Valley Commerce Bancorp Reports Third Quarter 2014 Earnings

VISALIA, Calif., Oct. 16, 2014 /PRNewswire/ -- Valley Commerce Bancorp, (OTCBB: VCBP), a bank holding company and the parent company of Valley Business Bank, today announced third quarter 2014 net income of $930 thousand or $0.31 per diluted share.  This compared to earnings of $905 thousand, or $0.30 per diluted share, for the third quarter of 2013.  For the nine months ended September 30, 2014, the Company reported net income of $3.2 million, or $1.08 per diluted share compared to earnings of $3.3 million, or $1.11 per diluted share, for the nine months ended September 30, 2013.    

Allan W. Stone, President and Chief Executive Officer, remarked, "I am pleased to report Valley Business Bank ended the third quarter of 2014 with net loans at a record high of $255 million, a $20 million 9 percent increase since December 31, 2013.  Our net interest income has improved in 2014 and our loan growth should continue to propel revenue growth in future periods.  In addition, we continue to benefit from our ongoing emphasis on loan credit quality.  Thus far in 2014, we've experienced no loan losses and loss recoveries of $433 thousand.  Although agricultural loans comprise only 2 percent of our loan portfolio, we are located in a regional economy that is heavily dependent on revenue from agricultural production so we are keeping a close watch on the severe drought conditions affecting California." 

Stone continued, "Of course, the numbers do not tell the whole story.  We are continually strengthening our team to ensure our risk management systems are functioning properly and customer service goals are achieved.  As we enter the heart of the planning season, I believe we have a very strong platform on which to base our growth and profitability initiatives.  For 2013, we received a number of accolades for our financial performance including a spot on American Banker Magazine's list of the Top 200 Community Banks.  Our team is dedicated to maintaining superior performance in 2014 and the coming years."

Selected financial information is presented in the following table:

Loans

Net loans were $254.9 million at September 30, 2014, an increase of $20.3 million or 9% from the $234.6 million at December 31, 2013.  The increase occurred primarily in real estate-mortgage loans.  Average gross loans were $247.6 million for the nine months ended September 30, 2014 and $230.0 million for the nine months ended September 30, 2013, an increase of $17.6 million or 8%.

Net loans at September 30, 2014, December 31, 2013, and September 30, 2013 are summarized in the following table:

Investment Securities

Available-for-sale investment securities were $66.6 million at September 30, 2014 compared to $66.5 million at December 31, 2013, an increase of $127 thousand or 0.2%.  There were $12.5 million of investment securities purchased during the nine months ended September 30, 2014 which were offset by normal repayments, maturities, calls, and sales.  Gain on sale of investment securities was $256 thousand for the nine months of 2014 compared to $126 thousand for the same period in 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 $24.8 million or 8%, from $317.9 million at December 31, 2013 to $342.7 million at September 30, 2014.  Average total deposits were $338.3 million for the nine months ended September 30, 2014, a $21.1 million or 7% increase from the $317.3 million in average total deposits for the nine months ended September 30, 2013.

Total deposits at September 30, 2014, December 31, 2013, and September 30, 2013 are summarized in the following table:

Shareholders' Equity

Total shareholders' equity was $43.2 million at September 30, 2014, an increase of $3.7 million or 9% from the $39.8 million at December 31, 2013.  The increase was due primarily to earnings of $3.2 million and to a lesser extent, a $679 thousand increase in accumulated other comprehensive income resulting from increases in unrealized gains of investment securities.  These factors were offset by the repurchase of common stock and cash dividends paid.  During the nine months ended September 30, 2014 and 2013 the Company paid common stock cash dividends totaling $623 thousand or $0.22 per share and $336 thousand or $0.12 per share, respectively.  Common stock repurchased during the nine months ended September 30, 2014 totaled $324 thousand at an average of $14.52 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 assets at September 30, 2014 were comprised of nine nonaccrual loans spread among five customer relationships with an aggregate balance of $2.9 million compared with nine nonaccrual loans spread among five customer relationships at December 31, 2013 with an aggregate balance of $3.2 million.  The Company had no other real estate owned at December 31, 2013 or September 30, 2014.

Impaired loans totaled $5.7 million and $6.6 million at September 30, 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 following table summarizes the changes in the allowance for loan and lease losses (ALLL) for the periods indicated:

The Company's ALLL decreased from $3.9 million at December 31, 2013 to $3.3 million at September 30, 2014 due to a $1.0 million reversal of provision for loan losses offset by $433 thousand in loss recoveries during the nine months ending September 30, 2014.  The loan loss reversal was recorded during the second quarter.  The ALLL represented 1.28% of total loans at September 30, 2014 compared to 1.62% at December 31, 2013.  The ALLL percentage decrease resulted from increased loan volume as well as the factors noted above.  The portion of the ALLL relating to specific impaired loans was $403 thousand at September 30, 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 nine-month periods indicated:

Net interest income for the periods ended September 30, 2014 and 2013 was $10.4 million and $9.9 million, respectively, an increase of $549 thousand or 6%.  Net interest income increased during the 2014 period due to an increase in the average volume and yield of investment securities, a $17.6 million or 8% increase in average loans, and reduced cost of interest-bearing liabilities.  These factors were offset by a decrease in average yield on loans.

Net interest margin was 4.13% and 4.20% for the periods ended September 30, 2014 and 2013, a 7 basis point (bps) decrease.  This was attributable to a 28 bps decrease in average loan yield for the 2014 period, which reflected the competitive environment for high quality loan customers.  The average rate paid on deposits and other interest-bearing liabilities decreased by 3 bps reflecting weak competition for deposits as well as a reduction in the average balances of time deposits.  Average noninterest-bearing deposits increased by $17.6 million or 14% in the 2014 period and average total deposits increased by $21 million or 7 percent in the 2014 period.

Non-Interest Income

The following table describes the components of non-interest income for the nine-month periods ended September 30, 2014 and 2013:

For the period ended September 30, 2014, non-interest income totaled $1.3 million, an increase of $166 thousand or 15% from the $1.1 million recorded during the period ended September 30, 2013.  Increases in service charges reflected increases in account analysis charges and non-sufficient funds charges.  Gains on sales of investment securities reflected portfolio management strategies to mitigate interest rate risk and enhance the overall yield potential of the portfolio while in the current low rate environment.  These were offset by decreases in earnings on the cash surrender value of life insurance policies and reduced mortgage loan underwriting fees which reflected reduced refinancing activity.

Non-Interest Expense

The following table describes the components of non-interest expense for the nine-month periods ended September 30, 2014 and 2013:

For the periods ended September 30, 2014 and 2013, non-interest expense increased to $7.8 million from $7.5 million, an increase of $223 thousand or 3%.  Salaries and employee benefits increased by $275 thousand or 6% due to new hire expenses related to business development and risk management.  Data processing costs increased by $15 thousand or 4% due to acquisition of new technology platforms and increased customer activity. FDIC insurance expense increased by $39 thousand or 19% due to FDIC's revised methodology for calculating insurance premiums.  Advertising and business development expense increased by $16 thousand or 9% due to increased advertising and marketing costs to support business development.  These were offset by a $80 thousand or 7% decrease in occupancy and equipment expense due to reduced technology and operational risk management costs compared to prior years.  In addition, there was a $38 thousand or 21% decrease in supplies due to a reduction in forms and printing costs, and a $19 thousand or 7% decrease in professional and legal expense due to timing of audit and legal costs.

For the periods ended September 30, 2014 and 2013 the effective tax rate increased to 35.38% from 33.89%, 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

Related Links

http://www.valleybusinessbank.net