SOURCE: Pacific Valley Bank

April 30, 2007 11:18 ET

Pacific Valley Bank Announces Continued Loan and Deposit Growth in the First Quarter of 2007

SALINAS, CA -- (MARKET WIRE) -- April 30, 2007 -- Pacific Valley Bank (OTCBB: PVBK), the only locally owned and managed community bank serving Monterey and San Benito Counties, today released its unaudited 2007 first quarter financial results.

Summary of Pacific Valley Bank's 1st Quarter 2007 Financial Results

The Bank closed the first quarter of 2007 with an asset base of $114.8 million, an increase of $6.8 million over December 31, 2006 assets of $108.0 million. Contributing to the increase was a net increase in loans and investments. Loans, net of deferred loan fees, increased from $73.9 million at December 31, 2006 to $75.9 million at March 31, 2007, an annualized growth of 11%. Total deposits realized an annualized growth of 33% in the same period with deposits increasing from $84.9 million at year-end 2006 to $91.9 million at March 31, 2007.

The net loss for the first three months of 2007 was $425,000 or $0.22 per share, an increase over the net loss of $171,500 or $0.13 per share in the same period in 2006. The 2007 first quarter loss is larger primarily due to the opening expenses of our new branches in King City and Hollister which opened in December 2006 and January 2007.

"The opening of our new branches in King City and Hollister, as well as the continued support at our Downtown Salinas Branch, has contributed to the significant growth in deposits," said President Ben Tinkey. "More importantly we are pleased with the quality of the new lending relationships we have established. We believe that our ability to deliver the combination of true community banking responsiveness and local decision making is the reason that more and more individuals and businesses are switching to Pacific Valley Bank."

Pacific Valley Bank is a full-service community-based bank organized by local business and community leaders. It opened its doors on September 14, 2004 and has approximately 1300 shareholders. The Bank now has four branches and has announced its intention to open its fifth branch in Monterey on May 7, 2007, at 498 Alvarado Street.

Management's Discussion and Analysis

Result of Operations

Our net loss was $425,000, or $0.22 per share, and $171,500, or $0.13 per share, for the three-month periods ended March 31, 2007 and 2006, respectively. A considerable portion of the expenses in the three-month period ended March 31, 2007 was due to the employee and opening expenses for the two new branches. These expenses were expected by Management, and we anticipate that we will turn a month-to-month profit in the second quarter of 2008.

Net Interest Income

Net interest income, the difference between interest earned on loans and investment securities, and the interest paid on deposits and other borrowings, is the principal component of our earnings. Net interest income for the three months ended March 31, 2007 was $1,099,200, an increase of 79% compared to $613,100 for the same period in 2006. Net interest income was higher in 2007 primarily due to an increase in the volume of interest earning assets and an increase in interest rates. The Net Interest Margin has also increased from 4.15% to 4.21% because of the increase in higher-earning assets and interest rates.

Interest Income

Interest income for the three months ended March 31, 2007 and 2006 totaled $1,951,900 and $1,012,800, respectively. There are two primary drivers that are producing our higher interest income this year compared to last year. The first is the increase in loan balances as we continue to grow. Just as important, the second driver of increased interest income was the general rise in interest rates through the first part of last year. There has been no change in rates since June 30, 2006.

Interest Expense

Interest expense for the three months ended March 31, 2007 and 2006 totaled $852,800 and $399,700, respectively. This increase is primarily due to the significant increase in interest-bearing deposits from $44.9 million to $77.9 million, but also due to the increase in interest rates discussed above. The average rate for interest-bearing liabilities increased from 3.43% for the three months ended March 31, 2006, to 4.53% for the three months ended March 31, 2007.

Allowance for Loan Losses

We made provisions of $9,500 and $53,000 to the allowance for loan losses during the three months ended March 31, 2007 and 2006, respectively. The allowance as of March 31, 2007 and 2006 was 1.15% and 1.23% of total loans, respectively.

Non-interest Income

Non-interest income for the three months ended March 31, 2007 and 2006 was $14,200 and $5,700, respectively. Non-interest income is primarily comprised of account service fees, and is not yet a major contributor to our income.

