Community Business Bank (OTCBB:CBBC) today reported net income of $4,000, or breakeven for the third quarter ended September 30, 2007, compared with a loss of $653,000, or -$0.31 per diluted share for the comparable period one year ago.
Third Quarter Financial Highlights
- Net income for the quarter was $4,000, or breakeven, compared with a loss of $653,000, or -$0.31 per diluted share in Q3 2006 and $78,000, or $0.04 per diluted share in Q2 2007.
- Net interest income increased to $1.15 million compared with $713,000 in Q3 2006 and $1.02 million in Q2 2007.
- Non-interest income increased to $157,000 compared with $10,000 in Q3 2006 and $114,000 in Q2 2007.
- Net interest margin decreased to 4.51% compared with 4.62% in Q3 2006 and was up marginally from 4.46% in Q2 2007.
- Efficiency ratio improved to 95.8% compared with 142.0% in Q3 2006; this ratio was up slightly from 91.0% in Q2 2007.
- Return on average assets improved to 0.02% compared with -3.90% in Q3 2006 and was down from 0.32% in Q2 2007.
- Return on average equity improved to .09% compared with -13.28% in Q3 2006 and was down from 1.67% in Q2 2007.
- Allowance for loan loss was 0.98% of total loans compared with 1.39% in Q3 2006 and 1.13% in Q2 2007.
- Total loans increased by 97.1% or $50 million to $102 million compared with $52 million in Q3 2006. This category increased by 12.4% or $11 million from $91 million in Q2 2007.
- Deposits increased by 75.3% or $36 million to $84 million compared with $48 million in Q3 2006. This category increased by 18.0% or $13 million from $71 million in Q2 2007.
- Other borrowings increased by 318.8% or $10 million to $13 million compared with $3 million in Q3 2006. This category decreased by $1 million from $14 million in Q2 2007
Operating Results
Net interest income for the third quarter of 2007 increased 61% to $1.15 million compared with the same period in 2006. This improvement was a result of average earning assets increasing by $40 million. The Bank's yield on average earning assets improved by .56% to 8.30% compared with 7.74% in the third quarter of 2006. This improvement was in spite of the fact that the Bank's cost of funds increased by .23% to 4.32% during this time frame.
Non-interest income grew by $147,000 to $157,000 compared with the third quarter of 2006, primarily due to an increase in other noninterest income related to gains on sale of loans.
When compared to a year ago, non-interest expense increased by $222,000 to $1.25 million. This reflects higher salaries and employee benefits associated with an increase in the number of staff. Provision for loan losses decreased to $50,000 from $350,000. This was the net result of a large provision being made in the third quarter of 2006. Net income before taxes increased by $658,000 to $4,000. Net income for the quarter ended September 30, 2007 totaled $4,000, or $0.002 per diluted share, compared with a loss of $653,000, or -$0.31 per diluted share for the corresponding period in 2006.
Return on average assets and return on average equity improved to 0.02% and 0.09%, respectively, for the third quarter ended September 30, 2007, compared with -3.90% and -13.28%, respectively, for the comparable period in 2006.
Balance Sheet Summary
As of September 30, 2007, total loans grew by 97.1% or $50 million to $102 million from $52 million at the end of the third quarter of 2006 and by 12.4%, or $11 million from $91 million at June 30, 2007. Construction loans accounted for the largest percentage of the total loan portfolio at 37.5% of the total loans, down from 44.6% one year ago. The concentration of commercial real estate loans increased to 23.9%, compared with 19.9% one year ago.
The Bank recorded its first non-performing loan in its history during the third quarter of 2007. This loan in the amount of $72,000 was charged off during the quarter. As of September 30, 2007, the allowance for loan losses increased to $1.00 million, or 0.98% of gross loans, compared with $718,000, or 1.39% of gross loans at the end of the third quarter 2006 and $1.03 million, or 1.13% of gross loans, at the end of the second quarter 2007. The Bank continues to maintain excellent asset quality overall.
Total deposits were $84 million at September 30, 2007 compared with $48 million a year ago and $71 million at quarter-end June 2007. The largest growth was from wholesale and retail certificates of deposit. Wholesale certificates of deposits increased by $20.6 million compared with a year ago and increased $22.1 million compared with the end of the second quarter of 2007. Retail CDs increased $10.1 million from a year ago and decreased $4.6 million since June 2007.
Shareholders' equity at September 30, 2007 decreased by $200,000 to $18.9 million from $19.1 million a year ago due to start-up costs in the 4th quarter of 2006 and was flat at $18.9 million since June 30, 2007. The Bank continues to be "well-capitalized" under all regulatory categories.
