EPIK Epic Bancorp (MM)

Epic Bancorp (the �Company") (NASDAQ:EPIK), the parent company for Tamalpais Bank and Tamalpais Wealth Advisors, today reported record quarterly earnings. Net income for the quarter ended March 31, 2008 was $1,227,000, a 20.6% increase over net income of $1,018,000 for the like quarter of 2007. Quarterly diluted earnings per share of $0.32 increased 28.0% over the comparable period last year. On a sequential quarter basis, net income increased 7.8% and diluted earnings per share increased 6.7% over the fourth quarter of 2007. Per share results for 2007 have been restated for the 7% stock dividend paid February 14, 2007 and reflected the repurchase of 4.9% of the outstanding shares in the fourth quarter of 2007. "Our performance in the first quarter was remarkable,� said Mark Garwood, President/CEO. �The combination of robust loan portfolio growth, clean asset quality, widening interest margin, and record earnings place us in a strong position for future growth and investment in our key business units.� �We continued to focus on commercial and relationship banking centered on our emerging Marin County commercial banking team and our established small business lending team throughout the greater Bay Area.� The total assets of the Company increased to $601.7 million as of March 31, 2008, up $44.9 million (8.1%) from $556.8 million as of December 31, 2007. For the three months ended March 31, 2008: net loans increased by $32.6 million (7.0%) to $497.3 million; deposits increased by $34.5 million (9.6%) to $395.7 million; checking accounts increased by $1.3 million (4.2%) to $31.4 million; investments increased by $4.5 million (8.1%) to $59.6 million; FHLB Borrowings increased by $4.6 million (3.1%) to $151.1 million; and, stockholders� equity increased by $1.4 million (4.2%) to $34.3 million. For the quarter, net interest income before provision for loan losses increased by $782,000 (18.2%). The net interest margin widened to 3.71%, up from 3.58% in the first quarter of 2007 and 3.47% from the fourth quarter of 2007. In the first quarter of 2008 the Company significantly lowered its cost of funds to 4.05%, down from 4.76% in the first quarter of 2007 and 4.43% in the fourth quarter of 2007. The Company benefited from the ongoing decreases in the Federal funds and discount rates through lower funding costs while asset yields remained relatively high due to the pricing structure of loans with floors, initial fixed rates, and prepayment penalties. Based on the increase in the loan portfolio, the provision for loan losses was $345,000 in the first quarter of 2008 compared to a net recovery of the provision of $86,000 in the first quarter of 2007, for an increase of $431,000. The allowance for loan losses was 1.05% of loans receivable as of March 31, 2008, unchanged from the prior year. The Company had three nonperforming loans at quarter end totaling $1,029,000, with an unguaranteed balance of $614,000. Included in this amount is a 90 day delinquent $466,000 commercial real estate loan located in Marin County that paid off on April 23rd 2008 with full collection of principal, interest, and late charges. Also included in nonperforming loans were a 30 day delinquent $553,000 SBA 7A loan that is 75% guaranteed by the SBA, and a $10,000 consumer line of credit. The Company is working closely with the SBA 7A loan borrower. Nonperforming loans were 0.20% of total loans and the unguaranteed balance of nonperforming loans was 0.12% of total loans at quarter end. �Our long history of diligent, fully documented underwriting while providing flexible lending products tailored to fit our customers� needs has allowed us to maintain a near pristine credit quality and an attractive loan yield. We had no loan charge offs in the quarter, after a total of only $1,000 in charge-offs over the preceding ten years. We have never participated in subprime lending and have low exposure to residential mortgages, construction, and land loans. These categories, in total, comprise just 10.9% of the loan portfolio. Although we have entered a period of economic weakness we believe that our outstanding credit culture and ample allowance for loan losses will minimize the financial impact of any potential deterioration in asset quality.