Press Release

California BanCorp Reports Financial Results for the Second Quarter and Six Months Ended June 30, 2019

Company Release - 7/29/2019 5:30 AM ET

OAKLAND, Calif., July 29, 2019 (GLOBE NEWSWIRE) -- California BanCorp (the “Company”) (OTCQX-CALB), the parent company of California Bank of Commerce (the “Bank”), today announced its financial results for the second quarter and six months ended June 30, 2019.

California BanCorp logo


Net income was $2.55 million for the second quarter of 2019, representing an increase of $682 thousand or 36% compared to $1.87 million for the first quarter of 2019 and an increase of $391 thousand or 18% compared to $2.16 million in the second quarter of 2018. For the six months ended June 30, 2019, net income was $4.42 million representing an increase of $326 thousand or 8% compared to $4.09 million for the same period in 2018.

Per share earnings of $0.31 for the second quarter of 2019 compared to $0.23 for the first quarter of 2019 and $0.32 in the second quarter of 2018. For the six months ended June 30, 2019, per share earnings of $0.54 compared to $0.60 for the same period in 2018. Per share earnings reflect the impact of the Company’s capital raise completed in August of 2018 which increased shares outstanding by 1.18 million or 18%.

Financial Highlights

Income Statement

Three months ended June 30, 2019 compared to March 31, 2019

  • Net income increased $682 thousand to $2.6 million.
  • Revenue increased $360 thousand, or 3% to $11.1 million.
  • Non-interest expense decreased by $232 thousand, or 3% to $7.4 million.

Six months ended June 30, 2019 compared to June 30, 2018

  • Net income increased $326 thousand to $4.4 million.
  • Revenue increased $2.8 million, or 15% to $21.8 million.
  • Non-interest expense increased by $1.9 million, or 15% to $15.0 million.

Financial Position

June 30, 2019 compared to June 30, 2018

  • Total assets increased by $148 million, or 16% to $1.06 billion.
  • Total loans increased by $159 million, or 21% to $912 million.
  • Total deposits increased by $82 million, or 10% to $882 million.
  • Capital ratios remain healthy with a tier-one leverage ratio of 11.22%, tangible common equity ratio of 10.71% and total risk-based capital ratio of 12.26%.

“In the second quarter we achieved record quarterly earnings and year-over-year loan growth of $159.0 million or 21%,” stated Steve Shelton, President and Chief Executive Officer. “The second quarter results reflect the continued successful efforts of our entire team to capitalize on building quality, long-term relationships in healthy and vibrant Northern California business communities. Our capital raise in 2018 enabled us to build upon a strong foundation and continue to position our franchise as Northern California’s premier business bank.”

Net Interest Income and Margin – three and six months ended June 30, 2019 and June 30, 2018.

Net interest income for the quarter ended June 30, 2019 was $10.1 million, an increase of $247 thousand or 3% over $9.8 million for the three months ended March 31, 2019, and an increase of $1.5 million or 17% over $8.6 million for the quarter ended June 30, 2018. The increase in net interest income compared to the prior quarter of 2019 and the same period in 2018 was primarily attributable to an increase in interest income driven by the strong increase in average earning assets, specifically growth in average loans, which increased 5% over the prior quarter of 2019 and 20% over the same period in 2018.

The yield on total interest-earning assets increased to 5.07% during the quarter ended June 30, 2019, compared to 4.98% during the prior quarter and compared to 4.68% during the same period in 2018, as the result of a shift in the mix toward loans and increases in the prime rate. Average loans represented 93% of average earning assets in the quarter ended June 30, 2019, up from 92% in the prior quarter and 89% in the same period in 2018.

The Company’s net interest margin for the quarter was 4.18% compared to 4.26% for the prior quarter in 2019 and 4.10% for the same period in 2018. The decrease in margin compared to the prior quarter was primarily the result of an increase in the cost of funds related to higher wholesale borrowing activity in the period. The increase in margin compared to the same period last year was the result of an increase in the yield of average earning assets offset, in part, by an increase in the average cost of funds.

Non-Interest Income – three and six months ended June 30, 2019 and June 30, 2018.

