Sowers added, “We view this as an opportunistic market. We continue to hire great bankers who share our culture and passion for Client service. Disruption in our markets continues to provide opportunities for us to grow and we fully intend to take advantage of those. To support that growth, we continue to forge ahead with infrastructure and technology investments to support our business and private banking clients, both now and into the future.”

“The Company continues to exhibit successful customer acquisition activity despite a challenging interest rate environment. Additionally, the Company is investing in people and infrastructure, including strong risk management, product strategy and innovation 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 first quarter of 2024 totaled $22.8 million, an increase of $0.6 million or 2.6% from the prior quarter and an increase of $0.6 million or 2.7% from the first quarter of 2023. The increase from the prior quarter was driven primarily by 4.4% growth in interest-earning assets and a 14 basis point increase in asset yields as interest income increased by $1.7 million. Partially offsetting this was an increase of $1.1 million in interest expense, which resulted from a 8.2% increase in average interest bearing-liabilities and a 9 basis point increase in the cost of interest-bearing liabilities.

Net Interest Margin

Net interest margin for the first quarter of 2024 was 4.31%, compared to 4.33% for the prior quarter and 4.90% in the first quarter of 2023. The 2 basis point decrease in net interest margin from the prior quarter was due primarily to higher rates paid on deposits, partially offset by higher rates on new loan originations and variable rate loans and investment securities. The yield on earning assets was 6.78% for the first quarter of 2024 compared to 6.64% for the prior quarter, and the cost of interest-bearing liabilities was 3.77% for the first quarter of 2024 compared to 3.68% in the prior quarter. The cost of total deposits was 2.61% for the first quarter of 2024 compared to 2.41% in the prior quarter. The cost of core deposits, which excludes brokered deposits, was 2.14% in the first quarter of 2024 compared to 1.93% in the prior quarter. The spot rate for total deposits was 2.66% as of March 31, 2024, compared to 2.49% at December 31, 2023.

Provision for Credit Losses

Provision expense for credit losses for the first quarter of 2024 was $0.2 million, compared to $0.5 million in the prior quarter and $0.1 million for the first quarter of 2023. For more details, please refer to the “Asset Quality” section below.

Noninterest Income

Noninterest income was $1.4 million for the first quarter of 2024, compared to $1.2 million in the prior quarter and $1.5 million in the first quarter of 2023. SBA loan sales for the first quarter of 2024 were $8.9 million with a 10.84% average trade premium resulting in a net gain on sale of $681 thousand, compared with $6.7 million with a 9.62% average trade premium resulting in a net gain on sale of $436 thousand in the prior quarter. Management expects continued softness in the market for SBA 7a loans.

Noninterest Expense

Noninterest expense was $12.8 million for the first quarter of 2024, compared to $11.8 million in the prior quarter and $11.6 million in the first quarter of 2023. Compensation and employee benefits expense increased $919 thousand compared to the prior quarter driven by seasonal increases to benefit expenses and employer taxes, annual merit increases and adjustments to share-based compensation. The efficiency ratio was 52.84% for the first quarter of 2024 compared to 50.22% in the prior quarter and 48.90% in the first quarter of 2023. The increase in the efficiency ratio from the prior quarter was due primarily to the aforementioned increases in compensation and employee benefits expense.

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 $3.3 million for the first quarter of 2024, compared to $3.3 million for the prior quarter. The effective tax rate for the first quarter of 2024 was 29.5%, compared to 29.9% in the prior quarter and 25.2% in the first quarter of 2023.

STATEMENT OF FINANCIAL CONDITION

As of March 31, 2024, total assets were $2.19 billion, an increase of $35.3 million since December 31, 2023. The increase in assets from the prior quarter was primarily due to higher loans receivable and investment securities, partially offset by the decrease in cash balances. Total cash and due from banks was $141.5 million as of March 31, 2024, a decrease of $36.6 million or 20.5%, since December 31, 2023, primarily due to the use of funds that were deposited at the end of the prior quarter. Loans HFI totaled $1.91 billion as of March 31, 2024, an increase of $59.8 million or 3.2% since December 31, 2023. Investment securities available for sale (“AFS”) were $114.1 million as of March 31, 2024, an increase of $11.6 million or 11.3% since December 31, 2023 as a result of new securities purchased. As of March 31, 2024, the net unrealized loss on the AFS investment securities portfolio, which is comprised mostly of US Treasury and Government Agency debt, was $12.4 million (pre-tax) compared to a loss of $12.1 million (pre-tax) as of December 31, 2023. The average duration of the Bank’s AFS portfolio is 3.6 years. The Company has no held-to-maturity securities.

Total deposits were $1.90 billion as of March 31, 2024, an increase of $29.3 million since December 31, 2023. During the quarter, core deposits increased by $22.1 million, which was driven by a $78.5 million increase in interest-bearing core deposits (including balances in the Intrafi ICS and CDARS programs), partially offset by a $56.5 million decrease in noninterest-bearing core deposits. Deposit mix has continued to shift while short-term interest rates remain higher. Noninterest-bearing deposits represent 32.1% of total core deposits. Uninsured deposits, net of collateralized and fiduciary deposit accounts, represent 46.3% of total deposits as of March 31, 2024.

As of March 31, 2024, total available liquidity was $1.6 billion or 181% of uninsured deposits, net of collateralized and fiduciary deposit accounts. Total available liquidity is comprised of $247 million of on-balance sheet liquidity (cash and investment securities) and $1.4 billion of unused borrowing capacity.

Asset Quality and Allowance for Credit Losses ("ACL")

As of March 31, 2024, the allowance for loan losses was $24.7 million or 1.29% of loans HFI, compared to $24.5 million or 1.33% as of December 31, 2023. The decrease in the coverage ratio from December 31, 2023 primarily reflects improvements in the economic forecasts used for estimating credit losses. The Company continues to have strong credit metrics and its nonperforming assets are 0.21% of total assets as of March 31, 2024. The reserve for unfunded commitments was $1.7 million as of March 31, 2024, compared to $1.7 million as of December 31, 2023. Given the credit quality of the loan portfolio, management believes we are sufficiently reserved.

At March 31, 2024 and December 31, 2023, there are no doubtful credits and classified assets were $10.8 million and $11.0 million, respectively. Total classified assets consisted of nine loans as of March 31, 2024, which included six loans totaling $6.9 million secured by real estate with a weighted average LTV of 43.3%. The remaining three loans were commercial and industrial loans, the first of which was an SBA loan with a balance of $1.0 million, which is 90% guaranteed by the SBA, the second had a balance of $0.3 million and was secured by a UCC-1 lien and the third was a $2.5 million nonaccrual loan with a specific reserve of $1.75 million.

Capital Ratios ⁽²⁾

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

(2) March 31, 2024 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.

(1) Non-GAAP measure. See GAAP to non-GAAP Reconciliation table.

(1) Non-GAAP measure. See GAAP to non-GAAP Reconciliation table.

(1) Includes $974 thousand related to the impact of CECL adoption on January 1, 2023.

(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 $0.9 million of legal costs by the participant bank. In addition, $0.7 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.

(1) A reconciliation of net income to adjusted net income is provided on page 12.