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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

/EIN News/ -- 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
Assets 30-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 - Period 2Q 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 Cost 2Q 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 Period 30-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 

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