Private Bancorp of America, Inc. Announces Strong Net Income and Earnings Per Share for Second Quarter 2023


Second Quarter 2023 Highlights

  • Net income for the second quarter of 2023 of $15.5 million, up 73% from the prior quarter and 253% from the second quarter of 2022
  • Net diluted earnings per share for the second quarter of 2023 of $2.69, up 71% from the prior quarter and 249% from the second quarter of 2022
  • Excluding the impact of the two loan recoveries and settlement of related legal fees described below, net income for the second quarter of 2023 was $8.3 million or $1.43 per diluted share (see non-GAAP reconciliation in the accompanying financial tables of this press release)
  • Loans held-for-investment (“HFI”) totaled $1.7 billion as of June 30, 2023, an increase of $95 million or 5.8% from March 31, 2023 and $129 million or 8.2% from December 31, 2022
  • The provision for loan losses for the second quarter of 2023 was a net reversal of $7.1 million, compared to a charge of $73 thousand for the prior quarter and a charge of $659 thousand for the second quarter of 2022. The net reversal in the second quarter of 2023 includes a recovery of $7.7 million for the settlement of a lawsuit against ANI Development, LLC/Gina Champion-Cain and Chicago Title (parent company, Fidelity National Financial) related to a previously charged-off loan, as well as a recovery of $902 thousand for a loan that was acquired as part of a merger in 2013
  • Core deposits were $1.5 billion as of June 30, 2023, an increase of $81 million or 5.3% from March 31, 2023. The increase was comprised of $18 million in noninterest-bearing deposits and $63 million in interest-bearing deposits, which includes fully insured balances in the Intrafi ICS and CDARS deposit programs. Noninterest-bearing deposits represent 42.9% of core deposits
  • Total deposits were $1.7 billion as of June 30, 2023, an increase of $115 million or 7.3% from March 31, 2023. Federal Home Loan Bank advances declined by $126 million as a consequence of strong deposit growth
  • Uninsured deposits, net of collateralized and fiduciary deposit accounts, represent 51% of total deposits as of June 30, 2023
  • As of June 30, 2023, total available liquidity was $1.5 billion or 174% of uninsured deposits, net of collateralized and fiduciary deposit accounts. Total available liquidity is comprised of $225 million of on-balance sheet liquidity (cash and investment securities) and $1.3 billion of unused borrowing capacity
  • Net interest margin was 4.73% for the second quarter of 2023, as compared to 4.90% for the prior quarter and 4.61% for the second quarter of 2022
  • Total cost of deposits was 1.59% for the second quarter of 2023, an increase from 1.23% for the prior quarter and 0.79% in the fourth quarter of 2022. The spot rate for deposits was 1.67% as of June 30, 2023, compared to 1.31% at March 31, 2023. Total cost of funding sources was 1.82% for the second quarter of 2023, an increase from 1.39% in the prior quarter and 0.86% in the fourth quarter of 2022
  • Tangible book value per share was $28.82 as of June 30, 2023, an increase of $2.52 since March 31, 2023 as a result of strong earnings, partially offset by the impact of adopting CECL. The overall impact of the two loan recoveries and settlement of related legal fees noted above was approximately $1.26 per share. Tangible book value per share increased 27% year-over-year.

LA JOLLA, Calif., July 21, 2023 (GLOBE NEWSWIRE) -- Private Bancorp of America, Inc. (OTCQX:PBAM), (“Company”) and CalPrivate Bank (“Bank”) announced unaudited financial results for the second fiscal quarter ended June 30, 2023. The Company reported record net income of $15.5 million, or $2.69 per diluted share, for the second quarter of 2023 compared to $4.4 million, or $0.77 per diluted share, for the second quarter of 2022. The quarter ended June 30, 2023 included loan recoveries of $8.6 million and a $1.6 million benefit from legal fees waived or collected related to the settlement of the ANI loan lawsuit (see non-GAAP reconciliation in the accompanying financial tables of this press release).

Rick Sowers, President and CEO of the Company and the Bank stated, “We are very pleased with the results of the second quarter and our continued growth of the balance sheet and solid net interest margin. Our Team continues to deliver exceptional service and quality relationship building while being opportunistic in new Client and Team member acquisition. Our focus remains on maintaining credit quality through active portfolio management, managing our variable expenses and making investments that build long-term value for shareholders.”

Sowers added, “We benefited during the quarter from two loan recoveries, including reaching a settlement with the Receiver for ANI Investments Champion-Cain for our previously reported loan charge-off related to fraud in which the Company recovered $7.7 million plus certain rights to future recoveries from a guarantor of the loan. This recovery amount represents 80% of the original principal charge-off and is net of the participant bank’s share. We are happy to have this behind us.”

“The Company continues to exhibit successful customer acquisition activity as shown by the growth in loans and deposits despite a rising rate environment. Additionally, the Company continues to invest in people and infrastructure, including strong risk management, needed to support the continued growth of the CalPrivate franchise,” said Selwyn Isakow, Chairman of the Board of the Company and the Bank.

