Commonwealth Business Bank Reports Strong Year-Over-Year Second Quarter and First Half Earnings Growth; Redeems 100% of Preferred Stock Issued Under TARP

LOS ANGELES, CA--(Marketwired - Jul 30, 2013) - Commonwealth Business Bank (the "Bank") (OTCQB: CWBB), a business-focused bank familiarly known as CBB Bank, today reported financial results for the three and six months ended June 30, 2013 that included double-digit year-over-year growth of earnings, and loan balances and non-interest bearing demand deposit increases. Additionally, on July 22, 3013, the Bank completed the redemption of all outstanding shares of its non-cumulative perpetual preferred stock previously held by the U.S. Treasury under its Troubled Asset Relief Program - Capital Purchase Program (TARP CPP).

Highlights:

• Second quarter 2013 net income increased by 27% to $2.20 million or $0.64 per diluted share compared with $1.73 million or $0.54 per diluted share in second quarter 2012.

• First half 2013 net income rose 42% to $4.85 million or $1.32 per diluted share compared with $3.42 million or $1.08 per diluted share in first half 2012.

• Return on average assets of 1.81% and return on average equity of 14.44%.

• Net interest margin increased by 15 basis points to 3.84% from that of the first quarter 2013.

• Second quarter 2013 efficiency ratio improved to 46.83% from 52.03% for the first quarter of 2013.

• At June 30, 2013, total assets, net loans and deposits all increased compared with those at March 31, 2013 and at June 30, 2012.

• At June 30, 2013, non-interest bearing demand deposits increased by 26.8% from the level at March 31, 2013 and 56.3% from the level at June 30, 2012.

• Key measures of asset quality at June 30, 2013 included a "Texas Ratio" of 3.35%, non-accrual loans to gross loans ratio of 0.64%, and a total non-performing assets (NPAs) to total assets ratio of 2.40%.

• In second quarter 2013, the bank raised $4.0 million in a private offering of its common stock, the proceeds of which were used, in combination with the Bank's retained earnings, to redeem 100% of the outstanding TARP CPP preferred stock held by the U.S. Treasury.

"We continue to generate strong and balanced results that reflect the efforts of our talented team and a commitment to excellent service," said Joanne Kim, President and CEO. "Our ability to provide value and a seamless customer relationship experience has helped us mitigate the industry-wide challenges of intense competition and rate-shopping."

Second quarter net income declined to $2.20 million, or $0.64 per diluted share, compared with $2.65 million, or $0.76 per diluted share, for the first quarter of 2013. When adjusted for the first quarter's reversal of provision for loan losses, second quarter net income before income tax was higher by $941,000. Net income increased by 27% compared with $1.73 million or $0.54 per diluted share in the second quarter of 2012. Net income for the first half of 2013 rose 42% to $4.85 million or $1.32 per diluted share compared with $3.42 million or $1.08 per diluted share for the first half of 2012. During second quarter 2013, the Bank raised $4 million in common equity and the timing of the transaction coupled with exercising of in-money options by employees negatively impacted earnings per share for the quarter.

In first half 2013, net interest income after loan loss provision increased 38% to $10.43 million compared with $7.53 million for the same period of 2012. For the first half of 2013, net interest income included $1.46 million reversal of loan loss provision booked in the first quarter of 2013 which was associated with a recovery of a loan previously charged off and an improvement in asset quality. For the second quarter of 2013, net interest income after provision for loan losses was $4.61 million compared with $3.77 million for the same period of 2012. Total interest expense for the second quarter and for the first half of 2013 was relatively stable compared to the total interest expense for the same periods of 2012 despite an increase in average deposit balance.

Net interest margin improved to 3.84% for the second quarter of 2013, which represented a 15 basis point increase from that of the first quarter of 2013. Net interest margin, however, declined from 3.96% for the second quarter of 2012. The Bank improved its yield on earning assets by managing composition and balance and lowered its cost of funds to 0.81% for the second quarter of 2013 compared with 0.85% for the first quarter of 2013 and 0.97% for the second quarter of 2012.

"Our loan growth and a lower cost of funds during the past year has supported net interest income growth despite pressures on net interest margin and loan pay-offs," Ms. Kim noted. "Loan origination has remained strong and the rate of loan pay-offs slowed in the second quarter of 2013 compared with the first quarter of 2013. And, with its asset sensitive profile, the Bank is well positioned for interest rate increases in future periods."

Total non-interest income continued to reflect strong SBA loan production and subsequent gains on sale of SBA loans. For the six months ended June 30, 2013, total non-interest income was $4.65 million, up 80% from $2.59 million for the six months ended June 30, 2012. Second quarter 2013 total non-interest income was $2.78 million, up 94% from second quarter 2012 total non-interest income of $1.43 million.