"I am pleased to report ongoing growth, the attaining and sustaining of positive earnings during 2007 and continuing cost control," said John DiMichele, President and Chief Executive Officer. "Since the Bank opened in November 2005, we have found ourselves in an extremely challenging environment. The persistent inverted / flat yield curve has put added pressure on the Bank's cost of funds just as we were reaching breakeven profitability. This has caused a contraction in the net interest margin for the Bank as well as for the banking industry as a whole. The more recent slowdown of the real estate industry has also impacted community banks, especially in the construction and commercial real estate areas. The larger players in the market are beginning to display a substantial slowdown in growth along with a compressed net interest margin and weakened credit quality. Other large companies with liquidity concerns have driven the cost of wholesale funding artificially high in recent months. Our Bank will continue to originate credit-worthy loans in targeted areas while establishing a pricing discipline and sales culture on the liability side of the Bank to drive down our cost of funds. Relationship pricing will be utilized in all new account relationships, on both sides of the Balance Sheet. I am confident that with Management implementing its strategic plan, the Bank will be well-positioned to continue its profitable growth through the rest of 2007, into 2008 and beyond. The Board, Management and staff are very proud of what we have accomplished in our 22 months of operation."
Subsequent Event:
The Bank sold its Lodi branch building on October 23, 2007 in a sale / leaseback transaction, recognizing a gain of about $769,000. Of this gain, approximately $300,000 was recognized right away and the remainder will be deferred over the 10-year life of the new lease. The majority of the gain recognized immediately was added to the Bank's provision for loan losses in October; this figure is consistent with the growth of the Bank's loan portfolio.
CONSOLIDATED BALANCE SHEETS (Unaudited)- $ in thousands | |||||||||
| Â | |||||||||
| 9/30/2007 | 6/30/2007 | 9/30/2006 | |||||||
| ASSETS | |||||||||
| Cash & Due From | $ | 1,686 | $ | 1,064 | $ | 968 | |||
| Fed Funds Sold | $ | 1,120 | $ | - | $ | 2,490 | |||
| Investment Securities | $ | 6,736 | $ | 7,817 | $ | 11,952 | |||
| Loans Net of Deferred Fees | $ | 102,100 | $ | 90,869 | $ | 51,800 | |||
| Allowance for Loan Losses | $ | (1,003 | ) | $ | (1,025 | ) | $ | (718 | ) |
| Net Loans | $ | 101,097 | $ | 89,844 | $ | 51,082 | |||
| Premises and Equipments, Net | $ | 3,653 | $ | 3,672 | $ | 3,545 | |||
| Accrued Interest Receivable | $ | 648 | $ | 450 | $ | 344 | |||
| Other Assets | $ | 1,876 | $ | 1,758 | $ | 148 | |||
| TOTAL ASSETS | $ | 116,816 | $ | 104,605 | $ | 70,529 | |||
| Â | |||||||||
| LIABILITIES & SHAREHOLDERS' EQUITY | |||||||||
| Non-interest Bearing Deposits | $ | 10,667 | $ | 7,267 | $ | 5,928 | |||
| Interest Bearing Deposits | $ | 73,565 | $ | 64,123 | $ | 42,117 | |||
| Total Deposits | $ | 84,232 | $ | 71,390 | $ | 48,045 | |||
| Accrued expenses/other liabilities | $ | 310 | $ | 469 | $ | 238 | |||
| Other borrowings | $ | 13,400 | $ | 13,931 | $ | 3,200 | |||
| Total Liabilities | $ | 97,942 | $ | 85,790 | $ | 51,483 | |||
| Total Shareholders' Equity | $ | 18,874 | $ | 18,815 | $ | 19,046 | |||
| Total Liabilities and Shareholders' | |||||||||
| Equity | $ | 116,816 | $ | 104,605 | $ | 70,529 | |||
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| CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) | |||||||||
| - $ in thousands | |||||||||
Three Months Ended | |||||||||
| 9/30/2007 | 6/30/2007 | 9/30/2006 | |||||||
| Â | |||||||||
| Net Interest Income | $ | 1,146 | $ | 1,028 | $ | 713 | |||
| Provision for Loan Loss | $ | 50 | $ | 25 | $ | 350 | |||
| Non-Interest Income | $ | 157 | $ | 114 | $ | 10 | |||
| Non-interest Expense | $ | 1,249 | $ | 1,038 | $ | 1,026 | |||
| Income Before Income Taxes | $ | 4 | $ | 78 | $ | (653 | ) | ||
| Income Taxes | $ | - | $ | - | $ | - | |||
| NET INCOME | $ | 4 | $ | 78 | $ | (653 | ) | ||
| Diluted EPS | $ | 0.002 | $ | 0.04 | $ | (0.31 | ) | ||
| Â | |||||||||
| FINANCIAL RATIOS | |||||||||
| ROA | 0.02 | % | 0.32 | % | -3.90 | % | |||
| ROE | 0.09 | % | 1.67 | % | -13.28 | % | |||
| Net Interest Margin | 4.51 | % | 4.46 | % | 4.62 | % | |||
| Efficiency Ratio | 95.83 | % | 90.95 | % | 141.97 | % | |||
The Bank's Call Reports are available for review or download directly from the FDIC website at www.fdic.gov, or through the link at the Bank's website at www.communitybizbank.com.
Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and factors such as: (1) the impact of changes in interest rates, (2) fluctuation in economic conditions, (3) competition in the Company's defined market, (4) the Company's ability to sustain its internal growth rate and to preserve its earning assets quality, and (5) government regulations. Although the Company believes the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct.
