PVBK Pacific Valley Bancorp (PK)

Pacific Valley Bank (OTCBB: PVBK) announced the first quarter 2010 net income of $331,800 and an increase in capital to $19.84 million. "The bank is experiencing early signs of stability and strength from the measured actions taken last year to reduce expenses, increase capital and improve loan quality," stated David Warner, Chief Executive Officer. The achievements during the first quarter go beyond positive earnings, and include the receipt of $3.00 million of new capital through a private placement offering resulting in the issuance of 428,572 shares of common stock at a price of $7.00 per share. Steady progress was made to improve our loan quality as indicated by the following key ratios; delinquent loans at 0.68% of gross loans and nonaccrual loans at 6.37% as compared to 0.84% and 7.91% for the prior quarter, respectively.

During the first quarter 2010 we earned net income of $331,800 or $0.11 per share as compared to the same quarter last year when we reported a net loss of ($1.22) million or ($0.52) per share. Contributing to the current quarter income were one-time benefits of $59,600 in recovered interest income and $77,000 in gain on sale of other real estate owned. These one-time benefits contributed $136,600 of the $331,800 net income in the first quarter. "Some of the strength behind our numbers is the result of improving net interest margins, benefiting from lower borrowing costs, and a stabilized overhead expense rate," stated Greg Spear, Chief Financial Officer.

Balance Sheet and Loan Quality Review:

Total assets were $174.42 million at March 31, 2010, which is a decrease of $8.01 million from the same quarter last year when assets were $182.43 million. Our gross loans at March 31, 2010 were $130.30 million, which is a decrease of $20.06 million as compared to $150.36 million at March 31, 2009. "Our strategy continues to be to deleverage the balance sheet and isolate the effects of problem loans, which is currently going as planned. This allows us to more effectively focus our energy on the development of our mission to create prosperity in our community through excellence in banking," stated David Warner.

The allowance for loan losses as of March 31, 2010 was $3.27 million, which reflects a decrease from the same quarter last year when it was $4.05 million. The percentage of allowance for loan losses to gross loans outstanding at March 31, 2010 was 2.52% as compared to 2.70% in the same quarter last year. "The decrease in our allowance for loan losses is due to moderate improvement in our problem loans, charge-offs that have reduced impaired loans to their net realizable value and some improvement in our delinquent and nonaccrual loan totals," stated Tom Van der Ploeg, Chief Credit Officer. "We are cautiously optimistic and hopeful that the current signs of gradual improvement in the economic stress encountered by many of our borrowers will be a sign of more positive trends in the future."

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 all other loans based on various analytics including the trends in non-accruing loans, delinquent loans and net charge-offs. The key trends in our qualitative measures include non-accruing loans, which were $8.27 million as of March 31, 2010 as compared to $11.00 million as of December 31, 2009 and $2.42 million as of the same quarter a year ago. The level of delinquent loans that were past due from 30 - 89 days have been steadily improving as reflected by $887,000 for the quarter ending March 31, 2010 as compared to $1.17 million at December 31, 2009 and $5.55 million as of March 31, 2009. The net charge-offs for the quarter ending March 31, 2010 were $644,300 as compared to $1.84 million at the quarter ended December 31, 2009 and a recovery of $2,000 for the same quarter a year ago.

The liquidity position is partly reflected in our Fed Funds Sold balance, which totaled $25.94 million as of March 31, 2010 as compared to $7.64 million as of March 31, 2009. The Bank's liquidity remains in a solid position and is largely funded with local customer deposits. Deposits remain stable at $143.32 million as of March 31, 2010 as compared to $144.81 million in the same quarter a year ago. The slight reduction in deposit totals in the current quarter occurred as a result of $2.80 million of brokered deposits that exited the bank since the same quarter last year.

Stockholders' equity at March 31, 2010 was $19.84 million as compared to $18.55 million from the quarter ending March 31, 2009. During the first quarter, additional capital was infused with a private placement transaction that contributed $3.00 million in gross capital. At March 31, 2010 our Tier 1 capital to average assets ratio was 11.20% and our total risk-based capital ratio was 15.14% as compared to 9.83% and 12.68% as of March 31, 2009, respectively.

Review of Operations:

The core earnings (interest income plus non-interest income less interest expense) of the Bank were $2.13 million for the current quarter as compared to $1.78 million for the same quarter a year ago. Included in the core earnings for the first quarter 2010 is $136,600 of one-time benefits.

The interest income for quarter ending March 31, 2010 was $2.49 million as compared to $2.60 million in the same quarter a year ago. Interest expense during the current quarter was $504,000 as compared to $896,000 in the same quarter a year ago. Our interest costs continue to trend downward as maturing deposits and borrowings reprice from higher rates into current lower rates. The net interest margin for the first quarter of this year was 4.76%, which is an improvement over 3.88% from the same period a year ago.

Provisions for loan losses were $250,000 for the current quarter as compared to $1.39 million for the same quarter last year. The reduction in the provision for loan losses was deemed appropriate based on our analysis of the risks in our loan portfolio by consistently applying our methodology for measuring the allowance for loan losses and evidence of a gradual improvement in our loan quality metrics.

Non-interest expenses during the current quarter totaled $1.55 million, which compares favorably to $1.61 million in the same quarter a year ago. Most of our expenses have leveled off and are expected to remain fairly stable. We do anticipate that a few of our expenses will run above historical levels, which include legal expenses related to loan workouts and FDIC insurance premiums. The efficiency ratio, which measures the amount of overhead expense per net interest income plus noninterest income, was 72.65% for the first quarter of this year, an improving trend as compared to 90.46% for the same quarter last year.

Progress on Regulatory Agreement:

On November 24, 2009, Pacific Valley Bank entered into a formal agreement with the Federal Deposit Insurance Corporation ('FDIC') and the State of California Department of Financial Institutions ("DFI"). The agreement contained target dates to achieve certain objectives as disclosed in our 8K filing on November 30, 2009, which is available on our website (www.pacificvalleybank.com) under 'Regulatory Filings.' Some of the key provisions of the Consent Order require us to retain qualified management, continue board oversight, maintain Tier 1 Leverage Capital above 9.00% and total risk-based capital above 11.00%, review the appropriateness of the allowance for loan losses, reduce problem loans to no more than 35% of Tier 1 Capital plus the allowance for loan losses, develop a written plan to reduce delinquent loans, implement written lending and collection policies, implement a written plan to retain profits and reduce overhead expenses, implement a written three-year strategic plan, eliminate and correct violations of law, develop a comprehensive audit policy, designate the audit committee as responsible for the Consent Order, provide advance notice to public announcements and provide a quarterly progress report to our regulatory agencies. Management believes the Bank is in compliance with many of the provisions of the Consent Order; including the capital level requirements, reduction of problem loans, development of the written plans, continued board oversight, retention of qualified management and board members. Management is committed to ensuring continued progress with compliance of the Consent Order.

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