For the quarter ended June 30, 2011, the bank reported net loss of $631 thousand, or <$0.51> per diluted share, compared to net loss of $2.21 million, or <$1.81> per diluted share for the quarter ended June 30, 2010. The improvement in net loss between the respective periods is primarily attributed to the decrease in provision for loan losses. The provision to the allowance for loan losses for the second quarter of 2011 totaled $884 thousand, compared to $2.52 million for the same period in 2010. Core earnings, which are represented by the earnings for the period prior to the provision for loan losses and income tax, increased from $131 thousand in the first quarter of 2011 to $253 thousand in the second quarter of 2011.
At June 30, 2011, the Bank had $6.3 million of non-performing loans, representing 5.66% of the Bank’s total loans, compared to $6.6 million of non-performing loans, or 5.30% of total loans, at June 30, 2010. The Bank had foreclosed real estate of $4.0 million at June 30, 2011, compared to foreclosed real estate of $1.2 million at June 30, 2010. At June 30, 2011, non-accrual loans totaled $6.3 million, representing 5.66% of total loans at that date, compared to non-accrual loans of $6.6 million at June 30, 2010, representing 5.30% of total loans at that date. The allowance for loan losses totaled $2.80 million at June 30, 2011, or 2.51% of total loans as of that date, compared to $3.06 million at June 30, 2010, or 2.46% of total loans as of that date.
At June 30, 2011, the Bank had total assets of $146.7 million, representing a decrease of $9.2 million or 5.91% compared to total assets of $155.9 million at June 30, 2010. The Bank had $20 million in FHLB borrowings at June 30, 2011, representing an increase of $3 million or 17.65% from the FHLB borrowings of $17 million at June 30, 2010. Total deposits at June 30, 2011 were $114.3 million, representing a decrease of 7.91% compared to total deposits of $124.1 million at June 30, 2010. Non-interest bearing demand deposits totaled $43.8 million at June 30, 2011, representing 38.32% of total deposits at that date, compared to $37.6 million of non-interest bearing demand deposits at June 30, 2010, which represented 30.3% of total deposits at that date.
The Bank’s gross loan portfolio decreased to $111.5 million at June 30, 2011, representing a 10.34% decrease compared to gross loans of $124.4 million at June 30, 2010. Unfunded credit commitments stood at $10.5 million at June 30, 2011, representing a 37.87% decrease compared to unfunded commitments of $16.9 million at June 30, 2010.
The Bank’s net interest margin for the quarter ended June 30, 2011 was 4.92%, an increase of 60 basis points as compared to the net interest margin of 4.31% for the second quarter of 2010.
Total shareholders’ equity at June 30, 2011 was $11.7 million, representing a decrease of $2.3 million, or 16.81% compared to total shareholders’ equity of $14 million at June 30, 2010. On December 1, 2010, the Bank entered into a Consent Order with the Federal Deposit Insurance Corporation and the California Department of Financial Institutions. The Consent Order requires the Bank, by February 28, 2011, to increase and thereafter maintain its Tier I capital in such an amount to ensure that the Bank’s leverage ratio equals or exceeds 9.50 percent and its total risk-based capital ratio equals or exceeds 12 percent. As of June 30, 2011, these capital ratios were 7.73% and 10.92%, respectively. As a result, the Bank was not in compliance, as of June 30, 2011, with the capital ratios required by the Consent Order. To increase the Bank’s capital ratios to the extent required by the Consent Order, the Bank has engaged the services of Hovde Securities LLC, a Financial Industry Regulatory Authority registered broker-dealer which specializes in the community banking industry, to assist the Bank in its efforts to raise up to $10 million in a nonpublic offering of common stock to accredited investors only. The offering is presently scheduled to close on or before August 31, 2011. The Bank cannot predict at this time whether this offering will satisfy the conditions of the Consent Order, or whether other actions, such as reducing the asset size of the Bank by selling loans, will be required to achieve compliance. Although the Bank is not in compliance with the capital requirements of the Consent Order at June 30, 2011, the Bank was adequately capitalized as of that date under applicable regulatory guidelines.
The Bank’s President and Chief Executive Officer, Kerry L. Pendergast, stated, “I believe we are beginning to see meaningful signs of improvement within the Bank’s loan portfolio; this includes a quarter over quarter decline in delinquency and in a decrease in non-accrual loans, which was triggered by foreclosures and movement into bank owned property. While the level of bank owned property remained relatively unchanged, it should be noted that the Bank liquidated in excess of $1.1 million in OREO within the quarter, suggesting that investors may believe the market has bottomed out. The Bank’s delinquency ratio for the quarter stood at 4.48% compared to a first quarter 2011 delinquency ratio of 6.20% and an 8.76% ratio for the second quarter 2010.”
