on each of its behalf and on behalf of its parents, subsidiaries, affiliates and successors-in-interest (collectively, the “Employer), with reference to the following:

A. Employee and Employer have entered into that certain Change in Control Agreement dated as of _____________________ (the “Agreement”).

B. A condition precedent to certain of Employer’s obligations under the Agreement is the execution of this Release Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants herein contained, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties, intending to be legally bound, agree and covenant as follows:

1. In consideration for the payment of the Change in Control Separation Benefit, as defined in the Agreement (the “Separation Benefit”), Employee agrees unconditionally and forever to release and discharge the Employer, its parents, subsidiaries, affiliates, successors-in-interest, and their respective officers, directors, managers, employees, members, shareholders, representatives, attorneys, agents and assigns from any and all claims, actions, causes of action, demands, rights or damages of any kind or nature which Employee may now have, or ever have, whether known or unknown, that arise out of or in any way relate to Employee’s employment with, or separation from, the Employer on or before the date of execution of this Release Agreement; provided, however, that this release does not apply to any unreimbursed expenses incurred in connection with Employee’s employment with Employer, any deposit accounts Employee may have at Employer, and any rights or benefits of Employee pursuant to the Agreement, including the right to enforce the collection of the Separation Benefit.

2. This release specifically includes, but is not limited to, any claims under federal, state, local or other authority law, rule or regulation pertaining to conditions of employment, wages, or discrimination in employment based on age, sex, disability, sexual orientation, medical condition, genetic characteristics, pregnancy, race, color, national origin, religion, family or medical leave, veteran status, or any other protected classification including, but not limited to, to the fullest extent permitted by law, the Civil Rights Act of 1964 (including Title VII of that Act), the Civil Rights Act of 1991, the Age Discrimination in Employment Act, the Employee Retirement Income Security Act of 1974, the California Fair Employment and Housing Act, as amended, the California Labor Code, the California Family Rights Act of 1991, the Vietnam Era Veterans Readjustments Assistance Act of 1974, the Americans with Disabilities in Employment Act, the Family and Medical Leave Act, Older Workers’ Benefit Protection Act, the Equal Pay Act of 1963, the Uniformed Services Employment and Reemployment Rights Act, the Rehabilitation Act of 1973, the Occupational Safety and Health Act, the Worker Adjustment and Retaining Notification Act, the Racketeer Influenced and Corrupt Organizations Act, the Financial Reform Recovery and Enforcement Act of 1989, the Fair Labor Standards Act, and Section 1981 of Title 42 of the United States Code, and all similar federal, state and local laws and regulations.

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3. Employee acknowledges that, unless this Release Agreement becomes effective within sixty (60) clays following Employee’s termination of-employment, he/she is not otherwise entitled to receive the Separation Benefit referenced in paragraph 1 above.

4. Employee understands and acknowledges that his/her execution of this Release Agreement is voluntary, and that if he/she does not accept the Separation Benefit, he/she will not lose any other rights that he/she may have under other policies or programs of the Employer.

5. Employee agrees that this release is meant to be as general as possible and covers all claims of any nature whether or not he/she knows the claims exist at this time, including but not limited to contract claims, tort claims, and claims under any state, federal, or local law and from any and all claims statutory or common law arising out of his/her employment by Employer and any legal restrictions on an employer’s right to discharge an employee, including but not limited to, intentional infliction of emotional distress and wrongful discharge. However, nothing in this release is intended to bar any claim that, by statute, may not be waived, or prohibits him/her from filing a charge of discrimination or cooperating in any proceeding before the California Department of Fair Employment and Housing (“CDFEIF’) or the Equal Employment Opportunity Commission (“EEOC”).

6. Employee hereby waives all rights under Section 1542 of the Civil Code of the State of California, or any analogous state law, federal law or regulation. Section 1542 provides as follows:

“A general release does not extend to claims which 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 understands and acknowledges that the significance and consequence of this waiver of California Civil Code Section 1542 relates to all facts and circumstances that occurred during or prior to, his/her employment with the Employer (including but not limited to my separation from the Employer), whether known or unknown, and that even if he/she should eventually suffer injury arising out of or pertaining to the employment relationship or its termination, he/she will not be able to make any claim for those injuries. Furthermore, Employee acknowledges that he/she consciously intends these consequences even as to claims that may exist as of the date of this Release Agreement but which he/she does not know exist and which, if known, would materially affect his/her decision to execute this Release Agreement, regardless of whether the lack of knowledge is the result of ignorance, oversight, error, negligence or any other cause.

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7. In further consideration for the Separation Benefit, Employee agrees and warrants that at all times after the termination of his/her employment with Employer, other than for the benefit of Employer, Employee will keep confidential and will make no use of Confidential Information, or any part thereof, for the benefit of any other person or entity. Employee further agrees and warrants that all Employer files, papers and property that have been in his/her possession, custody or control during his/her employment have been returned to the Employer or destroyed and will not be copied or removed from Employer’s premises. Employee further agrees that he/she will not disclose the terms of this Release Agreement except to his/her immediate family, attorney or tax consultant, or as required by law. For purposes of this Release Agreement, “Confidential Information- includes all secrets and other confidential information, ideas, knowledge, know-how, techniques, secret processes, improvements, discoveries, methods, inventions, sales, financial information, lists of customers and prospective customers, business, financial and other information received from a customer or prospective customer or any other third party that the Employer is obligated to treat as confidential, plans, concepts, strategies or products, as well as all documents, reports, drawings, designs, plans and proposals otherwise pertaining to same or relating to the business and properties of the Employer of which the Employee has acquired, or may hereafter acquire, knowledge and possession as an employee of Employer.

In accordance with 18 U.S.C. § 1833, the Bank hereby notifies Employee that, notwithstanding anything to the contrary herein or in the Agreement:

a. Employee shall not be in breach of the Agreement or this Release Agreement, and shall not be held criminally or civilly liable under any Federal or State trade secret law (i) for the disclosure of a trade secret that is made in confidence to a Federal, State, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (ii) for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

b. If Employee files a lawsuit for retaliation by Employer for reporting a suspected violation of law, Employee may disclose the trade secret to Employee’s attorney, and may use the trade secret information in the court proceeding, if Employee files any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.

8. This Release Agreement is subject to the terms of the Older Workers Benefit Protection Act of 1990 (“OWBPA”). The OWBPA provides that an individual cannot waive a right or claim under the Age Discrimination in Employment Act (“ADEA”) unless the waiver is knowing and voluntary. Pursuant to the terms of the OWBPA, Employee acknowledges and agrees that he/she has executed this Release Agreement voluntarily, and with full knowledge of its consequences. In addition, Employee hereby acknowledges and agrees as follows:

a. This Release Agreement has been written in a manner that is calculated to be understood, and is understood, by Employee;

b. The release provisions of this Release Agreement apply to any rights Employee may have under the ADEA;

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c. The release provisions of this Release Agreement do not apply to any rights or claims Employee may have under the ADEA that arise after the date he/she executes this Release Agreement;

d. Employer hereby advises Employee to consult with an attorney prior to executing this Release Agreement;

e. Employer is giving Employee a period of [twenty-one (21)] [forty-five (45)] calendar days to consider this Release Agreement. Employee may accept and sign this Release Agreement before the expiration of the [twenty-one (21)] [forty-five (45)] calendar day time-period, but Employee is not required to do so by Employer; and

f. Employee acknowledges that this offer is revoked if Employee fails to return this Release Agreement within the [twenty-one (21)] [forty-five (45)] calendar day time period specified in paragraph 8(e) above.

9. This Release Agreement is revocable by Employee for a period of seven (7) calendar days following Employee’s execution of this Release Agreement. The revocation by Employee of this Release Agreement must be in writing, must specifically revoke this Release Agreement and must be received by the Employer prior to the eighth (8th) day following the execution of this Release Agreement by Employee. This Release Agreement becomes effective, enforceable and irrevocable on the eighth (8th) day following Employee’s execution of this Release Agreement. No Separation Benefit payment will be made to the Employee until such date.

10. The amounts provided under this Release Agreement are not offered in connection with any specific exit incentives or other employment termination program.

11. Employee agrees not to disparage the Employer, its officers, employees or agents of the Employer either within the Employer or externally in any way.

12. Employee warrants that he/she has not assigned any right or claim released in this Release Agreement.

13. This Release Agreement is binding on Employee’s heirs and assigns.

14. In executing this Release Agreement, Employee is not relying on any representations made to him/her by the Employer. It is expressly understood that this Release Agreement, and any consideration for it, do not in any way constitute an admission of liability or wrongdoing on the part of the Employer. Any such liability is expressly denied.

15. Employee hereby expressly assumes any risk that the facts and law concerning this Release Agreement may be other than as presently known to him/her.

16. This Release Agreement constitutes the sole and entire agreement between Employer and Employee with respect to the subject matter hereof and supersedes any and all understandings and agreements made prior to the date of this Release Agreement.

17. This Release Agreement shall be subject to the arbitration provisions set forth in Section 9 of the Agreement. This Release Agreement shall be governed in all respects by the laws of the State of California. No action involving this Release Agreement or Employee’s employment by the Employer may be brought except in the State of California in San Diego County.

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The undersigned agree to the terms of this Release Agreement and voluntarily enter into it with the intent to be bound hereby.

BANK OF SOUTHERN CALIFORNIA, N.A.		EMPLOYEE
	By:		By:
	Its:		Its:
Date:		Date:
SOUTHERN CALIFORNIA BANCORP
	By:
	Its:
Date:

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EX-10.12

Exhibit 10.12

BANK OF SOUTHERN CALIFORNIA

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

THIS SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT (“Agreement”) is made and entered into this 15 day of July, 2021 (“Effective Date”), by and between Bank of Southern California, N.A., a national bank located in San Diego, California (the “Bank”), and Thomas Dolan (the “Executive”).

Article 1

Benefits Tables

The following tables describe the benefits available to the Executive, or the Executive’s Beneficiary, upon the occurrence of certain events. Capitalized terms have the meanings given them in Article 3. Each benefit described is in lieu of any other benefit herein, except as expressly stated otherwise.

Table A: Retirement Benefit

Distribution Event	Amount of Benefit	Form of Benefit	Timing of Benefit Distribution
Separation from Service following attainment of age 67	$50,000.00 per year	Equal annual installments	Payments begin: First day of first month following Separation from Service and on each subsequent anniversary thereafter Duration of payments: 10 years Note: Payment subject to delay pursuant to Section 9.14(b)

Table B: Benefit Available Prior to Retirement

Distribution Event	Amount of Benefit	Form of Benefit	Timing of Benefit Distribution
Voluntary Separation from Service prior to age 67	An amount equal to the vested Accrued Liability Balance, subject to the following vesting schedule: Executive shall vest in the Accrued Liability Balance at the rate of 20% per Year of Plan Participation, commencing with the Effective Date of this Agreement, until 100% vested at the end of 5 Years of Plan Participation.	Lump sum	Payment begins: on the date that is the first anniversary of Separation from Service Note: payment subject to delay pursuant to Section 9.14(b)

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Distribution Event	Amount of Benefit	Form of Benefit	Timing of Benefit Distribution
Involuntary Separation from Service without Cause prior to age 67	100% of the Accrued Liability Balance, as of the date of Separation from Service	Lump sum	Payment begins: on the date that is the first anniversary of Separation from Service Note: payment subject to delay pursuant to Section 9.14(b)
Change in Control prior to age 67 followed within 12 months by: (i) Involuntary Separation from Service or (ii) Separation from Service for “Good Reason”	100% of the Accrued Liability Balance, calculated as if Executive had attained age 67 while employed by the Bank, and discounted back to the date of Executive’s Separation from Service at the rate in effect under the Agreement at that time.	Lump sum	Payment begins: First day of the month following Separation from ServiceNote: Payment subject to delay pursuant to Section 9.14(b)

Table B (Cont.): Benefit Available Prior to Retirement

Distribution Event	Amount of Benefit	Form of Benefit	Timing of Benefit Distribution
Disability prior to age 67	100% of the Accrued Liability Balance, calculated as of date of Disability	Select one: ☒ lump sum	Payments begin: First day of the month following Disability
		or ☐ Equal annual installments for 1 years (not to exceed 10)	If payable in annual installments, each subsequent payment will be made on the anniversary of the first payment

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Table C: Death Benefit

Distribution Event	Amount of Benefit	Form of Benefit	Timing of Benefit Distribution
Death (while actively employed)	100% of the Accrued Liability Balance at the date of death	Select one: ☒ lump sum	Payment begins (to Beneficiary): 30 days following Executive’s death
Death during installment payout of benefit under Table A or B	Accrued Liability Balance, as of date of death	or ☐ Equal annual installments for 1 years (not to exceed 10)	If payable in annual installments, each subsequent payment will be made on the anniversary of the first payment

Article 2

Purpose

The purpose of this Agreement is to further the growth and development of the Bank by providing Executive with supplemental retirement income, and thereby encourage Executive’s productive efforts on behalf of the Bank and the Bank’s shareholders, and to align the interests of the Executive and those shareholders. The Bank promises to make certain payments to the Executive, or the Executive’s Beneficiary, at retirement, death, or upon some other qualifying event pursuant to the terms of this Agreement.

Article 3

Definitions and Construction

It is intended that this Agreement comply and be construed in accordance with Section 409A of the Internal Revenue Code (the “Code”). It is also intended that the Agreement be “unfunded” and maintained for a select group of management or highly compensated employees of the Bank, for purposes of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and not be construed to provide income to the Executive or Beneficiary under Code prior to actual receipt of benefits.

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Where the following words and phrases appear in the Agreement, they shall have the respective meanings set forth below, unless their context clearly indicates to the contrary:

3.1 “Accrued Liability Balance” shall mean the amount accrued by the Bank to fund the future benefit expense associated with this Agreement. The Bank shall account for this benefit using Generally Accepted Accounting Principles, regulatory accounting guidance of the Bank’s primary federal regulator, and other applicable accounting guidance. Accordingly, the Bank shall establish a liability retirement account for the Executive into which appropriate accruals shall be made using a reasonable discount rate, which may be adjusted from time to time.

3.2 “Affiliate” shall mean any partnership, firm, corporation, association, joint-stock company, unincorporated association, or other entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Bank, including any member of an affiliated group of which the Bank is a common parent corporation as provided in Section 1504 of the Code.

3.3 “Board” shall mean the Board of Directors of the Bank, as constituted from time to time.

3.4 “Change in Control” shall mean a change in ownership or control of the Bank as defined in Treasury Regulation §1.409A-3(i)(5) or any subsequently applicable published authority or guidance.

3.5 “Disability” shall mean Executive, while actively employed by the Bank: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which 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 (ii) is, by reason of any medically determinable physical or mental impairment which 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 Bank. Medical determination of Disability may be made by either the Social Security Administration or by the provider of an accident or health plan covering employees of the Bank, provided that the definition of Disability applied under such Disability insurance program complies with the requirements of Section 409A. Upon the request of the Plan Administrator, the Executive must submit proof to the Plan Administrator of Social Security Administration’s or the provider’s determination.

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3.6 “Good Reason” shall mean one or more of the following conditions without the consent of the Executive: (i) a material diminution in the Executive’s authority, duties, or responsibilities; (ii) a material diminution in the Executive’s base compensation (for this purpose, a reduction of five percent (5.0%) or more shall constitute a material diminution); (iii) a material diminution in the authority, duties or responsibilities of the supervisor to whom the Executive is required to report; (iv) a material diminution in the budget over which the Executive retains authority; (v) a material change in the geographic location at which the Executive must perform services; or (vi) any other action or inaction that constitutes a material breach of the terms of this Agreement or an applicable employment agreement with the Executive. For this purpose, (i) a change in the Executive’s location of employment that is within fifteen (15) miles of Executive’s current location of employment; or (ii) a regulatory order which, by necessity or implication, would require a change in the terms of Executive’s employment Agreement shall not constitute Good Reason. Upon the occurrence of any of the foregoing conditions, the Executive must provide notice of the condition within 90 days following the initial existence of the condition, and the Bank must be provided a period of at least 30 days during which it may remedy the good reason condition. Executive’s resignation from employment with the Bank for Good Reason must occur within thirty (30) days following the expiration of the foregoing cure period.

3.7 “Involuntary Separation from Service” shall mean that the Bank terminates Executive’s employment at any time before Executive’s age 67 and such termination is not considered a Termination for Cause, or Executive’s Separation from Service by reason of his resignation for Good Reason at any time before Executive’s age 67.

3.8 “Separation from Service” shall mean that the Executive has a “separation from service” as defined in Treasury Regulation Section 1.409A-1(h). A Separation from Service will not be deemed to have occurred while the Executive is on military leave, sick leave, or other bona fide leave of absence, provided Executive has the right to reemployment under an applicable statute or by contract.

3.9 “Termination for Cause” shall mean:

(a) The willful, intentional, and material breach of duty by Executive in the course of his/her employment; (b) the habitual and continued neglect by Executive of his/her employment duties and obligations; (c) Executive’s willful and intentional violation of any State of California or federal banking laws, or of the Bylaws, rules, policies, or resolutions of the Bank, or of the rules or regulations of the OCC or the FDIC, or other regulatory agency or governmental authority having jurisdiction over the Bank; (d) Executive’s refusal to comply in any material respect with the legal directives of any regulatory authority or governmental entity having jurisdiction over the Bank; (e) the determination by a state or federal banking agency or governmental authority having jurisdiction over the Bank that Executive is not suitable to act in the capacity for which he/she is then employed by the Bank; (f) Executive’s conviction of any felony or a crime involving moral turpitude or commission of a fraudulent or dishonest act, including a breach of trust or misappropriation, or if Executive has entered a plea of nolo contendere to such an act or offense;

(b) Executive’s willful misfeasance or gross negligence in the performance of his/her duties; (h) Executive’s conduct that is demonstrably and significantly harmful, or will likely have, or has had a material adverse effect on the Bank or an Affiliate, as reasonably determined by the Bank’s Board of Directors; (i) Executive cannot be covered under a fidelity bond issued by an insurance company reasonably acceptable to the Bank; (j) Executive’s disclosure without authority or unauthorized use of any secret or confidential information concerning the Bank or an Affiliate or their customers; or

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(c) Executive taking any action which the Bank’s Board of Directors determines, in its sole discretion and subject to good faith, fair dealing, and reasonableness, constitutes unfair competition with, or induces any customer to breach any contract with, the Bank or an Affiliate.

3.10 “Voluntary Separation from Service” shall mean the Executive willfully terminates employment with the Bank prior to age 67 for reasons other than Good Reason, death or because of permanent Disability.

3.11 “Year of Plan Participation” shall mean each 12-month period of full-time employment with the Bank. The first Year of Plan Participation shall commence with the Effective Date of this Agreement. The Board shall have discretion to grant a Year of Plan Participation vesting credit for nonconsecutive Years of Plan Participation, in its sole discretion.

Article 4

Beneficiary

4.1 Beneficiary. Executive shall have the right to name a Beneficiary of the death benefit, if any, described in Article 1 herein. Executive shall have the right to name such Beneficiary at any time prior to Executive’s death and submit it to the Plan Administrator (or Plan Administrator’s representative) on the form provided. Once received and acknowledged by the Plan Administrator, the form shall be effective. The Executive may change a Beneficiary designation at any time by submitting a new form to the Plan Administrator. Any such change shall follow the same rules as for the original Beneficiary designation and shall automatically supersede the existing Beneficiary form on file with the Plan Administrator.

4.2 Failure to Designate a Beneficiary. If Executive dies without a valid Beneficiary designation on file with the Plan Administrator, the Executive’s surviving spouse, if any, shall become the designated Beneficiary. If Executive has no surviving spouse, death benefits shall be paid to the personal representative of Executive’s estate.

4.3 Facility of Distribution. If the Plan Administrator determines in its discretion that a benefit is to be paid to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct distribution of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any distribution of a benefit shall be a distribution for the account of the Executive and the Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such distribution amount.

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Article 5

General Limitations

5.1 Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if Executive’s employment is terminated for Cause.

5.2 Removal. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act.

5.3 Trade Secrets.

5.3.1 Executive agrees that, during the Term, Executive will have access to, and become acquainted with, confidential, trade secret, and proprietary information concerning the Bank, which may include information on its operations and business, the identity of its customers, including knowledge of their financial condition and financial needs, as well as such customers’ methods of doing business. Executive will not use or disclose any of such trade secrets, proprietary, or confidential information during the Term or for a period of two (2) years thereafter, without the Bank’s prior written consent; provided, however, that non-public information about the customers, whether characterized as consumer information or customer information, as all such terms are defined in the Interagency Guidelines Establishing Information Security Standards implementing Section 501(b) of the Gramm-Leach-Bliley Act and Section 628 of the Fair Credit Reporting Act, as amended, shall be kept confidential for an unlimited period of time. This limitation shall not apply to information, which is or becomes public, or in the public domain, without the fault of Executive.

5.3.2 In accordance with 18 U.S.C. §1833, the Bank hereby notifies Executive that, notwithstanding anything to the contrary herein:

a) Executive shall not be in breach of this Agreement, and shall not be held criminally or civilly liable under any Federal or State trade secret law (i) for the disclosure of a trade secret that is made in confidence to a Federal, State, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (ii) for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

b) If Executive files a lawsuit for retaliation by the Bank for reporting a suspected violation of law, Executive may disclose the trade secret to Executive’s attorney, and may use the trade secret information in the court proceeding, if Executive files any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.

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5.4 Return of Documents. Executive expressly agrees that all manuals, documents, files, reports, studies, instruments or other materials used and/or developed by Executive during Executive’s employment with the Bank, are solely the property of the Bank and that Executive has no right, title or interest therein. Upon termination of Executive’s employment, Executive or Executive’s representative shall promptly deliver possession of all of said property to the Bank in good condition.

Article 6

Administration of Agreement

6.1 Plan Administrator. The Bank shall be the Plan Administrator, unless the Bank appoints a committee to be the Plan Administrator. The Bank may appoint a Committee (“Committee”) of one or more individuals in the employment of Bank for the purpose of discharging the administrative responsibilities of the Bank under the Plan. The Bank may remove a Committee member for any reason by giving such member ten (10) days’ written notice and may thereafter fill any vacancy thus created. The Committee shall represent the Bank in all matters concerning the administration of this Plan; provided however, the final authority for all administrative and operational decisions relating to the Plan remains with the Bank.

6.2 Authority of Plan Administrator. The Plan Administrator shall have full power and authority to adopt rules and regulations for the administration of the Plan, provided they are not inconsistent with the provisions of this Plan, and Section 409A of the Code, to interpret, alter, amend or revoke any rules and regulations so adopted, to enter into contracts on behalf of the Bank with respect to this Agreement, to make discretionary decisions under this Plan, to demand satisfactory proof of the occurrence of any event that is a condition precedent to the commencement of any payment or discharge of any obligation under the Plan, and to perform any and all administrative duties under this Plan.

6.3 Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Bank.

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

6.5 Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless any party contracted for the purposes of assisting the Plan Administrator in performing its duties under this Agreement against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by such contracted party.

6.6 Bank Information. To enable any party contracted for the purposes of assisting the Plan Administrator in performing its duties under this Agreement to perform its functions, the Bank shall supply full and timely information to such contracted party on all matters relating to the date and circumstances of any event triggering a benefit hereunder.

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6.7 Annual Statement. Any party contracted for the purposes of assisting the Plan Administrator in performing its duties under this Agreement shall provide to the Bank, on the schedule set forth in any administrative services contract, a statement setting forth the benefits to be distributed under this Agreement.

Article 7

Claims and Review Procedures

7.1 Claims Procedure. An Executive or Beneficiary (“claimant”) who has not received benefits under the Agreement that he or she believes should be distributed shall make a claim for such benefits as follows:

7.1.1 Initiation – Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits.

7.1.2 Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within 90 days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 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 Plan Administrator expects to render its decision.

7.1.3 Notice of Decision. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;

(d) An explanation of the Agreement’s review procedures and the time limits applicable to such procedures; and

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

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7.2 Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:

7.2.1 Initiation – Written Request. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review.

7.2.2 Additional Submissions – Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Plan Administrator shall also provide the 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 the claimant’s claim for benefits.

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

7.2.4 Timing of Plan Administrator Response. The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

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

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A statement that the 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 the claimant’s claim for benefits; and

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

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Article 8

Amendments and Termination

8.1 This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Executive. Provided, however, if the Board determines in good faith that the Executive is no longer a member of a select group of management or highly compensated employees, as that phrase applies to ERISA, for reasons other than death, Disability or retirement, the Bank may terminate this Agreement. No amendment or termination will reduce or eliminate Executive’s vesting in any benefit as of the time of such amendment or termination. Additionally, the Bank may also amend this Agreement to conform to written directives to the Bank from its banking regulators.

8.2 Termination or Modification of Agreement by Reason of Change in the Law, Rules, Regulations, or by a vote of Executive as Board Member. The Bank is entering into this Agreement upon the assumption that certain existing tax laws, the Code, rules, and regulations will continue in effect in their current form. If any said assumptions should change and the Board of Directors of the Bank determines that said change has a detrimental economic effect on the Executive, then the Bank reserves the right to terminate or modify this Agreement accordingly. No amendment or termination will reduce or eliminate Executive’s vesting in any benefit as of the time of such amendment or termination.

8.3 Subsequent Changes to Time and Form of Payment. The Bank may permit a subsequent change to the time and form of benefit distributions. Any such change shall be considered made only when it becomes irrevocable under the terms of the Agreement. Any change will be considered irrevocable not later than thirty (30) days following acceptance of the change by the Plan Administrator, subject to the following rules:

(a) the subsequent deferral election may not take effect until at least twelve (12) months after the date on which the election is made;

(b) the payment (except in the case of death, disability, or unforeseeable emergency) upon which the subsequent deferral election is made is deferred for a period of not less than five (5) years from the date such payment would otherwise have been paid; and

(c) in the case of a payment made at a specified time, the election must be made not less than twelve (12) months before the date the payment is scheduled to be paid.

Article 9

Miscellaneous

9.1 Binding Effect. This Agreement shall bind the Executive and the Bank, and their beneficiaries, survivors, executors, administrators and transferees.

9.2 No Guarantee of Employment. This Agreement is not a contract for employment. It does not give the Executive the right to remain as an employee of the Bank, nor does it interfere with the Bank’s right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time.

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9.3 Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner, other than by will or the laws of descent and distribution.

9.4 Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement. The Executive acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies).

9.5 Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of California, except to the extent preempted by the laws of the United States of America.

9.6 Unfunded Arrangement. The Executive is a general unsecured creditor of the Bank for the distribution of benefits under this Agreement. The benefits represent the mere promise by the Bank to distribute such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive’s life or other informal funding asset is a general asset of the Bank to which the Executive has no preferred or secured claim.

9.7 Reorganization. The Bank shall not merge or consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm, or person unless such succeeding or continuing bank, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term “Bank” as used in this Agreement shall be deemed to refer to the successor or survivor bank.

9.8 Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.

9.9 Interpretation. Wherever the fulfillment of the intent and purpose of this Agreement requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.

9.10 Headings. Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.

9.11 Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision has never been inserted herein.

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9.12 Notice. Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

Attn: Corporate Secretary, Bank of Southern California

12265 El Camino Real

Suite 100

San Diego, CA 92130

Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

Any notice or filing required or permitted to be given to the Executive under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Executive.

9.13 Opportunity to Consult with Independent Advisors. The Executive acknowledges that he/she has been afforded the opportunity to consult with independent advisors of his/her choosing including, without limitation, accountants or tax advisors and counsel regarding both the benefits granted to him/her under the terms of this Agreement and the (a) terms and conditions which may affect the Executive’s right to these benefits, and (b) personal tax effects of such benefits including, without limitation, the effects of any federal or state taxes, Section 280G of the Code, Section 409A of the Code, and any other taxes, costs, expenses or liabilities whatsoever related to such benefits, which in any of the foregoing instances the Executive acknowledges and agrees shall be the sole responsibility of the Executive notwithstanding any other term or provision of this Agreement. The 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 the Executive and further specifically waives any right for himself or herself, and his or her 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 Section 9.13. The Executive further acknowledges that he/she has read, understands and consents to all of the terms and conditions of this Agreement, and that he/she enters into this Agreement with a full understanding of its terms and conditions.

9.14 Section 409A of the Code.

(a) This Agreement is intended to be written, administered, interpreted and construed in a manner such that no payment or benefits provided under the Agreement become subject to the gross income inclusion set forth within Code Section 409A(a)(1)(A) or (b) the interest and additional tax set forth within Code Section 409A(a)(1)(B) (together, referred to herein as the “Section 409A Penalties”), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of Section 409A Penalties. For purposes of this Agreement, all references to Executive’s “termination of employment” shall mean Executive’s Separation from Service. For purposes of Section 409A of the Code (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), each payment that Executive may be eligible to receive under this Agreement shall be treated as a separate and distinct payment.

