Commonwealth Business Bank Reports 1Q Earnings of $2.8 Million, or $0.34 Per Diluted Share

LOS ANGELES--(BUSINESS WIRE)--

Commonwealth Business Bank ("CBB") CWBB today announced net income of $2.8 million for the first quarter of 2015, compared with $2.4 million for the fourth quarter of 2014 and $3.4 million for the first quarter of 2014. Diluted earnings per share were $0.34 for the first quarter of 2015, compared with $0.29 for the fourth quarter of 2014 and $0.42 for the first quarter of 2014.

"As we expand our franchise across the Southern California marketplace, we are continuing to experience robust growth in our loan portfolio and deposit accounts," said Joanne Kim, President and CEO. "In the third quarter of 2014, we opened a new branch office in the South Bay, which is already showing positive results. In April 2015, we further expanded our branch network with the opening of a new branch in Fullerton, Orange County."

CBB was recently ranked 14^th on SNL Financial's 2014 list of the Top 100 Community Banks with assets between $500 million and $5 billion. "We appreciate this recognition and will continue to strive for sustainable earnings and growth over the long term," Kim noted.

On January 29, 2015, CBB's Board of Directors declared a two-for-one stock split and issued the new shares on March 20, 2015, to shareholders of record as of March 12, 2015. Accordingly, all shares and per share data set forth herein have been retroactively adjusted to reflect the stock split.

STATEMENT OF OPERATIONS

Net income for the first quarter of 2015 was $2.8 million, compared with $2.4 million for the fourth quarter of 2014 and $3.4 million for the first quarter of 2014. The quarter-over-quarter increase from the fourth quarter of 2014 was due primarily to the $800,000 provision for loan losses and unfunded commitments recorded in the fourth quarter of 2014, and a $159,000 increase in net interest income for the current quarter, partially offset by a $248,000 decrease in noninterest income.

The year-over-year decrease of $661,000 in net income was due primarily to no provision for loan losses for the first quarter of 2015, compared to a $1.2 million reversal in loan loss reserves in the first quarter of 2014, coupled with a $710,000 decrease in noninterest income and a $459,000 increase in noninterest expense, which was partially offset by a $1.2 million increase in net interest income.

Net Interest Income and Net Interest Margin

Net interest income, before provision for loan losses and loan commitments, was $6.5 million for the first quarter of 2015, an increase of $159,000, or 2.5%, from $6.3 million for the fourth quarter of 2014 and an increase of $1.2 million, or 23.6%, from $5.2 million for the first quarter of 2014. The year-over-year increase in net interest income was primarily attributable to an increase of $102.6 million in average loan balances.

The net interest margin improved during the first quarter of 2015 to 4.04%, compared to 3.98% for the fourth quarter of 2014 and 3.85% for the first quarter of 2014. This improvement from the fourth quarter of 2014 was due primarily to an 8 basis points increase in the yield on earning assets. Total average earning asset yields increased to 4.73% for the first quarter of 2015 from 4.65% for the fourth quarter of 2014 and 4.60% for the first quarter of 2014 as a result of an increase in loan yield. The cost of funds was 0.77% for the first quarter of 2015, compared with 0.75% for the fourth quarter of 2014 and 0.85% from the first quarter of 2014. The increase in cost of funds from the fourth quarter of 2014 was attributable to a new $10.0 million Federal Home Loan Bank advance, used to provide matched funding in certain fixed rate loans.

Noninterest Income

For the first quarter of 2015, noninterest income totaled $2.6 million, compared with $2.9 million and $3.3 million for the fourth quarter of 2014 and the first quarter of 2014, respectively. The year-over-year decrease in noninterest income was due primarily to a $767,000, or 26.8%, decrease in the gains on the sale of SBA loans.

During the first quarter of 2015, CBB sold $25.7 million of Small Business Administration ("SBA") loans, compared with $26.9 million for the fourth quarter of 2014 and $31.7 million for the first quarter of 2014. SBA loan sales are dependent upon the volume of loans originated as well as the liquidity needs and market conditions, and, therefore, will vary from quarter to quarter. As of March 31, 2015, total loans held for sale were $16.5 million, compared with $21.3 million at December 31, 2014, and $11.3 million at March 31, 2014.

