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SOUTHERN CALIFORNIA BANCORP REPORTS NET INCOME OF $8.2 MILLION FOR THE FIRST QUARTER
Источник: Nasdaq GlobeNewswire / 25 апр 2023 08:00:01 America/New_York
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 EndedMarch 31,
2023December 31,
2022March 31,
2022EARNINGS ($ 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,
2023December 31,
2022CAPITAL ($ 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 EndedALLOWANCE for CREDIT LOSSES March 31,
2023December 31,
2022March 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,
2023December 31,
2022ASSETS ($ 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,
2023December 31,
2022March 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 $100 thousand for the three months ended March 31, 2023 and December 31, 2022. There was no provision for unfunded commitment for the three months ended March 31, 2022.
(2) Non-GAAP measure. See – GAAP to Non-GAAP reconciliation.Southern California Bancorp and Subsidiary
Average Balance Sheets and Yield Analysis
(Unaudited)Three Months Ended March 31, 2023 December 31, 2022 March 31, 2022 Average Balance Income/Expense Yield/Cost Average Balance Income/Expense Yield/Cost Average Balance Income/
ExpenseYield/Cost Assets ($ 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,
2023December 31,
2022March 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,
2023December 31,
2022March 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,
2023December 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