☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(d) OR THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
California | 82-1751097 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
Common Stock, No Par Value | CALB | NASDAQ Global Select Market | ||
(Title of class) | (Trading Symbol) | (Name of exchange on which registered) |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☒ | |||
Emerging growth company | ☒ |
CALIFORNIA BANCORP
INDEX TO QUARTERLY REPORT ON FORM
FOR THE QUARTER ENDED SEPTEMBER 30, 2021
Page | ||||||
Item 1. | 3 | |||||
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | |||||
Item 3. | ||||||
Item 4. | ||||||
Item 1. | ||||||
Item 1A. | ||||||
Item 2. | ||||||
Item 3. | ||||||
Item 4. | ||||||
Item 5. | ||||||
Item 6. | ||||||
2
September 30, | December 31, | |||||||||||||||
September 30, 2021 | December 31, 2020 | 2022 | 2021 | |||||||||||||
ASSETS: | ||||||||||||||||
Cash and due from banks | $ | 22,424 | $ | 22,485 | $ | 24,709 | $ | 4,539 | ||||||||
Federal funds sold | 578,626 | 396,032 | 216,345 | 465,917 | ||||||||||||
Total cash and cash equivalents | 601,050 | 418,517 | 241,054 | 470,456 | ||||||||||||
Investment securities, available for sale | 82,108 | 55,093 | ||||||||||||||
Loans, net of allowance for losses of $13,571 and $14,111 at September 30, 2021 and December 31, 2020, respectively | 1,289,161 | 1,355,482 | ||||||||||||||
Investment securities: | ||||||||||||||||
Available for sale, at fair value | 47,359 | 74,892 | ||||||||||||||
Held to maturity, at amortized cost | 110,172 | 28,386 | ||||||||||||||
Total investment securities | 157,531 | 103,278 | ||||||||||||||
Loans, net of allowance for losses of $16,555 and $14,081 at September 30, 2022 and December 31, 2021, respectively | 1,573,248 | 1,364,256 | ||||||||||||||
Premises and equipment, net | 4,227 | 5,778 | 3,382 | 4,405 | ||||||||||||
Bank owned life insurance (BOLI) | 24,247 | 23,718 | 24,955 | 24,412 | ||||||||||||
Goodwill and other intangible assets | 7,524 | 7,554 | 7,483 | 7,513 | ||||||||||||
Accrued interest receivable and other assets | 40,762 | 39,637 | 40,848 | 40,676 | ||||||||||||
Total assets | $ | 2,049,079 | $ | 1,905,779 | $ | 2,048,501 | $ | 2,014,996 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY: | ||||||||||||||||
Deposits | ||||||||||||||||
Non-interest bearing | $ | 790,646 | $ | 673,100 | $ | 758,716 | $ | 771,205 | ||||||||
Interest bearing | 951,408 | 859,106 | 950,362 | 908,933 | ||||||||||||
Total deposits | 1,742,054 | 1,532,206 | 1,709,078 | 1,680,138 | ||||||||||||
Other borrowings | 79,536 | 189,043 | 100,000 | 106,387 | ||||||||||||
Junior subordinated debt securities | 59,009 | 24,994 | 54,117 | 54,028 | ||||||||||||
Accrued interest payable and other liabilities | 21,241 | 23,126 | 21,248 | 23,689 | ||||||||||||
Total liabilities | 1,901,840 | 1,769,369 | 1,884,443 | 1,864,242 | ||||||||||||
Commitments and Contingencies (Note 5) | 0 | 0 | ||||||||||||||
Shareholders’ equity | ||||||||||||||||
Common stock, 0 par value; 40,000,000 shares authorized; 8,250,109 and 8,171,734 issued and outstanding at September 30, 2021 and December 31, 2020, respectively | 109,009 | 107,948 | ||||||||||||||
Common stock, no par value; 40,000,000 shares authorized; 8,327,781 and 8,264,300 issued and outstanding at September 30, 2022 and December 31, 2021, respectively | 110,786 | 109,473 | ||||||||||||||
Retained earnings | 38,008 | 27,821 | 54,628 | 41,189 | ||||||||||||
Accumulated other comprehensive income, net of taxes | 222 | 641 | (1,356 | ) | 92 | |||||||||||
Total shareholders’ equity | 147,239 | 136,410 | 164,058 | 150,754 | ||||||||||||
Total liabilities and shareholders’ equity | $ | 2,049,079 | $ | 1,905,779 | $ | 2,048,501 | $ | 2,014,996 | ||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | September 30, | September 30, | |||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||
Interest income | ||||||||||||||||||||||||||||||||
Loans | $ | 14,870 | $ | 12,849 | $ | 44,157 | $ | 37,096 | $ | 19,084 | $ | 14,870 | $ | 50,268 | $ | 44,157 | ||||||||||||||||
Federal funds sold | 199 | 117 | 371 | 554 | 867 | 199 | 1,283 | 371 | ||||||||||||||||||||||||
Investment securities | 470 | 222 | 1,222 | 621 | 1,217 | 470 | 3,247 | 1,222 | ||||||||||||||||||||||||
Total interest income | 15,539 | 13,188 | 45,750 | 38,271 | 21,168 | 15,539 | 54,798 | 45,750 | ||||||||||||||||||||||||
Interest expense | ||||||||||||||||||||||||||||||||
Deposits | 1,152 | 1,467 | 3,481 | 4,981 | 1,672 | 1,152 | 3,274 | 3,481 | ||||||||||||||||||||||||
Borrowings and subordinated debt | 546 | 533 | 1,506 | 1,136 | 1,133 | 546 | 2,412 | 1,506 | ||||||||||||||||||||||||
Total interest expense | 1,698 | 2,000 | 4,987 | 6,117 | 2,805 | 1,698 | 5,686 | 4,987 | ||||||||||||||||||||||||
Net interest income | 13,841 | 11,188 | 40,763 | 32,154 | 18,363 | 13,841 | 49,112 | 40,763 | ||||||||||||||||||||||||
Provision for credit losses | 300 | 850 | (500 | ) | 4,180 | 800 | 300 | 2,675 | (500 | ) | ||||||||||||||||||||||
Net interest income after provision for credit losses | 13,541 | 10,338 | 41,263 | 27,974 | 17,563 | 13,541 | 46,437 | 41,263 | ||||||||||||||||||||||||
Non-interest income | ||||||||||||||||||||||||||||||||
Service charges and other fees | 905 | 779 | 2,184 | 2,287 | 1,237 | 905 | 3,260 | 2,184 | ||||||||||||||||||||||||
Gain on the sale of loans | — | — | 1,393 | — | ||||||||||||||||||||||||||||
Other | 397 | 249 | 995 | 809 | 247 | 397 | 759 | 995 | ||||||||||||||||||||||||
Total non-interest income | 1,302 | 1,028 | 3,179 | 3,096 | 1,484 | 1,302 | 5,412 | 3,179 | ||||||||||||||||||||||||
Non-interest expense | ||||||||||||||||||||||||||||||||
Salaries and benefits | 6,920 | 6,452 | 19,661 | 15,051 | 7,415 | 6,920 | 21,654 | 19,661 | ||||||||||||||||||||||||
Premises and equipment | 1,372 | 1,359 | 3,778 | 3,630 | 1,275 | 1,372 | 3,844 | 3,778 | ||||||||||||||||||||||||
Professional fees | 334 | 634 | 1,450 | 3,013 | 524 | 334 | 1,662 | 1,450 | ||||||||||||||||||||||||
Data processing | 540 | 734 | 1,604 | 1,796 | 744 | 540 | 1,951 | 1,604 | ||||||||||||||||||||||||
Other | 1,347 | 1,366 | 3,935 | 3,903 | 1,259 | 1,347 | 3,841 | 3,935 | ||||||||||||||||||||||||
Total non-interest expense | 10,513 | 10,545 | 30,428 | 27,393 | 11,217 | 10,513 | 32,952 | 30,428 | ||||||||||||||||||||||||
Income before provision for income taxes | 4,330 | 821 | 14,014 | 3,677 | 7,830 | 4,330 | 18,897 | 14,014 | ||||||||||||||||||||||||
Provision for income taxes | 1,114 | 326 | 3,827 | 1,159 | 2,308 | 1,114 | 5,458 | 3,827 | ||||||||||||||||||||||||
Net income | $ | 3,216 | $ | 495 | $ | 10,187 | $ | 2,518 | $ | 5,522 | $ | 3,216 | $ | 13,439 | $ | 10,187 | ||||||||||||||||
Earnings per common share | ||||||||||||||||||||||||||||||||
Basic | $ | 0.39 | $ | 0.06 | $ | 1.24 | $ | 0.31 | $ | 0.66 | $ | 0.39 | $ | 1.62 | $ | 1.24 | ||||||||||||||||
Diluted | $ | 0.39 | $ | 0.06 | $ | 1.23 | $ | 0.31 | $ | 0.66 | $ | 0.39 | $ | 1.60 | $ | 1.23 | ||||||||||||||||
Average common shares outstanding | 8,244,154 | 8,141,807 | 8,211,907 | 8,124,387 | 8,322,529 | 8,244,154 | 8,298,269 | 8,211,907 | ||||||||||||||||||||||||
Average common and equivalent shares outstanding | 8,310,799 | 8,169,334 | 8,283,683 | 8,159,521 | 8,405,669 | 8,310,799 | 8,394,439 | 8,283,683 | ||||||||||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | September 30, | September 30, | |||||||||||||||||||||||||||||
2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||
Net Income | $ | 3,216 | $ | 495 | $ | 10,187 | $ | 2,518 | $ | 5,522 | $ | 3,216 | $ | 13,439 | $ | 10,187 | ||||||||||||||||
Other comprehensive income | ||||||||||||||||||||||||||||||||
Unrealized (losses) gains on securities available for sale | (440 | ) | (143 | ) | (595 | ) | 602 | |||||||||||||||||||||||||
Reclassification adjustment for realized loss on securities available for sale | — | 0 | — | 70 | ||||||||||||||||||||||||||||
Unrealized losses on securities available for sale, net | (1,006 | ) | (440 | ) | (1,788 | ) | (595 | ) | ||||||||||||||||||||||||
Unrealized losses on securities transferred from available for sale to held to maturity, net | — | — | (281 | ) | — | |||||||||||||||||||||||||||
Amortization of unrealized losses on securities transferred from available for sale to held to maturity, net | 2 | — | 6 | — | ||||||||||||||||||||||||||||
Tax effect | 130 | 43 | 176 | (200 | ) | 299 | 130 | 615 | 176 | |||||||||||||||||||||||
Total other comprehensive (loss) income | (310 | ) | (100 | ) | (419 | ) | 472 | |||||||||||||||||||||||||
Total other comprehensive loss | (705 | ) | (310 | ) | (1,448 | ) | (419 | ) | ||||||||||||||||||||||||
Total comprehensive income | $ | 2,906 | $ | 395 | $ | 9,768 | $ | 2,990 | $ | 4,817 | $ | 2,906 | $ | 11,991 | $ | 9,768 | ||||||||||||||||
Common Stock | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total Shareholders’ Equity | Accumulated | ||||||||||||||||||||||||||||||||||||
Shares | Amount | Other | ||||||||||||||||||||||||||||||||||||||
Balance at December 31, 2020 | 8,171,734 | $ | 107,948 | $ | 27,821 | $ | 641 | $ | 136,410 | |||||||||||||||||||||||||||||||
Stock awards issued and related compensation expense | 3,369 | 383 | — | — | 383 | |||||||||||||||||||||||||||||||||||
Stock options exercised | 14,495 | 99 | — | — | 99 | |||||||||||||||||||||||||||||||||||
Net income | — | — | 2,809 | — | 2,809 | |||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | (523 | ) | (523 | ) | |||||||||||||||||||||||||||||||||
Comprehensive | Total | |||||||||||||||||||||||||||||||||||||||
Balance at March 31, 2021 | 8,189,598 | $ | 108,430 | $ | 30,630 | $ | 118 | $ | 139,178 | |||||||||||||||||||||||||||||||
Stock awards issued and related compensation expense | 28,562 | 234 | — | — | 234 | |||||||||||||||||||||||||||||||||||
Shares withheld to pay taxes on stock based compensation | (2,740 | ) | (150 | ) | — | — | (150 | ) | ||||||||||||||||||||||||||||||||
Stock options exercised | 21,770 | 48 | — | — | 48 | |||||||||||||||||||||||||||||||||||
Shares withheld to pay exercise price on stock options | (8,074 | ) | (145 | ) | — | — | (145 | ) | ||||||||||||||||||||||||||||||||
Net income | — | — | 4,162 | — | 4,162 | |||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | 414 | 414 | |||||||||||||||||||||||||||||||||||
Common Stock | Retained | Income | Shareholders’ | |||||||||||||||||||||||||||||||||||||
Balance at June 30, 2021 | 8,229,116 | $ | 108,417 | $ | 34,792 | $ | 532 | $ | 143,741 | |||||||||||||||||||||||||||||||
Shares | Amount | Earnings | (Loss) | Equity | ||||||||||||||||||||||||||||||||||||
Balance at December 31, 2021 | 8,264,300 | $ | 109,473 | $ | 41,189 | $ | 92 | $ | 150,754 | |||||||||||||||||||||||||||||||
Stock awards issued and related compensation expense | 30,053 | 723 | — | — | 723 | 11,513 | 494 | — | — | 494 | ||||||||||||||||||||||||||||||
Shares withheld to pay taxes on stock based compensation | (10,056 | ) | (82 | ) | — | — | (82 | ) | (7,459 | ) | (173 | ) | — | — | (173 | ) | ||||||||||||||||||||||||
Stock options exercised | 3,750 | 0 | — | — | 0 | 4,200 | 55 | — | — | 55 | ||||||||||||||||||||||||||||||
Shares withheld to pay exercise price on stock options | (2,754 | ) | (49 | ) | — | — | (49 | ) | (1,653 | ) | (34 | ) | — | — | (34 | ) | ||||||||||||||||||||||||
Net income | — | — | 3,216 | — | 3,216 | — | — | 3,673 | — | 3,673 | ||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | (310 | ) | (310 | ) | — | — | — | (198 | ) | (198 | ) | ||||||||||||||||||||||||||
Balance at September 30, 2021 | 8,250,109 | $ | 109,009 | $ | 38,008 | $ | 222 | $ | 147,239 | |||||||||||||||||||||||||||||||
Balance at March 31, 2022 | 8,270,901 | $ | 109,815 | $ | 44,862 | $ | (106 | ) | $ | 154,571 | ||||||||||||||||||||||||||||||
Stock awards issued and related compensation expense | 43,855 | 539 | — | — | 539 | |||||||||||||||||||||||||||||||||||
Shares withheld to pay taxes on stock based compensation | (3,153 | ) | (65 | ) | — | — | (65 | ) | ||||||||||||||||||||||||||||||||
Stock options exercised | 7,350 | 42 | — | — | 42 | |||||||||||||||||||||||||||||||||||
Shares withheld to pay exercise price on stock options | (1,792 | ) | (42 | ) | — | — | (42 | ) | ||||||||||||||||||||||||||||||||
Net income | — | — | 4,244 | — | 4,244 | |||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | (545 | ) | (545 | ) | |||||||||||||||||||||||||||||||||
Balance at June 30, 2022 | 8,317,161 | $ | 110,289 | $ | 49,106 | $ | (651 | ) | $ | 158,744 | ||||||||||||||||||||||||||||||
Stock awards issued and related compensation expense | 14,314 | 586 | — | — | 586 | |||||||||||||||||||||||||||||||||||
Shares withheld to pay taxes on stock based compensation | (3,694 | ) | (89 | ) | — | — | (89 | ) | ||||||||||||||||||||||||||||||||
Net income | — | — | 5,522 | — | 5,522 | |||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | (705 | ) | (705 | ) | |||||||||||||||||||||||||||||||||
Balance at September 30, 2022 | 8,327,781 | $ | 110,786 | $ | 54,628 | $ | (1,356 | ) | $ | 164,058 | ||||||||||||||||||||||||||||||
Accumulated | Accumulated | |||||||||||||||||||||||||||||||||||||||
Other | Other | |||||||||||||||||||||||||||||||||||||||
Comprehensive | Total | Comprehensive | Total | |||||||||||||||||||||||||||||||||||||
Common Stock | Retained | Income | Shareholders’ | Common Stock | Retained | Income | Shareholders’ | |||||||||||||||||||||||||||||||||
Shares | Amount | Earnings | (Loss) | Equity | Shares | Amount | Earnings | (Loss) | Equity | |||||||||||||||||||||||||||||||
Balance at December 31, 2019 | 8,092,966 | $ | 106,427 | $ | 23,518 | $ | 311 | $ | 130,256 | |||||||||||||||||||||||||||||||
Stock awards issued and related compensation expense | 25,215 | 413 | — | — | 413 | |||||||||||||||||||||||||||||||||||
Shares withheld to pay taxes on stock based compensation | (7,550 | ) | (133 | ) | — | — | (133 | ) | ||||||||||||||||||||||||||||||||
Stock options exercised | 11,217 | 83 | — | — | 83 | |||||||||||||||||||||||||||||||||||
