California Bank of Commerce (OTCBB:CABC) reported net income of $2.4 million for the first nine months of 2014, or $0.71 per share, up from $1.9 million, or $0.66 per share, for the same period in 2013. Net income of $737 thousand for the third quarter 2014, was down less than one percent from $744 thousand for the third quarter of 2013 due primarily to new personnel related expenses tied to the Bank’s growth plans.
Net interest income grew 13% year over year for the third quarter, and grew 16% September year to date 2014 versus 2013. The Bank improved its net interest margin to 3.89% for the quarter ending June 30, 2014, compared to 3.82% for the same period a year ago. In addition, loan quality remained strong with the Bank’s NPA ratio declining 51 basis points (bp) to 0.38%.
Loans grew 14% year over year at September 30, 2014 while deposits grew 11% over the same period. Sequentially, loans grew 4% in the third quarter and deposits grew 2%.
“We had a very productive quarter,” said Terry A. Peterson, President and CEO. “We hired eight new employees during the third quarter, increasing our staff by 14% over the second quarter of 2014; we are investing in enhanced online banking capabilities to serve the growing sophistication of our clients, and we are investing in new technology to improve operating efficiencies,” said Peterson.
“With the $16 million in additional equity capital received at the end of the second quarter, we began investing for growth in earnest during the third quarter. While we expect some of our ratios will be temporarily impacted due to the additional equity capital and related hiring activities, our capital base is stronger, our growth opportunities are greatly improved, and our earnings remain strong,” said Stephen A. Cortese, Chairman of the Board for California Bank of Commerce.
Third Quarter 2014 versus Third Quarter 2013
- Net interest income reached a record high $3.8 million
- Net income of $737 thousand, decreased less than 1% due to higher non-interest expense
- Net interest margin improved to 3.89%, up from 3.82% last year
- Return on average assets was 0.72%, down 9 bps from 0.81% last year
Nine Months 2014 versus Nine Months 2013
- Net interest income increased 16% to $11.0 million
- Net income rose 27% to $2.4 million
- Basic earnings per common share increased 8% to $0.71
Continued strong year over year loan and deposit growth
- Total loans of $313 million, up $39 million or 14% from 3Q 2013
- Total deposits of $340 million, up $34 million or 11%
- Total non-interest bearing deposits of $118 million, up $14 million or 13%, representing 35% of total deposits
Strong credit quality
- Total non-performing assets declined to 0.38% of assets, from 0.89% last year
- Loan loss reserve of $5.5 million increased 5% over last year
- Loan loss reserve ratio fell to 1.75% of total loans from 1.90% as a result of improvements in credit quality and a more stable economic environment
Improved book value and capital ratios
- Tangible book value per share $10.79, up $0.88 or 9% from last year
- Capital ratios improved on stronger earnings and additional equity capital
“As we continue hiring talented bankers to accelerate the Bank’s growth, we expect some temporary decline in the Bank’s efficiency ratio,” said Peterson. The Bank’s efficiency ratio, (total overhead as a percent of revenue) increased to 71.7% in the third quarter of 2014 compared to 63.7% for the same period in 2013.
Net Income
Net income reached $737 thousand for the third quarter 2014, declining less than 1% from the same period in 2013. Improvements in net interest income were offset by higher non-interest expense. Return on average assets was 0.72% during the third quarter of 2014, compared to 0.81% for the same period in 2013. Return on average common equity declined to 6.29% during the third quarter of 2014 compared to 10.91% for the second quarter of 2013, due primarily to the $16 million in common equity raised at the end of the second quarter 2014.
Balance Sheet
As of September 30, 2014, total assets were up $53 million or 14% to $429 million with loans up by $39 million or 14% year over year to $313 million compared to September 30, 2013. Commercial and Industrial (C&I) loans grew 18% or $25 million over the third quarter of 2013, representing the largest component to the overall loan increase year over year. Commercial real estate loans grew 9% or $11 million in the third quarter of 2014 compared to the same period in 2013.
