More annual reports from California BanCorp:
2023 Report...defined by the company we keep.sm 2012 Annual Report In memory of Peter Branagh, Director, and Mona Branagh Founders & Friends Fellow Shareholders, Clients, and Friends: When we started our Bank in July of 2007, we purposefully chose a strategy that focused on banking middle market companies in the San Francisco Bay Area. We invested in high quality business bankers and technologies that would separate us from our competitors, create efficiencies, and provide a more valuable client experience. Since then, we’ve stayed true to our strategy, attracting new business clients and deepening relationships with our existing clients. Our Bank’s brand and reputation have spread rapidly across our region. Our strategy, our focus, and our quality people have resulted in one of the fastest growing business banks in California. We look forward to 2013, confident that our Bank will become even more successful. 2012 Achievements Our balance sheet continued to grow in 2012. Existing and new relationships brought $38 million in net year-over-year loan growth to the Bank. Total loans reached $246 million at year-end 2012, our highest year-end total. We’ve built a strong balance sheet that’s getting stronger. During 2012, we not only grew our loan portfolio at an impressive rate but also improved its quality. The Bank’s non-performing assets (including restructured loans that are current) to total assets ratio declined 35% to 1.26% at year-end 2012. We’ve built a strong balance sheet that’s only getting stronger Our relationship clients also entrusted us with a record level of deposits. Total deposits reached $281 million at year-end, an increase of over 15% from the previous year. Five percent of our relationships have over $1 million on deposit with our Bank, further demonstrating our clients’ confidence and trust in us. Non interest bearing deposits, monies businesses typically use for their daily operations and cash needs, represent approximately 30% of our total deposits, bolstering our margin, while demonstrating the depth of our relationships. Our loan portfolio is further evidence that we are staying true to our strategy. Over 50% of our loans are to middle market, privately held businesses for working capital, equipment, or term financing. Another 45% of the portfolio is composed of commercial real estate loans with a significant portion representing owner occupied properties. The remainder of our portfolio is invested in personal loans to business owners, construction & development loans, and Small Business Administration (SBA) loans. 1 Total Loans (Dollars Thousands) $280,000 $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $- 2008 2009 2010 2011 2012 Total Deposits (Dollars Thousands) $320,000 $280,000 $240,000 $200,000 $160,000 $120,000 $80,000 $40,000 $- 2008 2009 2010 2011 2012 Loan Portfolio (Dollars Thousands) CRE 45% C&I 50% California Bank of Commerce The low interest rate environment continues to be a challenge for most financial institutions, including ours. The prime rate, the base rate from which most business loans are priced, remains at its lowest level in decades, enabling our clients to take advantage of some of the lowest rates on commercial loans in generations. However, the low prime rate, in combination with lower returns on cash investments, has resulted in low yields on earning assets for most banks. The same market forces driving down asset yields have depressed rates that banks pay on client deposits. This fact created further challenges as we attempted to balance how we attract new deposits with maintaining a healthy overall net interest margin. We are pleased to have managed our net interest margin to 3.71%, relatively unchanged year over year. At the same time we were successfully maintaining our net interest margin, we continued to attract loans and deposits, fueling our net interest income growth. Net interest income reached a new high for the Bank in 2012, generating $11.4 million toward our bottom line compared to $9.1 million the previous year. Our net