Noninterest Expense

Noninterest expense for the first quarter of 2015 increased to $4.4 million, up 1.8% from $4.3 million for the fourth quarter of 2014, and up 11.8% from $3.9 million in the first quarter of 2014. The increase was due primarily to an increase in salaries and employee benefits resulting from the planned addition of staffing to support business expansion and to strengthen CBB's infrastructure. For the first quarter of 2015, salaries and employee benefits increased to $2.9 million, up $269,000 from $2.6 million for the fourth quarter and the first quarter of 2014.

Income Taxes

The effective income tax rate for the three months ended March 31, 2015, was 41.86%, compared with 42.61% and 41.60% for the three months ended December 31, 2014 and March 31, 2014, respectively.

Pre-Tax, Pre-Provision Income

For the first quarter of 2015, CBB's pre-tax, pre-provision ("PTPP") income was $4.8 million, down 3.3% from $4.9 million, but up 1.4% from $4.7 million for the first quarter of 2014. Annualized PTPP income was 2.90% of average assets for the first quarter of 2015, compared with 3.03% of average assets for the fourth quarter of 2014 and 3.38% of average asset for the same period in 2014. The increase in the PTPP income was attributable to the reasons explained above.

BALANCE SHEETS

At March 31, 2015, CBB had total assets of $703.9 million, an increase of $50.4 million, or 7.7%, from $653.5 million at December 31, 2014 and an increase of $131.8 million, or 23.0%, from $572.1 million at March 31, 2014. Earning assets totaled $685.2 million at March 31, 2015, an increase of $125.2 million, or 22.4%, from $560.0 million at March 31, 2014. The year-over-year increase in earning assets was primarily the result of a $134.6 million increase in total loans.

Loans and the Allowance for Loan Losses

At March 31, 2015, total loans were $607.2 million, which was a $ 37.1 million, or 6.5%, increase from $570.1 million at December 31, 2014 and a $134.6 million, or 28.5%, increase from $472.6 million at March 31, 2014. During the first quarter of 2015, total new loans production (including revolving lines of credit) was approximately $74.1 million, compared to $93.0 million for the fourth quarter of 2014 and $66.8 million for the first quarter of 2014.

The allowance for loan losses at March 31, 2015 was $9.0 million, or 1.52%, of total gross loans, compared to $9.0 million, or 1.64%, at December 31, 2014, and $8.7 million, or 1.89%, at March 31, 2014. There was no provision for loan losses recorded for the first quarter of 2015, compared to a $540,000 provision for the fourth quarter of 2014 and a $1.2 million reversal in loan loss reserves for the first quarter of 2014. CBB also recorded no provision for unfunded loan commitments for the first quarter of 2015, compared to $260,000 for the fourth quarter of 2014 and no provision for the first quarter of 2014.

The following table lists gross loans by type at the dates indicated:

Loan Type				March 31,						December 31,						September 30,						June 30,						March 31,
				2015						2014						2014						2014						2014
				(Dollars in thousands)
Construction				$	5,616					$	4,088					$	3,133					$	2,459					$	2,985
Commercial real estate					444,878						418,071						391,565						374,572						344,529
Commercial and industrial					136,231						122,861						121,489						105,462						108,625
Consumer					2,879						2,667						3,224						2,638						4,572
Gross loans					589,604						547,687						519,411						485,131						460,711
Deferred loan costs/fees					1,046						1,100						931						718						593
Gross loans, net				$	590,650					$	548,787					$	520,342					$	485,849					$	461,304
Loans held-for-sale				$	16,543					$	21,267					$	15,057					$	15,779					$	11,272
Gross loans including loans held-for-sale				$	607,193					$	570,054					$	535,399					$	501,628					$	472,576
Loan-to-deposit (LTD) ratio:					97.0	%					95.8	%					94.5	%					87.4	%					92.0	%
LTD ratio: including loans held-for-sale					99.7	%					99.5	%					97.3	%					90.2	%					94.3	%

