Bay Community Bancorp Earns $3.12 Million in Third Quarter 2023; Declares Quarterly Cash Dividend of $0.05 Per Share

OAKLAND, Calif., Oct. 31, 2023 (GLOBE NEWSWIRE) — 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 increased 41.1% to $3.12 million for the third quarter of 2023, compared to $2.21 million for the third quarter of 2022. A $2.48 million Equitable Recovery Program (‘ERP”) grant, as well as $437,000 Bank Enterprise Award (“BEA”), contributed to strong profitability for the third quarter of 2023. All financial results are unaudited.

The Company’s Board of Directors declared a quarterly cash dividend of $0.05 per share. The dividend is payable on December 8, 2023, to shareholders of record on November 27, 2023. This marks the eleventh consecutive cash dividend payment since the Company initiated quarterly cash dividends on April 30, 2021.     

“During the third quarter the Bank recorded the $2.48 million Equitable Recovery Program grant that was first announced in April 2023 as well as a $437,000 BEA award. The BEA award is the twenty-second time that the Bank has been recognized by the CDFI Fund for our lending and investment activities in low- and moderate-income communities,” stated William S. Keller, CEO. “We are also pleased to announce that the quarter included the realization of a number of initiatives we have been working on since the regional bank disruptions in March. Although these initiatives negatively impacted non-interest expense during the current quarter, the loss of five regional Bay Area competitors, either through acquisition or failure, created an unprecedented opportunity for us to leverage our capital position, which is in the top 3 percent of our peer group and well over three times the regulatory guidelines for well capitalized banks.”

“Our investments focused on core deposit generation, and we prioritized recruiting professionals with deep ties to the communities we serve,” Keller continued. “Specifically, we established a San Francisco Production Office led by SVP & Managing Director of CDFI & Non-profit Banking Kelny Denebeim, relocated our existing San Mateo office to a larger more visible location, opened a new full-service banking office in San Jose led by SVP Regional Manager Francisco Terrizzano, and added a new East Bay commercial banking team led by SVP Regional Manager Emily Wu. With these additional offices, Community Bank of the Bay now effectively rings the Bay and we are confident that these experienced, mission-aligned professionals and their teams will be key contributors to our future success.”

“The “higher for longer” interest rate environment continues to impact the deposit mix and pricing and as a result the majority of net deposit growth during the third quarter was in time deposit accounts,” said Keller. “Overall funding costs slightly outpaced asset yields during the quarter, resulting in a one basis point reduction in net interest margin compared to the preceding quarter. With the pace of net interest margin contraction slowing considerably, we anticipate that core deposit growth, driven by our recent office and staff investments, will help expand our net interest margin over the next few quarters.”

“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 September 30, 2023, our loan loss reserves represent 0.93% of total non-guaranteed loans, compared to 1.16% a year earlier.”

“The commercial real estate loan portfolio continues to perform well,” continued Ali. “Commercial real estate loans against office properties totaled $70.4 million at September 30, 2023 and represented 34.52% of capital. The non-owner occupied office segment consisted of 22 notes totaling $54.4 million and carried a weighted average loan-to-value of 42.16% at quarter end. All relationships in this category are performing as agreed.”

Third Quarter 2023 Financial Highlights (at or for the period ended September 30, 2023)

