Press Release

California BanCorp Reports Financial Results for the Third Quarter and Nine Months Ended September 30, 2019

Company Release - 11/4/2019 5:59 AM ET

OAKLAND, Calif., Nov. 04, 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 third quarter and nine months ended September 30, 2019. 

Net income was $2.0 million for the third quarter of 2019, representing a decrease of $546 thousand or 21% compared to $2.6 million for the second quarter of 2019 and a decrease of $510 thousand or 20% compared to $2.5 million in the third quarter of 2018.   For the nine months ended September 30, 2019, net income was $6.4 million representing a decrease of $182 thousand or 3% compared to $6.6 million for the same period in 2018.

Per share earnings of $0.25 for the third quarter of 2019 compared to $0.31 for the second quarter of 2019 and $0.34 in the third quarter of 2018.  For the nine months ended September 30, 2019, per share earnings of $0.79 compared to $0.94 for the same period in 2018.  Per share earnings for the three and nine month periods ended September 30, 2019 reflect, in part, the impact of the Company’s capital raise completed in August of 2018 which increased shares outstanding by 1.18 million or 18%. 

“Results for the quarter and year to date reflect the substantial impact of our recently-launched expansion initiatives, which extend our markets and enhance our treasury and systems capabilities,” stated Thomas A. Sa, Senior Executive Vice President, Chief Financial Officer and Chief Operating Officer, “This expansion is as envisioned for the capital we raised in the third quarter last year.  We expect to build momentum with these investments into the coming years as we continue our pace of growth and begin to drive improved operating leverage.” 

Financial Highlights

Financial Position

September 30, 2019 compared to September 30, 2018

  • Total assets increased by $140.0 million, or 15% to a record level of $1.10 billion.
  • Gross loans increased by $150.6 million, or 19% to a record level of $935.7 million.
  • Total deposits increased by $97.5 million, or 12% to a record level of $923.9 million.
  • Total equity increased by $10.7 million, or 9% to $129.0 million.

Income Statement

Three months ended September 30, 2019 compared to September 30, 2018

  • Net income decreased by $510 thousand, or 20% to $2.0 million.
  • Net interest income increased by $1.2 million, or 13% to $10.4 million.
  • Total revenue increased $1.5 million, or 15% to $11.7 million.
  • Operating expenses increased $2.2 million, or 35%, to $8.4 million.

Income Statement

Nine months ended September 30, 2019 compared to September 30, 2018

  • Net income decreased by $182 thousand, or 3% to $6.4 million.
  • Net interest income increased by $4.1 million, or 16% to $30.4 million.
  • Total revenue increased by $4.3 million, or 15% to $33.5 million.
  • Operating expenses increased by $4.1 million, or 21%, to $23.4 million.

Balance Sheet

Total assets reached a record $1.10 billion as of September 30, 2019, up 15% or $140 million compared to a year ago.

Total asset growth was driven by growth in loans which increased by $151 million or 19% from $785 million at September 30, 2018, to $936 million at September 30, 2019.  The largest categories of growth within the loan portfolio were in commercial real estate at $86 million and commercial & industrial loans at $73 million. 

Total deposits increased by $98 million, or 12% to $924 million at September 30, 2019, from $826 million at September 30, 2018.  Commercial noninterest-bearing deposits represented $32 million of total deposit growth and represented growth of 9% compared to September 30, 2018.  Non-interest bearing deposits at September 30, 2019 were 40% of total deposits compared to 41% of total deposits at September 30, 2018.   Growth in interest-bearing deposits of $65 million was comprised of growth in money market balances of $31 million and time deposits of $35 million, partially offset by a decline in interest-bearing demand deposits of $1 million.

Asset Quality

Non-performing assets (“NPAs”) to total assets of 0.43% at September 30, 2019, compared to 0.63% at June 30, 2019 and 0.18% at September 30, 2018, with non-performing loans of $4.7 million, $6.6 million and $1.8 million, respectively, on those dates.  The decrease in NPAs at September 30, 2019 compared to the prior quarter related to a partial charge-off on one commercial loan that was placed on nonaccrual and fully reserved in the second quarter of 2019.   

The allowance for loan losses decreased by $1.1 million, to $10.4 million, or 1.11% of total loans at September 30, 2019, compared to $11.5 million, or 1.26% of total loans at June 30, 2019 and $10.2 million, or 1.30% of total loans at September 30, 2018.  The changes in the allowance were primarily the result of the charge-off taken in the third quarter of 2019, which partially offset provisions to accommodate loan growth.

