Published:
Pacific Valley Bank Announces Continued Loan and Deposit Growth in the Third Quarter of 2007
Pacific Valley Bank (OTCBB: PVBK), the Salinas
Valley's only locally-owned and managed community bank, today released its
unaudited 2007 third quarter financial results.
Summary of Pacific Valley Bank's 3rd Quarter 2007 Financial Results
The Bank closed the third quarter of 2007 with an asset base of $141.9
million, an increase of $33.9 million over December 31, 2006 assets of
$108.0 million. This was the 12th consecutive quarter of growth for the
Bank. Contributing to the growth was an increase in loans funded by a
significant increase in deposits, reflecting our continued penetration of
local markets. Our growth through September 2007 has exceeded management's
expectations.
Loans, net of deferred loan fees, increased from $73.9 million at December
31, 2006 to $96.8 million at September 30, 2007, an annualized growth of
41%. Total deposits realized an annualized growth of 55% in the same
period with deposits increasing from $84.9 million at year end 2006 to
$120.0 million at September 30, 2007.
The net loss for the first nine months of 2007 was $2.0 million or $1.04
per share, an increase over the net loss of $483,800 or $0.31 per share in
the same period in 2006. The 2007 loss is larger primarily due to the
opening expenses of our new branches. We have opened four new branches
during the period from July 2006 to May 2007 in Salinas, King City,
Hollister and Monterey. This expansion has increased our employee,
occupancy and equipment expenses, which is consistent with management's
expectations for the implementation of our accelerated growth strategy.
"The opening of our fifth office in downtown Monterey in May caps an
aggressive expansion effort that Pacific Valley Bank has pursued in
response to a variety of market opportunities," said Pacific Valley Bank
President Ben Tinkey. "Our branch expansion has contributed to our strong
deposit growth, and now we can focus on utilizing our expanded branch
network to fuel our growth. We believe that the special brand of
responsive, community banking service we provide is a major factor in our
continued growth in both loans and deposits. We continue to be thankful
for the support shown us by the communities we serve."
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 located with two in Salinas, and one each in King City, Hollister
and Monterey.
Management's Discussion and Analysis
Result of Operations
Our net loss was $2,004,100, or $1.04 per share, and $483,800, or $0.31 per
share, for the nine-month periods ended September 30, 2007 and 2006,
respectively. A considerable portion of the expenses in the nine-month
period ended September 30, 2007 was due to the opening of our new branches
and the related increased occupancy and staffing costs. These expenses
were expected by Management and are part of our accelerated growth
strategy.
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 nine months ended September 30, 2007 was $3,376,600, an
increase of 45% compared to $2,331,100 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, which grew from $103.7 million to $132.7
million during the first nine months of the year. Our Net Interest margin
was 3.93% for the first nine months of 2007, compared to 4.05% for the same
period in 2006, a 12 bp decrease.
Interest Income
Interest income for the nine months ended September 30, 2007 and 2006
totaled $6,278,700 and $4,011,700, respectively. The primary factor
producing our higher interest income this year compared to last year is the
increase in interest-earning assets as we continue to grow. In addition,
rates during the first half of 2007 were higher than the average rates in
the same period of 2006. Our average yield on earning assets was 7.33% for
the first nine months of 2007, compared to 6.98% for the same period in
2006, a 35 bp increase.
Interest Expense
Interest expense for the nine months ended September 30, 2007 and 2006
totaled $2,902,100 and $1,680,600, respectively. This increase is
primarily due to the significant increase in deposits, but also due to the
increase in interest rates discussed above. Our average cost of funds was
4.33% for the first nine months of 2007, compared to 4.14% for the same
period in 2006, a 19 bp increase.
Allowance for Loan Losses
We made provisions of $286,000 and $178,100 to the allowance for loan
losses during the nine months ended September 30, 2007 and 2006,
respectively. The allowance as of September 30, 2007 and 2006 was 1.18%
and 1.20% of total loans, respectively.
Non-interest Income
Non-interest income for the nine months ended September 30, 2007 and 2006
was $50,300 and $21,900, respectively. Non-interest income is primarily
comprised of account service fees, and while growing, is not as yet a major
contributor to our income.
Non-interest Expense
Non-interest expense was $5,144,200 for the nine-month period ending
September 30, 2007, as compared to $2,657,900 for the same period in 2006.
Almost all of the increases in non-interest expenses have been in Salary
and employee benefits, and occupancy and equipment expense, incurred
through our rapid branch expansion. Salary and employee benefits have
grown as staff has been added to provide the service level we have
established at our four new branches; these were $3,075,700 and $1,573,600
for the nine-month periods ended September 30, 2007 and 2006, respectively.
Operating expenses for occupancy and equipment are also up in 2007 because
of the new branch openings; these were $721,500 and $291,900 for the
nine-month periods ended September 30, 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, and
result from the implementation of our accelerated growth strategy. With
the Monterey branch opening it is expected that these expenses will
stabilize, resulting in smaller increases in future quarters.
