Third Quarter 2023 Highlights
- Net income for the third quarter of 2023 of $8.5 million, up from $8.3 million(1) (as adjusted) in the prior quarter and up from $6.4 million in the third quarter of 2022. Net income for the third quarter of 2023 represents a return on average assets of 1.68% and a return on average tangible common equity of 19.74%
- Diluted earnings per share for the third quarter of 2023 of $1.47, up from $1.43(1) (as adjusted) in the prior quarter and up from $1.12 in the third quarter of 2022
- Loans held-for-investment (“HFI”) totaled $1.76 billion as of September 30, 2023, an increase of $47.1 million or 2.7% from June 30, 2023 and $176.6 million or 11.1% from December 31, 2022
- Provision for credit losses for the third quarter of 2023 of $0.5 million, compared to net reversal of $7.1 million for the prior quarter and a provision of $1.3 million for the third quarter of 2022. The provision for the third quarter of 2023 primarily relates to a $1.25 million specific reserve for a loan placed on nonaccrual status during the quarter, partially offset by a $520 thousand release of reserve for unfunded commitments that was reclassified from noninterest expense
- Total deposits were $1.77 billion as of September 30, 2023, an increase of $70.5 million or 4.1% from June 30, 2023. Federal Home Loan Bank advances increased by $16.0 million as a consequence of funding loan growth. Core deposits were $1.52 billion as of September 30, 2023, a decrease of $12.3 million or 0.8% from June 30, 2023
- As of September 30, 2023, total available liquidity was $1.5 billion or 179% of uninsured deposits, net of collateralized and fiduciary deposit accounts. Total available liquidity is comprised of $274 million of on-balance sheet liquidity (cash and investment securities) and $1.2 billion of unused borrowing capacity
- Net interest margin was 4.67% for the third quarter of 2023, as compared to 4.73% for the prior quarter and 4.99% for the third quarter of 2022
- Total cost of deposits was 1.92% for the third quarter of 2023, an increase from 1.59% for the prior quarter and 0.27% in the third quarter of 2022. The spot rate for total deposits was 2.18% as of September 30, 2023, compared to 1.67% at June 30, 2023. Total cost of funding sources was 2.12% for the third quarter of 2023, an increase from 1.82% in the prior quarter and 0.36% in the third quarter of 2022
- Tangible book value per share was $30.20 as of September 30, 2023, an increase of $1.38 since June 30, 2023 as a result of strong earnings. Tangible book value per share increased 28.6% year-over-year
LA JOLLA, Calif., Oct. 20, 2023 (GLOBE NEWSWIRE) -- Private Bancorp of America, Inc. (OTCQX:PBAM), (“Company”) and CalPrivate Bank (“Bank”) announced unaudited financial results for the third fiscal quarter ended September 30, 2023. The Company reported net income of $8.5 million, or $1.47 per diluted share, for the third quarter of 2023, which represents a 33.7% increase from $6.4 million, or $1.12 per diluted share, for the third quarter of 2022.
Rick Sowers, President and CEO of the Company and the Bank stated, “We are very pleased with the results of the third quarter and our continued growth of the balance sheet coupled with strong earnings and net interest margin. Loan demand remains soft but both our Commercial & Private Banking as well as our SBA Lending Teams remain active in the market. Competition for deposits is intense so we are focused on providing exceptional Client service and taking advantage of market disruptions to obtain new Clients who can benefit from our Distinctly Different Service model.”
Sowers added, “We look at this market as an opportunity for CalPrivate Bank as we hire exceptional bankers and make investments in product strategy and innovation to serve the needs of our Clients not only now, but into the future. Credit trends remain solid but we have increased our portfolio management activities to reflect the current economic and interest rate environment.”
“The Company continues to exhibit successful customer acquisition activity despite a challenging interest rate environment. Additionally, the Company continues to invest in people and infrastructure, including strong risk management, needed to support the continued growth of the CalPrivate franchise,” said Selwyn Isakow, Chairman of the Board of the Company and the Bank.
STATEMENT OF INCOME
Net Interest Income
Net interest income for the third quarter of 2023 totaled $23.3 million, an increase of $0.5 million or 2.4% from the prior quarter and an increase of $2.7 million or 12.9% from the third quarter of 2022. The increase from the prior quarter was driven primarily by an increase of $2.1 million in interest income, which resulted from a 2.6% increase in average earning assets and 20 basis point increase in yield on earning assets. Partially offsetting this was an increase of $1.6 million in interest expense, which resulted primarily from a 34 basis point increase in the cost of interest-bearing liabilities.
