SYS-CON MEDIA Authors: Doug Masi, Mat Mathews, PR.com Newswire, David Smith, Tim Crawford

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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:














March 31,




December 31,



2014



2013




2013*














 ANNUALIZED KEY FINANCIAL RATIOS












 Net income

$

742,587



$

742,845



$

4,054,468


 Return on average equity


7.42

%



7.86

%



10.37

%

 Return on average assets


0.78

%



0.83

%



1.11

%

 Net interest margin


4.08

%



4.14

%



4.21

%

 Efficiency ratio


70.79

%



70.57

%



69.23

%

 Loan to deposit ratio at period end


68.57

%



69.34

%



73.81

%

 Tier 1 leverage ratio


11.30

%



11.20

%



11.60

%

 Tier 1 risk based ratio


15.98

%



16.28

%



16.22

%

 Total risk-based capital ratio


17.23

%



17.54

%



17.47

%













 SHARE AND PER SHARE DATA












  Basic earnings per common share

$

0.27



$

0.26



$

1.45


  Diluted earnings per common share

$

0.26



$

0.26



$

1.43


  Quarterly weighted average common shares outstanding


2,781,077




2,815,036




2,798,477


  Quarterly weighted average diluted common shares outstanding


2,814,431




2,825,733




2,826,414


  Book value per common share

$

14.68



$

13.66



$

14.35


  Total common shares outstanding


2,786,322




2,815,036




2,770,929














                *For the year ended December 31, 2013
















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:


March 31, 2014


December 31, 2013


March 31, 2013

Commercial

$

38,485,787


16%


$

40,665,234


17%


$

35,983,395


16%

Real estate – mortgage

184,775,357


74


175,416,776


73


171,433,577


76%

Real estate – construction

19,954,944


8


17,039,578


7


14,379,051


6%

Agricultural

3,473,534


1


3,966,502


2


3,199,697


1%

Consumer and other

1,565,129


1


1,647,517


1


1,529,756


1%

    Subtotal

248,254,751


100%


238,735,607


100%


226,525,476


100%

Deferred loan fees, net

(192,155)




(234,790)




(347,549)



Allowance for loan and lease losses

(3,879,639)




(3,875,124)




(5,195,415)



    Total loans, net

$

244,182,957




$

234,625,693




$

220,982,512



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:


March 31, 2014



Gross

Gross 

Estimated


Amortized

Unrealized 

Unrealized

Fair


 Cost 

Gains

 Losses

Value

    Debt securities:





     U.S. Government sponsored entities and agencies              

$      5,098,489

$          49,545

$         (70,034)

$       5,078,000

     Mortgage-backed securities:     





        U.S. Government sponsored entities and agencies        

27,759,952

186,164

(454,116)

27,492,000

        Small Business Administration   

10,979,775

284,225

-

11,264,000

     Obligations of states and  political subdivisions       

23,056,658

444,155

(60,813)

23,440,000

            Total       

$ 66,894,874

$     964,089

$       (584,963)

$      67,274,000



December 31, 2013



Gross

Gross

Estimated


Amortized

Unrealized 

Unrealized

Fair


Cost 

Gains

Losses

Value

    Debt securities:





      U.S. Government sponsored entities and agencies   

$      5,189,721

$          25,698

$       (132,419)

$        5,083000

      Mortgage-backed securities:  





       U.S. Government sponsored entities and agencies 

28,900,413

138,087

(655,500)

28,383,000

       Small Business Administration        

9,844,047

354,879

(4,926)

10,194,000

     Obligations of states and political subdivisions   

22,804,771

230,688

(205,459)

22,830,000

               Total

$ 66,738,952

$      749,352

$       (998,304)

$    66,490,000






 

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:


              March 31, 2014


                 December 31, 2013


                 March 31, 2013

Non-interest bearing

$

163,183,821


46%


$

123,817,308


39%


$

122,546,166


38%

Interest bearing

130,619,566


37


131,802,344


41


129,053,931


41

Time deposits

62,290,918


17


62,268,507


20


67,087,956


21

           Total

$

356,094,305


100%


$

317,888,159


100%


$

318,688,053


100%

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:








March 31,
2014


December 31,

2013


March 31,

2013







Nonperforming loans

$       3,080,192


$    3,160,120


$        4,950,374

Loans past due 90 days or more and






     still accruing

-


-


-

Total nonperforming loans

$       3,080,192


$    3,160,120


$        4,950,374







Other real estate owned

$                      -


$                   -


$                       -

Total nonperforming assets

$       3,080,192


$    3,160,120


$        4,950,374







Specific loss reserve

$          107,759


$       197,344


$           658,563

% of nonperforming assets to total loans

1.24%


1.32%


2.19%

Nonperforming loans to total loans

1.26%


1.35%


2.24%

Nonperforming assets to total assets

0.76%


0.87%


1.36%

Classified loans

$    12,925,549


$  13,628,603


$     17,267,930

30-89 Day Delinquent loans

$      1,800,000


$                   -


$          708,713

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


 Three Months Ended


Three Months Ended


Year Ended


March 31, 2014


March 31, 2013


December 31, 2013










Balance at beginning of period

$

3,866,508


$

5,192,436


$

5,192,436

Charge-offs:






