Commonwealth Business Bank Reports 2016 Third Quarter Results

LOS ANGELES--(BUSINESS WIRE)--

Commonwealth Business Bank ("CBB" or the "Bank") CWBB today announced net income of $1.8 million for the third quarter of 2016, compared to $3.1 million for the preceding quarter and $2.9 million for the third quarter of 2015. Diluted earnings per share were $0.19 for the third quarter of 2016, compared to $0.34 for the preceding quarter and $0.32 for the third quarter of 2015.

Net income for the nine months ended September 30, 2016 decreased 8.4% to $8.0 million, or $0.87 per diluted share, compared to $8.7 million, or $0.95 per diluted share, for the same period in 2015.

"Our lower than expected earnings this quarter were due to an impairment allowance that was established on one loan to a commercial borrower who is experiencing financial difficulties. However, our earnings were positively impacted by an increase in net interest income from a concerted liquidity management program and the growth in the average balance of loans that offset a decline in yield, an increase in SBA servicing income, and effective management of noninterest expense." said Joanne Kim, President and CEO.

RESULTS OF OPERATIONS

	Three Months Ended													Nine Months Ended
	September 30,			June 30,			%		September 30,			%		September 30,			September 30,			%
		2016			2016		Change			2015		Change			2016			2015		Change
	(Dollars in thousands, except per share amounts)

Net income	$	1,755		$	3,139		(44.1	%)	$	2,933		-40.2	%	$	7,997		$	8,729		(8.4	%)
Net income per diluted common share	$	0.19		$	0.34		(44.1	%)	$	0.32	¹	-40.6	%	$	0.87		$	0.95	¹	(8.4	%)

Return on average assets		0.83	%		1.56	%	(46.8	%)		1.52	%	-45.4	%		1.32	%		1.64	%	(19.5	%)
Return on average equity		7.04	%		13.21	%	(46.7	%)		13.58	%	-48.2	%		11.16	%		14.22	%	(21.5	%)

Noninterest income/average assets		1.36	%		1.54	%	(11.7	%)		1.28	%	6.3	%		1.47	%		1.51	%	(2.6	%)
Pre-tax, pre-provision earnings/average assets		2.77	%		2.84	%	(2.5	%)		2.68	%	3.4	%		2.86	%		2.83	%	1.1	%
Noninterest expense/average assets		2.54	%		2.79	%	(9.0	%)		2.37	%	7.2	%		2.73	%		2.61	%	4.6	%
Efficiency ratio		47.83	%		49.51	%	(3.4	%)		46.95	%	1.9	%		48.86	%		47.94	%	1.9	%
Net interest margin²		4.08	%		4.20	%	(2.9	%)		3.86	%	5.7	%		4.24	%		4.03	%	5.2	%

¹ Restated for 10% stock dividend to shareholders of record on May 16, 2016
² Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate

Net Interest Income and Net Interest Margin

Net interest income was $8.4 million for the third quarter of 2016, an increase of $150,000, or 1.8%, compared to $8.2 million for the prior quarter and an increase of $1.1 million, or 15.5%, compared to $7.3 million for the year ago quarter. The quarter-over-quarter increase was primarily due to a $106,000 increase in interest earned on loans and a $115,000 increase in interest earned on investment securities, which were partially offset by a $43,000 decrease in interest earned on interest-earning deposits at the FRB and other banks and a $32,000 increase in interest expense on deposits. The quarter-over-quarter increase in interest earned on loans was due to a $37.6 million increase in average loan balances, which was partially offset by a 28 basis point decrease in the yield on loans to 5.23% from 5.51%. The year-over-year quarterly increase was primarily due to a $1.1 million increase in interest earned on loans and a $102,000 increase in interest earned on investment securities, which were partially offset by a $74,000 increase in interest expense on deposits. The year-over-year quarterly increase in interest earned on loans was due to a $75.5 million increase in average loan balances and a 7 basis point increase in the yield on loans to 5.23% from 5.16%.

Net interest income was $25.0 million for the first nine months of 2016, an increase of $4.0 million, or 19.1%, compared to $21.0 million for the same period last year. The year-over-year increase was primarily attributable to a $4.4 million increase in interest earned on loans, which was partially offset by a $528,000 increase in interest expense on deposits. The increase in interest earned on loans was due to a $81.9 million increase in average loan balances and a 22 basis point increase in the yield on loans to 5.48% from 5.26%.

The net interest margin was 4.08% for the current quarter, a decrease of 12 basis points from 4.20% in the prior quarter and an increase of 22 basis points from 3.86% in the year ago quarter. The quarter-over-quarter decrease was primarily due to a 14 basis point decrease in the yield on interest-earning assets to 4.77% from 4.91% for the prior quarter, which was partially offset by a 2 basis point decrease in our cost of funds to 0.77% from 0.79% last quarter. The year-over-year quarterly increase was primarily due to a 19 basis point increase in the yield on interest-earning assets and a 3 basis point decrease in our cost of funds to 0.77% from 0.80% for the same period last year.

For the nine months ended September 30, 2016, the net interest margin was 4.24%, an increase of 21 basis points compared to 4.03% for the same period last year. This increase was primarily driven by a 21 basis point increase in the yield on interest-earning assets, which was partially offset by a 1 basis point increase in our cost of funds to 0.79% from 0.78% for the same period last year.

