CBB Bancorp, Inc. Reports Second Quarter 2023 Financial Results

July 28, 2023 at 09:00 AM EDT

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 2023 of $8.1 million, or $0.76 per diluted share, an increase of 14.3% compared to $7.1 million, or $0.67 per diluted share, in the prior quarter and an increase of 25.5% compared to $6.5 million, or $0.62 per diluted share, in the same period last year.

Overall Results

Net income for second quarter 2023 includes the benefit of both a gain on the sale of SBA loans and reduced noninterest expense, which more than offset a decline in net interest margin. The return on average assets for second quarter 2023 was 1.79% compared to 1.59% for first quarter 2023 and 1.43% for second quarter 2022. The return on average equity for second quarter 2023 was 14.76%, compared to 13.45% for first quarter 2023 and 13.30% for second quarter 2022. The net interest margin for second quarter 2023 was 4.23%, compared to 4.38% for first quarter 2023 and 3.75% for second quarter 2022. The efficiency ratio for second quarter 2023 was 47.29%, compared to 51.04% for first quarter 2023 and 49.45% for second quarter 2022.

James Hong, President, and CEO, commented, “We are pleased to announce earnings growth for the second quarter of 2023, during a period in which we have continued to emphasize balance sheet safety and liquidity over growth. In addition to solid gains from the Bank’s SBA operations, the Company’s continued emphasis on cost control has helped to sustain the Company’s profitability.”

Net Interest Income and Margin

Net Interest Income

Net interest income for second quarter 2023 was $18.7 million, a decrease of $346 thousand, or 1.8%, from first quarter 2023, and an increase of $2.3 million, or 14.0%, from second quarter 2022. The decrease in net interest income compared with first quarter 2023 was primarily due to the impact of interest rate increases on the cost of deposits. The increase in net interest income compared with the second quarter 2022 was due to the increased yield on the Bank’s variable rate loans, which were impacted by the rising interest rate environment over the past year.

Net Interest Margin

The net interest margin for second quarter 2023 was 4.23%, compared to 4.38% for first quarter 2023 and 3.75% for second quarter 2022. The decrease in net interest margin from the prior quarter was primarily attributable to the rising cost of funds. The cost of funds for second quarter 2023 increased to 2.53% from 2.10% for first quarter 2023 and increased from 0.34% for second quarter 2022.

Provision for Loan Losses:

No provision for credit losses was recorded for the second quarter 2023 as asset quality remained steady and there was a decline in loan balances. The provision for loan losses for first quarter 2023 was also zero, compared with a provision for loan losses of $1.6 million for second quarter 2022. See Table 10 in this press release for additional information and trends.

Noninterest Income:

Noninterest income for second quarter 2023 was $2.8 million, compared to $1.1 million for first quarter 2023 and $4.5 million for second quarter 2022. The increase in noninterest income in second quarter 2023 compared to first quarter 2023 was primarily the result of gains on sales of loans. Sales of SBA loans were $42.4 million with an average premium percentage received of 6.8% during the second quarter 2023. There were no sales of SBA loans during the first quarter 2023 while there were SBA loan sales totaling $50.8 million, with an average premium percentage received of 8.0%, during the second quarter 2022.

Noninterest Expense:

Noninterest expense for second quarter 2023 was $10.2 million, compared to $10.3 million for the first quarter 2023 and $10.4 million for the second quarter 2022. Salaries and employee benefits were substantially lower at $5.6 million in second quarter 2023 compared with the prior quarter total of $6.1 million, and down from $ 7.0 million in the second quarter 2022. Lower salaries and employee benefits in the current quarter reflect both ongoing cost control efforts and lower incentive payments due to lower levels of loan originations. The increase in other expenses compared to the first quarter 2023 includes the effect of an increase in the cost of FDIC deposit insurance as the FDIC raised its general deposit insurance assessment rates effective on January 1, 2023.

Income Taxes:

The Company’ s effective tax rate for second quarter 2023 was 28.6% compared to 28.1% for first quarter 2023 and 28.3% for second quarter 2022.

Balance Sheet:

Investment Securities:

Investment securities were $66.4 million on June 30, 2023, a decrease of $2.5 million from March 31, 2023, and $11.1 million from June 30, 2022. The decreases were due to principal paydowns and an absence of portfolio additions in the six months of 2023, or in the second quarter 2022.

Loans Receivable:

Loans receivable (including loans held for sale) at June 30, 2023, was $1.4 billion, a decrease of $50.3 million, or 3.4%, from loans receivable at March 31, 2023, and an increase of $14.3 million, or 1.0%, from loans receivable at June 30, 2022. The decrease in loans receivable at June 30, 2023 compared to loans receivable at March 31, 2023, was due to slower loan origination due to reduced demand for loans resulting from the comparatively higher interest rate environment.

The weighted average loan-to-value ratio of commercial real estate loans (“CRE”) was 67.07% at June 30, 2023. Excluding SBA loans, the weighted average loan-to-value ratio of CRE loans was 49.91%.

Allowance for Credit Losses and Asset Quality:

The allowance for credit losses at June 30, 2023 was $15.6 million, or 1.30% of portfolio loans, compared to $15.6 million, or 12.8% of portfolio loans, at March 31, 2023, and compared to $14.7 million, or 1.17% of portfolio loans, at June 30, 2022. Nonperforming loans as of June 30, 2023, were $684 thousand, compared to $636 thousand at March 31, 2023, and compared to $2.5 million at June 30, 2022. The coverage ratio of allowance for credit losses to nonperforming assets exceeded 2200% at June 30, 2023.

