HispanicBusiness

Financial Summary

Net Income - Income before taxes was $929,000 for the quarter ended September 30, 2012 compared to $547,000 for the same quarter in the prior year. This increase was largely due to an increase in interest income and a decrease in interest expense, partially offset by an increase in non-interest expense. Net income of $539,000 for the quarter ended September 30, 2012 increased $227,000 compared to net income of $312,000 for the same quarter in the prior year, and increased $330,000 over the net income for the trailing quarter ended June 30, 2012.

Basic and fully diluted earnings per share of $0.17 and $0.16, respectively, for the three months ended September 30, 2012 continued to add to retained earnings. These per share earnings increased from $0.10, basic and fully diluted for the same quarter a year ago and $0.06 basic and fully diluted for the prior quarter.

Balance Sheet - Total assets of $303 million as of September 30, 2012 increased $67 million (28%) from September 30, 2011 and decreased $1 million (0%) from June 30, 2012. Loans grew $33 million (17%) from September 30, 2011 to a total of $234 million as of September 30, 2012, with $6 million (3%) of that growth occurring in the three-month period ended September 30, 2012. Loan growth was funded largely by increased deposits, which grew $65 million (32%) from September 30, 2011 to a total of $269 million as of September 30, 2012, and decreased by $2 million (1%) from the balances outstanding as of June 30, 2012. As of September 30, 2012, the ratio of loans to deposits increased to 87% compared to 84% as of June 30, 2012 and 99% as of September 30, 2011.

Interest Income and Expense - Net interest income for the quarter ended September 30, 2012 was $3,089,000, an increase of $516,000 (20%) over the quarter ended September 30, 2011 and an increase of $191,000 (7%) over the trailing quarter ended June 30, 2012.

Interest income for the quarter ended September 30, 2012 was $3,298,000, an increase of $473,000 (17%) over the quarter ended September 30, 2011 and an increase of $176,000 (6%) over the trailing quarter ended June 30, 2012. Average earning assets for the quarter ended September 30, 2012 were $292 million, an increase of $67 million (30%) and $5 million (2%) compared to the quarters ended September 30, 2011, and June 30, 2012, respectively.

Interest expense for the quarter ended September 30, 2012 was $209,000, a reduction of $43,000 (17%) from the quarter ended September 30, 2011 and a decrease of $15,000 (7%) from the trailing quarter ended June 30, 2012. Average interest bearing liabilities for the quarter ended September 30, 2012 were $167 million, an increase of $30 million (22%) compared to the quarter ended September 30, 2011 and unchanged from June 30, 2012. While the average balances of interest-bearing deposit liabilities for the quarter ended September 30, 2012 increased compared to September 30, 2011, interest expense decreased due to the repricing of interest-bearing deposits, reflecting the Bank's continued focus on improving its net interest margin. Average noninterest bearing deposits of $103 million for the quarter ended September 30, 2012 grew $38 million (58%) and $6 million (6%) compared to the quarters ended September 30, 2011 and June 30, 2012, respectively.

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, 2012 of 4.2% compared to 4.5% for the quarter ended September 30, 2011 and 4.1% for the quarter ended June 30, 2012. The decrease in net interest margin from a year ago was primarily the result of strong growth in the deposit portfolio during that time which resulted in an increase in liquidity that temporarily reduced the yield on earning assets and to the prolonged low interest rate environment which resulted in a decline in the loan portfolio yield. During the quarter ended September 30, 2012, the yield on the loan portfolio decreased to 5.4% compared to 5.7% for the quarter ended September 30, 2011 and 5.6% for the quarter ended June 30, 2012. Further, the Bank continued to reduce the overall cost of deposits to just 0.3% for the period ended September 30, 2012 from 0.5% and 0.3%, respectively, for the three month periods ended September 30, 2011 June 30, 2012.