1st Century Bancshares, Inc. Reports Financial Results for the Quarter and Nine Months Ended September 30, 2011

Tue Nov 8, 2011 4:05pm EST

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

  LOS ANGELES, CA, Nov 08 (MARKET WIRE) -- 
1st Century Bancshares, Inc. (the "Company") (NASDAQ: FCTY), the holding
company of 1st Century Bank, N.A. (the "Bank"), today reported net income
for the three and nine months ended September 30, 2011 of $354,000 and
$593,000, respectively, compared to $155,000 and $398,000 for the same
periods last year. Pre-tax, pre-provision earnings for the three and nine
months ended September 30, 2011 was $354,000 and $868,000, respectively,
compared to $255,000 and $598,000 for the same periods last 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.

    Alan I. Rothenberg, Chairman of the Board and Chief Executive Officer of
the Company, stated, "I'm encouraged by our results for the quarter,
which continue to improve despite a challenging environment. Highlights
of the quarter and year-to-date periods include:


--  Growth in total assets from $308 million at December 31, 2010 to $384
    million at September 30, 2011;
--  Growth in total deposits from $258 million at December 31, 2010 to
    $326 million at September 30, 2011, resulting primarily from robust
    demand for our core deposit services, which has reduced our cost of
    funds to 31 basis points;
--  Continued improvement in our credit quality, with non-performing
    assets reduced to 1.9% of total assets, a decline of 28% since the
    beginning of the year;
--  Improved net interest income of $8.2 million during the first nine
    months of 2011 as compared to $7.3 million during the first nine
    months of 2010; and
--  Improved pre-tax, pre-provision earnings, which have increased by over
    45% during the nine months ended September 30, 2011, compared to the
    same period last year, despite a reduction in our net interest
    margin."

    

Mr. Rothenberg continued, "I remain cautiously optimistic regarding
the consistent improvement in our credit quality trends, as well as the
level of our non-performing assets. These metrics have greatly improved
since the third quarter of 2009, which we believe to be the peak of our
credit related issues during this economic cycle. As of September 30,
2011, the ratio of non-performing assets to total assets and
non-performing loans to total loans were 1.87% and 3.59%, respectively,
compared to 4.87% and 6.66% at September 30, 2009. Furthermore, the Bank
continues to maintain capital ratios that are double the regulatory
requirements to be considered 'well capitalized.'"

    Jason P. DiNapoli, President and Chief Operating Officer of the Company,
stated, "In addition, we're beginning to see a modest recovery in loan
demand. Despite only a $5.5 million increase in gross loans, loan
originations increased to over $58.4 million during the nine months ended
September 30, 2011, compared to $32.7 million for the same period last
year. I attribute a significant portion of this progress to our continued
investment in our business development teams, which through their
dedication and unsurpassed commitment to serving our customers have
become an integral part of our deposit and loan initiatives."

    2011 3rd Quarter Highlights


--  The Bank's total risk-based capital ratio was 20.15% at September 30,
    2011, compared to the regulatory requirement of 10.00% for "well
    capitalized" financial institutions. The Bank's capital does not
    include any capital received in connection with TARP, nor other forms
    of capital such as trust preferred securities, convertible preferred
    stock or other equity or debt instruments other than common stock.
    
    
--  Total assets increased 24.6%, or $76.0 million, to $384.4 million at
    September 30, 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 $279.0 million and $197.9 million at September 30,
    2011 and December 31, 2010, respectively, representing an increase of
    $81.1 million, or 41.0%.
    
    
--  Net interest margin was 3.05% and 3.27% for the three and nine months
    ended September 30, 2011, respectively, compared to 3.46% and 3.73%
    for the same periods last year.
    
    
--  Cost of funds was 32 and 31 basis points for the three and nine months
    ended September 30, 2011, respectively, compared to 38 and 46 basis
    points for the same periods last year.
    
    
--  Investment securities increased by $44.8 million, or 76.7%, to $103.3
    million at September 30, 2011, from $58.5 million at December 31,
    2010. During the nine months ended September 30, 2011, the Company
    increased the level of investment security purchases as a result of
    excess liquidity generated by deposit growth, which continues to
    outpace quality loan demand.
    
    
--  Gross loans increased $5.5 million, or 3.1%, to $184.8 million at
    September 30, 2011 from $179.3 million at December 31, 2010. Loan
    originations were $18.0 million and $58.4 million during the three and
    nine months ended September 30, 2011, compared to $14.8 million and
    $32.7 million during the same periods last year.
    
