GlobeNewswire Inc | Jul 29, 2020 09:00AM EDT

July 29, 2020

OAKLAND, Calif., July 29, 2020 (GLOBE NEWSWIRE) -- Community Bank of the Bay (OTCPink: CBYA.A), a San Francisco Bay Area commercial bank with full-service offices in Oakland, Danville and San Mateo, today reported that net income increased 26.5% to $1.18 million for the second quarter of 2020, compared to $930,000 in the second quarter of 2019. Significant participation in the Small Business Administration ("SBA") Paycheck Protection Program ("PPP") contributed to second quarter profitability. All financial results are unaudited.

Our team delivered strong operating results for the second quarter 2020, despite the economic impact of the Coronavirus pandemic, stated William S. Keller, President and CEO. We will continue to meet the needs of our clients and prospects while prioritizing safety. Our technology infrastructure and mobile Relationship Manager business model has allowed us to seamlessly transition to a remote work environment.

The highlight of the quarter was our teams successful effort to help our small business and non-profit clients receive important support from the SBA through the Paycheck Protection Program, Keller continued. As of June 30, 2020, we had funded 367 loans totaling $80 million, approximately 30% were to non-clients who we are now working to bring on board as full relationship clients. Gross PPP loan fees are estimated to be $2.8 million. Based on the current term of these loans, this fee income is being amortized over sixty months, and will be accelerated upon formal loan forgiveness or as loans are repaid. As a longtime preferred SBA lender, and an active participant in the PPP, we are also well positioned to provide longer term SBA-supported solutions to our clients. While the Bank is prepared to participate in the Federal Reserves PPP Liquidity Facility, no advances have been required from this liquidity source to date.

We entered the current period of economic uncertainty in a position of significant strength, with a solid balance sheet and strong asset quality metrics, said Mukhtar Ali, Chief Credit Officer. While there has been noticeable deterioration in the general economic environment, we have not yet seen specific deterioration in our loan portfolio. However, we are committed to being proactive in our approach to the pandemics impact, and we booked a $500,000 loan loss provision in the second quarter, which is the same amount booked in the prior quarter. These provisions have increased our loan loss reserve as a percentage of non-guaranteed loans to 1.36% at June 30, 2020, compared to 1.12% at the end of 2019. Our portfolio exposure to the industries most affected by the pandemic are almost entirely secured by real estate with conservative loan-to-value ratios and strong guarantors. The majority of these loans, especially in the hospitality and gas station segments, are to experienced and resilient operators who we have worked directly with through several previous credit cycles.

The Banks exposure to the industry segments generally considered most at risk as of June 30, 2020 consists of:

Industry Segments ($ in thousands) Balances % of Total Loan Balances ModificationsHospitality $ 42,025 10.6 % $ 15,389Gasoline Stations 17,821 4.5 % 0Food Service 15,977 4.0 % 1,932Entertainment and Recreation 14,200 3.6 % 0Retail, Excluding Grocers and 4,932 1.2 % 143Gasoline StationsTotal $ 94,955 23.9 % $ 17,464

As of June 30, 2020, we provided twelve loan modifications that conformed to regulatory guidelines, totaling $24 million, or 6.1% of our non-PPP loan portfolio to eight clients. All of these loans are supported by personal guarantees and 91% are secured by conservatively leveraged real estate, added Ali.

Second Quarter 2020 Financial Highlights (at or for the period ended June 30, 2020)

-- Net income increased 26.5% to $1.18 million in the second quarter of 2020 compared to $930,000 in the second quarter a year ago. Earnings per share was $0.13 in the second quarter of 2020 compared to $0.11 in the second quarter a year ago. -- Pre-tax core earnings excluding gains on loan sales, Bank Enterprise Awards and loan loss provisions, increased $634 thousand or 40.5% to $2.2 million in the second quarter, compared to $1.56 million in the second quarter a year ago. -- Net interest income increased 6.9% to $4.64 million in the second quarter of 2020, compared to $4.34 million in the second quarter a year ago. The improvement in operating net income in the second quarter of 2020 compared to the second quarter a year ago reflects a $301,000 increase in net interest income and a $365,000 decrease in non-interest expense, offset by a $300,000 increase in the provision for loan loss reserve. The decrease in non-interest expense during the second quarter of 2020 reflects an increase in capitalized loan origination costs, primarily related to the origination of PPP loans. -- Net interest margin for the second quarter totaled 3.38% compared with 3.95% for the prior quarter and 4.17% in the second quarter a year ago. The reduction in margin from the prior quarter was primarily due to an 87-basis point decrease in the average yield on earning assets almost entirely as a result of the 150-basis point decrease in the Federal Funds Rate in March, 2020. The average interest yield on non-PPP loans in the second quarter was 5.09%, a decline of 10 basis points from the prior quarter. The average Cost of Funds in the second quarter was 0.66%, a decline of 32 basis points.

