Annual Report
2013.
ANY BANK CAN HAVE BRANCHES. OURS HAS ROOTS. Our deep, long-lasting client relationships have helped us become one of California’s fastest-growing business banks—boasting an enviable balance sheet, a growing loan portfolio, and very strong core deposit growth. Yet the true measure of our success isn’t the money our clients place with us, but the trust they have in us. Which is why we continue to expand our offerings. Enhance our technology. And attract and retain the industry’s most talented, and dedicated business banking specialists. We’re proud of all we’ve achieved. We’re prouder still of what we’ve helped others become: thriving, dynamic middle-market companies who embrace the future with confidence and optimism. We’re California Bank of Commerce.
01. California Bank of Commerce / Annual Report 2013
Dear fellow shareholders We are very pleased to report that we completed our most successful year in the history of California Bank of Commerce. We reported net income of $2.6 million for the full year 2013. Return on average common equity was 9.48% and return of average total assets was 0.72%. Specific financial accomplishments for 2013 include: • • • • • • • •
Net income after taxes improved by 45% over last year, to $2.6 million. Total loans increased by 15%, or $37 million, to $282 million. Net interest income increased by 14%, to $13 million. Non-interest bearing deposits increased by 26% to $105 million and represent 36% of our total deposits at December 31, 2013. Average 2013 net interest margin improved to 3.84% compared to 3.71% for 2012. Basic earnings per share improved by 56% to $0.89. Total risk-based capital ratio remains strong at 12.71%. We’ve enjoyed nineteen consecutive quarters of profitability.
Loan Portfolio
Total Assets
(Dollars Millions)
(Dollars Millions)
$350
$350
$240
$250
6%
$200 $150
$194
50%
Other Loans
$299
$300
C&I
$365
$400
%00
$100 $50
2013
$
2009
2010
2011
2012
2013
Total Loans & Deposits (Dollars Millions)
CRE
44%
$300
$281 $244
$250
$294 $283
$246 $184
$200
$208
$153
$150 $100
$174 $143
$50 $
2009
2010
2011 LOANS
2012
2013
DEPOSITS
03. California Bank of Commerce / Annual Report 2013
A brief history for our newest shareholders and clients: California Bank of Commerce (CABC) commenced operations in Lafayette, California in July 2007. The Board of Directors and Executive Management team raised $27.5 million to launch the new bank in a matter of several weeks. Several months later was the beginning of what is now known as the “Great Recession.” By virtue of this time in history, the Bank would either succumb to the great pressure of a tormented economy, or it would defeat those economic challenges and thrive. Today, California Bank of Commerce is thriving as a premier business bank in Northern California. Currently, the national economy is trying to heal and the Bay Area economy is getting stronger. The dynamic banking industry, however, continues to transform through changing regulatory conditions, non-bank competitors, and industry consolidation. While many banks are having difficulty navigating these waters, we are doing just fine. While many banks are having difficulty growing assets and earnings, we continue to outpace our peers. While many banks are having difficulty retaining and recruiting top banking talent, we continue attracting the best bankers. Our disciplined business strategy remains unchanged for 2014: • • • •
Provide customized business banking services to select middle-market companies located throughout the Greater Bay Area. Retain, recruit and develop the most experienced commercial bankers. Use technology to create efficiencies for both our clients and our bank. Safeguard our shareholder’s capital with strong risk management practices and earnings.
Our single branch location in Lafayette is enhanced with a loan production office in San Jose where our asset-based lending team is located. We have proven that we can provide high-quality customized business banking solutions over a wide geography by leveraging technology. Our focused approach to banking is grounded in taking the time to know our clients. We stick with what we know best–relationship business banking. The banking industry is undergoing a transformation. We believe that industry consolidation driven by the larger banks will provide continued disruption in our markets and opportunity for us to accelerate our growth. As the number of banks in California continues to shrink, we believe our brand of banking is relevant and proven. We are one of the fastest-growing business banks in California. On behalf of the entire Board of Directors, we thank our dedicated staff for their good work, our clients for their continuing trust and our shareholders for their ongoing support. The best is yet to come. We continue taking great pride by being…defined by the company we keep. Best regards,
TP
Pres/CEO
SC Chairman
05. California Bank of Commerce / Annual Report 2013
Professional Services From attorneys and accountants, to real estate brokerage firms and insurance companies, Northern California’s leading professional services firms count on California Bank of Commerce. We partner with both large, regional firms and smaller boutiques—crafting treasury services and general banking solutions tailored to every client’s needs and goals. For example, some firms often carry large deposit balances to fund working capital needs, while others have longer-term liquidity needs. Either way, we’ll develop a deposit strategy to complement their overall business objectives.
