Southern California Bancorp Reports Record Net Income of $8.5 Million for the Fourth Quarter and $16.1 Million for the Full Year of 2022

Rhea-AI Summary

Southern California Bancorp (OTC Pink: BCAL) announced record financial results for Q4 and full year 2022, reporting net income of $8.5 million for Q4 and $16.1 million for the year. Q4 earnings per share rose to $0.46, up 21.1%, while full-year EPS hit $0.88, a 22.2% increase. Key metrics include a net interest margin of 4.62%, total assets of $2.28 billion, and total loans reaching $1.91 billion, up 3.11% from the previous quarter. However, total deposits decreased by 4.4% to $1.93 billion. The company attributed its success to improved loan growth and a transformation in its banking model amid a challenging economic environment.

Positive

• Record net income of $8.5 million for Q4 2022, up 22.3% from Q3.
• Net interest margin improved to 4.62% in Q4, a 30 bps increase.
• Total loans increased to $1.91 billion, a growth of 3.11% quarter-over-quarter.

Negative

• Total deposits fell by $88.2 million, or 4.4%, in Q4 2022.
• Provision for loan losses for 2022 was $5.5 million, reflecting strong loan growth.

SAN DIEGO--(BUSINESS WIRE)-- Southern California Bancorp (“us,” “we,” “our,” or the “Company”) (OTC Pink: BCAL), the holding company for Bank of Southern California, N.A. (the “Bank”) today announced its consolidated financial results for the fourth quarter and full year of 2022.

Southern California Bancorp reported record net income of $8.5 million for the fourth quarter of 2022, or $0.46 per diluted share, compared to net income of $6.9 million, or $0.38 per diluted share in the third quarter of 2022. The Company reported net income of $16.1 million for the full year of 2022, or $0.88 per diluted share, compared to net income of $10.7 million, or $0.72 per diluted share for the full year of 2021.

Fourth Quarter 2022 Highlights

• Net income of $8.5 million, up $1.5 million, or 22.3% from the prior quarter
• Diluted earnings per share of $0.46, up $0.08, or 21.1% from the prior quarter
• Net interest margin of 4.62%, compared with 4.32% in the prior quarter; average loan yield of 5.47% compared with 5.09% in the prior quarter
• Efficiency ratio of 51.9%, down 3.6% from the prior quarter
• Tangible book value per common share ("TBV") (non-GAAP) of $12.32 at December 31, 2022, up $0.57 from $11.75 at September 30, 2022
• Provision for loan losses of $650 thousand commensurate with loan growth; the provision was $1.3 million in the prior quarter
• Total assets of $2.28 billion, relatively flat from September 30, 2022
• Total loans, including loans held for sale, increased to $1.91 billion, up $57.5 million or 3.11% from September 30, 2022
• Nonperforming assets to total assets ratio of 0.002% at December 31, 2022 and September 30, 2022
• Total deposits of $1.93 billion, down $88.2 million or 4.4%, compared to $2.02 billion at September 30, 2022
• Noninterest-bearing demand deposits were $923.9 million, representing 47.8% of total deposits, compared to $993.2 million, or 49.2% of total deposits at September 30, 2022
• Cost of deposits was 0.51%, up from 0.25% in the prior quarter
• Continued status as “well-capitalized,” the highest regulatory capital category

Full Year 2022 Highlights

• Net income increased to $16.1 million, up $5.4 million, or 50.5% from the prior year
• Diluted earnings per share of $0.88, up $0.16, or 22.2% from the prior year
• Total loan interest income increased to $86.4 million, up $20.2 million or 30.4% from the prior year
• Total loan interest income excluding non-Paycheck Protection Program ("non-PPP") loans increased to $84.7 million, up $36.2 million from the prior year
• Net interest margin of 4.06% for 2022, compared with 3.64% in the prior year; average loan yield was 5.02%, up from 4.88% in the prior year
• Efficiency ratio of 70.0%, down 7.7% from the prior year
• Provision for loan losses of $5.5 million commensurate with strong loan growth; the provision was $1.2 million for the year ended December 31, 2021
• Total assets of $2.28 billion, up $22.2 million or 1.0% from December 31, 2021
• Total loans, including loans held for sale, increased to $1.91 billion, up $402.1 million from December 31, 2021
• Total deposits of $1.93 billion, down $41.2 million from December 31, 2021
• Noninterest bearing demand deposits were $923.9 million, representing 47.8% of total deposits, compared to $986.9 million, or 50.0% of total deposits at December 31, 2021
• Cost of deposits was 0.23%, up from 0.13% in the prior year

“I am pleased to report record net income of $8.5 million for the fourth quarter and record net income of $16.1 million for the full year of 2022,” said David Rainer, Chairman and Chief Executive Officer of Southern California Bancorp and Bank of Southern California. “This outstanding achievement was due to the dedication of our entire team over the past two years in executing the transformation of our commercial banking model, and the expansion of our footprint in Los Angeles and Orange counties, which complemented our established San Diego market. All of which enabled the successful deployment of our excess liquidity into higher yielding assets.

“Our strong financial performance drove a return on average assets of 1.46%, a return on average equity of 13.21%, an efficiency ratio of 51.9%, and the expansion of our net interest margin to 4.62%.

“Our tangible book value per share is now $12.32, an increase of $0.57 in the fourth quarter, which exceeded fourth quarter diluted EPS of $0.46, as our unrealized losses on investment securities through other comprehensive income on our consolidated balance sheet decreased as of December 31, 2022. I note that our strong fourth quarter performance included a $994 thousand pre-tax loss on the sale of $22 million of low-yielding securities, which we sold in order to redeploy the proceeds into higher-yielding securities, which we believe will be accretive to earnings going forward.

“Our loans held for investment grew to $1.90 billion at December 31, 2022, increasing $54.0 million from the previous quarter end and $393.0 million from December 31, 2021. The credit quality of our loan portfolio remains pristine, with zero loan delinquencies of 30 days or more at December 31, 2022, and no charge-offs during the fourth quarter.

