CBOA Financial, Inc. Reports Consolidated Earnings of $395,000 in 2Q 2020

Rhea-AI Summary

CBOA Financial, Inc. (CBOF) reported a 6.5% increase in net income for Q2 2020, reaching $395,000, up from $371,000 in Q1. This growth was supported by significant loan activity related to the SBA's Paycheck Protection Program (PPP) and strong deposit growth of 26%. The Bank's net interest margin stood at 4.51%, despite a 150 basis point rate cut by the Federal Reserve. Total assets rose 29% to $315.2 million, with total gross loans increasing by 38%. However, the Bank reported a negative non-interest income of $460,000 due to writedowns on OREO properties.

Positive

• Net income increased by 6.5% to $395,000 in Q2 2020.
• Strong deposit growth of 26% during the quarter.
• Total assets grew 29% to $315.2 million.
• Total gross loans increased by 38% to $241 million.
• Net interest margin remained robust at 4.51%.

Negative

• Negative non-interest income of $460,000 due to OREO property writedowns.
• Economic factors and pandemic-related payment deferrals affecting loan loss reserves.

TUCSON, Ariz., Aug. 13, 2020 /PRNewswire/ -- CBOA Financial, Inc. (OTCMKTS:CBOF) (the "Company"), parent company of Commerce Bank of Arizona (the "Bank" or "CBAZ"), announced that consolidated net income for quarter ending June 30, 2020 increased 6.5% to $395,000, from $371,000 in the first quarter of 2020.

Chris Webster, Bank President and Chief Executive Officer commented, "Despite the many operational challenges of the COVID-19 pandemic, we are proud to complete another strong quarter. We experienced significant loan growth related to SBA's Paycheck Protection Program (PPP), however organic loan growth was also meaningful. Deposit growth was strong as many new customers moved their entire business banking relationship to us." Webster added, "It's also important to note that although the effective yield on our PPP loans is substantially below our core loan portfolio, we continued to maintain a robust net interest margin despite the Federal Reserve swiftly cutting interest rates 150 basis points in March, which caused many of our assets to reprice. Lastly, we have fully adapted to serving the banking of our customers using a variety of means including branch banking by appointment, mobile and on-line banking services."

Second Quarter 2020 Highlights

• Net Income for the quarter was $395,000;
• NIM was 4.51% for the quarter;
• Deposit grew 26% during the quarter.

Operational Highlights
Interest income was aided by an influx of PPP loans during the second quarter that bolstered earnings by $750,000 compared with prior periods due to recognized fee income.  Further contributing to the growth in net interest income was a $64,000 decline in interest expense despite the $64.8 million increase in total deposits during the quarter.

The Bank's $460,000 negative non-interest income was driven by $548,000 in writedowns of OREO properties which the Bank acquired primarily in the 2012-2015 time period. The Bank has aggressively priced these assets in response to the continuing difficulty of marketing these types of properties, which was exacerbated by the pandemic.

Balance Sheet
Total assets increased by 29% to $315.2 million during the quarter ended June 30, 2020 and increased 35% compared to $233.9 million a year ago. Total asset growth from June 2019 to June 2020 consisted of PPP loans funding CBAZ deposit accounts totaling $63 million, and organic net deposit growth of roughly $15 million.

Traditional gross loans rose $3.5 million since first quarter 2020 ending the second quarter at $178 million. Including the $63 million in PPP loans, total gross loans increased by 38% to $241 million in the quarter and increased 35% compared to $179 million a year ago. Total deposits increased by 26% to $268.8 million during the quarter and increased 32% compared to $204 million a year ago.

