SANTA CRUZ, Calif., April 22, 2025 /PRNewswire/ -- West Coast Community Bancorp ("Bancorp", OTCQX: SCZC), the parent company of West Coast Community Bank, formerly known as Santa Cruz County Bank (the "Bank"), today announced unaudited quarterly earnings of $11.7 million, or $1.10 per dilutive share, for the quarter ended March 31, 2025, compared to $3.8 million, or $0.36 per dilutive share, for the prior quarter and $9.3 million, or $1.10 per dilutive share, for the quarter ended March 31, 2024. Excluding after-tax charges related to the merger with 1st Capital Bancorp of $357 thousand and $10.2 million for the quarters ended March 31, 2025, and December 31, 2024, respectively, adjusted net income (non-GAAP1) would have been $12.0 million and $14.0 million for each of those quarters, respectively.
"Our strong results this quarter reflect continued earnings momentum generated by the efficient integration of our merger with 1st Capital Bancorp, sustained organic loan growth and disciplined expense management," said Krista Snelling, President and Chief Executive Officer of West Coast Community Bancorp. "Rebranding to West Coast Community Bank, effective April 1, also positions us for continued expansion and deeper community impact throughout our four-county region spanning the Central Coast and Silicon Valley."
On April 17, 2025, the Board of Directors of Bancorp declared a quarterly cash dividend of $0.20 per common share, an increase of $0.01 from the prior quarter, payable on May 6, 2025, to shareholders of record at the close of business on April 29, 2025.
"The Board's decision to increase the dividend again this quarter upholds our commitment to enhancing value for our shareholders, including those who joined us from 1st Capital Bancorp last fall," stated Stephen Pahl, Chairman of the Board of Directors. "The dividend increase also demonstrates our confidence in the financial strength, earnings potential and excellent client-focused bankers of West Coast Community Bank."
Financial Highlights
Performance highlights as of and for the quarter ended March 31, 2025, included the following:
- Gross loans, net of unaccreted purchase discount, totaled $2.1 billion at March 31, 2025, an increase of $60.0 million, or 3%, compared to December 31, 2024, and an increase of $726.5 million, or 53%, compared to March 31, 2024. Loan growth during the first quarter of 2025 was driven by organic originations primarily sourced by the new production team in Silicon Valley, who contributed to commercial and industrial ("C&I") and construction loan growth during the quarter of $18.8 million and $8.9 million, respectively. The strong growth in C&I loans allows the Bank to diversify its lending portfolio and build core deposit relationships. Besides organic growth, the increase in loans from March 31, 2024, was significantly bolstered by the merger with 1st Capital Bancorp, which added $603.1 million in acquired loans (net of fair value adjustments) as of October 1, 2024.
- Quarterly net income was $11.7 million, compared to $3.8 million for the prior quarter and $9.3 million for the quarter ended March 31, 2024. The increase in net income for this quarter was due to a decrease in after-tax charges related to the merger with 1st Capital Bancorp when compared to the quarter ended December 31, 2024. The increase over March 31, 2024, was mainly due to the merger with 1st Capital Bancorp as well as organic growth. Adjusted net income (non-GAAP1) for the quarter ended March 31, 2025, excluding after-tax charges related to the merger of $357 thousand, would have been $12.0 million. Adjusted net income (non-GAAP1) for the quarter ended December 31, 2024, would have been $14.0 million. The decrease in adjusted net income (non-GAAP1) in the first quarter of 2025 compared to the fourth quarter of 2024 was primarily driven by: 1) decline in accretion of purchase discount on acquired loans of $1.1 million, mainly due to less accelerated accretion of purchase discount from early loan pay-offs in the first quarter of 2025 compared to the prior quarter, combined with the seasoning effect of the acquired loan portfolio; and 2) the increase in provision for credit losses on originated loans of $1.1 million in the first quarter of 2025 compared to the fourth quarter of 2024, resulting from stronger organic loan growth in the first quarter of 2025.
- Basic and diluted earnings per share in the first quarter of 2025 and 2024 were $1.11 and $1.10, respectively. Basic and diluted earnings per share in the fourth quarter of 2024 were $0.37 and $0.36, respectively. Adjusted basic and diluted earnings per share (non-GAAP1) for the quarter ended March 31, 2025, excluding after-tax charges related to the merger with 1st Capital Bancorp, would have been $1.15 and $1.13, respectively. Adjusted basic and diluted earnings per share (non-GAAP1) for the quarter ended December 31, 2024, would have been $1.34 and $1.32, respectively.
- Total assets were $2.7 billion at March 31, 2025, a decrease of $22.2 million, or 1%, compared to December 31, 2024, and an increase of $945.6 million, or 55%, compared to March 31, 2024. Decrease over year-end 2024 was mainly driven by seasonal outflow of deposits of $54.2 million which contributed to the decrease in cash and cash equivalents of $39.7 million, combined with a strategic sale of investments of $20.2 million to fund loan growth, partially offset by an increase in net loans of $58.6 million. Increase over March 31, 2024, was largely the result of the merger with 1st Capital Bancorp, which added $994.3 million in assets including $14.3 million of goodwill and $27.7 million of core deposit intangible assets.
- Primary liquidity ratio, defined as cash and equivalents, deposits held in other banks and unpledged available-for-sale ("AFS") securities as a percentage of total assets, were 11.8%, 14.5% and 11.7% at March 31, 2025, December 31, 2024, and March 31, 2024, respectively.
- Deposits totaled $2.3 billion at March 31, 2025, a decrease of $54.2 million, or 2%, compared to December 31, 2024, and an increase of $800.3 million, or 55%, compared to March 31, 2024. There were no brokered deposits at March 31, 2025. The decrease in deposits during the first quarter of 2025 was mainly driven by seasonal outflows associated with agriculture and non-profit depositors. These decreases were partially offset by gains from new relationships and in the Bank's expanding market in Salinas. The increase over March 31, 2024, was largely the result of the merger with 1st Capital Bancorp.