STATEMENT OF INCOME

Net Interest Income

Net interest income for the second quarter of 2023 totaled $22.7 million, an increase of $540 thousand or 2.4% from the prior quarter and an increase of $4.7 million or 26.3% from the second quarter of 2022. The increase from the prior quarter was driven primarily by an increase of $2.8 million in interest income, which resulted from a 5.1% increase in average earning assets and 21 basis point increase in yield on earning assets. Partially offsetting this was an increase of $2.3 million in interest expense, which resulted primarily from a 60 basis point increase in the cost of interest-bearing liabilities.

Net Interest Margin

The net interest margin for the second quarter of 2023 was 4.73% compared to 4.90% for the prior quarter and 4.61% in the second quarter of 2022. The 17 basis point decrease in net interest margin from the prior quarter was due primarily to higher rates paid on funding sources, partially offset by higher rates on new loan originations and variable rate loans and investment securities. The yield on earning assets was 6.40% for the second quarter of 2023 compared with 6.19% for the prior quarter and the cost of interest-bearing liabilities was 2.90% for the second quarter of 2023 compared to 2.30% in the prior quarter. The cost of total deposits was 1.24% for the second quarter of 2023 compared to 0.86% in the prior quarter.

Provision for Loan Losses

The provision for loan losses for the second quarter of 2023 was a net reversal of $7.1 million compared to a charge of $73 thousand in the prior quarter. The net reversal in the second quarter of 2023 reflects recoveries of $8.6 million partially offset by provision expense of $1.5 million for loan growth. For more details, please refer to the “Asset Quality” section below.

Noninterest Income

Noninterest income was $1.1 million for the second quarter of 2023, a decrease from $1.5 million in the prior quarter and $1.4 million in the second quarter of 2022. The change from the prior quarter as well as the second quarter of 2022 was primarily due to lower gain on sale of SBA 7a loans. SBA loan sales for the second quarter of 2023 were $2.6 million with a 9.7% average trade premium resulting in a net gain on sale of $171 thousand, compared with $5.1 million with a 11.2% average trade premium resulting in a net gain on sale of $474 thousand in the prior quarter. Management sees continued softness in the market for SBA 7a loans.

Noninterest Expense

Noninterest expense was $8.8 million for the second quarter of 2023, a decrease from $11.6 million in the prior quarter and $12.6 million in the second quarter of 2022. The decrease from the prior quarter was primarily due to a $1.6 million benefit in professional services (legal expense specifically) resulting from legal fees waived as well as legal costs reimbursed by the participant bank in relation to the settled lawsuit with ANI Development, LLC/Gina Champion-Cain and Chicago Title. In addition, compensation and benefits expense declined by $841 thousand partially due to accrual adjustments for incentive and bonus compensation. Other expenses also declined by $563 thousand primarily due to a $629 thousand reversal of provision for the reserve for unfunded commitments. The efficiency ratio was 37.0% for the second quarter of 2023 compared to 48.9% in the prior quarter and 64.9% in the second quarter of 2022. The decrease in the efficiency ratio for the second quarter of 2023 was due primarily to the aforementioned expense variances.

The Company remains committed to making investments in the business, including technology, marketing, and staffing. Historically high inflation 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 $6.6 million for the second quarter of 2023, compared to $3.0 million for the prior quarter. The effective tax rate for the second quarter of 2023 was 29.7% compared to 25.2% in the prior quarter and 28.7% in the second quarter of 2022. The effective tax rate for the first quarter of 2023 was lower mainly due to discrete tax benefits related to exercised stock options.

STATEMENT OF FINANCIAL CONDITION

As of June 30, 2023, total assets were $2.0 billion, an increase of $10 million since the prior quarter and $122 million since December 31, 2022. The increase in assets from the prior quarter was primarily due to higher loans receivable, mostly offset by a decrease in cash. Loans HFI totaled $1.7 billion as of June 30, 2023, an increase of $95 million or 5.8% since March 31, 2023. Total deposits were $1.7 billion as of June 30, 2023, an increase of $115 million since March 31, 2023. The strong growth in deposits provided funding for loan growth and also enabled the Company to decrease wholesale borrowings (Federal Home Loan Bank advances) by $126 million since March 31, 2023. During the quarter, core deposits increased by $81 million, which was comprised of $18 million in noninterest-bearing deposits and $63 million in interest-bearing deposits (including balances in the Intrafi ICS and CDARS programs). As of June 30, 2023, the net unrealized loss on the available-for-sale (“AFS”) investment securities portfolio, which is comprised mostly of US Treasury and Government Agency debt, was $14.1 million (pre-tax) compared to a loss of $12.8 million as of March 31, 2023. The average duration of the Bank’s AFS portfolio is 3.9 years. The Company has no held-to-maturity securities.

Asset Quality

As of June 30, 2023, the allowance for loan losses was $22.6 million or 1.32% of loans HFI, compared to 1.30% as of March 31, 2023 and 1.21% at December 31, 2022. The increase in the coverage ratio from December 31, 2022 primarily resulted from the adoption of CECL. The Company continues to have strong credit metrics and there were no loan delinquencies as of June 30, 2023. As described above, the quarter ended June 30, 2023 results included loan recoveries of $8.7 million. The reserve for unfunded commitments was $2.2 million as of June 30, 2023, compared to $2.8 million as of March 31, 2023 and the change was due to a decrease in commitment balances available. Given the credit quality of the loan portfolio, management believes we are sufficiently reserved.

