Commonwealth Business Bank Reports Fourth Quarter & Full Year 2015 Earnings

LOS ANGELES--(BUSINESS WIRE)--

Commonwealth Business Bank ("CBB" or "Bank") CWBB today announced net income of $2.5 million for the fourth quarter of 2015, compared with $2.9 million for the third quarter of 2015 and $2.4 million for the fourth quarter of 2014. Diluted earnings per share were $0.30 for the fourth quarter of 2015, compared with $0.35 for the third quarter of 2015 and $0.29 for the fourth quarter of 2014. During the fourth quarter, the Bank incurred $864,000 of pre-tax core system conversion costs, or $0.06 per diluted common share on an after tax basis, compared to $29,000 in the third quarter and no expense in the year ago quarter.

The Bank announced net income of $11.3 million or $1.35 per diluted common share for the year ended December 31, 2015, compared with $11.2 million or $1.36 per diluted common share for the same period of 2014. For the year, CBB incurred $944,000 of pre-tax core system conversion costs, or $0.07 per diluted common share on an after tax basis.

"During the fourth quarter we made a significant investment in our core information system to better serve our customers. The majority of the implementation costs of the new system were expensed during the quarter, however we still achieved strong financial results," said Joanne Kim, President and CEO.

"In 2015 we also strengthened our executive management team to enable us to meet our strategic objectives of profitable growth and delivering maximum value to our customers, employees and shareholders," said Ms. Kim.

RESULTS OF OPERATIONS

	Quarterly Results Summary (Unaudited)
			Three Months Ended																							Twelve Months Ended
			December 31,					September 30,					%				December 31,					%				December 31,					December 31,				%
				2015					2015				Change					2014				Change					2015					2014			Change
			(Dollars in thousands, except per share information)
	Net income		$	2,546				$	2,933				-13.2	%			$	2,372				7.3	%			$	11,275				$	11,174			0.9	%
	Net income per diluted common share		$	0.30				$	0.35				-14.3	%			$	0.29				3.4	%			$	1.35				$	1.36			-0.7	%
	Return on average assets			1.31	%				1.52	%			-13.8	%				1.46	%			-10.0	%				1.55	%				1.84	%		-15.6	%
	Return on average equity			11.31	%				13.58	%			-16.7	%				12.56	%			-9.9	%				13.44	%				15.96	%		-15.8	%
	Noninterest income/average assets			1.60	%				1.28	%	¹		25.3	%				1.80	%	¹		-10.9	%				1.53	%				1.96	%	¹	-21.7	%
	Pre-tax, pre-provision earnings/average assets			2.40	%				2.68	%			-10.4	%				3.03	%			-20.8	%				2.72	%				3.08	%		-11.7	%
	Noninterest expense/average assets			3.11	%				2.37	%	¹		31.2	%				2.66	%	¹		16.9	%				2.74	%				2.63	%	¹	4.2	%
	Efficiency ratio			56.44	%				46.95	%	¹		20.2	%				46.69	%	¹		20.9	%				50.23	%				46.09	%	¹	9.0	%
	Net interest margin			4.00	%				3.86	%			3.5	%				3.98	%			0.5	%				4.02	%				3.84	%		4.8	%

^{1. Restated due to the reclassification of certain SBA fees}

Net income for the fourth quarter of 2015 decreased $387,000 compared to the prior quarter, and increased $174,000 over the fourth quarter of 2014. The quarter-over-quarter decrease was primarily driven by a $200,000 increase in the provision for loan losses and an $835,000 increase in core system conversion costs. Offsetting these items were a $296,000 increase in net interest income, a $532,000 increase in gains on sales of SBA loans and a $327,000 decrease in the provision for income taxes.

Net income for the twelve months ended December 31, 2015 increased $101,000, or 0.9%, to $11.3 million, compared with $11.2 million for the prior year. The increase was primarily due to a $5.7 million, or 24.7%, increase in net interest income, which was partially offset by an $878,000 increase in the provision for loan losses, an $867,000 decline in gains on sales of SBA loans and a $3.9 million increase in noninterest expenses. Included in the increase in noninterest expenses were $944,000 of non-recurring pre-tax core system conversion costs.

Net Interest Income and Net Interest Margin

Net interest income before provision for loan losses was $7.6 million for the fourth quarter of 2015, an increase of $296,000, or 4.1%, compared to $7.3 million for the prior quarter and an increase of $1.2 million, or 19.6%, compared to $6.3 million for the year ago quarter. These increases were primarily due to $19.1 million and $108.4 million increases, respectively, in average loan balances and 4 and 6 basis point increases, respectively, in loan yields. Net interest income before the provision for loan losses was $28.5 million for the year ended December 31, 2015, an increase of $5.7 million, or 24.7%, compared to $22.9 million for the same period in 2014. The annual year-over-year increase was primarily attributable to a $115.2 million increase in average loan balances and a 5 basis point increase in loan yields.