SBA Loans Held for Sale:

Total SBA loans held for sale at June 30, 2023, was $215.1 million, compared to $ 243.8 million at March 31 2023, and $141.1 million at June 30, 2022. We continue to assess SBA loan sale premiums and plan to sell loans when we believe it is advantageous to do so. See comments under “Noninterest Income”, and Table 7 for additional SBA loan origination and sale data.

Deposits:

Deposits were $ 1.5 billion at June 30, 2023, down $15.0 million, or 1.0% of, from March 31, 2023, and up $7.0 million, or 0.5%, from June 30, 2022. Noninterest-bearing demand deposits (“DDAs”) decreased $2.2 million, or 0.5%, to $426.3 million at June 30, 2023, from March 31, 2023, and decreased $140.3 million, or 24.8%, from June 30, 2022. DDAs were 28.6% of total deposits at June 30, 2023, compared to 28.6% at March 31, 2023, and 38.2% at June 30, 2022. NOW and MMDA accounts decreased $1.4 million, or 0.6%, to $210.4 million at June 30, 2023, from March 31, 2023, and decreased $117.0 million, or 35.7%, from June 30, 2022. Time deposits decreased $9.6 million, or 1.2%, at June 30, 2023, from March 31, 2023, and increased $279.5 million, or 52.3%, from June 30, 2022. Time deposits at June 30, 2023, were $814.3 million, or 53.5% of total deposits, compared to $823.9 million, or 53.6% of total deposits, at March 31, 2023, and $534.7 million, or 35.3% of total deposits, at June 30, 2022. The increases in time deposits during the first two quarters of 2023 compared with the second quarter 2022 reflect a shift in depositors’ preferences for the higher rate term deposits over money market and checking accounts as rates have risen over the course of the past year. The primary cause of the decreases in noninterest bearing deposit balances during 2023 compared with the second quarter 2022 was a decline in escrow-related deposits as the higher interest rate environment caused a significant slowdown in activity for that sector.

Borrowings:

Borrowings at June 30, 2023, March 31, 2023, and June 30, 2022, consisted of $50.0 million of Federal Home Loan Bank of San Francisco advances at each date.

Capital:

Stockholders’ equity was $223.3 million at June 30, 2023, representing an increase of $7.1 million, or 3.3%, over stockholders’ equity of $216.2 million at March 31, 2023. Tangible book value per share at June 30, 2023, was $20.85, compared with $20.18 at March 31, 2023, an increase of $0.67 per share, or 3.3%.

Each of the Company’s and the Bank’s regulatory capital ratios increased at June 30, 2023, from March 31, 2023, and from June 30, 2022, and continue to exceed the minimum levels required to be considered “Well Capitalized” under the applicable regulatory capital rules and in compliance with the fully phased-in Basel III requirements, which went into effect on January 1, 2022, as shown on Table 11 in this press release. The Common Equity Tier 1 risked-based capital at June 30, 2023, was 17.08% at the Company level and 17.03% 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 loans to small-to medium-sized businesses and does business as “CBB Bank.” As of June 30, 2023, the Bank has ten 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 five loan production offices in Texas, Georgia, Colorado, and Washington. For additional information, please go to www.cbb-bank.com under the tab “About Us” and select “Investors Relations” to see 2Q 2023 Overview and COVID-19 update presentation.

FORWARD-LOOKING STATEMENTS:

This news release may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, and CBB Bancorp and Commonwealth Business Bank (together, the “Company”) intend 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

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,			$			%
			2023			2023		Change			Change			2022		Change			Change			2023			2022		Change			Change

Interest income		$	28,664		$	27,248		$	1,416		5.2	%	$	17,807		$	10,857		61.0	%	$	55,912		$	34,839		$	21,073		60.5	%
Interest expense			9,930			8,168			1,762		21.6	%		1,369			8,561		625.3	%		18,098			2,578			15,520		602.0	%
Net interest income			18,734			19,080			(346	)	(1.8	%)		16,438			2,296		14.0	%		37,814			32,261			5,553		17.2	%

Provision for credit losses			-			-			-		-			1,600			(1,600	)	(100.0	%)		-			433			(433	)	(100.0	%)
Net interest income after provision for credit losses			18,734			19,080			(346	)	(1.8	%)		14,838			3,896		26.3	%		37,814			31,828			5,986		18.8	%

Gain on sale of loans			1,952			-			1,952		100.0	%		3,298			(1,346	)	(40.8	%)		1,952			7,966			(6,014	)	(75.5	%)
Gain (loss) on sale of OREO			-			-			-		-			-			-		-			-			-			-		-
SBA servicing fee income, net			440			654			(214	)	(32.7	%)		778			(338	)	(43.4	%)		1,094			1,247			(153	)	(12.3	%)
Service charges and other income			407			398			9		2.3	%		462			(55	)	(11.9	%)		805			960			(155	)	(16.1	%)
Noninterest income			2,799			1,052			1,747		166.1	%		4,538			(1,739	)	(38.3	%)		3,851			10,173			(6,322	)	(62.1	%)

Salaries and employee benefits			5,581			6,079			(498	)	(8.2	%)		6,994			(1,413	)	(20.2	%)		11,660			14,059			(2,399	)	(17.1	%)
Occupancy and equipment			1,122			1,124			(2	)	(0.2	%)		1,114			8		0.7	%		2,246			2,234			12		0.5	%
Marketing expense			409			374			35		9.4	%		511			(102	)	(20.0	%)		783			996			(213	)	(21.4	%)
Professional expense			436			454			(18	)	(4.0	%)		517			(81	)	(15.7	%)		890			932			(42	)	(4.5	%)
Merger related expense			2			9			(7	)	(77.8	%)		123			(121	)	(98.4	%)		11			123			(112	)	(91.1	%)
Other expenses			2,633			2,235			398		17.8	%		1,114			1,519		136.4	%		4,868			2,910			1,958		67.3	%
Noninterest expense			10,183			10,275			(92	)	(0.9	%)		10,373			(190	)	(1.8	%)		20,458			21,254			(796	)	(3.7	%)

