SOURCE: Beach Business Bank

October 23, 2007 23:31 ET

Beach Business Bank Reports Growth in Loans & Deposits

MANHATTAN BEACH, CA--(Marketwire - October 23, 2007) - Beach Business Bank (OTCBB: BBBC) (the "Bank") is pleased to report its results of operations for the third quarter of 2007. During the quarter, new loan commitments amounted to over $45 million, while new loan commitments for the year to date 2007 amounted to $117.8 million. Based on these commitments, the Bank realized 18.5% growth in net loans during the quarter compared to the previous quarter, and 68.0% growth in net loans over the same quarter of the prior year. Deposit growth was 24.4% over the previous quarter, and 98.6% over the same quarter of the prior year. Because of the strong loan growth, the Bank provided $305,000 in the quarter to the Allowance for Loan & Lease Losses ("ALLL"). During the quarter, the Bank made a strategic decision to retain the guaranteed portions of SBA 7(a) loans, rather than sell them into the secondary market. This decision reduced the gain on sale that might have otherwise been realized had the guaranteed portions of the Bank's SBA 7(a) loans been sold into the secondary market. The guaranteed portion of SBA 7(a) and Express loans at the quarter end was approximately $12.4 million. After recording a $739,000 provision for the nine months ending September 30, 2007, and a provision of $305,000 for the third quarter, the Bank recorded after tax earnings for the year to date of $294,000, and for the quarter of $68,000, a decrease of 37.7% compared to the Bank's reported profitability of $472,000 for the year to date through September 30, 2006, and a decrease of 74.1% compared to the Bank's reported profitability of $263,000 for the third quarter of 2006. The decrease in earnings was substantially caused by a change in strategy in the third quarter calling for the retention of the guaranteed portions of SBA loans, rather than selling them for a one time gain into turbulent secondary markets.

Robert Franko, president and chief executive of Beach Business Bank, commented, "As a result of the lack of liquidity in the credit markets in this past quarter, prices offered for the guaranteed portions of the Bank's SBA 7(a) loans were such that management made the decision to retain the loans in the Bank's own portfolio, rather than offer them for sale. This action will have a negative effect on the near-term income that would have been realized from those sales, but we believe that there will be a long term benefit to shareholders from the net interest income earned as a result of holding these loans on the Bank's own Balance Sheet. If markets recover in the future, the option of selling the guaranteed portions will still be available to the Bank."

Jim Gray, the co-chairman of the Bank's board of directors, commented, "We have strategically decided to leverage our capital by retaining the guaranteed portions of SBA loans. We view these as high quality assets because of the strength of the guarantee of the SBA, which represents the full faith and credit of the United States. At these prices, the Bank can afford to hold the loans and realize their interest income, rather than take the gain on sale."

As of the quarter end, the Bank's ALLL stands at about $2.3 million, approximately 1.39% of total loans. In the third quarter the bank placed a single loan in the approximate amount of $1.3 million on non-accrual. At the quarter end, there were no other loans 30 days or more past due.

The property securing the non-accrual loan, noted above, is a hotel and the loan was a bridge loan originated under the SBA 504 program. On October 2, 2007, the Bank foreclosed on the underlying property secured by that loan, and repurchased a senior loan in the approximate amount of $2.7 million which was secured by the property and had been fully participated to another bank. As of the date of this report, that property is owned by the Bank as Other Real Estate with an approximate value of $4.3 million. The Bank has retained a skilled management company to operate the property. At this time, the Bank does not anticipate any loss on the disposition of the property, based on the appraised value of the property. Because of the rapid decline in the performance of this individual loan, the Bank believes that this was a situation that is unique to this loan and its related parties and is not indicative of other loans in the Bank's portfolio.

The Bank ended the quarter with Shareholders' Equity of $37 million, with approximately 4 million shares issued and outstanding. The Bank continues to be well-capitalized under all regulatory guidelines, with Tier 1 leverage ratio of 21.1%, a Tier 1 risk-based capital ratio of 22.13%, and a total risk-based capital ratio of 23.38%, at the end of the quarter.

Other selected financial data is included in the table below.

Financial statements in the form of the Bank's Call Report, as filed with the FDIC, will be available on the Bank's web site at, and should be available for review or downloading from the FDIC web site at in approximately four weeks.

Since opening its doors on June 1, 2004, the Bank has grown from approximately $10.7 million in total assets to just over $194.6 million in total assets at the end of the quarter.

