Epic Bancorp Announces Quarterly Financial Results; Nine-Month Net Income and EPS Increase

Business Wire, Oct 18, 2007

Third Quarter Revenue at Record Level

SAN RAFAEL, Calif. -- Epic Bancorp (the "Company") (NASDAQ:EPIK), the parent company of Tamalpais Bank and Epic Wealth Management, today reported net income for the quarter ended September 30, 2007 of $985,000, or $0.25 per diluted share, compared with net earnings of $1,052,000, or $0.26 per diluted share for the same quarter ended in 2006.

These results represent a 6.4% decrease in net income and a 3.8% decrease in diluted earnings per share (EPS) over the comparable period last year. Per share results for 2006 have been restated for the 7% stock dividend paid February 14, 2007.

However, for the nine months ended September 30, net income was $3,070,000, an increase of $217,000 or 7.6% over net income of $2,853,000 in the comparable period last year. Year-to-date diluted earnings per share of $0.77 increased 6.9% from $0.72 in comparable period last year.

"Although we are operating in an extremely competitive environment, we continue on track with our strategic plan objectives," said Mark Garwood, President/CEO. "We had a record level of revenue in the third quarter as we made progress in controlling operating expenses and reduced personnel expenses by 4.7% in the third quarter compared to the same period in 2006."

For the period, net interest income before provision for loan losses increased 3.1% and noninterest income increased 9.1% over the same period in 2006. The interest margin, although down from the prior year, widened by nine basis points from the second quarter of 2007 to 3.53%.

"We expect the refinancing of our trust preferred securities," he said, "will provide ongoing shareholder value by lowering interest expense $221,000 per year, and we have increased noninterest checking accounts by 31% so far this year."

For the three and nine months ended September 30, 2007, results were also affected by a nonrecurring expense of $200,000 for the expensing of unamortized placement fees on the $10 million for the trust preferred securities whose pay off was accrued as of September 30, 2007. This $200,000 expense reduced diluted earnings per share by $0.03 for the quarter and year-to-date. As previously disclosed, the $10 million of trust preferred securities carried a floating interest rate of three-month LIBOR plus 3.65%. The funds utilized to redeem these trust preferred securities were primarily obtained from the issuance of $10 million in new trust preferred securities, bearing a floating interest rate of three-month LIBOR plus 1.44%.

"Our asset quality has remained very strong," Garwood said, "and has been unaffected by the turmoil in the mortgage markets. We have no nonperforming assets, and only $1000 in loan charge-offs so far this year. We are encouraged by having begun the fourth quarter with a strong loan pipeline.

"We have also made significant progress in our stock buy-back program. Through September 30, 2007 we had repurchased 77,300 shares at a weighted average price of $12.84 per share. This is 38.5% of our targeted repurchase amount after less than three weeks of repurchase activity," Garwood said.

The total assets of the Company increased to $543.0 million as of September 30, 2007, up $39.5 million (7.8%) from $503.5 million as of December 31, 2006 and up $21.2 million (4.1%) from June 30, 2007.

For the three months ended September 30, 2007 compared to 2006 and for the nine months ended September 30, 2007 compared to year end:

* gross loans increased by $11.6 million (2.6%) and $23.6 million (5.5%), respectively, to $449.6 million;

* deposits remained flat at $369.6 million;

* noninterest checking accounts increased by $1.8 million (8.0%) and $5.6 million (31.0%), respectively, to $23.8 million;

* stockholders' equity increased by $0.3 million (0.8%) and $2.4 million (7.8%), respectively, to $33.3 million; and,

* a bank owned life insurance (BOLI) asset was purchased in the second quarter, 2007 with a book value of $10.2 million.

The Company's net interest income before its provision for loan losses was $4,514,000 in the third quarter of 2007, an increase of 3.1% compared to $4,379,000 in the same period in 2006. The increase in net interest income was primarily attributable to an increase in earnings assets, partially offset by a narrowing net interest margin compared to the prior year period.

The Company's net interest income before its provision for loan losses for the nine months ended September 30, 2007 was $13,018,000, a decrease of 1.5% compared to $13,219,000 in the same period in 2006. The decrease in net interest income was primarily attributable to a narrowing net interest margin, partially offset by an increase in earning assets.

The provision for loan losses was $116,000 in the third quarter of 2007 compared to a recovery of $69,000 in the same period in 2006. The provision for the first nine months of 2007 was $40,000 as compared to an expense of $401,000 in the same period in 2006. The Company ended the quarter with no nonaccrual loans.

Noninterest income in the third quarter of 2007 was $609,000, a 9.1% increase compared to $558,000 in the same period in 2006. Noninterest income for the first nine months of 2007 was $1,854,000, a 9.6% increase compared to $1,691,000 for the same period in 2006.