For the quarter ended September 30, 2011, the bank reported a net loss of $141 thousand, or <$0.12> per diluted share, compared to a net loss of $357 thousand, or <$0.29> per diluted share for the quarter ended September 30, 2010. The improvement in net loss between the respective periods is primarily attributed to the decrease in the Bank’s deferred tax expenses. The provision to the allowance for loan losses for the third quarter of 2011 totaled $275 thousand, compared to $195 thousand for the same period in 2010.
At September 30, 2011, the Bank had $9.6 million of non-performing loans, representing 8.76% of the Bank’s total loans, compared to $9.6 million of non-performing loans, or 7.89% of total loans, at June 30, 2010. The Bank had foreclosed real estate of $3.2 million at September 30, 2011, compared to foreclosed real estate of $1.2 million at September 30, 2010. At September 30, 2011, non-accrual loans totaled $9.6 million, representing 8.76% of total loans at that date, compared to non-accrual loans of $9.6 million at September 30, 2010, representing 7.89% of total loans at that date. The allowance for loan losses totaled $3.13 million at September 30, 2011, or 2.86% of total loans as of that date, compared to $2.95 million at September 30, 2010, or 2.42% of total loans as of that date.
At September 30, 2011, the Bank had total assets of $145.1 million, representing a decrease of $12.4 million or 7.88% compared to total assets of $157.5 million at September 30, 2010. The Bank had $20 million in FHLB borrowings at September 30, 2011, representing an increase of $1 million or 5.26% from the FHLB borrowings of $19 million at September 30, 2010. Total deposits at September 30, 2011 were $112.7 million, representing a decrease of 9.15% compared to total deposits of $124.1 million at September 30, 2010. Non-interest bearing demand deposits totaled $43.2 million at September 30, 2011, representing 38.36% of total deposits at that date, compared to $38.9 million of non-interest bearing demand deposits at September 30, 2010, which represented 31.3% of total deposits at that date.
The Bank’s gross loan portfolio decreased to $109.4 million at September 30, 2011, representing a 10.35% decrease compared to gross loans of $122.1 million at September 30, 2010. Unfunded credit commitments stood at $10.4 million at September 30, 2011, representing a 27.27% decrease compared to unfunded commitments of $14.3 million at September 30, 2010.
The Bank’s net interest margin for the quarter ended September 30, 2011 was 4.94%, an increase of nine basis points as compared to the net interest margin of 4.85% for the third quarter of 2010.
Total shareholders’ equity at September 30, 2011 was $11.5 million, representing a decrease of $2.1 million, or 15.41% compared to total shareholders’ equity of $13.6 million at September 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 September 30, 2011, these capital ratios were 7.86% and 11.15%, respectively. As a result, the Bank was not in compliance, as of September 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 December 23, 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 September 30, 2011, the Bank was adequately capitalized as of that date under applicable regulatory guidelines.
In the Bank’s lawsuit against the FDIC, as receiver for 1st Centennial Bank, and against certain former officers of 1st Centennial Bank and 1st Centennial’s director and officer liability insurance carrier, the Bank negotiated a settlement, which was executed by both parties and entered into the Bank’s books in September 2011 for $150,000 cash from the FDIC. This amount constitutes a recovery which was added to the Bank’s loan loss reserve. The settlement also waives the FDIC’s claim for unpaid contributions by the Bank, totaling $139,000, under the participation agreement. Since the other defendants in the case were not willing to settle, the matter went to trial in October. It is anticipated that the parties will be advised of the results of the trial prior to year-end.
The Bank’s President and Chief Executive Officer, Kerry L. Pendergast, stated, “Within the quarter the Bank was able to dispose of approximately $628 thousand in Bank owned properties ("OREO"), the Bank has another $975 thousand in OREO that is either in escrow or under contract to purchase, which should close escrow within the fourth quarter of 2011.”