� Noninterest income increased $164,000 (32.9%) from the first quarter of 2007 to $664,000. Other income, primarily related to fees generated from retail and commercial banking operations and the Bank Owned Life Insurance asset purchased in April 2007, increased by $151,000 (97.7%) to account for much of this increase. In the first quarter of 2008 the Company sold $7.3 million of 504 SBA commercial real estate loans secured by first deeds of trust. The proceeds from the sale were used to purchase short duration GNMA securities. The sale of these loans generated a gain of $166,000 versus gains of $158,000 in the first quarter of 2007 and $99,000 in the fourth quarter of 2007. There may be periods in the coming quarters where no loan sales occur. Total noninterest expense in the first quarter of 2008 was $3,636,000, a $362,000 (11.0%) increase compared to $3,275,000 for the same period in 2007. Salaries and benefits increased $308,000 (16.8%) due primarily to planned increases in staff. The Company has expanded its staff and management in the first quarter to strengthen its commercial and small business banking operations. Income tax provision for the first quarter of 2008 amounted to $526,000, a decrease of $57,000 (9.7%) over the same period in 2007. The effective tax rate in the first quarter of 2007 was 30.0% compared to 36.4% in the first quarter of 2007. The Company has lowered its effective tax rate through tax benefits associated with Bank Owned Life Insurance, tax credits associated with Affordable Housing Fund investments, municipal securities, and lending in Enterprise Zones. �We are well positioned to capitalize on growth opportunities in the markets we serve. We enter the second quarter with a strong and growing balance sheet. We have also fortified Tamalpais Bank�s capital position through the recently obtained $5 million credit facility. We are in the process of rounding out our seasoned team of commercial and small business banking professionals and we expect continued success in loan and deposit growth as we increase our commercial banking market share.� About Epic Bancorp Epic Bancorp (www.epicbancorp.com) based in San Rafael, CA, is the parent company of Tamalpais Bank and Tamalpais Wealth Advisors. The Company had $601 million in assets and $396 million in deposits as of March 31, 2008. Shares of the Company's common stock are traded on the NASDAQ Capital Market System under the symbol EPIK. For additional information, please contact Mark Garwood at 415-526-6400. About Tamalpais Bank Tamalpais Bank, a wholly owned subsidiary of Epic Bancorp, operates seven branches in Marin County and loan production offices in Santa Rosa and Roseville, CA. The branches are located in Corte Madera, Greenbrae, Mill Valley, San Anselmo, San Rafael, Terra Linda, and Tiburon/Belvedere. About Tamalpais Wealth Advisors Tamalpais Wealth Advisors, located in San Rafael, specializes in helping clients of Tamalpais Bank and other high net worth families and institutional clients reach their financial goals through a collaborative, comprehensive and education-oriented approach to investment management. Tamalpais Wealth Advisors had $279 million in assets under management as of March 31, 2008. This news release contains forward-looking statements with respect to the financial condition, results of operation and business of Epic Bancorp and its subsidiaries. These include, but are not limited to, statements that relate to or are dependent on estimates or assumptions relating to the prospects of loan growth, credit quality, changes in securities or financial markets, and certain operating efficiencies resulting from the operations of Tamalpais Bank and Tamalpais Wealth Advisors. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) competitive pressure among financial services companies increases significantly; (2) changes in the interest rate environment reduce interest margins; (3) general economic conditions, internationally, nationally or in the State of California are less favorable than expected; (4) legislation or regulatory requirements or changes adversely affect the businesses in which the consolidated organization is or will be engaged;(5) the ability to satisfy the requirements of the Sarbanes-Oxley Act and other regulations governing internal controls; (6) volatility or significant changes in the equity and bond markets which can affect overall growth and profitability of our wealth management business, and (7) other risks detailed in the Epic Bancorp filings with the Securities and Exchange Commission. When relying on forward-looking statements to make decisions with respect to Epic Bancorp, investors and others are cautioned to consider these and other risks and uncertainties. Epic Bancorp disclaims any obligation to update any such factors or to publicly announce the results of any revisions to any of the forward-looking statements contained herein to reflect future events or developments. EPIC BANCORP AND SUBSIDIARIES Consolidated Balance Sheets � � � � � March 31 December 31, 2008 2007 $ Change % Change (unaudited) Assets Cash and cash equivalents: Cash and due from banks $ 4,068,057 $ 4,457,959 $ (389,902 ) -8.7 % Federal funds sold � 7,775,008 � � 566,541 � � 7,208,467 � 1272.4 % Total Cash and Cash Equivalents 11,843,065 5,024,500 6,818,565 135.7 % Interest-bearing time deposits in other financial institutions 635,298 627,387 7,911 1.3 % � Investment securities Available-for-sale 45,900,546 40,660,856 5,239,690 12.9 % Held-to-maturity, at cost 13,739,584 14,514,528 (774,944 ) -5.3 % Federal Home Loan Bank restricted stock, at cost 7,561,100 6,885,900 675,200 9.8 % Pacific Coast Banker's Bank restricted stock, at cost 50,000 50,000 - 0.0 % Loans receivable 502,559,173 469,613,486 32,945,687 7.0 % Less: Allowance for loan losses � (5,259,652 ) � (4,914,553 ) � (345,099 ) 7.0 % 497,299,521 464,698,933 32,600,588 7.0 % Bank premises and equipment, net 4,466,861 4,653,871 (187,010 ) -4.0 % Accrued interest receivable 3,374,848 3,221,249 153,599 4.8 % Cash surrender value of bank-owned life insurance 10,517,465 10,387,374 130,091 1.3 % Other assets � 6,304,050 � � 6,090,187 � � 213,863 � 3.5 % Total Assets $ 601,692,338 � $ 556,814,785 � $ 44,877,553 � 8.1 % � Liabilities and Stockholders' Equity Liabilities Deposits Noninterest-bearing deposits 24,264,606 23,254,723 $ 1,009,883 4.3 % Interest-bearing checking deposits 7,143,047 6,874,465 268,582 3.9 % Money market and saving deposits 146,923,125 138,275,392 8,647,733 6.3 % Certificates of deposit greater than or equal to $100,000 124,408,744 110,587,625 13,821,119 12.5 % Certificates of deposit less than $100,000 � 92,976,827 � � 82,182,492 � � 10,794,335 � 13.1 % Total Deposits 395,716,349 361,174,697 34,541,652 9.6 % Federal Home Loan Bank Advances 151,085,000 146,507,500 4,577,500 3.1 % Long term debt 3,000,000 - 3,000,000 N/A Junior Subordinated