Market Overview

Community Bank Reports 2018 Second Quarter Earnings of $7.8 Million, Record Loan Totals and Declares $.50 Dividend on Common Stock

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Community Bank (the "Bank") (CYHT- OTC-Pink ("Bank")), founded in 1945,
is an independent Southern California regional community bank, with
assets of $3.7 billion, and headquartered in Pasadena with 16 business
centers.

Acquisition by Citizens Business Bank:

As previously announced, on February 26, 2018, the Bank entered into an
Agreement and Plan of Reorganization and Merger with CVB Financial Corp.
("CVB") and Citizens Business Bank ("Citizens") (the "Merger Agreement")
pursuant to which the Bank will merge with and into Citizens and each
outstanding share of the Bank's common stock will be exchanged for (i)
9.4595 shares of CVB Financial common stock and (ii) $56.00 in cash,
subject to the adjustments set forth in the Merger Agreement. The merger
is expected to close in the third quarter of 2018 subject to
satisfaction of all the closing conditions set forth in the Merger
Agreement, including but not limited to, receipt of all requisite
regulatory approvals.

  • Financial Highlights: Net
    income for the second quarter and the first six months of 2018 was
    $7.8 million and $15.8 million, respectively, as compared to $8.4
    million and $16.1 million in the same periods of 2017. Net income for
    the second quarter and first six months of 2018 included merger
    related costs of $1.0 million and $2.1 million, respectively. During
    the first six months of 2018, a $3.1 million provision for loan loss
    was recorded while in the first six months of 2017 a release of $600
    thousand in provision for loan losses was recorded.
  • Net interest income was $31.0 million for the second quarter of 2018
    compared to $29.9 during the second quarter of 2017. The increase in
    net interest income of $1.1 million for the second quarter 2018 over
    the same period in 2017 was primarily the result of $212 million of
    average loan growth and higher yields on loans driven by Fed rate
    increases. These improvements were partially offset by increased
    funding costs. Net interest margin increased to 3.47% from 3.39% in
    the same period in the prior year due to the forgoing factors, plus
    growth in non-interest bearing deposits.
  • Net interest income was $62.6 million for the first six months of 2018
    compared to $57.7 during the same period of 2017. The increase in net
    interest income of $4.9 million for the six month period of 2018 over
    the same period in 2017 was primarily the result of $226 million in
    average loan growth, higher yields on loans driven by Fed rate
    increases and recoveries of non-accrual interest. These improvements
    were partially offset by increased funding costs. Net interest margin
    increased to 3.52% from 3.32% in the same period in the prior year due
    to the above factors, plus growth in non-interest bearing deposits.
  • Total loan balances at June 30, 2018 were a record $2.785 billion,
    representing a $45.6 million or 1.7% increase from the $2.740 billion
    at December 31, 2017. The Bank believes this growth reflects continued
    focus on origination of high quality loans in the greater Los Angeles
    area, primarily real estate loans.
  • Non-performing assets at June 30, 2018 were $10.6 million compared to
    $9.9 million at December 31, 2017 and criticized loan totals increased
    to $47.0 million at June 30, 2018 from $17.1 million at December 31,
    2017. The allowance for loan losses increased to 1.34% at June 30,
    2018 compared to 1.29% at December 31, 2017 reflecting the overall
    increase in non-performing assets and criticized loans. The coverage
    ratio related to non-performing loans at June 30, 2018 was 352%
    compared to 391% at the end of December 2017. During the first six
    months of 2018, a $3.1 million provision for loan loss was recorded,
    while in the first six months of 2017 a release of $600 thousand in
    provision for loan losses was recorded. The increased provision during
    2018 was due to second quarter charge-offs of $1.2 million and the
    increase in the non-performing assets and criticized loans as of June
    30, 2018.
  • Deposits grew to a total of $2.865 billion as of June 30, 2018, an
    increase of $4.8 million from December 31, 2017 even though certain
    higher rate public fund CDs totaling $140.4 million and money desk CDs
    totaling $53.4 million were not renewed during the period. Deposit
    increases during the six months were primarily in money market and
    non-interest bearing demand deposits.
  • Non-interest bearing deposits increased 6.5% or $77.0 million to
    $1.177 billion at December 31, 2017, a result of a Bank wide focus on
    increasing deposits that was initiated a few years ago. Average
    non-interest bearing deposits grew $118.7 million or 10.7% during
    second quarter 2018 over the same period in 2017.
  • Non-interest bearing deposits as a percentage of core deposits were
    47.4% and at June 30, 2018, a decrease from 47.9% at December 31,
    2017. Non-interest bearing deposits as a percentage of total deposits
    at June 30, 2018 were 43.8% compared to 41.1% at December 31, 2017.
  • Non-interest expense includes a decrease in salary related expenses of
    $618 thousand, a decrease in deferral of loan origination costs of
    $1.0 million and an increase in professional services of $305 thousand
    during the second quarter of 2018 as compared to the same period of
    2017. Net income for the second quarter of 2018 included merger
    related costs of $1.0 million primarily in professional services.
  • Non-interest expense includes an increase in salary related expenses
    of $329 thousand, a decrease in deferral of loan origination costs of
    $2.6 million and an increase in professional services of $1.6 million
    during the first six months as compared to the same period of 2017.
    Net income for the first six months of 2018 included merger related
    costs of $2.1 million primarily in professional services. Details of
    changes in non-interest income and non-interest expenses are provided
    in the financial reports attached to this document.
  • Community Bank's capital ratios continue to exceed "well capitalized"
    regulatory requirements

