FISB 1st Capital Bancorp (QX)

1st Capital Bank (OTCBB:FISB) reported record year-to-date net income of $2,569,000 and pre-tax earnings of $1,256,000 for the six months ended June 30, 2011 compared to $219,000 for the same period one year ago. A primary factor in these earnings was recognition of $1,313,000 in tax benefits primarily attributable to the reversal of the valuation allowance on its deferred tax assets as the Bank's consistent earnings made it likely that the Bank's deferred tax assets would be able to be utilized. In addition, 1st Capital Bank recorded record net interest income of $4,856,000 for the six months ended June 30, 2011, as the Bank continued to increase interest income and decrease interest expense.

Key Performance Highlights

• Income before income taxes of $1.3 million
• Growth in loans of $40 million over the last twelve months
• Continued excellent loan quality
• Growth in deposits of $22 million over the last twelve months
• Valuable composition of core deposits
• Well capitalized, with a total risk based capital ratio of 17.5%

Total assets grew to $229 million as of June 30, 2011 compared to $204 million a year ago. Total assets increased by $7 million compared to $222 million at March 31, 2011. Total gross loans, which comprise the majority of the Bank's assets, grew to $189 million at June 30, 2011, a 27% or $40 million growth over a year ago and 2% growth over the trailing quarter-ended March 31, 2011. Total deposits grew to $197 million, which was an increase of $22 million or 13% compared to a year ago and 3% growth over the trailing quarter-end. 1st Capital Bank continued to grow its valuable mix of "core" deposits, as demand and savings accounts were 76% of total accounts as of June 30, 2011.

"The management team at 1st Capital Bank remains focused on our continued pursuit to build a strong franchise with core loan and deposit relationships," stated President and Chief Executive Officer, Fred Rowden. "We believe our relationship-based client model provides us the competitive advantage necessary to grow the Bank within our core markets. This client centric approach and 1st Capital Bank's ranking as a premier performing community bank is making a difference," concluded Rowden.

The Bank's asset quality remained strong, with a ratio of nonperforming loans to total loans of just 0.24% as of June 30, 2011. "We continue to monitor and assess our credit quality. This, plus the character and financial strength of our borrowers, allows us to grow the Bank in a conservative and successful manner," said Mr. Rowden. 

1st Capital Bank has been recognized for its outstanding financial performance by receiving a five-star "Superior" rating from BauerFinancial, Inc in 2010; the only bank headquartered in Monterey, Santa Cruz and San Benito counties to receive such a rating. 1st Capital Bank also received a rating of "Premier Performing Bank" by the Findley Company in 2011. The Bank's Financial Summary for the quarter ended June 30, 2011 is included below. For more information regarding the Bank's growth and performance, please visit our website at www.1stcapitalbank.com, or call 831.264.4000.

About 1st Capital Bank

1st Capital Bank is focused on providing lending, deposit and highly efficient cash management services such as remote deposit and online banking for small to medium size businesses and their owners, along with specialized banking services for the medical and dental industry. The Bank is a full service financial institution with branches located in Monterey, Salinas and King City. The Bank's corporate offices are located at 5 Harris Court, Building N, Suite 3, Monterey, California 93940. Please visit our website at www.1stcapitalbank.com for more information.

Financial Summary

Income before income taxes of $660,000 for the quarter ended June 30, 2011 increased $456,000 over income before income taxes of $204,000 for the same period in the previous year, and increased $64,000 over the income before income taxes for the trailing quarter ended March 31, 2011. Net income of $1,973,000 for the quarter ended June 30, 2011 increased $1,770,000 over net income of $203,000 for the same period in the previous year, and increased $1,377,000 over the net income for the trailing quarter ended March 31, 2011. Diluted earnings per share for the three months ended June 30, 2011 increased to $0.62 compared to $0.06 for the same period in 2010. Net income and earnings per share increased primarily due to the Bank recording a benefit from income taxes of $1,313,000 for the quarter ended June 30, 2011. The tax benefits were recorded due to management's determination, based on earnings strength, that the valuation allowance on the Bank's deferred tax assets was no longer needed.

Total assets of $229,202,000 as of June 30, 2011 increased $25,156,000 (12%) from June 30, 2010 and increased $7,285,000 from March 31, 2011. Loans grew $39,593,000 or 26% from June 30, 2010 to $189,485,000 outstanding as of June 30, 2011, with $6,356,000 of that growth occurring in the three-month period from March 31, 2011 to June 30, 2011. Loan growth was funded largely by deposits, which grew $21,739,000 or 12% from June 30, 2010 to $197,136,000 as of June 30, 2011, and increased by $5,079,000 or 3% over the trailing quarter ended March 31, 2011. The remainder of loan growth was funded by a decrease in Fed Funds sold as the Bank deployed a portion of its excess liquidity into loans.