As of June 30, 2023, there are no doubtful credits and classified assets were $11.9 million, down from $14.6 million as of March 31, 2023. Total classified assets as of June 30, 2023, consisted of 11 loans, of which 6 loans totaling $7.3 million were secured by real estate with a weighted average LTV of 58.5%. The remaining 5 loans included 4 SBA loans with a balance of $2.1 million, which includes 2 loans that are 75% guaranteed and 2 loans that are 90% guaranteed by the SBA.

Capital Ratios (1)

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

 June 30, 2023 (1)March 31, 2023
CalPrivate Bank  
Tier I leverage ratio9.75%9.44%
Tier I risk-based capital ratio10.78%10.37%
Total risk-based capital ratio12.03%11.62%

(1) June 30, 2023 capital ratios are preliminary and subject to change.

About Private Bancorp of America, Inc.

Private Bancorp of America, Inc. (OTCQX: PBAM), is the holding company for CalPrivate Bank. CalPrivate Bank provides a Distinctly Different banking experience through unparalleled service and creative funding solutions to high-net-worth individuals, professionals, locally owned businesses, and real estate entrepreneurs. Customers are serviced through offices in Coronado, San Diego, La Jolla, Newport Beach, El Segundo and Beverly Hills as well as efficient electronic banking offerings. The Bank also offers various portfolio and government guaranteed lending programs, including SBA and cross-border Export-Import Bank programs. CalPrivate Bank is an SBA Preferred Lender and a Bauer Financial 5-star rated bank.

CalPrivate Bank’s website is www.calprivate.bank.

Non-GAAP Financial Measures

This press release contains certain non-GAAP financial measures in addition to results presented in accordance with GAAP, including adjusted income before provision for income taxes, adjusted net income, adjusted diluted earnings per share (“Adjusted EPS”), efficiency ratio, adjusted efficiency ratio, pretax pre-provision net revenue, average tangible common equity, adjusted return on average assets, return on average tangible common equity and adjusted return on average tangible common equity. The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company's results of operations and financial condition and to enhance investors’ overall understanding of such results of operations and financial condition, permit investors to effectively analyze financial trends of our business activities, and enhance comparability with peers across the financial services sector. These non-GAAP financial measures should be considered in addition to, not as a substitute for or superior to, financial measures prepared in accordance with GAAP and should be read in conjunction with the Company’s GAAP financial information. A reconciliation of the most comparable GAAP financial measures to non-GAAP financial measures is included in the accompanying financial tables.

Investor Relations Contacts

Rick Sowers
President and Chief Executive Officer
Private Bancorp of America, Inc., and CalPrivate Bank
(424) 303-4894

Cory Stewart
Executive Vice President and Chief Financial Officer
Private Bancorp of America, Inc., and CalPrivate Bank
(206) 293-3669

Safe Harbor Paragraph

This communication contains expressions of expectations, both implied and explicit, that are “forward-looking statements” within the meaning of such term in the Private Securities Litigation Reform Act of 1995. We caution you that a number of important factors could cause actual results to differ materially from those in the forward-looking statements, especially given the current turmoil in the banking and financial markets. These factors include the effects of depositors withdrawing funds unexpectedly, counterparties being unable to provide liquidity sources that we believe should be available, loan losses, economic conditions and competition in the geographic and business areas in which Private Bancorp of America, Inc. operates, including competition in lending and deposit acquisition, the unpredictability of fee income from participation in SBA loan programs, the effects of bank failures, liquidations and mergers in our markets and nationally, our ability to successfully integrate and develop business through the addition of new personnel, whether our efforts to expand loan, product and service offerings will prove profitable, system failures and data security, whether we can effectively secure and implement new technology solutions, inflation, fluctuations in interest rates, legislation and governmental regulation. You should not place undue reliance on forward-looking statements, and we undertake no obligation to update those statements whether as a result of changes in underlying factors, new information, future events or otherwise. These factors could cause actual results to differ materially from what we anticipate or project. You should not place undue reliance on any such forward-looking statement, which speaks only as of the date on which it was made. Although we in good faith believe the assumptions and bases supporting our forward-looking statements to be reasonable there can be no assurance that those assumptions and bases will prove accurate.

PRIVATE BANCORP OF AMERICA, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(Dollars in thousands)
      
 June 30, 2023 March 31, 2023 June 30, 2022
Assets     
Cash and due from banks$23,273  $13,347  $15,694 
Interest-bearing deposits in other financial institutions 27,566   73,420   43,857 
Interest-bearing deposits at Federal Reserve Bank 85,020   125,045   29,241 
Total cash and due from banks 135,859   211,812   88,792 
Interest-bearing time deposits with other institutions 7,661   7,661   6,157 
Investment securities available for sale 94,574   103,790   113,565 
Loan held for sale 1,982   465   4,460 
Total loans held-for-investment 1,717,705   1,623,028   1,379,519 
Allowance for loan losses (22,588)  (21,135)  (17,776)
Net loans 1,695,117   1,601,893   1,361,743 
Federal Home Loan Bank stock, at cost 8,915   7,020   7,020 
Right of use asset 2,525   2,889   3,037 
Premises and equipment, net 1,539   1,744   2,640 
Servicing assets, net 2,875   3,057   3,515 
Accrued interest receivable 6,118   5,674   3,855 
Other assets 19,572   20,623   17,318 
Total assets$ 1,976,737  $ 1,966,628  $ 1,612,102 
      