Net income | — | — | 473 | — | 473 | |||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | 101 | 101 | |||||||||||||||||||||||||||||||||||
Balance at March 31, 2020 | 8,121,848 | $ | 106,790 | $ | 23,991 | $ | 412 | $ | 131,193 | |||||||||||||||||||||||||||||||
Stock awards issued and related compensation expense | 1,428 | 314 | — | — | 314 | |||||||||||||||||||||||||||||||||||
Stock options exercised | 10,181 | 137 | — | — | 137 | |||||||||||||||||||||||||||||||||||
Net income | — | — | 1,550 | — | 1,550 | |||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | 471 | 471 | |||||||||||||||||||||||||||||||||||
Balance at June 30, 2020 | 8,133,457 | $ | 107,241 | $ | 25,541 | $ | 883 | $ | 133,665 | |||||||||||||||||||||||||||||||
Balance at December 31, 2020 | 8,171,734 | $ | 107,948 | $ | 27,821 | $ | 641 | $ | 136,410 | |||||||||||||||||||||||||||||||
Stock awards issued and related compensation expense | 12,483 | 525 | — | — | 525 | 3,369 | 383 | — | — | 383 | ||||||||||||||||||||||||||||||
Stock options exercised | 3,738 | 10 | — | — | 10 | 14,495 | 99 | — | — | 99 | ||||||||||||||||||||||||||||||
Net income | — | — | 495 | — | 495 | — | — | 2,809 | — | 2,809 | ||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | (100 | ) | (100 | ) | — | — | — | (523 | ) | (523 | ) | ||||||||||||||||||||||||||
Balance at September 30, 2020 | 8,149,678 | $ | 107,776 | $ | 26,036 | $ | 783 | $ | 134,595 | |||||||||||||||||||||||||||||||
Balance at March 31, 2021 | 8,189,598 | $ | 108,430 | $ | 30,630 | $ | 118 | $ | 139,178 | |||||||||||||||||||||||||||||||
Stock awards issued and related compensation expense | 28,562 | 234 | — | — | 234 | |||||||||||||||||||||||||||||||||||
Shares withheld to pay taxes on stock based compensation | (2,740 | ) | (150 | ) | (150 | ) | ||||||||||||||||||||||||||||||||||
Stock options exercised | 21,770 | 48 | — | — | 48 | |||||||||||||||||||||||||||||||||||
Shares withheld to pay exercise price on stock options | (8,074 | ) | (145 | ) | — | — | (145 | ) | ||||||||||||||||||||||||||||||||
Net income | — | — | 4,162 | — | 4,162 | |||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | 414 | 414 | |||||||||||||||||||||||||||||||||||
Balance at June 30, 2021 | 8,229,116 | $ | 108,417 | $ | 34,792 | $ | 532 | $ | 143,741 | |||||||||||||||||||||||||||||||
Stock awards issued and related compensation expense | 30,053 | 723 | — | — | 723 | |||||||||||||||||||||||||||||||||||
Shares withheld to pay taxes on | — | |||||||||||||||||||||||||||||||||||||||
stock based compensation | (10,056 | ) | (82 | ) | (82 | ) | ||||||||||||||||||||||||||||||||||
Stock options exercised | 3,750 | — | — | — | — | |||||||||||||||||||||||||||||||||||
Shares withheld to pay exercise price on stock options | (2,754 | ) | (49 | ) | — | — | (49 | ) | ||||||||||||||||||||||||||||||||
Net income | — | — | 3,216 | — | 3,216 | |||||||||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | (310 | ) | (310 | ) | |||||||||||||||||||||||||||||||||
Balance at September 30, 2021 | 8,250,109 | $ | 109,009 | $ | 38,008 | $ | 222 | $ | 147,239 | |||||||||||||||||||||||||||||||
Nine Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income | $ | 10,187 | $ | 2,518 | $ | 13,439 | $ | 10,187 | ||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||||||
Provision for credit losses | (500 | ) | 4,180 | 2,675 | (500 | ) | ||||||||||
Provision for deferred taxes | (1,851 | ) | 127 | (1,383 | ) | (1,851 | ) | |||||||||
Depreciation | 1,166 | 996 | 1,168 | 1,166 | ||||||||||||
Deferred loan (costs) fees, net | (152 | ) | 3,823 | |||||||||||||
Deferred loan costs, net | (182 | ) | (152 | ) | ||||||||||||
Accretion on discount of purchased loans, net | (85 | ) | (216 | ) | (32 | ) | (85 | ) | ||||||||
Stock based compensation, net | 1,108 | 1,119 | 1,292 | 1,108 | ||||||||||||
Increase in cash surrender value of life insurance | (487 | ) | (440 | ) | (497 | ) | (487 | ) | ||||||||
Discount on retained portion of sold loans, net | (26 | ) | (176 | ) | (27 | ) | (26 | ) | ||||||||
Loss on sale of investment securities, net | — | 70 | ||||||||||||||
Increase (decrease) in accrued interest receivable and other assets | 1,050 | (2,167 | ) | |||||||||||||
Decrease in accrued interest payable and other liabilities | 321 | 2,929 | ||||||||||||||
Gain on sale of loans, net | (1,393 | ) | — | |||||||||||||
Increase in accrued interest receivable and other assets | 1,986 | 1,050 | ||||||||||||||
(Increase) decrease in accrued interest payable and other liabilities | (1,894 | ) | 321 | |||||||||||||
Net cash provided by operating activities | 10,731 | 12,763 | 15,152 | 10,731 | ||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Purchase of investment securities | (36,548 | ) | (35,403 | ) | (78,780 | ) | (36,548 | ) | ||||||||
Proceeds from sales of investment securities | — | 7,729 | ||||||||||||||
Proceeds from principal payments on investment securities | 8,848 | 5,425 | 21,859 | 8,848 | ||||||||||||
Purchase of loans | (20,008 | ) | (24,289 | ) | ||||||||||||
Net decrease (increase) in loans | 87,092 | (382,916 | ) | |||||||||||||
Purchase of low income tax credit investments | (565 | ) | (941 | ) | ||||||||||||
Purchase of Federal Home Loan Bank stock | (1,344 | ) | (363 | ) | ||||||||||||
Proceeds from sale (purchase) of loans | 37,271 | (20,008 | ) | |||||||||||||
Net (increase) decrease in loans | (247,304 | ) | 87,092 | |||||||||||||
Capital calls on low income tax credit investments | (438 | ) | (565 | ) | ||||||||||||
Redemption (purchase) of Federal Home Loan Bank stock | 455 | (1,344 | ) | |||||||||||||
Purchase of premises and equipment | (165 | ) | (3,261 | ) | (145 | ) | (165 | ) | ||||||||
Purchase of bank-owned life insurance policies | (42 | ) | (821 | ) | (46 | ) | (42 | ) | ||||||||
Net cash used for investing activities | 37,268 | (434,840 | ) | |||||||||||||
Net cash (used for) provided by investing activities | (267,128 | ) | 37,268 | |||||||||||||
Cash flows from financing activities: | ||||||||||||||||
Net increase in customer deposits | 209,848 | 448,996 | 28,940 | 209,848 | ||||||||||||
Paydown of long term borrowing, net | (109,507 | ) | — | (56,387 | ) | (109,507 | ) | |||||||||
Proceeds from short term and overnight borrowings, net | — | 342,703 | 50,000 | — | ||||||||||||
Proceeds from issuance of subordinated debt, net | 34,240 | 19,700 | — | 34,240 | ||||||||||||
Proceeds from exercised stock options, net | (47 | ) | 230 | 21 | (47 | ) | ||||||||||
Net cash provided by financing activities | 134,534 | 811,629 | 22,574 | 134,534 | ||||||||||||
Increase in cash and cash equivalents | 182,533 | 389,552 | ||||||||||||||
(Decrease) increase in cash and cash equivalents | (229,402 | ) | 182,533 | |||||||||||||
Cash and cash equivalents, beginning of period | 418,517 | 114,342 | 470,456 | 418,517 | ||||||||||||
Cash and cash equivalents, end of period | $ | 601,050 | $ | 503,894 | $ | 241,054 | $ | 601,050 | ||||||||
Supplemental disclosure of cash flow information: | ||||||||||||||||
Recording of right to use assets and operating lease liabilities | $ | — | $ | 2,903 | ||||||||||||
Securities transferred from available for sale to the held to maturity classification | $ | 49,889 | $ | — | ||||||||||||
Cash paid during the year for: | ||||||||||||||||
Interest | $ | 5,490 | $ | 10,097 | $ | 6,089 | $ | 5,490 | ||||||||
Income taxes | $ | 4,684 | $ | 164 | $ | 5,303 | $ | 4,684 |
Three months ended | Nine months ended | Three months ended | Nine months ended | |||||||||||||||||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||||||||||||||||||
(Dollars in thousands, except per share data) | 2021 | 2020 | 2021 | 2020 | 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||||||
Net income available to common shareholders | $ | 3,216 | $ | 495 | $ | 10,187 | $ | 2,518 | $ | 5,522 | $ | 3,216 | $ | 13,439 | $ | 10,187 | ||||||||||||||||
Weighted average basic common shares outstanding | 8,244,154 | 8,141,807 | 8,211,907 | 8,124,387 | 8,322,529 | 8,244,154 | 8,298,269 | 8,211,907 | ||||||||||||||||||||||||
Add: dilutive potential common shares | 66,645 | 27,527 | 71,776 | 35,134 | 83,140 | 66,645 | 96,170 | 71,776 | ||||||||||||||||||||||||
Weighted average diluted common shares outstanding | 8,310,799 | 8,169,334 | 8,283,683 | 8,159,521 | 8,405,669 | 8,310,799 | 8,394,439 | 8,283,683 | ||||||||||||||||||||||||
Basic earnings per share | $ | 0.39 | $ | 0.06 | $ | 1.24 | $ | 0.31 | $ | 0.66 | $ | 0.39 | $ | 1.62 | $ | 1.24 | ||||||||||||||||
Diluted earnings per share | $ | 0.39 | $ | 0.06 | $ | 1.23 | $ | 0.31 | $ | 0.66 | $ | 0.39 | $ | 1.60 | $ | 1.23 | ||||||||||||||||
Gross | Gross | Estimated | ||||||||||||||||||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||||||||||||||||||
(Dollars in thousands) | Cost | Gains | Losses | Value | Amortized Cost | Gross Unrealized / Unrecognized Gains | Gross Unrealized / Unrecognized Losses | Estimated Fair Value | ||||||||||||||||||||||||
At September 30, 2021: | ||||||||||||||||||||||||||||||||
At September 30, 2022: | ||||||||||||||||||||||||||||||||
Mortgage backed securities | $ | 43,324 | $ | 416 | $ | (360 | ) | $ | 43,380 | $ | 19,080 | $ | 21 | $ | (933 | ) | $ | 18,168 | ||||||||||||||
Government agencies | 2,117 | 35 | 0 | 2,152 | 29,782 | — | (1,068 | ) | 28,714 | |||||||||||||||||||||||
Corporate bonds | 36,352 | 589 | (365 | ) | 36,576 | 429 | 48 | — | 477 | |||||||||||||||||||||||
Total available for sale securities | $ | 81,793 | $ | 1,040 | $ | (725 | ) | $ | 82,108 | $ | 49,291 | $ | 69 | $ | (2,001 | ) | $ | 47,359 | ||||||||||||||
At December 31, 2020: | ||||||||||||||||||||||||||||||||
Mortgage backed securities | $ | 62,525 | $ | — | $ | (8,245 | ) | $ | 54,280 | |||||||||||||||||||||||
Government agencies | 3,087 | — | (677 | ) | 2,410 | |||||||||||||||||||||||||||
Corporate bonds | 44,560 | 31 | (3,577 | ) | 41,014 | |||||||||||||||||||||||||||
Total held to maturity securities | $ | 110,172 | $ | 31 | $ | (12,499 | ) | $ | 97,704 | |||||||||||||||||||||||
At December 31, 2021: | ||||||||||||||||||||||||||||||||
Mortgage backed securities | $ | 27,541 | $ | 669 | $ | (17 | ) | $ | 28,193 | $ | 29,943 | $ | 325 | $ | (320 | ) | $ | 29,948 | ||||||||||||||
Government agencies | 2,418 | 0 | (6 | ) | 2,412 | 3,093 | — | (100 | ) | 2,993 | ||||||||||||||||||||||
Corporate bonds | 24,224 | 434 | (170 | ) | 24,488 | 41,725 | 694 | (468 | ) | 41,951 | ||||||||||||||||||||||
Total available for sale securities | $ | 54,183 | $ | 1,103 | $ | (193 | ) | $ | 55,093 | $ | 74,761 | $ | 1,019 | $ | (888 | ) | $ | 74,892 | ||||||||||||||
Mortgage backed securities | $ | 22,772 | $ | — | $ | (140 | ) | $ | 22,632 | |||||||||||||||||||||||
Government agencies | — | — | — | — | ||||||||||||||||||||||||||||
Corporate bonds | 5,614 | — | (30 | ) | 5,584 | |||||||||||||||||||||||||||
Total held to maturity securities | $ | 28,386 | $ | — | $ | (170 | ) | $ | 28,216 | |||||||||||||||||||||||
Less Than 12 Months | More Than 12 Months | Total | ||||||||||||||||||||||
Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
(Dollars in thousands) | Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | ||||||||||||||||||
At September 30, 2021: | ||||||||||||||||||||||||
Mortgage backed securities | $ | 28,621 | $ | (360 | ) | $ | — | $ | — | $ | 28,621 | $ | (360 | ) | ||||||||||
Government agencies | — | — | — | — | — | — | ||||||||||||||||||
Corporate bonds | 11,750 | (77 | ) | 4,712 | (288 | ) | 16,462 | (365 | ) | |||||||||||||||
Total available for sale securities | $ | 40,371 | $ | (437 | ) | $ | 4,712 | $ | (288 | ) | $ | 45,083 | $ | (725 | ) | |||||||||
At December 31, 2020: | ||||||||||||||||||||||||
Mortgage backed securities | $ | 4,481 | $ | (17 | ) | $ | — | $ | — | $ | 4,481 | $ | (17 | ) | ||||||||||
Government agencies | 2,412 | (6 | ) | — | — | 2,412 | (6 | ) | ||||||||||||||||
Corporate bonds | 7,830 | (170 | ) | — | — | 7,830 | (170 | ) | ||||||||||||||||
Total available for sale securities | $ | 14,723 | $ | (193 | ) | $ | — | $ | — | $ | 14,723 | $ | (193 | ) | ||||||||||
Less Than 12 Months | More Than 12 Months | Total | ||||||||||||||||||||||
(Dollars in thousands) | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||
At September 30, 2022: | ||||||||||||||||||||||||
Mortgage backed securities | $ | 11,221 | $ | (541 | ) | $ | — | $ | — | $ | 11,221 | $ | (541 | ) | ||||||||||
Government agencies | 28,714 | (1,068 | ) | 4,434 | (392 | ) | 33,148 | (1,460 | ) | |||||||||||||||
Corporate bonds | — | — | — | — | — | — | ||||||||||||||||||
Total available for sale securities | $ | 39,935 | $ | (1,609) | $ | 4,434 | $ | (392) | $ | 44,369 | $ | (2,001) | ||||||||||||
Mortgage backed securities | $ | 51,717 | $ | (7,767) | $ | 2,563 | $ | (478) | $ | 54,280 | $ | (8,245) | ||||||||||||
Government agencies | — | — | 2,410 | (677) | 2,410 | (677) | ||||||||||||||||||
Corporate bonds | 20,046 | (1,258) | 17,748 | (2,319) | 37,794 | (3,577) | ||||||||||||||||||
Total held to maturity securities | $ | 71,763 | $ | (9,025) | $ | 22,721 | $ | (3,474) | $ | 94,484 | $ | (12,499) | ||||||||||||
At December 31, 2021: | ||||||||||||||||||||||||
Mortgage backed securities | $ | 14,302 | $ | (320) | $ | — | $ | — | $ | 14,302 | $ | (320) | ||||||||||||
Government agencies | 2,993 | (100) | — | — | 2,993 | (100) | ||||||||||||||||||
Corporate bonds | 15,233 | (200) | 4,732 | (268) | 19,965 | (468) | ||||||||||||||||||
Total available for sale securities | $ | 32,528 | $ | (620) | $ | 4,732 | $ | (268) | $ | 37,260 | $ | (888) | ||||||||||||
Mortgage backed securities | $ | 22,632 | $ | (140) | $ | — | $ | — | $ | 22,632 | $ | (140) | ||||||||||||
Government agencies | 5,584 | (30) | — | — | 5,584 | (30) | ||||||||||||||||||
Corporate bonds | — | — | — | — | — | — | ||||||||||||||||||
Total held to maturity securities | $ | 28,216 | $ | (170) | $ | — | $ | — | $ | 28,216 | $ | (170) | ||||||||||||
September 30, 2021 | ||||||||||||||||||||||||
Amortized | Fair | Available for Sale | Held to Maturity | |||||||||||||||||||||
