Valley Commerce Bancorp Reports Record Earnings For 2012

VISALIA, Calif., Jan. 31, 2013 /PRNewswire/ -- Valley Commerce Bancorp, (OTCBB: VCBP), a bank holding company and the parent company of Valley Business Bank, today announced earnings of $3.2 million, or $1.12 per diluted common share, for the year ended December 31, 2012 compared to net earnings of $3.1 million, or $0.97 per diluted common share, for 2011.  Fourth quarter 2012 net income was $642 thousand, or $0.23 per diluted common share, compared to net income of $793 thousand, or $0.25 per diluted common share, for the fourth quarter of 2011.

Allan W. Stone, President and Chief Executive Officer, remarked, "I am very pleased to report for the second consecutive year a new earnings record.  Our team worked very hard in 2012 not only to achieve these results but just as importantly, to position the company for success in future years. We enter 2013 with a very health credit risk profile due to our dedicated efforts this past year to identify, monitor, and resolve credit weaknesses.  We competed aggressively and successfully for new customers in 2012 and will continue these efforts in 2013.  Also in 2012, we laid the groundwork to introduce exciting new banking technologies to our customers and expect these efforts to come to fruition early in 2013." 

Stone added, "Community banking is seeing a lot of changes, including in our local market, but we are confident Valley Business Bank is more than able to meet the challenges facing the industry.  We have focused our efforts on supporting local businesses and we are very optimistic about our local economy.  Our superior financial performance enhances our ability to deliver superior value to our customers and our team of banking professionals is dedicated to the proposition that local businesses are best served by a strong local bank fully dedicated to their needs."

Asset Quality

Non-performing loans at December 31, 2012 included nonaccrual loans involving eight customer relationships with an aggregate balance of $4.4 million or 1.95% of total loans.  This compared with nonaccrual loans involving eight customer relationships at December 31, 2011 with an aggregate balance of $5.6 million or 2.5% of total loans.  The Company had no other real estate owned at December 31, 2012 compared to $1.1 million at year end 2011.  Total non-performing assets at December 31, 2012 were 1.2% of total assets compared to 1.9% of total assets at December 31, 2011. 

Non-performing asset activity in 2012 included the sale of $1.1 million of other real estate owned, transfer of two real estate loans to nonaccrual status and charge-off of three nonaccrual loans.   Net charge-offs for 2012 totaled $276 thousand, or 0.12% of average loans, compared to the 2011 total of $1.8 million or 0.78% of average loans. 

Impaired loans totaled $8.0 million and $10.8 million at December 31, 2012 and 2011, respectively, and were comprised of the nonaccrual loans included in nonperforming assets and certain accruing loans whose terms have been modified from the original loan agreement.

The Company's allowance for loan and lease losses (ALLL) decreased from $5.5 million at December 31, 2011 to $5.2 million at December 31, 2012 due to net charge-offs of $276 thousand during 2012.  The ALLL represented 2.23% of total loans at December 31, 2012 compared to 2.38% at December 31, 2011.  The loan charge-offs in 2012 occurred primarily on impaired loans that had been assigned individual loss reserves prior to 2012.  The portion of the ALLL relating to specific impaired loans was $591 thousand and $528 thousand at December 31, 2012 and 2011, respectively.

Loans, Investment Securities, Deposits, and Borrowings

Net loans (gross loans less the ALLL) were $227.3 million at December 31, 2012 an increase of $2.7 million or 1% from the $224.5 million at December 31, 2011. The increase occurred primarily in the category of real estate-mortgage loans.  Average gross loans were $228.0 million for 2012 and $232.7 million for 2011, a decrease of $4.7 million or 2%.

Available-for-sale investment securities decreased from $56.7 million at December 31, 2011 to $53.0 million at December 31, 2012.  There were $10.2 million of investment security purchases made during 2012 which were offset by normal repayments, maturities, calls, and sales.   Gain on sale of investment securities was $152 thousand in 2012 compared to $290 thousand in 2011.  Security sales normally result from portfolio maintenance and repositioning transactions.

Total deposits decreased by $393 thousand or 0.1% from $315.9 million at December 31, 2011 to $315.5 million at December 31, 2012.  Average deposits were $304.6 million for the year ended December 31, 2012, a $9.7 million or 3.3% increase from the $294.9 million in average total deposits for the year ended December 31, 2011.  The Company held no brokered deposits at either year end date.

The Company had no Federal Home Loan Bank (FHLB) term borrowings at December 31, 2012 compared to $1.0 million in FHLB term borrowings at December 31, 2011.  FHLB borrowings decreased in 2012 due to scheduled maturities.  There were no FHLB short term borrowings at either date.