• Net income increased 41.1% to $3.12 million in the third quarter of 2023, compared to $2.21 million in the third quarter a year ago, and increased 68.5% compared to $1.85 million in the preceding quarter. Earnings per common share was $0.36 in the third quarter of 2023, compared to $0.25 in the third quarter a year ago, and $0.21 in the preceding quarter.
• Pre-tax, pre-provision, pre-CDFI grant income was $1.99 million in the third quarter of 2023, compared to $3.14 million in the year ago quarter, and $2.54 million in the second quarter of 2023.  
• Total assets increased $51.6 million, or 5.1%, to $1.07 billion at September 30, 2023, compared to $1.01 billion a year earlier, and increased $5.24 million, or 0.5%, compared to $1.06 billion three months earlier. Average assets for the quarter totaled 1.06 billion, an increase of $148.1 million, or 16.3%, from the third quarter a year ago and an increase of $36.9 million, or 3.6%, compared with the prior quarter.
• Net interest income, before the provision for credit losses, increased 5.5% to $8.20 million in the third quarter of 2023, compared to $7.77 million in the third quarter a year ago. There was a $626,000 provision for credit losses recorded in the third quarter of 2023. This compared to no provision for loan losses in the third quarter of 2022, and a $96,000 negative provision for credit losses recorded for the preceding quarter.
• Due primarily to the $2.48 million Equity Recovery Program grant, and the $437,000 BEA award, non-interest income increased substantially to $3.33 million in the third quarter of 2023, compared to $205,000 in the third quarter a year ago, and $233,000 in the preceding quarter.
• Operating revenue (net interest income before the provision for loan losses plus non-interest income) increased 48.3% to $11.54 million in the third quarter of 2023, compared to $7.78 million in the third quarter a year ago, and increased 43.5% compared to $8.04 million in the second quarter of 2023.
• Net interest margin was 3.15% in the third quarter, compared to 3.19% in the preceding quarter, and 3.48% in the third quarter a year ago. The 4 basis point contraction in net interest margin in the third quarter of 2023 was due to a shift in the deposit mix. The year-over-year contraction was due to an increase in deposit costs as well as increased liquidity from the capital raise during the current quarter, compared to the year ago quarter. The average interest yield on non-PPP loans in the third quarter of 2023 was 5.74%, compared to 4.84% in the year ago quarter and 5.59% in the prior quarter. The average cost of funds in the third quarter was 2.35%, a 159 basis point increase compared to the third quarter a year ago and a 17 basis point increase compared to the prior quarter.
• Loans, net of unearned income, increased $85.1 million, or 14.0%, to $675.9 million at September 30, 2023, compared to $590.9 million a year ago, and increased $2.16 million compared to $673.7 million three months earlier. In addition, at September 30, 2023, the unused portion of credit commitments totaled $141.0 million compared to $127.7 million in the prior quarter and $166.6 million a year ago.
• Total deposits decreased $83.0 million, or 10.3%, to $720.6 million at September 30, 2023, compared to $803.6 million a year ago, and increased $730,000 compared to $720.0 million three months earlier. Noninterest bearing demand deposit accounts decreased 14.7% compared to a year ago and represented 27.1% of total deposits. Savings, NOW and money market accounts decreased 32.2% compared to a year ago and represented 40.2% of total deposits. Reflective of the rising interest rate environment, CDs increased 59.7% compared to a year ago and comprised 32.7% of the total deposit portfolio, at September 30, 2023. For the quarter, the overall cost of funds was 235 basis points compared to 218 basis points in the prior quarter, and 76 basis points in the third quarter a year ago.
• Asset quality remains strong with 1.057% nonperforming loans to gross loans at September 30, 2023. This compares to 1.131% of nonperforming loans to gross loans at June 30, 2023, and nonperforming loans at 0.000% of total loans at September 30, 2022.
• The allowance for credit losses on loans was $6.31 million, or 0.93% of gross loans at September 30, 2023, compared to $6.91 million, or 1.16% of total loans at September 30, 2022. The allowance, as a percentage of non-guaranteed loans, was 0.95% at September 30, 2023, compared to 1.17% 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 4.9% to $190.8 million as of September 30, 2023, compared to $181.9 million a year ago. The Bank’s capital levels remained well above FDIC “Well Capitalized” standards as of September 30, 2023, with a Tier 1 capital ratio of 26.37%; Common Equity Tier 1 capital ratio of 10.39%; Total capital ratio of 27.30%; and Leverage ratio of 18.61%.
• Book value per common share totaled $8.14 as of September 30, 2023, compared to $7.27 per common share a year ago.
• Declared a quarterly cash dividend of $0.05 per share. The dividend is payable December 8, 2023 to shareholders of record on November 27, 2023.

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. The share repurchase program will become effective immediately and will end on 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.