Total non-interest expense for the first half of 2013 was $6.70 million compared with $4.95 million for the same period of 2012, reflecting an increase in salaries and benefits related to new hires and increased occupancy costs related to establishing the Texas LPOs and Loan Underwriting Center, and the relocation of the Bank's headquarters and Wilshire Branch. The Bank added revenue generating employees in SBA and commercial lending and added compliance and administration staff for support while maintaining an efficiency ratio of 46.8% for the second quarter 2013 compared with 45.5% for the same period in 2012.

"We are pleased with the immediate productivity, efficiency and growth as a result of investing in human resources and facilities," stated Ms. Kim. "Relocating our headquarters to a highly visible building in the heart of the Korean-American business community in Los Angeles has enhanced our accessibility to customers and provided a measureable marketing enhancement."

Balance Sheet, Asset Quality and Capital Strength

Total assets increased to $519.7 million at June 30, 2013 compared with $461.8 million at June 30, 2012, a 12.5% year-over-year growth. Net loans grew by 15.1% to $411.6 million at June 30, 2013 compared to $357.7 million at June 30, 2012. This increase reflects growth in SBA and core lending.

The Bank continues to demonstrate sound asset quality, with NPAs to total assets of 2.40%, total non-accrual loans to gross loans ratio of 0.64%, and a "Texas Ratio" of 3.35%, all reflecting improvement from the first quarter of 2013 and from the same period of 2012. However, loans 30 to 89 days past due increased to 0.88% of gross loans during the second quarter compared to the first quarter of 2013 as a result of a loan becoming delinquent because of a disagreement between the principals of the borrower that is undergoing litigation. It is deemed that the borrower has sufficient cash flow to service the debt.

Total deposits at June 30, 2013 increased 2.7% to $450.0 million compared with $438.0 million at March 31, 2013 and $406.6 million at June 30, 2012, primarily reflecting a 26.8% and a 56.3% growth in non-interest bearing demand deposit balances which contributed to the Bank's lower cost of funds for the period.

In July 2013, the Bank redeemed all outstanding shares of its non-cumulative perpetual preferred stock, liquidation preference of $8.1 million, pursuant to an auction held by the United States Treasury in which the Bank was the winning bidder. The preferred stock was previously issued to the U.S. Treasury under TARP CPP. The preferred stock was redeemed at an approximate discount of 4.9%. The Bank financed the redemption of the preferred stock from its retained earnings and $4 million in new common equity that was raised through a private offering in June 2013.

"We are very pleased with the outcome of the auction," commented Joanne Kim. "We believe our ability to buy back the entire outstanding preferred stock demonstrates our financial strength."

With the infusion of new common equity, coupled with strong earnings, the Bank expanded key capital ratios at June 30, 2013, compared with these capital ratios at March 31, 2013 and at June 30, 2012. At June 30, 2013, the Bank reported a Tier 1 Leverage ratio of 13.43%, a Tier 1 Risk-Based Capital ratio of 15.62%, and a Total Risk-Based Capital ratio of 16.89%. All ratios exceeded minimum regulatory standards to be deemed "well-capitalized" under regulatory guidelines.

Ms. Kim concluded: "Our business and operational model continues to exceed expectations for generating core deposit and loan activity, complemented by a focus on SBA lending that helps us maximize capital leverage while retaining less credit exposure. We are proud that our SBA lending capabilities put our ranking as the 24^th largest SBA lender in the nation in term of dollars approved during the nine months from October 2012 to June 2013, according to the National Association of Government Guaranteed Lenders report.

"We plan to open another SBA loan production office in the Southeastern United States during the third quarter. We are thrilled with the tremendous job our CBB team has done to identify attractive lending opportunities in a very competitive environment. We feel our progress and strong financial performances support our business strategy and display our ability to continue to create franchise value."

About the Company

CBB Bank is a traditional full-service commercial bank opened on March 9, 2005 and is headquartered in the business district of Koreatown, Los Angeles, California. The Bank also has loan production offices in Dallas and Houston, Texas.

Cautionary Statement Regarding Forward-Looking Statements

This press release contains certain forward-looking information about Commonwealth Business Bank (CWBB) that is intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements, and include statements related to the Bank's outlook. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of CWBB. CWBB cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. Risks and uncertainties include, but are not limited to, revenues that are lower than expected and credit quality deterioration which could cause an increase in the provision for credit losses.

