San Diego, Calif., April 25, 2023 (GLOBE NEWSWIRE) -- Southern California Bancorp ("us," "we," "our," or the "Company") (OTC Pink: BCAL), the holding company for Bank of Southern California, N.A. (the "Bank") announces its consolidated financial results for the first quarter of 2023.
Southern California Bancorp reported net income of $8.2 million for the first quarter of 2023, or $0.44 per diluted share, compared to net income of $1.4 million, or $0.08 per diluted share in the first quarter of 2022, and $8.5 million, or $0.46 per diluted share in the fourth quarter of 2022.
First Quarter 2023 Highlights
- Net income of $8.2 million, compared with $8.5 million in the prior quarter
- Diluted earnings per share of $0.44, compared with $0.46 the prior quarter
- Net interest margin of 4.71%, compared with 4.62% in the prior quarter; average loan yield of 5.78% compared with 5.47% in the prior quarter
- Return on average assets of 1.46%, the same as the prior quarter
- Return on average common equity of 12.72%, compared with 13.21% in the prior quarter
- Efficiency ratio of 56.8%, compared with 51.5% in the prior quarter
- Tangible book value per common share ("TBV") (non-GAAP) of $12.49 at March 31, 2023, up $0.17 from $12.32 at December 31, 2022
- Day 1 CECL transition adjustment to the allowance for credit losses ("ACL") of $5.5 million, and a related after-tax decrease to retained earnings of $3.9 million
- Day 2 CECL provisions for credit losses of $202 thousand
- Total assets of $2.29 billion, relatively flat from December 31, 2022
- Total loans, including loans held for sale, of $1.89 billion, compared with $1.91 billion at December 31, 2022
- Nonperforming assets to total assets ratio of 0.000% at March 31, 2023, compared with 0.002% at December 31, 2022
- Total deposits of $1.99 billion, up $54.0 million or 2.8%, compared with $1.93 billion at December 31, 2022
- Noninterest-bearing demand deposits were $882.0 million, representing 44.4% of total deposits, compared with $923.9 million, or 47.8% of total deposits at December 31, 2022
- Cost of deposits was 0.80%, compared with 0.51% in the prior quarter
- Banks's capital exceeds minimums to be "well-capitalized," the highest regulatory capital category
"We are pleased to report the Company's continued strong financial performance in the first quarter of 2023, with net income of $8.2 million, an increase of $6.8 million from the year-ago quarter," said David Rainer, Chairman and CEO of Southern California Bancorp and Bank of Southern California. "Our first quarter return on average assets of 1.46% and net interest margin of 4.71%, increased from 0.26% and 3.40%, respectively, from the year-ago quarter, The increase in income and performance metrics was the direct result of the outstanding execution of our relationship-based commercial banking model by our dedicated and accomplished team.
"While the banking industry experienced some disruption in the first quarter, and there is economic uncertainty regarding a potential recession and the future direction of the Fed funds rate, we believe our strong balance sheet and very diversified loan and deposit portfolios, which have very little sector or individual customer concentration, position us safely and soundly in the current environment. Our commercial banking model is founded on strong, ongoing relationships with clients in a broad variety of industries. I note that the current uncertainty in the banking industry has provided us with an opportunity to attract new clients.
"We are optimistic about the future and in early April 2023 we announced the filing of a Registration Statement on Form 10 with the U.S. Securities and Exchange Commission, subsequent to our March 2023 application to be listed on the Nasdaq Capital Market."
Adoption of the Current Expected Credit Loss ("CECL") Model
On January 1, 2023, we adopted the new accounting standard, commonly known as CECL, which uses a current expected credit loss model for determining ACL. Upon adoption, we recognized a Day 1 increase in the ACL of $5.5 million and a related after-tax decrease to retained earnings of $3.9 million. Our Day 1 ACL under the new CECL methodology totaled $23.9 million, or 1.26% of total loans, compared to $18.4 million under the incurred loss model at December 31, 2022. We recorded a Day 2 provision for credit losses of $202 thousand which reflects the new CECL methodology using current economic forecasts on lifetime credit losses. At March 31, 2023, the ACL totaled $24.1 million resulting in an ACL to total loans coverage ratio of 1.27%, up from 0.97% at December 31, 2022. The ACL includes amounts for reserve for unfunded loan commitments of $1.7 million and $1.3 million at March 31, 2023 and December 31, 2022.
First Quarter Operating Results
Net Income
Net income for the first quarter of 2023 was $8.2 million, or $0.44 per diluted share, compared with net income of $8.5 million, or $0.46 per diluted share in the fourth quarter of 2022. Pre-tax, pre-provision income (non-GAAP) for the first quarter was $11.4 million, a decrease of $902 thousand or 7.3% from the prior quarter.
Net Interest Income and Net Interest Margin
Net interest income for the first quarter of 2023 was $24.9 million, compared to $25.3 million in the prior quarter. The decrease in net interest income was primarily due to a $1.4 million increase in total interest expense, combined with two fewer interest-earning days in the first quarter of 2023 compared to the fourth quarter of 2022. The decrease was partially offset by a $1.1 million increase in total interest and dividend income in the first quarter of 2023 as compared to the prior quarter. During the first quarter of 2023, loan interest income increased $1.2 million, debt securities income increased $83 thousand, and interest and dividend income from other financial institutions decreased $255 thousand. The increase in interest income was due to a number of factors: a higher average total loan balance from organic loan growth; a change in the interest-earning asset mix; and higher yields on interest-earning assets resulting from increases in the target Fed funds rate. Average interest-earning assets decreased $26.9 million, the result of a $43.1 million decrease in average Fed funds sold/resale agreements, a $4.2 million decrease in average debt securities, and a $3.2 million decrease in average deposits in other financial institutions, partially offset by a $23.5 million increase in average total loans. The increase in interest expense for the first quarter of 2023 was primarily due to a $1.3 million increase in interest expense on interest-bearing deposits, the result of a 53 basis point increase in interest-bearing deposit costs.