(Dollars in thousands) | Cost | Value | Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||||||||
Available for sale securities: | ||||||||||||||||||||||||
Less than one year | $ | — | $ | — | ||||||||||||||||||||
Less that one year | $ | — | $ | — | $ | 2,521 | $ | 2,478 | ||||||||||||||||
One to five years | 22,145 | 22,317 | 34,810 | 33,645 | 21,080 | 20,377 | ||||||||||||||||||
Five to ten years | 14,846 | 15,061 | 2,141 | 2,100 | 32,139 | 30,049 | ||||||||||||||||||
Beyond ten years | 5,426 | 5,209 | 2,512 | 2,477 | 21,606 | 16,811 | ||||||||||||||||||
Securities not due at a single maturity date | 39,376 | 39,521 | 9,828 | 9,137 | 32,826 | 27,989 | ||||||||||||||||||
Total available for sale securities | $ | 81,793 | $ | 82,108 | ||||||||||||||||||||
Total investment securities | $ | 49,291 | $ | 47,359 | $ | 110,172 | $ | 97,704 | ||||||||||||||||
(Dollars in thousands) | September 30, 2022 | December 31, 2021 | ||||||
Commercial and industrial | $ | 643,131 | 474,281 | |||||
Real estate - other | 824,867 | 697,212 | ||||||
Real estate - construction and land | 71,523 | 43,194 | ||||||
SBA | 8,565 | 81,403 | ||||||
Other | 39,815 | 80,559 | ||||||
Total loans, gross | 1,587,901 | 1,376,649 | ||||||
Deferred loan origination costs, net | 1,902 | 1,688 | ||||||
Allowance for credit losses | (16,555 | ) | (14,081 | ) | ||||
Total loans, net | $ | 1,573,248 | 1,364,256 | |||||
September 30, | December 31, | |||||||
(Dollars in thousands) | 2021 | 2020 | ||||||
Commercial and industrial | $ | 428,169 | $ | 414,548 | ||||
Real estate - other | 664,202 | 550,690 | ||||||
Real estate - construction and land | 41,312 | 37,193 | ||||||
SBA | 107,096 | 317,564 | ||||||
Other | 61,193 | 49,075 | ||||||
Total loans, gross | 1,301,972 | 1,369,070 | ||||||
Deferred loan origination costs, net | 760 | 523 | ||||||
Allowance for credit losses | (13,571 | ) | (14,111 | ) | ||||
Total loans, net | $ | 1,289,161 | $ | 1,355,482 | ||||
Commercial | Real Estate | |||||||||||||||||||||||
and | Real Estate | Construction | ||||||||||||||||||||||
(Dollars in thousands) | Industrial | Other | and Land | SBA | Other | Total | ||||||||||||||||||
As of September 30, 2021 | ||||||||||||||||||||||||
Grade: | ||||||||||||||||||||||||
Pass | $ | 413,292 | $ | 653,813 | $ | 37,220 | $ | 105,164 | $ | 61,193 | $ | 1,270,682 | ||||||||||||
Special Mention | 10,933 | 4,661 | 1,288 | 1,000 | — | 17,882 | ||||||||||||||||||
Substandard | 3,944 | 5,728 | 2,804 | 932 | — | 13,408 | ||||||||||||||||||
Total | $ | 428,169 | $ | 664,202 | $ | 41,312 | $ | 107,096 | $ | 61,193 | $ | 1,301,972 | ||||||||||||
As of December 31, 2020 | ||||||||||||||||||||||||
Grade: | ||||||||||||||||||||||||
Pass | $ | 401,629 | $ | 540,153 | $ | 34,543 | $ | 315,277 | $ | 49,075 | $ | 1,340,677 | ||||||||||||
Special Mention | 9,013 | 2,911 | 872 | 859 | — | 13,655 | ||||||||||||||||||
Substandard | 3,906 | 7,626 | 1,778 | 1,428 | — | 14,738 | ||||||||||||||||||
Total | $ | 414,548 | $ | 550,690 | $ | 37,193 | $ | 317,564 | $ | 49,075 | $ | 1,369,070 | ||||||||||||
(Dollars in thousands) | Commercial and Industrial | Real Estate Other | Real Estate Construction and Land | SBA | Other | Total | ||||||||||||||||||
As of September 30, 2022 | ||||||||||||||||||||||||
Grade: | ||||||||||||||||||||||||
Pass | $ | 619,363 | $ | 816,546 | $ | 69,813 | $ | 7,488 | $ | 39,815 | $ | 1,553,025 | ||||||||||||
Special Mention | 20,438 | 3,658 | — | 503 | — | 24,599 | ||||||||||||||||||
Substandard | 3,330 | 4,663 | 1,710 | 574 | — | 10,277 | ||||||||||||||||||
Total | $ | 643,131 | $ | 824,867 | $ | 71,523 | $ | 8,565 | $ | 39,815 | $ | 1,587,901 | ||||||||||||
As of December 31, 2021 | ||||||||||||||||||||||||
Grade: | ||||||||||||||||||||||||
Pass | $ | 450,913 | $ | 690,916 | $ | 39,074 | $ | 79,379 | $ | 80,559 | $ | 1,340,841 | ||||||||||||
Special Mention | 20,904 | 1,583 | 1,278 | 1,111 | — | 24,876 | ||||||||||||||||||
Substandard | 2,464 | 4,713 | 2,842 | 913 | — | 10,932 | ||||||||||||||||||
Total | $ | 474,281 | $ | 697,212 | $ | 43,194 | $ | 81,403 | $ | 80,559 | $ | 1,376,649 | ||||||||||||
(Dollars in thousands) | 30 Days | 60 Days | 90+ Days | Non-Accrual | Current | Total | ||||||||||||||||||
As of September 30, 2021 | ||||||||||||||||||||||||
Commercial and industrial | $ | 134 | $ | — | $ | — | $ | — | $ | 428,035 | $ | 428,169 | ||||||||||||
Real estate - other | 0 | 191 | — | 1,000 | 663,011 | 664,202 | ||||||||||||||||||
Real estate - construction and land | — | — | — | — | 41,312 | 41,312 | ||||||||||||||||||
SBA | 0 | — | — | 233 | 106,863 | 107,096 | ||||||||||||||||||
Other | — | — | — | — | 61,193 | 61,193 | ||||||||||||||||||
Total loans, gross | $ | 134 | $ | 191 | $ | — | $ | 1,233 | $ | 1,300,414 | $ | 1,301,972 | ||||||||||||
As of December 31, 2020 | ||||||||||||||||||||||||
Commercial and industrial | $ | — | $ | — | $ | — | $ | — | $ | 414,548 | $ | 414,548 | ||||||||||||
Real estate - other | 1,505 | — | — | — | 549,185 | 550,690 | ||||||||||||||||||
Real estate - construction and land | — | — | — | — | 37,193 | 37,193 | ||||||||||||||||||
SBA | — | — | — | 234 | 317,330 | 317,564 | ||||||||||||||||||
Other | — | — | — | — | 49,075 | 49,075 | ||||||||||||||||||
Total loans, gross | $ | 1,505 | $ | — | $ | — | $ | 234 | $ | 1,367,331 | $ | 1,369,070 | ||||||||||||
(Dollars in thousands) | 30 Days | 60 Days | 90+ Days | Non-Accrual | Current | Total | ||||||||||||||||||
As of September 30, 2022 | ||||||||||||||||||||||||
Commercial and industrial | $ | 524 | $ | — | $ | 161 | $ | — | $ | 642,446 | $ | 643,131 | ||||||||||||
Real estate - other | 4,060 | — | — | — | 820,807 | 824,867 | ||||||||||||||||||
Real estate - construction and land | — | — | — | — | 71,523 | 71,523 | ||||||||||||||||||
SBA | — | — | — | 182 | 8,383 | 8,565 | ||||||||||||||||||
Other | — | — | — | — | 39,815 | 39,815 | ||||||||||||||||||
Total loans, gross | $ | 4,584 | $ | — | $ | 161 | $ | 182 | $ | 1,582,974 | $ | 1,587,901 | ||||||||||||
As of December 31, 2021 | ||||||||||||||||||||||||
Commercial and industrial | $ | — | $ | 2,597 | $ | — | $ | — | $ | 471,684 | $ | 474,281 | ||||||||||||
Real estate - other | — | — | — | — | 697,212 | 697,212 | ||||||||||||||||||
Real estate - construction and land | — | — | — | — | 43,194 | 43,194 | ||||||||||||||||||
SBA | — | — | — | 232 | 81,171 | 81,403 | ||||||||||||||||||
Other | — | — | — | — | 80,559 | 80,559 | ||||||||||||||||||
Total loans, gross | $ | — | $ | 2,597 | $ | — | $ | 232 | $ | 1,373,820 | $ | 1,376,649 | ||||||||||||
Commercial | Real Estate | |||||||||||||||||||||||
and | Real Estate | Construction | ||||||||||||||||||||||
(Dollars in thousands) | Industrial | Other | and Land | SBA | Other | Total | ||||||||||||||||||
As of September 30, 2021 | ||||||||||||||||||||||||
Gross loans: | ||||||||||||||||||||||||
Loans individually evaluated for impairment | $ | 0 | $ | 1,000 | $ | — | $ | 233 | $ | — | $ | 1,233 | ||||||||||||
Loans collectively evaluated for impairment | 428,169 | 663,202 | 41,312 | 106,863 | 61,193 | 1,300,739 | ||||||||||||||||||
Total gross loans | $ | 428,169 | $ | 664,202 | $ | 41,312 | $ | 107,096 | $ | 61,193 | $ | 1,301,972 | ||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Loans individually evaluated for impairment | $ | 0 | $ | — | $ | — | $ | 0 | $ | — | $ | 0 | ||||||||||||
Loans collectively evaluated for impairment | 8,209 | 4,393 | 675 | 273 | 21 | 13,571 | ||||||||||||||||||
Total allowance for loan losses | $ | 8,209 | $ | 4,393 | $ | 675 | $ | 273 | $ | 21 | $ | 13,571 | ||||||||||||
As of December 31, 2020 | ||||||||||||||||||||||||
Gross loans: | ||||||||||||||||||||||||
Loans individually evaluated for impairment | $ | 2,288 | $ | — | $ | — | $ | 689 | $ | — | $ | 2,977 | ||||||||||||
Loans collectively evaluated for impairment | 412,260 | 550,690 | 37,193 | 316,875 | 49,075 | 1,366,093 | ||||||||||||||||||
Total loans | $ | 414,548 | $ | 550,690 | $ | 37,193 | $ | 317,564 | $ | 49,075 | $ | 1,369,070 | ||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Loans individually evaluated for impairment | $ | 41 | $ | — | $ | — | $ | 259 | $ | — | $ | 300 | ||||||||||||
Loans collectively evaluated for impairment | 8,882 | 3,877 | 681 | 345 | 26 | 13,811 | ||||||||||||||||||
Total allowance for loan losses | $ | 8,923 | $ | 3,877 | $ | 681 | $ | 604 | $ | 26 | $ | 14,111 | ||||||||||||
Unpaid | Average | Interest | ||||||||||||||||||
Recorded | Principal | Related | Recorded | Income | ||||||||||||||||
(Dollars in thousands) | Investment | Balance | Allowance | Investment | Recognized | |||||||||||||||
As of September 30, 2021 | ||||||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||
Real estate - other | $ | 1,000 | $ | 1,000 | $ | — | $ | 1,000 | $ | 8 | ||||||||||
SBA | $ | 233 | $ | 755 | $ | — | $ | 1,973 | $ | 14 | ||||||||||
Total: | ||||||||||||||||||||
Real estate - other | $ | 1,000 | $ | 1,000 | $ | — | $ | 1,000 | $ | 8 | ||||||||||
SBA | $ | 233 | $ | 755 | $ | — | $ | 1,973 | $ | 14 | ||||||||||
As of December 31, 2020 | ||||||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||
SBA | $ | 234 | $ | 479 | $ | — | $ | 1,917 | $ | — | ||||||||||
With an allowance recorded: | ||||||||||||||||||||
Commercial and industrial | $ | 2,288 | $ | 2,288 | $ | 41 | $ | 2,137 | $ | 148 | ||||||||||
SBA | $ | 455 | $ | 455 | $ | 259 | $ | 3,921 | $ | 57 | ||||||||||
Total: | ||||||||||||||||||||
Commercial and industrial | $ | 2,288 | $ | 2,288 | $ | 41 | $ | 2,137 | $ | 148 | ||||||||||
SBA | $ | 689 | $ | 934 | $ | 259 | $ | 5,838 | $ | 57 |
(Dollars in thousands) | Commercial and Industrial | Real Estate Other | Real Estate Construction and Land | SBA | Other | Total | ||||||||||||||||||
As of September 30, 2022 | ||||||||||||||||||||||||
Gross loans: | ||||||||||||||||||||||||
Loans individually evaluated for impairment | $ | — | $ | — | $ | — | $ | 182 | $ | — | $ | 182 | ||||||||||||
Loans collectively evaluated for impairment | 643,131 | 824,867 | 71,523 | 8,383 | 39,815 | 1,587,719 | ||||||||||||||||||
Total gross loans | $ | 643,131 | $ | 824,867 | $ | 71,523 | $ | 8,565 | $ | 39,815 | $ | 1,587,901 | ||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Loans individually evaluated for impairment | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Loans collectively evaluated for impairment | 10,225 | 5,173 | 997 | 128 | 32 | 16,555 | ||||||||||||||||||
Total allowance for loan losses | $ | 10,225 | $ | 5,173 | $ | 997 | $ | 128 | $ | 32 | $ | 16,555 | ||||||||||||
As of December 31, 2021 | ||||||||||||||||||||||||
Gross loans: | ||||||||||||||||||||||||
Loans individually evaluated for impairment | $ | — | $ | — | $ | — | $ | 731 | $ | — | $ | 731 | ||||||||||||
Loans collectively evaluated for impairment | 474,281 | 697,212 | 43,194 | 80,672 | 80,559 | 1,375,918 | ||||||||||||||||||
Total gross loans | $ | 474,281 | $ | 697,212 | $ | 43,194 | $ | 81,403 | $ | 80,559 | $ | 1,376,649 | ||||||||||||
Allowance for loan losses: | ||||||||||||||||||||||||
Loans individually evaluated for impairment | $ | — | $ | — | $ | — | $ | 142 | $ | — | $ | 142 | ||||||||||||
Loans collectively evaluated for impairment | 8,552 | 4,524 | 681 | 167 | 15 | 13,939 | ||||||||||||||||||
Total allowance for loan losses | $ | 8,552 | $ | 4,524 | $ | 681 | $ | 309 | $ | 15 | $ | 14,081 | ||||||||||||
(Dollars in thousands) | Recorded Investment | Unpaid Principal Balance | Related Allowance | Average Recorded Investment | Interest Income Recognized | |||||||||||||||
As of September 30, 2022 | ||||||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||
SBA | $ | 182 | $ | 580 | $ | — | $ | 207 | $ | — | ||||||||||
With an allowance recorded: | ||||||||||||||||||||
SBA | $ | — | $ | — | $ | — | $ | 249 | $ | — | ||||||||||
Total: | ||||||||||||||||||||
SBA | $ | 182 | $ | 580 | $ | — | $ | 457 | $ | — | ||||||||||
As of December 31, 2021 | ||||||||||||||||||||
With no related allowance recorded: | ||||||||||||||||||||
SBA | $ | 232 | $ | 705 | $ | — | $ | 233 | $ | 14 | ||||||||||
With an allowance recorded: | ||||||||||||||||||||
SBA | $ | 499 | $ | 499 | $ | 142 | $ | 477 | $ | 59 | ||||||||||
Total: | ||||||||||||||||||||
SBA | $ | 731 | $ | 1,204 | $ | 142 | $ | 710 | $ | 73 |
Commercial | Real Estate | Commercial | Real Estate | |||||||||||||||||||||||||||||||||||||||||||||
and | Real Estate | Construction | and | Real Estate | Construction | |||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Industrial | Other | and Land | SBA | Other | Total | Industrial | Other | and Land | SBA | Other | Total | ||||||||||||||||||||||||||||||||||||
Three months ended September 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 9,526 | $ | 5,243 | $ | 907 | $ | 273 | $ | 8 | $ | 15,957 | ||||||||||||||||||||||||||||||||||||
Provision for loan losses | 699 | (70 | ) | 90 | 57 | 24 | 800 | |||||||||||||||||||||||||||||||||||||||||
Charge-offs | — | — | — | (202 | ) | — | (202 | ) | ||||||||||||||||||||||||||||||||||||||||
Recoveries | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
Ending balance | $ | 10,225 | $ | 5,173 | $ | 997 | $ | 128 | $ | 32 | $ | 16,555 | ||||||||||||||||||||||||||||||||||||
Net recoveries (charge-offs) / gross loans | 0.00 | % | 0.00 | % | 0.00 | % | -2.36 | % | 0.00 | % | -0.01 | % | ||||||||||||||||||||||||||||||||||||
Three months ended September 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 8,133 | $ | 4,069 | $ | 697 | $ | 317 | $ | 24 | $ | 13,240 | $ | 8,133 | $ | 4,069 | $ | 697 | $ | 317 | $ | 24 | $ | 13,240 | ||||||||||||||||||||||||
Provision for loan losses | 45 | 324 | (22 | ) | (44 | ) | (3 | ) | 300 | 45 | 324 | (22 | ) | (44 | ) | (3 | ) | 300 | ||||||||||||||||||||||||||||||
Charge-offs | — | — | — | 0 | — | 0 | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
Recoveries | 31 | — | — | — | — | 31 | 31 | — | — | — | — | 31 | ||||||||||||||||||||||||||||||||||||
Ending balance | $ | 8,209 | $ | 4,393 | $ | 675 | $ | 273 | $ | 21 | $ | 13,571 | $ | 8,209 | $ | 4,393 | $ | 675 | $ | 273 | $ | 21 | $ | 13,571 | ||||||||||||||||||||||||