Dividend:

  • The Board of Directors declared a $0.50 per share cash dividend
    (aggregating $1.6 million) on its outstanding common stock for common
    shareholders of record as of August 15, 2018 and payable on or about
    September 1, 2018. This represents the fifteenth consecutive quarter
    that the Bank has declared a dividend since introducing a formal
    dividend practice. The dividend was approved at the regularly
    scheduled Board of Directors meeting held on July 25, 2018. If the
    merger transaction with CVB and Citizens closes before the dividend
    record date of August 15, 2018, the dividend will not be paid.

Non-GAAP Financial Measures:

  • The Bank believes the presentation of net income before the effect of
    the tax rate change passed in the fourth quarter of 2017, and the
    effect of the tax rate change which are both non-GAAP financial
    measures provides useful supplemental information that is essential to
    an investor's proper understanding of the results of the operations
    and financial condition of the Bank. See the Statement on Non-GAAP
    measures and related table later in this document for additional
    disclosures and reconciliations.

Market Makers

CBank is pleased to include the following as market makers in Community
Bank stock. Community Bank stock trades on OTC pink sheets under the
ticket of CYHT. Contact information for our market makers is as follows:

Raymond James & Associates
John T. Cavender, SVP
Financial Institutions
415-616-8935
John.cavender@raymondjames.com
http://www.raymondjames.com

D.A. Davidson & Co.
Michael R. Natzic, Senior Vice
President
1-800-288-2811
mnatzic@dadco.com
https://dadavidson.com

 

Keefe Bruyette & Woods, a Stifel Company
Cathy
Bellina, Equity Trader
212-887-8996
cbellina@kbw.com
www.kbw.com

Sandler O'Neill + Partners, L.P.
Tom Thurston,
Principal
1-212-466-8027
tthurston@sandleroneill.com
http://www.sandleroneill.com/

 

Wedbush Securities

Joey Warmenhoven, Managing Director Community Banking Group
1-866-662-0351
Joey.warmenhoven@wedbush.com
https://www.wedbush.com/

Community Bank, partnering to be YOUR community bank, has offices in
Anaheim, Burbank, Century City, Commerce, Corona, Glendale, Huntington
Beach, Irvine, Laguna Niguel, Ontario, Pasadena, Redlands, Santa
Clarita, Santa Fe Springs, South Bay, and Woodland Hills. For more
information, visit the Community Bank Website at www.cbank.com.

This document may contain forward-looking statements concerning
projections of revenues, income/loss, earnings/loss per share, capital
expenditures, dividends, capital structure, or other financial items,
plans and objectives of management for future operations, future
economic performance, or any of the assumptions underlying or relating
to any of the foregoing. Forward-looking statements can be identified by
the fact that they do not relate strictly to historical or current
facts, and may include the words "believes," "plans," "expects,"
"anticipates," "forecasts," "intends," "hopes," "should," "estimates,"
or words of similar meaning. While the Bank believes that our
forward-looking statements and the assumptions underlying them are
reasonably based, such statements and assumptions are by their nature
subject to risks and uncertainties, and thus could later prove to be
inaccurate or incorrect. Accordingly, actual results could materially
differ from projections for a variety of reasons, to include, but not
limited to:
failure of conditions to closing our transaction with
CVB and Citizens,including as a result of failure to obtain regulatory
approvals, the effect of, and our failure to comply with any regulatory
orders we are or may become subject to; adverse economic conditions in

