1st Century Bancshares, Inc. Reports Financial Results for the Quarter Ended March 31, 2011

Wed May 11, 2011 5:00pm EDT

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

  LOS ANGELES, CA, May 11 (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 ended March 31, 2011.

    "I'm encouraged by our start to the new year, reporting net income of
$123,000 for the first quarter and quarterly growth rates of 10% in our
core deposits and over 5% in loans. These results highlight our team's
commitment to becoming the premier community business bank on the west
side of Los Angeles, as well as our belief that, as the economy
normalizes, the development of our core deposit franchise will ultimately
translate into increased loan demand. In addition, we further lowered our
average cost of funds to 29 basis points during the quarter and increased
our total assets to over $319 million. Our pre-tax pre-provision
earnings, which excludes the impact of tax and loan loss provisions, were
$323,000 and $124,000, during the three months ended March 31, 2011 and
2010, respectively," stated Alan I. Rothenberg, Chairman of the Board and
Chief Executive Officer of the Company.

    Jason P. DiNapoli, President and Chief Operating Officer of the Company
stated, "From a credit perspective, we continue to experience stability in
our portfolio and positive trends related to our problem assets. In
addition, the ratio of our allowance for loan losses to total loans
remained strong at 2.9% and our capital ratios were well in excess of the
regulatory requirements to be considered 'well capitalized,' At March 31,
2011, the Bank's total risk-based capital ratio was 19.4% compared to the
regulatory requirement of 10.0%, with all of our capital being common
equity."

    Mr. DiNapoli continued, "We remain focused on growing core deposits and
looking for quality loans in our West LA market. As part of this effort,
we recently signed a lease in the heart of downtown Santa Monica for our
first deposit production office. This office will further strengthen our
roots and franchise on the Westside and is scheduled to open during the
second quarter of this 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 income to pre-tax, pre-provision
earnings is provided in the summary financial information below.

    2011 1st Quarter Highlights

--  The Bank's total risk-based capital ratio was 19.42% at March 31, 2011,
    compared to 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 3.4%, or $10.6 million, to $319.0 million at
    March 31, 2011, from $308.4 million at December 31, 2010.

--  Total core deposits, which include non-interest bearing demand
    deposits, interest bearing demand deposits, and money market deposits
    and savings, were $216.7 million and $197.9 million at March 31, 2011
    and December 31, 2010, respectively, representing an increase of $18.8
    million, or 9.5%.

--  Cost of funds was 29 basis points for the three months ended March 31,
    2011, compared to 54 basis points for the same period last year.

--  Gross loans increased $9.2 million, or 5.1%, to $188.5 million at March
    31, 2011 from $179.3 million at December 31, 2010.  Loan originations
    were $29.9 million during the three months ended March 31, 2011,
    compared to $9.9 million during the same period last year.

--  As of March 31, 2011, the allowance for loan losses was $5.5 million,
    or 2.90% of gross loans, compared to $5.3 million, or 2.95% of gross
    loans, at December 31, 2010.  The ALL to total non-performing loans was
    78.36% and 74.22% at March 31, 2011 and December 31, 2010,
    respectively.

--  Non-performing loans decreased $130,000, or 1.8%, to $7.0 million at
    March 31, 2011 from $7.1 million at December 31, 2010.  Non-performing
    loans to total loans was 3.71% and 3.97% at March 31, 2011 and December
    31, 2010, respectively.

--  Non-performing assets as a percentage of total assets declined to 2.46%
    at March 31, 2011, compared to 2.58% at December 31, 2010.

--  Net interest margin was 3.59% and 3.96% during the three months ended
    March 31, 2011 and 2010, respectively.

--  For the three months ended March 31, 2011 and 2010, the Company
    recorded net income of $123,000, or $0.01 per diluted share, and
    $124,000, or $0.01 per diluted share, respectively.

    
Capital Adequacy

    At March 31, 2011, the Company's stockholders' equity totaled $44.5
million compared to $44.3 million at December 31, 2010. At March 31,
2011, the Bank's total risk-based capital ratio, tier 1 risk-based
capital ratio, and tier 1 leverage ratio were 19.42%, 18.15%, and 12.94%,
respectively, compared to 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 March
31, 2011, the Company had repurchased 109,654 shares in the open market
in connection with this program, at an average cost per share of $3.80.

