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California BanCorp Earnings Grew 12% to $5.6 Million or $0.89 per share in 2017

OAKLAND, Calif., Feb. 02, 2018 (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 that profitability continues to accelerate, fueled by strong loan and deposit growth, a healthy net interest margin and growing operating efficiencies. All financial results are unaudited and past periods have been adjusted to reflect the 5% stock dividend paid in August 2017.

Fourth quarter and annual earnings were reduced by $1.7 million, or $0.27 per share, due to the impact of an increase in the income tax expense for the fiscal year ended December 31, 2017, as the Bank revalued its deferred tax assets to align with the lowered U.S. corporate tax rate.

President and CEO, Terry A. Peterson commented, “We had another exceptional year with continued strong growth in earnings, loans and deposits. While our earnings for the quarter and entire year reflect the substantial one-time downward revaluation of our deferred tax asset, our pretax and after tax income for 2017 set another earnings record. Our balance sheet and earnings velocity continues to perform in line with our expectations. We are postured for continued balance sheet and earnings growth.”

Including the $1.7 million, or $0.27 per share charge from the non-operating revaluation of its deferred tax asset, earnings decreased to $5,000 in the fourth quarter of 2017, compared to $1.8 million in the fourth quarter of 2016. Year-to-date, earnings grew 12% to $5.6 million, or $0.89 per common share, from $5.0 million, or $0.84 per common share, in 2016. Without the one-time deferred tax asset adjustment of $1.7 million, earnings for 2017 would have accelerated by 45% to $7.3 million over the prior year.

“We posted solid profits in the fourth quarter of 2017 excluding the one-time deferred tax asset adjustment, while making investments in our franchise to expand into new markets in the San Francisco Bay Area,” said Stephen A. Cortese, Chairman of the Board. “During the year, we formed a Bank Holding Company, opened a loan production office in Walnut Creek, and hired several of the best bankers in the region to expand our leadership team.”

Financial Highlights

Fourth Quarter 2017 vs. Third Quarter 2017 and Fourth Quarter of 2016

  • Net income was $5,000, compared to $1.8 million, or $0.29 per share, in the fourth quarter a year ago and $2.1 million, or $0.33 per share, earned in the preceding quarter.
  • Net interest margin contracted 20 basis points to 3.95%, from 4.15% in the preceding quarter, primarily due to the $49 million, or 87% increase in interest-bearing cash balances during the period, while expanding by one basis point from 3.94% in the fourth quarter a year ago. While overall borrowings were down, compared to the prior year, as a long-term lower-cost FHLB advance was paid-off during the first quarter of 2017, their cost increased. Deposit costs rose during the fourth quarter, bringing total cost of funds to 0.82% from 0.80% in the third quarter of 2017 and 0.57% a year ago.
  • The efficiency ratio, which measures operating expenses as a percent of revenue, increased to 64.27% from 58.33% in the fourth quarter a year ago, and was also slightly higher than the 58.93% achieved in the preceding quarter.
  • Net operating expense to average assets increased to 2.25% from 1.94% a year ago.
  • Total assets increased 13%, to $866.7 million at quarter-end compared to $764.7 million a year ago.
  • Total loans, net of deferred costs, grew 17% to $732.8 million from $627.5 million a year ago, an increase of $105.3 million. Of the loan growth, 66% were commercial and industrial loans.
  • Total deposits grew 17%, to $760.6 million as of December 31, 2017, compared to $650.0 million a year ago.
  • Non-interest-bearing deposits increased to $314.7 million, up 11% from a year ago, an increase of $30.1 million.
  • Tangible book value per common share increased 3% to $12.10 as of December 31, 2017, compared to $11.72 a year ago.
  • Issued a 5% stock dividend on August 31, 2017. All financial results including past periods have been adjusted to reflect the dividend.

Twelve Months 2017 vs. Twelve Months 2016

  • Net income grew 12% to $5.6 million, or $0.89 per share, compared to $5.0 million, or $0.84 per share, in 2016. Excluding the deferred tax asset revaluation, net income increased 45% to $7.3 million or $1.16 per share in 2017.
  • ROAA at 0.69% and ROTCE was 7.38% for the twelve months of 2017. Excluding the deferred tax asset revaluation, ROAA was 0.90% and ROTCE was 9.87% for 2017
  • The efficiency ratio improved significantly to 59.71% from 64.61% in the twelve months ended December 31, 2017, compared to same period a year ago.
  • The ratio of net operating expense to average assets improved to 2.15% in 2017 from 2.34% during the prior year period.