Shareholder’s Equity

Total shareholder’s equity increased by $10.8 million, or 9% to $129.0 million at September 30, 2019, from $118.2 million at September 30, 2018.  The increase is primarily attributed to earnings during the twelve month period totaling $8.6 million, and the remainder resulting from issuance under stock compensation plans and an increase in other comprehensive income.  Tangible book value per common share increased by 9% between the periods, from $13.87 at September 30, 2018, to $15.08 at September 30, 2019.

Net Interest Income and Net Interest Margin – three months ended September 30, 2019 and September 30, 2018

Net interest income was $10.4 million for the three months ended September 30, 2019, an increase of $1.2 million or 13% from $9.2 million for the same period in 2018.  The increase in net interest income includes an increase of $1.9 million in interest income comprised of increases in interest and fees on loans of $2.2 million and interest on investment securities of $197 thousand, offset in part by a decrease in interest earned on excess funds of $482 thousand.   The increase in interest and fees on loans was primarily attributable to an increase in the average balance of loans outstanding of $159 million as the yield earned on loans was unchanged at 5.23%.

Partially offsetting the growth in interest income was an increase of $768 thousand in interest expense.  The growth in interest expense was comprised of growth in interest expense paid on deposits of $723 thousand and interest expense on borrowed funds of $45 thousand.   Growth in deposit expense was the result of growth in average interest bearing deposits of $63 million.   In addition, interest expense on borrowed funds increased as a result of increased utilization of wholesale funding, which increased by $16 million on average in the quarter ended September 30, 2019 compared to the same quarter one year earlier. 

Compared to the same period one year earlier, average loan growth of $158 million outpaced growth in average deposits of $53 million.  As a result, the loan to deposit ratio at September 30, 2019 increased to 103% from 90% one year earlier.  In addition, average loans comprised 93% of average earning assets during the third quarter of 2019, which was an increase from 84% for the third quarter of 2018.  Taken together, the impact of the higher loan to deposit ratio and the increase in loans as a percentage of average earning assets resulted in an increase in yield on average earning assets of 41 basis points to 5.05% in the third quarter of 2019 from 4.64% for the same period one year earlier.

Growth in average deposit balances in the quarter ended September 30, 2019 compared to the same period of 2018 was centered in interest-bearing deposits, which increased $63 million or 13%.  The average rate paid on interest bearing deposits also increased year over year by 41 basis points to 1.38% in the third quarter of 2019 compared .97% in the third quarter of 2018.  Noninterest-bearing demand deposits over the same period declined $12 million or 3%, averaging 38% of total deposits in the third quarter of 2019 compared to 42% for the same period in 2018.  In addition, average borrowed funds to supplement funding increased $16 million or 147% in the quarter ended September 30, 2019 compared to the same period one year earlier.  Taken together, the result of growth in interest-bearing funding, both in volume and as a percentage of overall funding, and the increase in rates paid on interest-bearing funding was an increase in the average cost of funds of 29 basis points to 0.92% in the quarter ended September 30, 2019 compared to 0.63% for the same period one year earlier.

The combination of the strong average loan growth and increased deposit leverage during the third quarter of 2019, when compared to 2018, resulted in modest expansion of 14 basis points in net interest margin to 4.19% during the period compared to 4.05% in the 2018 quarter.

Net Interest Income and Net Interest Margin – nine months ended September 30, 2019 and September 30, 2018

Net interest income for the nine months ended September 30, 2019, was $30.4 million, an increase of $4.1 million, or 15.5% from the $26.3 million for the same period in 2018.  During the nine month period the Bank benefited from a significant increase in average loan balances of $143 million or 19% to $889 million. 

Average total interest-earning assets increased by $105 million, or 12% to $964 million during the 2019 period, and the average yield increased by 38 basis points to 5.03%, primarily as a result of the strong increase in average loan balances and higher balance sheet leverage.  The average yield on total average loans including fees for the nine month period in 2019 was 5.21%, up by 13 basis points compared to the 5.08% yield during the same 2018 period.  In addition, as growth in average loan balances outpaced growth in average deposits, the average loan to deposit ratio for the nine months ended September 30, 2019 was 104% compared to 93% in the same period of 2018.