The allowance for loan losses totaled $2.99 million at June 30, 2020, or 1.68% of "traditional" non-PPP loans, compared to 1.71% in the previous quarter, and was 1.24% 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 $23.0 million at June 30, 2020, from $22.3 million the preceding quarter. At June 30, 2020, book value and tangible book value were $2.81 per share compared to $2.71 per share at March 31, 2020 and $2.57 per share a year ago. The growth in total assets associated with the PPP loans originated during the second quarter 2020 was the primary driver of the decline in the Bank's Tier 1 Leverage ratio.  Excluding the PPP loans, the Bank's second quarter 2020 Tier 1 Leverage ratio would have been 10.7%, just slightly lower than 11.2% for first quarter 2020 and 10.7% as of June 30, 2019.

Capital Management
Capital ratios exceeded regulatory guidelines for a well-capitalized institution under Basel III and Dodd Frank Wall Street Reform requirements at June 30, 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
		6/30/2020	3/30/2020	6/30/2019		6/30/2020	6/30/2019
Summary Income Data
Interest Income		3,549	2,826	3,062		6,375	5,880
Interest expense		366	446	513		812	903
Net Interest Income		3,183	2,380	2,549		5,563	4,977
Provision for (reduction in) loan losses		-	(279)	-		(279)	-
Non-interest income		(460)	8	158		(452)	229
Realized gains (losses) on sales of securities		47	121	-		168	-
Non-interest expense		2,375	2,417	2,090		4,792	4,276
Income (loss) before income taxes		395	371	617		766	930
Provision for income tax		-	-	-		-	-
Net Income		395	371	617		766	930
Per Share Data
Shares outstanding end-of-period		8,208	8,208	7,878		8,208	7,878
Earnings per common share ($'s)		0.05	0.05	0.08		0.09	0.12
Earnings per common share (Diluted) ($'s)		0.04	0.04	0.06		0.07	0.09
Cash dividend declared		-	-	-		-	-
Total shareholders' equity		23,049	22,265	20,283		23,049	19,039
Book value per share ($'s)		2.81	2.71	2.57		2.81	2.42
Selected Balance Sheet Data
Total assets		315,157	243,630	233,913		315,157	233,913
Securities available-for-sale		28,888	29,178	18,941		28,888	18,941
Loans		240,979	174,471	178,971		240,979	178,971
Allowance for loan losses		2,991	2,978	2,920		2,991	2,920
Deposits		268,836	212,807	204,026		268,836	204,026
Other borrowings		14,808	-	-		14,808	-
Shareholders' equity		23,049	22,265	20,283		23,049	20,283
Performance Ratios (%)
Return on average shareholders' equity  (annualized)		6.62	6.56	10.89		6.59	8.77
Net interest margin		4.51	4.20	4.62		4.37	4.69
Efficiency ratio		85.38	98.61	75.41		91.58	79.75
Asset Quality Data (%)
Nonperforming assets to total assets		1.45	3.40	3.61		1.45	3.61
Reserve for loan losses to total loans		1.24	1.71	1.63		1.24	1.63
Charge-offs to average loans for period		(0.02)	(0.66)	(0.08)		(0.30)	(0.07)
Regulatory Capital Ratios (%)
Common Equity Tier 1		13.40	13.61	13.16		13.71	13.21
Tier 1 risk-based capital ratio		13.40	13.61	13.16		13.71	13.21
Total risk-based capital ratio		14.65	14.87	14.41		14.97	14.46
Tier 1 leverage capital ratio		9.22	11.12	10.73		11.07	11.61

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

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SOURCE Commerce Bank of Arizona

FAQ

What were CBOF's earnings results for Q2 2020?

CBOF reported a net income of $395,000 for Q2 2020, a 6.5% increase from Q1.

How much did CBOF's total deposits grow in Q2 2020?

CBOF's total deposits grew by 26% during Q2 2020.

What was the net interest margin for CBOF in Q2 2020?

CBOF reported a net interest margin of 4.51% for Q2 2020.

What impact did the PPP loans have on CBOF's earnings?

PPP loans contributed approximately $750,000 to CBOF's interest income during Q2 2020.

What is the current Tier 1 Leverage ratio for CBOF?

CBOF's Tier 1 Leverage ratio was slightly below 11.2% for Q2 2020 when excluding PPP loans.