Net interest income after the provision for loan losses for the quarter ended June 30, 2011 was $2,363,000, an increase of $651,000 (38%) over the quarter ended June 30, 2010 and an increase of $237,000 or 11% over the trailing quarter ended March 31, 2011. 

Interest income for the quarter ended June 30, 2011 was $2,730,000, an increase of $511,000 (23%) over the quarter ended June 30, 2010 and $78,000 or 3% over the trailing quarter ended March 31, 2011. Average earning assets for the quarter ended June 30, 2011 were $220,422,000, an increase of $25,647,000 (13%) compared to $194,775,000 for the quarter ended June 30, 2010, and increased $9,068,000 or 4% compared to $211,354,000 for the trailing quarter ended March 31, 2011.

Interest expense for the quarter ended June 30, 2011 was $273,000, a decrease of $70,000 (20%) from the quarter ended June 30, 2010 and an increase of $20,000 (8%) from the trailing quarter ended March 31, 2011. Average interest bearing liabilities for the quarter ended June 30, 2011 were $142,592,000, an increase of $16,824,000 (13%) compared to $125,768,000 for the quarter ended June 30, 2010 and an increase of $7,553,000 or 6% compared to $135,039,000 for the trailing quarter ended March 31, 2011. While average balances of interest-bearing deposits as of June 30, 2011 increased compared to June 30, 2010, interest expense decreased due to the re-pricing of the interest-bearing deposits, reflecting the lower interest rate environment, and to changes in the mix of deposits.

These changes in the composition and pricing of 1st Capital Bank's earning assets and deposit liabilities resulted in a net interest margin for the quarter ended June 30, 2011 of 4.5% compared to 3.9% for the quarter ended June 30, 2010. The net interest margin decreased slightly from the 4.6% recorded for the trailing quarter ended March 31, 2011 due to a change in the mix of deposits as seasonally occurring noninterest bearing balances at year-end were replaced by interest bearing demand deposits during the year. 

1st Capital Bank recorded a provision for loan losses of $94,000 during the quarter ended June 30, 2011 compared to $164,000 in the quarter ended June 30, 2010 and $273,000 in the trailing quarter ended March 31, 2011. The ratio of the allowance for loan losses to total loans outstanding was 1.59% at June 30, 2011 compared to 1.54% and 1.64% at June 30, 2010 and March 31, 2011, respectively. The Bank's asset quality remained very strong, with a ratio of impaired and nonperforming loans to total loans of just 0.24% as of June 30, 2011 compared to 0.28% as of March 31, 2011. At June 30, 2010, there were no impaired or nonperforming loans. The Bank has never had any real estate acquired through foreclosure.

Noninterest income increased $11,000 (34%) to $43,000 for the quarter ended June 30, 2011 compared to the quarter ended June 30, 2010 and increased $16,000 (59%) compared to the trailing quarter ended March 31, 2011, largely due to changes in the outstanding balances of non-interest bearing deposits and to one-time payments received from the Bank's merchant services vendor.

Noninterest expenses increased by $206,000 (13%) to $1,746,000 for the quarter ended June 30, 2011 compared to the quarter ended June 30, 2010 and increased $189,000 (12%) compared to the trailing quarter ended March 31, 2011.   The majority of this increase was due to the overall growth of the Bank including the addition of several new employees during the last half of the prior year. 

A net income tax benefit of $1,313,000 was recorded in the second quarter of 2011, while no provision for taxes was required in the first quarter of 2011 or in the previous year. Recognition of this tax benefit resulted from the removal of the valuation allowance previously recognized against the Bank's net deferred tax asset as the strength of actual and forecasted earnings eliminated the need for this valuation allowance.  

Forward Looking Statements

In addition to the historical information contained herein, this press release may contain certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and subject to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. The reader of this press release should understand that all such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Factors that might cause such a difference include, among other matters, changes in interest rates; economic conditions including inflation and real estate values in California and the Bank's market areas; governmental regulation and legislation; credit quality; competition affecting the Bank's businesses generally; the risk of natural disasters and future catastrophic events including terrorist related incidents and other factors beyond the Bank's control; and factors discussed in the Bank's periodic reports under the Securities Exchange Act of 1934, as amended, on Forms 10-K, 10-Q and 8-K filed with the FDIC. The Bank does not undertake any obligation to publicly update or revise any of these forward-looking statements, whether to reflect new information, future events or otherwise, except as required by law.