Net interest margin for the first quarter of 2023 was 4.71%, compared with 4.62% in the prior quarter. The increase was primarily related to a 39 basis point increase in the total interest-earning assets yield, the result of higher market interest rates and a change in the Bank's interest-earning asset mix, partially offset by a 32 basis point increase in the cost of funds. The yield on total earning assets in the first quarter of 2023 was 5.53%, compared with 5.14% in the prior quarter. The yield on average total loans in the first quarter of 2023 was 5.78%, an increase of 31 basis points from 5.47% in the prior quarter.
Cost of funds for the first quarter of 2023 was 88 basis points, an increase of 32 basis points from 56 basis points in the prior quarter. The increase was primarily driven by a 53 basis point increase in the cost of interest-bearing deposits, coupled with a decrease in average noninterest-bearing deposits. Average noninterest-bearing demand deposits decreased $55.7 million to $915.2 million and represented 46.7% of total average deposits for the first quarter of 2023, compared with $970.9 million and 48.3%, respectively, for the prior quarter. The total cost of deposits in the first quarter of 2023 was 80 basis points, an increase of 29 basis points from 51 basis points in the prior quarter.
Average total borrowings increased $10.7 million to $32.1 million for the first quarter of 2023, primarily the result of an increase of $10.7 million in Federal Home Loan Bank (FHLB) borrowings during the quarter. The average cost of total borrowings was 5.54% for the first quarter of 2023, down from 5.82% in the prior quarter.
Provision for Credit Losses
The Company recorded a provision for credit losses of $202 thousand under the CECL model, compared to a $750 thousand provision in the prior quarter under the incurred loss model. The provision for credit losses included a $76 thousand negative provision for unfunded commitments primarily due to the impact of lower unfunded loan commitments. Total unfunded loan commitments decreased $43.6 million to $557.5 million at March 31, 2023 from $601.1 million at December 31, 2022. The provision for credit losses was driven by a number of factors: a slight increase in loan downgrades into special mention and substandard, changes in the portfolio mix and our reasonable and supportable forecast, primarily related to the economic outlook from the Federal Reserve's actions to control inflation over bank turmoil, and a decrease in total loan balances. The Company also increased the qualitative reserve to consider the potential losses resulting from future recessionary pressures and the impact of the banking turmoil that were not captured in quantitative analysis. The Company's management continues to monitor macroeconomic variables related to increasing interest rates, inflation and the concerns of an economic downturn, and believes it is appropriately provisioned for the current environment.
Noninterest Income
Total noninterest income in the first quarter of 2023 was $1.6 million, an increase of $1.4 million compared to total noninterest income of $188 thousand in the fourth quarter of 2022. The increase was due primarily to a $994 thousand pre-tax loss on sale of debt securities recorded in the previous quarter, for which there was no comparable transaction in the first quarter of 2023. In addition, in the first quarter of 2023, the Company recorded a gain on sale of loans of $808 thousand on the sale of $9.9 million of SBA 7A loans and $39 thousand on a nonaccrual 1-4 family residential loan, an increase of $515 thousand from the $293 thousand gain on sale of loans recorded on the sale of $5.1 million in SBA 7A loans in the prior quarter.
Noninterest Expense
Total noninterest expense for the first quarter of 2023 was $15.0 million, an increase of $1.9 million from total noninterest expense of $13.1 million in the prior quarter. In the first quarter of 2023, salaries and employee benefits increased by $1.6 million, legal, audit and professional fees increased by $298 thousand and regulatory assessments increased by $107 thousand.
The $1.6 million increase in salaries and benefits was due primarily to an accelerated stock compensation expense related to the vesting of performance-based restricted stock units of $632 thousand, and seasonal increases in payroll taxes and benefits expense, which were coupled with a decrease in the deferred loan origination costs resulting from slower loan growth in the first quarter of 2023. The $298 thousand increase in legal, audit and professional fees was due primarily to preparation for the Company's planned listing to the Nasdaq. The $107 thousand increase in regulatory assessments was due primarily to the increase in the initial base deposit insurance assessment rate beginning in the first quarterly assessment period of 2023.
Efficiency ratio for the first quarter of 2023 was 56.8%, compared to 51.5% in the prior quarter.
Income Tax
In the first quarter of 2023, the Company's income tax expense was $3.0 million, compared with $3.1 million in the fourth quarter of 2022. The effective rate was 26.8% for the first quarter of 2023 and 26.9% for the fourth quarter of 2022. The slight decrease in the effective tax rate for the first quarter of 2023 was primarily attributable to the impact of the vesting and exercise of equity awards combined with changes in the Company's stock price over time.
Balance Sheet
Assets
Total assets at March 31, 2023 were $2.29 billion, an increase of $8.1 million or 0.4% from December 31, 2022. The increase in total assets from the prior quarter was primarily related to a $15.4 million increase in cash and cash equivalents and an $11.9 million increase in securities available-for-sale, partially offset by a decrease of $12.3 million in total loans, including loans held for sale, and a Day 1 CECL transition adjustment of $5.0 million in the ACL for loan portfolio.
