CBB Bancorp, Inc. Reports Third Quarter 2021 Financial Results

October 28, 2021 - CBB Bancorp, Inc. ("CBB" or the "Company') (OTCQX: CBBI), the holding company of Commonwealth Business Bank (the "Bank"), announced today net income for third quarter 2021 of $7.9 million, or $0.75 per diluted share, an increase of 25.0%, compared to $6.3 million, or $0.61 per diluted share, in the prior quarter and 171.5% compared to $2.9 million, or $0.28 per diluted share, in the same period last year.

Overall Results

The acquisition of Ohana Pacific Bank was completed as of July 1, 2021, contributing to the Company’s growth in total assets to $1.9 billion, a $296.2 million or 18.4% increase from the June 30, 2021 level.

Net income for third quarter 2021 was positively affected by continuing strong performance in SBA loan originations and sales, as well as declining costs of deposits. The Company’s return on average assets for third quarter 2021 was 1.73% compared to 1.70% for second quarter 2021 and 0.85% for third quarter 2020. The Company’s return on average equity for third quarter 2021 was 17.87%, compared to 14.91% for second quarter 2021 and 7.43% for third quarter 2020. The Company’s net interest margin for third quarter 2021 was 3.62%, compared to 3.75% for second quarter 2021 and 3.20% for third quarter 2020. The efficiency ratio for third quarter 2021 was 49.0%, compared to 52.2% for second quarter 2021 and 58.8% for third quarter 2020.

Joanne Kim, President and CEO, commented, “We are pleased to announce record quarterly earnings for the third consecutive quarter. With the successful completion of the merger with Ohana Pacific Bank, we look forward to further growth in the remainder of the year in all of our markets, including our operations in Hawaii.”

Net Interest Income and Margin

Net Interest Income

Net interest income for third quarter 2021 was $16.1 million, an increase of $2.5 million, or 18.7%, from second quarter 2021, and an increase of $5.4 million, or 51.1%, from third quarter 2020. The increase in net interest income was due to the acquisition of Ohana Pacific Bank, in addition to the benefit of the decline in cost of funds as the Bank continues to aggressively reprice certificates of deposit as they mature.

Net Interest Margin

Our net interest margin for third quarter 2021 was 3.62% compared to 3.75% for second quarter 2021 and 3.20% for third quarter 2020. Our cost of funds for third quarter 2021 decreased to 0.33% from 0.42% for second quarter 2021 and 0.85% for third quarter 2020.

Provision for Loan Losses:

The Company made no provision for loan losses for third quarter 2021 or the second quarter of 2021, compared to $1.6 million for third quarter 2020. No provision was required during the current quarter due to the absence of charge-offs, and continuing signs of an improving economy. See Table 10 for additional information and trends.

Noninterest Income:

Noninterest income for third quarter 2021 was $5.5 million, compared to $5.0 million for second quarter 2021 and $3.0 million for third quarter 2020. The largest contributor to noninterest income continues to be gains on sales of loans. Sales of SBA loans were $42.0 million with an average premium percentage received of 11.5% during the third quarter of 2021, compared with SBA loan sales of $42.2 million with an average premium percentage received of 11.9% during the second quarter of 2021 and SBA loan sales of $24.9 million with an average premium percentage received of 9.8% during the third quarter of 2020.

Noninterest Expense:

Noninterest expense for third quarter 2021 was $10.6 million, compared to $9.7 million for second quarter 2021 and $8.0 million for third quarter 2020. Included in the third quarter 2021 noninterest expense is approximately $913 thousand in general and administrative expense directly related to the operation of the newly acquired Ohana Pacific Division in Hawaii.

Income Taxes:

The Company’ s effective tax rate for third quarter 2021 was 28.6% compared to 28.9% for second quarter 2021 and 27.9% for third quarter 2020.

Balance Sheet:

Investment Securities:

Investment securities were $86.4 million at September 30, 2021, an increase of $4.1 million from June 30, 2021 and a decrease of $2.3 million from September 30, 2020. The increase in the third quarter of 2021 is due to $5.7 million of securities acquired in the Ohana Pacific Bank merger. The remaining changes were due to principal paydowns. There were no portfolio purchases in third quarter 2021, or in second quarter 2021 or third quarter 2020.