1ST CAPITAL BANK
CONDENSED FINANCIAL DATA
(Unaudited)
(Dollars in thousands, except share and per share data)
		3 Months Ended June 30,			6 Months Ended June 30,
Statement of Income Data		2011	2010		2011	2010
Interest income
Loans (including fees)		$2,599	$2,054		$5,126	$3,895
Investment securities		107	123		213	239
Other		24	42		43	83
Total interest income		2,730	2,219		5,382	4,217
Interest expense
Interest on deposits		273	343		526	694
Other		--	--		--	--
Total interest expense		273	343		526	694
Net interest income		2,457	1,876		4,856	3,523
Provision for loan losses		94	164		367	257
Net interest income after provision for loan losses		2,363	1,712		4,489	3,266
Noninterest income
Service charges on deposits		16	17		29	26
Other		27	15		41	29
Total noninterest income		43	32		70	55
Noninterest expenses
Salaries and benefits		1,013	798		1,922	1,652
Occupancy		149	146		287	286
Furniture and equipment		84	75		161	142
Other		500	521		933	1,020
Total noninterest expenses		1,746	1,540		3,303	3,100
Income before income taxes		660	204		1,256	221
(Benefit from) provision for income taxes		(1,313)	1		(1,313)	2
Net income		$1,973	$203		$2,569	$219
Common Share Data
Earnings per share
Basic		$0.62	$0.06		$0.81	$0.07
Diluted		$0.62	$0.06		$0.81	$0.07
Weighted average shares outstanding
- basic		3,157,699	3,157,699		3,157,699	3,157,699
Weighted average shares outstanding
- diluted		3,159,944	3,157,699		3,159,803	3,157,699
Book value per share					$9.86	$8.79
Tangible book value					$9.86	$8.79
Shares outstanding					3,157,699	3,157,699

1ST CAPITAL BANK
CONDENSED FINANCIAL DATA
(Unaudited)
(Dollars in thousands)
Balance Sheet Data						June 2011		December 2010
Assets
Cash and due from banks						$6,025		$6,672
Federal funds sold and overnight deposits						16,033		25,530
Available-for-sale securities, at fair value, and interest bearing deposits						15,926		17,591
Loans:
Commercial						79,087		74,311
Real estate-construction						3,743		2,678
Real estate-other						105,212		97,581
Consumer						1,017		1,991
Deferred loan costs, net						426		426
Total loans						189,485		176,987
Allowance for loan losses						(3,022)		(2,723)
Net loans						186,463		174,264
Premises and equipment, net						658		745
Accrued interest receivable and other assets						4,097		2,032
Total assets						$229,202		$226,834
Liabilities and Shareholders' Equity
Deposits:
Demand, noninterest bearing						$59,647		$71,654
Demand, interest bearing						59,280		46,410
Savings						31,116		26,807
Time						47,093		52,406
Total Deposits						197,136		197,277
Accrued interest payable and other liabilities						935		1,083
Shareholders' equity						31,131		28,474
Total liabilities and shareholders' equity						$229,202		$226,834
Asset Quality
Loans past due 90 days or more and accruing interest						$ --		$ --
Nonaccrual loans						447		--
Restructured loans						--		--
Other real estate owned						--		--
Total nonperforming assets						$447		$ --
Allowance for loan losses to total loans						1.59%		1.54%
Allowance for loan losses to NPL's						676.06%		n/a
Allowance for loan losses to NPA's						676.06%		n/a
Regulatory Capital and Ratios
Tier 1 capital						$30,799		$28,210
Total capital						$33,181		$30,411
Tier 1 capital ratio						16.2%		16.1%
Total risk based capital ratio						17.5%		17.3%
Tier 1 leverage ratio						13.6%		13.9%

1ST CAPITAL BANK
CONDENSED FINANCIAL DATA
(Unaudited)
(Dollars in thousands)
		3 Months Ended June 30,				6 Months Ended June 30,
Selected Financial Ratios		2011	2010			2011	2010
Return on average total assets		3.67%	0.41%			2.42%	0.23%
Return on average shareholders' equity		28.19%	2.94%			18.54%	1.60%
Net interest margin		4.47%	3.86%			4.54%	3.76%
Efficiency ratio		69.84%	80.71%			67.05%	86.64%
Selected Average Balances
Loans		$184,379	$147,457			$182,905	$141,367
Investment securities		13,534	13,243			13,861	12,368
Federal funds sold and interest bearing deposits		22,508	34,075			19,147	35,211
Total earning assets		$220,421	$194,775			$215,913	$188,946
Total assets		$227,665	$200,481			$222,834	$195,165
Demand deposits - interest bearing		$62,750	$53,994			$59,795	$51,230
Savings		32,109	27,141			30,686	26,765
Time deposits		47,733	44,633			48,356	44,076
Total interest bearing liabilities		$142,592	$125,768			$138,837	$122,071
Demand deposits - noninterest bearing		$54,660	$46,020			$53,875	$44,348
Shareholders' equity		$29,591	$27,663			$29,202	$27,541

CONTACT: Jayme Fields, CFO
         (831) 264-4011