SALINAS, CA , the Salinas Valley's only locally-owned and
managed community bank, today released its 2007 financial
results.
Summary of Pacific Valley Bank's 2007 Financial Results
The Bank closed the year 2007 with an asset base of $160.8
million, an increase of $52.8 million (48%) over December 31, 2006
assets of $108.0 million. This was the 13th consecutive quarter of
growth for the Bank. Our growth in 2007 exceeded management's
expectations, reflecting our continued penetration of local
markets.
Loans, net of deferred loan fees, ended the year at $107.8
million, an increase of $33.9 million (46%) over December 31, 2006
loans of $73.9 million. Total deposits ended the year at $139.2
million, an increase of $54.3 million (64%) over December 31, 2006
deposits of $84.9 million.
As planned and primarily due to the investment in our new
branches, the Bank ended the year with a net loss of $2.5 million
or $1.30 per share. 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 offices 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. "We will now focus on utilizing our expanded branch network
to fuel our continued growth and reach core profitability. We
believe that the special brand of responsive, relationship banking
service we provide is a major factor in our 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 $2,499,100, or $1.30 per share, and $735,800,
or $0.45 per share, for the years ended December 31, 2007 and 2006,
respectively. While our 2007 loss was significantly greater than
that in 2006, a considerable portion of this loss was expected due
to the opening of our new branches and the related increased
occupancy and staffing costs. In addition, while increased expenses
were expected by Management, our non-interest expenses were
actually less than budgeted. Increases in interest expense also
contributed significantly to our loss.
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 year ended December 31, 2007 was
$4,695,300, an increase of 40% compared to $3,356,000 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 $150.8 million during the year.
However, interest expense was higher than expected, and our net
interest margin was 3.84% for 2007, compared to 4.04% for 2006, a
20 bp decrease.
Interest Income
Interest income for the years ended December 31, 2007 and 2006
totaled $8,828,200 and $5,870,100, 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, market rates during 2007 were higher than the
average rates in the same period of 2006. Our average yield on
earning assets was 7.24% for 2007, compared to 7.07% for 2006,
reflecting a 17 bp increase.
Interest Expense
Interest expense for the years ended December 31, 2007 and 2006
totaled $4,132,900 and $2,514,100, respectively. While this
increase is partially due to the general increase in interest
rates, more importantly the increase was due to our deposit growth
and a larger portion of our new activity was in higher interest
products than expected. Our average cost of funds was 4.49% for
2007, compared to 4.23% for 2006, a 26 bp increase.
Allowance for Loan Losses
We made provisions of $436,300 and $362,400 to the allowance for
loan losses during the years ended December 31, 2007 and 2006,
respectively. The allowance as of December 31, 2007 and 2006 was
1.20% and 1.18% of total loans, respectively.
Non-interest Income
Non-interest income for the years ended December 31, 2007 and
2006 was $71,600 and $35,600, 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 $6,828,900 for the year ending December
31, 2007, as compared to $3,764,200 for the same period in 2006. A
substantial portion 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 $3,927,900 and $2,145,900 for the years ended December 31,
2007 and 2006, respectively. Operating expenses for occupancy and
equipment are also up in 2007 because of the new branch openings;
these were $1,077,100 and $458,800 for the years ended December 31,
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
final branch opening in our expansion strategy 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 December 31, 2007. Note the
significant increase in both Commercial and Agriculture loans which
reflect the Banks emphasis during the year on these market
groups.
Dec. 31, 2007 Dec. 31, 2006
------------- -------------
Commercial $ 11,691,300 $ 2,322,000
Real estate - mortgage 7,970,000 8,996,200
Real estate - commercial 55,728,900 48,387,200
Real estate - construction and land 13,388,500 11,518,600
Consumer and other 1,493,500 511,700
Agriculture 17,308,700 2,049,700
------------- -------------
107,580,900 73,785,400
Deferred loan origination fees, net 183,900 73,200
Allowance for loan losses (1,297,700) (861,400)
------------- -------------
$ 106,467,100 $ 72,997,200
============= =============
Fed Funds Sold and Investments
Fed Funds sold was $20.5 million and $14.2 million as of
December 31, 2007 and 2006, respectively. We also had $2.3 million
in interest-bearing deposits (CDs) at other banks as of December
31, 2006.
At December 31, 2007 and 2006 our security portfolio consisted
of the following securities. None of these securities will be
directly effected by the sub-prime problems being discovered at
other institutions.
