California Business Bank Announces 3rd Quarter 2009 Financial Results

California Business Bank (OTCBB:CABB) (“CBB”) announced today its third quarter 2009 unaudited (“Q-3”) results. CBB reported a net operating loss of $1.765 million for the third quarter 2009, or $0.93 per share, compared to a profit as of June, 30, 2009 (“Q-2”) of $11.4 thousand, or $.006 per share. The year-to-date (“YTD”) loss at Q-3 was $2.074 million, and this represented $(1.09) per share compared to the 3rd quarter 2008 net loss of $0.3 million, or $0.16 per share.

The major drivers causing current quarter losses were:

Increases to the allowance for loan losses of $1.4 million for Q-3 resulting from charging-off $2 million in loans
Increase in FDIC assessments of $185,000 for Q-3, and $260,000 YTD
OREO and third party collection expenses of $300,000

Charles Wood, President and CEO of CBB commented: “The banking industry has been impacted significantly from the general economic events of the last year, and CBB is no exception. We are pleased to report that the Bank is working aggressively and successfully to recognize the financial impact of the general economy and specifically the real estate-related economic impacts to the Southern California market, and that CBB remains well-capitalized well in excess of regulatory requirements. The Bank took very proactive steps this year to recognize financial impacts on our construction and real-estate related portfolios, and we believe that we are well positioned to maintain our strong capital reserves and return to profitability within the near future. We have instituted enhanced controls on our lending and credit underwriting standards, and have, and will continue to review our portfolio minutely. We are pleased to report that we see little or no additional declines in the quality of our portfolio, and we look confidently toward 2010”.

CAPITAL:

CBB’s book balance as of the third quarter 2009 was $6.93 per share based upon shareholders’ equity of $13.1 million. CBB capital ratios exceed the “Well Capitalized” regulatory standards in all three capital ratios:

Core Capital – 11.72%
Tier-1 Risk Base – 14.14%
Total Risk Base Capital - 15.38%

ASSETS:

Total Assets increased by 7.5% to $114.7 million as of Q-3, from $106.7 million at December 31, 2008. Total Assets increased by 3% from $111.8 million in Q-2.

CBB is forecasting OREO decreasing to $3.5 million at the end of the 4th quarter ending December 31, 2009 (“Q-4”), and non-accrual (“NA”) loans decreasing to $.4 million at Q-4 2009. CBB expects the majority of its problem loans and assets to be resolved by the end of the 1st quarter, March 31, 2010, reducing the level of both the NA loans and OREO to $2.3 million. Furthermore, CBB expects the remainder of OREO will be resolved in 2010 to early 2011. However, no assurance can be given that CBB’s expectations will be realized.

The remaining loans in CBB’s portfolio are performing and at the end of Q-3, CBB had no loans 30-89 days past due and only one loan participation purchased with a balance of $300,000 in the over 90 days past due and still accruing category. This loan is expected to be renewed by the lead bank early in the fourth quarter.

LIABILITIES:

Total Deposits increased by 5% from Q-2 and totaled $95.9 million as of Q-3 and increased by 13% from December 31, 2008. Total Deposits further increased by 6% to $101.4 million as of October 31, 2009.

The growth in savings and money market deposits resulted primarily from new deposit products, appropriately called Stimulus Savings® and Stimulus Money Market®. These accounts require a transaction account and a transfer from either Stimulus Savings®/Stimulus Money Market® to a transaction account monthly. Additionally, CBB has had good success in generating new and existing customers for debit card and on-line banking services, all of which have resulted in deepening the quality and penetration of our customer base, with that base increasing the number of products per customer, in many cases to 5 to 7 products per customer These products generated $10 million in interest bearing deposits and $1 million in transaction account deposits since implementation approximately very early in October, from both existing and new customers.

These additional products, and CBB’s continuing high customer service levels have allowed the Bank to improve it’s liquidity, and the stability of it’s deposit portfolio significantly, and allowed the Bank to reduce it’s reliance on wholesale funding sources. CBB expects these trends to continue through the 4th quarter of 2009 and beyond.

LOOKING FORWARD:

Although CBB can give no assurance that the following events will occur, CBB believes the following:

the majority of identified problem assets will be resolved by the end of the 1st quarter, 2010, and these assets will be finally resolved either by the end of 2010 or the 1st quarter 2011, and
it will be profitable in 2010.

CBB is also considering various types of capital offerings to add additional capital, and CBB will look for strategic opportunities for acquisition growth if capital offerings are successful.

CBB established a United States Small Business Administration (“SBA”) Department in the 4th quarter of 2009. Mr. Wayne Wirth, Senior Vice President/Manager and Mr. Grady Kjesbo, Vice President joined CBB in early October, 2009. Mr. Wirth has over 25 years experience in SBA lending and has successfully managed SBA departments. Mr. Wirth was the Western Regional Manager at the Money Store which was the largest national SBA lender, and national sales manager at Temecula Valley Bank. CBB expects SBA to be a significant revenue driver in 2010. The SBA has expanded the program as to funding, reduction of costs to borrowers, and increased guarantee amounts.

Additionally, CBB has been extremely proactive in analyzing it’s expenditures in all areas; reducing staff where appropriate, cutting overhead costs in all areas, and maximizing the value of all expenditures.

California Business Bank offers a wide range of financial services to individuals, small and medium size businesses in Los Angeles, and the surrounding communities in Southern California. Our commitment is to deliver the highest quality financial services and products to our customers.

Forward Looking Statements

Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, and are subject to the safe harbors created by the act. These forward-looking statements refer to the CBB’s current expectations regarding future operating results, and growth in loans, deposits, and assets. These forward looking statements are subject to certain risks and uncertainties that could cause the actual results, performance, or achievements to differ materially from those expressed, suggested, or implied by the forward looking statements. These risks and uncertainties include, but are not limited to (1) the impact of changes in interest rates, a decline in economic conditions, and increased competition by financial service providers on the CBB’s results of operation, (2) the CBB’s ability to continue its internal growth rate, (3) the CBB’s ability to build net interest spread, (4) the quality of the CBB’s earning assets, and (5) governmental regulations.

California Business Bank (CE) (USOTC:CABB)
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