Three months ended September 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||
Net recoveries (charge-offs) / gross loans | 0.01 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||||||||||||||||||||||||||||
Nine months ended September 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 7,851 | $ | 3,332 | $ | 956 | $ | 366 | $ | 19 | $ | 12,524 | $ | 8,552 | $ | 4,524 | $ | 681 | $ | 309 | $ | 15 | $ | 14,081 | ||||||||||||||||||||||||
Provision for loan losses | 772 | 276 | (280 | ) | 79 | 3 | 850 | 1,672 | 649 | 316 | 21 | 17 | 2,675 | |||||||||||||||||||||||||||||||||||
Charge-offs | 0 | �� | — | — | 0 | — | 0 | — | — | — | (202 | ) | — | (202 | ) | |||||||||||||||||||||||||||||||||
Recoveries | 11 | — | — | — | — | 11 | 1 | — | — | — | — | 1 | ||||||||||||||||||||||||||||||||||||
Ending balance | $ | 8,634 | $ | 3,608 | $ | 676 | $ | 445 | $ | 22 | $ | 13,385 | $ | 10,225 | $ | 5,173 | $ | 997 | $ | 128 | $ | 32 | $ | 16,555 | ||||||||||||||||||||||||
Net recoveries (charge-offs) / gross loans | 0.00 | % | 0.00 | % | 0.00 | % | -2.36 | % | 0.00 | % | -0.01 | % | ||||||||||||||||||||||||||||||||||||
Nine months ended September 30, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 8,923 | $ | 3,877 | $ | 681 | $ | 604 | $ | 26 | $ | 14,111 | $ | 8,923 | $ | 3,877 | $ | 681 | $ | 604 | $ | 26 | $ | 14,111 | ||||||||||||||||||||||||
Provision for loan losses | (952 | ) | 516 | (6 | ) | (53 | ) | (5 | ) | (500 | ) | (952 | ) | 516 | (6 | ) | (53 | ) | (5 | ) | (500 | ) | ||||||||||||||||||||||||||
Charge-offs | — | — | — | (278 | ) | — | (278 | ) | — | — | — | (278 | ) | — | (278 | ) | ||||||||||||||||||||||||||||||||
Recoveries | 238 | — | — | — | — | 238 | 238 | — | — | — | — | 238 | ||||||||||||||||||||||||||||||||||||
Ending balance | $ | 8,209 | $ | 4,393 | $ | 675 | $ | 273 | $ | 21 | $ | 13,571 | $ | 8,209 | $ | 4,393 | $ | 675 | $ | 273 | $ | 21 | $ | 13,571 | ||||||||||||||||||||||||
Nine months ended September 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||
Beginning balance | $ | 6,708 | $ | 3,281 | $ | 1,022 | $ | 50 | $ | 14 | $ | 11,075 | ||||||||||||||||||||||||||||||||||||
Provision for loan losses | 3,688 | 327 | (346 | ) | 503 | 8 | 4,180 | |||||||||||||||||||||||||||||||||||||||||
Charge-offs | (1,868 | ) | — | — | (108 | ) | — | (1,976 | ) | |||||||||||||||||||||||||||||||||||||||
Recoveries | 106 | — | — | — | — | 106 | ||||||||||||||||||||||||||||||||||||||||||
Ending balance | $ | 8,634 | $ | 3,608 | $ | 676 | $ | 445 | $ | 22 | $ | 13,385 | ||||||||||||||||||||||||||||||||||||
Net recoveries (charge-offs) / gross loans | 0.06 | % | 0.00 | % | 0.00 | % | -0.26 | % | 0.00 | % | 0.00 | % |
Over One | ||||||||||||||||
Due in | Year But | |||||||||||||||
One Year | Less Than | Over | ||||||||||||||
(Dollars in thousands) | Or Less | Five Years | Five Years | Total | ||||||||||||
Unfunded fixed rate loan commitments: | ||||||||||||||||
Interest rate less than or equal to 4.00% | $ | 20,982 | $ | 3,751 | $ | 4,973 | $ | 29,706 | ||||||||
Interest rate between 4.00% and 5.00% | 1,108 | 9,188 | 719 | 11,015 | ||||||||||||
Interest rate greater than or equal to 5.00% | — | 1,254 | — | 1,254 | ||||||||||||
Total unfunded fixed rate loan commitments | $ | 22,090 | $ | 14,193 | $ | 5,692 | $ | 41,975 | ||||||||
Over One | ||||||||||||||||
Due in | Year But | |||||||||||||||
One Year | Less Than | Over | ||||||||||||||
(Dollars in thousands) | Or Less | Five Years | Five Years | Total | ||||||||||||
Unfunded fixed rate loan commitments: | ||||||||||||||||
Interest rate less than or equal to 4.00% | $ | 13,461 | $ | 1,841 | $ | 6,646 | $ | 21,948 | ||||||||
Interest rate between 4.00% and 5.00% | 2,245 | 1,160 | 995 | 4,400 | ||||||||||||
Interest rate greater than or equal to 5.00% | 250 | 345 | 0 | 595 | ||||||||||||
Total unfunded fixed rate loan commitments | $ | 15,956 | $ | 3,346 | $ | 7,641 | $ | 26,943 | ||||||||
September 30, | September 30, | |||||||
(Dollars in thousands) | 2021 | 2022 | ||||||
Operating lease cost (cost resulting from lease payments) | $ | 1,578 | $ | 1,452 | ||||
Operating lease - operating cash flows (fixed payments) | $ | 1,818 | $ | 1,844 | ||||
Operating lease - ROU assets | $ | 6,914 | $ | 5,015 | ||||
Operating lease - liabilities | $ | 8,774 | $ | 6,502 | ||||
Weighted average lease term - operating leases | 2.6 years | |||||||
Weighted average discount rate - operating leases | 0.60 | % | ||||||
Weighted average lease term—operating leases | 2.3 years | |||||||
Weighted average discount rate—operating leases | 3.76 | % |
September 30, | ||||
(Dollars in thousands) | 2021 | |||
2021 | $ | 613 | ||
2022 | 2,441 | |||
2023 | 1,497 | |||
2024 | 1,456 | |||
2025 | 1,500 | |||
Thereafter | 1,792 | |||
Total undiscounted cash flows | 9,299 | |||
Discount on cash flows | (525 | ) | ||
Total lease liability | $ | 8,774 | ||
September 30, | ||||
(Dollars in thousands) | 2022 | |||
2022 | $ | 597 | ||
2023 | 1,497 | |||
2024 | 1,456 | |||
2025 | 1,500 | |||
2026 | 1,435 | |||
Thereafter | 357 | |||
Total undiscounted cash flows | 6,842 | |||
Discount on cash flows | (340 | ) | ||
Total lease liability | $ | 6,502 | ||
Carrying | Fair Value Measurements | |||||||||||||||||||
(Dollars in thousands) | Amount | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||
As of September 30, 2021 | ||||||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and due from banks | $ | 601,050 | $ | 601,050 | $ | — | $ | — | $ | 601,050 | ||||||||||
Securities available for sale | 82,108 | — | 82,108 | — | 82,108 | |||||||||||||||
Loans, net | 1,289,161 | — | — | 1,289,677 | 1,289,677 | |||||||||||||||
Accrued interest receivable | 5,235 | — | 519 | 4,716 | 5,235 | |||||||||||||||
Financial liabilities: | ||||||||||||||||||||
Deposits | $ | 1,742,054 | $ | 1,645,361 | $ | 96,801 | $ | — | $ | 1,742,162 | ||||||||||
Other borrowings | 79,536 | — | — | 79,536 | 79,536 | |||||||||||||||
Subordinated debt | 59,009 | — | — | 61,127 | 61,127 | |||||||||||||||
Accrued interest payable | 327 | — | 48 | 279 | 327 | |||||||||||||||
As of December 31, 2020 | ||||||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and due from banks | $ | 418,517 | $ | 418,517 | $ | — | $ | — | $ | 418,517 | ||||||||||
Securities available for sale | 55,093 | — | 55,093 | — | 55,093 | |||||||||||||||
Loans, net | 1,355,482 | — | — | 1,360,845 | 1,360,845 | |||||||||||||||
Accrued interest receivable | 6,578 | — | 225 | 6,353 | 6,578 | |||||||||||||||
Financial liabilities: | ||||||||||||||||||||
Deposits | $ | 1,532,206 | $ | 1,331,572 | $ | 200,888 | $ | — | $ | 1,532,460 | ||||||||||
Other borrowings | 189,043 | — | — | 189,123 | 189,123 | |||||||||||||||
Subordinated debt | 24,994 | — | — | 24,642 | 24,642 | |||||||||||||||
Accrued interest payable | 545 | — | 51 | 494 | 545 |
Carrying | Fair Value Measurements | |||||||||||||||||||
(Dollars in thousands) | Amount | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||
As of September 30, 2022 | ||||||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 241,054 | $ | 241,054 | $ | — | $ | — | $ | 241,054 | ||||||||||
Investment securities: | ||||||||||||||||||||
Available for sale | 47,359 | — | 47,359 | — | 47,359 | |||||||||||||||
Held to Maturity | 110,172 | 89,069 | 8,635 | 97,704 | ||||||||||||||||
Loans, net | 1,573,248 | — | — | 1,524,759 | 1,524,759 | |||||||||||||||
Accrued interest receivable | 6,628 | — | 851 | 5,777 | 6,628 | |||||||||||||||
Financial liabilities: | ||||||||||||||||||||
Deposits | $ | 1,709,078 | $ | 1,391,143 | $ | 318,310 | $ | — | $ | 1,709,453 | ||||||||||
Other borrowings | 100,000 | — | — | 100,000 | 100,000 | |||||||||||||||
Subordinated debt | 54,117 | — | — | 51,564 | 51,564 | |||||||||||||||
Accrued interest payable | 457 | — | 355 | 102 | 457 | |||||||||||||||
As of December 31, 2021 | ||||||||||||||||||||
Financial assets: | ||||||||||||||||||||
Cash and cash equivalents | $ | 470,456 | $ | 470,456 | $ | — | $ | — | $ | 470,456 | ||||||||||
Investment securities: | ||||||||||||||||||||
Available for sale | 74,892 | — | 67,981 | 6,911 | 74,892 | |||||||||||||||
Held to Maturity | 28,386 | 22,632 | 5,584 | 28,216 | ||||||||||||||||
Loans, net | 1,364,256 | — | 1,353,888 | 1,353,888 | ||||||||||||||||
Accrued interest receivable | 5,713 | — | 633 | 5,080 | 5,713 | |||||||||||||||
Financial liabilities: | ||||||||||||||||||||
Deposits | $ | 1,680,138 | $ | 1,525,935 | $ | 154,146 | $ | — | $ | 1,680,081 | ||||||||||
Other borrowings | 106,387 | — | — | 106,387 | 106,387 | |||||||||||||||
Subordinated debt | 54,028 | — | — | 56,092 | 56,092 | |||||||||||||||
Accrued interest payable | 859 | — | 42 | 817 | 859 |
(Dollars in thousands) | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
As of September 30, 2022 | ||||||||||||||||
Investments available for sale: | ||||||||||||||||
Mortgage backed securities | $ | 18,168 | $ | — | $ | 18,168 | $ | — | ||||||||
Government agencies | 28,714 | — | 28,714 | — | ||||||||||||
Corporate bonds | 477 | — | 477 | — | ||||||||||||
Total assets measured at fair value on a recurring basis | $ | 47,359 | $ | — | $ | 47,359 | $ | — | ||||||||
As of December 31, 2021 | ||||||||||||||||
Investments available for sale: | ||||||||||||||||
Mortgage backed securities | $ | 29,948 | $ | — | $ | 29,948 | $ | — | ||||||||
Government agencies | 2,993 | — | 2,993 | — | ||||||||||||
Corporate bonds | 41,951 | — | 35,040 | 6,911 | ||||||||||||
Total assets measured at fair value on a recurring basis | $ | 74,892 | $ | — | $ | 67,981 | $ | 6,911 | ||||||||
(Dollars in thousands) | Corporate Securities | |||
Balance at December 31, 2021 | $ | 6,911 | ||
Purchases | — | |||
Transfers into Level 3 | — | |||
Transfers out of Level 3 | (6,911 | ) | ||
Balance at September 30, 2022 | $ | — | ||
(Dollars in thousands) | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
As of September 30, 2021 | ||||||||||||||||
Investments available for sale: | ||||||||||||||||
Mortgage backed securities | $ | 43,380 | $ | — | $ | 43,380 | $ | — | ||||||||
Government agencies | 2,152 | — | 2,152 | — | ||||||||||||
Corporate bonds | 36,576 | — | 36,576 | — | ||||||||||||
Total assets measured at fair value on a recurring basis | $ | 82,108 | $ | — | $ | 82,108 | $ | — | ||||||||
As of December 31, 2020 | ||||||||||||||||
Investments available for sale: | ||||||||||||||||
Mortgage backed securities | $ | 28,193 | $ | — | $ | 28,193 | $ | — | ||||||||
Government agencies | 2,412 | — | 2,412 | — | ||||||||||||
Corporate bonds | 24,488 | — | 24,488 | — | ||||||||||||
Total assets measured at fair value on a recurring basis | $ | 55,093 | $ | — | $ | 55,093 | $ | — | ||||||||
Carrying | Fair Value Measurements | Carrying | Fair Value Measurements | |||||||||||||||||||||||||||||
(Dollars in thousands) | Amount | Level 1 | Level 2 | Level 3 | Amount | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
As of September 30, 2021 | ||||||||||||||||||||||||||||||||
Impaired loans - Real estate other | $ | 1,000 | $ | — | $ | — | $ | 1,000 | ||||||||||||||||||||||||
As of September 30, 2022 | ||||||||||||||||||||||||||||||||
Impaired loans - SBA | 233 | — | — | 233 | $ | 182 | $ | — | $ | — | $ | 182 | ||||||||||||||||||||
Total assets measured at fair value on a non-recurring basis | $ | 1,233 | $ | — | $ | — | $ | 1,233 | $ | 182 | $ | — | $ | — | $ | 182 | ||||||||||||||||
As of December 31, 2020 | ||||||||||||||||||||||||||||||||
As of December 31, 2021 | ||||||||||||||||||||||||||||||||
Impaired loans - SBA | $ | 689 | $ | — | $ | — | $ | 689 | $ | 731 | $ | — | $ | — | $ | 731 | ||||||||||||||||
Total assets measured at fair value on a non-recurring basis | $ | 689 | $ | — | $ | — | $ | 689 | $ | 731 | $ | — | $ | — | $ | 731 | ||||||||||||||||
Number of | Principal | Number of Loans as a % of | Principal Balance as a % of | |||||||||||||||||||||
(Dollars in millions) | Loans | Balance | PPP Loans | Gross Loans | PPP Loans | Gross Loans | ||||||||||||||||||
Dental services | 174 | $ | 19.3 | 52 | % | 10 | % | 20 | % | 1 | % | |||||||||||||
Contractors | 33 | 20.4 | 10 | % | 2 | % | 21 | % | 2 | % | ||||||||||||||
Other | 126 | 57.7 | 38 | % | 8 | % | 59 | % | 4 | % | ||||||||||||||
Total | 333 | $ | 97.4 | 100 | % | 20 | % | 100 | % | 7 | % | |||||||||||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is a discussion of our financial condition at September 30, 20212022 and December 31, 20202021 and our results of operations for the three and nine months ended September 30, 20212022 and 2020,2021, and should be read in conjunction with our audited consolidated financial statements set forth in our Annual Report on Form
Forward Looking Statements
Statements contained in this Report that are not historical facts or that discuss our expectations, beliefs or views regarding future events, such as our future operations or future financial performance, or financial or other trends in our business or in the markets in which we operate, and our future plans constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Often, they include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project,” “forecast,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” The information contained in such forward-looking statements is based on current information available to us and on assumptions that we make about future economic and market conditions and other events over which we do not have control. In addition, our business and the markets in which we operate are subject to a number of risks and uncertainties. Such risks and uncertainties, and the occurrence of events in the future or changes in circumstances that had not been anticipated, could cause our financial condition or actual operating results in the future to differ materially from our expected financial condition or operating results that are set forth in the forward-looking statements contained in this Report and could, therefore, also affect the price performance of our shares.