Income before income tax expense			11,350			9,857			1,493		15.1	%		9,003			2,347		26.1	%		21,207			20,747			460		2.2	%

Income tax expense			3,248			2,767			481		17.4	%		2,547			701		27.5	%		6,015			5,883			132		2.2	%

Net income		$	8,102		$	7,090		$	1,012		14.3	%	$	6,456		$	1,646		25.5	%	$	15,192		$	14,864		$	328		2.2	%

Effective tax rate			28.6	%		28.1	%		0.5	%	1.9	%		28.3	%		0.3	%	1.2	%		28.4	%		28.4	%		0.0	%	0.0	%

Outstanding number of shares			10,588,136			10,588,136			-		-			10,416,601			171,535		1.6	%		10,588,136			10,416,601			171,535		1.6	%

Weighted average shares for basic EPS			10,588,136			10,576,191			11,945		0.1	%		10,305,014			283,122		2.7	%		10,582,197			10,298,081			284,116		2.8	%
Weighted average shares for diluted EPS			10,591,350			10,600,189			(8,839	)	(0.1	%)		10,409,663			181,687		1.7	%		10,595,803			10,441,230			154,573		1.5	%

Basic EPS		$	0.77		$	0.67		$	0.10		14.9	%	$	0.62		$	0.15		24.2	%	$	1.44		$	1.44		$	-		-
Diluted EPS		$	0.76		$	0.67		$	0.09		13.4	%	$	0.62		$	0.14		22.6	%	$	1.43		$	1.42		$	0.01		0.7	%

Return on average assets			1.79	%		1.59	%		0.20	%	12.6	%		1.43	%		0.36	%	25.2	%		1.69	%		1.67	%		0.02	%	1.2	%
Return on average equity			14.76	%		13.45	%		1.31	%	9.7	%		13.30	%		1.46	%	11.0	%		14.12	%		15.64	%		(1.52	%)	(9.7	%)

Efficiency ratio¹			47.29	%		51.04	%		(3.75	%)	(7.4	%)		49.45	%		(2.16	%)	(4.4	%)		49.10	%		50.09	%		(0.99	%)	(2.0	%)
Yield on interest-earning assets²			6.46	%		6.24	%		0.22	%	3.5	%		4.06	%		2.40	%	59.1	%		6.36	%		4.01	%		2.35	%	58.6	%
Cost of funds			2.53	%		2.10	%		0.43	%	20.5	%		0.34	%		2.19	%	644.1	%		2.32	%		0.33	%		1.99	%	603.0	%
Net interest margin²			4.23	%		4.38	%		(0.15	%)	(3.4	%)		3.75	%		0.48	%	12.8	%		4.30	%		3.71	%		0.59	%	15.9	%

Represents the ratio of noninterest expense less other real estate owned operations to the sum of net interest income before 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,			$			%
			2023			2023		Change			Change			2022		Change			Change
ASSETS
	Cash and due from banks	$	12,704		$	13,788		$	(1,084	)	(7.9	%)	$	18,087		$	(5,383	)	(29.8	%)
	Interest-earning deposits at the FRB and other banks		293,394			240,602			52,792		21.9	%		243,072			50,322		20.7	%
	Investment securities¹		66,400			68,943			(2,543	)	(3.7	%)		77,469			(11,069	)	(14.3	%)
	Loans held-for-sale		215,083			243,753			(28,670	)	(11.8	%)		141,104			73,979		52.4	%

	Loans held-for-investment		1,201,237			1,222,867			(21,630	)	(1.8	%)		1,260,939			(59,702	)	(4.7	%)
	Less: Allowance for credit losses ("ACL")		(15,626	)		(15,627	)		1		0.0	%		(14,739	)		(887	)	(6.0	%)
	Loans held-for-investment, net		1,185,611			1,207,240			(21,629	)	(1.8	%)		1,246,200			(60,589	)	(4.9	%)

	OREO		-			-			-		-			-			-		-
	Restricted stock investments		11,011			10,121			890		8.8	%		10,111			900		8.9	%
	Servicing assets		8,426			8,528			(102	)	(1.2	%)		10,996			(2,570	)	(23.4	%)
	Goodwill		2,185			2,185			-		-			2,185			-		-
	Intangible assets		279			291			(12	)	(4.1	%)		331			(52	)	(15.7	%)
	Other assets		24,537			25,697			(1,160	)	(4.5	%)		28,060			(3,523	)	(12.6	%)
	Total assets	$	1,819,630		$	1,821,148		$	(1,518	)	(0.1	%)	$	1,777,615		$	42,015		2.4	%

LIABILITIES AND STOCKHOLDERS' EQUITY
	Noninterest-bearing	$	426,333		$	428,559		$	(2,226	)	(0.5	%)	$	566,610		$	(140,277	)	(24.8	%)
	Interest-bearing		1,096,078			1,108,754			(12,676	)	(1.1	%)		948,760			147,318		15.5	%
	Total deposits		1,522,411			1,537,313			(14,902	)	(1.0	%)		1,515,370			7,041		0.5	%

