FISB 1st Capital Bancorp (QX)

1st Capital Bank (OTCBB:FISB) reported record year-to-date net income of $2,881,000 for the nine months ended September 30, 2011 compared to $564,000 for the same period one year ago. In addition, 1st Capital Bank recorded record net interest income of $7,429,000 for the nine months ended September 30, 2011, compared with $5,589,000 for the same period in 2010 due to the Bank's continued increase in interest income and decrease in interest expense.

Key Performance Highlights:

• Net income of $2.9 million for the nine months ended September 30, 2011
• Growth in loans of $36 million over the last twelve months
• Continued excellent credit quality
• Growth in deposits of $39 million over the last twelve months
• Strong composition of core deposits
• Well capitalized, with a total risk based capital ratio of 17.0%

Total assets grew to $236 million as of September 30, 2011 compared to $193 million a year ago. Total assets increased by $6 million compared to $229 million at June 30, 2011. Total gross loans, which comprise the majority of the Bank's assets, grew to $201 million at September 30, 2011, a 22% or $36 million growth over a year ago and 6% growth over the trailing quarter-ended June 30, 2011. Total deposits grew to $203 million, which was an increase of $39 million or 24% 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 78% of total accounts as of September 30, 2011 compared to 74% at September 30, 2010.

"We continue to develop the 1st Capital Bank franchise with sound credit quality through the execution of our relationship approach to banking," stated President and Chief Executive Officer, Fred Rowden. "In today's competitive landscape, we find the relationship banking approach does make a difference as business owners and professionals appreciate the Bank's commitment to providing service. Our commitment to our clients, employees and our shareholders is to continue our emphasis on relationship banking with a goal of safe and sound growth as a premier banking organization," concluded Rowden.

The Bank's asset quality remained strong, with a ratio of nonperforming loans to total loans of just 0.12% as of September 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. 

In 2011, 1st Capital Bank received a rating of "Premier Performing Bank" by the Findley Company for the Bank's financial performance during 2010. The Bank's Financial Summary for the quarter ended September 30, 2011 is included below.

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 branch offices 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, or call 831.264.4000, for more information about the Bank.

Financial Summary

Income before provision for income taxes of $547,000 for the quarter ended September 30, 2011 increased $202,000 over income before provision for income taxes of $345,000 for the same period September 30, 2010 due to year-over-year improvements in the net interest margin and reductions in the provision for loan losses, which were partially offset by increases in noninterest expenses. Net income of $312,000 for the quarter ended September 30, 2011 decreased $33,000 compared to net income of $345,000 for the same period in the previous year, and decreased $1,661,000 over the net income for the trailing quarter ended June 30, 2011. The decreases were due to the Bank's requirement to record a provision for income tax expense in the current quarter compared to no such provision being recorded in the prior year and compared to the income tax benefits recorded in the trailing quarter to recognize the Bank's deferred tax asset. Diluted earnings per share for the three months ended September 30, 2011 decreased to $0.10 compared to $0.11 for the same period in 2010. 

Total assets of $235,732,000 as of September 30, 2011 increased $42,455,000 (22%) from September 30, 2010 and increased $6,530,000 (3%) from June 30, 2011. Loans increased $35,933,000 (22%) from September 30, 2010 to $200,596,000 as of September 30, 2011, with $11,111,000 (6%) of that increase occurring in the three-month period from June 30, 2011 to September 30, 2011. Loan growth was funded largely by deposits, which increased $39,129,000 (24%) from September 30, 2010 to $203,406,000 as of September 30, 2011, including an increase of $6,270,000 (3%) over the trailing quarter ended June 30, 2011. The remainder of loan growth was funded by maturing available-for-sale securities and interest-bearing deposits in other financial institutions.

Net interest income after the provision for loan losses for the quarter ended September 30, 2011 was $2,471,000, an increase of $614,000 (33%) over the quarter ended September 30, 2010 and an increase of $108,000 (5%) over the trailing quarter ended June 30, 2011. 

