CB Financial Services, Inc. Announces First Quarter 2021 Financial Results and Declares Quarterly Cash Dividend

CB Financial Services, Inc. (“CB” or the “Company”) (NASDAQGM: CBFV), the holding company of Community Bank (the “Bank”) and Exchange Underwriters, Inc. (“EU”), a wholly-owned insurance subsidiary of the Bank, today announced its first quarter 2021 financial results.

	Three Months Ended
	3/31/21			12/31/20			9/30/20			6/30/20			3/31/20
(Dollars in thousands, except per share data) (Unaudited)
Net Income (Loss) (GAAP)	$	2,845		$	3,079		$	(17,395)		$	2,903		$	773
Excluding Non-Recurring Items (Non-GAAP) (1)	—			198			19,239			—			—
Adjusted Net Income (Non-GAAP) (1)	$	2,845		$	3,277		$	1,844		$	2,903		$	773
Earnings (Loss) per Common Share - Diluted (GAAP)	$	0.52		$	0.57		$	(3.22)		$	0.54		$	0.14
Adjusted Earnings per Common Share - Diluted (Non-GAAP) (1)	$	0.52		$	0.61		$	0.34		$	0.54		$	0.14

(1) Refer to Explanation of Use of Non-GAAP Financial Measures and reconciliation of net income (loss) and adjusted earnings per common share - diluted in this Press Release.

2021 First Quarter Financial Highlights

(Comparisons to three months ended March 31, 2020)

• Net income an increase to $2.8 million compared to $773,000.
• Earnings per diluted share (EPS) increased to $0.52 from $0.14.
• Return on average assets of 0.81%, compared to 0.24%.
• Return on average equity of 8.54%, compared to 2.04%.
• Net interest margin decreased to 3.04% from 3.55%.
• Net interest and dividend income was $10.0 million, compared to $10.5 million.
• Noninterest income increased to $3.2 million from $1.9 million.

(Amounts at March 31, 2021; comparisons to December 31, 2020)

• Total loans including Payroll Protection Program (“PPP) loans were $1.04 billion, a decrease of $3.1 million.
• Total loans (excluding PPP loans) were $981.3 million, a decrease of $8.3 million.
• Total deposits were $1.28 billion, an increase of $59.9 million.
• Total assets increased to a record $1.48 billion, compared to $1.42 billion.
• Book value per share was $24.62, compared to $24.76.
• Tangible book value per share (Non-GAAP) was $21.38, compared to $21.42.

   

Branch Optimization and Operational Efficiency Update

In connection with the previously announced branch consolidations and the other branch optimization initiatives, CB anticipates non-recurring pre-tax costs during 2021 in line with the $6.1 million announced in February. This estimated cost excludes the impact of any premium from sale of branches, and assumes no salvage value, lease termination, severance, and other costs associated with the consolidations or sales; however, the Company anticipates some recovery of these costs over time. CB expects an annual reduction in pre-tax operating expenses in 2021 of approximately $1.5 million, along with $3.0 million of ongoing pre-tax cost savings as a result of the implementation of the branch optimization initiatives. The Bank also completed a comprehensive review of its branch network and operating environment to identify solutions to improve operating performance. This review prioritized profitability, efficiency, infrastructure and client experience improvements, automation in operations, and digital marketing and technology investments.

Dividend Information

The Company’s Board of Directors has declared a $0.24 quarterly cash dividend per outstanding share of common stock, payable on or about June 1, 2021, to stockholders of record as of the close of business on May 21, 2021.

Management Commentary

President and CEO John H. Montgomery stated, “CB reported strong net income of $2.8 million for the first quarter of 2021, largely due to higher noninterest income and improvements in asset quality that included no provisions for loan losses during the period. We are continuing to focus on improving the franchise value in our core market area surrounding Southwestern Pennsylvania as CB remains well positioned for an economic recovery in the region. We improved our commercial real estate loan growth throughout the past several periods, while also growing deposits. Over the course of the year, we intend to invest in our current branch network while moving forward with a branch optimization strategy that will lead to continuing efficiency ratio improvements. The investments made in enhancing our fintech capabilities, including digital and mobile capabilities, will improve CB’s ability to adapt to changing customer needs as we emerge from the pandemic conditions of 2020.”

2021 First Quarter Financial Review

Net Interest and Dividend Income

Net interest and dividend income decreased $556,000, or 5.3%, to $10.0 million for the three months ended March 31, 2021 compared to $10.5 million for the three months ended March 31, 2020.

• Net interest margin (FTE) (Non-GAAP) decreased 52 basis points (“bps”) to 3.05% for the three months ended March 31, 2021 compared to 3.57% for the three months ended March 31, 2020. Net interest margin (GAAP) decreased to 3.04% for the three months ended March 31, 2021 compared to 3.55% for the three months ended March 31, 2020.
• Interest and dividend income decreased $1.3 million, or 10.9%, to $11.0 million for the three months ended March 31, 2021 compared to $12.3 million for the three months ended March 31, 2020.
  • Interest income on loans decreased $618,000, or 5.7%, to $10.1 million for the three months ended March 31, 2021 compared to $10.8 million for the three months ended March 31, 2020. While average loans increased $81.2 million compared to the three months ended March 31, 2020, the average yield decreased 57 bps to 4.00%. PPP loans decreased loan yield approximately 5 bps but that was offset by the recognition of $535,000 of net PPP loan origination fees in the current period. The impact of the accretion of the credit mark on acquired loan portfolios was $138,000 for the three months ended March 31, 2021 compared to $76,000 for the three months ended March 31, 2020, or 6 bps in the current period compared to 3 bps in the prior period.
  • Interest income on taxable investment securities decreased $555,000, or 46.2%, to $646,000 for the three months ended March 31, 2021 compared to $1.2 million for the three months ended March 31, 2020 driven by a $35.8 million decrease in average investment securities balances and 93 bps decrease in average yield. The Federal Reserve’s pandemic-driven decision to drop the benchmark interest rate in 2020 resulted in significant calls of U.S. government agency securities and paydowns on mortgage-backed securities in the declining interest rate environment, which were replaced with lower-yielding securities or maintained in cash.
  • Other interest and dividend income, which primarily consists of interest-bearing cash, decreased $140,000, or 58.8% to $98,000 for the three months ended March 31, 2021 compared to $238,000 for the three months ended March 31, 2020. Average other interest-earning assets increased $97.3 million compared to the three months ended March 31, 2020 primarily from buildup of cash as a result of securities activity, PPP loan funds and government stimulus payments deposited with the Bank, although average yield declined 123 bps due to interest rate cuts on interest-earning cash deposits held at other financial institutions.
• Interest expense decreased $785,000, or 43.7%, to $1.0 million for the thre