The net interest margin improved to 4.00% for the current quarter, from 3.86% in the prior quarter and 3.98% in the same quarter of 2014. The increase from the prior and year ago quarters was due to a 14 basis point increase in the yield on interest-earning assets to 4.72%, from 4.58% for the prior quarter and a 7 basis point increase in the yield on interest-earning assets from 4.65% for the year ago quarter. These increases were primarily driven by increases in the yield on loans. Our cost of funds remained unchanged at 0.80% quarter-over-quarter, but increased 5 basis points from 0.75% for the same period last year. The year-over-year increase in our cost of funds was due to a proportional increase in higher-cost time deposits. For the year ended December 31, 2015, our net interest margin increased 18 basis points to 4.02% from 3.84% in 2014. This increase was primarily driven by an 18 basis point increase in the yield on interest-earning assets. Our cost of funds for the current year was 0.79%, down 1 basis point from 0.80% in the prior year.

Noninterest Income

For the current quarter, noninterest income totaled $3.1 million, an increase of $643,000 and $178,000 from the prior and year ago quarters, respectively. The quarter-over-quarter increase was primarily due to a $532,000 increase in gains on sales of SBA loans and a $95,000 increase in SBA servicing income. The year-over-year quarterly increase was due to a $52,000 increase in gains on sales of SBA loans and a $73,000 increase in servicing income. For the year, noninterest income decreased $785,000 to $11.1 million from $11.9 million in 2014 primarily due to an $867,000 decrease in gains on sales of SBA loans. Annual average premiums on sales of SBA loans have declined to 10.58% in 2015 from 11.37% in the prior year.

During the fourth quarter of 2015, the Bank sold $33.8 million of SBA loans, compared with $24.6 million in the third quarter of 2015 and $26.9 million in the fourth quarter of 2014. For the full year 2015, the Bank sold $111.1 million of SBA loans, compared to $107.1 million in 2014. The amount of SBA loan sales varies based on the volume of loans we originate, our liquidity needs and market conditions.

		Three Months Ended																			Twelve Months Ended
		December 31,				September 30,				%			December 31,					%			December 31,				December 31,				%
			2015				2015			Change				2014				Change				2015				2014			Change
		(Dollars in thousands)																			(Dollars in thousands)
SBA loans held-for-sale at beginning of the quarter		$	21,043			$	25,286			-16.8	%		$	15,057				39.8	%		$	21,267			$	18,524			14.8	%
SBA loans originated/transferred from held-for-investment during the quarter			30,676				20,534			49.4	%			33,214				-7.6	%			108,321				110,159			-1.7	%
SBA loans sold during the quarter			(33,762	)			(24,594	)		37.3	%			(26,888	)			25.6	%			(111,134	)			(107,053	)		3.8	%
SBA loans principal payment, net of advance			(148	)			(183	)		-19.1	%			(116	)			27.6	%			(645	)			(363	)		77.7	%
SBA loans held-for-sale at end of the quarter		$	17,809			$	21,043			-15.4	%		$	21,267				-16.3	%		$	17,809			$	21,267			-16.3	%
Gain on sale of SBA loans		$	2,333			$	1,801			29.5	%		$	2,281				2.3	%		$	8,524			$	9,391			-9.2	%
Premium on sale (weighted average)			9.47	%			10.40	%		-9.0	%			10.89	%			-13.0	%			10.58	%			11.37	%		-7.0	%
SBA loan production		$	43,313			$	28,213			53.5	%		$	45,306				-4.4	%		$	147,362			$	157,662			-6.5	%

Noninterest Expense

Noninterest expense for the fourth quarter of 2015 was $6.0 million, an increase of $1.5 million, or 31.8%, from $4.6 million for the prior quarter and an increase of $1.7 million, or 39.4%, from $4.3 million in the same quarter last year. The quarter-over-quarter increase was primarily due to an $866,000 increase in data processing expense (of which $835,000 related to our core system conversion), a $141,000 increase in salaries and employee benefits and a $179,000 increase in marketing expenses. The year-over-year quarterly increase was primarily due to a $920,000 increase in data processing expense (of which $864,000 related to our core system conversion), a $676,000 increase in salaries and employee benefits and a $267,000 increase in marketing expenses. The increase in salaries and employee benefits was due to an increase in full time equivalent employees ("FTE") to 127 at the end of the current year compared to 103 at the end of 2014. The increases in staffing and core system conversion were needed to support business expansion and to strengthen our infrastructure. For the full year 2015, noninterest expense was $19.9 million, an increase of $3.9 million, or 24.2%, from $16.0 million for the prior year. The annual increase was primarily due to a $2.0 million increase in salaries and employee benefits, a $1.0 million increase in data processing expense (of which $944,000 related to our system conversion), a $305,000 increase in occupancy and equipment expense, and an increase of $275,000 in marketing expenses.