“We saw a decrease in total deposits of $88.2 million, or 4.4% in the fourth quarter, which was partly due to a movement into U.S. Treasuries and higher yielding money market funds, and partly seasonal, as many of our clients pay out their yearly bonuses and reposition assets at the end of the calendar year. Deposit costs in the fourth quarter increased to 51 basis points, up from 25 basis points in the prior quarter, as we continue to adjust rates for customers of our relationship-based business banking model to stay competitive in the current market, as well as attract new customers. The overall mix of our total deposits remains very good, with noninterest bearing deposits representing 47.8% of total deposits at December 31, 2022.

“While we face a challenging and somewhat uncertain economic environment going forward, we continue to believe the Southern California market for small to mid-size business banking offers a significant opportunity for our relationship-based business banking strategy, and we are committed to continue executing that strategy.”

Fourth Quarter and Full Year Operating Results

Net Income

Net income for the fourth quarter of 2022 was $8.5 million, or $0.46 per diluted share, compared to net income of $6.9 million, or $0.38 per diluted share in the third quarter of 2022. The adjusted net income (non-GAAP) for the fourth quarter was $8.5 million, or $0.46 per diluted share, compared to adjusted net income of $6.2 million, or $0.34 per diluted share in the third quarter of 2022. Pre-tax, pre-provision income for the fourth quarter was $12.2 million, an increase of $1.5 million or 14.1% from the prior quarter.

Net income for the full year of 2022 was $16.1 million, or $0.88 per diluted share, compared to net income of $10.7 million or $0.72 per diluted share for 2021. The operating results of 2022 were partly impacted by including the full year of Bank of Santa Clarita's operating results. The increase in net income in 2022 compared with 2021 was primarily due to a $23.4 million increase in net interest income, which was partially offset by a $10.5 million increase in noninterest expense, and a $4.3 million increase in the provision for loan losses, primarily related to strong loan growth in 2022. The adjusted net income for the full year of 2022 was $20.7 million, or $1.14 per diluted share, compared to $12.7 million or $0.85 per diluted share in the prior year. Pre-tax, pre-provision income for 2022 was $27.4 million, an increase of $12.0 million, or 78.3% compared to pre-tax, pre-provision income of $15.4 million for the full year of 2021.

Net Interest Income and Net Interest Margin

Net interest income for the fourth quarter of 2022 was $25.3 million, compared to $23.8 million in the prior quarter. The increase was primarily due to a $2.8 million increase in total interest and dividend income, partially offset by a $1.3 million increase in total interest expense. During the fourth quarter of 2022, loan interest income increased $2.9 million, debt securities income increased $16 thousand, and interest and dividend income from other financial institutions decreased $110 thousand. The increase in interest income was due to a number of factors: a higher average loan balance from organic loan growth; a change in the interest-earning asset mix; and higher yields on interest-earning assets resulting from increases in the target Fed funds rate. Average interest earning assets decreased $15.2 million, the result of an $83.8 million increase in average loans, partially offset by a $35.1 million decrease in average Fed funds sold/resale agreements, $8.3 million decrease in average debt securities, and a $55.7 million decrease in average lower yielding deposits in other financial institutions. The increase in interest expense for the fourth quarter of 2022 was primarily due to a $1.3 million increase in interest expense on interest-bearing deposits resulting from a 47 basis point increase in the interest-bearing deposit costs.

Net interest margin for the fourth quarter of 2022 was 4.62%, compared with 4.32% in the prior quarter. The increase was primarily related to a 54 basis point increase in the total interest-earning assets yield resulting from higher market interest rates and a change in the Bank's interest-earning asset mix, partially offset by a 25 basis point increase in the cost of funds. The yield on total earning assets in the fourth quarter of 2022 was 5.14%, compared with 4.60% in the prior quarter. The yield on average total loans in the fourth quarter of 2022 was 5.47%, an increase of 38 basis points from 5.09% in the prior quarter.

Cost of funds for the fourth quarter of 2022 was 56 basis points, an increase from 31 basis points in the prior quarter. The increase was primarily driven by the 47 basis points increase in the cost of interest-bearing deposits, coupled with a decrease in average noninterest-bearing deposits. Average noninterest-bearing demand deposits decreased $41.7 million to $970.9 million and represented 48.3% of total average deposits for the fourth quarter of 2022, compared with $1.01 billion and 49.8%, respectively, for the prior quarter. The total cost of deposits in the fourth quarter of 2022 was 51 basis points, up from 25 basis points in the prior quarter.

Average total borrowings increased $3.7 million to $21.5 million for the fourth quarter of 2022 resulting from an increase of $50.0 million in FHLB borrowings late in the month of December 2022. The average cost of total borrowings was 5.82% for the fourth quarter of 2022, down from 6.06% in the prior quarter.

Net interest income for the full year of 2022 totaled $87.8 million, compared to $64.4 million for the full year of 2021. The increase was primarily due to a $25.8 million increase in total interest and dividend income, partially offset by a $2.4 million increase in total interest expense. During the year of 2022, loan interest income excluding PPP loans increased $36.2 million, debt securities income increased $2.9 million and interest and dividend income from other financial institution increased $2.7 million, partially offset by a decrease in loan interest income from PPP loans of $16.0 million. Average interest earning assets increased $391.8 million, the result of a $364.8 million increase in average loans, coupled with a $122.4 million increase in average debt securities, and a $49.6 million increase in average Fed funds sold/resale agreements, which was partially offset by a decrease of $148.4 million in average lower yielding deposits in other financial institutions. The increase in interest expense for the full year of 2022 was due to a $2.5 million increase in interest expense on interest-bearing deposits.

Net interest margin for the full year of 2022 was 4.06%, compared with 3.64% for the full year of 2021. The increase was primarily related to a 50 basis point increase in the total interest-earning assets yield resulting from higher market interest rates and a change in the Bank's interest-earning asset mix, partially offset by a 9 basis point increase in the cost of funds. The yield on total earning assets for the full year of 2022 was 4.33%, compared with 3.83% for the full year of 2021. The yield on average total loans was 5.02%, an increase of 14 basis points from 4.88% for the full year of 2021.