In addition to the risk of incurring loan losses and provision for loan losses, which is an inherent risk of the banking business, these risks and uncertainties include, but are not limited to, the following: deteriorating economic conditions and macroeconomic factors such as unemployment rates and the volume of bankruptcies, as well as changes in monetary, fiscal or tax policy to address the impact of
Due to the risks and uncertainties we face, readers are cautioned not to place undue reliance on the forward-looking statements contained in this Report, which speak only as of the date of this Report, or to make predictions about future performance based solely on historical financial performance. We also disclaim any obligation to update forward-looking statements contained in this Report as a result of new information, future events or otherwise, except as may otherwise be required by law.
27
Overview
California BanCorp (the “Company”), a California corporation headquartered in Oakland, California, is the bank holding company for its wholly-owned subsidiary California Bank of Commerce (the “Bank”). The Company has 2a full service branchesbranch in California located in Contra Costa County and Santa Clara County and 4 loan production offices in California located in Alameda County, Contra Costa County, Sacramento County, and Santa Clara County.
Three months ended September 30, | ||||||||
(Dollars in thousands, except per share data) | 2021 | 2020 | ||||||
Income Statement Data: | ||||||||
Interest income | $ | 15,539 | $ | 13,188 | ||||
Interest expense | 1,698 | 2,000 | ||||||
Net interest income | 13,841 | 11,188 | ||||||
Provision for credit losses | 300 | 850 | ||||||
Net interest income after provision for credit losses | 13,541 | 10,338 | ||||||
Other income | 1,302 | 1,028 | ||||||
Other expenses | 10,513 | 10,545 | ||||||
Income before taxes | 4,330 | 821 | ||||||
Income taxes | 1,114 | 326 | ||||||
Net income | $ | 3,216 | $ | 495 | ||||
Per Share Data: | ||||||||
Basic earnings per share | $ | 0.39 | $ | 0.06 | ||||
Diluted earnings per share | $ | 0.39 | $ | 0.06 | ||||
Performance Measures: | ||||||||
Return on average assets | 0.64 | % | 0.10 | % | ||||
Return on average tangible equity (1) | 9.19 | % | 1.55 | % | ||||
Net interest margin | 2.87 | % | 2.41 | % | ||||
Efficiency ratio | 69.42 | % | 86.32 | % |
Nine months ended September 30, | ||||||||
(Dollars in thousands, except per share data) | 2021 | 2020 | ||||||
Income Statement Data: | ||||||||
Interest income | $ | 45,750 | $ | 38,271 | ||||
Interest expense | 4,987 | 6,117 | ||||||
Net interest income | 40,763 | 32,154 | ||||||
Provision for credit losses | (500 | ) | 4,180 | |||||
Net interest income after provision for credit losses | 41,263 | 27,974 | ||||||
Other income | 3,179 | 3,096 | ||||||
Other expenses | 30,428 | 27,393 | ||||||
Income before taxes | 14,014 | 3,677 | ||||||
Income taxes | 3,827 | 1,159 | ||||||
Net income | $ | 10,187 | $ | 2,518 | ||||
Per Share Data: | ||||||||
Basic earnings per share | $ | 1.24 | $ | 0.31 | ||||
Diluted earnings per share | $ | 1.23 | $ | 0.31 | ||||
Performance Measures: | ||||||||
Return on average assets | 0.70 | % | 0.21 | % | ||||
Return on average tangible equity (1) | 10.11 | % | 2.68 | % | ||||
Net interest margin | 2.92 | % | 2.80 | % | ||||
Efficiency ratio | 69.25 | % | 77.71 | % |
(Dollars in thousands) | September 30, 2021 | December 31, 2020 | ||||||
Balance Sheet Data: | ||||||||
Assets | $ | 2,049,079 | $ | 1,905,799 | ||||
Loans, net | $ | 1,289,161 | $ | 1,355,482 | ||||
Deposits | $ | 1,742,054 | $ | 1,532,206 | ||||
Shareholders’ equity | $ | 147,239 | $ | 136,410 | ||||
Asset Quality Data: | ||||||||
Allowance for loan losses / gross loans | 1.04 | % | 1.03 | % | ||||
Allowance for loan losses / nonperforming loans | 1100.65 | % | 6030.34 | % | ||||
Nonperforming assets / total assets | 0.06 | % | 0.01 | % | ||||
Nonperforming loans / gross loans | 0.09 | % | 0.02 | % | ||||
Capital Adequacy Measures: | ||||||||
Tier I leverage ratio | 7.29 | % | 7.49 | % | ||||
Tier I risk-based capital ratio | 9.17 | % | 10.11 | % | ||||
Total risk-based capital ratio | 13.92 | % | 13.22 | % |
Critical Accounting Policies
Our unaudited consolidated financial statements are prepared in accordance with GAAP and with general practices within the financial services industry. Application of these principles requires management to make complex and subjective estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under current circumstances. These assumptions form the basis for our judgments about the carrying values of assets and liabilities that are not readily available from independent, objective sources. We evaluate our estimates on an ongoing basis. Use of alternative assumptions may have resulted in significantly different estimates. Actual results may differ from these estimates.
Our most significant accounting policies are described in Note 1 to our audited financial statements for the year ended December 31, 2020,2021, included in our Annual Report on Form
Non-GAAP
Some of the financial measures discussed in this Quarterly Report on Form
The following tables reflect the details of the
(Dollars in thousands) | September 30, 2022 | December 31, 2021 | ||||||
Allowance for credit losses as a percentage of outstanding loans, excluding PPP loans: | ||||||||
Allowance for credit losses | $ | 16,555 | $ | 14,081 | ||||
Gross loans | 1,587,901 | 1,376,649 | ||||||
Less: PPP loans | 3,797 | 72,527 | ||||||
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|
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| |||||
Gross loans, net of PPP loans | 1,584,104 | 1,304,122 | ||||||
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|
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| |||||
Allowance for credit losses as a percentage of outstanding loans, excluding PPP loans | 1.05 | % | 1.08 | % | ||||
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|
|
28
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Dollars in thousands) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
Return on average tangible common equity: | ||||||||||||||||
Net income | $ | 3,216 | $ | 495 | $ | 10,187 | $ | 2,518 | ||||||||
Tangible equity: | ||||||||||||||||
Average equity | $ | 146,363 | $ | 134,240 | $ | 142,311 | $ | 132,982 | ||||||||
Average goodwill / core deposit intangible | 7,530 | 7,570 | 7,540 | 7,581 | ||||||||||||
Tangible equity | $ | 138,833 | $ | 126,670 | $ | 134,771 | $ | 125,401 | ||||||||
Return on average tangible common equity | 9.19 | % | 1.55 | % | 10.11 | % | 2.68 | % | ||||||||
(Dollars in thousands) | September 30, 2021 | December 31, 2020 | ||||||
Allowance for credit losses as a percentage of outstanding loans, excluding PPP loans: | ||||||||
Allowance for credit losses | $ | 13,571 | $ | 14,111 | ||||
Gross loans | 1,301,972 | 1,369,070 | ||||||
Less: PPP loans | 97,451 | 306,373 | ||||||
Gross loans, net of PPP loans | 1,204,521 | 1,062,697 | ||||||
Allowance for credit losses as a percentage of outstanding loans, excluding PPP loans | 1.13 | % | 1.33 | % | ||||
Results of Operations – Three Months Ended September 30, 20212022 and 2020:
Overview
For the three months ended September 30, 2022 and September 30, 2021, net income was $5.5 million and $3.2 million, comparedrespectively, representing an increase of $2.3 million, or 72%. Compared to $495,000 for the same period last year. The increase of $2.7 million, or 550%, was primarily attributable to an increase inyear, net interest income of $2.7increased by $4.5 million a decreaseand non-interest income increased by $182,000, which was offset by an increase in the provision for credit losses of $550,000$500,000, an increase in non-interest expense of $704,000 and an increase in
Net Interest Income and Margin
Net interest income, the difference between interest earned on loans and investments and interest paid on deposits and borrowings is the principal component of the Company’s earnings. Net interest income is affected by changes in the nature and volume of earning assets and interest-bearing liabilities held during the quarter, the rates earned on such assets and the rates paid on interest bearing liabilities.
Net interest income for the three months ended September 30, 2021,2022, was $13.9$18.4 million, an increase of $2.7$4.5 million, or 24% over $11.233% from $13.8 million for the same period in 2020.2021. The increase in net interest income was primarily attributable to the rising interest rate environment combined with a more favorable mix of higher yielding earning assets offset, in part, by an increase in interest income as the resultcost of highertotal deposits and a reduction in the amortization of net fees collectedreceived on PPP loans. Amortization of net fees received on PPP loans combined with growth in earning assets, a reduction inwas $278,000 and $1.6 million for the costthird quarter of deposits,2022 and the repayment of previously outstanding borrowing arrangements.
Average total interest-earning assets increased by $69.7 million, or 4% to $1.91were $1.85 billion in the third quarter of 2021 from $1.842022 compared to $1.91 billion for the same period during 2020.2021. For the quartersquarter ended September 30, 2021 and 2020,2022, the yield on average earning assets increased 37132 basis points to 4.54% from 3.22% from 2.85%.for the quarter ended September 30, 2021. The yield on total average gross loans in the three months ended September 30, 20212022 was 4.48%4.97%, representing an increase of 5949 basis points compared to 3.89%4.48% in the same period one year earlier. Excluding the impact of PPP loans and the related amortization of net deferred fees, the yield on total average gross loans for the three months ended September 30, 2021 was 4.37%.
For the three months ended September 30, 2021 grew $321.22022, average loans increased $207.4 million, or 23%16%, from the quarter ended September 30, 2020,2021 while average loans grew $3.0deposit balances decreased $126.4 million, or 0%7%, for the same period. As a result, the average loan to deposit ratio for the third quarter of 20212022 was 95.69% compared to 76.58% down from 93.7% for the third quarter of 2020.
Of the $321.2$207.4 million increase in average loan balances year over year, average commercial and real estate other loans increased by $165.6 million and $177.3 million, respectively, as a result of organic growth. These increases were partially offset by a decrease in average SBA loans of $142.6 million primarily due to PPP loan forgiveness.
Of the $126.4 million decrease in average total deposit balances year over year, $166.9$135.7 million was attributable to noninterest-bearing depositsmoney market and $154.3savings accounts and $37.2 million was attributable to total demand deposits. These decreases were offset by an increase in time deposits of $43.2 million and an increase in interest-bearing deposits.demand deposits of $3.3 million. The cost of interest-bearing deposits was 0.49%0.78% during the quarter ended September 30, 20212022 compared to 0.74%0.49% in the same quarter one year earlier. In addition, the overall cost of average total deposit balances decreasedincreased by 15 basis points to 0.42% in the third quarter of 2022 compared to 0.27% in the third quarter of 2021 compared to 0.42% in the third quarter of 2020.
As a result, the net interest margin increased by 46107 basis points to 3.94% for the three months ended September 30, 2022, compared to 2.87% for the three months ended September 30, 2021, compared to 2.41% for the three months ended September 30, 2020.2021.
29
The following table shows the composition of average earning assets and average funding sources, average yields and rates, and the net interest margin for the quarters ended September 30, 20212022 and 2020.
Three months ended September 30, | ||||||||||||||||||||||||||||
2021 | 2020 | |||||||||||||||||||||||||||
Average Balance | Yields or Rates | Interest Income/ Expense | Average Balance | Yields or Rates | Interest Income/ Expense | |||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||
Interest earning assets: | ||||||||||||||||||||||||||||
Loans (1) | $ | 1,316,080 | 4.48 | % | $ | 14,870 | $ | 1,313,092 | 3.89 | % | $ | 12,849 | ||||||||||||||||
Federal funds sold | 530,806 | 0.15 | % | 199 | 490,409 | 0.09 | % | 117 | ||||||||||||||||||||
Investment securities | 65,811 | 2.83 | % | 470 | 39,571 | 2.23 | % | 222 | ||||||||||||||||||||
Total interest earning assets | 1,912,697 | 3.22 | % | 15,539 | 1,843,072 | 2.85 | % | 13,188 | ||||||||||||||||||||
Noninterest-earning assets: | ||||||||||||||||||||||||||||
Cash and due from banks | 18,627 | 19,789 | ||||||||||||||||||||||||||
All other assets (2) | 54,570 | 60,140 | ||||||||||||||||||||||||||
TOTAL | $ | 1,985,894 | $ | 1,923,001 | ||||||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||||||
Demand | $ | 36,696 | 0.09 | % | $ | 8 | $ | 30,877 | 0.14 | % | $ | 11 | ||||||||||||||||
Money market and savings | 735,785 | 0.52 | % | 961 | 582,694 | 0.81 | % | 1,190 | ||||||||||||||||||||
Time | 169,849 | 0.43 | % | 183 | 174,436 | 0.61 | % | 266 | ||||||||||||||||||||
Other | 102,287 | 2.12 | % | 546 | 369,764 | 0.57 | % | 533 | ||||||||||||||||||||
Total interest-bearing liabilities | 1,044,617 | 0.64 | % | 1,698 | 1,157,771 | 0.69 | % | 2,000 | ||||||||||||||||||||
Noninterest-bearing liabilities: | ||||||||||||||||||||||||||||
Demand deposits | 776,195 | 609,273 | ||||||||||||||||||||||||||
Accrued expenses and other liabilities | 18,719 | 21,717 | ||||||||||||||||||||||||||
Shareholders’ equity | 146,363 | 134,240 | ||||||||||||||||||||||||||
TOTAL | $ | 1,985,894 | $ | 1,923,001 | ||||||||||||||||||||||||
Net interest income and margin (3) | 2.87 | % | $ | 13,841 | 2.41 | % | $ | 11,188 | ||||||||||||||||||||
Three months ended September 30, | ||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||
Average Balance | Yields or Rates | Interest Income/ Expense | Average Balance | Yields or Rates | Interest Income/ Expense | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Interest earning assets: | ||||||||||||||||||||||||
Loans (1) | $ | 1,523,442 | 4.97 | % | $ | 19,084 | $ | 1,316,080 | 4.48 | % | $ | 14,870 | ||||||||||||
Federal funds sold | 162,314 | 2.12 | % | 867 | 530,806 | 0.15 | % | 199 | ||||||||||||||||
Investment securities | 163,486 | 2.95 | % | 1,217 | 65,811 | 2.83 | % | 470 | ||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total interest earning assets | 1,849,242 | 4.54 | % | 21,168 | 1,912,697 | 3.22 | % | 15,539 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Noninterest-earning assets: | ||||||||||||||||||||||||
Cash and due from banks | 20,153 | 18,627 | ||||||||||||||||||||||
All other assets (2) | 60,832 | 54,570 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
TOTAL | $ | 1,930,227 | $ | 1,985,894 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||
Demand | $ | 40,044 | 0.08 | % | $ | 8 | $ | 36,696 | 0.09 | % | $ | 8 | ||||||||||||
Money market and savings | 600,100 | 0.62 | % | 938 | 735,785 | 0.52 | % | 961 | ||||||||||||||||
Time | 213,001 | 1.35 | % | 726 | 169,849 | 0.43 | % | 183 | ||||||||||||||||
Other | 154,101 | 2.92 | % | 1,133 | 102,287 | 2.12 | % | 546 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total interest-bearing liabilities | 1,007,246 | 1.10 | % | 2,805 | 1,044,617 | 0.64 | % | 1,698 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Noninterest-bearing liabilities: | ||||||||||||||||||||||||
Demand deposits | 738,951 | 776,195 | ||||||||||||||||||||||
Accrued expenses and other liabilities | 21,094 | 18,719 | ||||||||||||||||||||||
Shareholders’ equity | 162,936 | 146,363 | ||||||||||||||||||||||
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|
|
| |||||||||||||||||||||
TOTAL | $ | 1,930,227 | $ | 1,985,894 | ||||||||||||||||||||
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| |||||||||||||||||||||
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|
|
|
| |||||||||||||||||
Net interest income and margin (3) | 3.94 | % | $ | 18,363 | 2.87 | % | $ | 13,841 | ||||||||||||||||
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|
|
|
(1) | Nonperforming loans are included in average loan balances. No adjustment has been made for these loans in the calculation of yields. Interest income on loans includes amortization of net deferred loan fees of $100,000 and $1.0 million, |
(2) | Other noninterest-earning assets includes the allowance for loan losses of |
(3) | Net interest margin is net interest income divided by total interest-earning assets. |
30
The following table shows the effect of the interest differential of volume and rate changes for the quarters ended September 30, 20212022 and 2020.2021. The change in interest due to both rate and volume has been allocated in proportion to the relationship of absolute dollar amounts of change in each.
