CU Bancorp : Reports Net Income of $2.4 Million and Core Net Income of $2.9 Million for Second Quarter of 2014 with Loan Growth of 11%

CU Bancorp (NASDAQ: CUNB), the parent company of wholly owned California United Bank, today reported net income of $2.4 million for the second quarter of 2014, an increase of 2.8% from net income of $2.3 million for the second quarter of 2013, or $0.21 and $0.22 per fully diluted share, respectively. Core net income (defined below) for the second quarter of 2014 was $2.9 million, or $0.26 per diluted share, an increase of 24% from core net income of $2.3 million, or $0.22 per share for the second quarter of 2013.

The second quarter of 2014 included $497 thousand in non-tax deductible merger-related charges associated with the Bank’s pending merger with 1^st Enterprise Bank. The Company calculates core net income by adding back the merger-related charges to GAAP earnings for the quarter because the Company believes the use of core net income, a non-GAAP measure, facilitates the assessment of its banking operations and peer comparability. A reconciliation to GAAP is included in tabular form at the end of this release.

Second Quarter 2014 Highlights

• Net income increased to $2.4 million, or $0.21 per fully diluted share, from net income of $2.3 million, or $0.22 per fully diluted share, for second quarter of 2013
• Core net income of $2.9 million, compared to $2.3 million in the second quarter of 2013 and $2.7 million in the first quarter of 2014
• Total loans increased $95 million or 10.7% from June 30, 2013 to $980 million at June 30, 2014
• Total deposits increased $148 million or 13.4% from June 30, 2013 to $1.2 billion at June 30, 2014; cost of deposits fell to a new low of 0.11%
• Non-interest bearing demand deposits increased $111 million or 19.5% from June 30, 2013, representing 55% of total deposits
• Non-performing assets to total assets declined to 0.51% at June 30, 2014, from 1.06% at June 30, 2013
• Net interest margin increased to 3.88% from 3.82% for the prior quarter ended March 31, 2014
• Tangible book value per share increased $0.29 over March 31, 2014, to $11.66
• Announcement of merger with 1^st Enterprise Bank

• On June 3, 2014, CU Bancorp, the parent of California United Bank, and 1^st Enterprise Bank announced the execution of a definitive agreement and plan of merger whereby 1^st Enterprise Bank will merge into California United Bank
• The merger combines two of the leading commercial banking franchises in Southern California with more than $2.2 billion in combined assets and offices in Los Angeles, Orange, Ventura and San Bernardino counties; in the second quarter of 2014, both franchises experienced loan growth of more than 10% over the prior year same quarter
• The transaction, currently expected to close in the fourth quarter of 2014, is subject to customary conditions, including the approval of bank regulatory agencies and shareholders of both companies

“We are very pleased to report that core net income of $2.9 million is up 24% over the second quarter of 2013 and 8% over the first quarter of 2014,” said David Rainer, President and Chief Executive Officer of CU Bancorp and California United Bank. “Total loans grew 11% over the year ago period and 4% over the linked quarter, with strong net organic loan growth of $48 million, the highest quarterly net organic loan growth we have experienced in six quarters. Loan growth was driven primarily by an increase in commercial and industrial loans and owner-occupied nonresidential properties. We continue to focus on establishing new relationships and offering a more personalized banking experience than that available from larger institutions, and this is reflected in the 21% increase in commercial and industrial lines of credit over the previous year.

“The merger with 1^st Enterprise Bank continues on track and we are very excited about the potential of our combined bank, especially given the loan growth both banks experienced in the second quarter. We believe our collective banking experience and mutual focus on exceptional customer service will create the premier business banking franchise in Southern California.”

Second Quarter 2014 Summary Results

Net Income and Profitability Ratios

Net income was $2.4 million, or $0.21 per fully diluted share, for the second quarter of 2014, compared with net income of $2.3 million, or $0.22 per fully diluted share, for the second quarter of 2013. Net income for the second quarter of 2014 was impacted by $497 thousand in merger-related expenses; the second quarter of 2013 had no merger-related expenses. Excluding merger-related charges, net income before the provision for income taxes in the second quarter of 2014 was $4.8 million, compared to net income before the provision for income taxes of $3.8 million in the second quarter of 2013.

