Valley Commerce Bancorp Reports Record Earnings For 2014

VISALIA, Calif., Jan. 15, 2015 /PRNewswire/ -- Valley Commerce Bancorp, (OTCBB: VCBP), a bank holding company and the parent company of Valley Business Bank, today announced unaudited fourth quarter 2014 net income of $1.1 million or $0.35 per diluted share. This compared to earnings of $775 thousand, or $0.22 per diluted share, for the fourth quarter of 2013. For the year 2014, the company reported unaudited net income of $4.3 million, or $1.43 per diluted share. This compared to earnings of $4.1 million, or $1.37 per diluted share, for the year 2013.

Allan W. Stone, President and Chief Executive Officer, remarked, "It is my privilege to report a fourth straight year of record earnings. Our 2014 earnings reflect growth in our loan and investment portfolios, increased non-interest income, and prudent control of non-interest expenses. In 2014 our net loans and total deposits each grew by 13%. Just as importantly, our portfolios continue to reflect our well-established commitment to quality." He added, "Our team of banking professionals is embracing the challenges of the industry. We are looking forward to continuing the bank's success in the coming years and delivering even greater value to our shareholders."

Selected financial information is presented in the following table:

*2013 Data adjusted for 5% stock dividend issued in June 2014

Loans

Net loans were $264.5 million at December 31, 2014, an increase of $29.9 million or 13% from the $234.6 million at December 31, 2013. The increase occurred entirely in the category of real estate-mortgage. Average gross loans were $251.6 million for the year 2014 and $231.6 million for the year 2013, an increase of $20.0 million or 9%.

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

Investment Securities

Available-for-sale investment securities were $68.1 million at December 31, 2014 compared to $66.5 million at December 31, 2013, an increase of $1.6 million or 2%. There were $16.3 million of investment securities purchased during the year 2014 which were offset by normal repayments, maturities, calls, and sales. Gain on sale of investment securities was $246 thousand for the year 2014 compared to $126 thousand for 2013.

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 $41.5 million or 13%, from $317.9 million at December 31, 2013 to $359.4 million at December 31, 2014. The increase resulted from a $24.8 million or 20% increase in noninterest bearing deposits and a $19.8 million or 15% increase in interest bearing deposits which were offset by a $3.2 million or 5% decrease in time deposits. Average total deposits were $343.5 million for the year 2014, a $25.0 million or 8% increase from the $318.5 million in average total deposits for the year 2013.

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

Junior Subordinated Deferrable Interest Debentures

The company's $3.1 million of junior subordinated deferrable interest debentures were eliminated in 2014. The debentures were issued in 2003 to Valley Commerce Trust I, a Delaware business trust formed by the company for the sole purpose of issuing trust preferred securities. In exchange for the debentures, the company received $3.0 million of cash proceeds from the Trust's issuance of 3,000 trust preferred securities with liquidation value of $1 thousand per security and a $93 thousand capital investment in the Trust.

In December 2014, the company purchased the trust preferred securities issued by Valley Commerce Trust I. The securities were acquired at a discount of $338 thousand that was recorded as a gain within non-interest income. The company then canceled the trust preferred securities and junior subordinated deferrable interest debentures and dissolved Valley Commerce Trust I.

The company's trust preferred securities qualified as Tier 1 capital for purposes of calculating regulatory capital ratios. Accordingly, the purchase and cancellation of trust preferred securities resulted in a decrease in these ratios but they remain well above regulatory minimum requirements and internal targets.

Shareholders' Equity

Total shareholders' equity was $44.2 million at December 31, 2014, an increase of $4.4 million or 11%, from the $39.8 million at December 31, 2013. The increase was due to earnings of $4.3 million and an increase in accumulated other comprehensive income of $853 thousand resulting from increased value of available-for-sale investment securities. Shareholders' equity was reduced by the company's repurchase of common stock and payment of cash dividends. During the years 2014 and 2013 the company paid common stock cash dividends totaling $860 thousand or $0.30 per share and $502 thousand or $0.18 per share, respectively. Common stock repurchases during the year 2014 totaled $351 thousand, an average of $14.57 per share. Common stock repurchases during the year 2013 totaled $788 thousand, at an average of $13.59 per share.

