EPIK Epic Bancorp (MM)

Epic Bancorp (the �Company") (NASDAQ:EPIK), the parent company for Tamalpais Bank and Epic Wealth Management, today reported net income for the quarter ended December 31, 2006 of $1,076,000, or $0.29 per diluted share, compared with net earnings of $940,000, or $0.25 per diluted share for the same quarter in 2005. The Company also announced a 7% stock dividend to be paid on February 14, 2007 to shareholders of record on January 31, 2007. Excluding the effect of Statement of Financial Accounting Standard No. 123R (SFAS 123R) implemented on January 1, 2006, which requires the Company to record stock options as compensation expense, net income for the quarter ended December 31, 2006 would have been $1,157,000, or $0.31 per diluted share. Net Income for the full year 2006 of $3,928,000, or $1.06 per diluted share, compared with net earnings of $4,096,000, or $1.08 per diluted share, for the same period in 2005. Excluding the effect of Statement of Financial Accounting Standard No. 123R (SFAS 123R) net income for the full year 2006 would have been $4,252,000, or $1.13 per diluted share. The total assets of the Company increased to $503.5 million as of December 31, 2006, up $41.7 million (9 percent) from $461.8 million as of December 31, 2005. In 2006 net loans receivable increased by 10 percent to $421.3 million, deposits increased 18 percent to $369.8 million, investment securities increased 10 percent to $48.3 million, and stockholders� equity increased 15 percent to $30.9 million from December 31, 2005. The Company's net interest income before its provision for loan losses was $4,411,000 in the fourth quarter of 2006, compared to $4,279,000 for the full year 2005. The Company's net interest income before its provision for loan losses for the full year 2006 was $17,630,000, compared to $16,996,000 in the same period in 2005. The increases in net interest income are primarily attributable to an increased earning asset base partially offset by a narrowing net interest margin. Noninterest income in the fourth quarter of 2006 was $485,000, compared to $561,000 in the same period in 2005. The decrease in noninterest income in the fourth quarter was primarily due to a decrease in the volume of Small Business Administration (SBA) loans sold. Noninterest income for the full year 2006 was $2,176,000, compared to $1,634,000 for the full year 2005. The increase in noninterest income for the full year was primarily due to the increased volume of Small Business Administration (SBA) loans sold and increased investment advisory services fee income from Epic Wealth Management. Total noninterest expense in the fourth quarter of 2006 was $3,118,000, compared to $3,226,000 for the same period in 2005. The fourth quarter of 2006 included stock options expenses of $82,000, while the fourth quarter of 2005 did not reflect such expenses. Despite stock option expenses in the fourth quarter of 2006, noninterest expenses decreased $108,000 primarily due to decreases in personnel expenses. Total noninterest expense for the full year 2006 was $13,036,000, compared to $11,262,000 for the same period in 2005. Full year 2006 expenses included stock options expenses of $323,000, while the full year 2005 did not reflect such expenses. Other increases in noninterest expenses for the full year 2006 were primarily due to increased personnel costs in 2006 over 2005. �We are pleased with the 16 percent increase in fourth quarter earnings per share, which was accomplished primarily through controlled operating expenses that more than offset the expensing of stock options,� said Mark Garwood, Epic Bancorp CEO/president. �We were also able to increase net interest income three percent despite a narrowing net interest margin. �The full year 2006 was challenging for us and for community banks in general. The 17 consecutive � point increases in interest rates by the Federal Reserve from June 2004 through June 2006 have caused an inverted yield curve and a narrowing of our net interest margin as well as a decrease in loan demand. We also incurred stock option related expense of $323,000 for the full year. In the face of these difficulties, we were able to increase income sequentially in each of the last three quarters of 2006. �Despite strong local competition, we continue to increase market share through our retail Marin County branch network, including our newest branch in Tiburon, CA which opened in August 2006. We also grew our Small Business Lending (SBA) division and originated loans in increasingly wider geographies throughout the year. In addition, our asset quality has remained exceptionally strong, with no non-performing loans as of quarter end and no loan losses for 10 consecutive years.