CBB Bancorp, Inc. Reports Fourth Quarter and Full Year 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 fourth quarter 2021 of $8.0 million, or $0.77 per diluted share, an increase of 1.7% compared to $7.9 million, or $0.75 per diluted share, in the prior quarter and $115.7% compared to $3.7 million, or $0.36 per diluted share, in the same period last year.

Additionally, CBB reported net income for the year ended December 31, 2021 of $27.5 million, or $2.65 per diluted share, an increase of 178.6% from the $9.9 million, or $0.96 per diluted share, of net income for 2020.

Overall Results

Net income for fourth quarter 2021 was positively impacted by the continued strength of the Bank’s SBA loan originations and sales. The Company’s annualized return on average assets for fourth quarter 2021 was 1.68% compared to 1.73% for third quarter 2021 and 1.07% for fourth quarter 2020. The annualized return on average equity for fourth quarter 2021 was 17.54% compared to 17.87% for third quarter 2021 and 9.32% for fourth quarter 2020. The net interest margin for fourth quarter 2021 was 3.49% compared to 3.62% for third quarter 2021 and 3.48% for fourth quarter 2020. The efficiency ratio for fourth quarter 2021 was 52.84% compared to 49.00% for third quarter 2021 and 55.12% for fourth quarter 2020.

Joanne Kim, President and CEO, commented, “We are pleased to announce record quarterly earnings for the fourth consecutive quarter, as our earnings continue to benefit from growing net interest income and SBA loan sales, while maintaining excellent asset quality.”

Net Interest Income and Margin:

Net Interest Income

Net interest income for fourth quarter 2021 was $16.3 million, an increase of $188 thousand, or 1.2%, from third quarter 2021, and an increase of $4.5 million, or 38.2%, from fourth quarter 2020. For the year ended December 31, 2021, net interest income was $58.8 million, an increase of $16.0 million, or 37.4%, over 2020. The increase in net interest income over the prior year was primarily driven by our ability to continue to aggressively lower deposit rates combined with the impact of the inclusion of operations of the acquired Ohana Pacific Bank for the last six months the year.

Net Interest Margin

Our net interest margin for fourth quarter 2021 was 3.49% compared to 3.62% for third quarter 2021 and 3.48% for fourth quarter 2020. The decrease in net interest margin was due to the higher average levels of interest-earning deposits at the FRB and other banks in the fourth quarter of 2021. For the year ended December 31, 2021, net interest margin was 3.67% compared to 3.41% in 2020. Our cost of funds improved for fourth quarter 2021 to 0.30% from 0.33% for third quarter 2021 and 0.60% for fourth quarter 2020. For the year ended December 31, 2021, the cost of funds was 0.38% compared to 1.04% in 2020.

Provision for Loan Losses:

The Company recorded a negative provision for loan losses for fourth quarter 2021 of $0.8 million, compared to a zero provision for third quarter 2021 and $1.6 million positive provision for fourth quarter 2020. For the year ended December 31, 2021, a negative provision for loan losses of $0.3 million was recorded, compared to $5.5 million positive provision for the corresponding period in 2020. The negative loan loss provision during the fourth quarter of 2021 was due to continued improvement in asset quality ratios, the absence of significant charge-offs, and continuing signs of an improving economy. The loan loss provision also declined during the fourth quarter of 2021 in part due to the risk of loss included in other liabilities associated with the sold portion of SBA loans, as discussed further in Noninterest Expense below. See Table 10 for additional information and trends.

Noninterest Income:

Noninterest income for fourth quarter 2021 was $5.3 million compared to $5.5 million for third quarter 2021 and $3.4 million for fourth quarter 2020. For the year ended December 31, 2021, noninterest income was $19.6 million compared to $9.6 million in 2020. The largest contributor to noninterest income continues to be gains on sales of loans. Sales of SBA loans were $42.2 million with an average premium percentage received of 11.1% during the fourth quarter of 2021, compared with SBA loan sales of $42.0 million with an average premium percentage received of 11.5% during the third quarter of 2021 and SBA loan sales of $20.4 million with an average premium percentage received of 10.7% during the fourth quarter of 2020. For the year ended December 31, 2021, the gain on sale of SBA loans was $14.9 million compared to $4.6 million for the corresponding period in 2020.

Noninterest Expense:

Noninterest expense for fourth quarter 2021 was $11.4 million compared to $10.6 million for third quarter 2021 and $8.4 million for fourth quarter 2020. For the year ended December 31, 2021, noninterest expense was $40.3 million compared to $32.9 million for the corresponding period in 2020. The increase in noninterest expense in the fourth quarter of 2021 was largely due to an additional provision for loss of $800 thousand on the repurchase of SBA loans sold. The risk of loss associated with these loans had been included in the allowance for loan losses in prior quarters. The increase in noninterest expense in 2021 compared to 2020 was primarily driven by increases in merger related expense, donations to CBB Bank Foundation, and third party processing costs along with the result of the inclusion of the operations of the acquired Ohana Pacific Bank for the last six months of 2021.

Income Taxes:

The Company’s effective tax rate for fourth quarter 2021 was 27.1% compared to 28.6% for third quarter 2021 and 29.0% for fourth quarter 2020. For the year ended December 31, 2021, the effective tax rate was 28.2% compared to 29.8% in 2020.

