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Focus Business Bank Announces Unaudited Financial Results for the Quarter and Nine-Months Ended September 30, 2012

SAN JOSE, CA -- (Marketwire) -- 10/23/12 -- Focus Business Bank (OTCQB: FCSB) announced unaudited financial results for the quarter and nine-months ended September 30, 2012. Net income was $2,560,000, or $0.92 per share, and $3,067,000, or $1.11 per share, for the quarter and nine-months ended September 30, 2012, respectively. These results included an income tax benefit of $2,233,000 in the quarter ending September 30, 2012 resulting from the reversal of the valuation allowance on deferred tax assets. Reversal of the valuation allowance was based on the Bank's assessment that after ten consecutive quarters of pre-tax net income, including record pre-tax net income of $327,000 in the quarter ending September 30, 2012 compared to $267,000 for the quarter ended September 30, 2011, it was likely that the benefits from the deferred tax assets would be realized.

President and Chief Executive Officer Richard L. Conniff remarked, "The Bank's results for the third quarter of 2012 reflect the continuing successful execution of our business plan to become the bank of choice for closely held businesses in our market. While net income after tax for the quarter was positively impacted by one-time tax benefits, it is important to note that pre-tax net income for the three and nine month periods ending September 30, 2012 are up 22% and 112%, respectively, compared to the same periods in 2011. The improvement in earnings is driven by success in growing our business while controlling operating expenses and effectively managing asset quality."

Assets and Liabilities
The Bank continued to experience growth in the most recent quarter. Total assets were $189.6 million at September 30, 2012, growing $36.9 million, or 24%, from September 30, 2011. Total loans at September 30, 2012 were $114.2 million, a $25.2 million increase, or 28%, from September 30, 2011. Total deposits of $163.1 million at September 30, 2012 represented a $33.6 million increase, or 26%, from September 30, 2011. Assets, loans and deposits were all at record high levels on September 30, 2012.

Mr. Conniff noted, "Continued growth is a key component of the Bank's business plan. That growth is being funded by increasing core deposits and deploying that funding into high quality loans. We have achieved deposit growth across all of our business lines with particular success in two specialty business types where the Bank has significant local market share, condominium homeowner associations and non-profit organizations. Growth in loans has been balanced between traditional commercial and industrial loans, which have increased approximately 32% over the 12 months ending September 30, 2012 and commercial real estate loans, primarily first mortgages on commercial properties in Santa Clara County, which have grown approximately 27% over that same 12 month period."

Net Interest Income
Net interest income for the three and nine-months ended September 30, 2012 was $1,518,000 and $4,444,000, up 12% and 28%, respectively, compared to the same periods ending September 30, 2011. The increase in net interest income is attributable to the growth in interest earning assets, partially offset by a decrease in net interest margin. Net interest margin was 3.50% for the three months ended September 30, 2012 compared to 3.75% for the same three month period in 2011. The decrease in net interest margin is attributable primarily to declines in market rates of interest rather than a significant change in the Bank's mix of earning assets as the loan to deposit ratio was 70% at September 30, 2012 compared to 69% at September 30, 2011.

Non-interest Income
Non-interest income was $286,000 and $737,000 for the quarter and nine months ended September 30, 2012, respectively, compared to $117,000 and $890,000 for the same periods in 2011. Gains on the sale of SBA loans originated by the Bank and sold in the secondary market remain the largest component of non-interest income. The remaining balance of non-interest income is primarily related to loan servicing fees, deposit activities and changes in the cash surrender value of bank owned life insurance. The Bank purchased single premium life insurance policies totaling $3.0 million in the quarter ending March 31, 2012.

Non-Interest Expense
Non-interest expense was $1,477,000 and $4,272,000 for the quarter and nine-months ended September 30, 2012, respectively, compared to $1,204,000 and $3,943,000 for the comparable periods in 2011. The increase in non-interest expense is a result of the Bank's growth in assets. The largest component of non-interest expense is related to compensation of the Bank's employees. The Bank had 25 full-time employees at September 30, 2012 compared to 23 full-time employees at September 30, 2011.

Asset Quality
The Bank made no provision for loan losses in the quarter or nine-month periods ended September 30, 2012 and September 30, 2011. The allowance for loan losses was 2.23% of total loans at September 30, 2012, as compared to 2.85% at September 30, 2011. There were no loan charge-offs for the quarter or nine-months ended September 30, 2012. At September 30, 2012, the Bank had no non-performing loans and the Bank has never had other real estate owned.

Focus Business Bank has capital ratios substantially in excess of the minimum regulatory requirements for a bank to be considered well capitalized. At September 30, 2012, the total risk-based capital ratio was 18.91%. The Bank has not participated in any government sponsored capital programs, including the Troubled Asset Relief Program ("TARP") or the Small Business Lending Fund ("SBLF").