Provision for Loan Losses

The Bank recorded a $3.1 million provision for loan losses in the third quarter of 2016, an increase of $2.7 million compared to $400,000 recorded in the prior quarter and an increase of $3.0 million compared to $150,000 recorded in the same quarter last year. The provision for loan losses recorded in the current quarter related to one commercial loan to a borrower whose financial difficulties were identified in October 2016. For the first nine months of 2016, the Bank recorded a $3.9 million provision for loan losses, an increase of $3.8 million from $150,000 recorded in the same period in 2015.

Noninterest Income

For the current quarter, noninterest income totaled $2.9 million, a decrease of $215,000, or 6.9%, and an increase $420,000, or 17.0%, from $3.1 million and $2.5 million in the prior and year ago quarters, respectively. The quarter-over-quarter decrease was primarily due to a $437,000 decrease in gains on sales of SBA loans, which was partially offset by a $275,000 increase in SBA loan servicing fee income. The year-over-year quarterly increase was primarily due to a $224,000 increase in SBA loan servicing fee income and a $174,000 increase in gains on sales of SBA loans.

For the nine months ended September 30, 2016, noninterest income increased $875,000 to $8.9 million from $8.0 million in the same period last year. The increase was primarily due to a $520,000 increase in gains on sales of SBA loans, a $121,000 increase in SBA loan servicing fee income, and a $112,000 increase in other service fee income.

As the following table indicates, during the third quarter of 2016, the Bank sold $28.7 million of SBA loans, compared to $32.1 million in the preceding quarter and $24.6 million in the same quarter last year. For the nine months ended September 30, 2016, the Bank sold $92.3 million of SBA loans, compared to $77.4 million in the same period last year. The quarterly average premium on sales of SBA loans for the current quarter was 9.29% compared to 10.17% in the prior quarter and 10.40% in the year ago quarter. The average premium on sales of SBA loans for the nine months ended September 30, 2016 was 9.80% compared to 11.05% in the same period last year. The amount of SBA loan sales varies based on the volume of loans we originate, our liquidity needs and market conditions.

	Three Months Ended													Nine Months Ended
	September 30,			June 30,			%		September 30,			%		September 30,			September 30,			%
		2016			2016		Change			2015		Change			2016			2015		Change
	(Dollars in thousands)
SBA loans held-for-sale at beginning of the quarter	$	13,780		$	9,602		43.5	%	$	25,286		(45.5	%)	$	17,809		$	21,267		(16.3	%)
SBA loans originated/transferred from held-for-investment during the quarter		26,545			36,332		(26.9	%)		20,534		29.3	%		86,153			77,645		11.0	%
SBA loans sold during the quarter		(28,722	)		(32,127	)	(10.6	%)		(24,594	)	16.8	%		(92,258	)		(77,372	)	19.2	%
SBA loans principal payment, net of advance		(78	)		(27	)	188.9	%		(183	)	(57.4	%)		(179	)		(497	)	(64.0	%)
SBA loans held-for-sale at end of the quarter	$	11,525		$	13,780		(16.4	%)	$	21,043		(45.2	%)	$	11,525		$	21,043		(45.2	%)

Gain on sale of SBA loans	$	1,975		$	2,412		(18.1	%)	$	1,801		9.7	%	$	6,711		$	6,191		8.4	%
Premium on sale (weighted average)		9.29	%		10.17	%	(8.7	%)		10.40	%	(10.7	%)		9.80	%		11.05	%	(11.3	%)

SBA loan production	$	32,854		$	42,567		(22.8	%)	$	28,213		16.4	%	$	116,755		$	104,049		12.2	%

Noninterest Expense

Noninterest expense for the third quarter of 2016 was $5.4 million, a decrease of $221,000, or 3.9%, from $5.6 million in the prior quarter and an increase of $824,000, or 18.0%, from $4.6 million in the year ago quarter. The quarter-over-quarter decrease was primarily due to a $31,000 decrease in salaries and employee benefits, a $34,000 decrease in data processing expense, and a $40,000 decrease in professional expense, and a $135,000 decrease in other expense, which were partially offset by a $27,000 increase in occupancy and equipment expense. The year-over-year quarterly increase was primarily due to a $512,000 increase in salaries and employee benefits, a $62,000 increase in occupancy and equipment expense, a $154,000 increase in marketing expenses, and a $78,000 increase in other expense. The year-over-year quarterly increase in salaries and employee benefits was primarily due to a 12 person increase in the average number of full time equivalent employees ("FTEs") to 132 during the current quarter from 120 during the year ago quarter.

For the nine months ended September 30, 2016, noninterest expense was $16.5 million, an increase of $2.7 million, or 19.1%, from $13.9 million for the same period last year. The increase was primarily due to a $2.0 million increase in salaries and employee benefits, a $109,000 increase in occupancy and equipment expense, a $305,000 increase in data processing expense, and a $202,000 increase in other expense. The increase in salaries and employee benefits was due to a 17 person increase in the average number of FTEs to 130 in the first nine months of 2016 from 113 in the same period last year. The increase in data processing expense was primarily due to core system conversion related expenses.