California; adverse changes in the financial performance
and/or condition of our borrowers and, as a result, increased loan
delinquency rates, deterioration in asset quality, and losses in our
loan portfolio; the impact of local, national, and international
economies and events (including political events, acts of war or
terrorism, natural disasters such as wildfires
and earthquakes)
on the Bank's business; deterioration or malaise in economic conditions,
including destabilizing factors in the financial industry and
deterioration of the real estate market, as well as the impact from any
declining levels of consumer and business confidence in the state of the
economy in general and in financial institutions in particular; the
impact of regulatory action on the
Bank and legislation affecting
the financial services industry; changes in estimates of future reserve
requirements based upon the periodic review thereof under relevant
regulatory and accounting requirements; the Dodd-Frank Wall Street
Reform and Consumer Protection Act, other regulatory reform, and any
related rules and regulations on our business operations and
competitiveness; the costs and effects of legal and regulatory
developments, including legal proceedings or regulatory or other
governmental inquiries and proceedings and the resolution thereof, and
the results of regulatory examinations or reviews; changes in our
business plan; the effect of the Tax Cuts and Jobs Act; the effects of
and changes in trade, monetary and fiscal policies and laws, including
the interest rate policies of the Board of Governors of the Federal
Reserve System; inflation, interest rate,securities market and monetary
fluctuations; changes in consumer spending, borrowings and savings
habits; technological changes and developments; changes in the
competitive environment among financial holding companies and other
financial service providers, including fintech businesses; the effect of
changes in accounting policies and practices, as may be adopted by the
regulatory agencies, as well as the Public Company Accounting Oversight
Board, the Financial Accounting Standards Board and other accounting
standard setters; changes in our capital position; our ability to
attract and retain skilled executives and employees; changes in our
organization, compensation and benefit plans; and our success at
managing the risks involved in any of the foregoing items
.

 
COMMUNITY BANK - FINANCIAL HIGHLIGHTS
(Unaudited)
(Amounts in Thousands, except shares and per share data)  
       
For the Quarters Ended For the Six Months Ended
June 30, June 30,
Dollar Percent Dollar Percent
INCOME STATEMENT   2017     2018   Change Change   2017     2018   Change Change
 
Interest income $ 34,114 $ 36,043 $ 1,929 5.7 % $ 65,696 $ 72,368 $ 6,672 10.2 %
Interest expense   4,192     5,013     821   19.6 %   8,001     9,724     1,723   21.5 %
Net interest income 29,922 31,030 1,108 3.7 % 57,695 62,644 4,949 8.6 %
Provision for loan losses   1,000     2,410     1,410   141.0 %   (600 )   3,060     3,660   (610.0 %)
Net interest income after provision 28,922 28,620 (302 ) (1.0 %) 58,295 59,584 1,289 2.2 %
Non-interest income 3,141 2,066 (1,075 ) (34.2 %) 5,122 4,061 (1,061 ) (20.7 %)
Non-interest expense   18,436     19,566     1,130   6.1 %   37,166     41,216     4,050   10.9 %
Income before income tax 13,627 11,120 (2,507 ) (18.4 %) 26,251 22,429 (3,822 ) (14.6 %)
Income tax   5,273     3,307     (1,966 ) (37.3 %)   10,110     6,612     (3,498 ) (34.6 %)
Net income $ 8,354   $ 7,813   $ (541 ) (6.5 %) $ 16,141   $ 15,817   $ (324 ) (2.0 %)
 
 
As of
As of June 30, Dollar Percent December 31, June 30, Dollar Percent
BALANCE SHEET   2017     2018   Change Change   2017     2018   Change Change
Cash and cash equivalents $ 59,386 $ 65,247 $ 5,861 9.9 % $ 44,298 $ 65,247 $ 20,949 47.3 %
Investment securities 924,821 735,749 (189,072 ) (20.4 %) 837,415 735,749 (101,666 ) (12.1 %)
FHLB Stock 17,512 17,250 (262 ) (1.5 %) 17,250 17,250 - -
CRA bond investment - 9,644 9,644 100 % 9,589 9,644 55 0.6 %
Non-owner occupied real estate loans 883,811 940,989 57,178 6.5 % 919,714 940,989 21,275 2.3 %
Owner occupied real estate loans   1,145,592     1,220,106     74,514   6.5 %   1,191,757     1,220,106     28,349   2.4 %
Total real estate loans 2,029,403 2,161,095 131,692 6.5 % 2,111,471 2,161,095 49,624 2.4 %
Commercial & industrial loans 576,854 588,213 11,359 2.0 % 590,462 588,213 (2,249 ) (0.4 %)
Other loans   43,433     36,107     (7,326 ) (16.9 %)   37,926     36,107     (1,819 ) (4.8 %)
Total loans 2,649,690 2,785,415 135,725 5.1 % 2,739,859 2,785,415 45,556 1.7 %
Loan loss reserve   (34,824 )   (37,285 )   (2,461 ) 7.1 %   (35,346 )   (37,285 )   (1,939 ) 5.5 %
Net loans 2,614,866 2,748,130 133,264 5.1 % 2,704,513 2,748,130 43,617 1.6 %
Other assets   132,863     138,042     5,179   3.9 %   134,333     138,042     3,709   2.8 %
Total assets $ 3,749,448   $ 3,714,062   $ (35,386 ) (0.9 %) $ 3,737,809   $ 3,714,062   $ (23,747 ) (0.6 %)
 