Our team takes the time to get to know each firm from every angle. Likewise, many professional service firms also have seasonal cash flow challenges. So we’ll put together a customized credit structure to help them thrive during leaner times. The point is, no two firms are alike. Which is why our team takes the time to get to know each firm from every angle…resulting in nimble, creative and timely solutions.
INDUSTRY HIGHLIGHTS 2013 | Pleasant Hill: Provided long-term acquisition financing for a regional CPA firm to allow for expansion and diversification of their accounting practice. San Ramon: Provided cash management, international wire and foreign currency transactions for a large independently-owned CPA firm—with multi-state locations and global affiliations.
07. California Bank of Commerce / Annual Report 2013
Contractors and Construction Few industries are more challenging than construction. The economy, bad weather, funding issues: all can derail even the best laid plans. And yet, since the founding of California Bank of Commerce, in good times and bad, we have continually provided our contractor clients with the customized credit facilities they need to compete in their ever-changing market. Because of our deep knowledge of the contractor business model and our clients’ financial needs, we are in a unique position to work closely with our clients’ business partners – sureties and accountants – to create customized credit solutions that fit the needs of all parties. We understand the cyclicality of the construction industry. We are patient and loyal to our clients, even at the bottom of the construction cycle.
Recognized as the premier contractor’s bank in Northern California. In addition to providing capital and equipment financing, California Bank of Commerce provides top-of-market contract escrow retention accounts, as well as many owner/user real estate financing options. It’s little wonder then that California Bank of Commerce is recognized as the premier contractor’s bank in Northern California—with more than 50 relationships with general contractors, subcontractors, and construction firms throughout the region.
INDUSTRY HIGHLIGHTS 2013 | San Francisco/Oakland: Provided larger and longer-term credit facilities for a number of construction companies that worked on the new eastern span of the San Francisco-Oakland Bay Bridge. Alameda: Utilizing the SBA 504 program, including a construction phase, assisted a local marine contractor build and finance a multi-million dollar crane barge – when other banks were unable to produce a flexible and affordable financing structure. San Francisco: Proudly provided financing to a rapidly-growing Disabled Veteran Business Enterprise general contractor—giving an opportunity to one who’d given so much to his country.
09. California Bank of Commerce / Annual Report 2013
Food and Beverage Northern California is famous as a “foodie’s paradise”, thanks largely to the region’s many leading food and beverage companies. At California Bank of Commerce, we’re proud to support these companies in this competitive and often challenging environment—providing them with comprehensive, customized financial services. From new product development and launch to ongoing facility modernization, we’re with our F&B clients at every step…with strategies and solutions to help maximize margins, secure distribution and placement, and support seasonal fluctuations in working capital. Our industry specialists are adept at financing new and ongoing costs associated with ever-changing food safety and handling mandates. They’re also experts in helping acquire land and buildings, and financing growing accounts receivables and inventory.
We help keep our clients at the forefront of innovation. But what makes our people true partners are their deep and personal connections with industry leaders and resources. We provide our clients with direct access to a vast network of co-packers, food brokers, suppliers and clients. And, we help keep them at the forefront of innovation by introducing them to experts in lean manufacturing, food safety/ISO certification, and product formulation/re-formulation. It’s all the ingredients that go into making success.
INDUSTRY HIGHLIGHTS 2013 | East Bay: Assisted a rapidly-expanding condiments company by establishing an asset-based, working capital financing arrangement that scaled with growth in the company’s accounts receivable and inventories. South Bay: Helped a commercial bakery restructure existing financing to include increasing levels of working capital and term financing. North Bay: Solved a snack food company’s sourcing issue through an introduction to a co-packer known to the Bank. San Francisco: Provided a multi-unit restaurant company with an array of cash management services plus working capital financing.
11. California Bank of Commerce / Annual Report 2013
Practice Acquisition Financing Just as personal relationships are critical to providing successful dental care, they’re also the foundation of business success. That’s why California Bank of Commerce has a dedicated team that provides dental specialists with expert guidance through all phases of their career cycle—from practice acquisition through retirement. At every step we deliver a wide range of personalized solutions, including acquisition loans, equipment financing, lines of credit, commercial real estate financing, and cash management services. But what our clients find most valuable is our proven experience and unique understanding of the dental practice: both the challenges and the opportunities.
