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California BanCorp Profits Increased 73% to $1.9 Million, or $0.31 per Share in 2Q17 YOY; Robust Loan Growth, Strong Asset Quality and Healthy Margin Fuel Profitability

OAKLAND, Calif., July 27, 2017 (GLOBE NEWSWIRE) -- California BanCorp (OTCQX: CALB, formerly CABC), the holding company for California Bank of Commerce, a San Francisco Bay Area business bank, today reported continued strong profits with robust organic loan growth in the second quarter of 2017. Earnings grew 73% to $1.9 million in the second quarter from $1.1 million in the second quarter of 2016. Profitability was fueled by healthy loan growth, continuing strong credit quality, above average net interest margin, and improving operating efficiencies. Return on average assets (ROAA) improved to 0.94% and return on average tangible common equity (ROTCE) was 10.22% in the second quarter of 2017. All financial results are unaudited.

“Our second quarter profits build upon the momentum we are generating in growing our balance sheet and creating operating leverage,” said Terry A. Peterson, President and CEO. “The San Francisco Bay Area remains one of the nation’s most diversified and vibrant economies, and our team of experienced bankers continue to drive our exceptional growth and financial performance.

“We formed a Bank Holding Company at the end of the quarter to expand financial services capabilities and to facilitate growth,” said Stephen Cortese, Chairman of the Board for California BanCorp. California BanCorp, established on June 30, 2017, is the newly formed holding company that is the parent of California Bank of Commerce. California Bank of Commerce, formerly traded on the OTCQX market under the symbol CABC, now trades as California BanCorp under the symbol CALB.

Financial Highlights

Second Quarter 2017 vs. First Quarter 2017 and Second Quarter of 2016

  • Net income grew 73% to $1.9 million, or $0.31 per share, compared to $1.1 million, or $0.19 per share, in the year ago quarter and increased from $1.7 million, or $0.29 per share, earned in the preceding quarter.
  • ROAA improved to 0.94% and ROTCE was 10.22% in the second quarter of 2017.
  • Net interest margin was 4.28%, up 2 basis points from 4.26% in the preceding quarter and down 1 basis point from 4.29% in the second quarter a year ago. Deposit flow is seasonal, which impacts the loan to deposit ratio and net interest margin during the first half of the year.
  • The efficiency ratio, which measures operating expenses as a percent of revenue, improved significantly to 57.24% from 70.60% in the second quarter a year ago, and was also lower than the 59.46% achieved in the preceding quarter.
  • Net operating expense to average assets improved to 2.12% from 2.67% a year ago.
  • Total assets grew 11% to $806.8 million at quarter-end compared to $724.9 million a year ago, an increase of $81.8 million.
  • Total loans, net of deferred costs, grew 21% to $702.8 million from $579.7 million a year ago, an increase of $123.1 million. Of the loan growth, 46% were commercial and industrial loans.
  • Total deposits grew 15% to $705.9 million as of June 30, 2017, an increase of $92.2 million compared to $613.7 million a year ago.
  • Non-interest bearing deposits increased to $276.7 million, up 21% from a year ago, an increase of $47.7 million.
  • Tangible book value per common share increased 9% to $12.28 as of June 30, 2017, compared to $11.31 a year ago.

Six Months 2017 vs. Six Months 2016

  • Net income grew 75% to $3.5 million, or $0.60 per share, during the first half of 2017 compared to $2.0 million, or $0.36 per share, in the like period of 2016.
  • ROAA improved to 0.92% and ROTCE was 9.94% for the first six months of 2017.
  • The efficiency ratio improved significantly to 58.31% from 73.80% in the six months ended June 30, 2017, compared to same period a year ago.
  • The ratio of net operating expense to average assets improved to 2.56% in 2017 from 3.23% during the prior year period.

Peer Comparisons

“Our performance metrics continue to improve and compare favorably with the 488 banks included in the SNL Micro Cap Bank Index on almost every measurable value,” said Peterson. .

