Community Business Bank Reports 2008 Third Quarter Results

SACRAMENTO, Calif.--(BUSINESS WIRE)--Community Business Bank (OTCBB:CBBC), with $134 million in total assets, today reported a loss for the third quarter of 2008 of $463,000, or $.22 per diluted share, after recording a loan loss provision of $525,000 in the quarter. These quarterly results compare with earnings of $4,000, or $.00 per diluted share for the comparable period one year ago. The year-to-date loss recognized is $317,000 after recording a provision for loan losses of $700,000 for the first nine months of the year.

“Although we are currently well-capitalized, the Bank is also considering taking advantage of the Treasury’s Troubled Asset Relief Program (“TARP”

Financial Highlights

• Total loans increased by 20%, or $21 million to $123 million, compared with $102 million in Q3 2007
• Allowance for loan and lease losses was 1.41% of total loans, compared with .98% in Q3 2007; a large provision of $525,000 was recorded in Q3 2008 as a response to higher nonperforming assets
• Deposits increased by 25%, or $21 million to $105 million, compared with $84 million in Q3 2007
• Noninterest bearing deposits increased 32%, or $3 million to $14 million, compared with $11 million in Q3 2007
• Wholesale deposits increased by 53%, or $15 million to $42 million, compared with $27 million in Q3 2007

Operating Results

Net interest income for the third quarter ending September 30, 2008 increased $333,000 or 29% over that of September 30, 2007. This improvement was primarily a result of earning assets increasing by $17 million during that period of time. In addition, the Bank reduced its interest expense by $172,000 even while deposits increased $21 million since September 2007.

Noninterest income for the quarter ending September 30, 2008 decreased by $145,000 to $12,000, down from $157,000 in the same time period a year earlier. This was due to the market for SBA and other types of loan sales essentially ending due to the deteriorating economy.

The provision for loan losses for the third quarter of 2008 was $525,000, which represents an increase of $475,000 over September 30, 2007. Management’s assessment of the adequacy of the ALLL takes into consideration changes in loan volumes, concentrations and other qualitative factors including loan growth.

Noninterest expense rose $181,000 in the third quarter of 2008 over the same period in 2007. This reflects lower loan origination costs due to fewer loans boarded; these costs effectively decrease personnel expense, thus fewer recorded actually results in an increase in this category. Higher compensation and employee benefits associated with an increase in the number of staff, as well as higher occupancy expense related to new and / or expanded Bank facilities also contributed to this increase.

Balance Sheet Summary

As of September 30, 2008, total loans grew by 20%, or $21 million, to $121 million from $101 million at the end of the third quarter of 2007. Commercial real estate loans accounted for the largest percentage of the total loan portfolio at 35% of total loans, which is up from 25% one year ago. The concentration of construction and development loans, at 24%, was significantly down from 36% last year at the same time. Commercial and industrial loans represent 19% of the Bank’s portfolio at September 30, 2008, up from 16% one year ago. Other real estate-related loans currently make up 9% of the Bank’s portfolio, while agricultural-related and other loans comprise the remaining 13% of the Bank’s loans.

As of September 30, 2008, the allowance for loan and lease losses (ALLL) was $1.7 million, or 1.41% of gross loans, compared with $1.0 million, or .98% of gross loans at the end of the third quarter 2007. Management’s assessment of the adequacy of the ALLL takes into consideration changes in loan volumes, concentrations and other qualitative factors including loan growth. The Bank continues to maintain strong asset quality overall, however, several loans have been identified that are not performing as agreed primarily due to the severe economic changes in the marketplace. This has led to a nonperforming assets to total loans ratio of 3.97% as of September 30, 2008, up from 0% at the same time last year. Management is diligently working through these problematic and nonperforming loans and will know the extent of losses to the Bank, if any, in the next several months.

