SALINAS, CA , the Salinas Valley's only locally owned and
managed community bank, today released its unaudited 2008 first
quarter financial results.
Summary of Pacific Valley Bank's 1st Quarter 2008 Financial
Results
The Bank closed the first quarter of 2008 with an asset base of
$174.9 million, an increase of $14.1 million over December 31, 2007
assets of $160.8 million. Loans, net of deferred loan fees,
increased from $107.8 million at December 31, 2007 to $132.8
million at March 31, 2008, a growth of 23%. This $25 million growth
in the first quarter is 75% of the total loan growth for last year.
Total deposits showed a growth of $8.1 million in the same period
with deposits increasing from $139.2 million at year end 2007 to
$147.3 million at March 31, 2008.
The net loss for the first three months of 2008 was $478,400 or
$0.25 per share, an increase over the net loss of $424,900 or $0.22
per share in the same period in 2007, but a decrease over the net
loss of $495,100 in the fourth quarter of last year. The 2008 first
quarter loss primarily is due to the rapid decrease in interest
rates during the first quarter, which reduced our net interest
income considerably, and the expenses of our new branches which
opened in 2007. Now that we have our planned branch footprint, we
expect our non-interest expenses have stabilized going forward and
we are adjusting our operations to meet the challenges of reduced
interest income in this declining rate environment.
"I am pleased to announce that we again showed remarkable
growth," said President Ben Tinkey. "While these are trying times
for many in the financial industry, we have been able to continue
to increase our market share and exceed our growth objectives for
the period. We are especially 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 in September 2004 and has approximately 1100 shareholders.
The Bank now has five branches with two located in Salinas, and one
each in King City, Hollister and Monterey.
Management's Discussion and Analysis
Result of Operations
Our net loss was $478,400, or $0.25 per share, and $424,900, or
$0.22 per share, for the three-month periods ended March 31, 2008
and 2007, respectively. While our net interest income increased in
2008 compared to the same period in 2007, this increase was
considerably lower than planned due to the rapid decrease in
interest rates during the first quarter of 2008. While rates for
interest income repriced almost immediately during the quarter as
each decline in rates was announced, the rates for over half of our
deposits are fixed until their maturity so that the decline in
interest expenses is lagging considerably. In addition, because of
the substantial loan growth in the first quarter of 2008, our
provision for loan losses was $212,500 higher in the first quarter
of 2008 compared to the same period in 2007. And finally, our
non-interest expenses were $204,300 higher in the first quarter of
2008 because of the new branches that were added since that period
in 2007. However, we believe that our non-interest expenses have
stabilized and are consistent with our planned growth.
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, 2008 was
$1,436,600, an increase of 31% compared to $1,099,100 for the same
period in 2007. Net interest income was higher in 2008 primarily
due to an increase in the volume of interest earning assets. The
Net Interest Margin has decreased from 4.18% for the first quarter
of 2007 to 3.71% for the first quarter of 2008. This 47 bp decrease
represents approximately a $183,000 negative effect on the net
interest income for the $155.7 million average earning assets in
the first quarter of 2008.
Interest Income
Interest income for the three months ended March 31, 2008 and
2007 totaled $2,559,400 and $1,951,900, respectively. As discussed
above, while earning assets have grown significantly, the large
decline in interest rates in the first quarter of 2008 has
negatively affected our net interest margin.
Interest Expense
Interest expense for the three months ended March 31, 2008 and
2007 totaled $1,122,800 and $852,800, respectively. This increase
is primarily due to the significant increase in interest-bearing
deposits from $77.9 million to $126.3 million, but also is less
than expected due to the decrease in interest rates discussed
above. About 40% of our interest-bearing deposits are tied directly
to the Fed Funds rate, and interest expense for those deposits has
decreased in line with the Fed Funds rate decreases. However,
nearly half of our deposits have fixed rates that will not decrease
until maturity, normally within one year or less. Therefore, the
decrease in interest rates will continue to affect these deposits
throughout 2008.
Allowance for Loan Losses
We made provisions of $222,000 to the allowance for loan losses
during the three months ended March 31, 2008, compared to only
$9,500 for the same period in 2007. The significant amount added in
2008 is directly related to the extraordinary growth in loans
during the quarter. The allowance as of March 31, 2008 and 2007 was
1.14% and 1.15% of total loans, respectively.
Non-interest Income
Non-interest income for the three months ended March 31, 2008
and 2007 was $40,000 and $14,200, respectively. Non-interest income
is primarily comprised of account service fees, and while it is
growing in 2008, it is still not a major contributor to our
income.
Non-interest Expense
Non-interest expense was $1,732,200 for the three-month period
ending March 31, 2008, as compared to $1,527,900 for the same
period in 2007. Salary and employee benefits have grown as staff
has been added for the new branches and to provide the service
level we have established; these were $968,300 and $902,500 for the
three-month periods ended March 31, 2008 and 2007, respectively.
Operating expenses for occupancy and equipment are also up in 2008
because of the new branch openings; these were $302,100 and
$201,800 for the three-month periods ended March 31, 2008 and 2007,
respectively. Other operating expenses have also increased as we
have grown. All of these costs were consistent with management's
expectations for both 2008 and 2007, and management believes that
the small increase in expenses, considering the large expansion
that was accomplished in 2007, shows that we have been able to
control our operating expenses.
