1st Century Bancshares, Inc. Reports Financial Results for the Quarter and Year Ended December 31, 2010

Tue Mar 15, 2011 4:00pm EDT

* Reuters is not responsible for the content in this press release.

  LOS ANGELES, CA, Mar 15 (MARKET WIRE) -- 
1st Century Bancshares, Inc. (the "Company") (NASDAQ: FCTY), the holding
company of 1st Century Bank, N.A. (the "Bank"), today reported financial
results for the quarter and year ended December 31, 2010.

    "I'm proud to announce our financial results for the fourth quarter and
the year, which reflect our continuing commitment to growing the Company's
deposit franchise and expanding our footprint within the Westside of Los
Angeles. During the year, core deposits increased by over 47%, helping us
to reduce our average cost of funds to 42 basis points for the year ended
December 31, 2010. The growth in our core deposits has also enabled us to
finish the year with total assets of over $308 million and represents the
first time in our history that we've reported total assets in excess of
$300 million. Despite these accomplishments, I am disappointed to report
net losses of $2.4 million and $2.0 million during the quarter and year
ended December 31, 2010, respectively. These losses were primarily caused
by a single problem credit that emerged during the fourth quarter and
resulted in a $2.0 million charge to our provision for loan losses. The
Bank has commenced legal proceedings in connection with this credit and I
believe that the resolution of this matter will result in a substantial
recovery for the Bank. Our pre-tax pre-provision earnings, which excludes
the impact of this item, were $214,000 and $813,000, respectively, during
these same periods," stated Alan I. Rothenberg, Chairman of the Board and
Chief Executive Officer of the Company.

    Mr. Rothenberg continued, "Regardless, I remain optimistic and encouraged
by our achievements in 2010. I firmly believe that the loss incurred in
connection with this lone credit was an isolated incident and does not
accurately reflect the general improvements that we're experiencing within
our loan portfolio. With the exception of this credit, our outlook related
to problem credits has steadily improved and we continue to observe an
overall stabilizing trend within our loan portfolio. Non-performing assets
declined by 19% during the year and the percentage of non-performing loans
to total loans has consistently improved over the past four consecutive
quarters. In addition, the ratio of our allowance for loan losses to total
loans was 2.95% at year end and our capital ratios remain more than double
the regulatory requirements to be considered 'well capitalized.' At
December 31, 2010, the Bank's total risk-based capital ratio was 20.2%
compared to the regulatory requirement of 10.0%, with all of our capital
being common equity; with no preferred stock, no trust preferred stock, no
troubled asset relief program ('TARP') funds, and no other synthetic
equity instruments."

    Jason P. DiNapoli, President and Chief Operating Officer of the Company,
stated, "I believe that 2010 represented a defining year for the Company.
In addition to reaching the $300 million total asset milestone, the
Company has developed over 2,900 deposit account relationships and
expanded non-interest bearing demand deposits to over 35% of our total
deposit portfolio at year end. Looking forward to 2011, I'm excited to
build on the successes of 2010 and feel that we're well positioned going
into the new year."

    Pre-tax, pre-provision earnings figures, which are non-GAAP financial
measures, are presented because the Company believes adjusting its results
to exclude tax and loan loss provisions provides stockholders with a
useful metric for evaluating the core profitability of the Company. A
schedule reconciling our GAAP net loss to pre-tax, pre-provision earnings
is provided in the table below.

    2010 Fourth Quarter and Year End Highlights



    -- The Bank's total risk-based capital ratio was 20.16% at December 31,
       2010, which is above the regulatory requirement of 10.00% for "well
       capitalized" financial institutions.  The Bank's capital does not
       include any funding received in connection with TARP, nor other
       forms of capital such as trust preferred securities, convertible
       preferred stock or other equity or debt instruments.

    -- Total assets increased 13.3%, or $36.3 million, to $308.4 million at
       December 31, 2010, from $272.1 million at December 31, 2009.

    -- Total core deposits, which include non-interest bearing demand
       deposits, interest bearing demand deposits, savings and money market
       deposits, were $197.9 million and $133.9 million at December 31,
       2010 and December 31, 2009, respectively, representing an increase
       of $64.0 million, or 47.8%.