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(b) Solely to the extent necessary to avoid penalties under Section 409A, distributions under this Agreement may not commence earlier than six (6) months after a Separation from Service (as described under the “Separation from Service” provision herein) if, pursuant to Internal Revenue Code Section 409A, the participant hereto is considered a “specified employee” of a publicly-traded company. In the event a distribution is delayed pursuant to this Section, the originally scheduled distribution shall be delayed for six (6) months, and shall commence instead on the first day of the seventh month following Separation from Service. If payments are scheduled to be made in installments, the first six (6) months of installment payments shall be delayed, aggregated, and paid instead on the first day of the seventh month, after which all installment payments shall be made on their regular schedule. If payment is scheduled to be made in a lump sum, the lump sum payment shall be delayed for six (6) months and instead be made on the first day of the seventh month.

9.15 Certain Accelerated Payments. The Bank may make any accelerated distribution permissible under Treasury Regulation 1.409A-3(j)(4), provided that such distribution(s) meets the requirements of Section 1.409A-3(j)(4).

9.16 Rabbi Trust. The Bank and the Executive acknowledge and agree that, in anticipation of a Change in Control, the may Bank 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 the Executive in such manner and at such times as specified in this Agreement.

9.17 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.

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IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have signed this Agreement as of the date indicated above.

EXECUTIVE:	BANK:
/s/ Thomas Dolan	Bank of Southern California, N.A.
Thomas Dolan
	By	/s/ Anthony Divita
	Title	Chief Administrative Officer

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EX-10.13

Exhibit 10.13

BANK OF SOUTHERN CALIFORNIA

SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

THIS SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT (“Agreement”) is made and entered into this 14th day of July, 2021 (“Effective Date”), by and between Bank of Southern California, N.A., a national bank located in San Diego, California (the “Bank”), and Richard Hernandez (the “Executive”).

Article 1

Benefits Tables

The following tables describe the benefits available to the Executive, or the Executive’s Beneficiary, upon the occurrence of certain events. Capitalized terms have the meanings given them in Article 3. Each benefit described is in lieu of any other benefit herein, except as expressly stated otherwise.

Table A: Retirement Benefit

Distribution Event	Amount of Benefit	Form of Benefit	Timing of Benefit Distribution
Separation from Service following attainment of age 67	$75,000.00 per year	Equal annual installments	Payments begin: First day of first month following Separation from Service and on each subsequent anniversary thereafter Duration of payments: 10 years Note: Payment subject to delay pursuant to Section 9.14(b)

Table B: Benefit Available Prior to Retirement

Distribution Event	Amount of Benefit	Form of Benefit	Timing of Benefit Distribution
Voluntary Separation from Service prior to age 67	An amount equal to the vested Accrued Liability Balance, subject to the following vesting schedule: Executive shall vest in the Accrued Liability Balance at the rate of 10% per Year of Plan Participation, commencing with the Effective Date of this Agreement, until 100% vested at the end of 10 Years of Plan Participation.	Lump sum	Payment begins: on the date that is the first anniversary of Separation from Service Note: payment subject to delay pursuant to Section 9.14(b)
Involuntary Separation from Service without Cause prior to age 67	100% of the Accrued Liability Balance, as of the date of Separation from Service	Lump sum	Payment begins: on the date that is the first anniversary of Separation from Service Note: payment subject to delay pursuant to Section 9.14(b)
Change in Control prior to age 67 followed within 12 months by: (i) Involuntary Separation from Service or (ii) Separation from Service for “Good Reason”	100% of the Accrued Liability Balance, calculated as if Executive had attained age 67 while employed by the Bank, and discounted back to the date of Executive’s Separation from Service at the rate in effect under the Agreement at that time.	Lump sum	Payment begins: First day of the month following Separation from Service Note: Payment subject to delay pursuant to Section 9.14(b)
Disability prior to age 67	100% of the Accrued Liability Balance, calculated as of date of Disability	Select one: ☐ lump sum or ☐Equal annual installments for ______years (not to exceed 10)	Payments begin: First day of the month following Disability If payable in annual installments, each subsequent payment will be made on the anniversary of the first payment

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Table C: Death Benefit

Distribution Event	Amount of Benefit	Form of Benefit	Timing of Benefit Distribution
Death (while actively employed) Death during installment payout of benefit under Table A or B	100% of the Accrued Liability Balance at the date of death Accrued Liability Balance, as of date of death	Select one: ☐ lump sum or ☐ Equal annual installments for _____ years (not to exceed 10)	Payment begins (to Beneficiary): 30 days following Executive’s death If payable in annual installments, each subsequent payment will be made on the anniversary of the first payment

Article 2

Purpose

The purpose of this Agreement is to further the growth and development of the Bank by providing Executive with supplemental retirement income, and thereby encourage Executive’s productive efforts on behalf of the Bank and the Bank’s shareholders, and to align the interests of the Executive and those shareholders. The Bank promises to make certain payments to the Executive, or the Executive’s Beneficiary, at retirement, death, or upon some other qualifying event pursuant to the terms of this Agreement.

Article 3

Definitions and Construction

It is intended that this Agreement comply and be construed in accordance with Section 409A of the Internal Revenue Code (the “Code”). It is also intended that the Agreement be “unfunded” and maintained for a select group of management or highly compensated employees of the Bank, for purposes of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and not be construed to provide income to the Executive or Beneficiary under Code prior to actual receipt of benefits.

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Where the following words and phrases appear in the Agreement, they shall have the respective meanings set forth below, unless their context clearly indicates to the contrary:

3.1	“Accrued Liability Balance” shall mean the amount accrued by the Bank to fund the future benefit expense associated with this Agreement. The Bank shall account for this benefit using Generally Accepted Accounting Principles, regulatory accounting guidance of the Bank’s primary federal regulator, and other applicable accounting guidance. Accordingly, the Bank shall establish a liability retirement account for the Executive into which appropriate accruals shall be made using a reasonable discount rate, which may be adjusted from time to time.
3.2	“Affiliate” shall mean any partnership, firm, corporation, association, joint-stock company, unincorporated association, or other entity that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Bank, including any member of an affiliated group of which the Bank is a common parent corporation as provided in Section 1504 of the Code.
3.3	“Board” shall mean the Board of Directors of the Bank, as constituted from time to time.
3.4	“Change in Control” shall mean a change in ownership or control of the Bank as defined in Treasury Regulation §1.409A-3(i)(5) or any subsequently applicable published authority or guidance.
3.5	“Disability” shall mean Executive, while actively employed by the Bank: (i) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which 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 (ii) is, by reason of any medically determinable physical or mental impairment which 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 Bank. Medical determination of Disability may be made by either the Social Security Administration or by the provider of an accident or health plan covering employees of the Bank, provided that the definition of Disability applied under such Disability insurance program complies with the requirements of Section 409A. Upon the request of the Plan Administrator, the Executive must submit proof to the Plan Administrator of Social Security Administration’s or the provider’s determination.
3.6	“Good Reason” shall mean one or more of the following conditions without the consent of the Executive: (i) a material diminution in the Executive’s authority, duties, or responsibilities; (ii) a material diminution in the Executive’s base compensation (for this purpose, a reduction of five percent (5.0%) or more shall constitute a material diminution); (iii) a material diminution in the authority, duties or responsibilities of the supervisor to whom the Executive is required to report; (iv) a material diminution in the budget over which the Executive retains authority; (v) a material change in the geographic location at which the Executive must perform services; or (vi) any other action or inaction that constitutes a material breach of the terms of this Agreement or an applicable employment agreement with the Executive. For this purpose, (i) a change in the Executive’s location of employment that is within fifteen (15) miles of Executive’s current location of employment; or (ii) a regulatory order which, by necessity or implication, would require a change in the terms of Executive’s employment Agreement shall not constitute Good Reason. Upon the occurrence of any of the foregoing conditions, the Executive must provide notice of the condition within 90 days following the initial existence of the condition, and the Bank must be provided a period of at least 30 days during which it may remedy the good reason condition. Executive’s resignation from employment with the Bank for Good Reason must occur within thirty (30) days following the expiration of the foregoing cure period.

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3.7	“Involuntary Separation from Service” shall mean that the Bank terminates Executive’s employment at any time before Executive’s age 67 and such termination is not considered a Termination for Cause, or Executive’s Separation from Service by reason of his resignation for Good Reason at any time before Executive’s age 67.
3.8	“Separation from Service” shall mean that the Executive has a “separation from service” as defined in Treasury Regulation Section 1.409A-1(h). A Separation from Service will not be deemed to have occurred while the Executive is on military leave, sick leave, or other bona fide leave of absence, provided Executive has the right to reemployment under an applicable statute or by contract.
3.9	“Termination for Cause” shall mean:

(a) The willful, intentional, and material breach of duty by Executive in the course of his/her employment; (b) the habitual and continued neglect by Executive of his/her employment duties and obligations; (c) Executive’s willful and intentional violation of any State of California or federal banking laws, or of the Bylaws, rules, policies, or resolutions of the Bank, or of the rules or regulations of the OCC or the FDIC, or other regulatory agency or governmental authority having jurisdiction over the Bank; (d) Executive’s refusal to comply in any material respect with the legal directives of any regulatory authority or governmental entity having jurisdiction over the Bank; (e) the determination by a state or federal banking agency or governmental authority having jurisdiction over the Bank that Executive is not suitable to act in the capacity for which he/she is then employed by the Bank; (f) Executive’s conviction of any felony or a crime involving moral turpitude or commission of a fraudulent or dishonest act, including a breach of trust or misappropriation, or if Executive has entered a plea of nolo contendere to such an act or offense; (g) Executive’s willful misfeasance or gross negligence in the performance of his/her duties; (h) Executive’s conduct that is demonstrably and significantly harmful, or will likely have, or has had a material adverse effect on the Bank or an Affiliate, as reasonably determined by the Bank’s Board of Directors; (i) Executive cannot be covered under a fidelity bond issued by an insurance company reasonably acceptable to the Bank; (j) Executive’s disclosure without authority or unauthorized use of any secret or confidential information concerning the Bank or an Affiliate or their customers; or (k) Executive taking any action which the Bank’s Board of Directors determines, in its sole discretion and subject to good faith, fair dealing, and reasonableness, constitutes unfair competition with, or induces any customer to breach any contract with, the Bank or an Affiliate.

3.10	“Voluntary Separation from Service” shall mean the Executive willfully terminates employment with the Bank prior to age 67 for reasons other than Good Reason, death or because of permanent Disability.
3.11	“Year of Plan Participation” shall mean each 12-month period of full-time employment with the Bank. The first Year of Plan Participation shall commence with the Effective Date of this Agreement. The Board shall have discretion to grant a Year of Plan Participation vesting credit for nonconsecutive Years of Plan Participation, in its sole discretion.

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Article 4

Beneficiary

4.1	Beneficiary. Executive shall have the right to name a Beneficiary of the death benefit, if any, described in Article 1 herein. Executive shall have the right to name such Beneficiary at any time prior to Executive’s death and submit it to the Plan Administrator (or Plan Administrator’s representative) on the form provided. Once received and acknowledged by the Plan Administrator, the form shall be effective. The Executive may change a Beneficiary designation at any time by submitting a new form to the Plan Administrator. Any such change shall follow the same rules as for the original Beneficiary designation and shall automatically supersede the existing Beneficiary form on file with the Plan Administrator.
4.2	Failure to Designate a Beneficiary. If Executive dies without a valid Beneficiary designation on file with the Plan Administrator, the Executive’s surviving spouse, if any, shall become the designated Beneficiary. If Executive has no surviving spouse, death benefits shall be paid to the personal representative of Executive’s estate.
4.3	Facility of Distribution. If the Plan Administrator determines in its discretion that a benefit is to be paid to a minor, to a person declared incompetent, or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct distribution of such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem appropriate prior to distribution of the benefit. Any distribution of a benefit shall be a distribution for the account of the Executive and the Beneficiary, as the case may be, and shall be a complete discharge of any liability under the Agreement for such distribution amount.

Article 5

General Limitations

5.1	Termination for Cause. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if Executive’s employment is terminated for Cause.
5.2	Removal. Notwithstanding any provision of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the Federal Deposit Insurance Act.
5.3	Trade Secrets.

5.3.1 Executive agrees that, during the Term, Executive will have access to, and become acquainted with, confidential, trade secret, and proprietary information concerning the Bank, which may include information on its operations and business, the identity of its customers, including knowledge of their financial condition and financial needs, as well as such customers’ methods of doing business. Executive will not use or disclose any of such trade secrets, proprietary, or confidential information during the Term or for a period of two (2) years thereafter, without the Bank’s prior written consent; provided, however, that non-public information about the customers, whether characterized as consumer information or customer information, as all such terms are defined in the Interagency Guidelines Establishing Information Security Standards implementing Section 501(b) of the Gramm-Leach-Bliley Act and Section 628 of the Fair Credit Reporting Act, as amended, shall be kept confidential for an unlimited period of time. This limitation shall not apply to information, which is or becomes public, or in the public domain, without the fault of Executive.

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5.3.2 In accordance with 18 U.S.C. §1833, the Bank hereby notifies Executive that, notwithstanding anything to the contrary herein:

a) Executive shall not be in breach of this Agreement, and shall not be held criminally or civilly liable under any Federal or State trade secret law (i) for the disclosure of a trade secret that is made in confidence to a Federal, State, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (ii) for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

b) If Executive files a lawsuit for retaliation by the Bank for reporting a suspected violation of law, Executive may disclose the trade secret to Executive’s attorney, and may use the trade secret information in the court proceeding, if Executive files any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.

5.4 Return of Documents. Executive expressly agrees that all manuals, documents, files, reports, studies, instruments or other materials used and/or developed by Executive during Executive’s employment with the Bank, are solely the property of the Bank and that Executive has no right, title or interest therein. Upon termination of Executive’s employment, Executive or Executive’s representative shall promptly deliver possession of all of said property to the Bank in good condition.

Article 6

Administration of Agreement

6.1

Plan Administrator. The Bank shall be the Plan Administrator, unless the Bank appoints a committee to be the Plan Administrator. The Bank may appoint a Committee (“Committee”) of one or more individuals in the employment of Bank for the purpose of discharging the administrative responsibilities of the Bank under the Plan. The Bank may remove a Committee member for any reason by giving such member ten (10) days’ written notice and may thereafter fill any vacancy thus created. The Committee shall represent the Bank in all matters concerning the administration of this Plan; provided however, the final authority for all administrative and operational decisions relating to the Plan remains with the Bank.

6.2

Authority of Plan Administrator. The Plan Administrator shall have full power and authority to adopt rules and regulations for the administration of the Plan, provided they are not inconsistent with the provisions of this Plan, and Section 409A of the Code, to interpret, alter, amend or revoke any rules and regulations so adopted, to enter into contracts on behalf of the Bank with respect to this Agreement, to make discretionary decisions under this Plan, to demand satisfactory proof of the occurrence of any event that is a condition precedent to the commencement of any payment or discharge of any obligation under the Plan, and to perform any and all administrative duties under this Plan.

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6.3	Agents. In the administration of this Agreement, the Plan Administrator may employ agents and delegate to them such administrative duties as it sees fit, (including acting through a duly appointed representative), and may from time to time consult with counsel who may be counsel to the Bank.
6.4	Binding Effect of Decisions. The decision or action of the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation and application of the Agreement and the rules and regulations promulgated hereunder shall be final and conclusive and binding upon all persons having any interest in the Agreement.
6.5	Indemnity of Plan Administrator. The Bank shall indemnify and hold harmless any party contracted for the purposes of assisting the Plan Administrator in performing its duties under this Agreement against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by such contracted party.
6.6	Bank Information. To enable any party contracted for the purposes of assisting the Plan Administrator in performing its duties under this Agreement to perform its functions, the Bank shall supply full and timely information to such contracted party on all matters relating to the date and circumstances of any event triggering a benefit hereunder.
6.7	Annual Statement. Any party contracted for the purposes of assisting the Plan Administrator in performing its duties under this Agreement shall provide to the Bank, on the schedule set forth in any administrative services contract, a statement setting forth the benefits to be distributed under this Agreement.

Article 7

Claims and Review Procedures

7.1 Claims Procedure. An Executive or Beneficiary (“claimant”) who has not received benefits under the Agreement that he or she believes should be distributed shall make a claim for such benefits as follows:

7.1.1 Initiation - Written Claim. The claimant initiates a claim by submitting to the Plan Administrator a written claim for the benefits.

7.1.2 Timing of Plan Administrator Response. The Plan Administrator shall respond to such claimant within 90 days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 90 days by notifying the claimant in writing, prior to the end of the initial 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 Plan Administrator expects to render its decision.

7.1.3 Notice of Decision. If the Plan Administrator denies part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:

(a) The specific reasons for the denial;

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(b) A reference to the specific provisions of the Agreement on which the denial is based;

(c) A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;

(d) An explanation of the Agreement’s review procedures and the time limits applicable to such procedures; and

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

7.2 Review Procedure. If the Plan Administrator denies part or all of the claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial, as follows:

7.2.1 Initiation - Written Request. To initiate the review, the claimant, within 60 days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review.

7.2.2 Additional Submissions - Information Access. The claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Plan Administrator shall also provide the 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 the claimant’s claim for benefits.

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

7.2.4 Timing of Plan Administrator Response. The Plan Administrator shall respond in writing to such claimant within 60 days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can extend the response period by an additional 60 days by notifying the claimant in writing, prior to the end of the initial 60-day period, that an additional period is required. The notice of extension must set forth the special circumstances and the date by which the Plan Administrator expects to render its decision.

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

(a) The specific reasons for the denial;

(b) A reference to the specific provisions of the Agreement on which the denial is

(c) based;

(d) A statement that the claimant is entitled to receive, upon request and free of charge,

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(e) reasonable access to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits; and

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

Article 8

Amendments and Termination

8.1	This Agreement may be amended or terminated only by a written agreement signed by the Bank and the Executive. Provided, however, if the Board determines in good faith that the Executive is no longer a member of a select group of management or highly compensated employees, as that phrase applies to ERISA, for reasons other than death, Disability or retirement, the Bank may terminate this Agreement. No amendment or termination will reduce or eliminate Executive’s vesting in any benefit as of the time of such amendment or termination. Additionally, the Bank may also amend this Agreement to conform to written directives to the Bank from its banking regulators.
8.2	Termination or Modification of Agreement by Reason of Change in the Law, Rules, Regulations, or by a vote of Executive as Board Member. The Bank is entering into this Agreement upon the assumption that certain existing tax laws, the Code, rules, and regulations will continue in effect in their current form. If any said assumptions should change and the Board of Directors of the Bank determines that said change has a detrimental economic effect on the Executive, then the Bank reserves the right to terminate or modify this Agreement accordingly. No amendment or termination will reduce or eliminate Executive’s vesting in any benefit as of the time of such amendment or termination.
8.3	Subsequent Changes to Time and Form of Payment. The Bank may permit a subsequent change to the time and form of benefit distributions. Any such change shall be considered made only when it becomes irrevocable under the terms of the Agreement. Any change will be considered irrevocable not later than thirty (30) days following acceptance of the change by the Plan Administrator, subject to the following rules:

(a) the subsequent deferral election may not take effect until at least twelve (12) months after the date on which the election is made;

(b) the payment (except in the case of death, disability, or unforeseeable emergency) upon which the subsequent deferral election is made is deferred for a period of not less than five (5) years from the date such payment would otherwise have been paid; and

(c) in the case of a payment made at a specified time, the election must be made not less than twelve (12) months before the date the payment is scheduled to be paid.

Article 9

Miscellaneous

9.1 Binding Effect. This Agreement shall bind the Executive and the Bank, and their beneficiaries, survivors, executors, administrators and transferees.

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9.2	No Guarantee of Employment. This Agreement is not a contract for employment. It does not give the Executive the right to remain as an employee of the Bank, nor does it interfere with the Bank’s right to discharge the Executive. It also does not require the Executive to remain an employee nor interfere with the Executive’s right to terminate employment at any time.
9.3	Non-Transferability. Benefits under this Agreement cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner, other than by will or the laws of descent and distribution.
9.4	Tax Withholding. The Bank shall withhold any taxes that are required to be withheld from the benefits provided under this Agreement. The Executive acknowledges that the Bank’s sole liability regarding taxes is to forward any amounts withheld to the appropriate taxing authority(ies).
9.5	Applicable Law. The Agreement and all rights hereunder shall be governed by the laws of the State of California, except to the extent preempted by the laws of the United States of America.
9.6	Unfunded Arrangement. The Executive is a general unsecured creditor of the Bank for the distribution of benefits under this Agreement. The benefits represent the mere promise by the Bank to distribute such benefits. The rights to benefits are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment, or garnishment by creditors. Any insurance on the Executive’s life or other informal funding asset is a general asset of the Bank to which the Executive has no preferred or secured claim.
9.7	Reorganization. The Bank shall not merge or consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm, or person unless such succeeding or continuing bank, firm, or person agrees to assume and discharge the obligations of the Bank under this Agreement. Upon the occurrence of such event, the term “Bank” as used in this Agreement shall be deemed to refer to the successor or survivor bank.
9.8	Entire Agreement. This Agreement constitutes the entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.
9.9	Interpretation. Wherever the fulfillment of the intent and purpose of this Agreement requires, and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.
9.10	Headings. Article and section headings are for convenient reference only and shall not control or affect the meaning or construction of any of its provisions.
9.11	Validity. In case any provision of this Agreement shall be illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal and invalid provision has never been inserted herein.
9.12	Notice. Any notice or filing required or permitted to be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below:

Attn: Corporate Secretary, Bank of Southern California

12265 El Camino Real

Suite 100

San Diego, CA 92130

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Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown on the postmark on the receipt for registration or certification.

Any notice or filing required or permitted to be given to the Executive under this Agreement shall be sufficient if in writing and hand-delivered, or sent by mail, to the last known address of the Executive.

9.13

Opportunity to Consult with Independent Advisors. The Executive acknowledges that he/she has been afforded the opportunity to consult with independent advisors of his/her choosing including, without limitation, accountants or tax advisors and counsel regarding both the benefits granted to him/her under the terms of this Agreement and the (a) terms and conditions which may affect the Executive’s right to these benefits, and (b) personal tax effects of such benefits including, without limitation, the effects of any federal or state taxes, Section 280G of the Code, Section 409A of the Code, and any other taxes, costs, expenses or liabilities whatsoever related to such benefits, which in any of the foregoing instances the Executive acknowledges and agrees shall be the sole responsibility of the Executive notwithstanding any other term or provision of this Agreement. The 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 the Executive and further specifically waives any right for himself or herself, and his or her 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 Section 9.13. The Executive further acknowledges that he/she has read, understands and consents to all of the terms and conditions of this Agreement, and that he/she enters into this Agreement with a full understanding of its terms and conditions.

9.14

Section 409A of the Code.

(a) This Agreement is intended to be written, administered, interpreted and construed in a manner such that no payment or benefits provided under the Agreement become subject to (a) the gross income inclusion set forth within Code Section 409A(a)(1)(A) or (b) the interest and additional tax set forth within Code Section 409A(a)(1)(B) (together, referred to herein as the “Section 409A Penalties”), including, where appropriate, the construction of defined terms to have meanings that would not cause the imposition of Section 409A Penalties. For purposes of this Agreement, all references to Executive’s “termination of employment” shall mean Executive’s Separation from Service. For purposes of Section 409A of the Code (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), each payment that Executive may be eligible to receive under this Agreement shall be treated as a separate and distinct payment.

(b) Solely to the extent necessary to avoid penalties under Section 409A, distributions under this Agreement may not commence earlier than six (6) months after a Separation from Service (as described under the “Separation from Service” provision herein) if, pursuant to Internal Revenue Code Section 409A, the participant hereto is considered a “specified employee” of a publicly-traded company. In the event a distribution is delayed pursuant to this Section, the originally scheduled distribution shall be delayed for six (6) months, and shall commence instead on the first day of the seventh month following Separation from Service. If payments are scheduled to be made in installments, the first six (6) months of installment payments shall be delayed, aggregated, and paid instead on the first day of the seventh month, after which all installment payments shall be made on their regular schedule. If payment is scheduled to be made in a lump sum, the lump sum payment shall be delayed for six (6) months and instead be made on the first day of the seventh month.

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9.15	Certain Accelerated Payments. The Bank may make any accelerated distribution permissible under Treasury Regulation 1.409A-3(j)(4), provided that such distribution(s) meets the requirements of Section 1.409A-3(j)(4).
9.16	Rabbi Trust. The Bank and the Executive acknowledge and agree that, in anticipation of a Change in Control, the may Bank 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 the Executive in such manner and at such times as specified in this Agreement.
9.17	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.

IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have signed this Agreement as of the date indicated above.

EXECUTIVE:	BANK:
	Bank of Southern California, N.A.
/s/ Richard Hernandez	By:	/s/ Anthony Divita
Richard Hernandez	Title:	Chief Administrative Officer

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EX-10.14

Exhibit 10.14

MANAGEMENT INCENTIVE PLAN

TABLE OF CONTENTS

PAGE

ARTICLE 1	PLAN OBJECTIVES	1
ARTICLE 2	PLAN DURATION	1
ARTICLE 3	DEFINITIONS	1
ARTICLE 4	ELIGIBILITY AND PARTICIPATION; TERMINATION OF PARTICIPATION; REPAYMENT	4
ARTICLE 5	AWARD OPPORTUNITY	5
ARTICLE 6	ESTABLISHMENT OF PERFORMANCE OBJECTIVES	5
ARTICLE 7	DETERMINATION AND PAYMENT OF AWARDS	6
ARTICLE 8	ADMINISTRATION	6
ARTICLE 9	AMENDMENT AND TERMINATION	7
ARTICLE 10	MISCELLANEOUS	7

Southern California Bancorp – Management Incentive Plan Pg. ii

ARTICLE 1 PLAN OBJECTIVES

Section 1.1 Purpose. The purpose of the Plan is to achieve the following objectives: (i) recognize outstanding performers who have contributed significantly to the Company’s success and to the success of such performers’ respective business units, (ii) align corporate goals and strategy to executive compensation strategy, and (iii) provide a compensation environment which will attract, retain and motivate key employees of the Company and its Subsidiaries and Affiliates.

ARTICLE 2 PLAN DURATION

Section 2.1 Term. The Plan shall be effective as of the Plan Year commencing on the Effective Date and shall continue for subsequent Plan Years unless terminated by the Committee prior to the commencement of any subsequent Plan Year. A termination of the Plan shall be effective as of the last date of the full Plan Year prior to its termination.

ARTICLE 3 DEFINITIONS

The following definitions shall apply for purposes of the Plan unless a different meaning is clearly indicated by the context:

Section 3.1 “Affiliate” means any company or other entity that controls, is controlled by or is under common control with the Company within the meaning of Rule 405 of Regulation C under the Securities Act of 1933, as amended, including any Subsidiary.

Section 3.2 “Award” means an award that is (a) described in section 5.1, and (b) calculated under section 7.1.

Section 3.3 “Award Agreement” means any written agreement, contract, or other instrument or document evidencing an Award.

Section 3.4 “Base Salary” means, for any Participant for a Plan Year, such Participant’s annual rate of base salary as of January 1 of the Plan Year (including any base salary determined within the first ninety (90) days after January 1 of the Plan Year), or, for Participant’s whose employment begins after January 1 of the Plan Year, the date on which such Participant’s employment begins.

Section 3.5 “Board” means the Board of Directors of the Company.

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Section 3.6 “Change of Control” means the first to occur of any of the following events:

(a) (i) Any merger, consolidation or reorganization of Bank of Southern California, N.A. (“Bank”) or the Company in which Bank or the Company, as applicable, does not survive; except for purposes of this clause (i) the following shall not constitute a change in control: a merger, consolidation or reorganization where the beneficial owners, directly or indirectly, of securities of Bank or the Company, representing fifty percent (50.0%) or more of the combined voting power of Bank’s or the Company’s then outstanding securities, remain as the beneficial owners, directly or indirectly, of at least fifty percent (50.0%) of the combined voting power of the surviving corporation; (ii) any sale, lease, exchange, mortgage, pledge, transfer, or other disposition (in one transaction or a series of transactions) of any assets of Bank or the Company having an aggregate fair market value of fifty percent (50.0%) or more of the total value of assets of Bank or the Company, reflected in the most recent month end balance sheet of Bank or the Company; (iii) an acquisition whereby any -person” (as such term is used in the Exchange Act or any individual, corporation, partnership, trust, or any other entity, except for Employee,) is or becomes the beneficial owner, directly or indirectly, of securities of Bank or the Company representing more than fifty percent (50.0%) of the combined voting power of Bank’s or the Company’s then outstanding securities; except for purposes of this clause (iii) the following acquisition shall not constitute a change in control: (A) any acquisition directly from Bank or the Company; or (B) any acquisition by Bank or the Company; or (C) any acquisition by any employee benefit plan sponsored or maintained by Bank or the Company; (iv) if in any one year period, individuals who at the beginning of such period constitute the Board of Directors of Bank or the Company cease for any reason to constitute at least a majority thereof, unless the election, or the nomination for election by Bank’s or the Company’s shareholders, of each new director is approved by a vote of at least three-quarters of the directors then still in office who were directors at the beginning of the period; or (v) a majority of the members of the Board of Directors of Bank or the Company in office prior to the happening of any event determines in its sole discretion that as a result of such event there has been a change in control. Notwithstanding the foregoing, to the extent required by Section 409A of the Code, if a Change in Control would give rise to a payment or settlement event with respect to any payment or benefit hereunder that constitutes “nonqualified deferred compensation.” the transaction or event constituting the Change in Control must also constitute a “change in control event” (as defined in Treasury Regulation § 1.409A-3(i)(5)) in order to give rise to the payment or benefit which is payable by reason of occurrence of such transaction.