Three Months Ended September 30, 2021 vs. 2020 | ||||||||||||
Increase (Decrease) Due to Change in: | ||||||||||||
(Dollars in thousands) | Average Volume | Average Rate | Net Change | |||||||||
Interest income: | ||||||||||||
Loans | $ | 34 | $ | 1,987 | $ | 2,021 | ||||||
Federal funds sold | 15 | 67 | 82 | |||||||||
Investment securities | 187 | 61 | 248 | |||||||||
Interest expense: | ||||||||||||
Deposits | ||||||||||||
Demand | 1 | (4 | ) | (3 | ) | |||||||
Money market and savings | 200 | (429 | ) | (229 | ) | |||||||
Time | (5 | ) | (78 | ) | (83 | ) | ||||||
Other borrowings | (1,428 | ) | 1,441 | 13 | ||||||||
Net interest income | $ | 1,468 | $ | 1,185 | $ | 2,653 | ||||||
Three Months Ended September 30, 2022 vs. 2021 | ||||||||||||
Increase (Decrease) Due to | ||||||||||||
Change in: | ||||||||||||
Average | Average | Net | ||||||||||
(Dollars in thousands) | Volume | Rate | Change | |||||||||
Interest income: | ||||||||||||
Loans | $ | 2,598 | $ | 1,616 | $ | 4,214 | ||||||
Federal funds sold | (1,968 | ) | 2,636 | 668 | ||||||||
Investment securities | 727 | 20 | 747 | |||||||||
Interest expense: | ||||||||||||
Deposits | ||||||||||||
Demand | 1 | (1 | ) | — | ||||||||
Money market and savings | (212 | ) | 189 | (23 | ) | |||||||
Time | 147 | 396 | 543 | |||||||||
Other borrowings | 381 | 206 | 587 | |||||||||
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| |||||||
Net interest income | $ | 1,040 | $ | 3,482 | $ | 4,522 | ||||||
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Interest Income
Interest income increased by $2.4$5.6 million in the third quarter of 20212022 compared to the same period of 2020,2021, primarily due to amortization of net fees collectedan increase in the prime rate which generated higher yields on PPP loansour loan portfolio combined with the PPP loans that were forgiven by the SBA being replaced with higher yielding commercial and real estate other loans, partially offset by a decrease in amortization of net fees collected on PPP loans. In addition, increased liquidity resultedThe prime rate at September 30, 2022 and September 30, 2021 was 6.25% and 3.25%, respectively. Interest earned on our loan portfolio of $19.1 million in the growththird quarter of 2022 represented an increase of $4.2 million, or 28%, compared to $14.9 million for the third quarter of 2021.
Additionally, the Company benefited from a more favorable mix of other earning assets. Interest earned on our loaninvestment securities portfolio of $14.9$1.2 million for the three months ended September 30, 2022 increased $747,000, or 159%, over $470,000 for the same period in the prior year.
Interest Expense
Interest expense increased by $1.1 million in the third quarter of 2021 represented an increase of $2.0 million, or 16%, compared to $12.9 million for the third quarter of 2020.
Provision for Credit Losses
The provision for credit losses decreasedincreased to $800,000 for the third quarter of 2022 compared to $300,000 for the third quarter of 2021 compared2021. The increase in the provision for credit losses was primarily attributable to $850,000 forthe growth of the loan portfolio. The Company had net loan charge-offs of $202,000, or 0.01% of gross loans, during the third quarter of 2020. Net loan recoveries in the third quarter of 2021 were $31,000 or 0.00% of gross loans,2022 compared to net loan recoveries of $11,000,$31,000, or 0.00% of gross loans, in the third quarter 2020.same period of 2021. The allowance for credit losses as a percent of outstanding loans was 1.04% at September 30, 20212022 and 0.99%1.02% at September 30, 2020.December 31, 2021. The reserve percentage excluding PPP loans, which are guaranteed by the SBA, was 1.13%1.05% at September 30, 20212022 compared to 1.35%1.08% at September 30, 2020December 31, 2021 (See discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations
31
Noninterest Income
The following table reflects the major components of the Company’s noninterest income.
Three Months Ended September 30, | Increase (Decrease) | |||||||||||||||
(Dollars in thousands) | 2021 | 2020 | Amount | Percent | ||||||||||||
Service charges and other fees | $ | 905 | $ | 779 | $ | 126 | 16 | % | ||||||||
Earnings on BOLI | 162 | 144 | 18 | 13 | % | |||||||||||
Other | 235 | 105 | 130 | 124 | % | |||||||||||
Total noninterest income | $ | 1,302 | $ | 1,028 | $ | 274 | 27 | % | ||||||||
Three Months Ended | ||||||||||||||||
September 30, | Increase (Decrease) | |||||||||||||||
(Dollars in thousands) | 2022 | 2021 | Amount | Percent | ||||||||||||
Service charges and other fees | $ | 1,237 | $ | 905 | $ | 332 | 37 | % | ||||||||
Earnings on BOLI | 167 | 162 | 5 | 3 | % | |||||||||||
Other | 80 | 235 | (155 | ) | -66 | % | ||||||||||
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Total noninterest income | $ | 1,484 | $ | 1,302 | $ | 182 | 14 | % | ||||||||
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Noninterest income increased by $274,000$182,000, or 27%14% in the third quarter of 2021,2022, compared to the third quarter of 2020.2021. The increase was primarily attributable tothe result of an increase in service charges and loan related fees combined with increased FHLB dividendother fee income.
Noninterest Expense
The following table reflects the major components of the Company’s noninterest expense.
Three Months Ended September 30, | Increase (Decrease) | |||||||||||||||
(Dollars in thousands) | 2021 | 2020 | Amount | Percent | ||||||||||||
Salaries and benefits | $ | 6,920 | $ | 6,452 | $ | 468 | 7 | % | ||||||||
Premises and equipment | 1,372 | 1,359 | 13 | 1 | % | |||||||||||
Professional fees | 334 | 634 | (300 | ) | -47 | % | ||||||||||
Data processing | 540 | 734 | (194 | ) | -26 | % | ||||||||||
Other | 1,347 | 1,366 | (19 | ) | -1 | % | ||||||||||
Total non-interest expense | $ | 10,513 | $ | 10,545 | $ | (32 | ) | 0 | % | |||||||
Three Months Ended | ||||||||||||||||
September 30, | Increase (Decrease) | |||||||||||||||
(Dollars in thousands) | 2022 | 2021 | Amount | Percent | ||||||||||||
Salaries and benefits | $ | 7,415 | $ | 6,920 | $ | 495 | 7 | % | ||||||||
Premises and equipment | 1,275 | 1,372 | (97 | ) | -7 | % | ||||||||||
Professional fees | 524 | 334 | 190 | 57 | % | |||||||||||
Data processing | 744 | 540 | 204 | 38 | % | |||||||||||
Other | 1,259 | 1,347 | (88 | ) | -7 | % | ||||||||||
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Total non-interest expense | $ | 11,217 | $ | 10,513 | $ | 704 | 7 | % | ||||||||
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Non-interest expense was $11.2 million and $10.5 million for the three months ended September 30, 2022 and 2021, and 2020.respectively. Excluding capitalized loan origination costs,
For the three months ended September 30, 2022 and 2021, also included a decrease in professionalthe Company’s efficiency ratio, the ratio of non-interest expense to revenues, was 56.52% and legal fees of $300,000 related to implementation of FDICIA and SEC compliance controls and processes during the third quarter of 2020. Additionally, data processing expense decreased by $194,000 for the third quarter of 2021 compared to the third quarter of 2020 primarily due to a reduction in item processing expense which fluctuates based upon transactional volume.
Provision for Income Taxes
Income tax expense was $1.1$2.3 million for the third quarter of 2021 which2022 compared to $326,000$1.1 million for the same period one year earlier.in prior year. The effective tax rates for those time periods were 25.7%29.5% and 39.7%25.7%, respectively.
32
Results of Operations – Nine Months Ended September 30, 20212022 and 2020:
Overview
For the nine months ended September 30, 2022 and September 30, 2021, net income was $13.4 million and $10.2 million, compared to $2.5 million for the same period last year.respectively. The increase of $7.7$3.2 million, or 305%32%, was primarily attributable to an increase in net interest income of $8.6$8.3 million and a decreasean increase in non-interest income of $2.2 million, offset by an increase in the provision for credit losses of $4.7$3.2 million, partially offset by an increase in
Net Interest Income and Margin
Net interest income for the nine months ended September 30, 2021,2022, was $40.8$49.1 million, an increase of $8.6$8.3 million, or 27% over $32.220% from $40.8 million for the same period in 2020.2021. The increase in net interest income was primarily attributable to an increase in interest income as the resulta more favorable mix of amortization of fees collected on PPP loans andhigher yielding earning assets, partially offset by an increase in the volumecost of average earning assets offset,borrowings and a reduction in part, by lower yieldsthe amortization of net fees received on earning assets resulting from a decline in short-term interest ratesPPP loans. Amortization of net fees received on PPP loans was $1.7 million and higher liquidity.
Average total interest-earning assets increased by $328.9 million, or 21% to $1.86were $1.91 billion in the nine months ended September 30, 2021 from $1.54of 2022 compared to $1.94 billion for the same period during 2020.2021. For the nine months ended September 30, 2021 and 2020,2022, the yield on average earning assets decreased 5increased 73 basis points to 4.01% from 3.28% from 3.33%.for the nine months ended September 30, 2021. The yield on total average gross loans in the nine months ended September 30, 20212022 was 4.27%4.62%, representing an increase of 235 basis points compared to 4.25%4.27% in the same period one year earlier. ExcludingFor the impact of PPP loansnine months ended September 30, 2022 and the related amortization of net deferred fees,2021, the yield on total average grossinvestment securities increased 7 basis points to 2.79% from 2.72%.
For the nine months ended September 30, 2022, average loans forincreased $71.7 million from the nine months ended September 30, 2021 was 4.45%.
Of the $393.5$71.7 million increase in average loan balances year over year, average commercial, real estate other and construction and land loans increased by $125.3 million, $170.6 million and $15.1 million, respectively, as a result of organic growth. These increases were primarily offset by a decrease in lower yielding average SBA loans of $238.3 million as a result of PPP loan forgiveness.
Of the $28.6 million decrease in average total deposit balances year over year, $202.1$32.1 million was attributable to noninterest-bearinga decrease in money market and savings accounts and a decrease in time deposits and $191.4 million was attributable to interest-bearing deposits.of $8.3 million. These decreases were offset by an increase in total demand deposits of $11.8 million. The cost of interest-bearing deposits was 0.52%0.51% during the nine months ended September 30, 20212022 compared to 0.94%0.52% in the same period one year earlier. In addition, the overall cost of average total deposit balances decreased by 252 basis points to 0.27% in the nine months ended of 2022 compared to 0.29% in the first nine months ended of 2021 compared to 0.54% in the in the same period of 2020.
As a result of the more favorable mix of higher yielding earning assets, the net interest margin increased by 1268 basis points to 3.60% for the nine months ended September 30, 2022, compared to 2.92% for the nine months ended September 30, 2021, compared to 2.80% for the nine months ended September 30, 2020.2021.
33
The following table shows the composition of average earning assets and average funding sources, average yields and rates, and the net interest margin for the nine months ended September 30, 20212022 and 2020.
Nine months ended September 30, | ||||||||||||||||||||||||||||
2021 | 2020 | |||||||||||||||||||||||||||
Average Balance | Yields or Rates | Interest Income/ Expense | Average Balance | Yields or Rates | Interest Income/ Expense | |||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||
Interest earning assets: | ||||||||||||||||||||||||||||
Loans (1) | $ | 1,382,074 | 4.27 | % | $ | 44,157 | $ | 1,166,829 | 4.25 | % | $ | 37,096 | ||||||||||||||||
Federal funds sold | 422,050 | 0.12 | % | 371 | 334,773 | 0.22 | % | 554 | ||||||||||||||||||||
Investment securities | 60,042 | 2.72 | % | 1,222 | 33,649 | 2.47 | % | 621 | ||||||||||||||||||||
Total interest earning assets | 1,864,166 | 3.28 | % | 45,750 | 1,535,251 | 3.33 | % | 38,271 | ||||||||||||||||||||
Noninterest-earning assets: | ||||||||||||||||||||||||||||
Cash and due from banks | 17,223 | 20,098 | ||||||||||||||||||||||||||
All other assets (2) | 58,646 | 63,970 | ||||||||||||||||||||||||||
TOTAL | $ | 1,940,035 | $ | 1,619,319 | ||||||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||||||
Demand | $ | 35,031 | 0.11 | % | $ | 29 | $ | 26,842 | 0.12 | % | $ | 25 | ||||||||||||||||
Money market and savings | 684,995 | 0.56 | % | 2,858 | 528,456 | 0.93 | % | 3,677 | ||||||||||||||||||||
Time | 180,572 | 0.44 | % | 594 | 153,887 | 1.11 | % | 1,279 | ||||||||||||||||||||
Other | 144,501 | 1.39 | % | 1,506 | 226,274 | 0.67 | % | 1,136 | ||||||||||||||||||||
Total interest-bearing liabilities | 1,045,099 | 0.64 | % | 4,987 | 935,459 | 0.87 | % | 6,117 | ||||||||||||||||||||
Noninterest-bearing liabilities: | ||||||||||||||||||||||||||||
Demand deposits | 731,659 | 529,580 | ||||||||||||||||||||||||||
Accrued expenses and other liabilities | 20,966 | 21,298 | ||||||||||||||||||||||||||
Shareholders’ equity | 142,311 | 132,982 | ||||||||||||||||||||||||||
TOTAL | $ | 1,940,035 | $ | 1,619,319 | ||||||||||||||||||||||||
Net interest income and margin (3) | 2.92 | % | $ | 40,763 | 2.80 | % | $ | 32,154 | ||||||||||||||||||||
Nine months ended September 30, | ||||||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||||||
Average Balance | Yields or Rates | Interest Income/ Expense | Average Balance | Yields or Rates | Interest Income/ Expense | |||||||||||||||||||
ASSETS | ||||||||||||||||||||||||
Interest earning assets: | ||||||||||||||||||||||||
Loans (1) | $ | 1,453,741 | 4.62 | % | $ | 50,268 | $ | 1,382,074 | 4.27 | % | $ | 44,157 | ||||||||||||
Federal funds sold | 217,008 | 0.79 | % | 1,283 | 422,050 | 0.12 | % | 371 | ||||||||||||||||
Investment securities | 155,423 | 2.79 | % | 3,247 | 60,042 | 2.72 | % | 1,222 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total interest earning assets | 1,826,172 | 4.01 | % | 54,798 | 1,864,166 | 3.28 | % | 45,750 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Noninterest-earning assets: | ||||||||||||||||||||||||
Cash and due from banks | 19,550 | 17,223 | ||||||||||||||||||||||
All other assets (2) | 61,939 | 58,646 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
TOTAL | $ | 1,907,661 | $ | 1,940,035 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||||||||||
Interest-bearing liabilities: | ||||||||||||||||||||||||
Deposits: | ||||||||||||||||||||||||
Demand | $ | 40,214 | 0.08 | % | 25 | $ | 35,031 | 0.11 | % | $ | 29 | |||||||||||||
Money market and savings | 652,849 | 0.45 | % | 2,185 | 684,995 | 0.56 | % | 2,858 | ||||||||||||||||
Time | 172,284 | 0.83 | % | 1,064 | 180,572 | 0.44 | % | 594 | ||||||||||||||||
Other | 125,108 | 2.58 | % | 2,412 | 144,501 | 1.39 | % | 1,506 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total interest-bearing liabilities | 990,455 | 0.77 | % | 5,686 | 1,045,099 | 0.64 | % | 4,987 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Noninterest-bearing liabilities: | ||||||||||||||||||||||||
Demand deposits | 738,273 | 731,659 | ||||||||||||||||||||||
Accrued expenses and other liabilities | 20,848 | 20,966 | ||||||||||||||||||||||
Shareholders’ equity | 158,085 | 142,311 | ||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
TOTAL | $ | 1,907,661 | $ | 1,940,035 | ||||||||||||||||||||
|
|
|
| |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||
Net interest income and margin (3) | 3.60 | % | $ | 49,112 | 2.92 | % | $ | 40,763 | ||||||||||||||||
|
|
|
|
|
|
|
|
(1) | Nonperforming loans are included in average loan balances. No adjustment has been made for these loans in the calculation of yields. Interest income on loans includes amortization of net deferred loan fees of $501,000 and $3.3 million, |
(2) | Other noninterest-earning assets includes the allowance for loan losses of $15.0 million and $14.0 million, |
(3) | Net interest margin is net interest income divided by total interest-earning assets. |
34
The following table shows the effect of the interest differential of volume and rate changes for the nine months ended September 30, 20212022 and 2020.2021. The change in interest due to both rate and volume has been allocated in proportion to the relationship of absolute dollar amounts of change in each.
