Business Wire | Jul 30, 2020 09:01AM EDT

CBB Bancorp, Inc. Reports Second Quarter Financial Results

Jul. 30, 2020

LOS ANGELES--(BUSINESS WIRE)--Jul. 30, 2020--CBB Bancorp, Inc. ("CBB" or the "Company') (OTCQX: CBBI), the holding company of Commonwealth Business Bank (the "Bank"), announced today net income for second quarter 2020 of $1.7 million, or $0.16 per diluted share, an increase of 2.5% compared to $1.6 million, or $0.16 per diluted share, in the prior quarter and a decrease of 52.6% compared to $3.5 million, or $0.33 per share, in the same period last year.

Ms. Kim commented, "The COVID-19 pandemic continues to have a negative economic impact in the communities we serve. We believe our contingency planning, strong capital and liquidity will carry us through these challenging times. All branches and the corporate office are open to serve our customers, while observing recommended health precautions. As an SBA lender, we have dedicated our full department resources on securing SBA loans for customers under the Paycheck Protection Program ("PPP"). To date, we have approved and funded approximately 1,200 PPP loans totaling $92 million."

Overall Results

Net income for second quarter 2020 was impacted by lower net interest income, higher loan loss provision and lower compensation costs. The return on average assets for second quarter 2020 was 0.52% compared to 0.58% for first quarter 2020 and 1.19% for second quarter 2019. The return on average equity for second quarter 2020 was 4.36% compared to 4.31% for first quarter of 2020 and 10.06% for second quarter 2019. The efficiency ratio for second quarter 2020 was 66.02% compared to 73.28% for first quarter 2020 and 63.79% for second quarter 2019.

Net Interest Income and Margin:

Net Interest Income

Net interest income for second quarter 2020 was $9.9 million, a decrease of $628 thousand, or 6.0%, from first quarter 2020, and a decrease of $1.6 million, or 13.7%, from second quarter 2019. The decrease in net interest income was primarily driven by a decline in market interest rates. Our adjustable rate loans, which comprise approximately 46% of our loan portfolio, repriced downward immediately due to the rate cuts by the Federal Open Market Committee ("FOMC"). Time deposits, which comprised 46% of total deposits, are repricing lower, but at a much slower pace.

Net Interest Margin

Our net interest margin for second quarter 2020 was 3.17% compared to 3.86% for first quarter 2020 and 4.05% for second quarter 2019. The drastic reduction in interest rates by the FOMC caused our adjustable rate loan portfolio to immediately reprice lower, yet our time deposit dependent portfolio is lagging the loan portfolio repricing and will reprice lower as deposits reach their maturities. Nonetheless, there was a significant improvement in our cost of funds. Our cost of funds for second quarter 2020 was 1.20% compared to 1.67% for first quarter 2020 and 1.92% for second quarter 2019.

"Our net interest margin for the second quarter declined by 69 basis points compared to first quarter 2020 and declined by 88 basis points compared to second quarter 2019. However, we anticipate our net interest margin will improve slightly as our time deposits continue to reprice at lower rates" said Ms. Kim.

Provision for Loan Losses:

Our provision for loan losses for second quarter 2020 was $1.6 million, compared $700 thousand for first quarter 2020 and $900 thousand for second quarter 2019. Approximately $507 thousand of the second quarter provision was driven by an increase in qualitative factors, while $734 thousand was attributed to specific reserve requirements for impaired loans. The assumptions underlying these qualitative factors included a deterioration in the macro-economic environment caused by the pandemic and the uncertainties as to whether those borrowers who received payment deferments can resume regular payments when the deferment terms end under the CARES Act. See Table 10 for additional details and trends.

Noninterest Income:

Noninterest income for second quarter 2020 was $1.5 million compared to $1.7 million for first quarter 2020 and $3.0 million for second quarter 2019. The decrease in second quarter 2020 was due to lower gains on sale of SBA loans resulting from significantly lower sales volume. During the second quarter, the secondary market, into which we sell SBA loans, began exhibiting signs of investor concerns that the default risk was increasing due to the pandemic. As a result, the volume of loans sold during second quarter 2020 was $9.8 million, compared with $18.5 million for first quarter 2020, and $36.7 million for second quarter 2019.

Noninterest Expense:

Noninterest expense for second quarter 2020 was $7.5 million compared to $8.9 million for first quarter 2020 and $9.2 million for second quarter 2019. Salaries and employee benefits decreased by $1.1 million in the second quarter. Salaries and employee benefits decreased $644 thousand related to cost deferrals from PPP loan originations. Marketing expense decreased $710 thousand in second quarter compared to second quarter 2019 due to the cancellation of the Ladies Professional Golf Tournament in April 2020 for which the Bank is a sponsor.

Income Taxes:

The Company's effective tax rate for second quarter 2020 was 27.0% compared to 37.0% for first quarter 2020 and 29.3% in second quarter 2019. The overall decrease in the annualized effective tax rate was primarily due to the effect of significantly higher permanent differences versus projected pre-tax income as defined in Internal Revenue Service regulations.

Balance Sheet:

Investment Securities:

Investment securities were $91.1 million at June 30, 2020, down $772 thousand from March 31, 2020 and down $8.7 million from June 30, 2019. The decreases were due to principal paydowns. There were no portfolio additions. The unrealized gains and losses in the investment portfolio at June 30, 2020 are estimated based on observable market data. The disruption in the securities market due to the pandemic could produce different results if such securities were sold.

Loans Receivable:

Loans receivable outstanding (including loans held for sale) at June 30, 2020 was $1.01 billion, an increase of $73.4 million, or 7.9%, from March 31, 2020, and an increase of $123.5 million, or 14.0% from June 30, 2019. We provided loan payment deferments to our commercial borrowers under the CARES Act. The total amount of loans with three months deferment was approximately $298.7 million or 29.7% of total loan portfolio. Of the $298.7 million in loans with payment deferments, approximately 90% of such loans have resumed regular payment status beginning in July. Based upon further due diligence on payment deferred borrowers, we have identified approximately $29.6 million of commercial borrowers that may require an additional three months of payment deferrals. This potential second extended deferment of $29.6 million represents 2.9% of our total loan portfolio. Our weighted average loan-to-value CRE loans secured by real estate was 69.7%. Excluding SBA loans, our weighted average loan-to-value CRE loans secured by real estate was 54.0%.

