SAN LUIS OBISPO, Calif., May 3, 2012 /PRNewswire/ — American Perspective Bank (OTC Bulletin Board: APBA) (the “Bank”) today announced first quarter consolidated financial results through March 31, 2012. Net income during the first quarter of 2012 was $462 thousand, equivalent to $0.10 diluted earnings per share. This compares to: (i) net income of $1.5 million during the fourth quarter of 2011 (the immediately preceding quarter), equivalent to $0.34 diluted earnings per share; and (ii) net income of $474 thousand during the first quarter of 2011, equivalent to $0.11 diluted earnings per share. The fourth quarter 2011 earnings benefited from the recognition of $676 thousand in tax benefits primarily associated with the reversal of the valuation allowance against the Bank’s net deferred tax assets. The first quarter 2011 earnings reflected a provision for income taxes of just $2 thousand, as the Bank had not yet then reversed the aforementioned valuation allowance. Income before income taxes increased from $476 thousand during the first quarter of 2011 to $769 thousand during the first quarter of 2012.

The Bank reported record levels of net loans, deposits, and total assets as of March 31, 2012. Net loans increased from $181.3 million at December 31, 2011 to $184.4 million at March 31, 2012, fostered by: (i) referrals from directors and existing clients; (ii) the gradually improving economy; (iii) the Bank’s success in attracting clients from competing financial institutions; and (iv) the Bank’s proactive efforts to source more residential investor real estate and commercial business loans to assist in credit portfolio diversification. Total deposits rose from $210.4 million at December 31, 2011 to $213.4 million at March 31, 2012 despite the Bank’s intentionally reducing the amount of certain wholesale certificates of deposit during the first quarter of 2012. Total assets increased from $259.2 million at December 31, 2011 to $263.6 million at March 31, 2012, supported by the inflow of deposits.

At March 31, 2012, the Bank’s: (i) Tier One Leverage regulatory capital ratio was 16.89%; (ii) Tier One Risk-Based regulatory capital ratio was 21.86%; and (iii) Total Risk-Based regulatory capital ratio was 23.11%. All of these ratios were significantly in excess of the levels required to be categorized in the highest regulatory capital classification of “well capitalized.” The Bank’s capital ratio profile continues to be one of the strongest for banks headquartered in San Luis Obispo and Santa Barbara counties.

Commenting on the Bank’s recently announced pending merger with Pacific Western Bank, Mark A. Crawford, the Bank’s President, Chief Executive Officer, and Chief Credit Officer, stated: “Since the April 30, 2012 announcement of our planned merger, Pacific Western Bank has already sent multiple teams to visit the Bank to commence planning a smooth and timely integration. Their knowledge of the Central Coast marketplace has been of great benefit. Our clients will enjoy having access to a larger number of branches and ATMs throughout California.” Mr. Crawford then continued: “The legal and professional teams from both banks have started working on the regulatory applications and other documentation necessary to complete the merger.”

Mark R. Andino, the Bank’s Chief Financial Officer and Chief Operating Officer, added: “The $1.6 million termination fee payable by American Perspective Bank to Umpqua Bank in conjunction with the cancelation of the earlier definitive agreement will not impact the $13.00 per share cash consideration to be received by the Bank’s shareholders.”

Financial Condition Analysis

Cash and cash equivalents decreased from $5.1 million at December 31, 2011 to $3.9 million at March 31, 2012. This decrease was primarily caused by the Bank’s reducing by $0.9 million the funds maintained in a correspondent bank money market account following a reduction in the interest rate.

Total securities available for sale increased from $64.9 million at December 31, 2011 to $67.7 million at March 31, 2012. During the first quarter of 2012, the Bank invested excess liquidity arising from deposit inflows and the aforementioned reduction in a correspondent bank money market account balance into AA+ rated Agency floating rate collateralized mortgage obligations in order to augment yield while awaiting investment of the funds into loans. The collateralized mortgage obligations float at a margin over 1 month LIBOR, subject to lifetime caps. The fair value of the Bank’s $67.7 million in securities at March 31, 2012 exceeded its amortized cost basis by $790 thousand.

