Valley Commerce Bancorp Reports First Quarter 2014 Results

VISALIA, Calif., April 23, 2014 /PRNewswire/ -- Valley Commerce Bancorp, (OTCBB: VCBP), a bank holding company and the parent company of Valley Business Bank, today announced unaudited first quarter 2014 net income of $743 thousand, or $0.26 per diluted common share.  This matched net income of $743 thousand or $0.26 per diluted common share for the first quarter of 2013.  

Allan W. Stone, President and Chief Executive Officer, remarked, "Coming off a year of record profitability, we are pleased to be off to a similar start in 2014.  Drought conditions notwithstanding, we remain very optimistic about the local economy and are encouraged to see our growth strategies producing results.  Our loan and deposit portfolios grew significantly in the past year even as their risk profiles improved.  In addition, our core earnings remain strong which sets the stage for another successful year."

Stone added, "Our multi-year goal has been to build a community bank that can deliver products and services efficiently while meeting the challenges of a rapidly changing industry.  We are seeing our efforts come to fruition and our team is entering 2014 with great enthusiasm.  We believe we have a great platform for continued growth and look forward to building upon these first quarter results."

Selected financial information is presented in the following table:

Loans

Net loans were $244.2 million at March 31, 2014, an increase of $9.6 million or 4% from the $234.6 million of net loans at December 31, 2013 and an increase of $23.2 million or 10% from the $221.0 million of net loans at March 31, 2013.  The increase for the first quarter of 2014 occurred primarily in real estate-mortgage and real estate-construction loans.  Average gross loans were $240.3 million for the three months ended March 31, 2014 and $226.2 million for the three months ended March 31, 2013, an increase of $14.1 million or 6%.

Net loans at March 31, 2014, December 31, 2013, and March 31, 2013 are summarized in the following table:

Investment Securities

Available-for-sale investment securities were $67.3 million at March 31, 2014 compared to $66.5 million at December 31, 2013, an increase of $784 thousand or 1%.  There were $3.7 million of investment securities purchased during the three months ended March 31, 2014 which were offset by normal repayments, maturities, calls, and sales.  Gain on sale of investment securities was $76 thousand in 2014 compared to $126 thousand for the same period in 2013.  Security sales normally result from portfolio maintenance and repositioning transactions.

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

Deposits

Total deposits increased by $38.2 million or 12%, from $317.9 million at December 31, 2013 to $356.1 million at March 31, 2014.  The increase in deposits for 2014 was generally widespread but included transitory deposits of several business customers that are expected to be withdrawn over the next new months. Average total deposits were $338.9 million for the three months ended March 31, 2014, a $22.3 million or 7% increase from the $316.6 million in average total deposits for the three months ended March 31, 2013.

Total deposits at March 31, 2014, December 31, 2013, and March 31, 2013 are summarized in the following table:

Shareholders' Equity

Total shareholders' equity was $41.0 million at March 31, 2014, an increase of $1.2 million or 3%, from the $39.8 million in shareholders' equity at December 31, 2013.  The increase was due to quarterly earnings of $743 thousand, an increase in accumulated other comprehensive income of $370 thousand resulting from an increase in the value of investment securities, and $260,000 in new capital from the exercise of stock options. These increases were offset by the repurchase of common stock and cash dividends paid.  During the quarter ended March 31, 2014 the Company paid common stock cash dividends totaling $167 thousand or $0.06 per share.  Common stock cash dividends totaled $502 thousand or $0.18 per share for the year ended December 31, 2013.  Common stock repurchased during the quarter ended March 31, 2014 totaled $124 thousand, at an average of $13.94 per share.  Common stock repurchased during the year ended December 31, 2013 totaled $788 thousand, at an average of $13.59 per share.

Asset Quality

Nonperforming loans at March 31, 2014 were comprised of nine nonaccrual loans spread among five customer relationships with an aggregate balance of $3.1 million compared with nine nonaccrual loans spread among five customer relationships at December 31, 2013 with an aggregate balance of $3.2 million. 

Impaired loans totaled $6.1 million and $6.6 million at March 31, 2014 and December 31, 2013, 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.  The Company had no loans over 30 days past due at December 31, 2013, including the nonaccrual loans described above and one loan over 30 days past due at March 31, 2014 that was in the process of being renewed.

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 $3.9 million at December 31, 2013 and March 31, 2014 due to no loan loss provisions and $13 thousand in net recoveries during the three months ending March 31, 2014.  The ALLL represented 1.56% of total loans at March 31, 2014 compared to 1.63% at December 31, 2013.  The ALLL percentage decrease resulted from increased loan volume.  The portion of the ALLL relating to specific impaired loans was $108 thousand at March 31, 2014 and $197 thousand at December 31, 2013. 

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 three-month periods indicated:

Net interest income for the quarters ended March 31, 2014 and 2013 was $3.4 million and $3.2 million, respectively.  Net interest income increased during the 2014 period due to increases in the average balances of earning assets, increased yields on investment securities and reductions in the costs of interest bearing liabilities.  These improvements were partially offset by declines in the yields earned on loans and to a lesser extent, our continued growth of core deposits.

Net interest margin was 4.08% and 4.14% for the quarters ended March 31, 2014 and 2013, respectively.  Average loan yield was 5.33% and 5.64% for the three months ended March 31, 2014 and 2013, respectively, a decrease of 31 basis points (bps).  This decrease was offset by a 7 bps decrease in the average rate paid on deposits which was 0.36% and 0.43% for the three months ended March 31, 2014 and 2013, respectively.  The improvement in our cost of deposits was primarily due to a reduction in the average balances of time deposits, which decreased to $62.2 million at March 31, 2014 compared to $66.7 million at March 31, 2013.  The net interest margin was also positively affected by an increase in the average balance of loans.  

Non-Interest Income

The following table describes the components of non-interest income for the three-month periods ended March 31, 2014 and 2013:                                                    

For the quarter ended March 31, 2014, non-interest income totaled $407 thousand, a decrease of $25 thousand or 6% from the $431 thousand recorded during the first quarter of 2013.  Decreases in gains on sales of investment securities and mortgage loan underwriting fees contributed to the decrease in non-interest income during the 2014 period, which were offset by increases in FHLB stock dividends included in other and service charges. 

Non-Interest Expense

The following table describes the components of non-interest expense for the three-month periods ended March 31, 2014 and 2013:                                                   

For the quarters ended March 31, 2014 and 2013, non-interest expense increased from $2.6 million to $2.7 million.  Salaries and employee benefit expense increased by $103 thousand or 7% due to increases in stock option compensation expense.  Professional and legal expense also increased by $21 thousand or 28% due to the timing of services provided by third parties.    Advertising increased by $27 thousand or 52% due to advertisements used to support our various lending promotions.  Telephone and postal increased by $19 thousand or 33% due to transitional costs of changing data service plans.  These were offset by a $29 thousand or 8% decrease in occupancy and equipment expense due to lesser expenditure for small equipment purchases.  FDIC insurance and assessment expense decreased by $9 thousand or 11% which reflected more favorable risk factors in the FDIC premium calculation.  There also was a $21 thousand or 28% decrease in operational costs due to reduced courier costs.

For the quarters ended March 31, 2014 and 2013 the effective tax rate increased to 33.4% from 30.5%, due primarily to the curtailment of certain tax credits and deductions previously allowed by California through December 31, 2013.

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, and Fresno, California and has branch offices in Woodlake and Tipton, 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