Pendergast went on to say, “It is also important to note that within the Bank’s non-accrual loan portfolio of $9.6 million, there is approximately 44% or $4.2 million in loans that are current, according to modified terms or to the terms of their original loan agreements. Additionally, the Bank has another 14% or $1.3 million in loans that are represented by borrowers who are making their payments; however, those payments are not being received in a timely manner.”
Pendergast continued by saying, “Notwithstanding the fact that the level of non-accrual loans remains high, the Bank continues to enjoy a net interest margin that is in the top 10% of peer, as measured by historical data. This has been accomplished by controlling the cost of interest bearing liabilities, as well as by increasing the level of non-interest bearing deposits in proportion to the Bank’s earning assets; this is a fundamental component to enhancing the Bank’s core earnings.”
Pendergast said in closing, “We continue to remain focused on improving our overall asset quality, as well as in strengthening the Bank’s Balance Sheet structure, while, at the same time, remaining committed to the strong relationship focus we have with our customers and shareholders.”
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.
|Financial Data - Premier Service Bank|
|(In Thousands)||Sept 30, 2011||June 30, 2011||Mar. 31, 2011||Dec. 31, 2010||Sept. 30, 2010|
Interest income (not taxable equivalent)
|Net interest income||1,611||1,714||1,647||1,734||1,706|
|Provision for loan losses||275||884||725||960||195|
Net interest income after provision for loan losses
|Income before income taxes||(141||)||(631||)||(594||)||(707||)||145|
|(Benefit)/Provision for income taxes||-||-||-||-||502|
|(In Thousands)||Sept 30, 2011||June 30, 2011||Mar. 31, 2011||Dec. 31, 2010||Sept. 30, 2010|
|Net income - basic||$||(0.12||)||$||(0.51||)||$||(0.48||)||$||(0.57||)||$||(0.29||)|
|Weighted average shares used in basic||1,261||1,261||1,261||1,261||1,261|
|Net income - diluted||$||(0.12||)||$||(0.51||)||$||(0.48||)||$||(0.57||)||$||(0.29||)|
|Weighted average shares used in diluted||1,261||1,261||1,261||1,261||1,261|
|Book value at period end||$||5.89||$||6.00||$||6.49||$||6.97||$||7.60|
|Balance Sheet - At Period-End|
|Cash and due from banks||$||21,875||$||17,947||$||22,636||$||24,060||$||22,041|
|Investments and Fed fund sold||7,724||9,766||10,250||8,476||8,491|
|Allowance for loan losses||(3,130||)||(2,803||)||(2,561||)||(2,549||)||(2,952||)|
Total Liabilities and Shareholders' equity
|Asset Quality & Capital - At Period-End|
|Loans past due 90 days or more||-||-||-||-||-|
|Other real estate owned||3,194||4,036||3,927||1,865||1,162|
|Other bank owned assets||-||-||-||-||-|
|Total non-performing assets||$||12,785||$||10,345||$||11,974||$||10,074||$||10,797|
|Allowance for losses to loans, gross||2.86||%||2.51||%||2.25||%||2.17||%||2.42||%|
|Non-accrual loans to total loans, gross||8.76||%||5.66||%||7.08||%||6.98||%||7.89||%|
|Non-performing loans to total loans, gross||8.76||%||5.66||%||7.08||%||6.98||%||7.89||%|
|Non-performing asset to total assets||8.81||%||7.05||%||7.76||%||6.46||%||6.86||%|
|Allowance for losses to non-performing loans||32.63||%||44.43||%||31.83||%||31.05||%||30.64||%|
|Total risk-based capital ratio||11.15||%||10.92||%||11.27||%||11.64||%||11.90||%|
|Tier 1 risk-based capital ratio||9.88||%||9.66||%||10.00||%||10.38||%||10.63||%|
|Tier 1 leverage ratio||7.86||%||7.73||%||7.87||%||8.05||%||8.57||%|