These forward-looking statements involve known and unknown risks, uncertainties and factors such as: changes in consumer spending, borrowing and savings habits, technological changes, the cost of additional capital is more than expected, a change in the interest rate environment reducing interest margins, asset/liability repricing risks and liquidity risks, general economic conditions, particularly those affecting real estate values, either nationally or in the market areas in which CWBB does or anticipates doing business, including the possibility of a U.S. recession, a slowdown in construction activity, recent volatility in the credit or equity markets and its effect on the general economy, loan delinquency rates, the ability of CWBB to retain customers, demographic changes, demand for the products or services of CWBB as well as its ability to attract and retain qualified people, competition with other banks and financial institutions, and other factors. If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, CWBB's results could differ materially from those expressed in, or implied or projected by such forward-looking statements. CWBB assumes no obligation to update such forward-looking statements.

STATEMENTS OF FINANCIAL CONDITION (Unaudited)
June 30, 2013
(Dollar Amounts in Thousands)
			June 30,			March 31,			%			December 31,			%			June 30,			%
			2013			2013			Change			2012			Change			2012			Change
ASSETS
Cash and Cash Equivalent			$	81,244		$	89,537		-9.3	%		$	78,778		3.1	%			72,739		11.7	%
Total Investment Securities				10,110			9,488		6.6	%			11,542		-12.4	%			18,642		-45.8	%
	Loans and lease financing, net of deferred fee and costs			421,593			396,962		6.2	%			387,467		8.8	%			368,801		14.3	%
	Less: Allowance for loan losses			(9,960	)		(10,162	)	-2.0	%			(10,729	)	-7.2	%			(11,149	)	-10.7	%
Net Loans				411,633			386,800		6.4	%			376,738		9.3	%			357,652		15.1	%
FHLB & FRB stocks				3,513			3,288		6.8	%			3,288		6.8	%			3,264		7.6	%
Other assets				13,179			11,879		10.9	%			11,507		14.5	%			9,508		38.6	%
TOTAL ASSETS			$	519,679		$	500,992		3.7	%		$	481,853		7.9	%		$	461,805		12.5	%
LIABILITIES AND STOCKHOLDERS' EQUITY
	DDA		$	96,408		$	76,021		26.8	%		$	68,330		41.1	%		$	61,674		56.3	%
	Money market & NOW			145,034			148,545		-2.4	%			131,973		9.9	%			128,860		12.6	%
	Savings			6,176			5,109		20.9	%			5,260		17.4	%			4,801		28.6	%
	Time deposits < $100K			68,463			71,551		-4.3	%			80,654		-15.1	%			99,018		-30.9	%
	Time deposits ≥ to $100K			133,931			136,752		-2.1	%			136,777		-2.1	%			112,283		19.3	%
TOTAL DEPOSITS				450,012			437,978		2.7	%			422,994		6.4	%			406,636		10.7	%
TOTAL LIABILITIES				454,126			441,801		2.8	%			425,452		6.7	%			409,480		10.9	%
SHAREHOLDERS' EQUITY				65,553			59,191		10.7	%			56,401		16.2	%			52,325		25.3	%
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY			$	519,679		$	500,992		3.7	%		$	481,853		7.9	%		$	461,805		12.5	%

STATEMENTS OF OPERATIONS (Unaudited)

June 30, 2013

(Dollar Amounts in Thousands)

			Three Months Ended																Six Months Ended
			June 30,			March 31,				%			June 30,			%			June 30,				June 30,			$				%
			2013			2013				Change			2012			Change			2013				2012			Change				Change
	Total interest income		$	5,467		$	5,245			4.2	%		$	4,942		10.6	%		$	10,712			$	9,977		$	734			7.4	%
	Total interest expense			858			889			-3.5	%			870		-1.4	%			1,747				1,727			20			1.2	%
Net interest income before LL prov				4,609			4,356			5.8	%			4,072		13.2	%			8,965				8,250			714			8.7	%
	Provision for loan losses			-			(1,464	)		-				300		NM				(1,464	)			717			(2,181	)		NM
Net interest income after LL prov				4,609			5,820			-20.8	%			3,772		22.2	%			10,429				7,533			2,896			38.4	%
	Gain on sale of loans			2,345			1,467			59.8	%			913		NM				3,812				1,745			2,067			NM
	Service charges and other income			437			405			8.2	%			521		-16.0	%			842				844			(2	)		-0.2	%
Total non-interest Income				2,782			1,872			48.7	%			1,434		94.0	%			4,654				2,589			2,065			79.8	%
	Salaries and employee benefits			2,253			1,985			13.5	%			1,508		49.4	%			4,238				2,980			1,258			42.2	%
	Occupancy and equipment			454			439			3.4	%			288		57.6	%			893				563			330			58.7	%
	Other expenses			754			816			-7.7	%			709		6.3	%			1,570				1,404			166			11.8	%
Total non-interest Expense				3,461			3,240			6.8	%			2,505		38.2	%			6,701				4,947			1,754			35.5	%
Income (loss) before income taxes				3,930			4,452			-11.7	%			2,701		45.5	%			8,382				5,175			3,207			62.0	%
Total Income tax provision				1,728			1,807			-4.3	%			972		77.8	%			3,535				1,755			1,780			NM
Net income (loss)			$	2,202		$	2,645			-16.8	%		$	1,729		27.4	%		$	4,847			$	3,420		$	1,426			41.7	%
	BASIC EPS		$	0.68		$	0.81						$	0.56					$	1.41			$	1.10		$	0.31
	DILUTED EPS		$	0.64		$	0.76						$	0.54					$	1.32			$	1.08		$	0.24

