Total deposits decreased by $74.1 million, or 4%, to $1.72 billion at March 31, 2023, from $1.79 billion at December 31, 2022, and increased by $117.1 million, or 7%, from $1.60 billion at March 31, 2022. The decrease in total deposits from the end of the fourth quarter of 2022 was primarily due to the seasonal outflow of deposits that occurs at the beginning of the year and was comprised of decreases in non-interest bearing demand deposits of $71.0 million, interest bearing demand deposits of $7.0 million, and money market and savings deposits of $54.2 million. These decreases were partially offset by an increase in time deposits of $58.1 million as a result of higher balances of short-term brokered certificates of deposits which were added to temporarily increase liquidity. Compared to the same period last year, the increase in total deposits was primarily concentrated in time deposits, partially offset by a reduction in demand deposits and money market and savings deposits as a result of outflows related to forgiveness of PPP loans. Non-interest bearing deposits, primarily commercial business operating accounts, represented 43.1% of total deposits at March 31, 2023, compared to 45.3% at December 31, 2022 and 46.7% at March 31, 2022.
As of March 31, 2023, the Company had outstanding borrowings of $75.0 million, excluding junior subordinated debt securities, compared to no outstanding borrowings at December 31, 2022 and $32.2 million of outstanding borrowings at March 31, 2022.
Asset Quality:
The provision for credit losses decreased to $358,000 for the first quarter of 2023 compared to $1.1 million for the fourth quarter of 2022 and $950,000 for the first quarter of 2022. The Company had net loan charge-offs of $247,000, or 0.02% of gross loans, during the first quarter of 2023 and $650,000, or 0.04% of gross loans, during the fourth quarter of 2022. The Company had net loan recoveries of $1,000, or 0.00% of gross loans, during the first quarter of 2022.
Non-performing assets (“NPAs”) to total assets were 0.01% at March 31, 2023, compared to 0.06% at December 31, 2022 and 0.03% at March 31, 2022, with non-performing loans of $222,000, $1.3 million and $549,000, respectively, on those dates.
The allowance for credit losses was $17.1 million, or 1.06% of total loans, at March 31, 2023, compared to the allowance for loan losses of $17.0 million, or 1.07% of total loans, at December 31, 2022 and $15.0 million, or 1.07% of total loans, at March 31, 2022. On January 1, 2023, the Company adopted the new current expected credit losses (CECL) standard. The Company’s allowance for credit losses to total loans upon adoption on January 1, 2023 was 1.07% and remained consistent with the coverage as of December 31, 2022.
Capital Adequacy:
At March 31, 2023, shareholders’ equity totaled $178.6 million compared to $172.3 million at December 31, 2022 and $154.6 million one year ago. Additionally, at March 31, 2023, the Company’s total risk-based capital ratio, tier one capital ratio, and leverage ratio were 12.08%, 8.54%, and 8.76%, respectively; all of which were above the regulatory standards of 10.00%, 8.00%, and 5.00%, respectively, for “well-capitalized” institutions.
“Our strong financial performance and prudent balance sheet management resulted in an increase in all of our capital ratios and a 4% increase in our tangible book value per share during the first quarter,” said Thomas A. Sa, President, Chief Financial Officer and Chief Operating Officer of California BanCorp. “We have high levels of capital and liquidity, a stable deposit base, a low level of unrealized losses in our investment portfolio, and exceptional asset quality with minimal exposure to areas of concern such as office commercial real estate loans in major metropolitan areas. As such, we believe we are very well positioned to effectively manage through the current challenging environment and continue growing our client base given the fundamental strength of our franchise.”
