First California Financial Group (FCAL)

[Enterprising Investor]

FCAL Reports Significant Increase in Core Earnings for the 2012 First Quarter (4/26/12)

Company to Host Conference Call Today at 11 a.m. Pacific Time

WESTLAKE VILLAGE, CA--(Marketwire - Apr 26, 2012) - First California Financial Group, Inc. (NASDAQ: FCAL), the holding company of First California Bank, today reported net income for the 2012 first quarter ended March 31, 2012 of $2.6 million, compared with $15.6 million for the same quarter a year ago. Net income available to common shareholders was $2.3 million, or $0.08 per diluted share, compared with $15.3 million, or $0.54 per diluted share, for the prior year first quarter. The 2011 first quarter results included a non-recurring $34.7 million pre-tax gain related to the FDIC-assisted acquisition of San Luis Trust Bank. Preferred dividends were $312,500 for each of the first quarters of 2012 and 2011. At March 31, 2012, tangible book value per common share was $4.36.

"Our solid first quarter performance continued the Bank's earnings momentum and reflect the investments and decisions we made in 2011 to strengthen our business and ramp up loan growth," said C. G. Kum, president and chief executive officer of First California Financial Group. "Our financial results for the quarter were driven by a doubling of fee income and a significant increase in net interest revenues. Moreover, these results represent all core earnings stemming from effective balance sheet management which generated healthy and sustainable net interest margin."

2012 First Quarter Financial Highlights

•Net interest revenues jumped 27 percent from the same period a year ago on higher net interest margin;

•Net interest margin improved to 4.14 percent from 3.52 percent from the year ago period;

•Service charges, fees and other income more than doubled to $2.5 million from $1.2 million;

•Operating expenses increased to $13.5 million from $12.1 million, while the efficiency ratio declined to 72 percent from 87 percent;

•Provision for loan losses was $500,000, down from the year ago provision of $2.5 million;

•Non-covered loans were up 8 percent and deposits were up 3 percent from the year-end 2011;

•Allowance for loan losses to non-covered loans was 1.80 percent; first quarter annualized net charge-offs were 0.03 basis points of average loans and non-covered nonperforming assets were 1.77 percent of total assets;

•Tangible common book value per share was $4.36 and return on average tangible common equity was 8.41 percent.

Financial Results

For the 2012 first quarter, net interest income before the provision for loan losses, increased 27 percent to $16.2 million from $12.8 million for the 2011 first quarter. The increase reflects a higher level of loans and securities and loan yields, as well as a decrease in interest rates paid on interest-bearing liabilities. Interest income (discount accretion) on covered loans for the 2012 first quarter was $4.2 million. 2011 first quarter interest income (discount accretion) on covered loans was $2.3 million. Net interest margin, on a taxable equivalent basis, rose to 4.14 percent from 3.52 percent for the 2011 first quarter. The increase reflects a 3 percent rise in earning assets, a 6 percent improvement in earning asset yield, as well as a 27 percent decline in the cost of funds.

Service charges, fees and other income more than doubled to $2.5 million from $1.2 million for the 2011 first quarter, primarily due to the fee income of $1.2 million in the current quarter from the EPS division. The Bank acquired the EPS division in the second quarter of 2011.

Noninterest income included a $111,000 loss on non-hedged derivatives and a $28,000 impairment loss on a $1.0 million community development-related equity investment. For the 2011 first quarter noninterest income included a $1.1 million impairment loss on two private-label CMO securities.

Operating expenses for the 2012 first quarter were $13.5 million compared with $12.1 million for the 2011 first quarter. Operating expenses exclude intangible amortization, integration/conversion expenses and foreclosed property gains, losses and expenses. The increase reflects growth in the Bank's workforce associated with the acquisitions of San Luis Trust Bank (SLTB) and the EPS division, as well as the addition of lending teams. Employees at March 31, 2012 numbered 296 compared with 260 at the end of the same period a year ago. The efficiency ratio was 72.17 percent for the 2012 first quarter compared with 86.53 percent for the same period last year and 75.69 percent for the fourth quarter of 2011. The efficiency ratio improved from the 2011 fourth quarter notwithstanding that expenses are generally higher in the first quarter due to annual merit increases and higher payroll taxes at the beginning of the year.

Core earnings, which represent income before taxes and exclude credit charges and non-recurring items such as gain on acquisitions, integration/conversion expense and securities transactions, were $4.6 million for the first quarter of 2012 compared with $1.5 million for the same period a year ago, an increase of 212 percent.

Non-covered loans grew 8 percent to $1.0 billion at March 31, 2012 from $936.1 million at December 31, 2011. During the 2012 first quarter, the lending teams booked new loan commitments totaling $70 million.

At March 31, 2012, covered loans decreased to $127.7 million from $135.4 million at December 31, 2011. The Bank's covered non-performing assets declined by $2.6 million or 8 percent during the same period.

Non-interest checking deposits increased 7 percent from year-end 2011 and now represent 35 percent of total deposits. The cost of all deposits, aided by the change in the mix of deposits, fell 46 percent to 38 basis points for the 2012 first quarter from 71 basis points for the same period last year.

Kum added, "Our main goals for 2012 are loan and deposit growth through organic growth initiatives, improve our efficiency ratio to the low 60's by the fourth quarter and continue to increase core earnings. Our strong first quarter has put us on track to achieve each of these goals."

Asset Quality

At March 31, 2012, non-covered non-performing assets (the sum of non-covered loans past due 90 days and accruing, nonaccrual loans and foreclosed properties) improved to 1.77 percent of total assets compared with 1.89 percent at December 31, 2011.