At every step we deliver a wide range of personalized solutions. Our strong relationships throughout the dental community give us unmatched access to information and resources. Tools we then use to craft effective strategies for those looking to acquire an existing practice, expand their operations, or relocate to other areas. We see things other banks can’t, because we know people other banks don’t.
INDUSTRY HIGHLIGHTS 2013 | Berkeley: Funded an $800M commercial term loan to help a dental practice acquire 50% of a thriving periodontics & dental implants practice. San Francisco: Granted a $1.3M term loan to a noted Bay Area oral and maxillofacial surgeon for the purchase of two additional dental offices. Palo Alto: Granted a $650M commercial term loan to help partner acquire remaining 50% of practice—as well as equipment purchases and working capital. Modesto: Provided $750M commercial real estate loan to help leading local dentist purchase and convert 2,686 s.f. office/condo into owner-occupied dental offices.
13. California Bank of Commerce / Annual Report 2013
STATEMENTS OF INCOME
The accompanying notes are an integral part of these financial statements.
For the Years Ended December 31, 2013 and 2012 Interest Income: Interest and fees on loans Interest on investment securities Interest on interest-bearing deposits in banks Total interest income
2013 2012 $ 13,674,501 $ 12,386,016 648,611 553,138 96,895 108,624 14,420,007 3,047,778
Interest Expense: Interest on deposits (Note 7) Interest on borrowings (Note 9) Total interest expense Net interest income before provision for loan losses
932,200 1,167,674 452,092 443,911 1,384,292 1,611,585 13,035,715 11,436,193
Provision for Loan Losses (Note 5): Net interest income after provision for loan losses
Non‑interest Income: Service charges and fees Net gains on sales of loans Net gains on sales of investment securities (Note 3) Earnings on BOLI Other Total non-interest income
263,370 1,249,688 12,772,345 10,186,505 1,139,226 794,694 78,349 362,161 18,086 286,314 150,141 252,472 83,261 44,519 1,469,063 1,740,160
Non-interest Expenses: Salaries and employee benefits (Notes 4 and 14) Occupancy and equipment (Notes 6 and 10) Other (Note 15) Total non-interest expenses Income before provision for income taxes
6,512,034 5,930,106 830,736 708,068 2,576,784 2,168,671 9,919,554 8,806,845 4,321,854 3,119,820
Provision for Income Taxes (Note 8) Net Income
1,765,491 1,354,264 2,556,363 1,765,556
Preferred Stock Dividend Income to common shareholders
(110,000) $ 2,446,363
Earnings per common share: Basic $ Diluted $
0.89 $ 0.85 $
Weighted average number of shares outstanding – basic
2,760,432
Weighted average number of shares outstanding – diluted
2,873,483
14. California Bank of Commerce / Annual Report 2013
(201,667) $ 1,563,889 0.57 0.57
2,750,217 2,750,252
Balance sheets December 31, 2013 and 2012
Assets: 2013 2012 Cash and due from banks $ 6,785,137 $ 5,776,321 Interest-bearing deposits in banks 17,477,455 38,374,829 Total cash and cash equivalents 24,262,592 44,151,150 Investment securities (Note 3) Available-for-sale, at estimated fair value Held-to-maturity, at amortized cost (estimated fair value of $3,821,629 at December 31, 2012) Loans, less allowance for loan losses of $5,250,000 in 2013 and $4,675,000 in 2012 (Notes 4, 5, 9 and 10) Premises and equipment, net (Note 6) Bank-owned life insurance (BOLI) Deferred income taxes, net Accrued interest receivable and other assets Total assets Liabilities and shareholders’ equity Deposit: Non-interest bearing Interest bearing (Note 7) Total deposits
46,276,551
46,718,089
-
3,810,895
277,578,994 241,971 9,541,866 2,772,295 3,844,838 $ 364,519,107
241,473,981 195,679 7,391,725 2,019,607 3,835,463 $ 349,596,589
$ 104,642,228 189,498,459 294,140,687
$ 83,181,730 198,300,033 281,481,763
Other borrowings (Note 9) 29,000,000 Accrued interest payable and other liabilities (Note 14) 2,497,446 Total liabilities 325,638,133 Commitments and contingencies (Note 10) Shareholders’ equity (Notes 11 and 12): Preferred Stock – no par value: 10,000,000 shares authorized Series C, noncumulative, $1,000 per share liquidation value, 11,000 shares issued and outstanding at December 31, 2013 and 2012 (Note 16) 10,949,443
29,000,000 2,418,446 312,900,209
10,949,443
Common stock no par value; 40,000,000 shares authorized; 2,768,893 issued and outstanding in 2013 and 2,757,243 in 2012 30,737,603
30,342,414
Accumulated deficit (2,571,451) Accumulated other comprehensive income, net of taxes (Note 3) (234,621)
(5,017,814) 422,337
Total shareholders’ equity Total liabilities and shareholders’ equity
The accompanying notes are an integral part of these financial statements.