Deposits

Total deposits were $608.9 million at March 31, 2015, an increase of $36.1 million, or 6.3%, from total deposits of $572.8 million at December 31, 2014, and an increase of $107.6 million, or 21.5%, from $501.3 million at March 31, 2014. The deposits from the new South Bay Branch and organic growth from other branches contributed to the increase in noninterest-bearing and time deposits. Noninterest-bearing deposits grew $9.1 million, or 7.2%, to $135.0 million from December 31, 2014, and $52.4 million, or 63.4%, from March 31, 2014. At March 31, 2015, noninterest-bearing deposits represented 22.2% of total deposits, compared to 22.0% at December 31, 2014 and 16.5% at March 31, 2014.

The average cost of deposits was 0.76% during the first quarter of 2015, compared with 0.75% for the fourth quarter of 2014 and 0.85% for the first quarter of 2014. The increase in noninterest-bearing deposits was the primary contribution for the year-over-year reduction in the cost of funds.

The following table sets forth the amount of deposits by category at the dates indicated:

Deposit Type				March 31,					December 31,					September 30,					June 30,					March 31,
				2015					2014					2014					2014					2014
				(Dollars in thousands)
Noninterest-bearing demand				$	134,999				$	125,893				$	123,805				$	125,788				$	82,638
Money market & NOW					143,313					152,503					151,635					155,318					144,587
Savings					7,345					8,805					9,953					9,650					8,589
Time deposits					323,236					285,611					265,097					265,303					265,526
Total Deposits				$	608,893				$	572,812				$	550,490				$	556,059				$	501,340

ASSET QUALITY

At March 31, 2015, 30 to 89 days loan delinquencies were $18,000, compared with $83,000 at December 31, 2014, and $446,000 at March 31, 2014. Nonaccrual loans were $2.2 million, or 0.37% of total loans, at March 31, 2015, compared with $2.2 million and $2.4 million at December 31, 2014 and March 31, 2014, respectively.

Nonperforming assets (nonaccrual loans, accruing troubled debt restructuring loans and OREO), net of the SBA guaranteed balance, decreased to $8.0 million, or 1.13% of total assets, at March 31, 2015, compared with $8.2 million, or 1.25% of total assets, at December 31, 2014, as certain accruing troubled debt restructuring loans were paid off. Classified loans (loans graded "substandard" or worse) also decreased to $6.9 million at March 31, 2015, from $7.1 million at December 31, 2014 and $10.4 million at March 31, 2014. The $3.5 million year-over-year reduction in classified loans was due primarily to pay-offs and upgrades of classified commercial real estate loans. Classified loans to Tier 1 capital and the allowance for loan losses was 7.70% at March 31, 2015, compared to 8.38% at December 31, 2014 and 13.67% at March 31, 2014.

CAPITAL

As of March 31, 2015, CBB continued to exceed all regulatory capital requirements to be classified as a "well capitalized" institution under the newly implemented banking regulations, as summarized in the following table:

				Minimum to be Categorized				March 31,				December 31,				September 30,				June 30,				March 31,
				as Well Capitalized				2015				2014				2014				2014				2014
Leverage ratio				5.00%				12.08%				11.75%				11.82%				11.57%				11.93%
Tier 1 risk-based ratio				6.00%				13.22%				13.19%				13.57%				13.83%				14.19%
Total risk-based ratio				10.00%				14.47%				14.45%				14.83%				15.09%				15.45%

ABOUT COMMONWEALTH BUSINESS BANK ("CBB BANK")

Commonwealth Business Bank is a full-service commercial bank also doing business as "CBB Bank," and specializes in small- to medium-sized businesses. CBB has five full service branches in Los Angeles and Orange Counties and four loan production offices in Texas, Georgia and Colorado.

For additional information, please visit CBB's website at www.cbb-bank.com.

NON-GAAP FINANCIAL MEASURES

CBB may use certain non-GAAP financial measures to provide meaningful supplemental information regarding CBB's operational performance and to enhance investors' overall understanding of such financial performance. These non-GAAP measures have important limitations as analytical tools and should not be considered in isolation or as substitutes for an analysis of our results as reported under GAAP.

