CBB Bancorp, Inc. Reports First Quarter 2024 Financial Results

CBB Bancorp, Inc. ("CBB" or the "Company') (OTCQX: CBBI), the holding company of Commonwealth Business Bank, doing business as “CBB Bank” (the "Bank"), announced today net income of $5.7 million for the first quarter 2024, or $0.54 per diluted share, a decrease of 19.0% compared to $7.0 million, or $0.66 per diluted share, in the prior quarter and a decrease of 20.0% compared to $7.1 million, or $0.67 per diluted share, in the same period last year.

OVERALL RESULTS

Net income for the first quarter 2024 decreased from the prior quarter primarily due to lower net interest income, higher provision expense for credit losses offset by a negative credit loss expense related to off-balance-sheet financial instruments, and higher noninterest expenses offset by higher gain on sale of loans. The return on average assets for the first quarter 2024 was 1.32% compared to 1.54% for the fourth quarter 2023 and 1.59% for the first quarter 2023. The return on average equity for the first quarter 2024 was 9.57%, compared to 11.94% for the fourth quarter 2023 and 13.45% for the first quarter 2023. The efficiency ratio for the first quarter 2024 was 54.68%, compared to 49.45% for the fourth quarter 2023 and 51.04% for the first quarter 2023.

James Hong, President and CEO, commented, “In the present economic climate characterized by elevated interest rates, fostering growth poses a formidable challenge. However, CBB is committed to pursuing an expansion strategy in 2024, with a specific emphasis on penetrating untapped markets along the East Coast. To that end, our primary strategic objective for the forthcoming year is to establish a robust presence in the East Coast market, where we have yet to establish a foothold, but where we believe there are considerable opportunities.”

INCOME STATEMENT

Net Interest Income

Net interest income for the first quarter 2024 was $15.8 million, a decrease of $1.4 million, or 7.9%, from the fourth quarter 2023, and a decrease of $3.3 million, or 17.1%, from the first quarter 2023. The decrease in net interest income compared with both the fourth quarter 2023 and the first quarter 2023 was due to relatively higher increases in interest expenses on deposits.

Net Interest Margin

The net interest margin for the first quarter 2024 was 3.77%, compared to 3.86% for the fourth quarter 2023 and 4.38% for the first quarter 2023. The decrease in the net interest margin from the prior quarter and from the same quarter of 2023 is due primarily to the rising cost of funds. The cost of funds for the first quarter 2024 increased to 3.48% compared to 3.20% for the fourth quarter 2023 and 2.10% for the first quarter 2023.

Provision for Credit Losses

Credit loss expense of a net $400 thousand was recorded for the first quarter 2024. This amount was comprised of provision expense for credit losses of $743 thousand offset by a $343 thousand reduction in ACL related to off-balance-sheet financial instruments. No provisions for credit losses was recorded for the fourth quarter 2023 or the first quarter 2023.

Refer to the financial tables in this press release for additional information and trends.

Noninterest Income

Noninterest income in the first quarter 2024 was $2.6 million, an increase of $597 thousand compared to $2.0 million for the fourth quarter 2023, and an increase of $1.5 million compared to $1.1 million in the first quarter 2023. The quarter-over-quarter increase in noninterest income was primarily the result of higher gain on sale of loans. The Bank sold approximately $28.2 million in SBA loans with an average premium of 8.4% during the first quarter 2024 compared to sale of $21.7 million in SBA loans with an average premium of 6.7% during the fourth quarter 2023. There was no sale of loans during the first quarter 2023.

Noninterest Expense

Noninterest expense for the first quarter 2024 was $10.0 million, compared to $9.5 million for the fourth quarter 2023 and $10.3 million for the first quarter 2023. Salaries and employee benefits expenses totaled $6.0 million for the first quarter 2024 compared to $5.4 million for the fourth quarter 2023 and $6.1 million for the first quarter 2023.

Please refer to financial tables in this press release for additional information and trends.

Income Taxes

The Company’s effective tax rate for the first quarter 2024 was 28.4% compared to 27.6% for fourth quarter 2023 and 28.1% for first quarter 2023.

BALANCE SHEET

Investment Securities

Investment securities were $59.1 million at March 31, 2024, a decrease of $0.7 million, or 1.2% from December 31, 2023, and a decrease of $9.8 million or 14.2% from March 31, 2023. The decreases were due to principal paydowns and an absence of portfolio additions during the first quarter of 2024. Management believes that the Bank currently has adequate liquidity and does not need to sell securities for liquidity purposes.

Loans Receivable

Loans receivable (including loans held-for-sale) at March 31, 2024, was $1.39 billion, a decrease of $29.7 million, or 2.1% from December 31, 2023, and a decrease of $74.0 million, or 5.0%, from March 31, 2023. The decrease in loans receivable since last quarter, paired with the reduction from the previous year, reflects diminished loan demand amid the prevailing high-interest rate environment.

