SOURCE: First California Financial Group

February 20, 2008 19:36 ET

First California Financial Group Announces 2007 Results

LOS ANGELES, CA--(Marketwire - February 20, 2008) - First California Financial Group, Inc. (NASDAQ: FCAL)

--  2007 net income of $7.1 million versus $5.6 million in 2006
--  Asset quality high, no loan loss provision in 2007
--  Liquidity, core funding remain strong
--  Continues to generate operating efficiencies following merger
--  4Q 2007 EPS rises to 22 cents versus 20 cents in 3Q 2007
    

First California Financial Group, Inc. (NASDAQ: FCAL) today reported net income rose to $7.1 million for the year ended December 31, 2007, or 66 cents per diluted weighted average share, compared with 2006 net income of $5.6 million or 94 cents per diluted weighted average share.

Net income in 2007 was affected by the merger of equals between FCB Bancorp and National Mercantile Bancorp completed in the 2007 first quarter. The company's 2007 net income includes nine months, 19 days of combined results as well as the effect of merger-related gains and charges. First California Financial Group, Inc. was a wholly owned subsidiary of National Mercantile Bancorp formed to facilitate the reincorporation merger with National Mercantile Bancorp and the merger with FCB Bancorp, which occurred in March 2007. Accordingly, First California's historical balance sheet and results of operations before the merger are the same as the historical information of National Mercantile.

Net interest income for the year rose 72% to $40.2 million compared with $23.3 million in 2006, while non-interest income increased over 200% to $5.7 million compared with $1.8 million in 2006. Noninterest income includes service charges on deposit accounts, fees and other income as well as income from loan sales and commissions and trading gains and losses from non-hedge derivatives. The company attributed the dramatic rise in both numbers primarily to the merger.

Net income in fourth quarter 2007 was $2.7 million or 22 cents per diluted share, compared with fourth quarter 2006 net income of $1.7 million or 28 cents per diluted share on fewer shares. Net interest income for the fourth quarter rose to $10.7 million compared with $5.8 million in fourth quarter 2006, while non-interest income increased to $1.7 million compared with $1.1 million in the final quarter of 2006. The merger and modest organic growth throughout the year accounted for the dramatic difference.

C. G. Kum, president and CEO, said economic growth has slowed, but he believes that generally in the communities First California serves -- primarily coastal communities in Los Angeles, Ventura and Orange Counties -- the diversified business economies have been less affected by economic softness than in other California communities. He pointed out that through the merger, the bank stayed focused and maintained high lending standards that were a hallmark of the three individual banks before the merger.

"Maintaining the highest asset quality is one of our top priorities as we navigate through an uncertain market environment," explained Kum. "With our merger year behind us, I am ever more confident in the strength of our balance sheet. Our near-term goal is to continue our focus on loan quality, liquidity and capital. In addition, during these uncertain times, we will be vigilant on cost management."

"We have no exposure to subprime loans or related securities," the chief executive explained. "About 22 percent of our loan portfolio is construction related. Since the early summer of 2007, we have been aggressive in managing risks in this portfolio. We obtained new appraisals of our construction projects and prompted our builder clients to bolster their interest reserves and to lower their sale prices to be more in-line with the declining market. These loans continue to perform, but we will monitor them closely in light of the uncertain economy."

The company finished 2007 with $1.1 billion in total assets, up from $502 million in assets at year-end 2006. Deposits grew to $761.0 million compared with $380.6 million at the end of 2006. Loans rose to $746.2 million at year-end compared with $365.7 million at the end of 2006. While much of this was attributable to the merger, management noted that even in a difficult economy, the company added loans, deposits and income as the new entity pursued its increased business opportunities.