Net Interest Margin
Net interest margin for the third quarter of 2023 was 4.67% compared to 4.73% for the prior quarter and 4.99% in the third quarter of 2022. The 6 basis point decrease in net interest margin from the prior quarter was due primarily to higher rates paid on funding sources, partially offset by higher rates on new loan originations and variable rate loans and investment securities. The yield on earning assets was 6.60% for the third quarter of 2023 compared with 6.40% for the prior quarter and the cost of interest-bearing liabilities was 3.24% for the third quarter of 2023 compared to 2.90% in the prior quarter. The cost of total deposits was 1.92% for the third quarter of 2023 compared to 1.59% in the prior quarter. The cost of core deposits, which excludes brokered deposits, was 1.49% in the third quarter of 2023 compared to 1.24% in the prior quarter.
Provision for Credit Losses
The provision for credit losses for the third quarter of 2023 was $0.5 million, compared to a net reversal of $7.1 million in the prior quarter and a provision of $1.3 million for the third quarter of 2022. The provision for the third quarter of 2023 primarily relates to a $1.25 million specific reserve for a loan placed on nonaccrual status during the quarter, partially offset by a $520 thousand release of reserve for unfunded commitments that was reclassified from noninterest expense. The net reversal in the second quarter of 2023 reflects recoveries of $8.6 million partially offset by provision expense of $1.5 million for loan growth. For more details, please refer to the “Asset Quality” section below.
Noninterest Income
Noninterest income was $1.2 million for the third quarter of 2023, an increase from $1.1 million in the prior quarter and compared to $1.4 million in the third quarter of 2022. The change from the prior quarter as well as the third quarter of 2022 was primarily due to varying levels of gain on sale of SBA 7a loans. SBA loan sales for the third quarter of 2023 were $7.2 million with a 9.47% average trade premium resulting in a net gain on sale of $466 thousand, compared with $2.6 million with a 9.70% average trade premium resulting in a net gain on sale of $171 thousand in the prior quarter. Management expects continued softness in the market for SBA 7a loans.
Noninterest Expense
Noninterest expense was $11.8 million for the third quarter of 2023, an increase from $8.8 million in the prior quarter and $11.7 million in the third quarter of 2022. The increase from the prior quarter was primarily due to a $1.6 million benefit in professional services (legal expense specifically) in the second quarter resulting from legal fees waived as well as legal costs reimbursed by the participant bank in relation to the settled lawsuit with ANI Development, LLC/Gina Champion-Cain and Chicago Title. Additionally, other expenses increased by $1.1 million primarily due to a $520 thousand reclassification adjustment of the reversal of reserve for unfunded commitments which is now recorded in the provision (reversal) for credit losses line of the income statement as well as higher expenses for regulatory assessments. The efficiency ratio was 48.51% for the third quarter of 2023 compared to 37.04% in the prior quarter and 53.29% in the third quarter of 2022. The increase in the efficiency ratio from the prior quarter was due primarily to the aforementioned expense variances.
The Company remains committed to making investments in the business, including technology, marketing, and staffing. Inflationary pressures 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 $3.6 million for the third quarter of 2023, compared to $6.6 million for the prior quarter. The effective tax rate for the third quarter of 2023 was 29.8% compared to 29.7% in the prior quarter and 29.2% in the third quarter of 2022.
STATEMENT OF FINANCIAL CONDITION
As of September 30, 2023, total assets were $2.07 billion, an increase of $97.5 million since the prior quarter and $219.3 million since December 31, 2022. The increase in assets from the prior quarter was primarily due to higher cash balances and loans receivable. Total cash and due from banks was $198.3 million as of September 30, 2023, an increase of $62.5 million, or 46.0%, since June 30, 2023, primarily due to the timing of the settlement of $52 million of brokered certificates of deposit obtained at the end of September 2023 and subsequently used to pay off Federal Home Loan Bank Advances in early October 2023. Loans HFI totaled $1.76 billion as of September 30, 2023, an increase of $47.1 million or 2.7% since June 30, 2023. Total deposits were $1.77 billion as of September 30, 2023, an increase of $70.5 million since June 30, 2023. The growth in loans was also funded by wholesale borrowings (Federal Home Loan Bank advances), which increased by $16.0 million since June 30, 2023. During the quarter, core deposits decreased by $12.3 million, which was driven by a $63.0 million decrease in noninterest-bearing core deposits, partially offset by a $50.6 million increase in interest-bearing core deposits (including balances in the Intrafi ICS and CDARS programs). Noninterest-bearing deposits represent 39.1% of total core deposits. Uninsured deposits, net of collateralized and fiduciary deposit accounts, represent 47.7% of total deposits as of September 30, 2023. As of September 30, 2023, the net unrealized loss on the available-for-sale (“AFS”) investment securities portfolio, which is comprised mostly of US Treasury and Government Agency debt, was $15.8 million (pre-tax) compared to a loss of $14.1 million as of June 30, 2023. The average duration of the Bank’s AFS portfolio is 3.9 years. The Company has no held-to-maturity securities.