Allowance for Credit Losses and Asset Quality

The allowance for credit losses at March 31, 2024, was $16.0 million or 1.34% of loans held-for-investment, compared to $15.3 million at December 31, 2023, or 1.27% of loans held-for-investment, and compared to $15.6 million at March 31, 2023, or 1.28% of total loans held-for-investment. Total Nonperforming assets at March 31, 2024 were $4.4 million, compared to $2.5 million at December 31, 2023, and $0.6 million at March 31, 2023. The coverage ratio of allowance for credit losses to nonperforming assets was over 360% at March 31, 2024.

SBA Loans Held-for-Sale

Total SBA loans held-for-sale at March 31, 2024, was $198.2 million, compared to $218.3 million at December 31 2023, and $243.8 million at March 31, 2023. We continue to assess SBA loan market premiums and plan to sell loans when it is advantageous to do so.

Deposits

Total deposits were $1.36 billion at March 31, 2024, down $92.6 million, or 6.4%, from December 31, 2023, and down $176.3 million, or 11.5%, from March 31, 2023. DDAs were 21.6% of total deposits for both March 31, 2024 and December 31, 2023, and 28.6% at March 31, 2023. NOW and MMDA deposits comprised 16.9% of total deposits at March 31, 2024, compared to 16.3% at December 31, 2023, and 13.8% at March 31, 2023. The quarter-over-quarter and year-over-year declines in DDAs can be attributed to the higher interest rate environment. Depositors were eager to capitalize on the rising interest rates, moving funds from DDA to Savings, MMDA, CD or some combination thereof.

Borrowings

The Bank has maintained $50.0 million of Federal Home Loan Bank advances since March 31, 2023. The blended cost of FHLB advances was 0.94% as of March 31, 2024.

Capital

Stockholders’ equity was $240.6 million at March 31, 2024, representing an increase of $4.9 million, or 2.1%, from $235.7 million at December 31, 2023. Tangible book value per share at March 31, 2024, was $22.49, compared with $22.03 at December 31, 2023, an increase of $0.46, or 2.1% per share.

Each of the Company’s and the Bank’s regulatory capital ratios increased at March 31, 2024, when compared to December 31, 2023, and March 31, 2023. Capital ratios continue to exceed the minimum levels required to be considered “Well Capitalized” under the applicable regulatory capital rules.

The Common Equity Tier 1 Risked-Based Capital Ratios at March 31, 2024, were 18.67% and 18.65% for the Company and the Bank, respectively, and Total Capital Ratios were 19.92% and 19.91% for the Company and the Bank, respectively. The Common Equity Tier 1 Risked-Based Capital Ratios at March 31, 2023, were 16.15% and 16.10% for the Company and the Bank, respectively, and Total Capital Ratios were 17.37% and 17.31% for the Company and the Bank, respectively.

About CBB Bancorp, Inc.:

CBB Bancorp, Inc. is the holding company of Commonwealth Business Bank, a full-service commercial bank which specializes in loans to small-to-medium-sized businesses and does business as “CBB Bank.” As of March 31, 2024, the Bank had eleven full-service banking offices in Los Angeles and Orange Counties in California, Dallas County in Texas and Honolulu, Hawaii; two SBA regional offices in Los Angeles and Dallas Counties; and loan production offices in Georgia and Washington. For additional information, please go to www.cbb-bank.com under the tab “About Us” and select “Investor Relations” to see the 1Q 2024 Overview.

FORWARD-LOOKING STATEMENTS:

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. CBB Bancorp, Inc. (the “Company”) intends that such forward-looking statements be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Future events are difficult to predict, and the expectations described herein are necessarily subject to risks and uncertainties that may cause actual results to differ materially and adversely from those described herein. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” These forward-looking statements are not guarantees of future performance, nor should they be relied upon as representing management’s views as of any subsequent date. Factors that might cause actual results to differ materially from those presented, either expressed or implied, in this news release include, but are not limited to: the Company’s ability to successfully execute its business plans and achieve its objectives; changes in general economic and financial market conditions, either nationally or locally in areas in which the Company conducts its operations; changes in interest rates; continuing consolidation in the financial services industry; new litigation or changes in existing litigation; increased competitive challenges and expanding product and pricing pressures among financial institutions; legislation or regulatory changes which adversely affect the Company’s operations or business; loss of key personnel; and changes in accounting policies or procedures as may be required by the Financial Accounting Standards Board or other regulatory agencies.

The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances, except to the extent required by law.

Schedules and Financial Data: All tables and data to follow