2021 2nd Quarter Earnings

The Company also announced its Board of Directors declared a quarterly cash dividend of $0.04 per share. The dividend is payable on September 3, 2021 to shareholders of record on August 24, 2021. This marks the second dividend payment since the Company initiated quarterly cash dividends on April 30, 2021.  

“Our earnings for the second quarter were highlighted by strong revenue generation, higher deposit growth and the continued success of our outreach to new and existing customers. Overall, these factors contributed to a return on  average assets of 1.24% and a return on average equity of 15.04% for the quarter,” stated William S. Keller, President and CEO. “During the quarter, asset quality continued to improve with loan modifications and reportable  past due loans decreasing to zero. Nonetheless, with unused commitments and loans approved but not yet boarded increasing by $45.6 million during the quarter we made an appropriate provision to our allowance for loan losses. As the vaccine rollout continues and COVID-19 restrictions continue to lift in California, we remain optimistic for additional growth during the second half of the year.”  

“One of the highlights of the quarter was being named a recipient of the CDFI Rapid Response Program,” said  Keller. “We were granted and fully deployed $1.83 million, which was the largest award made available to any institution, and we were just one of 149 commercial banks around the country to receive the grant.” On June 15, 2021, the U.S. Department of the Treasury awarded $1.25 billion in COVID-19 relief funds to 863 Community  Development Financial Institutions (CDFIs). The grants were made through Treasury’s CDFI Rapid Response Program (CDFI RRP) to provide capital for CDFIs to respond to the economic challenges created by the COVID-19 pandemic, particularly in underserved communities. The grant funds may be used to support eligible activities such as the development and delivery of financial products and services, certain operational activities, and to enable  CDFIs to build capital reserves and loan-loss reserves. The CDFI RRP was authorized by the Consolidated Appropriations Act of 202, which included a number of important opportunities to assist CDFI banks in serving their communities.  

“Our focus since the onset of the pandemic has been to support the businesses and their employees in our communities,” said Keller. “During the second and third quarters of 2020, we helped 395 customers receive $81.2 million in PPP funding, with approximately one-third of the loans going to potential new clients. Many of these new PPP borrowers have already transitioned into full client relationships. The first round of PPP expired on August 8, 2020 and, as of June 30, 2021, we had received payments from the SBA for forgiveness of $65.7 million for 284 of first round PPP borrowers. Approximately $191,000 of the fee income recognized during the second quarter of 2021 related to these loan payoffs, compared to $213,000 of the fee income recognized during the prior quarter.”  

The Company’s PPP activity continued into 2021 when the CARES Act that was signed into law in late 2020 authorized additional COVID-19 stimulus relief through a second round of PPP funding. The program offers PPP  loans for companies that did not receive PPP funds in 2020 and additional “second draw” loans for those businesses  that were hit the hardest by the pandemic. “As a CDFI, our Bank was able to begin offering these loans before other institutions, and we conducted significant outreach and educational efforts in order to support the SBA’s goal of ensuring that all qualified applicants had access to this valuable economic recovery program. As of June 30, 2021, we had closed 600 second round loans with total originations of $73.0 million, and generated net deferred fee income of nearly $2.8 million that we will recognize over the loan’s five-year term or at loan forgiveness,” said  Keller.  

The Company’s net interest margin was 2.93% in the second quarter of 2021, compared to 3.71% in the preceding quarter, and 3.38% in the second quarter a year ago. “Increased liquidity due to higher deposit balances and the  resultant effect on the mix of our earning assets caused by higher Excess Reserves at the Fed continued to put  pressure on our net interest margin during the quarter,” said Keller. Excess Reserves had a 0.41% negative effect  on the net interest margin for the second quarter of 2021 compared to a 0.12% negative effect for the first quarter  of 2021.  

“We booked a $250,000 loan loss provision in the second quarter of 2021 in recognition of substantial growth in loan commitments and in the event that the increasing COVID-19 case counts negatively impact what has to date been positive economic indicators in our market,” said Mukhtar Ali, Chief Credit Officer. “Our loan loss reserves now represent 1.42% of total non-guaranteed loans at June 30, 2021, compared to 1.36% a year earlier. We continue to review our loan portfolio and communicate with our borrowers. We believe we have adequate provisions in  place to navigate through the pandemic.” The Bank had no loans on deferral at June 30, 2021.  

Second Quarter 2021 Financial Highlights (at or for the period ended June 30, 2021):