First California had no provision for loan losses during any quarter in 2007. Net loan charge-offs for 2007 were $466,000 compared with $38,000 for 2006. The company has one $5.7 million non-accruing loan, which has been in foreclosure and which it believes is backed by real estate more than sufficient to pay off the debt. The increase in the company's loans past due 90 days and accruing since the end of the third quarter represents one $1.5 million loan that was renewed in January. The company ended 2007 with a 1.05 percent allowance for loan losses to loans compared with 1.30 percent at December 31, 2006.

Income Bolstered by Operating Efficiencies

"Given the economic context, we had a productive first year," said Kum. "We completed the operational consolidation of the banks on schedule, made great strides to integrate our employees and managers into one corporate culture, and by year-end began building visibility for the First California Bank brand. An immediate goal was to retain the clients of all three banks by providing superior service and convenience. Not only did we accomplish this, but we made good progress to add new clients."

Kum explained that the company has a strong source of core funding because a third of its total deposits are demand deposits. The company also has access to the wholesale market for increased liquidity if needed. Kum added, "We do not have to chase the highest interest rates."

Referring to First California's near term operational goals, Kum explained: "We are continuing to benefit from our merger by making our operations as efficient as possible. We have consolidated facilities to reduce operating costs without impacting service or accessibility. Late in the year, we arranged to sublease a significant amount of unneeded office space, which we estimate will save the company approximately $270,000 a year. We will continue to rationalize back office operations and re-allocate people to eliminate redundancy and work more efficiently."

The company completed its technology and operational integration within 95 days of the completion of the merger, and focused on building a unified First California Bank culture throughout 2007. Management noted that primarily as a result of the merger, the company's efficiency ratio at year-end was 63 percent, slightly higher than its 61 percent at the end of 2006. The efficiency ratio remained stable from third to fourth quarter 2007, and was down from 67 percent in first quarter 2007.

During the final quarter of 2007, the company repurchased approximately $2.4 million, or 262,000, of its shares significantly below its book value of $11.81 at December 31, 2007. Management said the company is authorized to repurchase up to $5.0 million in First California common stock.

2008 Outlook

"Like many well-run community banks, we have been somewhat tarred with the same brush as other institutions with credit or asset quality issues which we haven't experienced," said Kum. "We're confident that, in time, investors will recognize our strengths and quality. In the meantime, we recognize the value of First California's stock, and believe a share buyback is an optimal use of our cash."

He said the company's focus in the first half of 2008 will include maintaining high asset quality and ensuring the company's products and services are positioned to take full advantage of the new First California Bank. Cost management will be the top operational priority; however, Kum said management will also look for selective organic growth opportunities in line with the company's strategic objectives.

The chief executive concluded, "The economic outlook for 2008 is uncertain, but we feel that First California's diversified mix of business clients, combined with the comparatively good health of the Southern California communities we serve, will lead to modest organic growth. With the merger behind us, we anticipate putting our capital to greater use in 2008, and anticipate improving our return on assets of .66 percent and return on average equity of 5.34 percent in 2007. We believe our strong capital and asset position will let us pursue additional business opportunities at a time when many competitors are being forced by asset quality issues and liquidity to dramatically pull back."

About First California

First California Financial Group, Inc. (NASDAQ: FCAL) is an emerging force in Southern California banking. With assets exceeding $1 billion, the company operates throughout Southern California, primarily under the First California Bank brand. The bank's focus is the commercial market, particularly small and middle-sized businesses and commercial real estate, development and construction concerns. With a commitment to provide the best client service available in its markets, the bank offers a full line of quality commercial banking products through 12 full-service branch offices and one loan production office. The holding company's website can be accessed at www.fcalgroup.com. For additional information on First California Bank's products and services, visit www.fcbank.com.