Earning assets $ 3,614,466 $ 3,571,189 $ (43,277 ) (1.2 %) $ 3,616,405 $ 3,571,189 $ (45,216 ) (1.3 %)
 
Non-interest bearing deposits $ 1,135,140 $ 1,254,480 $ 119,340 10.5 % $ 1,177,453 $ 1,254,480 $ 77,027 6.5 %
Interest bearing deposits   1,611,711     1,610,493     (1,218 ) (0.1 %)   1,682,761     1,610,493     (72,268 ) (4.3 %)
Total deposits 2,746,851 2,864,973 118,122 4.3 % 2,860,214 2,864,973 4,759 0.2 %
Borrowings - short term 313,000 160,000 (153,000 ) (48.9 %) 197,500 160,000 (37,500 ) (19.0 %)
Borrowings - long term 315,000 305,000 (10,000 ) (3.2 %) 305,000 305,000 - -
Other liabilities   27,782     30,201     2,419   8.7 %   32,274     30,201     (2,073 ) (6.4 %)
Total liabilities 3,402,633 3,360,174 (42,459 ) (1.2 %) 3,394,988 3,360,174 (34,814 ) (1.0 %)
Stockholders' equity   346,815     353,888     7,073   2.0 %   352,410     353,888     1,478   0.4 %
Total liabilities & stockholders'equity $ 3,749,448   $ 3,714,062   $ (35,386 ) (0.9 %) $ 3,747,398   $ 3,714,062   $ (33,336 ) (0.9 %)
 
Shares outstanding 3,034,095 3,134,095 3,134,095 3,134,095
 
Selected Financial Data and Highlights
 
For the Quarters Ended For the Six Months Ended
June 30, June 30,
  2017     2018     2017     2018  
Return on average equity 9.74 % 8.89 % 9.63 % 9.09 %
Return on average assets 0.91 % 0.84 % 0.89 % 0.85 %
Earning Asset Yields 3.87 % 4.04 % 3.78 % 4.06 %
Cost of Funds   0.48 %   0.57 %   0.46 %   0.54 %
Net interest margin 3.39 % 3.47 % 3.32 % 3.52 %
Efficiency ratio 55.76 % 59.22 % 59.15 % 61.67 %
 
Book value per common share $ 110.66 $ 112.92
Basic earnings per common share $ 2.67 $ 2.49 $ 5.15 $ 5.05
Diluted earnings per common share $ 2.66 $ 2.48 $ 5.15 $ 5.01
Weighted average shares outstanding - basic 3,134,095 3,134,095 3,132,839 3,134,095
Weighted average shares outstanding - dilutive 3,136,435 3,153,978 3,134,689 3,154,096
Dividend declared $ 0.50 $ 0.50 $ 1.00 $ 1.00
 
June 30, Minimum Ratios for a
CAPITAL RATIOS   2017     2018   Well-Capitalized Bank
Tier 1 leverage capital 9.39 % 9.88 % 5.00 %
Tier 1 risk-based capital 10.97 % 11.32 % 8.00 %
Total risk-based capital 12.11 % 12.50 % 10.00 %
Common equity tier 1 capital 10.97 % 11.32 % 6.50 %
 
 
COMMUNITY BANK - FINANCIAL HIGHLIGHTS
(Unaudited)
(Amounts in Thousands, except per share data)
         
 
As of
BALANCE SHEET June 30, 2017 September 30, 2017 December 31, 2017 March 31, 2018 June 30, 2018
Cash and cash equivalents $ 59,386 $ 48,546 $ 44,298 $ 46,420 $ 65,247
Investments 924,821 887,257 837,415 780,183 735,749
FHLB Stock 17,512 17,250 17,250 17,250 17,250
CRA bond investments - 1,360 9,589 9,603 9,644
Non-owner occupied real estate loans 883,811 883,199 919,714 910,227 940,989
Owner occupied real estate loans   1,145,592     1,175,410     1,191,757     1,219,430     1,220,106  
Total real estate loans 2,029,403 2,058,609 2,111,471 2,129,657 2,161,095
Commercial & industrial loans 576,854 585,369 590,462 596,754 588,213
Other loans   43,433     43,303     37,926     38,212     36,107  
Total loans 2,649,690 2,687,281 2,739,859 2,764,623 2,785,415
Loan loss reserve   (34,824 )   (35,345 )   (35,346 )   (36,026 )   (37,285 )
Net loans 2,614,866 2,651,936 2,704,513 2,728,597 2,748,130
Other assets   132,863     134,363     134,333     138,320     138,042  
Total assets $ 3,749,448   $ 3,740,712   $ 3,747,398   $ 3,720,373   $ 3,714,062  
 