The Company’s non-interest income for the quarters ended June 30, 2019, March 31, 2019, and June 30, 2018 was $976 thousand, $863 thousand and $888 thousand, respectively.

The increases in non-interest income of $113 thousand during the second quarter of 2019 compared to the first quarter of 2019 and $88 thousand compared to the same period last year was primarily due to increases in client deposit service charges and a loan termination fee.

For the six months ended June 30, 2019, non-interest income of $1.8 million represented a slight decrease from $1.9 million for the first six months of 2018. The decrease was primarily due to a decrease in gains on sale of loans partially offset by increases in deposit service charges and loan related fees.

Non-Interest Expense – three and six months ended June 30, 2019 and June 30, 2018.

The Company’s non-interest expense for the quarters ended June 30, 2019, March 31, 2019, and June 30, 2018 was $7.4 million, $7.6 million and $6.6 million, respectively.

For the quarter ended June 30, 2019 the decrease in non-interest expense of $232 thousand compared to the quarter ended March 31, 2019, was primarily due to a decrease in nonrecurring expenses associated with public company readiness and FDICIA implementation, and lower recurring legal and professional fees, partially offset by an increase in salaries and benefits related to hiring in support of growth. Compared to the same period in 2018, non-interest expense increased $810 thousand, primarily due to an increase in salary and benefits related to hiring to support growth.

Non-interest expenses of $15.0 million for the six months ended June 30, 2019 compared to $13.1 million for the first six months of 2018. The increase of $1.9 million was due primarily to an increase in salaries and benefits related to hiring to support the continued growth of the Bank and nonrecurring costs related to preparing for public registration and FDICIA implementation.

Balance Sheet

Total assets reached a record $1.06 billion as of June 30, 2019, up 16%, or $148 million compared to $911 million at June 30, 2018. Net loan growth of $157 million outpaced net deposit growth of $82 million as the Bank undertook a strategy in 2018 to reduce higher-cost wholesale deposits in its funding mix.

Total loans increased by $159 million, or 21% to $912 million at June 30, 2019, from $753 million at June 30, 2018, with the largest categories of growth within the loan portfolio in relationship-based commercial real estate loans at $119 million and commercial and industrial loans at $58 million. In the second quarter of 2019, total loans increased by $23 million from $889 million at March 31, 2019, with an increase in commercial and industrial loans of $17 million and an increase in commercial real estate loans of $14 million offset by a reduction in construction and other lending of $8 million.

Total deposits increased by $82 million, or 10% to $882 million at June 30, 2019, from $800 million at June 30, 2018, with growth primarily concentrated in core commercial deposits, which increased by $55 million, or 8% to $749 million. Non-interest bearing deposits, primarily commercial business operating accounts, represented 37.3% of total deposits at June 30, 2019, compared to 40.8% at June 30, 2018, primarily indicative of lower levels of operating cash from some commercial clients, as they deployed funds into commercial activity.

Credit Quality

Non-performing assets (“NPAs”) to total assets of 0.63% at June 30, 2019, compared to 0.40% at March 31, 2019 and 0.28% at June 30, 2018, with non-performing loans of $6.6 million, $4.2 million and $2.5 million, respectively, on those dates. The increase in NPAs at June 30, 2019 compared to the prior quarter related to one commercial loan that was placed on nonaccrual in the second quarter of 2019.

The allowance for loan losses increased by $1.7 million, or 17% to $11.5 million, or 1.26% of total loans at June 30, 2019, compared to $11.3 million at March 31, 2019 and $9.8 million, or 1.30% of total loans at June 30, 2018.

Shareholder’s Equity

Total shareholder’s equity increased by $35.5 million, or 39% to $126.6 million at June 30, 2019, from $91.2 million at June 30, 2018. The $35.5 million increase includes earnings during the twelve-month period totaling $9.0 million, proceeds from the exercise of stock options totaling $2.9 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 19% between the periods, to $14.80 at June 30, 2019, from $12.49 at June 30, 2018.

