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Low Interest Rates Took a Toll on Bank’s Net Profit

California Bank & Trust, San Diego’s largest commercial bank, saw its net profit drop 5.4 percent last year or by $7 million from 2011, mostly as a result of compressed net interest margins.

For the year, CB&T reported a net profit of $127.1 million, compared with net earnings of $134.4 million in 2011.

Like practically all banks, CB&T makes most of its money on the difference between what it charges on its loans and what it pays out on its deposits. Because of the prolonged low interest rate environment, new loans that are booked yield lower revenue compared with older loans, hence the reduced net interest margin.

Eric Ellingsen, CB&T’s chief financial officer, said 2012 had some positives and negatives, but overall, the bank’s growth in loans wasn’t large enough to offset the reduction in net interest margin. For the full year, the bank’s margin was 4.74 percent, compared with 5.2 percent for all of 2011.

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Forty six basis points might not sound like much but when applied to an $11 billion asset bank, it is.

As for lending, CB&T, which has 102 branches in the state including 25 in San Diego, did more of it last year. The loan balance as of the end of 2012 increased 1 percent to $7.77 billion. That excludes the tainted loans it holds on its books from two failed banks, Alliance and Vineyard.

Those credits, which come with loss-sharing agreements with federal regulators, shrunk to $491 million from $703 million at the end of 2011.

Ellingsen declined to reveal loan origination numbers, but said year-over-year they increased by “mid-single digits.” The bank generated more loans in just about every category — commercial, commercial and industrial, and in mortgages, he said.

In the fourth quarter, CB&T saw a few bigger loan transactions, which Ellingsen said were directly related to higher capital gains tax rates taking effect Jan. 1.

Credit quality of CB&T’s portfolio continues to improve with its nonperforming asset ratio (excluding the federally-protected loans) at 1.66 percent, down from 2.04 percent at the end of 2011.

Net charge-offs as a percentage of total loans fell to 0.3 percent compared with 0.54 percent in 2011.

Also affecting the bank’s reduced profits was a $9.2 million loss it took on the sale of collateralized debt obligations it sold to its parent bank, Zions Bancorporation in the first quarter.

Salt Lake City-based Zions reported net income for the full year of $58.3 million, down from $89 million in 2011.

Last year, Zions repaid the remaining $700 million in federal funds it received from the Treasury Dept.’s Troubled Asset Relief Program. It received $1.4 billion in all from that program, and paid $253 million in dividends to the Treasury.

CB&T plans to open a newly constructed branch in Carlsbad near Palomar Airport that will replace a branch that is two blocks away.

BofI hits record profit again: BofI Holding Inc., the San Diego based parent of BofI Federal Bank, reported record fiscal 2013 second quarter profit of $9.7 million, up 47 percent from the like quarter of the prior fiscal year. It was the fourth consecutive quarter of record earnings for the online bank.

For its six months ended Dec. 31, 2012, BofI reported net income of $18.7 million, up 42 percent from the like time of the prior fiscal year.

BofI’s loans grew by $628 million over the 12 months, up 41 percent; in the second quarter alone, loans were up 70 percent compared with the second quarter of FY 2012.

Total assets increased by $650 million to $2.87 billion, making it the second largest locally based bank behind CB&T with about $11 billion in assets.

Asset quality remains strong with nonperforming assets making up only 0.79 percent of total assets.

Capital ratios all exceed regulatory minimums, with total risk-based capital at 14.6 percent, above the 10 percent needed to be regarded as well-capitalized.

Vibra profits decline: Vibra Bank, with a single office based in Chula Vista, reported unaudited, fourth quarter net profit of $183,000 compared with a profit of $576,000 for the like quarter of 2011.

For the full year, Vibra reported net income of $1.15 million, compared with net income of $1.28 million in 2011.

CEO Scott Parker said last year the bank increased staffing and deployed “significant resources” to support continued growth, which incurred higher costs.

Vibra’s loan portfolio grew by $9 million over the year to $85 million at year end, while deposits were up by $6 million to $96 million. The bank’s total assets increased $6 million to $110 million as of the end of 2012.

Vibra continues to hold plenty of capital, with total risk-based capital ratio at 18.99 percent, nearly double the level to be considered as a well-capitalized institution. It also is carrying no problem loans or foreclosed real estate as of the end of last year.

Small Change: U.S. Bank provided $48 million in financing to Bridge Housing to develop a 250-unit apartment project in the East Village area of San Diego called Celadon at Ninth and Broadway … San Diego County Credit Union named Lori Beador senior vice president, controller … CommerceWest Bank, based in Irvine and with an office in San Marcos, reported 2012 net income of $4.2 million, up 199 percent from 2011. Total assets grew 17 percent to nearly $347 million.

Send any news about locally based financial companies to Mike Allen via email at mallen@sdbj.com He can be reached at 858-277-6359.

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