Cost of funds for the full year of 2022 was 29 basis points, an increase from 20 basis points for the full year of 2021. The increase was primarily driven by a 21 basis point increase in the cost of interest-bearing deposits, and a 296 basis point increase in total borrowings cost, partially offset by an increase in average noninterest-bearing deposits. Average noninterest-bearing demand deposits increased $223.0 million to $1.01 billion and represented 50.1% of total average deposits for the full year of 2022, compared with $783.8 million and 48.6% for the full year of 2021. The total cost of deposits was 23 basis points, up 10 basis points from the prior year.

Average total borrowings decreased $22.8 million to $19.9 million for the full year of 2022 resulting from the payoffs of FHLB advances and the Paycheck Protection Program Liquidity Facility (“PPPLF”) borrowings in 2021, and the early extinguishment of certain trust preferred securities ("TruPS") in 2022. The average cost of total borrowings was 6.03% for the full year of 2022, up from 3.07% in the prior year.

Provision for Loan Losses

The Company recorded a loan loss provision of $650 thousand in the fourth quarter of 2022 and $5.5 million for the full year of 2022, primarily related to organic loan growth, as compared to the loan loss provision of $1.3 million in the third quarter of 2022 and $1.2 million for the full year of 2021. The Company’s management continues to monitor macroeconomic variables related to increasing interest rates, inflation and the concerns of an economic downturn and believes it is appropriately provisioned for the current environment.

Noninterest Income

Total noninterest income in the fourth quarter of 2022 was $188 thousand, a decrease of $170 thousand compared to total noninterest income of $358 thousand in the third quarter of 2022. The decrease was due primarily to a $994 thousand pre-tax loss on sale of debt securities, for which there was no comparable transaction in the third quarter of 2022; however, in the third quarter of 2022 the Company recorded a $768 thousand loss on sale of a building and related fixed assets. In the fourth quarter of 2022, the Company recorded a gain on sale of $293 thousand on the sale of $5.1 million of SBA 7A loans, an increase of $53 thousand from $3.7 million in SBA 7A sales in the prior quarter.

Total noninterest income for the full year of 2022 was $3.7 million, compared with total noninterest income of $4.5 million for the full year of 2021. The decrease in total noninterest income in 2022 was primarily due to the $994 thousand loss on sale of debt securities and the $764 thousand loss on the sale of a building and related fixed assets, partially offset by the $704 thousand increase in income from bank-owned life insurance and the $429 thousand increase in gain on loan sale. Additionally, in 2021 the Company recorded a gain on branch sale of $726 thousand, for which there was no corresponding transaction in 2022. The $429 thousand increase in gain on loan sale was primarily due to the SBA 7A loan sales during 2022. In 2022, the Company recorded a gain on sale of $1.3 million on the sale of $20.0 million of SBA 7A loans and $360 thousand of non-SBA loans, compared with a gain on sale of $920 thousand on two acquired non-SBA loans in 2021.

Noninterest Expense

Total noninterest expense for the fourth quarter of 2022 was $13.2 million, a decrease of $198 thousand from total noninterest expense of $13.4 million in the prior quarter. In the fourth quarter of 2022, salaries and employee benefits decreased by $244 thousand, occupancy and equipment expenses decreased by $152 thousand, legal, audit and professional fees decreased by $398 thousand and other expense decreased by $185 thousand. There was no loss contingency expense in the fourth quarter of 2022, as compared to a $975 thousand net recovery in the third quarter of 2022.

The $244 thousand decrease in salaries and benefits was due primarily to a decrease in bonus and incentives expense, coupled with lower employer taxes, partially offset by a decrease in the deferred loan origination costs resulting from slower loan growth in the fourth quarter of 2022. The $152 thousand decrease in occupancy and equipment expenses was due primarily to the additional rent expenses incurred for the temporary spaces in multiple locations in the third quarter of 2022. The $398 thousand decrease in legal, audit and professional fees was due primarily to a $250 thousand decrease in legal fees related to the recent settlement of litigation. The $185 thousand decrease in other expense was due primarily to a lower provision for unfunded loan commitments of $160 thousand in the fourth quarter of 2022. Total unfunded loan commitments increased $23.7 million to $601.1 million at December 31, 2022 from $577.4 million at September 30, 2022.

Efficiency ratio for the fourth quarter of 2022 was 51.9%, compared to 55.5% in the prior quarter. Adjusted efficiency ratio was 51.9%, compared to 60.0% in the prior quarter.

Noninterest expense for the full year of 2022 was $64.0 million, an increase of $10.5 million compared with $53.5 million for the full year of 2021. The increase was largely due to a net loss contingency expense of $5.5 million recorded in 2022, for which there was no corresponding expense in 2021. Additionally, salaries and employee benefits increased by $2.2 million, occupancy and equipment expenses increased by $688 thousand, data processing increased by $498 thousand, legal audit and professional expenses increased by $919 thousand, regulatory assessments increased by $560 thousand, director and shareholder expenses increased by $310 thousand and other expense increased by $1.0 million. These increases were partially offset by a decrease in merger and related expenses of $1.3 million in 2022 compared with 2021.