PERFORMANCE RATIOS: CALB
SNL US Micro
Cap Bank Index*
2Q17
1Q17
Return on average assets 0.94% 0.78%
Return on average equity 9.23% 7.95%
Net interest margin 4.28% 3.57%
Efficiency ratio 57.24% 69.22%
Net operating expense/average assets 2.12% 2.09%
Nonperforming loans/loans 0.42% 1.36%
Allowance for loan losses/loans 1.24% 1.19%
Allowance for loan losses/NPAs 293% 70.44%

* SNL Micro Cap U.S. Bank: Includes all publicly traded (NYSE, NYSE MKT, NASDAQ, OTC) Banks in SNL's coverage universe with less than $250M Total Common Market Capitalization as of most recent pricing data.

“The middle market business owners in the San Francisco Bay Area appreciate our ability to provide customized commercial lending and treasury management solutions,” said Peterson. “The new loan production office in Walnut Creek, opened just a few weeks ago, further expands our presence in the dynamic East Bay market. The investments we are making in experienced bankers and infrastructure continue to build momentum and accelerate our profitability.”

The effective tax rate for the second quarter of 2017 was 24.3% compared to 38.5% for the first quarter of 2017 and 37.6% for the second quarter a year ago. The lower tax rate was a result of tax benefits accrued following the exercise of stock options during the second quarter of 2017.

Credit Quality

“We are happy to welcome Doug Stoveland to our team as Credit Risk Officer and Chief Credit Officer. He brings strong risk and credit management skills and 25 years of banking experience to our executive team,” Peterson noted.

Credit quality remains strong, with non-performing assets to total assets at 0.37% at June 30, 2017, compared to 0.30% at June 30, 2016. Nonperforming loans increased to $3.0 million at the end of the second quarter, up from $2.1 million at March 31, 2017, and $2.2 million a year ago.

“We increased the provision for loan losses in the second quarter of 2017 to $1.3 million, following the slight increase in non-performing loans and continued growth of the loan portfolio,” said Stoveland. “The loan loss reserve increased by $600,000 for the quarter and by $2.1 million from a year ago, to $8.7 million at June 30, 2017. This is reflective of $663,000 in net charge-offs, comprised of a gross charge-off on a single loan of $825,000 and a recovery of previously charged-off loans of $162,000. The ratio of reserves to total loans was 1.24% on June 30, 2017, up from 1.14% at June 30, 2016.

Please see our detailed Second quarter 2017 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 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.

CALIFORNIA BANCORP
UNAUDITED SUMMARY FINANCIAL STATEMENTS
INCOME STATEMENT
($ Thousands)
Three Months Ended Year Over Year Change
30-Jun-17 31-Mar-17 30-Jun-16 $ %
Interest Income $8,606 $7,826 $7,106 $1,500 21%
Interest Expense (712) (534) (511) (201) 39%
Net Interest Income Before Provision 7,894 7,292 6,595 1,299 20%
Provision to the Loan Loss Reserve (1,263) (550) (419) (844) NA
Net Interest Income After Provision $6,631 $6,742 $6,176 $455 7%
Non-interest Income 782 756 708 74 10%
Non-interest Expense (4,967) (4,785) (5,172) 205 -4%
Income Before Tax Provision 2,446 2,713 1,712 734 43%
Provision for Income Taxes (595) (1,038) (643) 48 -7%
Net Income $1,851 $1,675 $1,069 $782 73%
Preferred Dividends - - 85 (85) -100%
Income to Common Shareholders $1,851 $1,675 $984 $867 88%
Net Income per Common Share $0.312 $0.285 $0.188 $0.124 66%
Basic Earnings per Common Share $0.312 $0.285 $0.173 $0.139 80%
Weighted Average Shares Outstanding 5,930,924 5,873,474 5,686,101
Return on Average Assets 0.94% 0.91% 0.64%
Return on Average Tangible Common Equity 10.22% 9.66% 6.77%
Merger Expenses $- $- $16
Non-interest Expense to Average Total Assets* 2.51% 2.60% 3.10%
Net Operating Expense to Average Total Assets** 2.12% 2.17% 2.67%
Efficiency Ratio* 57.24% 59.46% 70.60%
*Excludes one-time merger expenses
**Excludes one-time merger expenses and includes non-interest income


