For the year ended December 31, 2011, the Bank reported a net loss of $2.19 million, or ($1.77) per diluted share, compared to a net loss of $3.26 million, or ($2.66) per diluted share for the year ended December 31, 2010. The net loss for the fourth quarter of 2011 was $820 thousand, or ($0.66) per diluted share, compared to a net loss of $707 thousand, or ($0.57) per diluted share for the fourth quarter of 2010. The variance in earnings between the respective periods is primarily attributed to the provisions to the Bank’s allowance for loan losses, which, for the year ended December 31, 2011, totaled $2.79 million, compared to $4.01 million for the year ended December 31, 2010. The provision to the allowance for loan losses for the fourth quarter of 2010 totaled $910 thousand, compared to $960 thousand for the same period in 2010.
At December 31, 2011, the Bank had $8.93 million of non-performing loans, representing 8.61% of the Bank’s total loans, compared to $8.21 million of non-performing loans, or 6.98% of total loans, at December 31, 2010. Impairment analyses are performed on the Bank’s non-performing loans and impairment adjustments, if any, are written off as a part of this process. The Bank had foreclosed real estate of $2.92 million at December 31, 2011, compared to foreclosed real estate of $1.87 million at December 31, 2010. All non-performing loans were on non-accrual at December 31, 2011 and 2010. The allowance for loan losses totaled $2.36 million at December 31, 2011, or 2.28% of total loans as of that date, compared to $2.55 million at December 31, 2010, or 2.17% of total loans as of that date.
At December 31, 2011, the Bank had total assets of $141 million, representing a decrease of $14.7 million or 9.45% compared to total assets of $156 million at December 31, 2010. Total deposits at December 31, 2011 were $111.8 million, representing a 9.43% reduction compared to total deposits of $123.4 million at December 31, 2010. Non-interest bearing demand deposits totaled $41.1 million at December 31, 2011, representing 36.8% of total deposits at that date, compared to $37.6 million of non-interest bearing demand deposits at December 31, 2010, which represented 30.5% of total deposits at that date.
The Bank’s gross loan portfolio totaled $103.7 million at December 31, 2011, representing an 11.9% decrease compared to gross loans of $117.6 million at December 31, 2010. Unfunded credit commitments stood at $7.6 million at December 31, 2011, representing a 42.9% decrease when compared to unfunded commitments of $13.3 million at December 31, 2010.
The Bank’s net interest margin for the year ended December 31, 2011 was 4.82%, a decrease of 0.14% compared to the net interest margin of 4.96% for the year ended December 31, 2010. The Bank’s net interest margin for the quarter ended December 31, 2011 was 4.64%, a decrease of 0.09% compared to the net interest margin of 4.73% for the fourth quarter of 2010.
At December 31, 2011, the Bank was adequately capitalized under applicable regulatory guidelines. Total shareholders’ equity at December 31, 2011 was $10.7 million, representing a decrease of $2.2 million, or 17%, compared to total shareholders’ equity of $12.9 million at December 31, 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. Among the provisions of the Consent Order is the requirement that within 90 days from the effective date of the Order (by February 28, 2011), the Bank shall 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. The Bank was not in compliance with this requirement as of February 28, 2011 as required by the Order. As of December 31, 2011, these capital ratios were 7.21% and 10.78%, respectively. As a result, the Bank had not achieved compliance, as of December 31, 2011, with the capital ratios required by the Order. The Bank attempted to comply with the capital requirements of the Order during 2011, but its private placement offering during 2011 of up to $10 million of common stock to accredited investors was not successful. The stock permit issued by the DFI for that offering expired on December 23, 2011, and the Bank did not request an extension of the permit in view of the stale financial statements included in the offering and other factors. Because the Bank did not sell the minimum amount required by the offering, all subscriptions were returned when the offering expired. Before the Bank may commence a new offering, it must receive audited financial statements for its year ended December 31, 2011, and a new stock permit must be issued. Audited financial statements are anticipated to be issued in early February. At that time, if the Bank has not satisfied the capital ratios required by the Order, the Bank intends to seek a new stock permit from the Department of Financial Institutions for the sale of up to $10 million of common stock to accredited investors in another nonpublic offering. While the Bank continues to be adequately capitalized under applicable regulatory guidelines, in order to comply with the capital requirements of the Consent Order the Bank will need to complete the proposed capital offering in 2012 or find another solution which improves its capital ratios, including the possible sale of the Bank or a transfer of control of the Bank, or taking steps to decrease the asset size of the Bank until the ratios are in compliance with the Consent Order.
