OAKLAND, Calif., Feb. 05, 2020 (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 fourth quarter and year ended December 31, 2019.

Net income was $578 thousand for the fourth quarter of 2019, representing a decrease of $1.4 million, or 70% compared to $2.0 million for the third quarter of 2019. For the year ended December 31, 2019, net income was $7.0 million representing a decrease of $1.7 million or 20% compared to $8.7 million in 2018.

Diluted earnings per share of $0.07 for the fourth quarter of 2019 compared to $0.25 for the third quarter of 2019. For the year ended December 31, 2019, diluted earnings per share of $0.86 compared to $1.19 in 2018.

“The past year has been one of meaningful investment in the future potential of our franchise. During 2019 we added substantial capabilities, in people and systems, to extend our markets and enhance our effectiveness in all markets,” said Steve Shelton, President and Chief Executive Officer. “As we move forward, we expect to continue our momentum in building a quality balance sheet and driving operating leverage in our business.”

“Our fourth quarter results were significantly impacted by our push to complete key initiatives and aggressively resolve a legacy problem loan,” stated Thomas A. Sa, Senior Executive Vice President, Chief Financial Officer and Chief Operating Officer. “At the same time, we made remarkable progress in quality measures for our business by growing average deposits by over $100 million, $45 million of which came in noninterest-bearing demand deposits, and by reducing nonperforming assets by half.”

Financial Highlights

Financial Position

December 31, 2019 compared to December 31, 2018

• Total assets increased by $146.4 million, or 15% to a record level of $1.15 billion.
• Total deposits increased by $114.0 million, or 13% to a record level of $988.2 million. Average total deposits increased $79.0 million, or 10%.
• Gross loans increased by $104.9 million, or 12% to a record level of $949.7 million. Average gross loans increased $148.3 million, or 20%.
• Total equity increased by $9.2 million, or 8% to $130.3 million.

December 31, 2019 compared to September 30, 2019

• Total assets increased by $57.4 million, or 5% to a record level of $1.15 billion.
• Total deposits increased by $64.3 million, or 7%. Average total deposits increased $102.0 million, or 11%.
• Average noninterest-bearing demand deposits increased $45.0 million, or 13%.
• Gross loans increased by $16.4 million, or 2%. Average gross loans grew $20.8 million, or 2%.

Income Statement

Years ended December 31, 2019 compared to December 31, 2018

• Net income decreased by $1.7 million, or 20% to $7.0 million.
• Net interest income increased by $5.1 million, or 14% to $40.9 million.
• Total revenue increased by $5.6 million, or 14% to $45.2 million.
• Provision for loan losses increased by $890.0 thousand, or 62%, to $2.3 million.
• Operating expenses increased by $6.9 million, or 26%, to $33.2 million.

Three months ended December 31, 2019 compared to September 30, 2019

• Net income decreased by $1.4 million, or 71% to $578 thousand.
• Net interest income increased by $151 thousand, or 1% to $10.6 million.
• Provision for loan losses increased by $500.0 thousand, or 100%, to $1.0 million.
• Operating expenses increased $1.4 million, or 17%, to $9.8 million.

Balance Sheet

Total assets reached a record $1.15 billion as of December 31, 2019, up $146.4 million, or 15% compared to a year ago.

Total asset growth was driven by growth in deposits which increased by $114.0 million or 13% from $874.2 million at December 31, 2018, to $988.2 million at December 31, 2019. Commercial noninterest-bearing deposits represented $34.9 million of total deposit growth year over year, and represented growth of 10% compared to December 31, 2018. Noninterest-bearing deposits at December 31, 2019 were 39% of total deposits compared to 40% of total deposits at December 31, 2018. Growth in interest-bearing deposits of $79.1 million was comprised of growth in money market balances of $63.1 million and time deposits of $23.4 million, partially offset by a decline in interest-bearing demand deposits of $7.5 million.

Total gross loans increased by $104.9 million, or 12% to $949.7 million at December 31, 2019, from $844.7 million at December 31, 2018. The largest categories of growth within the loan portfolio were in commercial real estate at $51.1 million and commercial & industrial loans at $48.6 million.

Asset Quality

The allowance for loan losses increased by $275 thousand to $11.1 million, or 1.17% of total loans at December 31, 2019, compared to $10.8 million, or 1.28% of total loans at December 31, 2018. The change in the allowance was primarily the result of the charge-off activity in 2019, which partially offset provisions to accommodate loan growth.

