ANNUAL REPORT PRESERVING THE OLD. GROWING THE NEW.

Transcription

1 2015 ANNUAL REPORT PRESERVING THE OLD. GROWING THE NEW.

2 02 HISTORY The Bank of Charlie and Howard As the Southern California economy grew, the need for more sophisticated financial tools also grew. Community Bank s range of services expanded to meet these evolving needs. Today, Community Bank provides virtually every financial service needed by businesses in Southern California, including lending to ESOPs, financing of foreign trade and hedging of foreign currency. The story of Community Bank exemplifies the entrepreneurial business spirit of California. Two brothers, Charlie and Howard Cook, came to Southern California in the 1920s with their resourcefulness and determination to succeed. Through years of hard work, they built a company that manufactured concrete mixers for the construction trade. The Great Depression severely reduced demand. Even worse, most banks stopped financing construction equipment. The brothers began financing equipment for their customers who were small business owners. Frustrated with dealing with large banks, Charlie decided to open his own bank. Not one bank had been formed in California since the stock market crash of 1929 and the state banking office had trouble finding the application forms for a bank charter. But Charlie overcame all these hurdles, and on August 18, 1945, Huntington Park Bank opened its doors. From its inception, the Bank was successful, ending its first year with $896,000 in total assets. In 1950, Huntington Park Bank changed its name to Community Bank to reflect its increased geographical coverage and to underscore the Bank s commitment to the communities it served. What hasn t changed is dedication to integrity and customer service the values so important to Charlie and Howard when they built their business. These same values still define Community Bank today and into the future. The Cook family is proud of the growth and success that Community Bank has achieved in 70 years as Southern California s Community Bank. Our success is built on the shared values of integrity, teamwork and excellence that stem from the Cook family and are embedded in every employee and transaction at the Bank. In 2016, we are committed to continue providing exceptional service and options to our customers and hope to become Southern California s leading Community Bank. Kristen D. Stovesand Great-granddaughter of Founder Charles Cook & Board Member

3 AT-A-GLANCE 03 $3.6 Billion in Assets Historic Loan & Deposit Data 16 Locations Total Loans Core Deposits Employee Tenure 35+ Years 2% Years 2% Years 3% Years 6% Years 9% 5-9 Years 20% >5 Years 42% 5x75 Our goal is to grow to $5 billion in assets by our 75th year in business.

4 04 BANK STRENGTH ($ in thousands) FINANCIAL HIGHLIGHTS EARNINGS Actual Actual Proforma for the years ended December Return on equity 9.22% 9.08% 10.06% Return on assets 0.75% 0.79% 0.87% Net interest margin 3.20% 3.30% 3.20% Book value per common share $94.81 $99.38 $ ASSET QUALITY as of December 31 Actual 2014 Actual 2015 Proforma 2015 Reserve for loan losses to total loans 1.55% 1.50% 1.50% Non-performing loans as a % of total loans Non-performing assets as a % of total assets 0.67% 0.49% 0.49% 0.57% 0.57% 0.54% COMPARATIVE STATEMENTS OF OPERATION for the years ended December 31 INTEREST INCOME INTEREST EXPENSE Interest-bearing deposits 8,678 7,353 7,353 Other borrowed funds/securities sold under agreements to repurchase 10,316 6,776 9,590 Total interest expense 18,994 14,129 16,943 Net interest income 106, , ,469 Provision for loan losses Net interest income after provision for loan losses NON-INTEREST INCOME Actual 2014 Actual 2015 Proforma 2015 Loans $ 95,542 $ 98,969 $ 98,969 Investment securities 29,509 26,446 28,390 Interest-bearing bank balances Total interest income 125, , , , , ,469 Service charges on deposits 4,088 4,084 4,084 Fees and commissions 2,064 2,166 2,166 Bank-owned life insurance 1,015 1,539 1,539 Gross gain on sale of securities 867 5, Other income 3,958 4,610 4,610 Total non-interest income 11,992 17,701 12,887 COMPARATIVE STATEMENTS OF CONDITION as of December 31 ASSETS Actual 2014 Actual 2015 Total cash and cash equivalents $ 46,819 $ 48,907 Investment securities 1,156, ,392 Loans 2,280,259 2,427,925 Loan loss reserve (35,329) (36,327) Bank-owned life insurance 48,757 65,296 Other assets 88,230 86,062 TOTAL ASSETS $ 3,585,719 $ 3,550,255 LIABILITIES AND SHAREHOLDERS EQUITY Non-interest-bearing deposits $ 882,601 $ 916,753 Interest-bearing deposits 1,714,189 Total deposits 2,596,790 2,589,442 Other borrowed funds/securities sold under agreements to repurchase 670, ,000 Other liabilities 21,832 $24,911 Total liabilities 3,289,122 3,239,353 Total shareholders equity 296, ,902 TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $ 3,585,719 $ 3,550,255 NON-INTEREST EXPENSE Salary and employee benefits 50,853 50,221 50,221 Occupancy expense 7,977 6,888 6,888 Debt termination expense - 11,414 - Other expense 16,762 15,701 15,701 Total non-interest expense 75,592 84,224 72,810 Income before taxes 42,499 44,816 50,546 Income tax expense 16,693 17,051 19,460 NET INCOME $ 25,806 $ 27,765 $ 31,086 *Proforma information is shown to reflect the bank s performance excluding the impact of a balance sheet restructuring strategy executed in June The restructuring involved the payoff of $153 million in FHLB advances funded by security sales with a one-time net cost of $3.8 million.