The Bank concluded the first quarter of 2012 with a strong liquidity profile, consisting of on-balance sheet liquid assets (including cash & cash equivalents and securities available for sale) and over $140 million in off-balance sheet borrowing capacity.

Net loans increased from $181.3 million at December 31, 2011 to $184.4 million at March 31, 2012. Factors impacting loan portfolio growth during the first quarter of 2012 included:

• The Bank’s originating loans to several clients who took advantage of market opportunities to acquire residential rental properties at historically attractive terms, resulting in strong levels of debt service coverage. This accounted for the $1.0 million increase in residential 1 to 4 unit real estate loans outstanding during the first quarter of 2012. The Bank has not yet pursued closed end, owner occupied residential mortgages as a line of business.
• The Bank’s orienting its business development efforts towards commercial business loans in order to:
  1. further diversify the loan portfolio mix;
  2. acquire related deposits (particularly demand deposits);
  3. sell various cash management and other fee based services; and
  4. augment loan production under various government programs, including those of the U.S. Small Business Administration (“SBA”).

  Commercial business loans increased by $2.6 million during the first quarter of 2012.

• While construction loans increased by a net $1.2 million during the first quarter of 2012, the associated portfolio continues to experience turnover as various projects are completed and obtain permanent financing. All of the Bank’s construction loans at March 31, 2012 were for projects in the Central Coast region of California.
• Loan portfolio growth during the first quarter of 2012 was restrained by the Bank’s selling a total of $1.1 million in loans for credit concentration management reasons (e.g. commercial real estate loans), in order to continue serving clients near the Bank’s legal lending limit, and to take advantage of attractive secondary market pricing for the guaranteed portion of SBA program loans.

At March 31, 2012, the Bank had $5.5 million in outstanding loan balances that were guaranteed under various programs administered by the SBA, the U.S. Department of Agriculture, or other similar guarantors. The Bank currently has a number of loans in the pipeline under these programs, which help to provide earlier stage and / or longer term financing to various profiles of businesses than might otherwise be available.

The Bank’s allowance for loan losses increased from $3.3 million at December 31, 2011 to $3.6 million at March 31, 2012. The ratio of allowance for loan losses to loans outstanding rose from 1.78% at December 31, 2011 to 1.90% at March 31, 2012. At both December 31, 2011 and March 31, 2012, the Bank did not have any: (i) loans which were 30 or more days delinquent; or (ii) loans on non-accrual status. At March 31, 2012, the Bank had eight impaired loans with an aggregate principal balance of $1.1 million, four of which were troubled debt restructured loans. All eight of these loans were current in their payments as of March 31, 2012. Factors that contributed to the increase in the ratio of allowance for loan losses to loans outstanding during the first quarter of 2012 included:

• a $152 thousand increase in specific reserves associated with impaired loans; and
• the downgrade of a $1.0 million owner occupied commercial real estate loan from the Watch List to Special Mention in response to new information regarding delinquency in certain tax payments by the borrower.

Premises and equipment, net, decreased from $1.2 million at December 31, 2011 to $1.1 million at March 31, 2012, as the effect of periodic depreciation and amortization was larger than the impact of a relatively small volume of new fixed asset purchases.

At both March 31, 2012 and December 31, 2011, the Bank owned a single piece of foreclosed real estate with a book value of $2.0 million which was comprised of a house with approximately 237 acres of farmland located in the Bank’s primary market area. This property is currently the subject of a legal action to clarify title and litigation by the Bank against the title insurance company that processed the escrow and issued the title insurance policy for the subject loan. During 2012, the Bank has achieved progress in removing some of the intervening liens associated with prior title and recording issues related to the real property. At this time, it is still uncertain when the remaining title and recording issues will be resolved and therefore when the Bank will commence marketing the foreclosed property for sale. In the interim, the Bank continues to lease the house and the farmland to generate revenue to partially offset carrying costs.