Net income in the second quarter of 2014 of $2.4 million was $280 thousand lower than net income of $2.7 million in the first quarter of 2014, due to merger-related expenses incurred in the second quarter. Net income before the provision for income tax expense, excluding merger-related expenses, in the second quarter of 2014 was $4.8 million, compared to net income before the provision for income tax expense of $4.3 million in the first quarter of 2014.

The following table shows certain of the Company’s performance ratios for the second quarter of 2014, the first quarter of 2014 and the second quarter of 2013, as well as a column calculating performance ratios based on core net income for the second quarter of 2014:

Net Interest Income and Net Interest Margin

Net interest income before the provision for loan losses totaled $12.6 million for the second quarter of 2014 and the second quarter of 2013. However, net interest income in the second quarter of 2013 benefited from the recognition of $891 thousand in discount earned on early loan payoffs of acquired loans, compared to $483 thousand earned in the second quarter of 2014. Additionally, during the second quarter of 2013, the Company recorded $162 thousand of interest income related to the recovery of interest on a non-accrual loan that was paid off.

Net interest income before the provision for loan losses for the second quarter of 2014 increased $405 thousand or 3.3% from the first quarter of 2014. The increase was primarily driven by net organic loan growth.

The Company’s net interest income continued to be positively impacted in both the first and second quarter of 2014 by the recognition of the fair value discount earned on early payoffs of acquired loans. The Company recorded $519 thousand and $483 thousand in discount earned on early loan payoffs of acquired loans in the first and second quarter of 2014, respectively, with a positive impact on the net interest margin of 16 and 15 basis points, respectively.

As of June 30, 2014, the Company had $6.8 million of accretable yield discount remaining on acquired loans.

Net interest margin in the second quarter of 2014 was 3.88%, compared to 4.25% in the second quarter of 2013. The decrease in net interest margin is primarily attributable to the higher level of fair value discount earned on early payoffs of acquired loans and the recovery of interest income on the non-accrual loan that was paid off during the second quarter of 2013, the combination of which had a positive impact of 36 basis points on the year ago quarter’s net interest margin.

Net interest margin in the second quarter of 2014 was 3.88%, compared to 3.82% in the first quarter of 2014. Average loans increased by $35.2 million over the previous quarter, which positively impacted the net interest margin in the second quarter.

The Company’s average yield on loans was 5.18% in the second quarter of 2014, compared to 5.24% in the first quarter of 2014. The core loan yield was 4.97% in the second quarter of 2014, compared to 5.01% in the first quarter of 2014.

The Company’s cost of funds was 0.15% in the second quarter of 2014, a decrease from 0.19% in the second quarter of 2013 and equal to 0.15% for the first quarter of 2014.

Non-Interest Income

Non-interest income was $1.8 million in the second quarter of 2014, an increase of $93 thousand or 5.5% from $1.7 million in the same quarter of the prior year. The increase was primarily attributable to a $225 thousand settlement related to an other real estate owned property sold last year and included in other non-interest income in the second quarter of 2014. Non-interest income in the second quarter of 2013 benefited from a $250,000 insurance settlement also included in other non-interest income.

Non-interest income in the second quarter of 2014 decreased $7 thousand or 0.4% from the first quarter of 2014. The decrease in non-interest income from the prior quarter was primarily attributable to a decrease in the gain on sale of SBA loans in the second quarter, partially offset by the settlement related to the previously mentioned other real estate owned property.

Non-Interest Expense

Non-interest expense for the second quarter of 2014 increased $417 thousand or 4.5% over the second quarter of 2013. The increase was primarily due to merger-related expenses of $497 thousand and the annual granting of stock-based compensation to senior management. Merger expenses include investment banking costs associated with a fairness opinion and legal fees for the drafting of the definitive agreement.

