CABB California Business Bank (CE)

California Business Bank (OTCBB:CABB) (“CBB”) announced today its fourth quarter 2009 unaudited (“Q-4”) results. CBB reported a net operating loss of $1.915 million for the fourth quarter 2009, or ($1.02) per share, and total fiscal year end losses for the period ended December 31, 2009 (“FYE-09”) of $3.915 million or ($2.08) per share.

The major drivers causing current quarter losses and year-to-date losses, and information about the Bank’s remediation follows:

• The non-accrual and OREO assets are the Bank’s legacy construction loans (originated in 2006 and 2007) and this loan category has decreased to under $500 thousand at Q409 from $7.2 million at Q408, and further reductions are anticipated in the 1st quarter of 2010. These legacy assets caused:

1. Increases to the allowance for loan losses of $1.15 million for Q-4 2009 and $2.25 million YTD for FYE2009 resulted from loan charge-offs and the replenishment of our loan loss reserve to 2%,
2. OREO and third party collection expenses of $501,720 for Q4 2009 and $1.04 million YTD for 2009 impacted earnings,
3. Loss of income opportunity on non-performing legacy loans and OREO of approximately $470,000,

• The Bank made marked improvement in the level of Non-Performing Assets (“NPA”) that decreased to 38% of Tier-1 Capital as of FYE-09 from a high of 69% of Tier-1 Capital as of Q-3.
• The bank has experienced two consecutive quarters of no 30-89 day past due loans.

ASSETS: (000)

    Asset Type   FYE-09   FYE-08   FYE-07   FYE-06 Cash   2,774   1,666   1,426   1,499 Investments   21,367   17,419   31,845   29,513 Loans   84,544   82,936   82,632   52,804 Fixed Assets   686   772   769   656 Accruals   274   405   491   337 OREO   4,250   2,189   --   -- Other Assets   1,516   1,331   678   332 Total Assets   115,411   106,718   117,841   85,141             Loans:   FYE-09   FYE-08   FYE-07   FYE-06 Commercial & Industrial   56,270   53,205   53,909   34,585 SBA Loans   1,588   908   150   -- Construction   467   7,182   13,740   5,936 Commercial Real Estate   27,664   23,488   15,781   12,938 Consumer Loans   378   155   129   11 Deferred Loan Fees   -95   -10   -36   -87 Deferred Loan Premiums   35   43   44   -- Less: Reserves   1,763   2,035   1,085   579 Net Loans   84,544   82,936   82,632   52,804             Investments:   FYE-09   FYE-08   FYE-07   FYE-06 Fed Funds Sold   16,415   3,775   7,760   12,950 Securities Available for Sale   4,493   11,394   24,084   16,562 Due from Banks Interest Bearing   459   2,250   1   1 Total Investments   21,367   17,419   31,845   29,513        

Total loans at 12/31/09 increased by 2% from the prior year end. The majority of this growth was in both Commercial and Industrial loans which grew by 6% and commercial real estate loans by 18%.

CBB’s Other Real Estate Owned (“OREO”) balances decreased to $4.2 million at the end of the 4th quarter ending December 31, 2009 (“Q-4 2009”) from $4.9 million at September 30, 2009, and non-accrual (“NA”) loans decreased to $800 thousand at Q-4 2009, from $3.9 million at September 30, 2009. CBB expects non-performing legacy assets to further reduce throughout 2010. The remaining loans in CBB’s portfolio are performing and at the end of Q-4, CBB had no loans 30-89 days past due for the second consecutive quarter. However, no assurance can be given that CBB’s expectations will be realized.

CBB’s long-term investments consist of two (2) securities; a Government Agency for $2.3 million issued from the FHLBB, and one issued by GNMA for $2.0 million that is backed by the full-faith and credit of the United States The Bank has deliberately maintained a short term on investments which sacrifices short-term yield. This affords the bank protection from any sudden upward shocks in a volatile rate environment.

LIABILITIES & EQUITY: (000)

    Liabilities & Equity   FYE-09   FYE-08   FYE-07   FYE-06 Deposits   103,599   85,110   94,231   68,264 Other Borrowings   --   6,000   5,000   -- Accrual Interest Payable   73   87   234   76 Other Liabilities   385   242   400   185 Total Liabilities   104,057   91,438   99,865   68,525 Equity   11,354   15,279   17,976   16,616 Total Liabilities & Equity   115,411   106,718   117,841   85,141             Deposits:   FYE-09   FYE-08   FYE-07   FYE-06 Non-Interest Deposits   16,306   18,315   16,680   12,383 NOW Accounts   3,735   1,651   4,422   384 Savings   18,357   6,400   18,663   4,561 Money Market   9,446   17,669   12,769   19,313 Time Deposits   55,755   41,075   41,697   31,623 Total Deposits   103,599   85,110   94,231   68,264        

Total Deposits increased by 8.0% from Q-3 2009 and totaled $103.6 million as of Q-4 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® or 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 $15 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.

LIQUIDITY:

The bank’s loan-to-deposit ratio was 83.39% and net liquid assets were 17.02% as of FYE-09. Additionally, the bank has back-up sources of liquidity at both the Federal Home Loan Bank of $8.2 million and Federal Reserve Bank Discount Window of $34.4 million, respectively. These sources of both on balance and off balance sheet provide significant liquidity and funding sources.

CAPITAL:

CBB’s book balance as of the fourth quarter 2009 was $6.04 per share based upon shareholders’ equity of $11.4 million. CBB capital ratios exceed the “Well Capitalized” regulatory standards in all three capital ratios:

• Tier 1 Leverage - 9.15%
• Tier-1 Risk Based - 12.87%
• Total Risk Base Capital - 14.13%

LOOKING FORWARD:

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

• We expect continued improvement in the quality of our asset portfolio within 2010, and we project that the majority of the legacy assets will be finally resolved either by the end of 2010 or the 1st quarter 2011,
• The Bank is moving towards sustainable profitability,
• CBB is now better positioned to focus on sustainable profitability. The bank’s loan spread will also improve with the continued reduction in NPA and further placement of loan floors on variable priced loans that began in the fourth quarter of 2008, and
• CBB has been extremely proactive in analyzing its 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.