Nine Months Ended September 30, | ||||||||||||
2021 vs. 2020 | ||||||||||||
Increase (Decrease) Due to | ||||||||||||
Change in: | ||||||||||||
Average | Average | Net | ||||||||||
(Dollars in thousands) | Volume | Rate | Change | |||||||||
Interest income: | ||||||||||||
Loans | $ | 6,877 | $ | 184 | $ | 7,061 | ||||||
Federal funds sold | 77 | (260 | ) | (183 | ) | |||||||
Investment securities | 537 | 64 | 601 | |||||||||
Interest expense: | ||||||||||||
Deposits | ||||||||||||
Demand | 7 | (3 | ) | 4 | ||||||||
Money market and savings | 653 | (1,472 | ) | (819 | ) | |||||||
Time | 88 | (773 | ) | (685 | ) | |||||||
Other borrowings | (852 | ) | 1,222 | 370 | ||||||||
Net interest income | $ | 7,595 | $ | 1,014 | $ | 8,609 | ||||||
Nine Months Ended September 30, 2022 vs. 2021 | ||||||||||||
Increase (Decrease) Due to Change in: | ||||||||||||
(Dollars in thousands) | Average Volume | Average Rate | Net Change | |||||||||
Interest income: | ||||||||||||
Loans | $ | 2,478 | $ | 3,633 | $ | 6,111 | ||||||
Federal funds sold | (1,212 | ) | 2,124 | 912 | ||||||||
Investment securities | 1,993 | 32 | 2,025 | |||||||||
Interest expense: | ||||||||||||
Deposits | ||||||||||||
Demand | 3 | (7 | ) | (4 | ) | |||||||
Money market and savings | (108 | ) | (565 | ) | (673 | ) | ||||||
Time | (51 | ) | 521 | 470 | ||||||||
Other borrowings | (374 | ) | 1,280 | 906 | ||||||||
|
|
|
|
|
| |||||||
Net interest income | $ | 3,789 | $ | 4,560 | $ | 8,349 | ||||||
|
|
|
|
|
|
Interest Income
Interest income increased by $7.5$9.0 million in the first nine months of 2021ended September 30, 2022 compared to the same period of 2020,2021, primarily due to growth in average earning assets, and in particular an increase in the prime rate which generated higher yields on our loan portfolio combined with PPP loans that were forgiven by the SBA being replaced with higher yielding commercial and real estate other loans, partially offset by a decrease in amortization of net fees collected on PPP loans. The increase in interestprime rate at September 30, 2022 and September 30, 2021 was 6.25% and 3.25%, respectively. Interest earned on our loan portfolio of $7.1$50.3 million in the first nine months ended September 30, 2022 represented an increase of 2021$6.1 million, or 14%, compared to $44.2 million for the same period in 2021.
Additionally, the Company benefited from a more favorable mix of other earning assets. Interest earned on our investment securities portfolio of $3.2 million for the nine months ended September 30, 2022 increased $2.0 million, or 166%, over $1.2 million for the same period in the prior year.
Interest Expense
Interest expense increased by $699,000 in the nine months ended September 30, 2022 compared to the same period of 2020 was comprised of $6.8 million attributable to an approximate $215.2 million increase in average loans outstanding and $184,000 attributable to the increase in the yield earned on loans to 4.27% from 4.25%.
Provision for Credit Losses
The provision for credit losses of $4.2increased to $2.7 million for the same periodnine months ended of 2020. Net2022 compared to a release of reserves of $500,000 for the nine months ended of 2021. The increase in the provision for credit losses was primarily attributable to the growth of the loan portfolio. The Company had net loan charge-offs of $40,000 in$201,000, or 0.01 % of gross loans, during the first nine months ended of 20212022 compared to net loan charge-offs of $1.9 million during$40,000, or 0.00% of gross loans, in the same period of 2020. During the first nine months of 2020, the Company
35
September 30, 20212022 and 0.99%1.02% at September 30, 2020.December 31, 2021. The reserve percentage excluding PPP loans, which are guaranteed by the SBA, was 1.13%1.05% at September 30, 20212022 compared to 1.35%1.08% at September 30, 2020December 31, 2021 (See discussion in “Management’s Discussion and Analysis of Financial Condition and Results of Operations
Noninterest Income
The following table reflects the major components of the Company’s noninterest income.
Nine Months Ended | ||||||||||||||||
September 30, | Increase (Decrease) | |||||||||||||||
(Dollars in thousands) | 2021 | 2020 | Amount | Percent | ||||||||||||
Service charges and other fees | $ | 2,184 | $ | 2,287 | $ | (103 | ) | -5 | % | |||||||
Earnings on BOLI | 487 | 440 | 47 | 11 | % | |||||||||||
Other | 508 | 369 | 139 | 38 | % | |||||||||||
Total noninterest income | $ | 3,179 | $ | 3,096 | $ | 83 | 3 | % | ||||||||
Nine Months Ended September 30, | Increase (Decrease) | |||||||||||||||
(Dollars in thousands) | 2022 | 2021 | Amount | Percent | ||||||||||||
Service charges and other fees | $ | 3,260 | $ | 2,184 | $ | 1,076 | 49 | % | ||||||||
Gain on sale of SBA loans | 1,393 | — | 1,393 | 100 | % | |||||||||||
Earnings on BOLI | 497 | 487 | 10 | 2 | % | |||||||||||
Other | 262 | 508 | (246 | ) | -48 | % | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total noninterest income | $ | 5,412 | $ | 3,179 | $ | 2,233 | 70 | % | ||||||||
|
|
|
|
|
|
|
|
Noninterest income increased by $83,000,$2.2 million, or 3%70%, in the first nine months of 2021,ended September 30, 2022, compared to the same periodnine months ended of 2020.2021. The increase was primarily attributable to a lossgain of $1.4 million recognized on the sale of securitiesa portion of $70,000 recognized in the first nine monthsour solar loan portfolio and an increase of 2020 combined with increased FHLB dividend income during the current year, partially offset by a decrease in$1.1 million pertaining to service charges and other fees.
Noninterest Expense
The following table reflects the major components of the Company’s noninterest expense.
Nine Months Ended | ||||||||||||||||
September 30, | Increase (Decrease) | |||||||||||||||
(Dollars in thousands) | 2021 | 2020 | Amount | Percent | ||||||||||||
Salaries and benefits | $ | 19,661 | $ | 15,051 | $ | 4,610 | 31 | % | ||||||||
Premises and equipment | 3,778 | 3,630 | 148 | 4 | % | |||||||||||
Professional fees | 1,450 | 3,013 | (1,563 | ) | -52 | % | ||||||||||
Data processing | 1,604 | 1,796 | (192 | ) | -11 | % | ||||||||||
Other | 3,935 | 3,903 | 32 | 1 | % | |||||||||||
Total non-interest expense | $ | 30,428 | $ | 27,393 | $ | 3,035 | 11 | % | ||||||||
Nine Months Ended September 30, | Increase (Decrease) | |||||||||||||||
(Dollars in thousands) | 2022 | 2021 | Amount | Percent | ||||||||||||
Salaries and benefits | $ | 21,654 | $ | 19,661 | $ | 1,993 | 10 | % | ||||||||
Premises and equipment | 3,844 | 3,778 | 66 | 2 | % | |||||||||||
Professional fees | 1,662 | 1,450 | 212 | 15 | % | |||||||||||
Data processing | 1,951 | 1,604 | 347 | 22 | % | |||||||||||
Other | 3,841 | 3,935 | (94 | ) | -2 | % | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total non-interest expense | $ | 32,952 | $ | 30,428 | $ | 2,524 | 8 | % | ||||||||
|
|
|
|
|
|
|
|
Non-interest expense was $33.0 million or 11% toand $30.4 million compared to $27.4 million infor the same period of 2020.nine months ended September 30, 2022 and 2021, respectively. Excluding capitalized loan origination costs, of $3.9non-interest expense for the nine months ended September 30, 2022 was $36.1 million and $6.7 million, respectively,
Salaries and 2020, respectively, which reflectsbenefits for the Company’s continued focus on managing expensesnine months ended September 30, 2022 were $21.7 million, representing an increase of $2.0 million, or 10%, compared to $19.7 million for the nine months ended September 30, 2021. The increase in salaries and utilizing the recent investment in infrastructurebenefits expense was primarily due to investments to support the continued growth of the Company.business combined with a reduction in capitalized loan origination costs.
For the nine months ended September 30, 2022 and 2021, the Company’s efficiency ratio, the ratio of non-interest expense to revenues, was 60.44% and 69.25%, respectively.
36
Provision for Income Taxes
Income tax expense was $5.5 million and $3.8 million for the first nine months of 2021 which compared to $1.2 million for the same period one year earlier.ended September 30, 2022 and 2021. The effective tax rates for those time periods were 27.3%28.9% and 31.5%27.3%, respectively. The decrease in the effective tax rate for the nine months ended September 30, 2021 was the result of an adjustment to the amortization schedule of an individual low income housing tax credit investment.
Financial Condition:
Overview
Total assets of the Company were $2.05 billion as of September 30, 20212022 compared to $1.91$2.01 billion as of December 31, 2020.2021. The increase in total assets from year-endwas primarily due to excess liquidity,growth in the loan portfolio, partially offset by a reduction in grossdecreased liquidity resulting from deposit outflows related to forgiveness of PPP loans.
Loan Portfolio
Our loan portfolio consists almost entirely of loans to customers who have a full banking relationship with us. Gross loan balances decreasedincreased by $67.1$211.3 million, or 5%15%, from December 31, 20202021 to September 30, 2021,2022 primarily due to PPP loans forgiven byorganic growth in the SBA,commercial and industrial and real estate other loan portfolios, partially offset by growtha reduction in commercialSBA loans due to PPP loan forgiveness and industrial loans and commercial real estate loans. a reduction in the other loan portfolio as a result of the Company selling a portion of its residential solar loan portfolio.
The loan portfolio at September 30, 20212022 was comprised of approximately 33%41% of commercial and industrial loans compared to 30%34% at December 31, 2020.2021. In addition, commercial real estate loans comprised 51%56% of our loans at September 30, 20212022 compared to 40%54% at December 31, 2020.2021. A substantial percentage of the commercial real estate loans are considered owner-occupied loans. Our loans are generated by our relationship managers and executives. Our senior management is actively involved in the lending, underwriting, and collateral valuation processes. Higher dollar loans or loan commitments are also approved through a bank loan committee comprised of executives and outside board members.
The following table reflects the composition of the Company’s loan portfolio and theirthe percentage distribution.distribution at September 30, 2022 and December 31, 2021.
September 30, | December 31, | |||||||
(Dollars in thousands) | 2022 | 2021 | ||||||
Commercial and industrial | $ | 643,131 | 474,281 | |||||
Real estate - other | 824,867 | 697,212 | ||||||
Real estate - construction and land | 71,523 | 43,194 | ||||||
SBA | 8,565 | 81,403 | ||||||
Other | 39,815 | 80,559 | ||||||
|
|
|
| |||||
Total loans, gross | 1,587,901 | 1,376,649 | ||||||
Deferred loan origination costs, net | 1,902 | 1,688 | ||||||
Allowance for credit losses | (16,555 | ) | (14,081 | ) | ||||
|
|
|
| |||||
Total loans, net | $ | 1,573,248 | 1,364,256 | |||||
|
|
|
| |||||
Commercial and industrial | 41 | % | 34 | % | ||||
Real estate - other | 52 | % | 51 | % | ||||
Real estate - construction and land | 4 | % | 3 | % | ||||
SBA | 1 | % | 6 | % | ||||
Other | 2 | % | 6 | % | ||||
|
|
|
| |||||
Total loans, gross | 100 | % | 100 | % | ||||
|
|
|
|
37
September 30, | December 31, | |||||||
(Dollars in thousands) | 2021 | 2020 | ||||||
Commercial and industrial | $ | 428,169 | $ | 414,548 | ||||
Real estate—other | 664,202 | 550,690 | ||||||
Real estate—construction and land | 41,312 | 37,193 | ||||||
SBA | 107,096 | 317,564 | ||||||
Other | 61,193 | 49,075 | ||||||
Total loans, gross | 1,301,972 | 1,369,070 | ||||||
Deferred loan origination costs, net | 760 | 523 | ||||||
Allowance for credit losses | (13,571 | ) | (14,111 | ) | ||||
Total loans, net | $ | 1,289,161 | $ | 1,355,482 | ||||
Commercial and industrial | 33 | % | 30 | % | ||||
Real estate—other | 51 | % | 40 | % | ||||
Real estate—construction and land | 3 | % | 3 | % | ||||
SBA | 8 | % | 23 | % | ||||
Other | 5 | % | 4 | % | ||||
Total loans, gross | 100 | % | 100 | % | ||||
The following table shows the maturity distribution for total loans outstanding as of September 30, 2021.2022. The maturity distribution is grouped by remaining scheduled principal payments that are due within one year, after one but within five years, after five years but within fifteen years, or after fivefifteen years. The principal balances of loans are indicated by both fixed and variable rate categories.
Over One | ||||||||||||||||||||||||
Due in | Year But | Loans With | ||||||||||||||||||||||
One Year | Less Than | Over | Fixed | Variable | ||||||||||||||||||||
(Dollars in thousands) | Or Less | Five Years | Five Years | Total | Rates (1) | Rates | ||||||||||||||||||
Commercial and industrial | $ | 111,627 | $ | 168,439 | $ | 148,103 | $ | 428,169 | $ | 216,570 | $ | 211,599 | ||||||||||||
Real estate—other | 38,256 | 219,031 | 406,915 | 664,202 | 324,501 | 339,701 | ||||||||||||||||||
Real estate—construction and land | 29,228 | 8,294 | 3,790 | 41,312 | 6,914 | 34,398 | ||||||||||||||||||
SBA | 5,465 | 94,178 | 7,453 | 107,096 | 97,638 | 9,458 | ||||||||||||||||||
Other | 924 | 428 | 59,841 | 61,193 | 59,808 | 1,385 | ||||||||||||||||||
Total loans, gross | $ | 185,500 | $ | 490,370 | $ | 626,102 | $ | 1,301,972 | $ | 705,431 | $ | 596,541 | ||||||||||||
Over One | Over Five | |||||||||||||||||||
Due in | Year But | Years But | ||||||||||||||||||
One Year | Less Than | Less Than | Over | |||||||||||||||||
(Dollars in thousands) | Or Less | Five Years | Fifteen Years | Fifteen Years | Total | |||||||||||||||
Commercial and industrial | $ | 241,875 | $ | 255,203 | $ | 146,053 | $ | — | $ | 643,131 | ||||||||||
Real estate - other | 21,238 | 354,926 | 439,317 | 9,386 | 824,867 | |||||||||||||||
Real estate - construction and land | 53,539 | 11,518 | 6,466 | — | 71,523 | |||||||||||||||
SBA | 115 | 4,480 | 2,647 | 1,323 | 8,565 | |||||||||||||||
Other | 262 | 2,260 | 37,293 | — | 39,815 | |||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Total loans, gross | $ | 317,029 | $ | 628,387 | $ | 631,776 | $ | 10,709 | $ | 1,587,901 | ||||||||||
|
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|
|
|
|
|
|
|
|
Loans With | ||||||||||||
Fixed | Variable | |||||||||||
(Dollars in thousands) | Rates (1) | Rates | Total | |||||||||
Commercial and industrial | $ | 200,191 | $ | 442,940 | $ | 643,131 | ||||||
Real estate - other | 536,935 | 287,932 | 824,867 | |||||||||
Real estate - construction and land | 5,996 | 65,527 | 71,523 | |||||||||
SBA | 3,797 | 4,768 | 8,565 | |||||||||
Other | 39,500 | 315 | 39,815 | |||||||||
|
|
|
|
|
| |||||||
Total loans, gross | $ | 786,419 | $ | 801,482 | $ | 1,587,901 | ||||||
|
|
|
|
|
|
(1) | Excludes variable rate loans on floors |
Nonperforming Assets
Nonperforming assets are comprised of loans on nonaccrual status, loans 90 days or more past due and still accruing interest, and other real estate owned. We had no loans 90 days or more past due and still accruing interest and no other real estate owned at September 30, 2021.2022. A loan is placed on nonaccrual status if there is concern that principal and interest may not be fully collected or if the loan has been past due for a period of 90 days or more, unless the obligation is both well secured and in process of legal collection. When loans are placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on nonaccrual loans is subsequently recognized only to the extent that cash is received and the loan’s principal balance is deemed collectible. Loans are returned to accrual status when they are brought current with respect to principal and interest payments and future payments are reasonably assured. Loans in which the borrower is encountering financial difficulties and we have modified the terms of the original loan are evaluated for impairment and classified as TDR loans. See “Part I –
The CARES Act and the revised interagency guidance issued in April 2020, “Interagency Statement on Loan Modifications and Reporting for Financial Information, NotesInstitutions Working With Customers Affected by the Coronavirus (Revised)”, provided banks the option to Unaudited Consolidated Financial Statements, Footnote 7 – Business Impacttemporarily suspend certain requirements under GAAP related to Troubled Debt Restructurings (“TDRs”) for a limited time to account for the effects of
38
The following table presents information regarding the Company’s nonperforming and restructured loans.
