Press Release

California BanCorp Reports Strong Loan Growth and Earnings of $1.9 Million in the First Quarter of 2019

Company Release - 4/30/2019 7:06 PM ET

OAKLAND, Calif., April 30, 2019 (GLOBE NEWSWIRE) -- California BanCorp (the “Company”) (OTCQX-CALB), the parent company of California Bank of Commerce (the “Bank”), today announced very strong year-over-year loan growth resulting from the investments in both bankers and infrastructure made after its successful 2018 capital raise.

With the Bank’s focus on relationship banking and the continued economic strength in the Northern California commercial and industrial sector, total loans increased by $146 million, or 20% at March 31, 2019 compared to March 31, 2018.  “Achieving this increase in loan volume is directly attributable to the quality of our bankers and our attention to building quality long-term relationships in the Northern California business community,” stated Steve Shelton, President and Chief Executive Officer.

Net income was $1.87 million, or $0.23 per share for the first quarter of 2019 compared to $1.93 million or $0.30 per share for the first quarter of 2018.  Overall first quarter 2019 earnings were impacted by strategic investments and costs associated with hiring to support continued growth and expansion into new geographies, and public company readiness initiatives including  preparing for FDICIA compliance.

Excluding non-recurring expenses in both 2019 and 2018, net income for the first quarter of 2019 was $2.3 million, or $0.29 per share, compared to $2.1 million, or $0.33 per share for the same quarter in 2018.  The lower earnings per share primarily resulted from additional shares issued in 2018 from its private placement of common stock.

During the first quarter of 2019, average earning assets were $937 million, an increase of $106 million, or 13% from the same period in 2018 and include growth in average loan and investment securities balances of $130 million and $30 million respectively, with a coinciding decline in cash balances of $53 million.

Total assets reached a record $1.04 billion as of March 31, 2019, up 14%, or $129 million compared to $909 million at March 31, 2018. This growth was propelled by an $84 million, or 12% increase in core commercial deposits, including $15 million in non-interest-bearing commercial deposits.  Core deposit growth exceeded the change in total deposits between the periods as a result of a shift in funding strategy during 2018, as the Bank reduced its reliance on a few higher cost and non-core deposits, which declined by $60 million at March 31, 2019, compared to March 31, 2018.

Financial Highlights

March 31, 2019 compared to March 31, 2018

  • Total assets increased by $129 million, or 14% to $1.04 billion.
  • Total loans increased by $146 million, or 20% to $889 million.
  • Total deposits increased by $72 million, or 9% to $871 million.
  • Total core deposits increased by $84 million, or 12% to $779 million.
  • Total equity increased by $36 million, or 41% to $124 million.

Income Statement

Three months ended March 31, 2019 compared to March 31, 2018

  • First quarter net income of $1.87 million.
  • Net interest income increased by $1.4 million, or 17% to $9.8 million.
  • Non-interest income decreased by $177 thousand, or 17% to $863 thousand.
  • Core earnings increased by $179 thousand, or 8% to $2.3 million.

Balance Sheet

Total loans increased by $146 million, or 20% to $889 million at March 31, 2019, with the largest categories of growth within the loan portfolio in relationship-based commercial real estate loans at $117 million and commercial & industrial loans at $42 million.  While CRE loan originations were especially strong during 2018, C&I loan growth was robust during the first quarter of 2019, as a result of both new relationships and additional borrowing on existing lines of credit during the quarter, reflecting the continued strength in the regional economy.

The Bank’s investment portfolio was $42 million at March 31, 2019 compared to $12.3 million at the prior year quarter end, reflecting the deployment of excess cash during the third and fourth quarters of 2018 as market interest rates peaked.

Total deposits increased by $72 million, or 9% to $871 million at March 31, 2019, from $799 million at March 31, 2018, with growth primarily concentrated in core commercial deposits, which increased by $84 million, or 12% to $779 million. Non-interest bearing deposits, primarily commercial business operating accounts, represented 38.5% of total deposits at March 31, 2019, compared to 40.2% at March 31, 2018, indicative of lower levels of operating cash from some commercial clients, as they deployed funds into commercial activity. 