Section 3.7 “Code” means the Internal Revenue Code of 1986, as amended, including the corresponding provisions of any succeeding law.

Section 3.8 “Company” means SOUTHERN CALIFORNIA BANCORP, a corporation organized and existing under the laws of the State of California, and any successor thereto. Where the context requires, “Company” shall also include all direct and indirect subsidiaries of SOUTHERN CALIFORNIA BANCORP, including but not limited to Bank.

Section 3.9 “Corporate Performance Objectives “means for any Plan Year one or more objective performance objectives selected and established by the Committee in accordance with the requirements of Article VI.

Section 3.10 “Committee” means the Compensation Committee of the Company, or if no such committee exists, the Board.

Section 3.11 “Disability” shall, for purposes of determining the vesting of an Award, be considered to exist at the Participant’s termination of employment if, on such date, the Participant is suffering from a medical condition which qualifies him (or would, if he were a participant in such plan and upon completion of any applicable waiting or elimination period, qualify him) for benefits under the Company’s long-term disability plan as in effect from time to time or if there is no such plan at the applicable date, physical or mental incapacity as determined solely by the Committee.

Southern California Bancorp – Management Incentive Plan Pg. 2

Section 3.12 “Discharge for Cause “means termination of employment due to (a) the willful, intentional, and material breach of duty by Participant in the course of his/her employment; (bi) the habitual and continued neglect by Participant of his/her employment duties and obligations; (c) Participant’s willful and intentional violation of any State of California or federal banking laws, or of the Bylaws, rules, policies, or resolutions of Bank or the Company, or of the rules or regulations of the Office of the Comptroller of the Currency (the “OCC”), the Federal Deposit Insurance Corporation (the “FDIC”) or the Board of Governors of the Federal Reserve System (“FRB”), or other regulatory agency or governmental authority having jurisdiction over Bank or the Company; (d) Participant’s refusal to comply in any material respect with the legal directives of any regulatory authority or governmental entity having jurisdiction over Bank or the Company; (e) the determination by a state or federal banking agency or governmental authority having jurisdiction over Bank or the Company that Participant is not suitable to act in the capacity for which he/she is then employed by Bank or the Company; (f) Participant’s conviction of any felony or a crime involving moral turpitude or commission of a fraudulent or dishonest act, including a breach of trust or misappropriation, or if Participant has entered a plea of nolo contendere to such an act or offense: (g) Participant’s willful misfeasance or negligence in the performance of his/her duties based on the sole discretion of the Company’s Board of Directors; (h) Participant’s conduct that is demonstrably and significantly harmful, or will likely have, or has had a material adverse effect on Company or an Affiliate, as reasonably determined by Company’s Board of Directors; (i) Participant cannot be covered under a fidelity bond issued by an insurance company reasonably acceptable to Company; (j) Participant’s disclosure without authority or unauthorized use of any secret or confidential information concerning Company or an Affiliate or their customers; or (k) Participant taking any action which Company’s Board of Directors determines, in its sole discretion and subject to good faith, fair dealing, and reasonableness, constitutes unfair competition with, or induces any customer to breach any contract with, Company or an Affiliate. Notwithstanding the foregoing, with respect to any Participant who is a party to an employment agreement or offer letter with the Company or any of its Affiliates or an offer letter with the Company or any of its Affiliates which contains a definition of “cause” or a substantially similar term, “Discharge for Cause” shall mean a termination for “cause” as defined in such an agreement.

Section 3.13 “Effective Date “means January 1, 2023.

Section 3.14 “Employee” means any individual employed by the Company or an Affiliate as an employee, but does not mean an individual who renders service solely as a director or independent contractor.

Section 3.15 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

Section 3.16 “Exchange Act” means the Securities Exchange Act of 1934, as amended.

Section 3.17 “GAAP” means generally accepted accounting principles, as amended from time to time and applied in preparing the financial statements of the Company.

Section 3.18 “Good Reason” without Participant’s consent, which consent may be given or withheld in the Participant’s sole discretion, there occurs: (i) a material diminution in Participant’s authority, duties, or responsibilities, as determined on an enterprise-wide level and not with respect to any specific region or geographic location; (ii) a material diminution in Participant’s then annual base salary (excluding any bonus or incentive payments) on the date Participant provides Company with the written notice required hereunder (for this purpose, a reduction of five percent (5.0%) or more shall constitute a material diminution); (iii) a material diminution in the budget over which Participant retains authority; or (iv) a material change in the principal geographic location at which Participant must perform the services (for this purpose, a change in Participant’s location of employment that is within twenty-five (25) miles of Participant’s current location shall not constitute Good Reason). Notwithstanding the foregoing, ‘‘Good Reason” shall only exist if Participant shall have provided the Company with written notice within ninety (90) days of the initial occurrence of any of the foregoing events or conditions which specifically identifies the circumstances constituting Good Reason, and the Company fails to eliminate the conditions constituting Good Reason within thirty (30) days after Company’s receipt of written notice of such event or condition from Participant and Participant resigns within thirty (30) days of the expiration of such cure period. Notwithstanding the foregoing, with respect to any Participant who is a party to an employment agreement or offer letter with the Company or any of its Affiliates or an offer letter with the Company or any of its Affiliates which contains a definition of “good reason” or a substantially similar term, “Good Reason” shall have the meaning set forth in such agreement.

Section 3.19 “Participant” means an Employee who is selected by the Committee as eligible to participate in the Plan for a Plan Year.

Southern California Bancorp – Management Incentive Plan Pg. 3

Section 3.20 “Plan” means the Southern California Bancorp Management Incentive Plan as amended and in effect from time to time.

Section 3.21 “Plan Year” means the calendar year.

Section 3.22 “Subsidiary” means any corporation (other than the Company) or non-corporate entity with respect to which the Company owns, directly or indirectly, 50% or more of the total combined voting power of all classes of stock, membership interests or other ownership interests of any class or kind ordinarily having the power to vote for the directors, managers or other voting members of the governing body of such corporation or non-corporate entity. In addition, any other entity may be designated by the Committee as a Subsidiary, provided that such entity could be considered as a subsidiary according to GAAP.

Section 3.23 “Taxable Year” means the taxable year of the Company for federal income tax purposes.

ARTICLE 4 ELIGIBILITY AND PARTICIPATION; TERMINATION OF PARTICIPATION; REPAYMENT

Section 4.1 Eligibility. The Committee shall annually select the individual Employees, if any, eligible for participation in the Plan, who shall be senior executive officers and/or key employees of the Company and its Subsidiaries and Affiliates. Unless otherwise specifically provided in this Article 4 or in the Award Agreement, Participant must be employed in good standing on the payment date of applicable Award for any Plan Year to be eligible to receive payment hereunder with respect to such Award for such Plan Year.

Section 4.2 Participation. An Employee who holds or assumes an eligible position shall be a Participant for a Plan Year only if selected by the Committee to participate in the Plan for the Plan Year.

Section 4.3 Termination of Employment - Change of Control. Unless otherwise provided in the Plan, in the specific terms of an Award Agreement, or in the provisions of a written employment or change of control/retention agreement between the Company and the Participant, a Participant who terminates employment with the Company in connection with and/or within 12 months following the effective date of a Change of Control shall be eligible for a prorated Award for the Plan Year in which the Change of Control occurs, and for the full amount of such Award if such termination occurs after such Plan Year but before payment otherwise is due with respect thereto, provided that his/her termination was not (i) a Discharge for Cause or (ii) voluntary without Good Reason. If a prorated Award is paid out under this section 4.3, the amount of such Award shall be calculated and paid after the end of the Plan Year at the same time as other Awards for that Plan Year are paid, provided that, if such termination occurs after the Change in Control, in no event shall the amount of such Award prior to proration be less than the amount paid to such Participant under the Plan for the preceding Plan Year.

Section 4.4 Other Terminations. Unless otherwise provided in the specific terms of an Award Agreement, or in the provisions of a written employment or change of control/retention agreement between the Company and the Participant, the Committee shall have the authority to determine whether a Participant who ceases employment prior to the end of a Plan Year, whether by reason of Death, Disability or otherwise, is eligible to receive a prorated Award for that Plan Year. In the event that the Committee determines that a Participant who otherwise ceases employment prior to the end of a Plan Year is eligible to receive a prorated Award for that Plan Year, the amount of such Award shall be calculated and paid after the end of the Plan Year at the same time as other Awards for that Plan Year are paid.

Section 4.5 Prorated Awards. Prorated Awards shall be calculated by dividing the applicable annual Award by twelve (12) and multiplying the result by the number of months of the Participant’s service during the Plan Year, rounded up the next highest whole month.

Southern California Bancorp – Management Incentive Plan Pg. 4

Section 4.6 Repayment. Any Award granted pursuant to the Plan or payment with respect thereto shall be subject to the Company’s Clawback Policy.

ARTICLE 5 AWARD OPPORTUNITY

Section 5.1 Target Awards. For each Plan Year, the Committee shall establish a target Award opportunity for each Participant. The target Award opportunity for each Plan Year shall be a percentage of the Participant’s Base Salary for the Plan Year or a specific dollar amount that may be earned upon the achievement of prescribed performance objectives.

ARTICLE 6 ESTABLISHMENT OF PERFORMANCE OBJECTIVES

Section 6.1 Corporate Performance Objectives.

Not later than a date which is within the first ninety (90) days of each Plan Year, the Committee shall establish one or more specific Corporate Performance Objectives for such Plan Year, including target levels and, if deemed appropriate by the Committee, one or more threshold, above target or other enhanced or reduced achievement levels associated with each Corporate Performance Objective. If the Committee adds a Participant to the Plan for a Plan Year after initially establishing the award opportunities and Corporate Performance Objectives for the Plan Year, the Committee shall determine whether to establish Corporate Performance Objectives applicable to the new Participant or provide that the new Participant be eligible to participate on a pro-rata basis.

The Corporate Performance Objectives may be expressed on an absolute and/or relative basis, or a before- or after-tax basis, or a consolidated or business-unit basis, may be based on or otherwise employ comparisons based on internal targets, the past performance of the Company and/or the past or current performance of other companies and may include or exclude any or all extraordinary, non-core, non-operating or non-recurring items, or such other items as the Committee may determine.

(a) Those Corporate Performance Objectives which have meanings ascribed to them by GAAP as in effect and applied to the Company on the date on which the Corporate Performance Objectives are established, without giving effect to any subsequent changes in GAAP, unless the Committee specifically provides otherwise when it establishes the Corporate Performance Objectives.

Section 6.2 Award Matrix, Formula or Methodology. The Committee shall assign a percentage weight to each Corporate Performance Objective established by the Committee for each Plan Year. The weight assigned to any Corporate Performance Objectives which are not established in any Plan Year shall be zero, and the aggregate weight assigned to all Corporate Performance Objectives established by the Committee for any Plan Year shall equal one hundred percent (100%). The Committee may assign different weightings to Corporate Performance Objectives for each Participant or for classes of Participants. The Committee shall establish a matrix, formula or other methodology which shall set forth or otherwise define the relationship between the Corporate Performance Objectives, the target and other applicable performance levels with respect thereto, the weighting of such Corporate Performance Objectives, if any, and the corresponding award opportunity for each Participant.

Section 6.3 Adjustments. Under normal business conditions, once established for a Plan Year as provided herein, Corporate Performance Objectives shall not be subject to revision or alteration. However, unusual conditions may warrant a reexamination of such criteria. Such conditions may include, but not be limited to, a Change of Control, declaration and distribution of stock dividends or stock splits, mergers, consolidation or reorganizations, acquisitions or dispositions of material business units, pandemics or other unforeseeable Acts of God, or infrequently occurring or extraordinary gains or losses. In the event the Committee determines that, upon reexamination, alteration of the Corporate Performance Objectives is appropriate, the Committee shall reestablish the Corporate Performance Objectives to maintain as closely as possible the previously established expected level of overall performance of the Participants, taken as a whole, as is practicable.

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Section 6.4 Other Discretionary Adjustments. The Committee may, in its sole and absolute discretion, determine to adjust (whether increase or decrease) the amount of an Award computed by applying the award matrix, formula or methodology contemplated by section 6.2 for any or all Participants if it determines that prevailing circumstances (including, but not limited to, the subjective appraisal of the Participant’s performance for the Plan Year) so warrant.

ARTICLE 7 DETERMINATION AND PAYMENT OF AWARDS

Section 7.1 Certification of Corporate Performance Objectives. As promptly as practicable, but in any event within sixty (60) days after the end of each Plan Year, the Committee shall certify the performance of the Company relative to the Corporate Performance Objective or Objectives established for Participants. Each Participant’s Award shall be determined by multiplying either (i) the Participant’s Base Salary for the Plan Year multiplied by such Participant’s target Award opportunity established as a percentage of the Participant’s Base Salary for the Plan Year pursuant to section 5.1 or (ii) the specific dollar amount established as the Participant’s target Award opportunity pursuant to section 5.1, by the percentage or ordinal “score” determined by applying the matrix, formula or methodology established pursuant to sections 6.2 and 6.3, adjusted, if applicable, to take into account such subjective and objective factors as the Committee deems appropriate, including, but not limited to, the extent to which Participant’s overall individual performance met expectations. Awards under the Plan shall be paid no later than March 15 of the year immediately following the Plan Year.

Section 7.2 Form of Award Payment. Unless the Committee otherwise determines, Awards shall be payable in cash and/or payable in whole or in part by issuing shares of the Company’s common stock, no par value per share (“Common Stock”), in accordance with, and subject to the terms and conditions of, the Southern California Bancorp 2019 Omnibus Equity Incentive Plan, as such plan may from time to time be amended, or any equity compensation plan adopted by the Company as a successor plan thereto (collectively, the “LTIP”), which Common Stock shall have a fair market value (determined as set forth in the LTIP) on the date the Award is determined substantially equivalent to, but in no event greater than, the Award (or portion thereof to be paid in Common Stock) determined in accordance with section 7.1.

Section 7.3 Deferral of Awards. In lieu of receiving a cash payment in respect of Awards payable under the Plan, Participants may elect to defer Awards pursuant to the terms of a deferred compensation plan, as may then be adopted and in effect; provided, however, that notwithstanding the foregoing, the Company shall not be obligated and the foregoing shall not be construed as obligated the Company, to adopt any such deferred compensation plan or maintain such deferred compensation plan.

ARTICLE 8 ADMINISTRATION

Section 8.1 Committee. The Plan shall be administered by the Committee.

Section 8.2 Committee Action. The Committee shall hold such meetings, and may make such administrative rules and regulations, as it may deem proper. A majority of the members of the Committee shall constitute a quorum, and the action of a majority of the members of the Committee present at a meeting at which a quorum is present, as well as actions taken pursuant to the unanimous written consent of all of the members of the Committee without holding a meeting, shall be deemed to be actions of the Committee. All actions of the Committee shall be final and conclusive and shall be binding upon the Company and all other interested parties. Any person dealing with the Committee shall be fully protected in relying upon any written notice, instruction, direction or other communication signed by the Secretary of the Committee, by two (2) members of the Committee or by a representative of the Committee authorized to sign the same in its behalf.

Section 8.3 Committee Responsibilities. Subject to the terms and conditions of the Plan and such limitations as may be imposed by the Board, the Committee shall have plenary authority and responsibility for the management and administration of the Plan and shall have such authority as shall be necessary or appropriate in order to carry out its responsibilities, including, without limitation, the authority:

(a) to interpret and construe the Plan, and to determine all questions that may arise under the Plan as to eligibility for participation in the Plan;

Southern California Bancorp – Management Incentive Plan Pg. 6

(b) to adopt rules and regulations for the operation and administration of the Plan; and

(c) to take any other action not inconsistent with the provisions of the Plan that it may deem necessary or appropriate.

The Committee may delegate to one or more of its members or to one or more executive officers of the Company the authority to take any action or exercise any discretion required or permitted to be taken or exercised by the Committee with respect to any Employee or Participant other than the Company’s Chief Executive Officer or any Section 162(m) Covered Employee (as defined in 26 U.S.C. §162(m)(3)). Action taken or discretion exercised pursuant to such delegated authority shall be reported to the Committee. To the extent of any such delegation, references in the Plan or any instrument issued in relation to the Plan to the Committee shall be deemed to be references to the Committee’s delegate.

ARTICLE 9 AMENDMENT AND TERMINATION

Section 9.1 Amendment. The Board may amend or revise the Plan in whole or in part at any time; provided, however, that to the extent required to comply with section 162(m) of the Code, no such amendment or revision shall be effective if it amends a material term of the Plan unless approved by the requisite vote of shareholders.

Section 9.2 Termination. The Board may suspend or terminate the Plan in whole or in part at any time by giving written notice of such suspension or termination to the Committee.

ARTICLE 10 MISCELLANEOUS

Section 10.1 No Right to Continued Employment. Neither the establishment of the Plan nor any provisions of the Plan nor any action of the Board or the Committee with respect to the Plan shall be held or construed to confer upon any Participant any right to continuation of his or her position as an Employee. The Company and any Affiliate reserve the right to dismiss any Participant or otherwise deal with any Participant to the same extent as though the Plan had not been adopted.

Section 10.2 Non-Alienation of Benefits. Except as may otherwise be required by law, no distribution or payment under the Plan to any Participant, former Participant or beneficiary shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge, whether voluntary or involuntary, and any attempt to so anticipate, alienate, sell, transfer, assign, pledge, encumber or charge the same shall be void; nor shall any such distribution or payment be in any way liable for or subject to the debts, contracts, liabilities, engagements or torts of any person entitled to such distribution or payment. If any Participant, former Participant or beneficiary is adjudicated bankrupt or purports to anticipate, alienate, sell, transfer, assign, pledge, encumber or charge any such distribution or payment, voluntarily or involuntarily, the Committee, in its sole and absolute discretion, may cancel such distribution or payment or may hold or cause to be held or applied to such distribution or payment, or any part thereof, to or for the benefit of such Participant, former Participant or beneficiary, in such manner as the Committee shall direct; provided, however, that no such action by the Committee shall cause the acceleration or deferral of any benefit payments from the date on which such payments are scheduled to be made.

Southern California Bancorp – Management Incentive Plan Pg. 7

Section 10.3 Appendices and Conflicts. Corporate Performance Objectives for Plan Year may be appended to this Plan as an Appendix. Capitalized terms used in such Appendix shall have the meaning ascribed to such terms as set forth herein. In the event of any conflict between the terms of any Appendix or any Award Agreement and the Plan, the terms of the Plan shall govern.

Section 10.4 Status of Plan Under ERISA. The Plan is intended to be a non-qualified incentive compensation program that is exempt from the regulatory requirements of ERISA. The Plan is not intended to comply with the requirements of section 401(a) of the Code or to be subject to Parts 2, 3 and 4 of Title I of ERISA. The Plan shall be administered and construed so as to effectuate this intent.

Section 10.5 Construction and Language. Wherever appropriate in the Plan, words used in the singular may be read in the plural, words used in the plural may be read in the singular, and the masculine gender may be read as referring equally to the feminine gender or the neuter.

Section 10.6 Governing Law. The Plan shall be construed, administered and enforced according to the laws of the State of California, without giving effect to the conflict of laws principles thereof, except to the extent that such laws are preempted by federal law. The federal and state courts having jurisdiction in San Diego County, California shall have exclusive jurisdiction over any claim, action, complaint or lawsuit brought under the terms of the Plan or in any way relating to the rights or obligations of any person under the Plan, or the acts or omissions of the Company, the Board, the Committee or any duly authorized person acting in their behalf in relation to the Plan. By participating in the Plan, the Participant, for himself and any other person claiming any rights under the Plan through him, agrees to submit himself, and any such legal action described herein that he shall bring, to the exclusive jurisdiction of such courts for the adjudication and resolution of such disputes.

Section 10.7 Headings. The headings of Articles and sections are included solely for convenience of reference. If there is any conflict between such headings and the text of the Plan, the text shall control.

Section 10.8 Withholding. Payments from the Plan shall be subject to all applicable federal, state and local withholding taxes.

Section 10.9 Notices. Any communication required or permitted to be given under the Plan, including any notice, direction, designation, comment, instruction, objection or waiver, shall be in writing and shall be deemed to have been given at such time as it is delivered personally or five (5) days after mailing if mailed, postage prepaid, by registered or certified mail, return receipt requested, addressed to such party at the address listed below, or at such other address as one such party may by written notice specify to the other party: (a) if to the Committee: Southern California Bancorp., 12265 El Camino Real # 100, San Diego, CA 92130, Attention: Executive Vice President, Chief Administration Officer; and (b) if to a Participant: to the Participant’s address as shown in the Company’s records.

Section 10.10 Severability. A determination that any provision of the Plan is invalid or unenforceable shall not affect the validity or enforceability of any other provision hereof.

Section 10.11 Waiver. Failure to insist upon strict compliance with any of the terms, covenants or conditions of the Plan shall not be deemed a waiver of such term, covenant or condition. A waiver of any provision of the Plan must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought. Any waiver or relinquishment of any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times.

Section 10.12 Successors and Assigns. The provisions of the Plan will inure to the benefit of and be binding upon the Participants and their respective legal representatives and testate or intestate distributees, and the Company and its respective successors and assigns, including any successor by merger or consolidation or a statutory receiver or any other person or firm or corporation to which all or substantially all of the assets and business of the Company may be sold or otherwise transferred.

Southern California Bancorp – Management Incentive Plan Pg. 8

Section 10.13 Compliance with Section 409A of the Code. The Plan and the Awards made hereunder are intended to be exempt from section 409A of the Code and the regulations thereunder as “short-term deferrals.” To the extent that the Plan is construed to be a non-qualified deferred compensation plan described in section 409A of the Code, the Plan and any grant instruments shall be operated, administered and construed so as to comply with the requirements of section 409A of the Code. The Plan and any Award Agreements shall be subject to amendment, with or without advance notice to Participants and other interested parties, and on a prospective or retroactive basis, including, but not limited to, amendment in a manner that adversely affects the rights of Participants and other interested parties, to the extent necessary to effect compliance with section 409A of the Code. Notwithstanding anything contained herein to the contrary, to the extent required to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, the Participant shall not be considered to have separated from service with the Company for purposes of this Plan or Awards and no payment shall be due to the Grantee under this Plan on account of a separation from service until the Grantee would be considered to have incurred a “separation from service” from the Company within the meaning of Section 409A of the Code. Notwithstanding anything to the contrary in this Plan or Award Agreements, to the extent that any amounts are payable upon a separation from service and such payment would result in accelerated taxation and/or tax penalties under Section 409A of the Code, such payment, under this Plan or any other agreement of the Company, shall be made on the first business day after the date that is six (6) months following such separation from service (or death, if earlier). The Company makes no representation that any or all of the payments described in this Plan will be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to any such payment. The Participant shall be solely responsible for the payment of any taxes and penalties incurred under Section 409A of the Code. For purposes of Section 409A of the Code a right receive any installment payments pursuant to this Plan or Awards shall be treated as a right to receive a series of separate and distinct payments.

Section 10.14 Clawback of Incentive Compensation. The Company may terminate a Plan Participant’s right to the unpaid or unvested incentive compensation awarded hereunder and may require reimbursement to the Company by a Plan Participant of any incentive compensation previously paid or vested within the prior 12-month period pursuant to this Plan, in the event a Plan Participant is obligated to disgorge to or reimburse the Company for such compensation paid or payable to a Plan Participant by reason of application of Section 304 of the Sarbanes-Oxley Act of 2002, Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, or any other applicable law or regulation requiring recapture, reimbursement or disgorgement of incentive-based pay. In the event a Plan Participant fails to make prompt reimbursement of any such incentive compensation previously paid, the Company may, to the extent permitted by applicable law, deduct the amount required to be reimbursed from a Plan Participant’s compensation otherwise due under this Agreement.

In addition, any incentive compensation payable to the a Plan Participant under this Agreement or any other agreement shall be subject to any policy, whether in existence as of the Effective Date of this Agreement or later adopted and/or established by the Company that provides for the clawback or recovery of amounts due to restatement of the Company’s financial records or due to fraud or other malfeasance in connection with the eligibility for or calculation of any amounts, that were paid to the Plan Participant under circumstances requiring clawback or recovery as set forth in such policy. The Company shall not apply such policy retroactively to a Plan Participant except to the extent it deems warranted, in good faith, due to a Plan Participant’s own fraud or malfeasance. The Company will make any determinations for clawback or recover in its sole discretion and in accordance with such policy and any applicable law or regulations; provided that such policy is generally applicable to other executive officers.

Southern California Bancorp – Management Incentive Plan Pg. 9

EX-10.15

Exhibit 10.15

Execution Version

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”), dated as of April 26, 2021 (the “Agreement Date”), is entered into by and between Bank of Southern California, N.A., a national banking association (the “Bank”) and Frank D. Di Tomaso, Jr. (the “Employee”) with regard to the following:

RECITALS

WHEREAS, simultaneously with the execution of this Agreement, Southern California Bancorp, a California corporation (“SCB”), the Bank, and Bank of Santa Clarita, a California state chartered bank (“BSCA”) entered into that certain Agreement and Plan of Merger, dated April 26, 2021 (as amended, supplemented or otherwise modified from time to time, the “Merger Agreement”), providing, among other things, for the merger of BSCA with and into the Bank, with the Bank surviving as a national banking association (the “Merger”) and the wholly-owned subsidiary of SCB; and

WHEREAS, as a condition and inducement to SCB’s and the Bank’s willingness to enter into and carry out the terms and conditions of the Merger Agreement and complete the Merger, the Employee is entering into this Agreement and agrees to provide certain services to the Bank from and after the Effective Time (as that term is defined in the Merger Agreement) of the Merger in accordance with the terms of this Agreement (the “Effective Date”); and

WHEREAS, the Bank is a national banking association duly organized, validly existing, and in good standing under the laws of the United States of America, with power to own property and carry on its business as it is now being conducted and is the wholly-owned subsidiary of SCB; and

WHEREAS, Employee has been a founder and is the Chairman of the Board of Directors and Chief Executive Officer of BSCA as of the Agreement Date and possesses valuable knowledge, skills and experience related to the banking services offered by BSCA, the current and prospective customers of BSCA, and the employees of BSCA that will be employed by the Bank after the closing of the Merger, and SCB and the Bank wish to have Employee assist in providing such knowledge, skills and experience from and after the closing of the Merger in order to assist SCB and the Bank in achieving the benefits of their substantial investment in BSCA and the successful operation of their businesses; and

WHEREAS, Employee has read and understood the terms and provisions set forth in this Agreement and has been afforded a reasonable opportunity to review this Agreement with Employee’s legal counsel; and

WHEREAS, the parties hereto desire to specify the terms of Employee’s employment by the Bank; and

WHEREAS, by their execution of this Agreement, the parties intend that these Recitals are made a part of the Agreement.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, it is agreed that, effective at the Effective Date, the following terms and conditions shall apply to Employee’s employment by the Bank:

1. Employment. Bank hereby employs Employee and Employee hereby accepts such employment, upon the terms and conditions set forth herein for the period commencing with the Effective Date and terminating on the second anniversary of the Effective Date (the “Term”); subject to the provisions of Paragraph 6 of this Agreement.

2. Duties.

2.1 Position. Employee is employed as “Executive Director,” reporting to the Executive Chairman of the Bank (the “Chairman”) and shall have the following duties and responsibilities during the Term as may be assigned or requested from time to time by the Chairman: (a) maintaining and expanding the existing relationships of former customers of BSCA with the Bank and attracting new relationships and prospective customers to the Bank for such services as the Bank may offer from time to time; (b) retaining Former BSCA Employees (as that term is defined in the Merger Agreement) as employees of the Bank; (c) retaining former contractors and suppliers of BSCA as contractors and suppliers of the Bank; (d) providing the Bank with Employee’s skill, knowledge, and experience in the management, operation, and business development in the service areas of the Bank as they are established from time to time; and (e) such other services as are related to the foregoing as may be reasonably requested by the Bank. At no time shall Employee have or shall he exercise the authority to enter into or conclude any contracts in the name of Bank. Employee shall perform faithfully and diligently all duties assigned to him, but it is specifically understood that if any of the relationships described in clauses (a)-(d) are severed, Employee shall not be deemed in breach of this Agreement, unless such event is caused by Employee’s action which is deemed to constitute Cause as defined in this Agreement. In addition, while employed by the Bank, Employee may participate in charitable and educational activities, manage personal and family investments and be a director of for profit enterprises, in each case, so long as such activities do not materially interfere with his duties hereunder.