Non-interest expense for the second quarter of 2014 increased $149 thousand over the first quarter of 2014. The increase was primarily due to merger-related expenses, partially offset by a reduction in salaries and employee benefits, which are seasonally higher in the first quarter due to 401(k) employee contribution matches and FICA. Additionally, the lower gain on sale of SBA loans resulted in lower commissions paid in the second quarter.

Non-interest expense for both quarters benefited from reduced legal and professional fees, down $161 thousand from the year ago quarter and $112 thousand from the previous quarter, due to the Company’s varying utilization of outside consultants and legal counsel.

Income Tax

The Company’s merger-related expenses of $497 thousand are not tax deductible, which had the consequence of increasing its effective tax rate for the quarter to 43.9%, compared to 39.5% for the second quarter of 2013.

Balance Sheet

Assets

Total assets at June 30, 2014, were $1.4 billion, a year-over-year increase of $152 million or 11.9% from June 30, 2013, primarily resulting from growth in total deposits. Total assets increased $48 million or 3.5% quarter-over-quarter from March 31, 2014, primarily resulting from growth in total deposits, including $31 million in non-interest bearing deposits.

Loans

Total loans were $980 million at June 30, 2014, an increase of $34 million or 3.6% from $946 million at the end of the prior quarter. This also represents an increase of $95 million or 10.7% from June 30, 2013. During the second quarter of 2014, the Company had approximately $48 million of net organic loan growth, which was partially offset by approximately $13 million in loan run-off from acquired portfolios.

The increase in total loans from the prior quarter included a $13.9 million increase in the commercial and industrial loan portfolio and a $13.8 million increase in the owner-occupied nonresidential properties portfolio; these two portfolios now represent 52% of total loans. Commercial and industrial lines of credit increased to $439 million in the second quarter of 2014, up 20.8% from the prior year and 3.5% from the previous quarter.

Deposits

Total deposits at June 30, 2014, were $1.2 billion, an increase of $42 million or 3.5% from March 31, 2014. This also represents an increase of $148 million or 13.4% from June 30, 2013. The increase in deposits from the end of the prior quarter primarily reflects increases in non-interest bearing demand deposits and interest bearing transaction accounts from existing customers, as well as new relationships, partially offset by reductions in money market accounts and certificates of deposit.

Non-interest bearing demand deposits at June 30, 2014, were $682 million, an increase of $30.7 million or 4.7% from March 31, 2014. Non-interest-bearing demand deposits represented 55% of total deposits at June 30, 2014, up from 54% at the end of the prior quarter. Cost of deposits for the quarter was 0.11%, down from 0.12% in the prior quarter.

Asset Quality

Total non-performing assets were $7.2 million, or 0.51% of total assets at June 30, 2014, compared with $8.2 million or 0.60% of total assets, at March 31, 2014. Approximately 71% of the total non-performing assets at June 30, 2014, were acquired loans that were marked to fair value at the time of acquisition.

Of the total non-performing assets at June 30, 2014, the other real estate owned category consisted of one industrial condominium located in Palm Desert, which is carried on the books at $219 thousand. The property was sold in the third quarter of 2014 for approximately book value.

During the second quarter of 2014, the Company recorded net recoveries of $53 thousand, compared with net recoveries of $145 thousand during the first quarter of 2014.

The Company recorded a loan loss provision of $408 thousand for the second quarter of 2014. The loan loss provision reflects strong organic loan growth, recoveries recorded in the quarter and an improving credit quality environment.

The allowance for loan losses as a percentage of loans (excluding acquired loans that have been marked to fair value and the related allowance) was 1.45% at June 30, 2014, compared with 1.48% at March 31, 2014, and 1.50% at June 30, 2013.

Capital

CU Bancorp remained well capitalized at June 30, 2014, with total risk weighted assets of $1,212,027,000. All of the Company’s capital ratios are above minimum regulatory standards for “well capitalized” institutions.

At June 30, 2014, tangible common equity was $130.8 million with common shares issued and outstanding of 11,222,235 as of the same date, resulting in tangible book value per common share of $11.66. This compares to tangible common equity of $127.5 million with a tangible book value per common share of $11.37 at March 31, 2014. The increase in tangible book value per common share from the prior quarter primarily reflects the net income generated during the second quarter of 2014.

