Pacific Valley Bank Announces Second Quarter 2012 Financial Results

SALINAS, Calif., Aug. 1, 2012 /PRNewswire/ -- Pacific Valley Bank (OTCBB: PVBK) announced second quarter 2012 net income of $435,000 or $0.13 basic earnings per share as compared to the same quarter last year when we reported a net income of $255,000 or $0.08 basic earnings per share.  The net income for the six month period ending June 30, 2012 was $745,000 or $0.23 basic earnings per share as compared to the same period ending June 30, 2011 when the net income was $622,000 or $0.19 basic earnings per share. 

"We are pleased to be able to report another strong quarterly performance – our seventh straight positive quarter. Earnings in the second quarter increased over the same quarter last year, as well as over the first quarter of 2012.  Our shareholders will be pleased to know that we continue to find ways to save on overhead expenses and explore new products and services for the benefit of our customers," stated David B. Warner, President and Chief Executive Officer.  "Additionally, we experienced further improvement in the quality of the loan portfolio during the second quarter."

Balance Sheet and Loan Quality Review:

Total assets were $170.03 million at June 30, 2012, which is a decrease of $2.71 million from the same period last year when assets were $172.74 million.  The decrease in total assets is in part a result of the use of the Bank's liquidity to payoff outstanding borrowings to the FHLB of San Francisco.  Our gross loans at June 30, 2012 were $133.36 million, which is an increase of $8.83 million as compared to $124.53 million at June 30, 2011. 

The allowance for loan losses as of June 30, 2012 was $3.58 million, which is a decrease from the same quarter last year when it was $3.66 million.  The percentage of allowance for loan losses to gross loans outstanding at June 30, 2012 was 2.69% as compared to 2.94% in the same quarter last year. 

Our allowance for loan losses is based on management's judgment that is derived from two separate measurements in order to maintain a level considered adequate to provide for losses that can be estimated based on general and specific conditions.  The measurement for contingent losses are measured for impairment at the individual loan level, whereas the general conditions of the loan portfolio are analyzed by applying loss rates to aggregate groups of loan balances with common risk characteristics.

Management measures individual loans for impairment when it is probable that the Bank will be unable to collect in entirety both the principal and interest according to the contractual terms of the loan agreement.  The individual reserves required for specific reserves as of June 30, 2012 were $192,000 as compared to $450,000 as of June 30, 2011.

The loans that do not meet this definition are aggregated into separate pools based on loan type and loan risk (grade) to measure and assess general reserves.  Some of the key qualitative factors credit administration monitors include; 1) non-accruing loans, which declined to $2.13 million as of June 30, 2012 as compared to $6.46 million as of June 30, 2011: 2) loans past due from 30 – 89 days, of which there were none as of June 30, 2012 as compared to $858,000 at June 30, 2011; 3) net charge-offs were $544,000 for the quarter ending June 30, 2012 as compared to net charge-offs of $831,000 for the quarter ending June 30, 2011; and 4) non-performing assets ratio, which declined to 1.39% as of June 30, 2012 as compared to 3.98% at June 30, 2011. 

Based on management's methodology, we measured the general reserve portion of the allowance to be $3.39 million as of June 30, 2012 as compared to $3.21 million as of June 30, 2011.  Included in the general reserve portion of the allowance was $944,000 unallocated reserves as of June 30, 2012 as compared as of $225,000 as of June 30, 2011.  The unallocated reserves are an amount that is over and above the estimated inherent losses.  Management believes the unallocated reserves are a prudent margin to address the imperfect nature of measuring contingent losses.

A significant component of our current liquidity position is reflected in our excess balances held at the Federal Reserve, which totals $25.19 million as of June 30, 2012 as compared to $33.23 million as of June 30, 2011.  The Bank's liquidity is in a good position to support future loan growth.  Deposits trended down at $149.12 million as of June 30, 2012 as compared to $151.00 million in the same quarter a year ago. 

Stockholders' equity at June 30, 2012 was $20.09 million as compared to $18.83 million from the quarter ending June 30, 2011.  At June 30, 2012 our Tier 1 capital to average assets ratio was 12.14% and our total risk-based capital ratio was 15.97% as compared to 10.98% and 14.92% as of June 30, 2011, respectively.