SELECTED FINANCIAL RATIOS
June 30, 2013
(Dollar in Thousands)
			Three Month Ended
			June 30,				March 31,			%			December 31,			%			June 30,				%
			2013				2013			Change			2012			Change			2012				Change
Performance Ratios:
	Return on Average Assets			1.81	%			2.21	%	-0.41	%			1.98	%	-0.17	%			1.67	%		0.14	%
	Return on Average Equity			14.44	%			18.63	%	-4.18	%			16.58	%	-2.14	%			13.47	%		0.97	%
	Net Interest Margin			3.84	%			3.69	%	0.15	%			4.03	%	-0.19	%			3.96	%		-0.12	%
	Cost of Funds			0.81	%			0.85	%	-0.04	%			0.85	%	-0.04	%			0.97	%		-0.16	%
	Efficiency Ratio			46.83	%			52.03	%	-5.20	%			52.36	%	-5.53	%			45.50	%		1.33	%
Capital Ratios:
	Core Capital (Leverage) Ratio			13.43	%			12.21	%	1.22	%			12.18	%	1.25	%			12.50	%		0.93	%
	Tier 1 Risk-Based Capital Ratio			15.62	%			15.07	%	0.55	%			14.47	%	1.15	%			14.16	%		1.46	%
	Total Risk-Based Capital Ratio			16.89	%			16.34	%	0.55	%			15.74	%	1.15	%			15.44	%		1.45	%
Delinquent Loans, 30-89 Days Past-Due:			$	3,710			$	181		NM			$	215		NM			$	95			NM
Non-Performing Assets:
	Total Non-Accrual Loans		$	2,707			$	3,205		-15.54	%		$	3,307		-18.15	%		$	7,070			-61.71	%
	90 Days or More Past-Due and Still Accruing			-				-		-				-		-				-			-
	Accrual TDR Loans			9,770				9,761		0.10	%			10,996		-11.14	%			7,292			33.99	%
	Total Non-Performing Loans			12,477				12,966		-3.77	%			14,303		-12.77	%			14,362			-13.13	%
	Other Real Estate Owned			-				-		-				-		-				-			-
	Total Non-Performing Assets		$	12,477			$	12,966		-3.77	%		$	14,303		-12.77	%		$	14,362			-13.13	%
Asset Quality Ratios:
	Total Non-Accrual Loans to Gross Loans			0.64	%			0.81	%	-0.16	%			0.85	%	-0.21	%			1.92	%		-1.28	%
	Non-Performing Loans to Gross Loans			2.96	%			3.27	%	-0.30	%			3.69	%	-0.73	%			3.89	%		-0.93	%
	Total NPA to Assets			2.40	%			2.59	%	-0.19	%			2.97	%	-0.57	%			3.11	%		-0.71	%
	Net Charge-offs to Average Gross Loans			0.20	%			-0.82	%	1.02	%			0.32	%	-0.11	%			-0.09	%		0.29	%
	ALLL to Loans, Net of Deferred Fees/Costs			2.37	%			2.56	%	-0.19	%			2.77	%	-0.40	%			3.02	%		-0.65	%
	ALLL to Non-Accrual Loans			367.92	%			317.07	%	50.85	%			324.43	%	43.49	%			157.69	%		210.23	%
	ALLL to Non-Performing Loans			79.83	%			78.38	%	1.45	%			75.01	%	4.82	%			77.63	%		2.20	%
	Texas Ratio			3.35	%			3.78	%	-0.43	%			3.50	%	-0.15	%			10.63	%		-7.28	%