FORWARD-LOOKING STATEMENTS

This release may contain forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties may include, but are not necessarily limited to, fluctuations in interest rates, inflation, government regulations and general economic conditions, and competition within the business areas in which Commonwealth Business Bank is conducting its operations, including the real estate market in California, and other factors beyond Commonwealth Business Bank's control. Such risks and uncertainties could cause results for subsequent interim periods or for the entire year to differ materially from those indicated. Readers should not place undue reliance on the forward-looking statements, which reflect management's view only as of the date hereof. Commonwealth Business Bank undertakes no obligation to revise these forward-looking statements publicly to reflect subsequent events or circumstances.

BALANCE SHEET (Unaudited)
(Dollars in thousands)
				March 31,						December 31,						%					March 31,						%
				2015						2014						Change					2014						Change
ASSETS
Cash and due from banks				$	7,291					$	5,874					24.1	%				$	6,655					9.6	%
Interest-earning due from FRB and other banks					68,078						56,901					19.6	%					76,234					-10.7	%
Investment securities					5,756						7,058					-18.4	%					7,387					-22.1	%
Loans held-for-sale, at the lower of cost or fair value					16,543						21,267					-22.2	%					11,272					46.8	%
Loans					590,650						548,787					7.6	%					461,304					28.0	%
Less: Allowance for loan losses					(8,995	)					(8,977	)				0.2	%					(8,737	)				3.0	%
Loans receivable, net of ALLL					581,655						539,810					7.8	%					452,567					28.5	%
FHLB & FRB stock					4,189						3,981					5.2	%					3,649					14.8	%
Other assets					20,379						18,559					9.8	%					14,348					42.0	%
TOTAL ASSETS				$	703,891					$	653,450					7.7	%				$	572,112					23.0	%
LIABILITIES AND STOCKHOLDERS' EQUITY
Noninterest-bearing				$	134,999					$	125,893					7.2	%				$	82,638					63.4	%
Interest-bearing					473,894						446,919					6.0	%					418,702					13.2	%
Total deposits					608,893						572,812					6.3	%					501,340					21.5	%
FHLB advances					10,000						-					100.0	%					-					100.0	%
Other liabilities					4,304						4,772					-9.8	%					3,498					23.0	%
Total liabilities					623,197						577,584					7.9	%					504,838					23.4	%
Stockholders' Equity					80,694						75,866					6.4	%					67,274					19.9	%
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY				$	703,891					$	653,450					7.7	%				$	572,112					23.0	%

STATEMENT OF INCOME (Unaudited)
(Dollars in thousands, except per share information)
				Three Months Ended
				March 31,					December 31,					%					March 31,						%
				2015					2014					Change					2014						Change
Interest income				$	7,595				$	7,388				2.8	%				$	6,279					21.0	%
Interest expense					1,113					1,065				4.5	%					1,034					7.6	%
Net interest income					6,482					6,323				2.5	%					5,245					23.6	%
Provision for loan losses and loan commitments					-					800				-						(1,178	)				-
Net interest income after provision for ALLL					6,482					5,523				17.4	%					6,423					0.9	%
Gain on sale of loans					2,096					2,281				-8.1	%					2,863					-26.8	%
Service charges and other income					542					605				-10.4	%					485					11.8	%
Noninterest income					2,638					2,886				-8.6	%					3,348					-21.2	%
Salaries and employee benefits					2,912					2,643				10.2	%					2,640					10.3	%
Occupancy and equipment					453					513				-11.7	%					362					25.1	%
Other expenses					987					1,120				-11.9	%					891					10.8	%
Noninterest expense					4,352					4,276				1.8	%					3,893					11.8	%
Income before Income Taxes					4,768					4,133				15.4	%					5,878					-18.9	%
Income tax provision					1,996					1,761				13.3	%					2,445					-18.4	%
Net income				$	2,772				$	2,372				16.9	%				$	3,433					-19.3	%
Weighted average shares for basic EPS					7,852,799					7,758,086				1.2	%					7,699,128					2.0	%
Weighted average shares for diluted EPS					8,263,307					8,258,676				0.1	%					8,200,696					0.8	%
Basic EPS				$	0.35				$	0.31				15.5	%				$	0.45					-20.8	%
Diluted EPS				$	0.34				$	0.29				16.8	%				$	0.42					-19.9	%

Note: All earnings per share data, including weighted average common shares outstanding has been retroactively adjusted to reflect the 2:1 stock split in March 2015.