The $2.2 million increase in salaries and benefits was due primarily to the full year impact of the Bank of Santa Clarita acquisition and the expansion of the Company’s commercial banking strategy into Orange, Los Angeles and Ventura counties in late 2021 and early 2022, which was partially offset by an increase in deferred loan origination costs resulting from strong loan growth during 2022 and a decrease in stock compensation expense resulting from forfeitures and accelerated stock compensation expenses recorded in 2021 related to a preexisting employment contract for which there was no corresponding expense in 2022. The $688 thousand increase in occupancy and equipment expenses was due primarily to an increase in lease expenses resulting from new and renewed leases, and an increase in depreciation and maintenance expense related to new leased locations. The $498 thousand increase in data processing was due primarily to higher software amortization for new and upgraded technology. The $560 thousand in regulatory assessments was due primarily from the increase in the total assets from organic growth and the Bank of Santa Clarita acquisition. The $310 thousand increase in director and shareholder expenses was due primarily to the increase in directors' stock compensation expense resulting from a change in the directors compensation program approved in early 2022. The $1.0 million increase in other expense was primarily due to an increase in sundry losses of $235 thousand related to an increase in customer fraud activities, an increase in insurance expense of $140 thousand and an increase in travel expense of $101 thousand. Other expense also included a $347 thousand loss on an early extinguishment of debt acquired from CalWest Bancorp, for which there was no corresponding transaction in the prior year.

Efficiency ratio for the full year of 2022 was 70.0%, compared to 77.7% in 2021. Adjusted efficiency ratio was 62.9%, compared to 74.1% in 2021.

Income Tax

In the fourth quarter of 2022, the Company’s income tax expense was $3.1 million, compared with $2.5 million in the third quarter of 2022. The effective rate was 26.9% for the fourth quarter of 2022 and 26.6% for the third quarter of 2022. For the full year of 2022 the Company’s income tax expense was $5.9 million, compared with $3.5 million for the full year of 2021. The effective rate was 26.7% for 2022 and 24.5% for 2021. The increase in the effective tax rate for the full year of 2022 was primarily attributable to the impact of the vesting and exercise of equity awards combined with changes in the Company's stock price over time.

Balance Sheet

Assets

Total assets at December 31, 2022 were $2.28 billion, a decrease of $28.3 million or 1.2% from September 30, 2022, and an increase of $22.2 million or 1.0% from December 31, 2021. The decrease in total assets from the prior quarter was primarily related to a $70.4 million decrease in lower yielding cash and cash equivalents and $11.9 million decrease in securities available-for-sale, partially offset by an increase of $57.5 million in total loans.

The increase in total assets from December 31, 2021 was primarily related to a $402.1 million increase in total loans, a $57.0 million increase in securities available-for-sale, and a $53.9 million increase in securities held-to-maturity, partially offset by a $493.2 million decrease in cash and cash equivalents.

Loans

Total loans held for investment were $1.90 billion at December 31, 2022, compared to $1.84 billion and $1.50 billion at September 30, 2022, and December 31, 2021, respectively. In the fourth quarter of 2022, the Company's loans held for investment had net organic growth of $54.0 million or 2.9%, net of total loan principal payoffs of approximately $45.9 million. Total loans secured by real estate decreased by $17.9 million, construction and land development loans increased by $61.3 million and commercial and industrial loans increased by $10.5 million. The Company had $9.0 million in SBA 7A loans held for sale at December 31, 2022, compared with $5.5 million at September 30, 2022; most of these loans are expected to be sold in the secondary market in the first quarter of 2023.

For the full year of 2022, the Company’s loans held for investment had net organic growth of $393.0 million, or 26.1%, net of total loan principal payoffs of approximately $334.2 million. Total loans secured by real estate increased by $245.0 million, and construction and land development loans increased by $161.4 million. Total commercial and industrial loans decreased by $17.4 million, which included $55.2 million in PPP loans that received SBA forgiveness or pay downs.

Deposits

Total deposits at December 31, 2022 were $1.93 billion, a decrease of $88.2 million from September 30, 2022, and a decrease of $41.2 million from December 31, 2021. Noninterest-bearing demand deposits at December 31, 2022 were $923.9 million, or 47.8% of total deposits, compared to $993.2 million and $986.9 million, or 49.2% and 50.0% of total deposits at September 30, 2022 and December 31, 2021, respectively.

Asset Quality

Total non-performing assets decreased to $41 thousand, or 0.002% of total assets at December 31, 2022, compared with $48 thousand, or 0.002% of total assets at September 30, 2022, and $809 thousand or 0.04% of total assets at December 31, 2021. The decrease from December 31, 2021 was due primarily to $721 thousand in payoffs, note sale and charge-offs, partially offset by $9 thousand from one loan downgraded to nonaccrual during the year.

The Company had no loans over 90 days past due that were accruing interest at December 31, 2022. For the full year of 2022, the Company recorded net charge-offs of $8 thousand.

There were no loan delinquencies (30-89 days past due) at December 31, 2022, compared to $69 thousand and $1.0 million at September 30, 2022, and December 31, 2021, respectively.

The allowance for loan losses (“ALLL”) was $17.1 million at December 31, 2022, compared to $16.4 million and $11.7 million at September 30, 2022 and December 31, 2021, respectively. The ALLL to total loans was 0.90% at December 31, 2022, compared to 0.89% and 0.77% at September 30, 2022, and December 31, 2021, respectively. The ALLL to total loans, excluding PPP loans was 0.90%, 0.89% and 0.81% at December 31, 2022, September 30, 2022 and December 31, 2021, respectively. The net carrying value of acquired loans totaled $274.2 million and included a remaining net discount of $1.8 million at December 31, 2022.

Capital

Tangible book value per common share at December 31, 2022, was $12.32, compared with $11.75 and $11.73 at September 30, 2022 and December 31, 2021, respectively. Tangible book value was impacted in the third and fourth quarters of 2022 by other comprehensive losses related to unrealized losses, net of taxes, on securities available-for-sale, the balance of which was $6.4 million at December 31, 2022, $8.3 million at September 30, 2022, and $38 thousand at December 31, 2021.

The Bank’s leverage capital ratio and total risk-based capital ratio were 10.62% and 11.97%, respectively, at December 31, 2022.

