Community Bank of the Bay (OTCBB:CBYAA) has announced fourth-quarter earnings for 2007 of $135,097, more than double the earnings of $62,476 recorded for the same period in 2006. Additionally, the bank reported year-end earnings of $516,924 for 2007, compared to $428,133 for 2006.
Brian Garrett, President and CEO of Community Bank of the Bay, described these earnings as “good. We need to do better, but there will be very difficult times ahead with the uncertain nature of the economy. While we were never involved in subprime lending, the aftermath has affected how we are doing and will do business for the next few years.”
Garrett said, “The best example of this is the fact that for the past several years we have been able to maintain a very acceptable Net Interest Margin (NIM) (the difference between the amount of interest the bank earns on loans and the total it must pay on deposits.) The sudden and precipitous fall in rates has put pressure on bank margins. We saw our NIM drop 75 basis points in the last three months of 2007. This will put earnings pressure on all banks, not just us. For the year, our NIM averaged 5.27%, but for the last 3 months of 2007 it dropped to 4.49%.”
Wil Hobbs, Senior Vice President and Chief Loan Officer, described the current loan portfolio as “good but evidencing the stress of a tough economic environment. We have seen some unexpected loan problems surface and we have added an additional $100,000 to our Loan Loss Provision to build up reserves in anticipation of possible problems in 2008. Our reserves continue to be above industry norms. We are reviewing our portfolio on a regular basis to identify problems before they become surprises.”
Chaula Pandya, Senior Vice President and Chief Financial Officer, noted, “Our total deposits in 2007 dropped to $50.872 million, compared to $55.362 million the year before, because of our emphasis on increasing our NIM. We chose not to renew some higher-cost deposits and let these go. We re-focused our efforts on raising our core balances through our Oakland 1st Fund and the Bay Area Green Fund. This will be our goal in 2008 to counter the compression of rates we expect for 2008 and into 2009.”
Garrett said, “We are pleased with our loan growth during 2007, a 21 percent increase over 2006. But pressures exist on the portfolio and we must be mindful that the economy is going through a significant downturn. This type of growth may not be possible in 2008. When we do add loans, the underwriting and analysis must take into consideration both the increased scrutiny by regulators and the continued potential for economic ‘time-bombs.