Interest income for the quarter ended September 30, 2011 was $2,825,000, an increase of $453,000 (19%) over the quarter ended September 30, 2010 and $95,000 (3%) over the trailing quarter ended June 30, 2011. Average earning assets for the quarter ended September 30, 2011 were $224,863,000, an increase of $26,862,000 (14%) compared to $198,001,000 for the quarter ended September 30, 2010, and an increase of $4,441,000 (2%) compared to $220,422,000 for the trailing quarter ended June 30, 2011.

Interest expense for the quarter ended September 30, 2011 was $252,000, a decrease of $54,000 (18%) from the quarter ended September 30, 2010 and a decrease of $21,000 (8%) from the trailing quarter ended June 30, 2011. Average interest bearing liabilities for the quarter ended September 30, 2011 were $137,096,000, an increase of $9,605,000 (8%) compared to $127,491,000 for the quarter ended September 30, 2010 and a decrease of $5,496,000 (4%) compared to $142,592,000 for the trailing quarter ended June 30, 2011. While quarterly average balances of interest-bearing deposits as of September 30, 2011 increased compared to September 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. In addition to the re-pricing factors and changes in mix of deposits, the decrease in interest expense compared to the trailing quarter ended June 30, 2011 was also due to the decrease in average interest-bearing liabilities for the quarter ended September 30, 2011 compared to the trailing quarter ended June 30, 2011.

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 September 30, 2011 of 4.5% compared to 4.1% for the quarter ended September 30, 2010. The net interest margin remained unchanged compared to the 4.5% recorded for the trailing quarter ended June 30, 2011. 

1st Capital Bank recorded a provision for loan losses of $102,000 during the quarter ended September 30, 2011 compared to $209,000 in the quarter ended September 30, 2010 and $94,000 in the trailing quarter ended June 30, 2011. The ratio of the allowance for loan losses to total loans outstanding was 1.56% at September 30, 2011 compared to 1.55% and 1.59% at September 30, 2010 and June 30, 2011, respectively. The Bank's asset quality remained very strong, with a ratio of impaired and nonperforming loans to total loans of just 0.12% as of September 30, 2011 compared to 0.24% as of June 30, 2011. At September 30, 2010, there were no impaired or nonperforming loans. The Bank has never had any real estate acquired through foreclosure.

Noninterest income increased $2,000 (7%) to $32,000 for the quarter ended September 30, 2011 compared to the quarter ended September 30, 2010 and decreased $11,000 (26%) compared to the trailing quarter ended June 30, 2011. The increase as compared to the quarter ended September 30, 2010 was largely due to changes in the outstanding balances of non-interest bearing deposits. The decrease as compared to the trailing quarter ended June 30, 2011 was due to one-time payments received from the Bank's merchant services vendor.

Noninterest expenses increased by $414,000 (27%) to $1,956,000 for the quarter ended September 30, 2011 compared to the quarter ended September 30, 2010 and increased $210,000 (12%) compared to the trailing quarter ended June 30, 2011. The majority of this increase was due to increased salary expense due to the addition of key staff to support the Bank's growth and strategic plan, and to stock-based compensation expense related to the issuance of restricted stock to directors.

A provision for income taxes of $235,000 was recorded in the third quarter of 2011, compared to an income tax benefit of $1,313,000 recorded in the second quarter of 2011, and no provision for taxes in the first quarter of 2011 or during the entire previous year. Recognition of the income tax benefit in the second quarter of 2011 resulted from the removal of the valuation allowance previously recognized against the Bank's net deferred tax assets 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		9 Months Ended
	September 30,		September 30,
Statement of Income Data	2011	2010	2011	2010
Interest income
Loans (including fees)	$2,709	$2,227	$7,835	$6,122
Investment securities	94	107	307	346
Other	22	38	65	121
Total interest income	2,825	2,372	8,207	6,589
Interest expense
Interest on deposits	252	306	778	1,000
Other	--	--	--	--
Total interest expense	252	306	778	1,000
Net interest income	2,573	2,066	7,429	5,589
Provision for loan losses	(102)	(209)	(469)	(466)
Net interest income after provision for loan losses	2,471	1,857	6,960	5,123
Noninterest income
Service charges on deposits	19	18	48	44
Other	13	12	54	41
Total noninterest income	32	30	102	85
Noninterest expenses
Salaries and benefits	1,107	804	3,029	2,456
Occupancy	150	149	437	435
Furniture and equipment	110	80	271	222
Other	589	509	1,522	1,529
Total noninterest expenses	1,956	1,542	5,259	4,642
Income before provision for income taxes	547	345	1,803	566
Provision for (benefit from) income taxes	235	--	(1,078)	2
Net income	$312	$345	$2,881	$564
Common Share Data
Earnings per share
Basic	$0.10	$0.11	$0.91	$0.18
Diluted	$0.10	$0.11	$0.91	$0.18
Weighted average shares outstanding
Basic	3,157,699	3,157,699	3,157,699	3,157,699
Diluted	3,190,496	3,157,699	3,170,034	3,157,699
Book value per share			$9.98	$8.90
Tangible book value			$9.98	$8.90
Shares outstanding			3,157,699	3,157,699