Allowance for Loan Losses and Asset Quality:

The allowance for loan losses at June 30, 2020 was $12.3 million, or 1.22% of portfolio loans, compared to $11.0 million, or 1.18% of portfolio loans, at March 31, 2020. Excluding PPP loans which are government guaranteed, the allowance for loan losses at June 30, 2020 was 1.34%. Non-performing loans and other real estate owned as of June 30, 2020 was $4.2 million, down from $7.3 million at March 31, 2020. Loans with payment deferments are considered performing loans in accordance with the regulatory guidance. Our coverage ratio of allowance for loan losses to nonperforming assets continues to exceed 200%. See comments under "Provision for Loan Losses", and Table 10 for additional details and trends regarding asset quality.

SBA Loans Held for Sale:

SBA loans held for sale at June 30, 2020 were $32.3 million, compared to $30.0 million at March 31, 2020 and $32.3 million at June 30, 2019. We continue to assess SBA loan sale premiums and plan to sell loans when it is advantageous to do so. However, due to the COVID-19 pandemic, loan sale premiums fluctuated and the volume of SBA loan sales declined significantly. See comments under "Noninterest Income", and the Table 7 for additional SBA loan origination and sale data.

Deposits:

Deposits were $1.03 billion at June 30, 2020, up $77.2 million from March 31, 2020 and down $4.1 million from June 30, 2019. Noninterest-bearing demand deposits (DDAs) increased $83.7 million or 39.7% from March 31, 2020 and increased $92.3 million or 45.6% from June 30, 2019. DDAs were 28.7% of total deposits at June 30, 2020 compared to 22.2% at March 31, 2020 and 19.6% at June 30, 2019. NOW and MMDA increased $56.6 million or 41.5% from March 31, 2020 and increased $46.3 million or 31.6% from June 30, 2019. Time Deposits decreased $66.8 million or 12.4% from March 31, 2020 and decreased $162.9 million or 25.7% from June 30, 2019. Our overall funding strategy has been to place less reliance on time deposits to lower our funding costs. Our time deposits at June 30, 2020 were $471.5 million or 45.9% of total deposits, down from $538.3 million or 56.6% of total deposits at March 31, 2020 and down from $634.4 million or 61.5% of total deposits at June 30, 2019. Our cost of funds for second quarter 2020 was 1.20% compared to 1.67% in first quarter 2020 and 1.92% for second quarter 2019.

Borrowings:

Borrowings at June 30, 2020 consisted of $90.0 million of Federal Home Loan Bank of San Francisco (FHLB-SF) advances, up $5 million from March 31, 2020. The historically low market interest rates enabled us to match fund some of our fixed rate loans with long term, low cost funds to minimize interest rate risk.

Additionally, we match funded approximately $59 million of PPP loans using the FRB PPP Liquidity Facility without taking on liquidity or funding risk. The current borrowing rate for the facility is 0.35% and the PPP loan rate is 1% plus a loan fee ranging from 1.0% to 5% depending on the loan amount.

Capital:

Stockholders' equity was $152.8 million at June 30, 2020, representing an increase of $3.0 million, or 2.0%, over stockholders' equity of $149.8 million at March 31, 2020. Book value per share at quarter end was $14.92 compared with $14.63 at March 31, 2020, an increase of $0.29 per share or 2.0%.

All of our regulatory capital ratios increased at June 30, 2020 from their levels at March 31, 2020 and continue to exceed the minimum levels required to be considered "Well Capitalized" as defined for bank regulatory purposes and in compliance with the fully phased-in Basel III requirements, which went into effect on January 1, 2019, as shown on Table 11 in this press release. Importantly, our Common Equity Tier 1 risked-based capital at June 30, 2020 was 15.23% at the Company level and 15.18% 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 small-to medium-sized businesses and does business as "CBB Bank." The Bank has eight full-service branches in Los Angeles and Orange Counties in California, and Dallas County in Texas; 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.

FORWARD-LOOKING STATEMENTS:

This news release contains a number of forward-looking statements. These statements may be identified by use of 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. 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 guaranteeing 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. You should not place undue reliance on such 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; 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; 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; or 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. 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.

STATEMENT OF INCOME AND PERFORMANCE HIGHLIGHT (Unaudited) - Table 1 (Dollars in thousands, except per share amounts) Three Months Ended Six Months Ended June 30, March 31, $ % June 30, $ % June 30, June 30, $ %

2020 2020 Change Change 2019 Change Change 2020 2019 Change Change

Interest income $ 13,206 $ 14,473 $ (1,267 ) (8.8 %) $ 16,296 $ (3,090 ) (19.0 %) $ 27,679 $ 31,880 $ (4,201 ) (13.2 %)

Interest expense 3,342 3,981 (639 ) (16.1 %) 4,865 (1,523 ) (31.3 %) 7,323 9,162 (1,839 ) (20.1 %)

Net interest income 9,864 10,492 (628 ) (6.0 %) 11,431 (1,567 ) (13.7 %) 20,356 22,718 (2,362 ) (10.4 %)

Provision for loan losses 1,600 700 900 128.6 % 300 1,300 433.3 % 2,300 300 2,000 666.7 %

Net interest income after 8,264 9,792 (1,528 ) (15.6 %) 11,131 (2,867 ) (25.8 %) 18,056 22,418 (4,362 ) (19.5 %)provision for loan losses Gain on sale of loans 509 939 (430 ) (45.8 %) 2,109 (1,600 ) (75.9 %) 1,448 3,276 (1,828 ) (55.8 %)

