West Coast Community Bancorp Reports Growth in Earnings for the Second Quarter of 2025; Board Declares Increase in Quarterly Cash Dividend by $0.01 to $0.21 per Share

Performance highlights as of and for the three- and six-month periods ended June 30, 2025, included the following:

• Net income for the quarter ended June 30, 2025, increased $1.2 million, or 10.6%, from the first quarter of 2025 due to a decrease in the provision for credit losses of $762 thousand (primarily attributable to less volume of loan growth in the second quarter compared to the first quarter of 2025), combined with an increase in net interest income of $462 thousand and an increase in noninterest income of $400 thousand. The increase over the quarter ended June 30, 2024, was mainly due to the merger with 1^st Capital Bancorp on October 1, 2024, ("the Merger") as well as organic growth, partially offset by higher organic loan-growth-related provision for credit losses in 2025. Adjusted net income (non-GAAP¹) would have been $13.1 million, $12.0 million and $8.5 million for the quarters ended June 30, 2025, March 31, 2025, and June 30, 2024, respectively. Adjusted net income (non-GAAP¹) would have been $25.1 million and $17.8 million for the six-month periods ended June 30, 2025, and 2024.
• Basic and diluted EPS of $1.23 and $1.22 in the second quarter of 2025, respectively, both increased $0.12 per share, or 11%, from the first quarter of 2025. Basic and diluted EPS both increased $0.25 per share from $0.98 and $0.97, respectively, in the second quarter of 2024. Basic and diluted EPS of $2.34 and $2.31 for the six-month period ended June 30, 2025, respectively, increased $0.25 and $0.23 per share, respectively, from the previous year. Adjusted basic and diluted EPS (non-GAAP¹) for the quarter ended June 30, 2025, excluding after-tax charges related to the Merger, would have been $1.25 and $1.23, respectively. Adjusted basic and diluted EPS (non-GAAP¹) for the quarter ended March 31, 2025, would have been $1.15 and $1.13, respectively. Adjusted basic and diluted EPS (non-GAAP¹) would have been $2.39 and $2.37 for the six-month period end June 30, 2025, an increase of $0.26 for both compared to basic and diluted EPS of $2.13 and $2.11 for the six-month period end June 30, 2024.
• Total assets were $2.7 billion at both June 30 and March 31, 2025, compared to $1.7 billion at June 30, 2024. The increase of $938.6 million, or 55%, over June 30, 2024, was largely the result of the Merger, which added $994.3 million in assets including $14.3 million of goodwill and $27.7 million of core deposit intangible assets on October 1, 2024.
• 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, were 11.7%, 11.8% and 11.7% at June 30, 2025, March 31, 2025, and June 30, 2024, respectively.
• Taxable equivalent net interest margin was 5.30%, 5.29% and 4.99% for the quarters ended June 30, 2025, March 31, 2025, and June 30, 2024, respectively. Taxable equivalent net interest margin for the six-month periods ended June 30, 2025, and 2024 was 5.30% and 4.93%, respectively. Net interest margin excluding the purchase discount accretion on the acquired loan portfolio and accelerated accretion on discount of partially redeemed subordinated debt (non-GAAP¹) for the quarters ended June 30, 2025, and March 31, 2025, was 4.91% and 4.86%, respectively, and 4.88% for the six-month period ended June 30, 2025.