	At or for the Three Months Ended													At or for the Nine Months Ended
	September 30,			June 30,			%		September 30,			%		September 30,			September 30,			%
		2016			2016		Change			2015		Change			2016			2015		Change
	(Dollars in thousands)

Salaries and benefits	$	3,690		$	3,721		(0.8	%)	$	3,178		16.1	%	$	11,189		$	9,182		21.9	%
FTE at end of period		136			129		5.4	%		119		14.3	%		136			119		14.3	%
Average FTE during the period		132			128		2.9	%		120		10.0	%		130			113		15.0	%
Salaries and benefit/average FTE¹	$	111		$	117		(5.1	%)	$	105		5.7	%	$	115		$	109		5.5	%
Salaries and benefit/average assets¹		1.74	%		1.85	%	(5.9	%)		1.65	%	5.5	%		1.85	%		1.73	%	6.9	%
Noninterest expense/average assets¹		2.54	%		2.79	%	(9.0	%)		2.37	%	7.2	%		2.73	%		2.61	%	4.6	%

¹ Annualized

Income Tax Expense

The income tax expense was $1.0 million for the quarter, or an effective tax rate of 36.92%, compared to $2.2 million, or an effective tax rate of 41.06%, for the prior quarter and $2.1 million, or an effective tax rate of 41.48%, for the year ago quarter. For the nine months ended September 30, 2016, income tax expense was $5.4 million, or an effective tax rate of 40.40%, compared to $6.2 million, or an effective tax rate of 41.57% in the same period last year.

Pre-Tax, Pre-Provision Income

For the third quarter of 2016, the Bank's pre-tax, pre-provision ("PTPP") income was $5.9 million, an increase of $156,000, or 2.7%, from $5.7 million for the prior quarter and an increase of $720,000, or 13.9%, from $5.2 million for the same quarter a year ago. Annualized PTPP income to average assets decreased to 2.77% for the current quarter, compared to 2.84% and 2.68% for the prior and year ago quarters, respectively. For the nine months ended September 30, 2015, PTPP income was $17.3 million, an increase of $2.2 million, or 14.8%, from $15.1 million in the same period last year. PTPP income to average assets for the nine months ended September 30, 2016 was 2.86%, an increase of 1.1%, compared to 2.83% from the same period last year.

	Three Months Ended													Nine Months Ended
	September 30,			June 30,			%		September 30,			%		September 30,			September 30,			%
		2016			2016		Change			2015		Change			2016			2015		Change
	(Dollars in thousands)

PTPP income	$	5,882		$	5,726		2.7	%	$	5,162		13.9	%	$	17,317		$	15,088		14.8	%
Annualized PTPP/average assets		2.77	%		2.84	%	(2.5	%)		2.68	%	3.4	%		2.86	%		2.83	%	1.1	%
PTPP, excluding gain on sale of SBA loans	$	3,907		$	3,314		17.9	%	$	3,361		16.2	%	$	10,606		$	8,897		19.2	%

"As the year end approaches, we are focused on strong origination and sales of SBA loans, lowering our cost of funds, and managing our loan concentration levels." added Ms. Kim.

BALANCE SHEET

At September 30, 2016, the Bank had total assets of $892.8 million, an increase of $67.3 million, or 8.1%, from $825.5 million at June 30, 2016 and an increase of $114.0 million, or 14.6%, from $778.8 million at September 30, 2015. Earning assets totaled $861.6 million at September 30, 2016, an increase of $59.1 million, or 7.4%, from $802.5 million at June 30, 2015, and an increase of $101.3 million, or 13.3%, from $760.3 million at September 30, 2015.

The quarter-over-quarter increase in earning assets was primarily due to a $43.3 million increase in interest-earning balances due from the FRB and other banks and a $15.1 million increase in investment securities. The year-over-year increase in earning assets was primarily due to a $21.9 million increase in interest-earning balances due from the FRB and other banks, a $35.4 million increase in investment securities, and a $43.9 million increase in gross loans including loans held-for-sale.

	September 30,			June 30,			%		September 30,			%
		2016			2016		Change			2015		Change
	(Dollars in thousands, except per share amounts)

Assets	$	892,758		$	825,493		8.1	%	$	778,807		14.6	%
Earning assets		861,626			802,496		7.4	%		760,311		13.3	%
Interest-earning deposits at FRB and other banks		101,515			58,214		74.4	%		80,077		26.8	%
Investment securities		39,864			24,757		61.0	%		4,485		788.8	%
Loans held-for-sale		11,525			13,780		(16.4	%)		21,043		(45.2	%)
Loans receivable		703,372			700,395		0.4	%		649,925		8.2	%
Deposits		776,835			711,504		9.2	%		675,225		15.0	%

Tangible common equity/total assets		11.08	%		11.76	%	(5.8	%)		11.20	%	(1.1	%)
Tangible common equity per common share	$	10.89		$	10.71		1.7	%	$	9.80	¹	11.1	%

¹ Restated for 10% stock dividend to shareholders of record on May 16, 2016

Investment Securities

Investment securities totaled $39.9 million at the current quarter-end, an increase of $15.1 million, or 61.0%, compared to $24.8 million at the end of the prior quarter, and an increase of $35.4 million, or 788.8%, compared to $4.5 million at the end of the year ago quarter.