Forward-Looking Information

This press release contains certain forward-looking information about First California that is intended to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements, and include statements related to the maintenance of First California's asset quality and focus on cost management, First California's long-term goals of growth and becoming one of the leading business banks in its area, the ability of First California to pursue sound lending opportunities as a result of strong capital and asset position, the monitoring of First California's construction loan portfolio, the ability of First California to adequately recover on non-accruing loans in foreclosure, the continued stabilization of First California's loan and deposit base and protection of margins in a changing interest rate environment through its operating plan, the continued benefit from and the creation of additional operating efficiencies, and expected annual savings from the consolidation of office space and operations, the implementation and timing of First California's share repurchase plan, expected growth and use of capital in 2008, the status of the economy in the Southern California communities served by First California and the search for selective organic growth opportunities in line with the company's strategic objectives. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of First California. First California cautions readers that a number of important factors could cause actual results to differ materially from those expressed in, or implied or projected by, such forward-looking statements. Risks and uncertainties include, but are not limited to, the impact of the current national and regional economy on small business loan demand in Southern California, loan delinquency rates, the ability of First California and First California Bank to retain customers, interest rate fluctuations and the impact on margins, demographic changes, demand for the products and services of First California and First California Bank, as well as their ability to attract and retain qualified people, competition with other banks and financial institutions, and other factors. If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, First California's results could differ materially from those expressed in, or implied or projected by such forward-looking statements. First California assumes no obligation to update such forward-looking statements. For a more complete discussion of risks and uncertainties, investors and security holders are urged to read the section titled "Risk Factors" in First California's Annual Report on Form 10-K and any other reports filed by it with the Securities and Exchange Commission ("SEC"). The documents filed by First California with the SEC may be obtained at the SEC's website at www.sec.gov. These documents may also be obtained free of charge from First California by directing a request to: First California Financial Group, Inc., 1880 Century Park East, Suite 800, Los Angeles, CA 90067. Attention: Investor Relations. Telephone (310) 282-6703.

                       First California Financial Group
                          Unaudited Financial Results

(in thousands except
 for share data and
 ratios)
As of or for the
 quarter ended           31-Dec-07    30-Sep-07    30-Jun-07    31-Mar-07
                        -----------  -----------  -----------  -----------

Income statement
 summary
Net interest income     $    10,658  $    10,954  $    11,710  $     6,922
Service charges, fees &
 other income                   886          858          824          680
Loan commissions &
 sales                          586          540          816          257
Operating expenses            7,845        7,819        8,094        5,249
Provision for loan
 losses                           -            -            -            -
Amortization of
 intangible assets              372          242          353           62
Gain on sale of charter           -            -        2,375            -
Integration/conversion
 expense                          -          540        1,427        3,476
Expense of early
 termination of debt              -            -            -        1,564
Insurance proceeds and
 other                            -            -            -            -
Trading gains on
 non-hedge derivatives          224            -            -            -
Net settlement on
 interest rate swaps              -            -            -            -
                        -----------  -----------  -----------  -----------
Income (loss) before
 tax                          4,137        3,751        5,851       (2,492)
Tax expense (benefit)         1,475        1,340        2,741       (1,397)
                        -----------  -----------  -----------  -----------
Net income (loss)       $     2,662  $     2,411  $     3,110  $    (1,095)
                        ===========  ===========  ===========  ===========




Balance sheet data
Total assets            $ 1,109,736  $ 1,091,696  $ 1,033,782  $ 1,064,896
Shareholders' equity        136,818      135,233      131,209      128,113
Common shareholders'
 equity                     135,818      134,233      130,209      127,113
Earning assets              988,982      964,387      914,786      933,048
   Loans                    746,179      756,264      731,098      722,445
   Loans - held for
    sale                     11,454        3,567        7,256       25,583
   Securities               231,095      204,281      173,654      182,220
   Federal funds sold &
    other                       255          275        2,777        2,800
Interest-bearing funds      759,367      741,246      670,377      723,418
   Interest-bearing
    deposits                563,818      566,799      557,034      572,679
   Borrowings               168,901      147,811       86,721      123,734
   Junior subordinated
    debt                     26,648       26,635       26,622       27,005
Goodwill and other
 intangibles                 60,246       60,231       60,472       60,605
Deposits                    761,080      767,237      776,587      770,768