- Nonaccrual loans totaled $2.3 million, or 0.11%, of gross loans at March 31, 2025, an increase of $1.6 million from December 31, 2024, and an increase of $2.2 million from March 31, 2024. The March 31, 2025, non-accrual loans primarily consist of two real estate secured loans: one $1.7 million loan secured by undeveloped land in the process of foreclosure with no anticipated loss, and another $504 thousand acquired loan secured by real estate with an adequate reserve established.
- The allowance for credit losses ("ACL"), reflecting management's reasonable estimate of credit losses for the expected life of the loans in the portfolio, totaled $33.1 million, or 1.57%, of total loans at March 31, 2025, compared to $31.6 million, or 1.55%, at December 31, 2024. The slight increase in the ACL to loans ratio during the first quarter of 2025 was primarily driven by strong net loan growth in commercial revolving lines and construction loans, which carry higher estimated loss reserve rates. Model assumptions remained stable, reflecting a consistent economic condition qualitative factor and minimal changes during the first quarter of 2025 under the discounted cash flow methodology. While recent stock market volatility and policy uncertainty prompted close review, key credit indicators remain stable and the broader economic condition has not shown measurable deterioration as of March 31, 2025, compared to December 31, 2024. Management continues to monitor economic outlook but did not deem the related qualitative risk factors warranted adjustment during the first quarter of 2025.
- The provision for credit losses was $1.4 million, consisting of $1.5 million provision for loan losses and a $100 thousand reversal for credit losses on unfunded credit commitments during the first quarter of 2025, compared to a $7.9 million provision during the fourth quarter of 2024 and a $1.0 million reversal in the first quarter of 2024. The provision expense in the first quarter of 2025 was primarily due to organic loan growth, with additional minor impacts from changes in loan portfolio mix and increase in specific reserves on individually evaluated loans. The provision during the fourth quarter of 2024 was primarily due to the provision for loans acquired during the merger with 1st Capital Bancorp.
- Taxable equivalent net interest margin was 5.29% in the first quarter of 2025, compared to 5.38% in the prior quarter and 4.87% for the first quarter of 2024. The decrease from prior quarter was the result of less purchase discount accretion on the acquired loan portfolio, partially offset by decreased cost of deposits. Net interest margin excluding the purchase discount accretion on the acquired loan portfolio was 4.86% in the first quarter of 2025, an increase of 0.07% over the preceding quarter driven by easing funding pressure.
- The Bank's cost of funds was 1.32% in the first quarter of 2025 compared to 1.37% in the prior quarter. The decrease of 5 basis points in cost of funds was primarily due to management's discretionary decrease in deposit rates on certain higher costing deposit accounts and a decreased reliance on wholesale deposits.
- For the quarters ended March 31, 2025, and December 31, 2024, return on average assets ("ROAA") was 1.78% and 0.57%, respectively, return on average equity ("ROAE") was 13.83% and 4.55%, respectively, and return on average tangible equity ("ROATE") was 17.23% and 5.72%, respectively. Excluding merger-related items for the quarter ended March 31, 2025, adjusted ROAA (non-GAAP1) was 1.84%, adjusted ROAE (non-GAAP1) was 14.25% and adjusted ROATE (non-GAAP1) was 17.76%. Excluding merger-related items for the quarter ended December 31, 2024, adjusted ROAA (non-GAAP1) was 2.08%, adjusted ROAE (non-GAAP1) was 16.65% and adjusted ROATE (non-GAAP1) was 20.94%.
- The efficiency ratio was 46.48% for the first quarter of 2025, compared to 61.62% in the prior quarter and 42.81% in the first quarter of 2024. Excluding merger-related items, adjusted efficiency ratio (non-GAAP1) was 45.38% for the first quarter of 2025 and 43.05% for the fourth quarter of 2024.
- All capital ratios were above regulatory requirements for a well-capitalized institution with a total risk-based capital ratio of 14.23% at March 31, 2025, compared to 14.00% at December 31, 2024. Tangible common equity to tangible asset ratio was 10.75% at March 31, 2025, compared to 10.14% at December 31, 2024.
- Tangible book value per share was $26.32 at March 31, 2025, compared to $25.09 at December 31, 2024, and $25.05 at March 31, 2024. Increase was driven by net income of $11.7 million during the first quarter combined with an improvement in after-tax accumulated other comprehensive losses of $2.7 million.
1Non-GAAP measure. See Non-GAAP Financial Measures table for reconciliation to GAAP financial measures below. |
Merger with 1st Capital Bancorp
The merger between West Coast Community Bancorp and 1st Capital Bancorp (the "Merger") was closed on October 1, 2024, with the core system conversion completed in December 2024. At the effective time of the closing, each share of 1st Capital Bancorp common stock was converted into the right to receive 0.36 shares of common stock of Bancorp. As a result, 2,071,483 Bancorp shares were issued as of October 1, 2024. No significant expenses related to the merger of 1st Capital Bancorp are expected to incur beyond March 31, 2025, and the overhead cost savings resulting from the synergy of the merger has been in line with initial management estimates.
Interest Income, Interest Expense and Net Interest Margin
Net interest income of $32.3 million in the first quarter of 2025 decreased $1.8 million from $34.1 million for the quarter ended December 31, 2024. The quarter-over-quarter decrease was largely the result of a decline in purchase discount accretion on the acquired loan portfolio from $3.8 million in the fourth quarter of 2024, which was elevated due to early loan payoffs, to $2.6 million in the first quarter of 2025. The Bank's cost of funds decreased 5 basis points from 1.37% in the fourth quarter of 2024 to 1.32% in the first quarter of 2025. The decrease in the cost of funds was driven by reduction in deposit rates on selective deposit accounts and less reliance on high-cost wholesale funding sources during the first quarter of 2025 compared to the preceding quarter.