Beach Business Bank is headquartered at 1230 Rosecrans Avenue, Lobby Level, in Manhattan Beach, and has a second full-service office at 180 E. Ocean Blvd. in Long Beach, CA. The Bank is first and foremost a community business bank serving Los Angeles, Long Beach, and the South Bay area residents and businesses. The Bank also has a division named The Doctors Bank, which serves physicians and dentists nationwide. In addition, Beach Business Bank provides loans to small businesses, focused around the SBA 7(a), 504, and Express lending programs. The Bank makes a special effort to serve minority-owned businesses. For more information on the Bank, please visit or call 866-862-3878 or 310-536-2260; in Long Beach, call 562-435-8600.

"Safe Harbor" statement under the Private Securities Litigation Reform Act of 1995:

The financial information in this press release is based on our unaudited financial results. Certain statements in this press release, including statements regarding the anticipated development and expansion of the Bank's business, and the intent, belief, and current expectations of the Bank, its directors, or its officers, are "forward-looking" statements (as such term is defined in the Private Securities Litigation Reform Act of 1995). Such forward-looking statements are subject to risks and uncertainties and therefore the Bank's actual results may differ materially from those expressed or implied by such forward-looking statements. The risks and uncertainties that the Bank is subject to include, but are not limited to, risks related to the local and national economy, including fluctuations in interest rates and costs and changes in economic policy; the ability of the Bank to perform in accordance with its plans; competition; regulatory matters; and other risks detailed in its filings with the State of California Department of Financial Institutions and the Federal Deposit Insurance Corporation. The Bank cautions readers not to place undue reliance on any forward-looking statements. The Bank does not undertake, and specifically disclaims any obligation, to revise any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

                               September 30,  December 31,   September 30,
                                   2007           2006           2006
Balance Sheet Results
 (In thousands), except
 per share data:
    Total Assets               $     194,586  $     136,695  $     115,143
    Gross Loans                $     165,251  $     113,456  $      98,473
    Loans Held for Sale                       $      11,311  $           -
    Allowance for Loan Losses  $       2,304  $       1,565  $       1,505
    Total Net Loans            $     162,947  $     100,580  $      96,968
    Total Deposits             $     155,559  $      98,917  $      78,333
    Non-performing Assets      $       1,319  $           -  $           -
    Total Shareholders' Equity $      36,988  $      36,449  $      35,783
    Net Loans to Deposits             104.75%        101.68%        123.79%
    ALLL to Loans HTM                   1.39%          1.53%          1.53%
    Equity to Assets                   19.01%         26.66%         31.08%
    Ending Shares outstanding      4,036,984      4,036,984      4,020,484
    Ending Book Value per
     Share                     $        9.16  $        9.03  $        8.90

                                                  Three Months Ended
                                                     September 30,
                                                  2007           2006
Quarterly Operating Results (In thousands):
    Net Interest Income                       $       1,941  $       1,437
    Non-interest Income                       $         218  $         398
    Non-interest Expense                      $       1,785  $       1,296
    Income Before Provision & Taxes           $         373  $         539
    Provision for Loan Losses                 $         305  $         276
    Income Tax Expense                        $           -  $           -
    Net Income                                $          68  $         263
    Quarterly Return on Average Assets*                0.16%          0.98%
    Quarterly Return on Average Equity*                0.74%          2.96%
    Quarterly Net Interest Margin*                     3.95%          5.28%
    Quarterly Efficiency Ratio*                       82.71%         70.63%

                                                  Nine Months Ended
                                                     September 30,
                                                  2007           2006
                                              -------------  -------------
YTD Operating Results (In thousands):
    Net Interest Income                       $       5,445  $       3,752
    Non-interest Income                       $       1,056  $       1,262
    Non-interest Expense                      $       5,468  $       3,851
    Income Before Provision & Taxes           $       1,033  $       1,162
    Provision for Loan Losses                 $         739  $         689
    Income Tax Expense                        $           -  $           1
    Net Income                                $         294  $         472
    YTD Return on Average Assets*                      0.25%          0.65%
    YTD Return on Average Equity*                      1.06%          2.03%
    YTD Net Interest Margin*                           4.78%          5.24%
    YTD Efficiency Ratio*                             84.12%         76.82%

    *Percentages are reported on an annualized basis.
    Source: FDIC quarterly Call Reports for Beach Business Bank for the
    periods indicated.

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