“We are excited with the momentum of the Bank represented in this quarter’s operating results as we look to capitalize on recent investments and on emerging opportunities in our existing markets,” stated Thomas A. Sa, Senior Executive Vice President, Chief Financial Officer and Chief Operating Officer. “The capital raise in 2018 created significant capacity for the Bank and we are pleased to be deploying that capital at the pace represented in our loan growth over the past year. The capital also enabled the formation of a Sacramento, California initiative, that we expect will allow the Bank to expand and diversify our business in Northern California in the years ahead.”

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 Northern California. 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.

Contacts

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

Thomas A. Sa, (510) 457-3775
Senior Executive Vice President
Chief Financial Officer and
Chief Operating Officer
tsa@bankcbc.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.

Source: California BanCorp

 
California BanCorp Financial Data as of June 30, 2019 (Unaudited)
                 
($ Thousands) For the three months ended Change % For the six months ended Change %
Income Statement 6/30/2019 3/31/2019 6/30/2018 QoQ YoY 6/30/2019 6/30/2018 YTDoYTD
Interest and fees on loans $11,743  $10,954  $9,384  7% 25% $22,697  $18,483  23%
Other interest income  478   540   424  (11%) 13%  1,019   827  23%
Total interest income  12,221   11,494   9,808  6% 25%  23,715   19,310  23%
                 
Interest on deposits  1,641   1,543   997  6% 65%  3,184   1,860  71%
Interest on borrowings and subordinated debentures  496   114   209  333% 137%  610   416  47%
Total interest expense  2,137   1,657   1,206  29% 77%  3,794   2,276  67%
Net interest income*    10,084      9,837      8,602   3 % 17 %    19,921      17,034   17 %
Provision for loan loss  246   581   191  (58%) 29%  826   450  84%
Net interest income after provision  9,839   9,256   8,411  6% 17%  19,095   16,584  15%
                 
Service charges and other account fees  312   300   306  4% 2%  612   570  7%
Loan related fees  508   370   320  37% 59%  877   743  18%
Net gains on securities sales  -   -   -  0% 0%  -   -  0%
Net gains on loan sales  -   23   108  (100%) (100%)  23   283  (92%)
Other  157   170   154  (8%) 2%  327   332  (2%)
Total non-interest income*    976      863      888   13 % 10 %    1,839      1,928   (5%)
                 
Salaries and employee benefits  4,823   4,515   3,950  7% 22%  9,338   7,829  19%
Occupancy and equipment expenses  771   745   746  3% 3%  1,517   1,410  8%
Data processing, internet and software  418   419   357  (0%) 17%  837   742  13%
Professional and legal  290   358   168  (19%) 73%  648   345  88%
Strategic initiatives  70   648   212  (89%) (67%)  718   514  40%
Other operating expenses  1,010   930   1,140  9% (11%)  1,940   2,220  (13%)
Total operating expenses    7,383      7,615      6,573   (3%) 12 %    14,998      13,060   15 %
                 
Net income before taxes  3,432   2,504   2,726  37% 26%  5,936   5,452  9%
Income taxes  882   636   567  39% 56%  1,518   1,360  12%
Net income $   2,550   $   1,868   $   2,159   36 % 18 % $   4,418   $   4,092   8 %
                 
*Revenue (net interest income + non-interest income)    11,060      10,700      9,490   3 % 17 %    21,761      18,962   15 %
                 
Earnings Per Share                
Basic earnings per share $   0.32   $   0.23   $   0.33   36 % (3%) $   0.55   $   0.63   (13%)
Diluted earnings per share $   0.31   $   0.23   $   0.32   36 % (1%) $   0.54   $   0.60   (9%)
Average shares outstanding  8,046,635   8,020,456   6,604,562       8,033,613   6,557,046   
Average diluted shares  8,124,165   8,102,543   6,843,821       8,113,184   6,831,442   
                 
CORE EARNINGS SUMMARY                
  For the three months ended Change % For the six months ended Change %
Nonrecurring expense 6/30/2019 3/31/2019 6/30/2018 QoQ YoY 6/30/2019 6/30/2018 YTDoYTD
Strategic initiatives $70  $648  $598      $718  $900   
Total Nonrecurring expense  70   648   598       718   900   
                 
