Highlights Include:
- Assets, deposits, investment securities, and loans all increased over prior-year levels
- Net interest income increased 10.8% year-over-year, the highest six-month net interest income in Bank’s history
- Liquidity and capital strength remain exemplary, providing the stability and flexibility to deal with changing times
IRVINE, Calif. (August 31, 2023) – Commercial Bank of California (“CBC” or “Bank”), a BauerFinancial Four-Star Excellent Bank, today reported net income of $6.3 million for the first half of 2023, compared to $7.9 million for the first six months of 2022. For the second quarter of 2023, the Bank’s net income was $3.4 million, versus net income of $4.3 million for the same period of 2022. Net interest income for the first six months of 2023 increased by 10.8%, or $3.2 million, to $32.7 million compared to $29.5 million in the prior year-to-date period reflecting growth in earning assets and rising asset yields. In addition, this gain was augmented by higher fee income from payment processing activities. Provisions for credit losses (including credit losses of $750 thousand related to investment securities) totaled $2.8 million in the first half of 2023, an increase from the $525 thousand recorded for 2022’s first half, but despite this increase credit quality and borrower performance has remained strong thus far in 2023.
CBC’s total assets at June 30, 2023 grew by $312.4 million, or 16.1%, to $2.3 billion, compared to total assets of $1.9 billion at this time a year ago. Loans rose from $1.3 billion at June 30, 2022 to $1.6 billion at June 30, 2023, an increase of $276.5 million, or 21.4%. Deposits increased to $1.9 billion at June 30, 2023 from $1.8 billion on the same date in 2022, an increase of $97.6 million, or 5.5%. CBC’s deposit growth over the past twelve months was attributable to solid contributions from both retail deposits generated by its regional offices (including the specialty deposit group) and brokered deposits. Non-interest-bearing demand deposits represented 46.6% of total deposits at June 30, 2023, and the loan-to-deposit ratio was 84.0%. Average non-interest-bearing demand deposits of the Bank’s payment processing division remained strong over the reporting period, reflecting effective marketing and the continuing rise in contactless and online payments.
Total capital at June 30, 2023 was $157.4 million, an increase over the comparable 2022 figure of $145.9 million, with the retention of earnings from CBC’s continued profitability being partially offset by unrealized losses on investment securities. CBC’s Tier 1 Leverage Ratio stood at 8.04% as of June 30, 2023, 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: “Since our last report, relative stability has returned to the U.S. banking system, which is good news indeed. As you will recall, a bank failure in the first quarter of 2023 led us to write off an investment security of the failed bank, but the improved conditions sharply reduce the likelihood of a similar recurrence. While there will undoubtedly still be occasional bumps in the road, the industry turmoil of the first quarter of 2023 appears to be behind us. Of course, the rising interest rates that spawned that turmoil are still with us, and continue to impact CBC, our clients, and the U.S. economy as a whole. And the stubborn inflation that triggered the Federal Reserve’s interest rate hikes in the first place continues to have an effect on the cost of doing business for us all.”
He continued: “CBC’s profitability for the first six months of 2023 dipped compared to the same period a year ago, but given today’s economic backdrop, the reduction is understandable. On the one hand, growth in earning assets and the current high interest rates resulted in record interest income. Unfortunately, most of those gains were absorbed by higher deposit costs resulting from the rising interest rates. Payments revenues continued to increase, but inflation contributed to higher salary and other non-interest expenses. The net result of these factors was the modest decline in profitability that CBC experienced through the second quarter of 2023. But as before, CBC remains fundamentally sound and successful, and we look for our profitability to rebound as we return to more normal conditions. The factors that make CBC successful – our continued growth in earning assets, our expansion of net interest income, and the solid asset quality that has long been a CBC hallmark – remain fully in place. Those attributes, combined with our ongoing efforts to expand revenues and manage expenses, will enable us to maintain our positive momentum and further increase our financial strength.”