Of the $63 million increase in average total deposit balances between the nine month periods, $4 million were non-interest-bearing deposits while $59 million were interest-bearing.  In addition, the overall cost of average total deposit balances was up by 28 basis points to 0.79% during the 2019 period compared to 0.51% during 2018.  Average borrowed funds increased by $20.1 million to $34.6 million during the 2019 period while the average cost decreased to 2.91% in 2019 compared to 5.27% in 2018.

As a result of the strong increase in average loan balances and increased balance sheet leverage the net interest margin increased by 12 basis points to 4.21% during the nine month period ended September 30, 2019, compared to 4.09% for the same period in 2018.

Non-Interest Income and Expense – three months ended September 30, 2019 and September 30, 2018

During the three months ended September 30, 2019, non-interest income totaled $1.3 million, an increase of $334 thousand, or 36% from the three month period ended September 30, 2018.  The increase was primarily the result of higher gains on loan sales during the current quarter compared to the 2018 quarter.

During the three months ended September 30, 2019, total non-interest expenses increased by $2.1 million, or 35% to $8.4 million compared to $6.2 million for the same 2018 quarter.  Of the increase, $1.9 million was in net salaries and benefits expenses, the result of hiring key executive and support staff positions to support the Company’s expansion initiatives and continued growth. 

Non-Interest Income and Expense – nine months ended September 30, 2019 and September 30, 2018

During the nine months ended September 30, 2019, non-interest income totaled $3.1 million, a $246 thousand, or 9% increase over the same period in 2018.  This increase for the nine-month period was primarily the result of higher loan fee income and commercial deposit account analysis fees compared to the 2018 period.

During the nine months ended September 30, 2019, non-interest expenses increased by $4.1 million or 21% to $23.4 million compared to the same period in 2018.  Of this increase, $3.4 million was in net salaries and benefits expenses, the result of hiring key executive and support staff positions to support the Company’s expansion initiatives and continued growth.  In addition, operating expenses for the nine months ended September 30, 2019 included increases in occupancy and equipment related to the expansion of the Oakland facility, data processing costs related to enhancement of systems and professional and legal fees.

Closing Remarks

“We are pleased to have added significantly to our team of talent and capabilities to enable our continued success in building our franchise,” said Steve Shelton, President and Chief Executive Officer. “We believe we are poised to execute on our strategic initiatives to responsibly grow our company while adding to our shareholders’ investment value.”

Please see our detailed Third Quarter 2019 Unaudited Summary Financial Statements 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 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.

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 September 30, 2019 (Unaudited)
                      
($ Thousands) For the three months ended Change % For the nine months ended Change %
Income Statement 9/30/2019 6/30/2019 9/30/2018 QoQ YoY  9/30/2019
 9/30/2018 YTDoYTD
Interest and fees on loans $12,087  $11,743  $9,839   3%  23% $34,783  $28,323  23%
Other interest income  471   478   756   (2%)  (38%)  1,490   1,583  (6%)
Total interest income  12,557   12,221   10,595   3%  19%  36,273   29,906  21%
                      
Interest on deposits  1,929   1,641   1,205   18%  60%  5,112   3,065  67%
Interest on borrowings and subordinated debentures  196   496   151   (61%)  30%  806   567  42%
Total interest expense  2,124   2,137   1,356   (1%)  57%  5,919   3,632  63%
Net interest income*  10,433   10,084   9,239   3%  13%  30,354   26,274  16%
Provision for loan loss  500   246   394   104%  27%  1,326   845  57%
Net interest income after provision  9,933   9,839   8,845   1%  12%  29,028   25,429  14%
                      
Service charges and other account fees  245   312   350   (21%)  (30%)  857   767  12%
Loan related fees  517   508   404   2%  28%  1,394   1,150  21%
Net gains on securities sales  -   -   -   0%  0%  -   -  0
%
Net gains on loan sales  212   -   -   0%  0%  235   283  (17%)
Other  287   157   173   83%  66%  614   654  (6%)
Total non-interest income*  1,261   976   927   29%  36%  3,100   2,854  9%
                      
Salaries and employee benefits  5,597   4,823   3,692   16%  52%  14,905   11,521  29
%
Occupancy and equipment expenses  826   771   736   7%  12%  2,343   2,145  9%
Data processing, internet and software  524   418   373   25%  40%  1,361   1,115  22%
Professional and legal  355   290   340   22%  4%  1,003   686  46%
Other operating expenses  1,097   1,080   1,080   2%  2%  3,785   3,814  (1%)
Total operating expenses  8,399   7,383   6,221   14%  35%  23,397   19,281  21%
                      