	At or for the Three Months Ended																			At or for the Twelve Months Ended
	December 31,				September 30,				%			December 31,				%				December 31,				December 31,				%
		2015				2015			Change				2014			Change					2015				2014			Change
	(Dollars in thousands)
Salaries and benefits	$	3,319			$	3,178			4.4	%		$	2,643			25.6	%			$	12,501			$	10,510			18.9	%
FTE at end of period		127				119			6.7	%			103			23.3	%				127				103			23.3	%
Average FTE during the period		123				120			2.8	%			103			19.5	%				116				97			20.1	%
Salaries and benefit/average FTE	$	107		¹	$	103		¹	3.8	%		$	103		¹	3.8	%			$	108			$	109			-0.9	%
Salaries and benefit/average assets		1.71	%			1.65	%		3.6	%			1.62	%		5.6	%				1.72	%			1.73	%		-0.6	%
Noninterest expense/average assets		3.11	%			2.35	%		32.3	%			2.66	%		16.9	%				2.74	%			2.63	%		4.2	%

^{1. Annualized}

Provision for Income Taxes

The provision for income taxes was $1.8 million, or an effective tax rate of 40.76%, compared to $2.1 million, or an effective tax rate of 41.48%, for the prior quarter and $1.8 million, or an effective tax rate of 42.61%, for the year ago quarter. For the full year 2015, the provision for income taxes was $8.0 million, or an effective tax rate of 41.39%, compared to $8.0 million, or an effective tax rate of 41.59% in the prior year.

Pre-Tax, Pre-Provision Income

For the fourth quarter of 2015, our pre-tax, pre-provision ("PTPP") income was $4.6 million, a decrease of $514,000, or 10.0%, from $5.2 million for the prior quarter and a decrease of $285,000, or 5.8%, from $4.9 million for the same quarter of 2014. Annualized PTPP income to average assets income decreased to 2.40% for the current quarter, compared with 2.68% and 3.03% for the prior and year ago quarters, respectively. For the twelve months ended December 31, 2015, PTPP income was $19.7 million, an increase of $983,000, or 5.2%, from $18.8 million in the prior year. PTPP income to average assets for current year decreased to 2.72% from 3.08% last year.

	Three Months Ended																			Twelve Months Ended
	December 31,				September 30,				%			December 31,				%				December 31,				December 31,				%
		2015				2015			Change				2014			Change					2015				2014			Change
	(Dollars in thousands)
PTPP income	$	4,648			$	5,162			-10.0	%		$	4,933			-5.8	%			$	19,736			$	18,753			5.2	%
Annualized PTPP/average assets		2.40	%			2.68	%		-10.4	%			3.03	%		-20.8	%				2.72	%			3.08	%		-11.7	%
PTPP, excluding gain on sale of SBA loans	$	2,315			$	3,361			-31.1	%		$	2,652			-12.7	%			$	11,212			$	9,362			19.8	%

BALANCE SHEET SUMMARY

At December 31, 2015, the Bank had total assets of $786.4 million, an increase of $7.6 million, or 1.0%, from $778.8 million at September 30, 2015, and an increase of $133.0 million, or 20.3%, from $653.5 million at December 31, 2014. Earning assets totaled $765.7 million at December 31, 2015, an increase of $127.5 million, or 20.0%, from $638.2 million at December 31, 2014. The year-over-year increase in earning assets was mainly from a $97.4 million growth in total loans.