    -- Cost of funds was 0.32% and 0.42% for the three months and year
       ended December 31, 2010, respectively, compared to 0.66% and 0.66%
       for the same periods last year.

    -- Gross loans decreased $2.4 million, or 1.3%, to $179.3 million at
       December 31, 2010 from $181.7 million at December 31, 2009.

    -- As of December 31, 2010, the allowance for loan losses was $5.3
       million, or 2.95% of gross loans, compared to $5.5 million, or
       3.01% of gross loans, at December 31, 2009.

    -- Non-performing loans decreased $2.7 million, or 27.6%, to $7.1
       million at December 31, 2010 from $9.8 million at December 31, 2009.
       The decline in non-performing loans was primarily attributable to
       loan pay-downs received and charge-offs incurred during the current
       period and, to a lesser extent, loans migrating back to performing
       status or being foreclosed upon and transferred to other real estate
       owned.

    -- Non-performing assets as a percentage of total assets has declined
       to 2.58% at December 31, 2010, compared to 3.60% at December 31,
       2009.

    -- Net interest margin for the fourth quarter of 2010 decreased 47
       basis points to 3.33% compared to 3.80% for the fourth quarter of
       2009.  Net interest margin decreased to 3.62% from 4.13% comparing
       year ended December 31, 2010 to year ended December 31, 2009.

    -- There was no income tax provision for the year ended December 31,
       2010 compared to a $3.5 million income tax provision for the year
       ended December 31, 2009.  The income tax provision in 2009 was
       related to recording of a valuation allowance against the Company's
       deferred tax assets.

    -- Net loss was $2.4 million, or $0.27 per diluted share, and $2.0
       million, or $0.22 per diluted share, for the quarter and year ended
       December 31, 2010, respectively, compared to net loss of $3.5
       million, or $0.39 per diluted share, and $7.8 million, or $0.86 per
       diluted share, for the quarter and year ended December 31, 2009,
       respectively.

    
Capital Adequacy

    At December 31, 2010, the Company's stockholders' equity totaled $44.3
million compared to $46.3 million at December 31, 2009. The decline in
stockholders' equity was primarily caused by the $2.0 million net loss
incurred during 2010, as well as an increase of $550,000 of treasury stock
acquired during 2010. At December 31, 2010, the Bank's total risk-based
capital ratio, tier 1 risk-based capital ratio, and tier 1 leverage ratio
were 20.16%, 18.90%, and 12.88%, respectively, and were more than double
the regulatory requirements for "well capitalized" financial institutions
of 10.00%, 6.00%, and 5.00%, respectively.

    On August 16, 2010, we announced that our board of directors had
authorized a share repurchase program, permitting us to acquire up to
$2.0 million of our common stock, or approximately 6.5% of our
outstanding common stock as of June 30, 2010. The manner, price, number
and timing of these share repurchases are subject to market conditions
and applicable U.S. Securities and Exchange Commission rules. As of
December 31, 2010, the Company had repurchased 107,142 shares in the open
market at a cost ranging from $3.35 to $4.02 per share in connection with
this program.

    Balance Sheet

    Total assets increased 13.3%, or $36.3 million, to $308.4 million at
December 31, 2010, from $272.1 million at December 31, 2009. The growth in
total assets was primarily due to increases of $23.1 million and $15.4
million in cash and cash equivalents and investment securities,
respectively, partially offset by a decrease of $2.4 million in gross
loans. Cash and cash equivalents totaled $69.0 million and $45.9 million
at December 31, 2010 and 2009, respectively. The elevated amount of cash
and cash equivalents maintained at the most recently completed year end
was primarily due to the increase in deposits generated during the year.
The increase in investment securities was primarily related to purchases
during the most recently completed year of 10 and 15-year agency mortgage
backed securities. Gross loans at December 31, 2010 were $179.3 million,
which represented a decrease of $2.4 million, or 1.3%, from $181.7
million at December 31, 2009.

