CBOA Financial, Inc. Reports Consolidated Earnings of $1,522,000 in 4Q 2020

Rhea-AI Summary

CBOA Financial, Inc. (OTCMKTS:CBOF) reported a remarkable 373% increase in after-tax net income for Q4 2020, totaling $1.52 million, compared to $457,000 in Q3 2020. The company achieved 8.9% deposit growth and improved its cost of funds by 11 basis points. Despite a 3.9% drop in total loans, total assets rose 7.3% to $355.8 million. Shareholders' equity increased to $25 million. The bank also recorded a negative tax provision expense of $1.9 million, reflecting improved financial results.

Positive

• 373% increase in after-tax net income to $1.52 million in Q4 2020.
• 8.9% growth in deposits, totaling $304.2 million.
• Improved cost of funds by 11 basis points.
• Shareholders' equity increased to $25 million from $23.6 million.
• Capital ratios exceeded regulatory guidelines.

Negative

• Total loans decreased by 3.9% to $240 million.
• 43% increase in non-interest expense driven by non-recurring events.
• Negative non-interest income of $107,000 due to OREO property write-downs.

TUCSON, Ariz., Feb. 11, 2021 /PRNewswire/ -- CBOA Financial, Inc. (OTCMKTS:CBOF) (the "Company"), parent company of Commerce Bank of Arizona (the "Bank" or "CBAZ"), announced that consolidated after tax net income for quarter ending December 31, 2020 increased 373% to $1,522,000, from $457,000 in the third quarter of 2020.

Chris Webster, Bank President and Chief Executive Officer said "The economic and operating challenges of 2020 were unprecedented. I am extremely proud of our team and how we were able to maintain our exceptional customer service performance standards." Webster added, "Our financial metrics for the year were excellent. The Bank generated strong loan and deposit growth, Net Interest Margin and bottom line Net Income. And, we were able to re-align key non-interest costs which will benefit the Bank in the years to come."

Fourth Quarter 2020 Highlights

• After tax net income was up 233% quarter over quarter
• Deposit growth was $24.7 million, or 8.9% for the quarter
• Cost of funds improved 11 basis points during the quarter

Operational Highlights

Interest income was aided by recognized fee income of PPP loans that bolstered earnings by $399,000.  Further contributing to the growth in net interest income was a $37,000 decline in interest expense despite the $10 million increase in total deposits during the quarter.

The $107,000 negative non-interest income was driven by further write-downs of OREO properties which the Bank acquired primarily in the 2012-2015 time period. The Bank has executed a strategy of aggressively pricing these assets in response to the continuing difficulty of marketing these types of properties, which was exacerbated by the pandemic. For the full year, non-performing assets which include loans and OREO are down 68% from $8.6 million or 3.6% of assets to $2.8MM or 0.78% of assets.

The 43% increase in non-interest expense during the quarter was driven by two large non-recurring events. The first was approximately $500,000 in lease and building expenses related to the moving of the Bank's two Tucson metro branches into superior locations with improved lease terms that will positively impact Bank earnings going forward. The second was approximately $400,000 in technology contract restructuring costs that will significantly improve the Bank's internal technology support while impacting income positively in 2021 and going forward.

A negative tax provision expense of $1.9 million was recorded in the quarter to recognize the full reversal of the valuation allowance recorded against the Company's deferred tax assets. The decision to reverse this allowance was driven by the Company's improvement in all financial results since the valuation allowance was originally recorded in 2012, and reflects management's confidence that sufficient future taxable earnings will be generated to utilize the deferred tax asset.

Balance Sheet

Total assets increased by 7.3% to $355.8 million during the quarter ended December 31, 2020 and increased 49.6% compared to $237.8 million a year ago. Total asset growth from December 2019 to December 2020 consisted of PPP loans funding CBAZ deposit accounts totaling $60 million, and organic net deposit growth of roughly $36 million.

Traditional gross loans dropped $6 million since third quarter 2020 ending the third quarter at $180 million. Including the $60 million in PPP loans, total loans decreased by 3.9% to $240 million in the quarter and increased 38% compared to $174 million a year ago. Total deposits increased by 8.9% to $304.2 million during the quarter and increased 47% compared to $208 million a year ago.

The allowance for loan losses totaled $2.95 million at December 31, 2020, or 1.64% of "traditional" non-PPP loans, compared to 1.61% in the previous quarter, and was 1.23% for the quarter with the PPP loans included. Though the Bank's recorded reserve did not materially change, worsening economic factors and pandemic related payment deferrals are being accounted for in the Bank's reserve calculation. Due to a large "unallocated" reserve, the Bank remained adequately reserved for the quarter.

Shareholders' equity increased to $25 million at December 31, 2020, from $23.6 million the preceding quarter. At December 31, 2020, book value and tangible book value were $2.81 per share compared to $2.81 per share at September 30, 2020 and $2.66 per share a year ago. The growth in total assets associated with the PPP loans was the primary driver of the decline in the Bank's Tier 1 Leverage ratio.  Excluding the PPP loans, the Bank's third quarter 2020 Tier 1 Leverage ratio would have been 9.2%, just lower than 10.3% for third quarter 2020 and 11.1% as of December 31, 2019.