	FHLB advances and other borrowing		50,000			50,000			-		-			50,000			-		-
	Other liabilities		23,956			17,651			6,305		35.7	%		15,134			8,822		58.3	%
	Total liabilities		1,596,367			1,604,964			(8,597	)	(0.5	%)		1,580,504			15,863		1.0	%

	Stockholders' Equity		223,263			216,184			7,079		3.3	%		197,111			26,152		13.3	%
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY		$	1,819,630		$	1,821,148		$	(1,518	)	(0.1	%)	$	1,777,615		$	42,015		2.4	%

CAPITAL RATIOS
	Leverage ratio
	Company		12.23	%		11.86	%		0.37	%	3.1	%		10.80	%		1.43	%	13.2	%
	Bank		12.20	%		11.82	%		0.38	%	3.2	%		10.73	%		1.47	%	13.7	%
	Common equity tier 1 risk-based capital ratio
	Company		17.08	%		16.15	%		0.93	%	5.7	%		14.47	%		2.60	%	18.0	%
	Bank		17.03	%		16.10	%		0.93	%	5.8	%		14.38	%		2.65	%	18.4	%
	Tier 1 risk-based capital ratio
	Company		17.08	%		16.15	%		0.93	%	5.7	%		14.47	%		2.60	%	18.0	%
	Bank		17.03	%		16.10	%		0.93	%	5.8	%		14.38	%		2.65	%	18.4	%
	Total risk-based capital ratio
	Company		18.32	%		17.37	%		0.95	%	5.5	%		15.63	%		2.69	%	17.2	%
	Bank		18.27	%		17.31	%		0.96	%	5.5	%		15.53	%		2.74	%	17.6	%
	Tangible common equity per share	$	20.85		$	20.18		$	0.67		3.3	%	$	18.68		$	2.17		11.6	%
	Loan-to-Deposit (LTD) ratio		78.90	%		79.55	%		(0.65	%)	(0.8	%)		83.21	%		(4.31	%)	(5.2	%)
	Nonperforming assets	$	684		$	636		$	48		7.5	%	$	2,532		$	(1,848	)	(73.0	%)
	Nonperforming assets as a % of loans held-for-investment		0.06	%		0.05	%		0.01	%	20.00	%		0.20	%		(0.14	%)	(70.0	%)
	ACL as a % of loans held-for-investment		1.30	%		1.28	%		0.02	%	1.56	%		1.17	%		0.13	%	11.1	%

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,
		2023			2023			2022			2022			2022

Interest income	$	28,664		$	27,248		$	24,744		$	21,334		$	17,807
Interest expense		9,930			8,168			4,677			2,507			1,369
Net interest income		18,734			19,080			20,067			18,827			16,438

Provision for credit losses		-			-			-			910			1,600
Net interest income after provision for credit losses		18,734			19,080			20,067			17,917			14,838

Gain on sale of loans		1,952			-			-			-			3,298
Gain (loss) on sale of OREO		-			-			-			-			-
SBA servicing fee income, net		440			654			491			709			778
Service charges and other income		407			398			457			518			462
Noninterest income		2,799			1,052			948			1,227			4,538

Salaries and employee benefits		5,581			6,079			6,233			6,861			6,994
Occupancy and equipment		1,122			1,124			1,133			1,118			1,114
Marketing expense		409			374			434			489			511
Professional expense		436			454			418			519			517
Merger related expense		2			9			7			47			123
Other expenses		2,633			2,235			2,579			2,125			1,114
Noninterest expense		10,183			10,275			10,804			11,159			10,373

Income before income tax expense		11,350			9,857			10,211			7,985			9,003

Income tax expense		3,248			2,767			2,882			2,258			2,547

Net income	$	8,102		$	7,090		$	7,329		$	5,727		$	6,456

Effective tax rate		28.6	%		28.1	%		28.2	%		28.3	%		28.3	%

Outstanding number of shares		10,588,136			10,588,136			10,569,601			10,569,601			10,416,601

Weighted average shares for basic EPS		10,588,136			10,576,191			10,569,601			10,516,394			10,305,014
Weighted average shares for diluted EPS		10,591,350			10,600,189			10,600,053			10,545,544			10,409,663

Basic EPS	$	0.77		$	0.67		$	0.70		$	0.54		$	0.62
Diluted EPS	$	0.76		$	0.67		$	0.70		$	0.54		$	0.62

FIVE-QUARTER SALARIES BENEFIT METRICS (Unaudited) - Table 4
(Dollars in thousands)

	At or for the Three Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
		2023			2023			2022			2022			2022

Salaries and benefits	$	5,581		$	6,079		$	6,233		$	6,861		$	6,994
FTE at the end of period		165			170			179			190			199
Average FTE during the period		164			174			184			193			201
Salaries and benefits/average FTE¹	$	137		$	142		$	134		$	141		$	140
Salaries and benefits/average assets¹		1.23	%		1.36	%		1.39	%		1.52	%		1.55	%
Noninterest expense/average assets¹		2.25	%		2.30	%		2.41	%		2.47	%		2.30	%

Annualized

FIVE-QUARTER BALANCE SHEET (Unaudited) - Table 5
(Dollars in thousands)

		June 30,			March 31,			December 31,			September 30,			June 30,
			2023			2023			2022			2022			2022
ASSETS
	Cash and due from banks	$	12,704		$	13,788		$	20,134		$	17,232		$	18,087
	Interest-earning deposits at the FRB and other banks		293,394			240,602			170,839			225,044			243,072
	Investment securities		66,400			68,943			72,550			75,839			77,469
	Loans held-for-sale		215,083			243,753			230,431			186,438			141,104