Gain (loss) on sale of 9 (6 ) 15 (250.0 %) (4 ) 13 325.0 % 3 (14 ) 17 121.4 %OREOSBA servicing fee income, 738 372 366 98.4 % 312 426 136.5 % 1,110 815 295 36.2 %netService charges and other 251 396 (145 ) (36.6 %) 577 (326 ) (56.5 %) 647 1,034 (387 ) (37.4 %)incomeNoninterest income 1,507 1,701 (194 ) (11.4 %) 2,994 (1,487 ) (49.7 %) 3,208 5,111 (1,903 ) (37.2 %)

Salaries and employee 4,617 5,702 (1,085 ) (19.0 %) 5,467 (850 ) (15.5 %) 10,319 10,565 (246 ) (2.3 %)benefitsOccupancy and equipment 943 946 (3 ) (0.3 %) 831 112 13.5 % 1,889 1,663 226 13.6 %

Marketing expense 279 458 (179 ) (39.1 %) 989 (710 ) (71.8 %) 737 1,509 (772 ) (51.2 %)

Professional expense 500 435 65 14.9 % 574 (74 ) (12.9 %) 935 1,212 (277 ) (22.9 %)

Other expenses 1,168 1,394 (226 ) (16.2 %) 1,340 (172 ) (12.8 %) 2,562 2,616 (54 ) (2.1 %)

Noninterest expense 7,507 8,935 (1,428 ) (16.0 %) 9,201 (1,694 ) (18.4 %) 16,442 17,565 (1,123 ) (6.4 %)

Income before income tax 2,264 2,558 (294 ) (11.5 %) 4,924 (2,660 ) (54.0 %) 4,822 9,964 (5,142 ) (51.6 %)expense Income tax expense 612 946 (334 ) (35.3 %) 1,441 (829 ) (57.5 %) 1,558 2,891 (1,333 ) (46.1 %)

Net income $ 1,652 $ 1,612 $ 40 2.5 % $ 3,483 $ (1,831 ) (52.6 %) $ 3,264 $ 7,073 $ (3,809 ) (53.9 %)

Effective tax rate 27.0 % 37.0 % (10.0 %) (26.9 %) 29.3 % (2.2 %) (7.6 %) 32.3 % 29.0 % 3.3 % 11.4 %

Outstanding number of 10,237,310 10,237,310 - - 10,140,760 96,550 1.0 % 10,237,310 10,140,760 96,550 1.0 %shares Weighted average shares 10,237,310 10,224,146 13,164 0.1 % 10,125,622 111,688 1.1 % 10,230,728 10,113,986 116,742 1.2 %for basic EPSWeighted average shares 10,276,637 10,327,730 (51,093 ) (0.5 %) 10,341,488 (64,851 ) (0.6 %) 10,302,184 10,350,725 (48,541 ) (0.5 %)for diluted EPS Basic EPS $ 0.16 $ 0.16 - - $ 0.34 $ (0.18 ) (52.9 %) $ 0.32 $ 0.70 $ (0.38 ) (54.3 %)

Diluted EPS $ 0.16 $ 0.16 - - $ 0.33 $ (0.17 ) (51.5 %) $ 0.32 $ 0.68 $ (0.36 ) (52.9 %)

Return on average assets 0.52 % 0.58 % (0.06 %) (10.3 %) 1.19 % (0.67 %) (56.3 %) 0.54 % 1.24 % (0.70 %) (56.45 %)

Return on average equity 4.36 % 4.31 % 0.05 % 1.2 % 10.06 % (5.70 %) (56.7 %) 4.34 % 10.44 % (6.10 %) (58.43 %)

Efficiency ratio^1 66.02 % 73.28 % (7.26 %) (9.9 %) 63.79 % 2.23 % 3.5 % 69.78 % 63.12 % 6.66 % 10.55 %

Yield on interest-earning 4.24 % 5.31 % (1.07 %) (20.2 %) 5.76 % (1.52 %) (26.4 %) 4.74 % 5.75 % (1.01 %) (17.57 %)assets?Cost of funds 1.20 % 1.67 % (0.47 %) (28.1 %) 1.92 % (0.72 %) (37.5 %) 1.42 % 1.84 % (0.42 %) (22.86 %)

Cost of funds exc. SBA 1.25 % 1.45 % PPP loan fundingNet interest margin? 3.17 % 3.86 % (0.69 %) (17.9 %) 4.05 % (0.88 %) (21.7 %) 3.49 % 4.10 % (0.61 %) (14.92 %)

Net interest margin exc. 3.20 % 3.51 % SBA PPP loans?

Represents the ratio of noninterest expense less other real^ estate owned operations to the sum of net interest income before1 provision for credit losses and total noninterest income, less gains/(loss) on sale of securities, other-than-temporary impairment recovery/(loss) on investment securities and gain/ (loss) from other real estate owned. ? Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate

BALANCE SHEET, CAPITAL AND OTHER DATA (Unaudited) - Table 2(Dollars in thousands) June 30, March 31, $ % June 30, $ %

2020 2020 Change Change 2019 Change Change

ASSETSCash and due from $ 9,043 $ 7,804 $ 1,239 15.9 % $ 12,369 $ (3,326 ) (26.9 %)banksInterest-earning 179,519 113,880 65,639 57.6 % 127,199 52,320 41.1 %deposits at the FRBand other banksInvestment 91,091 91,863 (772 ) (0.8 %) 99,758 (8,667 ) (8.7 %)securities^1Loansheld-for-sale, at 32,264 29,989 2,275 7.6 % 46,875 (14,611 ) (31.2 %)the lower of costor fair value Loans receivable 1,005,128 931,717 73,411 7.9 % 881,614 123,514 14.0 %

Allowance for loan (12,283 ) (11,034 ) (1,249 ) (11.3 %) (10,019 ) (2,264 ) (22.6 %)lossesLoans receivable, 992,845 920,683 72,162 7.8 % 871,595 121,250 13.9 %net

OREO - 364 (364 ) (100.0 %) 11 (11 ) (100.0 %)

Restricted stock 8,196 8,194 2 0.0 % 8,194 2 0.0 %investmentsServicing assets 8,944 9,203 (259 ) (2.8 %) 10,174 (1,230 ) (12.1 %)