For the first quarter of 2025, taxable equivalent net interest margin was 5.29%, compared to 5.38% in the fourth quarter of 2024 and 4.87% for the corresponding quarter in 2024. The decline from the prior quarter was driven by the decrease in accretion of purchase discount on acquired loans as discussed above, partially offset by decreased funding costs. Excluding the accretion of purchase discounts on acquired loans would adjust the net interest margin (non-GAAP1) for the first quarter of 2025 to 4.86% and for the fourth quarter of 2024 to 4.79%.
The following tables compare interest income, average interest-earning assets, interest expense, average interest-bearing liabilities, net interest income, net interest margin and cost of funds for each period reported.
For the Quarters Ended | ||||||||||||||||||||||||
March 31, 2025 | December 31, 2024 | March 31, 2024 | ||||||||||||||||||||||
Average | Interest | Avg | Average | Interest | Avg | Average | Interest | Avg | ||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Interest-earning due from banks | $ | 26,732 | $ | 290 | 4.40 % | $ | 83,210 | $ | 928 | 4.44 % | $ | 29,870 | $ | 212 | 2.85 % | |||||||||
Investments* | 394,328 | 3,305 | 3.40 % | 421,681 | 3,519 | 3.32 % | 253,054 | 1,082 | 1.72 % | |||||||||||||||
Loans* | 2,070,473 | 36,362 | 7.12 % | 2,023,902 | 37,845 | 7.44 % | 1,397,298 | 24,405 | 7.02 % | |||||||||||||||
Total interest-earning assets | 2,491,533 | 39,957 | 6.50 % | 2,528,793 | 42,292 | 6.65 % | 1,680,222 | 25,699 | 6.15 % | |||||||||||||||
Noninterest-earning assets | 163,239 | 164,421 | 71,198 | |||||||||||||||||||||
Total assets | $ | 2,654,772 | $ | 2,693,214 | $ | 1,751,420 | ||||||||||||||||||
LIABILITIES | ||||||||||||||||||||||||
Interest checking deposits | $ | 264,206 | $ | 642 | 0.99 % | $ | 356,531 | $ | 630 | 0.70 % | $ | 213,075 | $ | 447 | 0.84 % | |||||||||
Money market deposits | 709,186 | 4,864 | 2.78 % | 580,526 | 4,817 | 3.30 % | 414,490 | 2,686 | 2.61 % | |||||||||||||||
Savings deposits | 176,889 | 341 | 0.78 % | 183,240 | 353 | 0.77 % | 99,202 | 116 | 0.47 % | |||||||||||||||
Time certificates of deposits | 165,997 | 1,339 | 3.27 % | 180,334 | 1,643 | 3.62 % | 139,731 | 1,144 | 3.29 % | |||||||||||||||
Brokered deposits | - | - | - | 28,284 | 380 | 5.34 % | 66,790 | 883 | 5.32 % | |||||||||||||||
Short-term borrowings | 3,861 | 43 | 4.52 % | - | 3 | 4.90 % | 4,797 | 68 | 5.74 % | |||||||||||||||
Subordinated debt | 11,638 | 238 | 8.30 % | 11,551 | 237 | 8.16 % | - | - | 0.00 % | |||||||||||||||
Total interest-bearing liabilities | 1,331,777 | 7,467 | 2.27 % | 1,340,466 | 8,063 | 2.39 % | 938,085 | 5,344 | 2.29 % | |||||||||||||||
Noninterest-bearing deposits | 956,204 | 994,214 | 560,864 | |||||||||||||||||||||
Other noninterest-bearing liabilities | 24,242 | 22,827 | 17,870 | |||||||||||||||||||||
Total liabilities | 2,312,223 | 2,357,507 | 1,516,819 | |||||||||||||||||||||
EQUITY | 342,549 | 335,707 | 234,601 | |||||||||||||||||||||
Total liabilities and equity | $ | 2,654,772 | $ | 2,693,214 | $ | 1,751,420 | ||||||||||||||||||
Net interest income/margin-taxable equivalent adjusted | ||||||||||||||||||||||||
$ | 32,490 | 5.29 % | $ | 34,229 | 5.38 % | $ | 20,355 | 4.87 % | ||||||||||||||||
GAAP net interest income | $ | 32,345 | $ | 34,076 | $ | 20,313 | ||||||||||||||||||
Cost of funds | 1.32 % | 1.37 % | 1.43 % | |||||||||||||||||||||
*Interest income on investments and loans is reported as tax equivalent basis. Prior period figures have been restated for comparability. |
Noninterest Income and Expense
Noninterest income for the quarter ended March 31, 2025, was $999 thousand compared to $911 thousand for the previous quarter and $1.0 million in the first quarter of 2024. First quarter of 2025 results reflected a $257 thousand loss on the sale of investments while the fourth quarter of 2024 results reflected a $509 thousand loss on the sale of the Bank's Monterey branch building as a result of branch consolidation post-merger with 1st Capital Bancorp. Starting in December 2024, the Bank also temporarily waived monthly service and account analysis fees for business deposit clients from 1st Capital Bank, resulting in $87 thousand lower service charge income in the first quarter of 2025 compared to the fourth quarter of 2024.
Noninterest expense was $15.5 million in the first quarter of 2025 compared to $21.6 million in the prior quarter and $9.1 million in the same quarter last year. The decrease from prior quarter is due to $250 thousand in merger-related expenses during the current quarter, compared to $6.3 million in the fourth quarter of 2024. The first quarter of 2025 reflected costs of $126 thousand related to the facilities the Bank exited that are not expected to continue in the remainder of 2025, in addition to $74 thousand of rebranding costs. The increase from the same quarter last year is also due to merger-related growth, particularly $3.1 million higher personnel expenses and $984 thousand higher amortization of core deposit intangibles.