About CU Bancorp and California United Bank

CU Bancorp is the parent of California United Bank. Founded in 2005, California United Bank provides a full range of financial services, including credit and deposit products, cash management, and internet banking to businesses, non-profits, entrepreneurs, professionals and investors throughout Southern California from offices in the San Fernando Valley, the Santa Clarita Valley, the Conejo Valley, Simi Valley, Los Angeles, South Bay, and Orange County. California United Bank is an SBA Preferred Lender. To view CU Bancorp’s most recent financial information, please visit the Investor Relations section of the Company’s website. Information on products and services may be obtained by calling 818-257-7700 or visiting the Company’s website at www.cunb.com.

FORWARD-LOOKING STATEMENTS

This press release contains certain forward-looking information about CU Bancorp (the “Company”), 1^st Enterprise Bank and the combined company after the close of the transaction that is intended to be covered by the safe harbor for “forward looking statements” provided by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact are forward-looking statements. Such statements involve inherent risks and uncertainties, many of which are difficult to predict and are generally beyond the control of the Company. Forward-looking statements speak only as of the date they are made and we assume no duty to update such statements. We caution readers that a number of important factors could cause actual results to differ materially from those expressed in, implied or projected by, such forward-looking statements. Risks and uncertainties include, but are not limited to: lower than expected revenues; credit quality deterioration or a reduction in real estate values could cause an increase in the allowance for credit losses and a reduction in net earnings; increased competitive pressure among depository institutions; the Company’s ability to complete future acquisitions, successfully integrate such acquired entities, or achieve expected beneficial synergies and/or operating efficiencies within expected time-frames or at all; the possibility that personnel changes will not proceed as planned; the cost of additional capital is more than expected; a change in the interest rate environment reduces net interest margins; asset/liability repricing risks and liquidity risks; legal matters could be filed against the Company and could take longer or cost more than expected to resolve or may be resolved adversely to the Company; general economic conditions, either nationally or in the market areas in which the Company does or anticipates doing business, are less favorable than expected; environmental conditions, including natural disasters and drought, may disrupt our business, impede our operations, negatively impact the values of collateral securing the Company’s loans and leases or impair the ability of our borrowers to support their debt obligations; the economic and regulatory effects of the continuing war on terrorism and other events of war, including the conflicts in the Middle East; legislative or regulatory requirements or changes adversely affecting the Company’s business; changes in the securities markets; regulatory approvals for any capital activities cannot be obtained on the terms expected or on the anticipated schedule; and, other risks that are described in CU Bancorp’s public filings with the U.S. Securities and Exchange Commission (the “SEC”). Additional risks and uncertainties relating to the proposed transaction with 1st Enterprise Bank include, but are not limited to: the ability to complete the proposed transaction, including obtaining regulatory approvals and approvals by the shareholders of CU Bancorp and 1st Enterprise Bank; the length of time necessary to consummate the proposed transaction; the ability to successfully integrate the two institutions and achieve expected synergies and operating efficiencies on the expected timeframe; unexpected costs relating to the proposed transaction; and the potential impact on the institutions’ respective businesses as a result of uncertainty surrounding the proposed transaction. If any of these risks or uncertainties materializes or if any of the assumptions underlying such forward-looking statements proves to be incorrect, CU Bancorp’s results could differ materially from those expressed in, implied or projected by such forward-looking statements. CU Bancorp assumes no obligation to update such forward-looking statements. For a more complete discussion of risks and uncertainties, investors and security holders are urged to read CU Bancorp’s annual report on Form 10-K, quarterly reports on Form 10-Q and other reports filed by CU Bancorp with the SEC. The documents filed by CU Bancorp with the SEC may be obtained at CU Bancorp’s website at www.cubancorp.com or at the SEC’s website at www.sec.gov. These documents may also be obtained free of charge from CU Bancorp by directing a request to: CU Bancorp c/o California United Bank, 15821 Ventura Boulevard, Suite 100, Encino, CA 91436. Attention: Investor Relations. Telephone 818-257-7700.