Loans
Total loans held for investment were $1.89 billion at March 31, 2023, compared to $1.90 billion at December 31, 2022, with first quarter of 2023 new originations of $78.6 million and payoffs and net paydowns of $81.7 million. Total loans secured by real estate decreased by $13.7 million, with construction and land development loans increasing by $17.0 million, and 1-4 family residential and multifamily increasing $9.7 million and $9.1 million, respectively, offset by a decrease in commercial real estate of $22.2 million. In addition, commercial and industrial loans decreased by $17.4 million. The Company had $577 thousand in SBA 7A loans held for sale at March 31, 2023, compared to $9.0 million at December 31, 2022; most of these loans are expected to be sold in the secondary market in the second quarter of 2023.
Deposits
Total deposits at March 31, 2023 were $1.99 billion, an increase of $54.0 million from December 31, 2022. Noninterest-bearing demand deposits at March 31, 2023 were $882.0 million, or 44.4% of total deposits, compared with $923.9 million, or 47.8% of total deposits at December 31, 2022. At March 31, 2023, total brokered time deposits were $84.5 million, compared to $20.7 million at December 31, 2022, as we refined our funding strategy by paying off short-term FHLB financing of $50 million and replacing it with brokered term deposits. Given the nature of our commercial banking model, at March 31, 2023, approximately 50% of our total deposits exceeded the FDIC insurance limits; however, for our larger depositors we offer the Insured Cash Sweep (ICS) product, providing customers with FDIC insurance coverage at ICS network institutions. At March 31, 2023, ICS deposits increased to $140.3 million, or 7% of total deposits, compared to $65.5 million, or 3% of total deposits at December 31, 2022.
Federal Home Loan Bank ("FHLB") and Federal Reserve Bank ("Federal Reserve") Borrowings
During the first quarter of 2023, the Company repaid $50.0 million of outstanding overnight FHLB borrowings; there were no outstanding FHLB borrowings or Federal Reserve Discount Window borrowings at March 31, 2023, compared with the $50.0 million in overnight advances with the FHLB at December 31, 2022. The Company did not participate in the Federal Reserve Bank Term Funding Program.
At March 31, 2023, the Company had available borrowing capacity from the FHLB secured lines of credit of approximately $453 million and available borrowing capacity from the Federal Reserve Discount Window of approximately $110 million. The Company also had available borrowing capacity from three unsecured credit lines from correspondent banks of approximately $75 million at March 31, 2023, with no outstanding borrowings. Additionally, the Company had unpledged, liquid securities of approximately $132 million and cash and cash equivalents of $102.1 million at March 31, 2023.
Asset Quality
Total non-performing assets decreased to $1 thousand, or 0.000% of total assets at March 31, 2023, compared with $41 thousand, or 0.002% of total assets at December 31, 2022. The decrease from December 31, 2022, was due primarily to $39 thousand in note sales. There were no loans downgraded to nonaccrual during the quarter. Special mention loans increased by $4.7 million during the first quarter due mostly to a downgrade from one loan relationship with $4.3 million in commercial real estate loans. Substandard loans increased by $2.6 million during the first quarter of 2023 due mostly to downgrades from four loan relationships that totaled $2.7 million in commercial and industrial loans.
The Company had no loans over 90 days past due that were accruing interest at March 31, 2023.
Loan delinquencies (30-89 days past due) totaled $123 thousand at March 31, 2023, compared to no loan delinquencies (30-89 days past due) at December 31, 2022.
The allowance for credit losses, which is comprised of allowance for loan losses (ALL) and reserve for unfunded loan commitments, totaled $24.1 million, or 1.27% of total loans at March 31, 2023, compared to $18.4 million, or 0.97% at December 31, 2022. The $5.7 million increase in the allowance includes a $5.5 million Day 1 CECL transition adjustment, a $278 thousand provision in credit losses for the loan portfolio and a $76 thousand negative provision for unfunded loan commitments for the quarter end March 31, 2023. The Day 1 adjustment to the allowance for credit losses is reflective of expected lifetime credit losses associated with the composition of financial assets within in the scope of the CECL accounting standard as of January 1, 2023, which is substantially comprised of loans held for investment and off-balance sheet unfunded loan commitments at January 1, 2023, as well as management's current expectation of future economic conditions.
Allowance for loan losses was $22.4 million, or 1.18% of total loans at March 31, 2023, compared to $17.1 million, or 0.90% at December 31, 2022.
Capital
Tangible book value (non-GAAP) per common share at March 31, 2023, was $12.49, compared with $12.32 at December 31, 2022. In the first quarter of 2023, tangible book value was primarily impacted by a net decrease of $3.9 million to the beginning balance of retained earnings as of January 1, 2023, for the cumulative effect of the Day 1 CECL transition adjustment, and an increase of outstanding common stock related to the vesting of performance-based restricted stock units. These decreases were modestly offset by a reduction of $1.4 million in other comprehensive losses related to unrealized losses, net of taxes, on securities available-for-sale; the balance of which was $5.0 million at March 31, 2023, and $6.4 million at December 31, 2022. Tangible common equity (non-GAAP) as a percent of total tangible assets at March 31, 2023 increased to 10.13% from 9.84% in the prior quarter, and unrealized losses as a percent of tangible capital equity at March 31, 2023 were reduced to 2.2% from 2.9% in the prior quarter.
The Bank's leverage capital ratio and total risk-based capital ratio were 11.15% and 12.61%, respectively, at March 31, 2023. The Bank elected the three-year phase-in period under the regulatory capital rules, which allow a phase-in of the Day 1 CECL transition adjustment to the regulatory capital at 25% per year over a three-year transition period.