Earning assets $ 3,614,466   $ 3,603,279   $ 3,616,405   $ 3,584,759   $ 3,571,189  
 
 
Non-interest bearing deposits $ 1,135,140 $ 1,188,818 $ 1,177,453 $ 1,206,049 $ 1,254,480
Interest bearing deposits   1,611,711     1,682,461     1,682,761     1,617,713     1,610,493  
Total deposits 2,746,851 2,871,279 2,860,214 2,823,762 2,864,973
Borrowings - short term 313,000 166,000 197,500 212,000 160,000
Borrowings - long term 315,000 315,000 305,000 305,000 305,000
Other liabilities   27,782     31,888     32,274     29,709     30,201  
Total liabilities 3,402,633 3,384,167 3,394,988 3,370,471 3,360,174
Stockholders' equity   346,815     356,545     352,410     349,902     353,888  
Total liabilities & stockholders 'equity $ 3,749,448   $ 3,740,712   $ 3,747,398   $ 3,720,373   $ 3,714,062  
 
 
DEPOSIT COMPONENTS
Treasury deposits $ 407,647 $ 416,431 $ 400,752 $ 301,212 $ 219,611
Core Bank deposits   2,339,204     2,454,848     2,459,462     2,522,550     2,645,362  
Total Deposits $ 2,746,851   $ 2,871,279   $ 2,860,214   $ 2,823,762   $ 2,864,973  
Core deposits / total deposits 85.2 % 85.5 % 86.0 % 89.3 % 92.3 %
Non-interest bearing deposits/core deposits   48.5 % 48.4 % 47.9 % 47.8 %   47.4 %
 
As of
CAPITAL RATIOS June 30, 2017 September 30, 2017 December 31, 2017 March 31, 2018 June 30, 2018
Tier 1 leverage capital 9.39 % 9.50 % 9.43 % 9.66 % 9.88 %
Tier 1 risk-based capital 10.97 % 11.14 % 10.91 % 11.12 % 11.32 %
Total risk-based capital 12.11 % 12.29 % 12.04 % 12.26 % 12.50 %
Common equity tier 1 capital 10.97 % 11.14 % 10.91 % 11.12 % 11.32 %
 
 
 
For the Quarters Ended
INCOME STATEMENT June 30, 2017 September 30, 2017 December 31, 2017 March 31, 2018 June 30, 2018
 
Interest income $ 34,114 $ 35,256 $ 35,126 $ 36,325 $ 36,043
Interest expense   4,192     4,439     4,400     4,711     5,013  
Net interest income 29,922 30,817 30,726 31,614 31,030
Provision for loan losses   1,000     (4,000 )   104     650     2,410  
Net interest income after provision 28,922 34,817 30,622 30,964 28,620
Non-interest income 3,141 2,353 1,903 1,995 2,066
Non-interest expense   18,436     20,598     21,123     21,650     19,566  
Income before income tax 13,627 16,572 11,402 11,309 11,120
Income tax   5,273     6,431     10,960     3,305     3,307  
Net income $ 8,354   $ 10,141   $ 442   $ 8,004   $ 7,813  
 
 
For the Quarters Ended
PERFORMANCE AND PER SHARE DATA June 30, 2017 September 30, 2017 December 31, 2017 March 31, 2018 June 30, 2018
Return on average equity 9.74 % 11.40 % 0.49 % 9.29 % 8.89 %
Return on average equity before effect of tax rate change 1) 9.74 % 11.40 % 8.00 % 9.29 % 8.89 %
 
Return on average assets 0.91 % 1.08 % 0.05 % 0.87 % 0.84 %
Return on average assets before effect of tax rate change 1) 0.91 % 1.08 % 0.76 % 0.87 % 0.84 %
 
Earning Asset Yields 3.87 % 3.88 % 3.84 % 4.09 % 4.04 %
Cost of Funds   0.48 %   0.49 %   0.48 %   0.53 %   0.57 %
Net interest margin 3.39 % 3.39 % 3.36 % 3.56 % 3.47 %
Efficiency ratio 55.76 % 62.29 % 64.85 % 64.05 % 59.22 %
 
Book value per common share $ 110.66 $ 113.76 $ 112.44 $ 111.64 $ 112.92
Earnings per share - basic $ 2.67 $ 3.24 $ 0.14 $ 2.55 $ 2.49
Earnings per share - basic before effect of tax rate change 1) $ 2.67 $ 3.24 $ 2.30 $ 2.55 $ 2.49
 
Diluted earnings per common share $ 2.66 $ 3.23 $ 0.14 $ 2.54 $ 2.48
Diluted earnings per common share before effect of tax rate change
1)
$ 2.66 $ 3.23 $ 2.29 $ 2.54 $ 2.48
 