Other assets 21,383 20,144 1,239 6.2 % 22,662 (1,279 ) (5.6 %)

Total assets $ 1,343,285 $ 1,202,124 $ 141,161 11.7 % $ 1,198,837 $ 144,448 12.0 %

LIABILITIES ANDSTOCKHOLDERS'EQUITYNoninterest-bearing $ 295,003 $ 211,139 $ 83,864 39.7 % $ 202,657 $ 92,346 45.6 %

Interest-bearing 732,647 739,285 (6,638 ) (0.9 %) 829,088 (96,441 ) (11.6 %)

Total deposits 1,027,650 950,424 77,226 8.1 % 1,031,745 (4,095 ) (0.4 %)

FHLB advances and 148,671 85,000 63,671 74.9 % 10,000 138,671 1386.7 %other borrowingOther liabilities 14,208 16,895 (2,687 ) (15.9 %) 15,990 (1,782 ) (11.1 %)

Total liabilities 1,190,529 1,052,319 138,210 13.1 % 1,057,735 132,794 12.6 %

Stockholders' 152,756 149,805 2,951 2.0 % 141,102 11,654 8.3 %EquityTOTAL LIABILITIES & $ 1,343,285 $ 1,202,124 $ 141,161 11.7 % $ 1,198,837 $ 144,448 12.0 %STOCKHOLDERS'EQUITY CAPITAL RATIOSLeverage ratioCompany 11.98 % 13.17 % (1.19 %) (9.04 %) 11.93 % 0.05 % 0.42 %

Bank 11.94 % 13.12 % (1.18 %) (8.99 %) 11.89 % 0.05 % 0.42 %

Common equity tier1 risk-basedcapital ratioCompany 15.23 % 14.82 % 0.41 % 2.77 % 14.69 % 0.54 % 3.68 %

Bank 15.18 % 14.77 % 0.41 % 2.78 % 14.65 % 0.53 % 3.62 %

Tier 1 risk-basedcapital ratioCompany 15.23 % 14.82 % 0.41 % 2.77 % 14.69 % 0.54 % 3.68 %

Bank 15.18 % 14.77 % 0.41 % 2.78 % 14.65 % 0.53 % 3.62 %

Total risk-basedcapital ratioCompany 16.48 % 16.01 % 0.47 % 2.94 % 15.81 % 0.67 % 4.24 %

Bank 16.43 % 15.95 % 0.48 % 3.01 % 15.76 % 0.67 % 4.25 %

Book value per $ 14.92 $ 14.63 $ 0.29 2.0 % $ 13.91 $ 1.01 7.2 %shareLoan-to-Deposit 97.81 % 98.03 % (0.22 %) (0.22 %) 85.45 % 12.36 % 14.47 %(LTD) ratioNonperforming 4,189 7,265 (3,076 ) (42.3 %) 2,532 $ 1,657 65.44 %assetsNonperforming 0.42 % 0.74 % (0.32 %) (43.24 %) 0.29 % 0.13 % 44.83 %assets as a % ofloans receivableALLL as a % of 1.22 % 1.18 % 0.04 % 3.39 % 1.14 % 0.08 % 7.02 %loans receivableALLL as a % of 1.34 %loans receivableexc. SBA PPP loans

^1 Includes AFS and HTM

FIVE-QUARTER STATEMENT OF INCOME (Unaudited) - Table 3(Dollars in thousands, except per share amounts) Three Months Ended June 30, March 31, December 31, September 30, June 30,

2020 2020 2019 2019 2019

Interest $ 13,206 $ 14,473 $ 15,254 $ 15,888 $ 16,296 incomeInterest 3,342 3,981 4,517 4,977 4,865 expenseNet interest 9,864 10,492 10,737 10,911 11,431 income Provision 1,600 700 700 300 300 for loan lossesNet interestincome after 8,264 9,792 10,037 10,611 11,131 provision for loanlosses Gain on sale 509 939 1,481 1,396 2,109 of loansGain (loss) 9 (6 ) - - (4 )on sale of OREOSBAservicing 738 372 413 523 312 fee income,netSBAservicing - - - - - rightimpairmentService 251 396 416 505 577 charges and other incomeNoninterest 1,507 1,701 2,310 2,424 2,994 income Salaries and 4,617 5,702 5,355 5,132 5,467 employee benefitsOccupancy 943 946 978 869 831 and equipmentMarketing 279 458 119 302 989 expenseProfessional 500 435 417 691 574 expenseOther 1,168 1,394 1,487 1,203 1,340 expensesNoninterest 7,507 8,935 8,356 8,197 9,201 expense Incomebefore 2,264 2,558 3,991 4,838 4,924 income taxexpense Income tax 612 946 1,137 1,421 1,441 expense Net income $ 1,652 $ 1,612 $ 2,854 $ 3,417 $ 3,483

Effective 27.0 % 37.0 % 28.5 % 29.4 % 29.3 %tax rate Outstanding 10,237,310 10,237,310 10,197,380 10,170,760 10,140,760 number of shares Weightedaverage 10,237,310 10,224,146 10,188,700 10,141,086 10,125,622 shares forbasic EPSWeightedaverage 10,276,637 10,327,730 10,336,793 10,321,937 10,341,488 shares fordiluted EPS Basic EPS $ 0.16 $ 0.16 $ 0.28 $ 0.34 $ 0.34

Diluted EPS $ 0.16 $ 0.16 $ 0.28 $ 0.33 $ 0.33

QUARTERLY SALARIES BENEFIT METRICS (Unaudited) - Table 4(Dollars in thousands) At or for the Three Months Ended June 30, March 31, December September June 30, 31, 30,

2020 2020 2019 2019 2019

Salaries and benefits $ 4,617 $ 5,702 $ 5,355 $ 5,132 $ 5,467

FTE at the end of period 191 194 190 190 192

Average FTE during the 193 192 191 191 192 periodSalaries and benefits/ $ 96 $ 119 $ 111 $ 106 $ 114 average FTE^1Salaries and benefits/ 1.44 % 2.03 % 1.83 % 1.72 % 1.87 %average assets^1Noninterest expense/ 2.35 % 3.19 % 2.85 % 2.75 % 3.15 %average assets^1^1 Annualized