    Total liabilities increased by $38.2 million to $264.0 million as compared
to $225.8 million at December 31, 2009. This increase was primarily due to
increases in non-interest bearing deposits, interest bearing checking and
money market deposits and savings of $23.7 million, $13.8 million and
$26.5 million, respectively, due to our continued core deposit gathering
efforts, partially offset by a $13.3 million decrease in certificates of
deposit and a $14.5 million decrease in other borrowings. At December 31,
2010, total deposits were $258.0 million compared to $207.4 million at
December 31, 2009, representing an increase of 24.4%, or $50.6 million.
Total core deposits, which include non-interest bearing demand deposits,
interest bearing demand deposits and money market deposits and savings,
were $197.9 million and $133.9 million at December 31, 2010 and December
31, 2009, respectively, representing an increase of $64.0 million, or
47.8%. As of December 31, 2010 and 2009, core deposits as a percentage of
our total deposit portfolio were 76.7% and 64.6%, respectively.

    Credit Quality

    Allowance and Provision for Loan Losses

    The allowance for loan losses ("ALL") was $5.3 million, or 2.95% of our
total loan portfolio, at December 31, 2010 as compared to $5.5 million, or
3.01% of our total loan portfolio, at December 31, 2009. The ALL is
impacted by inherent risk in the loan portfolio, including the level of
our non-performing loans, as well as specific reserves and charge-off
activities. The provision for loan losses was $2.8 million and $6.2
million for the years ended December 31, 2010 and 2009, respectively. The
decrease in the provision for loan losses were primarily due to a general
improvement in the level of non-performing loans, as well as a decrease in
the amount of charge-offs incurred during 2010 as compared to the same
period last year. We incurred net charge-offs of $3.0 million during the
most recently completed year compared to $5.8 million during the same
period last year. During the fourth quarter of 2010, we recorded a $2.0
million provision for loan losses and a corresponding $1.0 million
charge-off related to a commercial loan to a borrower located in Southern
California. At December 31, 2010, the remaining balance of this loan was
on non-accrual status. Management believes that the ALL as of December 31,
2010 and December 31, 2009 was adequate to absorb known and inherent risks
in the loan portfolio.

    Non-Performing Assets

    Non-performing assets totaled $8.0 million and $9.8 million at December
31, 2010 and December 31, 2009, respectively. Non-accrual loans totaled
$7.1 million and $9.8 million at December 31, 2010 and 2009,
respectively. At December 31, 2010, non-accrual loans consisted of four
commercial loans totaling $1.7 million, three commercial real estate
loans totaling $5.1 million and one consumer related loan totaling
$345,000. As of December 31, 2010, other real estate owned ("OREO")
consisted of two single-family residential properties totaling $845,000.
These properties are located in Southern California. As of December 31,
2009, the Company did not have any OREO. As a percentage of our total
loan portfolio, the amount of non-performing loans was 3.97% and 5.40% at
December 31, 2010 and December 31, 2009, respectively. As a percentage of
total assets, the amount of non-performing assets was 2.58% and 3.60% at
December 31, 2010 and 2009, respectively.

    "Although I'm disappointed by the isolated credit loss incurred during the
last quarter of this year, I don't believe it should overshadow the
overall progress and improving trends that we're seeing within our loan
portfolio. Our credit team has worked diligently to limit our credit
related losses, as well as identify and resolve credit issues in a timely
manner. I'm extremely proud of our team and their accomplishments during
2010," stated Mr. DiNapoli.

    Net Interest Income and Margin

    For the quarter and year ended December 31, 2010, average interest earning
assets were $305.3 million and $273.4 million, respectively, generating
net interest income of $2.6 million and $9.9 million, respectively. For
the quarter and year ended December 31, 2009, average interest-earning
assets were $258.2 million and $252.4 million, respectively, generating
net interest income of $2.5 million and $10.4 million, respectively. The
growth in average earning assets during the quarter and year ended
December 31, 2010 was primarily related to interest earning deposits at
other financial institutions, which was primarily funded by an increase
in average deposits during the year, partially offset by a decline in
average other borrowings.