	Loans held-for-investment		1,201,237			1,222,867			1,285,278			1,260,590			1,260,939
	Less: Allowance for credit losses		(15,626	)		(15,627	)		(15,525	)		(15,602	)		(14,739	)
	Loans held-for-investment, net		1,185,611			1,207,240			1,269,753			1,244,988			1,246,200

	OREO		-			-			-			-			-
	Restricted stock investments		11,011			10,121			10,121			10,121			10,111
	Servicing assets		8,426			8,528			9,232			10,158			10,996
	Goodwill		2,185			2,185			2,185			2,185			2,185
	Intangible assets		279			291			303			317			331
	Other assets		24,537			25,697			26,939			27,845			28,060
	Total assets	$	1,819,630		$	1,821,148		$	1,812,487		$	1,800,167		$	1,777,615

LIABILITIES AND STOCKHOLDERS' EQUITY
	Noninterest-bearing	$	426,333		$	428,559		$	451,651		$	562,051		$	566,610
	Interest-bearing		1,096,078			1,108,754			1,086,599			971,263			948,760
	Total deposits		1,522,411			1,537,313			1,538,250			1,533,314			1,515,370

	FHLB advances		50,000			50,000			50,000			50,000			50,000
	Other liabilities		23,956			17,651			14,706			14,109			15,134
	Total liabilities		1,596,367			1,604,964			1,602,956			1,597,423			1,580,504

	Stockholders' Equity		223,263			216,184			209,531			202,744			197,111
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY		$	1,819,630		$	1,821,148		$	1,812,487		$	1,800,167		$	1,777,615

FIVE-QUARTER LOANS RECEIVABLE COMPONENTS (Unaudited) - Table 6
(Dollars in thousands)

	June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022				June 30, 2022
	Balance		%		Balance		%		Balance		%		Balance		%		Balance		%

Construction	$	20,106	1.7	%	$	19,550	1.6	%	$	17,537	1.4	%	$	14,919	1.2	%	$	23,431	1.9	%
Commercial real estate		1,014,785	84.5	%		1,033,124	84.5	%		1,078,588	83.9	%		1,050,154	83.3	%		1,023,298	81.1	%
Commercial and industrial		114,106	9.5	%		114,184	9.3	%		125,298	9.7	%		128,099	10.1	%		146,175	11.6	%
Home mortgage		45,987	3.8	%		49,155	4.0	%		52,031	4.1	%		57,773	4.6	%		57,612	4.6	%
Consumer		1,074	0.1	%		1,049	0.1	%		6,260	0.5	%		4,839	0.4	%		6,609	0.5	%
Gross loans held-for-investment		1,196,058	99.6	%		1,217,062	99.5	%		1,279,714	99.6	%		1,255,784	99.6	%		1,257,125	99.7	%

Deferred loan fees/costs, net		5,179	0.4	%		5,805	0.5	%		5,564	0.4	%		4,806	0.4	%		3,814	0.3	%
Loans held-for-investment	$	1,201,237	100.0	%	$	1,222,867	100.0	%	$	1,285,278	100.0	%	$	1,260,590	100.0	%	$	1,260,939	100.0	%

Loans held-for-sale	$	215,083			$	243,753			$	230,431			$	186,438			$	141,104
Total loans receivable	$	1,416,320			$	1,466,620			$	1,515,709			$	1,447,028			$	1,402,043

FIVE-QUARTER SBA LOAN PRODUCTIONS/SALES DATA (Unaudited) - Table 7
(Dollars in thousands)

	Three Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
		2023			2023			2022			2022			2022

SBA loans held-for-sale at beginning of the quarter/year	$	243,753		$	230,431		$	186,438		$	141,104		$	149,733
SBA loans originated/transferred from/to held-for-
investment during the quarter/year		18,273			16,890			45,184			49,922			43,451
SBA loans sold during the quarter/year		(42,437	)		-			-			-			(50,845	)
SBA loans principal paydown/payoff, net of advance		(4,506	)		(3,568	)		(1,191	)		(4,588	)		(1,235	)
SBA loans held-for-sale at end of the quarter/year	$	215,083		$	243,753		$	230,431		$	186,438		$	141,104

Gain on sale of SBA loans	$	1,952		$	-		$	-		$	-		$	3,298
Premium on sale (weighted average)		6.8	%		-			-			-			8.0	%

SBA loan production	$	24,013		$	21,719		$	60,746		$	69,234		$	56,676

FIVE QUARTER SBA SERVICING ASSETS AND SERVICING FEES (Unaudited) - Table 8
(Dollars in thousands)

	Three Months Ended
	June 30,			March 31,			December 31,			September 30,			June 30,
		2023			2023			2022			2022			2022


SBA servicing assets @ beginning of the quarter/year	$	8,528		$	9,232		$	10,158		$	10,996		$	10,671

Newly added SBA servicing assets from SBA loans sold		806			-			-			-			1,081
Regular quarterly/annual servicing assets amortization		(379	)		(403	)		(434	)		(471	)		(478	)
SBA servicing assets amortized from SBA loans paid off/charged off		(529	)		(301	)		(492	)		(367	)		(278	)

Subtotal before impairment		8,426			8,528			9,232			10,158			10,996

Reversal of valuation allowance on servicing assets		-			-			-			-			-

SBA servicing assets @ the end of the quarter/year	$	8,426		$	8,528		$	9,232		$	10,158		$	10,996

FIVE-QUARTER DEPOSIT COMPONENTS (Unaudited) - Table 9
(Dollars in thousands)

	June 30, 2023				March 31, 2023				December 31, 2022				September 30, 2022				June 30, 2022
	Balance		%		Balance		%		Balance		%		Balance		%		Balance		%