SELECTED FINANCIAL HIGHLIGHTS (Unaudited)
(Dollars in thousands, except per share information)
					Three Months Ended
					March 31,						December 31,						%					March 31,						%
					2015						2014						Change					2014						Change
Performance Ratios:
	Return on average assets					1.69	%					1.46	%				15.5	%					2.47	%				-31.7	%
	Return on average equity					14.40	%					12.56	%				14.6	%					21.47	%				-32.9	%
	Net interest margin					4.04	%					3.98	%				1.6	%					3.85	%				5.0	%
	Cost of funds					0.77	%					0.75	%				3.5	%					0.85	%				-9.0	%
	Efficiency ratio					47.72	%					46.44	%				2.8	%					45.31	%				5.3	%
Capital Ratios:
	Core capital (leverage) ratio					12.08	%					11.75	%				2.8	%					11.93	%				1.3	%
	Tier 1 risk-based capital ratio					13.22	%					13.19	%				0.2	%					14.19	%				-6.8	%
	Total risk-based capital ratio					14.47	%					14.45	%				0.1	%					15.45	%				-6.3	%
	Tangible common equity / total assets					11.46	%					11.61	%				-1.3	%					11.76	%				-2.5	%
	Tangible common equity per share				$	10.03					$	9.77					2.7	%				$	8.74					14.7	%
Selected Average Balances:
	Loans, net of deferred fees/costs (1)				$	577,255					$	558,405					3.4	%				$	474,663					21.6	%
	Total investment securities					6,274						7,122					-11.9	%					7,497					-16.3	%
	Interest-earning assets					650,574						630,793					3.1	%					553,095					17.6	%
	Total assets					666,432						645,492					3.2	%					563,684					18.2	%
	Noninterest-bearing deposits					115,019						126,204					-8.9	%					77,175					49.0	%
	Total deposits					575,131						565,690					1.7	%					495,045					16.2	%
	Interest-bearing liabilities					468,715						439,486					6.7	%					417,872					12.2	%
	Stockholders' equity					78,091						74,899					4.3	%					64,840					20.4	%

(1)			Includes loans held-for-sale.

SELECTED LOAN AND ASSET QUALITY HIGHLIGHTS (Unaudited)
(Dollars in thousands)
					1st Qtr						4th Qtr						3rd Qtr						2nd Qtr						1st Qtr
					2015						2014						2014						2014						2014
Allowance for Loan Losses:
	Balance at beginning of period				$	8,977					$	8,860					$	8,837					$	8,737					$	8,925
	Provision for loan losses					-						540						-						-						(1,178	)
	Charge-offs					7						455						-						-						123
	Recoveries					25						32						23						100						1,113
	Balance at the end of period				$	8,995					$	8,977					$	8,860					$	8,837					$	8,737
Nonperforming Assets:
	Over 90 days still accruing				$	-					$	-					$	-					$	-					$	-
	Nonaccrual loans (1)					2,162						2,175						1,919						1,981						2,379
	Performing TDR loans					5,815						6,023						6,135						6,217						7,915
	Total nonperforming loans					7,977						8,198						8,054						8,198						10,294
	Other real estate owned					-						-						-						-						-
	Total nonperforming assets				$	7,977					$	8,198					$	8,054					$	8,198					$	10,294
Classified Loans (1):
	Substandard				$	6,910					$	7,110					$	8,113					$	8,274					$	10,388
	Doubtful					-						-						-						-						-
	Loss					-						-						-						-						-
	Total classified assets				$	6,910					$	7,110					$	8,113					$	8,274					$	10,388
Delinquent Loans:
	Loans 30-89 days past due				$	18					$	83					$	727					$	19					$	446
	90 days or more past due and still accruing					-						-						-						-						-
	Nonaccrual					2,162						2,175						1,919						1,981						2,379
	Total delinquent loans				$	2,180					$	2,258					$	2,646					$	2,000					$	2,825
Asset Quality Ratios:
	Net charge-offs to average gross loans (2)					-0.01	%					0.30	%					-0.02	%					-0.08	%					-0.83	%
	Nonaccrual loans to gross loans					0.37	%					0.40	%					0.37	%					0.41	%					0.52	%
	Total NPA to total assets					1.13	%					1.25	%					1.28	%					1.30	%					1.80	%
	Classified assets to total assets					0.98	%					1.09	%					1.29	%					1.31	%					1.82	%
	Classified assets to Tier 1 and ALLL					7.70	%					8.38	%					9.88	%					10.50	%					13.67	%
	Nonperforming loans to gross loans (exc. LHFS)					1.35	%					1.49	%					1.55	%					1.69	%					2.23	%
	ALLL to gross loans (exc. LHFS)					1.52	%					1.64	%					1.70	%					1.82	%					1.89	%
	ALLL to nonaccrual loans					416.05	%					412.74	%					461.70	%					446.09	%					367.26	%
	ALLL to nonperforming loans					112.76	%					109.50	%					110.01	%					107.80	%					84.87	%
	Texas ratio (3)					8.89	%					9.66	%					9.81	%					10.40	%					13.54	%