The allowance for loan losses was $18.2 million, or 1.80 percent of non-covered loans, at March 31, 2012 compared with $17.7 million, or 1.90 percent of non-covered loans, at December 31, 2011. Net loan charge-offs for the 2012 first quarter were $93,000, down substantially from $867,000 for the 2011 first quarter. The provision for non-covered loan losses for the 2012 first quarter was $500,000, down from $2.5 million for the 2011 first quarter.

Capital resources

Shareholders' equity was $227.6 million at March 31, 2012 compared with $223.1 million at December 31, 2011. The Company's book value per common share increased to $6.89 at March 31, 2012 from $6.75 at December 31, 2011. Tangible book value per common share rose to $4.36 at March 31, 2012 from $4.19 at December 31, 2011.

At March 31, 2012, First California's preliminary Tier 1 leverage capital ratio was 10.30 percent. At the end of the 2011 fourth quarter, the Tier 1 leverage capital ratio was 10.33 percent, and the total risk-based capital ratio decreased to 16.88 percent from 17.32 percent at December 31, 2011. The Company's ratio of tangible common equity to tangible assets was 7.08 percent at March 31, 2012 and 7.05 percent at the end of the 2011 fourth quarter. Total assets were $1.88 billion at March 31, 2012 compared with $1.81 billion at December 31, 2011.

Kum concluded, "In the 2012 first quarter, we made significant progress toward increasing profitability and increasing shareholder returns. Solid loan bookings for the quarter combined with a healthy pipeline of new loans, sharper focus on expense management and improving net interest margin have enabled us to increase core earnings and position us to achieve our mid-range goal of a return on average tangible common equity in the teens."

Use of Non-GAAP Financial Measures

This news release includes "non-GAAP financial measures" within the meaning of the Securities and Exchange Commission rules. Tangible common equity as a percentage of tangible assets is a non-GAAP financial measure. Tangible common equity to tangible assets represents tangible common equity, calculated as total shareholders' equity less preferred stock and related dividend and accretion of preferred stock discount, goodwill and intangible assets, net, divided by tangible assets which are total assets less goodwill and other intangible assets, net. Management believes that this measure is useful when comparing banks with preferred stock due to CPP or SBLF funding to banks without preferred stock on their balance sheet and for evaluating a company's capital levels. Core earnings represent income before taxes and exclude credit charges and other items such as gain on acquisitions, integration/conversion expense and securities transactions and are intended to represent recurring operating earnings. Operating expenses exclude amortization of intangible assets and loss on and expense of foreclosed property and other items such as integration/conversion expenses related to acquisitions and are intended to represent normalized, recurring expenses. This information is being provided in response to market participant interest in these financial metrics. This information is not intended to be considered in isolation or as a substitute for the relevant measures calculated in accordance with U.S. GAAP. The reconciliation of this non-GAAP financial measure to a GAAP financial measure is provided as an attachment to the financial tables.

Conference Call and Webcast

First California will hold a conference call today, April 26, 2012 at 11 a.m. Pacific (2 p.m. Eastern) to discuss the Company's 2012 first quarter financial performance. Investment professionals are invited to participate in the live call by dialing 877-317-6789 (domestic), 866-605-3852 (Canada) or 412-317-6789 (international) and requesting the First California conference call. Other interested parties are invited to listen to the live call through a live, listen-only audio Internet broadcast at www.fcalgroup.com. Listeners are encouraged to visit the Web site at least 15 minutes prior to the start of the call to register, download and install any necessary audio software. For those who are not available to listen to the live broadcast, the call will be archived on the same Web site for one year. A telephonic replay of the call will be available one hour after the end of the conference through May 10, 2012 by dialing 877-344-7529 (domestic) or 412-317-0088 (international) and entering replay passcode 10013124.

About First California

First California Financial Group, Inc. (NASDAQ: FCAL) is the holding company of First California Bank. Founded in 1979 and with nearly $2 billion in assets, First California serves the comprehensive financial needs of small- and middle-sized businesses and high net worth individuals throughout Southern California. Led by an experienced team of bankers, First California is committed to providing the best client service available in its markets, offering a full line of quality commercial banking products through 19 full-service branch offices in Los Angeles, Orange, Riverside, San Bernardino, San Diego, San Luis Obispo and Ventura counties. 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 capital position, the Company's ability to enhance efficiencies and manage costs and the expected continued progress in consolidating operations and the benefits of those activities, the monitoring of and management of risks in First California's loan portfolio, the adequacy of sources of liquidity to support First California's operations and strategic plans, the monitoring of and response to changing market conditions, and the status of the economy in the Southern California communities served by First California. 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, revenues are lower than expected, credit quality deterioration which could cause an increase in the provision for credit losses, First California's ability to complete future acquisitions, successfully integrate such acquired entities, or achieve expected beneficial synergies and/or operating efficiencies within expected time-frames or at all, changes in consumer spending, borrowing and savings habits, technological changes, the cost of additional capital is more than expected, a change in the interest rate environment reduces interest margins, asset/liability repricing risks and liquidity risks, general economic conditions, particularly those affecting real estate values, either nationally or in the market areas in which First California does or anticipates doing business are less favorable than expected, a slowdown in construction activity, volatility in the credit or equity markets and its effect on the general economy, loan delinquency rates, the ability of First California to retain customers, changes in the bank regulatory environment, demographic changes, demand for the products or services of First California as well as their ability to attract and retain qualified people, competition with other banks and financial institutions, First California's level of small business lending, 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., 3027 Townsgate Road, Suite 300, Westlake Village, CA 91361. Attention: Investor Relations. Telephone [phone].

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