• The cost of funds was 1.41% in the second quarter of 2025 compared to 1.32% in the prior quarter and 1.54% in the second quarter of 2024. The cost of funds for the six-month periods ended June 30, 2025, and 2024 was 1.37% and 1.48%, respectively. The increase in the cost of funds in the second quarter of 2025 over the preceding quarter was driven by a greater utilization of higher cost borrowings in addition to $160 thousand in expense related to accelerated discount recognition from early redemption of $1 million in par value of Bancorp's subordinated debentures assumed in the Merger.
• For the quarters ended June 30, 2025, March 31, 2025, and June 30, 2024, return on average assets ("ROAA") was 1.95%, 1.78% and 1.93%, respectively, return on average equity ("ROAE") was 14.71%, 13.83% and 13.63%, respectively, and return on average tangible equity ("ROATE") was 18.14%, 17.23% and 15.37%, respectively. Excluding merger-related items for the quarters ended June 30, 2025, March 31, 2025, and June 30, 2024, adjusted ROAA (non-GAAP¹) were 1.98%, 1.84% and 1.99%, respectively, adjusted ROAE (non-GAAP¹) was 14.93%, 14.25% and 14.11%, respectively, and adjusted ROATE (non-GAAP¹) was 18.41%, 17.76% and 15.90%, respectively.
• For the six-month periods ended June 30, 2025, and June 30, 2024, return on average assets ("ROAA") was 1.87% and 2.04%, respectively, return on average equity ("ROAE") was 14.28% and 14.79%, respectively, and return on average tangible equity ("ROATE") was 17.70% and 16.71%, respectively. Excluding merger-related items for the six-month periods ended June 30, 2025, and 2024, adjusted ROAA (non-GAAP¹) was 1.91% and 2.07%, respectively, adjusted ROAE (non-GAAP¹) was 14.60% and 15.03%, respectively, and adjusted ROATE (non-GAAP¹) was 18.10% and 16.98%, respectively.
• The efficiency ratio was 45.16% for the second quarter of 2025 compared to 46.48% in the prior quarter and 45.30% in the second quarter of 2024. The efficiency ratio for the six-month periods ended June 30, 2025, and 2024 was 45.81% and 44.05%, respectively. Excluding merger-related items, the adjusted efficiency ratio (non-GAAP¹) was 44.85% for the second quarter of 2025, 45.38% for the first quarter of 2025 and 43.80% for the second quarter of 2024. The adjusted efficiency ratio (non-GAAP¹) was 45.11% and 43.30% for the six-month periods ended June 30, 2025, and 2024, respectively.
• All capital ratios were above regulatory requirements for a well-capitalized institution with a total risk-based capital ratio of 14.46%, 14.23% and 16.22% at June 30, 2025, March 31, 2025, and June 30, 2024, respectively. Tangible common equity to tangible asset ratio was 11.26%, 10.75% and 13.00% at June 30, 2025, March 31, 2025, and June 30, 2024, respectively.
• Tangible book value per share was $27.51 at June 30, 2025, compared to $26.32 at March 31, 2025, $25.95 at June 30, 2024, and $27.20 at September 30, 2024, immediately prior to the Merger. Increase in the second quarter of 2025 was driven by net income of $12.9 million during the second quarter. 