CALIFORNIA BANCORP
UNAUDITED SUMMARY FINANCIAL STATEMENTS
INCOME STATEMENT
($ Thousands)
Six Months Ended Year Over Year Change
30-Jun-17 30-Jun-16 $ %
Interest income $16,432 $13,926 $2,506 18%
Interest expense (1,247) (933) (314) 34%
Net interest income before provision 15,185 12,993 2,192 17%
Provision to the Loan Loss Reserve (1,813) (534) (1,279) NA
Net interest income after provision $13,372 $12,459 $913 7%
Non-interest income 1,539 1,315 224 17%
Non-interest expense (9,752) (10,558) 806 -8%
Income before tax provision 5,159 3,216 1,943 60%
Provision for income taxes (1,633) (1,204) (429) 36%
Net income $3,526 $2,012 $1,514 75%
Preferred Dividends - 152 (152) -100%
Income to Common Shareholders $3,526 $1,860 $1,666 90%
Net Income per Common Share $0.597 $0.358 $0.239 67%
Basic Earnings per Common Share $0.597 $0.331 $0.266 80%
Weighted average shares outstanding 5,902,358 5,614,304
Return on Average Assets 0.92% 0.62%
Return on Avg. Tangible Common Equity 9.94% 6.53%
Merger Expenses $- $264
Net Operating Expense to Average Total Assets* 2.56% 3.23%
Efficiency Ratio* 58.31% 73.80%
*Excludes one-time merger expenses


CALIFORNIA BANCORP
UNAUDITED SUMMARY FINANCIAL STATEMENTS
BALANCE SHEET
($ Thousands)
Year Over Year Change
Assets30-Jun-17 31-Mar-17 30-Jun-16 $ %
Total Cash and Investments$71,088 $54,930 $113,029 $(41,941) -37%
Loans, net of Deferred Costs/Fees 702,835 677,183 579,749 123,086 21%
Loan Loss Reserve (8,700) (8,100) (6,635) (2,065) 31%
Other 41,549 38,932 38,805 2,744 7%
Total Assets$806,772 $762,945 $724,948 $81,824 11%
Liabilities & Shareholders' Equity
Non-interest Bearing Deposits$276,654 $288,153 $228,927 $47,727 21%
Interest Bearing Deposits 429,216 379,195 384,759 44,457 12%
Total Deposits$705,870 $667,348 $613,686 $92,184 15%
Total Borrowings and Other Liabilities 19,113 17,222 38,171 (19,058) -50%
Total Liabilities$724,983 $684,570 $651,857 $73,126 11%
Shareholder's Equity 81,789 78,375 73,091 8,698 12%
Total Liabilities & Shareholders' Equity$806,772 $762,945 $724,948 $81,824 11%
Common Shares Outstanding 6,039,093 5,875,502 5,839,134 199,959 3%
Tangible Book Value per Common Share$12.28 $12.04 $11.31 $0.97 9%
Average Balances - Period2Q 2017 1Q 2017 2Q 2016
Total Assets$792,739 $746,126 $669,828
Total Loans$704,724 $643,431 $545,388
Total Investments$14,674 $15,287 $17,734
Total Earning Assets$740,647 $693,927 $616,777
Total Non-Interest Bearing Deposits$264,101 $261,662 $204,902
Total Deposits$670,080 $641,259 $559,817
Total Borrowings$41,125 $23,437 $33,231
Tangible Common Equity$72,687 $70,333 $63,878
Average Yields and Cost2Q 2017 1Q 2017 2Q 2016
Net Interest Margin 4.28% 4.26% 4.29%
Yield on Earning Assets 4.66% 4.57% 4.62%
Cost of Interest Bearing Liabilities 0.64% 0.54% 0.53%
End of Period30-Jun-17 31-Mar-17 30-Jun-16
Loan Loss Reserve to Total Loans 1.24% 1.20% 1.14%
Nonperforming loans/loans 0.42% 0.31% 0.38%
NPAs (including accruing TDRs) to Total Assets 0.37% 0.27% 0.30%
Accruing TDRs to Total Assets 0.19% 0.18% 0.15%

California BanCorp Terry A. Peterson, (510) 457-3751 President and CEO tpeterson@bankcbc.com Randall D. Greenfield, (510) 457-3769 EVP and Chief Financial Officer rgreenfield@bankcbc.com

Source:California BanCorp