Commercial Bank Of California Achieves Strong Growth, Record Profitability In 2022
Highlights Include:
- Total assets, total deposits, investment securities, and loans all increased significantly over prior-year levels
- 2022 net income increased by 11.5% year-over-year, the highest net income to date
- Net interest income increased 33.4% year-over-year, representing CBC’s highest yearly net interest income in its history
- Provision expense increased to keep pace with loan growth; all credit quality metrics remained strong
IRVINE, CALIF. (March 29, 2023) – Commercial Bank of California (“CBC” or “Bank”) today reported net income of $17.9 million for the full year 2022, compared to the $16.0 million earned in 2021. The full-year results for 2022 represented a return on average assets (“ROA”) of 0.9% and a return on average equity (“ROE”) of 11.6%, compared with 0.9% and 10.7%, respectively, in 2021.
Net interest income increased by $16.2 million in 2022 compared to 2021, reflecting continued growth in earning assets over the prior year’s levels. Net interest income was augmented by higher fee income recognized from payment processing activities and service charges on deposit accounts. Other income fell in 2022 primarily due to the absence of 2021’s one time recognition of fees and fair value adjustment on Paycheck Protection Program loans made in response to the COVID-19 pandemic. To keep pace with loan growth, provisions for loan losses were $3.0 million in 2022 versus $2.1 million in 2021.
At December 31, 2022, total assets were $2.1 billion, compared to $2.0 billion at this point a year ago. The Bank continued to record significant growth in loans, which rose to $1.5 billion at December 31, 2022 from a 2021 total of $1.2 billion. Deposits also enjoyed meaningful growth, rising from $1.7 billion at December 31, 2021 to $1.8 billion at the end of December 2022, representing a year-over-year growth rate of 5.3%. The growth in deposits was due in part to CBC’s payment processing division, which grew thanks to increasing contactless and online payments activity. The mix of non-interest-bearing demand deposits remained strong at 48.8% of total deposits at December 31, 2022 and the loan-to-deposit ratio was 81.7%.
Total equity capital at December 31, 2022 was $148.4 million, versus the prior year-end equity capital of $165.0 million. CBC’s continued profitable operation contributed to capital, with the year-over-year decrease primarily reflecting a decline in the valuation of the Bank’s available-for-sale (AFS) securities portfolio resulting from increases in interest rates during 2022. Excluding the unrealized after-tax loss included in accumulated other comprehensive income, total equity capital at December 31, 2022 and 2021 was $183.6 million and $165.6 million, respectively. The book value of held-to-maturity (HTM) investment securities at December 31, 2022 was $60.7 million, representing 12.3% of the total book value of investment securities, with an unrealized loss of $1.8 million.
At December 31, 2022, the Bank’s Tier 1 Leverage Ratio, Tier-1 Risk-Based Ratio, and Total Risk-Based Capital Ratio were 8.40%, 10.42%, and 11.55%, respectively. The Bank’s capital ratios continue to reflect its sound capital position; at the end of 2022 all ratios exceeded the current well-capitalized standards, the highest category of capital strength established by banking regulators.
Ash Patel, President and Chief Executive Officer, commented: “In light of recent events in the banking system, the importance of strong relationships is clearer than ever. Our clients know that CBC has always been there to provide support during trying times, and the same holds true today. CBC remains prepared to work with our clients and prospects to help them navigate the current environment as well as whatever changes lie ahead. In doing so, we benefit from CBC’s long-standing practice of maintaining high liquidity as a hedge against possible deposit outflows, including the maintenance of credit facilities with the Federal Reserve, Federal Home Loan Bank, and other contingent funding sources should they ever prove necessary. As a result, CBC’s balance sheet remains well-positioned to deal with today’s economic environment as well as the changes that will inevitably emerge in the future. CBC has always represented a safe haven in troubling times, and that has never been more true than today. That’s one of the advantages of being a privately-held financial institution. We don’t have to sacrifice safety for profitability.”
