PASADENA, Calif., April 27, 2018 – 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. and Citizens Business Bank (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 shareholder and regulatory approvals.
- Financial Highlights: Net income was $8.0 million for the first quarter of 2018 compared to $7.8 million in the same period of 2017, an increase of $217 thousand or 2.8%, over the prior year. Net income for the first quarter of 2018 included non-deductible merger related costs of $1.1 million.
- Net interest income was $31.6 million for the first quarter of 2018 compared to $27.8 during the first quarter of 2017. The increase in net interest income of $3.8 million for the first quarter 2018 over the same period in 2017 was primarily the result of: 1) $240 million of average loan growth; 2) higher yields on loans driven by Fed rate increases; and, 3) collections of past due loan interest. These improvements were partially offset by increased funding costs. Net interest margin increased to 3.56% from 3.24% in the same period due to the above plus growth in non-interest bearing deposits.
- Total loan balances at March 31, 2018 were a record $2.765 billion, representing a $248.1 million or 9.9% increase from the $2.517 billion at March 31, 2017 and representing a $24.8 million or 0.9% increase from the $2.740 billion at December 31, 2017. The Bank believes this growth reflects continued strong focus on origination of high quality loans in the greater Los Angeles area, primarily real estate and SBA loans.
- Non-performing assets at March 31, 2018 were $10.7 million compared to $15.0 million at March 31, 2017 and $9.8 million at December 31, 2017 reflecting continued strong asset quality.
- The allowance for loan losses decreased to 1.30% at March 31, 2018 compared to 1.33% at March 31, 2017, reflecting overall improvement in nonperforming assets . The coverage ratio related to non-performing loans at March 31, 2018 was 363% compared to 223% at the end of March 2017. During the first quarter of 2018, a $650,000 provision for loan loss was recorded while in the first quarter of 2017 a release of $1.6 million in provision for loan losses was recorded.
Deposits grew to a total of $2.824 billion as of March 31, 2018, an increase of $177.9 million or 6.7% from the total deposits of $2.646 billion as of March 31, 2017. Deposits declined from December 31, 2017 by $36.5 million primarily because certain higher rate public fund CDs and money desk CDs were not renewed.
- Non-interest bearing deposits increased 14.2%, or $150.1 million to $1.206 billion at March 31, 2018 compared to $1.056 billion as of March 31, 2017 and increased 2.4% or $28.6 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 $163.4 million or 16.0% during first quarter 2018 over the same period in 2017.
- Non-interest bearing deposits as a percentage of core deposits were 47.8% and at March 31, 2018, up from 47.0% at March 31, 2017. Non-interest bearing deposits as a percentage of total deposits were 42.7% compared to 39.9% at the March 31, 2017.
- Non-interest expense includes an increase in salary related expenses of $947 thousand, a decrease in deferral of loan origination costs of $270 million and an increase in professional services of $1.3 million during the first quarter of 2018 as compared to the same period of 2017. 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
- 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 May 15, 2018 and payable on or about June 1, 2018. This represents the fourteenth 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 April 26, 2018.
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.
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
D.A. Davidson & Co.
Keefe Bruyette & Woods, a Stifel Company
Sandler O’Neill + Partners, L.P.
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.