First California Financial Group (FCAL)

Results of Operations

Net interest income before provision for loan losses increased 15.1% to $11.9 million for the 2009 second quarter from $10.3 million in the prior-year period. The company said the increase primarily reflects the benefits from its 1^st Centennial transaction effected in January 2009. The addition of $100.0 million of 1^st Centennial’s loans to the company’s portfolio during February 2009 contributed to increased levels of interest income on loans in the 2009 second quarter. Given the stability of the $270 million in core deposits assumed in the transaction, First California was able to reduce its borrowings, which resulted in lower levels of interest expense in the 2009 second quarter versus the prior-year period.

Net interest margin for the 2009 second quarter expanded 15 basis points to 3.75% from the immediately preceding quarter, but was lower when compared with 4.17% in the prior-year period primarily due to the significant reductions in the Federal Funds Rate versus a year ago. Year-over-year asset yields were also negatively impacted by the increase in nonaccrual loans and a higher percentage of earning assets in lower-yielding federal funds sold. However, these were partially offset by the decrease in rates paid on interest-bearing liabilities as time deposits and borrowings repriced to current, lower rates. The cost of interest-bearing liabilities was 2.09% for the 2009 second quarter, compared with 2.29% for the preceding quarter and 2.74% a year ago.

In addition to higher interest income and lower interest expense, the expansion of the deposit customer base from the 1^st Centennial transaction contributed to an increase in service charges on deposit accounts in the first half of 2009 compared with the first half of 2008. However, the lag between the costs of the transaction and the full deployment of the newly acquired liquid assets affected profitability levels for the 2009 three- and six-month periods. The company attributed approximately $250,000 and $723,000 of the increase in operating expenses for the second quarter and first half of the year, respectively, to integration-related matters.

The company’s 2009 second quarter efficiency ratio was also adversely impacted by a number of other factors. The regular FDIC insurance assessment increased to $550,000 for the second quarter from $196,000 for the first quarter due to increased rates and higher deposit levels and there was a special insurance assessment of $675,000 for the second quarter. The company incurred $249,000 of expenses during the 2009 second quarter in connection with the foreclosure and sale of other real estate owned. During the 2009 second quarter, the company posted a market loss of $709,000 on loans held-for-sale and an impairment loss of $565,000 on one security. All of these expenses more than offset securities gains of $2.0 million during the quarter. The

efficiency ratio for the current second quarter was 98.60%, compared with 87.30% for the preceding first quarter and 76.52% in the year-ago second quarter.

Net income for the 2009 second quarter was $217,000, compared with $1.3 million for the year-ago second quarter. After a dividend payment of $313,000 to the U.S. Treasury Department, the company incurred a loss per common share of $0.01. In the 2008 second quarter, earnings per diluted share equaled $0.11.

Loans at June 30, 2009 totaled $940.2 million, up 19.3% from $787.9 million at year-end 2008, largely reflecting the addition of selected 1^st Centennial loans, as well as the reclassification of loans held-for-sale to the loan portfolio. Deposits as of June 30, 2009 totaled $1.09 billion, compared with $817.6 million as of December 31, 2008. The sharp increase is predominantly attributed to the addition and retention of approximately $270 million in non-brokered deposits from the 1^st Centennial Bank transaction. Total assets at June 30, 2009 equaled $1.45 billion, compared with $1.18 billion at December 31, 2008.

Results of Operations

Net income for the three months ended March 31, 2009 totaled $413,000, equal to $0.02 per diluted common share, including the $1.1 million provision for loan losses, as well as non-core, integration-related costs of approximately $473,000. In the first quarter, the company made a dividend payment of $194,000 on the Series B Preferred Stock related to the U.S. Treasury Department’s Capital Purchase Program. This resulted in income available to common shareholders of $219,000 for the first quarter of 2009. For the 2008 fourth quarter, the company reported net income of $1.1 million, or $0.10 per diluted common share, which included $200,000 in provision for loan losses. In the 2008 first quarter, the company reported net income of $2.2 million, or $0.19 per diluted common share, including a provision for loan losses of $450,000. The company did not incur any comparable integration-related costs or Series B Preferred Stock dividend payments in the first and fourth quarters of 2008.