Net income before taxes  2,795   3,432   3,551   (19%)  (21%)  8,732   9,002  (3%)
Income taxes  791   882   1,037   (10%)  (24%)  2,309   2,397  (4%)
Net income $ 2,004  $ 2,550  $ 2,514   (21%)  (20%) $6,423  $6,605  (3%)
                      
*Revenue (net interest income + non-interest income)  11,694   11,060   10,166   6%  15%  33,455   29,128  15%
                      
Earnings Per Share                     
Basic earnings per share $ 0.25  $ 0.32  $ 0.34   (21%)  (27%) $0.80  $0.98  (18%)
Diluted earnings per share $ 0.25  $ 0.31  $ 0.34   (22%)  (27%) $0.79  $0.94  (16%)
Average shares outstanding  8,051,729   8,046,635   7,361,383       8,040,196   6,828,105    
Average diluted shares  8,135,337   8,124,165   7,499,978       8,120,376   7,056,646    
                      
                      
  For the three months ended Change $ Change %
  
Average Balance Sheet Items 9/30/2019 6/30/2019 9/30/2018 QoQ YoY QoQ
 YoY
   
Total Assets $1,063,923  $1,040,185  $962,254  $23,738  $101,670   2%  11%   
Total Loans  917,194   900,183   758,399   17,011   158,795   2%  21%   
Investments  36,902   39,817   15,417   (2,915)  21,485   -7%  139%   
Earning Assets  987,286   967,796   906,259   19,490   81,027   2%  9%   
Non-Interest Bearing Deposits  337,409   323,337   349,449   14,072   (12,040)  4%  -3%   
Core Deposits  754,403   741,289   737,891   13,114   16,512   2%  2%   
Total Deposits  892,079   838,103   841,409   53,976   50,670   6%  6%   
Borrowings  27,065   66,128   10,954   (39,063)  16,111   -59%  147%   
Tangible Common Equity  120,833   117,969   97,827   2,863   23,005   2%  24%   
                      
  For the nine months ended Change              
Average Balance Sheet Items 9/30/2019 9/30/2018 $ %             
Total Assets $1,033,395  $910,843  $122,552   13%             
Total Loans  889,191   745,851   143,340   19%             
Investments  39,921   13,449   26,472   197%             
Earning Assets  964,190   859,422   104,768   12%             
Non-Interest Bearing Deposits  328,138   323,818   4,320   1%             
Core Deposits  746,939   694,801   52,138   8%             
Total Deposits  856,977   800,857   56,120   7%             
Borrowings  34,558   14,418   20,140   140%             
Tangible Common Equity  117,994   86,489   31,505   36%             
                      
                      
  At the periods ended Change $ Change %
   
Balance Sheet 9/30/2019 6/30/2019 9/30/2018 QoQ YoY QoQ
 YoY
   
Cash and equivalents $67,660  $55,396  $92,224  $12,264  $(24,564)  22%  -27%   
Investment securities  36,260   38,103   42,532   (1,843)  (6,272)  -5%  -15%   
Other investments  4,402   4,402   3,536   -   866   0%  24%   
                      
Commercial loans  402,303   388,131   329,539   14,172   72,764   4%  22%   
CRE loans  484,606   477,094   399,096   7,512   85,510   2%  21%   
Construction and land loans  32,547   30,611   40,207   1,936   (7,660)  6%  -19%   
Other loans  16,214   16,520   16,270   (306)  (56)  -2%  0%   
Loans  935,670   912,356   785,112   23,314   150,558   3%  19%   
Allowance for loan losses  10,413   11,501   10,200   (1,088)  213   -9%  2%   
Net loans  925,257   900,856   774,912   24,401   150,345   3%  19%   
                      
Premises and equipment, net  1,917   1,786   2,253   131   (336)  7%  -15%   
Bank owned life insurance  22,156   21,994   16,756   162   5,400   1%  32%   
Deferred income taxes, net  5,247   5,762   5,205   (515)  42   -9%  1%   
Core Deposit Intangible  278   265   405   13   (127)  5%  -31%   
Goodwill  7,350   7,350   7,350   -   -   0%  0%   
Other assets and interest receivable  24,082   23,534   9,435   548   14,647   2%  155%   
Total assets $ 1,094,609  $ 1,059,448  $ 954,608  $ 35,161  $ 140,001   3%  15%   
                      