Non-performing assets (“NPAs”) to total assets of 0.24% at December 31, 2019, compared to 0.44% at December 31, 2018, with non-performing loans of $2.7 million and $4.5 million, respectively, on those dates. At December 31, 2019, the allowance represented 402% coverage of non-performing assets, up from 242% at December 31, 2018.

Shareholder’s Equity

Total shareholder’s equity increased by $9.2 million, or 8% to $130.3 million at December 31, 2019, from $121.1 million at December 31, 2018. The increase is primarily attributed to earnings during the twelve-month period totaling $7.0 million, and the remainder resulting from shares issued under stock compensation plans and an increase in other comprehensive income. Tangible book value per common share increased by 7% between the periods, from $14.20 at December 31, 2018, to $15.16 at December 31, 2019.

Net Interest Income and Net Interest Margin – Years ended December 31, 2019 and December 31, 2018

Net interest income for the year ended December 31, 2019, was $40.9 million, an increase of $5.1 million, or 14.2% over $35.8 million for the same period in 2018.

Average total interest-earning assets increased by $116.4 million, or 13.3% to $992.7 million during 2019, and the average yield increased 27 basis points to 4.94%, primarily as a result of the strong increase in average loan balances and higher balance sheet leverage. During the year the Bank benefited from a significant increase in average loan balances of $148.2 million or 19.6% to $903.9 million. The average yield on total average gross loans in 2019 was 5.30%, up by 5 basis points compared to the 5.25% yield during 2018. In addition, as growth in average loan balances outpaced growth in average deposits, the average loan to deposit ratio for the year ended December 31, 2019 was 101.1% compared to 92.7% in the same period of 2018.

Of the $79.0 million increase in average total deposit balances year over year, $9.6 million were noninterest-bearing deposits while $69.4 million were interest-bearing. In addition, the overall cost of average total deposit balances was up by 25 basis points to 0.80% during 2019 compared to 0.55% during 2018. Average borrowed funds increased by $17.7 million to $29.7 million during 2019 while the average cost decreased to 3.13% in 2019 compared to 5.37% in 2018.

As a result of the strong increase in average loan balances and increased balance sheet leverage the net interest margin increased by 3 basis points to 4.12% during 2019, compared to 4.09% for 2018.

Net Interest Income and Net Interest Margin – three months ended December 31, 2019 and September 30, 2019

Net interest income was $10.6 million for the three months ended December 31, 2019, an increase of $150.7 thousand or 1% over $10.4 million for the third quarter ended September 30, 2019. The increase in net interest income includes an increase of $248.2 thousand in interest income comprised of increases in interest and fees on loans of $45.0 thousand and interest on excess funds of $262.6 thousand, offset in part by a decrease in interest earned on investment securities of $59.2 thousand.

Partially offsetting the growth in interest income was an increase of $97.5 thousand in interest expense. The growth in interest expense was comprised of growth in interest expense paid on deposits of $167.7 thousand offset by a decrease in interest expense on borrowed funds of $70.3 thousand. Growth in deposit expense was the result of growth in average interest-bearing deposits of $57.0 million. Interest expense on borrowed funds decreased as a result of lower utilization of wholesale funding, which decreased by $12.1 million on average in the quarter ended December 31, 2019 compared to the preceding quarter of 2019.

Compared to the third quarter of 2019, average deposit growth of $102.0 million outpaced growth in average loans of $20.8 million. As a result, the average loan to deposit ratio during the quarter ended December 31, 2019 decreased to 94.4% from 102.8% in the third quarter of 2019. In addition, average loans comprised 87.1% of average earning assets during the fourth quarter of 2019, which was a decrease from 92.9% for the third quarter of 2019. Taken together, the impact of the lower loan to deposit ratio and the decrease in loans as a percentage of average earning assets resulted in a decrease in yield on average earning assets of 33 basis points to 4.72% in the fourth quarter of 2019 from 5.05% for the third quarter.

Growth in average deposit balances in the quarter ended December 31, 2019 compared to the quarter ended September 30, 2019, was comprised of increases in average noninterest-bearing deposits of $45.0 million, or 13%, and $57.0 million, or 10.3%, in interest-bearing deposits. The average rate paid on interest-bearing deposits decreased by 2 basis points to 1.36% in the fourth quarter of 2019 compared to 1.38% in the third quarter of 2019. Noninterest-bearing demand deposits averaged 38.6% of total deposits in the fourth quarter of 2019 compared to 38.0% for the prior quarter. In addition, average borrowed funds to supplement funding decreased $12.1 million or 45% in the quarter ended December 31, 2019 compared to the third quarter of 2019.

