CBB Bancorp, Inc. Reports Second Quarter 2021 Financial Results

CBB Bancorp, Inc. ("CBB" or the "Company') (OTCQX: CBBI), the holding company of Commonwealth Business Bank (the "Bank"), announced today net income for second quarter 2021 of $6.3 million, or $0.61 per diluted share, an increase of 18.2%, compared to $5.3 million, or $0.52 per diluted share, in the prior quarter and 281.5% compared to $1.7 million, or $0.16 per diluted share, in the same period last year.

Overall Results

Net income for second quarter 2021 was positively affected by improving credit quality and continued balance sheet growth. The Company’s return on average assets for second quarter 2021 was 1.70% compared to 1.58% for first quarter 2021 and 0.52% for second quarter 2020. Its return on average equity for second quarter 2021 was 14.91%, compared to 13.26% for first quarter 2021 and 4.36% for second quarter 2020. The Company’s net interest margin for second quarter 2021 was 3.75%, compared to 3.90% for first quarter 2021 and 3.17% for second quarter 2020. Its efficiency ratio for second quarter 2021 was 52.24%, compared to 51.78% for first quarter 2021 and 66.02% for second quarter 2020.

Joanne Kim, President and CEO, commented, “We are pleased to announce record quarterly earnings for the second consecutive quarter. With positive trends in our balance sheet growth and asset quality, we look forward to further growth in the second half of the year. We are excited about the completion of the acquisition of Ohana Pacific Bank on July 1, 2021 and the opportunities this Hawaii base of operations will provide.”

Net Interest Income and Margin

Net Interest Income

Net interest income for second quarter 2021 was $13.6 million, an increase of $726 thousand, or 5.7%, from first quarter 2021, and an increase of $3.7 million, or 37.5%, from second quarter 2020. The increase in net interest income was driven by loan growth, as well as our continuing to aggressively reduce deposit rates and wholesale borrowing costs, while strategically shifting our deposit mix to lower-cost core deposits.

Net Interest Margin

Our net interest margin for second quarter 2021 was 3.75% compared to 3.90% for first quarter 2021 and 3.17% for second quarter 2020. The decrease in net interest margin compared to first quarter 2021 was due to a substantial increase in due from bank balances in the quarter, which reduced the average yield on interest earning assets. The larger than usual due from bank balances were due in part to the all-cash acquisition of Ohana Pacific Bank that was still pending as of June 30, 2021. The lower yield on earning assets was partially offset by a downward repricing of our time deposits and growth in our demand deposits. Our cost of funds for second quarter 2021 decreased to 0.42% from 0.52% for first quarter 2021 and 1.20% for second quarter 2020.

Provision for Loan Losses:

The Company made no provision for loan losses for second quarter 2021, compared to $500 thousand for first quarter 2021 and $1.6 million for second 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 second quarter 2021 was $5.0 million, compared to $3.7 million for first quarter 2021 and $1.5 million for second quarter 2020. The increase in noninterest income in second quarter 2021 was primarily the result of increased gains on sales of loans. Sales of SBA loans were $42.2 million with an average premium percentage received of 11.9% during the second quarter of 2021, compared with SBA loan sales of $30.2 million with an average premium percentage received of 10.9% during the first quarter of 2021 and SBA loan sales of $9.8 million with an average premium percentage received of 8.6% during the second quarter of 2020. The increased gain on sale of SBA loans was partially offset by a decline in SBA servicing fees during the current quarter due to a higher level of payoffs during the period.

Noninterest Expense:

Noninterest expense for second quarter 2021 was $9.7 million, compared to $8.6 million for first quarter 2021 and $7.5 million for second quarter 2020. Salaries and employee benefits increased by $1.1 million to $6 million in second quarter 2021, compared to $4.9 million in the prior quarter, due to the effect of higher incentive payments made related to loan originations and a decrease in the amount of compensation deferred as loan origination costs.

Income Taxes:

The Company’ s effective tax rate for second quarter 2021 was 28.9% compared to 28.6% for first quarter 2021 and 27.0% for second quarter 2020.

Balance Sheet:

Investment Securities:

Investment securities were $82.4 million at June 30, 2021, a decrease of $1.1 million from March 31, 2021 and $8.7 million from June 30, 2020. The decreases were due to principal paydowns. There were no portfolio additions in second quarter 2021, or in the first quarter 2021 or second quarter 2020.

