2022 1st Quarter Earnings

The Company’s Board of Directors declared a quarterly cash dividend of $0.045 per share. The dividend is payable on June 6, 2022 to shareholders of record on May 25, 2022. This marks the fifth consecutive, and first increase in the cash dividend payment since the Company initiated quarterly cash dividends on April 30, 2021.

“We reported another quarter of core loan growth and our ongoing outreach efforts to existing clients and prospects has produced a robust loan pipeline that we expect to recognize in the coming quarters,” stated William S. Keller, President and CEO. “Operating revenue increased during the first quarter compared to a year ago, driven by increased earning assets, lower overall cost of funds and stable DDA balances, while non-interest expenses, exclusive of last year’s PPP related offsets, increased 7.6% as we built capacity to support near term growth.”  

Over the last two years, the Company was an active participant in the SBA PPP, resulting in over $158.0 million in PPP loans originated over the course of the two rounds of the program. As of March 31, 2022, the Company had received payments from the SBA for forgiveness of $141.4 million for 910 PPP borrowers. At quarter end, the Company had a total of $16.9 million in gross PPP loans remaining on its books. Approximately $596,000 of the fee income recognized during the first quarter of 2022 was related to these PPP loan payoffs, compared to $829,000 of the fee income recognized during the prior quarter. At March 31, 2022, approximately $445,000 in net unrecognized fee income remained to be recognized in relation to the PPP loan portfolio, which is predominantly expected during the next few quarters.  

“Higher than typical liquidity levels, primarily due to larger deposit balances and the resulting effect on the mix of our earning assets, continued to pressure our net interest margin,” said Keller. “However, as PPP loan balances run off and we recognize the benefit of the March 16 rate increase enacted by the Federal Reserve, we expect to see our NIM improve in future quarters, especially with the potential for additional rate increases throughout the year.” The  Company’s net interest margin was 3.58% in the first quarter of 2022, compared to 3.69% in the preceding quarter, and 3.74% in the first quarter a year ago. PPP loan fees and interest added 26 basis points to the net interest margin for the first quarter of 2022, compared to adding 34 basis points in the preceding quarter.  

“Due to rebounding economic activity, especially in industry segments that were the most affected by the pandemic, and a $220,000 recovery of a previous charge off in one of those segments, the Company did not record a provision for loan losses for the quarter ended March 31, 2022,” said Mukhtar Ali, Chief Credit Officer. “Our loan loss reserves represent 1.31% of total non-guaranteed loans at March 31, 2022, compared to 1.36% a year earlier. We communicate with our borrows regularly and we continue to be impressed by their capabilities and resilience. As a result we believe that we have adequate provisions in place to navigate the ongoing economic transition.” The Bank had no past due loans or loans on deferral at March 31, 2022.

First Quarter 2022 Financial Highlights (at or for the period ended March 31, 2022) 