During the third quarter 2014, total asset growth was funded with deposit growth which increased 11% or $34 million to $371 million at the end of the quarter compared to $337 million at the end of the third quarter of 2013. Non-interest bearing deposits increased 13% and represented 35% of total deposits at September 30, 2014 compared to 34% for the same date a year ago.
Total shareholders’ equity and shares outstanding increased as a result of the additional equity capital raised at the end of the second quarter 2014. Shareholders’ equity increased 50% to $58 million at September 30, 2014 compared to the $38 million for the same date a year ago.
Credit Quality
The Bank’s overall loan quality remains strong. Total non-performing assets declined to 0.38% of assets, from 0.89% last year. The reserve for loan losses increased to $5.5 million as of September 30, 2014 compared to $5.2 million at September 30, 2013. As a percent of total loans, the reserve level continues to reflect the Bank’s healthy loan portfolio and conservative posture at 1.75% of total loans at the end of the current period compared to 1.90% at September 30, 2013.
“As our history demonstrates, we are a growth story,” said Peterson. “With our recent and successful capital offering, we are now executing the next chapter of our balance sheet and earnings growth strategy. Our staff is excited for our prospects of growth, and the marketplace sees this opportunity too as we continue to attract the most experienced commercial bankers in the Bay Area,” said Peterson.
About California Bank of Commerce
California Bank of Commerce was designed and built to provide a unique banking experience for its clients. The Bank offers a broad range of commercial banking services to closely held businesses and professionals throughout the San Francisco Bay Area. For more information on California Bank of Commerce and our unique banking experience, call us at (925) 283-2265, or visit us at www.californiabankofcommerce.com.
CALIFORNIA BANK OF COMMERCE | |||||||||||||||||||
UNAUDITED SUMMARY FINANCIAL STATEMENTS | |||||||||||||||||||
INCOME STATEMENT | |||||||||||||||||||
($ Thousands) | |||||||||||||||||||
Three Months Ended | Year Over Year Change | ||||||||||||||||||
30-Sep-14 | 30-Jun-14 | 30-Sep-13 | $ | % | |||||||||||||||
Interest income | $ | 4,107 | $ | 3,954 | $ | 3,701 | $ | 406 | 11 | % | |||||||||
Interest expense | (328 | ) | (307 | ) | (343 | ) | 15 | -4 | % | ||||||||||
Net interest income before provision | 3,779 | 3,647 | 3,358 | 421 | 13 | % | |||||||||||||
Provision to the loan loss reserve | (1 | ) | (3 | ) | (79 | ) | 78 | -99 | % | ||||||||||
Net interest income after provision | $ | 3,778 | $ | 3,644 | $ | 3,279 | $ | 499 | 15 | % | |||||||||
Non-interest income | 617 | 612 | 401 | 216 | 54 | % | |||||||||||||
Non-interest expense | (3,152 | ) | (2,707 | ) | (2,394 | ) | (758 | ) | 32 | % | |||||||||
Income before tax provision | 1,243 | 1,549 | 1,286 | (43 | ) | -3 | % | ||||||||||||