Loans at March 31, 2009 rose to $899.4 million, compared with $787.9 million at December 31, 2008, primarily reflecting the addition of selected 1^st Centennial loans. Loans held for sale amounted to $31.3 million at the close of the 2009 first quarter, versus $31.4 million at year-end 2008. Deposits increased sharply to $1.10 billion as of March 31, 2009 from $817.6 million as of December 31, 2008, which is predominantly attributed to the addition and retention of approximately $270 million in non-brokered deposits from 1^st Centennial. Total assets at March 31, 2009 increased to $1.47 billion from $1.18 billion at December 31, 2008.

Reflecting the full impact of reductions in the Federal Funds Rate totaling 175 basis points during the 2008 fourth quarter, the company’s net interest margin compressed to 3.68% in the first quarter from 3.90% in the immediately preceding quarter.

The 2009 first quarter margin was also impacted by a higher percentage of earning assets in lower-yielding Federal Funds sold.

The efficiency ratio for the first quarter of 2009 was 87.30%, compared with 83.63% in the fourth quarter of 2008 and 64.85% in the year-ago first quarter. The company attributed the higher efficiency ratio for the 2009 first quarter primarily to expenses associated with the 1^st Centennial Bank transaction and a higher percentage of earning assets in lower-yielding Federal Funds sold.

Results of Operations

Net income for the three months ended December 31, 2008 totaled $1.1 million, equal to $0.10 per diluted common share. This compares with the 2008 third quarter net income of $1.8 million, or $0.15 per diluted common share, and net income of $2.7 million, or $0.22 per diluted common share, for the 2007 fourth quarter.

For the year ended December 31, 2008, net income totaled $6.4 million, or $0.54 per diluted common share, compared with $7.1 million, or $0.66 per diluted common share, for 2007. The decrease is principally a reflection of a dramatic change in the interest rate environment during 2008. The company noted that its 2007 results reflect several items that affect comparability, including a $2.4 million gain on the sale of two subsidiary bank charters, a $1.6 million charge related to the refinancing of trust preferred securities and approximately $5.4 million of integration and conversion charges related to the merger of two holding companies that created First California in March 2007. In addition, the company’s first quarter of 2007 included only approximately 19 days of results for FCB Bancorp.

Loans at December 31, 2008 rose 6% to $787.9 million from $746.2 million at year-end 2007. Loans held for sale were $31.4 million at December 31, 2008 and $11.5 million at year-end 2007. Deposits increased 7% to $817.6 million as of December 31, 2008 from $761.1 million at year-end 2007. Total assets at December 31, 2008 increased 7% to $1.18 billion from $1.11 billion at December 31, 2007.

As anticipated, the company’s net interest margin for the 2008 fourth quarter was pressured by reductions in the Federal Funds Rate totaling 175 basis points during the three months ended December 31, 2008 and declined to 3.90% from 4.17% in the immediately preceding third quarter. Net interest margin for 2008 narrowed to 4.10% from 4.64% for 2007, principally reflecting a total reduction of 400 basis points in the Federal Funds Rate during 2008.

The efficiency ratio for the fourth quarter of 2008 was 83.63%, compared with 69.72% in the third quarter of 2008 and 63.41% in the 2007 fourth quarter. The company attributed the higher efficiency ratio for the 2008 fourth quarter primarily to expenses associated with its new corporate headquarters in Westlake Village, California and increased compensation expense as compared to the third quarter which included the recapture of previously accrued benefit obligations related to the departure of two senior officers.

Results of Operations

Net income for the quarter ended September 30, 2008 totaled $1.8 million, or $0.15 per diluted share. This compares with 2008 second quarter net income of $1.3 million, equal to $0.11 per diluted share, including a $367,000 pre-tax loss on derivatives which lowered second quarter earnings by approximately $213,000, or $0.02 per diluted share. In the year-ago third quarter, the company posted net income of $2.4 million, or $0.20 per diluted share.

For the nine months ended September 30, 2008, the company reported net income of $5.2 million, or $0.45 per diluted share, compared with net income of $4.4 million, or $0.41 per diluted share for the 2007 nine-month period. Year-ago results that affect comparability include a $2.4 million gain on the sale of two bank charters, a $1.6 million charge related to the refinancing of trust preferred securities and approximately $5.4 million of integration and conversion charges related to the merger of two holding companies that created First California in March 2007, as well as the fact that the first quarter 2007 included only approximately 19 days of results for FCB Bancorp.