Merger with 1^st Capital Bancorp

The merger between West Coast Community Bancorp and 1^st Capital Bancorp was closed on October 1, 2024, with the core system conversion completed in December 2024. At the effective time of the closing, each share of 1^st Capital Bancorp common stock was converted into the right to receive 0.36 shares of common stock of Bancorp. As a result, 2,071,483 Bancorp shares were issued as of October 1, 2024.

Interest Income, Interest Expense and Net Interest Margin

Net interest income of $32.8 million for the quarter ended June 30, 2025, increased $462 thousand from $32.3 million for the quarter ended March 31, 2025, and increased $12.6 million, or 62.2%, from $20.2 million for the quarter ended June 30, 2024. The quarter-over-quarter increase in 2025 was largely the result of one extra day of interest earned. Net interest income for the six-month periods ended June 30, 2025, and 2024 was $65.2 million and $40.5 million, respectively. The increase of $24.6 million, or 61%, from the six-month period ended June 30, 2024, was mainly due to the Merger as well as organic growth.

The cost of funds increased nine basis points from 1.32% in the first quarter of 2025 to 1.41% in the second quarter of 2025. The increase in the cost of funds was driven by greater reliance on short-term borrowings during the second quarter of 2025 compared to the preceding quarter. Additionally, during the second quarter of 2025, $1 million in par value of Bancorp's subordinated debentures assumed from the Merger were redeemed early, resulting in $160 thousand additional interest expense from accelerated accretion of the discount. The cost of funds decreased 13 basis points from 1.54% in the second quarter of 2024, as we benefit from the lower costing funding base of the deposit franchise from 1^st Capital Bancorp. The cost of funds decreased 11 basis points from 1.48% in the six-month period ended June 30, 2024, to 1.37% in the six-month period ended June 30, 2025, primarily for the same reason.

For the second quarter of 2025, taxable equivalent net interest margin was 5.30%, compared to 5.29% in the first quarter of 2025 and 4.99% for the corresponding quarter in 2024. For the six-month period ended June 30, 2025, taxable equivalent net interest margin was 5.30%, compared to 4.93% for the corresponding period in 2024. The earning asset yield for the second quarter of 2025 increased nine basis points over prior quarter due to a slight increase in the loan yield from growth in high yielding construction loan products in addition to a shift in the overall earning asset composition toward loans from lower yielding investments. The increase in the earning asset yield compared to prior quarter was largely offset by the cost of funds increases discussed above resulting in a relatively stable overall net interest margin quarter-over-quarter. Excluding the purchase discount accretion on the acquired loan portfolio and the acceleration of the discount related to the partial redemption of Bancorp's subordinated debentures would adjust the net interest margin (non-GAAP¹) for the quarters ended June 30, 2025, and March 31, 2025, to 4.91% and 4.86%, respectively, and to 4.88% for the six-month period ended June 30, 2025.

The following tables compare interest income, average interest-earning assets, interest expense, average interest-bearing liabilities, net interest income, net interest margin and cost of funds for each period reported.

Noninterest Income and Expense

Noninterest income for the quarter ended June 30, 2025, was $1.4 million compared to $999 thousand for the previous quarter and $1.0 million in the second quarter of 2024. Noninterest income for the six-month period ended June 30, 2025, was $2.4 million compared to $2.1 million for the six-month period ended June 30, 2024. Second quarter of 2025 results reflected a $21 thousand loss on sale of investments compared to $257 thousand in the first quarter of 2025 and no sale of investments in the second quarter of 2024.

Noninterest expense was $15.5 million in both the first and second quarters of 2025 compared to $9.6 million in the second quarter of 2024. While total noninterest expense did not change significantly from the first quarter to the second quarter of 2025, it reflected decreases in occupancy, furniture and equipment expenses of $307 thousand post-merger facility consolidation, which occurred in the first quarter of 2025, and other acquisition-related expenses of $153 thousand, offset by second quarter expenses including annual director stock grants of $368 thousand, re-branding costs of $236 thousand, and professional expenses of $138 thousand incurred in preparation for becoming an SEC registrant. The $5.8 million, or 60.4%, increase over the second quarter of 2024 was mainly due to the Merger, annual merit increases and inflationary effects, investment in our expansion of the Silicon Valley team and specific expenses in the second quarter of 2025 mentioned earlier. Excluding these additional expenses as well as the $1.1 million quarterly core deposit intangible amortization, we have achieved the overhead cost saving target of $11.2 million that Management had modeled related to the Merger. Noninterest expense for the six-month period ended June 30, 2025, totaled $30.9 million, an increase of $12.2 million, or 64.9%, when compared to $18.8 million for the six-month period ended June 30, 2024.

Liquidity Position

The following table summarizes the Bank's liquidity as of June 30, 2025, March 31, 2025, and June 30, 2024:

As of June 30, 2025, net liquidity exceeded uninsured and uncollateralized deposits of $1.1 billion, with a coverage ratio of 134%.

Investment Portfolio

Securities issued by U.S. Government-sponsored agencies, U.S. Treasury bonds and SBA securities accounted for 38%, 29% and 2% of the investment portfolio as of June 30, 2025, respectively. These securities carry explicit or implicit credit guarantees from the U.S. government and thus present minimal credit or liquidity risk. Municipal bonds, corporate bonds, private-label collateralized mortgage obligations and asset-backed instruments represent 24%, 4%, 2% and 1% of the carrying value of the portfolio, respectively.

