Commercial Bank of California Reports Accelerating Profitability in Second Quarter of 2021

IRVINE, CALIF. (August 25, 2021) – Commercial Bank of California (“CBC” or “Bank”), a BauerFinancial Five-Star Superior Bank, today reported net income of $7,585,000 for the first six months of 2021, a strong improvement from the $2,278,000 profit of the first half of 2020.  For the second quarter of 2021, the Bank’s net income was $3,444,000, up sharply from the net income of $1,139,000 recorded in the same period of 2020.  Net interest income increased by $2,814,000 for 2021’s initial six-month period due to growth in earning assets over the past year.  Moreover, these gains were augmented by higher fee income from payment processing activities, SBA loan sales, and Paycheck Protection Program (“PPP”) loans thus far in 2021.  Provisions for loan losses totaled $1,200,000 in the first half of 2021; such provisions were $3,575,000 for the comparable period in the prior year, as CBC built reserves in 2020 as an abundance of caution against potential adverse effects of the COVID-19 pandemic on the payment performance of some Bank borrowers.

At June 30, 2021, the Bank’s total assets were $1.7 billion, compared to $1.4 billion at this point a year ago.  Net loans increased sharply, rising from $1.0 billion at June 30, 2020 to $1.1 billion on the same date in 2021.  PPP loans made up approximately $200 million of net loans at June 30 of each year, as the origination of $143 million in Second Draw PPP loans in 2021 was offset by the ongoing forgiveness of First Draw 2020 loans.  Deposits have enjoyed strong growth in 2021, increasing to $1.5 billion at June 30, 2021 from $1.2 billion at the end of June 2020.  While branch deposits have shown robust growth, CBC’s payment processing division contributed the majority of the growth in deposits as the pandemic-related trend of increasing contactless and online payments continued. 

Total capital at June 30, 2021 was $146.0 million, a strong increase from June 30, 2020, when total was $110.8 million.  The Bank’s capital ratios continue to be well above all regulatory standards for well-capitalized institutions.  CBC’s Tier 1 Leverage Ratio stood at 8.70% as of June 30, 2021.

Ash Patel, Board Chairman, President, and Chief Executive Officer, commented,  “The recent surge in “Delta Variant” cases of COVID-19 is a reminder that the current pandemic will likely be with us for some time to come.  As before, the safety of our staff and our valued clients is our greatest concern.  We hope that you, your family, and your associates are staying healthy and persevering in the current situation. 

“While COVID clearly will remain a fact of life well into the future, the U.S. economy appears to be slowly strengthening.  Against that backdrop, we remain pleased with CBC’s operating results for the initial six months of the current year.  Our net income for the first half of 2021 more than doubled over the same period last year.  Much of the upswing in earnings reflects our continued growth in earning assets.  CBC’s strong gains in client deposits have been most encouraging and are expected to result in further earnings growth in future periods as we fully deploy the liquidity from our deposit growth into loans and investments.  Fee income from payment processing, SBA loan sales, and PPP lending has also contributed significantly to earnings so far in 2021, along with a reduction in provision expense in 2021 compared to the prior year.  As you will recall, in 2020 we increased our reserves for potential loan losses due to the uncertainties relating to the then-emerging pandemic.  While CBC has continued to build its reserves in 2021 due to loan growth, we were able to reduce our loan loss provisions from $3,575,000 in the first half of 2020 to $1,200,000 for the same period in 2021, and those reduced provisions have had a favorable impact on our overall profitability as provision expense has returned to pre-pandemic levels.  While CBC’s credit quality and borrower performance have remained strong, we believe that holding reserves against potential adverse changes remains the appropriate course of action at the present time.  Beyond that, we are doubling down on our efforts to grow revenues and control expenses to optimize our operating performance now and in the future.”

Mr. Patel concluded:  “The wisdom of maintaining financial strength to deal with economic uncertainty has never been more evident than it is today.  Thanks to our robust capital position and financial strength, CBC had the resiliency to deal with the challenges of the recent past, and now is capitalizing on the opportunities that are emerging as the economy strengthens.  Our confidence in the future of CBC has never been stronger, and we remain profoundly grateful to our clients, team members, and friends for their loyalty and support during this unprecedented period.”

About Commercial Bank of California

Commercial Bank of California is a full-service bank and diversified financial services company serving the business and professional communities of Los Angeles and Orange counties. Recognized as a BauerFinancial, Inc. “Five-Star Superior Bank” for its financial strength and stability, CBC provides the financial expertise of a major bank while maintaining a commitment to personalized service for every CBC client.  More information about CBC’s custom solutions for your business is available at www.cbcal.com.

STATEMENTS OF CONDITION (UNAUDITED)

($000s omitted) June 30, 2021 June 30, 2020
ASSETS:    
Cash and due from banks$68,336$17,050
Interest bearing deposits with banks 296,920 262,106
Fed funds sold 10,000 10,000
Cash and cash equivalents 375,256 289,156
     
Investment securities 167,472 87,453
     
Loans 1,117,220 1,020,162
Less: allowance for loan and lease losses 16,467 13,882
Loans, net 1,100,753 1,006,280
     
Premises and equipment - net 2,041 2,948
Other real estate owned - -
Accrued interest receivable and other assets 46,246 41,307
     
Total assets$1,691,768$1,427,144
     
LIABILITIES AND CAPITAL:    
Non-interest bearing deposits$821,181$550,471
Interest bearing demand deposits 61,013 55,396
Savings and money market deposits 593,430 534,693
Time deposits 47,049 62,591
     
Total deposits 1,522,673 1,203,151
     
     
Other borrowings 8,933 103,064
Accrued interest paybale and other liabilities 14,204 10,138
     
Total liabilities 1,545,810 1,316,353
     
Stated capital 107,430 83,830
Retained earnings 36,723 25,034
Accumulated other comprehensive income (loss) 1,805 1,927
     
Total capital 145,958 110,791
     
Total liabilities and capital$1,691,768$1,427,144

STATEMENTS OF OPERATIONS (UNAUDITED)

  Six Months Ended Six Months Ended
($000's omitted) June 30, 2021 June 30, 2020
     
Interest on loans$24,283$21,228
Interest on deposits with banks 258 516
Interest on investment securities 1,052 1,010
Other interest income 145 145
     
Total interest income 25,738 22,899
     
Interest on deposits 2,334 2,358
Interest on borrowings 103 54
     
Total interest expense 2,437 2,412
     
Net interest income 23,301 20,487
     
Provision for loan losses 1,200 3,575
     
Net interest income after provision for loan losses 22,101 16,912
Bank service charges and fees 457 488
Payment processing fee income 3,634 3,062
Other income 6,467 990
     
Other operating income 10,558 4,540
     
Salaries and related benefits 15,171 11,513
Occupancy expenses 2,070 2,298
Other expenses 5,171 4,528
     
Total other operating expenses 22,412 18,339
     
Income before provision for income taxes 10,247 3,113
     
Provision for income taxes 2,662 835
     
Net income$7,585$2,278

 

This report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical fact, included herein may constitute forward-looking statements. Although Commercial Bank of California believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct. Important factors that could cause actual results to differ materially from Commercial Bank of California’s expectations include fluctuations in interest rates, inflation, government regulations, and economic conditions and competition in the geographic and business areas in which Commercial Bank of California conducts its operations.

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