Asset Quality
As of September 30, 2023, the allowance for loan losses was $23.8 million or 1.35% of loans HFI, compared to 1.32% as of June 30, 2023 and 1.21% at December 31, 2022. The increase in the coverage ratio from December 31, 2022 primarily resulted from the adoption of CECL. The Company continues to have strong credit metrics and its nonperforming assets are 0.25% of total assets as of September 30, 2023. The reserve for unfunded commitments was $2.0 million as of September 30, 2023, compared to $2.2 million as of June 30, 2023 and the change was due to a decrease in commitment balances available. Given the credit quality of the loan portfolio, management believes we are sufficiently reserved.
As of September 30, 2023, there are no doubtful credits and classified assets were $11.0 million, down from $11.9 million as of June 30, 2023. Total classified assets as of September 30, 2023, consisted of 9 loans, of which 6 loans totaling $7.2 million were secured by real estate with a weighted average LTV of 58.5%. The remaining 3 loans were commercial and industrial loans, two of which were SBA loans with a balance of $1.4 million, which includes one loan that is 75% guaranteed and one loan that is 90% guaranteed by the SBA, and the third was a $2.5 million unsecured loan with a specific reserve of $1.3 million.
Capital Ratios (2)
The Bank’s capital ratios were in excess of the levels established for “well capitalized” institutions and are as follows:
| September 30, 2023 (2) | June 30, 2023 | |
| CalPrivate Bank | ||
| Tier I leverage ratio | 9.98% | 9.75% |
| Tier I risk-based capital ratio | 11.03% | 10.77% |
| Total risk-based capital ratio | 12.28% | 12.02% |
| (2) September 30, 2023 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, including adjusted income before provision for income taxes, adjusted net income, adjusted diluted earnings per share (“Adjusted EPS”), efficiency ratio, adjusted efficiency ratio, pretax pre-provision net revenue, average tangible common equity, adjusted return on average assets, return on average tangible common equity and adjusted return on average tangible common equity. 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 communication contains expressions of expectations, both implied and explicit, that are “forward-looking statements” within the meaning of such term in the Private Securities Litigation Reform Act of 1995. We caution you that a number of important factors could cause actual results to differ materially from those in the forward-looking statements, especially given the current turmoil in the banking and financial markets. These factors include the effects of depositors withdrawing funds unexpectedly, counterparties being unable to provide liquidity sources that we believe should be available, loan losses, economic conditions and competition in the geographic and business areas in which Private Bancorp of America, Inc. operates, including competition in lending and deposit acquisition, the unpredictability of fee income from participation in SBA loan programs, the effects of bank failures, liquidations and mergers in our markets and nationally, our ability to successfully integrate and develop business through the addition of new personnel, whether our efforts to expand loan, product and service offerings will prove profitable, system failures and data security, whether we can effectively secure and implement new technology solutions, 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. These factors could cause actual results to differ materially from what we anticipate or project. You should not place undue reliance on any such forward-looking statement, which speaks only as of the date on which it was made. Although we in good faith believe the assumptions and bases supporting our forward-looking statements to be reasonable there can be no assurance that those assumptions and bases will prove accurate.