• Net income was $1.63 million in the first quarter of 2022, compared to $1.68 million in the first quarter a year ago, and $1.75 million in the preceding quarter. Earnings per share was $0.18 in the first quarter of 2022, compared to $0.20 in the prior quarter, and $0.19 in the first quarter a year ago. 
• Total assets increased $29.5 million, or 3.9%, to $791.6 million at March 31, 2022, compared to $762.1 million a year earlier, and increased $76.0 million, or 10.6%, compared to $715.6 million three months earlier. Average assets for the quarter totaled $759.4 million, an increase of $74.2 million, or 10.8%, from the first quarter a year ago and an increase of $18.1 million, or 2.4%, compared with the prior quarter. 
• Net interest before the provision for loan losses, increased 6.7% to $6.49 million in the first quarter of 2022, compared to $6.08 million in the first quarter a year ago. There was no provision for loan losses recorded in the first quarter of 2022, compared to a $250,000 provision for loan losses in the first quarter of 2021.
• Non-interest income was $180,000 during the first quarter of 2022, compared to $208,000 for the first quarter a year ago, and $226,000 in the fourth quarter of 2021.
• Operating revenue (net interest income before the provision for loan losses plus non-interest income) increased 6.1% to $6.67 million in the first quarter of 2021, compared to $6.29 million in the first quarter a year ago, and decreased 3.1% compared to $6.88 million in the fourth quarter of 2021. 
• Net interest margin for the first quarter was 3.58%, compared to 3.69% in the preceding quarter and 3.74% in the first quarter a year ago. The contraction in net interest margin in the first quarter of 2022 as compared to the prior quarter was largely due to the decrease in recognition of PPP origination fee income due to lower PPP loan forgiveness during the current quarter, compared to the prior quarter. Excluding all PPP-related income  and balances, the net interest margin would have been 3.32% in the first quarter of 2022, and 3.35% in the fourth quarter of 2021. The average interest yield on non-PPP loans in the first quarter was 4.48%, compared to 4.56% in the prior quarter. The average cost of funds in the first quarter was 0.24%, a 1 basis point increase compared to the prior quarter and an 8 basis points decline compared to the prior year. 
• Loans net of unearned income were $521.7 million at March 31, 2022, compared to $541.6 million a year ago, and $538.8 million three months earlier. At March 31, 2022, net non-PPP loans totaled $504.8 million, a 0.9% increase compared to $500.2 million at December 31, 2021, and a 17.4% increase compared to $429.9 million at March 31, 2021. In addition, at March 31, 2022, the unused portion of credit commitments totaled $148.7  million compared to $139.4 million in the prior quarter and $96.0 million a year ago.
• Total deposits increased $36.9 million, or 5.6%, to $698.5 million at March 31, 2022, compared to $661.6 million a year ago and increased $88.3 million, or 14.5%, compared to $610.2 million three months earlier. Noninterest bearing demand deposit accounts decreased 5.3% compared to a year ago and represented 34.6% of total deposits. Savings, NOW and money market accounts increased 25.22% compared to a year ago and represented 54.4% of total deposits. CDs decreased 25.6% when compared to a year ago and comprised 11.0% of the total deposit portfolio, at March 31, 2022. For the quarter, the overall Cost of Deposits was 24 basis points (“bp”) compared to 23 bp in the prior quarter, and 32 bp in the first quarter a year ago. 
• Asset quality remained exemplary with $22,440 of nonperforming loans at March 31, 2022, representing 0.004% of total loans. This compares to nonperforming loans at 0.005% of total loans at December 31, 2021, and 0.021% at March 31, 2021.
• The allowance for loan losses was $6.50 million, or 1.25% of total loans at March 31, 2022, compared to $5.68 million, or 1.05% of total loans at March 31, 2021. The allowance, as a percentage of non-guaranteed loans, was 1.31% at March 31, 2022, compared to 1.36% a year ago. The allowance for loan losses reflects management’s assessment of the current economic environment. 
• Total equity increased 6.0% to $67.0 million as of March 31, 2022, compared to a year ago. The Bank’s capital levels remained well above FDIC “Well Capitalized” standards as of March 31, 2022, with a Tier 1 Common Equity capital ratio of 12.07%; Total risk-based capital ratio of 13.23%; and Tier 1 leverage ratio of 9.10%. 
• Book value per common share totaled $7.56 as of March 31, 2022, an increase of 5.0% from a year ago.
• Declared a quarterly cash dividend of $0.045 per share. The dividend is payable June 6, 2022 to shareholders of record on May 25, 2022. 

On December 14, 2021 at the annual Freedman’s Bank Forum in Washington, D.C. Secretary of the Treasury Janet L. Yellen and Vice President Kamala Harris announced that $8.7 billion in Emergency Capital Investments had been granted to 186 MDI and CDFI banks and credit unions to, among other things, provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers, especially low-income and  underserved communities that may have been disproportionately impacted by the economic effects of the COVID-19 pandemic.  

“We are proud to be one of only five banks and six credit unions in California to be approved by the US Treasury for investment under ECIP. We are currently working directly with Treasury to close their investment by June 30, 2022, at which time we will announce more details including the final investment amount,” said Keller. “We look forward to working with Treasury and are excited by the increased services and lending capabilities that we will be able to provide to our clients and the communities we serve as a result. Management and the board have worked diligently to prepare for this investment capital, and we are confident that any investment, whether it is preferred stock from Treasury or common stock from shareholders, will only serve to enhance our existing  business model.” 

For additional information on the ECIP Program please visit  

https://home.treasury.gov/policy-issues/coronavirus/assistance-for-small-businesses/emergency-capital investment-program 

For additional information on the CDFI Rapid Response Program please visit  

https://www.cdfifund.gov/programs-training/programs/rrp  

About Bay 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.

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