Shareholder’s Equity

Total shareholder’s equity increased by $35.8 million, or 41% from $87.9 million at March 31, 2018, to $123.7 million at March 31, 2019. The $35.8 million increase includes earnings during the twelve-month period totaling $8.7 million, proceeds from the exercise of stock options totaling $3.5 million and $23.6 million in net proceeds from the Company’s successful private placement of common stock during the third quarter of 2018. Tangible book value per common share increased by 18% between the periods, from $12.23 at March 31, 2018, to $14.43 at March 31, 2019.

Net Interest Income and Net Interest Margin – three months ended March 31, 2019 and March 31, 2018

Net interest income was $9.8 million for the three months ended March 31, 2019, an increase of $1.4 million or 17% from $8.4 million for the same period in 2018. The increase in net interest income was primarily attributable to an increase in interest and fees on loans of $1.9 million, the result of a $130 million increase in the average balance of loans outstanding between the periods and the change in the Prime Rate, with the average yield on loans increasing by 11 basis points, from 5.06% during the 2018 quarter to 5.17% in the current quarter.

Interest income from investment securities increased by $265 thousand to $331 thousand, compared to the 2018 quarter, as a result of the $30 million, or 235% increase in the average balance of investment securities outstanding in 2019 compared to the 2018 period, and the increase in the average yield to 3.14% in the current quarter compared to 2.09% in 2018.

With the substantial increase in the average balances of loans and investment securities during the 2019 quarter, the average balance of interest-earning cash and equivalents declined by $53 million compared to the 2018 period, while the  average yield on cash and equivalents increased to 2.43% from 1.56% in 2018.

The yield on total interest-earning assets increased by 34 basis points to 4.98% in the 2019 quarter, compared to 4.64% during the same period in 2018, as a result of the stronger balances of both loans and investments and reduced cash and cash equivalents balances in the period.

Both non-interest-bearing and interest-bearing deposits grew at a strong rate between the periods, with average non-interest-bearing deposits up by $30 million, or 10% to $334 million and average interest-bearing deposits up by $51 million, or 10% to $523 million during the first quarter of 2019, compared to the same 2018 period. The increase in the average balance of interest-bearing deposits, as well as higher market interest rates between the periods, led to an increase in interest paid on deposits of $680 thousand to $1.5 million and an increase in the average rate paid on total deposits of 28 basis points to 0.73%, compared to 0.45% in the 2018 period.

As a result of the significant growth in higher rate loan and investment securities during the 2019 quarter compared to the 2018 period, the net interest margin increased by 14 basis points to 4.26% in 2019, compared to 4.12% in 2018.

Non-Interest Income and Expense – three months ended March 31, 2019 and March 31, 2018

During the quarter ended March 31, 2019, non-interest income totaled $863 thousand, a decrease of $177 thousand, or 17% from the quarter ended March 31, 2018. The decrease was primarily the result of a $152 thousand decrease in gains on loan sales during the 2019 quarter, in addition to a $53 thousand decrease in loan fees, primarily pre-payment fees, all partially offset by a $36 thousand increase in client service charge and other account fee income.

For the quarter ended March 31, 2019, total non-interest expenses increased by $1.1 million, or 17% to $7.6 million compared to the same 2018 period.  Of the increase, $636 thousand was in net salaries and benefits expenses, the result of hiring key lending and operational staff positions during 2018 to support the Company’s continued growth.  Occupancy and FF&E expense increased by $81 thousand, or 12% to $745 thousand in the 2019 period, as the Bank expanded its Oakland, California premises.  Other non-interest expenses increased by $411 thousand, or 21% to $2.4 million during the 2019 quarter, primarily as a result of increased professional fees incurred during the period.  Of the 2019 first quarter non-interest expenses, $648 thousand were non-recurring and primarily related to costs associated with public company readiness and FDICIA implementation.  These 2019 non-recurring expenses compare to $302 thousand in non-recurring expenses during the 2018 quarter related to a strategic initiative.

Credit Quality

Credit quality remains strong, with non-performing assets (“NPAs”) to total assets of 0.56% at March 31, 2019, compared to 0.44% at March 31, 2018, with non-performing loans of $5.8 million and $4.0 million, respectively, on those dates.

The allowance for loan losses increased by $1.7 million, or 17% to $11.3 million, or 1.27% of total loans at March 31, 2019, compared to $9.6 million, or 1.29% of total loans at March 31, 2018.

Closing Remarks

“It is a credit to our strong commercial loan culture and credit administration team to have achieved this level of loan growth over the previous year while maintaining our loan quality,” stated Chairman Stephen Cortese. “We are also especially pleased to have reported earlier this month, the addition of Senior Executive Vice President/Chief Lending Officer Scott Myers  and the formation of a Sacramento, California based commercial banking team, which will allow the Bank to expand and diversify our client base in Northern California in the years ahead.”

Please see our detailed First Quarter 2019 Unaudited Summary Financial Statements or visit our Investor Relations website for more information.

About California BanCorp

California BanCorp, the parent company for California Bank of Commerce, offers a broad range of commercial banking services to closely held businesses and professionals located throughout the San Francisco Bay Area. The stock trades on the OTCQX marketplace under the symbol CALB (formerly CABC). For more information on California BanCorp, call us at (510) 457-3751, or visit us at www.californiabankofcommerce.com.

Forward-Looking Information

Statements in this news release regarding expectations and beliefs about future financial performance and financial condition, as well as trends in the Company’s business and markets are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements often include words such as "believe," "expect," "anticipate," "intend," "plan," "estimate," "project," "outlook," or words of similar meaning, or future or conditional verbs such as "will," "would," "should," "could," or "may." The forward looking statements in this news release are based on current information and on assumptions that the Company makes about future events and circumstances that are subject to a number of risks and uncertainties that are often difficult to predict and beyond the Company’s control. As a result of those risks and uncertainties, the Company’s actual financial results in the future could differ, possibly materially, from those expressed in or implied by the forward looking statements contained in this news release and could cause the Company to make changes to future plans. Those risks and uncertainties include, but are not limited to, the risk of incurring loan losses, which is an inherent risk of the banking business; the risk that the Company will not be able to continue its internal growth rate; the risk that the United States economy will experience slowed growth or recession or will be adversely affected by domestic or international economic conditions and risks associated with the Federal Reserve Board taking actions with respect to interest rates, any of which could adversely affect, among other things, the values of real estate collateral supporting many of the Company’s loans, interest income and interest rate margins and, therefore, the Company’s future operating results; risks associated with changes in income tax laws and regulations; and risks associated with seeking new client relationships and maintaining existing client relationships.  Also, the Company’s actual financial results in the future may differ from those currently expected or previously reported due to additional risks and uncertainties of which the Company is not currently aware or does not currently view as, but in the future may become, material to its business or operating results. Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained in this news release, which speak only as of today's date, or to make predictions based solely on historical financial performance. The Company disclaims any obligation to update forward-looking statements contained in this news release, whether as a result of new information, future events or otherwise, except as may be required by law.

California BanCorp
Steven E. Shelton, (510) 457-3751
President and Chief Executive Officer
seshelton@bankcbc.com

Randall D. Greenfield, (510) 457-3769
Senior Executive Vice President and Chief Financial Officer
rgreenfield@bankcbc.com

Source: California BanCorp


 California BanCorp Financial Data as of March 31, 2019 (Unaudited)        
                 
 ($ Thousands) For the three months ended Change %     
 Income Statement 3/31/2019 12/31/2018 3/31/2018 QoQ YoY     
 Interest and fees on loans $  10,954  $  10,120  $  9,099  8% 20%     
 Other interest income    540     913     403  (41%) 34%     
 Total interest income    11,494     11,033     9,502  4% 21%     
                 
 Interest on deposits    1,543     1,396     863  11% 79%     
 Interest on borrowings and subordinated debentures    114     78     206  47% (44%)     
 Total interest expense    1,657     1,474     1,069  12% 55%     
 Net interest income    9,837      9,559      8,433   3 % 17 %     
 Provision for loan loss    581     591     260  (2%) 123%     
 Net interest income after provision    9,256     8,968     8,173  3% 13%     
                 
 Service charges and other account fees    300     292     264  3% 14%     
 Loan related fees    370     291     423  27% (13%)     
 Net gains on securities sales    -     97     -  (100%) 0%     
 Net gains on loan sales    23     135     175  (83%) (87%)     
 Other    170     47     178  262% (4%)     
 Total non-interest income    863      862      1,040   0 % (17%)     
                 