Liabilities and Shareholders' Equity     
Liabilities     
Noninterest bearing$657,980  $639,664  $747,006 
Interest Bearing 1,041,192   944,102   693,646 
Total deposits 1,699,172   1,583,766   1,440,652 
FHLB borrowings 66,000   192,000   10,000 
Other borrowings 17,958   17,956   17,950 
Accrued interest payable and other liabilities 26,396   20,592   13,305 
Total liabilities 1,809,526   1,814,314   1,481,907 
      
Shareholders' equity     
Common stock 73,379   73,254   71,516 
Additional paid-in capital 3,405   3,289   3,368 
Retained earnings 100,281   84,751   64,036 
Accumulated other comprehensive (loss) income, net (9,854)  (8,980)  (8,725)
Total shareholders' equity 167,211   152,314   130,195 
Total liabilities and shareholders' equity$ 1,976,737  $ 1,966,628  $ 1,612,102 


PRIVATE BANCORP OF AMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
           
  For the three months ended Year to Date
  June 30, 2023 March 31, 2023 June 30, 2022 June 30, 2023 June 30, 2022
Interest Income          
Loans $28,270  $26,228  $17,931  $54,498  $35,177 
Investment securities  560   580   571   1,140   972 
Deposits in other financial institutions  1,933   1,150   204   3,083   339 
Total interest income  30,763   27,958   18,706   58,721   36,488 
           
Interest Expense          
Deposits  6,581   4,924   410   11,505   737 
Borrowings  1,474   866   313   2,340   626 
Total interest expense  8,055   5,790   723   13,845   1,363 
           
Net interest income  22,708   22,168   17,983   44,876   35,125 
Provision (reversal) for loan losses  (7,149)  73   659   (7,076)  802 
Net interest income after provision for loan losses 29,857   22,095   17,324   51,952   34,323 
           
Noninterest income:          
Service charges on deposit accounts  310   348   299   658   580 
Net gain on sale of loans  171   474   768   645   3,239 
Other noninterest income  573   643   375   1,216   732 
Total noninterest income  1,054   1,465   1,442   2,519   4,551 
           
Noninterest expense:          
Compensation and employee benefits  7,189   8,030   7,374   15,219   14,687 
Occupancy and equipment  795   806   808   1,601   1,531 
Data processing  878   944   824   1,822   1,476 
Professional services  (836)  438   1,835   (398)  2,750 
Other expenses  776   1,339   1,759   2,115   2,998 
Total noninterest expense  8,802   11,557   12,600   20,359   23,442 
Income before provision for income taxes  22,109   12,003   6,166   34,112   15,432 
Provision for income taxes  6,575   3,029   1,769   9,604   4,517 
Net income  $ 15,534  $ 8,974  $ 4,397  $ 24,508  $ 10,915 
Net income available to common shareholders $ 15,407  $ 8,923  $ 4,347  $ 24,345  $ 10,794 
           
Earnings per share          
Basic earnings per share $2.72  $1.59  $0.78  $4.32  $1.94 
Diluted earnings per share $2.69  $1.57  $0.77  $4.25  $1.91 
           
Average shares outstanding  5,654,435   5,608,193   5,543,065   5,631,442   5,555,662 
Diluted average shares outstanding  5,726,522   5,673,394   5,639,282   5,722,645   5,652,071 


PRIVATE BANCORP OF AMERICA, INC.
Consolidated average balance sheet, interest, yield and rates
(Unaudited)
(Dollars in thousands)
                   
  For the three months ended
  June 30, 2023 March 31, 2023 June 30, 2022
  Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate
Interest-Earnings Assets                  
Deposits in other financial institutions $140,939  $1,933  5.50% $123,159  $1,150  3.79% $100,017  $204  0.82%
Investment securities  110,332   560  2.03%  112,694   580  2.06%  125,550   571  1.82%
Loans, including LHFS  1,675,790   28,270  6.77%  1,597,236   26,228  6.66%  1,339,095   17,931  5.37%
Total interest-earning assets  1,927,061   30,763  6.40%  1,833,089   27,958  6.19%  1,564,662   18,706  4.80%
Noninterest-earning assets  32,741       24,905       27,614     
Total Assets $1,959,802      $1,857,994      $1,592,276     
                   
Interest-Bearing Liabilities                  
Interest bearing DDA, excluding brokered 99,334   364  1.47%  100,640   343  1.38%  87,682   53  0.24%
Savings & MMA, excluding brokered  645,219   3,570  2.22%  619,316   2,378  1.56%  492,048   215  0.18%
Time deposits, excluding brokered  101,241   719  2.85%  83,032   456  2.23%  67,184   111  0.66%
Total deposits, excluding brokered  845,794   4,653  2.21%  802,988   3,177  1.60%  646,914   379  0.23%
Total brokered deposits  155,577   1,928  4.97%  151,993   1,747  4.66%  15,006   31  0.83%
Total Interest-Bearing Deposits  1,001,371   6,581  2.64%  954,981   4,924  2.09%  661,920   410  0.25%
                   