Review of Operations:

The core earnings of the Bank are measured by the interest income plus non-interest income less interest expense.  During the current second quarter, core earnings of the Bank were $1.94 million, which is higher by comparison to $1.92 million for the same quarter a year ago.  The core earnings for the six month period ending June 30, 2012 were $3.79 million as compared to the same period ending June 30, 2011 when the core earnings were $3.60 million.

Interest income for the quarter ending June 30, 2012 was $2.07 million as compared to $2.00 million in the same quarter a year ago.  The interest income for the six month period ending June 30, 2012 was $4.16 million as compared to the same period ending June 30, 2011 when it was $4.11 million.  Interest expense during the current quarter was $251,000 as compared to $324,000 in the same quarter a year ago.  The interest expense for the six month period ending June 30, 2012 was $526,000 as compared to the same period ending June 30, 2011 when it was $657,000.  Our interest costs continue to benefit from a low rate environment that allows us to gradually re-price maturing deposits into current lower market rates.  The Bank achieved net interest margins of 4.63% and 4.09% for the quarter-ending periods June 30, 2012 and June 30, 2011, respectively.  On a year-to-date basis, the Bank achieved net interest margins of 4.62% and 4.26% for the periods ending June 30, 2012 and June 30, 2011, respectively. 

There were no provisions for loan losses in the current quarter as compared to $150,000 for the same quarter a year ago.  The Bank's methodology did not identify the need for a provision for loan loss due to management's judgment regarding adequate reserves to cover measured probable losses in our loan portfolio.  On a year-to-date basis, there were no provisions for loan losses in 2012 as compared to $150,000 for the same period during 2011.

Non-interest expenses during the current quarter totaled $1.49 million for the quarter ending June 30, 2012.  This compares to $1.48 million for the same period ending in 2011.  The non-interest expenses for the six month period ending June 30, 2012 were $3.03 million as compared to the same period ending June 30, 2011 when they were $2.90 million.  During the second quarter 2012, the Bank recognized cost savings from an April 16^th decision to file a Form 15 with the FDIC to voluntarily terminate registration.  The efficiency ratio, which measures the amount of overhead expense per net interest income plus noninterest income, was 76.83% for the first quarter of this year as compared to 77.13% for the same period ending in 2011.  The efficiency ratio moved slightly lower due to higher net interest income.   On a year-to-date basis, the Bank's efficiency ratios were 79.75% and 77.17% for the periods ending June 30, 2012 and June 30, 2011, respectively. 

About Pacific Valley Bank: 
Pacific Valley Bank is a California State chartered bank that commenced operations in September 2004.  Pacific Valley Bank serves three locations; administrative headquarters and branch offices in Salinas, King City and Monterey, California.  The Bank offers a broad range of banking products and services, including credit and deposit services to small and medium sized businesses, agriculture related businesses, non-profit organizations, professional service providers and individuals.  The Bank serves customers primarily in Monterey County.  For more information, visit www.pacificvalleybank.com.

Safe Harbor Statement: 
Except for the historical information in this news release, the matters described herein are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially. Such risks and uncertainties include: the credit risks of lending activities, including changes in the level and trend of loan delinquencies and charge-offs, results of examinations by our banking regulators, our ability to maintain adequate levels of capital and liquidity, our ability to manage loan delinquency rates, our ability to price deposits to retain existing customers and achieve low-cost deposit growth, manage expenses and lower the efficiency ratio, expand or maintain the net interest margin, mitigate interest rate risk for changes in the interest rate environment, competitive pressures in the banking industry, access to available sources of credit to manage liquidity, the local and national economic environment, and other risks and uncertainties. Accordingly, undue reliance should not be placed on forward-looking statements. These forward-looking statements speak only as of the date of this release. Pacific Valley Bank undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Investors are encouraged to read the FDIC filing reports of Pacific Valley Bank which are available on our website; including the most recent filing of the Form 10-K for fiscal year ended December 31, 2011.  They contain meaningful cautionary language and discussion why actual results may vary from those anticipated by management.

SOURCE Pacific Valley Bank