ABOUT BANK OF SOUTHERN CALIFORNIA AND SOUTHERN CALIFORNIA BANCORP

Southern California Bancorp (OTC Pink: BCAL) is a registered bank holding company headquartered in San Diego, California. Bank of Southern California, N.A., a national banking association chartered under the laws of the United States and regulated by the Office of Comptroller of the Currency, is a wholly owned subsidiary of Southern California Bancorp. Established in 2001 and headquartered in San Diego, California, Bank of Southern California, N.A. offers a range of financial products and services to individuals, professionals, and small- to medium-sized businesses through its 13 branch offices serving San Diego, Orange, Los Angeles, and Ventura counties, as well as the Inland Empire. The Bank's solutions-driven, relationship-based approach to banking provides accessibility to decision makers and enhances value through strong partnerships with its clients. Additional information is available at www.banksocal.com.

Southern California Bancorp’s common stock is traded on the OTC Markets Group Inc. Pink Open Market under the symbol “BCAL.” For more information, please visit banksocal.com or call (844) BNK-SOCAL.

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 are not a substitute for GAAP measures and should be read in conjunction with the Company's GAAP financial information. A reconciliation of GAAP financial measures to non-GAAP financial measures is included in the accompanying financial tables.

FORWARD-LOOKING STATEMENTS

In addition to historical information, certain matters set forth herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to management’s beliefs, projections and assumptions concerning future results and events. Forward-looking statements include descriptions of management’s plans or objectives for future operations, products or services, and forecasts of Southern California Bancorp’s revenues, earnings, litigation expenses, or other measures of economic performance. As well, forward-looking statements may relate to future outlook and anticipated events. These forward-looking statements involve risks and uncertainties, based on the beliefs and assumptions of management and on the information available to management at the time that such forward-looking statements were made and can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words or phrases such as “aim,” “can,” "may," "could," "predict," "should," "will," "would," "believe," "anticipate," "estimate," "expect," “hope,” "intend," "plan," “potential," “project,” "will likely result," "continue," "seek," “shall,” “possible,” "projection," “optimistic,” and "outlook," and variations of these words and similar expressions or the negative version of those words or phrases.

Forward-looking statements involve substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control. Many factors could cause actual results to differ materially from those contemplated by these forward-looking statements. Except to the extent required by applicable law or regulation, Southern California Bancorp does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by law.

Southern California Bancorp and Subsidiary
Financial Highlights (Unaudited)
	At or for the Three Months Ended												At or for the Year Ended
	December 31, 2022				September 30, 2022				December 31, 2021				December 31, 2022				December 31, 2021
EARNINGS	($ in thousands except share and per share data)
Net interest income	$	25,269			$	23,786			$	20,333			$	87,786			$	64,411
Provision for loan losses	$	650			$	1,300			$	1200			$	5,450			$	1,200
Noninterest income	$	188			$	358			$	526			$	3,675			$	4,514
Noninterest expense	$	13,212			$	13,410			$	14,866			$	64,028			$	53,539
Income tax expense	$	3,121			$	2,505			$	1,418			$	5,870			$	3,477
Net income	$	8,474			$	6,929			$	3,375			$	16,113			$	10,709
Pre-tax pre-provision income (1)	$	12,245			$	10,734			$	5,993			$	27,433			$	15,386
Adjusted pre-tax pre-provision income (1)	$	12,237			$	9,651			$	6,962			$	33,910			$	17,836
Diluted earnings per share	$	0.46			$	0.38			$	0.19			$	0.88			$	0.72
Ending shares outstanding		17,940,283				17,863,525				17,707,737				17,940,283				17,707,737
PERFORMANCE RATIOS
Return on average assets		1.46	%			1.18	%			0.58	%			0.70	%			0.57	%
Adjusted return on average assets (1)		1.45	%			1.05	%			0.71	%			0.90	%			0.68	%
Return on average common equity		13.21	%			11.02	%			5.47	%			6.44	%			5.60	%
Adjusted return on average common equity (1)		13.20	%			9.80	%			6.66	%			8.28	%			6.64	%
Yield on total loans		5.47	%			5.09	%			5.49	%			5.02	%			4.88	%
Yield on interest earning assets		5.14	%			4.60	%			3.89	%			4.33	%			3.83	%
Cost of deposits		0.51	%			0.25	%			0.09	%			0.23	%			0.13	%
Cost of funds		0.56	%			0.31	%			0.15	%			0.29	%			0.20	%
Net interest margin		4.62	%			4.32	%			3.74	%			4.06	%			3.64	%
Efficiency ratio (1)		51.9	%			55.5	%			71.3	%			70.0	%			77.7	%
Adjusted efficiency ratio (1)		51.9	%			60.0	%			66.6	%			62.9	%			74.1	%
									As of
CAPITAL									December 31, 2022				September 30, 2022				December 31, 2021
									($ in thousands except share and per share data)
Tangible equity to tangible assets (1)										9.85	%			9.24	%			9.35	%
Book value (BV) per common share									$	14.51			$	13.96			$	13.92
Tangible BV per common share (1)									$	12.32			$	11.75			$	11.73
ASSET QUALITY
Allowance for loan losses (ALLL)									$	17,099			$	16,436			$	11,657
ALLL to total loans										0.90	%			0.89	%			0.77	%
ALLL to total loans (excl PPP)										0.90	%			0.89	%			0.81	%
Nonperforming loans									$	41			$	48			$	809
Other real estate owned									$	—			$	—			$	—
Nonperforming assets to total assets										—	%			—	%			0.04	%
END OF PERIOD BALANCES
Total loans, including loans held for sale									$	1,906,800			$	1,849,290			$	1,504,748
Total assets									$	2,282,049			$	2,310,329			$	2,259,866
Deposits									$	1,931,905			$	2,020,079			$	1,973,098
Loans to deposits										98.7	%			91.5	%			76.3	%
Shareholders' equity									$	260,356			$	249,432			$	246,528

(1) Non-GAAP measure. See – GAAP to Non-GAAP reconciliation.