Loans Receivable:

Loans receivable (including loans held for sale) at September 30, 2021 was $1.4 billion, an increase of $162.3 million, or 13.2%, from loans receivable at June 30, 2021, and an increase of $326.6 million, or 30.6%, from loans receivable at September 30, 2020. Included in the total loans at September 30, 2021 are $149.2 million in loans that were acquired from Ohana Pacific Bank at July 1, 2021.

Loan payment deferments to our commercial borrowers under the CARES Act have declined since the first round of deferments that began during the second quarter of 2020. As of September 30, 2021, 5 loans totaling $29.7 million remain on modified payment terms, unchanged from the level of such loans at June 30, 2021 and down from $298.7 million of such loans at their peak at June 30, 2020.

Our weighted average loan-to-value ratio of commercial real estate loans was 72.6% at September 30, 2021. Excluding SBA loans, our weighted average loan-to-value ratio of CRE loans was 55.6%. For additional information, please go to www.cbb-bank.com under tab “About Us” and select “Investors Relations” to see 3Q 2021 Overview and COVID-19 update presentation.

Paycheck Protection Program (PPP):

PPP loans totaled $63.0 million at September 30, 2021. Net unearned fees on PPP loans as of September 30, 2021 was $2.1 million, which fees are being accreted to income based on a two-year contractual maturity. The SBA approved $31.5 million in PPP loan forgiveness applications processed for our PPP loans in third quarter 2021.

Allowance for Loan Losses and Asset Quality:

Our allowance for loan losses at September 30, 2021 was $15.0 million, or 1.19% of portfolio loans, compared to $14.9 million, or 1.32% of portfolio loans, at June 30 2021 and compared to $13.6 million, or 1.35% of portfolio loans, at September 30, 2020. Excluding PPP loans of $63.0 million, which are government guaranteed, the allowance for loan losses at September 30, 2021 was 1.26% of total loans, compared to 1.42% and 1.48%, respectively, at June 30 2021 and September 30, 2020. The allowance for loan losses as a percentage of total loans declined during the third quarter of 2021 because the loans which were acquired from Ohana Pacific Bank have been recorded at market value and have no allowance associated with them. Non-performing loans declined to $768 thousand at September 30, 2021, down from $1.3 million at June 30, 2021 and $4.1 million at September 30 2020. Loans with payment deferments are considered to be performing loans in accordance with regulatory guidance. Our coverage ratio of allowance for loan losses to nonperforming assets exceeded 1900%. For additional information, please go to www.cbb-bank.com under tab “About Us” and select “Investors Relations” to see 3Q 2021 Overview and COVID-19 update presentation.

SBA Loans Held for Sale:

SBA loans held for sale at September 30, 2021 were $136.4 million, compared to $96.6 million at June 30 2021 and $53.8 million at September 30, 2020. We continue to assess SBA loan sale premiums and plan to sell loans when we believe it is advantageous to do so. See comments under “Noninterest Income”, and Table 7 for additional SBA loan origination and sale data.

Deposits:

Deposits were $1.7 billion at September 30, 2021, up $287.4 million, or 20.8%, from June 30 2021 and up $564.7 million, or 51.3%, from September 30, 2020. Noninterest-bearing demand deposits (“DDAs”) increased $98.2 million, or 17.2%, to $670.5 million at September 30, 2021 from June 30 2021 and increased $307.1 million, or 84.5%, from September 30, 2020. Total DDAs including interest-bearing demand deposits were 40.9% of total deposits at September 30, 2021, compared to 41.5% at June 30 2021 and 33.0% at September 30, 2020. NOW and MMDA accounts increased $85.1 million, or 29.2%, to $376.5 million at September 30, 2021 from June 30 2021 and increased $146.8 million, or 63.9%, from September 30, 2020. Time deposits increased $58.9 million, or 12.4%, at September 30, 2021 from June 30 2021 and increased $85.9 million, or 19.2%, from September 30, 2020. Time deposits at September 30, 2021 were $532.6 million, or 32.0% of total deposits, compared to $473.7 million, or 34.4% of total deposits, at June 30, 2021, and $446.7 million, or 40.6% of total deposits, at September 30, 2020. The primary cause of the increase in deposit balances during the third quarter of 2021 was the completion of the merger with Ohana Pacific Bank during the quarter. Included in the total deposits at September 30, 2021 are $202.2 million in deposits that were acquired from Ohana Pacific Bank at July 1, 2021.