Asset quality data and
 ratios
Loans past due 90 days
 and accruing           $     2,848  $       890  $       953  $       100
Nonaccruing loans             5,720        5,720        5,992          334
                        -----------  -----------  -----------  -----------
Total nonperforming
 loans                        8,568        6,610        6,945          434
Foreclosed property             197          244          161          303
                        -----------  -----------  -----------  -----------
Total nonperforming
 assets                 $     8,765  $     6,854  $     7,106  $       737
                        ===========  ===========  ===========  ===========

Allowance for loan
 losses                       7,828        8,085        8,296        8,296
Allowance for loan
 losses to loans               1.05%        1.07%        1.13%        1.15%


Common shareholder data
Basic earnings (loss)
 per share              $      0.23  $      0.21  $      0.27  $     (0.16)
Diluted earnings (loss)
 per share              $      0.22  $      0.20  $      0.25  $     (0.15)
Book value per share    $     11.81  $     11.46  $     11.11  $     11.01
Tangible book value per
 share                  $      6.57  $      6.32  $      5.95  $      5.76
Shares outstanding       11,500,520   11,715,310   11,715,185   11,545,601
Basic weighted average
 shares                  11,621,958   11,715,245   11,565,075    6,902,629
Diluted weighted
 average shares          11,887,269   12,246,499   12,241,087    7,160,279


Selected ratios
Return (loss) on
 average assets                0.99%        0.93%        1.19%       -0.63%
Return (loss) on
 average equity                8.02%        7.19%        9.63%       -5.12%
Equity to assets              12.33%       12.39%       12.69%       12.03%
Tangible equity to
 tangible assets               7.30%        7.27%        7.27%        6.72%
Efficiency ratio              63.50%       63.30%       60.63%       66.79%
Net interest margin
 [tax equivalent]              4.34%        4.62%        5.07%        4.13%



(in thousands except
 for share data and
 ratios)
As of or for the
 quarter ended           31-Dec-06    30-Sep-06
                        -----------  -----------

Income statement
 summary
Net interest income     $     5,805  $     5,861
Service charges, fees &
 other income                   315          273
Loan commissions &
 sales                            -            -
Operating expenses            3,889        3,477
Provision for loan
 losses                         104           72
Amortization of
 intangible assets               55           56
Gain on sale of charter           -            -
Integration/conversion
 expense                          -            -
Expense of early
 termination of debt              -            -
Insurance proceeds and
 other                          808            -
Trading gains on
 non-hedge derivatives            -          550
Net settlement on
 interest rate swaps              -            5
                        -----------  -----------
Income (loss) before
 tax                          2,880        3,084
Tax expense (benefit)         1,196        1,328
                        -----------  -----------
Net income (loss)       $     1,684  $     1,756
                        ===========  ===========




Balance sheet data
Total assets            $   501,563  $   494,197
Shareholders' equity         45,069       42,777
Common shareholders'
 equity                      44,069       41,777
Earning assets              472,132      465,698
   Loans                    365,718      358,220
   Loans - held for
    sale                          -            -
   Securities               104,414      105,478
   Federal funds sold &
    other                     2,000        2,000
Interest-bearing funds      335,633      331,742
   Interest-bearing
    deposits                264,869      263,678
   Borrowings                55,300       52,600
   Junior subordinated
    debt                     15,464       15,464
Goodwill and other
 intangibles                  4,410        4,464
Deposits                    380,614      379,418


Asset quality data and
 ratios
Loans past due 90 days
 and accruing           $         -  $       338
Nonaccruing loans                 -            -
                        -----------  -----------
Total nonperforming
 loans                            -          338
Foreclosed property             303            -
                        -----------  -----------
Total nonperforming
 assets                 $       303  $       338
                        ===========  ===========

Allowance for loan
 losses                       4,740        4,661
Allowance for loan
 losses to loans               1.30%        1.30%


