2023 4th Quarter Earnings

OAKLAND, CA – February 5, 2024 — Bay Community Bancorp, (OTCPink: CBOBA) (the “Company”), parent company of Community Bank of the Bay, (the “Bank”) a San Francisco Bay Area commercial bank and California’s first certified FDIC-insured Community Development Financial Institution (“CDFI”) with full-service offices in Oakland, Danville, San Jose and San Mateo, today reported net income of $1.31 million for the fourth quarter of 2023, compared to $2.39 million for the fourth quarter of 2022. In the third quarter of 2023, the Company earned $3.12 million, which included a $2.48 million Equitable Recovery Program (“ERP”) grant, as well as $437,000 Bank Enterprise Award (“BEA”). All financial results are unaudited.

For the year 2023, net income increased 2.1% to a record $8.23 million, compared to $8.06 million in 2022. The previously mentioned ERP grant, as well as the BEA contributed to record profitability for the year.

The Company’s Board of Directors declared a quarterly cash dividend of $0.05 per share. The dividend is payable March 6, 2024, to shareholders of record on February 23, 2024. This marks the twelfth consecutive cash dividend payment since the Company initiated quarterly cash dividends on April 30, 2021.

“In 2023 we delivered record operating results as growth initiatives were more than offset by the Equitable Recovery Program grant that was recorded during the prior quarter. Unlike other CDFI Fund awards, such as the BEA, which we received for the twenty-second time in recognition of our annual lending and investment activities in low- and moderate-income communities, the ERP grant is a non-recurring award,” stated William S. Keller, CEO. “The loss of five regional Bay Area competitors during 2023 created an unprecedented opportunity for us to invest this one- time award and leverage our abundant capital position, which is in the top three percent of our nationwide peer group, by opening a new full-service banking office in San Jose, expanding our San Mateo office and establishing a San Francisco Production Office. These offices, and more importantly the top-tier professionals who joined us, will be key contributors to our future success.”

“With these investments in place and gaining momentum, we decided to lean into our capital position and improve our deposit mix by moving $60.0 million of our highest cost deposits off balance sheet near year end,” Keller continued. “While this decision reduced total assets below $1 billion, it improved our deposit mix and we expect to see better net interest margins going forward. We are pleased with our progress in this area as deposits increased over $14.3 million in January, with all of the growth attributed to non-real estate service-related DDA account balances.”

“We implemented the Current Expected Credit Losses standard on January 1, 2023, which replaced the former “incurred loss” model for recognizing credit losses with an “expected loss” model referred to as the CECL model. Utilizing CECL may have a more volatile impact on our allowance for credit losses going forward and may result in a lack of comparability between 2023 and 2022 quarterly periods,” said Mukhtar Ali, President and Chief Credit Officer. “At December 31, 2023, our loan loss reserves represent 0.93% of total non-guaranteed loans, compared to 1.06% a year earlier.”

“The commercial real estate loan portfolio continues to perform well,” continued Ali. “Commercial real estate loans against office properties totaled $69.6 million at December 31, 2023 and represented 34.3% of capital. The non- owner occupied office segment consisted of 23 notes totaling $53.7 million and carried a weighted average loan- to-value of 40.8% at quarter end. All relationships in this category are performing as agreed.”

Fourth Quarter 2023 Financial Highlights (at or for the period ended December 31, 2023)