Liquidity Position
The following table summarizes the Bank's liquidity as of March 31, 2025, and December 31, 2024:
As of | ||||||
(Dollars in thousands) | 3/31/2025 | 12/31/2024 | ||||
Cash and due from banks | $ | 45,350 | $ | 85,007 | ||
Unencumbered AFS securities | 268,525 | 302,386 | ||||
Total on-balance-sheet liquidity | 313,875 | 387,393 | ||||
Line of credit from the Federal Home Loan Bank of San Francisco - collateralized | 639,607 | 645,716 | ||||
Line of credit from the Federal Reserve Bank of San Francisco - collateralized | 357,453 | 322,258 | ||||
Lines at correspondent banks - unsecured | 100,000 | 95,000 | ||||
Total external contingency liquidity capacity | 1,097,060 | 1,062,974 | ||||
Less: short-term borrowings | (20,000) | - | ||||
Net available liquidity sources | $ | 1,390,935 | $ | 1,450,367 | ||
As of March 31, 2025, net liquidity exceeded uninsured and uncollateralized deposits of $1.1 billion, with a coverage ratio of 131%.
Investment Portfolio
Securities issued by U.S. Government-sponsored agencies, U.S. Treasury bonds and SBA securities accounted for 38%, 28% and 2% of the investment portfolio as of March 31, 2025, respectively. These securities carry explicit or implicit credit guarantees from the U.S. government and thus present minimal credit or liquidity risk. Municipal bonds, corporate bonds, private-label collateralized mortgage obligations and asset-backed instruments represent 25%, 4%, 2% and 1% of the carrying value of the portfolio, respectively. The investment portfolio decreased from $407.7 million as of December 31, 2024, to $371.3 million as of March 31, 2025, primarily due to sales of $20.2 million and maturities of $16.6 million during the quarter. The investment portfolio had an average life of 5.6 years as of March 31, 2025, compared to 5.4 years as of December 31, 2024. Net unrealized losses on AFS securities totaled $14.9 million ($10.5 million after-tax) at March 31, 2025, compared to $18.8 million ($13.2 million after-tax) at December 31, 2024. Held-to-maturity securities totaled $6.6 million at March 31, 2025, with $455 thousand of pre-tax unrealized losses, compared to $469 thousand pre-tax unrealized losses at December 31, 2024.
Loans and Asset Quality
Gross loans, net of unaccreted purchase discount, increased $60.0 million, or 3%, from December 31, 2024, and increased $726.5 million, or 53%, compared to March 31, 2024. New loan commitments generated were $130.9 million during the first quarter of 2025. Loan growth during the first quarter of 2025 was driven by organic originations primarily sourced by the new production team in Silicon Valley, who contributed to C&I and construction loan growth during the quarter of $18.8 million and $8.9 million, respectively. The strong growth in C&I loans positions the Bank to diversify the Bank's lending portfolio, with $58.5 million in new lines of credit commitments booked in the first quarter of 2025. Alongside organic growth, the increase in loans from March 31, 2024, was significantly bolstered by the merger with 1st Capital Bancorp, which added $603.1 million in acquired loans net of fair value adjustment as of October 1, 2024.
Nonaccrual loans increased $1.6 million from December 31, 2024, and $2.2 million from March 31, 2024, to $2.3 million, or 0.11%, of gross loans. The March 31, 2025, balance primarily reflects two real estate secured loans, including one $1.7 million loan secured by undeveloped land in the process of foreclosure with no anticipated loss and another $504 thousand acquired loan secured by real estate that has been adequately reserved for by the Bank. Loans past due 30-89 days increased $6.8 million from December 31, 2024, and increased $7 million from March 31, 2024, to $7.2 million. The increase in past due loans is primarily due to SBA 7(a) loans secured by real estate, of which the total government guaranteed amount on these loans as of March 31, 2025, was $4.3 million.
The allowance for credit losses was $33.1 million at March 31, 2025, or 1.57% of total loans, and $31.6 million at December 31, 2024, or 1.55% of the total loans. The allowance for credit losses allocated to individually evaluated loans were $534 thousand and $235 thousand as of March 31, 2025, and December 31, 2024, respectively. The allowance on unfunded credit commitments, presented as part of other liabilities, as a percentage of unfunded credit commitments was 0.33% at March 31, 2025, a slight decrease from 0.35% at December 31, 2024. The slight increase in the ACL to loan ratio during the first quarter of 2025 was primarily driven by loan growth, particularly in commercial revolving lines and construction loans, which carry higher reserve rates. Model inputs remained stable, reflecting consistent economic conditions and minimal changes during the first quarter of 2025. While recent market volatility and tariff policy uncertainty prompted close review, key credit indicators remain stable and the broader economic outlook has not shown measurable deterioration.