    Balance Sheet

    Total assets increased 3.4%, or $10.6 million, to $319.0 million at March
31, 2011, from $308.4 million at December 31, 2010. The increase in total
assets was primarily attributable to increases in gross loans and
investment securities, partially offset by a decrease in cash and cash
equivalents. Gross loans at March 31, 2011 were $188.5 million,
representing an increase of $9.2 million, or 5.1%, from $179.3 million at
December 31, 2010. Loan originations were $29.9 million during the three
months ended March 31, 2011, compared to $9.9 million during the same
period last year. Investment securities at March 31, 2011 were $64.6
million, representing an increase of $6.1 million, or 10.4%, from $58.5
million at December 31, 2010. Cash and cash equivalents decreased $4.4
million, or 6.4%, from $69.0 million at December 31, 2010 to $64.6 million
at March 31, 2011. The decrease in cash and cash equivalents was primarily
attributable to utilizing excess liquidity to fund loan originations and
to purchase investment securities.

    Total liabilities at March 31, 2011 increased by $10.6 million, or 4.0%,
to $274.6 million as compared to $264.0 million at December 31, 2010. This
increase was primarily due to increases in non-interest bearing deposits
and money market deposits and savings of $5.4 million and $13.1 million,
respectively, due to continued core deposit gathering efforts, partially
offset by a $6.2 million decrease in certificates of deposit. Total core
deposits, which include non-interest bearing demand deposits, interest
bearing demand deposits and money market deposits and savings, were $216.7
million and $197.9 million at March 31, 2011 and December 31, 2010,
respectively, representing an increase of $18.8 million, or 9.5%.

    Credit Quality

    Allowance and Provision for Loan Losses

    The allowance for loan losses ("ALL") was $5.5 million, or 2.90% of our
total loan portfolio, at March 31, 2011 as compared to $5.3 million, or
2.95% of our total loan portfolio, at December 31, 2010. The ALL to total
non-performing loans was 78.36% and 74.22% at March 31, 2011 and December
31, 2010, respectively. 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 $200,000 for the three months ended March 31, 2011, compared to no
provision for the three months ended March 31, 2010. We incurred net
charge-offs of $7,000 during the three months ended March 31, 2011,
compared to net recoveries of $24,000 during the same period last year.
Management believes that the ALL as of March 31, 2011 and December 31,
2010 was adequate to absorb known and inherent risks in the loan
portfolio.

    Non-Performing Assets

    Non-performing assets totaled $7.8 million and $8.0 million at March 31,
2011 and December 31, 2010, respectively. Non-accrual loans totaled $7.0
million and $7.1 million at March 31, 2011 and December 31, 2010,
respectively. At March 31, 2011, non-accrual loans consisted of three
commercial loans totaling $1.6 million, three commercial real estate loans
totaling $5.0 million and one consumer related loan totaling $345,000. As
of March 31, 2011, other real estate owned ("OREO") consisted of two
single-family residential properties totaling $845,000, which are both
located in California. As a percentage of our total loan portfolio, the
amount of non-performing loans was 3.71% and 3.97% at March 31, 2011 and
December 31, 2010, respectively. As a percentage of total assets, the
amount of non-performing assets was 2.46% and 2.58% at March 31, 2011 and
December 31, 2010, respectively.

    "Like most community business banks, credit quality will remain a critical
factor for us. Despite the recent improving trends, we continue to focus
on the timely recognition and resolution of any credit related matters.
Each successive quarter during the past year, we've generally experienced
improvements within our loan portfolio and I'm cautiously optimistic that
these positive trends will continue. I also believe that, because of our
aggressive approach to addressing and containing these issues, we will
benefit as markets improve and loan demand returns," stated Mr. DiNapoli.

    Net Interest Income and Margin

    During the three months ended March 31, 2011, net interest income was $2.7
million compared to $2.5 million for the same period last year. The
increase was primarily related to an increase of $62,000 in interest
earned in connection with our loan portfolio, an increase of $65,000 in
interest earned on our investment securities and a $77,000 decline in
interest expense incurred on borrowings. The fluctuation in our loan
interest income was primarily related to an increase of $7.4 million in
the average balance of loans, partially offset by a 6 basis point decline
in our loan yield. The increase in interest earned on our investment
portfolio was primarily due to an increase in the average balance of
residential mortgage-backed securities and CMOs, partially offset by a 93
basis points decline in the yield earned on these securities.