Southern California Bancorp and Subsidiary
Balance Sheets (Unaudited)
	December 31, 2022				September 30, 2022				December 31, 2021
ASSETS	($ in thousands)
Cash and due from banks	$	60,295			$	29,167			$	22,435
Federal funds sold & interest-bearing balances		26,465				128,025				557,571
Total cash and cash equivalents		86,760				157,192				580,006
Securities available-for-sale, at fair value		112,580				124,524				55,567
Securities held-to-maturity, at cost		53,946				54,027				—
Loans held for sale		9,027				5,495				—
Loans held for investment:
Construction & land development		239,067				177,796				77,629
1-4 family residential		144,322				143,764				133,994
Multifamily		218,606				202,415				175,751
Other commercial real estate		958,676				993,344				766,824
Commercial & industrial		331,644				321,192				349,022
Other consumer		5,458				5,284				1,528
Total loans held for investment		1,897,773				1,843,795				1,504,748
Allowance for loan losses		(17,099	)			(16,436	)			(11,657	)
Total loans held for investment, net		1,880,674				1,827,359				1,493,091
Restricted stock at cost		14,543				14,516				12,493
Premises and equipment		14,334				14,506				19,639
Right of use asset		8,607				9,267				8,069
Goodwill		37,803				37,803				36,784
Core deposit intangible		1,584				1,724				2,022
Bank owned life insurance		37,972				37,751				37,849
Deferred taxes, net		10,699				11,993				5,069
Accrued interest and other assets		13,520				14,172				9,277
Total Assets	$	2,282,049			$	2,310,329			$	2,259,866
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand	$	923,899			$	993,232			$	986,935
Interest bearing NOW accounts		209,625				226,575				193,525
Money market and savings accounts		668,602				689,284				690,348
Time deposits		129,779				110,988				102,290
Total deposits		1,931,905				2,020,079				1,973,098
Borrowings		67,770				17,747				20,409
Operating lease liability		11,055				11,731				9,002
Accrued interest and other liabilities		10,963				11,340				10,829
Total liabilities		2,021,693				2,060,897				2,013,338
Total shareholders' equity		260,356				249,432				246,528
Total Liabilities and Shareholders' Equity	$	2,282,049			$	2,310,329			$	2,259,866

Southern California Bancorp and Subsidiary
Income Statements - Quarterly and Year-to-Date (Unaudited)
	Three Months Ended												Year Ended
	December 31, 2022				September 30, 2022				December 31, 2021				December 31, 2022				December 31, 2021
	($ in thousands except share and per share data)
INTEREST AND DIVIDEND INCOME
Interest and fees on loans	$	25,781			$	22,907			$	20,568			$	86,366			$	66,213
Interest on debt securities		1,135				1,119				139				3,385				455
Interest and dividends from other institutions		1,227				1,337				407				3,824				1,105
Total interest and dividend income		28,143				25,363				21,114				93,575				67,773
INTEREST EXPENSE
Interest on NOW, savings, and money market accounts		2,096				1,151				320				3,793				1,320
Interest on time deposits		463				155				133				797				734
Interest on borrowings		315				271				328				1,199				1,308
Total interest expense		2,874				1,577				781				5,789				3,362
Net interest income		25,269				23,786				20,333				87,786				64,411
Provision for loan losses		650				1,300				1,200				5,450				1,200
Net interest income after provision for loan losses		24,619				22,486				19,133				82,336				63,211
NONINTEREST INCOME
Service charges and fees on deposit accounts		456				468				500				1,796				1,601
Gain on sale of loans		293				240				—				1,349				920
Bank owned life insurance income		221				222				219				1,490				786
Servicing and related income on loans		53				45				9				192				116
(Loss) gain on sale of debt securities		(994	)			—				(9	)			(994	)			46
Loss on sale of building and related fixed assets		—				(768	)			—				(768	)			(4	)
(Loss) gain on branch sale		—				—				(291	)			—				726
Other charges and fees		159				151				98				610				323
Total noninterest income		188				358				526				3,675				4,514
NONINTEREST EXPENSE
Salaries and employee benefits		8,634				8,878				9,158				37,069				34,883
Occupancy and equipment expenses		1,458				1,610				1,350				6,210				5,522
Data processing		1,089				1,008				1,737				4,609				4,111
Legal, audit and professional		487				885				463				2,597				1,678
Regulatory assessments		345				445				433				1,550				990
Director and shareholder expenses		219				311				183				946				636
Merger and related (income) expenses		(8	)			117				969				1,177				2,450
Core deposit intangible amortization		141				99				100				438				364
Loss contingency (recovery) expense		—				(975	)			—				5,525				—
Other expense		847				1,032				473				3,907				2,905
Total noninterest expense		13,212				13,410				14,866				64,028				53,539
Income before income tax expense		11,595				9,434				4,793				21,983				14,186
Income tax expense		3,121				2,505				1,418				5,870				3,477
Net income	$	8,474			$	6,929			$	3,375			$	16,113			$	10,709
Net income per share - basic	$	0.47			$	0.39			$	0.19			$	0.90			$	0.74
Net income per share - diluted	$	0.46			$	0.38			$	0.19			$	0.88			$	0.72
Pre-tax, pre-provision income (1)	$	12,245			$	10,734			$	5,993			$	27,433			$	15,386
Adjusted pre-tax, pre-provision income (1)	$	12,237			$	9,651			$	6,962			$	33,910			$	17,836

(1) Non-GAAP measure. See – GAAP to Non-GAAP reconciliation.

