Valley Commerce Bancorp Reports Record Earnings For 2015

VISALIA, Calif., Jan. 15, 2016 /PRNewswire/ -- Valley Commerce Bancorp, (OTCBB: VCBP), a bank holding company and the parent company of Valley Business Bank, today announced unaudited fourth quarter 2015 net income of $1.5 million or $0.50 per diluted share.  This compared to earnings of $1.1 million, or $0.35 per diluted share, for the fourth quarter of 2014.  For the year 2015, the company reported unaudited net income of $4.5 million, or $1.51 per diluted share.  This compared to earnings of $4.3 million, or $1.43 per diluted share, for the year 2014.

Allan W. Stone, President and Chief Executive Officer, remarked, "It is my pleasure to announce earnings of $4.5 million and a return on average assets of 1.08 percent for 2015.  This marks our fifth consecutive year of record earnings and we anticipate once again being ranked among the top performing banks.  Our solid loan growth and continued dedication to credit quality were key factors in our 2015 earnings performance.   We ended the year with gross loans exceeding $300 million, a significant milestone for our bank.  Our loan growth and our success at resolving nonperforming loan issues resulted in a favorable 4.40 percent annual net interest margin.  We were also successful at increasing noninterest income."

Stone noted, "Our 2015 pretax earnings of $6.8 million included a $400 thousand release of loan loss reserves that was prompted by our net loan loss recoveries for the year of $428 thousand.  The 2015 release was significantly reduced from 2013 and 2014 when we found it necessary to release $1.5 million and $1.0 million, respectively, and we continue to maintain healthy loan loss reserves relative to the risk in our loan portfolio."

Stone added, "While a record earnings year is good news in and of itself, I am also very pleased to report that the bank made significant progress on its longer term objectives that we believe will pave the way for future success.  In 2015 we continued to strengthen our risk management teams and systems to meet operational and economic challenges, as well as the challenges of a more demanding regulatory environment.  This sets us apart from many other community banks and we will continue to work towards building a bank that is exemplary in every respect for its customers and shareholders.  As we enter our 20^th year of operations, we firmly believe that greater benefits are ahead for Valley Commerce Bancorp shareholders."

Selected financial information is presented in the following table:

Loans

Net loans were $298.5 million at December 31, 2015, an increase of $34.0 million or 13% from the $264.5 million at December 31, 2014.  The increase occurred in the categories of commercial and real estate-mortgage. Average gross loans were $276.6 million for the year 2015 and $251.6 million for the year 2014, an increase of $25.1 million or 10%.

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

Investment Securities

Available-for-sale investment securities were $71.1 million at December 31, 2015 compared to $68.1 million at December 31, 2014, an increase of $3.0 million or 11%.  There were $20.1 million of investment securities purchased during the 2015 year which were offset by normal repayments, maturities, calls, and sales.  Gain on sale of investment securities was $140 thousand for 2015 compared to $246 thousand for 2014. 

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

Deposits and Borrowings

Total deposits decreased by $7.1 million or 2%, from $359.4 million at December 31, 2014 to $352.2 million at December 31, 2015.  The year over year decrease reflected the expected drawdown of large deposits made at the end of 2014 by certain business customers.  There was a $12.2 million or 8% decrease in interest bearing deposits and a $2.1 million or 3% decrease in time deposits which were offset by a $7.1 million or 5% increase in noninterest bearing deposits.  Average total deposits were $361.2 million for 2015, a $17.7 million or 5% increase from the $343.5 million in average total deposits for 2014.  Our loan to deposit ratio was 84.7% at December 31, 2015 as compared to 73.6% at the same time a year ago which reflects increased loans and decreased deposits.

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

Borrowings outstanding were $18.0 million at December 31, 2015 and average borrowings for the year were only $131 thousand.  These short term borrowings were utilized to fund loan growth during the year.

Shareholders' Equity

Total shareholders' equity was $46.8 million at December 31, 2015, an increase of $2.6 million or 6%, from the $44.2 million at December 31, 2014.  The increase was due to earnings of $4.5 million offset by a decrease in accumulated other comprehensive income of $244 thousand resulting from decreased value of available-for-sale investment securities. Shareholders' equity was further reduced by the company's repurchase of common stock and payment of cash dividends.  During the years 2015 and 2014 the company paid common stock cash dividends totaling $1.1 million or $0.38 per share and $860 thousand or $0.30 per share, respectively.  Common stock repurchases during the year 2015 totaled $752 thousand at an average cost of $15.57 per share.  Common stock repurchases during the year 2014 totaled $351 thousand, at an average cost of $14.57 per share.