ABOUT BANK OF SOUTHERN CALIFORNIA AND SOUTHERN CALIFORNIA BANCORP
Southern California Bancorp (OTC Pink: BCAL) is a registered bank holding company headquartered in San Diego, California. Bank of Southern California, N.A., a national banking association chartered under the laws of the United States and regulated by the Office of Comptroller of the Currency, is a wholly owned subsidiary of Southern California Bancorp. Established in 2001 and headquartered in San Diego, California, Bank of Southern California, N.A. offers a range of financial products and services to individuals, professionals, and small- to medium-sized businesses through its 13 branch offices serving Orange, Los Angeles, Riversides, San Diego, and Ventura counties, as well as the Inland Empire. The Bank's solutions-driven, relationship-based approach to banking provides accessibility to decision makers and enhances value through strong partnerships with its clients. Additional information is available at www.banksocal.com.
Southern California Bancorp's common stock is traded on the OTC Markets Group Inc. Pink Open Market under the symbol "BCAL." For more information, please visit banksocal.com or call (844) BNK-SOCAL.
NON-GAAP FINANCIAL MEASURES
This press release contains certain non-GAAP financial measures in addition to results presented in accordance with GAAP. The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company's results of operations and financial condition and to enhance investors' overall understanding of such results of operations and financial condition, permit investors to effectively analyze financial trends of our business activities, and enhance comparability with peers across the financial services sector. These non-GAAP financial measures are not a substitute for GAAP measures and should be read in conjunction with the Company's GAAP financial information. A reconciliation of GAAP financial measures to non-GAAP financial measures is included in the accompanying financial tables.
FORWARD-LOOKING STATEMENTS
In addition to historical information, certain matters set forth herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to management's beliefs, projections and assumptions concerning future results and events. Forward-looking statements include descriptions of management's plans or objectives for future operations, products or services, and forecasts of Southern California Bancorp's revenues, earnings, litigation expenses, or other measures of economic performance. Also, forward-looking statements may relate to future outlook and anticipated events. These forward-looking statements involve risks and uncertainties, based on the beliefs and assumptions of management and on the information available to management at the time that such forward-looking statements were made and can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words or phrases such as "aim," "can," "may," "could," "predict," "should," "will," "would," "believe," "anticipate," "estimate," "expect," "hope," "intend," "plan," "potential," "project," "will likely result," "continue," "seek," "shall," "possible," "projection," "optimistic," and "outlook," and variations of these words and similar expressions or the negative version of those words or phrases.
Forward-looking statements involve substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control. Many factors could cause actual results to differ materially from those contemplated by these forward-looking statements. Except to the extent required by applicable law or regulation, Southern California Bancorp does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by law.
Southern California Bancorp and Subsidiary
Financial Highlights (Unaudited)
| At or for the Three Months Ended | ||||||||||||
| March 31, 2023 | December 31, 2022 | March 31, 2022 | ||||||||||
| EARNINGS | ($ in thousands except share and per share data) | |||||||||||
| Net interest income | $ | 24,892 | $ | 25,269 | $ | 17,795 | ||||||
| Provision for credit losses | $ | 202 | $ | 750 | $ | 1850 | ||||||
| Noninterest income | $ | 1,570 | $ | 188 | $ | 1,603 | ||||||
| Noninterest expense | $ | 15,019 | $ | 13,112 | $ | 15,552 | ||||||
| Income tax expense | $ | 3,017 | $ | 3,121 | $ | 550 | ||||||
| Net income | $ | 8,224 | $ | 8,474 | $ | 1,446 | ||||||
| Pre-tax pre-provision income (1) | $ | 11,443 | $ | 12,345 | $ | 3,846 | ||||||
| Adjusted pre-tax pre-provision income (1) | $ | 11,443 | $ | 12,337 | $ | 4,370 | ||||||
| Diluted earnings per share | $ | 0.44 | $ | 0.46 | $ | 0.08 | ||||||
| Ending shares outstanding | 18,271,194 | 17,940,283 | 17,753,849 | |||||||||
| PERFORMANCE RATIOS | ||||||||||||