    The Company's net interest margin (net interest income divided by average
interest earning assets) was 3.59% for the three months ended March 31,
2011, compared to 3.96% for the same period last year. The 37 basis point
decline in net interest margin was primarily due to a decrease in the
yield on earning assets of 57 basis points, partially offset by a decline
of 33 basis points in the cost of interest bearing deposits and
borrowings. The decrease in yield on earning assets was primarily the
result of an increase of $27.0 million in the average balance of lower
yielding interest earning deposits at other financial institutions. These
deposits yielded approximately 25 basis points during the three months
ended March 31, 2011. During the three months ended March 31, 2011 as
compared to the same period last year, the decline in our cost of
interest bearing deposits and borrowings was primarily attributable to
the decrease in interest rates paid on these accounts, as well as a
decline in the average balance of borrowings, partially offset by an
increase in the average balance of interest bearing deposits. The average
cost of interest bearing deposits was 0.45% during the three months ended
March 31, 2011 compared to 0.61% for the same period last year. The
average balance of borrowings decreased by $10.5 million during the three
months ended March 31, 2011 as compared to the same period last year. The
average cost of borrowings was 1.59% during the three months ended March
31, 2011 compared to 2.76% for the same period last year.

    Non-Interest Income

    Non-interest income was $204,000 for the three months ended March 31, 2011
compared to $229,000 for the three months ended March 31, 2010. The
decrease in non-interest income was primarily due to a decrease in loan
arrangement fees of $38,000, partially offset by an increase in service
charges and other operating income of $13,000.

    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 both the three months ended
March 31, 2011 and 2010. Compensation and benefits was $1.4 million for
both the three months ended March 31, 2011 and 2010. Occupancy expense
was $239,000 for the three months ended March 31, 2011, compared to
$224,000 for the three months ended March 31, 2010, an increase of
$15,000, or 6.7%.

    Income Tax Provision

    During the three months ended March 31, 2011 and 2010, we did not record
an income tax provision related to our pre-tax earnings. Tax expense that
would normally arise, because of the Company's earnings during the three
months ended March 31, 2011 and 2010, was not recorded because it was
offset by a reduction in the valuation allowance on the Company's deferred
tax asset.

    Net Income

    For the three months ended March 31, 2011 and 2010, the Company recorded
net income of $123,000, or $0.01 per diluted share, and $124,000, or $0.01
per diluted share, 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.1cbank.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, and (5) 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):

                                    March 31,   December 31,    March 31,
                                      2011          2010          2010
                                  ------------  ------------  ------------
Balance Sheet Results:            (unaudited)                 (unaudited)

  Total Assets                    $    319,043  $    308,364  $    263,624
  Gross Loans                     $    188,549  $    179,271  $    172,666
  Allowance for Loan Losses
   ("ALL")                        $      5,476  $      5,283  $      5,502
  ALL to Gross Loans                      2.90%         2.95%         3.19%
  Year-To-Date ("YTD") Net
   Charge-Offs(Recoveries) to
   YTD Average Gross Loans*               0.01%         1.72%        -0.06%
  Non-Performing Assets           $      7,833  $      7,963  $      9,002
  Deposits:
    Non-Interest Bearing Demand
     Deposits                     $     96,942  $     91,501  $     71,761
    Interest Bearing Demand
     Deposits                           33,949        33,632        23,538
    Money Market Deposits and
     Savings                            85,843        72,757        50,159
    Certificates of Deposit             53,949        60,099        58,169
                                  ------------  ------------  ------------
      Total Deposits              $    270,683  $    257,989  $    203,627
  Total Stockholders' Equity      $     44,481  $     44,338  $     46,791
  Gross Loans to Deposits                69.66%        69.49%        84.80%
  Equity to Assets                       13.94%        14.38%        17.75%
  Ending Shares Issued,
   excluding Treasury Stock          9,298,779     9,302,291     9,218,269
  Ending Book Value per Share     $       4.78  $       4.77  $       5.08

                                      Three Months Ended
                                          March 31,
Quarterly Operating Results       --------------------------
 (unaudited):                         2011          2010
                                  ------------  ------------
  Net Interest Income             $      2,711  $      2,478
  Provision for Loan Losses       $        200  $          -
  Non-Interest Income             $        204  $        229
  Non-Interest Expense            $      2,592  $      2,583
  Income Before Taxes             $        123  $        124
  Income Tax Provision            $          -  $          -
  Net Income                      $        123  $        124
  Basic Earnings per Share        $       0.01  $       0.01
  Diluted Earnings per Share      $       0.01  $       0.01
  Quarterly Return on Average
   Assets*                                0.16%         0.19%
  Quarterly Return on Average
   Equity*                                1.13%         1.08%
  Quarterly Net Interest
   Margin*                                3.59%         3.96%

Reconciliation of YTD Net Income
 to Pre-Tax, Pre-Provision
 Earnings:

  Net Income                      $        123  $        124
  Provision for Loan Losses                200             -
  Income Tax Provision                       -             -
                                  ------------  ------------
  Pre-Tax, Pre-Provision Earnings $        323  $        124
                                  ============  ============

*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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