interest income growth was bolstered by a 109% increase in non interest income, including gains on loan sales, securities sales, and additional fee income. We Doubled Net Income in 2012 Yields (Percent) 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% Yield on Earning Assets Net Interest Margin Cost of Funds 2008 2009 2010 2011 2012 Net Interest Income (Dollars Thousands) $14,000 $12,000 $10,000 $8,000 $6,000 $4,000 $2,000 $- Interest Income Net Interest Income Interest Expense 2008 2009 2010 2011 2012 In 2012, we generated $1.8 million in net income, doubling our previous year’s net income. Income before taxes was $3.1 million in 2012, compared to $1.5 million in 2011. Pre-tax operating profit -- profit before taxes, extraordinary items, option expense, and provision -- was $4.7 million in 2012 compared to $3.1 million in 2011. Pre-tax Operating Profit (Dollars Thousands) The Bank’s success is the result of the client relationships we have established and maintained since our inception. These relationships are developed by the quality people we have hired and retained. In 2012 we continued to add quality bankers to our ranks. Yet we managed to maintain enviable productivity, efficiency, and overhead cost ratios. The Bank’s average assets per employee reached $7.76 million at year-end, marking the Bank’s highest asset productivity mark since we opened. At the same time, the Bank continues to improve its efficiency ratio, which averaged 67% in 2012. $5,000 $4,000 $3,000 $2,000 $1,000 $- $(1,000) $(2,000) 2008 2009 2010 2011 2012 2 California Bank of Commerce Tangible Book Value Per Share (Dollars) $10.00 $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 2008 2009 2010 2011 2012 Sophisticated Treasury Mangement and Online Banking Suite Everywhere Business Banking From CBC Mobile All of our efforts have directly translated into enhanced shareholder value. We increased earnings per share (EPS) nearly 150% in 2012 to $0.57, and the Bank’s tangible book value per common share reached $9.34. While pleased with our progress, we expect to continue driving improved shareholder value. We Continue to Explore New Business Lines and Invest in our Infrastructure In 2012, our two newest business lines – dental and medical practice acquisition financing, and asset based lending – began to contribute to both our loan growth and profitability. As these two specialized business lines become more established in the market, we expect their contributions will grow and further add to our success in the coming years. Last year we also launched a new online banking platform, rivaling treasury management tools provided by money center banks. The new platform provided improved functionality and features to our business clients. In addition, we enhanced our online security and fraud prevention mechanisms. Our new online banking suite also improves the ease and speed of money transfers between accounts, stop payments, and enhanced ACH functionality. We also made changes that were subtle but very helpful to our clients such as customized payment and balance alerts, and the ability for our clients to customize their home page to more intuitively navigate their online banking experience. We also introduced mobile banking applications on the two primary phone platforms. The new mobile applications enable our business clients to submit and approve electronic payments including wires and ACH transfers. Our mobile application also benefits our personal clients with mobile payments, alerts, and of course a plethora of balance information. Our strategy and focus remains unchanged, and we look forward to continued grow in a safe and sound manner. We are optimistic for the Bank’s future as we possess the most important ingredient for our future success -- our people. We continue to be defined by the company we keep. Sincerely, Stephen A. Cortese Chairman of the Board Terry A. Peterson President & CEO 3 California Bank of Commerce ...defined by the GOLDEN STATE BRIDGE Engineers & Contractors Bay Cities Paving & Grading ALL WEATHER INSULATED PANELS ® CONCORD IRON WORKS, INC. Shaw