Noninterest-bearing demand	$	426,333	28.0	%	$	428,559	27.9	%	$	451,651	29.4	%	$	562,051	36.7	%	$	566,610	37.4	%
Interest-bearing demand		9,056	0.6	%		10,883	0.7	%		8,878	0.6	%		10,268	0.7	%		12,754	0.8	%
NOW & MMDA		210,429	13.8	%		211,793	13.8	%		274,521	17.9	%		313,719	20.5	%		327,477	21.6	%
Savings		62,324	4.1	%		62,188	4.0	%		52,845	3.4	%		66,673	4.3	%		73,791	4.9	%
TCDs of $250K and under		298,520	19.6	%		294,074	19.1	%		278,952	18.1	%		246,886	16.1	%		245,203	16.2	%
TCDs of $250K over		368,262	24.2	%		367,167	23.9	%		320,386	20.8	%		242,700	15.8	%		198,518	13.1	%
Wholesale TCDs		147,487	9.7	%		162,649	10.6	%		151,017	9.8	%		91,017	5.9	%		91,017	6.0	%
Total Deposits	$	1,522,411	100.0	%	$	1,537,313	100.0	%	$	1,538,250	100.0	%	$	1,533,314	100.0	%	$	1,515,370	100.0	%

Recap:
Noninterest-bearing demand	$	426,333	28.0	%	$	428,559	27.9	%	$	451,651	29.4	%	$	562,051	36.7	%	$	566,610	37.4	%
Interest-bearing demand		9,056	0.6	%		10,883	0.7	%		8,878	0.6	%		10,268	0.7	%		12,754	0.8	%
NOW & MMDA		210,429	13.8	%		211,793	13.8	%		274,521	17.8	%		313,719	20.5	%		327,477	21.6	%
Savings		62,324	4.1	%		62,188	4.0	%		52,845	3.5	%		66,673	4.3	%		73,791	4.9	%
TCDs of $250K and under		298,520	19.6	%		294,074	19.1	%		278,952	18.1	%		246,886	16.1	%		245,203	16.2	%
Core Deposits		1,006,662	66.1	%		1,007,497	65.5	%		1,066,847	69.4	%		1,199,597	78.3	%		1,225,835	80.9	%

TCDs of $250K over		368,262	24.2	%		367,167	23.9	%		320,386	20.8	%		242,700	15.8	%		198,518	13.1	%
Wholesale TCDs		147,487	9.7	%		162,649	10.6	%		151,017	9.8	%		91,017	5.9	%		91,017	6.0	%
Noncore Deposits		515,749	33.9	%		529,816	34.5	%		471,403	30.6	%		333,717	21.7	%		289,535	19.1	%
Total Deposits	$	1,522,411	100.0	%	$	1,537,313	100.0	%	$	1,538,250	100.0	%	$	1,533,314	100.0	%	$	1,515,370	100.0	%

FIVE-QUARTER SELECTED LOAN AND ASSET QUALITY HIGHLIGHTS (Unaudited) - Table 10
(Dollars in thousands)

		2nd Qtr.			1st Qtr.			4th Qtr.			3rd Qtr.			2nd Qtr.
			2023			2023			2022			2022			2022
Allowance for Credit Losses
	Balance at beginning of period	$	15,627		$	15,525		$	15,602		$	14,739		$	13,089
	CECL transition provision					250
	Provision for credit losses					-			-			910			1,600
	Charge-offs		(11	)		(159	)		(90	)		(89	)		-
	Recoveries		10			11			13			42			50
	Balance at the end of period	$	15,626		$	15,627		$	15,525		$	15,602		$	14,739

Nonperforming Assets:¹
	Over 90 days still accruing	$	39		$	-		$	6,006		$	-		$	-
	Nonaccrual loans		645			636			801			690			2,532
	Total nonperforming loans		684			636			6,807			690			2,532

	Other real estate owned		-			-			-			-			-
	Total nonperforming assets	$	684		$	636		$	6,807		$	690		$	2,532

Classified Assets:¹
	Substandard	$	10,491		$	7,673		$	8,165		$	9,146		$	11,133
	Doubtful		-			-									-
	Loss														-
	Total classified loans	$	10,491		$	7,673		$	8,165		$	9,146		$	11,133

	Other real estate owned		-			-			-			-			-
	Total classified assets	$	10,491		$	7,673		$	8,165		$	9,146		$	11,133

Performing TDR loans:¹		$	7,220		$	4,332		$	4,471		$	4,797		$	4,744

Delinquent Loans:¹
	Loans 30-89 days past due	$	4,420		$	3,551		$	381		$	3,936		$	11,553
	90 days or more past due and still accruing		39			-			6,006			-			-
	Nonaccrual		645			636			801			690			2,532
	Total delinquent loans	$	5,104		$	4,187		$	7,188		$	4,626		$	14,085