    The Company's net interest margin was 3.33% and 3.62% for the quarter and
year ended December 31, 2010, respectively, compared to 3.80% and 4.13%
for the same periods last year. The 47 and 51 basis point declines in net
interest margin during the quarter and year ended December 31, 2010,
respectively, was primarily due to decreases in yield on earning assets of
74 and 70 basis points, respectively, partially offset by declines of 43
and 26 basis points, respectively, in the cost of interest bearing
deposits and borrowings. The decreases in yield on earning assets was
primarily the result of increases in the average balance of lower
yielding interest earning deposits at other financial institutions, which
increased by $56.0 million and $47.3 million, respectively, during the
quarter and year ended December 31, 2010 as compared to the same periods
last year. The increase in the average balance of interest earning
deposits at other financial institutions was primarily due to excess
liquidity generated by the growth in deposits.

    Non-Interest Income

    Non-interest income was $284,000 and $945,000 for the quarter and year
ended December 31, 2010, respectively, compared to $250,000 and $1.0
million for the same periods last year.

    Non-interest income primarily consists of loan arrangement fees, service
charges and fees on deposit accounts, as well as other operating income,
which mainly consists of wire transfer and other consumer related fees.
Loan arrangement fees are related to a college loan funding program the
Company established with a student loan provider. The Company initially
funds student loans originated by the student loan provider in exchange
for non-interest income. All loans are purchased by the student loan
provider within 30 days of origination. All purchase commitments are
supported by collateralized deposit accounts. Service charges and other
operating income includes service charges and fees on deposit accounts,
as well as other operating income, which mainly consists of outgoing
funds transfer wire fees.

    Non-Interest Expense

    Non-interest expense was $2.6 million for the quarter ended December 31,
2010 compared to $2.4 million for the same period last year, representing
an increase of $210,000, or 8.7%. The increase during the quarter was
primarily attributed to an increase in professional fees incurred related
to loan related matters during the current quarter.

    Non-interest expense was $10.0 million for the year ended December 31,
2010 compared to $9.6 million for the same period last year, representing
an increase of $419,000, or 4.4%. The increase during the year was
primarily due to incremental hiring of additional staff to handle the
growth in deposits, as well as an increase in technology related costs.

    Income Tax Provision

    There was no income tax provision recorded for the quarter and year ended
December 31, 2010 compared to none and $3.5 million, respectively for the
same periods last year. Any income tax benefit that would normally arise
because of the Company's losses incurred during the year ended December
31, 2010 is not recorded because it is offset by a corresponding increase
in the valuation allowance on the Company's net deferred tax assets.
During the year ended December 31, 2009, we established a full valuation
allowance against the Company's deferred tax assets due to uncertainty
regarding its realizability. During the year ended December 31, 2010, we
reassessed the need for this valuation allowance and concluded that a
full valuation allowance remained appropriate. Management reached this
conclusion as a  result of the Company's cumulative losses since
inception, and the anticipated near term economic climate in which the
Company will operate.

    Loss before Income Taxes

    The Company's loss before income taxes for the quarter and the year ended
December 31, 2010 was $2.4 million and $2.0 million, respectively. The
Company's loss before income taxes for the quarter and the year ended
December 31, 2009 was $3.5 million and $4.3 million, respectively.

    About 1st Century Bancshares, Inc.

    1st Century Bancshares, Inc. is a publicly owned company traded on the
Nasdaq Capital Market under the symbol "FCTY." The Company's wholly-owned
subsidiary, 1st Century Bank, N.A., is a full service business bank
headquartered in the Century City area of Los Angeles. The Bank's primary
focus is serving the specific banking needs of entrepreneurs,
professionals and small businesses with the personal service of a
traditional community bank, while offering the technologies of a big
money center bank. The Company maintains a website at
www.1stcenturybank.com. By including the foregoing website address link,
the Company does not intend to and shall not be deemed to incorporate by
reference any material contained therein.

    Safe Harbor

    Certain matters discussed in this press release may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. You can find many (but not all) of these
forward-looking statements by looking for words such as "approximates,"
"believes," "expects," "anticipates," "estimates," "intends," "plans,"
"would," "may" or other similar expressions in this press release. These
statements are based upon our current expectations and speak only as of
the date hereof. Forward-looking statements are subject to certain risks
and uncertainties that could cause our actual results, performance or
achievements to differ materially and adversely from those expressed,
suggested or implied herein. Accordingly, investors should use caution in
relying on forward-looking statements to anticipate future results or
trends. These risks and uncertainties include, but are not limited to: (1)
the impact of changes in interest rates, (2) a further decline in economic
conditions, (3) increased competition among financial service providers,
(4) government regulation, (5) the outcome of litigation regarding a
problem credit that emerged during the fourth quarter and resulted in a
$2.0 million charge to our provision for loan losses, and (6) the other
risks set forth in the Company's reports filed with the U.S. Securities
and Exchange Commission. The Company does not undertake, and specifically
disclaims, any obligation to revise or update any forward-looking
statements for any reason.