 Salaries and employee benefits    4,515     4,052     3,879  11% 16%     
 Occupancy and equipment expenses    745     773     664  (4%) 12%     
 Data processing, internet and software    419     424     385  (1%) 9%     
 Professional and legal    358     190     177  88% 102%     
 Strategic initiatives    648     348     302  86% 115%     
 Other operating expenses    930     1,304     1,080  (29%) (14%)     
 Total operating expenses    7,615      7,091      6,487   7 % 17 %     
                 
 Net income before taxes    2,504     2,739     2,726  (9%) (8%)     
 Income taxes    636     632     793  1% (20%)     
 Net income $   1,868   $   2,107   $   1,933   (11%) (3%)     
                 
 Earnings Per Share               
 Basic earnings per share $   0.23   $   0.26   $   0.30   (12%) (22%)     
 Diluted earnings per share $   0.23   $   0.26   $   0.28   (11%) (19%)     
 Average shares outstanding    8,020,456     7,990,089     6,508,999          
 Average diluted shares    8,102,543     8,103,041     6,819,965          
                 
 CORE EARNINGS SUMMARY               
   For the three months Ended Change %     
 Nonrecurring expense 3/31/2019 12/31/2018 3/31/2018 QoQ YoY     
 Strategic initiatives $  648  $  348  $  302          
 Total Nonrecurring expense    648     348     302          
                 
 Income taxes    191     103     89          
                 
                 
 Nonrecurring expense (net of tax)    457      245      213           
                 
 Core Net income $   2,325   $   2,352   $   2,146   (1%) 8 %     
                 
 Core Earnings Per Share               
 Basic core earnings per share    0.29      0.29      0.33   (2%) (12%)     
 Diluted core earnings per share    0.29      0.29      0.31   (1%) (9%)     
                 
 Core return on average assets  0.95%  0.95%  0.99%         
 Core return on average tangible common equity  8.19%  8.30%  11.00%         
                 
   For the three months Ended Change $ Change % 
 Average Balance Sheet Items 3/31/2019 12/31/2018 3/31/2018 QoQ YoY QoQ YoY 
 Total Assets    995,362     982,992     882,386    12,370    112,976  1% 13% 
 Total Loans    859,326     784,765     729,781    74,561    129,545  10% 18% 
 Investments    42,719     52,836     12,736    (10,117)   29,983  -19% 235% 
 Earning Assets    936,929     926,331     830,522    10,598    106,407  1% 13% 
 Non-Interest Bearing Deposits    334,493     358,016     304,551    (23,523)   29,942  -7% 10% 
 Core Deposits    760,652     760,220     665,711    432    94,941  0% 14% 
 Total Deposits    857,034     854,165     775,625    2,869    81,409  0% 10% 
 Borrowings    10,781     5,000     16,078    5,781    (5,297) 116% -33% 
 Tangible Common Equity    115,117     112,450     79,137    2,667    35,980  2% 45% 
                 
                 
   At the periods ended Change $ Change % 
 Balance Sheet 3/31/2019 12/31/2018 3/31/2018 QoQ YoY QoQ YoY 
 Cash and equivalents    61,320     78,705     121,342    (17,385)   (60,022) (22%) (49%) 
 Investment securities    42,008     43,415     12,268    (1,407)   29,740  (3%) 242% 
 Other investments    3,536     3,536     3,199    0    337  0% 11% 
                 
 Commercial loans    371,359     341,184     329,269    30,175    42,090  9% 13% 
 CRE loans    462,779     451,851     345,580    10,928    117,199  2% 34% 
 Construction and land loans    38,764     37,344     41,182    1,420    (2,418) 4% (6%) 
 Other loans    15,800     16,552     26,342    (752)   (10,542) (5%) (40%) 
 Loans    888,702     846,931     742,373    41,771    146,329  5% 20% 
 Allowance for loan losses    11,250     10,800     9,600    450    1,650  4% 17% 
 Net loans    877,452      836,131      732,773     41,321     144,679   5% 20 % 
                 