Demand deposits $373,289  $329,497  $340,941  $43,792  $32,348   13%  9%   
Interest bearing demand deposits  22,896   24,279   24,054   (1,383)  (1,158)  -6%  -5%   
Money market & savings deposits  398,242   395,379   367,539   2,863   30,703   1%  8%   
Time deposits  129,483   133,065   93,855   (3,582)  35,628   -3%  38%   
Total deposits  923,910   882,221   826,389   41,689   97,521   5%  12%   
                      
Borrowings  20,000   30,000   -   (10,000)  20,000   -33%  0%   
Subordinated debentures, net  4,973   4,969   4,956   4   17   0%  0%   
Other liabilities  16,724   15,618   5,036   1,106   11,688   7%  N/A   
Total liabilities  965,607   932,807   836,381   32,800   129,226   4%  15%   
                      
Common stock  105,711   105,356   104,062   355   1,649   0%  2%   
Retained earnings  22,937   20,934   14,407   2,003   8,530   10%  59%   
Other comprehensive income  354   351   (242)  3   596   1%  N/A   
Total shareholder’s equity  129,002   126,641   118,227   2,361   10,775   2%  9%   
Total liabilities and equity $ 1,094,609  $ 1,059,448  $ 954,608  $ 35,161  $ 140,001   3%  15%   
                      
Tangible book value per common share $15.08  $14.80  $13.87                
Total shares outstanding  8,052,549   8,047,212   7,974,856                
                      
Core relationship deposits  772,811   749,156   734,837   23,655   37,974            
                      
                      
  For the three months ended For the nine months ended           
Performance Ratios 9/30/2019 6/30/2019 9/30/2018 9/30/2019 9/30/2018           
Return on average assets  0.75%  0.98%  1.04%  0.83%  0.97%           
Return on average tangible common equity  6.58%  8.67%  10.20%  7.28%  10.21%           
Efficiency ratio  71.82%  66.75%  61.19%  69.94%  66.19%           
                                
Net Interest Margin                               
Net interest margin  4.19%  4.18%  4.05%  4.21%  4.09%           
Average earning assets yield  5.05%  5.07%  4.64%  5.03%  4.65%           
Average investment yield  3.12%  3.14%  2.41%  3.14%  2.24%           
Average loan yield  5.23%  5.23%  5.15%  5.21%  5.08%           
Average total deposit rate  0.86%  0.78%  0.57%  0.79%  0.51%           
Average borrowing rate  2.87%  3.01%  5.43%  2.91%  5.27%           
                      
Other Ratios                     
Average total loans to total deposits  102.8%  107.4%  90.0%  103.8%  93.0%           
Average C&I loans to total loans  41.7%  41.0%  42.6%  41.0%  43.4%           
Average non-interest bearing deposits to total deposits  37.8%  38.6%  41.5%  38.3%  40.5%           
Average core deposits to total deposits  84.6%  88.4%  87.7%  87.2%  86.8%           
                      
  At the periods ended               
Capital Ratios - Bank 9/30/2019 6/30/2019 9/30/2018               
Tier 1 leverage ratio  11.22%  11.22%  11.26%               
Common equity tier 1 capital ratio  10.68%  10.71%  11.61%               
Tier 1 risk-based capital ratio  10.68%  10.71%  11.61%               
Total risk-based capital ratio  12.09%  12.26%  13.27%               
                      
  At the periods ended               
Non-Performing Assets 9/30/2019 6/30/2019 9/30/2018               
Non-Accrual Loans $4,675  $6,647  $1,754                
Restructured Loans  -   -   -                
Total non-performing loans (NPL)  4,675   6,647   1,754                
Other Real Estate Owned  -   -   -                
Total non-performing assets (NPA) $4,675  $6,647  $1,754                
                      
Restructured Loans Performing  1,393   1,528   969                
                      
Quarterly Net (Charge-offs)/Recoveries $1,588  $5  $3                
                      
NPAs / Assets %  0.43%  0.63%  0.18%               
NPAs / Loans and OREO %  0.50%  0.73%  0.22%               
Loan Loss Reserves / Loans (%)  1.11%  1.26%  1.30%               
Loan Loss Reserves / NPLs (%)  223%  173%  582%               
                      

 

 

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Source: California BanCorp
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