(1)			Net of SBA guaranteed balance.
(2)			Includes loans held-for-sale.
(3)			Nonperforming assets divided by tangible common equity and ALLL.

MARGIN ANALYSIS (Unaudited)
(Dollars in thousands)
				Three Months Ended
				March 31, 2015													December 31, 2014													March 31, 2014
				Avg Balance					Interest				Yield				Avg Balance					Interest				Yield				Avg Balance					Interest				Yield
INTEREST-EARNING ASSETS
Loans (1)				$	577,255				$	7,444			5.23	%			$	558,405				$	7,229			5.14	%			$	474,663				$	6,125			5.23	%
Investment securities					6,274					29			1.87	%				7,122					40			2.23	%				7,497					41			2.22	%
Interest-earning due from FRB and other banks					62,872					51			0.33	%				61,095					51			0.33	%				67,096					49			0.30	%
Other earning assets					4,173					71			6.90	%				4,171					68			6.49	%				3,839					64			6.76	%
Total interest-earning assets					650,574					7,595			4.73	%				630,793					7,388			4.65	%				553,095					6,279			4.60	%
NONINTEREST-EARNING ASSETS
Cash and due from banks					6,479													6,680													6,176
Other noninterest-earning assets					18,367													16,889													13,711
Total noninterest-earning assets					24,846													23,569													19,887
Less: Allowance for loan losses					(8,988	)												(8,870	)												(9,298	)
TOTAL ASSETS				$	666,432												$	645,492												$	563,684
INTEREST-BEARING DEPOSITS
Interest-bearing demand				$	667					-			0.15	%			$	621				$	-			0.15	%			$	259				$	-			0.19	%
Money market					142,901					323			0.92	%				153,864					361			0.93	%				149,875					367			0.99	%
Savings					7,760					39			2.04	%				9,224					50			2.15	%				7,998					49			2.48	%
Time deposits					308,784					716			0.94	%				275,777					654			0.94	%				259,738					618			0.96	%
Total interest-bearing deposits					460,112					1,078			0.95	%				439,486					1,065			0.96	%				417,870					1,034			1.00	%
Borrowings					8,603					35			1.65	%				-					-			-					2					-			-
Total interest-bearing liabilities					468,715					1,113			0.96	%				439,486					1,065			0.96	%				417,872					1,034			1.00	%
Noninterest-bearing deposits					115,019													126,204													77,175
Other liabilities					4,607													4,903													3,797
Stockholders' equity					78,091													74,899													64,840
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY				$	666,432												$	645,492												$	563,684
Net interest income									$	6,482												$	6,323												$	5,245
Net interest spread													3.77	%												3.69	%												3.60	%
Net interest margin													4.04	%												3.98	%												3.85	%
Cost of funds													0.77	%												0.75	%												0.85	%

(1)			Includes loans-held-for-sale.