The following tables summarize the Bank's loan mix as well as delinquent and nonperforming loans:
As of | Change % vs. | ||||||||||||
(Dollars in thousands) | 3/31/2025 | 12/31/2024 | 3/31/2024 | 12/31/2024 | 3/31/2024 | ||||||||
Loans held for sale | $ | - | $ | - | $ | 27,224 | 0 % | -100 % | |||||
SBA and B&I loans | 183,743 | 183,240 | 140,916 | 0 % | 30 % | ||||||||
Commercial term loans | 130,559 | 121,238 | 105,309 | 8 % | 24 % | ||||||||
Revolving commercial lines | 174,810 | 148,336 | 111,420 | 18 % | 57 % | ||||||||
Asset-based lines of credit | 29,990 | 28,788 | 17,674 | 4 % | 70 % | ||||||||
Construction loans | 211,085 | 191,772 | 137,460 | 10 % | 54 % | ||||||||
Commercial real estate loans | 1,364,071 | 1,364,352 | 805,218 | 0 % | 69 % | ||||||||
Home equity lines of credit | 34,950 | 33,853 | 29,378 | 3 % | 19 % | ||||||||
Consumer and other loans | 1,779 | 2,125 | 2,064 | -16 % | -14 % | ||||||||
Deferred loan expenses, net of fees | 2,240 | 2,133 | 2,098 | 5 % | 7 % | ||||||||
Total loans, net of deferred | |||||||||||||
expenses/fees | 2,133,227 | 2,075,837 | 1,378,761 | 3 % | 55 % | ||||||||
Purchase discount on acquired loans | (27,980) | (30,622) | - | -9 % | 100 % | ||||||||
Total loans, net of unaccreted | |||||||||||||
purchase discount | $ | 2,105,247 | $ | 2,045,215 | $ | 1,378,761 | 3 % | 53 % | |||||
As of or for the Quarter Ended | |||||||||||||
(Dollars in thousands) | 3/31/2025 | 12/31/2024 | 3/31/2024 | ||||||||||
Loans past due 30-89 days | $ | 7,192 | $ | 387 | $ | 143 | |||||||
Delinquent loans | - | - | - | ||||||||||
Nonaccrual loans | 2,259 | 618 | 90 | ||||||||||
Other real estate owned | - | - | - | ||||||||||
Nonperforming assets | 2,259 | 618 | 90 | ||||||||||
Net loan charge-offs QTD | 5 | - | - | ||||||||||
Net loan charge-offs YTD | 5 | 55 | - | ||||||||||
Deposits
Deposits totaled $2.3 billion at March 31, 2025, a decrease of $54.2 million, or 2%, compared to December 31, 2024, and an increase of $800.3 million, or 55%, compared to March 31, 2024. The decrease in deposits is attributed to the seasonality of large depositors in the agricultural sector, with the primary planting season on the Central Coast underway. Outflow from notable clients in the agriculture industry contributed to more than $40 million in deposit decreases in the first quarter. Additionally, $22.9 million in runoff was attributed to large non-for-profit clients that issued significant grants and donations through the first quarter. A $10 million time certificate of deposit issued to the State of California also matured in the first quarter and was not renewed at the Bank's discretion.
Decreases were partially offset by gains from new client relationships established in the first quarter, which totaled $23 million at March 31, 2024. Organic deposit growth in the Bank's expanding market in Salinas totaled $9.6 million. Noninterest-bearing deposits to total deposits decreased slightly from 43.9% at December 31, 2024, to 42.3% at March 31, 2025.
The 10 largest deposit relationships, excluding fully collateralized government agency deposits, represent approximately 11% of total deposits as of March 31, 2025, compared to 13% as of December 31, 2024, and 12% as of March 31, 2024.
The following table summarizes the Bank's deposit mix:
As of | Change % vs. | ||||||||||||
(Dollars in thousands) | 3/31/2025 | 12/31/2024 | 3/31/2024 | 12/31/2024 | 3/31/2024 | ||||||||
Noninterest-bearing demand | $ | 954,663 | $ | 1,014,263 | $ | 564,595 | -6 % | 69 % | |||||
Interest-bearing demand | 250,585 | 270,254 | 213,494 | -7 % | 17 % | ||||||||
Money markets | 718,465 | 668,584 | 408,026 | 7 % | 76 % | ||||||||
Savings | 171,670 | 183,507 | 95,670 | -6 % | 79 % | ||||||||
Time certificates of deposit | 160,866 | 173,875 | 137,251 | -7 % | 17 % | ||||||||
Brokered deposits | - | - | 36,940 | 0 % | -100 % | ||||||||
Total deposits | $ | 2,256,249 | $ | 2,310,483 | $ | 1,455,976 | -2 % | 55 % | |||||
Deposits - personal | 776,856 | 794,990 | 515,499 | -2 % | 51 % | ||||||||
Deposits - business | 1,479,393 | 1,515,493 | 903,537 | -2 % | 64 % | ||||||||
Deposits - brokered | - | - | 36,940 | 0 % | -100 % | ||||||||
Total deposits | $ | 2,256,249 | $ | 2,310,483 | $ | 1,455,976 | -2 % | 55 % | |||||
Shareholders' Equity
Total shareholders' equity was $345.7 million at March 31, 2025, a $12.7 million, or 4%, increase compared to December 31, 2024, and an increase of $107.6 million, or 45% compared to March 31, 2024. Increase over December 31, 2024, was primarily due to earnings of $11.7 million, as well as a decrease of $2.7 million in the after-tax accumulated other comprehensive losses ($9.8 million as of March 31, 2025, and $12.5 million as of December 31, 2024). Additionally, increase over March 31, 2024, was primarily due to the issuance of common stock of $80.8 million as part of the merger with 1st Capital Bancorp on October 1, 2024.
Non-GAAP Financial Measures1
In addition to evaluating the Bancorp's results of operations in accordance with generally accepted accounting principles ("GAAP") in the United States of America, certain non-GAAP financial measures are widely accepted by the institutional investor community. Non-GAAP measures provide the reader with additional perspectives on operating results, financial condition and performance trends, while facilitating comparisons with the performance of other financial institutions. Disclosing these non-GAAP measures is both usefully internally and is expected by our investors to understand the overall performance of the Bancorp.
Examples of non-GAAP financial measure include adjusted net income, efficiency ratio, adjusted tangible common equity and adjusted return on average tangible common equity:
- Adjusted net income excludes the impact of non-recurring activity. This financial measure is useful for evaluating the performance of a business consistently, whether acquired or developed internally.
- Efficiency ratio is a common comparable metric used by banks to understand the expense structure relative to total revenue. To improve the comparability of the ratio to our peers, non-recurring items are excluded.
- Adjusted tangible common equity measures exclude the impact of intangible assets, net of deferred taxes, and their related amortization. These financial measures are useful for evaluating the performance of a business consistently, whether acquired or developed internally.
- Adjusted return on average tangible common equity is used by management and readers of our financial statements to understand how efficiently the Bancorp is deploying its common equity. Companies that can demonstrate more efficient use of common equity are more likely to be viewed favorably by current and prospective investors.
A reconciliation of GAAP to non-GAAP financial measures and other performance ratios used by the Bancorp, as adjusted, is presented in the table at the end of this earnings release.
ABOUT WEST COAST COMMUNITY BANK AND WEST COAST COMMUNITY BANCORP
Founded in 2004, West Coast Community Bank (formerly Santa Cruz County Bank and its division, 1st Capital Bank) is the wholly owned subsidiary of West Coast Community Bancorp, a bank holding company. The Bank is a top-rated, locally operated and full-service community bank headquartered in Santa Cruz, Calif. with branches in Aptos, Capitola, Cupertino, King City, Monterey, Salinas, San Luis Obispo, Santa Cruz, Scotts Valley and Watsonville. West Coast Community Bank is distinguished from "big banks" by its relationship-based service, problem-solving focus and direct access to decision makers. The Bank is a leading SBA lender in Santa Cruz County and Silicon Valley. As a full-service bank, West Coast Community Bank offers competitive deposit and lending solutions for businesses and individuals; including business loans, lines of credit, commercial real estate financing, construction lending, asset-based lending, agricultural loans, SBA and USDA government guaranteed loans, credit cards, merchant services, remote deposit capture, mobile and online banking, bill payment and treasury management. True to its community roots, West Coast Community Bank has supported regional well-being by actively participating in and donating to local nonprofit organizations. Visit wccb.com for more information.
NATIONAL, STATE AND LOCAL RATINGS AND AWARDS
- Newsweek Magazine: Named one of the 2025 Top 500 Regional Banks & Credit Unions in the U.S. (Based upon 3-year average equity for banks with fewer than $2 billion in assets. The Bank ranked #50 in the nation and #9 among the 18 California banks that made the rankings.).
- S&P Global Market Intelligence: Ranked #62 among top U.S. community banks under $3B in assets (for full-year 2024 financial performance).
- Independent Community Bankers of America Top 25: Ranked #12 for best-performing community banks with assets greater than $1 billion.
- The Findley Reports, Inc.: Super Premier Performing Bank rating for 15 consecutive years.
- BauerFinancial: Rated 5-star "Superior" for every quarter of 2024.
- SBA Lending (for fiscal year ending June 30, 2024 ):
- California - Ranked #33 in 7(a) lending by total volume in loan approvals.
- San Francisco District - Ranked #13 in 7(a) lending by total volume in loan approvals.
- American Banker Magazine: Ranked #50 among the top 100 best-performing community banks.
- Silicon Valley Business Journal
- Ranked #1 for Silicon Valley Banks with Fastest-growing Deposits for deposits as of December 31, 2024.
- Ranked #13 among Top 20 Banks for deposits in Silicon Valley for the period October 1, 2023 to September 30, 2024.
- Santa Cruz Area Chamber of Commerce: 2025 Business of the Year.
- Good Times "Best of Santa Cruz County" Readers' Poll: Voted Best Local Bank for the thirteenth consecutive year.
- The Pajaronian "2024 Best of the Pajaro Valley" Readers' Poll: Voted Best Bank.
- The Press Banner "2024 The Best of Scotts Valley" Readers' Poll: Voted Best Local Bank.
- Santa Cruz Sentinel, 2024 Readers' Choice Award: Voted number one bank in Santa Cruz County for 10 years.
Forward-Looking Statements
This release may contain forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties may include but are not necessarily limited to the successful integration with 1st Capital Bancorp post-merger, achieving the targeted cost savings and synergies within expected time-frames or at all, retaining employees and clients, fluctuations in interest rates (including but not limited to changes in depositor behavior in relation thereto), inflation, government regulations and general economic conditions and competition within the business areas in which the Bank is conducting its operations, health of the real estate market in California, Bancorp's ability to effectively execute its business plans and other factors beyond Bancorp and the Bank's control. In particular, rapid and large increases in interest rates in the past few years have driven core deposit intangible levels higher. Higher interest rates reflect a higher cost of wholesale borrowing from the market relative to the cost of maintaining cheaper core deposits, which has made the value of deposit relationships increased. When interest rates fall, banks may adjust deposit rates closer to falling market rates. This could reduce the value of core deposit intangible asset and result in future impairment charges. Such risks and uncertainties could cause results for subsequent interim periods or for the entire year to differ materially from those indicated. Readers should not place undue reliance on the forward-looking statements, which reflect management's view only as of the date hereof. Bancorp undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.
Concurrent with this earnings release, Bancorp issued presentation slides providing supplemental information intended to be reviewed together with this release. Slides may be viewed online at: wccb.com/investor_relations.
