Rick Sowers, President and CEO of the Company and the Bank stated, “We experienced continued strong loan and deposit growth in the second quarter fueled by continued expansion of Relationships and the acquisition of new Clients. Growth came from all geographies of the bank and business lines. We also saw continued traction for our Legal Services and Cross Border verticals as well. The Team continues to bring discipline to our lending which has yielded expanded loan rates and solid Net Interest Income growth.”

_{⁽¹⁾ A reconciliation of net income to adjusted net income and diluted earnings per share to adjusted earnings per share is provided on page 13}

Sowers added, “We were very pleased to be recognized in the American Banker as one of the top performing banks in the country in our asset class. This recognition reinforces that through an outstanding, hard working and dedicated Team, you create satisfied Clients and Shareholders.”

“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 second quarter of 2024 totaled $24.7 million, an increase of $1.9 million or 8.4% from the prior quarter and an increase of $2.0 million or 8.6% from the second quarter of 2023. The increase from the prior quarter was driven primarily by 4.4% growth in interest-earning assets and a 24 basis point increase in asset yields as interest income increased by $2.9 million. Interest income in the second quarter of 2024 included $0.6 million from nonaccrual interest on a loan that was paid off during the quarter, contributing 11 basis points to asset yields. Partially offsetting this was an increase of $1.0 million in interest expense, which resulted from a 7.5% increase in average interest bearing-liabilities and a 1 basis point increase in the cost of interest-bearing liabilities.

Net Interest Margin

Net interest margin for the second quarter of 2024 was 4.48%, compared to 4.31% for the prior quarter and 4.73% in the second quarter of 2023. The 17 basis point increase in net interest margin from the prior quarter was primarily due to higher yields on loans, which included 11 basis points from nonaccrual interest on a loan that was paid off during the quarter, partially offset by a higher cost on total deposits. The yield on earning assets was 7.02% for the second quarter of 2024 compared to 6.78% for the prior quarter, and the cost of interest-bearing liabilities was 3.78% for the second quarter of 2024 compared to 3.77% in the prior quarter. The cost of total deposits was 2.67% for the second quarter of 2024 compared to 2.61% in the prior quarter. The cost of core deposits, which excludes brokered deposits, was 2.28% in the second quarter of 2024 compared to 2.14% in the prior quarter. The spot rate for total deposits was 2.61% as of June 30, 2024, compared to 2.66% at March 31, 2024.

Provision for Credit Losses

Provision expense for credit losses for the second quarter of 2024 was $2.1 million, compared to $0.2 million in the prior quarter and a net reversal of $7.1 million for the second quarter of 2023. The increase from the prior quarter was primarily due to the $72.7 million increase in loans HFI and higher reserve rates on commercial real estate loans due to CECL model updates. For more details, please refer to the “Asset Quality” section below.

Noninterest Income

Noninterest income was $1.5 million for the second quarter of 2024, compared to $1.4 million in the prior quarter and $1.1 million in the second quarter of 2023. SBA loan sales for the second quarter of 2024 were $8.0 million with a 12.16% average trade premium resulting in a net gain on sale of $661 thousand, compared with $8.9 million with a 10.84% average trade premium resulting in a net gain on sale of $681 thousand in the prior quarter. Management expects continued softness in the market for SBA 7a loans.

Noninterest Expense

Noninterest expense was $13.0 million for the second quarter of 2024, compared to $12.8 million in the prior quarter and $8.8 million in the second quarter of 2023. The efficiency ratio was 49.46% for the second quarter of 2024 compared to 52.84% in the prior quarter and 37.04% in the second quarter of 2023. The decrease in the efficiency ratio from the prior quarter was primarily due to the increase in net interest income described above, while the increase in noninterest expense was relatively modest.

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 second quarter of 2024, compared to $3.3 million for the prior quarter. The effective tax rate for the second quarter of 2024 was 29.5%, compared to 29.5% in the prior quarter and 29.7% in the second quarter of 2023.

STATEMENT OF FINANCIAL CONDITION

As of June 30, 2024, total assets were $2.29 billion, an increase of $97.9 million since March 31, 2024. The increase in assets from the prior quarter was primarily due to higher loans receivable, cash balances and investment securities. Total cash and due from banks was $158.4 million as of June 30, 2024, an increase of $16.9 million or 11.9%, since March 31, 2024, primarily due to funds that were deposited at the end of the quarter and deployed in the following month. Loans HFI totaled $1.98 billion as of June 30, 2024, an increase of $72.7 million or 3.8% since March 31, 2024.  Investment securities available-for-sale (“AFS”) were $121.7 million as of June 30, 2024, an increase of $7.7 million or 6.7% since March 31, 2024, as a result of new securities purchased. As of June 30, 2024, the net unrealized loss on the AFS investment securities portfolio, which is comprised mostly of US Treasury and Government Agency debt, was $13.0 million (pre-tax) compared to a loss of $12.4 million (pre-tax) as of March 31, 2024. The average duration of the Bank’s AFS portfolio is 3.7 years. The Company has no held-to-maturity securities.

Total deposits were $2.00 billion as of June 30, 2024, an increase of $97.1 million since March 31, 2024. During the quarter, core deposits increased by $136.6 million, which was driven by a $95.9 million increase in interest-bearing core deposits (including balances in the Intrafi ICS and CDARS programs) and a $40.8 million increase in noninterest-bearing core deposits. Deposit mix has continued to shift while short-term interest rates remain higher. Noninterest-bearing deposits represent 32.0% of total core deposits. Uninsured deposits, net of collateralized and fiduciary deposit accounts, represent 47.9% of total deposits as of June 30, 2024.

As of June 30, 2024, total available liquidity was $1.7 billion or 181.5% of uninsured deposits, net of collateralized and fiduciary deposit accounts. Total available liquidity is comprised of $271 million of on-balance sheet liquidity (cash and investment securities) and $1.5 billion of unused borrowing capacity.

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

As of June 30, 2024, the allowance for loan losses was $26.6 million or 1.34% of loans HFI, compared to $24.7 million or 1.29% as of March 31, 2024. The increase in the coverage ratio from March 31, 2024 primarily reflects updates to the third-party national dataset of historical loss rates used in the commercial real estate lifetime loss rate model. The Company continues to have strong credit metrics and its nonperforming assets are 0.11% of total assets as of June 30, 2024 compared to 0.21% as of March 31, 2024. The reserve for unfunded commitments was $1.9 million as of June 30, 2024, compared to $1.7 million as of March 31, 2024. Given the credit quality of the loan portfolio, management believes we are sufficiently reserved.

At June 30, 2024 and March 31, 2024, there are no doubtful credits and classified assets were $10.1 million and $10.8 million, respectively. Total classified assets consisted of eight loans as of June 30, 2024, which included seven loans totaling $7.6 million secured by real estate with a weighted average LTV of 43.4%. The remaining loan was a $2.5 million nonaccrual commercial and industrial loan with a specific reserve of $1.5 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⁾   June 30, 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.

PRIVATE BANCORP OF AMERICA, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in thousands)

PRIVATE BANCORP OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)

PRIVATE BANCORP OF AMERICA, INC.
Consolidated average balance sheet, interest, yield and rates
(Unaudited)
(Dollars in thousands)

PRIVATE BANCORP OF AMERICA, INC.
Consolidated average balance sheet, interest, yield and rates
(Unaudited)
(Dollars in thousands)

PRIVATE BANCORP OF AMERICA, INC.
Condensed Balance Sheets
(Unaudited)
(Dollars in thousands, except per share amounts)

^{_{(1) Non-GAAP measure. See GAAP to non-GAAP Reconciliation table.}}

PRIVATE BANCORP OF AMERICA, INC.
Condensed Statements of Income
(Unaudited)
(Dollars in thousands, except per share amounts)

^{_{(1) Non-GAAP measure. See GAAP to non-GAAP Reconciliation table.}}

PRIVATE BANCORP OF AMERICA, INC.
(Unaudited)

PRIVATE BANCORP OF AMERICA, INC.
(Unaudited)

PRIVATE BANCORP OF AMERICA, INC.
(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.

^{_{(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.}}

PRIVATE BANCORP OF AMERICA, INC.
(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.

^{_{(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.}}

PRIVATE BANCORP OF AMERICA, INC.
(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.

^{_{(1) A reconciliation of net income to adjusted net income is provided on page 13.}}

PRIVATE BANCORP OF AMERICA, INC.
(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.

_{^{(1) A reconciliation of net income to adjusted net income is provided on page 14.}}