� �We are beginning 2007 on sound footing. We have strengthened our team of seasoned business banking professionals and are encouraged by our progress. We are confident about our prospects and look forward to continued success in increasing profitability and market share. �We are also paying our first ever stock dividend on February 14, 2007, Valentine�s Day, to Shareholders of record on January 31, 2007. This dividend, which is intended to increase the number of shares outstanding and increase shareholder liquidity, is another way for us to say �thank you� to our shareholders for their continued support,� he said. About Epic Bancorp Epic Bancorp (www.epicbancorp.com) based in San Rafael, CA, is the holding company of Tamalpais Bank and Epic Wealth Management. The Company had $504 million in assets and $370 million in deposits as of December 31, 2006. 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 a loan production office in Santa Rosa. The branches are located in Corte Madera, Greenbrae, Mill Valley, San Anselmo, San Rafael, Terra Linda, and Tiburon/Belvedere. About Epic Wealth Management Epic Wealth Management specializes in helping clients of Tamalpais Bank and other high net worth families reach their lifetime financial goals through a collaborative, comprehensive and education-oriented approach to investment management. Epic Wealth Management is located at 851 Irwin Street in San Rafael. For additional information about Epic Wealth Management, please call 415-526-4300. 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 Epic Wealth Management. 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 SUBSIDIARIESConsolidated Balance Sheets � � December 31, December 31, 2006� 2005� $ Change� % Change� (unaudited) Assets Cash and cash equivalents: Cash and due from banks $ 3,750,262� $ 10,566,026� $ (6,815,764) -64.5% Federal funds sold 8,525,772� 5,535,817� 2,989,955� 54.0% Investment in Money Market Fund -� 20� (20) -100.0% Total Cash and Cash Equivalents 12,276,034� 16,101,863� (3,825,829) -23.8% Interest-bearing time deposits in other financial institutions 987,305� 942,964� 44,341� 4.7% � Investment securities Available-for-sale 26,515,887� 15,117,507� 11,398,380� 75.4% Held-to-maturity, at cost 21,823,305� 28,844,341� (7,021,036) -24.3% Federal Home Loan Bank restricted stock, at cost 5,891,900� 6,197,600� (305,700) -4.9% Pacific Coast Banker's Bank restricted stock, at cost 50,000� 50,000� -� 0.0% Loans receivable 426,006,504� 386,656,568� 39,349,936� 10.2% Less: Allowance for loan losses (4,671,596) (4,232,124) (439,472) 10.4% 421,334,908� 382,424,444� 38,910,464� 10.2% Bank premises and equipment, net 5,274,915� 4,706,098� 568,817� 12.1% Accrued interest receivable 3,297,170� 2,645,271� 651,899� 24.6% Other assets 6,062,952� 4,808,780� 1,254,172� 26.1% Total Assets $503,514,376� $461,838,868� $ 41,675,508� 9.0% � Liabilities and Stockholders' Equity Liabilities Deposits Noninterest-bearing deposits $ 18,134,565� $ 17,309,740� $ 824,825� 4.8% Interest-bearing checking deposits 8,432,730� 7,519,133� 913,597� 12.2% Money market and saving deposits 150,011,698� 148,372,182� 1,639,516� 1.1% Certificates of deposit greater than or equal to $100,000 129,011,093� 58,855,694� 70,155,399� 119.2% Certificates of deposit less than $100,000 64,214,598� 81,342,670� (17,128,072) -21.1% Total Deposits 369,804,684� 313,399,419� 56,405,265� 18.0% Federal Home Loan Bank Advances 86,250,777� 107,812,052� (21,561,275) -20.0% Junior Subordinated Debentures 13,403,000� 10,310,000� 3,093,000� 30.0% Accrued interest payable and other liabilities 3,175,055� 3,472,319� (297,264) -8.6% Total Liabilities 472,633,516� 434,993,790� 37,639,725� 8.7% � Commitment and Contingencies -� -� -� 0.0% � Stockholders' Equity Common stock, no par value; 10,000,000 shares authorized; 3,701,731 and 3,679,663 shares issued