Balance Sheet | |||||||||
As of | |||||||||
(Dollars in thousands) | March 31, | December 31, | March 31, | ||||||
ASSETS | |||||||||
Cash and cash equivalents | $ | 45,101 | $ | 84,758 | $ | 28,944 | |||
Interest-bearing deposits in other financial institutions | 249 | 249 | 10,204 | ||||||
Debt securities available-for-sale (amortized cost $379,580, $419,237 | 364,666 | 400,473 | 219,727 | ||||||
Debt securities held-to-maturity, net of allowance for credit losses of $0 | 6,620 | 7,273 | 7,346 | ||||||
Loans held for sale | - | - | 27,224 | ||||||
Loans | 2,105,247 | 2,045,215 | 1,351,537 | ||||||
Less: Allowance for credit losses on loans | (33,102) | (31,622) | (23,043) | ||||||
Loans, net of allowance | 2,072,145 | 2,013,593 | 1,328,494 | ||||||
Non-marketable equity investments, at cost | 15,355 | 15,355 | 8,897 | ||||||
Premises and equipment, net | 9,418 | 9,397 | 10,646 | ||||||
Goodwill | 40,054 | 40,054 | 25,762 | ||||||
Core deposit intangible asset, net | 26,984 | 28,051 | 1,588 | ||||||
Bank-owned life insurance | 27,727 | 27,550 | 18,179 | ||||||
Accrued interest receivable and other assets | 49,939 | 53,675 | 25,633 | ||||||
Total assets | $ | 2,658,258 | $ | 2,680,428 | $ | 1,712,644 | |||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||||||
Deposits | |||||||||
Noninterest-bearing | $ | 954,663 | $ | 1,014,263 | $ | 564,595 | |||
Interest-bearing | 1,301,586 | 1,296,220 | 891,381 | ||||||
Total deposits | 2,256,249 | 2,310,483 | 1,455,976 | ||||||
Federal Home Loan Bank advances and other borrowings | 20,000 | - | - | ||||||
Subordinated debentures | 11,696 | 11,608 | - | ||||||
Accrued interest payable and other liabilities | 24,628 | 25,356 | 18,579 | ||||||
Total liabilities | 2,312,573 | 2,347,447 | 1,474,555 | ||||||
Shareholders' equity | |||||||||
Preferred stock, no par value; 10,000,000 shares authorized; no shares issued or outstanding | - | - | - | ||||||
Common stock, no par value; 30,000,000 shares authorized; | 205,122 | 204,787 | 122,719 | ||||||
Retained earnings | 150,346 | 140,672 | 125,170 | ||||||
Accumulated other comprehensive loss, net of taxes | (9,783) | (12,478) | (9,800) | ||||||
Total shareholders' equity | 345,685 | 332,981 | 238,089 | ||||||
Total liabilities and shareholder's equity | $ | 2,658,258 | $ | 2,680,428 | $ | 1,712,644 | |||
Income Statement | |||||||||
Three months ended | |||||||||
(Dollars in thousands, except share data) | March 31, | December 31, | March 31, | ||||||
Interest income | |||||||||
Loans, including fees | $ | 36,340 | $ | 37,822 | $ | 24,382 | |||
Interest-bearing deposits in other financial institutions | 290 | 928 | 212 | ||||||
Taxable securities | 2,572 | 2,729 | 976 | ||||||
Tax-exempt securities | 610 | 660 | 87 | ||||||
Total interest income | 39,812 | 42,139 | 25,657 | ||||||
Interest expense | |||||||||
Deposits | 7,186 | 7,823 | 5,276 | ||||||
Subordinated debentures | 238 | 237 | - | ||||||
Federal Home Loan Bank advances and other borrowings | 43 | 3 | 68 | ||||||
Total interest expense | 7,467 | 8,063 | 5,344 | ||||||
Net interest income before provision for credit losses | 32,345 | 34,076 | 20,313 | ||||||
Provision (reversal) for credit losses on loans | 1,482 | 7,729 | (900) | ||||||
(Reversal) provision for credit losses on unfunded loan commitments | (100) | 210 | (100) | ||||||
Net interest income after provision (reversal) for credit losses | 30,963 | 26,137 | 21,313 | ||||||
Noninterest income | |||||||||
Service charges on deposits | 170 | 257 | 138 | ||||||
Loan servicing fees | 141 | 127 | 160 | ||||||
ATM fee income | 273 | 237 | 202 | ||||||
Earnings on bank-owned life insurance | 178 | 181 | 119 | ||||||
Dividends on non-marketable equity securities | 290 | 302 | 179 | ||||||
Loss on sale of assets | (233) | (509) | - | ||||||
Other | 180 | 316 | 236 | ||||||
Total noninterest income | 999 | 911 | 1,034 | ||||||
Noninterest expense | |||||||||
Salaries and employee benefits | 8,481 | 8,312 | 5,362 | ||||||
Occupancy | 918 | 967 | 590 | ||||||
Furniture and equipment | 1,004 | 1,022 | 570 | ||||||
Marketing, business development and shareholder-related expense | 362 | 277 | 161 | ||||||
Data and item processing | 716 | 761 | 469 | ||||||
Regulatory assessments, including federal deposit insurance | 421 | 350 | 241 | ||||||
Amortization of core deposit intangibles | 1,067 | 1,072 | 83 | ||||||
Professional fees | 254 | 530 | 230 | ||||||
Acquisition-related expense | 250 | 6,278 | - | ||||||
Other | 2,024 | 1,990 | 1,432 | ||||||
Total noninterest expense | 15,497 | 21,559 | 9,138 | ||||||
Income before income taxes | 16,465 | 5,489 | 13,209 | ||||||
Income tax expense | 4,787 | 1,649 | 3,885 | ||||||
Net income | $ | 11,678 | $ | 3,840 | $ | 9,324 | |||
Earnings per share | |||||||||
Basic | $ | 1.11 | $ | 0.37 | $ | 1.11 | |||
Diluted | $ | 1.10 | $ | 0.36 | $ | 1.10 | |||
Financial Highlights | |||||||||
As of or for the three months ended | |||||||||
(Dollars in thousands, except share data) | March 31, | December 31, | March 31, | ||||||
Ratios | |||||||||
Net interest margin, tax equivalent a | 5.29 % | 5.38 % | 4.87 % | ||||||
Cost of funds b | 1.32 % | 1.37 % | 1.43 % | ||||||
Efficiency ratio c | 46.48 % | 61.62 % | 42.81 % | ||||||
Return on: | |||||||||
Average assets | 1.78 % | 0.57 % | 2.14 % | ||||||
Average equity | 13.83 % | 4.55 % | 15.99 % | ||||||
Average tangible equity d | 17.23 % | 5.72 % | 18.10 % | ||||||
ACL/Gross loans | 1.57 % | 1.55 % | 1.67 % | ||||||