Finally, Chairman Bill Assenmacher stated, "I am excited to announce that we have made two extremely well qualified additions to our Board of Directors, Rhonda Pina and David Porter. We believe both Rhonda and David will provide valuable support to the strategic initiatives of Commerce Bank of Arizona going forward."

Rhonda Pina has 30 years of banking experience in southern Arizona. Most recently she was an elected Town Council Member for the Town of Oro Valley.

David Porter spent nearly 30 years in the banking industry within the Phoenix metropolitan area. He currently serves as the CFO of The Renaissance Companies, one the largest and most successful commercial property development companies in Arizona.

Capital Management

Capital ratios exceeded regulatory guidelines for a well-capitalized institution under Basel III and Dodd Frank Wall Street Reform requirements at December 31, 2020. Capital ratios are presented below.

About the Company

Commerce Bank of Arizona, established in 2002 in Tucson, Arizona, is a full-service community bank that caters to small-to mid-sized businesses and real estate professionals. CBAZ offers commercial clients with a variety of services ranging from U.S. Small Business Administration (SBA) financing solutions, construction loans, and commercial real estate loans. CBOA Financial, Inc is a single-bank holding company and parent of the Bank. The Company is traded over-the-counter as CBOF. For additional information, visit: www.commercebankaz.com.

Forward-looking Statements

This press release may include forward-looking statements about CBOA Financial, Inc. or Commerce Bank of Arizona. These statements involve certain risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors: competition, fluctuations in interest rates, dependency on key individuals, loan defaults, geographical concentration, litigation and changes in federal laws, regulations and interpretations thereof. All forward-looking statements included in this press release are based on information available at the time of the release, and CBOA Financial, Inc. and Commerce Bank of Arizona assume no obligation to update any forward-looking statement.

Unaudited Consolidated Summary Financial Information
Dollars in thousands - Unaudited		For the quarter ended				Year to Date
		12/31/2020	9/30/2020	12/31/2019		12/31/2020	12/31/2019
Summary Income Data
Interest Income		3,300	3,202	2,969		12,877	11,804
Interest expense		319	356	489		1,486	1,912
Net Interest Income		2,981	2,846	2,480		11,391	9,892
Provision for (reduction in) loan losses		-	-	(74)		(279)	(153)
Non-interest income		(107)	(49)	139		(608)	498
Realized gains (losses) on sales of securities		-	-	3		168	(2)
Non-interest expense		3,344	2,340	2,251		10,475	8,668
Income (loss) before income taxes		(470)	457	445		755	1,873
Provision for income tax		(1,992)	-	-		(1,992)	-
Net Income		1,522	457	445		2,747	1,873
Per Share Data
Shares outstanding end-of-period		8,218	8,208	7,878		8,218	7,878
Earnings per common share ($'s)		0.19	0.06	0.06		0.33	0.24
Earnings per common share (Diluted) ($'s)		0.19	0.04	0.04		0.33	0.04
Cash dividend declared		-	-	-		-	-
Total shareholders' equity		25,070	23,589	20,944		25,070	20,944
Book value per share ($'s)		2.81	2.87	2.66		2.81	2.66
Selected Balance Sheet Data
Total assets		355,798	331,636	237,788		355,798	237,788
Securities available-for-sale		37,128	36,636	26,162		37,128	26,162
Loans		240,016	249,684	173,976		240,016	173,976
Allowance for loan losses		2,955	2,996	2,969		2,955	2,969
Deposits		303,932	279,187	207,519		303,932	207,519
Other borrowings		16,563	21,574	-		16,563	-
Shareholders' equity		25,070	23,589	20,944		25,070	20,944
Performance Ratios (%)
Return on average shareholders' equity  (annualized)		10.56	7.10	8.50		10.64	8.50
Net interest margin		3.73	4.03	4.43		4.10	4.43
Efficiency ratio		114.92	82.45	83.91		95.39	83.91
Asset Quality Data (%)
Nonperforming assets to total assets		0.78	1.30	3.61		0.78	3.61
Reserve for loan losses to total loans		1.23	1.20	1.71		1.23	1.71
Charge-offs to average loans for period		0.07	(0.01)	(0.2)		(0.12)	(0.2)
Regulatory Capital Ratios (%)
Common Equity Tier 1		12.96	12.95	13.71		12.96	13.71
Tier 1 risk-based capital ratio		12.96	12.95	13.71		12.96	13.71
Total risk-based capital ratio		14.21	14.20	14.97		14.21	14.97
Tier 1 leverage capital ratio		8.56	8.80	11.07		8.56	11.07

 

Contact:
Chris Webster
President & CEO
480-253-4511
cwebster@commercebankaz.com 

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SOURCE Commerce Bank of Arizona

FAQ

What was CBOF's net income for Q4 2020?

CBOF reported an after-tax net income of $1.52 million for Q4 2020.

How much did CBOF's deposits grow in Q4 2020?

Deposits increased by 8.9% to $304.2 million during Q4 2020.

What was the impact of PPP loans on CBOF's earnings?

PPP loans contributed $399,000 to the bank's interest income.

What changes occurred in CBOF's total assets by December 31, 2020?

Total assets rose by 7.3% to $355.8 million by December 31, 2020.

What is the status of CBOF's capital ratios?

CBOF's capital ratios exceeded regulatory guidelines for a well-capitalized institution.