2.2 Faithful Performance/Best Interests. During the Term, Employee shall perform the services herein in material compliance of all applicable laws and SCB’s and the Bank’s written policies and procedures which have been provided to the Employee or to which employee had readily available access (provided Employee had been notified in writing as to the existence of such policies and their location), including but not limited to SCB’s Articles of Incorporation and Bylaws and the Bank’s policies and procedures, Articles of Association and Bylaws, as applicable.

2.3 Code of Ethics. Employee shall conduct himself at all times with due regard to the Bank’s Code of Conduct Policy (receipt of a copy of which Employee hereby acknowledges) (“Code of Ethics”), and other written employment policies of SCB or the Bank provided to Employee as amended by them from time to time. Furthermore, Employee agrees to materially abide by all lawful decisions made by Bank, which are not in breach of this Agreement, as well as all applicable federal, state and international laws, regulations or ordinances, including but not limited to any applicable tax laws (it is specifically understood that Employee’s compliance with any directive by the Chairman or the board of directors of the Bank or of SCB or performance of any action which was deemed by the legal counsel of the Bank or SCB (in writing) to be in compliance with federal, state and international laws, regulations or ordinances, including but not limited to any applicable tax laws, shall not be deemed a breach of this provision by the Employee).

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2.4 Hours of Service. Employee shall be available to provide the assigned duties hereunder to the Bank on a full time basis and as reasonably requested by the Chairman. Employee shall not be required to complete or file formal time sheets or other hourly records of his hours of service, but shall provide monthly summaries of material customers and prospective customer meetings. Employee is classified as an exempt employee, which means Employee is paid for the job as a whole and not by the hour. Accordingly, Employee acknowledges that he will not receive overtime pay if he works more than 8 hours in a workday or 40 hours in a workweek. It is anticipated that Employee will work full time and as a full time employee will receive all of the regular and normal employee benefits provided to other senior executives of the Bank or of SCB.

2.5 Work Location. Employee’s principal place of work shall be the Bank’s branch office to be located at 23780 Magic Mountain Parkway, Santa Clarita, California and will have the use of the same office at that location that Employee occupied as the Chief Executive Officer of BSCA immediately prior to the Effective Time. Executive will also be entitled to utilize his current BSCA email address (or a Bank email address, at the time that BSCA email addresses are no longer operational) and have access to typical office equipment, including a phone, copier, fax, computer and mobile phone. However, Employee acknowledges and agrees that to perform his duties he may be visiting and meeting with customers, prospective customers, and/or employees of the Bank from time to time at other branches and offices of Bank wherever located and that such activity shall not be deemed a material change in the geographic location at which Employee must perform such duties.

2.6 At-Will Relationship. Employee’s employment with Bank is at-will notwithstanding the stated two year term of this Agreement. His employment may be terminated at any time, with or without cause, by either Employee or Bank subject to the terms of Paragraph 6 below. No representative of Bank, other than the Chairman has the authority to alter the at-will employment relationship. Any change to the at-will employment relationship must be by specific, written agreement signed by Bank’s Chairman and the Employee. Nothing in this Agreement is intended to or should be construed to contradict, modify or alter this at-will relationship.

3. Compensation. As compensation for Employee’s performance of his duties hereunder, Bank shall pay to Employee a total salary of $200,000.00 per year (“Salary”), payable in accordance with the normal payroll practices of Bank, less required deductions for state and federal tax withholdings, social security and all other employment taxes and payroll deductions.

4. Fringe Benefits. Employee will be eligible for any of the fringe benefits generally available to Bank employees in Employee’s job classification; provided, however, Employee shall be allowed to accrue unused sick leave in accordance with applicable law and the Bank’s policies contained in its Employee Handbook. Sick leave is not part of salary or wages. Employee is not entitled to be paid for unused sick leave. Employee shall have the right to take vacation at his discretion with the reasonable approval of the Chairman.

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5. Business Expenses. Employee shall be entitled to reimbursement by the Bank for all reasonable out of pocket business expenses incurred by Employee in the performance of Employee’s duties and in acting for the Bank during the Term. To obtain reimbursement, expenses must be submitted promptly with the appropriate documentation in accordance with the Bank’s policies.

6. Termination of Employment. Although Bank and Employee anticipate a mutually rewarding employment relationship, either party may terminate the employment relationship at any time on thirty (30) days’ advance written notice to the other party. In addition, Bank may terminate Employee’s employment immediately at any time for Cause (as defined below). For purposes of this Agreement, “Cause” shall be defined as (i) conviction of a felony, or a misdemeanor involving dishonesty; (ii) one or more acts of willful misconduct, dishonesty or fraudulent behavior if done in connection with Employee’s employment with the Bank, or if it is likely that such act or acts will cause substantial harm to the Bank’s reputation, financial interests, or operation; (iii) material breach of obligations set forth in this Agreement; or (iv) material violation of Bank’s policies.. In the event Employee’s employment under this Agreement is terminated by either party, for any reason, Employee will earn any unpaid Salary prorated to the date of termination. In addition, Employee shall receive, (i) reimbursement for any expenses properly incurred and reported by Employee prior to the date of termination, payable on the Company’s first regularly scheduled payroll date which occurs at least ten (10) business days after the date of termination; and (ii) vested employee benefits, if any, to which Employee is entitled as of the date of termination (collectively, the “Accrued Rights”). In addition, if such termination is by the Bank without Cause or by the Employee for Good Reason (as defined below), Employee shall continue to receive his Salary and the Bank shall provide Employee with continuation of medical benefits until the second anniversary of the Effective Date. “Good Reason” means, in each case without Employee’s consent, (a) a material reduction by the Bank of Employee’s Salary; (b) a mandatory relocation of Employee’s principal place of work to a location that is more than 25 miles from the current location (unless consented to by Employee); (c) the Bank’s material breach of any material term of this Agreement (which shall be deemed to include, but not be limited to the material diminution of Employee’s title or duties, relative to Employee’s title and duties set forth in Section 2 hereof). To establish “Good Reason,” Employee must provide written notice to the Bank within thirty (30) days immediately following any event that may qualify as “Good Reason,” and the Bank must fail to remedy this event within thirty (30) days after receipt of such notice, and Employee’s resignation must be effective not later than ninety (90) days after the expiration of the Bank’s cure period.

7. No Conflict of Interest. Employee acknowledges and agrees that he is subject to that certain Non-Solicitation, Non-Competition, and Confidentiality Agreement by and among Employee, SCB and the Bank, dated April 26, 2021 and incorporated herein by reference. During the Term, Employee must not engage in any work, paid or unpaid, that creates an actual conflict of interest with SCB or the Bank. Such work shall include, but is not limited to, directly or indirectly competing with SCB or the Bank in any way, or acting as an officer, director, employee, consultant, stockholder, volunteer, lender, or agent (in each case, other than in the form of a passive investment not to exceed 5% of the outstanding shares of any class of security or of the total outstanding equity of any company) of any business enterprise of the same nature as, or which is in direct competition with, the business (and in the same location or city or County where the Bank is located) in which SCB and the Bank is now engaged or in which SCB and the Bank becomes engaged during the Term. If Bank believes such a conflict exists during the Term, Bank may ask Employee to choose to discontinue the other work or resign employment with Bank. In addition, Employee agrees not to refer any client or potential client of SCB or the Bank to competitors of SCB or the Bank, without obtaining the Bank’s prior written consent.

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8. Confidentiality and Proprietary Rights. Employee agrees to read, sign and abide by the terms of the Bank’s Employee Proprietary and Confidential Information and Assignment of Employee Inventions Agreement, attached as “Attachment A” to this Agreement and incorporated herein by reference.

9. Injunctive Relief1.. Employee acknowledges that his breach of the covenants contained in sections 7 and 8 (collectively “Covenants”) would cause irreparable injury to SCB and the Bank and agrees that in the event of any such breach, the Bank shall be entitled to seek temporary, preliminary and permanent injunctive relief without the necessity of proving actual damages or posting any bond or other security.

10. [RESERVED]

11. General Provisions.

11.1 Successors and Assigns. The rights and obligations of SCB and the Bank under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of SCB and the Bank. Employee shall not be entitled to assign any of his rights or obligations under this Agreement.

11.2 Waiver. Either party’s failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement.

11.3 Attorneys’ Fees. Each side will bear its own attorneys’ fees in any dispute unless a statutory section at issue, if any, authorizes the award of attorneys’ fees to the prevailing party.

11.4 Severability. In the event any provision of this Agreement is found to be unenforceable by an arbitrator or court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the parties shall receive the benefit contemplated herein to the fullest extent permitted by law. If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby.

11.5 Interpretation; Construction. The headings set forth in this Agreement are for convenience only and shall not be used in interpreting this Agreement. This Agreement has been drafted by legal counsel representing SCB and the Bank, but Employee has participated in the negotiation of its terms. Furthermore, Employee acknowledges that he has had an opportunity to review and revise the Agreement and have it reviewed by legal counsel, if desired, and, therefore, the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.

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11.6 Governing Law. This Agreement will be governed by and construed in accordance with the laws of the United States and the State of California. Each party consents to the exclusive jurisdiction and venue of the state or federal courts in Los Angeles County, California, if applicable, in any action, suit, or proceeding arising out of or relating to this Agreement.

11.7 Notices. Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated: (a) by personal delivery when delivered personally; (b) by overnight courier upon written verification of receipt; (c) by facsimile or email transmission upon acknowledgment of receipt of electronic transmission; or (d) by certified or registered mail, return receipt requested, upon verification of receipt. Notice shall be sent to the addresses set forth below, or such other address as either party may specify in writing.

11.8 Survival. Sections 7 (“No Conflict of Interest”), 8 (“Confidentiality and Proprietary Rights”), 9 (“Injunctive Relief”), and 11 (“General Provisions”) of this Agreement shall survive Employee’s employment by Bank.

11.9 Entire Agreement. This Agreement, including Bank’s Employee Proprietary and Confidential Information and Assignment of Employee Inventions Agreement and Non-Competition, Non-Solicitation, and Confidentiality Agreement, both of which are incorporated herein by reference, constitutes the entire agreement between the parties relating to this subject matter and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral. This Agreement may be amended or modified only with the written consent of Employee and Bank’s Chairman. No oral waiver, amendment or modification will be effective under any circumstances whatsoever.

11.10 Counterparts. This Agreement may be executed in one or more counterparts, any of which may be executed and transmitted by facsimile or electronic transmission or other electronic method, and each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

11.11 409A. Notwithstanding anything to the contrary in this Agreement, if at the time Employee’s employment terminates, and Employee is a “specified employee,” as defined below, any and all amounts payable under this Agreement on account of such separation from service that would (but for this provision) be payable within six (6) months following the date of termination, shall instead be paid on the next business day following the expiration of such six (6) month period or, if earlier, upon Employee’s death; except (a) to the extent of amounts that do not constitute a deferral of compensation within the meaning of Treasury regulation Section 1.409A-1(b) (including without limitation by reason of the safe harbor set forth in Section 1.409A-1(b)(9)(iii), as determined by the Company in its reasonable good faith discretion); (b) benefits which qualify as excepted welfare benefits pursuant to Treasury regulation Section 1.409A-1(a)(5); or (c) other amounts or benefits that are not subject to the requirements of Section 409A (“Section 409A”) of the Internal Revenue Code of 1986 as amended (the “Code”). For purposes of this Agreement, all references to “termination of employment” and correlative phrases shall be construed to require a “separation from service” (as defined in Section 1.409A-1(h) of the Treasury regulations after giving effect to the presumptions contained therein), and the term “specified employee” means an individual determined by the Company to be a specified employee under Treasury regulation Section 1.409A-1(i). Each payment made under this Agreement shall be treated as a separate payment and the right to a series of installment payments under this Agreement is to be treated as a right to a series of separate payments. In no event shall the Company have any liability relating to the failure or alleged failure of any payment or benefit under this Agreement to comply with, or be exempt from, the requirements of Section 409A. The immediately preceding sentence shall not apply if such failure is caused by the Company’s or any of its affiliates’ breach of this Agreement.

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THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW.

		Frank D. Di Tomaso, Jr.
Dated:	April 26, 2021	/S/ Frank D. Di Tomaso, Jr.
		29850 Muledeer Lane
		Castaic, California 91384
		Bank of Southern California, N.A
Dated:	April 26, 2021	By:	/S/ Nathan L. Rogge
		NAME:	Nathan L. Rogge, President and Chief Executive Officer
		Bank of Southern California, N.A. 12265 El Camino Real, Suite 100 San Diego, California 92130

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EX-10.16

Exhibit 10.16

STOCK PURCHASE AGREEMENT

dated September 22, 2016

by and between

BANK OF SOUTHERN CALIFORNIA, N.A.

and

CASTLE CREEK CAPITAL PARTNERS VI, LP

STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement (this “Agreement”) is dated as of September 22, 2016, by and between Bank of Southern California, N.A., a national banking association (the “Bank”), and Castle Creek Capital Partners VI, L.P., a Delaware limited partnership (the “Purchaser”).

RECITALS

A. The Bank and the Purchaser are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 16.7 of the regulations of the Office of the Comptroller of the Currency (the “OCC”), which regulation incorporates Rule 506 of Regulation D (“Regulation D”) as promulgated under the Securities Act of 1933, as amended (the “Securities Act”) by the United States Securities and Exchange Commission (the “Commission”).

B. The Purchaser wishes to purchase, and the Bank wishes to sell, upon the terms and conditions stated in this Agreement, shares of voting common stock, par value $5.00 per share, of the Bank (the “Common Stock”). The number of shares of Common Stock to be purchased by the Purchaser hereunder (the “Purchased Shares”) are set forth on the signature page of this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Bank and the Purchaser hereby agree as follows:

Article I

DEFINITIONS

1.1 Definitions

. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms shall have the meanings indicated in this Section 1.1:

“Acquisition Proposal” means a written offer or proposal involving the Bank with respect to: (i) any merger, reorganization, consolidation, share exchange, share issuance, recapitalization, business combination, liquidation, dissolution or other similar transaction involving any sale, issuance, lease, exchange, mortgage, pledge, transfer or other disposition of, all or a material portion of the assets or equity securities or deposits of, the Bank, in a single transaction or series of related transactions; (ii) any tender offer or exchange offer for all or a material portion of the outstanding shares of capital stock of the Bank; or (iii) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.

“Action” means any action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition), or investigation pending or, to the Bank’s Knowledge, threatened against the Bank, or any of their respective properties or any officer, director, or employee of the Bank acting in his or her capacity as an officer, director, or employee before or by any Governmental Entity.

“Affiliate” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, Controls, is controlled by, or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act.

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“Agency” has the meaning set forth in Section 3.1(mm).

“Agreement” shall have the meaning ascribed to such term in the Preamble.

“Articles of Association” means the Articles of Association of the Bank and all amendments thereto, as the same may be amended from time to time.

“Bank” has the meaning set forth in the Preamble.

“Bank Counsel” means Horgan, Rosen, Beckham & Coren, L.L.P.

“Bank Deliverables” has the meaning set forth in Section 2.2(a).

“Bank Reports” has the meaning set forth in Section 3.1(hh).

“Bank Financial Statements” has the meaning set forth in Section 3.1(h). “Bank Party” has the meaning set forth in Section 4.7(b).

“Bank’s Knowledge” means with respect to any statement made to the knowledge of the Bank, that the statement is based upon the actual knowledge after reasonable inquiry of the executive officers of the Bank having responsibility for the matter or matters that are the subject of the statement.

“Bankruptcy Exceptions” means applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, or similar Laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.

“BHCA” means the Bank Holding Company Act of 1956.

“BHCA Control” has the meaning set forth in Section 3.1(ss).

“Board of Directors” means the board of directors of the Bank.

“Board Representative” has the meaning set forth in Section 4.21(a)

“Burdensome Condition” has the meaning set forth in Section 4.14.

“Business Combination” has the meaning set forth in Section 1.1.

“Business Day” means a day, other than a Saturday or Sunday, on which banks in California are open for the general transaction of business.

“Bylaws” means the bylaws of the Bank, as amended from time to time.

“California Courts” means the state and federal courts sitting in the State of California.

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“Change in Control” means, with respect to the Bank, the occurrence of any of the following events:

(1) any Person or “group” (other than the Purchaser and its Affiliates) becomes a beneficial owner (as defined in Rules 13d-3 of the Exchange Act), directly or indirectly, of 50% or more of the aggregate shares of Common Stock;

(2) any Person or “group” (other than the Purchaser and its Affiliates) becomes a beneficial owner (as defined in Rules 13d-3 of the Exchange Act), directly or indirectly, of 24.9% or more of the aggregate shares of Common Stock, and in connection with such event, individuals who, on the date of this Agreement, constitute the Board of Directors cease for any reason to constitute at least a majority of the Board of Directors;

(3) the consummation of a merger, consolidation, statutory share exchange, or similar transaction that requires adoption by the Bank’s shareholders (a “Business Combination”), unless immediately following such Business Combination more than 50% of the total voting power of the corporation resulting from such Business Combination (the “Surviving Corporation”), or, if applicable, the ultimate parent corporation that directly or indirectly has beneficial ownership (as defined in Rules 13d-3 of the Exchange Act) of 100% of the voting securities eligible to elect directors of the Surviving Corporation, is represented by Common Stock that was outstanding immediately before such Business Combination;

(4) the shareholders of the Bank approve a plan of liquidation or dissolution of the Bank or a sale of all or substantially all of the Bank’s assets; or

(5) the Bank has entered into a definitive agreement, the consummation of which would result in the occurrence of any of the events described in clauses (1) through (4) of this definition above.

“CIBC Act” means the Change in Bank Control Act of 1978.

“Closing” means the closing of the purchase and sale of the Purchased Shares pursuant to this Agreement.

“Closing Date” has the meaning set forth in Section 2.1(a).

“Code” means the Internal Revenue Code of 1986, including the regulations and published interpretations thereunder.

“Commission” has the meaning set forth in the Recitals. “Common Stock” has the meaning set forth in the Recitals.

“Control” (including the terms “controlling,” “controlled by” or “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise for purposes of the BHCA or the CIBC Act.

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“Covered Persons” has the meaning set forth in Section 3.1(pp) “CRA” has the meaning set forth in Section 3.1(kk). “Disqualification Event” has the meaning set forth in Section 3.1(pp). “Environmental Laws” has the meaning set forth in Section 3.1(k). “ERISA” has the meaning set forth in Section 3.1(oo).

“Exchange Act” means the Securities Exchange Act of 1934 any successor statute, and the rules and regulations promulgated thereunder.

“FDIC” means the Federal Deposit Insurance Corporation.

“Fundamental Representations” has the meaning set forth in Section 5.1(a).

“GAAP” means U.S. generally accepted accounting principles as applied by the Bank.

“Governmental Entity” means any court, administrative agency, arbitrator, or commission or other governmental or regulatory authority or instrumentality, whether federal, state, local, or foreign, and any applicable industry self-regulatory organization or securities exchange.

“Holder” means any holder of outstanding Registrable Securities. “Information” has the meaning set forth in Section 4.4(b).

“Insurer” has the meaning set forth in Section 3.1(mm).

“Intellectual Property” has the meaning set forth in Section 3.1(q).

“Law” means any federal, state, county, municipal or local ordinance, permit, concession, grant, franchise, law, statute, code, rule or regulation or any judgment, ruling, order, writ, injunction or decree promulgated by any Governmental Entity.

“Lien” means any lien, charge, claim, encumbrance, security interest, right of first refusal, preemptive right, mortgage, deed of trust, pledge, conditional sale agreement, restriction on transfer or other restrictions of any kind.

“Loan Investor” has the meaning set forth in Section 3.1(mm). “Loans” has the meaning set forth in Section 3.1(mm). “Losses” has the meaning set forth in Section 4.7(a).

“Material Adverse Effect” means any event, circumstance, change or occurrence that has had or would reasonably be expected to have (i) a material and adverse effect on the legality, validity, or enforceability of any Transaction Document with respect to the Bank, (ii) a material and adverse effect on the results of operations, assets, properties, business, condition (financial or otherwise), or prospects of the Bank, or (iii) any adverse impairment to the Bank’s ability to perform in any material respect by the Outside Date its obligations under any Transaction Document; provided, however, that no effect (taken by itself or when aggregated with any and all other effects) directly or indirectly resulting from, arising out of, or attributable to or related to any of the following shall be deemed to be or constitute a “Material Adverse Effect” for purposes of clause (ii) above: (A) changes in banking and similar Laws of general applicability or enforcement or interpretations thereof by any applicable Governmental Entity; (B) changes in GAAP or regulatory accounting requirements applicable to banks and their holding companies generally; (C) general changes in national or California’s economic, monetary, market or financial conditions, including changes in prevailing interest rates, inflation, credit markets, capital market conditions or real estate price appreciation/depreciation trends, or in the industries in which the Bank operates; (D) the effects of any action or omission taken by the Bank with the prior written consent of the Purchaser; (E) changes in global or national political conditions, including the outbreak or escalation of acts of terrorism; (F) the failure, in and of itself, to meet earnings projections, but not including any underlying causes thereof except to the extent separately excluded hereunder; or (G) any natural disasters or acts of God, or any outbreaks of a disease or pandemic; except, with respect to (A), (B), (C), (E) and (G), to the extent that the effects of such change are disproportionally adverse to the condition (financial or otherwise), results of operations, assets, prospects or business of the Bank as compared to other similarly situated banks and their holding companies generally.

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“Material Contract” means any of the following agreements of the Bank:

(1) any contract containing covenants that limit in any material respect the ability of the Bank to compete in any line of business or with any person or which involve any material restriction of the geographical area in which, or method by which or with whom, the Bank may carry on its business (other than as may be required by law or applicable regulatory authorities), and any contract that could require the disposition of any material assets or line of business of the Bank;

(2) any joint venture, partnership, strategic alliance, or other similar contract (including any franchising agreement, but in any event excluding introducing broker agreements), and any contract relating to the acquisition or disposition of any material business or material assets (whether by merger, sale of stock or assets, or otherwise), which acquisition or disposition is not yet complete or where such contract contains continuing material obligations or contains continuing indemnity obligations of the Bank;

(3) any real property lease and any other lease with annual rental payments aggregating $100,000 or more;

(4) other than with respect to loans, any contract providing for, or reasonably likely to result in, the receipt or expenditure of more than $250,000 on an annual basis, including the payment or receipt of royalties or other amounts calculated based upon revenues or income;

(5) any contract or arrangement under which the Bank is licensed or otherwise permitted by a third party to use any Intellectual Property that is material to its business (except for any “shrinkwrap” or “click through” license agreements or other agreements for software that is generally available to the public and has not been customized for the Bank) or under which a third party is licensed or otherwise permitted to use any Intellectual Property owned by the Bank;

(6) any contract that by its terms limits the payment of dividends or other distributions by the Bank;

(7) any standstill or similar agreement pursuant to which any party has agreed not to acquire assets or securities of another person;

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(8) any contract that would reasonably be expected to prevent, materially delay, or materially impede the Bank’s ability to consummate the transactions contemplated by this Agreement and the other Transaction Documents;

(9) any contract providing for indemnification by the Bank of any person, except for immaterial contracts entered into in the ordinary course of business consistent with past practice;

(10) any contract that contains a put, call, or similar right pursuant to which the Bank could be required to purchase or sell, as applicable, any equity interests or assets that have a fair market value or purchase price of more than $100,000; and

(11) any other contract or agreement which is a “material contract” within the meaning of Item 601(b)(10) of Regulation S-K.

“Material Permits” has the meaning set forth in Section 3.1(o).

“Minimum Ownership Interest” has the meaning set forth in Section 4.21(a).

“Money Laundering Laws” has the meaning set forth in Section 3.1(ff).

“OCC” means the Office of the Comptroller of the Currency.

“OCC Securities Regulations” means part 16 of the OCC’s regulations (12 C.F.R. Part 16), which incorporate by reference certain provisions of the Securities Act, including but not limited to Regulation D, promulgated under the Securities Act, and Rule 144 of the Securities Act.

“OFAC” has the meaning set forth in Section 3.1(ee).

“Outside Date” means 120 days following the date of this Agreement; provided that if such day is not a Business Day, the first day following such day that is a Business Day.

“Person” means an individual, corporation, partnership, limited liability company, trust, business trust, association, joint stock company, joint venture, sole proprietorship, unincorporated organization, Governmental Entity, or any other form of entity not specifically listed herein.

“Preferred Stock” has the meaning set forth in Section 1.1.

“Proceeding” means an action, claim, suit, investigation, or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

“Purchased Shares” has the meaning set forth in the Recitals.

“Purchase Price” means $8.50 per Purchased Share.

“Purchaser” has the meaning set forth in the Preamble.

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“Purchaser Deliverables” has the meaning set forth in Section 2.2(b).

“Purchaser Indemnitors” has the meaning set forth in Section 4.21(f).

“Registrable Securities” means all of the Purchased Shares, shares of Common Stock issuable to the Purchaser under this Agreement, and any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization, share exchange, reorganization (including a Holding Company Reorganization) or similar event with respect to the Purchased Shares; provided that the Purchased Shares shall cease to be Registrable Securities upon the earliest to occur of the following: (A) a sale pursuant to a Registration Statement or Rule 144 under the Securities Act (in which case, only the securities sold shall cease to be Registrable Securities); (B) becoming eligible for sale without time, volume or manner of sale restrictions by the Holders under Rule 144; (C) if the Purchased Shares have ceased to be outstanding; or (D) the date a Registration Statement including the Purchased Shares becomes effective.

“Registration Statements” means any one or more registration statements of the Bank filed under the Securities Act that covers the resale of any of the Registrable Securities pursuant to the provisions of this Agreement, any one or more amendments and supplements to such Registration Statements, including post-effective amendments, all exhibits and all material incorporated by reference or deemed to be incorporated by reference in such Registration Statements.

“Regulation D” has the meaning set forth in the Recitals.

“Regulatory Agreement” has the meaning set forth in Section 3.1(jj).

“Required Approvals” has the meaning set forth in Section 3.1(e).

“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule 144.

“Securities” means (1) all of the issued and outstanding shares of Common Stock; (2) all of the issued and outstanding shares of preferred stock of the Bank authorized under its Articles of Association, as amended to date (collectively, the “Preferred Stock”); (3) all rights, options and warrants to acquire either Common Stock or Preferred Stock, to the extent presently exercisable or exercisable at any time in the future, subject only to the condition of the passage of time; and (4) all notes, bonds, debentures and other instruments convertible into or exchangeable for Common Stock and/or Preferred Stock.

“Securities Act” has the meaning set forth in the Recitals.

“Series A Preferred Stock” has the meaning set forth in Section 3.1(g).

“Series B Preferred Stock” has the meaning set forth in Section 3.1(g).

“Series C Preferred Stock” has the meaning set forth in Section 3.1(g).

“Solicitor” has the meaning set forth in Section 3.1(pp).

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“Shareholder Litigation” has the meaning set forth in Section 4.17.

“Subsidiary” means any entity in which the Bank, directly or indirectly, owns 50% or more of the outstanding capital stock or otherwise has Control over such entity. For the avoidance of doubt, the Bank has no Subsidiaries.

“Surviving Corporation” has the meaning set forth in this Section 1.1.

“Tax” or “Taxes” mean (i) any federal, state, local or foreign income, gross receipts, property, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or add on minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge of any kind whatsoever, together with any interest or penalty, imposed by any Governmental Entity and (ii) any liability in respect of any items described in clause (i) above payable by reason of contract, assumption, transferee or successor liability, operation of law, Treasury Regulations Section 1.1502-6(a) (or any predecessor or successor thereof or analogous or similar provisions of Law) or otherwise.

“Tax Return” means any return, declaration, report or similar statement filed or required to be filed with respect to any Tax (including any attached schedules), including, without limitation, any information return, claim for refund, amended return or declaration of estimated Tax.

“Transaction Documents” means this Agreement, the Schedules and Exhibits attached hereto, including the VCOC Letter Agreement and any other documents or agreements executed by the Bank or the Purchaser in connection with the transactions contemplated hereunder.

“VCOC Letter Agreement” means the letter agreement in the form attached hereto as Exhibit A, dated as of the Closing Date, between the Bank and Purchaser.

“Voting Securities” means the securities of the Bank that is then entitled to vote generally in the election of directors of the Bank.

Article II

PURCHASE AND SALE

2.1 Closing.

(a) Purchase of Shares. Unless this Agreement has been terminated pursuant to Section 6.15 and subject to the satisfaction (or waiver, as applicable) of the conditions set forth in Article V and the delivery of the Bank Deliverables and the Purchaser Deliverables, the Closing shall take place on the date that is five (5) Business Days following the day on which the conditions set forth in Article V (other than those conditions that by their nature are to be satisfied at Closing, but subject to the fulfillment or waiver of those conditions) are satisfied or waived (the “Closing Date”), via electronic communication or at such location as agreed by the parties in writing. Subject to the terms and conditions set forth in this Agreement, at the Closing, the Bank shall issue and sell to the Purchaser, and the Purchaser shall purchase from the Bank, the Purchased Shares against payment by the Purchaser of the Purchase Price in accordance with the requirements set forth in Section 2.1(b).