Balance Sheet:

Investment Securities:

Investment securities were $84.2 million at December 31, 2021, a decrease from $86.4 million at September 30, 2021 and from $85.9 million from December 31, 2020. The decreases were due to net principal paydowns. There were no portfolio additions in the fourth quarter 2021.

Loans Receivable:

Loans receivable (including loans held for sale) at December 31, 2021 was $1.4 billion, an increase of $7.2 million, or 0.5%, from September 30, 2021, and an increase of $296.7 million, or 26.9% from December 31, 2020. The increase in loan balances in 2021 compared with 2020 was in part due to the $149.2 million in loans that were acquired in the Ohana Pacific Bank merger at July 1, 2021.

Loan payment deferments for 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 December 31, 2021, three loans totaling $26.7 million remain on modified payment terms, a $3.0 million decrease from the $29.7 million level of such loans at September 30, 2021 and down from $298.7 million of such loans at their peak at June 30, 2020. All three loans that remained on modified payment terms as of December 31, 2021 are scheduled to return to their regular payment terms in January 2022.

Our weighted average loan-to-value ratio of Commercial Real Estate loans was 72.2% at December 31, 2021. Excluding SBA loans, our weighted average loan-to-value ratio of CRE loans was 55.1%. For additional information, please go to www.cbb-bank.com under tab “About Us” and select “Investors Relations” to see 4Q 2021 Overview and COVID-19 update presentation.

Paycheck Protection Program (PPP):

PPP loans totaled $35.4 million at December 31, 2021. Net unearned fees as of December 31, 2021 were $0.9 million and are being accreted to income based on the two-year contractual maturity. The SBA approved $25.5 million in PPP loan forgiveness applications processed for our PPP loans in fourth quarter 2021.

Allowance for Loan Losses and Asset Quality:

The allowance for loan losses at December 31, 2021 was $14.2 million, or 1.14% of portfolio loans, compared to $15.0 million, or 1.19% of portfolio loans, at September 30, 2021. Excluding PPP loans of $35.4 million, which are government guaranteed, the allowance for loan losses at December 31, 2021 was 1.18% compared to 1.26% at September 30, 2021. Non-performing loans as of December 31, 2021 were $747 thousand, down from $768 thousand at September 30, 2021. Loans with payment deferments are considered performing loans in accordance with regulatory guidance. Our coverage ratio of allowance for loan losses to nonperforming assets continues to exceed 1800%. For additional information, please go to www.cbb-bank.com under tab “About Us” and select “Investors Relations” to see 4Q 2021 Overview and COVID-19 update presentation.

SBA Loans Held for Sale:

SBA loans held for sale at December 31, 2021 were $158.1 million, compared to $136.4 million at September 30 2021 and $59.1 million at December 31, 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 $1.6 billion at December 31, 2021, down $108.0 million from September 30, 2021 and up $459.0 million from December 31, 2020. Noninterest-bearing demand deposits (DDAs) decreased $50.7 million, or 7.6%, from September 30, 2021 and increased $284.6 million, or 84.9%, from December 31, 2020. DDAs were 40.5% of total deposits at December 31, 2021 compared to 40.9% at September 30, 2021 and 30.5% at December 31, 2020. The decrease in DDA deposits in the fourth quarter of 2021 was due a decline in the escrow related deposits managed by the Bank’s Specialty Deposit Group. The increase in DDA at December 31, 2021 compared with the prior year includes both increased balances with the Specialty Deposit Group and the deposits added in the acquisition of Ohana Pacific Bank.

NOW and MMDA decreased $51.2 million, or 13.6%, from September 30, 2021 and increased $64.9 million, or 24.9% from December 31, 2020. Time deposits decreased $6.9 million, or 1.3% from September 30, 2021 and increased $73.8 million, or 16.3%, from December 31, 2020. Our time deposits at December 30, 2021 were $525.7 million, or 33.7% of total deposits, down from $532.6 million, or 32.0% of total deposits at September 30, 2021 and up from $451.9 million, or 41.1% of total deposits at December 31, 2020. The increases in NOW, MMDA and time deposit balances during 2021 compared with the prior year were primarily attributable to the completion of the merger with Ohana Pacific Bank during the third quarter.

Borrowings:

Borrowings at December 31, 2021 consisted of $50.0 million of Federal Home Loan Bank of San Francisco (FHLB-SF) advances and were unchanged from the balance of FHLB-SF advances at September 30, 2021. Borrowings at December 31, 2020 included of $95.0 million of FHLB-SF advances and $10.0 million of Pacific Coast Bankers Bank borrowings.

Capital:

Stockholders’ equity was $185.2 million at December 31, 2021, representing an increase of $6.9 million, or 3.9%, over stockholders’ equity of $178.3 million at September 30, 2021. Tangible book value per share at December 31, 2021 was $17.76 compared with $17.08 at September 30, 2021, an increase of $0.68 per share, or 4.0%.

All of our regulatory capital ratios increased at December 31, 2021 continue to exceed the minimum levels required to be considered “Well Capitalized” as defined for bank regulatory purposes and remain in compliance with the fully phased-in Basel III requirements, which went into effect on January 1, 2020, as shown on Table 11 in this press release. Our Common Equity Tier 1 risked-based capital ratio at December 31, 2021 was 13.84% at the Company level and 13.83% 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 December 31, 2021, the Bank has ten full-service branches in Los Angeles and Orange Counties in California, 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 4Q 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 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