CU BANCORP, CALIFORNIA UNITED BANK AND 1^ST ENTERPRISE BANK MERGER ANNOUNCEMENT

On June 3, 2014, CU Bancorp announced that it had entered into an Agreement and Plan of Merger (the “Merger Agreement”) among CU Bancorp, California United and 1^st Enterprise Bank, a California state-chartered commercial bank (“1st Enterprise”) pursuant to which CU Bancorp will acquire 1^st Enterprise Bank by merging 1^st Enterprise Bank with and into California United Bank (the “Merger”). California United Bank will survive the Merger and will continue the commercial banking operations of the combined bank following the Merger. Under the terms of the Merger Agreement, holders of 1^st Enterprise Bank common stock will receive shares of CU Bancorp common stock based upon a fixed exchange ratio of 1.3450 shares of CU Bancorp common stock for each share of 1^st Enterprise Bank common stock. The U.S. Treasury, as the holder of all outstanding shares of 1^st Enterprise Bank preferred stock granted in connection with 1^st Enterprise’s participation in the Treasury’s Small Business Lending Fund program, will receive, in exchange for these shares, a new series of CU Bancorp preferred stock having the same rights (including with respect to dividends), preferences, privileges, voting powers, limitations and restrictions as the 1^st Enterprise preferred stock. The Merger is subject to customary closing conditions, including regulatory and shareholder approvals.

ADDITIONAL INFORMATION ABOUT THE PROPOSED TRANSACTION WITH 1^ST ENTERPRISE BANK AND WHERE TO FIND IT

Investors and security holders are urged to carefully review and consider each of CU Bancorp’s public filings with the SEC, including but not limited to its annual reports on Form 10-K, proxy statements, current reports on Form 8-K and quarterly reports on Form 10-Q. The documents filed by CU Bancorp with the SEC may be obtained free of charge at CU Bancorp’s website at www.cubancorp.com or at the SEC website at www.sec.gov. These documents may also be obtained free of charge from CU Bancorp by directing a request to: CU Bancorp c/o California United Bank, 15821 Ventura Boulevard, Suite 100, Encino, CA 91436. Attention: Investor Relations. Telephone 818-257-7700. The information on CU Bancorp’s website is not, and shall not be deemed to be, a part of this filing or incorporated into other filings CU Bancorp makes with the SEC.

In connection with the proposed merger of California United Bank with 1^st Enterprise Bank, CU Bancorp intends to file a registration statement on Form S-4 with the SEC to register the shares of CU Bancorp common stock to be issued to shareholders of 1^st Enterprise Bank. The registration statement will include a joint proxy statement of CU Bancorp and 1^st Enterprise and a prospectus of CU Bancorp, and each party will file other documents regarding the proposed transaction with the SEC. Before making any voting or investment decision, investors and security holders of CU Bancorp and 1^st Enterprise Bank are urged to carefully read the entire registration statement and joint proxy statement/prospectus, when they become available, as well as any amendments or supplements to these documents, because they will contain important information about the proposed transaction. A definitive joint proxy statement/prospectus will be sent to the shareholders of each institution seeking any required stockholder approvals. Investors and security holders will be able to obtain the registration statement and the joint proxy statement/prospectus free of charge from the SEC’s website or from CU Bancorp by writing to the address provided in the paragraph above.

PARTICIPANTS IN THE SOLICITATION

CU Bancorp and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of CU Bancorp and 1^st Enterprise Bank in connection with the transaction. Information about the directors and executive officers of CU Bancorp is set forth in its annual report on Form 10-K/A filed with the SEC on April 29, 2014.

1^st Enterprise Bank and its directors and executive officers may also be deemed to be participants in the solicitation of proxies from the shareholders of CU Bancorp and 1^st Enterprise Bank in connection with the Merger.

Additional information regarding the interests of these participants and other persons who may be deemed participants in the Merger may be obtained by reading the proxy statement/prospectus regarding the Merger when it becomes available.

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval.

As of June 30, 2014, there were no restructured loans or loans over 90 days past due and still accruing.