$CBOF CBOA Financial, Inc. Reports Consolidated Earnings of $1,522,000 in 4Q 2020
Press Release | 02/11/2021
CBOA Financial, Inc. Reports Consolidated Earnings of $1,522,000 in 4Q 2020
PR Newswire
TUCSON, Ariz., Feb. 11, 2021
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.
Commerce Bank of Arizona (PRNewsfoto/Commerce Bank of Arizona)
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
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