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(b) Form of Payment. Subject to the satisfaction or waiver of the conditions described in Article V, at the Closing, (i) the Purchaser shall wire the Purchase Price to the Bank, in United States dollars and in immediately available funds; and (ii) upon receipt thereof, the Bank will deliver to the Purchaser the Purchased Shares in certificated form or in uncertificated book-entry form (pursuant to written instructions provided by the Purchaser to the Bank at least three (3) Business Days in advance of the Closing Date).

2.2 Closing Deliveries.

(a) On or prior to the Closing, the Bank shall issue, deliver, or cause to be delivered to the Purchaser (unless otherwise indicated) the following (the “Bank Deliverables”):

(i) a legal opinion of Bank Counsel, dated as of the Closing Date and in the form attached hereto as Exhibit B, executed by such counsel and addressed to the Purchaser;

(ii) a certificate of the Secretary of the Bank, in the form attached hereto as Exhibit C, dated as of the Closing Date, (a) certifying the resolutions adopted by the Board of Directors of the Bank or a duly authorized committee thereof approving the transactions contemplated by this Agreement and the other Transaction Documents and the issuance of the Shares pursuant to this Agreement and the other Transaction Documents, (b) certifying the current versions of the Articles of Association and Bylaws, and (c) certifying as to the signatures and authority of persons signing the Transaction Documents and related documents on behalf of the Bank;

(iii) a certificate, dated as of the Closing Date and signed by the Bank’s President and Chief Executive Officer or its Chief Financial Officer, substantially in the form attached hereto as Exhibit D;

(iv) a certificate of the OCC, as of a recent date, evidencing the corporate existence of the Bank under the Laws of the United States and certificate of the FDIC to the effect that the deposit accounts are insured by the FDIC under the provisions of the Federal Deposit Insurance Act; and

(v) the VCOC Letter Agreement.

(b) On or prior to the Closing, the Purchaser shall deliver or cause to be delivered to the Bank the following (the “Purchaser Deliverables”):

(i) a fully completed and duly executed Accredited Investor Questionnaire, reasonably satisfactory to the Bank, in the form attached hereto as Exhibit E; and

(ii) the VCOC Letter Agreement.

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Article III

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Bank. Except as otherwise set forth on the Disclosure Schedule attached to this Agreement, the Bank hereby makes the following representations and warranties to the Purchaser as of the date hereof and as of the Closing Date, except for the representations and warranties that speak as of a specific date, which shall be made as of such date. Disclosure of an item in the Disclosure Schedule corresponding to a particular Section in this Agreement, should the existence of the item or its content be relevant to any other Section, shall be deemed to be disclosed in that other Section whether or not an explicit cross-reference appears to the extent that it is reasonably apparent on the face of such disclosure that such disclosure is applicable to the other Section.

(a) Subsidiaries. The Bank has no direct or indirect Subsidiaries.

(b) Organization and Qualification. The Bank is an entity duly incorporated or otherwise organized, validly existing, and in good standing under the Laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own or lease and use its properties and assets and to carry on its business as currently conducted. The Bank is not in violation of any of the provisions of its respective certificate or articles of association, bylaws, or other organizational or charter documents. The Bank is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not in the reasonable judgment of the Bank be expected to have a Material Adverse Effect. The Bank’s deposit accounts are insured up to applicable limits by the FDIC, and all premiums and assessments required to be paid in connection therewith have been paid when due and no proceeding for the termination of such insurance is pending or, to the Bank’s Knowledge, threatened. The Bank has conducted its business in compliance with all applicable federal, state and foreign Laws, orders, judgments, decrees, and applicable stock exchange requirements, including all Laws restricting activities of banking organizations, in all material respects except as disclosed in Schedule 3.1(b).

(c) Authorization; Enforcement; Validity. The Bank has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations hereunder and thereunder, including, without limitation, to issue the Purchased Shares in accordance with the terms hereof. The Bank’s execution and delivery of each of the Transaction Documents and the consummation by it of the transactions contemplated hereby (including, but not limited to, the sale and delivery of the Purchased Shares) have been duly authorized by all necessary corporate action on the part of the Bank, and no further corporate action is required by the Bank, its Board of Directors, or its shareholders in connection therewith other than in connection with the Required Approvals. Each of the Transaction Documents has been (or upon delivery will have been) duly executed by the Bank and is, or when delivered in accordance with the terms hereof or thereof, will constitute the legal, valid, and binding obligation of the Bank enforceable against the Bank in accordance with its terms, except (i) as such enforceability may be limited by the Bankruptcy Exceptions, (ii) as limited by Laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, (iii) insofar as indemnification and contribution provisions may be limited by applicable Law; and (iv) as such enforceability may be limited by Section 8(b)(6)(D) of the Federal Deposit Insurance Act, 12 U.S.C. § 1818(b)(6)(D)). There are no shareholder agreements, voting agreements, or other similar arrangements with respect to the Bank’s capital stock to which the Bank is a party or, to the Bank’s Knowledge, between or among any of the Bank’s shareholders.

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(d) No Conflicts. The execution, delivery, and performance by the Bank of the Transaction Documents and the consummation by the Bank of the transactions contemplated hereby or thereby (including, without limitation, the issuance of the Purchased Shares) do not and will not, subject to receipt of the Required Approvals, (i) conflict with or violate any provisions of the Bank’s articles of association, bylaws, or otherwise result in a violation of the organizational documents of the Bank, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would result in a default) under, result in the creation of any Lien upon any of the properties or assets of the Bank or give to others any rights of termination, amendment, acceleration, or cancellation (with or without notice, lapse of time or both) of, any agreement, indenture or instrument to which the Bank is a party, or (iii) subject to the Required Approvals and assuming full compliance by the applicable party with any condition, covenant or requirement contained in such Required Approvals, conflict with or result in a violation of any Law, or other restriction of any court or Governmental Entity to which the Bank is subject (including federal and state securities Laws), or by which any property or asset of the Bank is bound or affected, except in the case of clauses (ii) and (iii) such as would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(e) Filings, Consents and Approvals. The Bank is not required to obtain any consent, waiver, authorization, or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local, or other Governmental Entity, self-regulatory organization, or other Person in connection with the execution, delivery, and performance by the Bank of the Transaction Documents (including, without limitation, the issuance of the Purchased Shares), other than (i) filings required by any applicable state securities Laws, (ii) the filing with the OCC of all notices and/or applications required under the applicable Law and the receipt of all applicable consents or non- objections from such Governmental Entities necessary or required under applicable Law, and (iii) those that have been made or obtained prior to the date of this Agreement (collectively, the “Required Approvals”). The Bank is unaware of any facts or circumstances relating to the Bank which would be likely to prevent the Bank from obtaining or effecting any of the foregoing.

(f) Issuance of the Shares. The issuance of the Purchased Shares has been duly authorized and the Purchased Shares, when issued and paid for in accordance with the terms of the Transaction Documents, will be duly and validly issued, fully paid, and free and clear of all Liens, other than restrictions on transfer imposed by applicable securities Laws, restrictions contemplated by this Agreement and Liens, if any, created by the Purchaser, and shall not be subject to preemptive or similar rights. The Purchased Shares will be issued in compliance with all applicable federal and state securities Laws.

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(g) Capitalization. The authorized capital stock of the Bank consists of (i) 10,000,000 shares of Common Stock, of which 4,314,538 shares are issued and outstanding, 157,725 shares are reserved for issuance pursuant to outstanding options granted in accordance with the Bank’s 2001 Stock Option Plan (which has been terminated in accordance with its terms), and 997,235 shares are reserved for issuance pursuant to the Bank’s 2011 Omnibus Equity Incentive Plan, leaving 4,530,503 shares of Common Stock available for future issuances; and (ii) 10,000,000 shares of serial Preferred Stock, of which no shares of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series A (the “Series A Preferred Stock”), no shares of Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series B (the “Series B Preferred Stock”), and no shares of the Fixed Rate Non-Cumulative Perpetual Preferred Stock, Series C (the “Series C Preferred Stock”) are currently outstanding. All of the outstanding shares of capital stock of the Bank are duly authorized, validly issued, fully paid, and have been issued in compliance in all material respects with all applicable federal and state securities Laws, and none of such outstanding shares was issued in violation of any preemptive rights or similar rights to subscribe for or purchase any capital stock of the Bank. Schedule 3.1(g) sets forth: (A) the shares of Common Stock reserved for issuance pursuant to the Bank’s 2001 Stock Option Plan and the Bank’s 2011 Omnibus Equity Incentive Plan; (B) the shares of Common Stock issuable by the Bank pursuant to the exercise of outstanding options granted in accordance with the Bank’s 2001 Stock Option Plan or granted in accordance with the Bank’s 2011 Omnibus Equity Incentive Plan; (C) the shares of Common Stock subject to outstanding awards of restricted shares pursuant to the Bank’s 2011 Omnibus Equity Incentive Plan; (D) the shares of Common Stock that, subject to the discretion of the Board of Directors, the Bank may grant as stock options or award as restricted stock pursuant to the Bank’s 2011 Omnibus Equity Incentive Plan prior to the Outside Date; and (E) the number of shares of the Bank’s Common Stock outstanding immediately following the Closing after giving effect to the transactions contemplated by this Agreement but not including the exercise of any outstanding stock options currently vested or that will vest prior to the Outside Date, or any restricted shares that will vest and become unrestricted prior to the Outside Date. Except as disclosed in Schedule 3.1(g), there are no outstanding options, warrants, scrip, rights to subscribe to, calls, or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Bank, or contracts, commitments, understandings or arrangements by which the Bank is or may become bound to issue additional shares of capital stock of the Bank or options, warrants, scrip, rights to subscribe to, calls, or commitments of any character whatsoever relating to, or securities or rights convertible into, or exercisable or exchangeable for, any shares of capital stock of the Bank. Except as set forth on Schedule 3.1(g) which identifies credit facilities, the Bank has made available to the Purchaser or its representatives, prior to the date hereof, true, correct, and complete copies of all material outstanding debt securities, notes, credit agreements, credit facilities or other agreements, documents or instruments evidencing indebtedness of the Bank or by which the Bank is bound, if applicable. There are no outstanding securities or instruments of the Bank that contain any redemption or similar provisions, and there are no contracts, commitments, understandings or arrangements by which the Bank is or may become bound to redeem a security of the Bank. The Bank does not have any stock appreciation rights or “phantom stock” plans or agreements or any similar plan or agreement. The Bank does not have any liabilities or obligations required to be disclosed in the Bank Financial Statements but not so disclosed in the Bank Financial Statements, which will have or would reasonably be expected to have a Material Adverse Effect. There are no securities or instruments issued by or to which the Bank is a party containing anti-dilution or similar provisions that will be triggered by the issuance of the Purchased Shares pursuant to this Agreement and the other Transaction Documents.

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(h) Financial Statements. The balance sheets of the Bank as of December 31, 2015 and 2014 and related statements of operations, changes in shareholders’ equity and cash flows for the two years ended December 31, 2015, together with the notes thereto, and the unaudited balance sheets of the Bank as of June 30, 2016 and the related statements of operations and changes in shareholders’ equity for the six months then ended (the “Bank Financial Statements”), (1) have been prepared from, and are in accordance with the books and records of the Bank, (2) have been prepared in accordance with GAAP applied on a consistent basis during the periods involved, except as may be otherwise specified in such financial statements or the notes thereto and except that the unaudited financial statements may not contain all footnotes required by GAAP and (3) fairly present in all material respects the balance sheet, results of operations and changes in shareholders’ equity of the Bank taken as a whole as of and for the dates thereof and the results of operations, shareholders’ equity and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, year-end audit adjustments, which would not be material, either individually or in the aggregate.

(i) Tax Matters. Since January 1, 2011, the Bank has (i) timely filed all material foreign, U.S. federal, state and local Tax Returns that are or were required to be filed, and all such Tax Returns are true, correct and complete in all material respects, (ii) paid all material Taxes required to be paid by it and any other material assessment, fine or penalty levied against it, whether or not shown or determined to be due on such Tax Returns, other than any such amounts (x) currently payable without penalty or interest, or (y) being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP; (iii) timely withheld, collected or deposited as the case may be all material Taxes (determined both individually and in the aggregate) required to be withheld, collected or deposited by it, and to the extent required, have been paid to the relevant taxing authority in accordance with applicable Law; and (iv) complied with all applicable information reporting requirements in all material respects. The Bank (i) is not subject to any outstanding audit, assessment, dispute or claim concerning any material Tax liability of the Bank either within the Bank’s Knowledge or claimed, pending or raised by an authority in writing; (ii) is not a party to, bound by or otherwise subject to any obligation under any Tax sharing or Tax indemnity agreement or similar contract or arrangement; (iii) has not participated in a “listed transaction” within the meaning of Treasury Regulation Section 1.6011- 4(b)(2); or (iv) has any liability for Taxes of any Person arising from the application of Treasury Regulation Section 1.1502-6 or any analogous provision of state, local or foreign Law, or as a transferee or successor, by contract, or otherwise. To the Bank’s Knowledge, no claim has been made by a tax authority in a jurisdiction where the Bank does not pay Taxes or file Tax Returns asserting that the Bank is or may be subject to Taxes assessed by such jurisdiction. The Bank will not be required to include any item of income in, or exclude any item of deduction from, taxable income for any period (or any portion thereof) ending after the Closing as a result of any: (1) installment sale or other open transaction disposition made on or prior to the Closing; (2) prepaid amount received on or prior to the Closing; (3) written and legally binding agreement with a Governmental Entity relating to taxes for any taxable period ending on or before the Closing; (4) change in method of accounting in any taxable period ending on or before the Closing; or (5) election under Section 108(i) of the Code.

(j) Material Changes. Since December 31, 2015, there have been no events, occurrences, or developments that have had or would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect.

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(k) Environmental Matters. To the Bank’s Knowledge, the Bank (i) is not in violation of any Law of any Governmental Entity relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “Environmental Laws”), (ii) is not liable for any off-site disposal or contamination pursuant to any Environmental Laws, (iii) does not own or operate any real property contaminated with any substance that is in violation of any Environmental Laws or (iv) is not subject to any claim relating to any Environmental Laws; in each case, which violation, contamination, liability or claim has had or would reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; and there is no pending or, to the Bank’s Knowledge, threatened investigation that might lead to such a claim. Except as would not result in a Material Adverse Effect, there are no circumstances or conditions (including the presence of asbestos, underground storage tanks, lead products, polychlorinated biphenyls, prior manufacturing operations, dry-cleaning or automotive services) involving the Bank, or any currently or formerly owned or operated property of the Bank, that could reasonably be expected to result in any claim, liability, investigation, cost or restriction against the Bank, or result in any restriction on the ownership, use, or transfer of any property pursuant to any Environmental Law, or adversely affect the value of any currently owned property of the Bank.

(l) Litigation. There is no Action pending or, to the Bank’s Knowledge, threatened, which (i) challenges the legality, validity, or enforceability of any of the Transaction Documents, the issuance of Purchased Shares pursuant to this Agreement, or (ii) except as disclosed in Schedule 3.1(l), is reasonably likely to be material to the Bank, individually or in the aggregate, if there were an unfavorable decision. Neither the Bank nor, to the Knowledge of the Bank, any director or officer thereof, is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities Laws or a claim of breach of fiduciary duty nor is any such Action, to the Bank’s Knowledge, currently threatened. There is no Action by the Bank pending or which the Bank intends to initiate (other than collection or similar claims in the ordinary course of business). There are no outstanding orders, judgments, injunctions, awards or decrees of any court, arbitrator or governmental or regulatory body against the Bank or any executive officers or directors of the Bank in their capacities as such, which individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on the Bank.

(m) Employment Matters. No labor dispute exists or, to the Bank’s Knowledge, is imminent with respect to any of the employees of the Bank which would have or reasonably be expected to have a Material Adverse Effect. None of the employees of the Bank is a member of a union that relates to such employee’s relationship with the Bank, and the Bank is not a party to a collective bargaining agreement. To the Bank’s Knowledge, there is no activity involving any of the employees of the Bank seeking to certify a collective bargaining unit or similar organization. To the Bank’s Knowledge, no executive officer of the Bank is, or is now expected to be, in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement or non-competition agreement, or any other contract or agreement or any restrictive covenant in favor of a third party, and to the Bank’s Knowledge, the continued employment of each such executive officer does not subject the Bank to any liability with respect to any of the foregoing matters. The Bank is in compliance with all Laws and regulations relating to employment and employment practices, immigration, terms and conditions of employment and wages and hours, except where the failure to be in compliance would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. As of the date of this Agreement, except as otherwise disclosed to the Purchaser, no employee with the title of Vice President or higher has given notice to the Bank of his or her intent to terminate his or her employment or service relationship with the Bank. The Bank is in material compliance with all Laws concerning the classification of employees and independent contractors and has properly classified all such individuals for purposes of participation in employee benefit plans.

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(n) Compliance. The Bank (i) is not in default under or in violation of, and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Bank, nor has the Bank received written notice of a claim that it is in default under or that it is in violation of, any Material Contract (whether or not such default or violation has been waived), (ii) is in violation of any order of which the Bank has been made aware in writing of any court, arbitrator, or governmental body having jurisdiction over the Bank or its properties or assets, (iii) is in violation of, or in receipt of written notice that it is in violation of, any statute, rule, regulation, policy, guideline, or order of any Governmental Entity or self-regulatory organization applicable to the Bank, or which would have the effect of revoking or limiting FDIC deposit insurance, except in each case as would not have or reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

(o) Regulatory Permits. The Bank possesses or has applied for all certificates, authorizations, consents, licenses, franchises, variances, exemptions, orders, approvals and permits issued by the appropriate Governmental Entities necessary to conduct its businesses as currently conducted, except where the failure to possess such certificates, authorizations, consents, or permits, individually or in the aggregate, has not had and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect (“Material Permits”), and (i) the Bank has not received any notice in writing of proceedings relating to the revocation or material adverse modification of any such Material Permits, and (ii) the Bank is unaware of any facts or circumstances that would give rise to the revocation or material adverse modification of any Material Permits.

(p) Title to Assets. The Bank has good and marketable title to all real property and tangible personal property owned by it which is material to the business of the Bank, free and clear of all Liens, except such as do not materially affect the value of such property or do not interfere with the use made and proposed to be made of such property by the Bank. Any real property and facilities held under lease by the Bank are held by it under valid, subsisting, and enforceable leases with such exceptions as are not material and do not interfere with the use made and proposed to be made of such property and facilities by the Bank. No notice of a claim of default by any party to any lease entered into by the Bank has been delivered to the Bank or is now pending, and there does not exist any event or circumstance that with notice or passing of time, or both, would constitute a default or excuse performance by any party thereto. None of the owned or leased premises or properties of the Bank is subject to any current or potential interests of third parties or other restrictions or limitations that would impair or be inconsistent in any material respect with the current use of such property by the Bank.

(q) Patents and Trademarks. The Bank owns, possesses, licenses, or has other rights to use all foreign and domestic patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, inventions, trade secrets, technology, Internet domain names, know-how, and other intellectual property (collectively, the “Intellectual Property”) necessary for the conduct of its business as now conducted or as proposed to be conducted, except where the failure to own, possess, license, or have such rights would not have or reasonably be expected to have a Material Adverse Effect. Except where such violations or infringements would not have or reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, (a) there are no rights of third parties to any such Intellectual Property, (b) to the Bank’s knowledge there is no infringement by third parties of any such Intellectual Property, (c) there is no pending or, to the Bank’s Knowledge, threatened action, suit, proceeding, or claim by others challenging the Bank’s rights in or to any such Intellectual Property, (d) there is no pending or, to the Bank’s Knowledge, threatened action, suit, proceeding, or claim by others challenging the validity or scope of any such Intellectual Property, and (e) there is no pending or, to the Bank’s Knowledge, threatened action, suit, proceeding, or claim by others that the Bank infringes or otherwise violates any patent, trademark, copyright, trade secret, or other proprietary rights of others.

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(r) Insurance. The Bank is, and following the Closing Date will remain, insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as the Bank reasonably believes to be prudent and customary in the businesses and locations in which and where the Bank is engaged. The Bank has not been refused any insurance coverage sought or applied for, and the Bank does not have any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect. All premiums due and payable under all such policies and bonds have been timely paid, and the Bank is in material compliance with the terms of such policies and bonds. The Bank has not received any notice of cancellation of any such insurance, nor, to the Bank’s Knowledge, will it be unable to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not be materially higher than its existing insurance coverage. The Bank (i) maintains directors’ and officers’ liability insurance and fiduciary liability insurance with financially sound and reputable insurance companies with benefits and levels of coverage as disclosed in Schedule 3.1(r), (ii) has timely paid all premiums on such policies, and (iii) there has been no lapse in coverage during the term of such policies.

(s) Transactions with Affiliates and Employees. Except as set forth in Schedule 3.1(s), none of the officers or directors of the Bank and, to the Bank’s Knowledge, none of the employees of the Bank, is presently a party to any transaction with the Bank or to a presently contemplated transaction (other than for services as employees, officers, and directors) that would be required to be disclosed pursuant to Item 404 of Regulation S-K promulgated under the Securities Act if the Common Stock was required to be registered with the Commission under the Securities Act or the Exchange Act.

(t) Internal Control over Financial Reporting. Based upon the most recent evaluation by the Bank’s outside auditors of the Bank’s internal control over financial reporting, there are no significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting that are reasonably likely to materially and adversely affect the Bank’s ability to record, process, summarize, and report financial information. From the period beginning December 31, 2012 and ending on the Closing Date, there has not been any fraud, whether or not material, that involves management or other employees who have a significant role in the Bank’s internal control over financial reporting. Since December 31, 2012, (i) neither the Bank nor, to the Bank’s Knowledge, any director, officer, employee, auditor, accountant or representative of the Bank has received or otherwise had or obtained knowledge of any material complaint, allegation, assertion or claim, whether written or oral, regarding the accounting or auditing practices, procedures, methodologies or methods of the Bank or their respective internal accounting controls, including any material complaint, allegation, assertion or claim that the Bank has engaged in questionable accounting or auditing practices; and (ii) no attorney representing the Bank, whether or not employed by the Bank, has reported evidence of a violation of securities Laws, breach of fiduciary duty or similar violation by the Bank or any of its officers, directors, employees or agents to the board of directors or any committee thereof or to any director or officer of the Bank.

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(u) Brokers and Finders. No person or entity will have, as a result of the transactions contemplated by this Agreement, any valid right, interest, or claim against or upon the Bank or the Purchaser for any commission, fee, or other compensation as a broker or a finder, or in any similar capacity pursuant to any agreement, arrangement, or understanding entered into by or on behalf of the Bank, except for the fees paid and/or payable to MJC Partners, LLC, as set forth on Schedule 3.1(u). The Bank shall indemnify, pay, and hold the Purchaser harmless against, any liability, loss or expense (including, without limitation, attorneys’ fees and out-of-pocket expenses) arising in connection with any such right, interest or claim.

(v) Private Placement. Assuming the accuracy of the Purchaser’s representations and warranties set forth in Section 3.2 of this Agreement and the accuracy of the information disclosed in the Accredited Investor Questionnaire, no registration under the Securities Act is required for the offer and sale of the Shares by the Bank to the Purchaser under the Transaction Documents.

(w) Registration Rights. Other than the Purchaser, no Person has any right to cause the Bank to effect the registration under the Securities Act of any securities of the Bank.

(x) No Integrated Offering. Assuming the accuracy of the Purchaser’s representations and warranties set forth in Section 3.2, neither the Bank nor, to the Bank’s Knowledge, any of its Affiliates or any Person acting on its behalf has, directly or indirectly, at any time within the past six months, made any offers or sales of any Bank security or solicited any offers to buy any security under circumstances that would eliminate the availability of the exemption from registration under the OCC Securities Regulations in connection with the offer and sale by the Bank of the Purchased Shares as contemplated hereby.

(y) Investment Company. The Bank is not required to be registered as, and is not an Affiliate of, and immediately following the Closing will not be required to register as, an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the Bank does not sponsor any Person that is such an investment company.

(z) Unlawful Payments. To the Bank’s Knowledge, neither the Bank nor any directors, officers, employees, agents, or other Persons acting at the direction of or on behalf of the Bank has, in the course of its actions for, or on behalf of, the Bank (a) directly or indirectly, used any corporate funds for unlawful contributions, gifts, entertainment, or other unlawful expenses relating to foreign or domestic political activity, (b) made any direct or indirect unlawful payments to any foreign or domestic governmental officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (c) violated any provision of the Foreign Corrupt Practices Act of 1977, or (d) made any other unlawful bribe, rebate, payoff, influence payment, kickback, or other material unlawful payment to any foreign or domestic government official or employee.

(aa) Application of Takeover Protections; Rights Agreements. The Bank has not adopted any shareholder rights plan or similar arrangement relating to accumulations of beneficial ownership of its Common Stock or a Change in Control of the Bank. The Bank and the Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement), or other similar anti-takeover provision under the Bank’s Articles of Association or other organizational documents or the Laws of the jurisdiction of its incorporation or otherwise which is or could become applicable to any Purchaser solely as a result of the transactions contemplated by this Agreement, including, without limitation, the Bank’s issuance of the Purchased Shares and the Purchaser’s ownership of the Purchased Shares.

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(bb) No Undisclosed Liabilities. There are no material liabilities or obligations of the Bank of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable, or otherwise, except for (i) liabilities appropriately reflected or reserved against in accordance with GAAP in the Bank’s audited balance sheet or that are otherwise disclosed in the footnotes to the financial statements for the year ended December 31, 2015, and (ii) liabilities that have arisen in the ordinary and usual course of business and consistent with past practice since December 31, 2015.

(cc) Acknowledgment Regarding Purchaser’s Purchase of Shares. The Bank acknowledges and agrees that the Purchaser is acting solely in the capacity of an arm’s length purchaser with respect to the Transaction Documents and the transactions contemplated hereby and thereby. The Bank further acknowledges that the Purchaser is not acting as a financial advisor or fiduciary of the Bank (or in any similar capacity) with respect to the Transaction Documents and the transactions contemplated thereby and any advice given by the Purchaser or its representatives or agents in connection with the Transaction Documents and the transactions contemplated thereby is merely incidental to the Purchaser’s purchase of the Purchased Shares.

(dd) Absence of Manipulation. The Bank has not, and to the Bank’s Knowledge no one acting on its behalf has, taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Bank to facilitate the sale or resale of any of the Purchased Shares.

(ee) OFAC. The Bank and, to the Bank’s Knowledge, any director, officer, agent, employee, Affiliate, or Person acting on behalf of the Bank is not currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Treasury Department (“OFAC”); and the Bank will not knowingly use the proceeds of the sale of the Purchased Shares towards any sales or operations in Cuba, Iran, Syria, Sudan, Myanmar, or any other country sanctioned by OFAC or for the purpose of financing the activities of any Person currently subject to any U.S. sanctions administered by OFAC.

(ff) Money Laundering Laws. The operations of the Bank are, and have been conducted at all times, in compliance in all material respects with the money laundering Laws (collectively, the “Money Laundering Laws”), and to the Bank’s Knowledge, no action, suit, or proceeding by or before any court or Governmental Entity, authority, or body or any arbitrator involving the Bank with respect to the Money Laundering Laws is pending or, to the Bank’s Knowledge, threatened.

(gg) No Additional Agreements. The Bank has no agreements or understandings (including, without limitation, side letters) with any other Person to purchase shares of Common Stock on terms more favorable to such Person than as set forth herein.

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(hh) Reports, Registrations and Statements. Since January 1, 2014, the Bank has filed all material reports, registrations, documents, filings, submissions and statements, together with any required amendments thereto, that it was required to file with the FDIC, the OCC, and any other applicable federal or state securities or banking authorities, and has paid all fees and assessments due and payable in connection therewith, except where the failure to pay any such fees and/or assessments, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. All such reports and statements filed with any such regulatory body or authority are collectively referred to herein as the “Bank Reports.” All such Bank Reports were filed on a timely basis or the Bank received a valid extension of such time of filing and has filed any such Bank Reports prior to the expiration of any such extension. As of their respective dates, the Bank Reports complied in all material respects with all the rules and regulations promulgated by the FDIC, the OCC, and any other applicable foreign, federal, or state securities or banking authorities, as the case may be.

(ii) Regulatory Capitalization. As of June 30, 2016, the Bank was considered “well capitalized” under the OCC’s regulatory framework for prompt corrective action (12 C.F.R. § 6.4(c)(1)).