Balance Sheet Management
Loan Related Data
The following table illustrates the growth in loans from
December 31, 2007 through March 31, 2008:
March 31, 2008 Dec. 31, 2007
-------------- --------------
Commercial $ 14,223,300 $ 11,691,300
Real estate - mortgage 8,525,100 7,970,000
Real estate - commercial 76,786,800 55,728,900
Real estate - construction and land 17,166,000 13,388,500
Consumer and other 2,324,500 1,493,400
Agriculture 16,708,300 17,308,700
-------------- --------------
135,734,000 107,580,800
Deferred loan origination fees, net 432,700 184,000
Allowance for loan losses (1,519,700) (1,297,700)
-------------- --------------
$ 134,647,000 $ 106,467,100
============== ==============
Fed Funds Sold and Investments
Fed Funds sold was $10,510,000 and $15,875,000 as of March 31,
2008 and 2007, respectively. This decrease is generally due to the
increase in loans in 2008.
At March 31, 2008 and 2007 our security portfolio consisted
of:
March 31, 2008 March 31, 2007
-------------------- --------------------
Market Market
Value Avg Yld Value Avg Yld
----------- ------- ----------- -------
US Government agencies $ 4,868,500 5.60% $ 5,288,600 5.24%
Mortgage-backed securities 13,744,800 5.39% 7,910,600 5.19%
SBA pools 1,750,800 4.60% 2,173,000 6.82%
----------- -----------
Total 20,364,100 5.37% 15,372,200 5.42%
Deposits and Other Borrowings
The following table illustrates the growth in deposits from
December 31, 2007 through March 31, 2008:
March 31, 2008 Dec. 31, 2007
-------------- --------------
Non-interest bearing $ 21,038,400 $ 25,933,900
Savings $ 5,562,000 2,972,700
Money market 54,743,800 56,730,600
NOW accounts 5,580,200 5,611,900
Time, $100,000 or more 17,336,700 14,096,300
Other time 43,028,600 33,857,000
-------------- --------------
$ 147,289,700 $ 139,202,400
============== ==============
In addition to these deposits, we have a line of credit at the
Federal Home Loan Bank in the amount of $24.1 million that we could
use if loan demand outpaced our deposit growth. As of March 31,
2008, we had drawn down a total of $9.3 million on the line that
has an average rate of 3.24%. Funds borrowed on this line are
collateralized by loans pledged from our portfolio.
Capital
Shareholders' equity at March 31, 2008 totaled $17,458,300
compared to $19,251,800 at March 31, 2007. There have been limited
additions to capital due to exercised stock options and gains on
securities held for sale, but the primary impact on capital has
been the accumulated deficit. We continue to be "Well Capitalized"
under the prompt corrective action regulatory framework.
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 who are from Monterey
County. We completed a second stock offering on May 5, 2007 raising
over $8.8 million in additional capital. The bank currently has two
offices in Salinas and an office in King City, Hollister and
Monterey.
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,
2008 2007
-------------- --------------
ASSETS
Cash and due from banks $ 8,082,500 $ 6,414,900
Federal funds sold 10,510,000 20,465,000
Investment securities available for sale 20,364,100 22,539,800
Loans net of deferred loan fees 132,815,900 107,764,800
Allowance for loan losses (1,519,700) (1,297,700)
Bank premises and equipment, net (Note 3) 2,698,200 2,564,900
Accrued interest receivable and other assets 1,940,100 2,332,800
-------------- --------------
Total assets $ 174,891,100 $ 160,784,500
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits 147,289,700 139,202,400
Other borrowings 9,300,000 3,000,000
Accrued interest payable and other
liabilities 843,100 878,100
-------------- --------------
Total liabilities 157,432,800 143,080,500
-------------- --------------
Shareholders' equity
Common stock 22,828,600 22,764,900
Accumulated deficit (5,647,900) (5,169,500)
Unrealized gain on securities available
for sale (net of income tax expense) 277,600 108,600
-------------- --------------
Total shareholders' equity 17,458,300 17,704,000
-------------- --------------
Total liabilities and shareholders'
equity $ 174,891,100 $ 160,784,500
============== ==============
SUMMARY STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
2008 2007
Interest income 2,559,400 1,951,900
Interest expense 1,122,800 852,800
-------------- --------------
Net interest income 1,436,600 1,099,100
Provision for loan losses 222,000 9,500
Non-interest income 40,000 14,200
Non-interest expense 1,732,200 1,527,900
-------------- --------------
Loss before provision for income taxes (477,600) (424,100)
Provision for income taxes 800 800
-------------- --------------
Net loss $ (478,400) $ (424,900)
============== ==============
Basic loss per share $ (0.25) $ (0.22)
CONTACTS: Ben Tinkey President & Chief Executive Officer
831-771-4306 Frank H. Lippman Executive Vice President & Chief
Financial Officer 831-771-4317
Pacific Valley Bancorp (PK) (USOTC:PVBK)
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