Pipeline Inc. G A R N E R F I N A N C I A L M A N A G E M E N T Olympian Gulf Properties, Inc. Tahoe Asphalt eLLWOOD COMMERCIAL REAL ESTATE 4 California Bank of Commerce company we keep.sm SHIMMICK Suprema Meat Company Bayside Insulation, Inc. California Trenchless, Inc. B C McCosker Construction Company, Inc. General Engineering Contractor 5 California Bank of Commerce Board of Directors Executive Officers Stephen A. Cortese Chairman of the Board, California Bank of Commerce Managing Partner, Cortese Investment Company Terry A. Peterson President and CEO, California Bank of Commerce Edward B. Collins Partner and Managing Director, ChinaVest Kevin J. Cullen Chief Financial Officer, Olson & Co. Steel Stephen R. Dathe Vice President and General Manager A & B Die Casting Company Rochelle G. Klein Advisory Director, Ocean Gate Capital Management John E. Lindstedt Chief Credit Officer, California Bank of Commerce Thomas R. Morehouse Retired President, Filesafe Inc. John H. Sears Retired, Special Counsel Sheppard, Mullin, Richter & Hampton Edmond E. Traille Founding Partner & CEO, GALLINA LLP Terry A. Peterson President and Chief Executive Officer Thomas M. Park Executive Vice President Steven E. Shelton Executive Vice President Stephen P. Tessler Executive Vice President, Director of Sales Randall D. Greenfield Executive Vice President, Chief Financial Officer John E. Lindstedt Executive Vice President, Chief Credit Officer Virginia M. Robbins Executive Vice President, Chief Operating Officer James Christiansen Executive Vice President CBC Business Credit Mark A. DeVincenzi Executive Vice President, Marketing & Investor Relations Vivian Z. Mui Senior Vice President, Senior Credit Officer 6 California Bank of Commerce Relationship Managers & Senior Officers Colleen Atkinson Senior Vice President, Relationship Manager catkinson@bankcbc.com Tony Mesones Senior Vice President, Relationship Manager tmesones@bankcbc.com Tom Dorrance Senior Vice President, Chief Information Officer tdorrance@bankcbc.com Cindy Peters Senior Vice President, Treasury Management cpeters@bankcbc.com Terry Guillory Senior Vice President, Relationship Manager tguillory@bankcbc.com Ray Strzelecki Senior Vice President, Relationship Manager rstrzelecki@bankcbc.com John Lehman Senior Vice President, Operations & Compliance jlehman@bankcbc.com Jamie Smith Senior Vice President, Relationship Manager jsmith@bankcbc.com Michele Wirfel Senior Vice President, Relationship Manager mwirfel@bankcbc.com 7 California Bank of Commerce Organizers In 2006 and 2007, our Organizers shared a vision of California Bank of Commerce and they put their time, money, and reputations on the line to make the Bank a reality. We thank them for their contributions and commitment. Danville, CA Danville, CA Danville, CA Moraga, CA Lafayette, CA Alamo, CA Newport Beach, CA Orinda, CA Orinda, CA San Francisco, CA Orinda, CA Andy and Denise Armanino Charles and Judith Bellig John and Susan Bellig Mike and Patrice Botto Peter and Mona Branagh Joe Brescia Ray Brown Jeff and Patty Calder Sandy and Jean Colen Ted and Margaret Collins Jerry Condon Michael and Darcy Cookson Walnut Creek, CA Steve and Ann Cortese Jack and Jackie Cullen Kevin and Amy Cullen Steve and Elaine Dathe Richard and Nancy Doyle Joe and Jackie Duffel Doug and Lori Fowler John and Leslie French Rob and Laurie Fuller Claude and Jackie Gaubert Barry and Mary Gilbert Mollie and Greg Gilbert Orinda, CA Orinda, CA Lafayette, CA Orinda, CA Lafayette, CA Orinda, CA Lafayette, CA Orinda, CA Orinda, CA Lafayette, CA Alameda, CA Oakland, CA Stu and Sally Kahn Brad and Jeanne Kisner Ken and Kristen Kisner Paul and Vicki Klapper Roxy and Steve Klein Bob and Judy Locker David and Marsha Maiero John and Nancy Montgomery Tom and Carol Morehouse Terry and Linda Murray Guy and Maria Muzio J.P. and Jane Oosterbaan Tom and Sue Park Paul Remack Dave and Lori Sanson Hans Schroeder Dan and Denise Siri Randy and Kathryn Soso Bill and Sherry Stevenson Mark and Kristi Swimmer Steve and Trish Thomas Ed and Mary Traille Bruce and Patti Westphal Dick and Lorraine Whitehurst