PVBK Pacific Valley Bancorp (PK)

Pacific Valley Bank (OTCBB: PVBK) released its unaudited 2008 third quarter financial results.

Summary of Pacific Valley Bank's Financial Results for the 3rd Quarter and Nine Months ended September 30, 2008

The Bank reported total assets of $193,130,000 at September 30, 2008, an increase of $1,101,000 from June 30, 2008. Loans totaled $160,539,700 at quarter end, an increase of $2,416,300 from June 30, 2008. Deposits totaled $151,142,100, an increase of $929,700 from June 30, 2008.

Since December 31, 2007, assets have increased by $32,345,900 (20.1%). Included in this change is a 49% increase in loans of $52,774,900, which was funded by a decrease in cash and investments of $16,382,000, an increase in deposits of $11,939,700 and an increase in borrowings of $21,300,000.

The Bank incurred a net loss of $67,700 in the third quarter of 2008, which was an improvement of $873,700 over the third quarter loss of $941,400 in 2007. The loss per share was $0.04 as compared to $0.49 in the third quarter of 2007. The significant decrease in the net loss for the third quarter was due to an improvement in net interest income of $509,300, a reduction of $123,400 in the provision for loan losses, an improvement in noninterest income due mostly to a sale of SBA loans that generated $200,200 in non-interest income, and staff reductions that helped to stabilize overall non-interest expenses at prior year levels.

For the nine-month periods ended September 30, 2008 and 2007, the net loss was $1,097,900, or $0.57 per share, and $2,004,100, or $1.04 per share, respectively. The $906,200 improvement in the net loss resulted from a $1,393,200 increase in net interest income; a $316,900 increase in noninterest income; offset by a $661,300 increase in the provision for loan losses and an increase of $142,600 in noninterest expenses. Total shareholder's equity decreased from $17.7 million at year end 2007 to $16.8 million as of September 30, 2008. At September 30, 2008, our Tier 1 capital to total assets ratio was 8.53% and our total risk-based capital ratio was 10.87% compared to 11.5% and 17.2%, respectively, at December 31, 2007.

Recent Developments

Following the conclusion of an examination conducted by the California Department of Financial Institutions ("CDFI") Commissioner and the FDIC in the second quarter of 2008, the Bank entered into an Order on November 7, 2008 with the Commissioner pursuant to Financial Code Section 1913 and with the FDIC pursuant to Section 8(b) of the Federal Deposit Insurance Act (the "Order"). The Order requires the Bank, within certain timeframes, to retain qualified management and maintain a Board of Directors that is acceptable to the CDFI and FDIC; increase the Board's participation in the affairs of the Bank; improve the oversight of the Audit Committee over the audit functions; achieve and maintain a Tier 1 Capital to Average Assets level at no lower than 9 percent by February 2009; develop a Plan to meet and maintain Total Risk-Based Capital to Risk-Weighted Assets at no lower than 10 percent; increase the allowance for loan and leases losses by $345,000 and maintain an adequate loan loss reserve; eliminate all loan assets classified as "Loss"; reduce loan assets classified as "Substandard" to not more than 20 percent of Tier 1 Capital; strengthen Lending Policies and develop a written policy on Commercial Real Estate lending; approve a three-year Strategic Plan, comprehensive budget and profit plan; assure compliance with all applicable laws and regulations; develop a liquidity and funds management policy, enhance additional polices and procedures, and provide periodic reports of our progress to the FDIC and CDFI. As part of the Order, the Bank has also agreed not to pay cash dividends without the prior approval of the FDIC and CDFI.

Ben Tinkey, President and Chief Executive Officer, indicated that in response to the examination and resultant Order, the Board and management have taken numerous steps to address the issues raised and to further strengthen the Bank. "We have significantly reduced overhead and we are in the process of further decreasing operating expenses by closing our Hollister Branch by December 31, 2008; we are enhancing our policies and procedures; and we are strengthening our executive management team. We are pleased that Mr. Robert Stanberry joined the Bank in September to serve as the Chief Financial Officer. Mr. Stanberry was previously the CFO of Central Coast Bancorp/Community Bank of Central California."

Mr. Tinkey highlighted, "A key step underway is to increase the Bank's capital. The Board has approved and received regulatory approval for a $3.8 million private placement of common stock. Other steps taken include reconfiguring the makeup of the Board of Directors; correcting loan documentation deficiencies; and improving the Bank's allowance for loan loss methodology. The allowance for loan losses at September 30, 2008 already includes the increase in the allowance for loan losses of $345,000 required under the Order." Mr. Tinkey said, "These corrective actions will strengthen the safety and soundness of the Bank's operations, increase profitability and enhance the Bank's contribution to the communities we serve."

"The Bank is also taking full advantage of the recently announced increases in FDIC insurance coverage on customer deposits," Mr. Tinkey added. "We are communicating with both our existing customers, as well as potential new customers, on the benefits of the increased FDIC insurance for interest bearing accounts up to $250,000 and for unlimited amounts for non-interest bearing accounts. This recently increased FDIC insurance coverage will be beneficial to our business customers."

About Pacific Valley Bank

Pacific Valley Bank is a California banking corporation that commenced operations on September 14, 2004. We offer our services from five locations; our headquarters office and Main Street office which are both located in Salinas, California, our office located in King City, our office located in Hollister, and our office located in Monterey. We provide a broad range of banking products and services, including credit and deposit services to our targeted client base of small and medium sized businesses, agriculture related businesses, non-profit organizations, professionals and individuals in Monterey, Santa Cruz and San Benito Counties. For more information, visit www.pacificvalleybank.com.

Forward-Looking Statements

Statements concerning future performance, developments or events, expectations for growth and income forecasts, and any other guidance on future periods, constitute forward-looking statements 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, competitive pressure in the banking industry, balance sheet management, net interest margin variations, the ability to control costs and expenses, changes in the interest rate environment and financial policies of the United States government and general economic conditions. The Bank disclaims any obligation to update any such factors.

Contact: Rob Stanberry 831-771-4317