Debentures 13,403,000 13,403,000 - 0.0 % Accrued interest payable and other liabilities � 4,172,788 � � 2,797,051 � � 1,375,737 � 49.2 % Total Liabilities � 567,377,137 � � 523,882,248 � � 43,494,889 � 8.3 % � Commitment and Contingencies - - - - � Stockholders' Equity Common stock, no par value; 10,000,000 shares authorized; 3,818,284 issued and outstanding March 31, 2008 and December 31, 2007 11,977,473 11,977,473 - 0.0 % Paid-In-Capital 741,846 663,213 78,633 11.9 % Retained earnings 21,130,786 20,084,667 1,046,119 5.2 % Accumulated other comprehensive income/loss � 465,096 � � 207,184 � � 257,912 � 124.5 % Total Stockholders' Equity � 34,315,201 � � 32,932,537 � � 1,382,664 � 4.2 % Total Liabilities and Stockholders' Equity $ 601,692,338 � $ 556,814,785 � $ 44,877,553 � 8.1 % EPIC BANCORP AND SUBSIDIARIES Consolidated Statements of Income For the Periods Ended March 31, 2008 and 2007 � � � � Three Months Ended March 31, $ Change % Change 2008 2007 (Unaudited) Interest Income Interest and fees on loans $ 9,435,557 $ 8,813,046 $ 622,511 7.1 % Interest on investment securities 646,927 566,859 80,068 14.1 % Interest on Federal funds sold 40,718 45,398 (4,680 ) -10.3 % Interest on other investments 93,036 80,021 13,015 16.3 % Interest on deposits in other financial institutions � 7,911 � � 11,256 � � (3,345 ) -29.7 % Total Interest Income � 10,224,149 � � 9,516,580 � � 707,569 � 7.4 % Interest Expense Interest expense on deposits 3,353,822 4,093,507 (739,685 ) -18.1 % Interest expense on borrowed funds 1,596,832 843,970 752,862 89.2 % Interest expense on Junior Subordinated Debentures � 202,135 � � 289,274 � � (87,139 ) -30.1 % Total Interest Expense � 5,152,789 � � 5,226,751 � � (73,962 ) -1.4 % Net Interest Income Before Provision for Loan Losses 5,071,360 4,289,829 781,531 18.2 % � Provision for Loan Losses � 345,099 � � (86,289 ) � 431,388 � -499.9 % � Net Interest Income After Provision for Loan Losses � 4,726,261 � � 4,376,118 � � 350,143 � 8.0 % Noninterest Income Gain on sale of loans, net 166,293 158,438 7,855 5.0 % Loan servicing 35,759 27,027 8,732 32.3 % Registered Investment Advisory Services fee income 156,847 159,993 (3,146 ) -2.0 % Other income � 305,043 � � 154,299 � � 150,744 � 97.7 % Total Noninterest Income � 663,942 � � 499,757 � � 164,185 � 32.9 % Noninterest Expenses Salaries and benefits 2,143,401 1,835,814 307,587 16.8 % Occupancy 355,443 348,347 7,096 2.0 % Advertising 78,345 136,631 (58,286 ) -42.7 % Professional 110,346 114,390 (4,044 ) -3.5 % Data processing 120,926 111,325 9,601 8.6 % Equipment and depreciation 220,967 199,270 21,697 10.9 % Other administrative � 606,971 � � 529,105 � � 77,866 � 14.7 % Total Noninterest Expense � 3,636,399 � � 3,274,882 � � 361,517 � 11.0 % � Income Before Income Taxes 1,753,804 1,600,993 152,811 9.5 % Provision for Income Taxes � 526,481 � � 583,064 � � (56,583 ) -9.7 % Net Income $ 1,227,323 � $ 1,017,929 � $ 209,394 � 20.6 % Earnings Per Share Basic $ 0.32 � $ 0.26 � $ 0.06 � 23.1 % � Diluted $ 0.32 � $ 0.25 � $ 0.07 � 28.0 % EPIC BANCORP AND SUBSIDIARIES Selected Ratios and Other Data Unaudited (Dollars in Thousands Except Per Share Amounts) � � At or For the Three Months Ended March 31, 2008 2007 Profitability Ratios: Return on average assets 0.86% 0.83% Return on average equity 14.72% 13.09% Net Interest Margin 3.71% 3.58% Efficiency ratio 63.4% 68.4% � Other Information: Average total assets $ 571,956 $ 498,973 Average interest earning assets $ 549,722 $ 486,627 Average equity $ 33,542 $ 31,547 Average Basic Shares Outstanding 3,818,284 � 3,963,581 Average Diluted Shares Outstanding 3,778,826 � 4,153,390 Basic earnings per share $ 0.32 $ 0.26 Diluted earnings per share $ 0.32 $ 0.25 � At March 31, At