    
--  As of September 30, 2011, the allowance for loan losses ("ALL") was
    $5.2 million or 2.84% 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 79.03% and 74.21% at September 30, 2011 and
    December 31, 2010, respectively.
    
    
--  Non-performing loans decreased $480,000, or 6.7%, to $6.6 million at
    September 30, 2011 from $7.1 million at December 31, 2010.
    Non-performing loans to total loans was 3.59% and 3.97% at September
    30, 2011 and December 31, 2010, respectively.
    
    
--  Non-performing assets as a percentage of total assets declined to
    1.87% at September 30, 2011, compared to 2.58% at December 31, 2010.
    
    
--  For the three and nine months ended September 30, 2011, the Company
    recorded net income of $354,000, or $0.04 per diluted share, and
    $593,000, or $0.07 per diluted share, respectively. During the same
    periods last year, the Company reported net income of $155,000, or
    $0.02 per diluted share, and $398,000, or $0.04 per diluted share.
    


    

Capital Adequacy

    At September 30, 2011, the Company's stockholders' equity totaled $45.3
million compared to $44.3 million at December 31, 2010. At September 30,
2011, the Bank's total risk-based capital ratio, tier 1 risk-based
capital ratio, and tier 1 leverage ratio were 20.15%, 18.89%, and 11.10%,
respectively, compared to the regulatory requirements for "well
capitalized" financial institutions of 10.00%, 6.00%, and 5.00%,
respectively.

    In August 2010, the Company's Board of Directors (the "Board") authorized
the purchase of up to $2.0 million of the Company's common stock. Under
this stock repurchase program, the Company has been acquiring its common
stock in the open market from time to time beginning in August 2010.
During the nine months ended September 30, 2011, the Company repurchased
267,345 shares in the open market at a cost ranging from $3.52 to $4.02
per share in connection with this program. At September 30, 2011, the
remaining value of shares that may be repurchased under this program was
$609,000. 

    Balance Sheet

    Total assets increased 24.7%, or $76.0 million, to $384.4 million at
September 30, 2011, from $308.4 million at December 31, 2010. The
increase in total assets is primarily attributable to increases in cash
and cash equivalents, investment securities and gross loans. Cash and
cash equivalents increased $26.1 million, or 37.9%, from $69.0 million at
December 31, 2010 to $95.1 million at September 30, 2011. Investment
securities at September 30, 2011 were $103.3 million, representing an
increase of $44.8 million, or 76.7%, from $58.5 million at December 31,
2010. The increase in investment securities was primarily attributable to
the purchase of agency mortgage-backed securities, which had an average
life of 4.08 years at September 30, 2011. Gross loans at September 30,
2011 were $184.8 million, representing an increase of $5.5 million, or
3.1%, from $179.3 million at December 31, 2010. Loan originations were
$18.0 million and $58.4 million during the three and nine months ended
September 30, 2011, compared to $14.8 million and $32.7 million during
the same periods last year.

    Total liabilities at September 30, 2011 increased by $75.0 million, or
28.4%, to $339.0 million as compared to $264.0 million at December 31,
2010. This increase is primarily due to increases in non-interest bearing
deposits and money market deposits and savings of $29.4 million and $60.6
million, respectively, due to continued core deposit gathering efforts,
partially offset by declines of $13.2 million and $8.9 million in
certificates of deposit and interest bearing demand accounts,
respectively. Total core deposits, which include non-interest bearing
demand deposits, interest bearing demand deposits and money market
deposits and savings, were $279.0 million and $197.9 million at September
30, 2011 and December 31, 2010, respectively, representing an increase of
$81.1 million, or 41.0%. The increase in total liabilities is also
partially due to an $8.0 million increase in other borrowings, which were
primarily utilized to fund additional loan production during the current
year.