The combination of the strong average deposit growth and lower deposit leverage during the fourth quarter of 2019, when compared to the third quarter of 2019, resulted in a decrease of 29 basis points in net interest margin to 3.90% during the fourth quarter of 2019 compared to 4.19% in the prior quarter.

Non-Interest Income and Expense – Years ended December 31, 2019 and December 31, 2018

During the year ended December 31, 2019, non-interest income totaled $4.2 million, an increase of $532 thousand, or 14.3% over 2018. This increase was primarily the result of higher loan fee income.

During the year ended December 31, 2019, non-interest expenses increased by $6.9 million or 26% to $33.2 million compared to $26.4 million in 2018. Of this increase, $5.1 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 year ended December 31, 2019 included increases in occupancy and equipment related to the expansion of facilities; data processing costs related to enhancement of treasury management systems; and professional and legal fees related to implementation of FDICIA and SEC compliance controls and processes.

Non-Interest Income and Expense – three months ended December 31, 2019 and September 30, 2019

During the three months ended December 31, 2019, non-interest income totaled $1.2 million, a decrease of $115 thousand, or 9% from the three-month period ended September 30, 2019. The decrease was primarily the result of lower gains on loan sales compared to the prior quarter.

During the three months ended December 31, 2019, total non-interest expenses increased by $1.4 million, or 17% to $9.8 million compared to $8.4 million for the third quarter. This increase primarily related to completion of expansion initiatives, marketing campaigns and implementation of FDICIA and SEC compliance controls and processes. Salary and benefits expense increased $172 thousand for benefits related to executive hires in 2019.

Please see our detailed Fourth Quarter 2019 Unaudited Summary Financial Statements for more information.

Closing Remarks

“Following our capital raise in 2018, we embarked on a plan to position the Bank for substantive growth. We are proud of our efforts and progress in 2019 and believe we are well positioned to continue executing that plan,” Shelton concluded.