Commercial and agricultural

-


-


-

Real estate mortgage

-


-


(27,135)

Real estate construction

-


-


-

Consumer



(1,021)


(1,021)

Total charge-offs



(1,021)


(28,156)

Recoveries:






Commercial and agricultural

13,131


4,000


210,844

Real estate mortgage

-


-


-

Real estate construction

-


-


-

Consumer

-


-


-

Total recoveries

13,131


4,000


210,844

Net recoveries

13,131


2,979


182,688

Provision for loan losses

-


-


(1,500,000)

Balance at end of period

$

3,879,639


$

5,195,415


$

3,875,124

Net recoveries to average loans outstanding

0.005%


0.001%


0.079%

Average loans outstanding

$

240,332,182


$

226,183,371


$

231,584,419

Ending allowance to total loans  outstanding

1.56%


2.30%


1.63%














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:



Average balances and weighted average yields and costs


Three Months ended March 31,


2014


2013




Interest


Average




Interest


Average


Average


income/


yield/


Average


income/


yield/

(dollars in thousands)

Balance


Expense


Cost


Balance


Expense


Cost

ASSETS












Due from banks

$

43,784


$

28


0.26%


$

46,625


$

31


0.27%

Available-for-sale investment securities:












         Taxable

43,263


224


2.10%


31,681


168


2.15%

         Exempt from Federal income taxes (1)

23,243


214


5.66%


18,385


122


4.08%

    Total securities (1)

66,506


438


3.34%


50,066


290


2.86%

Loans (2) (3)

240,109


3,153


5.33%


225,797


3,142


5.64%

      Total interest-earning assets (1)

350,399


3,619


4.32%


322,488


3,463


4.43%













Noninterest-earning assets, net of allowance for loan losses

36,811






40,081





       Total assets

$

387,210






$

362,569

















LIABILITIES AND SHAREHOLDERS' EQUITY












Deposits:












   Other interest bearing

$

139,170


$

101


0.29%


$

129,449


$

113


0.35%

   Time deposits less than $100,000

17,468


22


0.51%


19,363


27


0.57%

   Time deposits $100,000 or more

44,692


57


0.52%


47,370


69


0.59%

   Total interest-bearing deposits

201,330


180


0.36%


196,182


209


0.43%

Junior subordinated deferrable interest debentures

3,093


27


3.54%


3,093


28


3.67%

      Total interest-bearing liabilities

204,423


207


0.41%


199,275


237


0.48%













Noninterest bearing deposits

137,564






120,404





Other liabilities

4,639






4,574





    Total liabilities

346,626






324,253





Shareholders' equity

40,584






38,316





    Total liabilities and shareholders' equity

$

387,210






$

362,569

















Net interest income and margin (1)



$

3,412


4.08%




$

3,226


4.14%













(1)

Interest income is not presented on a taxable-equivalent basis, however, the average yield was calculated on a taxable-equivalent basis by using a marginal tax rate of 34%.

(2)

Nonaccrual loans are included in total loans. Interest income is included on nonaccrual loans only to the extent cash payments have been received. There was $53 thousand and $94 thousand in foregone interest on nonaccrual loans for the three months ended March 31, 2014 and 2013, respectively. Income received from nonaccrual loans was $41 thousand for 2014 period and $85 in the 2013 period.

(3)

Interest income on loans includes amortized loan fees, net of costs, of $140 thousand and $118 thousand for 2014 and 2013, respectively.



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:                                                    



Three Months ended

March 31,





2014


2013


Increase

(Decrease)

Service charges


$

163,617


$

153,329


$

10,288

Gain on sale of available-for-sale investment securities


76,021


125,926


(49,905)

Mortgage loan brokerage fees


5,549


13,449


(7,900)

Earnings on cash surrender value of life insurance policies


73,387


77,308


(3,921)

Other


88,086


61,456


26,630

     Total non-interest income


$

406,660


$

431,468


$

(24,808)

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:                                                   



Three Months ended

March 31,





2014


2013


Increase

(Decrease)

Salaries and employee benefits


$

1,652,756


$

1,566,061


$

86,695

Occupancy and equipment


326,578


355,339


(28,761)

Other real estate owned


-


78


(78)

Data processing


138,036


137,788


248

Operations


72,220


74,767


(20,804)

Professional and legal


95,571


74,767


20,804

Advertising and business development


79,024


52,032


26,992

Telephone and postal


74,112


55,587


18,525

Supplies


45,282


52,390


(7,108)

Assessment and insurance


78,984


88,393


(9,409)

Other expenses


140,834


136,034


4,800

     Total non-interest expense


$

2,703,397


$

2,588,279


$

115,118

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.