5 LETTER FROM THE CEO PRESERVING THE OLD. GROWING THE NEW. 05 PRESERVING THE OLD. Community Bank s history and continued family ownership is an important part of the culture of your Bank today. The Bank was founded in 1945 by two brothers Charlie and Howard Cook who manufactured and sold construction equipment. After World War II, their customers found it hard to get the financing necessary to buy the cement mixers, trucks and other equipment the Cooks were selling and the brothers saw an opportunity. The brothers solution was to create a bank that would provide funding and services for this customer base and the result was YOUR Community Bank. Now, the Cooks could help their customers purchase the equipment they needed by providing the financing. This entrepreneurial spirit and commitment to servicing you, our customers, is still a driving force for the Bank today. This is at the core of our heritage at Community Bank and we will continue to preserve that going forward. Another aspect of the Cook legacy that continues to drive the Bank is its family orientation. This continues to be reflected in the Bank s ownership and in its shared values. These values Integrity, Teamwork and Excellence remind us to remain focused on providing our customers with the same exceptional service and support that Charlie and Howard provided some 70 years ago. GROWING THE NEW. While preserving the old, Community Bank has evolved over the years into a modern bank with first-class technology and products while keeping our customer centric approach. As you ll see in the financial reports, 2015 was a great year for the Bank. We had a high performing year, earning $27.8MM, a record, and attaining record equity, in excess of $300MM. We also broke records in terms of deposit levels, foreign exchange trades and fraud losses averted for our clients among other records. Community Bank is in a good position to move toward achieving its goal of being a $5BN bank by the Bank s 75 th year in business. This is a very reasonable goal and one that is within reach if your Bank continues to focus on doing the right thing for its clients. Over the past year, the Bank made transitions in the board room, organizational changes, technology investments and operational updates that are intended to better position the Bank to achieve this goal. Many of the Bank s greatest strengths come from our heritage. At the same time, Community Bank continues to grow and evolve to meet the needs of its customers and communities. Our goal for 2016 and beyond is to preserve the old and grow the new. David R. Misch Chief Executive Officer

6 06 HIGHLIGHTS COMMUNITY BANK RECORDS IN 2015 Wire volume up 19% Equity greater than $300MM Demand Deposit Accounts (briefly) crossed the billion mark Installed Remote Deposit Capture devices up 13% More than 300 mobile banking installations SBA team celebrates being ranked 31 st in the nation 2015 ACCOMPLISHMENTS Assets at year end totaled $3.6 billion Deposit Support Group prevented over $1.0 million in fraud SBA ranked 31 st nationally in 7(a) loans Average commercial loans increased over 7% or $105MM+ Average Real Estate Group loans increased over 10% or $70MM+

7 BUSINESS CENTER ACCOMPLISHMENTS Commerce and South Bay surpassed $100 million in loans Double digit loan growth for: Commerce CH Cook Huntington Beach Irvine Pasadena Santa Clarita Doubled year over year deposits: CH Cook Huntington Beach Irvine Fontana crossed the $200 million mark in deposits Burbank and Irvine grew deposits more than $50 million

8 08 OUR SHARED VALUES Community Bank is committed to serving the communities in which we live, work and do business. We strive to establish partnerships with organizations, businesses and individuals within our communities and the surrounding neighborhoods. Our philosophy of local involvement is demonstrated at the corporate level and further expressed in the time and energy our employees devote each year to community service activities. OUR COMMUNITY FOCUS Financial Literacy Excellence Teamwork Integrity VOLUNTEER HOURS Community Development Veteran Organizations Integrity Teamwork Excellence

9 09 COOK BROTHERS SCHOLARSHIP NUMBER OF SCHOLARSHIPS INCREASED 214% Charlie and Howard Cook believed in the importance of education and provided a scholarship fund for employees children and grandchildren. In 2014 the Bank reinstated the program and awarded seven scholarships. In 2015 that program grew to a total of 22 recipients compared to 7 in The Bank gave nearly $50,000 in awards to these deserving young men and women. The scholarship recipients work diligently to achieve superior grades, provide leadership in campus activities and volunteer their time and efforts giving back to their community. The Community Bank Board of Directors and the Cook family look forward to the ongoing success of this program for many years to come. SCHOOLS INCLUDE: Arizona State Berkeley City College Boise State Brigham Young University Cal State Fullerton Cal Poly San Luis Obispo Cypress College Golden West College Howard University Norco College Pacific University Santa Ana College UC Davis University of Michigan University of Washington Woodbury University

10 10 EXECUTIVE MANAGEMENT DAVID R. MISCH Chief Executive Officer THOMAS C. BAKER Chief Operating Officer ALAN BUCKLE President and Chief Banking Officer ROBERT J. CASSIDY Chief Human Resources Officer PAUL F. RODENO Chief Credit and Risk Officer NANCY L. KARLSON Chief Financial Officer

11 11 COMMUNITY BANK BOARD OF DIRECTORS Listed top left to bottom right: CRAIG H. STEWART CHARLES E. COOK MATTHEW DENMARK KYLE R. JONES MARSHALL V. LAITSCH LYLE R. KNIGHT ROBERT J. KUSHNER CHARLES D. McCLUER KRISTEN D. STOVESAND DAVID R. MISCH WILLIAM L. BROWNING

12 Partnership Banking CBank.com MKT500 (4/16) SBA Preferred Lender Member FDIC Equal Housing Lender