Asset Quality

Nonperforming loans at December 31, 2014 were comprised of nine nonaccrual loans spread among five customer relationships with an aggregate balance of $2.8 million. This compared with nine nonaccrual loans spread among five customer relationships at December 31, 2013 with an aggregate balance of $3.2 million. The decrease was due to receipt of cash payments. The decrease in impaired loans was due to payoffs and receipt of scheduled payments. The company had no other real estate owned at December 31, 2014 or December 31, 2013.

Impaired loans totaled $5.6 million and $6.6 million at December 31, 3014 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, 2014, including the nonaccrual loans described above.

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

During the year 2014 the company recorded a $1.0 million reversal of provision for loan losses compared to a $1.5 million reversal of provision for loan losses in 2013. In both years, the reversal was recorded during the second quarter. In determining the amount of ALLL required at December 31, 2014, 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 internal 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 years indicated:

Net interest income before provision for loan losses for the years 2014 and 2013 was $14.1 million and $13.3 million, respectively, an increase of $723 thousand or 5%. The primary components of this increase were a $407 thousand or 3% increase in interest income from loans and a $294 thousand or 21% increase in interest income from available-for-sale investment securities. In 2014, there was a $20.2 million or 9% increase in the average balance of loans offset by a slight decline in average yield and investment securities saw an increase in both average volume and average yield.

Net interest margin was 4.10% and 4.21% for the years 2014 and 2013, an 11 basis point (bps) decrease. Average loan yield was 5.23% and 5.51% for the years 2014 and 2013, respectively, a decrease of 28 bps, which reflected the competitive environment for high quality loan customers. There was a 2 bps decrease in the average rate paid on interest-bearing deposits and other interest-bearing liabilities that reflected continued weak market conditions for funds. Average noninterest-bearing deposits increased by $19.8 million or 16 percent. 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 years 2014 and 2013:

For the year 2014, non-interest income totaled $2.0 million, an increase of $550 thousand or 39% from the $1.4 million recorded during the year 2013. As noted above, the company realized a gain due to the repurchase of trust preferred securities at a discount. Increases in service charges for 2014 reflected changes to the company's fee structure and the acquisition of new deposit customers. Gains on sales of investment securities were greater in 2014 due to planned sales of securities that no longer fit with management's desired portfolio profile or were likely to be called. Federal Home Loan Bank of San Francisco dividends contributed to the increase in the other category and resulted from an increase the FHLB's dividend payout rate in 2014. These favorable increases were offset by a decrease in mortgage loan underwriting fees which primarily reflected changes in interest rates and a slowing residential real estate market.

Non-Interest Expense

The following table describes the components of non-interest expense for the years 2014 and 2013:

For the years 2014 and 2013, non-interest expense was $10.6 million and $10.2 million, respectively, an increase of $339 thousand or 3%. Salaries and employee benefits increased by $321 thousand or 5% due primarily to new hires made in connection with the company's growth initiatives. Data processing increased by $31 thousand or 6% due to additional investment in mobile banking technology and growing customer activity. Advertising and business development increased by $42 thousand or 17% due to increased customer-focused marketing and charitable contributions. FDIC insurance and other assessments increased by $39 thousand or 13% due to continued Bank growth. These increases were offset by a $69 thousand or 5% reduction in occupancy and equipment due to decreased technology acquisition and maintenance costs in 2014. There also was a $34 thousand or 8% decrease in supplies due to reduced forms and other printing costs in 2014.

For the year 2014 the effective tax rate increased to 34.38% from 32.92% for 2013 due primarily to the curtailment of certain tax credits and deductions previously allowed by the State of 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.

*All earnings per share data have been restated for the 5% stock dividend issued in June 2014.

SOURCE Valley Commerce Bancorp

Related Links

http://www.valleybusinessbank.net