		December 31,				September 30,				June 30,				March 31,				December 31,
			2015				2015				2015				2015				2014
		(Dollars in thousands, except per share amounts)
Assets		$	786,423			$	778,807			$	744,028			$	703,891			$	653,450
Loans receivable, net			641,145				640,687				587,917				581,655				539,810
Deposits			680,512				675,225				644,646				608,893				572,812
Tangible common equity/total assets			11.44	%			11.20	%			11.30	%			11.46	%			11.61	%
Tangible common equity per common share		$	11.06			$	10.78			$	10.40			$	10.03			$	9.77
Nonperforming assets to assets			0.90	%			0.91	%			1.01	%			1.13	%			1.25	%
ALLL to nonperforming assets			120.30	%			130.04	%			119.74	%			112.76	%			109.50	%
Nonperforming assets to tangible common equity and ALLL			7.21	%			7.36	%			8.11	%			8.89	%			9.66	%

Loans Receivable

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

	December 31, 2015				September 30, 2015				June 30, 2015				March 31, 2015				December 31, 2014
	(Dollars in thousands)
Construction	$	10,577			$	7,938			$	7,460			$	5,616			$	4,088
Commercial real estate		502,679				498,659				453,915				444,878				418,071
Commercial and industrial		131,869				140,194				131,144				136,231				122,861
Consumer		3,153				1,872				3,236				2,879				2,667
Gross loans		648,278				648,663				595,755				589,604				547,687
Net deferred loan costs		1,413				1,262				1,201				1,046				1,100
Gross loans, net	$	649,691			$	649,925			$	596,956			$	590,650			$	548,787
Loans held-for-sale	$	17,809			$	21,043			$	25,286			$	16,543			$	21,267
Gross loans, net, including loans held-for-sale	$	667,500			$	670,968			$	622,242			$	607,193			$	570,054
Loan-to-deposit (LTD) ratio:		95.5	%			96.3	%			92.6	%			97.0	%			95.8	%
LTD ratio including loans held-for-sale		98.1	%			99.4	%			96.5	%			99.7	%			99.5	%

At December 31, 2015, gross loans including loans held-for-sale were $667.5 million, a decrease of $3.5 million, or 0.5%, from $671.0 million at September 30, 2015 and an increase of $97.4 million, or 17.1%, from $570.1 million at the end of last year. During the fourth quarter of 2015, total new loan production, including revolving lines of credit, was $76.4 million, compared to $113.4 million for the prior quarter and $99.9 million for the same quarter last year. The decline in the current quarter loan production was due to seasonal trends and increased market competition. For the full year 2015, total new loan production, including revolving lines of credit, was $361.5 million, compared to $344.0 million in 2014. As discussed earlier, during the current year we sold $111.1 million of SBA loans, compared to $107.1 million in 2014.

Deposits

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

	December 31, 2015							September 30, 2015							June 30, 2015							March 31, 2015							December 31, 2014
	Balance				%			Balance				%			Balance				%			Balance				%			Balance				%
	(Dollars in thousands)
Noninterest-bearing demand	$	163,385			24.0	%		$	145,348			21.5	%		$	140,284			21.8	%		$	134,999			22.2	%		$	125,893			22.0	%
Money market & NOW		133,343			19.6	%			141,722			21.0	%			134,731			20.9	%			143,313			23.5	%			152,503			26.6	%
Savings		8,845			1.3	%			7,354			1.1	%			7,482			1.2	%			7,345			1.2	%			8,805			1.5	%
Time deposits		374,939			55.1	%			380,801			56.4	%			362,149			56.2	%			323,236			53.1	%			285,611			49.9	%
Total Deposits	$	680,512			100.0	%		$	675,225			100.0	%		$	644,646			100.0	%		$	608,893			100.0	%		$	572,812			100.0	%
Cost of deposits for the quarter		0.79	%						0.79	%						0.76	%						0.76	%						0.75	%

Total deposits were $680.5 million at quarter end, an increase of $5.3 million, or 0.8%, compared to $675.2 million at the end of the prior quarter and an increase of $107.7 million, or 18.8%, compared to at the end of last year. Noninterest-bearing deposits grew $18.0 million, or 12.4% to $163.4 million during the quarter and increased $37.5 million, or 29.8%, from December 31, 2014. Noninterest-bearing deposits to total deposits were 24.0%, 21.5% and 22.0% at December 31, 2015, September 30, 2015 and December 31, 2014, respectively. Despite the proportional increase in noninterest-bearing deposits, our cost of deposits remained constant at 0.79% quarter-over-quarter and increased 4 basis points from 0.75% for the same quarter last year due to a higher proportional increase in higher-cost time deposits.

