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ANY BANK CAN HAVE BRANCHES.OURS HAS ROOTS.
Our deep, long-lasting client relationships have helped us become one of California’s
fastest-growing business banks—boasting an enviable balance sheet, a growing loan
portfolio, and very strong core deposit growth. Yet the true measure of our success isn’t
the money our clients place with us, but the trust they have in us. Thus, we continue to
expand our offerings, enhance our technology, and attract and retain the industry’s most
talented and dedicated business banking specialists. We’re proud of all we’ve achieved.
We’re even more proud of what we’ve helped others become: thriving, dynamic
middle-market companies who embrace the future with confidence and optimism.
We’re California Bank of Commerce.
California Bank of Commerce / Annual Report 2013
01.
Dear fellow shareholders
Other Loans
6%C&I
50%
CRE
44%
2013
LOANS DEPOSITS
$
$50
$100
$150
$200
$250
$300
20102009 2011 2012 2013
$153
$294
$143
$283
20102009 2011 2012 2013$
$50
$100
$150
$200
$250
$350
$300
$400
Loan Portfolio (Dollars Millions) Total Assets (Dollars Millions)
Total Loans & Deposits (Dollars Millions)
We are very pleased to report that we completed our most successful year in the history of
California Bank of Commerce. We reported net income of $2.6 million for the full year 2013.
Return on average common equity was 9.48% and return of average total assets was 0.72%.
Specific financial accomplishments for 2013 include:
• Net income after taxes improved by 45% over last year, to $2.6 million.
• Total loans increased by 15%, or $37 million, to $282 million.
• Net interest income increased by 14%, to $13 million.
• Non-interest bearing deposits increased by 26% to $105 million and represented 36%
of our total deposits at December 31, 2013.
• Average 2013 net interest margin improved to 3.84% compared to 3.71% for 2012.
• Basic earnings per share improved by 56% to $0.89.
• Total risk-based capital ratio remained strong at 12.71%.
• We’ve enjoyed fifteen consecutive quarters of profitability.
California Bank of Commerce / Annual Report 2013
03.
A brief history for our newest shareholders and clients: California Bank of Commerce (CABC) commenced operations in Lafayette, California in July 2007. The Board of Directors and Executive Management team raised $27.5 million to launch the new bank in a matter of several weeks. Several months later was the beginning of what is now known as the “Great Recession.” The Bank would either succumb to the great pressure of a tormented economy, or it would defeat those economic challenges and thrive. Today, California Bank of Commerce is thriving as a premier business bank in Northern California.
Currently, the national economy is trying to heal and the Bay Area economy is getting stronger. Meanwhile, the dynamic banking industry continues to transform through changing regulatory conditions, non-bank competitors, and industry consolidation. While many banks are having difficulty navigating these waters, we are doing just fine. While many banks are having difficulty growing assets and earnings, we continue to outpace our peers. And while many banks are having difficulty retaining and recruiting top banking talent, we continue to attract the best bankers. Our disciplined business strategy remains unchanged for 2014: • Provide customized business banking services to select middle-market companies located throughout the Greater Bay Area. • Retain, recruit and develop the most experienced commercial bankers. • Use technology to create efficiencies for our clients and our Bank. • Safeguard our shareholders’ capital with strong risk management practices and earnings.
Our single branch location in Lafayette is enhanced with a loan production office in San Jose, where our asset-based lending team is located. We have proven that we can provide high-quality customized business banking solutions over a wide geography by leveraging technology. Our focused approach to banking is grounded in taking the time to know our clients. We stick with what we know best—relationship business banking. The banking industry is undergoing a transformation. We believe that industry consolidation driven by the larger banks will provide continued disruption in our markets and opportunities for us to accelerate our growth. As the number of banks in California continues to shrink, we believe our brand of banking is relevant and proven. We are one of the fastest-growing business banks in California. On behalf of the entire Board of Directors, we thank our dedicated staff for their great work, our clients for their continuing trust, and our shareholders for their ongoing support. The best is yet to come.
We continue taking great pride by being…defined by the company we keep.
Best regards,
Terry A. Peterson Stephen A. CortesePresident and Chief Executive Officer Chairman of the Board
California Bank of Commerce / Annual Report 2013
05.