Provision for income taxes | (506 | ) | (629 | ) | (542 | ) | 36 | -7 | % | ||||||||||
Net income | $ | 737 | $ | 920 | $ | 744 | $ | (7 | ) | -1 | % | ||||||||
Preferred dividends | 28 | 28 | 28 | - | 0 | % | |||||||||||||
Income to common shareholders | $ | 709 | $ | 892 | $ | 716 | $ | (7 | ) | -1 | % | ||||||||
Basic earnings per common share | $ | 0.164 | $ | 0.320 | $ | 0.260 | $ | (0.095 | ) | -37 | % | ||||||||
Weighted average shares outstanding | 4,314,781 | 2,787,061 | 2,758,875 | 1,555,906 | 56 | % | |||||||||||||
Return on average assets | 0.72 | % | 1.00 | % | 0.81 | % | |||||||||||||
Return on average tangible common equity | 6.29 | % | 12.12 | % | 10.91 | % | |||||||||||||
Non-interest expense to average total assets | 3.07 | % | 2.93 | % | 2.60 | % | |||||||||||||
Efficiency ratio | 71.7 | % | 63.6 | % | 63.7 | % | |||||||||||||
CALIFORNIA BANK OF COMMERCE | |||||||||||||||
UNAUDITED SUMMARY FINANCIAL STATEMENTS | |||||||||||||||
INCOME STATEMENT | |||||||||||||||
($ Thousands) | |||||||||||||||
Nine Months Ended | Year Over Year Change | ||||||||||||||
30-Sep-14 | 30-Sep-13 | $ | % | ||||||||||||
Interest income | $ | 11,920 | $ | 10,511 | $ | 1,409 | 13 | % | |||||||
Interest expense | (932 | ) | (1,065 | ) | 133 | -12 | % | ||||||||
Net interest income before provision | 10,988 | 9,446 | 1,542 | 16 | % | ||||||||||
Provision to the loan loss reserve | 149 | (348 | ) | 497 | -143 | % | |||||||||
Net interest income after provision | $ | 11,137 | $ | 9,098 | $ | 2,039 | 22 | % | |||||||
Non-interest income | 1,655 | 1,040 | 615 | 59 | % | ||||||||||
Non-interest expense | (8,716 | ) | (7,029 | ) | (1,687 | ) | 24 | % | |||||||
Income before tax provision | 4,076 | 3,109 | 967 | 31 | % | ||||||||||
Provision for income taxes | (1,663 | ) | (1,214 | ) | (449 | ) | 37 | % | |||||||
Net income | $ | 2,413 | $ | 1,895 | $ | 518 | 27 | % | |||||||
Preferred dividends | 83 | 83 | - | 0 | % | ||||||||||
Income to common shareholders | $ | 2,330 | $ | 1,812 | $ | 518 | 29 | % | |||||||
Basic earnings per common share | $ | 0.707 | $ | 0.657 | $ | 0.050 | 8 | % | |||||||
Weighted average shares outstanding | 3,295,908 | 2,757,793 | 538,115 | 20 | % | ||||||||||
Return on average assets | 0.85 | % | 0.72 | % | |||||||||||
Return on average tangible common equity | 9.15 | % | 9.51 | % | |||||||||||
Non-interest expense to average total assets | 3.07 | % | 2.69 | % | |||||||||||
Efficiency ratio | 68.9 | % | 67.0 | % | |||||||||||
CALIFORNIA BANK OF COMMERCE | |||||||||||||||||||
UNAUDITED SUMMARY FINANCIAL STATEMENTS | |||||||||||||||||||
BALANCE SHEET | |||||||||||||||||||
($ Thousands) | |||||||||||||||||||
Year Over Year Change | |||||||||||||||||||
Assets | 30-Sep-14 | 30-Jun-14 | 30-Sep-13 | $ | % | ||||||||||||||
Total cash and investments | $ | 102,942 | $ | 110,742 | $ | 94,562 | $ | 8,380 | 9 | % | |||||||||
Loans, net of deferred costs/fees | 312,952 | 301,520 | 274,124 | $ | 38,828 | 14 | % | ||||||||||||