ASSET QUALITY

			December 31,				September 30,				June 30,				March 31,				December 31,
				2015				2015				2015				2015				2014
			(Dollars in thousands)
Delinquent Loans:
	Loans 30-89 days past due		$	175			$	1,369			$	92			$	18			$	83
	90 days or more past due and still accruing			-				-				-				-				-
	Nonaccrual			2,878				2,682				1,930				2,162				2,175
	Total delinquent loans		$	3,053			$	4,051			$	2,022			$	2,180			$	2,258
Nonperforming Assets:
	Over 90 days still accruing		$	-			$	-			$	-			$	-			$	-
	Nonaccrual loans ¹			2,878				2,682				1,930				2,162				2,175
	Performing TDR loans			4,341				4,422				5,619				5,815				6,023
	Total nonperforming loans			7,219				7,104				7,549				7,977				8,198
	Other real estate owned			-				-				-				-				-
	Total nonperforming assets		$	7,219			$	7,104			$	7,549			$	7,977			$	8,198
	Nonaccrual loans to gross loans			0.44	%			0.41	%			0.32	%			0.37	%			0.40	%
	Nonperforming loans to gross loans (exc. LHFS)			1.11	%			1.09	%			1.26	%			1.35	%			1.49	%
	Total nonperforming assets to total assets			0.92	%			0.91	%			1.01	%			1.13	%			1.25	%
Classified Loans: ¹
	Substandard		$	7,056			$	7,483			$	6,471			$	6,910			$	7,110
	Doubtful			-				-				-				-				-
	Loss			-				-				-				-				-
	Total classified assets		$	7,056			$	7,483			$	6,471			$	6,910			$	7,110
	Classified assets to total assets			0.90	%			0.96	%			0.87	%			0.98	%			1.09	%
	Classified assets to Tier 1 and ALLL			7.16	%			7.75	%			6.95	%			7.70	%			8.38	%

^{1. Net of SBA guaranteed balance.}

The increase in nonaccrual loans during the current quarter was primarily due to a single C&I loan with a net outstanding balance of $250,000 after a charge-off $1.2 million.

The allowance for loan losses at December 31, 2015 was $8.5 million, or 1.32% of gross loans excluding loans held-for-sale, compared to $9.2 million, or 1.42%, at September 30, 2015, and $9.0 million, or 1.64%, at December 31, 2014. The Bank recorded a $500,000 provision for loan losses in the current year, compared to a $378,000 negative provision for loan losses in 2014. The $500,000 provision for loan losses was primarily due to organic loan growth and an increase in the historical loss rate for C&I loans during the current quarter, which resulted from aforementioned charge-off.

CAPITAL

Effective January 1, 2015, the federal banking regulators changed the ratios and ratio thresholds for capital evaluations to conform to the prompt corrective action and the Basel III capital rules. As of December 31, 2015, the impact of such changes on capital was minor and the Bank exceeded the regulatory capital requirements under the new Basel III capital rules to be classified as "well-capitalized."

	Well-Capitalized												Well-Capitalized
	Regulatory Requirement				December 31, 2015				September 30, 2015				Regulatory Requirement				December 31, 2014
Leverage ratio	5.00	%			11.68	%			11.40	%			5.00	%			11.75	%
Common equity tier 1 capital ratio	6.50	%			13.26	%			12.84	%			N/A				N/A
Tier 1 risk-based ratio	8.00	%			13.26	%			12.84	%			6.00	%			13.19	%
Total risk-based ratio	10.00	%			14.51	%			14.10	%			10.00	%			14.45	%

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 the 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)
		December 31,				September 30,				%			December 31,				%
			2015				2015			Change				2014			Change
ASSETS
	Cash and due from banks	$	7,878			$	7,118			10.7	%		$	5,874			34.1	%
	Interest-earning due from FRB and other banks		88,951				80,077			11.1	%			56,901			56.3	%
	Investment securities		4,363				4,485			-2.7	%			7,058			-38.2	%
	Loans held-for-sale, at the lower of cost or fair value		17,809				21,043			-15.4	%			21,267			-16.3	%
	Loans		649,691				649,925			0.0	%			548,787			18.4	%
	Allowance for loan losses		(8,546	)			(9,238	)		-7.5	%			(8,977	)		-4.8	%
	Loans receivable, net		641,145				640,687			0.1	%			539,810			18.8	%
	FHLB & FRB stock		4,853				4,781			1.5	%			4,171			16.4	%
	Other assets		21,424				20,616			3.9	%			18,369			16.6	%
	TOTAL ASSETS	$	786,423			$	778,807			1.0	%		$	653,450			20.3	%
LIABILITIES AND STOCKHOLDERS' EQUITY
	Noninterest-bearing	$	163,385			$	145,348			12.4	%		$	125,893			29.8	%
	Interest-bearing		517,127				529,877			-2.4	%			446,919			15.7	%
	Total deposits		680,512				675,225			0.8	%			572,812			18.8	%
	FHLB advances		10,000				10,000			0.0	%			-			100.0	%
	Other liabilities		5,924				6,322			-6.3	%			4,772			24.1	%
	Total liabilities		696,436				691,547			0.7	%			577,584			20.6	%
Stockholders' Equity			89,987				87,260			3.1	%			75,866			18.6	%
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY		$	786,423			$	778,807			1.0	%		$	653,450			20.3	%