-- Net loans increased $111.3 million, or 30.7%, to $474.2 million at June 30, 2020, compared to $362.9 million a year ago, and grew 10.5% compared to $400.2 million three months earlier. The increase in net loans compared to the prior quarter primarily reflects the origination of SBA PPP loans during the current quarter, which totaled $80.1 million outstanding as of June 30, 2020. The $5.6 million YTD decline in non-PPP loans is attributed to an $18.1 million reduction in our purchased loan portfolio as management took advantage of the increased market values of our USDA-backed loan portfolio to harvest premium income, and pre-paids have accelerated. -- Total deposits increased $141.4 million, or 38.7%, to $506.9 million at June 30, 2020, compared to $365.5 million a year ago and increased $74.9 million, or 17.3%, compared to $432.0 million three months earlier. The increase in total deposits from the preceding quarter was due primarily to SBA PPP loan funds deposited into customer accounts. Noninterest bearing demand deposit accounts increased 52.2% compared to a year ago and represented 40.6% of total deposits, savings, NOW and money market accounts increased 16.5% compared to a year ago and represented 37.4% of total deposits and CDs increased 65.1% when compared to a year ago and comprised 22.0% of the total deposit portfolio, at June 30, 2020. -- Assets totaled $612.0 million at June 30, 2020, a $157.8 million increase, or 38.7%, compared to $454.2 million a year earlier, and an $84.6 million increase, or 16.0%, compared to $493.4 million three months earlier. Average earning assets for the quarter totaled $551.1 million, an increase of $133.5 million, or 32.0%, from the second quarter a year ago and an increase of $81.3 million, or 17.3%, compared with the prior quarter end. -- Asset quality remained excellent with only $151 thousand of nonperforming loans at June 30, 2020, representing 0.02% of total loans. This compares to nonperforming loans at 0.20% of total loans at June 30, 2019, and 0.04% at March 31, 2020. The year over year improvement in NPAs reflects the stability of the loan portfolio and the ongoing pay down in principal balances. -- The Allowance for Loan Losses totaled $5.1 million, or 1.08% of total loans at June 30, 2020, compared to 1.05% of total loans at June 30, 2019. The Allowance as a percentage of non-guaranteed loans was 1.36% and 1.12% respectively. The increasing Allowance now stands at 4,427% of non-performing loans and reflects managements recognition of the current economic environment. -- Total equity as of June 30, 2020 of $58.7 million increased $1.3 million, or 2.2%, from the prior quarter end. The Banks capital levels are well above FDIC Well Capitalized standards as of June 30, 2020, with a Tier 1 Common Equity capital ratio of 14.51%; Total risk-based capital ratio of 15.77%; and Tier 1 leverage ratio of 10.14%. -- Book value per common share totaled $6.71 as of June 30, 2020, an increase of 9.2% from a year ago.

