California First National Bancorp (NASDAQ:CFNB)(“CalFirst Bancorp” or the “Company”) today announced net earnings of $1.7 million for the first quarter ended September 30, 2010, down 52% from $3.5 million earned during the first quarter of fiscal 2010. Diluted earnings per share for the first quarter of $0.16 compared to $0.34 per share reported for the same period of the prior year.

The decline in net earnings from the first quarter of the prior year is largely due to a $1.7 million gain realized on the sale of investment securities during the prior period, but also reflects a decline in direct finance income.

For the first quarter ended September 30, 2010, total direct finance, loan and interest income decreased 21% to $5.9 million, compared to $7.5 million for the first quarter of fiscal 2010. The decrease includes a $1.2 million, or 25%, decrease in direct finance income related to a 6% decline in the average investment in leases and lower average yields earned, and a $741,000 decrease in investment income as the average investment balances declined 48% to $66.8 million. Commercial loan income increased by $342,000 on an average loan portfolio that increased 10% to $80.5 million compared to $73.3 million during the first quarter of the prior year. The average yield on all leases and loans held in the Company’s portfolio decreased 112 basis points to 7.54% while the average yield on cash and investments of 2.4% was down 102 basis points as compared to the first quarter of fiscal 2010. Net direct finance, loan and interest income after provision for credit losses decreased by $1.0 million, or 18%, to $4.7 million, and included a 40% decrease in interest expense paid on deposits and borrowings and a $25,000 increase in the provision for credit losses. The decrease in interest expense reflected a 19% decrease in the average balance of deposits and borrowings to $223.1 million on which interest was paid at an average rate of 1.65%, down 60 basis point from 2.25% during the comparable period in fiscal 2010. The provision for credit losses primarily related to growth within the commercial loan portfolio that expanded from $65.4 million at June 30, 2010 to $94.1 million at September 30, 2010.