Valley Commerce Bancorp Reports Earnings For Second Quarter 2015

VISALIA, Calif., July 24, 2015 /PRNewswire/ -- Valley Commerce Bancorp, (OTCBB: VCBP), a bank holding company and the parent company of Valley Business Bank, today announced second quarter 2015 net income of $911 thousand or $0.31 per diluted share.  This compared to earnings of $1.5 million, or $0.52 per diluted share, for the second quarter of 2014.  For the six months ended June 30, 2015, the Company reported net income of $1.7 million, or $0.58 per diluted share.  This compared to earnings of $2.3 million, or $0.77 per diluted share, for the six months ended June 30, 2014.

Allan W. Stone, President and Chief Executive Officer, remarked, "The difference between our 2014 and 2015 earnings is a $1 million reversal of loan loss reserves recorded in the second quarter of 2014.  That single adjustment accounted for about $0.6 million of 2014 earnings.  Our ongoing collection efforts may result in additional and potentially significant loan loss recoveries in future periods, but our primary focus remains on diversifying and growing our core sources of revenue."

Stone added, "I am pleased to report we've achieved solid top line growth in a competitive market.  Over the past year, our loan portfolio increased by $23.5 million or 9 percent and our deposit portfolio increased by $23.9 million or 7 percent.  Just as importantly, our loan portfolio credit quality remains excellent and our cost of funds remains very favorable.  Our core earnings remain strong and in the second quarter, we increased our cash dividend by 25 percent to $.10 per common share.  We are very excited about our bank's future and we've set growth and revenue goals that will continue to produce strong results for our shareholders.  Our growth objective in the coming years is to surpass the $500 million total asset threshold and in 2015 we are making the investments needed to reach that goal.  We're pleased to have recently added experienced, enthusiastic business development officers to our team.  We've also restructured our branch and customer service operations to grow our noninterest income, improve our operational risk management, and continue providing excellent service to our customers.  I believe our shareholders can feel confident that their investment will continue to gain value in the years ahead."

Selected financial information is presented in the following table:

Loans

Net loans were $270.5 million at June 30, 2015, an increase of $6.0 million or 2% from the $247.1 million at December 31, 2014.  The increase occurred primarily in commercial and real estate-mortgage loans.  Average gross loans were $266.5 million for the six months ended June 30, 2015 and $244.8 million for the six months ended June 30, 2014, an increase of $21.7 million or 9%.

Net loans at June 30, 2015, December 31, 2014, and June 30, 2014 are summarized in the following table:

Investment Securities

Available-for-sale investment securities were $74.7 million at June 30, 2015 compared to $68.1 million at December 31, 2014, an increase of $6.6 million or 10%.  There were $16.0 million of investment securities purchased during the six months ended June 30, 2015 which were offset by normal repayments, maturities, calls, and sales.  Gain on sale of investment securities was $59 thousand for the first six months of 2015 compared to $155 thousand for the same period in 2014.

The amortized cost and estimated fair value of available-for-sale investment securities at the dates indicated consisted of the following:

Deposits

Total deposits decreased by $5.6 million or 2%, from $359.4 million at December 31, 2014 to $353.8 million at June 30, 2015.  The decrease was anticipated and was primarily attributable to one customer that had significant transitory deposits arising from normal business activities.  There were decreases of $13.8 million or 9% in interest bearing deposits and $1.0 million or 2% in time deposits offset by a $9 million or 6% increase in noninterest bearing deposits.   Time deposits $250 thousand and above increased $424 thousand or 29% from $14.7 million at December 31, 2014 to $15.1 million at June 30, 2015.  Average total deposits were $364.9 million for the six months ended June 30, 2015, a $27.2 million or 8% increase from the $337.7 million in average total deposits for the six months ended June 30, 2014.

Total deposits at June 30, 2015, December 31, 2014, and June 30, 2014 are summarized in the following table:

Shareholders' Equity

Total shareholders' equity was $44.7 million at June 30, 2015, an increase of $535 thousand or 1%, from the $44.2 million at December 31, 2014.  The increase was due to earnings of $1.7 million offset by dividends and other factors.  During the six months ended June 30, 2015 and 2014 the Company paid common stock cash dividends totaling $523 thousand and $393 thousand, respectively.  Common stock repurchased during the six months ended June 30, 2015 totaled $306 thousand at an average of $15.72 per share.  Common stock repurchased during the year ended December 31, 2014 totaled $351 thousand at an average of $14.57 per share.  Shareholders' equity was also impacted in 2015 by a $512 thousand decrease in accumulated other comprehensive income that resulted primarily from decreased values of investment securities caused by changes in interest rates. 

Asset Quality

Nonperforming assets at June 30, 2015 and December 31, 2014 were comprised of nine nonaccrual loans spread among five customer relationships with an aggregate balance of $2.8 million.  The Company had no other real estate owned at June 30, 2015 or December 31, 2014.