FHLB advances  96,626   1,202  4.99%  48,711   594  4.95%  10,000   42  1.68%
Other borrowings  17,971   272  6.07%  17,976   272  6.14%  17,948   271  6.06%
Total Interest-Bearing Liabilities  114,597   1,474  2.90%  66,687   866  2.30%  27,948   313  0.42%
                   
Noninterest-bearing deposits  655,169   -     669,796   -     757,728   -   
Total Funding Sources  1,771,137   8,055  1.82%  1,691,464   5,790  1.39%  1,447,596   723  0.20%
                   
Noninterest-bearing liabilities  26,492       19,752       11,891     
Shareholders' equity  162,173       146,778       132,789     
                   
Total Liabilities and Shareholders' Equity$1,959,802      $1,857,994      $1,592,276     
                   
Net interest income/spread   $22,708  4.58%   $22,168  4.80%   $17,983  4.60%
Net interest margin     4.73%     4.90%     4.61%


PRIVATE BANCORP OF AMERICA, INC.
Consolidated average balance sheet, interest, yield and rates
(Unaudited)
(Dollars in thousands)
             
  Year to Date
  June 30, 2023 June 30, 2022
  Average Balance Interest Average Yield/Rate Average Balance Interest Average Yield/Rate
Interest-Earnings Assets:            
Deposits in other financial institutions $132,124  $3,083  4.71% $108,413  $339  0.63%
Investment securities  111,506   1,140  2.04%  117,447   972  1.66%
Loans  1,636,730   54,498  6.71%  1,304,089   35,177  5.44%
Total interest-earning assets  1,880,360   58,721  6.30%  1,529,949   36,488  4.81%
Noninterest-earning assets  28,819       24,572     
Total Assets $1,909,179      $1,554,521     
             
Interest-Bearing Liabilities            
Interest bearing DDA, excluding brokered  99,983   707  1.43%  83,145   68  0.16%
Savings & MMA, excluding brokered  632,340   5,948  1.90%  494,344   402  0.16%
Time deposits, excluding brokered  92,187   1,175  2.57%  67,851   226  0.67%
Total deposits, excluding brokered  824,510   7,830  1.92%  645,340   696  0.22%
Total brokered deposits  153,794   3,675  4.82%  15,005   41  0.55%
Total Interest-Bearing Deposits  978,304   11,505  0.68%  660,345   737  0.27%
             
FHLB advances  72,801   1,796  4.97%  10,000   83  1.67%
Other borrowings  17,974   544  6.10%  17,949   543  6.10%
Total Interest-Bearing Liabilities  90,775   2,340  2.61%  27,949   626  0.40%
             
Noninterest-bearing deposits  662,442       720,504     
Total Funding Sources  1,731,521   13,845  1.61%  1,408,798   1,363  0.20%
             
Noninterest-bearing liabilities  23,140       13,085     
Shareholders' equity  154,518       132,638     
             
Total Liabilities and Shareholders' Equity $1,909,179      $1,554,521     
             
Net interest income/spread   $44,876  4.69%   $35,125  4.61%
Net interest margin     4.81%     4.63%


PRIVATE BANCORP OF AMERICA, INC.
Condensed Balance Sheets
(Unaudited)
(Dollars in thousands, except per share amounts)
          
 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022
Assets         
Cash and due from banks$135,859  $211,812  $128,642  $102,173  $88,792 
Interest-bearing time deposits with other institutions 7,661   7,661   7,923   6,157   6,157 
Investment securities 94,574   103,790   104,652   107,332   113,565 
Loans held for sale 1,982   465   7,061   7,789   4,460 
Total loans held-for-investment 1,717,705   1,623,028   1,588,248   1,487,098   1,379,519 
Allowance for loan losses (22,588)  (21,135)  (19,152)  (19,092)  (17,776)
Net loans 1,695,117   1,601,893   1,569,096   1,468,006   1,361,743 
Right of use asset 2,525   2,889   3,265   2,669   3,037 
Premises and equipment, net 1,539   1,744   1,742   2,040   2,640 
Other assets and interest receivable 37,480   36,374   32,499   30,735   31,708 
Total assets$ 1,976,737  $ 1,966,628  $ 1,854,880  $ 1,726,901  $ 1,612,102 
          
Liabilities and Shareholders' Equity         
          
Liabilities         
Noninterest Bearing$657,980  $639,664  $691,392  $763,227  $747,006 
Interest Bearing 1,041,192   944,102   983,730   767,371   693,646 
Total Deposits 1,699,172   1,583,766   1,675,122   1,530,598   1,440,652 
Borrowings 83,958   209,956   17,954   47,952   27,950 
Accrued interest payable and other liabilities 26,396   20,592   18,480   13,417   13,305 
Total liabilities 1,809,526   1,814,314   1,711,556   1,591,967   1,481,907 
          
Shareholders' equity         
Common stock 73,379   73,254   72,221   71,671   71,516 
Additional paid-in capital 3,405   3,289   3,353   3,568   3,368 
Retained earnings 100,281   84,751   77,810   70,386   64,036 
Accumulated other comprehensive (loss) income (9,854)  (8,980)  (10,060)  (10,691)  (8,725)
Total shareholders' equity 167,211   152,314   143,324   134,934   130,195 
Total liabilities and shareholders' equity$ 1,976,737  $ 1,966,628  $ 1,854,880  $ 1,726,901  $ 1,612,102 
          
Book value per common share$29.32  $26.83  $25.60  $24.12  $23.31 
Tangible book value per common share (1)$28.82  $26.30  $25.06  $23.49  $22.68 
Shares outstanding 5,702,637   5,676,017   5,599,025   5,594,380   5,584,465 
          
(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)
          
 For the three months ended
 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022
Interest income$30,763  $27,958  $26,065  $21,978  $18,706 
Interest expense 8,055   5,790   3,469   1,375   723 
Net interest income 22,708   22,168   22,596   20,603   17,983 
Provision (reversal) for loan losses (7,149)  73   60   1,316   659 
Net interest income after provision for loan losses 29,857   22,095   22,536   19,287   17,324 
          
Noninterest income 1,054   1,465   1,084   1,405   1,442 
          
Compensation and employee benefits 7,189   8,030   8,482   7,261   7,374 
Occupancy and equipment 795   806   820   756   808 
Data processing 878   944   942   993   824 
Professional services (836)  438   1,018   1,493   1,835 
Other expenses 776   1,339   1,813   1,224   1,759 
Total noninterest expense 8,802   11,557   13,075   11,727   12,600 
          
Income before provision for income taxes 22,109   12,003   10,545   8,965   6,166 
Income taxes 6,575   3,029   3,102   2,614   1,769 
Net income$15,534  $8,974  $7,443  $6,351  $4,397 
Net income available to common shareholders$15,407  $8,923  $7,394  $6,306  $4,347 
          
Earnings per share         
Basic earnings per share$2.72  $1.59  $1.33  $1.13  $0.78 
Diluted earnings per share$2.69  $1.57  $1.31  $1.12  $0.77 
          
Average shares outstanding 5,654,435   5,608,193   5,551,376   5,549,480   5,543,065 
Diluted average shares outstanding 5,726,522   5,673,394   5,645,355   5,640,841   5,639,282 
          
 Performance Ratios
 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022
ROAA 3.18%  1.96%  1.68%  1.51%  1.11%
ROAE 38.42%  24.80%  20.89%  17.41%  13.28%
ROATCE (1) 39.14%  25.32%  21.41%  17.84%  13.64%
Net interest margin 4.73%  4.90%  5.17%  4.99%  4.61%
Net interest spread 4.58%  4.80%  5.11%  4.96%  4.60%
Efficiency ratio (1) 37.04%  48.90%  55.22%  53.29%  64.86%
Noninterest expense / average assets 1.80%  2.52%  2.95%  2.79%  2.95%
          
(1) Non-GAAP measure. See GAAP to non-GAAP Reconciliation table.        


PRIVATE BANCORP OF AMERICA, INC.
(Unaudited)
          
 Selected Quarterly Average Balances
 (Dollars in thousands)
 For the three months ended
 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022
Total assets$1,959,802  $1,857,994  $1,759,204  $1,665,491  $1,592,276 
Earning assets$1,927,061  $1,833,089  $1,733,577  $1,638,026  $1,564,662 
Total loans, including loans held for sale$1,675,790  $1,597,236  $1,527,863  $1,438,489  $1,339,095 
Total deposits$1,656,540  $1,624,777  $1,574,002  $1,482,739  $1,419,648 
Total shareholders' equity$162,173  $146,778  $141,330  $144,727  $132,789 
          
          
 Loan Balances by Type
 (Dollars in thousands)
 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022
Real estate - investor owned$481,518  $472,315  $476,404  $403,950  $390,628 
Real estate - owner occupied 468,234   418,788   394,365   382,689   359,270 
Real estate - multifamily 150,003   141,783   130,901   136,841   121,693 
Real estate - single family 119,762   121,760   118,502   107,728   94,212 
Commercial business 421,717   401,277   405,919   394,369   362,410 
Land and construction 73,665   64,571   56,153   55,418   44,856 
Consumer 2,806   2,534   6,004   6,103   6,450 
Total loans held for investment$1,717,705  $1,623,028  $1,588,248  $1,487,098  $1,379,519 
          
          
 Deposits by Type
 (Dollars in thousands)
 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022
Noninterest-bearing DDA$657,980  $639,664  $691,392  $763,227  $747,006 
Interest-bearing DDA, excluding brokered 101,064   99,988   109,130   95,677   93,405 
Savings & MMA, excluding brokered 670,195   637,031   614,991   576,395   518,139 
Time deposits, excluding brokered 105,757   77,052   54,887   56,341   67,096 
Total deposits, excluding brokered 1,534,996   1,453,735   1,470,400   1,491,640   1,425,646 
Total brokered deposits 164,176   130,031   204,722   38,958   15,006 
Total deposits$1,699,172  $1,583,766  $1,675,122  $1,530,598  $1,440,652 


PRIVATE BANCORP OF AMERICA, INC.
(Unaudited)
          
 Rollforward of Allowance for Credit Losses
 (Dollars in thousands)
 For the three months ended
 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022
Allowance for loan losses:         
Beginning balance$21,135  $19,152  $19,092  $17,776  $17,117 
Impact of CECL adoption -   1,910   -   -   - 
Provision for loan losses (7,149)  73   60   1,316   659 
Net (charge-offs) recoveries 8,602   -   -   -   - 
Ending balance 22,588   21,135   19,152   19,092   17,776 
Reserve for unfunded commitments (1) 2,172   2,802   1,718   1,674   1,635 
Total allowance for credit losses$24,760  $23,937  $20,870  $20,766  $19,411 
          
(1) Includes $974 thousand related to the impact of CECL adoption on January 1, 2023.      
          