Peer Comparisons

“Our performance metrics continue to improve and compare favorably with the 470 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**
4Q17 3Q17
Return on average assets* 0.76% 0.88%
Return on average equity* 8.64% 8.74%
Net interest margin 3.95% 3.71%
Efficiency ratio 64.27% 66.69%
Net operating expense/average assets 2.25% 2.06%
Non-performing loans/loans 0.30% 1.27%
Allowance for loan losses/loans 1.27% 1.20%
Allowance for loan losses/NPAs 423% 72.84%


* Q4 2017 ROA and ROE have been adjusted to reflect the $1.7 million Deferred Tax Asset revaluation.

** 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 effective tax rate for 2017 was 50.1% compared to 38.3% for 2016. The higher tax rate for the year was primarily the result of the one-time deferred tax asset adjustment related to the deferred tax asset valuation, partially offset by tax benefits following the exercise of stock options during the year. In 2018, we expect our tax rate will be between 25% and 30%, significantly contributing to bottom line results.

Credit Quality

Credit quality remains strong, with non-performing assets (“NPAs”) to total assets at 0.25% at December 31, 2017, compared to 0.28% at December 31, 2016. Non-performing loans increased to $2.2 million at the end of the fourth quarter, up from $1.0 million at September 30, 2017, and $2.1 million a year ago.

“The loan loss reserve increased by $284,000 for the quarter and by $1.8 million from a year ago, to $9.3 million at December 31, 2017. The ratio of reserves to total loans was 1.27% on December 31, 2017, up from 1.20% at December 31, 2016,” said Chief Credit Officer Doug Stoveland.

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

CALIFORNIA BANCORP
UNAUDITED SUMMARY FINANCIAL STATEMENTS
INCOME STATEMENT
($ Thousands)
Three Months Ended Year Over Year Change
31-Dec-17 30-Sep-17 31-Dec-16 $ %
Interest Income$ 9,266 $ 8,995 $ 7,784 $ 1,482 19%
Interest Expense (990) (923) (601) (389) 65%
Net Interest Income Before Provision 8,276 8,072 7,183 1,093 15%
Provision to the Loan Loss Reserve (284) (296) (412) 128 -31%
Net Interest Income After Provision$ 7,992 $ 7,776 $ 6,771 $ 1,221 18%
Non-interest Income 766 786 974 (208) -21%
Non-interest Expense (5,848) (5,345) (4,824) (1,024) 21%
Income Before Tax Provision 2,910 3,217 2,921 (11) 0%
Provision for Income Taxes (2,905) (1,121) (1,135) (1,770) 156%
Net Income $ 5 $ 2,096 $ 1,786 $ (1,781) -100%
Preferred Dividends - - - - 0%
Income to Common Shareholders$ 5 $ 2,096 $ 1,786 $ (1,781) -100%
Basic Earnings per Common share$ 0.00 $ 0.33 $ 0.29 $ (0.289) -100%
Weighted Average Shares Outstanding 6,412,054 6,384,149 6,165,340
Return on Average Assets 0.00% 1.00% 0.91%
Return on Average Tangible Common Equity 0.03% 10.93% 10.35%
HC Formation-2017 & Merger Related Expenses-2016$ 37 $ 125 $ 66
Non-interest Expense to Average Total Assets* 2.60% 2.50% 2.44%
Net Operating Expense to Average Total Assets** 2.25% 2.12% 1.94%
Efficiency Ratio* 64.27% 58.93% 58.33%
*Excludes one-time HC Formation-2017 & Merger Related Expenses-2016
**Excludes one-time HC Formation-2017 & Merger Related Expenses-2016 and includes non-interest income


