West Coast Community Bancorp, Parent Company of Santa Cruz County Bank, Reports Newest Earnings

SANTA CRUZ, Calif., Oct. 24, 2023 /PRNewswire/ -- West Coast Community Bancorp ("Bancorp", OTCQX: SCZC), the parent company of Santa Cruz County Bank (the "Bank"), announced unaudited earnings for the quarter ended September 30, 2023 of $9.1 million, an increase of 10% from $8.3 million in the prior quarter and a decrease of 1% from $9.2 million in the third quarter of 2022. Basic and diluted earnings per share in the third quarter of 2023 were $1.09 and $1.08, respectively, and both improved over the prior quarter by $0.10. Basic and diluted earnings per share in the third quarter of 2023 improved over the prior year comparative quarter by $0.01 and $0.04, respectively.

Year-to-date earnings for the nine-month period ended September 30, 2023 were $26.3 million, an increase of 26% from $20.9 million over 2022. Basic and diluted earnings for the nine-month period of 2023 improved over 2022 by $0.68 and $0.73, respectively, to $3.13 and $3.11.

President and CEO, Krista Snelling commented: "We are pleased to report record gross loans and growth in deposits in the third quarter. The Bank's total FDIC deposit market share for the County of Santa Cruz increased to 15.5% as of June 30, 2023 as compared to over 15.3% a year ago. Market share improvements over prior year were also recorded in Monterey County due to the opening of our Salinas branch in January. Also during the quarter, we successfully completed the formation of the Bank's holding company which positions us to take advantage of future strategic opportunities for growth and diversification."

On October 19, 2023, the Board of Directors of Bancorp, declared a quarterly cash dividend of $0.16 per common share, an increase of $0.01 per share from the prior quarter, payable on November 13, 2023 to shareholders of record at the close of business on November 7, 2023.

"We are pleased to raise our quarterly cash dividend for the third consecutive year," said Stephen Pahl, Chairman of the Board of Directors. "This increase reflects the Board's confidence in our franchise and the management team, our strong capital position and 2023 year-to-date financial results."

Financial Highlights

Performance highlights as of and for the quarter ended September 30, 2023, included the following:

Quarterly net income of $9.1 million increased 10% from $8.3 million in the prior quarter and decreased 1% from $9.2 million in the third quarter ended September 30, 2022. Net income for the nine-month period ended September 30, 2023 was $26.3 million, an increase of 26% from $20.9 million over the nine-month period of the prior year.

Total assets of $1.77 billion as of September 30, 2023, increased $26.9 million or 2%, compared to $1.75 billion as of June 30, 2023.

Liquidity position remains healthy. Primary liquidity ratio, defined as cash and equivalents, deposits held in other banks and unpledged available-for-sale ("AFS") securities as a percentage of total assets was 15.2% and 15.3% at September 30 and June 30, 2023, respectively.

Deposits totaled $1.53 billion at September 30, 2023, an increase of $61.5 million or 4%, compared to June 30, 2023. Relationship deposits, i.e. deposits gathered outside of wholesale channels, increased $69.6 million compared to June 30, 2023. Total uninsured deposits, excluding collateralized deposits, represented approximately 45% and 43% of total deposits as of September 30 and June 30, 2023, respectively. The increases reflected several significant new commercial deposit relationships and cyclical fluctuation from our large depositors influenced by tourism and the agricultural harvest cycle.

Record gross loans (excluding PPP) of $1.37 billion, an increase of $37.6 million or 3%, compared to June 30, 2023, and an increase of $140.6 million or 11%, compared to September 30, 2022. The Bank continues to capitalize on lending opportunities in both the core Santa Cruz market and its expanded markets with a strong mix of loans serving our business community and the development of multifamily housing.

Nonaccrual loans totaled $10.7 million, or 0.78% of gross loans, as of September 30, 2023, compared to $8.0 million, or 0.60% of total loans as of June 30, 2023. The increase during the third quarter is primarily due to the addition of a $3.0 million commercial real estate loan that is well-secured without loss expected.

Current Expected Credit Loss ("CECL") methodology was adopted January 1, 2023. The allowance for credit losses ("ACL"), which is based on estimating credit losses for the life of the loans in the portfolio, totaled $25.1 million, or 1.83% of total loans at September 30, 2023, compared to 1.85% at June 30, 2023. The slight decline in ACL as a percentage of total outstanding loans was due to adjustments to the qualitative factors, as well as slight declines in historical loss rates. In addition, the allowance on unfunded credit commitments, presented as part of other liabilities, increased $556 thousand in the third quarter of 2023 due to higher reserve level on unfunded multi-year construction commitments.

Provision for credit losses, including funded and unfunded credit commitments, was $858 thousand in the third quarter, compared to $486 thousand for the second quarter of 2023 and a reversal of $317 thousand for the same period in 2022. The provision was driven by growth in the portfolio, particularly the large and longer-term credit commitments mentioned above.

Net interest margin was 4.92% in the third quarter of 2023, compared to 4.93% in the prior quarter and 4.22% for the corresponding quarter in 2022. In the third quarter of 2023, higher yields on interest-earning assets were more than offset by increased funding costs. Net interest margin was 4.98% for the nine months ended September 2023, compared to 3.97% for the nine months ended September of 2022. The Bank's large proportion of adjustable-rate loans benefited from the rising prime index rate in 2022. However, the Bank experienced pressure from the rising cost of funds, particularly in 2023 following the failures of several high-profile banks which accelerated a trend of bank depositors shifting to higher rate deposit networks for increased FDIC insurance coverage and to higher yielding investment opportunities, increasing funding pressure across the banking industry.

For the quarters ended September 30, 2023 and June 30, 2023, return on average assets was 2.05% and 1.94%, respectively, return on average equity was 16.85% and 15.98%, respectively, and the return on average tangible equity was 19.33% and 18.42%, respectively. For the nine months ended September 30, 2023, return on average assets was 2.02%, compared to 1.60% for the nine months ended September 30, 2022, return on average equity was 16.90% and 14.89% for the nine months ended September 30, 2023 and 2022, respectively, and return on average tangible equity was 19.50% and 17.51% for the nine months ended September 30, 2023 and 2022, respectively.

The efficiency ratio was 38.23% for the third quarter of 2023, as compared to 41.52% in the prior quarter and 36.17% in the third quarter of 2022. The efficiency ratio was 39.83% and 42.41% for the nine months ended September 2023 and 2022, respectively.

All capital ratios were above regulatory requirements for a well-capitalized institution with a total risk-based capital ratio of 14.83% at September 30, 2023 compared to 14.57% at June 30, 2023. Tangible common equity to tangible asset ratio increased from 10.51% at June 30, 2023 to 10.89% at September 30, 2023.

Tangible book value per share increased to $22.65 at September 30, 2023 from $21.54 at June 30, 2023 and $18.77 at September 30, 2022.

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