          
          
 Asset Quality
 (Dollars in thousands)
 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022
Total loans held-for-investment$1,717,705  $1,623,028  $1,588,248  $1,487,098  $1,379,519 
Allowance for loan losses$(22,588) $(21,135) $(19,152) $(19,092) $(17,776)
30-89 day past due loans$-  $-  $-  $-  $- 
90+ day past due loans$-  $-  $-  $-  $- 
Nonaccrual loans$3,354  $4,384  $3,880  $4,593  $1,453 
NPAs / Assets 0.17%  0.22%  0.21%  0.27%  0.09%
NPLs / Total loans held-for-investment & OREO 0.20%  0.27%  0.24%  0.31%  0.11%
Net quarterly charge-offs (recoveries)$(8,602) $-  $-  $-  $- 
Net charge-offs (recoveries) /avg loans (annualized) (2.05)%  0.00%  0.00%  0.00%  0.00%
Allowance for loan losses to loans HFI 1.32%  1.30%  1.21%  1.28%  1.29%
Allowance for loan losses to nonaccrual loans 673.46%  482.09%  493.61%  415.68%  1,223.4%


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.
           
 GAAP to Non-GAAP Reconciliation 
 (Dollars in thousands, except per share amounts) 
           
  For the three months ended Year to Date
  Jun 30, 2023 Mar 31, 2023 Jun 30, 2022 Jun 30, 2023 Jun 30, 2022
           
Adjusted income before provision for income taxes          
Income before provision for income taxes $22,109  $12,003  $6,166  $34,112  $15,432 
ANI recovery (1)  (7,708)  -   -   (7,708)  - 
Settlement of legal fees related to ANI litigation (2)  (1,635)  -   -   (1,635)  - 
Recovery of principal and interest on a loan acquired with credit deterioration as part of a business combination (3)  (986)  -   -   (986)  - 
Adjusted income before provision for income taxes (non-GAAP) $11,780  $12,003  $6,166  $23,783  $15,432 
           
Adjusted net income          
Net income $15,534  $8,974  $4,397  $24,508  $10,915 
ANI recovery, net of tax (1)(4)  (5,430)  -   -   (5,430)  - 
Settlement of legal fees related to ANI litigation, net of tax (2)(4)  (1,152)  -   -   (1,152)  - 
Recovery of principal and interest on a loan acquired with credit deterioration as part of a business combination, net of tax(3)(4)  (694)  -   -   (694)  - 
Adjusted net income (non-GAAP) $8,258  $8,974  $4,397  $17,232  $10,915 
           
Adjusted diluted earnings per share ("Adjusted EPS")          
Diluted earnings per share $2.69  $1.57  $0.77  $4.25  $1.91 
ANI recovery, net of tax (1)(4)  (0.94)  -   -   (0.94)  - 
Settlement of legal fees related to ANI litigation, net of tax (2)(4)  (0.20)  -   -   (0.20)  - 
Recovery of principal and interest on a loan previously acquired with credit deterioration as part of a business combination, net of tax(3)(4)  (0.12)  -   -   (0.12)  - 
Adjusted EPS (non-GAAP) $1.43  $1.57  $0.77  $2.99  $1.91 
           
Diluted average shares outstanding  5,726,522   5,673,394   5,639,282   5,722,645   5,652,071 
           
(1) In the second quarter of 2023, the Company reached a settlement with the Receiver for ANI Investments and Gina Champion-Cain in which the Company recovered $7.7 million (or approximately $0.94 per diluted share after tax) plus certain rights to future recoveries from a guarantor of the charged off loan. This recovery amount represents 80% of the original principal charge-off and is net of the participant bank’s share.
(2) In the second quarter of 2023, in conjunction with the resolution of the ANI litigation, the Company was reimbursed $0.6 million of legal costs by the participant bank. In addition, $0.5 million of previously invoiced legal fees were waived at settlement of the litigation.
(3) In the second quarter of 2023, the Company received $1.0 million related to a loan that was originated and written off by San Diego Private Bank ("SDPB") prior to SDPB merging with the Company in 2013. Accordingly, the Company recorded an allowance recovery of $0.9 million for the amount that would have been written off at the time of the merger under CECL and $0.1 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.
          