Asset Quality Ratios:
	Net (recoveries) charge-offs to average loans²		0.00	%		0.04	%		0.02	%		0.01	%		(0.01	%)
	Nonaccrual loans to loans held-for-investment		0.05	%		0.05	%		0.06	%		0.05	%		0.20	%
	Nonperforming loans to loans held-for-investment		0.06	%		0.05	%		0.53	%		0.05	%		0.20	%
	Nonperforming assets to total assets		0.04	%		0.03	%		0.38	%		0.04	%		0.14	%
	Classified loans to loans held-for-investment		0.87	%		0.63	%		0.64	%		0.73	%		0.88	%
	Classified loans to Tier 1 and ACL		4.44	%		3.35	%		3.67	%		4.24	%		5.32	%
	Classified assets to total assets		0.58	%		0.42	%		0.45	%		0.51	%		0.63	%
	Classified assets to Tier 1 and ACL		4.44	%		3.35	%		3.67	%		4.24	%		5.32	%
	ACL to loans held-for-investment		1.30	%		1.28	%		1.21	%		1.24	%		1.17	%
	ACL to nonaccrual loans		2422.64	%		2457.08	%		1938.20	%		2261.16	%		582.11	%
	ACL to nonperforming loans		2284.50	%		2457.08	%		228.07	%		2261.16	%		582.11	%
	ACL to nonperforming assets		2284.50	%		2457.08	%		228.07	%		2261.16	%		582.11	%
	Texas ratio ³		0.29	%		0.28	%		3.06	%		0.32	%		1.21	%

Net of SBA guaranteed balance

Includes loans held-for-sale

Nonperforming assets divided by tangible common equity and ACL

FIVE-QUARTER CAPITAL RATIOS (Unaudited) - Table 11

	Well Capitalized		Adequately Capitalized		June 30,			March 31,			December 31,			September 30,			June 30,
	Regulatory		BASEL III
	Requirement		Fully Phased In			2023			2023			2022			2022			2022

Leverage ratio
Company	N/A		N/A			12.23	%		11.86	%		11.71	%		11.25	%		10.80	%
Bank	5.00	%	4.00	%		12.20	%		11.82	%		11.67	%		11.15	%		10.73	%
Common equity tier 1 risk-based capital ratio
Company	N/A		N/A			17.08	%		16.15	%		14.92	%		14.82	%		14.47	%
Bank	6.50	%	7.00	%		17.03	%		16.10	%		14.87	%		14.70	%		14.38	%
Tier 1 risk-based capital ratio
Company	N/A		N/A			17.08	%		16.15	%		14.92	%		14.82	%		14.47	%
Bank	8.00	%	8.50	%		17.03	%		16.10	%		14.87	%		14.70	%		14.38	%
Total risk-based capital ratio
Company	N/A		N/A			18.32	%		17.37	%		16.08	%		16.02	%		15.63	%
Bank	10.00	%	10.50	%		18.27	%		17.31	%		16.03	%		15.89	%		15.53	%

Tangible common equity/total assets						12.15	%		11.75	%		11.44	%		11.14	%		10.96	%
Tangible common equity per share					$	20.85		$	20.18		$	19.59		$	18.95		$	18.68

FIVE-QUARTER MARGIN ANALYSIS (Unaudited) -Table 12
(Dollars in thousands)

	Three Months Ended
	June 30, 2023							March 31, 2023							December 31, 2022							September 30, 2022							June 30, 2022
	Avg Balance			Interest		Yield		Avg Balance			Interest		Yield		Avg Balance			Interest		Yield		Avg Balance			Interest		Yield		Avg Balance			Interest		Yield
Number of Days in the Period
INTEREST-EARNING ASSETS
Loans Receivable¹	$	1,444,608		$	24,661	6.85	%	$	1,502,078		$	24,379	6.58	%	$	1,473,100		$	22,407	6.03	%	$	1,413,632		$	19,299	5.42	%	$	1,389,968		$	16,643	4.80	%
Investment securities ²		67,958			595	3.51	%		70,146			577	3.34	%		73,371			552	2.98	%		77,304			543	2.79	%		78,709			488	2.49	%
Interest-earning deposits at the FRB and other banks		258,236			3,296	5.12	%		190,692			2,178	4.63	%		180,358			1,666	3.66	%		246,955			1,398	2.25	%		286,974			599	0.84	%
Other earning assets		10,825			163	6.04	%		10,121			164	6.57	%		10,121			169	6.62	%		10,121			145	5.68	%		9,861			129	5.25	%
Total interest-earning assets ²		1,781,627			28,715	6.46	%		1,773,037			27,298	6.24	%		1,736,950			24,794	5.66	%		1,748,012			21,385	4.85	%		1,765,512			17,859	4.06	%

NONINTEREST-EARNING ASSETS
Cash and due from banks		12,792							14,262							15,632							17,429							14,866
Other noninterest-earning assets		34,060							36,643							38,529							40,251							38,621
Total noninterest-earning assets		46,852							50,905							54,161							57,680							53,487

Less: Allowance for credit losses		(15,627	)						(15,552	)						(15,581	)						(14,756	)						(13,126	)

TOTAL ASSETS	$	1,812,852						$	1,808,390						$	1,775,530						$	1,790,936						$	1,805,873

INTEREST-BEARING DEPOSITS
Interest-bearing demand	$	14,522		$	7	0.19	%	$	18,021		$	9	0.20	%	$	20,352		$	10	0.19	%	$	23,461		$	8	0.14	%	$	26,781		$	4	0.06	%
Money market		192,872			1,414	2.94	%		231,865			1,469	2.57	%		288,611			1,433	1.97	%		316,964			894	1.12	%		308,377			443	0.58	%
Savings		63,786			324	2.04	%		55,576			164	1.20	%		61,152			96	0.62	%		71,519			85	0.47	%		75,306			59	0.31	%
Time deposits		839,198			8,068	3.86	%		797,072			6,410	3.26	%		625,823			3,020	1.91	%		556,919			1,401	1.00	%		523,504			746	0.57	%
Total interest-bearing deposits		1,110,378			9,813	3.54	%		1,102,534			8,052	2.96	%		995,938			4,559	1.82	%		968,863			2,388	0.98	%		933,968			1,252	0.54	%