Non-interest bearing checking account balances increased from $35.8 million at December 31, 2011 to a record $39.3 million at March 31, 2012. The Bank has been actively marketing for additional non-interest bearing checking account balances in conjunction with its commercial lending program.

Money market deposits increased from $117.8 million at December 31, 2011 to $119.0 million at March 31, 2012. In recent periods, money market deposit balances have benefited from:

• low (often, near zero) interest rates being paid on brokerage accounts and money market mutual funds, thereby encouraging clients to transfer their funds to higher yielding and FDIC insured accounts;
• the conversion of certain deposits from certificates of deposit to money market accounts given the limited yield differential between the products in the current interest rate environment;
• the Bank’s offering tiered pricing on its money market accounts, whereby clients receive a higher interest rate on their entire account balance as each successively higher balance tier level is attained; and
• strong inflows into the Bank’s public funds money market product.

Certificates of deposit decreased from $53.4 million at December 31, 2011 to $51.7 million at March 31, 2012 primarily due to:

• the Bank’s early call (at par) of $10.1 million (face value) in long term brokered certificates of deposit on January 19, 2012 that presented a weighted average effective interest rate of 2.19% combined with the Bank’s issuing $7.5 million (face value) in long term, callable brokered certificates of deposit on March 29, 2012 at a weighted average effective interest rate of 1.18%;
• the Bank’s returning certain certificates of deposit upon maturity in light of its strong liquidity position and the limited or negative spreads that were available for investing the funds in cash equivalents or short duration securities; and
• the transfer of certain maturing certificates of deposits into money market accounts given the limited interest rate differential in the current capital markets environment.

The brokered certificates of deposit (two tranches) called on January 19, 2012 had a weighted average maturity date of September 29, 2015. The brokered certificates of deposit (four tranches) issued on March 29, 2012 have a weighted average maturity date of November 3, 2016. The Bank was therefore successful in:

• recapturing in net interest income during the first quarter of 2012 a majority of the $55 thousand in accelerated original issue discount amortization recognized in conjunction with the early call of the $10.1 million in brokered certificates of deposit by utilizing available excess liquidity for the seventy day period between the call of the prior brokered certificates of deposit and the issuance of the new brokered certificates of deposit;
• increasing the duration of the subject certificates of deposit by more than one year while at the same time reducing the weighted average effective cost of funds by 1.01%; and
• augmenting the Bank’s prospective net interest income for the remainder of 2012 and for all of 2013 and 2014.

The Bank issued the new, callable brokered certificates of deposit in conjunction with its interest rate risk management program in general, and specifically to match fund client demand for intermediate term fixed rate income property loans.

Commenting on the Bank’s deposit performance, Thomas R. Strait, the Bank’s Chief Banking Officer, stated: “We are pleased with the $3.0 million rise in total deposits during the first quarter of 2012 in light of the $2.6 million reduction in the face value of callable brokered certificates of deposit. This was accomplished while the Bank reduced its average cost of total deposits from 0.73% at December 31, 2011 to 0.64% at March 31, 2012.” Mr. Strait then added: “We are particularly pleased with the Bank’s change in deposit mix during the first quarter of 2012. Non-interest bearing checking account balances as a percentage of total deposits increased from 17.0% at December 31, 2011 to 18.4% at March 31, 2012, which is a significant change in just three months. During the same time period, aggregate transaction accounts rose from 74.6% to 75.8% of total deposits.”

Borrowings increased from $5.0 million at December 31, 2011 to $5.8 million at March 31, 2012. The rise was associated with $0.8 million in overnight FHLB advances outstanding at March 31, 2012. The other $5.0 million in borrowings outstanding at March 31, 2012 was comprised of a single long term FHLB advance (2015 maturity) that was obtained to match fund intermediate term fixed rate loans.

Stockholders’ equity rose from $43.2 million at December 31, 2011 to $43.9 million at March 31, 2012. The increase was due to:

• the 2012 year to date net income of $462 thousand;
• $116 thousand in capital generated through the Bank’s Restricted Share Plan; and
• a $77 thousand increase in accumulated other comprehensive income associated with the unrealized gain on securities available for sale.