 GAAP to Non-GAAP Reconciliation
 (Dollars in thousands)
          
 For the three months ended
 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022
Efficiency Ratio         
Noninterest expense$8,802  $11,557  $13,075  $11,727  $12,600 
Net interest income 22,708   22,168   22,596   20,603   17,983 
Noninterest income 1,054   1,465   1,084   1,405   1,442 
Total net interest income and noninterest income 23,762   23,633   23,680   22,008   19,425 
Efficiency ratio (non-GAAP) 37.04%  48.90%  55.22%  53.29%  64.86%
          
Adjusted Efficiency Ratio         
Noninterest expense$8,802  $11,557  $13,075  $11,727  $12,600 
Settlement of legal fees related to ANI litigation 1,635   -   -   -   - 
Adjusted noninterest expense (non-GAAP) 10,437   11,557   13,075   11,727   12,600 
Total net interest income and noninterest income 23,762   23,633   23,680   22,008   19,425 
Recovery of interest on a loan acquired with credit deterioration as part of a business combination (84)  -   -   -   - 
Adjusted total net interest income and noninterest income (non-GAAP) 23,678   23,633   23,680   22,008   19,425 
Adjusted Efficiency ratio (non-GAAP) 44.08%  48.90%  55.22%  53.29%  64.86%
          
Pretax pre-provision net revenue         
Net interest income$22,708  $22,168  $22,596  $20,603  $17,983 
Noninterest income 1,054   1,465   1,084   1,405   1,442 
Total net interest income and noninterest income 23,762   23,633   23,680   22,008   19,425 
Less: Noninterest expense 8,802   11,557   13,075   11,727   12,600 
Pretax pre-provision net revenue (non-GAAP)$14,960  $12,076  $10,605  $10,281  $6,825 
          
Return and Adjusted Return on Average Assets, Average Equity, Average Tangible Equity         
Net income$15,534  $8,974  $7,443  $6,351  $4,397 
Adjusted net income (non-GAAP) (1) 8,258   8,974   7,443   6,351   4,397 
Average assets 1,959,802   1,857,994   1,759,204   1,665,491   1,592,276 
Average shareholders' equity 162,173   146,778   141,330   144,727   132,789 
Less: Average intangible assets 2,975   3,026   3,385   3,599   3,490 
Average tangible common equity (non-GAAP) 159,198   143,752   137,945   141,128   129,299 
          
Return on average assets 3.18%  1.96%  1.68%  1.51%  1.11%
Adjusted return on average assets (non-GAAP) (1) 1.69%  1.96%  1.68%  1.51%  1.11%
Return on average equity 38.42%  24.80%  20.89%  17.41%  13.28%
Adjusted return on average equity (non-GAAP) (1) 20.42%  24.80%  20.89%  17.41%  13.28%
Return on average tangible common equity (non-GAAP) 39.14%  25.32%  21.41%  17.85%  13.64%
Adjusted return on average tangible common equity (non-GAAP) (1) 20.81%  25.32%  21.41%  17.85%  13.64%
          
Tangible book value per share         
Total equity 167,211   152,314   143,324   134,934   130,195 
Less: Total intangible assets 2,875   3,057   3,007   3,502   3,515 
Total tangible equity 164,336   149,257   140,317   131,432   126,680 
Shares outstanding 5,702,637   5,676,017   5,599,025   5,594,380   5,584,465 
Tangible book value per share (non-GAAP)$28.82  $26.30  $25.06  $23.49  $22.68 
          
(1) A reconciliation of net income to adjusted net income is provided on page 15.


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.
    
 GAAP to Non-GAAP Reconciliation
 (Dollars in thousands)
    
 Year to Date
 Jun 30, 2023 Jun 30, 2022
Efficiency Ratio   
Noninterest expense$20,359  $23,442 
Net interest income 44,876   35,125 
Noninterest income 2,519   4,551 
Total net interest income and noninterest income 47,395   39,676 
Efficiency ratio (non-GAAP) 43.0%  59.1%
    
Adjusted Efficiency Ratio   
Noninterest expense$20,359  $23,442 
Settlement of legal fees related to ANI litigation 1,635   - 
Adjusted noninterest expense (non-GAAP) 21,994   23,442 
Total net interest income and noninterest income 47,395   39,676 
Recovery of interest on a loan acquired with credit deterioration as part of a business combination (84)  - 
Adjusted total net interest income and noninterest income (non-GAAP) 47,311   39,676 
Adjusted Efficiency ratio (non-GAAP) 46.49%  59.08%
    
Pretax pre-provision net revenue   
Net interest income$44,876  $35,125 
Noninterest income 2,519   4,551 
Total net interest income and noninterest income 47,395   39,676 
Less: Noninterest expense 20,359   23,442 
Pretax pre-provision net revenue (non-GAAP)$27,036  $16,234 
    
Return and Adjusted Return on Average Assets, Average Equity, Average Tangible Equity   
Net income$24,508  $10,915 
Adjusted net income (non-GAAP) (1) 17,232   10,915 
Average assets 1,909,179   1,554,521 
Average shareholders' equity 154,518   132,638 
Less: Average intangible assets 2,973   3,435 
Average tangible common equity 151,545   129,203 
    
Return on average assets 2.59%  1.42%
Adjusted return on average assets (non-GAAP) (1) 1.82%  1.42%
Return on average equity 31.98%  16.59%
Adjusted return on average equity (non-GAAP) (1) 22.49%  16.59%
Return on average tangible common equity (non-GAAP) 32.61%  17.04%
Adjusted return on average tangible common equity (non-GAAP) (1) 22.93%  17.04%
    
(1) A reconciliation of net income to adjusted net income is provided on page 15.