 Premises and equipment, net    1,942     2,076     2,600    (134)   (658) (6%) (25%) 
 Bank owned life insurance    17,933     17,806     16,547    127    1,386  1% 8% 
 Deferred income taxes, net    4,804     5,803     3,894    (999)   910  (17%) 23% 
 Core Deposit Intangible    276     286     433    (10)   (157) (4%) (36%) 
 Goodwill    7,350     7,350     7,350    -    -  0% 0% 
 Other assets and interest receivable    21,885     10,564     8,942    11,321    12,943  107% 145% 
 Total assets    1,038,506      1,005,672      909,348     32,834     129,158   3% 14 % 
                 
 Demand deposits    335,719     352,402     321,214    (16,683)   14,505  (5%) 5% 
 Interest bearing demand deposits    25,878     32,650     26,744    (6,772)   (866) (21%) (3%) 
 Money market & savings deposits    414,734     392,290     361,023    22,444    53,711  6% 15% 
 Time deposits    94,844     96,912     89,927    (2,068)   4,917  (2%) 5% 
 Total deposits    871,175      874,254      798,908     (3,079)   72,267   (0%) 9 % 
                 
 Borrowings    25,000     -     14,500    25,000    10,500  N/A 72% 
 Subordinated debentures, net    4,964     4,960     4,947    4    17  0% 0% 
 Other liabilities    13,710     5,379     3,130    8,331    10,580  155% 338% 
 Total liabilities    914,849     884,593     821,485    30,256    93,364  3% 11% 
                 
 Common stock    105,107     104,563     78,229    544    26,878  1% 34% 
 Retained earnings    18,383     16,515     9,735    1,868    8,648  11% 89% 
 Other comprehensive income    167     1     (101)   166    268  N/A   
 Total shareholder’s equity    123,657      121,079      87,863     2,578     35,794   2% 41 % 
 Total liabilities and equity    1,038,506      1,005,672      909,348     32,834     129,158   3% 14 % 
                 
 Tangible book value per common share    14.43     14.20     12.23      2% 18% 
 Total shares outstanding    8,045,399     7,993,908     6,560,445          
                 
 Core relationship deposits    778,627     779,783     694,165    (1,156)   84,462  (0%) 12% 
                 
                 
   For the three months ended         
 Performance Ratios 3/31/2019 12/31/2018 3/31/2018         
 Return on average assets  0.76%  0.85%  0.89%         
 Return on average tangible common equity  6.58%  7.43%  9.91%         
 Efficiency ratio  71.17%  68.05%  68.48%         
                 
 Net Interest Margin               
 Net interest margin  4.26%  4.09%  4.12%         
 Average investment yield  3.14%  3.08%  2.09%         
 Average loan yield  5.17%  5.12%  5.06%         
 Average total deposit rate  0.73%  0.65%  0.45%         
 Average borrowing rate  4.31%  6.17%  5.20%         
                 
 Other Ratios               
 Average total loans to total deposits  100.3%  91.9%  94.1%         
 Average C&I loans to total loans  40.2%  41.1%  43.9%         
 Average non-interest bearing deposits to total deposits 39.0%  41.9%  39.3%         
 Average core deposits to total deposits  88.8%  89.0%  85.8%         
                 
   At the periods ended         
 Capital Ratios - Bank 3/31/2019 12/31/2018 3/31/2018         
 Tier 1 leverage ratio  11.41%  11.31%  10.27%         
 Common equity tier 1 capital ratio  10.81%  10.94%  10.34%         
 Tier 1 risk-based capital ratio  10.81%  10.94%  10.34%         
 Total risk-based capital ratio  12.38%  12.52%  12.04%         
                 
   At the periods ended         
 Non-Performing Assets 3/31/2019 12/31/2018 3/31/2018         
 Non-Accrual Loans $  4,185  $  4,463  $  2,632          
 Restructured Loans    1,586     930     1,399          
 Total non-performing loans (NPL)    5,771     5,393     4,031          
 Other Real Estate Owned    -     -     -          
 Total non-performing assets (NPA) $  5,771  $  5,393  $  4,031          
 Quarterly Net (Charge-offs)/Recoveries $  (135) $  9  $  40          
                 
 NPAs / Assets %  0.56%  0.54%  0.44%         
 NPAs / Loans and OREO %  0.65%  0.64%  0.54%         
 Loan Loss Reserves / Loans (%)  1.27%  1.28%  1.29%         
 Loan Loss Reserves / NPLs (%)  195%  200%  238%         
                 


CALB new 5 (2) (1).jpg

Source: California BanCorp