Nominal and tangible book values were $9.96 per share at March 31, 2012 versus $9.88 per share at December 31, 2011. Shares of common stock outstanding rose by 33,490 during the first quarter of 2012 in conjunction with the vesting of awards under the Restricted Share Plan. The Bank has historically granted restricted share awards to directors and employees as a means of aligning their interests with the generation of shareholder value. Under the terms of the merger agreement with Pacific Western Bank, the Bank will not grant any new restricted share awards; and all outstanding restricted share awards will vest immediately prior to the close of the merger.

Operating Results Analysis

Net interest income before the provision for loan losses increased slightly from $2.57 million during the fourth quarter of 2011 (the immediately preceding quarter) to $2.58 million during the first quarter of 2012, as following factors largely offset each other:

• Net loans (the Bank’s highest yielding asset category) as a percentage of average total assets increased from 68.5% during the fourth quarter of 2011 to 70.7% during the first quarter of 2012.
• Non-interest bearing funding (including capital) rose from 30.0% of average total assets during the fourth quarter of 2011 to 30.8% during the first quarter of 2012.
• The Bank maintained a reduced average balance of relatively lower yielding cash equivalents (primarily excess balances maintained at the Federal Reserve Bank) during the first quarter of 2012 versus the fourth quarter of 2011.
• During the first three months of 2012, the Bank benefitted from an entire quarter of interest income from the comparatively higher yielding (compared to Agency mortgage securities) municipal securities purchased at various times during the fourth quarter of 2011.
• The fourth quarter of 2011 benefited from a $63 thousand prepayment penalty on a commercial real estate loan and one additional day (equivalent to approximately $27 thousand in net interest income) versus the first quarter of 2012.
• The Bank recognized $55 thousand in accelerated original issue discount amortization in conjunction with the early call of $10.1 million (face value) in brokered certificates of deposit during January 2012, a majority, but not all, of which was offset by drawing down excess liquidity that was earning comparatively low interest rates.

Net interest income before the provision for loan losses of $2.58 million during the first quarter of 2012 compared favorably to net interest income before the provision for loan losses of $2.14 million during the first quarter of 2011. The ratio of annualized net interest income to average total assets expanded significantly from 3.71% during the first quarter of 2011 to 4.01% during the first quarter of 2012. Average interest earning assets increased 12.9% from the first quarter of 2011 to the first quarter of 2012.

The provision for loan losses was $277 thousand during the first quarter of 2012, compared to $259 thousand during the fourth quarter of 2011 (the immediately preceding quarter) and $56 thousand during the first quarter of 2011. The Bank experienced no net charge-offs during both the first quarter of 2012 and all of 2011. The loan loss provision during the first quarter of 2012 primarily arose from: (i) increased specific reserves for impaired loans, all of which were current in their payments as of March 31, 2012; (ii) increased reserve requirements stemming from the growth in the loan portfolio; and (iii) greater reserve requirements for a $1.0 million owner occupied commercial real estate loan that was downgraded from the Watch List to Special Mention.

The Bank sold one commercial real estate loan participation (associated with one of the Bank’s larger borrowers) and the guaranteed portion of one SBA 7(a) Program loan during the first quarter of 2012, generating an aggregate $44 thousand gain on sale. The Bank did not sell any loans during the fourth quarter of 2011. A total of $14 thousand in losses on sale of loans was incurred during the first quarter of 2011 in order to accommodate the needs of certain clients with substantial and profitable aggregate relationships with the Bank. The Bank plans to continue its secondary marketing of loans during 2012 as a means of generating income and managing credit concentrations and interest rate risk.

Other non-interest income increased from $25 thousand during the three months ended March 31, 2011 to $37 thousand during the three months ended March 31, 2012. The Bank implemented a revised fee and service charge schedule on August 1, 2011, which benefited subsequent revenue. In addition, growth in the number of clients and accounts between the 2011 and the 2012 periods and a larger portfolio of loans serviced for others supported increased fee income.