FIVE-QUARTER BALANCE SHEET (Unaudited) - Table 5(Dollars in thousands) June 30, March 31, December 31, September 30, June 30,

2020 2020 2019 2019 2019

ASSETSCash and due from $ 9,043 $ 7,804 $ 10,059 $ 12,448 $ 12,369 banks

Interest-earning 179,519 113,880 93,259 72,907 127,199 deposits at the FRBand other banksInvestment 91,091 91,863 94,640 97,141 99,758 securities^1Loansheld-for-sale, at 32,264 29,989 28,826 42,132 46,875 the lower of costor fair value Loans receivable 1,005,128 931,717 906,875 905,004 881,614

Allowance for loan (12,283 ) (11,034 ) (10,596 ) (9,978 ) (10,019 )lossesLoans receivable, 992,845 920,683 896,279 895,026 871,595 net

OREO - 364 362 11 11

Restricted stock 8,196 8,194 8,194 8,194 8,194 investmentsServicing assets 8,944 9,203 9,697 9,953 10,174

Other assets 21,383 20,144 21,372 21,885 22,662

Total assets $ 1,343,285 $ 1,202,124 $ 1,162,688 $ 1,159,697 $ 1,198,837

LIABILITIES ANDSTOCKHOLDERS'EQUITYNoninterest-bearing $ 295,003 $ 211,139 $ 209,484 $ 200,034 $ 202,657

Interest-bearing 732,647 739,285 763,822 789,280 829,088

Total deposits 1,027,650 950,424 973,306 989,314 1,031,745

FHLB advances 148,671 85,000 25,000 10,000 10,000

Other liabilities 14,208 16,895 16,298 15,164 15,990

Total liabilities 1,190,529 1,052,319 1,014,604 1,014,478 1,057,735

Stockholders' 152,756 149,805 148,084 145,219 141,102 EquityTOTAL LIABILITIES & $ 1,343,285 $ 1,202,124 $ 1,162,688 $ 1,159,697 $ 1,198,837 STOCKHOLDERS'EQUITY ^1 Includes AFS andHTM

FIVE-QUARTER LOANS RECEIVABLE COMPONENTS (Unaudited) - Table 6(Dollars in thousands) June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 Balance % Balance % Balance % Balance % Balance % Construction $ 14,649 1.5 % $ 12,607 1.4 % $ 16,957 1.9 % $ 18,477 2.0 % $ 17,853 2.0 %

Commercial 769,563 76.6 % 768,539 82.5 % 746,969 82.4 % 725,096 80.1 % 691,859 78.5 %real estateCommercial 215,362 21.4 % 143,117 15.4 % 135,412 14.9 % 153,306 16.9 % 164,089 18.6 %andindustrialConsumer 5,646 0.6 % 5,056 0.5 % 5,184 0.6 % 5,389 0.6 % 5,366 0.6 %

Gross loans 1,005,220 100.0 % 929,319 99.7 % 904,522 99.7 % 902,268 99.7 % 879,167 99.7 %

Net deferred (92 ) 0.0 % 2,398 0.3 % 2,353 0.3 % 2,736 0.3 % 2,447 0.3 %loan fees/costsLoans $ 1,005,128 100.0 % $ 931,717 100.0 % $ 906,875 100.0 % $ 905,004 100.0 % $ 881,614 100.0 %receivable Loans $ 32,264 $ 29,989 $ 28,826 $ 42,132 $ 46,875held-for-saleLoansreceivable, $ 1,037,392 $ 961,706 $ 935,701 $ 947,136 $ 928,489includingloansheld-for-sale

SBA LOAN PRODUCTIONS/SALES DATA (Unaudited) - Table 7(Dollars in thousands) Three Months Ended Six Months Ended June 30, March 31, December September June 30, June 30, June 30, 31, 30, 2020 2020 2019 2019 2019 2020 2019

SBA loansheld-for-sale $ 29,988 $ 28,826 $ 42,132 $ 46,875 $ 45,275 $ 28,826 $ 45,665 at beginningof thequarter/yearSBA loansoriginated/transferredfrom/toheld-for-investment 12,497 20,479 19,146 20,850 38,785 32,976 63,281 during thequarter/yearSBA loanssold during (9,832 ) (18,530 ) (28,948 ) (25,276 ) (36,653 ) (28,362 ) (61,143 )the quarter/yearSBA loansprincipal (389 ) (787 ) (3,504 ) (317 ) (532 ) (1,176 ) (928 )payment, netof advanceSBA loansheld-for-sale $ 32,264 $ 29,988 $ 28,826 $ 42,132 $ 46,875 $ 32,264 $ 46,875 at end of thequarter/year Gain on sale $ 509 $ 939 $ 1,481 $ 1,396 $ 2,109 $ 1,448 $ 3,276 of SBA loansPremium onsale 8.6 % 8.0 % 7.6 % 8.7 % 8.8 % 8.2 % 8.3 %(weightedaverage) SBA loan $ 103,565 $ 31,794 $ 30,783 $ 30,009 $ 48,497 $ 135,359 $ 76,184 production

SBA SERVICING ASSETS AND SERVICING FEES (Unaudited) - Table 8(Dollars in thousands) Three Months Ended Six Months Ended June 30, March 31, December September June 30, June 30, June 30, 31, 30,

2020 2020 2019 2019 2019 2020 2019

SBAservicingassets @ $ 9,203 $ 9,697 $ 9,953 $ 10,174 $ 10,303 $ 9,697 $ 10,541 beginning ofthe quarter/year Newly addedSBAservicing 197 383 606 531 806 580 1,253 assets fromSBA loanssoldRegularquarterly/annual (383 ) (388 ) (402 ) (398 ) (397 ) (771 ) (790 )servicingassetsamortizationSBAservicingassetsamortized (73 ) (489 ) (460 ) (354 ) (538 ) (562 ) (830 )from SBAloans paidoff/chargedoff Subtotalbefore 8,944 9,203 9,697 9,953 10,174 8,944 10,174 impairment