(jj) Agreements with Regulatory Agencies. Except as set forth in Schedule 3.1(jj), the Bank is not subject to any cease-and-desist or other similar order or enforcement action issued by, or is a party to any written agreement, consent agreement, or memorandum of understanding with, or is a party to any commitment letter or similar undertaking to, or is subject to any capital directive by, or since December 31, 2014, has adopted any board resolutions at the request of, any Governmental Entity that currently restricts in any material respect the conduct of its business or that in any material manner relates to its capital adequacy, its liquidity and funding policies and practices, its ability to pay dividends, its credit, risk management or compliance policies, its internal controls, its management, or its operations or business (each item in this sentence, a “Regulatory Agreement”), nor has the Bank been advised in writing since December 31, 2014 by any Governmental Entity that it intends to issue, initiate, order, or request any such Regulatory Agreement. The Bank is in compliance in all material respects with the all Regulatory Agreements applicable to it.

(kk) Compliance with Certain Banking Regulations. To the Bank’s Knowledge, there are no facts or circumstances, and the Bank has no reason to believe that any facts or circumstances exist, that would cause the Bank (i) to be deemed not to be in satisfactory compliance with the Community Reinvestment Act (“CRA”) and the regulations promulgated thereunder or to be assigned a CRA rating by federal or state banking regulators of lower than “satisfactory,” (ii) to be deemed to be operating in violation, in any material respect, of the Bank Secrecy Act, the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001, any order issued with respect to anti-money laundering by OFAC, or any other Money Laundering Law, (iii) to be deemed not to be in satisfactory compliance, in any material respect, with the Home Mortgage Disclosure Act, the Fair Housing Act, the Community Reinvestment Act, the Equal Credit Opportunity Act, or (iv) to be deemed not to be in satisfactory compliance, in any material respect, with all applicable privacy of customer information requirements contained in any applicable federal and state privacy Laws as well as the provisions of all information security programs adopted by the Bank.

(ll) No General Solicitation or General Advertising. Neither the Bank nor, to the Bank’s Knowledge, any person acting on its behalf has engaged or will engage in any form of general solicitation or general advertising (within the meaning of Regulation D under the Securities Act) in connection with any offer or sale of the Purchased Shares.

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(mm) Loan Portfolio. Except as has not had and would not reasonably be expected to have a Material Adverse Effect:

(i) The Bank has complied in all material respects with, and all documentation in connection with the origination, processing, underwriting and credit approval of any loan, lease or other extension of credit or commitment to extend credit (“Loans”) originated, purchased or serviced by the Bank satisfied in all material respects, (A) all applicable Laws with respect to the origination, insuring, purchase, sale, pooling, servicing, subservicing or filing of claims in connection with Loans, including all Laws relating to real estate settlement procedures, consumer credit protection, truth in lending Laws, usury limitations, fair housing, transfers of servicing, collection practices, equal credit opportunity and adjustable rate mortgages, (B) the responsibilities and obligations relating to Loans set forth in any contract or agreement between the Bank and any Agency, Loan Investor or Insurer, (C) the applicable rules, regulations, guidelines, handbooks and other requirements of any Agency, Loan Investor or Insurer, (D) the terms and provisions of any mortgage or other collateral documents and other Loan documents with respect to each Loan and (E) the underwriting guidelines and other loan policies and procedures of the Bank;

(ii) No Agency, Loan Investor, or Insurer has (A) claimed in writing that the Bank has violated or has not complied with the applicable underwriting standards with respect to Loans sold by the Bank to a Loan Investor or Agency, or with respect to any sale of Loan servicing rights to a Loan Investor, (B) imposed in writing restrictions on the activities (including commitment authority) of the Bank or (C) indicated in writing to the Bank that it has terminated or intends to terminate its relationship with the Bank for poor performance, poor Loan quality or concern with respect to the Bank’s compliance with Laws; and

(iii) The characteristics of the loan portfolio of the Bank have not materially changed from the characteristics of the loan portfolio of the Bank as of December 31, 2015.

For purposes of this Section 3.1(mm), (A) “Agency” means the Federal Housing Administration, the Federal Home Loan Mortgage Corporation, the Farmers Home Administration (now known as Rural Housing and Community Development Services), the Federal National Mortgage Association, the United States Department of Veterans’ Affairs, the Rural Housing Service of the U.S. Department of Agriculture, or any other Governmental Entity with authority to (i) determine any investment, origination, lending, or servicing requirements with regard to Loans originated, purchased, or serviced by the Bank, or (ii) originate, purchase, or service Loans, or otherwise promote lending, including state and local housing finance authorities, (B) “Loan Investor” means any person (including an Agency) having a beneficial interest in any Loan originated, purchased, or serviced by the Bank or a security backed by or representing an interest in any such Loan, and (C) “Insurer” means a person who insures or guarantees for the benefit of the mortgagee all or any portion of the risk of loss upon borrower default on any of the Loans originated, purchased, or serviced by the Bank, including the Federal Housing Administration, the United States Department of Veterans’ Affairs, the Rural Housing Service of the U.S. Department of Agriculture, and any private mortgage insurer, and providers of hazard, title, or other insurance with respect to such Loans or the related collateral.

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(nn) Risk Management Instruments. The Bank has in place risk management policies and procedures sufficient in scope and operation to protect against risks of the type and in amounts reasonably expected to be incurred by companies of similar size and in similar lines of business as the Bank. Except as has not had or would not reasonably be expected to have a Material Adverse Effect, since January 1, 2013, all derivative instruments, including, swaps, caps, floors, and option agreements, entered into for the Bank’s own account were entered into (1) only in the ordinary course of business, (2) in accordance with prudent practices and in all respects with all applicable Laws, and (3) with counterparties believed to be financially responsible at the time, and each of them constitutes the valid and legally binding obligation of the Bank, enforceable in accordance with its terms, subject in each case to the Bankruptcy Exceptions. Neither the Bank nor, to the Bank’s Knowledge, any other party thereto, is in breach of any of its obligations under any such agreement or arrangement.

(oo) ERISA. The Bank is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, including the regulations and published interpretations thereunder (“ERISA”); no “reportable event” (as defined in ERISA) has occurred with respect to any “pension plan” (as defined in ERISA) for which the Bank would have any liability; the Bank has not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “pension plan, “ or (ii) Sections 412 or 4971 of the Code; and each “Pension Plan” for which the Bank would have liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification.

(pp) No “Bad Actor” Disqualification. The Bank has exercised reasonable care, in accordance with the Commission rules and guidance, and has conducted a factual inquiry including the procurement of relevant questionnaires from each Covered Person (as defined below) or other means, the nature and scope of which reflect reasonable care under the relevant facts and circumstances, to determine whether any Covered Person (as defined below) is subject to any of the “bad actor” disqualifications described in Rule 506(d)(1)(i) to (viii) under the Securities Act (“Disqualification Events”). To the Bank’s knowledge, after conducting such sufficiently diligent factual inquiries, no Covered Person is subject to a Disqualification Event, except for a Disqualification Event covered by Rule 506(d)(2) or (d)(3) under the Securities Act. The Bank has complied, to the extent applicable, with any disclosure obligations under Rule 506(e) under the Securities Act. “Covered Persons” are those persons specified in Rule 506(d)(1) under the Securities Act, including the Bank; any predecessor or affiliate of the Bank; any director, executive officer, other officer participating in the offering, general partner or managing member of the Bank; any beneficial owner of 20% or more of the Bank’s outstanding voting equity securities, calculated on the basis of voting power; any promoter (as defined in Rule 405 under the Securities Act) connected with the Bank in any capacity at the time of the sale of the Securities; and any person that has been or will be paid (directly or indirectly) remuneration for solicitation of purchasers in connection with the sale of the Securities (a “Solicitor”), any general partner or managing member of any Solicitor, and any director, executive officer or other officer participating in the offering of any Solicitor or general partner or managing member of any Solicitor.

(qq) Nonperforming Assets. To the Bank’s Knowledge, as of the date hereof, the Bank believes that (i) it will be able to fully and timely collect substantially all interest, principal, or other payments when due under its loans, leases, and other assets that are not classified as substandard, doubtful, loss or nonperforming and such belief is reasonable under all the facts and circumstances known to the Bank and (2) the amount of reserves and allowances for loan and lease losses and other nonperforming assets established on the Bank Financial Statements is adequate, and such belief is reasonable under all the facts and circumstances known to the Bank.

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(rr) No Change in Control. The Bank is not a party to any employment, Change in Control, severance, or other compensatory agreement or any benefit plan pursuant to which the issuance of the Purchased Shares to the Purchaser as contemplated by this Agreement would trigger a “change of control” or other similar provision in any of the agreements, which results in payments to the counterparty or the acceleration of vesting of benefits.

(ss) Common Control. The Bank is not and, after giving effect to the offering and sale of the Shares, will not be under the control (as defined in the BHCA and the Federal Reserve’s Regulation Y (12 C.F.R. Part 225) (“BHCA Control”) of any Company (as defined in the BHCA and the Federal Reserve’s Regulation Y). The Bank is not in BHCA Control of any federally insured depository institution. The Bank does not control, in the aggregate, more than five percent of the outstanding voting class, directly or indirectly, of any federally insured depository institution. The Bank is not subject to the liability of any commonly controlled depository institution pursuant to Section 5(e) of the Federal Deposit Insurance Act (12 U.S.C. § 1815(e)).

(tt) Material Contracts. The Bank has made available to the Purchaser or its representatives, prior to the date hereof, true, correct, and complete copies of each Material Contract to which the Bank is a party or subject (whether written or oral, express or implied) as of the date of this Agreement. Each Material Contract is a valid and binding obligation of the Bank and, to the Bank’s Knowledge, each other party to such Material Contract, except for such failures to be valid and binding as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Each such Material Contract is enforceable against the Bank and, to the Bank’s Knowledge, each other party to such Material Contract in accordance with its terms (subject in each case to the Bankruptcy Exceptions, regardless of whether such enforceability is considered in a proceeding of law or at equity and Section 8(b)(6)(D) of the Federal Deposit Insurance Act, 12 U.S.C. § 1818(b)(6)(D)), except for such failures to be enforceable as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. Neither the Bank nor, to the Bank’s Knowledge, any other party to a Material Contract, is in material default or material breach of a Material Contract and there does not exist any event, condition or omission that would constitute such a default or breach (whether by lapse of time or notice or both), in each case, except as, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

3.2 Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants as of the date hereof and as of the Closing Date to the Bank as follows:

(a) Organization; Authority. The Purchaser is duly organized, validly existing, and in good standing under the Laws of the jurisdiction of its organization, is duly qualified to do business and is in good standing in all jurisdictions where its ownership or leasing of property or the conduct of its business requires it to be so qualified and failure to be so qualified would have a Material Adverse Effect on the Purchaser, and has the requisite corporate, partnership, limited liability company, or other power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder. The execution, delivery, and performance by the Purchaser of this Agreement and the transactions contemplated hereby have been duly authorized by the Purchaser’s board of directors, general partner, managing members, investment committee or other authorized persons, as the case may be (if such authorization is required), and no further approval or authorization by any of such persons, as the case may be, is required. This Agreement has been duly executed by the Purchaser, and when delivered by the Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of the Purchaser, enforceable against it in accordance with its terms, except as such enforceability may be limited by the Bankruptcy Exceptions.

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(b) No Conflicts. The execution, delivery, and performance by the Purchaser of this Agreement, and the consummation by the Purchaser of the transactions contemplated hereby will not (i) result in a violation of the organizational documents of the Purchaser, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, or instrument to which the Purchaser is a party, or (iii) result in a violation of any Law applicable to the Purchaser, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights, or violations which would not, individually or in the aggregate, reasonably be expected to have a material adverse effect on the ability of the Purchaser to perform its obligations hereunder.

(c) Investment Intent. The Purchaser understands that the Purchased Shares are “restricted securities” and have not been registered under the Securities Act or any applicable state securities Law and is acquiring the Purchased Shares as principal for its own account and not with a view to, or for distributing or reselling such Shares or any part thereof in violation of the Securities Act or any applicable state securities Laws, provided, however, that by making the representations herein, the Purchaser does not agree to hold any of the Purchased Shares for any minimum period of time and reserves the right at all times to sell or otherwise dispose of all or any part of such Purchased Shares pursuant to an effective registration statement under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities Laws. The Purchaser is acquiring the Purchased Shares hereunder in the ordinary course of its business. The Purchaser does not presently have any agreement, plan, or understanding, directly or indirectly, with any Person to distribute or effect any distribution of any of the Purchased Shares (or any securities which are derivatives thereof) to or through any person or entity.

(d) Purchaser Status. At the time the Purchaser was offered the Shares, it was, and at the date hereof it is, an “accredited investor” as defined in Rule 501(a) under the Securities Act. The Purchaser has provided the information in the Accredited Investor Questionnaire attached hereto as Exhibit E, which information is true, accurate and correct in all respects.

(e) General Solicitation. The Purchaser is not purchasing the Purchased Shares as a result of any advertisement, article, notice, or other communication regarding the Purchased Shares published in any newspaper, magazine, or similar media or broadcast over television or radio or presented at any seminar or any other form of “general solicitation” or “general advertising” (as such terms are used in Regulation D promulgated under the Securities Act and interpreted by the Commission).

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(f) Experience of The Purchaser. The Purchaser, either alone or together with its representatives, has such knowledge, sophistication, and experience in business and financial matters so as to be capable of evaluating the merits and risks of the prospective investment in the Purchased Shares and has so evaluated the merits and risks of such investment. The Purchaser is capable of protecting its own interests in connection with this investment and has experience as an investor in securities of companies like the Bank. The Purchaser is able to hold the Purchased Shares indefinitely if required, is able to bear the economic risk of an investment in the Purchased Shares, and, at the present time, is able to afford a complete loss of such investment. Further, the Purchaser understands that no representation is being made as to the future trading value or trading volume of the Purchased Shares.

(g) Access to Information. The Purchaser is sufficiently aware of the Bank’s business affairs and financial condition to reach an informed and knowledgeable decision to acquire the Purchased Shares. The Purchaser acknowledges that it has had the opportunity to review the Disclosure Materials and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, management and representatives of the Bank concerning the terms and conditions of the offering of the Purchased Shares and the merits and risks of investing in the Purchased Shares and any such questions have been answered to the Purchaser’s reasonable satisfaction; (ii) access to information about the Bank and its financial condition, results of operations, business, properties, management, and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Bank possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. The Purchaser has received all information it deems appropriate for assessing the risk of an investment in the Purchased Shares. Neither such inquiries nor any other investigation conducted by or on behalf of the Purchaser or its representatives or counsel shall modify, amend, or affect the Purchaser’s right to rely on the truth, accuracy, and completeness of the Disclosure Materials provided to the Purchaser and the Bank’s representations and warranties contained in the Transaction Documents. The Purchaser has sought such accounting, legal, and tax advice as it has considered necessary to make an informed decision with respect to its acquisition of the Purchased Shares. Purchaser acknowledges that the Bank has not made any representation, express or implied, with respect to the accuracy, completeness, or adequacy of any available information except that the Bank has made the express representations and warranties contained in Section 3.1 of this Agreement.

(h) Brokers and Finders. No Person will have, as a result of the transactions contemplated by this Agreement, any valid right, interest, or claim against or upon the Bank for any commission, fee, or other compensation as a broker or a finder, or in any similar capacity pursuant to any agreement, arrangement, or understanding entered into by or on behalf of the Purchaser.

(i) Independent Investment Decision. The Purchaser has independently evaluated the merits of its decision to purchase the Purchased Shares pursuant to the Transaction Documents, and the Purchaser confirms that it has not relied on the advice of the Bank (or any of its agents, counsel, or Affiliates). The Purchaser understands that nothing in this Agreement or any other materials presented by or on behalf of the Bank to the Purchaser in connection with the purchase of the Purchased Shares constitutes legal, regulatory, tax, or investment advice. The Purchaser has consulted such legal, tax, and investment advisors as it, in its sole discretion, has deemed necessary or appropriate in connection with its purchase of the Purchased Shares.

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(j) Residency. The Purchaser’s office in which its investment decision with respect to the Purchased Shares was made is located at the address immediately below the Purchaser’s name on its signature page hereto.

3.3 The Bank and the Purchaser acknowledge and agree that neither party to this Agreement has made or makes any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Article III and the Transaction Documents.

Article IV

OTHER AGREEMENTS OF THE PARTIES

4.1 Transfer Restrictions.

(a) Compliance with Laws. Notwithstanding any other provision of this Article IV, the Purchaser covenants that the Purchased Shares may be disposed of only pursuant to an effective registration statement under, and in compliance with the requirements of, the OCC Securities Regulations, or pursuant to an available exemption from, or in a transaction not subject to, the registration requirements of the OCC Securities Regulations, and in compliance with any applicable state, federal or foreign securities Laws. In connection with any transfer of the Purchased Shares other than (i) pursuant to an effective registration statement, (ii) to the Bank, or (iii) pursuant to Rule 144 of the Securities Act (provided that the transferor provides the Bank with reasonable assurances (in the form of a seller representation letter and, if applicable, a broker representation letter) that such securities may be sold pursuant to such rule), the Bank may require the transferor thereof to provide to the Bank and the transfer agent, at the transferor’s expense, an opinion of counsel reasonably acceptable to the Bank to the effect that such transfer does not require registration of such transferred securities under the OCC Securities Regulations. As a condition of transfer (other than pursuant to clauses (i), (ii) or (iii) of the preceding sentence), any such transferee shall agree in writing to be bound by the terms of this Agreement and shall have the rights of the Purchaser under this Agreement with respect to such transferred Purchased Shares.

(b) Legends. Certificates evidencing the Securities shall bear any legend as required by the “blue sky” Laws of any state and restrictive legends in substantially the following form, until such time as they are not required under Section 4.1(c) or applicable Law:

“THIS SECURITY HAS NOT BEEN REGISTERED WITH THE OFFICE OF THE COMPTROLLER OF THE CURRENCY UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND HAS NOT BEEN QUALIFIED BY THE COMMISSIONER OF THE CALIFORNIA DEPARTMENT OF BUSINESS OVERSIGHT UNDER THE CALIFORNIA CORPORATE SECURITIES LAW OF 1968, AS AMENDED, OR QUALIFIED WITH ANY OTHER STATE SECURITIES COMMISSIONER OR OTHER REGULATORY AUTHORITY IN RELIANCE ON APPLICABLE EXEMPTIONS. IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY IN THE ABSENCE OF REGISTRATION AND QUALIFICATION OR A WRITTEN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE BANK REGARDING THE AVAILABILITY OF EXEMPTIONS FROM REGISTRATION AND QUALIFICATION.

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THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND OTHER RESTRICTIONS SET FORTH IN A STOCK PURCHASE AGREEMENT, DATED AS OF SEPTEMBER 22, 2016, COPIES OF WHICH ARE ON FILE WITH THE SECRETARY OF THE BANK AT THE BANK’S PRINCIPAL EXECUTIVE OFFICES.”

(c) Removal of Legends. Upon the written request of the holder, the restrictive legends set forth in Section 4.1(b) above shall be removed and the Bank shall issue a certificate without such restrictive legends or any other restrictive legends (other than the legend described below in Section 4.2) to the holder of the applicable Securities upon which it is stamped, if (i) such Securities are registered for resale under the Securities Act, (ii) such Securities are sold or transferred pursuant to Rule 144, or (iii) such Securities are eligible for sale under Rule 144, without the requirement for the Bank to be in compliance with the current public information required under Rule 144(c)(1) (or Rule 144(i)(2), if applicable) as to such securities and without volume or manner-of-sale restrictions and, in the case of clauses (i), (ii) and (iii), the new holder is not an Affiliate of the Bank and the Bank receives an opinion of counsel for the holder reasonably satisfactory to the Bank stating that neither the holder nor the new holder of the certificate evidencing the Securities is an Affiliate of the Bank. Following the earlier of (A) the date on which an initial Registration Statement is first declared effective by the OCC or (B) Rule 144 becoming available for the resale of Securities, without the requirement for the Bank to be in compliance with the current public information required under Rule 144(c)(1) (or Rule 144(i)(2), if applicable) as to the Securities and without volume or manner-of-sale restrictions, the Bank, upon the written request of the holder, shall instruct the transfer agent to remove the legend from the Securities and shall cause its counsel to issue any legend removal opinion required by the transfer agent. Any fees (with respect to the transfer agent, Bank counsel, or otherwise) associated with the issuance of such opinion or the removal of such legend shall be borne by the Purchaser. If a legend is no longer required pursuant to the foregoing, the Bank will, as soon as practicable following the delivery by the Purchaser to the Bank or the transfer agent (with notice to the Bank) of a legended certificate representing such Securities (endorsed or with stock powers attached, signatures guaranteed, and otherwise in form necessary to affect the reissuance and/or transfer) and a representation letter to the extent required by Section 4.1(a), deliver or cause to be delivered to the Purchaser a certificate representing such Securities that is free from all restrictive legends. The Bank may not make any notation on its records or give instructions to the transfer agent that enlarge the restrictions on transfer set forth in this Section 4.1(c).

4.2 Purchaser’s Acknowledgement of Transfer Restrictions. The Purchaser acknowledges its primary responsibilities under the OCC Securities Regulations and the Securities Act and, accordingly, will not sell or otherwise transfer the Purchased Shares or any interest therein without complying with the requirements of the OCC Securities Regulations and the Securities Act. Except as otherwise provided below, to the extent applicable to the Purchaser’s Shares, while the registration statement referred to in Section 4.1(c) remains effective, the Purchaser may sell the Purchased Shares in accordance with the plan of distribution contained in the registration statement, if applicable, and if it does so, it will comply therewith and with the related prospectus delivery requirements, unless an exemption therefrom is available.

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4.3 Acknowledgment of Dilution. The Bank acknowledges that the issuance of the Securities may result in dilution of the outstanding shares of Common Stock. The Bank further acknowledges that its obligations under this Agreement, including without limitation its obligation to issue the Securities pursuant to this Agreement, are unconditional (except as otherwise set forth herein) and absolute and not subject to any right of set off, counterclaim, delay, or reduction, regardless of the effect of any such dilution or any claim the Bank may have against the Purchaser and regardless of the dilutive effect that such issuance may have on the ownership of the other shareholders of the Bank.

4.4 Access, Information and Confidentiality.

(a) In addition to any rights provided in the VCOC Letter Agreement, so long as the Purchaser, together with its Affiliates, in the aggregate owns at least 1.0% or more of the Common Stock then outstanding, the Bank will (A) permit the Purchaser to visit and inspect, at the Purchaser’s expense, the properties of the Bank and the Subsidiaries, to examine the corporate books and to discuss the affairs, finances and accounts of the Bank and the Subsidiaries with personnel of the Bank, all upon reasonable notice and at such reasonable times and as often as the Purchaser may reasonably request, and (B) make appropriate officers of the Bank and the Subsidiaries available periodically and at such times as reasonably requested by the Purchaser for consultation with the Purchaser or its designated representative with respect to matters relating to the business and affairs of the Bank and the Subsidiaries. Any investigation pursuant to this Section 4.4(a) shall be conducted during normal business hours and in such manner as not to interfere unreasonably with the conduct of the business of the Bank.

(b) The parties to this Agreement will hold, and will cause its respective subsidiaries and their directors, officers, employees, agents, consultants and advisors to hold, in strict confidence, unless disclosure to a Governmental Entity is necessary or appropriate in connection with any necessary regulatory approval, or request for information or similar process, or unless compelled to disclose by judicial or administrative process or, in the written opinion of its counsel, by other requirement of Law or the applicable requirements of any Governmental Entity (in which case, the party permitted to disclose such information shall, to the extent legally permissible and reasonably practicable, provide the other party with prior written notice of such permitted disclosure), all nonpublic records, books, contracts, instruments, computer data and other data and information (collectively, “Information”) concerning the other party hereto furnished to it by such other party or its representatives pursuant to this Agreement (except to the extent that such Information can be shown to have been (1) previously known by such party on a nonconfidential basis, (2) in the public domain through no fault of such party or (3) later lawfully acquired from other sources by the party to which it was furnished), and neither party hereto shall release or disclose such Information to any other person, except its auditors, attorneys, financial advisors, other consultants and advisors with the express understanding that such parties will maintain the confidentiality of the Information and, to the extent permitted above, to bank and securities regulatory authorities.

4.5 Intentionally Omitted.

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4.6 No Integration. The Bank shall not, and shall use its commercially reasonable efforts to ensure that no Affiliate of the Bank shall, sell, offer for sale, or solicit offers to buy, or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that will be integrated with the offer or sale of the Purchased Shares in a manner that would require the registration under the Securities Act of the sale of the Purchased Shares to the Purchaser.

4.7 Indemnification.

(a) Indemnification of Purchaser. The Bank will indemnify and hold the Purchaser and its directors, officers, shareholders, members, partners, employees, agents, and investment advisors (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls the Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners, employees, agents, or investment advisors (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling person (each, a “Purchaser Party”) harmless against all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses of any nature incurred by a Purchaser Party, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees, costs of investigation, consultants’ fees, penalties and judgments that any such Purchaser Party may suffer or incur (“Losses”) as a result of any breach of any of the representations, warranties, covenants, or agreements made by the Bank in the Transaction Documents to the extent the aggregate amount of such Losses exceeds $100,000 (other than in connection with any breach of the Fundamental Representations or covenants by the Bank in the Transaction Documents, in which case this limitation shall not apply); it being understood that once the aggregate amount of such Losses exceeds $100,000, the Bank shall be liable for all Losses under the foregoing indemnity provisions in excess of $100,000 (other than in connection with any breach of the Fundamental Representations or covenants by the Bank in the Transaction Documents, in which case this limitation shall not apply); it being further understood that the Bank shall not indemnify or hold harmless any Purchaser Party for any individual Loss or series of related Losses that do not equal or exceed $5,000 and any such individual Loss or series of related Losses shall not apply against the foregoing $100,000. Notwithstanding the immediately foregoing, the Bank will not be liable to any Purchaser Party under this Agreement to the extent, but only to the extent that a loss, claim, damage, or liability is attributable to any Purchaser Party’s breach of any of the representations, warranties, covenants, or agreements made by such Purchaser Party in the Transaction Documents or attributable to the actions or inactions of such Purchaser Party. Any indemnification payment made pursuant to this Agreement shall be treated as an adjustment to purchase price for Tax purposes, except as otherwise required by Law or deemed impermissible under GAAP.

(b) Indemnification of Bank. The Purchaser will indemnify and hold the Bank and its directors, officers, shareholders, members, partners, employees, agents, and investment advisors (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls the Bank (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners, employees, agents, or investment advisors (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling person (each, a “Bank Party”) harmless against all Losses as a result of any breach of any of the representations, warranties, covenants, or agreements made by the Purchaser in the Transaction Documents to the extent the aggregate amount of such Losses exceeds $100,000; it being understood that once the aggregate amount of such Losses exceeds $100,000, the Purchaser shall be liable for all Losses under the foregoing indemnity provisions in excess of $100,000; it being further understood, that the Purchaser shall not indemnify or hold harmless any Bank Party for any individual Loss or series of related Losses that do not equal or exceed $5,000 and any such individual Loss or series of related Losses shall not apply against the foregoing $100,000. Notwithstanding the foregoing, the Purchaser will not be liable to any Bank Party under this Agreement to the extent, but only to the extent that a loss, claim, damage, or liability is attributable to any Bank Party’s breach of any of the representations, warranties, covenants, or agreements made by such Bank Party in the Transaction Documents or attributable to the actions or inactions of such Bank Party.

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(c) Conduct of Indemnification Proceedings. Promptly after receipt by either a Purchaser Party or a Bank Party of notice of any demand, claim, or circumstances which would or might give rise to a claim or the commencement of any action, proceeding, or investigation in respect of which indemnity may be sought by the Purchaser Party pursuant to Section 4.7(a) or by the Bank Party pursuant to Section 4.7(b) (the “Indemnified Party”), such Indemnified Party shall promptly notify the other party (the “Indemnifying Party”) in writing and the Indemnifying Party shall assume the defense thereof, including the employment of counsel reasonably satisfactory to such Indemnified Party, and shall assume the payment of all fees and expenses; provided, however, that: (i) the failure of any Indemnified Party so to notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder except to the extent that the Indemnifying Party is actually and materially and adversely prejudiced by such failure to notify, and (ii) the Bank shall not be obligated to pay any fees or expenses or indemnify any Purchaser Party for any Losses until the Purchaser Party or Purchaser Parties have incurred, in the aggregate, and have documented to the Bank’s reasonable satisfaction Losses of not less than $100,000 (other than in connection with any breach of the Fundamental Representations or covenants by the Bank in the Transaction Documents, in which case this limitation shall not apply). In any such proceeding, any Indemnified Party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Party unless (i) the Indemnifying Party and the Indemnified Party shall have mutually agreed to the retention of such counsel, (ii) the Indemnifying Party shall have failed promptly to assume the defense of such proceeding and to employ counsel reasonably satisfactory to such Indemnified Party in such proceeding and Indemnified Party is actually and materially and adversely prejudiced by such failure, or (iii) in the reasonable judgment of counsel to such Indemnified Party, representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. The Indemnifying Party shall not be liable for any settlement of any proceeding effected without its written consent, which consent shall not be unreasonably withheld, delayed or conditioned. Without the prior written consent of the Indemnified Party, the Indemnifying Party shall not effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Party is or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such settlement includes an unconditional release of such Indemnified Party from all liability arising out of such proceeding.