and outstanding at Deceber 31, 2006 and December 31, 2005, respectively 10,384,816� 10,207,688� 177,128� 1.7% Paid-In-Capital 381,993� -� 381,993� N/A� Retained earnings 20,236,571� 16,899,835� 3,336,736� 19.7% Accumulated other comprehensive income/loss (122,520) (262,445) 139,925� -53.3% Total Stockholders' Equity 30,880,860� 26,845,078� 4,035,782� 15.0% Total Liabilities and Stockholders' Equity $503,514,376� $461,838,868� $ 41,675,508� 9.0% EPIC BANCORP AND SUBSIDIARIESConsolidated Statements of IncomeFor the Periods Ended December 31, 2006 and 2005 � Three Months EndedDecember 31, Twelve Months EndedDecember 31, 2006� 2005� 2006� 2005� (Unaudited) (Unaudited) Interest Income Interest and fees on loans $8,875,154� $7,203,352� $33,228,862� $26,497,787� Interest on investment securities 513,408� 404,326� 1,902,396� 1,811,067� Interest on Federal funds sold 113,506� 27,907� 314,126� 86,104� Interest on other investments 102,905� 73,068� 324,485� 285,759� Interest on deposits in other financial institutions 11,372� 11,167� 44,342� 43,096� Total Interest Income 9,616,345� 7,719,820� 35,814,211� 28,723,813� Interest Expense Interest expense on deposits 4,062,260� 2,414,111� 13,507,085� 7,718,981� Interest expense on borrowed funds 851,284� 821,070� 3,636,467� 3,266,083� Interest expense on Junior Subordinated Debentures 292,105� 205,294� 1,040,962� 743,214� Total Interest Expense 5,205,649� 3,440,475� 18,184,514� 11,728,278� Net Interest Income Before Provision for Loan Losses 4,410,696� 4,279,345� 17,629,697� 16,995,535� Provision for Loan Losses 38,163� 27,124� 439,472� 631,691� Net Interest Income After Provision for Loan Losses 4,372,533� 4,252,221� 17,190,225� 16,363,844� Noninterest Income Gain on sale of loans, net 48,300� 218,690� 791,966� 581,397� Loss on sale of securities, net -� -� (1,820) -� Loan servicing 52,162� 26,112� 161,142� 65,403� Other income 384,723� 316,033� 1,225,169� 986,831� Total Noninterest Income 485,185� 560,835� 2,176,457� 1,633,631� Noninterest Expenses Salaries and benefits 1,843,608� 1,982,019� 7,934,800� 6,449,886� Occupancy 351,642� 316,171� 1,409,557� 1,164,053� Advertising 75,731� 65,825� 367,768� 357,213� Professional 44,353� 94,073� 337,172� 487,682� Data processing 64,133� 204,077� 364,223� 698,329� Equipment and depreciation 246,246� 188,815� 850,820� 571,324� Other administrative 492,143� 375,294� 1,771,318� 1,533,519� Total Noninterest Expense 3,117,856� 3,226,274� 13,035,658� 11,262,006� � Income Before Income Taxes 1,739,862� 1,586,782� 6,331,024� 6,735,469� Provision for Income Taxes 664,359� 647,000� 2,402,575� 2,639,300� Net Income $1,075,503� $ 939,782� $ 3,928,449� $ 4,096,169� Earnings Per Share Basic $ 0.29� $ 0.26� $ 1.06� $ 1.12� � Diluted $ 0.29� $ 0.25� $ 1.06� $ 1.08� EPIC BANCORP AND SUBSIDIARIESSelected Ratios and Other DataUnaudited(Dollars in Thousands Except Per Share Amounts) � At or For theThree Months EndedDecember 31, At or For theTwelve Months EndedDecember 31, 2006� 2005� 2006� 2005� Profitability Ratios: Return on average assets 0.86% 0.82% 0.81% 0.92% Return on average equity 14.67% 14.08% 13.81% 16.54% Net Interest Margin 3.59% 3.79% 3.71% 3.89% Efficiency ratio 63.7% 66.7% 65.8% 60.5% � Other Information: Average total assets $ 499,504� $ 459,404� $ 486,652� $ 446,677� Average interest earning assets $ 487,899� $ 447,521� $ 475,841� $ 436,981� Average equity $ 29,330� $ 26,705� $ 28,446� $ 24,772� Average Basic Shares Outstanding 3,701,731� 3,675,328� 3,693,265� 3,673,425� Average Diluted Shares Outstanding 3,701,347� 3,824,972� 3,702,337� 3,796,343� Basic earnings per share $ 0.29� $ 0.26� $ 1.06� $ 1.12� Diluted earnings per share $ 0.29� $ 0.25� $ 1.06� $ 1.08� � At December 31,2006 At December 31,2005 � Share Information: Book value per share $ 8.34� $ 7.30� Shares outstanding 3,701,731� 3,679,663� � Asset Quality Information: Non-performing loans $ -� $ 393� Other real estate owned $ -� $ -� Allowance for loan losses $ 4,672� $ 3,600� Non-performing loans / total loans 0.00% 0.12% Non-performing assets / total assets 0.00% 0.09% Allowance for loan losses / loans outstanding 1.10% 1.09% Allowance for loan losses / non-accrual loans N/A� 916.03% � Tamalpais Bank Capital Ratios: Tier 1 leverage ratio 8.62% 7.73% Tier 1 risk based capital ratio 9.70% 9.07% Total risk