STATEMENT OF INCOME (Unaudited)
(Dollars in thousands, except per share amounts)
		Three Months Ended															Twelve Months Ended
		December 31,			September 30,			%			December 31,			%			December 31,			December 31,				%
		2015			2015			Change			2014			Change			2015				2014			Change
Interest income		$	8,917		$	8,617		3.5	%		$	7,388		20.7	%		$	33,523		$	27,113			23.6	%
Interest expense			1,355			1,351		0.3	%			1,065		27.2	%			5,011			4,251			17.9	%
Net interest income			7,562			7,266		4.1	%			6,323		19.6	%			28,512			22,862			24.7	%
Provision for loan losses			350			150		133.3	%			800		-56.3	%			500			(378	)		-232.3	%
Net interest income after provision for loan losses			7,212			7,116		1.3	%			5,523		30.6	%			28,012			23,240			20.5	%
Gain on sale of loans			2,333			1,801		29.5	%			2,281		2.3	%			8,524			9,391			-9.2	%
Service charges and other income			775			664	¹	16.7	%			649	¹	19.4	%			2,616			2,534		¹	3.2	%
Noninterest income			3,108			2,465		26.1	%			2,930		6.1	%			11,140			11,925			-6.6	%
Salaries and employee benefits			3,319			3,178		4.4	%			2,643		25.6	%			12,501			10,510			18.9	%
Occupancy and equipment			503			489		2.9	%			513		-1.9	%			1,968			1,663			18.3	%
Other expenses			2,200			902	¹	143.9	%			1,164	¹	89.0	%			5,447			3,861		¹	41.1	%
Noninterest expense			6,022			4,569		31.8	%			4,320		39.4	%			19,916			16,034			24.2	%
Income before Income Taxes			4,298			5,012		-14.2	%			4,133		4.0	%			19,236			19,131			0.5	%
Income tax provision			1,752			2,079		-15.7	%			1,761		-0.5	%			7,961			7,957			0.1	%
Net income		$	2,546		$	2,933		-13.2	%		$	2,372		7.3	%		$	11,275		$	11,174			0.9	%
Weighted average shares for basic EPS			8,103,456			8,091,332		0.1	%			7,758,086		4.5	%			8,030,258			7,731,154			3.9	%
Weighted average shares for diluted EPS			8,364,379			8,360,698		0.0	%			8,258,676		1.3	%			8,339,577			8,226,152			1.4	%
Basic EPS		$	0.31		$	0.36		-13.9	%		$	0.31		0.0	%		$	1.40		$	1.45			-3.4	%
Diluted EPS		$	0.30		$	0.35		-14.3	%		$	0.29		3.4	%		$	1.35		$	1.36			-0.7	%
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.

1. Restated due to the reclassification of certain SBA fees

SELECTED FINANCIAL HIGHLIGHTS (Unaudited)
(Dollars in thousands, except per share amounts)
			Three Months Ended																		Twelve Months Ended
			December 31,				September 30,				%			December 31,				%			December 31,				December 31,				%
				2015				2015			Change				2014			Change				2015				2014			Change
Performance Ratios:
	Return on average assets			1.31	%			1.52	%		-13.8	%			1.46	%		-10.3	%			1.55	%			1.84	%		-15.6	%
	Return on average equity			11.31	%			13.58	%		-16.7	%			12.56	%		-10.0	%			13.44	%			15.96	%		-15.8	%
	Net interest margin			4.00	%			3.86	%		3.6	%			3.98	%		0.5	%			4.02	%			3.84	%		4.8	%
	Cost of funds			0.80	%			0.80	%		0.0	%			0.75	%		6.7	%			0.79	%			0.80	%		-1.6	%
	Efficiency ratio			56.44	%			46.95	%	¹	20.2	%			46.69	%	¹	20.9	%			50.23	%			46.09	%	¹	9.0	%
Capital Ratios:
	Core capital (leverage) ratio			11.68	%			11.40	%		2.5	%			11.75	%		-0.6	%			11.68	%			11.75	%		-0.6	%
	Tier 1 risk-based capital ratio			13.26	%			12.84	%		3.3	%			13.19	%		0.5	%			13.26	%			13.19	%		0.5	%
	Total risk-based capital ratio			14.51	%			14.10	%		2.9	%			14.45	%		0.4	%			14.51	%			14.45	%		0.4	%
	Tangible common equity / total assets			11.44	%			11.20	%		2.1	%			11.61	%		-1.4	%			11.44	%			11.61	%		-1.4	%
	Tangible common equity per share		$	11.06			$	10.78			2.6	%		$	10.03			10.3	%		$	11.06			$	9.77			13.2	%
Selected Average Balances:
	Gross loans, net ²		$	666,831			$	647,725			2.9	%		$	558,405			19.4	%		$	624,870			$	509,677			22.6	%
	Total investment securities			4,448				7,331			-39.3	%			7,122			-37.5	%			5,945				7,298			-18.5	%
	Interest-earning assets			749,850				745,895			0.5	%			630,793			18.9	%			708,506				596,080			18.9	%
	Total assets			768,885				763,574			0.7	%			645,492			19.1	%			725,773				608,606			19.3	%
	Noninterest-bearing deposits			140,452				131,954			6.4	%			126,204			11.3	%			126,424				106,166			19.1	%
	Total deposits			662,374				661,463			0.1	%			565,690			17.1	%			626,666				534,247			17.3	%
	Interest-bearing liabilities			531,922				539,509			-1.4	%			439,486			21.0	%			509,898				428,082			19.1	%
	Stockholders' equity			89,271				85,667			4.2	%			74,899			19.2	%			83,894				69,992			19.9	%

