Commercial Bank of California Reports Strong Growth, Robust Profitability for First Half of 2022

Highlights Include:

  • Total assets, total deposits, investment securities, and net loans all increased significantly over prior-year levels
  • Net interest income increased 26.6% year-over-year, the highest six-month net interest income to date
  • Core earnings (excluding one-time recognition of PPP-related fees and fair value adjustments) expanded dramatically compared to the results for the prior year-to-date period, reflecting higher net interest income and payment processing fee income

IRVINE, CALIF. (August 18, 2022) – Commercial Bank of California (“CBC” or “Bank”), a BauerFinancial Four-Star Excellent Bank, today reported net income of $7.9 million for the first half of 2022, up from $7.6 million for the first six months of 2021.  For the second quarter of 2022, the Bank’s net income was $4.3 million, compared to net income of $3.4 million for the same period of 2021.  Net interest income for the first six months of 2022 increased 26.6%, or $6.2 million, to $29.5 million from $23.3 million in the prior year-to-date period due to growth in earning assets and rising asset yields.  In addition, these gains were augmented by higher fee income from payment processing activities.  Provisions for loan losses totaled $525 thousand for 2022’s first half, down from $1.2 million in the first half of 2021, as credit quality and borrower performance remained strong thus far in 2022.

While net income for the first six months of 2022 climbed compared to the same period of 2021, the improvement is even more dramatic after adjusting for 2021’s substantial nonrecurring revenues and fair value adjustments from Paycheck Protection Program (“PPP”) loans.  CBC’s after-tax “core earnings” absent PPP-related nonrecurring items were $7.5 million for the first half of 2022, compared to a core earnings figure of $4.4 million for the like period of 2021.   As previously reported, during the first half of 2021, the Bank recognized over $5.6 million in origination fees relating to the PPP loans.  The Bank also recorded an adjustment to income of $1.4 million during the first half of 2021 to measure the PPP loans at fair value at June 30, 2021.  In contrast, CBC recognized no PPP origination fees in the first half of 2022, and recorded an adjustment to income of $540 thousand to reflect the fair value of the remaining PPP loans at June 30, 2022.

CBC’s total assets at June 30, 2022 grew by $249.1 million, or 14.7%, to $1.9 billion, compared to total assets of $1.7 billion at this time a year ago.  Net loans rose from $1.1 billion at June 30, 2021 to $1.3 billion at June 30, 2022, an increase of $175.3 million, or 15.9%.  Deposits swelled to $1.8 billion at June 30, 2022 from $1.5 billion on the same date in 2021, an increase of $248.7 million, or 16.3%.  CBC’s regional offices generated 51% of the deposit growth over the past twelve months, with the Bank’s payment processing division contributing the remaining 49% of the increase thanks to effective marketing and the continuing rise in contactless and online payments.

Total capital at June 30, 2022 was $145.9 million, essentially unchanged from a year ago, with the retention of earnings from CBC’s continued profitability being largely offset by unrealized losses on investment securities.  CBC’s Tier 1 Leverage Ratio stood at 8.50% as of June 30, 2022, and the Bank’s capital ratios continue to exceed the current regulatory standards for well-capitalized institutions. 

Ash Patel, President and Chief Executive Officer, commented:  “Against the backdrop of today’s changing economic environment, we remain pleased with CBC’s results and progress.  Operating results for the second quarter and first half of 2022 were both among the strongest in our history, driven as before by outstanding loan production, robust expansion of net interest income, and solid asset quality.  Our 2022 results are even more impressive when 2021’s net revenue from PPP loans is excluded from the prior-year comparison.  Our after-tax “core earnings” excluding one-time PPP-related fees and fair value adjustments grew by 69% in the first six months of 2022 versus the same period of 2021.  Despite these gratifying results, rest assured that CBC will continue its efforts to control expenses and expand revenues to maintain our progress and bolster our financial strength.”

He continued:  “CBC and its clients are feeling the impact of the Federal Reserve’s ongoing actions to raise interest rates to counter inflationary pressures.  This leaves many potential borrowers in a state of uncertainty regarding their future, and creates upward rate pressure on both our loans and deposits.  On balance, CBC’s margins have increased due to the Fed’s actions, but how long that will continue remains unknown.  Fortunately, our resolute actions over the past two years to reduce our sensitivity to changing rates mean that CBC’s balance sheet is well-positioned to deal with today’s rising rate environment.  As before, CBC is prepared to work with our clients and prospects to help them navigate the changes ahead, whatever those changes may be.”

Mr. Patel concluded:  “CBC’s financial strength and flexibility is the bedrock of our success.  It is what enabled us to emerge from the recent pandemic with the strength to navigate today’s interest rate fluctuations while generating excellent earnings performance.  CBC’s financial strength is what allows us and our clients to enjoy the benefits of the opportunities that are already beginning to emerge from the stresses of the current period.  Our confidence in the future of CBC is stronger than ever, but while we believe our performance justifies that confidence, we also know that you are the foundation of our achievements.   We thank our clients, team members, and friends for their support and loyalty.”
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) June 30, 2022 June 30, 2021
ASSETS:    
Cash and due from banks$36,061$68,336
Interest bearing deposits with banks 136,370 296,920
Fed funds sold - 10,000
Cash and cash equivalents 172,431 375,256
     
Investment securities 410,187 167,472
     
Loans 1,293,374 1,117,220
Less: allowance for loan and lease losses 17,368 16,467
Loans, net 1,276,006 1,100,753
     
Premises and equipment - net 13,122 2,041
Other real estate owned - -
Accrued interest receivable and other assets 69,135 46,246
     
Total assets$1,940,881$1,691,768
     
LIABILITIES AND CAPITAL:    
Non-interest bearing deposits$923,328$821,181
Interest bearing demand deposits 114,522 61,012
Savings and money market deposits 687,044 593,430
Time deposits 46,521 47,049
     
Total deposits 1,771,415 1,522,672
     
Borrowings - 8,933
Accrued interest paybale and other liabilities 23,550 14,205
     
Total liabilities 1,794,965 1,545,810
     
Stated capital 120,430 107,430
Retained earnings 53,013 36,723
Accumulated other comprehensive income (loss) -27,527 1,805
     
Total capital 145,916 145,958
     
Total liabilities and capital$1,940,881$1,691,768

STATEMENTS OF OPERATIONS (UNAUDITED)

($000's omitted) Six Months Ended June 30, 2022 Six Months Ended June 30, 2021
     
Interest on loans$28,195$24,283
Interest on deposits with banks 584 258
Interest on investment securities 3,512 1,052
Other interest income 239 145
     
Total interest income 32,530 25,738
     
Interest on deposits 3,028 2,334
Interest on borrowings 2 103
     
Total interest expense 3,030 2,437
     
Net interest income 29,500 23,301
     
Provision for loan losses 525 1,200
     
Net interest income after provision for loan losses 28,975 22,101
     
Bank service charges and fees 607 462
Payment processing fee income 6,668 4,451
Other income 1,285 5,645
     
Other operating income 8,560 10,558
     
Salaries and related benefits 17,763 15,171
Occupancy expenses 2,067 2,070
Other expenses 6,665 5,171
     
Total other operating expenses 26,495 22,412
     
Income before provision for income taxes 11,040 10,247
     
Provision for income taxes 3,168 2,662
     
Net income$7,872$7,585

 

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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