Professional Services From attorneys and accountants to real estate brokerage firms and insurance
companies, Northern California’s leading professional services firms count on
California Bank of Commerce.
We partner with large, regional firms and smaller boutiques—crafting treasury services
and general banking solutions tailored to every client’s needs and goals. For example,
some firms often carry large deposit balances to fund working capital needs, while
others have longer-term liquidity needs. Either way, we’ll develop a deposit strategy to
complement their overall business objectives.
Our team takes the time to get to knoweach firm from every angle.
Likewise, many professional services firms also have seasonal cash flow requirements.
So we’ll put together a customized credit structure to help them thrive during these
times. The point is, no two firms are alike. This is why our team takes the time to get
to know each firm from every angle—resulting in nimble, creative and timely solutions.
INDUSTRY HIGHLIGHTS 2013 | Pleasant Hill: Provided long-term acquisition financing for
a regional CPA firm to allow for expansion and diversification of its accounting practice.
San Ramon: Provided cash management, international wire, and foreign currency transactions
for a large, independently owned CPA firm with multi-state locations and global affiliations.
California Bank of Commerce / Annual Report 2013
07.
Few industries are more challenging than construction. The economy, bad weather and funding
issues—all can derail even the best-laid plans. And yet, since the founding of California
Bank of Commerce, in good times and bad we have continually provided our contractor
clients with the customized credit facilities they need to compete in their ever-changing
market. Because of our deep knowledge of the contractor business model and our clients’
financial needs, we are in a unique position to work closely with our clients’ business
partners—sureties and accountants—to create customized credit solutions that fit the
needs of all parties. We understand the cyclicality of the construction industry. We are
patient and loyal to our clients, even at the bottom of the construction cycle.
Recognized as a premier contractor’sbank in Northern California.
In addition to providing capital and equipment financing, California Bank of Commerce
provides very competitive contractor escrow retention accounts, as well as many owner/user
real estate financing options. It’s little wonder that California Bank of Commerce is
recognized as a premier contractor’s bank in Northern California—with more than 50
relationships with general contractors, subcontractors, and surety providers throughout
the region.
INDUSTRY HIGHLIGHTS 2013 | San Francisco/Oakland: Provided larger and longer-term
credit facilities for a number of construction companies that worked on the new eastern
span of the San Francisco-Oakland Bay Bridge. Alameda: Utilizing the SBA 504 program,
including a construction phase, helped a local marine contractor build and finance a
multimillion-dollar crane barge when other banks were unable to produce a flexible and
affordable financing structure. San Francisco: Proudly provided financing to a rapidly growing
Disabled Veteran Business Enterprise general contractor—giving an opportunity to one
who’d given so much to his country.
Contractors and Construction
California Bank of Commerce / Annual Report 2013
09.
Food and Beverage Northern California is famous as a “foodie’s paradise,” thanks largely to the region’s many
leading food and beverage companies. At California Bank of Commerce, we’re proud to
support these companies in this competitive and often challenging environment—providing
them with comprehensive, customized financial services.
From new product development and launch to ongoing facility modernization, we’re with
our F&B clients at every step…with strategies and solutions to help maximize margins,
secure distribution and placement, and support seasonal fluctuations in working capital.
Our industry specialists are adept at financing new and ongoing equipment needs
associated with ever-changing food safety and handling mandates. They’re also experts in
helping acquire land and buildings and financing growing accounts receivables and inventory.
We help keep our clients at the forefrontof innovation.
But what makes our people true partners are their deep and personal connections with
industry leaders and resources. We provide our clients with direct access to a vast network
of co-packers, food brokers, suppliers, and clients. And we help keep them at the forefront
of innovation by introducing them to experts in lean manufacturing, food safety/ISO
certification, and product formulation/reformulation. It’s all the ingredients that go into
making a successful business.
INDUSTRY HIGHLIGHTS 2013 | East Bay: Assisted a rapidly expanding condiments company
by establishing an asset-based, working capital financing arrangement that scaled with growth
in the company’s accounts receivable and inventories. South Bay: Helped a commercial bakery
restructure existing financing to include increasing levels of working capital and term financing.
North Bay: Solved a snack food company’s sourcing issue through an introduction to a co-packer
known to the Bank. San Francisco: Provided a multiunit restaurant company with an array of
cash management services plus working capital financing.
California Bank of Commerce / Annual Report 2013
11.