FINANCIAL TABLES TO FOLLOW:

Bay Community Bancorp
Quarterly Financial Summary (Unaudited)
(Dollars in thousands, except per share data)
		Three Months Ended
Earnings and dividends:		Sep. 30, 2023			Jun. 30, 2023			Mar. 31, 2023			Dec. 31, 2022			Sep. 30, 2022
	Interest income	$	13,268		$	12,278		$	11,442		$	11,099		$	9,151
	Interest expense		5,064			4,473			3,790			2,354			1,377
	Net interest income		8,204			7,805			7,652			8,745			7,774
	Provision for credit losses, loans		626			(96	)		39			–			–
	Noninterest income		3,332			234			248			253			205
	Noninterest expense		6,464			5,495			5,134			5,609			4,835
	Provision for income taxes		1,322			786			784			1,001			930
	Net income		3,124			1,854			1,943			2,388			2,214
Share data:
	Basic earnings per common share	$	0.36		$	0.21		$	0.22		$	0.28		$	0.25
	Dividends declared per common share		0.050			0.050			0.050			0.045			0.045
	Book value per common share		8.14			7.92			7.86			7.50			7.27
	Common shares outstanding, 30,000,000 authorized		8,771,302			8,728,802			8,728,802			8,728,802			8,591,052
	Average common shares outstanding		8,756,981			8,728,802			8,728,802			8,664,401			8,685,400
Balance sheet – average balances:
	Loans receivable, net	$	673,313		$	662,470		$	653,181		$	627,608		$	584,807
	PPP loans		453			500			595			1,215			4,289
	Earning assets		1,032,794			980,094			945,121			972,965			885,777
	Total assets		1,058,475			1,021,564			987,071			999,316			910,388
	Deposits		716,450			684,328			668,397			764,127			697,174
	Borrowings		140,000			139,940			122,278			42,652			19,500
	Preferred equity (ECIP)		119,413			119,413			119,413			119,413			119,413
	Shareholders’ common equity		68,947			68,088			65,676			63,038			65,688
Ratios:
	Return on average assets		1.17	%		0.73	%		0.80	%		0.95	%		0.96	%
	Return on average common equity		17.98	%		10.92	%		12.00	%		15.03	%		13.37	%
	Yield on earning assets		5.10	%		5.03	%		4.91	%		4.53	%		4.10	%
	Cost of interest-bearing deposits		2.86	%		2.61	%		2.25	%		1.49	%		1.08	%
	Cost of funds		2.35	%		2.18	%		1.94	%		1.16	%		0.76	%
	Net interest margin		3.15	%		3.19	%		3.28	%		3.57	%		3.48	%
	Efficiency ratio		76.15	%		68.10	%		64.99	%		62.34	%		60.60	%
Asset quality:
	Net loan (charge-offs) recoveries to average loans		-0.085	%		0.004	%		-0.023	%		-0.003	%		0.001	%
	Nonperforming loans to gross loans		1.057	%		1.131	%		0.021	%		0.046	%		0.000	%
	Nonperforming assets to total assets		0.677	%		0.725	%		0.014	%		0.031	%		0.000	%
	Allowance for credit losses to gross loans		0.93	%		0.92	%		0.95	%		1.05	%		1.16	%