1 ) See Statement of non-GAAP measures at the end of this document
 
 
For the Quarters Ended
June 30, 2017 September 30, 2017 December 31, 2017 March 31, 2018 June 30, 2018
 
Interest income
Loans $ 28,702 $ 30,064 $ 30,048 $ 31,498 $ 31,393
Securities 5,045 4,790 4,619 4,399 4,164
FHLB dividends 314 320 307 304 298
CRA investments - - 22 55 110
Interest bearing bank balances   53     82     130     69     78  
Total interest income $ 34,114   $ 35,256   $ 35,126   $ 36,325   $ 36,043  
 
Interest expense
Money market 837 1,034 1,344 1,505 1,719
CD's 1,438 1,522 1,485 1,221 940
Other interest bearing deposits 35 36 37 41 45
Borrowings - Short term (<92 days) 641 633 342 778 1,131
Borrowings - long term   1,241     1,214     1,192     1,166     1,178  
Total interest expense $ 4,192   $ 4,439   $ 4,400   $ 4,711   $ 5,013  
 
 
 
For the Quarters Ended
June 30, 2017 September 30, 2017 December 31, 2017 March 31, 2018 June 30, 2018
 
Non-interest income
Service charges on deposits $ 1,022 $ 1,013 $ 1,025 $ 977 $ 970
International income 264 256 243 269 294
Fees and commissions 239 232 160 154 180
Bank owned life insurance 384 417 365 603 377
Gain on sale of OREO / fixed/ other assets 521 1 (50 ) (13 ) 32
Gain (loss) on sale of securities - 104 56 (191 ) 58
Gain on sale of loans 19 56 30 118 6
Swap fee income 494 - - - 60
Other non-interest income   198     274     74     78     89  
Total non-interest income $ 3,141   $ 2,353   $ 1,903   $ 1,995   $ 2,066  
 
Non-interest expense
Salary and employee benefits 14,302 15,181 15,538 15,542 13,684
Deferral of loan origination costs (1,896 ) (1,492 ) (1,229 ) (986 ) (889 )
Occupancy 1,640 1,776 1,682 1,733 1,824
Professional Services 1,000 1,126 2,274 1,905 1,305
FDIC Insurance 355 339 239 329 322
Net OREO expense 21 3 43 3 5
Data processing 908 1,059 627 931 858
Other expense   2,106     2,606     1,949     2,193     2,457  
Total non-interest expense $ 18,436   $ 20,598   $ 21,123   $ 21,650   $ 19,566  
 
 
COMMUNITY BANK - FINANCIAL HIGHLIGHTS
(Unaudited)
(Amounts in Thousands)
       
For the Six Months Ended
June 30, 2017 June 30, 2018
 
Interest income
Loans $ 54,826 $ 62,891
Securities 10,076 8,563
FHLB dividends 708 602
CRA investments - 165
Interest bearing bank balances   86     147  
Total interest income $ 65,696   $ 72,368  
 
Interest expense
Money market 1,637 3,224
CD's 2,654 2,161
Other interest bearing deposits 75 86
Borrowings - Short term (<92 days) 1,201 1,909
Borrowings - long term   2,434     2,344  
Total interest expense $ 8,001   $ 9,724  
 
 
 
For the Six Months Ended
June 30, 2017 June 30, 2018
 
Non-interest income
Service charges on deposits $ 2,043 $ 1,947
International income 470 563
Fees and commissions 535 334
Bank owned life insurance 737 980
Gain on sale of OREO / fixed/ other assets 529 19
Gain (loss) on sale of securities (15 ) (133 )
Gain on sale of loans 82 124
Swap fee income 494 60
Other non-interest income   247     167  
Total non-interest income $ 5,122   $ 4,061  
 
Non-interest expense
Salary and employee benefits 28,897 29,226
Deferral of loan origination costs (4,467 ) (1,875 )
Occupancy 3,350 3,557
Professional Services 1,575 3,210
FDIC Insurance 663 651
Net OREO expense 60 8
Data processing 1,715 1,789
Other expense   5,373     4,650  
Total non-interest expense $ 37,166   $ 41,216  
 
 
COMMUNITY BANK - FINANCIAL HIGHLIGHTS
AVERAGE BALANCE SHEET AND YIELDS
(Unaudited)
 