Practice Acquisition FinancingJust as personal relationships are critical to providing successful dental care, they’re
also the foundation of business success. That’s why California Bank of Commerce has a
dedicated team that provides dental specialists with expert guidance through all phases of
their career cycle—from practice acquisition through retirement. At every step we deliver
a wide range of personalized solutions, including acquisition loans, equipment financing,
lines of credit, commercial real estate financing, and cash management services. But what
our clients find most valuable is our proven experience and unique understanding of the
dental practice: the challenges and the opportunities.
At every step we deliver a wide range ofpersonalized solutions.
Our strong relationships throughout the dental community give us unmatched access to
information and resources. We then use these tools to craft effective strategies for those
looking to acquire an existing practice, expand their operations, or relocate to other areas.
We see things other banks can’t, because we know people other banks don’t.
INDUSTRY HIGHLIGHTS 2013 | Berkeley: Funded a commercial term loan to help a dental
practice acquire 50% of a thriving periodontics and dental implants practice. San Francisco:
Granted a term loan to a noted Bay Area oral and maxillofacial surgeon for the purchase of
two additional dental offices. Palo Alto: Granted a commercial term loan to help a partner
acquire the remaining 50% of a practice—as well as equipment purchases and working capital.
Modesto: Provided a commercial real estate loan to help a leading local dentist purchase and
convert 2,700 s.f. office/condo into owner-occupied dental offices.
California Bank of Commerce / Annual Report 2013
13.
California Bank of Commerce / Annual Report 2013
15.California Bank of Commerce / Annual Report 2013
14.
STATEMENTS OF INCOME For the Years Ended December 31, 2013 and 2012
Balance sheetsDecember 31, 2013 and 2012 Assets 2013 2012 Cash and due from banks $ 6,785,137 $ 5,776,321 Interest-bearing deposits in banks 17,477,455 38,374,829 Total cash and cash equivalents 24,262,592 44,151,150
Investment securities: Available-for-sale, at estimated fair value 46,276,551 46,718,089 Held-to-maturity, at amortized cost (estimated fair value of $3,821,629 at December 31, 2012) — 3,810,895
Loans, less allowance for loan losses of $5,250,000 in 2013 and $4,675,000 in 2012 277,578,994 241,473,981 Premises and equipment, net 241,971 195,679 Bank-owned life insurance (BOLI) 9,541,866 7,391,725 Deferred income taxes, net 2,772,295 2,019,607 Accrued interest receivable and other assets 3,844,838 3,835,463 Total assets $ 364,519,107 $ 349,596,589 Liabilities and shareholders’ equity Deposits: Non-interest bearing $ 104,642,228 $ 83,181,730 Interest bearing 189,498,459 198,300,033 Total deposits 294,140,687 281,481,763
Other borrowings 29,000,000 29,000,000 Accrued interest payable and other liabilities 2,497,446 2,418,446 Total liabilities 325,638,133 312,900,209 Shareholders’ equity: Preferred Stock—no par value: 10,000,000 shares authorized Series C, noncumulative, $1,000 per share liquidation value, 11,000 shares issued and outstanding at December 31, 2013 and 2012 10,949,443 10,949,443
Common stock no par value; 40,000,000 shares authorized; 2,768,893 issued and outstanding in 2013 and 2,757,243 in 2012 30,737,603 30,342,414
Accumulated deficit (2,571,451) (5,017,814) Accumulated other comprehensive (loss) income, net of taxes (234,621) 422,337 Total shareholders’ equity 38,880,974 36,696,380
Total liabilities and shareholders’ equity $ 364,519,107 $ 349,596,589
Interest Income: 2013 2012 Interest and fees on loans $ 13,674,501 $ 12,386,016 Interest on investment securities 648,611 553,138 Interest on interest-bearing deposits in banks 96,895 108,624 Total interest income 14,420,007 13,047,778
Interest Expense: Interest on deposits 932,200 1,167,674 Interest on borrowings 452,092 443,911 Total interest expense 1,384,292 1,611,585 Net interest income before provision for loan losses 13,035,715 11,436,193
Provision for Loan Losses: 263,370 1,249,688 Net interest income after provision for loan losses 12,772,345 10,186,505 Non‑interest Income: Service charges and fees 1,139,226 794,694 Net gains on sales of loans 78,349 362,161 Net gains on sales of investment securities 18,086 286,314 Earnings on BOLI 150,141 252,472 Other 83,261 44,519 Total non‑interest income 1,469,063 1,740,160
Non‑interest Expenses: Salaries and employee benefits 6,512,034 5,930,106 Occupancy and equipment 830,736 708,068 Other 2,576,784 2,168,671 Total non‑interest expenses 9,919,554 8,806,845 Income before provision for income taxes 4,321,854 3,119,820
Provision for Income Taxes 1,765,491 1,354,264 Net Income 2,556,363 1,765,556
Preferred Stock Dividend (110,000) (201,667) Income to common shareholders $ 2,446,363 $ 1,563,889
Earnings per common share: Basic $ 0.89 $ 0.57 Diluted $ 0.85 $ 0.57
Weighted average number of shares outstanding – basic 2,760,432 2,750,217 Weighted average number of shares outstanding – diluted 2,873,483 2,750,252
16.