Loans Receivable

The following table details loans by type at the dates indicated:

	September 30,			June 30,			%		September 30,			%
		2016			2016		Change			2015		Change
	(Dollars in thousands)

Construction	$	12,232		$	10,894		12.3	%	$	7,938		54.1	%
Commercial real estate		564,214			550,767		2.4	%		498,659		13.1	%
Commercial and industrial		122,125			133,686		(8.6	%)		140,194		(12.9	%)
Consumer		3,448			3,785		(8.9	%)		1,872		84.2	%
Gross loans		702,019			699,132		0.4	%		648,663		8.2	%

Net deferred loan costs		1,353			1,263		7.1	%		1,262		7.2	%
Gross loans, net	$	703,372		$	700,395		0.4	%	$	649,925		8.2	%

Loans held-for-sale	$	11,525		$	13,780		(16.4	%)	$	21,043		(45.2	%)
Gross loans, net, including loans held-for-sale	$	714,897		$	714,175		0.1	%	$	670,968		6.5	%

Loan-to-deposit (LTD) ratio:		90.54	%		98.44	%	(8.0	%)		96.30	%	(6.0	%)
LTD ratio including loans held-for-sale		92.03	%		100.38	%	(8.3	%)		99.37	%	(7.4	%)

At September 30, 2016, gross loans, net, including loans held-for-sale were $714.9 million, an increase of $722,000, or 0.1%, from $714.2 million at June 30, 2016 and an increase of $43.9 million, or 6.5%, from $671.0 million at September 30, 2015. During the third quarter of 2016, total new loan production, including revolving lines of credit, was $86.0 million, compared to $113.1 million for the prior quarter and $113.4 million for the same quarter last year. For the nine months ended September 30, 2016, total new loan production, including revolving lines of credit, was $275.3 million, compared to $285.2 million for the same period last year.

As discussed earlier, during the current quarter we sold $28.7 million of SBA loans, compared to sales of $32.1 million in the prior quarter and sales of $24.6 million in the year ago quarter. During the nine months ended September 30, 2016 we sold $92.3 million of SBA loans, compared to sales of $77.4 million for the same period last year.

Deposits

The following table details deposits by category at the dates indicated:

	September 30, 2016					June 30, 2016					%		September 30, 2015					%
	Balance			%		Balance			%		Change		Balance			%		Change
	(Dollars in thousands)

Noninterest-bearing demand	$	187,367		24.1	%	$	155,420		21.8	%	20.6	%	$	145,348		21.5	%	28.9	%
Money market & NOW		166,209		21.4	%		148,484		20.9	%	11.9	%		141,722		21.0	%	17.3	%
Savings		12,373		1.6	%		10,568		1.5	%	17.1	%		7,354		1.1	%	68.2	%
Time deposits		410,886		52.9	%		397,032		55.8	%	3.5	%		380,801		56.4	%	7.9	%

Total Deposits	$	776,835		100.0	%	$	711,504		100.0	%	9.2	%	$	675,225		100.0	%	15.0	%

Cost of deposits		0.76	%				0.78	%						0.79	%

Total deposits were $776.8 million at the end of the current quarter, an increase of $65.5 million, or 9.2%, compared to $711.5 million at the end of the prior quarter and an increase of $101.6 million, or 15.0%, compared to $675.2 million at the end of the year ago quarter. Noninterest-bearing deposits increased $31.9 million, or 20.6%, to $187.4 million at the end of the current quarter from $155.4 million at the end of the prior quarter and increased $42.0 million, or 28.9%, compared to $145.3 million at the end of the year ago quarter. Noninterest-bearing deposits to total deposits were 24.1%, 21.8% and 21.5% at the end of the current, prior and year ago quarters, respectively. The Bank's cost of deposits decreased 2 basis points to 0.76% in the current quarter from 0.78% in the prior quarter and decreased 3 basis points from 0.79% in the same quarter last year. The quarter-over-quarter decrease in the cost of deposits was primarily due to replacing maturing higher-cost retail time deposits with lower-cost wholesale time deposits combined with a $19.1 million increase in average balance of noninterest-bearing deposits. For the nine months ended September 30, 2016, the Bank's cost of deposits was 0.78%, an increase of 1 basis point compared to 0.77% for the same period last year.

ASSET QUALITY

		September 30,			June 30,			%		September 30,			%
			2016			2016		Change			2015		Change
		(Dollars in thousands)
Delinquent Loans:¹
	Loans 30-89 days past due	$	576		$	354		62.5	%	$	1,369		(57.9	%)
	90 days or more past due and still accruing		126			-		100.0	%		-		100.0	%
	Nonaccrual loans		6,965			3,279		112.4	%		2,682		159.7	%
	Delinquent loans	$	7,667		$	3,633		111.0	%	$	4,051		89.3	%

Nonperforming Assets:
	90 days or more past due and still accruing	$	126		$	-		100.0	%	$	-		100.0	%
	Nonaccrual loans ¹		6,965			3,279		112.4	%		2,682		159.7	%
	Performing TDR loans		3,898			3,930		(0.8	%)		4,422		(11.8	%)
	Nonperforming loans		10,989			7,209		52.4	%		7,104		54.7	%

	Other real estate owned		1,403			1,155		21.5	%		-		100.0	%
	Nonperforming assets	$	12,392		$	8,364		48.2	%	$	7,104		74.4	%

	Nonaccrual loans to gross loans (exc. LHFS)		0.99	%		0.47	%	110.6	%		0.41	%	141.5	%
	Nonperforming loans to gross loans (exc. LHFS)		1.56	%		1.03	%	51.5	%		1.09	%	43.1	%
	Nonperforming assets to total assets		1.39	%		1.01	%	37.6	%		0.91	%	52.7	%
	Texas Ratio²		11.13	%		7.86	%	41.6	%		7.36	%	51.2	%

Classified Loans: ¹
	Substandard	$	12,111		$	9,783		23.8	%	$	7,483		61.8	%
	Doubtful		-			-		-			-		-
	Loss		-			-		-			-		-
	Classified loans	$	12,111		$	9,783		23.8	%	$	7,483		61.8	%

