Valley Commerce Bancorp Reports Earnings For Third Quarter 2015

VISALIA, Calif., Oct. 14, 2015 /PRNewswire/ -- Valley Commerce Bancorp, (OTCBB: VCBP), a bank holding company and the parent company of Valley Business Bank, today announced third quarter 2015 net income of $1.3 million  or $0.43 per diluted share.  This compared to earnings of $930 thousand, or $0.31 per diluted share, for the third quarter of 2014.  For the nine months ended September 30, 2015, the Company reported net income of $3.0 million, or $1.00 per diluted share.  This compared to earnings of $3.2 million, or $1.08 per diluted share, for the nine months ended September 30, 2014.

Allan W. Stone, President and Chief Executive Officer, remarked, "I'm pleased to report favorable earnings for the third quarter of 2015.  We experienced very good loan growth, 12% over the last 12 months, and completed the collection of certain nonperforming loans. At quarter end there were no loans past due.  That shows our continued emphasis on our commitment to maintain quality assets even while experiencing strong growth. Our third quarter earnings are putting us in position to possibly repeat our record earnings of 2014, which included a $1 million reversal of loan loss reserves recorded in the second quarter of 2014 that is not expected to be repeated in 2015.  Going into the final quarter of 2015, we are achieving our revenue goals while maintaining a conservative risk profile.  This is precisely how we want to begin 2016 which will be our 20^th year of operations."

Stone added, "Just about every community bank under $500 million in total assets is announcing plans to grow to that level in the next few years and we are no exception.  The fact is we have built a production and an operations workforce that is capable of growing well beyond $500 million; and we will get there without sacrificing profitability or taking excessive risk – or holding back shareholder benefits.  At the end of the third quarter, we paid a quarterly cash dividend of $.10 per common share, which equates to a very favorable dividend yield, and we continue to repurchase our common stock.  In recent years, we've made a number of investments to enable us to achieve our long term growth and profitability goals.  We can see they are producing results, so this is a very exciting time for our bank."

 Selected financial information is presented in the following table:

Loans

Net loans were $285.9 million at September 30, 2015, an increase of $21.4 million or 8% from the $264.5 million at December 31, 2014.  The increase occurred primarily in commercial and real estate-mortgage loans.  Average gross loans were $270.7 million for the nine months ended September 30, 2015 and $247.6 million for the nine months ended September 30, 2014, an increase of $23.1 million or 9%.

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

Investment Securities

Available-for-sale investment securities were $71.7 million at September 30, 2015 compared to $68.1 million at December 31, 2014, an increase of $3.6 million or 5%.  There were $18.8 million of investment securities purchased during the nine months ended September 30, 2015 which were offset by normal repayments, maturities, calls, and sales.  Gain on sale of investment securities was $140 thousand for the first nine months of 2015 compared to $256 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 $7.7 million or 2%, from $359.4 million at December 31, 2014 to $351.7 million at September 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 $1.3 million or 2% in time deposits offset by a $7.4 million or 5% increase in noninterest bearing deposits.  Average total deposits were $360.9 million for the nine months ended September 30, 2015, a $22.6 million or 7% increase from the $338.3 million in average total deposits for the nine months ended September 30, 2014.  Our loan to deposit ratio was 81.3% at September 30, 2015 as compared to 74.4% at the same time a year ago.

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

Shareholders' Equity

Total shareholders' equity was $45.7 million at September 30, 2015, an increase of $1.5 million or 4%, from the $44.2 million at December 31, 2014.  The increase was due to earnings of $3.9 million offset by dividends and other factors.  During the nine months ended September 30, 2015 and 2014 the Company paid common stock cash dividends totaling $813 thousand and $623 thousand, respectively.  Common stock repurchased during the nine months ended September 30, 2015 totaled $536 thousand at an average of $15.59 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 $310 thousand decrease in accumulated other comprehensive income that resulted from changes in values of available-for-sale investment securities caused by changes in interest rates. 

Asset Quality

Nonperforming assets at September 30, 2015 were comprised of seven nonaccrual loans spread among four customer relationships with an aggregate balance of $2.3 million. There were nine nonaccrual loans spread among five customer relationships with an aggregate balance of $2.8 million at December 31, 2014.  The Company had no other real estate owned at September 30, 2015 or December 31, 2014. There were no loans past due 30 days or more at September 30, 2015 or December 31, 2014.

Impaired loans totaled $5.1 million at September 30, 2015 and $5.6 million at December 31, 2014, respectively, 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 September 30, 2015 due to $41 thousand in net recoveries during the nine months ending September 30, 2015.  The ALLL represented 1.16% of total loans at September 30, 2015 compared to 1.23% at December 31, 2014.  The ALLL percentage decreased due to increased loan volume offset by the recoveries.  In determining the amount of ALLL required at September 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 nine-month periods indicated:

Net interest income for the periods nine months ended September 30, 2015 and 2014 was $11.2 million and $10.4 million, respectively, an increase of $777 thousand or 7%.  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 4.21% and 4.13% for the periods ended September 30, 2015 and 2014, an 8 basis point (bps) increase.  Average loan yield was 5.19% and 5.27% for the nine months ended September 30, 2015 and 2014, respectively, a decrease of 8 bps, which reflected the competitive environment for high quality loan customers.  This decrease was offset by a 7 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 $19.0 million or 14% increase in average noninterest-bearing deposits during the first half of the year.  These funds were primarily deployed into 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 nine-month periods ended September 30, 2015 and 2014:

For the period ended September 30, 2015, non-interest income totaled $1.8 million, an increase of $480 thousand or 38% from the $1.3 million recorded during the nine months ended September 30, 2014.  The gain on sale of loans resulted primarily from the Company's sale of two nonaccrual loans to an unrelated party during September 2015.  The improvement in non-interest income also reflected increases in service charges due to acquisition of customers with greater volume of fee-generating transactions.  The other category included increased cash dividends paid by Federal Home Loan Bank of San Francisco, including a special mid-year dividend paid to all of FHLBSF's cooperative members.  These increases 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 nine-month periods ended September 30, 2015 and 2014:

For the periods ended September 30, 2015 and 2014, total non-interest expense was $8.5 million and $7.8 million, respectively, an increase of $714 thousand or 9%.  Salaries and employee benefits increased by $495 thousand or 11% due to new hires related to business development and risk management as well as normal adjustments to salaries and post-retirement benefits.  Full-time equivalent employees totaled 88.8 and 80.7 at September 30, 2015 and 2014, respectively.  Occupancy and equipment increased $84 thousand or 8% due primarily to risk management and security software costs.  The other category increased $71 thousand or 16% due to internal appraisal costs.  Assessment and insurance increased by $14 thousand or 1% due to continued asset growth.  These were offset by a $53 thousand or 25% decrease in telephone and postal due to changes to communications services that generated a refund in 2015 and other savings.

For the nine month periods ended September 30, 2015 and 2014 the effective tax rate decreased to 33.8% from 35.4% due primarily to an increase in the ratio of non-taxable income to total pretax income; i.e., tax exempt income from investments was 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

http://www.valleybusinessbank.net