Pendergast went on to say, “Proactively managing our problem assets and disposing of Bank-owned property in an effective and timely manner continues to be the primary focus of the Bank. Profitability is inexorably linked to these activities and Executive Management is committed to making continued progress in each of these areas; this also includes controlling overhead expenses to ensure that the Bank is operating at optimum efficiency, thereby improving the institution’s core earnings. For the second quarter, the Bank was able to improve its core earnings by 93%, compared to the first quarter of 2011.”
Pendergast said in closing, “As I reported in our first quarter 2011 release, the pace of newly identified problem loans has slowed considerably, but our challenge in the coming months will be to continue the orderly, but timely, liquidation of Bank-owned property and in maintaining a proactive, communicative culture with those borrowers who are continuing to exhibit signs of stress.”
Premier Service Bank is a California state-chartered bank with two offices, its headquarters office in Riverside and a full-service banking office in Corona. The Bank provides commercial banking services, including a wide variety of checking accounts, investment services with competitive deposit rates, on-line banking products, and real estate, construction, commercial and consumer loans, to small and medium-sized businesses, professionals and individuals. Additional information about Premier Service Bank is available at its website at www.premierservicebank.com.
This news release contains statements that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates and projections about Premier Service Bank’s business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including those described above and in the following: Premier Service Bank’s ability to increase its assets, deposits and total loans, control expenses, retain critical personnel, manage interest rate risk, manage technological changes, address regulatory requirements, and other risks discussed from time to time in Premier Service Bank’s filings and reports with the Federal Deposit Insurance Corporation. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic and international economic conditions. Such forward-looking statements speak only as of the date on which they are made, and Premier Service Bank does not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this release.
For a more complete discussion of risks and uncertainties, investors and security holders are urged to read Premier Service Bank’s annual report on Form 10-K, quarterly reports on Form 10-Q and other reports filed by Premier Service Bank with the FDIC.
See the unaudited Financial Data:
|Financial Data - Premier Service Bank|
|(In Thousands)||June 30, 2011||Mar. 31, 2011||Dec. 31, 2010||Sept. 30, 2010||June 30, 2010|
|Interest income(not taxable equivalent)||$||1,959||$||1,938||$||2,063||$||2,057||$||2,192|
|Net interest income||1,714||1,647||1,734||1,706||1,801|
|Provision for loan losses||884||725||960||195||2,516|
|Net interest income after|
|provision for loan losses||830||922||774||1,511||(715||)|
|Income before income taxes||(631||)||(594||)||(707||)||145||(2,244||)|
|(Benefit)/Provision for income taxes||-||-||-||502||(32||)|
|(In Thousands)||June 30, 2011||Mar. 31, 2011||Dec. 31, 2010||Sept. 30, 2010||June 30, 2010|
|Net income - basic||$||(0.51||)||$||(0.48||)||$||(0.57||)||$||(0.29||)||$||(1.81||)|
|Weighted average shares used in basic||1,261||1,261||1,261||1,261||1,261|
|Net income - diluted||$||(0.51||)||$||(0.48||)||$||(0.57||)||$||(0.29||)||$||(1.81||)|
|Weighted average shares used in diluted||1,261||1,261||1,261||1,261||1,261|
|Book value at period end||$||6.01||$||6.49||$||6.97||$||7.60||$||7.91|
|Balance Sheet - At Period-End|
|Cash and due from banks||$||17,947||$||22,636||$||24,060||$||22,041||$||16,372|
|Investments and Fed fund sold||9,766||10,250||8,476||8,491||9,709|
|Allowance for loan losses||(2,803||)||(2,561||)||(2,549||)||(2,952||)||(3,060||)|
|Total Liabilities and Shareholders' equity||$||146,736||$||154,308||$||155,992||$||157,488||$||155,956|
|Asset Quality & Capital - At Period-End|
|Loans past due 90 days or more||-||-||-||-||-|
|Other real estate owned||4,036||3,927||1,865||1,162||1,242|
|Other bank owned assets||-||-||-||-||-|
|Total non-performing assets||$||10,345||$||11,974||$||10,074||$||10,797||$||7,832|
|Allowance for losses to loans, gross||2.51||%||2.25||%||2.17||%||2.42||%||2.46||%|
|Non-accrual loans to total loans, gross||5.66||%||7.08||%||6.98||%||7.89||%||5.30||%|
|Non-performing loans to total loans, gross||5.66||%||7.08||%||6.98||%||7.89||%||5.30||%|
|Non-performing asset to total assets||7.05||%||7.76||%||6.46||%||6.86||%||5.02||%|
|Allowance for losses to non-performing loans||44.43||%||31.83||%||31.05||%||30.64||%||46.43||%|
|Total risk-based capital ratio||10.92||%||11.27||%||11.64||%||11.90||%||11.86||%|
|Tier 1 risk-based capital ratio||9.66||%||10.00||%||10.38||%||10.63||%||10.60||%|
|Tier 1 leverage ratio||7.73||%||7.87||%||8.05||%||8.57||%||8.61||%|