Common shareholder data
Basic earnings (loss)
 per share              $      0.30  $      0.32
Diluted earnings (loss)
 per share              $      0.28  $      0.29
Book value per share    $      7.73  $      7.45
Tangible book value per
 share                  $      7.03  $      6.75
Shares outstanding        5,650,147    5,551,267
Basic weighted average
 shares                   5,597,733    5,545,903
Diluted weighted
 average shares           6,004,100    5,985,837


Selected ratios
Return (loss) on
 average assets                1.34%        1.43%
Return (loss) on
 average equity               15.29%       17.05%
Equity to assets               8.99%        8.66%
Tangible equity to
 tangible assets               8.18%        7.82%
Efficiency ratio              63.55%       51.98%
Net interest margin
 [tax equivalent]              4.86%        5.09%





                              First California Financial Group
                             Unaudited Financial Results (con't)



(in thousands except for share data and ratios)
                                                  -----------  -----------
                                                   31-Dec-07    31-Dec-06
                                                  -----------  -----------

Income statement summary
Net interest income                               $    40,244  $    23,348
Service charges, fees & other income                    3,248          326
Loan commissions & sales                                2,199            -
Operating expenses                                     29,008       14,805
Provision for loan losses                                   -          248
Amortization of intangible assets                       1,029          223
Gain on sale of charter                                 2,375            -
Integration/conversion expense                          5,443            -
Expense of early termination of debt                    1,564            -
Insurance proceeds and other                                -          808
Trading gains (losses) on non-hedge derivatives           224         (267)
Net settlement on interest rate swaps                       -          925
                                                  -----------  -----------
Income before tax                                      11,246        9,864
Tax expense                                             4,158        4,222
                                                  -----------  -----------
Net income                                        $     7,088  $     5,642
                                                  ===========  ===========


Balance sheet data
Total assets                                      $ 1,109,736  $   501,563
Shareholders' equity                                  136,818       45,069
Common shareholders' equity                           135,818       44,069
Earning assets                                        988,982      472,132
   Loans                                              746,179      365,718
   Loans - held for sale                               11,454            -
   Securities                                         231,095      104,414
   Federal funds sold & other                             255        2,000
Interest-bearing funds                                759,367      335,633
   Interest-bearing deposits                          563,818      264,869
   Borrowings                                         168,901       55,300
   Junior subordinated debt                            26,648       15,464
Goodwill and other intangibles                         60,246        4,409
Deposits                                              761,080      380,614


Asset quality data and ratios
Loans past due 90 days and accruing               $     2,848  $         -
Nonaccruing loans                                       5,720            -
                                                  -----------  -----------
Total nonperforming loans                               8,568            -
Foreclosed property                                       197          303
                                                  -----------  -----------
Total nonperforming assets                        $     8,765  $       303
                                                  ===========  ===========

Allowance for loan losses                               7,828        4,740
Allowance for loan losses to loans                       1.05%        1.30%


Common shareholder data
Basic earnings per share                          $      0.68  $      1.02
Diluted earnings per share                        $      0.66  $      0.94
Book value per share                              $     11.81  $      7.73
Tangible book value per share                     $      6.57  $      7.03
Shares outstanding                                 11,500,520    5,650,147
Basic weighted average shares                      10,467,620    5,551,570
Diluted weighted average shares                    10,731,694    6,007,186


Selected ratios
Return on average assets                                 0.66%        1.15%
Return on average equity                                 5.34%       13.63%
Equity to assets                                        12.33%        8.99%
Tangible equity to tangible assets                       7.30%        8.18%
Efficiency ratio                                        63.18%       60.85%
Net interest margin [tax equivalent]                     4.64%        4.07%

Contact Information

  • For further Information:

    At the Company:
    Ron Santarosa
    805-322-9333

    At The Investor Relations Company:
    Tad Gage
    Woody Wallace
    312-245-2700

    Corporate Headquarters Address:
    1880 Century Park East, Suite 800
    Los Angeles, CA 90067