	Classified assets to total assets		1.36	%		1.19	%	14.3	%		0.96	%	41.7	%
	Classified assets to Tier 1 and ALLL		10.87	%		9.20	%	18.2	%		7.75	%	40.3	%

Allowance for Loan Losses Items:
	Balance at beginning of period	$	9,321		$	9,026		3.3	%	$	9,039		3.1	%
	Provision for loan losses		3,100			400		675.0	%		150		1966.7	%
	Charge-offs		3			166		(98.2	%)		-		100.0	%
	Recoveries		20			61		(67.2	%)		49		(59.2	%)
	Balance at the end of period	$	12,438		$	9,321		33.4	%	$	9,238		34.6	%

	ALLL to gross loans (exc. LHFS)		1.77	%		1.33	%	33.1	%		1.42	%	24.6	%
	ALLL to nonperforming loans		113.19	%		129.30	%	(12.5	%)		130.04	%	(13.0	%)

¹ Net of SBA guaranteed balance
² Nonperforming assets divided by tangible common equity and ALLL

Loans 30 to 89 days past due and on accrual status at the end of the current quarter were $576,000, an increase of $222,000 compared to $354,000, at the end of the prior quarter, and a decrease of $793,000 from $1.4 million at the end of the same quarter last year. Loans 90 days or more past due and still accruing were $126,000, at the end of the current quarter, compared to none at the end of the prior and year ago quarters. Nonaccrual loans increased $3.7 million to $7.0 million, or 0.99% of gross loans excluding loans held-for-sale, at the end of the current quarter from $3.3 million, or 0.47% of gross loans excluding loans held-for-sale, at the end of the prior quarter and increased $4.3 million from $2.7 million, or 0.41% of gross loans excluding loans held-for-sale, at the end of the year ago quarter.

Nonperforming loans at September 30, 2016 were $11.0 million, or 1.56% of gross loans excluding loans held-for-sale, an increase of $3.8 million compared to $7.2 million, or 1.03% of gross loans excluding loans held-for-sale, at the end of the prior quarter and an increase of $3.9 million from $7.1 million, or 1.09% of gross loans excluding loans held-for-sale, at the end of the same quarter last year.

Nonperforming assets at the end of current quarter were $12.4 million, or 1.39% of total assets, an increase of $4.0 million compared to $8.4 million, or 1.01% of total assets, at June 30, 2016 and an increase of $5.3 million from $7.1 million, or 0.91% of total assets, at September 30, 2015.

The allowance for loan losses at the end of current quarter was $12.4 million, or 1.77% of gross loans excluding loans held-for-sale, compared to $9.3 million, or 1.33% of gross loans excluding loans held-for-sale, at June 30, 2016, and $9.2 million, or 1.42% of gross loans excluding loans held-for-sale, at September 30, 2015.

CAPITAL

At September 30, 2016, the Bank continued to exceed all regulatory capital requirements to be classified as a "well-capitalized" institution and maintained a capital conservation buffer in excess of the minimum required to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments. The minimum capital conservation buffer requirement is 0.6250% in 2016 and there was no capital conservation buffer requirement in prior years. The capital conservation buffer is calculated as the smallest excess of a bank's common equity tier 1, tier 1 risk-based and total risk-based capital ratios over the regulatory "adequately" capitalized minimum ratios of 4.5000%, 6.0000% and 8.0000%, respectively. The minimum capital conservation buffer will increase an additional 0.6250% at the beginning of each of the subsequent three calendar years, reaching the fully phased-in minimum of 2.5000% at the beginning of 2019. Effective January 1, 2016, regulatory capital ratios are rounded to four decimal places, up from two decimal places in prior years. The Bank's regulatory capital ratios and capital conservation buffer at the dates indicated are summarized below:

			CBB Capital Ratios
	Well-Capitalized		September 30,		June 30,		March 31,		December 31,		September 30,
	Minimum		2016		2016		2016		2015		2015

Leverage ratio	5.0000	%	11.6816	%	11.9349	%	12.0946	%	11.67	%	11.40	%
Common equity tier 1 capital ratio	6.5000	%	13.2559	%	13.1721	%	13.6178	%	13.25	%	12.84	%
Tier 1 risk-based capital ratio	8.0000	%	13.2559	%	13.1721	%	13.6178	%	13.25	%	12.84	%
Total risk-based capital ratio	10.0000	%	14.5124	%	14.4240	%	14.8705	%	14.50	%	14.10	%

			Capital Conservation Buffer
			September 30,		June 30,		March 31,		December 31,		September 30,
			2016		2016		2016		2015		2015

Minimum capital conservation buffer			0.6250	%	0.6250	%	0.6250	%	N/A		N/A
CBB Capital conservation buffer			6.5124	%	6.4240	%	6.8705	%	N/A		N/A

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 six full service branches in Los Angeles, Orange, and Dallas Counties and five loan production offices in Texas, Georgia, Colorado, and Washington. 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)

		September 30,			June 30,			%		September 30,			%
			2016			2016		Change			2015		Change
ASSETS
	Cash and due from banks	$	11,832		$	8,062		46.8	%	$	7,118		66.2	%
	Interest-earning deposits at the FRB and other banks		101,515			58,214		74.4	%		80,077		26.8	%
	Investment securities		39,864			24,757		61.0	%		4,485		788.8	%
	Loans held-for-sale, at the lower of cost or fair value		11,525			13,780		(16.4	%)		21,043		(45.2	%)