September 30, | December 31, | |||||||
(Dollars in thousands) | 2021 | 2020 | ||||||
Nonaccrual loans | $ | 1,233 | $ | 234 | ||||
Loans over 90 days past due and still accruing | — | — | ||||||
Total nonperforming loans | 1,233 | 234 | ||||||
Foreclosed assets | — | — | ||||||
Total nonperforming assets | $ | 1,233 | $ | 234 | ||||
Performing TDR’s | $ | — | $ | — | ||||
September 30, | December 31, | |||||||
(Dollars in thousands) | 2022 | 2021 | ||||||
Nonaccrual loans | $ | 182 | $ | 232 | ||||
Loans over 90 days past due and still accruing | 161 | — | ||||||
|
|
|
| |||||
Total nonperforming loans | 343 | 232 | ||||||
Foreclosed assets | — | — | ||||||
|
|
|
| |||||
Total nonperforming assets | $ | 343 | $ | 232 | ||||
|
|
|
| |||||
Performing TDR’s | $ | — | $ | — | ||||
|
|
|
| |||||
Nonperforming loans / gross loans | 0.02 | % | 0.02 | % | ||||
Allowance for loan losses / nonperforming loans | 4826.53 | % | 6069.40 | % |
Allowance for Credit Losses
Our allowance for credit losses is maintained at a level management believes is adequate to account for probable incurred credit losses in the loan portfolio as of the reporting date. We determine the allowance based on a quarterly evaluation of risk. That evaluation gives consideration to the nature of the loan portfolio, historical loss experience, known and inherent risks in the portfolio, the estimated value of any underlying collateral, adverse situations that may
Our allowance is established through charges to the provision for loan losses. Loans, or portions of loans, deemed to be uncollectible are charged against the allowance. Recoveries of previously
39
The following table provides information on the activity within the allowance for credit losses as of and for the periods indicated.
(Dollars in thousands) | Commercial and Industrial | Real Estate Other | Real Estate Construction and Land | SBA | Other | Total | ||||||||||||||||||
Three months ended September 30, 2022 | ||||||||||||||||||||||||
Beginning balance | $ | 9,526 | $ | 5,243 | $ | 907 | $ | 273 | $ | 8 | $ | 15,957 | ||||||||||||
Provision for loan losses | 699 | (70 | ) | 90 | 57 | 24 | 800 | |||||||||||||||||
Charge-offs | — | — | — | (202 | ) | — | (202 | ) | ||||||||||||||||
Recoveries | — | — | — | — | — | — | ||||||||||||||||||
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|
|
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|
|
|
| |||||||||||||
Ending balance | $ | 10,225 | $ | 5,173 | $ | 997 | $ | 128 | $ | 32 | $ | 16,555 | ||||||||||||
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| |||||||||||||
Net recoveries (charge-offs) / gross loans | 0.00 | % | 0.00 | % | 0.00 | % | -2.36 | % | 0.00 | % | -0.01 | % | ||||||||||||
Three months ended September 30, 2021 | ||||||||||||||||||||||||
Beginning balance | $ | 8,133 | $ | 4,069 | $ | 697 | $ | 317 | $ | 24 | $ | 13,240 | ||||||||||||
Provision for loan losses | 45 | 324 | (22 | ) | (44 | ) | (3 | ) | 300 | |||||||||||||||
Charge-offs | — | — | — | — | — | — | ||||||||||||||||||
Recoveries | 31 | — | — | — | — | 31 | ||||||||||||||||||
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Ending balance | $ | 8,209 | $ | 4,393 | $ | 675 | $ | 273 | $ | 21 | $ | 13,571 | ||||||||||||
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Net recoveries (charge-offs) / gross loans | 0.01 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | ||||||||||||
Nine months ended September 30, 2022 | ||||||||||||||||||||||||
Beginning balance | $ | 8,552 | $ | 4,524 | $ | 681 | $ | 309 | $ | 15 | $ | 14,081 | ||||||||||||
Provision for loan losses | 1,672 | 649 | 316 | 21 | 17 | 2,675 | ||||||||||||||||||
Charge-offs | — | — | — | (202 | ) | — | (202 | ) | ||||||||||||||||
Recoveries | 1 | — | — | — | — | 1 | ||||||||||||||||||
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Ending balance | $ | 10,225 | $ | 5,173 | $ | 997 | $ | 128 | $ | 32 | $ | 16,555 | ||||||||||||
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Net recoveries (charge-offs) / gross loans | 0.00 | % | 0.00 | % | 0.00 | % | -2.36 | % | 0.00 | % | -0.01 | % | ||||||||||||
Nine months ended September 30, 2021 | ||||||||||||||||||||||||
Beginning balance | $ | 8,923 | $ | 3,877 | $ | 681 | $ | 604 | $ | 26 | $ | 14,111 | ||||||||||||
Provision for loan losses | (952 | ) | 516 | (6 | ) | (53 | ) | (5 | ) | (500 | ) | |||||||||||||
Charge-offs | — | — | — | (278 | ) | — | (278 | ) | ||||||||||||||||
Recoveries | 238 | — | — | — | — | 238 | ||||||||||||||||||
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Ending balance | $ | 8,209 | $ | 4,393 | $ | 675 | $ | 273 | $ | 21 | $ | 13,571 | ||||||||||||
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Net recoveries (charge-offs) / gross loans | 0.06 | % | 0.00 | % | 0.00 | % | -0.26 | % | 0.00 | % | 0.00 | % |
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Commercial | Real Estate | |||||||||||||||||||||||
and | Real Estate | Construction | ||||||||||||||||||||||
(Dollars in thousands) | Industrial | Other | and Land | SBA | Other | Total | ||||||||||||||||||
Three months ended September 30, 2021 | ||||||||||||||||||||||||
Beginning balance | $ | 8,133 | $ | 4,069 | $ | 697 | $ | 317 | $ | 24 | $ | 13,240 | ||||||||||||
Provision for loan losses | 45 | 324 | (22 | ) | (44 | ) | (3 | ) | 300 | |||||||||||||||
Charge-offs | — | — | — | — | — | — | ||||||||||||||||||
Recoveries | 31 | — | — | — | — | 31 | ||||||||||||||||||
Ending balance | $ | 8,209 | $ | 4,393 | $ | 675 | $ | 273 | $ | 21 | $ | 13,571 | ||||||||||||
Three months ended September 30, 2020 | ||||||||||||||||||||||||
Beginning balance | $ | 7,851 | $ | 3,332 | $ | 956 | $ | 366 | $ | 19 | $ | 12,524 | ||||||||||||
Provision for loan losses | 772 | 276 | (280 | ) | 79 | 3 | 850 | |||||||||||||||||
Charge-offs | — | — | — | — | — | — | ||||||||||||||||||
Recoveries | 11 | — | — | — | — | 11 | ||||||||||||||||||
Ending balance | $ | 8,634 | $ | 3,608 | $ | 676 | $ | 445 | $ | 22 | $ | 13,385 | ||||||||||||
Nine months ended September 30, 2021 | ||||||||||||||||||||||||
Beginning balance | $ | 8,923 | $ | 3,877 | $ | 681 | $ | 604 | $ | 26 | $ | 14,111 | ||||||||||||
Provision for loan losses | (952 | ) | 516 | (6 | ) | (53 | ) | (5 | ) | (500 | ) | |||||||||||||
Charge-offs | — | — | — | (278 | ) | — | (278 | ) | ||||||||||||||||
Recoveries | 238 | — | — | — | — | 238 | ||||||||||||||||||
Ending balance | $ | 8,209 | $ | 4,393 | $ | 675 | $ | 273 | $ | 21 | $ | 13,571 | ||||||||||||
Nine months ended September 30, 2020 | ||||||||||||||||||||||||
Beginning balance | $ | 6,708 | $ | 3,281 | $ | 1,022 | $ | 50 | $ | 14 | $ | 11,075 | ||||||||||||
Provision for loan losses | 3,688 | 327 | (346 | ) | 503 | 8 | 4,180 | |||||||||||||||||
Charge-offs | (1,868 | ) | — | — | (108 | ) | — | (1,976 | ) | |||||||||||||||
Recoveries | 106 | — | — | — | — | 106 | ||||||||||||||||||
Ending balance | $ | 8,634 | $ | 3,608 | $ | 676 | $ | 445 | $ | 22 | $ | 13,385 | ||||||||||||
Investment Portfolio
Our investment portfolio is comprised of debt securities. We use two classifications for our investment portfolio:
During the first quarter of 2022, the Company re-designated certain securities previously classified as available for sale to the held to maturity classification. The securities re-designated consisted of mortgage backed securities and government agencies with a total carrying value of $49.9 million at December 31, 2020, we had no
Our investments provide a source of liquidity as they can be pledged to support borrowed funds or can be liquidated to generate cash proceeds. The investment portfolio is also a significant resource to us in managing interest rate risk, as the maturity and interest rate characteristics of this asset class can be readily changed to match changes in the loan and deposit portfolios. The majority of our
41
The following table reflects the amortized cost and fair market values for the total portfolio for each of the categories of investments in our securities portfolio as of September 30, 20212022 and December 31, 2020.
Gross | Gross | Estimated | ||||||||||||||
Amortized | Unrealized | Unrealized | Fair | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
(Dollars in thousands) | ||||||||||||||||
At September 30, 2021: | ||||||||||||||||
Mortgage backed securities | $ | 43,324 | $ | 416 | $ | (360 | ) | $ | 43,380 | |||||||
Government agencies | 2,117 | 35 | — | 2,152 | ||||||||||||
Corporate bonds | 36,352 | 589 | (365 | ) | 36,576 | |||||||||||
Total available for sale securities | $ | 81,793 | $ | 1,040 | $ | (725 | ) | $ | 82,108 | |||||||
At December 31, 2020: | ||||||||||||||||
Mortgage backed securities | $ | 27,541 | $ | 669 | $ | (17 | ) | $ | 28,193 | |||||||
Government agencies | 2,418 | — | (6 | ) | 2,412 | |||||||||||
Corporate bonds | 24,224 | 434 | (170 | ) | 24,488 | |||||||||||
Total available for sale securities | $ | 54,183 | $ | 1,103 | $ | (193 | ) | $ | 55,093 | |||||||
Gross | Gross | |||||||||||||||
Unrealized / | Unrealized / | Estimated | ||||||||||||||
Amortized | Unrecognized | Unrecognized | Fair | |||||||||||||
(Dollars in thousands) | Cost | Gains | Losses | Value | ||||||||||||
At September 30, 2022: | ||||||||||||||||
Mortgage backed securities | $ | 19,080 | $ | 21 | $ | (933 | ) | $ | 18,168 | |||||||
Government agencies | 29,782 | — | (1,068 | ) | 28,714 | |||||||||||
Corporate bonds | 429 | 48 | — | 477 | ||||||||||||
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| |||||||||
Total available for sale securities | $ | 49,291 | $ | 69 | $ | (2,001 | ) | $ | 47,359 | |||||||
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| |||||||||
Mortgage backed securities | $ | 62,525 | $ | — | $ | (8,245 | ) | $ | 54,280 | |||||||
Government agencies | 3,087 | — | (677 | ) | 2,410 | |||||||||||
Corporate bonds | 44,560 | 31 | (3,577 | ) | 41,014 | |||||||||||
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|
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|
|
|
| |||||||||
Total held to maturity securities | $ | 110,172 | $ | 31 | $ | (12,499 | ) | $ | 97,704 | |||||||
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At December 31, 2021: | ||||||||||||||||
Mortgage backed securities | $ | 29,943 | $ | 325 | $ | (320 | ) | $ | 29,948 | |||||||
Government agencies | 3,093 | — | (100 | ) | 2,993 | |||||||||||
Corporate bonds | 41,725 | 694 | (468 | ) | 41,951 | |||||||||||
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|
|
|
|
|
|
| |||||||||
Total available for sale securities | $ | 74,761 | $ | 1,019 | $ | (888 | ) | $ | 74,892 | |||||||
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|
|
|
|
| |||||||||
Mortgage backed securities | $ | 22,772 | $ | — | $ | (140 | ) | $ | 22,632 | |||||||
Government agencies | — | — | — | — | ||||||||||||
Corporate bonds | 5,614 | — | (30 | ) | 5,584 | |||||||||||
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| |||||||||
Total held to maturity securities | $ | 28,386 | $ | — | $ | (170 | ) | $ | 28,216 | |||||||
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Deposits
Our deposits are generated through core customer relationships, related predominantly to business relationships. Many of our business customers maintain high levels of liquid balances in their demand deposit accounts and use the Bank’s treasury management services.
At September 30, 2021,2022, approximately 46%44% of our deposits were in noninterest-bearing demand deposits. The balance of our deposits at September 30, 20212022 were held in interest-bearing demand, savings and money market accounts and time deposits. More than 45%Approximately 37% of total deposits were held in interest-bearing demand, savings and money market deposit accounts at September 30, 2021,2022, which provide our customers with interest and liquidity. Time deposits comprised the remaining 9%19% of our deposits at September 30, 2021.2022.
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The following table provides a comparative distribution of our deposits by outstanding balance as well as by percentage of total deposits at the dates indicated.
(Dollars in thousands) | Balance | % of Total | ||||||
At September 30, 2021: | ||||||||
Demand noninterest-bearing | $ | 790,646 | 46 | % | ||||
Demand interest-bearing | 39,679 | 2 | % | |||||
Money market and savings | 750,112 | 43 | % | |||||
Time | 161,617 | 9 | % | |||||
Total deposits | $ | 1,742,054 | 100 | % | ||||
At December 31, 2020: | ||||||||
Demand noninterest-bearing | $ | 673,100 | 44 | % | ||||
Demand interest-bearing | 34,869 | 2 | % | |||||
Money market and savings | 623,603 | 41 | % | |||||
Time | 200,634 | 13 | % | |||||
Total deposits | $ | 1,532,206 | 100 | % | ||||
(Dollars in thousands) | Balance | % of Total | ||||||
At September 30, 2022: | ||||||||
Demand noninterest-bearing | $ | 758,716 | 44 | % | ||||
Demand interest-bearing | 35,183 | 2 | % | |||||
Money market and savings | 597,244 | 35 | % | |||||
Time | 317,935 | 19 | % | |||||
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| |||||
Total deposits | $ | 1,709,078 | 100 | % | ||||
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| |||||
At December 31, 2021: | ||||||||
Demand noninterest-bearing | $ | 771,205 | 46 | % | ||||
Demand interest-bearing | 37,250 | 2 | % | |||||
Money market and savings | 717,480 | 43 | % | |||||
Time | 154,203 | 9 | % | |||||
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| |||||
Total deposits | $ | 1,680,138 | 100 | % | ||||
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Liquidity
Our primary source of funding is deposits from our core banking relationships. The majority of the Bank’s deposits are transaction accounts or money market accounts that are payable on demand. A small number of customers represent a large portion of the Bank’s deposits, as evidenced by the fact that approximately 21%18% of deposits were represented by the 10 largest depositors as of September 30, 2021.2022. We strive to manage our liquidity in a manner that enables us to meet expected and unexpected liquidity needs under both normal and adverse conditions. The Bank maintains significant
Capital Resources
We are subject to various regulatory capital requirements administered by federal and state banking regulators. Our capital management consists of providing equity to support our current operations and future growth. Failure to meet minimum regulatory capital requirements may result in mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on our financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, we must meet specific capital guidelines that involve quantitative measures of our assets, liabilities and
At September 30, 2022, the Bank had a Tier 1 risk based capital ratio of 10.32%, a total capital to risk-weighted assets ratio of 11.17%, and a leverage ratio of 10.62%. At December 31, 2021, the Bank had a Tier 1 risk based capital ratio of 12.14%11.38%, a total capital to risk-weighted assets ratio of 13.32%12.25%, and a leverage ratio of 9.64%9.51%. At December 31, 2020, the Bank had a Tier 1 risk based capital ratio of 10.80%, a total capital to risk-weighted assets ratio of 12.33%, and a leverage ratio of 8.02%.
43
Item 3. Quantitative and Qualitative Disclosures About Market Risk
As a smaller reporting company, we are not required to provide the information required by this item.
Item 4. Controls and Procedures
Management of the Company, with the participation of its Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness as of September 30, 20212022 of the Company’s disclosure controls and procedures, as defined in Rules
Changes in Internal Control over Financial Reporting
There was no change in the Company’s internal control over financial reporting that occurred during the Company’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, such controls.
44
PART II – OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are party to legal actions that are routine and incidental to our business. Given the nature, scope and complexity of the extensive legal and regulatory landscape applicable to our business, we, like all banking organizations, are subject to heightened regulatory compliance and legal risk. However, based on available information, management does not expect the ultimate disposition of any or a combination of these actions to have a material adverse effect on our business, financial condition and results of operation.
Item 1A. Risk Factors
There have been no material changes in the risk factors that were disclosed in Item 1A, under the caption “Risk Factors” in Part I of our Annual Report on Form
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not Applicable
Item 5. Other Information
None
45
Item 6. Exhibits
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
California BanCorp | ||||||
Dated: November | By: | /s/ Steven E. Shelton | ||||
Steven E. Shelton | ||||||
(Principal Executive Officer) | ||||||
Dated: November | By: | /s/ Thomas A. Sa | ||||
Thomas A. Sa | ||||||
and Chief Financial Officer | ||||||
(Principal Financial and Accounting Officer) |
46