VALLEY COMMERCE BANCORP

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)










March 31,

2014


December 31,

2013


March 31,

2013








Assets







Cash and due from banks


$

71,357,818


$

42,006,511


$

68,993,747

Available-for-sale investment securities, at fair value


67,274,000


66,490,000


51,948,000

Loans, net of deferred fees


248,062,596


238,500,817


226,177,927

Less: allowance for loan and lease losses


3,879,639


3,875,124


5,195,415

    Net loans


244,182,957


234,625,693


220,982,512

Bank premises and equipment, net


7,573,577


7,701,676


7,988,134

Cash surrender value of bank-owned life insurance


8,333,401


8,268,894


8,062,100

Accrued interest receivable and other assets


5,662,917


6,044,999


6,353,650

Total assets


$

404,384,670


$

365,137,773


$

364,328,143








Liabilities and Shareholders' Equity







Deposits:







Noninterest-bearing


$

163,183,821


$

123,817,308


$

122,546,166

Interest-bearing


192,910,484


194,070,851


196,141,887

Total deposits


356,094,305


317,888,159


318,688,053

Accrued interest payable and other liabilities


4,216,422


4,393,172


4,088,364

Junior subordinated deferrable interest debentures


3,093,000


3,093,000


3,093,000

Total liabilities


363,403,727


325,374,331


325,869,417








Commitments and contingencies














Shareholders' equity:







   Common stock - no par value; 30,000,000 shares authorized;

     issued and outstanding 2,786,322 shares at March 31, 2014 and

     2,770,929 share at December 31, 2013 and 2,815,036 shares at March 31, 2013


28,121,689


27,811,859


28,118,354

Retained earnings


12,636,138


12,098,091


9,506,172

Accumulated other comprehensive income (loss), net of taxes


223,116


(146,508)


834,200

Total shareholders' equity


40,980,943


39,763,442


38,458,726








              Total liabilities and shareholders' equity


$

404,384,670


$

365,137,773


$

364,328,143








 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)









For the Three Months





Ended March 31,





2014


2013


Interest Income:







Interest and fees on loans



$

3,153,030


$

3,141,709


Interest on investment securities:






Taxable



224,352


168,175


Exempt from Federal income taxes



214,466


121,880


Interest on deposits in banks



27,771


31,270


Total interest income



3,619,619


3,463,034









Interest Expense:







Interest on deposits



179,922


209,489


   Interest on junior subordinated deferrable interest debentures



27,373


27,889


           Total interest expense



207,295


237,378









              Net interest income before provision for loan losses



3,412,324


3,225,656









Provision for loan losses



-


-


              Net interest income after provision for loan losses



3,412,324


3,225,656









Non-Interest Income:







Service charges



163,617


153,329


Gain on sale of available-for-sale investment securities, net



76,021


125,926


Mortgage loan brokerage fees



5,549


13,449


Earnings on cash surrender value of life insurance policies



73,387


77,308


Other



88,086


61,456


         Total non-interest income



406,660


431,468









Non-Interest Expense:







Salaries and employee benefits



1,652,756


1,550,159


Occupancy and equipment



326,578


355,339


Other



724,063


682,781


         Total non-interest expense



2,703,397


2,588,279









         Income before provision for income taxes



1,115,587


1,068,845









Provision for income taxes



373,000


326,000











            Net income



$

742,587


$

742,845











Basic earnings per share



$

0.27


$

0.26











Diluted earnings per share



$

0.26


$

0.26


 

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(UNAUDITED)

For the Periods Ended March 31, 2014, December 31, 2013




















Accumulated











Other











Compre-


Total



Common Stock




hensive


Share-







Retained


Income (Loss)


holders'



Shares


Amount


Earnings


(Net of Taxes)


Equity












Balance, January 1, 2013


2,815,036


$    28,080,655


$    8,763,327


$    1,059,184


$    37,903,166

Net income






4,054,468




4,054,468

Other comprehensive loss








(1,205,692)


(1,205,692)

Stock repurchased


(58,000)


(570,725)


(217,755)




(788,480)

Cash dividends $0.18 per share






(501,949)




(501,949)

Stock options exercised and related by benefit


13,893


153,576






153,576

Stock-based compensation expense




148,353






148,353












Balance, December 31, 2013


2,770,929


$    27,811,859


$  12,098,091


$    (146,508)


$    39,763,442












Net income






 

742,587




742,587

Other comprehensive income








369,624


 

369,624

Stock Repurchased


(8,900)


(86,946)


(37,109)




(124,055)

Cash dividend $0.06 per share






(167,431)




(167,431)

Stock options exercised and related tax benefit


24,293


260,041






260,041

Stock-based compensation expense




136,735






136,735












Balance March 31, 2014


2,786,322


$    28,121,689


$  12,636,138


$       223,116


$    40,980,943

 

SOURCE Valley Commerce Bancorp

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