About Focus Business Bank
Focus Business Bank is dedicated to meeting the banking needs of closely-held businesses and professionals in Santa Clara County. The Bank's office is located at 10 Almaden Boulevard in downtown San Jose, California and offers a variety of commercial banking products including loans, deposits, remote deposit capture and other cash management services oriented toward closely-held businesses and their owners. The Bank specializes in commercial loans and is also an SBA Preferred Lender. The Bank also serves not-for-profit businesses and condominium homeowner associations by offering expertise, market knowledge and specialized products and services to these customers.

Forward-Looking Statements
This release may contain forward-looking statements, such as, among others, statements about plans, expectations and goals concerning growth and improvement. Forward-looking statements are subject to risks and uncertainties. Such risks and uncertainties may include but are not necessarily limited to fluctuations in interest rates, inflation, government regulations and general economic conditions, including the real estate market in California and other factors beyond the Bank's control. Such risks and uncertainties could cause results for subsequent interim periods or for the entire year to differ materially from those indicated. Readers should not place undue reliance on the forward-looking statements, which reflect management's view only as of the date hereof. The Bank undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances.

                                      Focus Business Bank
                                 Summary Financial Information
                                             As of
                                                                   12 Month
BALANCE SHEET                  30-Sep-12   31-Dec-11   30-Sep-11   % Change
                              ----------  ----------  ----------  ---------
($ in ',000s except per share
Cash and due from banks
  Interest bearing            $   39,397  $   40,906  $   32,942         20%
  Non-interest bearing             6,231       4,309       4,320         44%
Federal funds sold                   505         505         505          0%
Investment securities             25,103      26,502      26,980         -7%
Loans                            114,168      97,401      89,011         28%
Net deferred loan costs               22          37         102        -78%
  Allowance for loan losses       (2,544)     (2,541)     (2,541)         0%
                              ----------  ----------  ----------
    Net Loans                    111,646      94,897      86,572         29%
Other assets                       6,730       1,405       1,442        367%
                              ----------  ----------  ----------

TOTAL ASSETS                  $  189,612  $  168,524  $  152,761         24%
                              ==========  ==========  ==========

  Non-interest bearing        $   55,649  $   63,196  $   44,045         26%
  Interest bearing               107,451      81,986      85,478         26%
                              ----------  ----------  ----------
    Total deposits               163,100     145,182     129,523         26%
Other liabilities                    721         716         828        -13%
                              ----------  ----------  ----------
TOTAL LIABILITIES                163,821     145,898     130,351         26%
Stockholders' equity              25,791      22,626      22,410         15%
                              ----------  ----------  ----------

 EQUITY                       $  189,612  $  168,524  $  152,761         24%
                              ==========  ==========  ==========

Book value/share              $     9.28  $     8.15  $     8.07         15%

Balance Sheet Ratios
  Loan/deposit                        70%         67%         69%
  Non-interest/total deposit          34%         44%         34%

Regulatory Capital Ratios
  Tier-1 leverage                  13.40%      13.82%      15.47%
  Tier-1 risk based capital        17.65%      19.48%      20.04%
  Total risk-based capital         18.91%      20.75%      21.31%

Asset Quality Metrics
  Non-performing loans        $        -  $    1,044  $       83
  Non-performing loans/total
   loans                            0.00%       1.07%       0.09%
  ALLL/total loans                  2.23%       2.61%       2.85%

                            Focus Business Bank
                       Summary Financial Information

                                 Quarters Ended         Nine-Months Ended
                             ----------------------  ----------------------
INCOME STATEMENT              30-Sep-12   30-Sep-11   30-Sep-12   30-Sep-11
                             ----------  ----------  ----------  ----------
($ in ',000s except per
 share data)
Interest income              $    1,635  $    1,452  $    4,762  $    3,811
Interest expense                    117          98         318         329
                             ----------  ----------  ----------  ----------
  Net interest income             1,518       1,354       4,444       3,482
Provision for loan losses             -           -           -           -
Non-interest income                 286         117         737         890
Non-interest expense              1,477       1,204       4,272       3,943
                             ----------  ----------  ----------  ----------
    Pre-tax income                  327         267         909         429
    Income taxes                 (2,233)         67      (2,158)         67
                             ----------  ----------  ----------  ----------
Net income                   $    2,560  $      200  $    3,067  $      362
                             ==========  ==========  ==========  ==========
Net income per basic share   $     0.92  $     0.07  $     1.11  $     0.13

Performance Metrics
  Net interest margin              3.50%       3.75%       3.70%       3.45%
  Return on average assets         5.65%       0.54%       2.44%       0.35%
  Return on average equity        43.26%       3.56%      17.68%       2.21%

Richard L. Conniff
President and Chief Executive Officer
Email Contact

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