Other non-interest income decreased slightly from $39 thousand during the fourth quarter of 2011 to $37 thousand during the first quarter of 2012 primarily due to reduced non-sufficient funds / uncollected funds fees. During the first quarter of 2012, the Bank closed several checking accounts that had been chronically overdrawn, with a reduction in related fees.

The operation of other real estate owned generated $8 thousand in net expense during the first quarter of 2012, compared to $21 thousand in net expense during the first quarter of 2011 and $9 thousand in net income during the fourth quarter of 2011. The results for the fourth quarter of 2011 benefited from the Bank’s receipt of harvest income from the farmland and refunds of property taxes. The Bank owned three foreclosed properties at times during the first quarter of 2011, all but one of which was sold by March 31, 2011. The single foreclosed property owned by the Bank at March 31, 2012 is projected to generate a small operating loss until it is sold, as rental income from the home and crop income from the farmland is forecasted to be insufficient to offset insurance, property taxes, and other related costs.

Non-interest expense (excluding other real estate owned expense) totaled $1.6 million during the three months ended March 31, 2012, March 31, 2011, and December 31, 2011.

Compensation and employee benefits expenses decreased from $865 thousand during the three months ended March 31, 2011 to $818 thousand during the three months ended March 31, 2012, as lower costs for incentive compensation and employee severance more than offset higher expenses for medical insurance and base salaries. The increased base salary costs arose from employee raises; and the staffing of the Paso Robles loan production office towards the end of the first quarter of 2011.

Accounting, legal, and consulting expenses rose from $143 thousand during the three months ended March 31, 2011 to $170 thousand during the three months ended March 31, 2012. The increase was primarily caused by particular events during the first quarter of 2012. Legal costs during the first quarter of 2012 included the accrual of $18 thousand in conjunction with the planned settlement of a claim arising from certain of the title issues associated with the Bank’s single foreclosed property and $21 thousand related to legal services in support of the Bank’s pending merger. Consulting costs during the first quarter of 2012 included $6 thousand paid to the Bank’s investment bankers for advice regarding competitors, emerging trends in the financial services industry, and strategic alternatives. These factors were partially offset by lower legal expenses for credit collections during the first quarter of 2012 compared to the first quarter of 2011.

Occupancy expense increased from $172 thousand during the three months ended March 31, 2011 to $180 thousand for the three months ended March 31, 2012 primarily due to rent associated with the Paso Robles loan production office (which commenced in March 2011) and an increase in tenant improvement amortization.

Regulatory assessments decreased from $93 thousand during the three months ended March 31, 2011 to $62 thousand during the three months ended March 31, 2012 despite the growth of the Bank. This decline arose from the Bank’s benefiting from the new FDIC insurance assessment formula that became effective on April 1, 2011. The new formula is based upon average consolidated assets less average tangible equity, while the prior formula was based upon deposits. The combination of the Bank’s strong capitalization and the new, nominally lower assessment rates (applied against a larger assessment base across the financial services industry) resulted in the reduction in the Bank’s FDIC insurance expense.

Director expenses rose from none during the three months ended March 31, 2011 to $55 thousand during the three months ended March 31, 2012. The increase was due to the grant of a total of 32,000 restricted share awards to directors in March 2011. The expense for these awards was recognized over the twelve months ending in March 2012, when the 32,000 shares vested. These grants were only the second restricted share award to directors since the organization of the Bank. The Bank’s outside directors have never received cash director fees or any other type of compensation other than restricted shares. Prospective director expense is projected to decrease since there are no remaining outstanding restricted share awards for directors.

Provision for the allowance for off balance sheet liabilities was negative $9 thousand during the first quarter of 2012 compared to positive $4 thousand during the first quarter of 2011. This variance arose from changes in the volume and credit rating of the Bank’s unfunded commitments.

The first quarter of 2012 represented the Bank’s initial quarterly presentation of a normalized combined federal and state effective book tax rate (39.9%) following the reversal of the valuation allowance against the Bank’s net deferred tax assets at the end of 2011. The Bank’s prospective effective book tax rate will vary from period to period based upon the mix of permanent differences in book versus tax income and expense.