The investment portfolio decreased from $371.3 million at March 31, 2025, to $365.6 million as of June 30, 2025, primarily due to paydowns of $4.7 million and sales of $2.7 million during the quarter. The investment portfolio increased from $219.5 million at June 30, 2024, mainly due to the Merger. The investment portfolio had an average life of 5.5 years as of June 30, 2025, compared to 5.6 years as of March 31, 2025, and 2.6 years at June 30, 2024.

Net unrealized losses on AFS securities totaled $13.8 million ($9.7 million after-tax) at June 30, 2025, compared to $14.9 million ($10.5 million after-tax) at March 31, 2025, and $13.9 million ($9.8 million after-tax) at June 30, 2024.

Loans and Asset Quality

Gross loans, net of unaccreted purchase discount, increased $4.7 million from March 31, 2025, and increased $722.9 million, or 52%, compared to June 30, 2024. Loan growth during the second quarter of 2025 was led by construction, which grew by $14.4 million from new originations and advances for projects that originated in the first quarter. Alongside organic growth, the increase in loans from June 30, 2024, was significantly bolstered by the Merger, which added $603.1 million in acquired loans net of fair value adjustment as of October 1, 2024.

New loan commitments generated were $150.8 million during the second quarter of 2025, driven by $60.4 million in new construction commitments and $47.8 million in new commercial and industrial loans ("C&I") commitments. The Asset Based Lending ("ABL") Division originated $6.8 million in new loan commitments and funded balances increased $4.1 million or 14% in the second quarter of 2025. We believe that strong growth in ABL, construction, and C&I loans positions the Bank to diversify the lending portfolio.

Nonaccrual loans of $2.9 million accounted for 0.14% of gross loans at June 30, 2025, and increased $666 thousand from March 31, 2025. The balance at June 30, 2025, primarily reflects two real estate secured loans, including a $1.7 million construction loan that was subsequently paid off in July 2025 and a $504 thousand acquired loan secured by real estate that has been adequately reserved for by the Bank. The remaining $754 thousand of nonaccrual loans are SBA loans, which have a government guarantee of $184 thousand. Loans past due 30-89 days that are still accruing decreased $5.8 million from March 31, 2025, and decreased $1.0 million from June 30, 2024, to $1.4 million. Loans over 90 days past due that are still accruing as of June 30, 2025, increased $1.4 million in the second quarter due to a single real estate secured loan that is pending renewal.

The allowance for credit losses ("ACL") was $33.6 million at June 30, 2025, or 1.59% of total loans, $33.1 million at March 31, 2025, or 1.57% of total loans, and $23.0 million, or 1.66% of total loans at June 30, 2024. The allowance allocated to individually evaluated loans was $556 thousand, $534 thousand and $0 as of June 30, 2025, March 31, 2025, and June 30, 2024, respectively. The allowance on unfunded credit commitments, presented as part of other liabilities, as a percentage of unfunded credit commitments was 0.34% at June 30, 2025, a slight increase from 0.33% at March 31, 2025, and a slight decrease from 0.35% at June 30, 2024.

The slight increase in the ACL to loan ratio during the second quarter of 2025 was primarily driven by the growth in construction loans, which carry a higher estimated credit reserve factor than the rest of the portfolio. The increase also reflects worsening economic forecasts published by the Federal Open Market Committee in June 2025. Other qualitative factors have remained relatively stable compared to last quarter.

The following tables summarize the Bank's loan mix as well as delinquent and nonperforming loans:

Deposits

Deposits totaled $2.3 billion at June 30, 2025, an increase of $3.8 million compared to March 31, 2025, and an increase of $828.4 million, or 58%, compared to June 30, 2024. The increase in deposits in the second quarter of 2025 is attributed to the seasonality of large depositors in the agricultural sector, who are responsible for more than $9 million in deposit growth in the second quarter. Deposit growth from newly established relationships over the second quarter was $15.3 million. Deposit growth in the second quarter of 2025 was partially offset by outflow of deposits of large depositors in the public and nonprofit sectors, who accounted for more than $9.6 million in deposit decreases in the second quarter as they invested their cash in local projects.