| Return on average assets | 1.46 | % | 1.46 | % | 0.26 | % | ||||||
| Adjusted return on average assets(1) | 1.46 | % | 1.45 | % | 0.33 | % | ||||||
| Return on average common equity | 12.72 | % | 13.21 | % | 2.37 | % | ||||||
| Adjusted return on average common equity(1) | 12.72 | % | 13.20 | % | 3.00 | % | ||||||
| Yield on total loans | 5.78 | % | 5.47 | % | 4.70 | % | ||||||
| Yield on interest earning assets | 5.53 | % | 5.14 | % | 3.54 | % | ||||||
| Cost of deposits | 0.80 | % | 0.51 | % | 0.08 | % | ||||||
| Cost of funds | 0.88 | % | 0.56 | % | 0.14 | % | ||||||
| Net interest margin | 4.71 | % | 4.62 | % | 3.40 | % | ||||||
| Efficiency ratio (1) | 56.8 | % | 51.5 | % | 80.2 | % | ||||||
| Adjusted efficiency ratio (1) | 56.8 | % | 51.5 | % | 77.5 | % | ||||||
| As of | ||||||||
| March 31, 2023 | December 31, 2022 | |||||||
| CAPITAL | ($ in thousands except share and per share data) | |||||||
| Tangible equity to tangible assets (1) | 10.13 | % | 9.84 | % | ||||
| Book value (BV) per common share | $ | 14.64 | $ | 14.51 | ||||
| Tangible BV per common share (1) | $ | 12.49 | $ | 12.32 | ||||
| ASSET QUALITY | ||||||||
| Allowance for loan losses (ALL) | $ | 22,391 | $ | 17,099 | ||||
| Reserve for unfunded loan commitments | $ | 1,673 | $ | 1,310 | ||||
| Allowance for credit losses (ACL) | $ | 24,064 | $ | 18,409 | ||||
| ALL to total loans | 1.18 | % | 0.90 | % | ||||
| ACL to total loans | 1.27 | % | 0.97 | % | ||||
| Nonperforming loans | $ | 1 | $ | 41 | ||||
| Other real estate owned | $ | - | $ | - | ||||
| Nonperforming assets to total assets | - | % | - | % | ||||
| END OF PERIOD BALANCES | ||||||||
| Total loans, including loans held for sale | $ | 1,894,509 | $ | 1,906,800 | ||||
| Total assets | $ | 2,292,053 | $ | 2,283,927 | ||||
| Deposits | $ | 1,985,856 | $ | 1,931,905 | ||||
| Loans to deposits | 95.4 | % | 98.7 | % | ||||
| Shareholders' equity | $ | 267,539 | $ | 260,355 | ||||
(1)Non-GAAP measure. See - GAAP to Non-GAAP reconciliation
| For the Three Months Ended | ||||||||||||
| ALLOWANCE for CREDIT LOSSES | March 31, 2023 | December 31, 2022 | March 31, 2022 | |||||||||
| ($ in thousands) | ||||||||||||
| Allowance for loan losses (ALL) | ||||||||||||
| Balance at beginning of period | $ | 17,099 | $ | 16,436 | $ | 11,657 | ||||||
| Adoption of ASU 2016-13 (1) | 5,027 | - | - | |||||||||
| Provision for loan losses | 278 | 650 | 1,850 | |||||||||
| Charge-offs | (27 | ) | - | - | ||||||||
| Recoveries | 14 | 13 | 27 | |||||||||
| Net (charge-offs) recoveries | (13 | ) | 13 | 27 | ||||||||
| Balance, end of period | $ | 22,391 | $ | 17,099 | $ | 13,534 | ||||||
| Reserve for unfunded loan commitments | ||||||||||||
| Balance, beginning of period | $ | 1,310 | $ | 1,210 | $ | 804 | ||||||
| Adoption of ASU 2016-13 (1) | 439 | - | - | |||||||||
| Provision (reversal) for loan losses | (76 | ) | 100 | - | ||||||||
| Balance, end of period | 1,673 | 1,310 | 804 | |||||||||
| Allowance for credit losses (ACL) | $ | 24,064 | $ | 18,409 | $ | 14,338 | ||||||
| ALL to total loans | 1.18 | % | 0.90 | % | 0.83 | % | ||||||
| ACL to total loans | 1.27 | % | 0.97 | % | 0.88 | % | ||||||
(1) Represents the impact of adopting ASU 2016-13, Financial Instruments - Credit Losses on January 1, 2023. As a result of adopting ASU 2016-13, our methodology to compute our allowance for credit losses is based on a current expected credit loss methodology, rather than the previously applied incurred loss methodology.
Southern California Bancorp and Subsidiary
Balance Sheets (Unaudited)
| March 31, 2023 | December 31, 2022 | |||||||
| ASSETS | ($ in thousands) | |||||||
| Cash and due from banks | $ | 34,159 | $ | 60,295 | ||||
| Federal funds sold & interest-bearing balances | 67,980 | 26,465 | ||||||
| Total cash and cash equivalents | 102,139 | 86,760 | ||||||
| Securities available-for-sale, at fair value | 124,438 | 112,580 | ||||||
| Securities held-to-maturity, at cost (fair value of $49,713 at March 31, 2023 and $47,906 at December 31, 2022) | 53,864 | 53,946 | ||||||
| Loans held for sale | 577 | 9,027 | ||||||
| Loans held for investment: | ||||||||
| Construction & land development | 256,096 | 239,067 | ||||||
| 1-4 family residential | 154,071 | 144,322 | ||||||
| Multifamily | 227,676 | 218,606 | ||||||
| Other commercial real estate | 936,513 | 958,676 | ||||||
| Commercial & industrial | 314,248 | 331,644 | ||||||
| Other consumer | 5,328 | 5,458 | ||||||
| Total loans held for investment | 1,893,932 | 1,897,773 | ||||||
| Allowance for credit losses - loans | (22,391 | ) | (17,099 | ) | ||||
| Total loans held for investment, net | 1,871,541 | 1,880,674 | ||||||