CALIFORNIA BANCORP
UNAUDITED SUMMARY FINANCIAL STATEMENTS
INCOME STATEMENT
($ Thousands)
Twelve Months Ended Year Over Year Change
31-Dec-17 31-Dec-16 $ %
Interest Income$ 34,692 $ 29,249 $ 5,443 19%
Interest Expense (3,159) (2,099) (1,060) 51%
Net Interest Income Before Provision 31,533 27,150 4,383 16%
Provision to the Loan Loss Reserve (2,393) (1,403) (990) 71%
Net Interest Income After Provision$ 29,140 $ 25,747 $ 3,393 13%
Non-interest Income 3,091 3,058 33 1%
Non-interest Expense (20,945) (20,389) (556) 3%
Income Before Tax Provision 11,286 8,416 2,870 34%
Provision for Income Taxes (5,659) (3,223) (2,436) 76%
Net Income $ 5,627 $ 5,193 $ 434 8%
Preferred Dividends - (152) 152 -100%
Income to Common Shareholders$ 5,627 $ 5,041 $ 586 12%
Basic Earnings per Common Share$ 0.89 $ 0.84 $ 0.06 7%
Weighted Average Shares Outstanding 6,298,971 6,023,563
Return on Average Assets 0.69% 0.74%
Return on Avgerage Tangible Common Equity 7.58% 8.03%
HC Formation-2017 & Merger Related Expenses-2016$ 270 $ 873
Net Operating Expense to Average Total Assets** 2.15% 2.34%
Efficiency Ratio* 59.71% 64.61%
Annual Annual Year Over Year Change
Average Balances - Period 2017 2016 $ %
Total Assets$ 817,126 $ 704,189 $ 112,937 16%
Total Loans$ 691,520 $ 565,236 $ 126,284 22%
Total Investments$ 14,333 $ 19,292 $ (4,959) -26%
Total Interest Bearing Deposits in Other Banks$ 54,290 $ 65,301 $ (11,011) -17%
Total Earning Assets$ 760,142 $ 649,828 $ 110,314 17%
Total Non-Interest Bearing Deposits$ 282,385 $ 233,747 $ 48,638 21%
Total Deposits$ 704,990 $ 592,347 $ 112,643 19%
Total Borrowings$ 24,134 $ 32,566 $ (8,432) -26%
Tangible Common Equity$ 74,237 $ 64,637 $ 9,600 15%
Annual Annual
Average Yields and Cost 2017 2016
Net Interest Margin 4.15% 4.18%
Yield on Earning Assets 4.56% 4.50%
Cost of Interest Bearing Liabilities 0.71% 0.54%
*Excludes one-time HC Formation-2017 & Merger Related Expenses-2016
**Excludes one-time HC Formation-2017 & Merger Related Expenses-2016 and includes non-interest income


CALIFORNIA BANCORP
UNAUDITED SUMMARY FINANCIAL STATEMENTS
BALANCE SHEET
($ Thousands)
Year Over Year Change
Assets31-Dec-17 30-Sep-17 31-Dec-16 $ %
Total Cash and Investments$ 86,172 $ 84,009 $ 105,818 $ (19,646) -19%
Loans, net of Deferred Costs/Fees 732,765 719,162 627,509 105,256 17%
Loan Loss Reserve (9,300) (9,000) (7,525) (1,775) 24%
Other 57,053 59,009 38,943 18,110 47%
Total Assets$ 866,690 $ 853,180 $ 764,745 $ 101,945 13%
Liabilities & Shareholders' Equity
Non-interest Bearing Deposits$ 314,736 $ 292,047 $ 284,674 $ 30,062 11%
Interest Bearing Deposits 445,857 456,576 365,373 80,484 22%
Total Deposits$ 760,593 $ 748,623 $ 650,047 $ 110,546 17%
Total Borrowings and Other Liabilities 21,354 20,110 38,226 (16,872) -44%
Total Liabilities$ 781,947 $ 768,733 $ 688,273 $ 93,674 14%
Shareholder's Equity 84,743 84,447 76,472 8,271 11%
Total Liabilities & Shareholders' Equity$ 866,690 $ 853,180 $ 764,745 $ 101,945 13%
Common Shares Outstanding 6,416,295 6,394,963 6,165,340 250,955 4%
Tangible Book Value per Common Share$ 12.10 $ 12.04 $ 11.72 $ 0.38 3%
Year Over Year Change
Average Balances - Period4Q 2017 3Q 2017 4Q 2016 $ %
Total Assets$ 888,403 $ 828,476 $ 776,724 $ 111,679 14%
Total Loans$ 714,695 $ 702,326 $ 612,474 $ 102,221 17%
Total Investments$ 13,377 $ 14,018 $ 16,030 $ (2,653) -17%
Total Interest Bearing Deposits in Other Banks$ 104,254 $ 55,674 $ 94,444 $ 9,810 10%
Total Earning Assets$ 832,326 $ 772,019 $ 722,948 $ 109,378 15%
Total Non-Interest Bearing Deposits$ 318,955 $ 284,174 $ 277,080 $ 41,875 15%
Total Deposits$ 781,715 $ 725,141 $ 662,912 $ 118,803 18%
Total Borrowings$ 16,009 $ 16,000 $ 34,000 $ (17,991) -53%
Tangible Common Equity$ 78,287 $ 76,094 $ 68,448 $ 9,839 14%
Average Yields and Cost4Q 2017 3Q 2017 4Q 2016
Net Interest Margin 3.95% 4.15% 3.94%
Yield on Earning Assets 4.42% 4.62% 4.27%
Cost of Interest Bearing Liabilities 0.82% 0.80% 0.57%
End of Period31-Dec-17 30-Sep-17 31-Dec-16
Loan Loss Reserve to Total Loans 1.27% 1.25% 1.20%
Non-performing Loans/Loans 0.30% 0.14% 0.34%
NPAs (including accruing TDRs) to Total Assets 0.25% 0.12% 0.28%
Accruing TDRs to Total Assets 0.20% 0.12% 0.19%



Source:California BanCorp