Non-interest Expense

Non-interest expense was $1,527,900 for the three-month period ending March 31, 2007, as compared to $736,500 for the same period in 2006. Salary and employee benefits has grown as staff has been added for the new branches and to provide the service level we have established; these were $902,500 and $445,500 for the three-month periods ended March 31, 2007 and 2006, respectively. Operating expenses for occupancy and equipment are also up in 2007 because of the new branch openings; these were $201,800 and $67,900 for the three-month periods ended March 31, 2007 and 2006, respectively. Other operating expenses have also increased as we have grown. All of these costs were consistent with management's expectations for both 2007 and 2006.

Balance Sheet Management

Loan Related Data

The following table illustrates the growth in loans from December 31, 2006 through March 31, 2007:

                                           March 31, 2007    Dec. 31, 2006
                                           --------------    -------------

Commercial                                  $   6,386,400    $   2,322,000
Real estate - mortgage                          5,997,400        8,996,200
Real estate - commercial                       49,111,800       48,387,200
Real estate - construction and land            10,944,500       11,518,600
Consumer and other                              1,411,600          511,700
Agriculture                                     1,955,900        2,049,700
                                            -------------    -------------
                                               75,807,600       73,785,400
Deferred loan origination fees, net               108,400           73,200
Allowance for loan losses                        (870,900)        (861,400)
                                            -------------    -------------
                                            $  75,045,100    $  72,997,200
                                            =============    =============
Fed Funds Sold and Investments

Fed Funds sold was $15,875,000 and $21,600,000 as of March 31, 2007 and 2006, respectively. We also had $2,398,800 in interest-bearing deposits (CDs) at other banks as of March 31, 2007.

At March 31, 2007 and 2006 our security portfolio consisted of:


                                March 31, 2007          March 31, 2006
                            ----------------------- -----------------------
                              Market                  Market
                              Value       Avg Yld     Value       Avg Yld
                            ----------- ----------  ----------- ----------

US Government agencies      $ 5,288,600       5.24%   3,924,700       5.18%
Mortgage-backed securities    7,910,600       5.19%   1,935,000       4.85%
SBA pools                     2,173,000       6.82%           -          -

Deposits and Other Borrowings

The following table illustrates the growth in deposits from December 31, 2006 through March 31, 2007:

                                           March 31, 2007    Dec. 31, 2006
                                           --------------    -------------

Non-interest bearing                        $  13,926,400    $  17,298,100

Savings                                     $   2,833,000    $   3,247,000
Money market                                   47,594,500       39,756,200
NOW accounts                                    4,130,300        3,982,600
Time, $100,000 or more                         10,350,900        9,566,200
Other time                                     13,033,700       11,095,500
                                            -------------    -------------

                                            $  91,868,800    $  84,945,600
                                            =============    =============
In addition to these deposits, we have a line of credit at the Federal Home Loan Bank in the amount of $16.2 million that we could use if loan demand out paced our deposit growth. As of March 31, 2007, we had drawn down a total of $3.0 million on the line that has a rate of 4.30% for an original fixed term of three years. Funds borrowed on this line are collateralized by loans pledged from our portfolio.

Capital

Shareholders' equity at March 31, 2007 totaled $19,251,800 compared to $10,622,500 at March 31, 2006. The second stock offering completed in May 2006 added $8.8 million, and exercised stock options provided additional capital. These additions were offset somewhat by the losses in 2006 and first quarter of 2007. We continue to be "Well Capitalized" under the prompt corrective action regulatory framework.