Borrowings:

Borrowings at September 30, 2021 consisted of $50.0 million of Federal Home Loan Bank of San Francisco (“FHLB-SF”) advances, unchanged from the balance at June 30, 2021. Borrowings at September 30, 2020 were $128.7 million and consisted of $70.0 million of FHLB-SF advances and $58.7 million of FRB PPP Liquidity Facility.

Capital:

Stockholders’ equity was $178.3 million at September 30, 2021, representing an increase of $7.1 million, or 4.1%, over stockholders’ equity of $171.2 million at June 30, 2021. Tangible book value per share at September 30, 2021 was $17.08, compared with $16.66 at June 30, 2021, an increase of $0.42 per share or 2.5%.

All of our regulatory capital ratios continue to exceed the minimum levels required to be considered “Well Capitalized” as defined for bank regulatory purposes and in compliance with the fully phased-in Basel III requirements, as shown on Table 11 in this press release. Our Common Equity Tier 1 risked-based capital at September 30, 2021 was 13.61% at the Company level and 13.59% at the Bank level.

About CBB Bancorp, Inc.:

CBB Bancorp, Inc. is the holding company of Commonwealth Business Bank, a full-service commercial bank which specializes in loans to small-to medium-sized businesses and does business as “CBB Bank.” As of September 30, 2021, the Bank has ten full-service branches in Los Angeles and Orange Counties in California, and Dallas County in Texas and Honolulu, Hawaii; two SBA regional offices in Los Angeles and Dallas Counties; and five loan production offices in Texas, Georgia, Colorado and Washington.

For additional information, please go to www.cbb-bank.com under tab “About Us” and select “Investors Relations” to see 3Q 2021 Overview.

FORWARD-LOOKING STATEMENTS:

This news release contains forward-looking statements. These statements typically include words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would” and similar terms and phrases, including references to assumptions. You should not place undue reliance on such statements. Forward-looking statements are based upon various assumptions and analyses made by the Company in light of management’s experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate under the circumstances. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond the Company’s control) that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Factors that could affect our results include, without limitation, the following: the timing and occurrence or non-occurrence of events may be subject to circumstances beyond the Company’s control; increases in competitive pressure among financial institutions or from non-financial institutions may occur; changes in the interest rate environment may reduce interest margins; changes in deposit flows, loan demand or real estate values may adversely affect the business of the Company and the Bank; significant increases in loan losses may occur; the possibility that changes in accounting principles, policies or guidelines may cause the Company’s financial condition to be perceived differently; changes in corporate and/or individual income tax laws may adversely affect the Company’s financial condition or results of operations; general economic conditions, either nationally or locally in some or all areas in which the Company conducts business, the effects of the COVID-19 pandemic, and of other widespread outbreaks of disease or pandemics, together with related impacts on general economic conditions, including adverse impacts on our customers’ ability to make timely payments on their loans from us, reduced fee income due to reduced loan origination activity, reductions in or absence of gains on loan sales due to uncertainty in the loan sale market, and increased operating expense due to required changes in how we conduct our business may adversely affect us; conditions in the securities markets or the banking industry may be less favorable than the Company currently anticipates; legislation or regulatory changes may adversely affect the Company’s business; technological changes may be more difficult or expensive to implement or accommodate than the Company anticipates; there may be failures or breaches of information technology security systems; success or consummation of new business initiatives may be more difficult or expensive than the Company anticipates; or litigation or matters before regulatory agencies, whether currently existing or commencing in the future, may delay the occurrence or non-occurrence of events longer than the Company anticipates; we may encounter greater difficulty, delay and expense than we anticipate in integrating the personnel and operations of Ohana Pacific Bank or any other companies we acquire. The Company undertakes no obligation to revise any forward-looking statement contained herein to reflect any future events or circumstances, except to the extent required by law.

Schedules and Financial Data: All tables and data to follow