Total loans at September 30, 2008 rose 3.3% to $783.5 million from $757.6 million at year-end 2007. The company’s total deposits remained relatively stable at $757.8 million as of September 30, 2008, compared with $761.1 million at year-end 2007. Total assets at September 30, 2008 increased by $16.3 million, or 1.5%, to $1.13 billion, compared with $1.11 billion at December 31, 2007.

The company’s net interest margin for the 2008 third quarter was stable sequentially at 4.17%, compared with 4.17% in the immediately preceding second quarter. The 2008 third quarter net interest margin is lower, however, when compared with 4.77% for the 2007 third quarter, reflecting the 325 basis point reduction in the Federal Funds Rate from 2007 through the end of the current third quarter. For the year-to-date period, net interest margin was 4.15%, compared with 4.73% for the corresponding period in 2007.

The efficiency ratio for the third quarter of 2008 improved sequentially to 69.72% from 77.27% in the second quarter of 2008, but was higher when compared with 63.20% in the year-ago third quarter. The company noted that the efficiency ratio for its 2008 second quarter was adversely impacted by the previously mentioned $367,000 derivative loss during the quarter.

“We continue to focus on enhancing our efficiencies and managing costs in this challenging economic environment,” said C. G. Kum, president and chief executive officer. “During the third quarter, we consolidated our administrative and back-office departments into our new headquarters in Westlake Village, and we look forward to continued benefits as we make further progress consolidating our operations and locations.”

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First California Financial Group, Inc.

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Results of Operations

For the quarter ended June 30, 2008, the company reported net income of $1.3 million, or 11 cents per diluted share, compared to 2008 first quarter net income of $2.2 million or 19 cents per diluted share. The first quarter 2008 results include a $1.2 million pre-tax gain on derivatives and the second quarter 2008 results include a $0.4 million pre-tax loss on derivatives. Excluding these amounts from both periods results in adjusted first quarter earnings of $1.5 million, or 13 cents per diluted share, compared to adjusted second quarter earnings of $1.5 million or 13 cents per diluted share. The interest rate swap contracts were terminated in the second quarter 2008; the remaining interest rate floor contract expires in December 2008 and is not expected to have a significant effect on earnings for the second half of the year.

For the six months ended June 30, 2008, the company reported net income of $3.5 million, or 30 cents per diluted share, compared with net income of $2.0 million, or 20 cents per diluted share for the six months ended June 30, 2007. Year-ago results that affect comparability include a $2.4 million gain on the sale of two bank charters, a $1.6 million charge related to the refinancing of trust preferred securities and approximately $4.9 million of integration and conversion charges related to the merger of two holding companies that created First California in March 2007, as well as the fact that the first quarter 2007 included only approximately 19 days of results for FCB Bancorp.

Total assets increased $16 million, or 1.5%, to $1.13 billion at June 30, 2008 compared to $1.11 billion at December 31, 2007. Total loans compared with year-end 2007 rose 4% to $773.5 million at June 30, 2008. Total deposits decreased 1% to $754.1 million as of June 30, 2008 compared to $761.1 million at year end 2007. The company’s net interest margin was 4.17% for the quarter ended June 30, 2008 compared to 4.14% in the previous quarter and 5.14% in the year ago quarter. The company’s net interest margin was 4.16% for the six months ended June 30, 2008 compared to 4.93% in the same period in 2007.

The efficiency ratio for the second quarter of 2008 was 77% as compared with 65% in the first quarter of 2008. The previous quarter’s ratio is primarily lower due to $1.2 million of derivative gains in the quarter versus $0.4 million of derivative losses in the current quarter. “We recognize the necessity of controlling costs and we are being very selective in which areas we place our growth emphasis. We have made several important moves to consolidate operations and control expenses while judiciously expanding some segments of operations according to our strategic plan. For example, we continue to hire personnel slightly ahead of our planned expansion so that our business can grow smoothly and appropriately,” Kum explained.

First California continued to fine-tune its branch network to generate operating efficiencies and establish a more visible presence in new areas of the three major counties it serves in Southern California – Los Angeles, Orange and Ventura. The company completed its announced plans to close a small branch in El Segundo in May. Consistent with previously announced plans, in July the company opened a new full-service office in Glendale which is north of Los Angeles. This location establishes a presence in an area management perceives to be underserved and puts First California within convenient reach of new markets, including media and entertainment, technology, education, culture, shopping and dining in nearby Universal City, Studio City, Burbank and Pasadena. The company is also on schedule to consolidate its administrative and back-office departments in its new headquarters in Westlake Village in the third quarter.