About Community Bank of the Bay

Community Bank of the Bay (OTCPink: CBYA.A) 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 Californias 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 fromthose 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:

COMMUNITY BANK OF THE BAYUNAUDITED SUMMARY FINANCIAL STATEMENTS(Dollars in thousands, except earnings per share) INCOME Three Months EndedSTATEMENT Qtr Qtr 2020 2020 over 2019 over Yr Qtr Ago Qtr June 30 March 31 % June 30 % Change Change Interest $ 5,480 $ 5,690 -3.7 % $ 5,287 3.7 %incomeInterest 841 1,062 -20.8 % 949 -11.4 %expenseNet interestincome 4,639 4,628 0.2 % 4,338 6.9 %beforeprovisionProvisionfor Loan 500 500 0.0 % 200 150.0 %LossesNet interestincome after 4,139 4,128 0.3 % 4,138 0.0 %provision Non-interest 168 492 -65.9 % 200 -16.0 %incomeNon-interest 2,609 3,328 -21.6 % 2,974 -12.3 %expenseIncomebeforeprovision 1,698 1,292 31.4 % 1,364 24.5 %for incometaxesProvisionfor income 522 406 28.6 % 434 20.3 %taxesNet income $ 1,176 $ 886 32.7 % $ 930 26.5 % Less:preferred - - 0.0 % - 0.0 %dividendsNet incomeavailable $ 1,176 $ 886 32.7 % $ 930 26.5 %for commonstockholders Basicearnings per $ 0.13 $ 0.10 32.4 % $ 0.11 24.0 %common shareWeightedaveragecommon 8,739,338 8,720,352 8,569,028 sharesoutstanding Return onaverage 0.82 % 0.72 % 0.86 % assetsReturn onaverage 8.04 % 6.23 % 7.17 % commonequity

COMMUNITY BANK OF THE BAYUNAUDITED SUMMARY FINANCIAL STATEMENTS(Dollars in thousands, except book value per share) BALANCE At Period EndSHEET Qtr Year 2020 2020 over 2019 over Qtr YearASSETS June 30 March 31 % June 30 % Change Change Total cashand $ 119,338 $ 115,411 3.4 % $ 83,728 42.5 %investmentsLoans, netof unearned 474,205 400,242 18.5 % 362,917 30.7 %incomeLoan loss (5,115 ) (4,613 ) 10.9 % (3,824 ) 33.8 %reserveOther assets 23,573 16,330 44.4 % 11,358 107.5 %Total Assets $ 612,001 $ 527,370 16.0 % 454,179 34.7 % LIABILITIES AND SHAREHOLDERS EQUITY Non-interestbearing 205,580 147,525 39.4 % 135,069 52.2 %demanddepositsInterestbearing 301,324 284,441 5.9 % 230,452 30.8 %depositsTotal 506,904 431,966 17.3 % 365,521 38.7 %depositsTotalborrowings 46,391 37,982 22.1 % 35,242 31.6 %and otherliabilitiesTotal $ 553,295 $ 469,948 17.7 % $ 400,763 38.1 %Liabilities Total equity 58,706 57,422 2.2 % 53,416 9.9 %TotalLiabilities $ 612,001 $ 527,370 16.0 % $ 454,179 34.7 %and TotalEquity Book valueper common $ 6.71 $ 6.57 2.2 % $ 6.15 9.2 %share

SELECTED FINANCIAL DATA (In thousands of dollars, except for ratios and per share amounts)Unaudited At or for the Three Months Ended 2020 2020 2019 June 30 March 31 June 30ASSET QUALITY RATIOS Net (charge-offs) recoveries 2 7 74 Net (charge-offs) recoveries to average 0.0004 % 0.0018 % 0.0217 %loansNon-performing loans as a % of loans 0.02 % 0.04 % 0.20 %Non-performing assets as a % of assets 0.02 % 0.03 % 0.16 %Allowance for loan losses as a % of 1.08 % 1.15 % 1.05 %total loansAllowance for loan losses as a % of 1.36 % 1.21 % 1.12 %total unguaranteed loansAllowance for loan losses as a % of 4427 % 3283 % 519 %non-performing loans AVERAGE BALANCE SHEET DATA Average assets 572,778 493,457 434,370 Average total loans 452,619 402,021 340,928 Average total deposits 471,924 398,055 361,825 Average shareholders' equity 58,644 57,050 52,021 FINANCIAL RATIOS\STATISTICS Return on average equity 0.82 % 0.72 % 0.86 %Return on average assets 8.04 % 6.23 % 7.17 %Net interest margin 3.38 % 3.95 % 4.17 %Efficiency ratio 54.28 % 64.99 % 65.54 %

Contacts: William S. Keller, President & CEO510-433-5404wkeller@BankCBB.com