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 December 31, 2019 (Unaudited)
	($ Thousands)		For the three months ended												Change %								Year ended								Change %
	Income Statement		12/31/2019				9/30/2019				12/31/2018				QoQ				YoY				12/31/2019				12/31/2018				YTDoYTD
	Interest and fees on loans		$	12,132			$	12,087			$	10,120				0	%			20	%		$	46,588			$	38,443			21	%
	Other interest income			673				471				913				43	%			(26	%)			2,490				2,496			(0	%)
	Total interest income			12,805				12,557				11,033				2	%			16	%			49,078				40,939			20	%
	Interest on deposits			2,096				1,929				1,396				9	%			50	%			7,209				4,461			62	%
	Interest on borrowings and subordinated debentures			125				196				78				(36	%)			61	%			931				645			44	%
	Total interest expense			2,221				2,124				1,474				5	%			51	%			8,140				5,106			59	%
	Net interest income*			10,584				10,433				9,559				1	%			11	%			40,938				35,833			14	%
	Provision for loan loss			1,000				500				591				100	%			69	%			2,326				1,436			62	%
	Net interest income after provision			9,584				9,933				8,968				(4	%)			7	%			38,612				34,397			12	%
	Service charges and other account fees			200				245				292				(18	%)			(32	%)			957				1,059			(10	%)
	Loan related fees			652				517				291				26	%			124	%			2,046				1,441			42	%
	Net gains on securities sales			-				-				97				0	%			(100	%)			-				97			(100	%)
	Net gains on loan sales			17				212				135				(92	%)			(87	%)			253				418			(39	%)
	Other			277				287				47				(3	%)		N/A					992				701			42	%
	Total non-interest income*			1,146				1,261				862				(9	%)			33	%			4,248				3,716			14	%
	Salaries and employee benefits			5,769				5,597				4,052				3	%			42	%			20,674				15,573			33	%
	Occupancy and equipment expenses			1,160				826				773				40	%			50	%			3,502				2,918			20	%
	Data processing, internet and software			521				524				424				(1	%)			23	%			1,883				1,539			22	%
	Professional and legal			764				355				437				115	%			75	%			2,383				1,123			112	%
	Other operating expenses			1,611				1,097				1,405				47	%			15	%			4,781				5,218			(8	%)
	Total operating expenses			9,825				8,399				7,091				17	%			39	%			33,223				26,371			26	%
	Net income before taxes			905				2,795				2,739				(68	%)			(67	%)			9,637				11,742			(18	%)
	Income taxes			327				791				632				(59	%)			(48	%)			2,636				3,029			(13	%)
	Net income		$	578			$	2,004			$	2,107				(71	%)			(73	%)		$	7,001			$	8,713			(20	%)
	*Revenue (net interest income + non-interest income)			11,730				11,694				10,421				0	%			13	%			45,186				39,549			14	%
	Earnings Per Share
	Basic earnings per share		$	0.07			$	0.25			$	0.26				(71	%)			(73	%)		$	0.87			$	1.22			(29	%)
	Diluted earnings per share		$	0.07			$	0.25			$	0.26				(71	%)			(73	%)		$	0.86			$	1.19			(28	%)
	Average shares outstanding			8,074,285				8,051,729				7,990,089												8,048,793				7,120,986
	Average diluted shares			8,162,585				8,135,337				8,103,041												8,132,093				7,317,611
			For the three months ended												Change $								Change %
	Average Balance Sheet Items		12/31/2019				9/30/2019				12/31/2018				QoQ				YoY				QoQ				YoY
	Total Assets		$	1,156,611			$	1,063,923			$	982,992			$	92,688			$	173,619				9	%			18	%
	Total Loans			937,973				917,194				784,765				20,779				153,208				2	%			20	%
	Investments			32,646				36,902				52,836				(4,256	)			(20,190	)			-12	%			-38	%
	Earning Assets			1,077,708				987,286				926,331				90,422				151,377				9	%			16	%
	Non-Interest Bearing Deposits			382,426				337,409				358,016				45,017				24,410				13	%			7	%
	Core Deposits			865,686				754,403				760,220				111,284				105,466				15	%			14	%
	Total Deposits			994,122				892,079				854,165				102,043				139,957				11	%			16	%
	Borrowings			14,976				27,065				5,000				(12,089	)			9,976				-45	%			200	%
	Tangible Common Equity			122,684				120,833				112,450				1,851				10,234				2	%			9	%
			Year ended								Change
	Average Balance Sheet Items		12/31/2019				12/31/2018				$				%
	Total Assets		$	1,064,452			$	929,028			$	135,424				15	%
	Total Loans			903,923				755,659				148,264				20	%
	Investments			38,197				23,378				14,819				63	%
	Earning Assets			992,679				876,288				116,391				13	%
	Non-Interest Bearing Deposits			342,720				333,075				9,645				3	%
	Core Deposits			778,916				711,928				66,988				9	%
	Total Deposits			893,893				814,930				78,963				10	%
	Borrowings			29,717				12,051				17,666				147	%
	Tangible Common Equity			119,176				92,963				26,213				28	%
			At the periods ended												Change $								Change %
	Balance Sheet		12/31/2019				9/30/2019				12/31/2018				QoQ				YoY				QoQ				YoY
	Cash and equivalents		$	114,342			$	67,660			$	78,705			$	46,682			$	35,637				69	%			45	%
	Investment securities			28,555				36,260				43,415				(7,705	)			(14,860	)			-21	%			-34	%
