PVBK Pacific Valley Bancorp (PK)

Pacific Valley Bank (OTCBB: PVBK) announced the second quarter 2010 net loss of ($814,000) or ($0.25) basic loss per share as compared to the same quarter last year when we reported a net loss of ($1.21) million or ($0.49) basic loss per share. Contributing to the current quarter loss was a provision for loan losses of $1.35 million. "We continue to address loan quality issues while at the same time we have achieved new levels of success in the growth of our revenues in relationship to expenses," stated David Warner, Chief Executive Officer. The core earnings (interest income plus non-interest income less interest expense) of the Bank were $2.06 million for the current quarter as compared to $1.51 million for the same quarter a year ago. Included in the core earnings for the second quarter 2010 are $323,500 of one-time benefits from $193,600 in recovered interest income and $130,500 in gain on sale of an SBA loan.

Balance Sheet and Loan Quality Review:

Total assets were $174.22 million at June 30, 2010, which is a decrease of $13.48 million from the same quarter last year when assets were $187.70 million. Our gross loans at June 30, 2010 were $124.93 million, which is a decrease of $22.37 million as compared to $147.30 million at June 30, 2009. "We have reached our desired targets on the balance sheet. The gradual improvement in our local economy is now an opportunity for our sales team to work with prospective local businesses and help them with their cash management and banking needs. We continue to find opportunities to deepen our relationship with our existing customers and the community to demonstrate our commitment to our mission to create prosperity in our community and excellence in banking," stated David Warner.

The allowance for loan losses as of June 30, 2010 was $3.46 million, which is an increase from the same quarter last year when it was $2.40 million. The percentage of allowance for loan losses to gross loans outstanding at June 30, 2010 was 2.77% as compared to 1.63% 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. The key trends in our qualitative measures include non-accruing loans, which were $6.85 million as of June 30, 2010 as compared to $11.00 million as of December 31, 2009 and $11.29 million as of the same quarter a year ago. The level of delinquent loans that were past due from 30 - 89 days was $884,000 for the quarter ending June 30, 2010 as compared to $1.17 million at December 31, 2009 and $9.00 million as of June 30, 2009. The net charge-offs for the quarter ending June 30, 2010 were $1.19 million as compared to $1.84 million at the quarter ended December 31, 2009 and $1.85 million for the same quarter a year ago. The improving trends in loan quality are also reflected in our non-performing asset ratio, which was 4.06% for the quarter ending June 30, 2010 as compared to 6.26% at December 31, 2009 and 6.44% for the same quarter a year ago.

The most significant component of our current liquidity position is reflected in our Fed Funds Sold balance, which totals $33.11 million as of June 30, 2010 as compared to $16.44 million as of June 30, 2009. The Bank's liquidity position is in a good, solid position due to the support of local customer deposits and our deliberate strategy to deleverage the balance sheet. Deposits remain stable at $150.24 million as of June 30, 2010 as compared to $152.38 million in the same quarter a year ago. "One of the benefits of doing business with Pacific Valley Bank is our participation in the FDIC Transaction Account Guarantee Program, which grants unlimited deposit insurance coverage to the Bank's customers' deposits in qualifying checking accounts. The Bank pays an additional deposit insurance premium to the FDIC for this added benefit to our customers," stated David Warner.

Stockholders' equity at June 30, 2010 was $19.08 million as compared to $17.31 million from the quarter ending June 30, 2009. The increase in capital is due largely from the recent private placement transaction that was completed in the first quarter of this year contributing $3.00 million to our capital. At June 30, 2010 our Tier 1 capital to average assets ratio was 11.07% and our total risk-based capital ratio was 15.09% as compared to 9.13% and 12.19% as of June 30, 2009, respectively.

Review of Operations:

The interest income for the quarter ending June 30, 2010 was $2.35 million as compared to $2.39 million in the same quarter a year ago. Interest expense during the current quarter was $468,200 as compared to $915,000 in the same quarter a year ago. Our interest costs continue to benefit from a low rate environment that is gradually repricing deposits into current lower rates. The net interest margin for the second quarter of this year was 4.61%, which benefited from the one-time interest income recovery noted above. This is an improvement over 3.26% from the same period a year ago.

Provisions for loan losses were $1.35 million for the current quarter as compared to $194,600 for the same quarter last year. The provision for loan losses was deemed appropriate based on our analysis of the risks in our loan portfolio.

Non-interest expenses during the current quarter totaled $1.53 million, which compares favorably to $2.53 million in the same quarter a year ago. Most of our expenses are expected to remain level on a go forward basis, with the exception of loan quality related expenses including legal and insurance expenses. In addition, the cost of FDIC insurance premiums are expected to remain above historical levels. The efficiency ratio, which measures the amount of overhead expense per net interest income plus noninterest income, was 74.01% for the second quarter of this year, an improving trend as compared to 167.47% for the same quarter last year.

During the quarter, one of the founding members of our management team and President, Ben Tinkey, resigned to pursue other opportunities. "Mr. Tinkey was a part of Pacific Valley Bank's history and connection with the community and a valued member of the management team," stated David Warner.

Progress on Regulatory Agreement:

On November 24, 2009, in cooperation with our regulatory agencies and without admitting or denying any allegations, Pacific Valley Bank entered into a Consent Order with the Federal Deposit Insurance Corporation ("FDIC") and the State of California Department of Financial Institutions ("DFI"). This Consent Order replaces the previously issued order, removes certain items from the previous order that were properly addressed, and includes new and repeat items that require management and board attention. The Consent Order contains 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