• Net income was $1.31 million in the fourth quarter of 2023, compared to $2.39 million in the fourth quarter a year ago, and $3.12 million in the preceding quarter. Earnings per common share was $0.15 in the fourth quarter of 2023, compared to $0.28 in the fourth quarter a year ago, and $0.36 in the preceding quarter.
• Pre-tax, pre-provision, pre-CDFI grant income was $1.59 million in the fourth quarter of 2023, compared to $3.39 million in the year ago quarter, and $1.99 million in the third quarter of 2023.
• Total assets were $975.0 million at December 31, 2023, compared to $976.0 million a year earlier, and decreased $90.9 million, or 8.5%, compared to $1.07 billion three months earlier. Average assets for the quarter totaled $1.04 billion, an increase of $44.7 million, or 4.5%, from the fourth quarter a year ago and a decrease of $14.5 million, or 1.4%, compared with $1.06 billion the prior quarter.
• Net interest income, before the provision for credit losses, was $8.17 million in the fourth quarter of 2023, compared to $8.74 million in the fourth quarter a year ago, and $8.20 million in the preceding quarter. There was a $106,000 negative provision for credit losses recorded in the fourth quarter of 2023. This compared to no provision for loan losses in the fourth quarter of 2022, and a $626,000 provision for credit losses recorded for the preceding quarter.
• Noninterest income was $345,000 in the fourth quarter of 2023, compared to $253,000 in the fourth quarter of 2022. Due primarily to the $2.48 million Equity Recovery Program grant, and the $437,000 BEA award, noninterest income was $3.33 million in the third quarter of 2023.
• Operating revenue (net interest income before the provision for loan losses plus non-interest income) was $8.51 million in the fourth quarter of 2023, compared to $9.00 million in the fourth quarter a year ago, and $11.54 million in the third quarter of 2023.
• Net interest margin was 3.16% in the fourth quarter, compared to 3.15% in the preceding quarter, and 3.57% in the fourth quarter a year ago. The one basis point increase in net interest margin in the fourth quarter of 2023 was due to an improved deposit mix. The year-over-year contraction was due to an increase in deposit costs as well as a change in the earning asset mix, compared to the year ago quarter. The average interest yield on non- PPP loans in the fourth quarter of 2023 was 5.69%, compared to 5.25% in the year ago quarter and 5.74% in the prior quarter. The average cost of funds in the fourth quarter was 2.41%, a 125 basis point increase compared to the fourth quarter a year ago and a 6 basis point increase compared to the prior quarter.
• Noninterest expense was $6.84 million in the fourth quarter of 2023, compared to $5.48 million in the fourth quarter of 2022, and $6.46 million in the third quarter of 2023. Higher noninterest expense during the fourth quarter of 2023 reflected market expansion expenses. Also impacting expenses during the quarter was $322,000 of extraordinary charges associated with altered or otherwise unauthorized checks. The Company believes it has legal recourse against the bank of first deposit and is vigorously pursuing restitution.
• Loans, net of unearned income, increased $19.4 million, or 3.0%, to $670.2 million at December 31, 2023, compared to $650.8 million a year ago, and decreased $5.69 million compared to $675.8 million three months earlier. In addition, at December 31, 2023, the unused portion of credit commitments totaled $134.9 million compared to $141.0 million in the prior quarter and $150.8 million a year ago.
• Total deposits decreased $72.0 million, or 10.2%, to $633.9 million at December 31, 2023, compared to $705.9 million a year ago, and decreased $86.7 million, or 12.0%, compared to $720.6 million three months earlier. Noninterest bearing demand deposit accounts decreased 13.1% compared to a year ago and represented 27.8% of total deposits. Savings, NOW and money market accounts decreased 29.8% compared to a year ago and represented 39.3% of total deposits. Reflective of the rising interest rate environment, CDs increased 40.9% compared to a year ago and comprised 32.8% of the total deposit portfolio, at December 31, 2023. For the quarter, the overall cost of funds was 241 basis points compared to 235 basis points in the prior quarter, and 116 basis points in the fourth quarter a year ago.
• Asset quality remains strong with 1.056% nonperforming loans to gross loans at December 31, 2023. This compares to 1.057% of nonperforming loans to gross loans at September 30, 2023, and 0.046% of nonperforming loans to gross loans at December 31, 2022.
• The allowance for credit losses on loans was $6.21 million, or 0.92% of gross loans at December 31, 2023, compared to $6.89 million, or 1.05% of total loans at December 31, 2022. The allowance, as a percentage of non-guaranteed loans, was 0.93% at December 31, 2023, compared to 1.06% a year ago. The allowance for credit losses reflects management’s assessment of the current economic environment.
• Primarily due to retained earnings, total equity increased 4.3% to $192.9 million as of December 31, 2023, compared to $184.9 million a year ago. The Bank’s capital levels remained well above FDIC “Well Capitalized” standards as of December 31, 2023, with a Tier 1 capital ratio of 27.51%; Common Equity Tier 1 capital ratio of 10.78%; Total capital ratio of 28.45%; and Leverage ratio of 18.81%.
• Book value per common share increased 14.13% to $8.56 as of December 31, 2023, compared to $7.50 per common share a year ago.
• Declared a quarterly cash dividend of $0.05 per share. The dividend is payable March 6, 2024 to shareholders of record on February 23, 2024.

On October 23, 2023, the Company announced that its board of directors adopted a share repurchase program authorizing the Company to repurchase up to 436,440 shares of the Company’s outstanding shares of Series A common stock. As of December 31, 2023, the Company had repurchased 206,750 outstanding shares of Series A common stock and 229,690 shares remain available under the repurchase program ending September 30, 2024.

On June 7, 2022, the Company completed a $119.4 million investment from the US Treasury Department. Treasury’s investment, made under the Emergency Capital Investment Program (“ECIP”), is in the form of non- cumulative Senior Perpetual Preferred Stock. For the first two years from the date of issuance of the Senior Perpetual Preferred Stock the dividend rate shall be zero percent (0%) per annum, and thereafter dividend payments begin accruing with a maximum dividend rate of two percent (2%) and the dividend rate may be reduced to one half percent (0.5%) based on the level of increased qualified lending undertaken by the Bank.

While the ECIP investment was a transformative event brought on by the Federal response to the pandemic, the Bank has maintained a long and important relationship with the US Treasury’s CDFI Fund. Since its founding, the Bank has received 22 Bank Enterprise Awards totaling $9.2 million, plus miscellaneous other grants such as this quarter’s Equitable Recovery Grant totaling $4.3 million. All of these awards and grants, plus any future opportunities that may become available to us, such as our planned participation in the Clean Communities Investment Accelerator program that is being financed by the Environmental Protection Agency’s Greenhouse Gas Reduction Fund, support our lending and investment activities in low- and moderate-income communities.

For additional information on the US Treasury’s 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 Fund’s Rapid Response Program please visit

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

For additional information on the CDFI Fund’s Equitable Recovery Program please visit

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

For additional information on the EPA’s Clean Communities Investment Accelerator Program please visit

https://www.epa.gov/greenhouse-gas-reduction-fund/clean-communities-investment-accelerator

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, San Mateo and San Jose. 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, and is California’s first FDIC-insured certified Community Development Financial Institution. 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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