What makes a California Bank of Commerce Relationship Manager?
Tenacity. Ability. And a deep, abiding interest in their clients’ success. Our bankers are business owners too—each with a stake in CABC. So they know the opportunities and excitement a business owner experiences every day. But perhaps more importantly, they know the challenges business owners face. Which gives them the ability to craft strategies to help you meet yours—whether it’s providing financing to expand or introducing you to potential partners, contacts, and customers. Clearly, our Relationship Managers do more than provide business banking. They build personal connections based on their experience, knowledge, and ability to turn financial complexity into actionable advice. And because they already have extensive industry insight, they spend their time getting to know you and your unique business. They’ll immerse themselves in your goals, your plans, your vision of the future. Then they’ll quickly create personalized solutions that are simple and straightforward. And because they’re empowered to make decisions, they’ll turn those solutions into results. Now, and for years to come. Because when you’ve got a CABC Relationship Manager on your side, you’ve got a banker for life.
Board of Directors• Stephen A. Cortese
Chairman of the Board, California Bank of Commerce Managing Partner, Cortese Investment Company
• Terry A. Peterson President and Chief Executive Officer
California Bank of Commerce
• Andrew J. Armanino Managing Partner, Armanino LLP
• Edward B. Collins Private Investor
• Kevin J. Cullen Chief Financial Officer, Olson & Co. Steel
• Stephen R. Dathe Vice President and General Manager A & B Die Casting Company
• Donald J. Kintzer Principal Consultant, Korora Partners
• Rochelle G. Klein Retired, Goldman Sachs & Co.
• Thomas R. Morehouse Retired President, Filesafe Inc.
• John H. Sears Retired, Special Counsel Sheppard, Mullin, Richter & Hampton
• Edmond E. Traille Founding Partner & CEO, GALLINA LLP
Executive Officers• Terry A. Peterson
President and Chief Executive Officer
• Thomas M. Park Executive Vice President
• Steven E. Shelton Executive Vice President
• Stephen P. Tessler Executive Vice President, Director of Sales
• Randall D. Greenfield Executive Vice President, Chief Financial Officer
• John E. Lindstedt Executive Vice President, Chief Credit Officer
• Virginia M. Robbins Executive Vice President, Chief Operating Officer
• Mark A. DeVincenzi Executive Vice President, CMO & Investor Relations
• James Christiansen Executive Vice President CBC Business Credit
• Tom Dorrance Senior Vice President, Chief Information Officer
• Vivian Z. Mui Senior Vice President, Senior Credit Officer
• Tommiette Rey Assistant Vice President
Corporate Secretary
Relationship Managers • Colleen Atkinson
Senior Vice President, Relationship Manager [email protected]
• Terry Guillory Senior Vice President, Relationship Manager [email protected]
• Tony Mesones Senior Vice President, Relationship Manager [email protected]
• Cindy Peters Senior Vice President, Treasury Management [email protected]
• Ray Strzelecki Senior Vice President, Relationship Manager [email protected]
• Jamie Smith Senior Vice President, Relationship Manager [email protected]
• Michele Wirfel Senior Vice President, Relationship Manager [email protected]
• Franklin Haggas Vice President,
Relationship Manager [email protected]
• Timothy Healer Vice President,
Relationship Manager [email protected]
California Bank of Commerce / Annual Report 2013