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CB

California BanCorp (CALB)·Q3 2023 Earnings Summary

Executive Summary

  • Q3 2023 delivered stable profitability despite a tough rate backdrop: revenue $19.87M, diluted EPS $0.64, NIM 3.86%, efficiency ratio 59.64%; capital ratios improved and tangible book value per share rose to $21.76 .
  • Deposit base remained resilient (noninterest-bearing deposits 40.2% of total) while loans and deposits declined modestly QoQ as management maintained a conservative stance on new loan production; asset quality stayed best-in-class (NPAs/Assets 0.06%) .
  • Management highlighted disciplined expense control and treasury management investments as drivers of operating leverage; focus near term is on adding full commercial banking relationships and protecting NIM as the rate environment evolves .
  • No formal numerical guidance was provided; commentary indicated continued conservative loan production and deposit share gains—key stock narrative catalysts are credit quality, capital build, and deposit stability in a volatile banking backdrop .

What Went Well and What Went Wrong

What Went Well

  • Capital strengthened: Tier 1 leverage 9.27%, Tier 1 capital 9.34%, TRBC 13.00%; TBV/share up 3% QoQ to $21.76, underscoring balance sheet resilience .
  • Asset quality remained exceptional: NPAs/Assets 0.06%, allowance/gross loans 1.01%, with net recoveries in the quarter and only $1.24M of NPLs (with a state guarantee on a commercial loan, no additional loss expected as of 9/30) .
  • Operating discipline: efficiency ratio at 59.64% and stable total revenue; management emphasized “disciplined expense control” and strong ROAA above 1% despite macro headwinds .

What Went Wrong

  • NIM compression: NIM slipped to 3.86% from 3.93% in Q2 due to deposit cost pressure and mix shift in earning assets; efficiency ratio worsened modestly QoQ .
  • Modest balance sheet contraction: gross loans fell 1% QoQ (construction loan runoff) and deposits declined 2% QoQ with a shift away from noninterest-bearing demand deposits (40.2% vs. 42.7% in Q2) .
  • Noninterest income down YoY: $1.29M vs. $1.48M in Q3 2022, reflecting lower service charges/loan fees and absence of prior-year gains from solar loan sales .

Financial Results

MetricQ3 2022Q2 2023Q3 2023
Revenue ($USD Millions)$19.85 $19.78 $19.87
Net Income ($USD Millions)$5.52 $5.44 $5.40
Diluted EPS ($USD)$0.66 $0.65 $0.64
Net Interest Margin (%)3.94% 3.93% 3.86%
Efficiency Ratio (%)56.52% 58.66% 59.64%
Balance MetricsQ3 2022Q2 2023Q3 2023
Total Deposits ($USD Millions)$1,709.08 $1,738.30 $1,707.08
Gross Loans ($USD Millions)$1,587.90 $1,583.63 $1,573.12
Loans / Deposits (%)92.91% 91.10% 92.15%
Noninterest-Bearing Deposits / Total (%)44.39% 42.69% 40.23%
Income ComponentsQ3 2022Q2 2023Q3 2023
Net Interest Income ($USD Millions)$18.36 $18.65 $18.58
Non-Interest Income ($USD Millions)$1.48 $1.14 $1.29
Provision for Credit Losses (Total) ($USD Thousands)$800 $444 $314
Provision for Credit Losses on Loans ($USD Thousands)$800 $340 $121
KPIsQ3 2022Q2 2023Q3 2023
ROAA (%)1.13% 1.10% 1.08%
ROE (%)13.45% 11.91% 11.35%
ROATCE (%)14.09% 12.41% 11.81%
Tangible Book Value / Share ($)$18.80 $21.09 $21.76
Tier 1 Leverage (%)8.21% 9.01% 9.27%
Tier 1 Capital (%)7.98% 9.07% 9.34%
Total Risk-Based Capital (%)11.57% 12.73% 13.00%
NPAs / Assets (%)0.02% 0.01% 0.06%
Allowance / Gross Loans (%)1.04% 0.99% 1.01%
Nonperforming Loans ($USD Millions)$0.34 $0.18 $1.24
Loan & Deposit Composition (Segment/KPI)Q1 2023Q2 2023Q3 2023
C&I Loans / Gross Loans (%)40.6% 39.3% 40.3%
CRE Loans / Gross Loans (%)52.8% 54.1% 54.6%
Office CRE (% of Total Loans)10.6% 10.8% 10.9%
DDA / Total Deposits (%)44.9% 42.7% 40.2%
Core Deposits / Total Deposits (%)80.8% 80.8% 81.3%
Cost of Deposits (%)1.44% 1.78% 2.07%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue, Margins, OpEx, Tax Rate, DividendsQ4 2023+None providedNone provided; qualitative focus on conservative loan production, deposit growth, expense discipline, and NIM protectionMaintained qualitative posture