Shareholders' Equity

Book value per common share increased to $13.46 at December 31, 2012 from $12.50 at December 31, 2011 primarily due to 2012 earnings of $3.2 million, offset by cash dividends paid during 2012.  Total shareholder's equity was $37.9 million at December 31, 2012, a decrease of $4.6 million or 11%, from $42.5 million at December 31, 2011.  The decrease primarily resulted from the first quarter 2012 repurchase of $8.1 million of preferred stock that had been issued under the United States Treasury's Capital Purchase Program in 2009.  Valley Commerce Bancorp's Total Risk-Based Capital Ratio decreased to 16.9% at December 31, 2012 compared to 18.9% at December 31, 2011 due to the preferred stock repurchase and cash dividends, offset by 2012 earnings.  In June 2012, the Company paid its first quarterly cash dividend in the amount of $0.04 per share.  A second quarterly cash dividend of $0.04 per share was paid in September 2012 and a third cash dividend of $0.08 per share was paid in December 2012.

Net Interest Income and Net Interest Margin

For the quarter ended December 31, 2012 net interest income totaled $3.4 million, a decrease of $151 thousand or 4% from the $3.6 million earned during the fourth quarter of 2011.  For the year ended December 31, 2012, net interest income totaled $13.6 million, a decrease of $370 thousand or 3% from the 2011 total of $14.0 million.  Net interest income decreased during the 2012 periods due to a decrease in the average balances and average yields of investment securities and loans offset by reduced cost of deposits.

Net interest margin was 4.50% and 4.73% for the three-month periods ended December 31, 2012 and 2011, respectively.  Net interest margin for the year ended 2012 and 2011 was 4.50% and 4.55%, respectively, a decrease of 5 basis points (bps).  The decline in net interest margin was due primarily to the decrease in average loans and average loan yield and timing of certain nonrecurring revenue items.  The yield earned on loans averaged 5.77% and 6.00% for the years ended December 31, 2012 and 2011, respectively, a decrease of 23 bps.  This decrease was offset by a 22 bps decrease in the average rate paid on interest-bearing deposits which was 0.50% and 0.72% for the years ended December 31, 2012 and 2011, respectively.  This reflected market-based rate reductions and re-pricing of time deposits to lower rates at maturity.  The decrease in cost of funds also reflected the scheduled repayment of FHLB term debt which had interest rates well above our average cost of funds.

Non-Interest Income

For the quarter ended December 31, 2012, non-interest income totaled $321 thousand, a decrease of $144 thousand or 31% from the $465 thousand recorded during the fourth quarter of 2011.  The decrease resulted from $145 thousand in gains on sales of investment securities in the 2011 period compared to none in the 2012 period.

For all of 2012, non-interest income totaled $1.5 million, a decrease of $71 thousand or 5% from the 2011 total of $1.6 million.  The decrease in non-interest income for 2012 was attributable to gains on sales of investment securities of $152 thousand in 2012 compared to $290 thousand in 2011.  This was partially offset by a $36 thousand or 11% increase in earnings on cash surrender value of life insurance policies due to the purchase of a new policy in late 2011.

Non-Interest Expense

For the quarter ended December 31, 2012, non-interest expense totaled $2.9 million, an increase of $293 thousand or 11% from the $2.6 million recorded during the fourth quarter of 2011.  Salaries and employee benefits expense increased by $293 thousand or 21% from $1.4 million in 2011 to $1.7 million in the fourth quarter of 2012 due to adjustments to post-retirement benefits expense as well as normal personnel and salary changes.  In addition, there was a $44 thousand or 13% increase in occupancy and equipment costs due to higher than anticipated maintenance and repair costs and for operational risk management initiatives.  These were offset by a $34 thousand or 40% decrease in advertising expense resulting from reduced television advertising in 2012, and a $22 thousand or 22% decrease in FDIC insurance expense which reflected adjustments made to implement FDIC's revised methodology for calculating insurance premiums.

For the year ended December 31, 2012, non-interest expense totaled $10.5 million, an increase of $236 thousand or 2% from the $10.3 million recorded during 2011.  Salaries and employee benefit expense increased by $527 thousand or 9% during the year ended December 31, 2012 due to increased stock options and post-retirement benefits expense, and normal personnel and salary changes.  In addition, there was a $21 thousand or 2% increase in occupancy and equipment expense related to upgrade of the Company's technology platform.  These were offset by a $231 thousand or 43% decrease in FDIC insurance expense which reflected adjustments made to implement FDIC's revised methodology for calculating insurance premiums. Advertising and business development decreased by $38 thousand or 14% due to reduced television advertising in 2012 compared to 2011.

OTHER INFORMATION:  Valley Commerce Bancorp stock trades on NASDAQ's Over the Counter Bulletin Board under the symbol VCBP.  Valley Business Bank, the wholly owned subsidiary of Valley Commerce Bancorp, is a commercial bank that commenced operations in 1996.  Valley Business Bank operates through Business Banking Centers in Visalia, Tulare, and Fresno, California and has branch offices in Woodlake and Tipton, California.  Additional information about Valley Business Bank is available from the Bank's website at http://www.valleybusinessbank.net.