	Other investments			4,402				4,402				3,536				-				866				0	%			24	%
	Commercial loans			389,746				402,303				341,184				(12,557	)			48,562				-3	%			14	%
	CRE loans			502,929				484,606				451,851				18,323				51,078				4	%			11	%
	Construction and land loans			42,519				32,547				37,344				9,972				5,175				31	%			14	%
	Other loans			14,458				13,822				14,349				636				109				5	%			1	%
	Loans			949,652				933,278				844,728				16,374				104,924				2	%			12	%
	Net deferred costs			2,555				2,392				2,203				163				352				7	%			16	%
	Allowance for loan losses			11,075				10,413				10,800				662				275				6	%			3	%
	Net loans			941,132				925,257				836,131				15,875				105,001				2	%			13	%
	Premises and equipment, net			3,668				1,917				2,076				1,751				1,592				91	%			77	%
	Bank owned life insurance			22,316				22,156				17,806				160				4,510				1	%			25	%
	Deferred income taxes, net			6,173				5,247				5,803				926				370				18	%			6	%
	Core Deposit Intangible			264				278				286				(14	)			(22	)			-5	%			-8	%
	Goodwill			7,350				7,350				7,350				-				-				0	%			0	%
	Other assets and interest receivable			23,832				24,082				10,564				(250	)			13,268				-1	%			126	%
	Total assets		$	1,152,034			$	1,094,609			$	1,005,672			$	57,425			$	146,362				5	%			15	%
	Demand deposits		$	387,267			$	373,289			$	352,402			$	13,978			$	34,865				4	%			10	%
	Interest bearing demand deposits			25,178				22,896				32,650				2,282				(7,472	)			10	%			-23	%
	Money market & savings deposits			455,436				398,242				392,290				57,194				63,146				14	%			16	%
	Time deposits			120,355				129,483				96,912				(9,128	)			23,443				-7	%			24	%
	Total deposits			988,236				923,910				874,254				64,326				113,982				7	%			13	%
	Borrowings			10,000				20,000				-				(10,000	)			10,000				-50	%			0	%
	Subordinated debentures, net			4,977				4,973				4,960				4				17				0	%			0	%
	Other liabilities			18,565				16,724				5,379				1,841				13,186				11	%		N/A
	Total liabilities			1,021,778				965,607				884,593				56,171				137,185				6	%			16	%
	Common stock			106,427				105,711				104,563				716				1,864				1	%			2	%
	Retained earnings			23,519				22,937				16,515				582				7,004				3	%			42	%
	Other comprehensive income			310				354				1				(44	)			309				-12	%		N/A
	Total shareholder’s equity			130,256				129,002				121,079				1,254				9,177				1	%			8	%
	Total liabilities and equity		$	1,152,034			$	1,094,609			$	1,005,672			$	57,425			$	146,362				5	%			15	%
	Tangible book value per common share		$	15.16			$	15.08			$	14.20
	Total shares outstanding			8,092,966				8,052,549				7,993,908
	Core relationship deposits			867,881				772,811				779,783				95,070				88,098
			For the three months ended												Year ended
	Performance Ratios		12/31/2019				9/30/2019				12/31/2018				12/31/2019				12/31/2018
	Return on average assets			0.20	%			0.75	%			0.85	%			0.66	%			0.94	%
	Return on average tangible common equity			1.87	%			6.58	%			7.43	%			5.87	%			9.37	%
	Efficiency ratio			83.76	%			71.82	%			68.05	%			73.52	%			66.68	%
	Net Interest Margin
	Net interest margin			3.90	%			4.19	%			4.09	%			4.12	%			4.09	%
	Average earning assets yield			4.72	%			5.05	%			4.73	%			4.94	%			4.67	%
	Average investment yield			2.85	%			3.12	%			3.08	%			3.08	%			2.72	%
	Average loan yield			5.26	%			5.30	%			5.12	%			5.30	%			5.25	%
	Average total deposit rate			0.84	%			0.86	%			0.65	%			0.80	%			0.55	%
	Average borrowing rate			3.32	%			2.87	%			6.17	%			3.13	%			5.37	%
	Other Ratios
	Average total loans to total deposits			94.4	%			102.8	%			91.9	%			101.1	%			92.7	%
	Average C&I loans to total loans			41.8	%			41.7	%			40.9	%			41.5	%			43.0	%
	Average non-interest bearing deposits to total deposits			38.5	%			37.8	%			41.9	%			38.3	%			40.9	%
	Average core deposits to total deposits			87.1	%			84.6	%			89.0	%			87.1	%			87.4	%
			At the periods ended
	Capital Ratios - Bank		12/31/2019				9/30/2019				12/31/2018
	Tier 1 leverage ratio			10.44	%			11.22	%			11.31	%
	Common equity tier 1 capital ratio			10.38	%			10.68	%			10.94	%
	Tier 1 risk-based capital ratio			10.38	%			10.68	%			10.94	%
	Total risk-based capital ratio			11.79	%			12.09	%			12.52	%
			At the periods ended
	Non-Performing Assets		12/31/2019				9/30/2019				12/31/2018
	Non-Accrual Loans		$	2,753			$	4,675			$	4,463
	Restructured Loans			-				-
	Total non-performing loans (NPL)			2,753				4,675				4,463
	Other Real Estate Owned			-				-				-
	Total non-performing assets (NPA)		$	2,753			$	4,675			$	4,463
	Restructured Loans Performing			646				697				930
	Quarterly Net (Charge-offs)/Recoveries		$	338			$	1,588			$	9
	NPAs / Assets %			0.24	%			0.43	%			0.44	%
	NPAs / Loans and OREO %			0.29	%			0.50	%			0.53	%
	Loan Loss Reserves / Loans (%)			1.17	%			1.12	%			1.28	%
	Loan Loss Reserves / NPLs (%)			402	%			223	%			242	%