Noninterest-bearing deposits to total deposits | 42.31 % | 43.90 % | 38.78 % | ||||||
Gross loans to deposits | 93.31 % | 88.52 % | 94.70 % | ||||||
Capital Ratios | |||||||||
Tier 1 leverage ratio | 11.08 % | 10.51 % | 12.68 % | ||||||
Common equity tier 1 risk-based capital ratio | 12.47 % | 12.24 % | 14.62 % | ||||||
Tier 1 risk-based capital ratio | 12.47 % | 12.24 % | 14.62 % | ||||||
Total risk-based capital ratio | 14.23 % | 14.00 % | 15.87 % | ||||||
Tangible common equity ratio e | 10.75 % | 10.14 % | 12.50 % | ||||||
Per Share Data | |||||||||
Book value per share | $ | 32.65 | $ | 31.54 | $ | 28.30 | |||
Tangible book value per share f | $ | 26.32 | $ | 25.09 | $ | 25.05 | |||
Shares outstanding | 10,586,179 | 10,556,467 | 8,413,913 | ||||||
a | Net interest margin is calculated by dividing annualized taxable equivalent net interest income by period average interest-earning assets. Interest income on tax-exempt securities and loans are presented on a taxable-equivalent basis using the Federal statutory rate of 21 percent. |
b | Cost of funds is computed by dividing annualized interest expense by the sum of period average deposits and borrowings. |
c | Efficiency ratio equals total noninterest expenses divided by the sum of net interest income and noninterest income. |
d | Return on average tangible equity is calculated by dividing annualized net income by period average tangible shareholders' equity. Tangible shareholders' equity is defined in note f below. |
e | Tangible common equity ratio is calculated by dividing tangible shareholders' equity as defined in note f below by assets less goodwill and other intangible assets. |
f | Tangible equity equals total shareholders' equity less goodwill and other intangible assets. Tangible book value per share divides tangible equity by period ending shares outstanding |
1 Non-GAAP Financial Measures | |||||||||
As of or for the three months ended | |||||||||
(Dollars in thousands, except share data) | March 31, | December 31, | March 31, | ||||||
Non-interest expense reported per GAAP | $ | 15,497 | $ | 21,559 | $ | 9,138 | |||
Less: merger expense - non-deductible | - | 97 | - | ||||||
Less: merger expense - deductible | 250 | 6,180 | - | ||||||
Adjusted non-interest expense (non-GAAP) | $ | 15,247 | $ | 15,282 | $ | 9,138 | |||
Net interest income, taxable equivalent (TE) | $ | 32,490 | $ | 34,229 | $ | 20,355 | |||
Less: accretion of purchase discount of acquired loans | 2,641 | 3,783 | - | ||||||
Adjusted net interest income (non-GAAP) | $ | 29,849 | $ | 30,446 | $ | 20,355 | |||
Average interest earning assets | $ | 2,491,533 | $ | 2,528,793 | $ | 1,693,931 | |||
Adjusted loan yield without purchase discount accretion (non-GAAP) | 6.61 % | 6.70 % | 7.02 % | ||||||
Net interest margin, taxable equivalent | 5.29 % | 5.38 % | 4.87 % | ||||||
Adjusted net interest margin (TE) (non-GAAP) | 4.86 % | 4.79 % | 4.87 % | ||||||
Non-interest income reported per GAAP | $ | 999 | $ | 911 | $ | 1,034 | |||
Add: net loss on sale of Monterey branch facility | - | 509 | - | ||||||
Add: net loss on sale of investments | 257 | - | - | ||||||
Adjusted non-interest income (non-GAAP) | 1,256 | 1,420 | 1,034 | ||||||
Net interest income plus adjusted non-interest income (non-GAAP) | $ | 33,601 | $ | 35,496 | $ | 21,347 | |||
Efficiency ratio (non-GAAP) | 46.48 % | 61.62 % | 42.81 % | ||||||
Adjusted efficiency ratio (non-GAAP) | 45.38 % | 43.05 % | 42.81 % | ||||||
Net income reported per GAAP | $ | 11,678 | $ | 3,840 | $ | 9,324 | |||
Add: Day 1 provision for credit losses on acquired non-PCD loans | - | 7,667 | - | ||||||
Add: net loss on sale of Monterey branch facility | - | 509 | - | ||||||
Add: net loss on sale of investments | 257 | - | - | ||||||
Add: merger expense - non-deductible | - | 97 | - | ||||||
Add: merger expense - deductible | 250 | 6,180 | - | ||||||
Adjusted non-recurring items | 507 | 14,453 | - | ||||||
Tax effected non-recurring items | 357 | 10,209 | - | ||||||
Adjusted net income (non-GAAP) | $ | 12,035 | $ | 14,049 | $ | 9,324 | |||
GAAP basic earnings per share | $ | 1.11 | $ | 0.37 | $ | 1.11 | |||
Adjusted basic earnings per share (non-GAAP) | $ | 1.15 | $ | 1.34 | $ | 1.11 | |||
GAAP diluted earnings per share | $ | 1.10 | $ | 0.36 | $ | 1.10 | |||
Adjusted diluted earnings per share (non-GAAP) | $ | 1.13 | $ | 1.32 | $ | 1.10 | |||
Adjusted non-GAAP ROAA | 1.84 % | 2.08 % | 2.14 % | ||||||
Adjusted non-GAAP ROAE | 14.25 % | 16.65 % | 15.99 % | ||||||
Adjusted non-GAAP ROATE | 17.76 % | 20.94 % | 18.10 % | ||||||
Total shareholders' equity | $ | 345,685 | $ | 332,981 | $ | 238,089 | |||
Less: goodwill and other intangibles | 67,038 | 68,105 | 27,350 | ||||||
Tangible common equity (non-GAAP) | $ | 278,647 | $ | 264,876 | $ | 210,739 | |||
Common shares outstanding at period end | 10,586,179 | 10,556,467 | 8,413,913 | ||||||
Book value per common share | $ | 32.65 | $ | 31.54 | $ | 28.30 | |||
Tangible book value per common share (non-GAAP) | $ | 26.32 | $ | 25.09 | $ | 25.05 | |||
Total assets | $ | 2,658,258 | $ | 2,680,428 | $ | 1,712,644 | |||
Less: goodwill and other intangibles | 67,038 | 68,105 | 27,350 | ||||||
Tangible assets | $ | 2,591,220 | $ | 2,612,323 | $ | 1,685,294 | |||
Total shareholders' equity to total assets | 13.00 % | 12.42 % | 13.90 % | ||||||
Tangible equity to tangible assets (non-GAAP) | 10.75 % | 10.14 % | 12.50 % | ||||||
SOURCE West Coast Community Bancorp