Asset Quality

Nonperforming loans at December 31, 2015 were comprised of six nonaccrual loans spread among three customer relationships with an aggregate balance of $1.8 million.  This compared with nine nonaccrual loans spread among five customer relationships at December 31, 2014 with an aggregate balance of $2.8 million.  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, 2015 or December 31, 2014.

Impaired loans totaled $4.4 million and $5.6 million at December 31, 3015 and 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.  The company had no loans over 30 days past due at December 31, 2015, including the nonaccrual loans described above.

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:

During the year 2015 the company recorded a $400 thousand reversal of provision for loan losses compared to a $1.0 million reversal of provision for loan losses in 2014.  The reversals were recorded during the fourth and second quarter of 2015 and 2014, respectively.  The ALLL represented 1.11% of total loans at December 31, 2015 compared to 1.23% at December 31, 2015.  The ALLL percentage decreased due primarily to increased loan volume as the reversal of provision for loan losses was offset by net recoveries of $428 thousand.  In determining the amount of ALLL required at December 31, 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 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 2015 and 2014 was $15.7 million and $14.1 million, respectively, an increase of $1.7 million or 12%.  There was a $1.6 million or 12% increase in interest income from loans that reflected a $25.2 million or 10% increase in the average balance of loans as well as a $705 thousand increase in income from nonaccrual loans.  The increase in loan interest was offset by a $96 thousand or 5% decrease in interest income from available-for-sale investment securities.  In 2015, investment securities saw an increase in average volume but a decline in average yield.

Net interest margin was 4.40% and 4.10% for the years 2015 and 2014, a 30 basis points (bps) increase.  Average loan yield was 5.35% and 5.23% for the years 2015 and 2014, respectively, an increase of 12 bps, which reflected the income from nonaccrual loans noted above market conditions for high quality loans remained competitive.  Excluding the interest income recorded on nonaccrual loans, average loan yields for the years ended 2015 and 2014 were 5.05% and 5.23% respectively.  There was a 7 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 $15.2 million or 10%.  These funds were primarily deployed into average loans 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 2015 and 2014:

For the year 2015, non-interest income totaled $2.1 million, an increase of $163 thousand or 8% from the $2.0 million recorded during 2014.  The company realized $409 thousand in gains from the sale of loans in 2015, primarily related to the sale of two nonaccrual loans.  Increases in service charges for 2015 reflected changes to the company's fee structure and the acquisition of new deposit customers.  Federal Home Loan Bank of San Francisco dividends contributed to the increase in the other category and resulted from increased cash dividends paid, including a special mid-year cash dividend paid to all of FHLBSF's cooperative members.

The company's $3.1 million of junior subordinated deferrable interest debentures were redeemed in their entirety in the fourth quarter of 2014 at a discount of $338 thousand that was included in noninterest income as gain on debt extinguishment.  The favorable increases for 2015 were also offset by a decrease in fees from mortgage loan underwriting, an activity the company discontinued in February 2015.  In addition, gains on sales of investment securities decreased from 2014 due to reduced sales activity. 

Non-Interest Expense

The following table describes the components of non-interest expense for the years 2015 and 2014:

For the years 2015 and 2014, non-interest expense was $11.4 million and $10.6 million, respectively, an increase of $885 thousand or 8%.  Salaries and employee benefits increased by $593 thousand or 10% due primarily 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 87.5 and 86.1 at December 31, 2015 and 2014, respectively.  Occupancy and equipment increased by $79 thousand or 6% due primarily to risk management and security software costs.  Data processing increased by $48 thousand or 9% due to additional investment in mobile banking technology and growing customer activity.  Advertising and business development increased by $45 thousand or 16% due to increased customer-focused marketing and greater charitable contributions.   FDIC insurance and other assessments increased by $19 thousand or 6% due to continued asset growth.  The other category increased $27 thousand or 4% due to internal appraisal costs.  These increases were offset by a $21 thousand or 8% reduction in telephone and postal due to changes to communication services that generated a refund in 2015 and other savings.

For the 2015 year the effective tax rate increased to 34.58% from 34.38% in 2014.  The effective tax rate increased from years prior to 2014 due to the curtailment of tax credits and deductions previously allowed by the State of California.

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