Steve and Linda Wight Orinda, CA Lafayette, CA Lafayette, CA Hillsborough, CA Lafayette, CA Lafayette, CA Belmont, CA Orinda, CA Orinda, CA Lafayette, CA San Francisco, CA Mill Valley, CA Orinda, CA Walnut Creek, CA Walnut Creek, CA San Francisco, CA Orinda, CA Orinda, CA Orinda, CA Orinda, CA Walnut Creek, CA Moraga, CA Oakland, CA Alamo, CA Lafayette, CA 8 California Bank of Commerce BALANCE SHEETS (unaudited) December 31, 2012 and 2011 2012 2011 ASSETS Cash and due from banks $ 5,776,321 $ 3,093,294 Interest bearing deposits in banks 38,374,829 43,868,788 Total cash and cash equivalents 44,151,150 46,962,082 Investment securities Available-for-sale, at estimated fair value 46,718,089 36,349,666 Held to maturity, at amortized cost (fair value of $3,821,629 at December 31, 2012) 3,810,895 - Loans held for sale - 372,173 Loans, less allowance for loan losses of $4,675,000 in 2012 and $4,175,000 in 2011 241,473,981 203,572,096 Premises and equipment, net 195,679 319,749 Bank owned life insurance (BOLI) 7,391,725 4,939,253 Deferred taxes, net 2,019,607 2,704,410 Accrued interest receivable and other assets 3,835,463 3,325,821 Total Assets $ 349,596,589 $ 298,545,250 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Non-interest bearing $ 83,181,730 $ 55,465,028 Interest bearing 198,300,033 188,438,362 Total deposits 281,481,763 243,903,390 Other borrowings 29,000,000 18,000,000 Accrued interest payable and other liabilities 2,418,446 1,998,984 Total liabilities 312,900,209 263,902,374 Commitments and contingencies Shareholders' equity: Preferred Stock – no par value: 10,000,000 shares authorized Series C, noncumulative, $1,000 per share liquidation value, 11,000 shares issued and outstanding at December 31, 2012 and at December 31, 2011 10,949,443 10,949,443 Common stock - no par value; 40,000,000 shares authorized; 2,757,243 issued and outstanding in 2011 and 2,750,000 in 2010 30,342,414 30,056,339 Accumulated deficit (5,017,814) (6,581,703) Accumulated other comprehensive income, net of taxes 422,337 218,797 Total shareholders' equity 36,696,380 34,642,876 Total liabilities and shareholders' equity $ 349,596,589 $ 298,545,250 Please see our Audited Financial Statements and Report of Independent Auditors for details. 9 California Bank of Commerce STATEMENTS OF INCOME (unaudited) For the Years Ended December 31, 2012 and 2011 2012 2011 Interest income: Interest and fees on loans $ 12,386,016 $ 10,145,984 Interest on investment securities 553,138 452,533 Interest on Federal funds sold - 1,903 Interest on deposits in banks 108,624 88,639 Total interest income 13,047,778 10,689,059 Interest expense: Interest on deposits 1,167,674 1,149,344 Interest on borrowings 443,911 406,105 Total interest expense 1,611,585 1,555,449 Net interest income before provision for loan losses 11,436,193 9,133,610 Provision for loan losses 1,249,688 1,328,061 Net interest income after provision for loan losses 10,186,505 7,805,549 Non-interest income: Service charges and fees 794,694 384,445 Net gains on sales of loans 362,161 240,640 Net gains on sales of investment securities 286,314 124,100 Earnings on BOLI 252,472 81,234 Other 44,519 3,399 Total non-interest income 1,740,160 833,818 Non-interest expenses: Salaries and employee benefits 5,930,106 4,597,721 Occupancy and equipment 708,068 634,498 Other 2,168,671 1,931,384 Total non-interest expenses 8,806,845 7,163,603 Income before provision for income taxes 3,119,820 1,475,764 Provision for income taxes 1,354,264 682,616 Net Income 1,765,556 793,148 Preferred stock dividend (201,667) (159,556) Income to common shareholders $ 1,563,889 $ 633,592 Income per share: Basic $ 0.57 $ 0.23 Diluted $ 0.57 $ 0.23 Weighted average number of shares outstanding – basic 2,750,217 2,750,000 Weighted average number of shares outstanding – diluted 2,750,252 2,750,000 Please see our Audited Financial Statements and Report of Independent Auditors for details. 10 California Bank of Commerce californiabankofcommerce.com 3595 Mt. Diablo Boulevard Lafayette, CA 94549 Member FDIC
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