Noninterest-bearing deposits to total deposits increased from 38% at June 30, 2024, to 42% at March 31, 2025, and to 43% at June 30, 2025.  The increase in deposits since June 30, 2024, was primarily the result of the Merger, which increased deposits by $893.2 million.

The 10 largest deposit relationships, excluding fully collateralized government agency deposits, represent approximately 11% of total deposits as of both June 30, 2025, and March 31, 2025, compared to 12% as of June 30, 2024.

The following table summarizes the Bank's deposit mix:

Shareholders' Equity

Total shareholders' equity was $356.9 million at June 30, 2025, an $11.2 million, or 3%, increase compared to March 31, 2025, and a $110.7 million, or 45%, increase compared to June 30, 2024. Increase over March 31, 2025, was primarily due to quarterly earnings of $12.9 million, partially offset by quarterly dividends paid of $2.1 million as well as $998 thousand of share repurchases made in June 2025 as part of the new Share Repurchase Program noted below. The increase over June 30, 2024, was primarily due to the issuance of common stock of $80.8 million as part of the Merger in addition to the earnings accumulation over the past 12 months of $36.6 million, partially offset by dividends paid over the past 12 months of $7.4 million as well as the $998 thousand of shares repurchased in June 2025.

Share Repurchase Program

On May 6, 2025, Bancorp announced the launch of a new Share Repurchase Program approved by its Board of Directors to repurchase up to $10 million of common stock in the open market or through privately negotiated transactions as market conditions warrant. Bancorp intends to fund repurchases with dividends from the Bank, as needed, and to execute repurchases in compliance with applicable federal and state securities laws and bank regulations including Rules 10b-18 and 10b5-1 as promulgated under the Securities Exchange Act of 1934. The stock repurchase program may be suspended, terminated or modified at any time and will expire on June 30, 2026. The timing and amount of common stock repurchases made pursuant to the Share Repurchase Program are subject to various factors, including Bancorp's capital position, liquidity, financial performance, alternative uses of capital, stock trading price, regulatory requirements and general market conditions. Stock repurchases are accounted for as a reduction in equity. As of June 30, 2025, 25,600 shares had been repurchased at a weighted average share price of $39.00 for a total of $998 thousand.

Non-GAAP Financial Measures¹ 

In addition to evaluating Bancorp's results of operations in accordance with generally accepted accounting principles ("GAAP") in the United States of America, certain non-GAAP financial measures are widely accepted by the institutional investor community. Non-GAAP measures provide the reader with additional perspectives on operating results, financial condition and performance trends, while facilitating comparisons with the performance of other financial institutions. Disclosing these non-GAAP measures is both useful internally and is expected by our investors to understand the overall performance of Bancorp.

Examples of non-GAAP financial measures include adjusted net income, adjusted efficiency ratio, adjusted tangible common equity and adjusted return on average tangible common equity:

• Adjusted net income excludes the impact of non-recurring activity. This financial measure is useful for evaluating the performance of a business consistently, whether acquired or developed internally.
• Adjusted efficiency ratio is a common comparable metric used by banks to understand the expense structure relative to total revenue. To improve the comparability of the ratio to our peers, non-recurring items are excluded.
• Adjusted tangible common equity measures exclude the impact of intangible assets, net of deferred taxes, and their related amortization. These financial measures are useful for evaluating the performance of a business consistently, whether acquired or developed internally.
• Adjusted return on average tangible common equity is used by management and readers of our financial statements to understand how efficiently Bancorp is deploying its common equity. Companies that can demonstrate more efficient use of common equity are more likely to be viewed favorably by current and prospective investors.

A reconciliation of GAAP to non-GAAP financial measures and other performance ratios used by Bancorp, as adjusted, is presented in the table at the end of this earnings release.