based capital ratio 10.75% 10.38% EPIC BANCORP AND SUBSIDIARIES Average Balance Sheets (Unaudited) � For the Three Months Ended (dollars in thousands) 12/31/06� 12/31/05� Interest Yields Interest Yields Average Income/ Earned/ Average Income/ Earned/ Balance Expense Paid Balance Expense Paid Assets Investment securities - taxable (1) $ 46,444� $ 513� 4.38% $ 46,410� $ 404� 3.45% Other investments 5,957� 103� 6.86% 6,323� 73� 4.58% Interest bearing deposits in other financial institutions 1,108� 11� 3.94% 967� 11� 4.51% Federal funds sold 8,590� 114� 5.27% 2,902� 28� 3.83% Loans (2) 425,800� 8,875� 8.27% 390,919� 7,203� 7.31% Total Interest Earning Assets 487,899� 9,616� 7.82% 447,521� 7,719� 6.84% Allowance for loan losses (4,654) (4,264) Cash and due from banks 5,765� 6,069� Net premises, furniture and equipment 5,191� 4,292� Other assets 5,303� 5,786� Total Assets $ 499,504� $459,404� � Liabilities and Shareholders' Equity Interest bearing checking $ 7,497� 12� 0.64% $ 7,424� 12� 0.64% Savings deposits (3) 148,650� 1,624� 4.33% 136,547� 1,081� 3.14% Time deposits 191,266� 2,426� 5.03% 148,122� 1,321� 3.54% Other borrowings 87,610� 851� 3.86% 109,708� 821� 2.97% Junior Subordinated Debentures 13,403� 292� 8.64% 10,310� 205� 7.89% Total Interest Bearing Liabilities 448,426� 5,205� 4.61% 412,111� 3,440� 3.31% Noninterest deposits 18,208� 17,482� Other liabilities 3,540� 3,106� Total Liabilities 470,174� 432,699� Shareholders' Equity 29,330� 26,705� Total Liabilities and $ 499,504� $459,404� Shareholders' Equity $ 4,411� $ 4,279� Net interest income Net interest spread (4) 3.21% 3.53% Net interest margin (5) 3.59% 3.79% (1) The yields for securities were computed using the average amortized cost and therefore do not give effect for changes in fair value. (2) Loans, net of unearned income, include non-accrual loans but do not reflect average reserves for possible loan losses. (3) Savings deposits include Money Market accounts. (4) Net interest spread is the interest differential between total interest earning assets and total interest-bearing liabilities. (5) Net interest margin is the net yield on average interest earning assets. EPIC BANCORP AND SUBSIDIARIESAverage Balance Sheets (Unaudited) � For the Twelve Months Ended (dollars in thousands) 12/31/06� 12/31/05� Interest Yields Interest Yields Average Income/ Earned/ Average Income/ Earned/ Balance Expense Paid Balance Expense Paid Assets Investment securities - taxable (1) $ 46,893� $ 1,902� 4.06% $ 55,828� $ 1,811� 3.24% Other investments 6,035� 324� 5.37% 6,519� 286� 4.39% Interest bearing deposits in other financial institutions 1,167� 44� 3.77% 936� 43� 4.59% Federal funds sold 6,378� 314� 4.92% 2,674� 86� 3.22% Loans (2) 415,368� 33,230� 8.00% 371,024� 26,498� 7.14% Total Interest Earning Assets 475,841� 35,814� 7.53% 436,981� 28,724� 6.57% Allowance for loan losses (4,528) (4,017) Cash and due from banks 5,377� 5,623� Net premises, furniture and equipment 4,927� 3,198� Other assets 5,035� 4,892� Total Assets $ 486,652� $446,677� � Liabilities and Shareholders' Equity Interest bearing checking $ 7,301� 45� 0.62% $ 7,531� 49� 0.65% Savings deposits (3) 155,426� 6,176� 3.97% 127,622� 3,292� 2.58% Time deposits 161,739� 7,286� 4.50% 137,459� 4,378� 3.18% Other borrowings 101,051� 3,636� 3.60% 120,720� 3,266� 2.71% Junior Subordinated Debentures 11,524� 1,041� 9.03% 10,310� 743� 7.21% Total Interest Bearing Liabilities 437,041� 18,184� 4.16% 403,642� 11,728� 2.91% Noninterest deposits 17,874� 15,610� Other liabilities 3,291� 2,653� Total Liabilities 458,206� 421,905� Shareholders' Equity 28,446� 24,772� Total Liabilities and $ 486,652� $446,677� Shareholders' Equity $17,630� $16,996� Net interest income Net interest spread (4) 3.37% 3.67% Net interest margin (5) 3.71% 3.89% (1) The yields for securities were computed using the average amortized cost and therefore do not give effect for changes in fair value. (2) Loans, net of unearned income, include non-accrual loans but do not reflect average reserves for possible loan losses. (3) Savings deposits include Money Market accounts. (4) Net interest spread is the interest differential between total interest earning assets and total interest-bearing liabilities. (5) Net interest margin is the net yield on average interest earning assets.