Valley Commerce Bancorp Reports Second Quarter 2016 Results

VISALIA, Calif., July 14, 2016 /PRNewswire/ -- Valley Commerce Bancorp, (OTCBB: VCBP), a bank holding company and the parent company of Valley Business Bank, today announced second quarter 2016 net income of $1.1 million or $0.37 per diluted share.  This compared to earnings of $911 thousand, or $0.31 per diluted share, for the second quarter of 2015.  For the six months ended June 30, 2016, the Company reported net income of $2.2 million, or $0.75 per diluted share.  This compared to earnings of $1.7 million, or $0.58 per diluted share, for the six months ended June 30, 2015.

Allan W. Stone, President and Chief Executive Officer, remarked, "I'm pleased to report solid second quarter 2016 earnings to go along with our very strong first quarter.  We are particularly proud to have grown net loans by $29 million or 11 percent during the 12 months ended June 30, 2016.  This resulted in our yield on average assets improving to 4.47 percent for the first half of 2016.  We also reduced our cost of funds compared to the prior year and our 2016 net interest margin of 4.30 percent is considered favorable as compared to both our peers and the industry as a whole.  We have diligently adhered to conservative credit fundamentals and are confident that our core earnings will remain strong despite looming economic challenges.  For the first half of 2016 our net income, return on average equity, and return on average assets improved compared to the same period of 2015, and we remain focused on producing strong returns for our shareholders."

 Selected financial information is presented in the following table:

Loans

Net loans were $299.9 million at June 30, 2016, an increase of $1.4 million or 0.5% from the $298.5 million of net loans at December 31, 2015 and an increase of $29.4 million or 11% from the $270.5 million of net loans at June 30, 2015.  The Bank's historical pattern is for loan growth to accelerate as the year progresses.  Average gross loans were $302.8 million for the six months ended June 30, 2016 and $266.5 million for the six months ended June 30, 2015, an increase of $36.3 million or 14%.

Net loans at June 30, 2016, December 31, 2015, and June 30, 2015 are summarized in the following table:

Investment Securities

Available-for-sale investment securities were $60.8 million at June 30, 2016 compared to $71.1 million at December 31, 2015, a decrease of $10.3 million or 15%.  There were $6.9 million of investment securities sold during the six months ended June 30, 2016 along with normal repayments and calls.  Gain on sales of investment securities was $124 thousand for the first six months of 2016 compared to $59 thousand for the same period in 2015. 

The amortized cost and estimated fair value of available-for-sale investment securities at the dates indicated consisted of the following:

Deposits

Total deposits increased by $10.7 million or 3%, from $352.2 million at December 31, 2015 to $362.9 million at June 30, 2016.  There were increases of $3.9 million or 3% in interest bearing deposits and $99 thousand or 0.2% in time deposits and a $6.7 million or 4% increase in noninterest bearing deposits.  Average total deposits were $359.4 million for the six months ended June 30, 2016, a $5.5 million or 2% decrease from the $364.9 million in average total deposits for the six months ended June 30, 2015.  Average deposits for the 2015 period included large deposits made by a single customer late in 2014 that were withdrawn over several months.

Total deposits at June 30, 2016, December 31, 2015, and June 30, 2015 are summarized in the following table:

Shareholders' Equity

Total shareholders' equity was $48.5 million at June 30, 2016, an increase of $1.7 million or 4%, from the $46.8 million at December 31, 2015.  The increase was due to earnings of $2.2 million and an increase in accumulated other comprehensive income of $418 thousand that resulted from an increase in the value of investment securities.  These increases were offset by the repurchase of common stock and cash dividends paid.  During the six months ended June 30, 2016 and 2015 the Company paid common stock cash dividends totaling $571 thousand and $523 thousand, respectively.  Common stock repurchased during the six months ended June 30, 2016 totaled $485 thousand at an average of $15.59 per share.  Common stock repurchased during the year ended December 31, 2015 totaled $752 thousand at an average of $15.57 per share. 

Asset Quality

Nonperforming assets at June 30, 2016 were comprised of four nonaccrual loans spread among two customer relationships with an aggregate balance of $1.4 million compared with five nonaccrual loans spread among three customer relationships at December 31, 2015 with an aggregate balance of $1.8 million.  The Company had no other real estate owned at June 30, 2016 or December 31, 2015.

Impaired loans totaled $3.6 million at June 30, 2016 and $4.4 million at December 31, 2015, 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 had no loans over 30 days past due, including nonaccrual loans, at June 30, 2016.  There were $249 thousand of loans over 30 days past due at December 31, 2015.

The following table summarizes the changes in the allowance for loan and lease losses (ALLL) for the periods indicated:

The Company's ALLL was $3.3 million at December 31, 2015 and $3.4 million at June 30, 2016 due to $603 thousand in net recoveries during the six months ending June 30, 2016 and the reversal of $550 thousand of provision for loan losses.  The ALLL represented 1.12% of total loans at June 30, 2016 compared to 1.11% at December 31, 2015.  The ALLL percentage increased only slightly despite recoveries exceeding the reversal of loss provision due to increased loan volume.  In determining the amount of ALLL required at June 30, 2016, management analyzed the composition and strength of the Company's loan portfolio, including borrower performance trends, the potential for losses in loans identified as being classified or nonperforming, and the results of recent credit reviews.

Net Interest Income and Net Interest Margin

The following table presents the Company's average balance sheet, including weighted average yields and rates on a taxable-equivalent basis, for the six-month periods indicated:

Net interest income before provision for loan losses for the periods ended June 30, 2016 and 2015 was $7.8 million and $7.4 million, respectively, an increase of $444 thousand or 6%.  There was a $572 thousand or 8% increase in interest income from loans that reflected a $36 million or 14% increase in the average balance of loans and a $144 thousand decrease in interest income from available-for-sale investment securities.  In 2016, investment securities saw a decrease in average volume and yield due to sales, calls, and normal paydowns.

Net interest margin was 4.30% and 4.14% for the periods ended June 30, 2016 and 2015, a 16 basis points (bps) increase due to a more favorable mix of assets and liabilities that offset declining asset yields.  More specifically an increase in average loans of $36.3 million yielding 4.93% replaced $24.2 million in cash equivalents yielding 0.58% during the comparable periods.  Average loan yield was 4.93% and 5.19% for the six months ended June 30, 2016 and 2015, respectively, a decrease of 26 bps. The decline in average loan yield reflected the highly competitive lending environment for quality customers.

The average rate paid on interest-bearing deposits was 0.32% for the six months ended June 30, 2016 and 0.35% at June 30, 2015.  Average time deposits decreased by $1.4 million or 2 percent from $58.7 million at June 30, 2015 to $57.3 million at June 30, 2016.  Average noninterest bearing deposits increased by $2.1 million or 1%.

Non-Interest Income

The following table describes the components of non-interest income for the six-month periods ended June 30, 2016 and 2015: 

For the period ended June 30, 2016, non-interest income totaled $864 thousand, an increase of $36.0 thousand or 4% from the $828 thousand recorded during the first half of 2015.  The improvement reflected increases in service charges, earnings on cash surrender value of the life insurance, and gains on sales of investment securities.  These were offset by decreases in the Other category that included FHLB dividends, mortgage loan underwriting fees, and gains from sale of loans.  The Federal Home Loan Bank of San Francisco paid a special dividend in the first half of 2015 that was not repeated in 2016 which is the primary contributor to the decline in other non-interest income.

Non-Interest Expense

The following table describes the components of non-interest expense for the six-month periods ended June 30, 2016 and 2015:

For the periods ended June 30, 2016 and 2015, total non-interest expense was $6.1 million and $5.6 million, respectively, an increase of $435 thousand or 8%.  Salaries and employee benefits increased by $129 thousand or 4% due to normal adjustments to salaries and post-retirement benefits.  Full-time equivalent employees totaled 84.2 and 88.2 at June 30, 2016 and 2015, respectively.  There was a $79 thousand or 87% increase in telephone and postal due to changes in communications services that generated a refund in the 2015 period and raised costs in the 2016 period.  Occupancy and equipment increased $28 thousand or 4% due primarily to risk management and security software costs.  The other category increased $127 thousand or 35% due to nonrecurring expenses within director fees and sundry losses.  Operations expense increased by $21 thousand or 15% due to expenses associated with new banking products.  Professional and legal costs increased by $11 thousand or 6% due to an increase in consulting fees.  Assessment and insurance decreased by $12 thousand or 7% due to decreases in insurance premiums. 

For the six month periods ended June 30, 2016 and 2015, the effective tax rate decreased to 30.5% from 32.9% due primarily to $150 thousand in solar credits recorded in the second quarter of 2016.

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, Fresno and Woodlake, 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.

SOURCE Valley Commerce Bancorp

Related Links

http://www.valleybusinessbank.net