Total deposits were $105 million at September 30, 2008, compared with $84 million a year ago. The largest growth was from wholesale certificates of deposit; this category increased by $15 million compared with a year ago. Management has implemented a Liability Management Strategy in order to drive down its cost of funds. Replacement of high-cost promotional retail CDs with wholesale funding has been the primary thrust during the first year of this program. Savings and money market deposits increased $4 million, while noninterest bearing DDA increased $3.5 million in the last year as calling efforts continue to reap benefits. Retail CDs decreased $3 million from a year ago, once again primarily due to the run-off of higher-cost “specials” and replacement with alternative funding sources.

Shareholders' equity at September 30, 2008 decreased by $147,000 to $18.7 million from $18.9 million a year ago. This decrease was primarily due to the large provision for loan losses in the third quarter of 2008; this small loss was offset partially by accounting for stock options. The Bank continues to be "well-capitalized" under all regulatory categories.

“Recent economic developments and instability in the financial markets have created a number of problems for the banking industry as a whole and is reflected in the less than expected third quarter performance of Community Business Bank.,” said John DiMichele, President and Chief Executive Officer. “The current market conditions are challenging for all businesses throughout the nation. The negative impact to the general economy, housing industry and businesses in general has resulted in the Bank increasing its loan loss reserve to a much higher level because of the rise in non-performing assets.”

“On the positive side, we are actively managing and have recognized reductions in these non-performing assets. There is a lot of work associated with these troubled loans, which not only affects our earnings, but is a major distraction when we are trying to profitably grow the Bank.”

“Although we are currently well-capitalized, the Bank is also considering taking advantage of the Treasury’s Troubled Asset Relief Program (“TARP”), specifically the Treasury Capital Purchase Plan (“TCPP”). The TCPP would allow the Bank to further enhance its capital position in these uncertain times”.

CONSOLIDATED BALANCE SHEETS (Unaudited) - $ in thousands
		9/30/2008			9/30/2007
ASSETS		----------			----------
Cash & Due From	$	4,661		$	1,686
Fed Funds Sold	-				1,120
Investment Securities		3,611			6,736
Loans Net of Deferred Fees		122,872			102,100
Allowance for Loan Losses		(1,731	)		(1,003	)
Net Loans		121,141			101,097
Premises and Equipments, Net		1,744			3,653
Accrued Interest Receivable		581			648
Other Assets		2,397			1,876
TOTAL ASSETS	$	134,135		$	116,816
LIABILITIES & SHAREHOLDERS' EQUITY
Non-interest Bearing Deposits		14,122			10,667
Interest Bearing Deposits		90,928			73,561
Total Deposits		105,050			84,228
Accrued expenses/other liabilities		1,358			314
Other borrowings		9,000			13,400
Total Liabilities		115,408			97,942
Total Shareholders' Equity		18,727			18,874
Total Liabilities and Shareholders'
Equity	$	134,135		$	116,816

CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) - $ in thousands
		Nine Months Ended
		9/30/2008			9/30/2007
Net Interest Income	$	4,051		$	3,141
Provision for Loan Loss		700			75
Non-Interest Income		216			374
Non-interest Expense		3,883			3,348
Income Before Income Taxes		(316	)		92
Income Taxes	1			1
NET INCOME	$	(317	)	$	91
Diluted EPS	$	(.15	)	$	.04

CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) - $ in thousands
		Three Months Ended
		9/30/2008		9/30/2007
Net Interest Income	$	1,479	$	1,146
Provision for Loan Loss		525		50
Non-Interest Income		12		157
Non-interest Expense		1,429		1,249
Income Before Income Taxes		(463)	4
Income Taxes	-		-
NET INCOME	$	(463)	$	4
Diluted EPS	$	(.22)	$	-

The Bank's Call Reports are available for review or download directly from the FDIC website at www.fdic.gov, or through the link at the Bank's website at www.communitybizbank.com.

Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and factors such as: (1) the impact of changes in interest rates, (2) fluctuation in economic conditions, (3) competition in the Company's defined market, (4) the Company's ability to sustain its internal growth rate and to preserve its earning assets quality, and (5) government regulations. Although the Company believes the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct.