Community Business Bank Reports 2008 Second Quarter Earnings

WEST SACRAMENTO, Calif.--(BUSINESS WIRE)--Community Business Bank (OTCBB:CBBC) today reported earnings for the second quarter of 2008 of $104,000, or $.05 per diluted share, compared with earnings of $78,000, or $.04 per diluted share for the comparable period one year ago.

“The second quarter of 2008 has continued to be challenging for the financial services industry”

Financial Highlights

• Total loans increased by 40%, or $37 million to $128 million, compared with $91 million in Q2 2007
• Allowance for loan loss was 1.10% of total loans, compared with 1.13% in Q2 2007
• Deposits increased by 41%, or $30 million to $101 million, compared with $71 million in Q2 2007
• Noninterest bearing deposits increased 96%, or $7 million to $14 million, compared with $7 million in Q2 2007
• Wholesale deposits increased by 701%, or $38 million to $44 million, compared with $5 million in Q2 2007

Operating Results

Net interest income for the three months ending June 30, 2008 increased $304,000 or 30% over that of June 2007. This improvement was primarily a result of average earning assets increasing by $33 million. In addition, the Bank reduced its interest expense by $135,000 even while deposits increased $29 million since June 2007.

Noninterest income for the three months ending June 30, 2008 increased by $1,000 to $115,000, up marginally from $114,000 in the same time period a year earlier.

The provision for loan losses for the second quarter of 2008 was $150,000, which represents an increase of $125,000 over June 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 $153,000 in the second quarter of 2008 over the same period in 2007. This reflects higher salaries 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. Higher regulatory assessments, professional fees and data processing expense related to the Bank’s growth also contributed to this increase.

Net income for the second quarter of 2008 totaled $104,000, or $0.05 per diluted share, compared with earnings of $78,000, or less than $.04 per diluted share for the corresponding period in 2007.

Balance Sheet Summary

As of June 30, 2008, total loans grew by 40%, or $37 million, to $128 million from $91 million at the end of the second quarter of 2007. Construction and development loans accounted for the largest percentage of the total loan portfolio at 24% of total loans, which is down significantly from 43% one year ago. The concentration of commercial real estate loans, at 23%, was equal to last year at the same time. Commercial and industrial loans represent 20% of the Bank’s portfolio at June 30, 2008, up from 12% one year ago. Other real estate-related loans currently make up 20% of the Bank’s portfolio, while agricultural-related and other loans comprise the remaining 13% of the Bank’s loans.

As of June 30, 2008, the allowance for loan and lease losses (ALLL) was $1.4 million, or 1.10% of gross loans, compared with $1.025 million, or 1.13% of gross loans at the end of the second 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 3.05% as of June 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 $101 million at June 30, 2008, compared with $71 million a year ago. The largest growth was from wholesale certificates of deposit. Wholesale certificates of deposits increased by $38 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 nine months of this program. Noninterest Bearing DDA increased $7 million since June 30, 2007, as calling efforts continue to reap benefits. Retail CDs decreased $15 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 June 30, 2008 increased by $347,000 to $19.2 million from $18.8 million a year ago. These increases were primarily due to increasing profitability during the latter part of 2007 and the first half of 2008, as well as accounting for stock options. The Bank continues to be "well-capitalized" under all regulatory categories.

“The second quarter of 2008 has continued to be challenging for the financial services industry,” said John DiMichele, President and Chief Executive Officer. “Not only has the mortgage debacle turned into a crisis for a number of banks and mortgage providers, it has negatively impacted the economy as a whole. As such, this issue has directly or indirectly touched all of us and has added to the deteriorating confidence level of consumers and businesses which we subsequently see reflected in our customers, shareholders and employees.”

“Please be assured that Community Business Bank is willing and able to do business in this business climate. We have an experienced management team and staff that will allow us to take advantage of this unusual market opportunity. I encourage any clients, shareholders or potential customers who have questions or would like more information about the Bank to contact me or any member of our team.”

CONSOLIDATED BALANCE SHEETS (Unaudited)
- $ in thousands
		6/30/2008					6/30/2007
ASSETS		----------					----------
Cash & Due From	$	1,338				$	1,064
Fed Funds Sold	-					-
Investment Securities		3,835					7,817
Loans Net of Deferred Fees		127,565					90,869
Allowance for Loan Losses		(1,400	)				(1,025	)
Net Loans		126,165					89,844
Premises and Equipments, Net		1,340					3,672
Accrued Interest Receivable		509					451
Other Assets		1,934					1,758
TOTAL ASSETS	$	135,121				$	104,606
LIABILITIES & SHAREHOLDERS' EQUITY
Non-interest Bearing Deposits		14,257					7,267
Interest Bearing Deposits		86,540					64,119
Total Deposits		100,797					71,386
Accrued expenses/other liabilities		1,286					473
Other borrowings		13,875					13,931
Total Liabilities		115,958					85,790
Total Shareholders' Equity		19,163					18,816
Total Liabilities and Shareholders'
Equity	$	135,121				$	104,606

CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
- $ in thousands
		Three Months Ended
		6/30/2008					6/30/2007
Net Interest Income	$	1,331				$	1,028
Provision for Loan Loss		150					25
Non-Interest Income		115					114
Non-interest Expense		1,191					1,039
Income Before Income Taxes		105					78
Income Taxes		1				-
NET INCOME	$	104				$	78
Diluted EPS	$	0.05				$	0.04

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.