(d) Materiality Scrape. For purposes of the indemnity contained in Section 4.7(a) and 4.7(b), all qualifications and limitations set forth in the parties’ representations and warranties as to “materiality,” “Material Adverse Effect,” and words of similar import shall be disregarded in determining whether there shall have been any inaccuracy in or breach of any representations and warranties in this Agreement and the Losses arising therefrom.

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4.8 Certain Transactions. The Bank will not merge or consolidate into, or sell, transfer or lease all or substantially all of its property or assets to, any other party unless the successor, transferee or lessee party, as the case may be (if not the Bank), expressly assumes the due and punctual performance and observance of each and every covenant and condition of this Agreement to be performed and observed by the Bank.

4.9 Use of Proceeds. The Purchaser acknowledges and understands that the Bank intends to use the net proceeds from the sale of the Purchased Shares hereunder to augment its capital position, support its operations, or for general corporate purposes.

4.10 No Additional Issuances. Between the date of this Agreement and the Closing Date, except for the Purchased Shares being issued pursuant to this Agreement and except as set forth on Schedule 3.1(g), the Bank shall not issue or agree to issue any additional shares of Common Stock or other securities which provide the holder thereof the right to convert such securities into, or acquire, shares of Common Stock. For the avoidance of doubt, nothing in this Section 4.10 shall restrict the Bank from issuing securities in response or pursuant to an order or directive by the OCC with respect to capital adequacy.

4.11 Conduct of Business. From the date hereof until the earlier of the Closing Date or the termination of this Agreement in accordance with its terms, except as contemplated by this Agreement, the Bank will: (i) operate its and their business in the ordinary course consistent with past practice; (ii) preserve intact the current business organization of the Bank; (iii) use commercially reasonable efforts to retain the services of its employees, consultants, and agents; (iv) preserve the current relationships of the Bank with material customers and other Persons with whom the Bank has and intends to maintain significant relations; (v) maintain all of its operating assets in their current condition (normal wear and tear excepted); (vi) refrain from taking or omitting to take any action that would constitute a breach of Section 3.1(j); and (vii) refrain from (1) declaring, setting aside or paying any distributions or dividends on, or making any distributions (whether in cash, securities, or other property) in respect of, any of its capital stock, (2) splitting, combining or reclassifying any of its capital stock or issuing or authorizing the issuance of any other securities in respect of, in lieu of or in substitution for capital stock or any of its other securities, or (3) purchasing, redeeming or otherwise acquiring any capital stock, assets or other securities or any rights, warrants or options to acquire any such capital stock, assets or other securities, other than acquisitions of investment securities in the ordinary course of business.

4.12 Avoidance of Control. Notwithstanding anything to the contrary in this Agreement, the Bank shall not take any action (including, without limitation, any redemption, repurchase, rescission or recapitalization of Common Stock, or securities or rights, options or warrants to purchase Common Stock, or securities of any type whatsoever that are, or may become, convertible into or exchangeable into or exercisable for Common Stock), that would reasonably be expected to pose a substantial risk that (a) the Purchaser’s ownership of any class of Voting Securities (together with such Voting Securities owned by the Purchaser’s Affiliates (as such term is used under the BHCA)) to exceed 24.9%, without the prior written consent of the Purchaser, or to increase to an amount that would constitute “control” under the BHC Act or otherwise cause the Purchaser to “control” the Bank under and for purposes of the BHC Act. Notwithstanding anything to the contrary in this Agreement, Purchaser shall not have the ability to purchase more than 24.9% of the Bank’s total equity. In the event either the Bank or the Purchaser breaches its obligations under this Section 4.12 or believes that it is reasonably likely to breach such an obligation, it shall promptly notify the other parties hereto and shall cooperate in good faith with such parties to modify ownership or, to the extent commercially reasonable, make other arrangements or take any other action, in each case, as is necessary to cure or avoid such breach.

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4.13 Most Favored Nation. During the period from the date of this Agreement through the Closing Date, the Bank shall not enter into any additional, or modify any existing, agreements with any existing or future investors in the Bank that have the effect of establishing rights or otherwise benefiting such investor in a manner more favorable in any material respect to such investor than the rights and benefits established in favor of the Purchaser by this Agreement, unless, in any such case, the Purchaser has been provided with such rights and benefits.

4.14 Filings; Other Actions. The Purchaser and the Bank will reasonably cooperate and consult with the other and use commercially reasonable efforts to provide all necessary and customary information and data, to prepare and file all necessary and customary documentation, to effect all necessary and customary applications, notices, petitions, filings and other documents as requested by the applicable Governmental Entity, including executing and delivery to the applicable Governmental Entities customary passivity commitments, disassociation commitments, and commitments not to act in concert, with respect to the Bank, and to obtain all necessary and customary permits, consents, orders, approvals, and authorizations of, or any exemption by, all third parties and Governmental Entities, in each case, (i) necessary or advisable to consummate the transactions contemplated by this Agreement, and to perform the covenants contemplated by this Agreement, in each case required by it, and (ii) with respect to the Purchaser, to the extent typically provided by the Purchaser to such third parties or Governmental Entities, as applicable, under the Purchaser’s policies consistently applied, to the extent the Purchaser has such policies, and subject to such confidentiality requests as the Purchaser may reasonably seek. Each of the parties hereto shall execute and deliver both before and after the Closing such further certificates, agreements, and other documents and take such other actions as the other parties may reasonably request to consummate or implement such transactions or to evidence such events or matters, subject, in each case, to clauses (i) and (ii) of the first sentence of this Section 4.14. The Purchaser and the Bank will have the right to review in advance, and to the extent practicable each will consult with the other, in each case subject to applicable Laws relating to the exchange of information and confidential information related to the Purchaser and any of their respective Affiliates, which appears in any filing made with, or written materials submitted to, any third party or any Governmental Entity in connection with the transactions to which it will be party contemplated by this Agreement. In exercising the foregoing right, the parties hereto agree to act reasonably and as promptly as practicable. The Purchaser and the Bank agree to keep the other reasonably apprised of the status of matters referred to in this Section 4.14. The Purchaser and the Bank shall promptly furnish each other with copies of written communications received by it or its Affiliates from, or delivered by any of the foregoing to, any Governmental Entity in respect of the transactions contemplated by this Agreement; provided, that the party delivering any such document may redact any confidential information contained therein. Notwithstanding anything in this Section 4.14 or elsewhere in this Agreement to the contrary, the Purchaser shall not be required to provide to the Bank any of its, its Affiliates’, its investment advisors’ or its or their control persons’ or equity holders’ nonpublic, proprietary, personal, or otherwise confidential information including the identities or financial condition of limited partners, shareholders, or non-managing members of the Purchaser or its Affiliates or their investment advisors. Notwithstanding anything to the contrary in this Section 4.14, the Purchaser shall not be required to perform any of the above actions if such performance would constitute or could reasonably result in any restriction or condition that the Purchaser determines, in its reasonable good faith judgment, (i) is materially and unreasonably burdensome, or (ii) would reduce the benefits of the transactions contemplated hereby to the Purchaser to such a degree that the Purchaser would not have entered into this Agreement had such condition or restriction been known to it on the date of this Agreement (any such condition or restriction, a “Burdensome Condition”); for the avoidance of doubt, any requirement to disclose the identities or financial condition of limited partners, shareholders, or non- managing members of the Purchaser or its Affiliates or its investment advisers shall be deemed a Burdensome Condition unless otherwise determined by the Purchaser in its sole discretion.

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4.15 Intentionally Omitted.

4.16 Notice of Certain Events. Each party hereto shall promptly notify the other party hereto of (a) any event, condition, fact, circumstance, occurrence, transaction or other item of which such party becomes aware prior to the Closing that would constitute a violation or breach of this Agreement or any other Transaction Document (or a breach of any representation or warranty contained herein or therein) or, if the same were to continue to exist as of the Closing Date, would constitute the non-satisfaction of any of the conditions set forth in Article V hereof, and (b) any event, condition, fact, circumstance, occurrence, transaction or other item of which such party becomes aware that would have been required to have been disclosed pursuant to the terms of this Agreement had such event, condition, fact, circumstance, occurrence, transaction or other item existed as of the date hereof; provided that delivery of any notice pursuant to this Section 4.16 shall not modify the representations, warranties, covenants, agreements or obligations of the parties (or remedies with respect thereto) or the conditions to the obligations of the parties under this Agreement. Notwithstanding the foregoing, neither party shall be required to take any action that would jeopardize such party’s attorney-client privilege.

4.17 Shareholder Litigation. The Bank shall promptly inform the Purchaser of any claim, action, suit, arbitration, mediation, demand, hearing, investigation or proceeding (“Shareholder Litigation”) against the Bank, or any of the past or present executive officers or directors of the Bank that is threatened in writing or initiated by or on behalf of any shareholder of the Bank in connection with or relating to the transactions contemplated hereby or by the Transaction Documents. The Bank shall consult with the Purchaser and keep the Purchaser informed of all material filings and developments relating to any such Shareholder Litigation.

4.18 Acquisition Proposals. The Bank shall notify the Purchaser orally and in writing promptly (but in no event later than two (2) Business Days) after receipt by the Bank of any proposal or offer from any Person to effect an Acquisition Proposal or any request in connection with a prospective Acquisition Proposal for non-public information relating to the Bank or for access to the properties, books or records of the Bank by any Person other than the Purchaser, indicating in such notice the material terms and conditions of any such proposal or offer and the identity of the Person making the proposal or offer, and thereafter shall keep Purchaser reasonably informed with respect to the status of such proposal or offer.

4.19 Holding Company Reorganization. If the Bank becomes a direct or indirect wholly owned subsidiary of a holding company pursuant to a holding company reorganization, the obligations of the Bank under this Agreement shall then become the obligations of the holding company and the holding company shall expressly assume the Bank’s obligations under this Agreement.

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4.20 Registration Rights.

(a) If the Bank intends to file a Registration Statement covering a primary or secondary offering of any of its Securities, whether or not the sale is for its own account, which is not a registration solely to implement an employee benefit plan pursuant to a registration statement on Form S- 8 (or successor form), a registration statement on Form S-4 (or successor form) or a transaction to which Rule 145 of the Commission or any other similar rule is applicable, the Bank will promptly (and in any event at least ten (10) Business Days before the anticipated filing date) give written notice to the Purchaser and all other Holders of its intention to effect such a registration. The Bank will effect the registration under the Securities Act of all Registrable Securities that the Holder(s) request(s) be included in such registration (a “Piggyback Registration”) by a written notice delivered to the Bank within five (5) Business Days after the notice given by the Bank in the preceding sentence. Subject to Section 4.20(b), securities requested to be included in a Bank registration pursuant to this Section 4.20 shall be included by the Bank on the same form of Registration Statement as has been selected by the Bank for the securities the Bank is registering for sale referred to above. The Holders shall be permitted to withdraw all or part of the Registrable Securities from the Piggyback Registration at any time at least two (2) Business Days prior to the effective date of the Registration Statement relating to such Piggyback Registration. If the Bank elects to terminate any registration filed under this Section 4.20 prior to the effectiveness of such registration, the Bank will have no obligation to register the securities sought to be included by the Holders in such registration under this Section 4.20. There shall be no limit to the number of Piggybank Registrations pursuant to this Section 4.20(a).

(b) If a Registration Statement under this Section 4.20 relates to an underwritten offering and the managing underwriter(s) advise(s) the Bank that in its or their reasonable opinion the number of securities requested to be included in such offering exceeds the number which can be sold without adversely affecting the marketability of such offering (including an adverse effect on the per share offering price), the Bank will include in such registration or prospectus only such number of securities that in the reasonable opinion of such underwriter(s) can be sold without adversely affecting the marketability of the offering (including an adverse effect on the per share offering price), which securities will be so included in the following order of priority: (i) first, the Common Stock and other securities the Bank proposes to sell, (ii) second, the Registrable Securities of the Holders who have requested inclusion of Registrable Securities pursuant to this Section 4.20 and the shares of Common Stock beneficially owned or controlled by John Farkash and Heidi Farkash to the extent either of them has requested inclusion of such shares, pro rata on the basis of the aggregate number of such securities or shares owned by each such person, or as such Holders, John Farkash and Heidi Farkash may otherwise agree, and (iii) third, any other securities of the Bank that have been requested to be so included, subject to the terms of Section 4.20(c). The Bank shall select the investment banking firm or firms to act as the lead underwriter or underwriters in connection with an underwritten offering made pursuant to this Section 4.20. No Holder may participate in any underwritten registration under this Section 4.20 unless such Holder (i) agrees to sell the Registrable Securities it desires to have covered by the underwritten offering on the basis provided in any underwriting arrangements in customary form and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements.

(c) All expenses incurred in connection with a registration pursuant to this Section 4.20 (excluding underwriters’ discounts and commissions), including, without limitation all registration and qualification fees, printing and accounting fees, and fees and disbursements of the Bank’s counsel shall be borne by the Bank.

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4.21 Governance Matters.

(a) Following the Closing and upon the written request of the Purchaser, the Bank will promptly cause Mr. David J. Volk or another designee of the Purchaser reasonably acceptable to the Bank (the “Board Representative”) to be elected or appointed to the Board of Directors, subject to satisfaction of all legal and regulatory requirements regarding service and election or appointment as a director of the Bank, so long as the Purchaser, together with its Affiliates, in the aggregate owns at least 50% or more of all of the Purchased Shares and, in the aggregate, 5.0% or more of the Common Stock then outstanding (the “Minimum Ownership Interest”). So long as the Purchaser, together with its respective Affiliates, has a Minimum Ownership Interest, the Bank will recommend to its shareholders the election of the Board Representative to the Board of Directors at the Bank’s annual meeting of shareholders, subject to satisfaction of all legal requirements regarding service and election or appointment as a director of the Bank. If the Purchaser no longer has a Minimum Ownership Interest, the Purchaser will have no further rights under Sections 4.21(a) through 4.21(b) and, at the written request of the Board of Directors, shall use commercially reasonable efforts to cause the Board Representative to resign from the Board of Directors as promptly as possible thereafter.

(b) The Board Representative shall, subject to applicable Law, be one of the Bank’s nominees to serve on the Board of Directors. The Bank shall use its reasonable best efforts to have the Board Representative elected as a director of the Bank by the shareholders of the Bank, and the Bank shall solicit proxies for the Board Representative to the same extent as it does for any of its other Bank nominees to the Board of Directors. The Bank shall ensure that the Board of Directors shall have at least four members for so long as the Purchaser shall have the right to appoint a Board Representative. The Purchaser covenants and agrees to hold any information obtained from the Board Representative in confidence. Notwithstanding anything to the contrary contained herein, at all times when the Purchaser maintains a Minimum Ownership Interest, it shall comply in all respects with applicable Laws concerning equity investments in banks.

(c) Subject to Section 4.21(a), upon the death, resignation, retirement, disqualification, or removal from office as a member of the Board of Directors of the Board Representative, the Purchaser shall have the right to designate the replacement for the Board Representative, which replacement shall satisfy all legal, bank regulatory and governance requirements regarding service as a director of the Bank and shall be reasonably acceptable to the Bank. The Board of Directors shall use their respective reasonable best efforts to take all action required to fill the vacancy resulting therefrom with such person (including such person, subject to applicable Law, being one of the Bank’s nominees to serve on the Board of Directors), using reasonable best efforts to have such person elected as director of the Bank by the shareholders of the Bank and the Bank soliciting proxies for such person to the same extent as it does for any of its other nominees to the Board of Directors, as the case may be.

(d) Reserved.

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(e) The Board Representative shall be entitled to compensation and indemnification and insurance coverage in connection with his or her role as a director to the same extent as other directors on the Board of Directors, and shall be entitled to reimbursement for reasonable and documented out-of-pocket expenses incurred in attending meetings of the Board of Directors, or any committee thereof in accordance with Bank policy. The Bank shall notify the Board Representative of all regular meetings and special meetings of the Board of Directors and of all regular and special meetings of any committee of the Board of Directors. The Bank shall provide the Board Representative with copies of all notices, minutes, consents and other material that it provides to all members of the Board of Directors at the same time such materials are provided to the other members.

(f) The Bank acknowledges that the Board Representative may have certain rights to indemnification, advancement of expenses and/or insurance provided by the Purchaser and/or its respective Affiliates (collectively, the “Purchaser Indemnitors”). The Bank hereby agrees that, with respect to a claim by a Board Representative for indemnification arising out his or her service as a director of the Bank, (1) it is the indemnitor of first resort (i.e., its obligations to the Board Representative with respect to indemnification, advancement of expenses and/or insurance (which obligations shall be the same as, but in no event greater than, any such obligations to members of the Board of Directors, as applicable) are primary and any obligation of the Purchaser Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by the Board Representative are secondary), and (2) the Purchaser Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of the Board Representative against the Bank.

Article V
CONDITIONS PRECEDENT TO CLOSING

5.1 Conditions Precedent to the Obligations of the Purchaser to Purchase Shares. The obligation of the Purchaser to acquire the Purchased Shares at the Closing is subject to the fulfillment to the Purchaser’s satisfaction, on or prior to the Closing Date, of each of the following conditions, any of which may be waived by the Purchaser:

(a) Representations and Warranties. The representations and warranties of the Bank contained in Section 3.1 shall be true and correct as of the date when made and as of the Closing Date, as though made on and as of such date, except for such representations and warranties that speak as of a specific date (in which case that representation and warranty only shall be true and correct as of that specific date); provided, however, that no representation or warranty of the Bank, other than Fundamental Representations (as hereinafter defined) and any representation qualified by Material Adverse Effect, shall be deemed untrue or incorrect for purposes hereunder as a consequence of the existence of any fact, event or circumstance inconsistent with such representation or warranty, unless such fact, event or circumstance, individually or taken together with all other facts, events or circumstances inconsistent with any representations or warranty of the Bank, has had or would result in a Material Adverse Effect on the Bank. All Fundamental Representations shall be shall be true and correct in all material respects on and as of the date when made and as of the Closing Date, except for such representations and warranties that speak as of a specific date (in which case that representation and warranty only shall be true and correct in all material respects as of that specific date). Any representation or warranty that is qualified by Material Adverse Effect shall be true and correct in all respects on and as of the date when made and as of the Closing Date, except for such representations and warranties that speak as of a specific date (in which case that representation and warranty only shall be true and correct as of that specific date). As used herein, the term “Fundamental Representations” means the representations and warranties of the Bank contained in Sections 3.1(a), (Subsidiaries), 3.1(b) (Organization and Qualification), 3.1(c) (Authorization; Enforcement; Validity), 3.1(d) (No Conflicts), 3.1(e) (Filings, Consents and Approvals), 3.1(f) (Issuance of Shares), 3.1(g) (Capitalization), 3.1(h) (Financial Statements), 3.1(s) (Transactions with Affiliates and Employees), 3.1(t) (Internal Control Over Financial Reporting), 3.1(u) (Certain Fees) and 3.1(bb) (No Undisclosed Liabilities).

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(b) Performance. The Bank shall have performed, satisfied, and complied in all material respects with all covenants, agreements, and conditions required by the Transaction Documents to be performed, satisfied, or complied with by it at or prior to the Closing.

(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling, or injunction shall have been enacted, entered, promulgated, or endorsed by any court or Governmental Entity of competent jurisdiction, nor has there been any regulatory communication, that prohibits the consummation of any of the transactions contemplated by the Transaction Documents or restricts the Purchaser or any of its Affiliates from owning any securities of the Bank in accordance with the terms thereof.

(d) Consents. The Bank shall have obtained in a timely fashion any and all material consents, permits, approvals, non-objections, registrations, and waivers necessary for consummation of the purchase and sale of the Purchased Shares (including all Required Approvals), all of which shall be and remain so long as necessary in full force and effect.

(e) Bank Deliverables. The Bank shall have delivered the Bank Deliverables in accordance with Section 2.2(a).

(f) Intentionally Omitted.

(g) No Burdensome Condition. Since the date hereof, there shall not be imposed any Burdensome Condition.

(h) Governmental Approvals. The Purchaser shall have received all consents, approvals, permits, non-objections, waivers and authorizations from Governmental Entities required to consummate the transactions contemplated by this Agreement pursuant to applicable Laws (including by the OCC under the CIBC Act and by the California Department of Business Oversight under Section 1250 of the California Financial Code). In addition, the Purchaser shall have received written confirmation satisfactory in its reasonable good faith judgment from the Federal Reserve and the California Department of Business Oversight, as applicable, to the effect that purchase of the Shares will not result in the Purchaser or its Affiliates being deemed in control of the Bank for purposes of (i) the BHCA, (ii) the California Financial Code, or (iii) otherwise being regulated as a bank holding company within the meaning of the BHC Act or the California Financial Code.

(i) Material Adverse Effect. No Material Adverse Effect shall have occurred since December 31, 2015.

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(j) VCOC Letter Agreement. The Bank and the Purchaser shall have executed and delivered the VCOC Letter Agreement.

(k) No Change in Control. The Bank shall not have agreed to enter into or entered into (A) any agreement or transaction in order to raise capital, or (B) any transaction that resulted in, or would result in if consummated, a Change in Control of the Bank, in each case, other than in connection with the transactions contemplated by the Transaction Documents.

(l) Well-Capitalized Status. After the Closing and the consummation of the transactions contemplated by this Agreement: (A) the Bank’s capital levels shall exceed the specific quantitative capital requirements necessary to be deemed “well capitalized,” as defined in 12 C.F.R. § 6.4(c)(1); and (B) the Bank shall meet or exceed all specific quantitative capital requirements stated in any written agreement, order, understanding or undertaking with the OCC, if applicable.

(m) Non-Performing Assets. As of the end of the month immediately prior to Closing, total nonperforming assets shall not have increased more than 33% over total nonperforming assets as of June 30, 2016.

5.2 Conditions Precedent to the Obligations of the Bank to sell the Shares. The Bank’s obligation to sell and issue the Shares to the Purchaser at the Closing is subject to the fulfillment to the satisfaction of the Bank on or prior to the Closing Date of the following conditions, any of which may be waived by the Bank:

(a) Representations and Warranties. The representations and warranties made by the Purchaser in Section 3.2 hereof shall be true and correct in all material respects (except to the extent such representations and warranties are qualified by materiality, in which case they shall be true and correct in all respects) as of the date when made and as of the Closing Date as though made on and as of such date (except to the extent such representations and warranties are made as of a specified date, in which case such representations and warranties shall be true and correct in all material respects as of such date), in each case except as would not have a material adverse effect on the ability of the Purchaser to consummate the transactions contemplated by this Agreement and the other Transaction Documents.

(b) Performance. The Purchaser shall have performed, satisfied, and complied in all material respects with all covenants, agreements, and conditions required by the Transaction Documents to be performed, satisfied, or complied with by the Purchaser at or prior to the Closing.

(c) No Injunction. No statute, rule, regulation, executive order, decree, ruling, or injunction shall have been enacted, entered, promulgated, or endorsed by any court or Governmental Entity of competent jurisdiction, nor has there been any regulatory communication, that prohibits the consummation of any of the transactions contemplated by the Transaction Documents.

(d) Purchaser Deliverables. The Purchaser shall have delivered its Purchaser Deliverables in accordance with Section 2.2(b).

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Article VI

MISCELLANEOUS

6.1 Fees and Expenses. The Bank shall reimburse the Purchaser for all expenses in connection with due diligence efforts, the negotiation and preparation of the Transaction Documents and undertaking of the transactions contemplated by the Transaction Documents (including out-of-pocket due diligence and travel expenses and professional fees incurred by or on behalf of the Purchaser or its Affiliates in connection with the transactions contemplated hereby) in an amount not to exceed $25,000; however, the Bank shall not reimburse the Purchaser for expenses and shall have no obligation to the Purchaser pursuant to this Section 6.1 in the event this Agreement is terminated by the Bank with respect to the Purchaser pursuant to Section 6.15(a)(v). Each of the Bank and the Purchaser shall be responsible for their respective closing and administrative fees and expenses, the fees and expenses of their respective advisors (including their respective attorneys and other professional fees), and fees and expenses of any broker or finders for which they are responsible. Except as set forth above and elsewhere in the Transaction Documents, the parties hereto shall be responsible for the payment of all expenses incurred by them in connection with the preparation and negotiation of the Transaction Documents and the consummation of the transactions contemplated hereby. The Bank shall pay all transfer agent fees, stamp taxes and other taxes and duties levied in connection with the Bank’s sale and issuance of the Purchased Shares to the Purchaser.

6.2 Entire Agreement. The Transaction Documents, together with the Exhibits and Schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, discussions, and representations, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits, and schedules. At or after the Closing, and without further consideration, the Bank and the Purchaser will execute and deliver to the other such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under the Transaction Documents.

6.3 Notices. Any notice, request, instruction or other document to be given hereunder by any party to the other will be in writing and will be deemed to have been duly given (a) on the date of delivery if delivered personally or by telecopy, facsimile or e-mail, upon confirmation of receipt, (b) on the first business day following the date of dispatch if delivered by a recognized next-day courier service, or (c) on the third business day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice.

If to the Bank: Bank of Southern California, N.A. 12265 El Camino Real, Suite 100 San Diego, CA 92130 Attention: Nathan L. Rogge, Chief Executive Officer Email: NRogge@banksocal.com

With a copy to: Horgan, Rosen, Beckham & Coren, L.L.P. 23975 Park Sorrento, Suite 200 Calabasas, CA 91302 Attention: S. Alan Rosen, Esq. Telephone: (818) 591-2121 Facsimile: (818) 591-3838 Email: arosen@hrbc.com

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If to the Purchaser:	Castle Creek Capital Partners VI, LP  6051 El Tordo, P.O. Box 1329 Rancho Santa Fe, CA 92067 Attn: David J. Volk, Principal Email: dvolk@castlecreek.com
With a copy to:	Vijay S. Sekhon, Esq. Sidley Austin LLP 1999 Avenue of the Stars 17th Floor Los Angeles, CA 90067 Telephone: (310) 595-9507 Facsimile: (310) 595-9501 Email: vsekhon@sidley.com

6.4 Amendments; Waivers; No Additional Consideration. No amendment or waiver of any provision of this Agreement will be effective with respect to either party unless made in writing and signed by a duly authorized representative of such party. No waiver of any default with respect to any provision, condition, or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition, or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.

6.5 Construction. The headings herein are for convenience only, do not constitute a part of this Agreement, and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. This Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement or any other Transaction Document.

6.6 Successors and Assigns. The provisions of this Agreement shall inure to the benefit of and be binding upon the parties and their successors and permitted assigns. This Agreement, or any rights or obligations hereunder, may not be assigned by the Bank without the prior written consent of the Purchaser. The Purchaser may assign its rights hereunder in whole or in part to any Person to whom the Purchaser assigns or transfers any Purchased Shares in compliance with the Transaction Documents and applicable Law, provided such transferee shall agree in writing to be bound, with respect to the transferred Purchased Shares, by the terms and conditions of this Agreement that apply to the Purchaser.

6.7 No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto, their respective successors and permitted assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, other than, solely with respect to the provisions of Section 4.7, the Purchaser Parties.

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6.8 Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal Laws of the State of California, without regard to the principles of conflicts of law thereof. The parties hereto irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the state and federal courts located in the State of California for all Proceedings arising out of or relating to this Agreement and any of the other Transaction Documents and the transactions contemplated hereby and thereby. The parties hereto hereby irrevocably waive personal service of process and consent to process being served in any such Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.

6.9 Survival. Except for the Fundamental Representations, which will survive the Closing indefinitely, all other representations and warranties made by the Bank in this Agreement shall survive the Closing and shall terminate on the first anniversary of the date of the Closing. All covenants made by the Bank that are intended to be performed prior to the Closing shall not survive the Closing and all covenants made by the Bank that are intended to be performed after the Closing shall survive the Closing. All representations and warranties made by the Purchaser in this Agreement shall survive the Closing indefinitely. All covenants made by the Purchaser that are intended to be performed prior to the Closing shall not survive the Closing and all covenants made by the Purchaser that are intended to be performed after the Closing shall survive the Closing.

6.10 Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.

6.11 Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

6.12 Replacement of Shares. If any certificate or instrument evidencing any Purchased Shares is mutilated, lost, stolen, or destroyed, the Bank shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Bank and the transfer agent of such loss, theft, or destruction and the execution by the holder thereof of a customary lost certificate affidavit of that fact and an agreement to indemnify and hold harmless the Bank and the transfer agent for any losses in connection therewith or, if required by the transfer agent, a bond in such form and amount as is required by the transfer agent. The applicants for a new certificate or instrument under such circumstances shall also pay all third-party costs associated with the issuance of such replacement Shares. If a replacement certificate or instrument evidencing any Purchased Shares is requested due to a mutilation thereof, the Bank may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.