Bay Community Bancorp
Consolidated Balance Sheets (Unaudited)
(Dollars in thousands, except per share data)
Assets		Sep. 30, 2023				Jun. 30, 2023				Sep. 30, 2022
	Cash and due from	$	147,847			$	134,869			$	177,930
	Interest bearing deposits		10,923				10,923				11,165
	Available-for-sale securities		165,093				176,670				172,662
	Held-to-maturity securities		34,500				34,500				34,500
	Allowance for credit losses, investments		(155	)			(177	)			–
	Commercial		57,837				73,405				64,303
	PPP		428				471				4,280
	CRE (Owner occupied)		148,860				130,339				97,844
	CRE (Non-owner occupied)		341,181				343,661				304,750
	Construction and land		80,588				74,089				73,480
	Consumer and other		55,169				59,860				54,786
	Unearned fees, net		(1,853	)			(1,852	)			(1,653	)
	Allowance for credit losses, loans		(6,313	)			(6,236	)			(6,911	)
	Net Loans		675,897				673,737				590,879
	Premises and equipment		1,086				956				1,091
	Life insurance assets		7,944				7,890				7,732
	Accrued interest receivable and other assets		22,742				21,272				18,291
	Total assets	$	1,065,877			$	1,060,640			$	1,014,250
Liabilities and Shareholders’ Equity
Liabilities
	Deposits
	Demand	$	194,929			$	205,060			$	228,650
	Saving, NOW and money market		289,824				313,794				427,260
	Time		235,857				201,026				147,671
	Total deposits		720,610				719,880				803,581
	FHLB Advances		140,000				140,000				19,500
	Interest payable and other liabilities		14,453				12,202				9,285
	Total liabilities		875,063				872,082				832,366
Shareholders’ Equity
	Preferred stock, $1,000 par value		119,413				119,413				119,413
	Common stock, without par value		55,865				55,645				54,840
	Retained earnings		23,426				20,740				15,771
	Accumulated other comprehensive income (expense)		(7,890	)			(7,240	)			(8,140	)
	Total shareholders’ equity		190,814				188,558				181,884
	Total liabilities and shareholders’ equity	$	1,065,877			$	1,060,640			$	1,014,250

Bay Community Bancorp
Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)
		Three Months Ended
Interest Income		Sep. 30, 2023			Jun. 30, 2023				Sep. 30, 2022
	Loans	$	9,724		$	9,264			$	7,384
	Securities		1,718			1,810				1,384
	Federal funds sold and deposits in banks		1,826			1,205				383
	Total interest income		13,268			12,279				9,151
Interest Expense
	Deposits		3,658			3,086				1,273
	Borrowings		1,406			1,387				104
	Total interest expense		5,064			4,473				1,377
Net Interest Income			8,204			7,806				7,774
Provision for Loan Losses			626			(96	)			–
Net Interest Income After Provision for Loan Losses			7,578			7,902				7,774
Noninterest income
	Service charges		52			59				54
	Gains on sale of loans		163			–				–
	Government grants		2,916			–				–
	Other		201			174				151
	Total noninterest income		3,332			233				205
Noninterest Expense
	Salaries and employee benefits		3,518			3,201				2,815
	Net occupancy and equipment expense		462			333				365
	Software and data processing fees		808			769				641
	Professional fees		312			295				223
	Marketing and business development		235			178				166
	FDIC insurance premiums		149			111				38
	Other		980			608				587
	Total noninterest expense		6,464			5,495				4,835
Income before Income Tax			4,446			2,640				3,144
Provision for Income Taxes			1,322			786				930
Net Income		$	3,124		$	1,854			$	2,214
Basic Earnings Per Share		$	0.36		$	0.21			$	0.25

Bay Community Bancorp
Additional Financial Information
(Dollars in thousands except per share amounts)(Unaudited)
Asset Quality Ratios and Data:
		Sep. 30, 2023				Jun. 30, 2023				Sep. 30, 2022
Nonaccrual loans (excluding restructured loans)		$	7,212			$	7,691			$	–
Nonaccrual restructured loans			–				–				–
Loans past due 90 days and still accruing			–				–				–
Total non-performing loans			7,212				7,691				–
OREO and other non-performing assets			–				–				–
Total non-performing assets		$	7,212			$	7,691			$	–
Nonperforming loans to gross loans			1.057	%			1.131	%			0.000	%
Nonperforming assets to total assets			0.677	%			0.725	%			0.000	%
Allowance for loan losses to gross loans			0.93	%			0.92	%			1.16	%
Performing restructured loans (RC-C)		$	120			$	121			$	125
Net (charge-offs) recoveries quarter ending		$	(571	)		$	29			$	2

Contacts: William S. Keller, President & CEO
510-433-5404
wkeller@BankCBB.com