Income taxes  21   191   176       212   266   
                 
                 
Nonrecurring expense (net of tax)    49      457      422          506      635    
                 
Core Net income $   2,599   $   2,325   $   2,581   12 % 1 % $   4,925   $   4,727   4 %
                 
Core Earnings Per Share                
Basic core earnings per share    0.32      0.29      0.39   11 % (17%)    0.61      0.72   (15%)
Diluted core earnings per share    0.32      0.29      0.38   11 % (15%)    0.61      0.69   (12%)
                 
Core return on average assets  1.00%  0.95%  1.16%      0.98%  1.07%  
Core return on average tangible common equity  8.84%  8.19%  12.58%      8.52%  11.81%  
                 
  For the three months ended Change $ Change %  
Average Balance Sheet Items 6/30/2019 3/31/2019 6/30/2018 QoQ YoY QoQ YoY  
Total Assets  1,040,185   995,362   894,024  44,823  146,161   5%  16%  
Total Loans  900,183   859,326   749,057  40,857  151,126   5%  20%  
Investments  39,817   42,719   12,165  (2,902) 27,652   -7% N/A   
Earning Assets  967,796   936,929   840,653  30,867  127,143   3%  15%  
Non-Interest Bearing Deposits  323,337   334,493   317,759  (11,156) 5,578   -3%  2%  
Core Deposits  741,289   760,652   665,711  (19,363) 75,578   -3%  11%  
Total Deposits  838,103   857,034   775,625  (18,931) 62,478   -2%  8%  
Borrowings  66,128   10,781   16,259  55,347  49,869  N/A N/A   
Tangible Common Equity  117,969   115,117   82,247  2,852  35,722   2%  43%  
                 
  For the six months ended Change         
Average Balance Sheet Items 6/30/2019 6/30/2018 $ %        
Total Assets  1,017,878   886,999   130,879  15%        
Total Loans  879,910   739,472   140,438  19%        
Investments  41,260   12,312   28,948  235%        
Earning Assets  952,491   835,615   116,876  14%        
Non-Interest Bearing Deposits  328,884   311,192   17,692  6%        
Core Deposits  750,917   673,302   77,615  12%        
Total Deposits  847,516   780,646   66,870  9%        
Borrowings  38,608   16,114   22,494  140%        
Tangible Common Equity  116,551   80,718   35,833  44%        
                 
                 
  At the periods ended Change $ Change %  
Balance Sheet 6/30/2019 3/31/2019 6/30/2018 QoQ YoY QoQ YoY  
Cash and equivalents  55,396   61,320   111,202  (5,924) (55,806)  -10%  -50%  
Investment securities  38,103   42,008   11,652  (3,905) 26,451   -9% N/A   
Other investments  4,402   3,536   3,536  866  866   24%  24%  
                 
Commercial loans  388,131   371,359   329,914  16,772  58,217   5%  18%  
CRE loans  477,094   462,779   357,969  14,315  119,125   3%  33%  
Construction and land loans  30,611   38,764   40,671  (8,153) (10,060)  -21%  -25%  
Other loans  16,520   15,800   24,778  720  (8,258)  5%  -33%  
Loans  912,356   888,702   753,332  23,654  159,024   3%  21%  
Allowance for loan losses  11,501   11,250   9,800  251  1,701   2%  17%  
Net loans    900,856      877,452      743,532     23,403     157,324    3%  21%  
                 
Premises and equipment, net  1,786   1,942   2,428  (156) (642)  -8%  -26%  
Bank owned life insurance  21,994   17,933   16,651  4,061  5,343   23%  32%  
Deferred income taxes, net  5,762   4,804   5,583  958  179   20%  3%  
Core Deposit Intangible  265   276   419  (10) (154)  -4%  -37%  
Goodwill  7,350   7,350   7,350  -  -   0%  0%  
Other assets and interest receivable  23,534   21,885   9,003  1,650  14,531   8%  161%  
Total assets    1,059,448      1,038,506      911,356     20,942     148,092    2%  16%  
                 