Commenting on the Bank’s pending merger with Pacific Western Bank, Thomas J. Madden, the Chairman of the Board, stated: “The Board of Directors has been very pleased with the client, employee, and community outreach extended by Pacific Western Bank since the merger announcement. Matt Wagner, Pacific Western Bank’s Chairman and Chief Executive Officer, will be the guest speaker at the upcoming meeting of the Bank’s Shareholders Advisory Circle in mid May.” Mr. Madden then continued: “The Bank will be calling a Special Meeting of Shareholders to, among other matters, vote upon the merger with Pacific Western Bank. We will announce the date for the Special Meeting as soon as we are a bit further into the various legal processes associated with the merger. American Perspective Bank shareholders will receive a Proxy Statement and other materials in advance of the Special Meeting.”

Michael D. Bouquet, the Bank’s Vice Chairman of the Board, commented: “We are very pleased to again announce record levels of loans, deposits, and total assets. The Bank continues to enjoy strong liquidity and an excellent capital position. Our credit profile remained favorable during the first quarter of 2012, and we look forward to the enhanced lending capacity available through Pacific Western Bank.”

The Bank’s target markets are commercial enterprises, professionals, real estate investors, family business entities, and residents in San Luis Obispo County and northern Santa Barbara County. The San Luis Obispo branch office is located at 4051 Broad Street, Suite 140, San Luis Obispo, California, near the intersection of Broad Street (Highway 227) and Tank Farm Road. The Santa Maria branch office is located at 2646 Santa Maria Way, Suite 101, Santa Maria, California, near the intersection of Santa Maria Way and Broadway. The Paso Robles loan production office is located at 720 10th Street in downtown Paso Robles. The Bank’s deposits are insured by the FDIC up to applicable legal limits.

Forward-Looking Statements

Certain of the statements contained herein that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements are typically identified by words or phrases such as “believe,” “expect,” “anticipate,” “intend,” “estimate,” “target,” “plans,” “may increase,” “may fluctuate,” “may result in,” “are projected,” and similar expressions. The Bank’s actual results may differ materially from those included in the forward-looking statements. These forward-looking statements involve risks and uncertainties including, but not limited to, the economic, business, and real estate market conditions in the Bank’s market areas, the interest rate environment, competition, regulatory and legislative actions, the possibility that the Bank will not be successful in achieving its strategic objectives (including closing the proposed merger with Pacific Western Bank), the performance and contributions of employees and directors, and other factors. The Bank does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.

Participants in a Solicitation

This release does not constitute an offer to sell securities or a solicitation of an offer to buy and does not constitute solicitation material in respect of the proposed acquisition of the Bank. In connection with the proposed transaction, the Bank will prepare a Proxy Statement containing all relevant disclosures. Shareholders of the Bank are encouraged to read the Proxy Statement because it will contain important information about the Bank and the proposed transaction. The Proxy Statement will be mailed to the Bank’s shareholders in advance of a special meeting of shareholders that will be held to consider the proposed transaction. The Bank and its directors, executive officers, and other members of its management and employees may be deemed to be participants in the solicitation of proxies in respect of the proposed acquisition. Information about the directors and executive officers of the Bank, their ownership of the Bank’s common stock, and regarding their interests in the proposed transaction will be included in the Proxy Statement, when it becomes available.

This news release is available at the www.AmericanPerspectiveBank.com Internet site for no charge.

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For further information contact:

General communication:

SERVICE@AMERICANPERSPECTIVEBANK.COM
www.AmericanPerspectiveBank.com

Phone: (805) 547 – 2800 (San Luis Obispo Branch)
Facsimile: (805) 547 – 2801 (San Luis Obispo Branch)

Phone: (805) 354 – 7800 (Santa Maria Branch)
Facsimile: (805) 354 – 7801 (Santa Maria Branch)

Phone: (805) 226 – 5300 (Paso Robles Loan Production Office)
Facsimile: (805) 226 – 5301 (Paso Robles Loan Production Office)

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SOURCE American Perspective Bank