PVBK Pacific Valley Bancorp (PK)

Pacific Valley Bank Announces Fourth Quarter 2013 Financial Results

SALINAS, CA--(Marketwired - Feb 3, 2014) - Pacific Valley Bank (OTCQB: PVBK) announced its unaudited fourth quarter 2013 net income of $4,059,000, or $1.13 basic earnings per share, as compared to the same quarter last year when we reported net income of $484,000, or $0.13 basic earnings per share. Our net income for the full year 2013 was $5,555,000, or $1.54 basic earnings per share, as compared to the full year 2012 for which we reported net income of $1,906,000, or $0.53 basic earnings per share. The fourth quarter of 2013 included a net tax benefit of $3,830,000 driven principally by the full reversal of the valuation allowance recorded against the Bank's deferred tax assets.

Fourth Quarter 2013 Financial Highlights (annualized):

• Return on Average Assets (ROAA): 7.91%
• Net Interest Margin (NIM): 3.86%
• Efficiency Ratio: 78.68%

Full Year 2013 Financial Highlights (annualized):

• Return on Average Assets (ROAA): 2.90%
• Net Interest Margin (NIM): 4.25%
• Efficiency Ratio: 76.97%

"This has been another record year in our Bank's history, with continued strong loan and deposit growth. The fourth quarter of 2013 marks our 13th 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 -- and Pacific Valley Bank continues to deliver as a prominent and respected institution in our home Monterey County markets. Our most valued customers are speaking highly of our services in the community, contributing to the growth of our 'brand.' Our ability to generate solid growth in total assets, deposits and loans throughout the year enabled us to achieve a 6% 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. Based on a combination of loan growth, economic factors, and our overall assessment of the asset quality within our portfolio, we recorded a $200,000 loan loss provision in the fourth quarter. 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 9%, driven in part by both director and employee compensation that we believe will be a benefit to us 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, "We have recently strengthened our team of business development officers by adding experienced local bankers in Monterey and Salinas. This investment in personnel, we believe, will serve the bank well in expanding and deepening our lending relationships throughout Monterey County."

Balance Sheet Review: Total assets were $212.2 million at December 31, 2013, which is an increase of $18.2 million from the same period last year when assets were $194.0 million. Our gross loans at December 31, 2013 were $160.2 million, which is an increase of $8.7 million as compared to $151.5 million at December 31, 2012. During the fourth quarter of 2013, our asset growth included $3.8 million attributable to the impact of the full reversal of the valuation allowance recorded against the Bank's deferred tax assets. The Bank periodically evaluates all available evidence to determine if its future tax benefits will more likely than not be realized.

The allowance for loan losses as of December 31, 2013 was $3.4 million, which is generally unchanged from the same period last year. The percentage of allowance for loan losses to gross loans outstanding at December 31, 2013 was 2.13% as compared to 2.24% at December 31, 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 overall loan growth.

A significant component of our current liquidity position is reflected in cash and cash equivalents, which totaled $45.6 million as of December 31, 2013, and which is $10.1 million higher than the $35.5 million reported as of December 31, 2012. The Bank's liquidity is in a solid position and continues to be available to support future loan growth. Deposits moved higher to $184.8 million as of December 31, 2013, as compared to $172.1 million at December 31, 2012. 

Stockholders' equity at December 31, 2013 was $26.7 million as compared to $21.2 million for the period ending December 31, 2012. At December 31, 2013 our Tier 1 capital to average assets ratio was 11.54% as compared to 11.57% as of December 31, 2012.

Review of Operations: Interest income for the quarter ending December 31, 2013 was $2.2 million which is slightly lower versus the same quarter a year ago. The interest income for the full year ending December 31, 2013 was $8.9 million as compared to the same period ending December 31, 2012 when it was $8.5 million. The increase in interest income for the full year 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 $0.3 million which is generally unchanged from the same quarter a year ago. The interest expense for the full year ending December 31, 2013 was $1.0 million which is slightly lower in comparison to the same period ending December 31, 2012. The Bank achieved net interest margins of 3.86% and 4.34% for the quarter-ending periods December 31, 2013 and December 31, 2012, respectively. On a year-to-date basis, the Bank achieved net interest margins of 4.25% and 4.51% for the full year periods ending December 31, 2013 and December 31, 2012, respectively. 

There was a $0.2 million provision for loan loss recorded in the fourth quarter and full year of 2013, versus no such provisions in the comparable periods of 2012. During the fourth quarter of 2013, the Bank's methodology identified 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. The Bank continually monitors its loan portfolio and it is therefore possible that additional 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 fourth quarter ending December 31, 2013. This compares to $1.5 million for the same period ending in 2012. Non-interest expenses for the full year ending December 31, 2013 were $6.4 million as compared to the full year ending December 31, 2012 when they were $5.9 million. The efficiency ratio, which measures the amount of overhead expense per net interest income plus noninterest income, was 78.68% for the fourth quarter of 2013 as compared to 75.00% for the same period ending in 2012. On a year-to-date basis, the Bank's efficiency ratios were 76.97% and 75.12% for the full years ending December 31, 2013 and December 31, 2012, respectively.

FINANCIAL HIGHLIGHTS (UNAUDITED)
(in thousands, except per share and ratio data)
Assets		12/31/2013				9/30/2013				12/31/2012
Cash and Cash Equivalents		$	45,580			$	45,924			$	35,536
Investment Securities			3,118				3,424				7,030
Loans Outstanding			160,236				154,999				151,545
Loan Loss Reserve			(3,411	)			(3,433	)			(3,397	)
Other Assets			6,720				3,017				3,290
Total Assets		$	212,243			$	203,931			$	194,004

Liabilities and Capital		12/31/2013				9/30/2013				12/31/2012
Deposits		$	184,803			$	180,343			$	172,066
Borrowings			-				-				-
Other Liabilities			740				938				734
Equity			26,700				22,650				21,204
Total Liabilities and Capital		$	212,243			$	203,931			$	194,004
Tier One Leverage Ratio			11.54	%			11.50	%			11.57	%
Book Value Per Share (Basic)		$	7.42			$	6.30			$	5.89

		Three Months Ended												Full-Year Ended
Income Statement		12/31/2013				9/30/2013				12/31/2012				12/31/2013				12/31/2012
Interest Income		$	2,173			$	2,196			$	2,181			$	8,889			$	8,495
Interest Expense			251				244				253				960				1,034
Net Interest Income			1,922				1,952				1,928				7,929				7,461
Provision for Loan Losses			200				-				-				200				-
Other Income			90				105				77				433				419
Operating Expenses			1,583				1,646				1,504				6,436				5,919
Tax Expense (Benefit)			(3,830	)			-				17				(3,829	)			55
Net Income		$	4,059			$	411			$	484			$	5,555			$	1,906
Annualized Return on Average Assets			7.91	%			0.83	%			1.11	%			2.90	%			1.12	%
Annualized Return on Average Equity			70.07	%			7.27	%			9.18	%			25.02	%			9.43	%
Annualized Net Interest Margin			3.86	%			4.05	%			4.34	%			4.25	%			4.51	%
Earnings Per Share (Basic)		$	1.13			$	0.11			$	0.13			$	1.54			$	0.53
Efficiency Ratio			78.68	%			80.02	%			75.00	%			76.97	%			75.12	%

Note: 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. 

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