Commercial Bank of California Reports Strong Growth, Continued Profitability in First Quarter of 2022

Highlights Include:

  • Total assets, total deposits, investment securities, and net loans (excluding Paycheck Protection Program loans) all increased significantly over prior-year levels
  • Net interest income increased 23.8% year-over-year, the highest net interest income to date
  • Core earnings (excluding one-time recognition of PPP-related fees and fair value adjustment) rose substantially compared to the prior year total, reflecting higher net interest income and payment processing fee income

IRVINE, CALIF. (May 24, 2022) – Commercial Bank of California (“CBC” or “Bank”), a BauerFinancial Four-Star Excellent Bank, today reported net income of $3.5 million for the first quarter of 2022, a decline from the $4.1 million earned in the first quarter of 2021. Reflecting the increase in earning assets compared to the prior year, net interest income for the first quarter of 2022 was $13.4 million, an increase of $2.4 million over the $11.0 million total for the comparable period in 2021. CBC recorded provisions of $250,000 to its allowance for loan losses during the first quarter of 2022 as credit quality remained strong; loan loss provisions were $300,000 in the first quarter of 2021.

While net income in the first quarter of 2022 fell compared to the same quarter of 2021, the apparent decline reflects 2021’s substantial nonrecurring revenues. CBC’s pre-tax “core earnings” absent PPP-related items were $2.1 million for the first quarter of 2021, so the comparable 2022 figure of $4.9 million represents a sharp increase. As previously reported, during the first quarter of 2021, the Bank recognized over $5 million in origination fees relating to the loans made in 2021 under the Paycheck Protection Program (“PPP”). The Bank also recorded an adjustment to income of $1.3 million during the first quarter of 2021 to measure these Second Draw PPP loans at fair value at March 31, 2021.

Over the twelve month period ended March 31, 2022, CBC’s total assets grew by $326.4 million, or 19.8%, to $2.0 billion, compared to total assets of $1.7 billion at this time one year ago. Net loans (excluding PPP loans of $53.4 million in 2022 and $300.9 million in 2021) rose to $1.1 billion at March 31, 2022 from $848.3 million at March 31, 2021, an increase of 33.8%. Deposits rose from $1.4 billion at March 31, 2021, to $1.8 billion on the same date in 2022, an increase of $370.4 million, or 26.1%. CBC’s Los Angeles and Orange County offices generated 58% of the deposit growth over the past twelve months, while the payment processing division contributed the remaining 42% of the increase thanks to the pandemic-related rise in contactless and online payments. Total capital at March 31, 2022 was $155.8 million compared to $140.2 million a year ago, with the increase primarily reflecting the retention of earnings from CBC’s continued profitability, partially offset by unrealized losses from investment securities. The Bank’s capital ratios continue to be well above all applicable regulatory standards for well-capitalized institutions. CBC’s Tier 1 Leverage Ratio stood at 8.24% as of March 31, 2022.

Ash Patel, President and Chief Executive Officer, commented: “It has been said that change is inevitable, and that has never been more true than today. Just when the economy was showing signs of renewed strength thanks to the easing of the COVID-19 pandemic, inflationary pressures emerged. The Federal Reserve’s actions to raise interest rates to counter that inflation have unnerved potential borrowers, thrown markets into turmoil, and threaten a possible economic contraction. Fortunately, CBC’s balance sheet is well-positioned to deal with a rising rate environment, yet we have also taken strong measures over the past two years to reduce our sensitivity to changing rates and create an “allweather” balance sheet position. As always, CBC stands ready to work with our clients and prospects to help them navigate the changes ahead, whatever those changes may be.”

He continued: “Despite the uncertainty that comes with a changing economic environment, we remain pleased with CBC’s results and progress. We have positive momentum to start 2022, primarily driven by robust loan production, net interest income expansion, and strong asset quality. As reported earlier, CBC’s Paycheck Protection Program loans to employers in 2020 and 2021 were successful in protecting businesses and jobs threatened by the pandemic. But due to its non-recurring nature, the non-core, one-time fee income associated with the PPP program masks CBC’s achievements in subsequent periods. The comparison of our pre-tax “core earnings” excluding one-time PPP-related fees and fair value adjustment shows that core earnings grew by 139% in the first quarter of 2022 versus the same period of 2021. We can’t guarantee that such earnings growth will continue indefinitely, but we can promise that we will continue our efforts to enhance revenues and control expenses to ensure that our progress continues and that our financial strength is maintained.”

Mr. Patel concluded: “Indeed, it is CBC’s financial strength and flexibility that enabled us to weather the recent pandemic and manage interest rate fluctuations while generating enviable earnings performance. CBC’s financial strength allows us – and our clients – to enjoy the benefits of the opportunities that inevitably emerge from periods of stress. For these reasons, our confidence in the future of CBC is stronger than ever. But while we believe that our performance justifies our confidence, we also know that you are the foundation of our success. We thank our clients, team members, and friends for their ongoing loyalty and support.

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. “Four-Star Excellent 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) March 31, 2022 March 31, 2021
ASSETS:    
Cash and due from banks$34,699$25,062
Interest bearing deposits with banks 260,586 312,358
Fed funds sold - 10,000
Cash and cash equivalents 295,285 347,420
     
Investment securities 415,799 102,458
     
Loans 1,205,519 1,164,684
Less: allowance for loan and lease losses 17,377 15,457
Loans, net 1,188,142 1,149,227
     
Premises and equipment - net 13,608 2,113
Other real estate owned - -
Accrued interest receivable and other assets 59,346 44,555
     
Total assets$1,972,180$1,645,773
     
LIABILITIES AND CAPITAL:    
Non-interest bearing deposits$915,134$744,368
Interest bearing demand deposits 95,207 53,845
Savings and money market deposits 732,370 580,282
Time deposits 49,466 43,276
     
Total deposits 1,792,177 1,421,771
     
Borrowings - 69,072
Accrued interest paybale and other liabilities 24,174 14,765
     
Total liabilities 1,816,351 1,505,608
     
Stated capital 120,430 105,430
Retained earnings 48,682 33,279
Accumulated other comprehensive income (loss) -13,283 1,456
     
Total capital 155,829 140,165
     
Total liabilities and capital$1,972,180$1,645,773

STATEMENTS OF OPERATIONS (UNAUDITED)

($000's omitted) Three Months Ended March 31, 2022 Three Months Ended March 31, 2021
     
Interest on loans$13,535$11,620
Interest on deposits with banks 215 133
Interest on investment securities 1,270 458
Other interest income 124 65
     
Total interest income 15,144 12,276
     
Interest on deposits 1,504 1,199
Interest on borrowings 2 62
     
Total interest expense 1,506 1,261
     
Net interest income 13,638 11,015
     
Provision for loan losses 250 300
     
Net interest income after provision for loan losses 13,388 10,715
     
Bank service charges and fees 307 226
Payment processing fee income 2,581 1,801
Other income 1,346 4,091
     
Other operating income 4,234 6,118
     
Salaries and related benefits 8,375 7,180
Occupancy expenses 1,072 1,040
Other expenses 3,231 2,838
     
Total other operating expenses 12,678 11,058
     
Income before provision for income taxes 4,944 5,775
     
Provision for income taxes 1,404 1,634
     
Net income$3,540$4,141

 

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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