Earnings Call Themes & Trends

TopicQ1 2023 (Prior)Q2 2023 (Prior)Q3 2023 (Current)Trend
Deposit StabilitySeasonal outflows early; net deposit growth in March; sticky operating accounts base Deposits up QoQ; noninterest-bearing >40% Deposits down slightly QoQ; noninterest-bearing 40.2%; period-end fluctuations Stable to modestly weaker mix QoQ
Loan ProductionConservative stance; total loans grew at 6% annualized Conservative underwriting; commercial line utilization down; loans slightly lower Conservative new production; construction runoff; commercial loans up within quarter Cautious, mix shift
Asset QualityNPAs/Assets 0.01%; allowance 1.06%; minimal office CRE downtown SF exposure NPAs/Assets 0.01%; allowance 0.99%; office CRE 10.8% total loans, suburban focus NPAs/Assets 0.06%; allowance 1.01%; NPL uptick tied to guaranteed loan; no expected loss Strong; temporary NPL uptick
Capital & TBVCapital ratios and TBV/share increased QoQ Capital ratios and TBV/share increased; borrowings repaid Capital ratios higher; TBV/share +3% QoQ Improving
NIM & Funding CostsNIM 4.02%; deposit and borrowing costs rising NIM 3.93%; deposit cost pressure; borrowings repaid NIM 3.86%; earning asset mix and deposit costs pressured Gradual compression

Note: No earnings call transcript was available in our document catalog for Q3 2023 or prior quarters; themes are from press releases and investor presentations .

Management Commentary

  • “Our third quarter results reflect the strength of the franchise we have built… return on average assets remaining above 1%… continued stability in our deposit base, net interest margin, and asset quality, along with disciplined expense control” — Steven Shelton, CEO .
  • “We will continue to maintain our conservative approach to new loan production… we expect to continue to generate a strong level of profitability while maintaining a high level of capital, liquidity, and reserves” — Steven Shelton, CEO .
  • “We continued to increase our capital ratios and tangible book value per share… exceptional asset quality with a very low level of non-performing assets” — Thomas A. Sa, President, CFO & COO .

Q&A Highlights

  • No published Q3 2023 earnings call transcript found; no Q&A available. Commentary indicates focus on deposit share gains, conservative loan growth, expense control, and NIM protection as the Fed cycle evolves .

Estimates Context

  • Wall Street consensus (S&P Global) for Q3 2023 EPS and revenue was unavailable due to a CIQ mapping gap for CALB; therefore, we cannot provide beat/miss analysis relative to estimates. Values would typically be retrieved from S&P Global but were not accessible in this instance.

Key Takeaways for Investors

  • Defensive posture with quality: best-in-class credit metrics and rising capital ratios provide downside protection amid bank sector volatility; tangible book compounding continues .
  • Earnings resilience: revenue and EPS held essentially flat QoQ/YoY while NIM compressed modestly, suggesting disciplined pricing and deposit strategy are offsetting rate headwinds .
  • Deposit mix watch: drift lower in noninterest-bearing deposits increases funding costs; trajectory of DDA mix is a key driver of future NIM and earnings power .
  • Loan growth trade-offs: conservative underwriting and construction runoff reduced balances; mix shifting toward commercial loans at attractive new production rates supports future NII when utilization rises .
  • Operating leverage: management’s expense discipline and treasury management investments should support fee income and efficiency improvements over time .
  • Near-term trading implication: favor stability/quality narrative vs. growth—stock likely reacts to signs of sustained DDA stabilization and NIM protection; monitor NPAs/NPLs given Q3 uptick tied to guaranteed exposure .
  • Medium-term thesis: relationship banking strategy aimed at deposit-rich industries, suburban CRE focus (limited downtown SF exposure), and strong sponsor finance credit quality underpin steady ROA/ROE with lower tail risk .