Mr. Patel concluded: “The recent turmoil and its aftermath reinforces our long-held belief in the importance of relationships and prudent financial management. CBC’s balance sheet remains well-positioned to deal with today’s economic environment and whatever changes emerge in the future, meaning that CBC and its clients are able to capitalize on the opportunities that are already beginning to emerge from the turmoil of the recent past. It bears repeating that CBC’s bright future would not be possible without you. We thank our clients, team members, and friends for their incomparable 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)
| ($000’s omitted) | June 30, 2023 | June 30, 2022 | ||
|---|---|---|---|---|
| ASSETS: | ||||
| Cash and due from banks | $ | 19,122 | $ | 36,061 |
| Interest bearing deposits with banks | 170,997 | 136,370 | ||
| Federal funds sold | – | – | ||
| Cash and cash equivalents | 190,119 | 172,431 | ||
| Investment securities | 422,106 | 410,187 | ||
| Loans | 1,569,843 | 1,293,374 | ||
| Less: allowance for loan and lease losses | 18,918 | 17,368 | ||
| Loans, net | 1,550,925 | 1,276,006 | ||
| Premises and equipment – net | 10,642 | 13,122 | ||
| Other real estate owned | – | – | ||
| Accrued interest receivable and other assets | 79,480 | 69,135 | ||
| Total assets | $ | 2,253,272 | $ | 1,940,881 |
LIABILITIES AND CAPITAL:
| ($000’s omitted) | June 30, 2023 | June 30, 2022 | ||
|---|---|---|---|---|
| Non-interest bearing demand deposits | $ | 870,258 | $ | 923,328 |
| Interest bearing demand deposits | 340,996 | 114,522 | ||
| Savings and money market deposits | 554,250 | 687,044 | ||
| Time deposits | 103,533 | 46,521 | ||
| Total deposits | 1,869,037 | 1,771,415 | ||
| Borrowings | 200,000 | – | ||
| Accrued interest payable and other liabilities | 26,808 | 23,550 | ||
| Total liabilities | $ | 2,095,845 | $ | 1,794,965 |
| Stated capital | 121,465 | 120,430 | ||
| Retained earnings | 68,968 | 53,013 | ||
| Accumulated other comprehensive income | -33,006 | -27,527 | ||
| Total capital | $ | 157,427 | $ | 145,916 |
| Total liabilities and capital | $ | 2,253,272 | $ | 1,940,881 |
STATEMENTS OF OPERATIONS (UNAUDITED)
| ($000’s omitted) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | ||
|---|---|---|---|---|
| Interest on loans | $ | 42,198 | $ | 28,195 |
| Interest on deposits with banks | 4,355 | 584 | ||
| Interest on investment securities | 5,616 | 3,512 | ||
| Other interest income | 335 | 239 | ||
| Total interest income | 52,504 | 32,530 | ||
| Interest on deposits | 15,995 | 3,028 | ||
| Interest on other borrowings | 3,810 | 2 | ||
| Total interest expense | 19,805 | 3,030 | ||
| Net interest income | 32,699 | 29,500 | ||
| Provision for credit losses | 2,755 | 525 | ||
| Net interest income after provision for credit losses | 29,944 | 28,975 | ||
| Bank service charges and fees | 573 | 607 | ||
| Payment processing fee income | 5,820 | 5,295 | ||
| Other income | 1,649 | 2,658 | ||
| Other operating income | 8,042 | 8,560 | ||
| Salaries and related benefits | 20,123 | 17,763 | ||
| Occupancy expenses | 2,035 | 2,067 | ||
| Other expenses | 7,004 | 6,665 | ||
| Total other operating expenses | 29,162 | 26,495 | ||
| Income before provision for income taxes | 8,824 | 11,040 | ||
| Provision for income taxes | 2,532 | 3,168 | ||
| Net income | $ | 6,292 | $ | 7,872 |