SBAservicing - - - - - - - assetsimpairmentSBAservicing - - - - - - - liabilityimpairment SBAservicing $ 8,944 $ 9,203 $ 9,697 $ 9,953 $ 10,174 $ 8,944 $ 10,174 assets @ endof thequarter/year

FIVE-QUARTER DEPOSIT COMPONENTS (Unaudited) - Table 9(Dollars in thousands) June 30, 2020 March 31, 2020 December 31, 2019 September 30, June 30, 2019 Balance % Balance % Balance % Balance % Balance %Noninterest-bearing $ 295,003 28.7 % $ 211,139 22.2 % $ 209,484 21.5 % $ 200,034 20.2 % $ 202,657 19.6 %demandNOW & MMDA 192,950 18.8 % 136,356 14.3 % 117,450 12.1 % 123,477 12.5 % 146,654 14.2 %

Savings 68,244 6.6 % 64,659 6.8 % 67,060 6.9 % 63,978 6.5 % 48,066 4.7 %

TCDs of $250K and under 241,718 23.5 % 273,624 28.8 % 328,058 33.7 % 342,670 34.6 % 356,563 34.6 %

TCDs of $250K over 139,197 13.5 % 154,108 16.2 % 158,009 16.2 % 165,910 16.8 % 172,060 16.7 %

Wholesale TCDs 90,538 8.8 % 110,538 11.6 % 93,245 9.6 % 93,245 9.4 % 105,745 10.2 %

Total Deposits $ 1,027,650 100.0 % $ 950,424 100.0 % $ 973,306 100.0 % $ 989,314 100.0 % $ 1,031,745 100.0 %

Recap:Noninterest-bearing $ 295,003 28.7 % $ 211,139 22.2 % $ 209,484 21.5 % $ 200,034 20.2 % $ 202,657 19.6 %demandNOW & MMDA 192,950 18.8 % 136,356 14.3 % 117,450 12.1 % 123,477 12.5 % 146,654 14.2 %

Savings 68,244 6.6 % 64,659 6.8 % 67,060 6.9 % 63,978 6.5 % 48,066 4.7 %

TCDs of $250K and under 241,718 23.5 % 273,624 28.8 % 328,058 33.7 % 342,670 34.6 % 356,563 34.6 %

Core Deposits 797,915 77.6 % 685,778 72.2 % 722,052 74.2 % 730,159 73.8 % 753,940 73.1 %

TCDs of $250K over 139,197 13.5 % 154,108 16.2 % 158,009 16.2 % 165,910 16.8 % 172,060 16.7 %

Wholesale TCDs 90,538 8.8 % 110,538 11.6 % 93,245 9.6 % 93,245 9.4 % 105,745 10.2 %

Noncore Deposits 229,735 22.4 % 264,646 27.8 % 251,254 25.8 % 259,155 26.2 % 277,805 26.9 %

Total Deposits $ 1,027,650 100.0 % $ 950,424 100.0 % $ 973,306 100.0 % $ 989,314 100.0 % $ 1,031,745 100.0 %

SELECTED LOAN AND ASSET QUALITY HIGHLIGHTS (Unaudited) - Table 10(Dollars in thousands) 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 2020 2020 2019 2019 2019

Allowance forLoan LossesBalance at $ 11,034 $ 10,596 $ 9,978 $ 10,019 $ 9,760 beginning ofperiodProvision for 1,600 700 700 300 300 loan lossesCharge-offs (359 ) (284 ) (94 ) (385 ) (100 )

Recoveries 8 22 12 44 59

Balance at the $ 12,283 $ 11,034 $ 10,596 $ 9,978 $ 10,019 end of period NonperformingAssets:^1Over 90 days $ - $ - $ - $ - $ - still accruingNonaccrual loans 4,189 6,901 8,030 5,123 2,521

Total 4,189 6,901 8,030 5,123 2,521 nonperformingloans Other real estate - 364 362 11 11 ownedTotal $ 4,189 $ 7,265 $ 8,392 $ 5,134 $ 2,532 nonperformingassets ClassifiedAssets:^1Substandard $ 9,909 $ 13,301 $ 14,497 $ 8,965 $ 13,708

Doubtful - - - - -

Loss - - - - -

Total classified $ 9,909 $ 13,301 $ 14,497 $ 8,965 $ 13,708 loans Other real estate - 364 362 11 11 ownedTotal classified $ 9,909 $ 13,665 $ 14,859 $ 8,976 $ 13,719 assets Performing TDR $ 1,073 $ 508 $ 592 $ 1,040 $ 5,030 loans: Delinquent Loans:^1Loans 30-89 days $ 721 $ 2,172 $ 43 $ 285 $ 5,764 past due90 days or more - - - - - past due andstill accruingNonaccrual 4,189 6,901 8,030 5,123 2,521

Total delinquent $ 4,910 $ 9,073 $ 8,073 $ 5,408 $ 8,285 loans Asset QualityRatios:Net (recoveries) 0.14 % 0.11 % 0.03 % 0.15 % 0.02 %charge-offs toaverage loans?Nonaccrual loans 0.42 % 0.74 % 0.89 % 0.57 % 0.29 %to loansreceivableNonperforming 0.42 % 0.74 % 0.89 % 0.57 % 0.29 %loans to loansreceivableNonperforming 0.31 % 0.60 % 0.72 % 0.44 % 0.21 %assets to totalassetsClassified loans 0.99 % 1.43 % 1.60 % 0.99 % 1.55 %to loansreceivableClassified loans 6.00 % 8.27 % 9.14 % 5.78 % 9.07 %to Tier 1 andALLLClassified assets 0.74 % 1.14 % 1.28 % 0.77 % 1.14 %to total assetsClassified assets 6.00 % 8.50 % 9.36 % 5.78 % 9.08 %to Tier 1 andALLLALLL to loans 1.22 % 1.18 % 1.17 % 1.10 % 1.14 %receivableALLL to loans 1.34 %receivable exc.SBA PPP loansALLL to 293.22 % 159.89 % 131.96 % 194.77 % 397.42 %nonaccrual loansALLL to 293.22 % 159.89 % 131.96 % 194.77 % 397.42 %nonperformingloansALLL to 293.22 % 151.88 % 126.26 % 194.35 % 395.70 %nonperformingassetsTexas ratio ? 2.54 % 4.52 % 5.29 % 3.31 % 1.68 %