1. Restated due to the reclassification of certain SBA fees
2. Includes loans held-for-sale.

SELECTED LOAN AND ASSET QUALITY HIGHLIGHTS (Unaudited)
(Dollars in thousands)
			4th Qtr				3rd Qtr				2nd Qtr				1st Qtr				4th Qtr
				2015				2015				2015				2015				2014
Allowance for Loan Losses:
	Balance at beginning of period		$	9,238			$	9,039			$	8,995			$	8,977			$	8,860
	Provision for loan losses			350				150				-				-				540
	Charge-offs			1,227				-				19				7				455
	Recoveries			185				49				63				25				32
	Balance at the end of period		$	8,546			$	9,238			$	9,039			$	8,995			$	8,977
Nonperforming Assets:
	Over 90 days still accruing		$	-			$	-			$	-			$	-			$	-
	Nonaccrual loans ¹			3,167				2,682				1,930				2,162				2,175
	Performing TDR loans			4,341				4,422				5,619				5,815				6,023
	Total nonperforming loans			7,508				7,104				7,549				7,977				8,198
	Other real estate owned			-				-				-				-				-
	Total nonperforming assets		$	7,508			$	7,104			$	7,549			$	7,977			$	8,198
Classified Loans:¹
	Substandard		$	7,056			$	7,483			$	6,471			$	6,910			$	7,110
	Doubtful			-				-				-				-				-
	Loss			-				-				-				-				-
	Total classified assets		$	7,056			$	7,483			$	6,471			$	6,910			$	7,110
Delinquent Loans:
	Loans 30-89 days past due		$	175			$	1,369			$	92			$	18			$	83
	90 days or more past due and still accruing			-				-				-				-				-
	Nonaccrual			3,167				2,682				1,930				2,162				2,175
	Total delinquent loans		$	3,342			$	4,051			$	2,022			$	2,180			$	2,258
Asset Quality Ratios:
	Net charge-offs to average gross loans ²			0.62	%			-0.03	%			-0.03	%			-0.01	%			0.30	%
	Nonaccrual loans to gross loans			0.49	%			0.41	%			0.32	%			0.37	%			0.40	%
	Total NPA to total assets			0.95	%			0.91	%			1.01	%			1.13	%			1.25	%
	Classified assets to total assets			0.90	%			0.96	%			0.87	%			0.98	%			1.09	%
	Classified assets to Tier 1 and ALLL			7.16	%			7.75	%			6.95	%			7.70	%			8.38	%
	Nonperforming loans to gross loans (exc. LHFS)			1.16	%			1.09	%			1.26	%			1.35	%			1.49	%
	ALLL to gross loans (exc. LHFS)			1.32	%			1.42	%			1.51	%			1.52	%			1.64	%
	ALLL to nonaccrual loans			269.85	%			344.44	%			468.34	%			416.05	%			412.74	%
	ALLL to nonperforming loans			113.83	%			130.04	%			119.74	%			112.76	%			109.50	%
	Texas ratio ³			7.62	%			7.36	%			8.11	%			8.89	%			9.66	%