December 31, 2007 December 31, 2006
--------------------- --------------------
Market Value Avg Yld Market Value Avg Yld
------------ ------- ------------ -------
US Government agencies $ 6,497,800 5.46% $ 6,061,300 5.24%
Mortgage-backed securities 14,204,200 5.51% 6,428,300 5.10%
SBA pools 1,837,800 5.32% - -
------------ ------- ------------ -------
$ 22,539,800 5.48% $ 12,489,600 5.17%
============ ======= ============ =======
Deposits and Other Borrowings
The following table illustrates the growth in deposits from
December 31, 2006 through December 31, 2007:
Dec. 31, 2007 Dec. 31, 2006
------------- -------------
Non-interest bearing $ 25,933,900 $ 17,298,100
Savings $ 2,972,700 $ 3,247,000
Money market 56,730,600 39,756,200
NOW accounts 5,611,900 3,982,600
Time, $100,000 or more 14,096,300 9,566,200
Other time 33,857,000 11,095,500
------------- -------------
$ 139,202,400 $ 84,945,600
============= =============
Based on our total assets at December 31, 2007, we have
available credit at the Federal Home Loan Bank in the amount of
$24.1 million that we could use if loan demand out paced our
deposit growth. Primarily to initiate this line, in 2005 we drew
down a total of $3.0 million which has a rate of 4.30% and matures
on September 19, 2008. No further draws have been made since. 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 December 31, 2007, none
of these lines have been drawn upon.
Capital
Shareholders' equity at December 31, 2007 totaled $17,779,900
compared to $19,552,700 at December 31, 2006. Exercised Stock
Options provided additional Capital, but that increase was offset
by the losses incurred in 2007. We continue to be "Well
Capitalized" under the prompt corrective action regulatory
framework.
The capital ratios at December 31, 2007 and 2006 are as
follows:
Regulatory
Minimum Ratio For Regulatory December 31,
Well-Capitalized Minimum Ratio 2007 2006
---------------- ------------- ---- ----
Tier I Capital (to Average
Assets) 5.00% 4.00% 11.45% 18.65%
Tier I Capital (to Risk
Weighted Assets) 6.00% 4.00% 15.96% 28.41%
Total Capital (to Risk
Weighted Assets) 10.00% 8.00% 17.13% 29.66%
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"
(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,
results of our accelerated growth strategy, loan production,
balance sheet management, changing 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)
December 31, December 31,
2007 2006
-------------- --------------
ASSETS
Cash and due from banks $ 6,414,900 $ 2,494,400
Federal funds sold 20,465,000 14,230,000
Investment securities available for sale
(market value) 22,539,800 13,267,400
Interest-bearing deposits held with other
banks - 2,368,400
Loans net of deferred loan fees 107,764,800 73,858,600
Allowance for loan losses (1,297,700) (861,400)
Bank premises and equipment, net 2,564,900 1,248,700
Accrued interest receivable and other
assets 2,332,800 1,367,000
-------------- --------------
Total assets $ 160,784,500 $ 107,973,100
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits 139,202,400 84,945,600
Other borrowings 3,000,000 3,000,000
Accrued interest payable and other
liabilities 802,200 474,800
-------------- --------------
Total liabilities 143,004,600 88,420,400
-------------- --------------
Shareholders' equity
Common stock 22,764,900 22,256,600
Accumulated deficit (5,169,500) (2,670,400)
Unrealized gain on securities available
for sale 184,500 (33,500)
-------------- --------------
Total shareholders' equity 17,779,900 19,552,700
-------------- --------------
Total liabilities and shareholders'
equity $ 160,784,500 $ 107,973,100
============== ==============
SUMMARY STATEMENT OF OPERATIONS
(Unaudited)
Year Ended
December 31
2007 2006
Interest income $ 8,828,200 $ 5,870,100
Interest expense 4,132,900 2,514,100
------------ ------------
Net interest income 4,695,300 3,356,000
Provision for loan losses 436,300 362,400
Non-interest income 71,600 35,600
Non-interest expense 6,828,900 3,764,200
------------ ------------
Loss before provision for income taxes (2,498,300) (735,000)
Provision for income taxes 800 800
------------ ------------
Net loss $ (2,499,100) $ (735,800)
============ ============
Basic loss per share $ (1.30) $ (0.45)
============ ============
CONTACTS: Ben Tinkey 831-771-4306 President & Chief
Executive Officer Frank H. Lippman 831-771-4317 Executive Vice
President & Chief Financial Officer
Pacific Valley Bancorp (PK) (USOTC:PVBK)
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