    SUMMARY FINANCIAL INFORMATION

    The following tables present relevant financial data from the Company's
recent performance (dollars in thousands, except per share data):

                                                  December 31, December 31,
Balance Sheet Results:                                2010         2009
                                                  -----------  -----------

  Total Assets                                    $   308,364  $   272,128
  Gross Loans                                     $   179,271  $   181,708
  Allowance for Loan Losses ("ALL")               $     5,283  $     5,478
  ALL to Gross Loans                                     2.95%        3.01%
  Year-To-Date ("YTD") Net Charge-Offs to YTD
   Average Gross Loans*                                  1.72%        3.00%
  Non-Performing Assets                           $     7,963  $     9,810
  Deposits:
       Non-Interest Bearing Demand Deposits       $    91,501  $    67,828
       Interest Bearing Demand Deposits                33,632       19,874
       Money Market Deposits and Savings               72,757       46,240
       Certificates of Deposit                         60,099       73,432
                                                  -----------  -----------
            Total Deposits                        $   257,989  $   207,374
  Total Stockholders' Equity                      $    44,338  $    46,320
  Gross Loans to Deposits                               69.49%       87.62%
  Equity to Assets                                      14.38%       17.02%
  Ending Shares Issued, excluding Treasury Stock    9,302,291    9,219,399
  Ending Book Value per Share                     $      4.77  $      5.02

                                                Quarters Ended December 31,
                                                  ------------------------
Quarterly Operating Results (unaudited):              2010         2009
                                                  -----------  -----------
  Net Interest Income                             $     2,565  $     2,477
  Provision for Loan Losses                       $     2,575  $     3,800
  Non-Interest Income                             $       284  $       250
  Non-Interest Expense                            $     2,635  $     2,425
  Loss Before Taxes                               $    (2,361) $    (3,498)
  Income Tax Provision                            $         -  $         -
  Net Loss                                        $    (2,361) $    (3,498)
  Basic and Diluted Loss per Share                $     (0.27) $     (0.39)
  Quarterly Return on Average Assets*                   -2.98%       -5.15%
  Quarterly Return on Average Equity*                  -20.04%      -27.89%
  Quarterly Net Interest Margin*                         3.33%        3.80%

                                                  Years Ended December 31,
                                                  ------------------------
YTD Operating Results:                                2010         2009
                                                  -----------  -----------

  Net Interest Income                             $     9,893  $    10,423
  Provision for Loan Losses                       $     2,775  $     6,154
  Non-Interest Income                             $       945  $     1,026
  Non-Interest Expense                            $    10,026  $     9,606
  Loss Before Taxes                               $    (1,963) $    (4,311)
  Income Tax Provision                            $         -  $     3,498
  Net Loss                                        $    (1,963) $    (7,809)
  Basic and Diluted Loss per Share                $     (0.22) $     (0.86)
  YTD Return on Average Assets                          -0.70%       -3.00%
  YTD Return on Average Equity                          -4.18%      -14.47%
  YTD Net Interest Margin                                3.62%        4.13%

Reconciliation of YTD Net Loss to Pre-Tax,
 Pre-Provision Earnings:
  Net Loss                                        $    (1,963) $    (7,809)
  Provision for Loan Losses                             2,775        6,154
  Income Tax Provision                                      -        3,498
                                                  -----------  -----------
  Pre-Tax, Pre-Provision Earnings                 $       812  $     1,843
                                                  ===========  ===========

    
*Percentages are reported on an annualized basis.

    

Contact Information:

Alan I. Rothenberg
Chairman/Chief Executive Officer
Phone: (310) 270-9501

Jason P. DiNapoli
President/Chief Operating Officer
Phone: (310) 270-9505

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