	Loans		703,372			700,395		0.4	%		649,925		8.2	%
	Allowance for loan losses		(12,438	)		(9,321	)	33.4	%		(9,238	)	34.6	%
	Loans receivable, net		690,934			691,074		(0.0	%)		640,687		7.8	%

	FHLB & FRB stock		5,350			5,350		0.0	%		4,781		11.9	%
	Other assets		31,738			24,256		30.8	%		20,616		53.9	%
	TOTAL ASSETS	$	892,758		$	825,493		8.1	%	$	778,807		14.6	%


LIABILITIES AND STOCKHOLDERS' EQUITY
	Noninterest-bearing	$	187,367		$	155,420		20.6	%	$	145,348		28.9	%
	Interest-bearing		589,468			556,084		6.0	%		529,877		11.2	%
	Total deposits		776,835			711,504		9.2	%		675,225		15.0	%

	FHLB advances		10,000			10,000		0.0	%		10,000		0.0	%
	Other liabilities		6,992			6,944		0.7	%		6,322		10.6	%
	Total liabilities		793,827			728,448		9.0	%		691,547		14.8	%

Stockholders' Equity			98,931			97,045		1.9	%		87,260		13.4	%
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY		$	892,758		$	825,493		8.1	%	$	778,807		14.6	%


	STATEMENT OF INCOME (Unaudited)
	(Dollars in thousands, except per share amounts)

	Three Months Ended											Nine Months Ended
	September 30,		June 30,		%		September 30,			%		September 30,		September 30,			%
		2016		2016	Change			2015		Change			2016		2015		Change

Interest income	$	9,816	$	9,633	1.9	%	$	8,617		13.9	%	$	29,147	$	24,606		18.5	%
Interest expense		1,426		1,393	2.4	%		1,351		5.6	%		4,191		3,656		14.6	%
Net interest income		8,390		8,240	1.8	%		7,266		15.5	%		24,956		20,950		19.1	%

Provision for loan losses		3,100		400	675.0	%		150		1966.7	%		3,900		150		2500.0	%
Net interest income after provision for loan losses		5,290		7,840	(32.5	%)		7,116		(25.7	%)		21,056		20,800		1.2	%

Gain on sale of loans		1,975		2,412	(18.1	%)		1,801		9.7	%		6,711		6,191		8.4	%
Service charges and other income		910		688	32.3	%		664		37.0	%		2,196		1,841		19.3	%
Noninterest income		2,885		3,100	(6.9	%)		2,465		17.0	%		8,907		8,032		10.9	%

Salaries and employee benefits		3,690		3,721	(0.8	%)		3,178		16.1	%		11,189		9,182		21.9	%
Occupancy and equipment		551		524	5.2	%		489		12.7	%		1,574		1,465		7.4	%
Other expenses		1,152		1,369	(15.9	%)		902		27.7	%		3,783		3,247		16.5	%
Noninterest expense		5,393		5,614	(3.9	%)		4,569		18.0	%		16,546		13,894		19.1	%

Income before income tax expense		2,782		5,326	(47.8	%)		5,012		(44.5	%)		13,417		14,938		(10.2	%)

Income tax expense		1,027		2,187	(53.0	%)		2,079		(50.6	%)		5,420		6,209		(12.7	%)

Net income	$	1,755	$	3,139	(44.1	%)	$	2,933		(40.2	%)	$	7,997	$	8,729		(8.4	%)

PTPP	$	5,882	$	5,726	2.7	%	$	5,162		13.9	%	$	17,317	$	15,088		14.8	%
PTPP excluding gain on sale of SBA loans	$	3,907	$	3,314	17.9	%	$	3,361		16.2	%	$	10,606	$	8,897		19.2	%

Weighted average shares for basic EPS		9,076,095		9,033,042	0.5	%		8,900,465	¹	2.0	%		9,018,368		8,806,150	¹	2.4	%
Weighted average shares for diluted EPS		9,285,072		9,218,037	0.7	%		9,196,768	¹	1.0	%		9,231,234		9,155,198	¹	0.8	%

Basic EPS	$	0.19	$	0.35	(45.7	%)	$	0.33	¹	(42.4	%)	$	0.89	$	0.99	¹	(10.1	%)
Diluted EPS	$	0.19	$	0.34	(44.1	%)	$	0.32	¹	(40.6	%)	$	0.87	$	0.95	¹	(8.4	%)

¹ Restated for 10% stock dividend to shareholders of record on May 16, 2016


SELECTED FINANCIAL HIGHLIGHTS (Unaudited)
(Dollars in thousands, except per share amounts)

		Three Months Ended													Nine Months Ended
		September 30,			June 30,			%		September 30,			%		September 30,			September 30,			%
			2016			2016		Change			2015		Change			2016			2015		Change
Performance Ratios:
	Return on average assets		0.83	%		1.56	%	(46.8	%)		1.52	%	(45.4	%)		1.32	%		1.64	%	(19.5	%)
	Return on average equity		7.04	%		13.21	%	(46.7	%)		13.58	%	(48.2	%)		11.16	%		14.22	%	(21.5	%)
	Net interest margin		4.08	%		4.20	%	(2.9	%)		3.86	%	5.7	%		4.24	%		4.03	%	5.2	%
	Cost of funds		0.77	%		0.79	%	(2.5	%)		0.80	%	(3.8	%)		0.79	%		0.78	%	1.3	%
	Efficiency ratio		47.83	%		49.51	%	(3.4	%)		46.95	%	1.9	%		48.86	%		47.94	%	1.9	%

