PVBK Pacific Valley Bancorp (PK)

Pacific Valley Bank (OTCBB: PVBK) announced the third quarter 2010 net loss of ($1.17) million or ($0.36) basic loss per share as compared to the same quarter last year when we reported a net loss of ($1.24) million or ($0.50) basic loss per share. On a year-to-date basis, Pacific Valley Bank's loss through September 30, 2010 was ($1.66) million or ($0.51) basic loss per share as compared to the same period ending September 30, 2009 of a loss of ($3.67) million or ($1.50) basic loss per share.

Third Quarter 2010 Financial Highlights: Return on Average Assets (ROA) -- (2.68%) Net Interest Margin (NIM) -- 4.54% Efficiency Ratio -- 78.05%

The loss in the current quarter is largely attributable to continued efforts to work through credit quality issues that include a provision for loan losses of $1.60 million as compared to the same quarter last year when provisions for loan losses were $1.30 million. Provisions for loan losses on a year-to-date basis for the period ending September 30, 2010 were $3.20 million as compared to the same period last year when they were $2.88 million. "The Bank continues to make sustained progress in its diligence to improve credit quality," stated David Warner, chief executive officer. "We're staying actively engaged with our borrowers through these challenging economic times. This is the time to work through the issues as we continue on the path of conservative growth in our loan portfolio."

The core earnings (interest income plus non-interest income less interest expense) of the bank continue to improve as compared to the prior year. During the current third quarter, core earnings of the Bank were $1.94 million as compared to $1.69 million for the same quarter a year ago. The core earnings on a year-to-date basis for the period ending September 30, 2010 were $6.13 million as compared to the same period last year when they were $4.98 million. "The improvement in our core earnings over same quarter 2009 reflects our ongoing efforts to manage expenses while increasing our operational efficiencies," stated David Warner. "We are fortunate to have a loyal client base who considers Pacific Valley Bank as their primary financial institution." Pacific Valley Bank continues to expand its cash management and international services to meet the continued demands of the market.

Balance Sheet and Loan Quality Review:

Total assets were $172.17 million at September 30, 2010, which is a decrease of $16.35 million from the same quarter last year when assets were $188.52 million. Our gross loans at September 30, 2010 were $120.66 million, which is a decrease of $21.11 million as compared to $141.77 million at September 30, 2009.

The allowance for loan losses as of September 30, 2010 was $4.50 million, which is an increase from the same quarter last year when it was $3.01 million. The percentage of allowance for loan losses to gross loans outstanding at September 30, 2010 was 3.73% as compared to 2.13% 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 $5.02 million as of September 30, 2010 as compared to $11.00 million as of December 31, 2009 and $11.56 million as of the same quarter a year ago. There were no delinquent loans past due from 30 - 89 days for the quarter ending September 30, 2010; however this compares to $1.17 million at December 31, 2009 and $5.50 million as of September 30, 2009. The net charge-offs for the quarter ending September 30, 2010 were $563,000 as compared to $1.84 million at the quarter ended December 31, 2009 and $688,000 for the same quarter a year ago. The improving trends in loan quality are also reflected in our non-performing asset ratio, which was 3.22% for the quarter ending September 30, 2010 as compared to 6.26% at December 31, 2009 and 6.56% for the same quarter a year ago.

"Pacific Valley Bank is fortunate to be part of one of the most robust agricultural markets in the world," noted David Warner. "We are in a good competitive position to pursue new deposit and credit relationships within the agricultural sector; and those owner-operated businesses and professionals located within our primary geographical markets."

The most significant component of our current liquidity position is reflected in our Fed Funds Sold balance, which totals $37.39 million as of September 30, 2010 as compared to $23.07 million as of September 30, 2009. The Bank's liquidity position is in a good position to support future loan growth. Deposits remain stable at $151.45 million as of September 30, 2010 as compared to $153.37 million in the same quarter a year ago.

Stockholders' equity at September 30, 2010 was $17.88 million as compared to $18.02 million from the quarter ending September 30, 2009. At September 30, 2010 our Tier 1 capital to average assets ratio was 10.04% and our total risk-based capital ratio was 14.58% as compared to 9.41% and 12.87% as of September 30, 2009, respectively.

Review of Operations:

Interest income for quarter ending September 30, 2010 was $2.32 million as compared to $2.51 million in the same quarter a year ago and on a year-to-date basis through September 30, 2010 the interest income was $7.17 million as compared to the same period last year ending September 30, 2009 when it was $7.50 million. Interest expense during the current quarter was $447,300 as compared to $873,700 in the same quarter a year ago and on a year-to-date basis through September 30, 2010 the interest expense was $1.42 million as compared to the same period last year ending September 30, 2009 when it was $2.68 million. Our interest costs continue to benefit from a low rate environment that is gradually repricing deposits into current lower rates. The Bank achieved net interest margins of 4.32% and 4.54% for the current quarter and nine month period ending September 30, 2010, respectively. This compares to 3.56% and 3.56% in the same periods ending in 2009.

Non-interest expenses during the current quarter totaled $1.52 million and $4.59 million for the nine months ending September 30, 2010. This compares to $1.63 million and $5.76 million for the same periods ending in 2009. 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. The efficiency ratio, which measures the amount of overhead expense per net interest income plus noninterest income, was 78.05% for the third quarter of this year and 74.82% for year-to-date September 30, 2010 as compared to 96.44% and 115.83% for the same periods ending in 2009.

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. We believe that it is likely the regulatory agencies will replace the Consent Order with a Memorandum of Understanding.

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