^1 Net of SBAguaranteedbalance? Includes loansheld-for-sale? Nonperformingassets divided bytangible commonequity and ALLL

FIVE-QUARTER CAPITAL RATIOS (Unaudited) - Table 11 Well Adequately Capitalized Capitalized June 30, March 31, December September June 30, Regulatory BASEL III 31, 30,

Requirement Fully 2020 2020 2019 2019 2019 Phased In Leverage ratio Company N/A N/A 11.98 % 13.17 % 12.59 % 12.14 % 11.93 %

Bank 5.00 % 4.00 % 11.94 % 13.12 % 12.55 % 12.10 % 11.89 %

Common equity tier 1 risk-based capital ratio Company N/A N/A 15.23 % 14.82 % 14.96 % 14.71 % 14.69 %

Bank 6.50 % 7.00 % 15.18 % 14.77 % 14.91 % 14.66 % 14.65 %

Tier 1 risk-based capital ratio Company N/A N/A 15.23 % 14.82 % 14.96 % 14.71 % 14.69 %

Bank 8.00 % 8.50 % 15.18 % 14.77 % 14.91 % 14.66 % 14.65 %

Total risk-based capital ratio Company N/A N/A 16.48 % 16.01 % 16.13 % 15.80 % 15.81 %

Bank 10.00 % 10.50 % 16.43 % 15.95 % 16.08 % 15.75 % 15.76 %

Common equity/ 11.37 % 12.46 % 12.74 % 12.52 % 11.77 % total assets Common $ 14.92 $ 14.63 $ 14.52 $ 14.28 $ 13.91 equity per share

MARGIN ANALYSIS (Unaudited) -Table 12(Dollars in thousands) Three Months Ended June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 Avg Balance Interest Yield Avg Balance Interest Yield Avg Balance Interest Yield Avg Balance Interest Yield Avg Balance Interest YieldNumber of Days in the PeriodINTEREST-EARNING ASSETS Loans ^1 $ 1,018,596 $ 12,568 4.96 % $ 941,147 $ 13,629 5.82 % $ 930,455 $ 14,119 6.02 % $ 932,004 $ 14,528 6.18 % $ 926,425 $ 14,926 6.46 %

Investment securities? 91,401 546 2.40 % 94,375 581 2.48 % 96,005 621 2.57 % 98,866 650 2.61 % 100,802 675 2.69 %

Interest-earning deposits 137,945 45 0.13 % 55,222 188 1.37 % 99,297 410 1.64 % 111,437 611 2.18 % 101,901 601 2.37 %at the FRB and other banksOther earning assets 8,195 93 4.56 % 8,194 122 5.99 % 8,194 152 7.36 % 8,194 145 7.02 % 8,122 141 6.96 %

Total interest-earning 1,256,137 13,252 4.24 % 1,098,938 14,520 5.31 % 1,133,951 15,302 5.35 % 1,150,501 15,934 5.49 % 1,137,250 16,343 5.76 %assets ?Total interest-earning 1,193,346 12,775 4.31 % assets exc. SBA PPP loans? NONINTEREST-EARNING ASSETS Cash and due from banks 8,224 9,056 9,084 9,769 11,758

Other noninterest-earning 32,285 30,050 30,746 31,552 32,474 assetsTotal noninterest-earning 40,509 39,106 39,830 41,321 44,232 assets Less: Allowance for loan (10,931 ) (10,594 ) (9,969 ) (10,004 ) (9,775 ) lossesTOTAL ASSETS $ 1,285,715 $ 1,127,450 $ 1,163,812 $ 1,181,818 $ 1,171,707

INTEREST-BEARING DEPOSITS Interest-bearing demand $ 13,634 $ 5 0.15 % $ 12,041 $ 5 0.17 % $ 10,176 $ 5 0.19 % $ 8,453 $ 5 0.23 % $ 9,423 $ 6 0.25 %

Money market 163,332 374 0.92 % 116,550 401 1.38 % 113,444 433 1.51 % 130,079 596 1.82 % 149,276 722 1.94 %

Savings 66,389 176 1.07 % 66,955 251 1.51 % 66,232 284 1.70 % 55,995 283 2.01 % 37,566 197 2.10 %

Time deposits 509,447 2,613 2.06 % 555,784 3,297 2.39 % 594,658 3,753 2.50 % 630,044 4,051 2.55 % 629,147 3,899 2.49 %

Total interest-bearing 752,802 3,168 1.69 % 751,330 3,954 2.12 % 784,510 4,475 2.26 % 824,571 4,935 2.37 % 825,412 4,824 2.34 %deposits Borrowings 115,613 174 0.61 % 9,874 27 1.10 % 10,209 42 1.63 % 10,000 42 1.67 % 10,000 41 1.64 %

Total interest-bearing 868,415 3,342 1.55 % 761,204 3,981 2.10 % 794,719 4,517 2.25 % 834,571 4,977 2.37 % 835,412 4,865 2.34 %liabilitiesTotal interest-bearing 805,624 3,287 1.64 %liabilities exc. SBA PPP loan funding Noninterest-bearing 249,909 199,721 205,449 187,740 181,326 depositsOther liabilities 15,141 16,018 15,805 15,832 16,091

Stockholders' equity 152,250 150,507 147,839 143,675 138,878

TOTAL LIABILITIES & $ 1,285,715 $ 1,127,450 $ 1,163,812 $ 1,181,818 $ 1,171,707 STOCKHOLDERS' EQUITY Net interest income? $ 9,910 $ 10,539 $ 10,785 $ 10,957 $ 11,478

Net interest income exc. $ 9,488 SBA PPP Loans? Net interest spread 2.69 % 3.21 % 3.10 % 3.12 % 3.42 %

