PVBK Pacific Valley Bancorp (PK)

Pacific Valley Bank (OTCBB: PVBK) announced fourth quarter 2010 net income of $322,300 or $0.10 basic earnings per share as compared to the same quarter last year when we reported a net loss of ($2.04) million or ($0.81) basic loss per share. On a year-to-date basis, Pacific Valley Bank's net loss for the twelve months ending December 31, 2010 was ($1.33) million or ($0.41) basic loss per share as compared to the same period ending December 31, 2009 of a loss of ($5.71) million or ($2.25) basic loss per share.

Fourth Quarter 2010 Financial Highlights: Return on Average Assets (ROA) -- 0.19% Net Interest Margin (NIM) -- 4.01% Efficiency Ratio -- 81.45%

Year 2010 Financial Highlights: Return on Average Assets (ROA) -- (0.79%) Net Interest Margin (NIM) -- 4.55% Efficiency Ratio -- 76.28%

"The positive earnings in this current quarter marks the second profitable quarter for the year 2010. We anticipated that 2010 would be volatile as we worked hard to transition from a problem loan workout mode to a focus on expanding our products and services and deepening our customer relationships," stated David B. Warner, President and Chief Executive Officer. "We have made significant strides toward strengthening the bank, which includes the recent lifting of the Consent Order by the regulatory agencies."

The core earnings of the bank are measured by the interest income plus non-interest income less interest expense. During the current fourth quarter, core earnings of the Bank were $1.74 million, which is lower by comparison to $1.96 million for the same quarter a year ago. The core earnings on a year-to-date basis for the period ending December 31, 2010 were $7.87 million, which is higher as compared to the same period last year when they were $6.99 million. "Though the year-to-date core earnings were an improvement over the prior year, the recent decline in the fourth quarter core earnings was due in large part to a gradual shrinking of the balance sheet, which contributed to a reduction in the net interest income," stated Mr. Warner.

Balance Sheet and Loan Quality Review:

Total assets were $172.32 million at December 31, 2010, which is a decrease of $8.57 million from the same period last year when assets were $180.88 million. Our gross loans at December 31, 2010 were $129.38 million, which is a decrease of $9.72 million as compared to $139.10 million at December 31, 2009.

The allowance for loan losses as of December 31, 2010 was $4.44 million, which is an increase from the same quarter last year when it was $3.67 million. The percentage of allowance for loan losses to gross loans outstanding at December 31, 2010 was 3.43% as compared to 2.64% in the same quarter last year.

The allowance for loan losses is measured using such factors that take into account current market valuations of our problem loans and qualitative factors for the remaining loans based on various analytics including the trends in non-accruing loans, delinquent loans and net charge-offs. There are four key qualitative factors we monitor as part of our credit administration oversight: 1) non-accruing loans, which were $9.01 million as of December 31, 2010 as compared to $11.00 million as of December 31, 2009; 2) loans past due from 30 - 89 days, which were $962,000 as of December 31, 2010 as compared to $1.17 million at December 31, 2009; 3) net charge-offs, which were $60,800 for the quarter ending December 31, 2010 as compared to $1.84 million for the quarter ending December 31, 2009; and 4) non-performing assets ratio, which was 6.12% as of December 31, 2010 as compared to 6.26% at December 31, 2009. These qualitative factors indicate a level of moderate improvement in loan quality.

The most significant component of our current liquidity position is reflected in our Fed Funds Sold balance, which totals $27.96 million as of December 31, 2010 as compared to $23.04 million as of December 31, 2009. The Bank's liquidity is in a good position to support future loan growth. Deposits remain stable at $151.40 million as of December 31, 2010 as compared to $154.65 million in the same quarter a year ago.

Stockholders' equity at December 31, 2010 was $18.16 million as compared to $16.47 million from the quarter ending December 31, 2009. At December 31, 2010 our Tier 1 capital to average assets ratio was 10.32% and our total risk-based capital ratio was 14.20% as compared to 8.68% and 12.25% as of December 31, 2009, respectively.

Review of Operations:

Interest income for quarter ending December 31, 2010 was $2.11 million as compared to $2.47 million in the same quarter a year ago and on a year-to-date basis through December 31, 2010 the interest income was $9.27 million as compared to the same period last year ending December 31, 2009 when it was $9.94 million. Interest expense during the current quarter was $395,300 as compared to $677,000 in the same quarter a year ago. On a year-to-date basis through December 31, 2010 the interest expense was $1.82 million as compared to the same period last year when it was $3.36 million. Our interest costs continue to benefit from a low rate environment that is allowing us to gradually reprice maturing deposits into current lower rates. The Bank achieved net interest margins of 4.01% and 4.55% for the current quarter and year ending December 31, 2010, respectively. This compares to 3.95% and 3.74% in the same periods ending in 2009.

There were no provisions for loan losses in the current quarter, which compares to $2.49 million for the quarter ending December 31, 2009. The bank's methodology did not identify the need for a provision for loan loss due to the moderate improvement in the credit quality and adequate reserves to cover measured probable losses in our loan portfolio.

Non-interest expenses during the current quarter totaled $1.42 million and $6.01 million for the year ending December 31, 2010. This compares to $1.49 million and $7.32 million for the same periods ending in 2009. The improvement in expenses in 2010 came from steps taken in 2009 to consolidate office space, renegotiate vendor contracts, and reduced insurance costs. In addition, expenses were higher in 2009 due to the $464,000 one-time charge associated with consolidating the headquarters with the downtown Salinas branch. Most of our expenses are expected to remain level on a go forward basis, with the exception of loan quality related expenses. The efficiency ratio, which measures the amount of overhead expense per net interest income plus noninterest income, was 81.45% for the fourth quarter of this year and 76.28% for year-to-date December 31, 2010 as compared to 76.62% and 104.73% for the same periods ending in 2009. The efficiency ratio was improved in 2010 due to lower deposit interest expense, operating expenses and lease related expenses.

Update on Regulatory Agreement:

On January 14, 2010, the Federal Deposit Insurance Corporation ("FDIC") and California Department of Financial Institutions ("DFI") terminated a consent order that was originally put in place November 2009.

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 are 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 and our ability to comply with the regulatory formal agreement with our regulators, our ability to increase capital and manage our 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 as discussed in Pacific Valley Bank's filings with the FDIC. 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 FDIC filing reports of Pacific Valley Bank which are available on our website; including the most recent filing of the Form 10-K for fiscal year ended December 31, 2009. They contain meaningful cautionary language and discussion why actual results may vary from those anticipated by management.

Contacts: David B. Warner CEO (831) 771-4323 Greg B. Spear CFO (831) 771-4317