| Restricted stock at cost | 14,557 | 14,543 | ||||||
| Premises and equipment | 14,105 | 14,334 | ||||||
| Right of use asset | 8,384 | 8,607 | ||||||
| Goodwill | 37,803 | 37,803 | ||||||
| Core deposit intangible | 1,493 | 1,584 | ||||||
| Bank owned life insurance | 38,196 | 37,972 | ||||||
| Deferred taxes, net | 10,492 | 10,699 | ||||||
| Accrued interest and other assets | 14,464 | 15,398 | ||||||
| Total Assets | $ | 2,292,053 | $ | 2,283,927 | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
| Deposits: | ||||||||
| Noninterest-bearing demand | $ | 882,000 | $ | 923,899 | ||||
| Interest bearing NOW accounts | 248,809 | 209,625 | ||||||
| Money market and savings accounts | 677,636 | 668,602 | ||||||
| Time deposits | 177,411 | 129,779 | ||||||
| Total deposits | 1,985,856 | 1,931,905 | ||||||
| Borrowings | 17,794 | 67,770 | ||||||
| Operating lease liability | 10,925 | 11,055 | ||||||
| Accrued interest and other liabilities | 9,939 | 12,842 | ||||||
| Total liabilities | 2,024,514 | 2,023,572 | ||||||
| Shareholders' Equity: | ||||||||
| Common Stock - 50,000,000 Shares Authorized, No Par Value; issued and Outstanding 18,271,194 at March 31, 2023 and 17,940,283 at December 31, 2022) | 219,659 | 218,280 | ||||||
| Retained earnings | 52,889 | 48,516 | ||||||
| Accumulated Other Comprehensive (Loss) Income - Net of Taxes | (5,009 | ) | (6,441 | ) | ||||
| Total shareholders' equity | 267,539 | 260,355 | ||||||
| Total Liabilities and Shareholders' Equity | $ | 2,292,053 | $ | 2,283,927 | ||||
Southern California Bancorp and Subsidiary
Income Statements - Quarterly and Year-to-Date (Unaudited)
| Three Months Ended | ||||||||||||
| March 31, 2023 | December 31, 2022 | March 31, 2022 | ||||||||||
| ($ in thousands except share and per share data) | ||||||||||||
| INTEREST AND DIVIDEND INCOME | ||||||||||||
| Interest and fees on loans | $ | 27,019 | $ | 25,781 | $ | 17,731 | ||||||
| Interest on debt securities | 731 | 647 | 254 | |||||||||
| Interest on tax-exempted debt securities | 487 | 488 | 76 | |||||||||
| Interest and dividends from other institutions | 972 | 1,227 | 424 | |||||||||
| Total interest and dividend income | 29,209 | 28,143 | 18,485 | |||||||||
| INTEREST EXPENSE | ||||||||||||
| Interest on NOW, savings, and money market accounts | 2,903 | 2,096 | 282 | |||||||||
| Interest on time deposits | 975 | 463 | 98 | |||||||||
| Interest on borrowings | 439 | 315 | 310 | |||||||||
| Total interest expense | 4,317 | 2,874 | 690 | |||||||||
| Net interest income | 24,892 | 25,269 | 17,795 | |||||||||
| Provision for credit losses (1) | 202 | 750 | 1,850 | |||||||||
| Net interest income after provision for loan losses | 24,690 | 24,519 | 15,945 | |||||||||
| NONINTEREST INCOME | ||||||||||||
| Service charges and fees on deposit accounts | 439 | 456 | 487 | |||||||||
| Gain on sale of loans | 808 | 293 | 49 | |||||||||
| Bank owned life insurance income | 223 | 221 | 832 | |||||||||
| Servicing and related income on loans | 75 | 53 | 69 | |||||||||
| Loss on sale of debt securities | - | (994 | ) | - | ||||||||
| Other charges and fees | 25 | 159 | 166 | |||||||||
| Total noninterest income | 1,570 | 188 | 1,603 | |||||||||
| NONINTEREST EXPENSE | ||||||||||||
| Salaries and employee benefits | 10,241 | 8,634 | 10,196 | |||||||||
| Occupancy and equipment expenses | 1,447 | 1,458 | 1,410 | |||||||||
| Data processing | 1,056 | 1,089 | 1,420 | |||||||||
| Legal, audit and professional | 785 | 487 | 617 | |||||||||
| Regulatory assessments | 452 | 345 | 339 | |||||||||
| Director and shareholder expenses | 213 | 219 | 195 | |||||||||
| Merger and related (income) expenses | - | (8 | ) | 524 | ||||||||
| Core deposit intangible amortization | 91 | 141 | 99 | |||||||||
| Other expense | 734 | 747 | 752 | |||||||||
| Total noninterest expense | 15,019 | 13,112 | 15,552 | |||||||||
| Income before income tax expense | 11,241 | 11,595 | 1,996 | |||||||||
| Income tax expense | 3,017 | 3,121 | 550 | |||||||||
| Net income | $ | 8,224 | $ | 8,474 | $ | 1,446 | ||||||
| Net income per share - basic | $ | 0.46 | $ | 0.47 | $ | 0.08 | ||||||
| Net income per share - diluted | $ | 0.44 | $ | 0.46 | $ | 0.08 | ||||||
| Pre-tax, pre-provision income (2) | $ | 11,443 | $ | 12,345 | $ | 3,846 | ||||||
| Adjusted pre-tax, pre-provision income (2) | $ | 11,443 | $ | 12,337 | $ | 4,370 | ||||||
(1) Included (reversal) provision for unfunded commitment of $(76) thousand and $100 thousand for the three months ended March 31, 2023 and December 31, 2022. There was no provision for unfunded commitment for the three months ended March 31, 2022.
(2) Non-GAAP measure. See - GAAP to Non-GAAP reconciliation.
