PVBK Pacific Valley Bancorp (PK)

Pacific Valley Bank (OTCBB: PVBK) announced the second quarter 2011 net income of $255,000 or $0.08 basic income per share as compared to the same quarter last year when we reported a net loss of ($814,000) or ($0.25) basic loss per share.

Second Quarter 2011 Financial Highlights: Return on Average Assets (ROA): 0.60% Net Interest Margin (NIM): 4.09% Efficiency Ratio: 77.13%

"This marks our third sequential quarterly profit. Our results this quarter were impacted by a one-time gain on sale of other real estate in the amount of $210,000 and a write-down of $40,000 on other real estate owned, which combined contributed to an increase of $170,000 to our income before tax," stated David B. Warner, President and Chief Executive Officer. "We continue to focus on the development of our cash management products that are designed to improve the ease and efficiency of managing business payment processing activities for our clients."

Balance Sheet and Loan Quality Review:

Total assets were $172.74 million at June 30, 2011, which is a decrease of $1.49 million from the same period last year when assets were $174.22 million. Our gross loans at June 30, 2011 were $124.53 million, which is a decrease of $405,000 as compared to $124.94 million at June 30, 2010. Our loan totals are lower this past year as compared to prior years, but during this current year we have remained flat in our loan totals. This is occurring as we continue to focus on the elimination of problem loans from our portfolio at the same time as new loan volume is being added to our loan totals.

The allowance for loan losses as of June 30, 2011 was $3.66 million, which is an increase from the same quarter last year when it was $3.46 million. The percentage of allowance for loan losses to gross loans outstanding at June 30, 2011 was 2.94% as compared to 2.77% in the same quarter last year.

The allowance for loan losses is measured using such factors that take into account historical loss migration within the portfolio, 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. Some of the key qualitative factors credit administration monitors include; 1) non-accruing loans, which were $6.46 million as of June 30, 2011 as compared to $6.85 million as of June 30, 2010; 2) loans past due 30 days or greater, which were $858,000 as of June 30, 2011 as compared to $884,000 at June 30, 2010; 3) net charge-offs, which were $831,000 for the period ending June 30, 2011 as compared to $1.81 million for the period ending June 30, 2010; and 4) non-performing assets ratio, which was 3.98% as of June 30, 2011 as compared to 4.06% at June 30, 2010. These qualitative factors indicate continued improvement of the loan quality metrics.

A significant component of our current liquidity position is reflected in our Fed Funds Sold balance, which totals $33.23 million as of June 30, 2011 as compared to $33.11 million as of June 30, 2010. The Bank's liquidity is well positioned to support future loan growth. Deposits remain stable at $151.00 million as of June 30, 2011 as compared to $150.24 million in the same quarter a year ago.

Stockholders' equity at June 30, 2011 was $18.83 million as compared to $19.08 million from the quarter ending June 30, 2010. At June 30, 2011 our Tier 1 capital to average assets ratio was 10.98% and our total risk-based capital ratio was 14.92% as compared to 11.07% and 15.09% as of June 30, 2010, respectively.

Review of Operations:

The interest income for the quarter ending June 30, 2011 was $2.00 million as compared to $2.36 million in the same quarter a year ago. Interest expense during the current quarter was $325,000 as compared to $469,000 in the same quarter a year ago. Our interest costs continue to benefit from a low rate environment that is repricing deposits lower, but at the same time interest income is trending lower as loans reprice lower, causing pressure on the net interest margin. The net interest margin for the second quarter of this year was 4.09%. This is a decline from the same period a year ago when the net interest margin was 4.61%.

The provision for loan losses was $150,000 for the current quarter as compared to $1.35 million for the same quarter last year. The provision for loan losses was deemed appropriate based on our analysis of our portfolio.

Non-interest expenses during the current quarter totaled $1.48 million, which compares favorably to $1.53 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, which are expected to remain above normal. The efficiency ratio, which measures the amount of overhead expense per net interest income plus noninterest income, was 77.13% for the second quarter of this year, which is slightly higher as compared to 73.31% for the same quarter last year.

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, our ability to maintain adequate levels of capital and 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, 2010. 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