    Credit Quality

    Allowance and Provision for Loan Losses

    The ALL was $5.2 million, or 2.84% of our total loan portfolio, at
September 30, 2011, as compared to $5.3 million, or 2.95% of our total
loan portfolio, at December 31, 2010. The decline in our ratio of ALL to
total loans is primarily a function of improving credit quality related
trends within our loan portfolio. During the nine months ended September
30, 2011, our non-performing loans declined to $6.6 million from $7.1
million at December 31, 2010, and the ratio of our ALL to total
non-performing loans improved to 79.03% at September 30, 2011 compared to
74.22% at December 31, 2010. In addition, our ratio of non-performing
loans to total loans was 3.59% and 3.97% at September 30, 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. There was no provision for loan losses for the
three months ended September 30, 2011 and $275,000 for the nine months
ended September 30, 2011, compared to $100,000 and $200,000 for the same
periods last year. The decline in provision for loan losses recorded
during the three months ended September 30, 2011, as compared to the same
period last year, was primarily due to the general improvement in the
level of our criticized and classified loans, which generally consist of
special mention, substandard and doubtful loans. Special mention,
substandard and doubtful loans were $6.8 million, $10.4 million and
$900,000, respectively, at September 30, 2011, compared to $14.9 million,
$16.7 million, and none at September 30, 2010. We had net recoveries of
$162,000 during the three months ended September 30, 2011, and net
charge-offs of $312,000 during the nine months ended September 30, 2011,
compared to net charge-offs of $528,000 and $1.2 million during the same
periods last year. Management believes that the ALL as of September 30,
2011 and December 31, 2010 was adequate to absorb known and inherent
risks in the loan portfolio.

    Non-Performing Assets

    Non-performing assets totaled $7.2 million and $8.0 million at September
30, 2011 and December 31, 2010, respectively. Non-accrual loans totaled
$6.6 million and $7.1 million at September 30, 2011 and December 31,
2010, respectively. At September 30, 2011, non-accrual loans consisted of
four commercial loans totaling $2.3 million, two commercial real estate
loans totaling $4.0 million and one consumer related loan totaling
$345,000. As of September 30, 2011, other real estate owned ("OREO")
consisted of one single-family residential property totaling $532,000,
which is located in California. As of December 31, 2010, OREO consisted
of two single-family residential properties totaling $845,000, which were
both located in California. As a percentage of total assets, the amount
of non-performing assets was 1.87% and 2.58% at September 30, 2011 and
December 31, 2010, respectively.

    Net Interest Income and Margin

    During the three and nine months ended September 30, 2011, net interest
income was $2.8 million and $8.2 million, respectively, compared to $2.4
million and $7.3 million for the same periods last year. The increases in
net interest income during the three and nine months ended September 30,
2011, is primarily related to an increase in loan and investment income
earned as compared to the same periods last year, as well as a decline in
interest expense incurred in connection with the Bank's other borrowings.
These items were partially offset by an increase in interest expense
incurred on deposits, caused by growth within our deposit portfolio
during the period.

    The Company's net interest margin (net interest income divided by average
interest earning assets) was 3.05% for the three months ended September
30, 2011, compared to 3.46% for the same period last year. During the
three months ended September 30, 2011, the 41 basis point decline in net
interest margin was primarily due to a decrease in the yield on earning
assets of 46 basis points, partially offset by a decline of 10 basis
points in the cost of interest bearing deposits and borrowings. The
decrease in yield on earning assets is primarily attributable to a
general decline in interest rates earned on these assets during the three
months ended September 30, 2011, as compared to the same period last
year, as well as an increase in the average balance of interest earning
deposits at other financial institutions. These deposits yielded
approximately 25 basis points during the three months ended September 30,
2011. During the three months ended September 30, 2011 as compared to the
same period last year, the decline in our cost of interest bearing
deposits and borrowings is primarily attributable to a general decrease
in interest rates paid on these accounts. The average cost of interest
bearing deposits and borrowings was 0.44% and 1.39%, respectively during
the three months ended September 30, 2011 compared to 0.50% and 2.37% for
the same period last year.

    The Company's net interest margin was 3.27% for the nine months ended
September 30, 2011, compared to 3.73% for the same period last year.
During the nine months ended September 30, 2011, the 46 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 21 basis points in the cost of interest bearing deposits and
borrowings. The decrease in yield on earning assets is primarily
attributable to a general decline in interest rates earned on these
assets during the nine months ended September 30, 2011, as compared to
the same period last year, as well as an increase in the average balance
of interest earning deposits at other financial institutions. These
deposits yielded approximately 25 basis points during the nine months
ended September 30, 2011. During the nine months ended September 30, 2011
as compared to the same period last year, the decline in our cost of
interest bearing deposits and borrowings is primarily attributable to a
general decrease in interest rates paid on these accounts, as well as a
decline in the average balance of borrowings. The average cost of
interest bearing deposits and borrowings was 0.45% and 1.42%,
respectively during the nine months ended September 30, 2011 compared to
0.59% and 2.64% for the same period last year. The average balance of
borrowings decreased to $5.6 million during the nine months ended
September 30, 2011, as compared to $10.0 million for the same period last
year.