December 31, 2008 2007 Share Information: Book value per share $ 8.99 $ 8.62 Shares outstanding 3,818,284 3,818,284 � Asset Quality Information: Non-performing loans $ 1,029 $ 466 Other real estate owned - - Allowance for loan losses $ 5,260 $ 4,915 Non-performing loans / total loans 0.20% 0.10% Non-performing assets / total assets 0.17% 0.08% Allowance for loan losses / loans outstanding 1.05% 1.05% Allowance for loan losses / non-accrual loans 511.14% 1054.63% � Tamalpais Bank Capital Ratios: Tier 1 leverage ratio 8.55% 8.33% Tier 1 risk based capital ratio 9.35% 9.15% Total risk based capital ratio 10.26% 10.15% Net Loans Outstanding: � � � � At March 31, At December 31, 2008 2007 AMOUNT % AMOUNT % (Dollars in thousands) One-to-four family residential $ 17,484 3.5 % $ 22,098 4.7 % Multifamily residential 142,004 28.3 123,077 26.2 Commercial real estate 278,774 55.5 246,257 52.4 Land 10,836 2.2 9,369 2.0 Construction real estate 25,689 5.1 28,988 6.2 Consumer loans 2,521 0.5 2,045 0.4 Commercial, non real estate � 23,651 4.7 � 36,250 7.7 Total gross loans 500,959 99.7 468,084 99.7 Net deferred loan costs � 1,640 0.3 � 1,529 0.3 Total loans receivable, net of deferred loan costs $ 502,599 100.0 % $ 469,613 100.0 % EPIC BANCORP AND SUBSIDIARIES Average Balance Sheets (Unaudited) � � � � � � For the Three Months Ended (dollars in thousands) 3/31/08 3/31/07 Interest Yields Interest Yields Average Income/ Earned/ Average Income/ Earned/ Balance Expense Paid Balance Expense � Paid Assets Investment securities - Muni's (1,2) $ 6,360 $ 21 5.43 % $ - $ - N/A Investment securities - taxable (2) 48,396 626 5.20 % $ 49,896 567 4.61 % Other investments 7,397 93 5.06 % 5,274 80 6.15 % � Interest bearing deposits in other financial institutions 637 8 5.05 % 1,025 11 4.35 % Federal funds sold 5,230 41 3.15 % 3,563 45 5.12 % Loans (3) � 481,702 � � 9,435 7.88 % � 426,869 � � 8,813 8.37 % Total Interest Earning Assets 549,722 10,224 7.48 % 486,627 9,516 7.93 % Allowance for loan losses (4,986 ) (4,683 ) Cash and due from banks 4,074 4,840 Net premises, furniture and equipment 4,593 5,097 Other assets � 18,553 � � 7,092 � Total Assets $ 571,956 � $ 498,973 � � Liabilities and Shareholders' Equity Interest bearing checking $ 6,753 $ 10 0.60 % $ 7,919 $ 12 0.61 % Savings deposits (4) 140,217 917 2.63 % 151,706 1,691 4.52 % Time deposits 201,838 2,427 4.84 % 188,348 2,390 5.15 % Other borrowings 149,927 1,597 4.28 % 84,100 844 4.07 % Long term debt 33 - 0.00 % - - N/A Junior Subordinated Debentures � 13,403 � � 202 6.06 % � 13,403 � � 289 8.74 % Total Interest Bearing Liabilities 512,171 5,153 4.05 % 445,476 5,226 4.76 % Noninterest deposits 22,741 17,985 Other liabilities � 3,502 � � 3,965 � Total Liabilities 538,414 467,426 Shareholders' Equity � 33,542 � � 31,547 � Total Liabilities and Shareholders' Equity $ 571,956 � $ 498,973 � � � Net interest income $ 5,071 $ 4,290 Net interest spread (5) 3.43 % 3.17 % Net interest margin (6) 3.71 % 3.58 % � (1) Yields on securities and certain loans have been adjusted upward to a "fully taxable equivalent" ("FTE") basis in order to reflect the effect of��income which is exempt from federal income taxation at the current statutory tax rate. (2)�The yields for securities were computed using the average amortized cost and therefore do not give effect for changes in fair value.������ (3)�Loans, net of unearned income, include non-accrual loans but do not reflect average reserves for possible loan losses. (4)�Savings deposits include Money Market accounts. (5)�Net interest spread is the interest differential between total interest earning assets and total interest-bearing liabilities. (6)�Net interest margin is the net yield on average interest earning assets.