He continued: “Against this backdrop, we are pleased with CBC’s progress and operating results. Our 2022 profitability ranks as the strongest in our history, thanks to continued growth in earning assets, robust expansion of net interest income, and solid asset quality. But while we are gratified by our progress, much work remains. CBC will continue its efforts to expand revenues and manage expenses so as to further increase our financial strength and maintain our positive momentum.”
Mr. Patel concluded: “CBC’s hallmark financial resiliance and strong client relationships remain key to our success, enabling us to deal with today’s business environment while achieving excellent earnings performance. Thanks to our financial strength, CBC and its clients are well positioned to capitalize on the opportunities that are always a byproduct of periods of stress like those we are now experiencing. Our confidence in the future of CBC is undiminished, but would not be possible without the firm foundation that you represent. We thank our clients, team members, and friends for their unflinching 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) | December 31, 2022 | December 31, 2021 | ||
|---|---|---|---|---|
| ASSETS: | ||||
| Cash and due from banks | $ | 18,010 | $ | 72,151 |
| Interest bearing deposits with banks | 142,049 | 487,314 | ||
| Federal funds sold | – | – | ||
| Cash and cash equivalents | 160,059 | 559,465 | ||
| Investment securities | 433,135 | 253,863 | ||
| Loans | 1,466,795 | 1,176,565 | ||
| Less: allowance for loan and lease losses | 18,052 | 17,300 | ||
| Loans, net | 1,448,743 | 1,159,265 | ||
| Premises and equipment – net | 12,106 | 2,136 | ||
| Other real estate owned | – | – | ||
| Accrued interest receivable and other assets | 75,798 | 53,812 | ||
| Total assets | $ | 2,129,841 | $ | 2,028,541 |
LIABILITIES AND CAPITAL:
| ($000’s omitted) | December 31, 2022 | December 31, 2021 | ||
|---|---|---|---|---|
| Non-interest bearing demand deposits | 876,725 | 852,619 | ||
| Interest bearing demand deposits | 105,886 | 50,692 | ||
| Savings and money market deposits | 681,173 | 753,948 | ||
| Time deposits | 131,506 | 47,501 | ||
| Total deposits | 1,795,290 | 1,704,760 | ||
| Other borrowings | 160,000 | 140,000 | ||
| Accrued interest payable and other liabilities | 26,145 | 18,782 | ||
| Total liabilities | $ | 1,981,435 | $ | 1,863,542 |
| Stated capital | 120,558 | 120,430 | ||
| Retained earnings | 62,995 | 45,142 | ||
| Accumulated other comprehensive income | -35,147 | -573 | ||
| Total capital | $ | 148,406 | $ | 164,999 |
| Total liabilities and capital | $ | 2,129,841 | $ | 2,028,541 |
STATEMENTS OF OPERATIONS (UNAUDITED)
| ($000’s omitted) | 12 Months Ended December 31, 2022 |
12 Months Ended December 31, 2021 |
||
|---|---|---|---|---|
| Interest on loans | $ | 64,160 | $ | 49,843 |
| Interest on deposits with banks | 2,554 | 678 | ||
| Interest on investment securities | 8,783 | 2,790 | ||
| Other interest income | 505 | 346 | ||
| Total interest income | 76,002 | 53,657 | ||
| Interest on deposits | 9,773 | 4,930 | ||
| Interest on other borrowings | 1,444 | 146 | ||
| Total interest expense | 11,217 | 5,076 | ||
| Net interest income | 64,785 | 48,581 | ||
| Provision for loan losses | 3,000 | 2,050 | ||
| Net interest income after provision for loan losses | 61,785 | 46,531 | ||
| Bank service charges and fees | 1,170 | 1,022 | ||
| Payment processing fee income | 13,857 | 9,342 | ||
| Other income | 2,308 | 8,474 | ||
| Other operating income | 17,335 | 18,838 | ||
| Salaries and related benefits | 36,743 | 28,811 | ||
| Occupancy expenses | 4,006 | 4,229 | ||
| Other expenses | 13,088 | 10,357 | ||
| Total other operating expenses | 53,837 | 43,397 | ||
| Income before provision for income taxes | 25,283 | 21,972 | ||
| Provision for income taxes | 7,431 | 5,968 | ||
| Net income | $ | 17,852 | $ | 16,004 |