Private Bancorp of America, Inc. Announces Record Fourth Quarter and Full Year 2022 Financial Results with Total Assets of $1.9 Billion

Fourth Quarter Highlights

• Net income for the fourth quarter of 2022 was $7.4 million, up 17.0% from the prior quarter and 5.0% from the same period in the prior year
• Diluted earnings per share for the fourth quarter of 2022 was $1.31, up 17.0% from the prior quarter and 5.6% from the same period in the prior year
• Total loans held-for-investment (“HFI”) reached $1.6 billion at December 31, 2022, an increase of $100.9 million or 6.8% from the prior quarter
• The allowance for loan losses was 1.21% of total loans HFI at December 31, 2022 compared to 1.28% as of September 30, 2022
• The provision for loan losses for the fourth quarter of 2022 was $60 thousand, a decrease from $1.3 million for the prior quarter
• Noninterest-bearing demand deposits, which represent 41.3% of total deposits at December 31, 2022, declined $71.8 million or 9.4% from the prior quarter. Total core deposits, which exclude brokered deposits, were $1.5 billion.
• Net interest margin was 5.17% for the fourth quarter of 2022, as compared to 4.99% for the prior quarter and 4.44% for the same period in the prior year
• Total cost of funding sources increased to 0.86% for the fourth quarter of 2022, an increase from 0.36% in the prior quarter. Total cost of deposits was 0.79%
• Tangible book value per share was $25.02 at December 31, 2022, up from $23.51 September 30, 2022 as a result of strong earnings
  

2022 Full Year and Period End Highlights

• Record net income of $24.7 million, an increase of 17.4% from $21.0 million for FY’21
• Diluted earnings per share of $4.33, an increase of 17.2% from $3.69 for FY’21
• Pretax, pre-provision net revenue of $37.1 million, representing a 13.9% increase from $32.6 million for FY’21
• Return on average assets of 1.51%, compared to 1.48% for FY’21
• Return on average equity of 18.16%, compared to 17.77% for FY’21
• Net interest margin of 4.87%, compared to 4.19% for FY’21
• Total assets increased to $1.9 billion, representing an increase of 22.2% since December 31, 2021
• Loans HFI reached $1.6 billion, an increase of $363.8 million or 29.7% since December 31, 2021
• Total deposits reached $1.7 billion, an increase of $329.5 million or 24.5% since December 31, 2021
• Non-interest-bearing demand deposits reached $691.4 million, an increase of $8.8 million or 1.3% since December 31, 2021

LA JOLLA, Calif., Jan. 30, 2023 (GLOBE NEWSWIRE) -- Private Bancorp of America, Inc. (OTCQX:PBAM), (“Company”) and CalPrivate Bank (“Bank”) announced unaudited financial results for the fourth quarter and full year ended December 31, 2022. The Company reported net income of $7.4 million, or $1.31 per diluted share, for the fourth quarter of 2022 compared to $7.3 million, or $1.28 per diluted share, for the prior year same quarter. Net income was $24.7 million, or $4.33 per diluted share, for the year ended December 31, 2022, compared to $21.0 million, or $3.69 per diluted share, in FY’21.

Rick Sowers, President and CEO of the Company and the Bank stated, “I am extremely proud of the progress our Team made this year. Earnings set a new record for the Company and despite a challenging environment, CalPrivate’s commitment to our Distinctly Different service remained steadfast and allowed our Team to focus on delivering value to Clients and Shareholders. Loan growth was strong for the quarter and full year, increasing $100.9 million and $363.8 million, respectively.”

Sowers added, “Net interest income was strong at $22.6 million for Q4’22. Additionally, while growing our revenue, we continued efforts to monitor and manage our efficiency ratio, which was 55.2% in Q4’22. While we anticipate that funding costs will increase, and there is mounting competition for deposits, we will continue to invest in our infrastructure to bring world class service to our Clients.”

“The Company continues to exhibit successful customer acquisition activity as shown by the growth in loans despite a rising rate environment. Additionally, the Company continues to invest in people and infrastructure needed to support the continued growth of the CalPrivate franchise,” said Selwyn Isakow, Chairman of the Board of the Company and the Bank.

Isakow added, “The Board is pleased with CalPrivate’s financial performance in 2022, and we remain optimistic about management’s ability to react to and successfully navigate the Company during these uncertain times.”

STATEMENT OF INCOME

Net Interest Income

Net interest income for the fourth quarter of 2022 totaled $22.6 million, representing an increase of $2.0 million or 9.7% compared to the prior quarter. This increase was driven primarily by $4.1 million higher interest income caused by the increase in average loan balances and higher yield on loans partially offset by the $2.1 million increase in interest expense, which resulted from higher deposit costs due to higher average deposit balances along with an increase in deposit rates.

Net Interest Margin

The net interest margin for the fourth quarter of 2022 was 5.17% compared to 4.99% for the prior quarter. The 18 basis point increase in net interest margin was due to higher rates on new loan originations and variable rate loans and investment securities, partially offset by higher rates paid on deposits. The yield on earning assets was 5.97% for the fourth quarter of 2022 compared with 5.32% for the prior quarter and the cost of total funding sources was 0.86% for the fourth quarter of 2022 compared to 0.36% in the prior quarter.

Provision for Loan Losses

The provision for loan losses for the fourth quarter of 2022 was $60 thousand, as compared to $1.3 million in the prior quarter. For more details, please refer to the “Asset Quality” section below.

Noninterest Income

Noninterest income was $1.1 million for the fourth quarter of 2022, a decline of $333 thousand compared to the third quarter of 2022. SBA loan sales for the fourth quarter of 2022 were $11.4 million with a 10.23% average trade premium resulting in a net gain on sale of $792 thousand, compared with $10.4 million with a 9.2% average trade premium resulting in a net gain on sale of $647 thousand in the prior quarter. The decline in noninterest income was primarily related to faster prepayments in the SBA portfolio which resulted in accelerated amortization and valuation adjustments to the SBA servicing asset.