PRIVATE BANCORP OF AMERICA, INC.CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in thousands) Sep 30, 2023 Jun 30, 2023 Sep 30, 2022Assets Cash and due from banks $20,013 $23,273 $13,506 Interest-bearing deposits in other financial institutions 20,508 27,566 44,776 Interest-bearing deposits at Federal Reserve Bank 157,807 85,020 43,891 Total cash and due from banks 198,328 135,859 102,173 Interest-bearing time deposits with other institutions 1,500 7,661 6,157 Investment securities available for sale 86,648 94,574 107,332 Loans held for sale 4,071 1,982 7,789 Total loans held-for-investment 1,764,846 1,717,705 1,487,098 Allowance for loan losses (23,789) (22,588) (19,092)Loans held-for-investment, net of allowance 1,741,057 1,695,117 1,468,006 Federal Home Loan Bank stock, at cost 8,915 8,915 7,020 Right of use asset 2,827 2,525 2,669 Premises and equipment, net 1,447 1,539 2,040 Servicing assets, net 2,449 2,875 3,502 Accrued interest receivable 6,877 6,118 4,262 Other assets 20,100 19,572 15,951 Total assets$2,074,219$1,976,737$1,726,901 Liabilities and Shareholders' Equity Liabilities Noninterest bearing $595,023 $657,980 $763,227 Interest Bearing 1,174,664 1,041,192 767,371 Total deposits 1,769,687 1,699,172 1,530,598 FHLB borrowings 82,000 66,000 30,000 Other borrowings 17,959 17,958 17,952 Accrued interest payable and other liabilities 29,894 26,396 13,417 Total liabilities1,899,5401,809,5261,591,967 Shareholders' equity Common stock 73,416 73,379 71,671 Additional paid-in capital 3,584 3,405 3,568 Retained earnings 108,757 100,281 70,386 Accumulated other comprehensive (loss) income, net (11,078) (9,854) (10,691)Total shareholders' equity174,679167,211134,934Total liabilities and shareholders' equity$2,074,219$1,976,737$1,726,901
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share amounts) For the three months endedYear to Date Sep 30, 2023 Jun 30, 2023Sep 30, 2022 Sep 30, 2023 Sep 30, 2022Interest Income Loans $30,568 $28,270 $21,028 $85,066 $56,205 Investment securities 562 560 578 1,702 1,550 Deposits in other financial institutions 1,748 1,933 372 4,831 711 Total interest income 32,878 30,763 21,978 91,599 58,466 Interest Expense Deposits 8,210 6,581 1,011 19,715 1,748 Borrowings 1,413 1,474 364 3,753 991 Total interest expense 9,623 8,055 1,375 23,468 2,739 Net interest income 23,255 22,708 20,603 68,131 55,727 Provision (reversal) for credit losses 471 (7,149) 1,316 (6,605) 2,118 Net interest income after provision for credit losses 22,784 29,857 19,287 74,736 53,609 Noninterest income: Service charges on deposit accounts 313 310 306 971 887 Net gain on sale of loans 466 171 647 1,111 3,886 Other noninterest income 380 573 452 1,596 1,184 Total noninterest income 1,159 1,054 1,405 3,678 5,957 Noninterest expense: Compensation and employee benefits 7,512 7,189 7,261 22,731 21,948 Occupancy and equipment 781 795 756 2,382 2,287 Data processing 1,064 878 993 2,886 2,469 Professional services 564 (836) 1,493 166 4,243 Other expenses 1,922 776 1,224 4,037 4,222 Total noninterest expense 11,843 8,802 11,727 32,202 35,169 Income before provision for income taxes 12,100 22,109 8,965 46,212 24,397 Provision for income taxes 3,611 6,575 2,614 13,215 7,131 Net income$8,489$15,534$6,351$32,997$17,266Net income available to common shareholders$8,422$15,407$6,306$32,763$17,115 Earnings per share Basic earnings per share $1.49 $2.72 $1.14 $5.81 $3.08 Diluted earnings per share $1.47 $2.69 $1.12 $5.75 $3.03 Average shares outstanding 5,658,340 5,654,435 5,549,480 5,640,764 5,559,122 Diluted average shares outstanding 5,709,994 5,726,522 5,640,841 5,697,911 5,657,117
Consolidated average balance sheet, interest, yield and rates
(Unaudited)
(Dollars in thousands) For the three months ended Sep 30, 2023Jun 30, 2023 Sep 30, 2022 Average
BalanceInterestAverage
Yield/RateAverage
BalanceInterestAverage
Yield/Rate Average
BalanceInterestAverage
Yield/RateInterest-Earnings Assets Deposits in other financial institutions $130,583 $1,748 5.31% $140,939 $1,933 5.50% $77,353 $372 1.91%Investment securities 101,313 562 2.22% 110,332 560 2.03% 122,184 578 1.89%Loans, including LHFS 1,745,113 30,568 6.95% 1,675,790 28,270 6.77% 1,438,489 21,028 5.80%Total interest-earning assets 1,977,009 32,878 6.60% 1,927,061 30,763 6.40% 1,638,026 21,978 5.32%Noninterest-earning assets 28,188 32,741 27,465 Total Assets $2,005,197 $1,959,802 $1,665,491 Interest-Bearing Liabilities Interest bearing DDA, excluding brokered 99,243 402 1.61% 99,334 364 1.47% 92,769 166 0.71%Savings & MMA, excluding brokered 657,453 4,248 2.56% 645,219 3,570 2.22% 533,902 