• Net income increased 104.5% to $2.41 million in the second quarter of 2021, compared to $1.68 million in  the prior quarter, and $1.18 million in the second quarter a year ago. Earnings per share was $0.27 in the second quarter of 2021, compared to $0.19 in the prior quarter, and $0.13 in the second quarter a year ago.  
• Pre-tax core earnings excluding gains on loan sales, PPP loan fees and loan loss provisions, was up $1.33 million, or 61.1%, to $3.50 million in the second quarter compared to the second quarter a year ago.  
• Total assets increased $183.9 million, or 30.1%, to $795.9 million at June 30, 2021, compared to $612.0 million  a year earlier, and increased $33.8 million, or 4.4% compared to $672.1 million three months earlier. Average assets for the quarter totaled $780.6 million, an increase of $207.8 million, or 36.3%, from the second quarter a year ago and an increase of $95.4 million, or 13.9%, compared with the prior quarter.
• Net interest income, before the provision for loan losses, increased 17.3% to $5.44 million in the second quarter  of 2021, compared to $4.64 million in the second quarter a year ago. The provision for loan losses was $250,000 in the second quarter of 2021, compared to $500,000 in the second quarter of 2020.
• Non-interest income increased substantially to $2.13 million during the second quarter of 2021, compared to $168,000 for the second quarter a year ago. Impacting non-interest income for the second quarter of 2021 was the proceeds from the $1.83 million CDFI Rapid Response Grant.  
• Operating revenue (net interest income before the provision for loan losses plus non-interest income) increased 57.6% to $7.58 million in the second quarter of 2021, compared to $4.81 million in the second quarter of 2020.
• Net interest margin for the second quarter was 2.93%, compared to 3.71% in the preceding quarter and 3.38% in the second quarter a year ago. The second quarter margin compression was driven by a $36.3 million  increase in deposit balances and $22.8 million in PPP loan forgiveness. In the second quarter, the net interest margin exclusive of all PPP-related income and balances would have been 3.26%. The average interest yield  on non-PPP loans in the second quarter was 4.87%, compared to 5.02% in the prior quarter. The average cost of funds in the second quarter was 0.26%, a decline of six basis points compared to the prior quarter and a decline of 40 basis points compared to the prior year. 
• Net loans increased $44.8 million, or 9.5%, to $519.0 million at June 30, 2021, compared to $474.2 million a year ago, and decreased 4.2% compared to $541.6 million, largely due to $23.3 million in PPP loan forgiveness during the current quarter. At June 30, 2021, net non-PPP loans totaled $432.9 million, a 0.2% increase compared to $432.2 million at March 31, 2021, and a 9.4% increase compared to $395.7 million at June 30,  2020. In addition, at June 30, 2021 the unused portion of credit commitments totaled $112.6 million compared to $95.4 million in the prior quarter and $42.4 million a year ago. 
• Total deposits increased $191.0 million, or 37.7%, to $697.9 million at June 30, 2021, compared to $506.9  million a year ago and increased $36.3 million, or 5.5% compared to $661.6 million three months earlier. Growth in new customer accounts, as well as a second round of PPP loan funds deposited into customer accounts, contributed to strong quarterly deposit growth year-over-year. Noninterest bearing demand deposit  accounts increased 28.3% compared to a year ago and represented 37.8% of total deposits. Savings, NOW and money market accounts increased 83.8% compared to a year ago and represented 49.9% of total deposits. CDs  decreased 23.2% when compared to a year ago and comprised 12.3% of the total deposit portfolio, at June 30,  2021. 
• Asset quality remained exemplary with $36,000 of nonperforming loans at June 30, 2021, representing 0.01%  of total loans. This compares to nonperforming loans at 0.02% of total loans at March 31, 2021, and at June 30, 2020. 
• The allowance for loan losses totaled $5.93 million, or 1.14% of total loans at June 30, 2021, compared to $5.12  million, or 1.08% of total loans at June 30, 2020. The allowance, as a percentage of non-guaranteed loans, was 1.42% at June 30, 2021, compared to 1.36% a year ago. The allowance for loan losses reflects management’s  assessment of the current economic environment. 
• Total equity increased 11.5% to $65.5 million as of June 30, 2021, compared to a year ago. The Bank’s capital  levels remained well above FDIC “Well Capitalized” standards as of June 30, 2021, with a Tier 1 Common Equity capital ratio of 13.26%; Total risk-based capital ratio of 14.49%; and Tier 1 leverage ratio of 8.35%. 
• Book value per common share totaled $7.44 as of June 30, 2021, an increase of 10.8% from a year ago.
• Declared a quarterly cash dividend of $0.04 per share. The dividend is payable September 3, 2021 to  shareholders of record on August 24, 2021.

In December, 2020, Bay Community Bancorp was formed, a bank holding company that is now the parent company of Community Bank of the Bay. The holding company structure provides more capital options to support its growing San Francisco Bay Area franchise, in addition to providing additional revenue generating opportunities. The financial data presented in this release is now consolidated, which only affected second quarter 2021 results, first quarter 2021 results and fourth quarter 2020 results. The results for the second quarter of 2021, the first quarter of 2021 and the fourth quarter of 2020 are comparable to prior Bank-only quarters.  

For additional information on the CDFI Rapid Response Program please visit https://www.cdfifund.gov/programs-training/programs/rrp 

About Community Bancorp

Bay Community Bancorp (OTCPink: CBOBA) is the parent company of Community Bank of the Bay, a San Francisco Bay Area commercial bank with full-service offices in Oakland, Danville and San Mateo. Community Bank of the Bay serves the financial needs of closely held businesses and professional service firms, as well as their owner-operators and non-profit organizations throughout the San Francisco Bay Area. Community Bank of the Bay is a member of the FDIC, an SBA Preferred Lender, and a CDARS depository institution, headquartered in Oakland, with full-service branches in Danville and San Mateo. It is also California’s first FDIC-insured certified Community Development Financial Institution and one of only three operating in the Bay Area. The bank is recognized for establishing the Bay Area Green Fund to provide financing to sustainable businesses and projects and supports environmentally responsible values. Additional information on the bank is available online at www.BankCBB.com.

Forward-Looking Statements

This release may contain forward-looking statements, such as, among others, statements about plans, expectations and goals concerning growth and improvement. Forward-looking statements are subject to risks and uncertainties. Such risks and uncertainties may include but are not necessarily limited to fluctuations in interest rates, inflation, government regulations and general economic conditions, including the real estate market in California and other factors beyond 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. The Bank does not undertake, and specifically disclaims, any obligation to update or revise any forward-looking statements, whether to reflect new information, future events, or otherwise, except as required by law.

FINANCIAL TABLES TO FOLLOW: