Pacific Valley Bank Announces Third Quarter 2013 Financial Results

Marketwired

SALINAS, CA--(Marketwired - Oct 25, 2013) - Pacific Valley Bank (OTCQB: PVBK) announced its unaudited third quarter 2013 net income of $411,000, or $0.11 basic earnings per share, as compared to the same quarter last year when we reported net income of $677,000, or $0.19 basic earnings per share. Our net income for the first nine months of 2013 was $1,496,000, or $0.42 basic earnings per share, as compared to the first nine months of 2012 for which we reported net income of $1,422,000, or $0.40 basic earnings per share. As previously announced, in recognition of our solid earnings over the past few years, we distributed a 10% stock dividend to our shareholders on May 31, 2013. Consequently, per share amounts for all periods presented have been retroactively adjusted for the effect of the dividend.

Third Quarter 2013 Financial Highlights (annualized):
Return on Average Assets (ROAA): 0.83%
Net Interest Margin (NIM): 4.05%
Efficiency Ratio: 80.02%

Year-to-Date 2013 Financial Highlights (annualized):
Return on Average Assets (ROAA): 1.07%
Net Interest Margin (NIM): 4.39%
Efficiency Ratio: 76.43%

"We are pleased to be able to report stable earnings for the third quarter and first nine months of 2013 -- and this quarter marks our 12th consecutive quarter of profitability," stated David B. Warner, President and Chief Executive Officer. "Despite the sustained soft economy in which we continue to operate, we successfully expanded and deepened our customer relationships within the communities we serve -- driving 'double-digit' year-over-year percentage growth in total assets, deposits and loans. All of this speaks well for responsibly building the long-term value of our franchise and enabled us to achieve a 9% year-over-year increase in net interest income, the key revenue driver for the Bank. More specifically, in comparison to the prior year, interest income generated by organic loan growth has outpaced the pressure placed on our interest rate margins by the low-rate environment in which we continue to operate. Equally important, thus far in 2013, the overall asset quality of our portfolio has mitigated the need for us to recognize additional loan loss reserves. Despite strong year-over-year deposit growth, our funding costs have declined slightly -- primarily due to a combination of favorable changes in our deposit mix and the current interest rate environment. On a year-over-year basis, operating expenses have risen 10%, driven in part by director compensation that we believe will serve us well for the long term. Additionally, but to a slightly lesser extent, we have experienced an overall increase in the cost of doing business, principally due to a combination of asset growth and increased regulatory compliance requirements. Capital ratios remain very strong and we continue to be well positioned with funds for additional lending." Mr. Warner continued, "Pacific Valley Bank's Board of Directors would again like to recognize the support of our loyal shareholders, valued customers, and dedicated employees for their contributions to our success as a leading community bank in our home market of Monterey County."

Balance Sheet and Loan Quality Review:
Total assets were $203.9 million at September 30, 2013, which is an increase of $26.9 million from the same period last year when assets were $177.0 million. Our gross loans at September 30, 2013 were $155.0 million, which is an increase of $17.4 million as compared to $137.6 million at September 30, 2012. 

The allowance for loan losses as of September 30, 2013 was $3.4 million, which is nominally lower than the same period last year when it was $3.6 million. The percentage of allowance for loan losses to gross loans outstanding at September 30, 2013 was 2.21% as compared to 2.60% at September 30, 2012. The allowance for loan loss ratio has gradually been trending down since the same quarter last year due to net charge-offs of measured impairments and an overall improvement in loan quality.

A significant component of our current liquidity position is reflected in our excess balances held at the Federal Reserve, which totaled $33.9 million as of September 30, 2013, and which is $7.7 million higher than the $26.2 million reported as of September 30, 2012. The Bank's liquidity is in a solid position and continues to be available to support future loan growth. Deposits moved higher to $180.3 million as of September 30, 2013, as compared to $155.3 million at September 30, 2012. 

Stockholders' equity at September 30, 2013 was $22.7 million as compared to $20.8 million for the period ending September 30, 2012. At September 30, 2013 our Tier 1 capital to average assets ratio was 11.50% as compared to 11.83% as of September 30, 2012.

Review of Operations:
The core earnings of the Bank are measured by the interest income plus non-interest income less interest expense. During the third quarter 2013, core earnings were $2.1 million, which is slightly lower than the same quarter a year ago. The core earnings for the nine month period ending September 30, 2013 were $6.4 million as compared to the same period ending September 30, 2012 when the core earnings were $5.9 million.

Interest income for the quarter ending September 30, 2013 was $2.2 million which is slightly higher versus the same quarter a year ago. The interest income for the nine month period ending September 30, 2013 was $6.7 million as compared to the same period ending September 30, 2012 when it was $6.3 million. The increase in interest income for the nine month period of $0.4 million is due in large part to the recognition of interest income from a previously classified nonaccrual status loan that was paid off during the first quarter of 2013. This allowed for the recognition as interest income of just under $0.3 million of prior interest payments that were previously applied to principal. Interest expense during the current quarter was $0.2 million which is slightly lower than the same quarter a year ago. The interest expense for the nine month period ending September 30, 2013 was $0.7 million as compared to the same period ending September 30, 2012 when it was $0.8 million. Our interest costs continue to trend nominally lower, as over the past few years we have been able to gradually re-price maturing deposits into current lower market rates. The Bank achieved net interest margins of 4.05% and 4.49% for the quarter-ending periods September 30, 2013 and September 30, 2012, respectively. On a year-to-date basis, the Bank achieved net interest margins of 4.39% and 4.59% for the nine month periods ending September 30, 2013 and September 30, 2012, respectively. 

There were no provisions for loan losses in the third quarter or first nine months of 2013 nor were there any in the comparable periods of 2012. 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. Despite the fact that no loan loss provisions were recorded for the first nine months of 2013 and 2012, the Bank continually monitors its loan portfolio and it is therefore possible that loss provisioning may be required in future periods due to either loan growth or changes in asset quality, or some combination of both.

Non-interest expenses totaled $1.6 million for the third quarter ending September 30, 2013. This compares to $1.4 million for the same period ending in 2012. Non-interest expenses for the nine month period ending September 30, 2013 were $4.9 million as compared to the same nine month period ending September 30, 2012 when they were $4.4 million. The efficiency ratio, which measures the amount of overhead expense per net interest income plus noninterest income, was 80.02% for the third quarter of 2013 as compared to 66.80% for the same period ending in 2012. On a year-to-date basis, the Bank's efficiency ratios were 76.43% and 75.16% for the nine month periods ending September 30, 2013 and September 30, 2012, respectively.

   
FINANCIAL HIGHLIGHTS (UNAUDITED)  
                   
Assets   9/30/2012     9/30/2013     Y-O-Y Change  
Cash and Due From Bank   $ 5,350     $ 12,064     $ 6,714  
Investment Securities     7,906       3,424       (4,482 )
Federal Funds Sold     26,210       33,860       7,650  
Loans Outstanding     137,619       154,999       17,380  
Loan Loss Reserve     (3,582 )     (3,433 )     149  
Other Assets     3,475       3,017       (458 )
Total Assets   $ 176,978     $ 203,931     $ 26,953  
                         
Liabilities and Capital   9/30/2012     9/30/2013     Y-O-Y Change  
Deposits   $ 155,349     $ 180,343     $ 24,994  
Borrowings     -       -       -  
Other Liabilities     871       938       67  
Equity     20,758       22,650       1,892  
Total Liaibilities and Capital   $ 176,978     $ 203,931     $ 26,953  
                         
    Three Months Ended  
Income Statement   9/30/2012     9/30/2013     Q-O-Q Change  
Interest Income   $ 2,160     $ 2,196     $ 36  
Interest Expense     254       244       (10 )
Net Interest Income     1,906       1,952       46  
Provision for Loan Losses     -       -       -  
Other Income     177       105       (72 )
Operating Expenses     1,391       1,646       255  
Tax     15       -       (15 )
Net Income   $ 677     $ 411     $ (266 )
                         
    Nine Months Ended  
Income Statement   9/30/2012     9/30/2013     Y-O-Y Change  
Interest Income   $ 6,315     $ 6,716     $ 401  
Interest Expense     780       709       (71 )
Net Interest Income     5,535       6,007       472  
Provision for Loan Losses     -       -       -  
Other Income     342       343       1  
Operating Expenses     4,417       4,853       436  
Tax     38       1       (37 )
Net Income   $ 1,422     $ 1,496     $ 74  
                         
Ratios   9/30/2012     9/30/2013      
Tier One Leverage Ratio     11.83 %     11.50 %    
YTD Return on Average Assets     1.14 %     1.07 %    
YTD Return on Average Equity     9.52 %     9.11 %    
YTD Earnings Per Share (Basic)   $ 0.40     $ 0.42      
Book Value Per Share (Basic)   $ 5.77     $ 6.30      
YTD Efficiency Ratio     75.16 %     76.43 %    
                     

Note: Amounts in the above presentation are shown in thousands, except for per share amounts and financial ratios.  Additionally, per share amounts for all periods presented have been retroactively adjusted for the effect of the Bank's 10% stock dividend that was distributed on May 31, 2013. 

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 contain 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 Pacific Valley Bank annual reports which are available on our website.

Contact:

David B. Warner, CEO
(831) 771-4323
Robert J. Lampert, CFO
(831) 771-4317
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