    Non-Interest Income

    Non-interest income was $222,000 and $618,000 for the three and nine
months ended September 30, 2011, compared to $223,000 and $662,000 for
the same periods last year. There were no significant changes in the
sources or amounts of non-interest income.

    Non-Interest Expense

    Non-interest expense was $2.7 million and $8.0 million for the three and
nine months ended September 30, 2011, compared to $2.4 million and $7.4
million for the same periods last year. The variance in non-interest
expense was primarily due to the additional costs incurred in connection
with expanding the Bank's business development team and the opening of
our Santa Monica relationship office during the previous quarter. The
increase in non-interest expense was partially offset by a reduction in
the Bank's FDIC assessments, which declined as a result of a change in
the FDIC's methodology regarding calculating a bank's quarterly insurance
assessments. The FDIC assessment was $41,000 and $266,000 for the three
and nine months ended September 30, 2011, respectively, compared to
$107,000 and $283,000 for the same periods last year.

    Income Tax Provision

    During the three and nine months ended September 30, 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
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 and nine months ended September 30, 2011, the Company
recorded net income of $354,000, or $0.04 per diluted share, and
$593,000, or $0.07 per diluted share, respectively, compared to $155,000,
or $0.02 per diluted share, and $398,000, or $0.04 per diluted share, for
the same periods last year.

    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 headquartered in the Century City
area of Los Angeles, with a full service business bank in Century City,
CA and a relationship office in Santa Monica, CA. 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
institutions, (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): 

                                 September 30,  December 31,  September 30, 
                                      2011          2010           2010
                                 -------------  ------------  ------------- 
Balance Sheet Results:            (unaudited)                  (unaudited)

  Total Assets                   $     384,375  $    308,364  $     298,910 
  Gross Loans                    $     184,817  $    179,271  $     169,063 
  Allowance for Loan Losses
   ("ALL")                       $       5,246  $      5,283  $       4,519 
  Non-Performing Assets          $       7,170  $      7,963  $       7,494 
  Deposits:
    Non-Interest Bearing Demand
     Deposits                    $     120,895  $     91,501  $      88,383 
    Interest Bearing Demand
     Deposits                           24,770        33,632         32,693 
    Money Market Deposits and
     Savings                           133,349        72,757         63,712 
    Certificates of Deposit             46,893        60,099         60,839 
                                 -------------  ------------  ------------- 
      Total Deposits             $     325,907  $    257,989  $     245,627 
  Total Stockholders' Equity     $      45,331  $     44,338  $      47,163 
  Gross Loans to Deposits                56.71%        69.49%         68.83%
  Ending Book Value per Share    $        4.99  $       4.77  $        5.05 

                                      Three Months Ended
                                         September 30,
                                 ---------------------------
Quarterly Operating Results
 (unaudited):                         2011           2010
                                 -------------  ------------
  Net Interest Income            $       2,815  $      2,433
  Provision for Loan Losses      $           -  $        100
  Non-Interest Income            $         222  $        223
  Non-Interest Expense           $       2,683  $      2,401
  Income Tax Provision           $           -  $          -
  Net Income                     $         354  $        155
  Basic Earnings per Share       $        0.04  $       0.02
  Diluted Earnings per Share     $        0.04  $       0.02
  Quarterly Net Interest Margin*          3.05%         3.46%

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

  Net Income                     $         354  $        155
  Provision for Loan Losses                  -           100
  Income Tax Provision                       -             -
                                 -------------  ------------
  Pre-Tax, Pre-Provision
   Earnings                      $         354  $        255
                                 =============  ============

                                       Nine Months Ended
                                         September 30,
                                 ---------------------------
YTD Operating Results
 (unaudited):                         2011           2010
                                 -------------  ------------
  Net Interest Income            $       8,245  $      7,328
  Provision for Loan Losses      $         275  $        200
  Non-Interest Income            $         618  $        662
  Non-Interest Expense           $       7,995  $      7,392
  Income Tax Provision           $           -  $          -
  Net Income                     $         593  $        398
  Basic Earnings per Share       $        0.07  $       0.04
  Diluted Earnings per Share     $        0.07  $       0.04
  YTD Net Interest Margin*                3.27%         3.73%

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

  Net Income                     $         593  $        398
  Provision for Loan Losses                275           200
  Income Tax Provision                       -             -
                                 -------------  ------------
  Pre-Tax, Pre-Provision
   Earnings                      $         868  $        598
                                 =============  ============

    
*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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