The capital ratios at March 31, 2007 and 2006 are as follows:

                             Regulatory
                           Minimum Ratio
                                For          Regulatory       March 31,
                          Well-Capitalized  Minimum Ratio   2007      2006
                          ----------------  -------------   ----      ----
Tier I Capital
 (to Average Assets)            5.00%           4.00%      17.37%    17.10%
Tier I Capital
 (to Risk Weighted Assets)      6.00%           4.00%      26.32%    25.89%
Total Capital
 (to Risk Weighted Assets)     10.00%           8.00%      27.51%    27.14%
About Pacific Valley Bank

Pacific Valley Bank is a full-service, community-based bank. The bank was organized by local business and community leaders. We opened our doors on September 14, 2004 after raising $12.4 million in capital from over 880 investors, most of whom are from Monterey County. We completed a second stock offering on May 5, 2006 raising over $8.8 million in additional capital. The bank currently has two offices in Salinas and an office in King City and in Hollister. It has announced its intention to open its fifth branch in Monterey on May 7, 2007, at 498 Alvarado Street.

Forward-looking Statements

The financial results reported in this press release are unaudited. Statements concerning future performance, developments or events, expectations for growth and income forecasts, and any other guidance on future periods, constitute "forward-looking statements" (as such term is defined in the Private Securities Litigation Reform Act of 1995) that are subject to a number of risks and uncertainties. Actual results may differ materially from stated expectations. Specific factors include, but are not limited to, loan production, balance sheet management, expanded net interest margin, the ability to control costs and expenses, interest rate changes and financial policies of the United States government, and general economic conditions. Additional information on these and other factors that could affect financial results are included in filings made by the Bank with the Federal Deposit Insurance Corporation. The Bank disclaims any obligation to update any such factors or to publicly announce the results of any revisions to any forward-looking statements contained herein to reflect future events or developments.

                                  PACIFIC VALLEY BANK
                                 SUMMARY BALANCE SHEET
                                      (Unaudited)

                                               March 31,      December 31,
                                                 2007            2006
                                             -------------   -------------
ASSETS
Cash and due from banks                      $   3,005,400   $   2,494,400
Federal funds sold                              15,875,000      14,230,000
Investment securities available
 for sale                                       15,372,200      13,267,400
Interest-bearing deposits held
 with other banks                                2,398,800       2,368,400
Loans net of deferred loan fees                 75,916,000      73,858,600
Allowance for loan losses                         (870,900)       (861,400)
Bank premises and equipment, net
 (Note 3)                                        1,868,400       1,248,700
Accrued interest receivable and
 other assets                                    1,223,600       1,367,000
                                             -------------   -------------
       Total assets                          $ 114,788,500   $ 107,973,100
                                             =============   =============

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits                                        91,868,800      84,945,600
Other borrowings                                 3,000,000       3,000,000
Accrued interest payable and
 other liabilities                                 667,900         474,800
                                             -------------   -------------
       Total liabilities                        95,536,700      88,420,400
                                             -------------   -------------

Shareholders' equity
  Common stock                                  22,385,300      22,256,600
  Accumulated deficit                           (3,095,300)     (2,670,400)
  Unrealized loss on securities
   available for sale                              (38,200)        (33,500)
                                             -------------   -------------
       Total shareholders' equity               19,251,800      19,552,700
                                             -------------   -------------
       Total liabilities and
        shareholders' equity                 $ 114,788,500   $ 107,973,100
                                             =============   =============



                     SUMMARY STATEMENT OF OPERATIONS
                                (Unaudited)


                                                      Three Months Ended
                                                           March 31
                                                       2007        2006

Interest income                                      1,951,900   1,012,800
Interest expense                                       852,800     399,700
                                                    ----------  ----------
Net interest income                                  1,099,100     613,100

Provision for loan losses                                9,500      53,000

Non-interest income                                     14,200       5,700

Non-interest expense                                 1,527,900     736,500
                                                    ----------  ----------

Loss before provision for income taxes                (424,100)   (170,700)
Provision for income taxes                                 800         800
                                                    ----------  ----------
Net loss                                            $ (424,900) $ (171,500)

Basic loss per share                                $    (0.22) $    (0.13)

Contact Information

  • CONTACTS:

    C. Robert Wheeler, Jr.
    831-771-4307
    Chief Executive Officer

    Ben Tinkey
    831-771-4306
    President & Chief Operating Officer

    Frank H. Lippman
    831-771-4317
    Senior Vice President & Chief Financial Officer