602 0.45%Time deposits, excluding brokered 114,437 933 3.23% 101,241 719 2.85% 68,832 144 0.83%Total deposits, excluding brokered 871,133 5,583 2.54% 845,794 4,653 2.21% 695,503 912 0.52%Total brokered deposits 202,644 2,627 5.14% 155,577 1,928 4.97% 16,069 99 2.44%Total Interest-Bearing Deposits 1,073,777 8,210 3.03% 1,001,371 6,581 2.64% 711,572 1,011 0.56% FHLB advances 87,190 1,142 5.20% 96,626 1,202 4.99% 15,299 92 2.39%Other borrowings 17,958 271 5.99% 17,971 272 6.07% 17,951 272 6.06%Total Interest-Bearing Liabilities 1,178,925 9,623 3.24% 1,115,968 8,055 2.90% 33,250 364 4.34% Noninterest-bearing deposits 625,115 655,169 - 771,167 Total Funding Sources 1,804,040 9,623 2.12% 1,771,137 8,055 1.82% 1,515,989 1,375 0.36% Noninterest-bearing liabilities 27,810 26,492 4,775 Shareholders' equity 173,347 162,173 144,727 Total Liabilities and Shareholders' Equity $2,005,197 $1,959,802 $1,665,491 Net interest income/spread $23,255 4.48% $22,708 4.58% $20,603 4.96%Net interest margin 4.67% 4.73% 4.99%
Consolidated average balance sheet, interest, yield and rates
(Unaudited)
(Dollars in thousands) Year to DateSep 30, 2023Sep 30, 2022Average
BalanceInterestAverage
Yield/RateAverage
BalanceInterestAverage
Yield/RateInterest-Earnings Assets: Deposits in other financial institutions $131,621 $4,831 4.91% $97,946 $711 0.97%Investment securities 108,071 1,702 2.10% 119,042 1,550 1.74%Loans 1,673,254 85,066 6.80% 1,349,382 56,205 5.57%Total interest-earning assets 1,912,946 91,599 6.40% 1,566,370 58,466 4.99%Noninterest-earning assets 28,581 25,751 Total Assets $1,941,527 $1,592,121 Interest-Bearing Liabilities Interest bearing DDA, excluding brokered 99,734 1,109 1.49% 86,388 235 0.36%Savings & MMA, excluding brokered 640,803 10,196 2.13% 507,675 1,004 0.26%Time deposits, excluding brokered 99,685 2,108 2.83% 68,182 371 0.73%Total deposits, excluding brokered 840,222 13,413 2.13% 662,245 1,610 0.33%Total brokered deposits 170,256 6,302 4.95% 15,364 138 1.20%Total Interest-Bearing Deposits 1,010,478 19,715 2.61% 677,609 1,748 0.34% FHLB advances 77,651 2,938 5.06% 11,786 175 1.99%Other borrowings 17,969 815 6.06% 17,949 816 6.08%Total Interest-Bearing Liabilities 1,106,098 23,468 2.84% 29,735 991 4.46% Noninterest-bearing deposits 649,863 737,578 Total Funding Sources 1,755,961 23,468 1.79% 1,444,921 2,739 0.25% Noninterest-bearing liabilities 24,718 12,955 Shareholders' equity 160,848 134,245 Total Liabilities and Shareholders' Equity $1,941,527 $1,592,121 Net interest income/spread $68,131 4.61% $55,727 4.74%Net interest margin 4.76% 4.76%
Condensed Balance Sheets
(Unaudited)
(Dollars in thousands, except per share amounts) Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022Assets Cash and due from banks $198,328 $135,859 $211,812 $128,642 $102,173 Interest-bearing time deposits with other institutions 1,500 7,661 7,661 7,923 6,157 Investment securities 86,648 94,574 103,790 104,652 107,332 Loans held for sale 4,071 1,982 465 7,061 7,789 Total loans held-for-investment 1,764,846 1,717,705 1,623,028 1,588,248 1,487,098 Allowance for loan losses (23,789) (22,588) (21,135) (19,152) (19,092)Loans held-for-investment, net of allowance 1,741,057 1,695,117 1,601,893 1,569,096 1,468,006 Right of use asset 2,827 2,525 2,889 3,265 2,669 Premises and equipment, net 1,447 1,539 1,744 1,742 2,040 Other assets and interest receivable 38,341 37,480 36,374 32,499 30,735 Total assets$2,074,219$1,976,737$1,966,628$1,854,880$1,726,901 Liabilities and Shareholders' Equity Liabilities Noninterest Bearing $595,023 $657,980 $639,664 $691,392 $763,227 Interest Bearing 1,174,664 1,041,192 944,102 983,730 767,371 Total Deposits 1,769,687 1,699,172 1,583,766 1,675,122 1,530,598 Borrowings 99,959 83,958 209,956 17,954 47,952 Accrued interest payable and other liabilities 29,894 26,396 20,592 18,480 13,417 Total liabilities1,899,540 1,809,526 1,814,314 1,711,5561,591,967Shareholders' equity Common stock 73,416 73,379 73,254 72,221 71,671 Additional paid-in capital 3,584 3,405 3,289 3,353 3,568 Retained earnings 108,757 100,281 84,751 77,810 70,386 Accumulated other comprehensive (loss) income (11,078) (9,854) (8,980) (10,060) (10,691)Total shareholders' equity174,679 167,211 152,314 143,324134,934Total liabilities and shareholders' equity$2,074,219 $1,976,737 $1,966,628 $1,854,880$1,726,901 Book value per common share $30.63 $29.32 $26.83 $25.60 $24.12 Tangible book value per common share (1) $30.20 $28.82 $26.30 $25.06 $23.49 Shares outstanding 5,703,350 5,702,637 5,676,017 5,599,025 5,594,380 (1) Non-GAAP measure. See GAAP to non-GAAP Reconciliation table.