Balance Sheet Management
Loan Related Data
The following table illustrates the growth in loans by loan type from
December 31, 2006 through September 30, 2007:
Sept. 30, 2007 Dec. 31, 2006
-------------- --------------
Commercial $ 10,610,300 $ 2,322,000
Real estate - mortgage 20,261,800 8,996,200
Real estate - commercial 40,689,100 48,387,200
Real estate - construction and land 13,416,300 11,518,600
Consumer and other 670,400 511,700
Agriculture 10,997,500 2,049,700
-------------- --------------
96,645,400 73,785,400
Deferred loan origination fees, net 150,500 73,200
Allowance for loan losses (1,147,400) (861,400)
-------------- --------------
$ 95,648,500 $ 72,997,200
============== ==============
Fed Funds Sold and Investments
Fed Funds sold was $13.5 million and $22.3 million as of September 30, 2007
and 2006, respectively. We also had $2.3 million in interest-bearing
deposits (CDs) at other banks as of September 30, 2006.
At September 30, 2007 and 2006 our security portfolio consisted of:
September 30, 2007 September 30, 2006
-------------------- --------------------
Avg Avg
Market Value Yld Market Value Yld
------------ ------ ------------ ------
US Government agencies $ 9,200,200 5.52% $ 6,061,300 5.24%
Mortgage-backed securities 11,309,500 5.44% 6,428,300 5.10%
SBA pools 1,931,800 4.72% - -
------------ ------ ------------ ------
$ 22,441,500 5.42% $ 12,489,600 5.17%
============ ====== ============ ======
Deposits and Other Borrowings
The following table illustrates the growth in deposits from December 31,
2006 through September 30, 2007:
Sept. 30, 2007 Dec. 31, 2006
-------------- --------------
Non-interest bearing $ 22,713,000 $ 17,298,100
Savings $ 2,960,000 $ 3,247,000
Money market 53,679,400 39,756,200
NOW accounts 4,348,400 3,982,600
Time, $100,000 or more 13,389,500 9,566,200
Other time 22,936,300 11,095,500
-------------- --------------
$ 120,026,600 $ 84,945,600
============== ==============
Based on our total assets at September 30, 2007, we have a line of credit
at the Federal Home Loan Bank in the amount of $21.3 million that we could
use if loan demand out paced our deposit growth. We have drawn down a
total of $3.0 million of this line which has a rate of 4.30% and matures on
September 19, 2008. Funds borrowed on this line are collateralized by
loans pledged from our portfolio.
We also have uncollateralized lines of credit totaling $4.0 million at our
correspondent banks. As of September 30, 2007, none of these lines have
been drawn upon.
Capital
Shareholders' equity at September 30, 2007 totaled $17,872,100 compared to
$19,519,000 at September 30, 2006. Exercised Stock Options provided
additional Capital, but that increase was offset by the losses incurred in
2006 and 2007. We continue to be "Well Capitalized" under the prompt
corrective action regulatory framework.
The capital ratios at September 30, 2007 and 2006 are as follows:
Regulatory
Minimum Ratio Regulatory
For Well- Minimum September 30,
Capitalized Ratio 2007 2006
---------- --------- --------- ---------
Tier I Capital (to Average
Assets) 5.00% 4.00% 13.69% 21.25%
Tier I Capital (to Risk Weighted
Assets) 6.00% 4.00% 18.51% 34.69%
Total Capital (to Risk Weighted
Assets) 10.00% 8.00% 19.69% 35.91%
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, the current fluctuations in the U.S. and California credit
markets, 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)
September 30, December 31,
2007 2006
-------------- --------------
ASSETS
Cash and due from banks $ 5,741,800 $ 2,494,400
Federal funds sold 13,465,000 14,230,000
Investment securities available for sale
(market value) 22,441,500 13,267,400
Interest-bearing deposits held with other
banks - 2,368,400
Loans net of deferred loan fees 96,795,900 73,858,600
Allowance for loan losses (1,147,400) (861,400)
Bank premises and equipment, net 2,554,800 1,248,700
Accrued interest receivable and other
assets 2,047,900 1,367,000
-------------- --------------
Total assets $ 141,899,500 $ 107,973,100
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits 120,026,600 84,945,600
Other borrowings 3,000,000 3,000,000
Accrued interest payable and other
liabilities 1,000,800 474,800
-------------- --------------
Total liabilities 124,027,400 88,420,400
-------------- --------------
Shareholders' equity
Common stock 22,664,400 22,256,600
Accumulated deficit (4,674,400) (2,670,400)
Unrealized loss on securities
available for sale (117,900) (33,500)
-------------- --------------
Total shareholders' equity 17,872,100 19,552,700
-------------- --------------
Total liabilities and
shareholders' equity $ 141,899,500 $ 107,973,100
============== ==============
SUMMARY STATEMENT OF OPERATIONS
(Unaudited)
Nine Months Ended
September 30
2007 2006
Interest income $ 6,278,700 $ 4,011,700
Interest expense 2,902,100 1,680,600
------------ ------------
Net interest income 3,376,600 2,331,100
Provision for loan losses 286,000 178,100
Non-interest income 50,300 21,900
Non-interest expense 5,144,200 2,657,900
------------ ------------
Loss before provision for income taxes (2,003,300) (483,000)
Provision for income taxes 800 800
------------ ------------
Net loss $ (2,004,100) $ (483,800)
============ ============
Basic loss per share $ (1.04) $ (0.31)
============ ============
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