ABOUT WEST COAST COMMUNITY BANK AND WEST COAST COMMUNITY BANCORP

Founded in 2004, West Coast Community Bank (formerly Santa Cruz County Bank and its division, 1^st Capital Bank) is the wholly owned subsidiary of West Coast Community Bancorp, a bank holding company. The Bank is a top-rated, locally operated and full-service community bank headquartered in Santa Cruz, Calif. with branches in Aptos, Capitola, Cupertino, King City, Monterey, Salinas, San Luis Obispo, Santa Cruz, Scotts Valley and Watsonville. West Coast Community Bank is distinguished from "big banks" by its relationship-based service, problem-solving focus and direct access to decision makers. The Bank is a leading SBA lender in Santa Cruz County and Silicon Valley. As a full-service bank, West Coast Community Bank offers competitive deposit and lending solutions for businesses and individuals; including business loans, lines of credit, commercial real estate financing, construction lending, asset-based lending, agricultural loans, SBA and USDA government guaranteed loans, credit cards, merchant services, remote deposit capture, mobile and online banking, bill payment and treasury management. True to its community roots, West Coast Community Bank has supported regional well-being by actively participating in and donating to local nonprofit organizations. Visit wccb.com for more information.

NATIONAL, STATE AND LOCAL RATINGS AND AWARDS

• Newsweek Magazine: Named one of the 2025 Top 500 Regional Banks & Credit Unions in the U.S.
• S&P Global Market Intelligence: Ranked #62 among top U.S. community banks under $3B in assets (for full-year 2024 financial performance).
• Independent Community Bankers of America Top 25: Ranked #12 for best-performing community banks with assets greater than $1 billion.
• The Findley Reports, Inc.: Super Premier Performing Bank rating for 15 consecutive years.
• BauerFinancial: Rated 5-star "Superior" for first quarter of 2025 and every quarter of 2024.
• SBA Lending (for fiscal year ended September 30, 2024):
  • California – Ranked #33 in 7(a) lending by total volume in loan approvals.
  • San Francisco District – Ranked #13 in 7(a) lending by total volume in loan approvals.
• American Banker Magazine: Ranked #59 among top U.S. community banks with $2-$10B in assets (for full-year 2024 financial performance).
• Bank Performance Report: Ranked #16 of 117 California banks for overall performance for the first quarter of 2025.
• Silicon Valley Business Journal
  • Ranked #1 for Silicon Valley Banks with Fastest-growing Deposits for deposits as of December 31, 2024.
  • Ranked #13 among Top 20 Banks for deposits in Silicon Valley as of June 30, 2024.
• Santa Cruz Area Chamber of Commerce: 2025 Business of the Year.
• Good Times "Best of Santa Cruz County" Readers' Poll: Voted Best Local Bank for the thirteenth consecutive year.
• The Pajaronian "2024 Best of the Pajaro Valley" Readers' Poll: Voted Best Bank.
• The Press Banner "2024 The Best of Scotts Valley" Readers' Poll: Voted Best Local Bank.
• Santa Cruz Sentinel, 2024 Readers' Choice Award: Voted number one bank in Santa Cruz County for 10 years.

Forward-Looking Statements

This release may contain forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties may include but are not necessarily limited to achieving the intended synergies with 1^st Capital Bancorp post-merger, retaining employees and clients, fluctuations in interest rates (including but not limited to changes in depositor behavior and/or impacts on our core deposit intangible in relation thereto), inflation, government regulations and general economic conditions and competition within the business areas in which the Bank is conducting its operations, health of the real estate market in California, Bancorp's ability to effectively execute its business plans and other factors beyond Bancorp and the Bank's control. Such risks and uncertainties could cause results for subsequent interim periods or for the entire year to differ materially from those indicated. Readers should not place undue reliance on the forward-looking statements, which reflect management's view only as of the date hereof. Bancorp undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

Concurrent with this earnings release, Bancorp issued presentation slides providing supplemental information intended to be reviewed together with this release. Slides may be viewed online at: wccb.com/investor_relations.