Condensed Statements of Income
(Unaudited)
(Dollars in thousands, except per share amounts) For the three months ended Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022Interest income$32,878 $30,763 $27,958 $26,065 $21,978 Interest expense 9,623 8,055 5,790 3,469 1,375 Net interest income 23,255 22,708 22,168 22,596 20,603 Provision (reversal) for credit losses 471 (7,149) 73 60 1,316 Net interest income after provision for credit losses 22,784 29,857 22,095 22,536 19,287 Noninterest income 1,159 1,054 1,465 1,084 1,405 Compensation and employee benefits 7,512 7,189 8,030 8,482 7,261 Occupancy and equipment 781 795 806 820 756 Data processing 1,064 878 944 942 993 Professional services 564 (836) 438 1,018 1,493 Other expenses 1,922 776 1,339 1,813 1,224 Total noninterest expense 11,843 8,802 11,557 13,075 11,727 Income before provision for income taxes 12,100 22,109 12,003 10,545 8,965 Income taxes 3,611 6,575 3,029 3,102 2,614 Net income$8,489 $15,534 $8,974 $7,443 $6,351 Net income available to common shareholders$8,422 $15,407 $8,923 $7,394 $6,306 Earnings per share Basic earnings per share$1.49 $2.72 $1.59 $1.33 $1.13 Diluted earnings per share$1.47 $2.69 $1.57 $1.31 $1.12 Average shares outstanding 5,658,340 5,654,435 5,608,193 5,551,376 5,549,480 Diluted average shares outstanding 5,709,994 5,726,522 5,673,394 5,645,355 5,640,841
(Unaudited) Selected Quarterly Average Balances(Dollars in thousands)For the three months ended Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022Total assets $2,005,197 $1,959,802 $1,857,994 $1,759,204 $1,665,491 Earning assets $1,977,009 $1,927,061 $1,833,089 $1,733,577 $1,638,026 Total loans, including loans held for sale $1,745,113 $1,675,790 $1,597,236 $1,527,863 $1,438,489 Total deposits $1,698,892 $1,656,540 $1,624,777 $1,574,002 $1,482,739 Total shareholders' equity $173,347 $162,173 $146,778 $141,330 $144,727
(Unaudited) Rollforward of Allowance for Credit Losses(Dollars in thousands)For the three months ended Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022Allowance for loan losses: Beginning balance $22,588 $21,135 $19,152 $19,092 $17,776 Impact of CECL adoption - - 1,910 - - Provision for loan losses 1,194 (7,149) 73 60 1,316 Net (charge-offs) recoveries 7 8,602 - - - Ending balance 23,789 22,588 21,135 19,152 19,092 Reserve for unfunded commitments (1) 1,969 2,172 2,802 1,718 1,674 Total allowance for credit losses $25,758 $24,760 $23,937 $20,870 $20,766 (1) Includes $974 thousand related to the impact of CECL adoption on January 1, 2023.