Capital Ratios:
	Core capital (leverage) ratio		11.6816	%		11.9349	%	(2.1	%)		11.40	%	2.5	%		11.6816	%		11.40	%	2.5	%
	Common equity tier 1 risk-based capital ratio		13.2559	%		13.1721	%	0.6	%		12.84	%	3.2	%		13.2559	%		12.84	%	3.2	%
	Tier 1 risk-based capital ratio		13.2559	%		13.1721	%	0.6	%		12.84	%	3.2	%		13.2559	%		12.84	%	3.2	%
	Total risk-based capital ratio		14.5124	%		14.4240	%	0.6	%		14.10	%	2.9	%		14.5124	%		14.10	%	2.9	%
	Minimum capital conservation buffer		0.6250	%		0.6250	%	N/A			N/A		N/A			0.6250	%		N/A		N/A
	CBB Capital conservation buffer		6.5124	%		6.4240	%	N/A			N/A		N/A			6.5124	%		N/A		N/A
	Tangible common equity / total assets		11.08	%		11.76	%	(5.8	%)		11.20	%	(1.1	%)		11.08	%		11.20	%	(1.1	%)
	Tangible common equity per share	$	10.89		$	10.71		1.7	%	$	9.80	²	11.1	%	$	10.89		$	9.80	²	11.1	%

Selected Average Balances:
	Gross loans, net ¹	$	723,184		$	685,573		5.5	%	$	647,725		11.6	%	$	692,626		$	610,729		13.4	%
	Total investment securities		36,440			5,485		564.4	%		7,331		397.1	%		15,498			6,449		140.3	%
	Interest-earning assets		821,989			788,754		4.2	%		745,895		10.2	%		787,129			694,573		13.3	%
	Total assets		845,402			810,236		4.3	%		763,574		10.7	%		809,225			711,582		13.7	%
	Noninterest-bearing deposits		160,897			141,811		13.5	%		131,954		21.9	%		146,119			121,696		20.1	%
	Total deposits		728,415			698,543		4.3	%		661,463		10.1	%		696,920			614,633		13.4	%
	Interest-bearing liabilities		577,844			566,732		2.0	%		539,509		7.1	%		560,910			502,476		11.6	%
	Stockholders' equity		99,207			95,585		3.8	%		85,667		15.8	%		95,683			82,083		16.6	%

¹ Includes loans held-for-sale
² Restated for 10% stock dividend to shareholders of record on May 16, 2016


SELECTED LOAN AND ASSET QUALITY HIGHLIGHTS (Unaudited)
(Dollars in thousands)

		3rd Qtr			2nd Qtr			1st Qtr			4th Qtr			3rd Qtr
			2016			2016			2016			2015			2015
Allowance for Loan Losses
	Balance at beginning of period	$	9,321		$	9,026		$	8,546		$	9,238		$	9,039
	Provision for loan losses		3,100			400			400			350			150
	Charge-offs		3			166			18			1,227			-
	Recoveries		20			61			98			185			49
	Balance at the end of period	$	12,438		$	9,321		$	9,026		$	8,546		$	9,238

Nonperforming Assets:¹
	Over 90 days still accruing	$	126		$	-		$	-		$	-		$	-
	Nonaccrual loans		6,965			3,279			1,895			2,927			2,682
	Performing TDR loans		3,898			3,930			4,282			4,341			4,422
	Total nonperforming loans		10,989			7,209			6,177			7,268			7,104

	Other real estate owned		1,403			1,155			1,155			-			-
	Total nonperforming assets	$	12,392		$	8,364		$	7,332		$	7,268		$	7,104

Classified Loans:¹
	Substandard	$	12,111		$	9,783		$	8,346		$	7,056		$	7,483
	Doubtful		-			-			-			-			-
	Loss		-			-			-			-			-
	Total classified loans	$	12,111		$	9,783		$	8,346		$	7,056		$	7,483

Delinquent Loans:¹
	Loans 30-89 days past due	$	576		$	354		$	2,270		$	175		$	1,369
	90 days or more past due and still accruing		126			-			-			-			-
	Nonaccrual		6,965			3,279			1,895			2,927			2,682
	Total delinquent loans	$	7,667		$	3,633		$	4,165		$	3,102		$	4,051

Asset Quality Ratios:
	Net charge-offs to average gross loans ²		(0.01	%)		0.06	%		(0.05	%)		0.62	%		(0.03	%)
	Nonaccrual loans to gross loans		0.99	%		0.47	%		0.29	%		0.45	%		0.41	%
	Nonperforming assets to total assets		1.39	%		1.01	%		0.91	%		0.92	%		0.91	%
	Classified assets to total assets		1.36	%		1.19	%		1.04	%		0.90	%		0.96	%
	Classified assets to Tier 1 and ALLL		10.87	%		9.20	%		8.14	%		7.16	%		7.75	%
	Nonperforming loans to gross loans (exc. LHFS)		1.56	%		1.03	%		0.94	%		1.12	%		1.09	%
	ALLL to gross loans (exc. LHFS)		1.77	%		1.33	%		1.37	%		1.32	%		1.42	%
	ALLL to nonaccrual loans		178.58	%		284.26	%		476.31	%		291.97	%		344.44	%
	ALLL to nonperforming loans		113.19	%		129.30	%		146.11	%		117.58	%		130.04	%
	ALLL to nonperforming assets		100.37	%		111.44	%		123.10	%		117.58	%		130.04	%
	Texas ratio ³		11.13	%		7.86	%		7.15	%		7.38	%		7.36	%

