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Focus Business Bank Announces Unaudited Financial Results for Quarter Ending March 31, 2014

SAN JOSE, CA -- (Marketwired) -- 05/01/14 -- Focus Business Bank (OTCQB: FCSB) announced unaudited financial results for the quarter ended March 31, 2014. Net income for the quarter was $253,000 (or $0.09 per diluted share) compared to $151,000 (or $0.05 per diluted share) for the quarter ending March 31, 2013. The 68% increase in net income for the quarter ending March 31, 2014 compared to the same quarter in 2013 was primarily attributable to growth in net interest income resulting from a significant increase in earning assets and an increase in non-interest income from the gain on sale of SBA loans, partially offset by increases in operating expenses, the provision for loan losses and income taxes.

Chairman and Chief Executive Officer Richard L. Conniff commented on the March 31, 2014 results, "The Bank continues to achieve high levels of growth as we execute our strategy to build market share in key areas including specialty deposits and business banking. We continue to believe that core deposits build long-term value for our franchise. While there are costs associated with the initial acquisition of these deposits, the long-term benefit for our shareholders will be significant as our current high levels of liquidity are carefully deployed into higher yielding assets such as loans."

Highlights of the Quarter Ended March 31, 2014

  • Total loans of $149.9 million at March 31, 2014 were 30% above March 31, 2013 and at a record high level.

  • Interest bearing demand deposits of $137.2 million at March 31, 2014 increased $46.3 million, or 51%, compared to March 31, 2013. The increase is primarily related to growth in the Bank's specialty deposit businesses.

  • Non-interest bearing demand deposits of $88.7 million at March 31, 2014 represent a 49% increase over March 31, 2013 and primarily reflect growth in business banking relationships.

  • Savings and money market deposits increased by $24.2 million, or 74%, over the past year and totaled $57.0 million at March 31, 2014. This increase is related to growth in both business bank and specialty deposit relationships.

  • Total assets of $336.0 million at March 31, 2014 were an all time record high and represented an increase of 44% over March 31, 2013 and 8% from December 31, 2013.

Assets and Liabilities

As a result of deposit growth, the Bank had high levels of liquidity at March 31, 2014. The Bank's primary sources of liquidity, consisting of cash and due from banks, federal funds sold and investment securities totaled $180.5 million or 54% of total assets at March 31, 2014 compared to $112.9 million or 48% of total assets at March 31, 2013. Investment securities were $72.2 million, an increase of 109% over March 31, 2013. The loan to deposit ratio at March 31, 2014 and December 31, 2013 was 49%, compared to 56% at March 31, 2013.

Mr. Conniff noted, "The Bay Area economy continues to grow more rapidly than most other metropolitan regions of the country. Although the market remains highly competitive for banks, Focus Business Bank is well positioned to support closely-held local businesses with commercial loans. The Bank has ample capacity and desire to originate loans and we have invested in our loan development team with the addition of three new lenders since June 30, 2013."

Net Interest Income

Net interest income for the quarter ended March 31, 2014 was $2.0 million, an increase of 30% over the quarter ended March 31, 2013. The increase in net interest income was directly related to the higher volume of earning assets. The increase in net interest income attributable to higher volumes of earning assets was partially offset by lower net interest margins related to the low loan to deposit ratio and market interest rates which remain at very low levels. The net interest margin for the quarter ended March 31, 2014 was 2.75% compared to 3.01% for the quarter ended March 31, 2013.

Non-interest Income

Non-interest income includes service charges and fees, securities gains and losses, SBA gain on sale and servicing fees. Total non-interest income was $525,000 for the quarter ended March 31, 2014 compared to $270,000 for the quarter ended March 31, 2013. Most of the increase in non-interest income for the quarter ended March 31, 2014 compared to the same quarter in the previous year related to gains on the sale of SBA loans in the secondary market. Gains from the sales of SBA loans totaled $312,000, $387,000 and $168,000 for the quarterly periods ended March 31, 2014, December 31, 2013, and March 31, 2013, respectively. Focus Business Bank is an SBA Preferred Lender and the origination and sale of SBA loans has been a core component of the Bank's revenue for many years.

Non-Interest Expense

Non-interest expense for the quarter ending March 31, 2014 was $2.0 million compared to $1.6 million for the quarter ended March 31, 2013 and $1.9 million for the linked quarter ended December 31, 2013. The increase in non-interest expense is primarily attributable to an increase in FTEs from 30 at March 31, 2013 to 34 at March 31, 2014. Increased headcount also resulted in higher occupancy expense as the Bank expanded its leased premises in mid-2013. Higher levels of SBA loan originations in the quarter ended March 31, 2014 also led to increased SBA broker commissions and referral fees.