Southern California Bancorp and Subsidiary
Average Balance Sheets and Yield Analysis
(Unaudited)
	Three Months Ended
	December 31, 2022									September 30, 2022									December 31, 2021
	Average Balance			Income/ Expense			Yield/ Cost			Average Balance			Income/ Expense			Yield/ Cost			Average Balance			Income/ Expense			Yield/ Cost
Assets	($ in thousands)
Interest-earning assets:
Total non-PPP loans	$	1,866,708		$	25,755		5.47	%		$	1,782,074		$	22,879		5.09	%		$	1,366,240		$	15,772		4.58	%
Total PPP loans		3,997			26		2.58	%			4,788			28		2.32	%			120,481			4,796		15.79	%
Total loans		1,870,705			25,781		5.47	%			1,786,862			22,907		5.09	%			1,486,721			20,568		5.49	%
Debt securities		175,371			1,135		2.57	%			183,636			1,119		2.42	%			43,192			139		1.28	%
Deposits in other financial institutions		40,781			347		3.38	%			96,504			528		2.17	%			594,957			211		0.14	%
Fed funds sold/resale agreements		68,437			637		3.69	%			103,515			598		2.29	%			17,573			6		0.14	%
Restricted stock investments and other bank stock		14,883			243		6.48	%			14,855			211		5.64	%			12,928			190		5.83	%
Total interest-earning assets		2,170,177			28,143		5.14	%			2,185,372			25,363		4.60	%			2,155,371			21,114		3.89	%
Total non-interest-earning assets		139,205									141,467									138,006
Total assets	$	2,309,382								$	2,326,839								$	2,293,377
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing NOW accounts	$	215,272		$	121		0.22	%		$	226,394		$	54		0.09	%		$	186,207		$	100		0.21	%
Money market and savings accounts		700,544			1,975		1.12	%			699,276			1,097		0.62	%			694,506			220		0.13	%
Time deposits		123,524			463		1.49	%			95,028			155		0.65	%			109,745			133		0.48	%
Total interest-bearing deposits		1,039,340			2,559		0.98	%			1,020,698			1,306		0.51	%			990,458			453		0.18	%
Borrowings:
FHLB advances		3,696			44		4.72	%			—			—		—	%			6,652			25		1.49	%
Subordinated debt		17,759			271		6.05	%			17,735			271		6.06	%			17,664			271		6.09	%
TruPS		—			—		—	%			—			—		—	%			2,730			32		4.65	%
Total borrowings		21,455			315		5.82	%			17,735			271		6.06	%			27,046			328		4.81	%
Total interest-bearing liabilities		1,060,795			2,874		1.07	%			1,038,433			1,577		0.60	%			1,017,504			781		0.30	%
Non-interest-bearing liabilities:
Noninterest-bearing deposits (1)		970,908									1,012,619									1,007,192
Other liabilities		23,199									26,287									23,886
Shareholders' equity		254,480									249,500									244,795
Total Liabilities and Shareholders' Equity	$	2,309,382								$	2,326,839								$	2,293,377
Net interest spread							4.07	%								4.00	%								3.58	%
Net interest income and margin				$	25,269		4.62	%					$	23,786		4.32	%					$	20,333		3.74	%
Net interest income and margin excluding PPP loans				$	25,243		4.62	%					$	23,758		4.32	%					$	15,537		3.03	%
Cost of deposits							0.51	%								0.25	%								0.09	%
Cost of funds							0.56	%								0.31	%								0.15	%

(1) Average noninterest-bearing deposits represent 48.30%, 49.80% and 50.42% of average total deposits for the three months ended December 31, 2022, September 30, 2022 and December 31, 2021.

Southern California Bancorp and Subsidiary
Average Balance Sheets and Yield Analysis
	Year Ended
	December 31, 2022									December 31, 2021
	Average Balance			Income/ Expense			Yield/Cost			Average Balance			Income/ Expense			Yield/Cost
Assets	($ in thousands)
Interest-earning assets:
Total non-PPP loans	$	1,707,487		$	84,711		4.96	%		$	1,029,702		$	48,523		4.71	%
Total PPP loans		13,073			1,655		12.66	%			326,064			17,690		5.43	%
Total loans		1,720,560			86,366		5.02	%			1,355,766			66,213		4.88	%
Debt securities		151,101			3,385		2.24	%			28,751			455		1.58	%
Deposits in other financial institutions		210,467			1,509		0.72	%			358,905			453		0.13	%
Fed funds sold/resale agreements		65,172			1,388		2.13	%			15,559			17		0.11	%
Restricted stock investments and other bank stock		14,668			927		6.32	%			11,186			635		5.68	%
Total interest-earning assets		2,161,968			93,575		4.33	%			1,770,167			67,773		3.83	%
Total non-interest-earning assets		139,450									97,436
Total assets	$	2,301,418								$	1,867,603
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Interest-bearing NOW accounts	$	211,075		$	312		0.15	%		$	135,765		$	207		0.15	%
Money market and savings accounts		690,830			3,481		0.50	%			589,384			1,113		0.19	%
Time deposits		100,746			797		0.79	%			105,101			734		0.70	%
Total interest-bearing deposits		1,002,651			4,590		0.46	%			830,250			2,054		0.25	%
Borrowings:
FHLB advances		932			43		4.61	%			5,170			25		0.48	%
Paycheck Protection Program Liquidity Facility		—			—		—	%			17,150			60		0.35	%
Subordinated debt		17,723			1,086		6.13	%			17,628			1,083		6.14	%
TruPS		1,239			70		5.65	%			2,718			140		5.15	%
Total borrowings		19,894			1,199		6.03	%			42,666			1,308		3.07	%
Total interest-bearing liabilities		1,022,545			5,789		0.57	%			872,916			3,362		0.39	%
Non-interest-bearing liabilities:
Noninterest-bearing deposits (1)		1,006,795									783,754
Other liabilities		22,024									19,788
Shareholders' equity		250,054									191,145
Total Liabilities and Shareholders' Equity	$	2,301,418								$	1,867,603
Net interest spread							3.76	%								3.44	%
Net interest income and margin				$	87,786		4.06	%					$	64,411		3.64	%
Net interest income and margin excluding PPP loans				$	86,131		4.01	%					$	46,721		3.24	%
Cost of deposits							0.23	%								0.13	%
Cost of funds							0.29	%								0.20	%

(1) Average noninterest-bearing deposits represent 50.10%, and 48.56% of average total deposits for the year ended December 31, 2022 and December 31, 2021.