Effect of 0.48 % 0.65 % 0.67 % 0.66 % 0.63 %noninterest-bearing sources Net interest margin? 3.17 % 3.86 % 3.77 % 3.78 % 4.05 %

Net interest margin exc. 3.20 % SBA PPP loans? Cost of deposits $ 1,002,711 $ 3,168 1.27 % $ 951,051 $ 3,954 1.67 % $ 989,959 $ 4,475 1.79 % $ 1,012,311 $ 4,935 1.93 % $ 1,006,738 $ 4,824 1.92 %

Cost of funds $ 1,118,324 $ 3,342 1.20 % $ 960,925 $ 3,981 1.67 % $ 1,000,168 $ 4,517 1.79 % $ 1,022,311 $ 4,977 1.93 % $ 1,016,738 $ 4,865 1.92 %

Cost of funds exc. SBA ppp $ 1,055,533 $ 3,287 1.25 % loan funding

^1 Includes loans held-for-sale? Amounts calculated on a fully taxable equivalent basis using the currentstatutory federal tax rate

COMPONENTS OF YIELD ON LOANS (Unaudited) - Table 13 (Dollars in thousands) Three Months Ended June 30, 2020 March 31, 2020 December 31, 2019 September 30, 2019 June 30, 2019 Amount Yield Amount Yield Amount Yield Amount Yield Amount Yield Contractual $ 11,578 4.57 % $ 12,445 5.32 % $ 12,911 5.51 % $ 13,481 5.74 % $ 13,670 5.92 % yield SBA discount 662 0.26 % 1,190 0.51 % 1,195 0.51 % 1,058 0.45 % 1,295 0.56 % accretion Prepayment 24 0.01 % 106 0.04 % 172 0.07 % 82 0.03 % 66 0.03 % penalties & late fees Amortization of net 304 0.12 % (112 ) (0.05 %) (159 ) (0.07 %) (93 ) (0.04 %) (208 ) (0.09 %) deferred costs Interest recognized - - - - - - - - 103 0.04 % on nonaccrual loans As reported $ 12,568 4.96 % $ 13,629 5.82 % $ 14,119 6.02 % $ 14,528 6.18 % $ 14,926 6.46 % yield on loans

MARGIN ANALYSIS (Unaudited) - Table 14(Dollars in thousands) Six Months Ended June 30, 2020 June 30, 2019 Avg Balance Interest Yield Avg Balance Interest YieldNumber of Days in the PeriodINTEREST-EARNING ASSETSLoans ^1 $ 979,872 $ 26,197 5.38 % $ 925,083 $ 29,326 6.39 %

Investment 92,888 1,127 2.44 % 101,901 1,370 2.71 %securities?Interest-earning 96,584 233 0.49 % 86,571 1,017 2.37 %deposits at the FRB and other banksOther earning 8,195 215 5.28 % 8,001 262 6.60 %assetsTotal 1,177,539 27,772 4.74 % 1,121,556 31,975 5.75 %interest-earning assets ?Totalinterest-earning 1,146,143 27,295 4.79 % assets exc. SBA PPPloans? NONINTEREST-EARNING ASSETSCash and due from 8,640 11,949 banksOther 31,113 30,262 noninterest-earning assetsTotal 39,753 42,211 noninterest-earning assets Less: Allowance for (10,763 ) (9,875 ) loan losses TOTAL ASSETS $ 1,206,529 $ 1,153,892

INTEREST-BEARING DEPOSITSInterest-bearing $ 12,837 $ 10 0.16 % $ 8,739 $ 11 0.25 %demandMoney market 139,941 775 1.11 % 157,872 1,488 1.90 %

Savings 66,672 427 1.29 % 29,586 299 2.04 %

Time deposits 532,616 5,910 2.23 % 614,189 7,282 2.39 %

Total 752,066 7,122 1.90 % 810,386 9,080 2.26 %interest-bearing deposits Borrowings 62,744 201 0.64 % 10,025 82 1.65 %

Total 814,810 7,323 1.81 % 820,411 9,162 2.25 %interest-bearing liabilitiesTotalinterest-bearing 783,414 7,268 1.87 % liabilities exc.SBA PPP loans Noninterest-bearing 224,815 183,311 depositsOther Liabilities 15,526 13,575

Stockholders' 151,378 136,595 equity TOTAL LIABILITIES & $ 1,206,529 $ 1,153,892 STOCKHOLDERS' EQUITY Net interest $ 20,449 $ 22,813 income?Net interest income $ 20,027 exc. SBA PPP loans? Net interest spread 2.93 % 3.50 %

Effect of 0.56 % 0.60 %noninterest-bearing sources Net interest 3.49 % 4.10 %margin?Net interest margin 3.51 % exc. SBA PPP loans? Cost of deposits $ 976,881 $ 7,122 1.47 % $ 993,697 $ 9,080 1.84 %

Cost of funds $ 1,039,625 $ 7,323 1.42 % $ 1,003,722 $ 9,162 1.84 %

Cost of funds exc. $ 1,008,229 $ 7,268 1.45 %SBA PPP loan funding ^1 Includes loans held-for-sale? Amounts calculated on a fully taxable equivalent basis using the currentstatutory federal tax rate

COMPONENTS OF YIELD ON LOANS (Unaudited) - Table 15(Dollars in thousands) Six Months Ended June 30, 2020 June 30, 2019 Amount Yield Amount YieldContractual yield $ 24,023 4.93 % $ 27,242 5.94 %

SBA discount accretion 1,852 0.38 % 2,246 0.49 %

Prepayment penalties & late fees 130 0.03 % 111 0.02 %

Amortization of net deferred costs 192 0.04 % (376 ) (0.08 %)

Interest recognized on nonaccrual loans - - 103 0.02 %

As reported yield on loans $ 26,197 5.38 % $ 29,326 6.39 %

View source version on businesswire.com: https://www.businesswire.com/news/home/20200730005210/en/

CONTACT: Long T. Huynh, EVP & CFO (323) 988-3010 Longh@cbb-bank.com