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Commonwealth Business Bank Reports Fourth Quarter and Full Year 2008 Results

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^{Published in Business and Finance on Wednesday, February 11th 2009 at 12:33 GMT, Last Modified on 2009-02-11 12:36:18 by Market Wire}  

LOS ANGELES--([ BUSINESS WIRE ])--Commonwealth Business Bank (OTCBB: CWBB) today reported net income of $370,000 or $0.12 diluted earnings per share for full year 2008 and a net loss of $467,000 or ($0.15) diluted earnings per share for fourth quarter.

"After three consecutive years of profits, we are disappointed to report our first quarterly loss for 2008. Despite our continued effort to vigilantly monitor the credit portfolio, many of our customers have been adversely affected by the recession and it had a negative impact on our credit performance. Our loan delinquency and nonperforming loans increased during the fourth quarter, and we increased the provisions for credit losses to support the risk profile within the loan portfolio. The recession is most likely to continue through 2009, and we expect to see elevated credit problems," stated Jack Choi, President and CEO.

The Bank recorded a net loss of $467,000 or ($0.15) diluted earnings per share in fourth quarter compared to a net income of $154,000 or $0.05 diluted earnings per share of the previous quarter. Net interest income for fourth quarter of $2.3 million, decreased by $145,000 or 6 percent from the third quarter. While the volume of earning assets grew, the net interest margin experienced further compression to 3.13 percent compared to 3.41 percent during the third quarter as prime-based loans repriced downward faster than the deposit rates declined. The provision for credit losses increased by $1.0 million to $1.6 million. There was no gain on sale of SBA loans during the fourth quarter, and noninterest income decreased to $281,000 from $311,000 reported in the third quarter. Noninterest expenses increased slightly to $1.78 million resulting in the efficiency ratio increasing to 70.0 percent. ROA and ROE for the quarter decreased to -0.63 percent and -4.38 percent, respectively, from 0.21 percent and 1.45 percent, respectively, during the third quarter.

For the twelve months ended December 31, 2008, net interest income decreased slightly to $9.2 million despite the growth of earning assets. Noninterest income for the year ending December 31, 2008 also decreased slightly to $1.6 million compared to the comparable period in 2007 as an increase in service charge income was offset by a reduction in gain on sale of SBA loans. Noninterest expense increased to $7.3 million for the year compared with $6.8 million reported in the corresponding period in 2007. This increase was mainly due to an increase in salary expenses associated with growth as well as non-recurring professional expenses associated with the Hana Financial Group's transaction. In light of the continuing challenges in the credit market, the Bank increased its provisions for credit losses to $2.9 million during 2008. This represents an increase of $556,000 compared to 2007. Net income for 2008 decreased to $370,000 or $0.12 per diluted share, compared to $1.2 million, or $0.36 per diluted share reported in 2007. The efficiency ratio increased to 67.3 percent during 2008. ROA and ROE for 2008 equaled 0.13 percent and 0.88 percent, respectively. ROA and ROE for 2007 were 0.44 percent and 2.90 percent, respectively.

As of December 31, 2008, total assets were $296.5 million compared to $295.8 million at September 30, 2008 and $257.7 million at the year-end 2007. Gross loans increased by $9.2 million or 3.9 percent to $247.6 million at year-end 2008 compared to $238.4 million at September 30, 2008 and by $36.4 million or 17.3 percent when compared to $211.2 million reported at December 31, 2007. At year-end 2008, total nonperforming loans increased to $2.1 million or 0.83 percent of total loans but still remains well below the peer average. Total nonperforming loans were $1.0 million or 0.42 percent of total loans and $426,000 or 0.20 percent of total loans at September 30, 2008 and December 31, 2007, respectively. Net charge-offs were $806,000 and $989,000 during fourth quarter and for the full year 2008, respectively. The allowance for credit losses at the year-end totaled $4.3 million or 1.72% of the gross loans compared to $3.5 million or 1.45% at September 30, 2008, or $2.3 million or 1.07% at December 31, 2007. Aggressive deposit promotions by other local banks triggered demands for higher deposit rates by customers. The Bank elected not to renew some of its high cost jumbo CDs, and total deposits decreased by $3.7 million or 1.5 percent to $238.5 million at year-end 2008 compared to $242.2 million reported in the preceding quarter. However, total deposits increased by $24.7 million or 11.6 percent when compared to $213.7 million reported at December 31, 2007. The Bank borrowed an additional $5 million in a short-term fixed rate advance from FHLB during fourth quarter increasing the total outstanding FHLB advances to $14 million.

"We recognize that the downturn of financial conditions in 2009 will continue to adversely impact the overall credit markets and profitability on a broader scale, and our focus will be on improving net interest margin and reducing overhead expenses as well as strengthening our balance sheet and enhancing risk management," commented Jack Choi.

"We issued $7.7 million in preferred stock though the Treasury's Capital Purchase Program during January 2009 which increased our total shareholder's equity to $49.4 million. We are "well-capitalized" under all regulatory categories with a total risk-based capital ratio of 19.89%, a Tier 1 risk-based capital ratio of 18.63%, and a Tier 1 leverage ratio of 16.64% at January 31, 2009. Although many lenders tightened the availability of credit, we valued our partnership with our customers and continued to make loans to meet their credit needs. In addition to renewals, we provided substantial amount of new credits to our credit-worthy customers during fourth quarter. We maintain a strong financial position, and are ready to take on the challenges of the next phase of growth."

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.cwbbank.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 Bank's defined market, (4) the Bank's ability to sustain its internal growth rate and to preserve its earning assets quality, and (5) government regulations. Although the Bank 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.