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
	September 30, 2016							June 30, 2016							September 30, 2015
	Avg Balance			Interest		Yield		Avg Balance			Interest		Yield		Avg Balance			Interest		Yield

INTEREST-EARNING ASSETS
Loans ¹	$	723,184		$	9,501	5.23	%	$	685,573		$	9,395	5.51	%	$	647,725		$	8,425	5.16	%
Investment securities²		36,440			169	1.85	%		5,485			24	1.76	%		7,331			37	2.00	%
Interest-earning due from FRB and other banks		57,015			75	0.52	%		92,457			118	0.51	%		86,058			60	0.28	%
Other earning assets		5,350			101	7.51	%		5,239			96	7.37	%		4,781			95	7.88	%
Total interest-earning assets ²		821,989			9,846	4.77	%		788,754			9,633	4.91	%		745,895			8,617	4.58	%

NONINTEREST-EARNING ASSETS
Cash and due from banks		8,272							7,574							7,324
Other noninterest-earning assets		24,502							22,924							19,411
Total noninterest-earning assets		32,774							30,498							26,735

Less: Allowance for loan losses		(9,361	)						(9,016	)						(9,056	)

TOTAL ASSETS	$	845,402						$	810,236						$	763,574

INTEREST-BEARING DEPOSITS
Interest-bearing demand	$	1,446		$	-	0.15	%	$	1,250		$	-	0.15	%	$	1,271		$	-	0.15	%
Money market		154,120			342	0.88	%		149,182			316	0.85	%		138,731			318	0.91	%
Savings		11,198			44	1.56	%		9,796			36	1.48	%		7,408			35	1.87	%
Time deposits		400,754			998	0.99	%		396,504			1,000	1.01	%		382,099			957	0.99	%
Total interest-bearing deposits		567,518			1,384	0.97	%		556,732			1,352	0.98	%		529,509			1,310	0.98	%

Borrowings		10,326			42	1.62	%		10,000			41	1.65	%		10,000			41	1.65	%
Total interest-bearing liabilities		577,844			1,426	0.98	%		566,732			1,393	0.99	%		539,509			1,351	0.99	%

Noninterest-bearing deposits		160,897							141,811							131,954
Other liabilities		7,454							6,108							6,444

Stockholders' equity		99,207							95,585							85,667
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	845,402						$	810,236						$	763,574

Net interest income				$	8,420						$	8,240						$	7,266


Cost of deposits						0.76	%						0.78	%						0.79	%

Cost of funds						0.77	%						0.79	%						0.80	%

Net interest spread						3.79	%						3.92	%						3.59	%

Net interest margin²						4.08	%						4.20	%						3.86	%

¹ Includes loans-held-for-sale
² Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate


MARGIN ANALYSIS (Unaudited)
(Dollars in thousands)

	Nine Months Ended
	September 30, 2016							September 30, 2015
	Avg Balance			Interest		Yield		Avg Balance			Interest		Yield

INTEREST-EARNING ASSETS
Loans ¹	$	692,626		$	28,391	5.48	%	$	610,729		$	24,019	5.26	%
Investment securities²		15,498			214	1.84	%		6,449			99	2.05	%
Interest-earning due from banks		73,857			285	0.52	%		72,864			163	0.30	%
Other earning assets		5,148			287	7.45	%		4,531			325	9.59	%
Total interest-earning assets ²		787,129			29,177	4.95	%		694,573			24,606	4.74	%

NONINTEREST-EARNING ASSETS
Cash and due from banks		7,733							6,896
Other noninterest-earning assets		23,351							19,132
Total noninterest-earning assets		31,084							26,028

Less: Allowance for loan losses		(8,988	)						(9,019	)

TOTAL ASSETS	$	809,225						$	711,582

INTEREST-BEARING DEPOSITS
Interest-bearing demand	$	1,311		$	1	0.15	%	$	1,027		$	1	0.15	%
Money market		146,118			952	0.87	%		141,349			953	0.90	%
Savings		9,966			116	1.55	%		7,513			103	1.83	%
Time deposits		393,406			2,998	1.02	%		343,048			2,482	0.97	%
Total interest-bearing deposits		550,801			4,067	0.99	%		492,937			3,539	0.96	%

Short-term borrowings		10,109			124	1.64	%		9,539			117	1.65	%
Total interest-bearing liabilities		560,910			4,191	1.00	%		502,476			3,656	0.97	%

Noninterest-bearing deposits		146,119							121,696
Other Liabilities		6,513							5,327

Stockholders' equity		95,683							82,083

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	809,225						$	711,582

Net interest income				$	24,986						$	20,950


Cost of deposits						0.78	%						0.77	%

Cost of funds						0.79	%						0.78	%

Net interest spread						3.95	%						3.77	%

Net interest margin²						4.24	%						4.03	%

¹ Includes loans-held-for-sale
² Amounts calculated on a fully taxable equivalent basis using the current statutory federal tax rate

View source version on businesswire.com: http://www.businesswire.com/news/home/20161028005163/en/

Commonwealth Business Bank
Michael W. McCall
EVP & CFO
(323) 988-3144
MichaelM@cbb-bank.com

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Commonwealth Business Bank Reports 2016 Third Quarter Results

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