Demand deposits  329,497   335,719   326,556  (6,222) 2,941   -2%  1%  
Interest bearing demand deposits  24,279   25,878   28,278  (1,599) (3,999)  -6%  -14%  
Money market & savings deposits  395,379   414,734   354,785  (19,355) 40,594   -5%  11%  
Time deposits  133,065   94,844   90,174  38,221  42,891   40%  48%  
Total deposits    882,221      871,175      799,793     11,046     82,428    1%  10%  
                 
Borrowings  30,000   25,000   11,500  5,000  18,500   20%  161%  
Subordinated debentures, net  4,969   4,964   4,951  4  18   0%  0%  
Other liabilities  15,618   13,710   3,960  1,908  11,658   14% N/A   
Total liabilities  932,807   914,849   820,204  17,958  112,603   2%  14%  
                 
Common stock  105,356   105,107   79,395  249  25,961   0%  33%  
Retained earnings  20,934   18,383   11,894  2,551  9,040   14%  76%  
Other comprehensive income  351   167   (137) 184  488   110% N/A   
Total shareholder’s equity    126,641      123,657      91,152     2,984     35,489    2%  39%  
Total liabilities and equity    1,059,448      1,038,506      911,356     20,942     148,092    2%  16%  
                 
Tangible book value per common share  14.80   14.43   12.49           
Total shares outstanding  8,047,212   8,045,399   6,691,664           
                 
Core relationship deposits  749,156   778,627   694,165  (29,471) 54,991       
                 
                 
  For the three months ended For the six months ended      
Performance Ratios 6/30/2019 3/31/2019 6/30/2018 6/30/2019 6/30/2018      
Return on average assets  0.98%  0.76%  0.97% 0.88% 0.93%      
Return on average tangible common equity  8.67%  6.58%  10.53% 7.64% 10.22%      
Efficiency ratio  66.75%  71.17%  69.26% 68.92% 68.87%      
                 
Net Interest Margin                
Net interest margin  4.18%  4.26%  4.10% 4.22% 4.17%      
Average earning assets yield  5.07%  4.98%  4.68% 5.02% 4.66%      
Average investment yield  3.14%  3.14%  2.09% 3.14% 2.14%      
Average loan yield  5.23%  5.17%  5.03% 5.20% 5.04%      
Average total deposit rate  0.79%  0.73%  0.51% 0.76% 0.48%      
Average borrowing rate  3.01%  4.31%  5.18% 3.19% 5.19%      
                 
Other Ratios                
Average total loans to total deposits  107.4%  100.3%  95.4% 103.8% 94.7%      
Average C&I loans to total loans  41.0%  41.2%  43.9% 40.3% 43.9%      
Average non-interest bearing deposits to total deposits  38.6%  38.6%  40.5% 38.8% 39.9%      
Average core deposits to total deposits  88.4%  88.4%  87.7% 88.6% 86.2%      
                 
  At the periods ended          
Capital Ratios - Bank 6/30/2019 3/31/2019 6/30/2018          
Tier 1 leverage ratio  11.22%  11.41%  10.56%          
Common equity tier 1 capital ratio  10.71%  10.81%  10.65%          
Tier 1 risk-based capital ratio  10.71%  10.81%  10.65%          
Total risk-based capital ratio  12.26%  12.38%  12.35%          
                 
  At the periods ended          
Non-Performing Assets 6/30/2019 3/31/2019 6/30/2018          
Non-Accrual Loans $6,647  $4,185  $2,525           
Restructured Loans  -   -   -           
Total non-performing loans (NPL)  6,647   4,185   2,525           
Other Real Estate Owned  -   -   -           
Total non-performing assets (NPA) $6,647  $4,185  $2,525           
                 
Restructured Loans Performing  1,528   1,586   1,009           
                 
Quarterly Net (Charge-offs)/Recoveries $5  $(135) $10           
                 
NPAs / Assets %  0.63%  0.40%  0.28%          
NPAs / Loans and OREO %  0.73%  0.47%  0.34%          
Loan Loss Reserves / Loans (%)  1.26%  1.27%  1.30%          
Loan Loss Reserves / NPLs (%)  173%  269%  388%          
                 

Source: California BanCorp
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