Asset Quality

The Bank had net loan charge-offs of $124,000 for the quarter ended March 31, 2014 compared to no loan charge-offs in the years of 2013 or 2012. At March 31, 2014, the Bank had $215,000 in non-performing loans compared to $1.1 million at December 31, 2013 and no non-performing loans at March 31, 2013. The provision for loan losses for the quarter ended March 31, 2014 was $100,000, compared to no provision for loan losses in 2013. At March 31, 2014, the reserve for loan losses was 1.68% of total loans, compared to 1.82% at December 31, 2013 and 2.20% at March 31, 2013.


Focus Business Bank has capital ratios in excess of the minimum regulatory requirements for a bank to be considered well capitalized. At March 31, 2014, the total risk-based capital ratio was 13.63% compared to the regulatory well capitalized minimum of 10%. 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 also serves not-for-profit organizations and condominium homeowner associations with expertise, market knowledge, products and services tailored to these specific industries. The Bank specializes in business cash management services and commercial loans of all types. The Bank's office is located at 10 Almaden Boulevard in downtown San Jose, California.

Forward-Looking Statements

This release may contain forward-looking statements, such as, among others, statements about plans, expectations and goals concerning future growth and performance. 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
                  Unaudited Summary Financial Information

                                              As of
                                                                   12 Month
BALANCE SHEET                   31-Mar-14   31-Dec-13   31-Mar-13  % Change
                               ----------  ----------  ----------  --------
($ in ',000s except per share

Cash and due from banks
  Interest bearing             $   89,237  $   89,507  $   67,566        32%
  Non-interest bearing         $   18,476      13,484  $   10,248        80%
Federal funds sold             $      501         501  $      505        -1%
Investment securities          $   72,253      63,293  $   34,625       109%
Loans                          $  149,900     140,342  $  115,717        30%
  Allowance for loan losses    $   (2,524)     (2,548) $   (2,544)       -1%
                               ----------  ----------  ----------
    Net Loans                     147,376     137,794     113,173        30%
Other assets                   $    8,142  $    8,080  $    7,308        11%
                               ----------  ----------  ----------

TOTAL ASSETS                   $  335,985  $  312,659  $  233,425        44%
                               ==========  ==========  ==========

  Non-interest bearing         $   88,720  $   94,661  $   59,641        49%
  Interest bearing             $  219,161     190,354  $  146,657        49%
                               ----------  ----------  ----------
    Total deposits                307,881     285,015     206,298        49%
Other liabilities              $      992  $      949  $      775        28%
                               ----------  ----------  ----------
TOTAL LIABILITIES                 308,873     285,964     207,073        49%
Stockholders' equity           $   27,112  $   26,695  $   26,352         3%
                               ----------  ----------  ----------

 EQUITY                        $  335,985  $  312,659  $  233,425        44%
                               ==========  ==========  ==========
Book value/share               $     9.31  $     9.16  $     9.05         3%

Balance Sheet Ratios
  Loan/deposit                         49%         49%         56%
  Non-interest/total deposit           29%         33%         29%

Regulatory Capital Ratios
  Tier-1 leverage                    7.89%       8.50%      10.82%
  Tier-1 risk based capital         12.38%      13.58%      16.88%
  Total risk-based capital          13.63%      14.84%      18.14%

Asset Quality Metrics
  Non-performing loans         $      215  $    1,098  $        -
  Non-performing loans/total
   loans                             0.14%       0.78%       0.00%
  ALLL/total loans                   1.68%       1.82%       2.20%

                            Focus Business Bank
              Unaudited Summary Financial Information (cont.)

                                                   Quarters Ended
INCOME STATEMENT                          31-Mar-14   31-Dec-13   31-Mar-13
                                         ----------  ----------  ----------
($ in ',000s except per share data)
Interest income                          $    2,206  $    2,067  $    1,698
Interest expense                         $      183  $      175  $      136
                                         ----------  ----------  ----------
  Net interest income                         2,023       1,892       1,562
Provision for loan losses                $      100  $        -  $        -
Non-interest income                      $      525  $      535  $      270
Non-interest expense                     $    2,048  $    1,852  $    1,605
                                         ----------  ----------  ----------
    Pre-tax income                              400         575         227
    Income taxes                         $      147  $      260  $       76
                                         ----------  ----------  ----------
Net income                               $      253  $      315  $      151
                                         ==========  ==========  ==========
Net income per diluted share             $     0.09  $     0.11  $     0.05

Performance Metrics
  Net interest margin                          2.75%       2.68%       2.98%
  Return on average assets                     0.32%       0.42%       0.27%
  Return on average equity                     3.79%       4.65%       2.32%

Richard L. Conniff
Chairman and Chief Executive Officer
Email Contact

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