Southern California Bancorp and Subsidiary
GAAP to Non-GAAP Reconciliation
(Unaudited)

The following tables present a reconciliation of non-GAAP financial measures to GAAP measures for: (1) adjusted net income, (2) efficiency ratio, (3) adjusted efficiency ratio, (4) pre-tax pre-provision income, (5) adjusted pre-tax pre-provision income, (6) average tangible common equity, (7) adjusted return on average assets, (8) adjusted return on average equity, (9) return on average tangible common equity, (10) adjusted return on average tangible common equity, (11) tangible common equity, (12) tangible assets, (13) tangible common equity to tangible asset ratio, and (14) tangible book value per share. 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.

		Three Months Ended												Year Ended
		December 31, 2022				September 30, 2022				December 31, 2021				December 31, 2022				December 31, 2021
		($ in thousands)
Adjusted net income
Net income		$	8,474			$	6,929			$	3,375			$	16,113			$	10,709
(Deduct)/add: After-tax merger and related (income) expenses			(6	)			82				734				846				1,987
(Deduct)/add: After-tax loss contingency (recovery) expenses			—				(845	)			—				3,734				—
Adjusted net income (non-GAAP)		$	8,468			$	6,166			$	4,109			$	20,693			$	12,696
Efficiency Ratio
Noninterest expense		$	13,212			$	13,410			$	14,866			$	64,028			$	53,539
Less: Merger and related expenses			(8	)			117				969				1,177				2,450
(Add)/deduct: Loss contingency (recovery) expenses			—				(1,200	)			—				5,300				—
Adjusted noninterest expense		$	13,220			$	14,493			$	13,897			$	57,551			$	51,089
Net interest income			25,269				23,786				20,333				87,786				64,411
Noninterest income			188				358				526				3,675				4,514
Total net interest income and noninterest income		$	25,457			$	24,144			$	20,859			$	91,461			$	68,925
Efficiency ratio (non-GAAP)			51.9	%			55.5	%			71.3	%			70.0	%			77.7	%
Adjusted efficiency ratio (non-GAAP)			51.9	%			60.0	%			66.6	%			62.9	%			74.1	%
Pre-tax pre-provision income
Net interest income		$	25,269			$	23,786			$	20,333			$	87,786			$	64,411
Noninterest income			188				358				526				3,675				4,514
Total net interest income and noninterest income			25,457				24,144				20,859				91,461				68,925
Less: Noninterest expense			13,212				13,410				14,866				64,028				53,539
Pre-tax pre-provision income (non-GAAP)		$	12,245			$	10,734			$	5,993			$	27,433			$	15,386
(Deduct)/add: Merger and related (income) expenses			(8	)			117				969				1,177				2,450
(Deduct)/add: Loss contingency (recovery) expenses			—				(1,200	)			—				5,300				—
Adjusted pre-tax pre-provision income (non-GAAP)		$	12,237			$	9,651			$	6,962			$	33,910			$	17,836
Return on Average Assets, Equity, and Tangible Equity
Net income		$	8,474			$	6,929			$	3,375			$	16,113			$	10,709
Adjusted net income (non-GAAP)		$	8,468			$	6,166			$	4,109			$	20,693			$	12,696
Average assets		$	2,309,382			$	2,326,839			$	2,293,377			$	2,301,418			$	1,867,603
Average shareholders' equity			254,480				249,500				244,795				250,054				191,145
Less: Average intangible assets			39,475				38,940				34,475				38,960				24,707
Average tangible common equity (non-GAAP)		$	215,005			$	210,560			$	210,320			$	211,094			$	166,438
Return on average assets			1.46	%			1.18	%			0.58	%			0.70	%			0.57	%
Adjusted return on average assets (non-GAAP)			1.45	%			1.05	%			0.71	%			0.90	%			0.68	%
Return on average equity			13.21	%			11.02	%			5.47	%			6.44	%			5.60	%
Adjusted return on average equity (non-GAAP)			13.20	%			9.80	%			6.66	%			8.28	%			6.64	%
Return on average tangible common equity (non-GAAP)			15.64	%			13.06	%			6.37	%			7.63	%			6.43	%
Adjusted return on average tangible common equity (non-GAAP)			15.63	%			11.62	%			7.75	%			9.80	%			7.63	%

		December 31, 2022				September 30, 2022				December 31, 2021
		($ in thousands except share and per share data)
Tangible Common Equity Ratio/Tangible Book Value Per Share
Shareholders' equity		$	260,356			$	249,432			$	246,528
Less: Intangible assets			39,387				39,527				38,806
Tangible common equity (non-GAAP)		$	220,969			$	209,905			$	207,722
Total assets		$	2,282,049			$	2,310,329			$	2,259,866
Less: Intangible assets			39,387				39,527				38,806
Tangible assets (non-GAAP)		$	2,242,662			$	2,270,802			$	2,221,060
Equity to asset ratio			11.41	%			10.80	%			10.91	%
Tangible common equity to tangible asset ratio (non-GAAP)			9.85	%			9.24	%			9.35	%
Book value per share		$	14.51			$	13.96			$	13.92
Tangible book value per share (non-GAAP)		$	12.32			$	11.75			$	11.73
Shares outstanding			17,940,283				17,863,525				17,707,737

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230125005288/en/

INVESTOR RELATIONS CONTACT

Kevin Mc Cabe

Bank of Southern California

kmccabe@banksocal.com

818.637.7065

Source: Southern California Bancorp

FAQ

What were Southern California Bancorp's Q4 2022 earnings results?

Southern California Bancorp reported Q4 2022 net income of $8.5 million, or $0.46 per diluted share.

How did Southern California Bancorp perform in 2022?

The company reported a full-year net income of $16.1 million, a 50.5% increase from 2021.

What was the net interest margin for Southern California Bancorp in Q4 2022?

The net interest margin for Q4 2022 was 4.62%, up from 4.32% in the previous quarter.

How much did total loans increase for Southern California Bancorp in Q4 2022?

Total loans increased by $57.5 million, or 3.11%, to $1.91 billion in Q4 2022.

What were the total deposits for Southern California Bancorp at the end of 2022?

Total deposits were $1.93 billion at the end of Q4 2022, down $88.2 million from the previous quarter.