Loans Receivable:

Loans receivable (including loans held for sale) at June 30, 2021 was $1.23 billion, an increase of $40.2 million, or 3.4%, from loans receivable at March 31, 2021, and an increase of $192.5 million, or 18.6%, from loans receivable at June 30, 2020.

Loan payment deferments to our commercial borrowers under the CARES Act have continued to decline since the first round of deferments that began during the second quarter of 2020. As of June 30, 2021, five loans totaling $29.7 million remain on modified payment terms. This is a decline from $50.4 million of such loans at March 31, 2021, and $298.7 million of such loans at June 30, 2020. No additional modification requests are currently in process.

Our weighted average loan-to-value ratio of commercial real estate loans was 72.4% at June 30, 2021. Excluding SBA loans, our weighted average loan-to-value of CRE loans was 55.9%. For additional information, please go to www.cbb-bank.com under tab “About Us” and select “Investors Relations” to see 2Q 2021 Overview and COVID-19 update presentation.

Paycheck Protection Program (PPP):

PPP loans totaled $85.4 million at June 30, 2021. Net unearned fees on PPP loans as of June 30, 2021 was $2.4 million, which fees are being accreted to income based on a two-year contractual maturity. The SBA approved $26.5 million in PPP loan forgiveness applications processed for our PPP loans in second quarter 2021.

Allowance for Loan Losses and Asset Quality:

Our allowance for loan losses at June 30, 2021 was $14.9 million, or 1.32% of portfolio loans, compared to $14.9 million, or 1.34% of portfolio loans, at March 31 2021 and compared to $12.3 million, or 1.22% of portfolio loans, at June 30, 2020. Excluding PPP loans of $85.4 million, which are government guaranteed, the allowance for loan losses at June 30, 2021 was 1.42%, compared to 1.48% and 1.34%, respectively, at March 31 2021 and June 30, 2020. Non-performing loans remained unchanged at $1.3 million over the quarter. 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 1,100%. For additional information, please go to www.cbb-bank.com under tab “About Us” and select “Investors Relations” to see 2Q 2021 Overview and COVID-19 update presentation.

SBA Loans Held for Sale:

SBA loans held for sale at June 30, 2021 were $96.6 million, compared to $76.1 million at March 31 2021 and $32.3 million at June 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 $1.38 billion at June 30, 2021, up $187.2 million, or 15.7% from March 31 2021 and up $351.0 million, or 34.2%, from June 30, 2020. Noninterest-bearing demand deposits (“DDAs”) increased $163.5 million, or 40.0%, to $572.3 million at June 30, 2021 from March 31 2021 and increased $277.3 million, or 94.0%, from June 30, 2020. DDAs were 41.5% of total deposits at June 30, 2021, compared to 34.3% at March 31 2021 and 28.7% at June 30, 2020. NOW and MMDA accounts increased $20.9 million, or 7.7%, to $291.4 million at June 30, 2021 from March 31 2021 and increased $98.5 million, or 51.0%, from June 30, 2020. Time deposits increased $7.7 thousand, or 1.7%, at June 30, 2021 from March 31 2021 and increased $2.2 thousand, or 0.5%, from June 30, 2020. Time deposits at June 30, 2021 were $473.7 million, or 34.4% of total deposits, compared to $466.0 million, or 39.1% of total deposits, at March 31, 2021, and $471.5 million, or 45.9% of total deposits, at June 30, 2020. As noted above, we are focused on increasing demand deposits and reducing our cost of funds.

Borrowings:

Borrowings at June 30, 2021 consisted of $50.0 million of Federal Home Loan Bank of San Francisco (FHLB-SF) advances, compared to $65.0 million of FHLB-SF advances at March 31, 2021. Borrowings at June 30, 2020 were $148.7 million and consisted of $90.0 million of FHLB-SF advances and $58.7 million of FRB PPP Liquidity Facility.

Capital:

Stockholders’ equity was $171.2 million at June 30, 2021, representing an increase of $6.1 million, or 3.7%, over stockholders’ equity of $165.1 million at March 31, 2021. Book value per share at June 30, 2021 was $16.66, compared with $16.11 at March 31, 2021, an increase of $0.55 per share or 3.4%.

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 June 30, 2021 was 14.58% at the Company level and 14.55% 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 July 31, 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 2Q 2021 Overview and COVID-19 update presentation.

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 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