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6.13 Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, the Purchaser and the Bank will be entitled to seek specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agree to waive in any action for specific performance of any such obligation (other than in connection with any action for a temporary restraining order) the defense that a remedy at law would be adequate.

6.14 Payment Set Aside. To the extent that the Bank makes a payment or payments to the Purchaser pursuant to any Transaction Document or the Purchaser enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by, or are required to be refunded, repaid or otherwise restored to the Bank, a trustee, receiver, or any other person under any Law (including, without limitation, any bankruptcy law, state, or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

6.15 Termination.

(a) This Agreement may be terminated and the sale and purchase of the Shares abandoned at any time prior to the Closing:

(i) by the written consent of the Bank and the Purchaser;

(ii) by either the Bank or the Purchaser upon written notice to the other, if the Closing has not been consummated on or prior to 5:00 p.m., Pacific Standard Time, on the Outside Date; provided, however, that the right to terminate this Agreement under this Section 6.15(a)(ii) shall not be available to any Person whose failure to comply with its obligations under this Agreement has been the cause of or resulted in the failure of the Closing to occur on or before such time;

(iii) by the Bank or the Purchaser, upon written notice to the other party, in the event that any Governmental Entity shall have issued any order, decree or injunction or taken any other action restraining, enjoining or prohibiting any of the transactions contemplated by this Agreement, and such order, decree, injunction or other action shall have become final and nonappealable;

(iv) by the Purchaser, upon written notice to the Bank, if there has been a material breach of any representation, warranty, covenant or agreement made by the Bank in this Agreement, or any such representation or warranty shall have become untrue after the date of this Agreement, in each case such that a closing condition in Section 5.1(a) or Section 5.1(b) would not be satisfied;

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(v) by the Bank, upon written notice to the Purchaser, if there has been a breach of any representation, warranty, covenant or agreement made by the Purchaser in this Agreement, or any such representation or warranty shall have become untrue after the date of this Agreement, in each case such that a closing condition in Section 5.2(a) or Section 5.2(b) would not be satisfied;

(vi) by the Bank or the Purchaser (with respect to itself only), upon written notice to the other, if any of the conditions to Closing set forth in Sections 5.1 or 5.1(l) are not capable of being satisfied on or before 5:00 p.m., Pacific Standard Time, on the Outside Date; provided, however, that the right to terminate this Agreement under this Section 6.15(a)(vi) shall not be available to any Person whose failure to comply with its obligations under this Agreement has been the cause of or resulted in the failure of the conditions to Closing set forth in Sections 5.1 or 5.1(l) to occur on or before such time;

(vii) by the Purchaser, upon written notice to the Bank, if the Purchaser or any of its Affiliates receives written notice from or is otherwise advised by the OCC that the OCC will not grant (or intends to rescind if previously granted) any of the approvals referred to in Section 5.1(h); or

(viii) by any Purchaser, if the Bank directly or indirectly effects or causes to be effected any transaction with a third party (1) with respect to an Acquisition Proposal or that would reasonably be expected to result in a Change in Control and (2) such transaction has a purchase price per share of Common Stock that is equal to or less than the Purchase Price.

(b) Nothing in this Section 6.15 shall be deemed to release either party from any liability for any breach by such party of the terms and provisions of this Agreement or the other Transaction Documents or to impair the right of any party to compel specific performance by any other party of its obligations under this Agreement or the other Transaction Documents. Upon a termination in accordance with this Section, neither the Bank nor the Purchaser shall not have any further obligation or liability (including arising from such termination) to the other.

6.16 Adjustments in Common Stock Numbers and Prices. In the event of any stock split, subdivision, dividend, or distribution payable in shares of Common Stock (or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly shares of Common Stock), combination, or other similar recapitalization or event occurring after the date hereof and prior to the Closing, each reference in any Transaction Document to a number of shares or a price per share shall be deemed to be amended to appropriately account for such event.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the parties hereto have caused this Stock Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

BANK OF SOUTHERN CALIFORNIA, N.A.
/S/ Nathan L. Rogge
Name:	Nathan L. Rogge
Title:	President and Chief Executive Officer
CASTLE CREEK CAPITAL PARTNERS VI, LP
/S/ David J. Volk
Name:	David J. Volk
Title:	Principal

Address: 6051 El Tordo P.O. Box 1329 Rancho Santa Fe, CA 92067

Aggregate Purchase Price: $6,999,996.50

No. of Common Shares to be Acquired at $8.50 per Share: 823,529

TaxIDNo: 61-1778768

[Signature Page to Stock Purchase Agreement]

EXHIBITS

[Exhibit Index]

EXHIBIT A

FORM OF VCOC LETTER AGREEMENT

BANK OF SOUTHERN CALIFORNIA, N.A.

12265 EL CAMINO REAL, SUITE 100
SAN DIEGO, CA 92130

[●], 2016

Castle Creek Capital Partners VI, L.P.

6051 El Tordo

Rancho Santa Fe, CA 92091

Dear Sir/Madam:

Reference is made to the Stock Purchase Agreement by and between Bank of Southern California, N.A., a national banking association (the “Bank”), and Castle Creek Capital Partners VI, L.P., a Delaware limited partnership (the “VCOC Investor”), dated as of September 22, 2016 (the “Stock Purchase Agreement”), pursuant to which the VCOC Investor agreed to purchase from the Bank shares of its voting common stock, $5.00 par value per share (the “Common Stock”). Capitalized terms used herein without definition shall have the respective meanings in the Stock Purchase Agreement.

For good and valuable consideration acknowledged to have been received, the Bank hereby agrees that it shall:

● For so long as the VCOC Investor, directly or through one or more Affiliates, continues to hold any Common Stock, provide the VCOC Investor or its designated representative with the governance rights set forth in Section 4.21 of the Stock Purchase Agreement;

● For so long as the VCOC Investor, directly or through one or more Affiliates, continues to hold any Common Stock, without limitation or prejudice of any of the rights provided to the VCOC Investor under the Stock Purchase Agreement, provide the VCOC Investor or its designated representative with:

(i) the right to visit and inspect any of the offices and properties of the Bank and its subsidiaries and inspect the books and records of the Bank and its subsidiaries at such times as the VCOC Investor shall reasonably request upon three (3) business days’ notice but not more frequently than once per calendar quarter, provided, however, that such rights shall not extend to confidential bank supervisory communications, customer financial records or other “exempt records” as defined by 12 C.F.R. Part 4, or reports of examination of any national or state chartered insured bank, which information may only be disclosed by the Bank in accordance with the provisions and subject to the limitations of Law;

EXHIBIT A-1

(ii) consolidated balance sheets and statements of income and cash flows (on a year-end basis only) of the Bank and its subsidiaries prepared in conformity with generally accepted accounting principles in the United States applied on a consistent basis (A) as of the end of each quarter of each fiscal year of the Bank as soon as practicable after preparation thereof but in no event later than ninety (90) days after the end of such quarter, and (B) with respect to each fiscal year end statement, as soon as practicable after preparation thereof but in no event later than one hundred and twenty (120) days after the end of such fiscal year together with an auditor’s report thereon; and

(iii) to the extent the Bank or any of its subsidiaries is required by law or pursuant to the terms of any outstanding indebtedness of the Bank to prepare such reports, any annual reports, quarterly reports and other periodic reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 or otherwise, actually prepared by the Bank or any of its subsidiaries as soon as available;

provided that, in each case, if the Bank makes the information described in clauses (ii) and (iii) of this bullet point available through public filings on the EDGAR system or any successor or replacement system of the Commission, the delivery of the information shall be deemed satisfied by such public filings.

● For so long as the VCOC Investor, directly or through one or more Affiliates, continues to hold any Common Stock, make appropriate officers and directors of the Bank available periodically and at such times as reasonably requested by the VCOC Investor for consultation with the VCOC Investor or its designated representative, but not more frequently than once per calendar quarter, with respect to matters relating to the business and affairs of the Bank; and

● For so long as the VCOC Investor, directly or through one or more Affiliates, continues to hold any Common Stock, if the VCOC Investor’s regular outside counsel determines in writing that other rights of consultation are reasonably necessary under applicable legal authorities promulgated after the date of this agreement to preserve the qualification of VCOC Investor’s investment in the Bank as a “venture capital investment” for purposes of the United States Department of Labor Regulation published at 29 C.F.R. Section 2510.3-101(d)(3)(i) (the “Plan Asset Regulation”), the Bank agrees to cooperate in good faith with the VCOC Investor to amend this letter agreement to reflect such other rights that are mutually satisfactory to the Bank and the VCOC Investor and consistent with the Federal Reserve Policy Statement on Equity Investments in Banks and Bank Holding Companies; provided that such consultation rights shall be limited to once per calendar quarter.

The Bank agrees to consider, in good faith, the recommendations of the VCOC Investor or its designated representative in connection with the matters on which it is consulted as described above, recognizing that the ultimate discretion with respect to all such matters shall be retained by the Bank.

The VCOC Investor agrees, and will require each designated representative of the VCOC Investor to agree, to hold in confidence and not use or disclose to any third party (other than its legal counsel and accountants) any confidential information provided to or learned by such party in connection with the VCOC Investor’s rights under this letter agreement except as may otherwise be required by law or legal, judicial or regulatory process, provided that the VCOC Investor takes all appropriate steps to minimize the extent of any such required disclosure.

In the event the VCOC Investor transfers all or any portion of its investment in the Bank to an affiliated entity (or to a direct or indirect wholly-owned conduit subsidiary of any such affiliated entity) that is intended to qualify as a venture capital operating company under the Plan Asset Regulation, such affiliated entity shall be afforded the same rights that the Bank has afforded to the VCOC Investor hereunder and shall be treated, for such purposes, as a third party beneficiary hereunder.

The rights of the VCOC Investor under this letter agreement are unique to the VCOC Investor and shall not be assignable or transferrable other than to an affiliated entity that is intended to qualify as a venture capital operating company under the Plan Asset Regulation.

This letter agreement and the rights and the duties of the parties hereto shall be governed by, and construed in accordance with, the laws of the State of California and may be executed in counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same instrument.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

EXHIBIT A-2

IN WITNESS WHEREOF, the parties have executed this letter agreement as of the date first above written.

BANK OF SOUTHERN CALIFORNIA, N.A.
By:
Name:
Title:

Agreed and acknowledged as of the date first above written:

CASTLE CREEK CAPITAL PARTNERS VI, L.P.

By:	Castle Creek Capital VI LLC, its general partner
By:
Name:
Title:

EXHIBIT A-3

EXHIBIT B

FORM OF OPINION OF BANK COUNSEL

[Bank Counsel to add Preamble and Carveouts]

1. The Bank validly exists as an association in good standing under the laws of the United States.

2. The Bank has the corporate power and authority to execute and deliver and to perform its obligations under the Transaction Documents, including, without limitation, to issue the Purchased Shares.

3. The deposit accounts of the Bank are insured by the FDIC under the provisions of the Federal Deposit Insurance Act.

4. Each of the Transaction Documents has been duly authorized, executed, and delivered by the Bank and, assuming due authorization, execution, and delivery by the Purchaser, each of the Transaction Documents constitutes a valid and binding agreement of the Bank, enforceable against the Bank in accordance with its terms, except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, or similar Laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application, (ii) as limited by Laws relating to the availability of specific performance, injunctive relief, or other equitable remedies, and (iii) insofar as indemnification and contribution provisions may be limited by applicable Law; and (iv) as such enforceability may be limited by Section 8(b)(6)(D) of the Federal Deposit Insurance Act, 12 U.S.C. § 1818(b)(6)(D)).

5. The execution and delivery by the Bank of each of the Transaction Documents and the performance by the Bank of its obligations under such agreements, including its issuance and sale of the Purchased Shares, do not and will not: (a) require any consent, approval, license or exemption by, order or authorization of, or filing, recording, or registration by the Bank with any federal or state Governmental Entity, except (1) as may be required by federal securities laws with respect to the Bank’s obligations under the Stock Purchase Agreement, and (2) the filings required in accordance with Section 4.5 of the Stock Purchase Agreement, (b) violate any federal or state statute, rule, or regulation, or any rule or regulation, or any court order, judgment, or decree, if any, listed in Exhibit A hereto, which exhibit lists all court orders, judgments, and decrees that the Bank has certified to us are applicable to it, (c) result in any violation of the Articles of Association or Bylaws of the Bank, or (d) result in a breach of, or constitute a default under, any Material Contract.

6. Assuming the accuracy of the representations, warranties, and compliance with the covenants and agreements of the Purchaser and the Bank contained in the Stock Purchase Agreement, the offer, sale, and delivery of the Shares to the Purchaser under the circumstances contemplated by the Stock Purchase Agreement constitute exempt transactions under the 12 C.F.R. § 16.5 and do not under existing law require the registration of the Shares under 12 C.F.R. § 16.3.

7. The Shares being delivered to the Purchaser pursuant to the Stock Purchase Agreement have been duly and validly authorized and, when issued, delivered, and paid for as contemplated in the Stock Purchase Agreement, will be duly and validly issued, fully paid, and free of any preemptive right or similar rights contained in the Bank’s Articles of Association or Bylaws.

EXHIBIT B

EXHIBIT C

FORM OF SECRETARY’S CERTIFICATE

The undersigned hereby certifies that he is the duly elected, qualified, and acting Secretary of Bank of Southern California, N.A., a national banking association (the “Bank”), and that as such he is authorized to execute and deliver this certificate in the name and on behalf of the Bank in connection with the Stock Purchase Agreement, dated as of September 22, 2016, by and between the Bank and Castle Creek Capital Partners VI, LP, a Delaware limited partnership, (the “Agreement”) and further certifies in his official capacity, in the name and on behalf of the Bank, the items set forth below (capitalized terms used but not otherwise defined herein shall have the meaning set forth in the Agreement):

1. Attached hereto as Exhibit A is a true, correct and complete copy of the resolutions duly adopted by the Board of Directors of the Bank at a meeting held on [ ], 2016. Such resolutions have not in any way been amended, modified, revoked, or rescinded, have been in full force and effect since their adoption to and including the date hereof and are now in full force and effect.

2. Attached hereto as Exhibit B is a copy of the Bank’s Articles of Association. Such Articles of Association constitute true, correct, and complete copies of the Articles of Association of the Bank as in effect on the date hereof.

3. Attached hereto as Exhibit C is a copy of the Bank’s bylaws. Such bylaws constitute true, correct, and complete copies of the bylaws of the Bank as in effect on the date hereof.

4. Each person listed below has been duly elected or appointed to the position(s) indicated opposite his name and is duly authorized to sign the Agreement and each of the Transaction Documents on behalf of the Bank, and the signature appearing opposite such person’s name below is such person’s genuine signature.

Name Position Signature

IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of this [●] day of [●], 2016.

[                                                         ]

Secretary

I, Nathan L. Rogge, President and Chief Executive Officer, hereby certify that [                  ] is the duly elected, qualified, and acting Secretary of the Bank and that the signature set forth above is his true signature.

Nathan L. Rogge

President and Chief Executive Officer

EXHIBIT C

EXHIBIT D

FORM OF OFFICER’S CERTIFICATE

The undersigned, the President and Chief Executive Officer of Bank of Southern California, N.A., a national banking association (the “Bank”), pursuant to Section 2.2(a)(iii) of the Stock Purchase Agreement, dated as of September 22, 2016, by and between the Bank and Castle Creek Capital Partners VI, LP, a Delaware limited partnership (the “Agreement”), hereby represents, warrants, and certifies as follows (capitalized terms used but not otherwise defined herein shall have the meaning set forth in the Agreement):

1. The representations and warranties of the Bank contained in the Agreement are true and correct as of the date when made and as of the Closing Date, as though made on and as of such date, except for such representations and warranties that speak as of a specific date.

2. The Bank has performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing.

3. Since December 31, 2015, there has not occurred any circumstance, event, change, development or effect that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect on the Bank.

IN WITNESS WHEREOF, the undersigned has executed this certificate this [●] day of [●], 2016.

Nathan L. Rogge

President and Chief Executive Officer

EXHIBIT D

EXHIBIT E

ACCREDITED INVESTOR QUESTIONNAIRE

(ALL INFORMATION WILL BE TREATED CONFIDENTIALLY)

To: Bank of Southern California, N.A.

This Accredited Investor Questionnaire (the “Questionnaire”) must be completed by Castle Creek Capital Partners VI, LP, a Delaware limited partnership (the “Purchaser”), in connection with the offer and sale by Bank of Southern California, N.A., a national banking association (the “Bank”), of its shares of common stock, $5.00 par value per share (the “Shares”) of the Bank. The Shares are being offered and sold by the Bank without registration under the Securities Act of 1933, as amended (the “Act”), and the securities laws of certain states, in reliance on the exemptions contained in Section 4(a)(2) of the Act and on Regulation D promulgated thereunder and in reliance on similar exemptions under applicable state laws. The Bank must determine that an investor meets certain suitability requirements before offering or selling the Shares to such investor. The purpose of this Questionnaire is to assure the Bank that the Purchaser will meet the applicable suitability requirements. The information supplied by the Purchaser will be used in determining whether the Purchaser meets such criteria, and reliance upon the private offering exemptions from registration is based in part on the information herein supplied.

This Questionnaire does not constitute an offer to sell or a solicitation of an offer to buy any security. Your answers will be kept strictly confidential. However, by signing this Questionnaire, the Purchaser will be authorizing the Bank to provide a completed copy of this Questionnaire to such parties as the Bank deems appropriate in order to ensure that the offer and sale of the Shares will not result in a violation of the Act or the securities laws of any state and that the Purchaser otherwise satisfies the suitability standards applicable to purchasers of the Shares. Please print or type all responses and attach additional sheets of paper if necessary to complete answers to any item.

PART A.          BACKGROUND INFORMATION

Name of Beneficial Owner of the Shares:                                                                                                              

Business Address:                                                                                                                                                     

(Number and Street)

(City)                                                                      (State)                                                                        (Zip Code)

Telephone Number: ( )                                                                                                              

Email Address:                                                                                                                         

EXHIBIT E

If a corporation, partnership, limited liability company, trust or other entity:

Type of entity:                                                                                                              

Were you formed for the purpose of investing in the securities being offered?

Yes ☐ No ☐

If an individual:

Residence Address:                                                                                                                                                     

(Number and Street)

(City)                                                                      (State)                                                                        (Zip Code)

Telephone Number: ( )                                                                                                                                                     

Email Address:                                                                                                                                                     

Age: Citizenship: Where registered to vote:

Set forth in the space provided below the state(s), if any, in the United States in which you maintained your residence during the past two years and the dates during which you resided in each state:                                                                                                                                                                                                                                                                                                         

Are you a director or executive officer of the Bank?

Yes ☐ No ☐

Social Security or Taxpayer Identification No.                                                                                                           

PART B. ACCREDITED INVESTOR QUESTIONNAIRE

In order for the Bank to offer and sell the Shares in conformance with state and federal securities laws, the following information must be obtained regarding your investor status. Please initial each category applicable to you as the Purchaser of Shares.

☐	1.	A bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity;
☐	2.	A broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934;
☐	3.	An insurance company as defined in Section 2(a)(13) of the Securities Act;

EXHIBIT E

☐	4.	An investment company registered under the Investment Bank Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act;
☐	5.	A Small Business Investment company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958;
☐	6.	A plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000;
☐	7.	An employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;
☐	8.	A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940;
☐	9.	An organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the Shares, with total assets in excess of $5,000,000;
☐	10.	A trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Shares, whose purchase is directed by a sophisticated person who has such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of investing in the Bank;
☐	11.	A natural person whose individual net worth, or joint net worth with that person’s spouse, at the time of his or her purchase exceeds $1,000,000 (see Note 11 below);
☐	12.	A natural person who had an individual income in excess of $200,000 in each of the two most recent years, or joint income with that person’s spouse in excess of $300,000 in each of those years, and has a reasonable expectation of reaching the same income level in the current year;
☐	13.	An executive officer or director of the Bank; and
☐	14.	An entity in which all of the equity owners qualify under any of the above subparagraphs. If the undersigned belongs to this investor category only, list the equity owners of the undersigned, and the investor category which each such equity owner satisfies.

EXHIBIT E

Note 11. For purposes of calculating net worth under paragraph (11):

(A) The person’s primary residence shall not be included as an asset;

(B) Indebtedness that is secured by the person’s primary residence, up to the estimated fair market value of the primary residence at the time of the sale of securities, shall not be included as a liability (except that if the amount of such indebtedness outstanding at the time of sale of securities exceeds the amount outstanding sixty (60) days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability); and

(C) Indebtedness that is secured by the person’s primary residence in excess of the estimated fair market value of the primary residence at the time of the sale of securities shall be included as a liability.

Date: [        ], 2016

CASTLE CREEK CAPITAL PARTNERS VI, LP
By:
Print Name:	David J. Volk
Title:	Principal

EXHIBIT E

EX-10.17

Exhibit 10.17

October 16, 2019

Re: Castle Creek Capital Partners VI, L.P. - Stock Purchase and Subscription Agreement

Ladies and Gentlemen:

Reference is made to that certain Stock Purchase and Subscription Agreement, dated as of the date of this side letter (the “Agreement”) between Bank of Southern California, National Association, a national banking association (the “Company”) and Castle Creek Capital Partners VI, L.P., a Delaware limited partnership (the “Purchaser”). Capitalized terms used but not defined in this side letter (this “Side Letter Agreement”) shall have the meanings assigned to them in the Agreement.

1. Acknowledgements and Agreements of the Company.

(a) The Company acknowledges and agrees that prior to the Company: (A) consenting to any material amendment to the Agreement and Plan of Merger, dated October 16, 2019, to which the Company and CalWest Bancorp, a California corporation, are parties (the “Merger Agreement”); or (B) waiving any material condition to, or obligation of Cal West Bancorp contained in, the Merger Agreement, the Company shall obtain the written consent of Purchaser to any such amendment and/or waiver. In obtaining the consent of the Purchaser as contemplated herein, the Company shall provide written notice to the Purchaser in accordance with Section 6.3 of the Agreement setting forth, in reasonable detail, all matters for which the Company is seeking the Purchaser’s consent hereunder. In the event Purchaser does not respond to such written notice within five (5) business days following the receipt of such notice, then Purchaser shall be deemed to have consented to any such amendment to, or waiver of any material condition to or obligation of Cal West Bancorp under, the Merger Agreement.

(b) The Company acknowledges and agrees that the obligations of the Company and the Purchaser and the rights, preferences and privileges of the Purchaser set forth in that certain Stock Purchase Agreement, dated September 22, 2016 (the “2016 Stock Purchase Agreement”), that certain Stock Purchase Agreement, dated February 21, 2018 (the “2018 Stock Purchase Agreement”) and that certain Side Letter Agreement, dated February 21, 2018 (together with the 2016 Stock Purchase Agreement and the 2018 Stock Purchase Agreement, the “Existing Castle Creek Agreements”) shall apply to the Shares purchased under the Agreement with the same effect as the Shares purchased by the Purchaser pursuant to the 2016 Stock Purchase Agreement and the 2018 Stock Purchase Agreement, including but not limited to any registration rights in respect thereof, and shall not otherwise be affected by the Agreement, except as modified in this Side Letter Agreement and except to the extent that any such obligations of the parties set forth in the Existing Castle Creek Agreements shall have already been satisfied or waived, as of the date hereof.

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2. Amendments to the Agreement.

(a) Section 1.1 of the Agreement is hereby amended to add the following defined terms:

“Castle Creek” means Castle Creek Capital Partners VI, L.P., a Delaware limited partnership.”

“Castle Creek Agreements” means (i) the Stock Purchase Agreement, dated September 22, 2016, by and between the Company and Castle Creek; (ii) the Stock Purchase Agreement, dated February 21, 2018, by and between the Company and Castle Creek; (iii) the Side Letter Agreement, dated February 21, 2018, by and between the Company and Castle Creek and (iv) the Side Letter Agreement, dated of even date herewith, by and between the Company and Castle Creek.”

(b) Section 4.3(a) of the Agreement is hereby amended to read as follows:

“Section 4.3 Indemnification.

(a) “Indemnification of Purchaser. The Company will indemnify and hold Purchaser and its directors, officers, shareholders, members, partners, employees, agents and investment advisers (and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title), each Person who controls such Purchaser (within the meaning of Section 15 of the Securities Act and Section 20 of the Exchange Act), and the directors, officers, shareholders, agents, members, partners, employees, agents and investment advisers ( and any other Persons with a functionally equivalent role of a Person holding such titles notwithstanding a lack of such title or any other title) of such controlling person ( each, an “Indemnified Person”) harmless from any and all damages, liabilities, obligations, claims, contingencies, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys’ fees and costs of investigation that any such Indemnified Person may suffer or incur as a result of (i) any breach of any of the representations, warranties, covenants or agreements made by the Company in this Agreement or in the other Transaction Documents, or (ii) any action instituted against an Indemnified Person in any capacity, or any of them or their respective Affiliates, by any shareholder of the Company or other third party who is not an Affiliate of such Indemnified Person, with respect to any of the transactions contemplated by this Agreement. The Company will not be liable to any Indemnified Person under this Agreement to the extent, but only to the extent that a loss, claim, damage or liability is directly attributable to any Indemnified Person’s breach of any of the representations, warranties, covenants or agreements made by such Indemnified Person in this Agreement or in the other Transaction Documents.”

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(c) Article IV of the Agreement is hereby amended to add the following Section 4.5:

“Section 4.5. Most Favored Nation. During the period from the date of this Agreement through the Closing Date, neither the Company nor its Subsidiaries shall enter into any additional, or modify any existing, agreements with any existing or future investors in the Company or any of its Subsidiaries that have the effect of establishing rights or otherwise benefiting such investor in a manner more favorable in any material respect to such investor than the rights and benefits established in favor of the Purchaser by this Agreement, unless, in any such case, the Purchaser has been provided with such rights and benefits.”

(d) Section 6.2 of the Agreement is hereby amended to read as follows:

“Section 6.2 Entire Agreement. The Transaction Documents, together with, the Castle Creek Agreements, and the Exhibits hereto and thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, discussions and representations, oral or written, with respect to such matters, which the parties acknowledge have been merged into such document, exhibits and schedules. At or after the Closing, and without further consideration, the Company and the Purchasers will execute and deliver to the other such further documents as may be reasonably requested in order to give practical effect to the intention of the parties under the Transaction Documents.”

(e) Section 6.6 of the Agreement is hereby amended to read as follows:

“Section 6.6 Successors and Assigns. The provisions of this Agreement shall inure to the benefit of and be binding upon the parties and their successors and permitted assigns. This Agreement, or any rights or obligations hereunder, may not be assigned by the Company without the prior written consent of the Purchaser, and may not be assigned by the Purchaser without the express written consent of the Company; provided, however, that the Purchaser may assign its rights hereunder in whole or in part to any Person to whom the Purchaser assigns or transfers any Shares in compliance with the Transaction Documents ·and applicable law, provided such transferee shall agree in writing to be bound, with respect to the transferred Shares, by the terms and conditions of this Agreement and the Castle Creek Agreements.”

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(f) Section 6.9 of the Agreement is hereby amended to read as follows:

“Section 6.9 Survival. The representations and warranties contained herein shall survive the Closing and the delivery of the Shares but only for a period of two (2) years after the Closing Date; provided, that the representations and warranties set forth in Sections 3.l(a) (Subsidiaries), 3.l(b) (Organization and Qualification; Compliance), 3 .1 ( c) (Authorization; Enforcement; Validity), 3 .1 ( d) (No Conflicts), 3.l(t) (Issuance of the Shares), 3.l(g) (Capitalization), 3.l(v) (Brokers and Finders) and 3.2(a) (Organization; Authority) shall survive the Closing until the expiration of the applicable statute of limitations. All covenants and agreements made by the Company that are intended to be performed prior to the Closing shall not survive the Closing and all covenants and agreements made by the Company that are intended to be performed after the Closing shall survive the Closing.”

This Side Letter Agreement will be governed by and construed in accordance with the internal laws of the State of California, without regard to the principles of conflicts of law thereof.

This Side Letter Agreement, the Existing Castle Creek Agreements and the Agreement and any other documents executed by the parties at the Closing constitute the entire agreement of the parties with respect to the subject matter hereof.

This Side Letter Agreement may be executed in any number of separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement. Executed signature pages to this Side Letter Agreement may be delivered by facsimile and such facsimiles will be deemed sufficient as if actual signature pages had been delivered.

[SIGNATURES APPEAR ON THE IMMEDIATELY FOLLOWING PAGE]

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In witness whereof, the parties have duly executed this Side Letter Agreement as of the date first written above.

BANK OF SOUTHERN CALIFORNIA, N.A.
/S/ Nathan L. Rogge
Name:	Nathan L. Rogge
Title:	President and Chief Executive Officer
CASTLE CREEK CAPITAL PARTNERS VI, L.P.
/S/ David J. Volk
Name:	David J. Volk
Title:	Principal

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EX-21.1

Exhibit 21.1

Subsidiaries

Southern California Bancorp Subsidiary:

Name	Jurisdiction of Incorporation
Bank of Southern California, National Association	United States