38,880,974
36,696,380
$ 364,519,107
$ 349,596,589
15. California Bank of Commerce / Annual Report 2013
What makes a California Bank of Commerce Relationship Manager? Tenacity. Ability. And a deep, abiding interest in their clients’ success. You see, our bankers are business owners too – each with a stake in CBC. So they know the opportunities and excitement a business owner experiences every day. But perhaps more importantly, they know the challenges business owners face. Which gives the ability to craft strategies to help you meet yours—whether it’s providing financing to expand or introducing you to potential partners, contacts and customers. Clearly, our Relationship Managers do more than provide business banking. They build personal connections based on their experience, knowledge, and ability to turn financial complexity into actionable advice. And because they already have extensive industry insight, they spend their time getting to know you and your business. They’ll immerse themselves in your goals, your plans, your vision of the future. Then they’ll quickly create personalized solutions that are simple and straightforward. And since they’re empowered to make decisions, they’ll turn those solutions into results. Now, and for years to come. Because when you’ve got a CBC Relationship Manager on your side, you’ve got a banker for life.
16. California Bank of Commerce / Annual Report 2013
Board of Directors •
Stephen A. Cortese Chairman of the Board, California Bank of Commerce Managing Partner, Cortese Investment Company
•
•
•
Kevin J. Cullen
•
Donald J. Kintzer
•
Stephen R. Dathe
Thomas R. Morehouse Retired President, Filesafe Inc.
•
John H. Sears Retired, Special Counsel Sheppard, Mullin, Richter & Hampton
Principal Consultant, Korora Partners •
Rochelle G. Klein Advisory Director, Ocean Gate Capital Management
Chief Financial Officer, Olson & Co. Steel
Andrew J. Armanino Managing Partner, Armanino LLP
Edward B. Collins Partner and Managing Director, ChinaVest
Terry A. Peterson President and CEO, California Bank of Commerce
•
•
•
Edmond E. Traille
Vice President and General Manager
Founding Partner & CEO,
A & B Die Casting Company
GALLINA LLP
Executive Officers •
Terry A. Peterson
•
•
Thomas M. Park Executive Vice President
•
Randall D. Greenfield
•
John E. Lindstedt
Stephen P. Tessler
•
Executive Vice President, Chief Credit Officer
Steven E. Shelton Executive Vice President
•
•
Executive Vice President, Chief Financial Officer
President and Chief Executive Officer
•
Virginia M. Robbins Executive Vice President, Chief Operating Officer
Executive Vice President, Director of Sales
•
•
Relationship Managers •
Colleen Atkinson
•
Senior Vice President, Relationship Manager catkinson@bankcbc.com •
Terry Guillory
•
Senior Vice President, Relationship Manager tguillory@bankcbc.com •
Tony Mesones Senior Vice President, Relationship Manager tmesones@bankcbc.com
Cindy Peters
•
Senior Vice President, Treasury Management cpeters@bankcbc.com
Ray Strzelecki
Jamie Smith Senior Vice President, Relationship Manager jsmith@bankcbc.com
James Christiansen
Executive Vice President CBC Business Credit
Tom Dorrance
Senior Vice President, Chief Information Officer
Vivian Z. Mui
Senior Vice President, Senior Credit Officer
Michele Wirfel Senior Vice President, Relationship Manager mwirfel@bankcbc.com
•
Senior Vice President, Relationship Manager rstrzelecki@bankcbc.com •
Mark A. DeVincenzi
Executive Vice President, CMO & Investor Relations
Franklin Haggas Vice President, Relationship Manager fhaggas@bankcbc.com
•
Timothy Healer Vice President, Relationship Manager thealer@bankcbc.com
californiabankofcommerce.com
California Bank of Commerce 3595 Mt. Diablo Boulevard, Lafayette, CA 94549 925.283.2265
Member
FDIC