Loan loss reserve | (5,450 | ) | (5,425 | ) | (5,200 | ) | $ | (250 | ) | 5 | % | ||||||||
Other | 18,189 | 15,081 | 12,047 | $ | 6,142 | 51 | % | ||||||||||||
Total Assets | $ | 428,633 | $ | 421,918 | $ | 375,533 | $ | 53,100 | 14 | % | |||||||||
Liabilities & Shareholders' Equity | |||||||||||||||||||
Non-interest bearing deposits | $ | 118,245 | $ | 125,449 | $ | 104,319 | $ | 13,926 | 13 | % | |||||||||
Interest bearing deposits | 221,716 | 209,042 | 201,842 | $ | 19,874 | 10 | % | ||||||||||||
Total deposits | $ | 339,961 | $ | 334,491 | $ | 306,161 | $ | 33,800 | 11 | % | |||||||||
Total borrowings and other liabilities | 31,139 | 30,682 | 31,016 | $ | 123 | 0 | % | ||||||||||||
Total liabilities | $ | 371,100 | $ | 365,173 | $ | 337,177 | $ | 33,923 | 10 | % | |||||||||
Shareholder's equity | $ | 57,533 | $ | 56,745 | $ | 38,356 | $ | 19,177 | 50 | % | |||||||||
Total Liabilities & Shareholders' Equity | $ | 428,633 | $ | 421,918 | $ | 375,533 | $ | 53,100 | 14 | % | |||||||||
Common shares outstanding | 4,316,248 | 4,311,248 | 2,766,893 | 1,549,355 | 56 | % | |||||||||||||
Book value per common share | $ | 10.79 | $ | 10.62 | $ | 9.91 | $ | 0.88 | 9 | % | |||||||||
Year Over Year Change | |||||||||||||||||||
Average Balances - Period | 3Q 2014 | 2Q 2014 | 3Q 2013 | $ | % | ||||||||||||||
Assets | $ | 407,699 | $ | 370,544 | $ | 365,284 | $ | 42,415 | 12 | % | |||||||||
Loans | $ | 305,207 | $ | 294,837 | $ | 263,560 | $ | 41,647 | 16 | % | |||||||||
Investments | $ | 34,822 | $ | 40,584 | $ | 40,874 | $ | (6,052 | ) | -15 | % | ||||||||
Earning assets | $ | 385,494 | $ | 350,558 | $ | 348,533 | $ | 36,961 | 11 | % | |||||||||
Non-interest bearing deposits | $ | 110,747 | $ | 98,439 | $ | 97,879 | $ | 12,868 | 13 | % | |||||||||
Deposits | $ | 319,448 | $ | 295,574 | $ | 296,796 | $ | 22,652 | 8 | % | |||||||||
Borrowings | $ | 29,000 | $ | 29,731 | $ | 29,000 | $ | - | 0 | % | |||||||||
Tangible common equity | $ | 46,466 | $ | 30,450 | $ | 27,037 | $ | 19,429 | 72 | % | |||||||||
Average Yields and Cost | 3Q 2014 | 2Q 2014 | 3Q 2013 | ||||||||||||||||
Net interest margin | 3.89 | % | 4.17 | % | 3.82 | % | |||||||||||||
Yield on earning assets | 4.23 | % | 4.52 | % | 4.21 | % | |||||||||||||
Cost of interest bearing liabilities | 0.55 | % | 0.54 | % | 0.60 | % | |||||||||||||
End of Period | 30-Jun-14 | 30-Jun-14 | 30-Sep-13 | ||||||||||||||||
Loan loss reserve to total loans | 1.75 | % | 1.80 | % | 1.90 | % | |||||||||||||
NPAs (incl. non performing TDRs) to total assets | 0.30 | % | 0.88 | % | 0.36 | % | |||||||||||||
Performing TDRs to total assets | 0.08 | % | 0.09 | % | 0.53 | % | |||||||||||||
Total NPAs | 0.38 | % | 0.97 | % | 0.89 | % | |||||||||||||
Tier I Leverage ratio | 14.10 | % | 15.27 | % | 10.49 | % | |||||||||||||
Contacts:
Terry A. Peterson, 925-444-2910
President
and CEO
tpeterson@bankcbc.com
or
Mark
DeVincenzi, 925-444-2916
EVP Shareholder Relations & CMO
mdevincenzi@bankcbc.com