1ST CAPITAL BANK
CONDENSED FINANCIAL DATA
(Unaudited)
(Dollars in thousands)
	September	December
Balance Sheet Data	2011	2010
Assets
Cash and due from banks	$ 8,964	$ 6,672
Federal funds sold and overnight deposits	9,878	25,530
Available-for-sale securities, at fair value, and interest bearing deposits	14,812	17,591
Loans:
Commercial	83,873	74,311
Real estate-construction	3,731	2,678
Real estate-other	110,783	97,581
Consumer	1,754	1,991
Deferred loan fees, net	455	426
Total loans	200,596	176,987
Allowance for loan losses	(3,124)	(2,723)
Net loans	197,472	174,264
Premises and equipment, net	567	745
Accrued interest receivable and other assets	4,039	2,032
Total assets	$ 235,732	$ 226,834
Liabilities and Shareholders' Equity
Deposits:
Demand, noninterest bearing	$ 69,047	$ 71,654
Demand, interest bearing	54,178	46,410
Savings	35,551	26,807
Time	44,630	52,406
Total deposits	203,406	197,277
Accrued interest payable and other liabilities	803	1,083
Shareholders' equity	31,523	28,474
Total liabilities and shareholders' equity	$ 235,732	$ 226,834
Asset Quality
Loans past due 90 days or more and accruing interest	$ --	$  --
Restructured loans	250	--
Other nonaccrual loans	--	--
Other real estate owned	--	--
Total nonperforming assets	$ 250	$ --
Allowance for loan losses to total loans	1.56%	1.54%
Allowance for loan losses to NPL's	1249.60%	n/a
Allowance for loan losses to NPA's	1249.60%	n/a
Regulatory Capital and Ratios
Tier 1 capital	$ 31,116	$ 28,210
Total capital	$ 33,654	$ 30,411
Tier 1 capital ratio	15.7%	16.1%
Total risk based capital ratio	17.0%	17.3%
Tier 1 leverage ratio	13.3%	13.9%

1ST CAPITAL BANK
CONDENSED FINANCIAL DATA
(Unaudited)
(Dollars in thousands)
	3 Months Ended		9 Months Ended
	September 30,		September 30,
Selected Financial Ratios	2011	2010	2011	2010
Return on average total assets	0.53%	0.67%	1.70%	0.38%
Return on average shareholders' equity	3.94%	4.89%	12.86%	2.72%
Net interest margin	4.54%	4.10%	4.54%	3.90%
Efficiency ratio	75.09%	73.57%	69.83%	81.81%
Selected Average Balances
Loans	$190,066	$157,001	$185,318	$146,635
Investment securities	12,852	13,646	13,521	12,799
Federal funds sold and CD's	21,945	27,354	20,090	32,563
Total earning assets	$224,863	$198,001	$218,929	$191,997
Total assets	$234,374	$204,193	$226,729	$198,208
Demand deposits - interest bearing	$57,815	$57,650	$59,127	$53,393
Savings	33,291	26,582	31,564	26,703
Time deposits	45,991	43,259	47,559	43,801
Total interest bearing liabilities	$137,096	$127,491	$138,250	$123,897
Demand deposits - noninterest bearing	$64,784	$47,742	$57,551	$45,492
Shareholders' equity	$31,449	$27,984	$29,963	$27,691

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