  Quarters Ended
(In thousands) June 30, 2017       September 30, 2017       December 31, 2017       March 31, 2018       June 30, 2018
Average     Yield/       Average     Yield/       Average     Yield/       Average     Yield/       Average     Yield/
Balance Interest Rate Balance Interest Rate Balance Interest Rate Balance Interest Rate Balance Interest Rate
INTEREST EARNING ASSETS
Loans and leases $ 2,563,327 $ 28,702 4.49 % $ 2,652,270 $ 30,064 4.50 % $ 2,702,750 $ 30,048 4.41 % $ 2,750,908 $ 31,498 4.64 % $ 2,775,502 $ 31,393 4.54 %
Investment securities 937,691 5,045 2.15 % 911,808 4,790 2.10 % 867,418 4,619 2.13 % 807,118 4,399 2.18 % 759,938 4,164 2.19 %
FHLB Stock/Dividends 18,388 314 6.85 % 17,378 320 7.31 % 17,250 307 7.06 % 17,250 304 7.15 % 17,250 298 6.93 %
CRA Bond Investments 0 0 0.00 % 489 0 0.00 % 3,870 22 2.26 % 9,599 55 2.32 % 9,608 110 4.59 %
FFSold/Fed balances/Due from Time 20,743 53 1.01 % 27,274 82 1.18 % 39,739 130 1.28 % 20,670 69 1.34 % 20,052 78 1.54 %
                             
Total Earning Assets 3,540,149 34,114 3.87 % 3,609,219 35,256 3.88 % 3,631,027 35,126 3.84 % 3,605,545 36,325 4.09 % 3,582,350 36,043 4.04 %
 
Nonearning assets 139,026 129,711 135,599 137,083 136,808
         
Total Assets $ 3,679,175 $ 3,738,930 $ 3,766,626 $ 3,742,628 $ 3,719,158
 
INTEREST BEARING LIABILITIES
Time deposits 588,910 1,438 0.98 % 570,096 1,522 1.06 % 530,375 1,485 1.11 % 437,634 1,221 1.13 % 320,160 940 1.18 %
Interest bearing demand 75,851 29 0.15 % 75,528 29 0.15 % 73,327 30 0.16 % 79,161 35 0.18 % 75,123 39 0.21 %
Money market 880,323 837 0.38 % 979,452 1,034 0.42 % 1,071,997 1,344 0.50 % 1,100,063 1,505 0.55 % 1,117,237 1,719 0.62 %
Savings and other 44,248 6 0.05 % 47,567 7 0.06 % 48,725 7 0.06 % 47,892 6 0.05 % 48,904 6 0.05 %
                             
Total Interest Bearing Deposits 1,589,332 2,310 0.58 % 1,672,643 2,592 0.61 % 1,724,424 2,866 0.66 % 1,664,750 2,767 0.67 % 1,561,424 2,704 0.69 %
 
Borrowings - short term 288,088 641 0.89 % 212,728 633 1.18 % 109,635 342 1.24 % 204,394 778 1.54 % 239,165 1,131 1.90 %
Borrowings - long term 313,494 1,241 1.59 % 315,000 1,214 1.53 % 305,109 1,192 1.55 % 305,000 1,166 1.55 % 305,000 1,178 1.55 %
                             
 
Total Interest Bearing Liabilities 2,190,914 4,192 0.77 % 2,200,371 4,439 0.80 % 2,139,168 4,400 0.82 % 2,174,144 4,711 0.88 % 2,105,589 5,013 0.95 %
 
Non-interest bearing deposits 1,113,374 1,154,496 1,236,292 1,186,605 1,232,045

 

Accrued interest payable and other liabilities

  31,019   31,037   33,387   32,469   29,044
 
Total Liabilities 3,335,307 3,385,904 3,408,847 3,393,218 3,366,678
Shareholders' equity   343,868   353,026   357,779   349,410   352,480

Total Liabilities and Shareholders' Equity

$ 3,679,175 $ 3,738,930 $ 3,766,626 $ 3,742,628 $ 3,719,158
 
Net Interest Spread 3.10 % 3.08 % 3.02 % 3.21 % 3.09 %
 
Effect of noninterest-bearing sources 0.29 % 0.31 % 0.34 % 0.35 % 0.38 %
 
 
Net Interest Income $ 29,922 $ 30,817 $ 30,726 $ 31,614 $ 31,030
 
Net Interest Margin 3.39 % 3.39 % 3.36 % 3.56 % 3.47 %
 
Total Cost of Deposits 0.34 % 0.36 % 0.38 % 0.39 % 0.39 %
 
 
COMMUNITY BANK - FINANCIAL HIGHLIGHTS
           
ALLL Trend and Statistics (Unaudited)
(Amounts in Thousands)
 
For the Quarters Ended
ALLL ROLLFORWARD June 30, 2017 September 30, 2017 December 31, 2017 March 31, 2018 June 30, 2018
Beginning Balance $ 33,449 $ 34,824 $ 35,345 $ 35,346 $ 36,026
 