(Unaudited) The following tables present a reconciliation of non-GAAP financial measures to GAAP measures for: adjusted income before provision for income taxes, adjusted net income and adjusted EPS. We believe the presentation of certain non-GAAP financial measures provides useful information to assess our consolidated financial condition and consolidated results of operations and to assist investors in evaluating our financial results relative to our peers. These non-GAAP financial measures complement our GAAP reporting and are presented below to provide investors and others with information that we use to manage the business each period. Because not all companies use identical calculations, the presentation of these non-GAAP financial measures may not be comparable to other similarly titled measures used by other companies. These non-GAAP measures should be taken together with the corresponding GAAP measures and should not be considered a substitute of the GAAP measures. GAAP to Non-GAAP Reconciliation (Dollars in thousands, except per share amounts) For the three months endedYear to Date Sep 30, 2023 Jun 30, 2023Sep 30, 2022 Sep 30, 2023 Sep 30, 2022Adjusted income before provision for income taxes Income before provision for income taxes $12,100 $22,109 $8,965 $46,212 $24,397 ANI recovery (1) - (7,708) - (7,708) - Settlement of legal fees related to ANI litigation (2) - (1,635) - (1,635) - Recovery of principal and interest on a loan acquired with credit deterioration as part of a business combination (3) - (986) - (986) - Adjusted income before provision for income taxes (non-GAAP) $12,100 $11,780 $8,965 $35,883 $24,397 Adjusted net income Net income $8,489 $15,534 $6,351 $32,997 $17,266 ANI recovery, net of tax (1)(4) - (5,430) - (5,430) - Settlement of legal fees related to ANI litigation, net of tax (2)(4) - (1,152) - (1,152) - Recovery of principal and interest on a loan acquired with credit deterioration as part of a business combination, net of tax(3)(4) - (694) - (694) - Adjusted net income (non-GAAP) $8,489 $8,258 $6,351 $25,721 $17,266 Adjusted diluted earnings per share ("Adjusted EPS") Diluted earnings per share $1.47 $2.69 $1.12 $5.75 $3.03 ANI recovery, net of tax (1)(4) - (0.94) - (0.94) - Settlement of legal fees related to ANI litigation, net of tax (2)(4) - (0.20) - (0.20) - Recovery of principal and interest on a loan previously acquired with credit deterioration as part of a business combination, net of tax(3)(4) - (0.12) - (0.12) - Adjusted EPS (non-GAAP) $1.47 $1.43 $1.12 $4.49 $3.03 Diluted average shares outstanding 5,709,994 5,726,522 5,640,841 5,697,911 5,657,117 (1) In the second quarter of 2023, the Company reached a settlement with the Receiver for ANI Investments and Gina Champion-Cain in which the Company recovered $7.7 million (or approximately $0.94 per diluted share after tax) plus certain rights to future recoveries from a guarantor of the charged off loan. This recovery amount represents 80% of the original principal charge-off and is net of the participant bank’s share.(2) In the second quarter of 2023, in conjunction with the resolution of the ANI litigation, the Company was reimbursed $0.6 million of legal costs by the participant bank. In addition, $0.5 million of previously invoiced legal fees were waived at settlement of the litigation.(3) In the second quarter of 2023, the Company received $1.0 million related to a loan that was originated and written off by San Diego Private Bank ("SDPB") prior to SDPB merging with the Company in 2013. Accordingly, the Company recorded an allowance recovery of $0.9 million for the amount that would have been written off at the time of the merger under CECL and $0.1 million of interest income for recovered interest.(4) Net of tax effect of 29.6%, which is comprised of 21.0% for the statutory Federal tax rate plus 8.6% for state franchise taxes, net of Federal benefits.
(Unaudited) The following tables present a reconciliation of non-GAAP financial measures to GAAP measures for: efficiency ratio, adjusted efficiency ratio, pretax pre-provision net revenue, average tangible common equity, adjusted return on average assets, return on average tangible common equity and adjusted return on average tangible common equity. We believe the presentation of certain non-GAAP financial measures provides useful information to assess our consolidated financial condition and consolidated results of operations and to assist investors in evaluating our financial results relative to our peers. These non-GAAP financial measures complement our GAAP reporting and are presented below to provide investors and others with information that we use to manage the business each period. Because not all companies use identical calculations, the presentation of these non-GAAP financial measures may not be comparable to other similarly titled measures used by other companies. These non-GAAP measures should be taken together with the corresponding GAAP measures and should not be considered a substitute of the GAAP measures. GAAP to Non-GAAP Reconciliation(Dollars in thousands)For the three months ended Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022Efficiency Ratio Noninterest expense $11,843 $8,802 $11,557 $13,075 $11,727 Net interest income 23,255 22,708 22,168 22,596 20,603 Noninterest income 1,159 1,054 1,465 1,084 1,405 Total net interest income and