Impaired loans totaled $5.6 million at June 30, 2015 and December 31, 2014 and were comprised of the nonaccrual loans included in nonperforming assets and certain accruing loans whose terms have been modified from the original loan agreement.

A summary of nonperforming assets is set forth below:

The following table summarizes the changes in the allowance for loan and lease losses (ALLL) for the periods indicated:

The Company's ALLL was $3.3 million at December 31, 2014 and $3.4 million at June 30, 2015 due to $77 thousand in net recoveries during the six months ending June 30, 2015.  The ALLL represented 1.24% of total loans at June 30, 2015 compared to 1.23% at December 31, 2014.  The ALLL percentage increased due to the recoveries noted offset by increased loan volume.  In determining the amount of ALLL required at June 30, 2015, management analyzed the composition and strength of the Company's loan portfolio, including borrower performance trends, the potential for losses in loans classified nonperforming, the potential for loan loss recoveries, and the results of recent credit reviews.

Net Interest Income and Net Interest Margin

The following table presents the Company's average balance sheet, including weighted average yields and rates on a taxable-equivalent basis, for the six-month periods indicated:

Net interest income for the periods ended June 30, 2015 and 2014 was $7.4 million and $7.0 million, respectively, an increase of $362 thousand or 5%.  Net interest income increased during the 2015 period due to increases in the average balances of loans and investment securities.  In addition the cost of interest bearing liabilities was reduced due to the elimination of junior subordinated deferrable interest debentures in the fourth quarter of 2014.  These improvements were partially offset by declines in the yields earned on loans and investment securities.

Net interest margin was 4.14% and 4.17% for the periods ended June 30, 2015 and 2014, a 3 basis point (bps) decrease.  Average loan yield was 5.19% and 5.36% for the six months ended June 30, 2015 and 2014, respectively, a decrease of 17 bps, which reflected the competitive environment for high quality loan customers.  This decrease was offset by a 6 bps decrease in the average rate paid on deposits and other interest-bearing liabilities that reflected weak competition for deposits as well as a reduction in average time deposits.  The Company was also benefited by a $9.2 million or 6 percent increase in average noninterest-bearing deposits during the first half of the year.  These funds were primarily deployed into average loans and investment securities which favorably impacted the Company's net interest income and net income.

Non-Interest Income

The following table describes the components of non-interest income for the six-month periods ended June 30, 2015 and 2014:

For the period ended June 30, 2015, non-interest income totaled $828 thousand, an increase of $11 thousand or 1% from the $817 thousand recorded during the first half of 2014.  The improvement reflected increases in service charges, earnings on cash surrender value of the life insurance, and FHLB dividends included in the other category.  These were offset by decreases in gains on sales of investment securities, and mortgage loan underwriting fees.  The Company discontinued underwriting mortgage loans in February 2015. 

Non-Interest Expense

The following table describes the components of non-interest expense for the six-month periods ended June 30, 2015 and 2014:

For the periods ended June 30, 2015 and 2014, total non-interest expense was $5.6 million and $5.3 million, respectively, an increase of $365 thousand or 7%.  Salaries and employee benefits increased by $303 thousand or 10% due to new hires related to business development and risk management.  Occupancy and equipment increased $69 thousand or 10% due primarily to risk management and security software costs.  The other category increased $43 thousand or 13% due to internal appraisal costs.  Assessment and insurance increased by $10 thousand or 6% due to increased deposit volume.  These were offset by a $61 thousand or 40% decrease in telephone and postal due to changes to communications services that generated a refund in 2015.

For the six month periods ended June 30, 2015 and 2014 the effective tax rate decreased to 32.9% from 35.7% due primarily to a change in the ratio of non-taxable income as a percent of net income.  This made tax exempt income from investments a higher percentage of total pretax income in 2015.

OTHER INFORMATION:  Valley Commerce Bancorp stock trades on NASDAQ's Over the Counter Bulletin Board under the symbol VCBP.  Valley Business Bank, the wholly owned subsidiary of Valley Commerce Bancorp, is a commercial bank that commenced operations in 1996.  Valley Business Bank operates through Business Banking Centers in Visalia, Tulare, Fresno and Woodlake, California.  Additional information about Valley Business Bank is available from the Bank's website at http://www.valleybusinessbank.net.

FORWARD-LOOKING STATEMENTS:  In addition to historical information, this release includes forward-looking statements, which reflect management's current expectations for Valley Commerce Bancorp's future financial results, business prospects and business developments.  Management's expectations for Valley Commerce Bancorp's future necessarily involve assumptions, estimates and the evaluation of risks and uncertainties. Various factors could cause actual events or results to differ materially from those expectations.  The forward-looking statements contained herein represent management's expectations as of the date of this release. Valley Commerce Bancorp undertakes no obligation to release publicly the results of any revisions to the forward-looking statements included herein to reflect events or circumstances after today, or to reflect the occurrence of unanticipated events.  For those statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

SOURCE Valley Commerce Bancorp

Related Links

https://www.valleybusinessbank.net