(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
	December 31, 2015										September 30, 2015										December 31, 2014
	Avg Balance				Interest			Yield			Avg Balance				Interest			Yield			Avg Balance				Interest			Yield
INTEREST-EARNING ASSETS
Loans ¹	$	666,831			$	8,746		5.20	%		$	647,725			$	8,425		5.16	%		$	558,405			$	7,229		5.14	%
Investment securities		4,448				22		1.96	%			7,331				37		2.00	%			7,122				40		2.23	%
Interest-earning due from FRB and other banks		73,735				59		0.32	%			86,058				60		0.28	%			61,095				51		0.33	%
Other earning assets		4,836				90		7.38	%			4,781				95		7.88	%			4,171				68		6.49	%
Total interest-earning assets		749,850				8,917		4.72	%			745,895				8,617		4.58	%			630,793				7,388		4.65	%
NONINTEREST-EARNING ASSETS
Cash and due from banks		7,274										7,324										6,680
Other noninterest-earning assets		20,535										19,411										16,889
Total noninterest-earning assets		27,809										26,735										23,569
Less: Allowance for loan losses		(8,774	)									(9,056	)									(8,870	)
TOTAL ASSETS	$	768,885									$	763,574									$	645,492
INTEREST-BEARING DEPOSITS
Interest-bearing demand	$	1,026			$	-		0.15	%		$	1,271			$	-		0.15	%		$	621			$	-		0.15	%
Money market		135,415				306		0.90	%			138,731				318		0.91	%			153,864				361		0.93	%
Savings		8,071				37		1.82	%			7,408				35		1.87	%			9,224				50		2.15	%
Time deposits		377,410				970		1.02	%			382,099				957		0.99	%			275,777				654		0.94	%
Total interest-bearing deposits		521,922				1,313		1.00	%			529,509				1,310		0.98	%			439,486				1,065		0.96	%
Borrowings		10,000				42		1.65	%			10,000				41		1.65	%			-				-		-
Total interest-bearing liabilities		531,922				1,355		1.01	%			539,509				1,351		0.99	%			439,486				1,065		0.96	%
Noninterest-bearing deposits		140,452										131,954										126,204
Other liabilities		7,240										6,444										4,903
Stockholders' equity		89,271										85,667										74,899
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	768,885									$	763,574									$	645,492
Net interest income					$	7,562									$	7,266									$	6,323
Net interest spread								3.71	%									3.59	%									3.69	%
Net interest margin								4.00	%									3.86	%									3.98	%
Cost of funds								0.80	%									0.80	%									0.75	%

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

MARGIN ANALYSIS (Twelve Months) (Unaudited)
(Dollars in thousands)
	Twelve Months Ended
	December 31, 2015										December 31, 2014
	Avg Balance				Interest			Yield			Avg Balance				Interest			Yield
INTEREST-EARNING ASSETS
Loans ¹	$	624,870			$	32,765		5.24	%		$	509,677			$	26,464		5.19	%
Investment securities		5,945				121		2.04	%			7,298				160		2.19	%
Interest-earning due from banks		73,083				222		0.30	%			75,041				227		0.30	%
Other earning assets		4,608				415		9.01	%			4,064				262		6.44	%
Total interest-earning assets		708,506				33,523		4.73	%			596,080				27,113		4.55	%
NONINTEREST-EARNING ASSETS
Cash and due from banks		6,992										6,356
Other noninterest-earning assets		19,232										15,121
Total noninterest-earning assets		26,224										21,477
Less: Allowance for loan losses		(8,957	)									(8,951	)
TOTAL ASSETS	$	725,773									$	608,606
INTEREST-BEARING DEPOSITS
Interest-bearing demand	$	1,027			$	2		0.15	%		$	431			$	-		0.15	%
Money market		139,853				1,260		0.90	%			152,567				1,476		0.97	%
Savings		7,653				139		1.82	%			8,974				208		2.31	%
Time deposits		351,709				3,451		0.98	%			266,109				2,567		0.96	%
Total interest-bearing deposits		500,242				4,852		0.97	%			428,081				4,251		0.99	%
Short-term borrowings		9,656				159		1.65	%			1				-		0.39	%
Total interest-bearing liabilities		509,898				5,011		0.98	%			428,082				4,251		1.00	%
Noninterest-bearing deposits		126,424										106,166
Other Liabilities		5,557										4,366
Stockholders' equity		83,894										69,992
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	725,773									$	608,606
Net interest income					$	28,512									$	22,862
Net interest spread								3.75	%									3.56	%
Net interest margin								4.02	%									3.84	%
Cost of funds								0.79	%									0.80	%

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

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