Provision for / (Release of) Loan Losses 1,000 (4,000 ) 104 650 2,410
 
Charge Offs (24 ) (156 ) (215 ) (35 ) (1,178 )
Recoveries   399     4,677     112     65     27  
Net Charge Offs 375 4,521 (103 ) 30 (1,151 )
         
Ending Balance $ 34,824   $ 35,345   $ 35,346   $ 36,026   $ 37,285  
 
Period End Loan Balance $ 2,649,690 $ 2,687,281 $ 2,739,859 $ 2,764,623 $ 2,785,415
 
Average Loan Balance for the period $ 2,563,327 $ 2,652,270 $ 2,702,750 $ 2,750,908 $ 2,775,502
 
ASSET QUALITY INDICATORS                      
 
Non-Performing Loans 12,157 3,951 9,041 9,920 10,592
OREO - 825 825 825 -
         
Total Non-Performing Assets (NPA) $ 12,157   $ 4,776   $ 9,866   $ 10,745   $ 10,592  
         
Criticized Loan Totals $ 22,366   $ 26,954   $ 17,097   $ 34,774   $ 47,039  
 
Loans and Leases 30 - 89 days past due 701 1,624 4,175 3,653 1,995
Loans and Leases >89 days past due   -     -     -     -     1  
Total Delinquent Loans and Leases $ 701   $ 1,624   $ 4,175   $ 3,653   $ 1,996  
 
Delinquent Loans and Leases to Total Loans 0.03 % 0.06 % 0.15 % 0.13 % 0.07 %
Net Charge Offs to Avg Loans (Annualized) 0.06 % 0.68 % (0.02 %) 0.00 % -0.17 %
NPL as a % of Total Loans 0.46 % 0.15 % 0.33 % 0.36 % 0.38 %
NPA as a % of Total Loans + OREO 0.46 % 0.18 % 0.36 % 0.39 % 0.38 %
ALLL/Non Performing loans 286.5 % 894.6 % 391.0 % 363.2 % 352.0 %
ALLL as a % of Total Loans 1.31 % 1.32 % 1.29 % 1.30 % 1.34 %
 

COMMUNITY BANK
Statement on Non-GAAP Measures
GAAP
to Non-GAAP Reconciliation and Calculation of Non-GAAP Performance
Measures (unaudited)

(Amounts in Thousands, except shares
and per share data)

Community Bank believes the presentation of the following non-GAAP
financial measures provides useful supplemental information that is
essential to an investor's proper understanding of the results of
operations and financial condition of the Bank. Management uses non-GAAP
financial measures in its analysis of the Bank's performance. These
non-GAAP measures should not be viewed as substitutes for the financial
measures determined in accordance with GAAP, nor are they necessarily
comparable to non-GAAP performance measures that may be presented by
other companies.

    For the Quarters Ended
June 30, 2017   September 30, 2017   December 31, 2017   March 31, 2018   June 30, 2018
Selected Financial Data and Highlights
Net income 8,354 10,141 442 8,004 7,813
Effect of tax rate change   -     -     6,771     -     -  
Net income before effect of tax rate change $ 8,354   $ 10,141   $ 7,213   $ 8,004   $ 7,813  
 
Statutory income tax rate   41.1 %     41.1 %     41.1 %     29.6 %     29.6 %
 
Effective income tax rate   38.7 %     38.8 %     96.1 %     29.2 %     29.7 %
 
Return on average equity 9.74 % 11.40 % 0.49 % 9.29 % 8.89 %
Effect of tax rate change   0.00     0.00     7.51     0.00     0.00  
Return on average equity before effect of tax rate change   9.74 %   11.40 %   8.00 %   9.29 %   8.89 %
 
Return on average assets 0.91 % 1.08 % 0.05 % 0.87 % 0.84 %
Effect of tax rate change   0.00     0.00     0.71     0.00     0.00  
Return on average assets before the effect of tax rate change   0.91 %   1.08 %   0.76 %   0.87 %   0.84 %
 
 
Earnings per share - basic $ 2.67 $ 3.24 $ 0.14 $ 2.55 $ 2.49
Effect of tax rate change   0.00     0.00     2.16     0.00     0.00  
Earnings per share - basic before effect of tax rate change $ 2.67   $ 3.24   $ 2.30   $ 2.55   $ 2.49  
 
Earnings per share - diluted $ 2.66 $ 3.23 $ 0.14 $ 2.54 $ 2.48
Effect of tax rate change   0.00     0.00     2.15     0.00     0.00  
Earnings per share - diluted before effect of tax rate change $ 2.66   $ 3.23   $ 2.29   $ 2.54   $ 2.48  
 
Weighted average shares outstanding - basic 3,134,095 3,134,095 3,134,095 3,134,095 3,134,095
Weighted average shares outstanding - dilutive 3,136,435 3,138,277 3,143,534 3,154,255 3,153,978

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