noninterest income 24,414 23,762 23,633 23,680 22,008 Efficiency ratio (non-GAAP) 48.51% 37.04% 48.90% 55.22% 53.29% Adjusted Efficiency Ratio Noninterest expense $11,843 $8,802 $11,557 $13,075 $11,727 Settlement of legal fees related to ANI litigation - 1,635 - - - Adjusted noninterest expense (non-GAAP) 11,843 10,437 11,557 13,075 11,727 Total net interest income and noninterest income 24,414 23,762 23,633 23,680 22,008 Recovery of interest on a loan acquired with credit deterioration as part of a business combination - (84) - - - Adjusted total net interest income and noninterest income (non-GAAP) 24,414 23,678 23,633 23,680 22,008 Adjusted Efficiency ratio (non-GAAP) 48.51% 44.08% 48.90% 55.22% 53.29% Pretax pre-provision net revenue Net interest income $23,255 $22,708 $22,168 $22,596 $20,603 Noninterest income 1,159 1,054 1,465 1,084 1,405 Total net interest income and noninterest income 24,414 23,762 23,633 23,680 22,008 Less: Noninterest expense 11,843 8,802 11,557 13,075 11,727 Pretax pre-provision net revenue (non-GAAP) $12,571 $14,960 $12,076 $10,605 $10,281 Return and Adjusted Return on Average Assets, Average Equity, Average Tangible Equity Net income $8,489 $15,534 $8,974 $7,443 $6,351 Adjusted net income (non-GAAP) (1) 8,489 8,258 8,974 7,443 6,351 Average assets 2,005,197 1,959,802 1,857,994 1,759,204 1,665,491 Average shareholders' equity 173,347 162,173 146,778 141,330 144,727 Less: Average intangible assets 2,709 2,975 3,026 3,385 3,599 Average tangible common equity (non-GAAP) 170,638 159,198 143,752 137,945 141,128 Return on average assets 1.68% 3.18% 1.96% 1.68% 1.51%Adjusted return on average assets (non-GAAP) (1) 1.68% 1.69% 1.96% 1.68% 1.51%Return on average equity 19.43% 38.42% 24.80% 20.89% 17.41%Adjusted return on average equity (non-GAAP) (1) 19.43% 20.42% 24.80% 20.89% 17.41%Return on average tangible common equity (non-GAAP) 19.74% 39.14% 25.32% 21.41% 17.85%Adjusted return on average tangible common equity (non-GAAP) (1) 19.74% 20.81% 25.32% 21.41% 17.85% Tangible book value per share Total equity 174,679 167,211 152,314 143,324 134,934 Less: Total intangible assets 2,449 2,875 3,057 3,007 3,502 Total tangible equity 172,230 164,336 149,257 140,317 131,432 Shares outstanding 5,703,350 5,702,637 5,676,017 5,599,025 5,594,380 Tangible book value per share (non-GAAP) $30.20 $28.82 $26.30 $25.06 $23.49 (1) A reconciliation of net income to adjusted net income is provided on page 13.
(Unaudited) The following tables present a reconciliation of non-GAAP financial measures to GAAP measures for: efficiency ratio, adjusted efficiency ratio, pretax pre-provision net revenue, average tangible common equity, adjusted return on average assets, return on average tangible common equity and adjusted return on average tangible common equity. We believe the presentation of certain non-GAAP financial measures provides useful information to assess our consolidated financial condition and consolidated results of operations and to assist investors in evaluating our financial results relative to our peers. These non-GAAP financial measures complement our GAAP reporting and are presented below to provide investors and others with information that we use to manage the business each period. Because not all companies use identical calculations, the presentation of these non-GAAP financial measures may not be comparable to other similarly titled measures used by other companies. These non-GAAP measures should be taken together with the corresponding GAAP measures and should not be considered a substitute of the GAAP measures. GAAP to Non-GAAP Reconciliation(Dollars in thousands)Year to Date Sep 30, 2023 Sep 30, 2022Efficiency Ratio Noninterest expense $32,202 $35,169 Net interest income 68,131 55,727 Noninterest income 3,678 5,957 Total net interest income and noninterest income 71,809 61,684 Efficiency ratio (non-GAAP) 44.84% 57.01% Adjusted Efficiency Ratio Noninterest expense $32,202 $35,169 Settlement of legal fees related to ANI litigation 1,635 - Adjusted noninterest expense (non-GAAP) 33,837 35,169 Total net interest income and noninterest income 71,809 61,684 Recovery of interest on a loan acquired with credit deterioration as part of a business combination (84) - Adjusted total net interest income and noninterest income (non-GAAP) 71,725 61,684 Adjusted Efficiency ratio (non-GAAP) 47.18% 57.01% Pretax pre-provision net revenue Net interest income $68,131 $55,727 Noninterest income 3,678 5,957 Total net interest income and noninterest income 71,809 61,684 Less: Noninterest expense 32,202 35,169 Pretax pre-provision net revenue (non-GAAP) $39,607 $26,515 Return and Adjusted Return on Average Assets, Average Equity, Average Tangible Equity Net income $32,997 $17,266 Adjusted net income (non-GAAP) (1) 25,721 17,266 Average assets 1,941,527 1,592,121 Average shareholders' equity 160,848 134,245 Less: Average intangible assets 2,879 2,903 Average tangible common equity 157,969 131,342 Return on average assets 2.27% 1.45%Adjusted return on average assets (non-GAAP) (1) 1.77% 1.45%Return on average equity 27.43% 17.20%Adjusted return on average equity (non-GAAP) (1) 21.38% 17.20%Return on average tangible common equity (non-GAAP) 27.93% 17.58%Adjusted return on average tangible common equity (non-GAAP) (1) 21.77% 17.58% (1) A reconciliation of net income to adjusted net income is provided on page 13.