Noninterest Expense

Noninterest expense was $13.1 million for the fourth quarter of 2022, an increase of $1.3 million, or 11.5%, compared to the prior quarter. Much of the increase was due to higher variable compensation and benefits expense related to strong loan growth, partially offset by the decline in professional services related to the active and on-going lawsuit for the recovery of the charged-off loan for the ANI Development, LLC/Gina Champion-Cain fraud case and Chicago Title (parent company, Fidelity National Financial) for its alleged involvement with the fraud scheme.

Additionally, the Company remains committed to making investments in the business, including technology, marketing, and staffing. Historically high inflation and low unemployment continue to have an impact on rising wages as well as increased costs related to third party service providers, which we proactively monitor and manage.

Provision for Income Tax Expense

Provision for income tax expense was $3.1 million for the fourth quarter of 2022, compared to $2.6 million for the prior quarter. The effective tax rate for 2022 was 29.3% compared to 29.6% for 2021.

STATEMENT OF FINANCIAL CONDITION

The Company reported total assets of $1.9 billion as of December 31, 2022, representing an increase of $126.6 million or 7.3% since September 30, 2022. The increase in assets was primarily due to higher net loans, which were funded by growth in deposits and an increase in wholesale borrowings. Loans HFI totaled $1.6 billion as of December 31, 2022, an increase of $100.9 million or 6.8% since September 30, 2022. Total deposits were $1.7 billion as of December 31, 2022, an increase of $144.5 million since September 30, 2022. Noninterest-bearing deposits represented 41.3% of total deposits as of December 31, 2022. Interest-bearing deposits grew $216.4 million from the prior quarter and included $61.6 million of callable brokered CDs. Additionally, as of December 31, 2022, the net unrealized loss on the available-for-sale investment securities portfolio, which is comprised mostly of US Treasury and Government Agency debt, was $14.4 million (pre-tax) compared to a loss of $15.2 million as of September 30, 2022. The average duration of the Bank’s investment securities portfolio is 4.7 years.

Asset Quality

As of December 31, 2022, the allowance for loan losses was $19.2 million or 1.21% of total loans HFI (excluding PPP loans), compared to 1.29% at September 30, 2022. The decrease in the coverage ratio was due to adjustments to the historical loss rate factors and qualitative factors which reflects the continuation of a sustained period of no charge-offs and low delinquencies. There were no net charge-offs (recoveries) during the quarter. Given the credit quality of the loan portfolio, management believes we are sufficiently reserved.

As of December 31, 2022, there are no doubtful credits and classified assets were $15.7 million, down from $15.9 million at September 30, 2022. Total classified assets at December 31, 2022 consisted of 13 loans, of which 7 loans totaling $10.0 million were secured by real estate with a weighted average LTV of 46%. The remaining 6 loans included 5 SBA loans with a balance of $3.2 million where 3 loans were 75% and 2 were 90% guaranteed by the SBA.

Capital Ratios (1)

The Bank’s capital ratios were in excess of the levels established for “well capitalized” institutions and are as follows:

      (1)   December 31, 2022, capital ratios are preliminary and subject to change.

About Private Bancorp of America, Inc.

Private Bancorp of America, Inc. (OTCQX: PBAM), is the holding company for CalPrivate Bank. CalPrivate Bank provides a Distinctly Different banking experience through unparalleled service and creative funding solutions to high-net-worth individuals, professionals, locally owned businesses, and real estate entrepreneurs. Customers are serviced through offices in Coronado, San Diego, La Jolla, Newport Beach, El Segundo and Beverly Hills as well as efficient electronic banking offerings. The Bank also offers various portfolio and government guaranteed lending programs, including SBA and cross-border Export-Import Bank programs. CalPrivate Bank is an SBA Preferred Lender and a Bauer Financial 5-star rated bank.

CalPrivate Bank’s website is www.calprivate.bank.

Non-GAAP Financial Measures

This press release contains certain non-GAAP financial measures in addition to results presented in accordance with GAAP. The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company's results of operations and financial condition and to enhance investors’ overall understanding of such results of operations and financial condition, permit investors to effectively analyze financial trends of our business activities, and enhance comparability with peers across the financial services sector. These non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures prepared in accordance with GAAP and should be read in conjunction with the Company’s GAAP financial information. A reconciliation of the most comparable GAAP financial measures to non-GAAP financial measures is included in the accompanying financial tables.

Investor Relations Contacts

Rick Sowers
President and Chief Executive Officer
Private Bancorp of America, Inc., and CalPrivate Bank
(424) 303-4894

Cory Stewart
Executive Vice President and Chief Financial Officer
Private Bancorp of America, Inc., and CalPrivate Bank
(206) 293-3669

Safe Harbor Paragraph

This press release includes forward-looking statements that involve inherent risks and uncertainties. Private Bancorp of America, Inc. cautions readers that a number of important factors could cause actual results to differ materially from those in the forward‐looking statements. These factors include the effects of the COVID-19 pandemic and related government actions on the Bank and its customers, loan losses, economic conditions and competition in the geographic and business areas in which Private Bancorp of America, Inc. operates, our ability to successfully integrate and develop business through the addition of new personnel and facilities and merged banks, whether our efforts to expand loan, product and service offerings will prove profitable, the effects of the bank mergers and acquisitions in our markets, system failures and internet security, inflation, fluctuations in interest rates, legislation and governmental regulation. You should not place undue reliance on forward‐looking statements, and we undertake no obligation to update those statements whether as a result of changes in underlying factors, new information, future events or otherwise.