FORWARD-LOOKING STATEMENTS:  In addition to historical information, this release includes forward-looking statements, which reflect management's current expectations for Valley Commerce Bancorp's future financial results, business prospects and business developments.  Management's expectations for Valley Commerce Bancorp's future necessarily involve assumptions, estimates and the evaluation of risks and uncertainties. Various factors could cause actual events or results to differ materially from those expectations.  The forward-looking statements contained herein represent management's expectations as of the date of this release. Valley Commerce Bancorp undertakes no obligation to release publicly the results of any revisions to the forward-looking statements included herein to reflect events or circumstances after today, or to reflect the occurrence of unanticipated events.  For those statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

 

VALLEY COMMERCE BANCORP


Condensed Consolidated

Balance Sheet

(In thousands) (Unaudited)

                  As of December 31,









2012



2011

Assets












Cash and Due from Banks







$

57,574


$

60,421

Available-for-Sale Investment Securities








53,001



56,705

Loans (net)








227,260



224,532

Bank Premises and Equipment (net)








7,995



8,168

Cash Surrender Value of Bank-Owned Life Insurance








7,993



7,693

Other Real Estate Owned








-



1,141

Other Assets








7,056



7,860

TOTAL ASSETS







$

360,879


$

366,520













Liabilities & Equity












Non-Interest Bearing Deposits







$

120,900


$

128,453

Interest Bearing Deposits








127,819



116,373

Time Deposits








66,765



71,051

Total Deposits








315,484



315,877

FHLB Term Borrowings








-



1,000

Junior Subordinated Deferrable Interest Debentures








3,093



3,093

Other Liabilities








4,399



4,045

Total Liabilities








322,976



324,015

Shareholders' Equity








37,903



42,505

TOTAL LIABILITIES & EQUITY







$

360,879


$

366,520
















Condensed Consolidated

Statement of Income

(In thousands except share and per share data) (Unaudited)

   Three Months Ended

   December 31,

        Years Ended

          December 31,



2012



2011



2012



2011













Interest Income

$

3,659


$

3,874


$

14,687


$

15,643

Interest Expense


253



317



1,080



1,666

NET INTEREST INCOME


3,406



3,557



13,607



13,977

Provision for Loan Losses


-



225



-



600

NET INTEREST INCOME AFTER

   PROVISION FOR LOAN LOSSES


3,406



3,332



13,607



13,377

Non-interest Income


321



465



1,489



1,560

Non-interest Expense


2,933



2,640



10,492



10,256

INCOME BEFORE INCOME TAXES


794



1,157



4,604



4,681

Provision  for Income Taxes


152



364



1,371



1,577

NET INCOME  

$

642


$

793


$

3,233


$

3,104

DIVIDENDS ACCRUED AND DISCOUNT

   ACCRETED ON PREFERRED SHARES

$

-


$

105


$

93


$

417

NET INCOME  AVAILABLE

   TO COMMON SHAREHOLDERS

$

642


$

688


$

3,140


$

2,687

EARNINGS PER COMMON SHARE – BASIC

$

0.23


$

0.25


$

1.13


$

0.97

EARNINGS PER COMMON SHARE – DILUTED

$

0.23


$

0.25


$

1.12


$

0.97

COMMON SHARES OUTSTANDING – END OF PERIOD


2,815,036



2,784,543



2,815,036



2,784,543

 

VALLEY COMMERCE BANCORP

SELECTED FINANCIAL INFORMATION

(In thousands, except share and per share data)

(Unaudited)




December 31,




2012



2011











CREDIT QUALITY DATA









Allowance for loan losses


$

5,193



$

5,469


Allowance for loan losses as a percentage of total loans



2.23

%



2.38

%

Non-performing loans


$

4,422



$

5,646


Non-performing loans as a percentage of total loans



1.95

%



2.51

%

Non-performing assets   


$

4,422



$

6,787


Non-performing assets as a percentage of total assets



1.23

%



1.85

%

Year-to-date net charge-offs


$

276



$

1,830


Year-to-date net charge-offs as a percentage of average loans



0.12

%



0.78

%










SHARE AND PER SHARE DATA









Basic earnings per common share for the quarter


$

0.23



$

0.25


Diluted earnings per common share for the quarter


$

0.23



$

0.25


Quarterly weighted average common shares outstanding



2,798,219




2,782,447


Quarterly weighted average diluted common shares outstanding



2,812,612




2,783,450


Basic earnings per common share, year-to-date


$

1.13



$

0.97


Diluted earnings per common share, year-to-date


$

1.12



$

0.97


Year-to-date weighted average common shares outstanding



2,788,018




2,768,114


Year-to-date weighted average diluted common shares outstanding



2,797,835




2,773,519


Book value per common share


$

13.46



$

12.50


Total common shares outstanding



2,815,036




2,784,543











QUARTERLY KEY FINANCIAL RATIOS









Annualized return on average equity



6.78

%



7.46

%

Annualized return on average assets



0.72

%



0.92

%

Net interest margin



4.50

%



4.73

%

Efficiency ratio



78.70

%



65.63

%










 ANNUAL KEY FINANCIAL RATIOS









 Return on average equity



8.47

%



7.63

%

 Return on average assets



0.92

%



0.90

%

 Net interest margin



4.50

%



4.55

%

 Efficiency ratio



69.50

%



66.01

%

 Loan to deposit ratio at year end



72.04

%



71.08

%

 Total Risk-Based Capital Ratio at year end



16.85

%



18.88

%

 

SOURCE Valley Commerce Bancorp



RELATED LINKS
https://www.valleybusinessbank.net

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