Borrowings		50,000			117	0.94	%		50,000			116	0.94	%		50,001			118	0.94	%		50,001			119	0.94	%		50,000			117	0.94	%
Total interest-bearing liabilities		1,160,378			9,930	3.43	%		1,152,534			8,168	2.87	%		1,045,939			4,677	1.77	%		1,018,864			2,507	0.98	%		983,968			1,369	0.56	%

Noninterest-bearing deposits		411,432							425,190							507,719							555,291							611,395
Other liabilities		20,934							16,947							14,732							14,596							15,818

Stockholders' equity		220,108							213,719							207,140							202,185							194,692
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	1,812,852						$	1,808,390						$	1,775,530						$	1,790,936						$	1,805,873

Net interest income²				$	18,785						$	19,130						$	20,117						$	18,878						$	16,490

Net interest spread						3.03	%						3.37	%						3.89	%						3.87	%						3.50	%

Effect of noninterest-bearing sources						1.20	%						1.01	%						0.70	%						0.41	%						0.25	%

Net interest margin²						4.23	%						4.38	%						4.59	%						4.28	%						3.75	%


Cost of deposits	$	1,521,810		$	9,813	2.59	%	$	1,527,724		$	8,052	2.14	%	$	1,503,657		$	4,559	1.20	%	$	1,524,154		$	2,388	0.62	%	$	1,545,363		$	1,252	0.32	%

Cost of funds	$	1,571,810		$	9,930	2.53	%	$	1,577,724		$	8,168	2.10	%	$	1,553,658		$	4,677	1.19	%	$	1,574,155		$	2,507	0.63	%	$	1,595,363		$	1,369	0.34	%

¹	Loan held-for-investment, plus loans held-for-sale
²	Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate

FIVE-QUARTER COMPONENTS OF YIELD ON LOANS (Unaudited) - Table 13
(Dollars in thousands)

	Three Months Ended
	June 30,2023					March 31, 2023					December 31, 2022					September 30, 2022					June 30, 2022
	Amount			Yield		Amount			Yield		Amount			Yield		Amount			Yield		Amount		Yield

Contractual yield	$	23,767		6.60	%	$	23,643		6.38	%	$	21,534		5.80	%	$	18,134		5.09	%	$	15,496	4.47	%
SBA discount accretion		1,124		0.31	%		937		0.25	%		1,172		0.32	%		1,078		0.30	%		1,035	0.30	%
Prepayment penalties & late fees		60		0.02	%		30		0.01	%		17		0.00	%		94		0.03	%		56	0.02	%
Amortization of net deferred costs		(290	)	-0.08	%		(231	)	-0.06	%		(316	)	-0.09	%		(7	)	0.00	%		56	0.01	%
As reported yield on loans	$	24,661		6.85	%	$	24,379		6.58	%	$	22,407		6.03	%	$	19,299		5.42	%	$	16,643	4.80	%

MARGIN ANALYSIS (Unaudited) - Table 14
(Dollars in thousands)

	Three Months Ended
	June 30,2023							June 30,2022
	Avg Balance			Interest		Yield		Avg Balance			Interest		Yield
Number of Days in the Period
INTEREST-EARNING ASSETS
Loans Receivable ¹	$	1,473,184		$	49,040	6.71	%	$	1,379,540		$	32,995	4.82	%
Investment securities ²		69,046			1,172	3.42	%		80,752			959	2.39	%
Interest-earning deposits at the FRB and other banks		224,651			5,474	4.91	%		288,018			740	0.52	%
Other earning assets		10,475			327	6.30	%		9,358			248	5.34	%
Total interest-earning assets ²		1,777,356			56,013	6.36	%		1,757,668			34,942	4.01	%

NONINTEREST-EARNING ASSETS
Cash and due from banks		13,523							14,106
Other noninterest-earning assets		35,296							37,674
Total noninterest-earning assets		48,819							51,780

Less: Allowance for credit losses		(15,590	)						(13,660	)

TOTAL ASSETS	$	1,810,585						$	1,795,788

INTEREST-BEARING DEPOSITS
Interest-bearing demand	$	16,261		$	16	0.20	%	$	27,110		$	7	0.05	%
Money market		212,261			2,883	2.74	%		314,999			799	0.51	%
Savings		59,704			488	1.65	%		76,132			120	0.32	%
Time deposits		818,251			14,478	3.57	%		526,446			1,419	0.54	%
Total interest-bearing deposits		1,106,477			17,865	3.26	%		944,687			2,345	0.50	%

Borrowings		50,000			233	0.94	%		50,000			233	0.94	%
Total interest-bearing liabilities		1,156,477			18,098	3.16	%		994,687			2,578	0.52	%

Noninterest-bearing deposits		418,273							593,071
Other Liabilities		18,904							16,389

Stockholders' equity		216,931							191,641

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	1,810,585						$	1,795,788

Net interest income²				$	37,915						$	32,364

Net interest spread						3.20	%						3.49	%

Effect of noninterest-bearing sources						1.10	%						0.22	%

Net interest margin²						4.30	%						3.71	%


Cost of deposits	$	1,524,750		$	17,865	2.36	%	$	1,537,758		$	2,345	0.31	%

Cost of funds	$	1,574,750		$	18,098	2.32	%	$	1,587,758		$	2,578	0.33	%

Loan held-for-investment, plus loans held-for-sale

Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate

View source version on businesswire.com: https://www.businesswire.com/news/home/20230727597137/en/

Contacts

Douglas J Goddard, EVP & CFO

(323) 988-3010

DouglasG@cbb-bank.com

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CBB Bancorp, Inc. Reports Second Quarter 2023 Financial Results

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