Southern California Bancorp and Subsidiary
Average Balance Sheets and Yield Analysis
(Unaudited)
| Three Months Ended | |||||||||||||||||||||||||||||||||||||||
| March 31, 2023 | December 31, 2022 | March 31, 2022 | |||||||||||||||||||||||||||||||||||||
| Average Balance | Income/Expense | Yield/Cost | Average Balance | Income/Expense | Yield/Cost | Average Balance | Income/ Expense | Yield/Cost | |||||||||||||||||||||||||||||||
| Assets | ($ in thousands) | ||||||||||||||||||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||||||||||||||
| Total non-PPP loans | $ | 1,890,758 | $ | 27,005 | 5.79 | % | $ | 1,866,708 | $ | 25,755 | 5.47 | % | $ | 1,496,375 | $ | 16,409 | 4.45 | % | |||||||||||||||||||||
| Total PPP loans | 3,476 | 14 | 1.63 | % | 3,997 | 26 | 2.58 | % | 34,867 | 1,322 | 15.38 | % | |||||||||||||||||||||||||||
| Total loans | 1,894,234 | 27,019 | 5.78 | % | 1,870,705 | 25,781 | 5.47 | % | 1,531,242 | 17,731 | 4.70 | % | |||||||||||||||||||||||||||
| Taxable debt securities | 97,023 | 731 | 3.06 | % | 102,205 | 647 | 2.51 | % | 72,309 | 254 | 1.42 | % | |||||||||||||||||||||||||||
| Tax-exempt debt securities (1) | 74,188 | 487 | 3.37 | % | 73,166 | 488 | 3.35 | % | 15,163 | 76 | 2.57 | % | |||||||||||||||||||||||||||
| Deposits in other financial institutions | 37,611 | 457 | 4.93 | % | 40,781 | 347 | 3.38 | % | 463,977 | 193 | 0.17 | % | |||||||||||||||||||||||||||
| Fed funds sold/resale agreements | 25,306 | 287 | 4.60 | % | 68,437 | 637 | 3.69 | % | 23,822 | 11 | 0.19 | % | |||||||||||||||||||||||||||
| Restricted stock investments and other bank stock | 14,902 | 228 | 6.20 | % | 14,883 | 243 | 6.48 | % | 14,009 | 220 | 6.37 | % | |||||||||||||||||||||||||||
| Total interest-earning assets | 2,143,264 | 29,209 | 5.53 | % | 2,170,177 | 28,143 | 5.14 | % | 2,120,522 | 18,485 | 3.54 | % | |||||||||||||||||||||||||||
| Total non-interest-earning assets | 134,707 | 139,205 | 139,279 | ||||||||||||||||||||||||||||||||||||
| Total assets | $ | 2,277,971 | $ | 2,309,382 | $ | 2,259,801 | |||||||||||||||||||||||||||||||||
| Liabilities and Shareholders' Equity | |||||||||||||||||||||||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||||||
| Interest-bearing NOW accounts | $ | 206,785 | $ | 316 | 0.62 | % | $ | 215,272 | $ | 121 | 0.22 | % | $ | 190,530 | $ | 81 | 0.17 | % | |||||||||||||||||||||
| Money market and savings accounts | 685,368 | 2,587 | 1.53 | % | 700,544 | 1,975 | 1.12 | % | 694,155 | 201 | 0.12 | % | |||||||||||||||||||||||||||
| Time deposits | 152,613 | 975 | 2.59 | % | 123,524 | 463 | 1.49 | % | 97,030 | 98 | 0.41 | % | |||||||||||||||||||||||||||
| Total interest-bearing deposits | 1,044,766 | 3,878 | 1.51 | % | 1,039,340 | 2,559 | 0.98 | % | 981,715 | 380 | 0.16 | % | |||||||||||||||||||||||||||
| Borrowings: | |||||||||||||||||||||||||||||||||||||||
| FHLB advances | 14,356 | 168 | 4.75 | % | 3,696 | 44 | 4.72 | % | - | - | - | % | |||||||||||||||||||||||||||
| Subordinated debt | 17,783 | 271 | 6.18 | % | 17,759 | 271 | 6.05 | % | 17,688 | 272 | 6.24 | % | |||||||||||||||||||||||||||
| TruPS | - | - | - | % | - | - | - | % | 2,737 | 38 | 5.63 | % | |||||||||||||||||||||||||||
| Total borrowings | 32,139 | 439 | 5.54 | % | 21,455 | 315 | 5.82 | % | 20,425 | 310 | 6.16 | % | |||||||||||||||||||||||||||
| Total interest-bearing liabilities | 1,076,905 | 4,317 | 1.63 | % | 1,060,795 | 2,874 | 1.07 | % | 1,002,140 | 690 | 0.28 | % | |||||||||||||||||||||||||||
| Non-interest-bearing liabilities: | |||||||||||||||||||||||||||||||||||||||
| Noninterest-bearing deposits (2) | 915,160 | 970,908 | 990,185 | ||||||||||||||||||||||||||||||||||||
| Other liabilities | 23,788 | 23,199 | 19,746 | ||||||||||||||||||||||||||||||||||||
| Shareholders' equity | 262,118 | 254,480 | 247,730 | ||||||||||||||||||||||||||||||||||||
| Total Liabilities and Shareholders' Equity | $ | 2,277,971 | $ | 2,309,382 | $ | 2,259,801 | |||||||||||||||||||||||||||||||||
| Net interest spread | 3.90 | % | 4.07 | % | 3.26 | % | |||||||||||||||||||||||||||||||||
| Net interest income and margin | $ | 24,892 | 4.71 | % | $ | 25,269 | 4.62 | % | $ | 17,795 | 3.40 | % | |||||||||||||||||||||||||||
| Cost of deposits | 0.80 | % | 0.51 | % | 0.08 | % | |||||||||||||||||||||||||||||||||
| Cost of funds | 0.88 | % | 0.56 | % | 0.14 | % | |||||||||||||||||||||||||||||||||
(1) Tax-exempt debt securities yields are presented on a tax equivalent basis using a 21% tax rate.
(2) Average noninterest-bearing deposits represent 46.69%, 48.30% and 50.21% of average total deposits for the three months ended March 31, 2023, December 31, 2022 and March 31, 2022.
Southern California Bancorp and Subsidiary
GAAP to Non-GAAP Reconciliation
(Unaudited)
The following tables present a reconciliation of non-GAAP financial measures to GAAP measures for: (1) adjusted net income, (2) efficiency ratio, (3) adjusted efficiency ratio, (4) pre-tax pre-provision income, (5) adjusted pre-tax pre-provision income, (6) average tangible common equity, (7) adjusted return on average assets, (8) adjusted return on average equity, (9) return on average tangible common equity, (10) adjusted return on average tangible common equity, (11) tangible common equity, (12) tangible assets, (13) tangible common equity to tangible asset ratio, and (14) tangible book value per share. We believe the presentation of certain non-GAAP financial measures provides useful information to assess our consolidated financial condition and consolidated results of operations and to assist investors in evaluating our financial results relative to our peers. These non-GAAP financial measures complement our GAAP reporting and are presented below to provide investors and others with information that we use to manage the business each period. Because not all companies use identical calculations, the presentation of these non-GAAP financial measures may not be comparable to other similarly titled measures used by other companies. These non-GAAP measures should be taken together with the corresponding GAAP measures and should not be considered a substitute of the GAAP measures.
| Three Months Ended | ||||||||||||
| March 31, 2023 | December 31, 2022 | March 31, 2022 | ||||||||||
| ($ in thousands) | ||||||||||||
| Adjusted net income | ||||||||||||
| Net income | $ | 8,224 | $ | 8,474 | $ | 1,446 | ||||||
| (Deduct)/add: After-tax merger and related (income) expenses (1) | - | (6 | ) | 387 | ||||||||
| Adjusted net income (non-GAAP) | $ | 8,224 | $ | 8,468 | $ | 1,833 | ||||||
| Efficiency Ratio | ||||||||||||
| Noninterest expense | $ | 15,019 | $ | 13,112 | $ | 15,552 | ||||||
| Less: Merger and related (income) expenses | - | (8 | ) | 524 | ||||||||
| Adjusted noninterest expense | $ | 15,019 | $ | 13,120 | $ | 15,028 | ||||||
| Net interest income | 24,892 | 25,269 | 17,795 | |||||||||
| Noninterest income | 1,570 | 188 | 1,603 | |||||||||
| Total net interest income and noninterest income | $ | 26,462 | $ | 25,457 | $ | 19,398 | ||||||
| Efficiency ratio (non-GAAP) | 56.8 | % | 51.5 | % | 80.2 | % | ||||||
| Adjusted efficiency ratio (non-GAAP) | 56.8 | % | 51.5 | % | 77.5 | % | ||||||
| Pre-tax pre-provision income | ||||||||||||
| Net interest income | $ | 24,892 | $ | 25,269 | $ | 17,795 | ||||||
| Noninterest income | 1,570 | 188 | 1,603 | |||||||||
| Total net interest income and noninterest income | 26,462 | 25,457 | 19,398 | |||||||||
| Less: Noninterest expense | 15,019 | 13,112 | 15,552 | |||||||||
| Pre-tax pre-provision income (non-GAAP) | $ | 11,443 | $ | 12,345 | $ | 3,846 | ||||||
| (Deduct)/add: Merger and related (income) expenses | - | (8 | ) | 524 | ||||||||
| Adjusted pre-tax pre-provision income (non-GAAP) | $ | 11,443 | $ | 12,337 | $ | 4,370 | ||||||
| Return on Average Assets, Equity, and Tangible Equity | ||||||||||||
| Net income | $ | 8,224 | $ | 8,474 | $ | 1,446 | ||||||
| Adjusted net income (non-GAAP) | $ | 8,224 | $ | 8,468 | $ | 1,833 | ||||||
| Average assets | $ | 2,277,971 | $ | 2,309,382 | $ | 2,259,801 | ||||||
| Average shareholders' equity | 262,118 | 254,480 | 247,730 | |||||||||
| Less: Average intangible assets | 39,340 | 39,475 | 38,760 | |||||||||
| Average tangible common equity (non-GAAP) | $ | 222,778 | $ | 215,005 | $ | 208,970 | ||||||
(1) After-tax merger and related (income) expenses are presented using a 29.56% tax rate on taxable merger and related (income) expenses.
| Three Months Ended | ||||||||||||
| March 31, 2023 | December 31, 2022 | March 31, 2022 | ||||||||||
| ($ in thousands) | ||||||||||||
| Return on average assets | 1.46 | % | 1.46 | % | 0.26 | % | ||||||
| Adjusted return on average assets (non-GAAP) | 1.46 | % | 1.45 | % | 0.33 | % | ||||||
| Return on average equity | 12.72 | % | 13.21 | % | 2.37 | % | ||||||
| Adjusted return on average equity (non-GAAP) | 12.72 | % | 13.20 | % | 3.00 | % | ||||||
| Return on average tangible common equity (non-GAAP) | 14.97 | % | 15.64 | % | 2.81 | % | ||||||
| Adjusted return on average tangible common equity (non-GAAP) | 14.97 | % | 15.63 | % | 3.56 | % | ||||||
| March 31, 2023 | December 31, 2022 | |||||||
| ($ in thousands except share and per share data) | ||||||||
| Tangible Common Equity Ratio/Tangible Book Value Per Share | ||||||||
| Shareholders' equity | $ | 267,539 | $ | 260,355 | ||||
| Less: Intangible assets | 39,296 | 39,387 | ||||||
| Tangible common equity (non-GAAP) | $ | 228,243 | $ | 220,968 | ||||
| Total assets | $ | 2,292,053 | $ | 2,283,927 | ||||
| Less: Intangible assets | 39,296 | 39,387 | ||||||
| Tangible assets (non-GAAP) | $ | 2,252,757 | $ | 2,244,540 | ||||
| Equity to asset ratio | 11.67 | % | 11.40 | % | ||||
| Tangible common equity to tangible asset ratio (non-GAAP) | 10.13 | % | 9.84 | % | ||||
| Book value per share | $ | 14.64 | $ | 14.51 | ||||
| Tangible book value per share (non-GAAP) | $ | 12.49 | $ | 12.32 | ||||
| Shares outstanding | 18,271,194 | 17,940,283 | ||||||
INVESTOR RELATIONS CONTACT
Kevin Mc Cabe
Bank of Southern California
kmccabe@banksocal.com
818.637.7065