The Bank’s President and Chief Executive Officer, Kerry L. Pendergast, stated, “While 2011, in most respects, was a continuum of 2010, there are anecdotal signs suggesting that, perhaps, the local marketplace is beginning to shows some signs of stabilization. While it is too early to state that we’ve turned the corner, I would suggest that our customers appear to be more optimistic about the future.”
Pendergast went on to say, “Throughout 2011 Premier Service Bank focused its efforts on managing the credit portfolio; while this message has been embedded in our releases for quite some time, it is central to returning the Bank to consistent profitability. Recognizing that delinquency is generally a precursor to more serious issues developing in a relationship, management and staff intensified their collection efforts throughout the year; as a result, overall delinquency within the institution has been trending downward over the last 2 quarters. In 2011 the Bank contributed $2.79 million to its Allowance for Loan Losses as compared to a contribution of $4.01 million in 2010; this serves to support the belief that the pace of problem loans is beginning to decline and that appraisal valuations, tied to Classified Commercial Real Estate Loans, are also beginning to stabilize.”
Pendergast said in closing, “While improving the overall asset quality of the Bank continues to be the primary focus of the executive management team and our Board of Directors, our entire team works tirelessly to ensure that our “customer first” mindset does not get lost in the process. Throughout the year, all of the Bank’s front line officers participated in a structured calling program that focused on the Bank’s existing customer base; at a minimum, each client assigned to an account officer was called on at least twice within the calendar year. The importance of retention calling cannot be overstated and is critical in an environment where large, money center banks are entering the region with the dollars and the resources to buy market share.”
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.
Forward-looking Statements
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.
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| Financial Data – Premier Service Bank | ||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||
| Quarter Ended | ||||||||||||||||||||||||||||||
| (In Thousands) | Dec. 31, 2011 | Sept. 30, 2011 | June 30, 2011 | Mar. 31, 2011 | Dec. 31, 2010 | |||||||||||||||||||||||||
| Interest income(not taxable equivalent) | $ | 1,750 | $ | 1,843 | $ | 1,959 | $ | 1,938 | $ | 2,063 | ||||||||||||||||||||
| Interest expense | 222 | 232 | 245 | 291 | 329 | |||||||||||||||||||||||||
| Net interest income | 1,528 | 1,611 | 1,714 | 1,647 | 1,734 | |||||||||||||||||||||||||
| Provision for loan losses | 910 | 275 | 884 | 725 | 960 | |||||||||||||||||||||||||
| Net interest income after provision for loan losses | 618 | 1,336 | 830 | 922 | 774 | |||||||||||||||||||||||||
| Non-interest income | 129 | 148 | 261 | 178 | 163 | |||||||||||||||||||||||||
| Non-interest expense | 1,566 | 1,625 | 1,722 | 1,694 | 1,644 | |||||||||||||||||||||||||
| Income before income taxes | (819 | ) | (141 | ) | (631 | ) | (594 | ) | (707 | ) | ||||||||||||||||||||
| (Benefit)/Provision for income taxes | 1 | - | - | - | - | |||||||||||||||||||||||||
| Net income | $ | (820 | ) | $ | (141 | ) | $ | (631 | ) | $ | (594 | ) | $ | (707 | ) | |||||||||||||||
| Quarter Ended | ||||||||||||||||||||||||||||||
| (In Thousands) | Dec. 31, 2011 | Sept. 30, 2011 | June 30, 2011 | Mar. 31, 2011 | Dec. 31, 2010 | |||||||||||||||||||||||||
| Per share: | ||||||||||||||||||||||||||||||
| Net income – basic | $ | (0.66 | ) | $ | (0.12 | ) | $ | (0.51 | ) | $ | (0.48 | ) | $ | (0.57 | ) | |||||||||||||||
| Weighted average shares used in basic | 1,261 | 1,261 | 1,261 | 1,261 | 1,261 | |||||||||||||||||||||||||
| Net income – diluted | $ | (0.66 | ) | $ | (0.12 | ) | $ | (0.51 | ) | $ | (0.48 | ) | $ | (0.57 | ) | |||||||||||||||
| Weighted average shares used in diluted | 1,261 | 1,261 | 1,261 | 1,261 | 1,261 | |||||||||||||||||||||||||
| Book value at period end | $ | 5.22 | $ | 5.89 | $ | 6.00 | $ | 6.49 | $ | 6.97 | ||||||||||||||||||||
| Ending shares | 1,261 | 1,261 | 1,261 | 1,261 | 1,261 | |||||||||||||||||||||||||
| Balance Sheet – At Period-End | ||||||||||||||||||||||||||||||
| Cash and due from banks | $ | 22,867 | $ | 21,875 | $ | 17,947 | $ | 22,636 | $ | 24,060 | ||||||||||||||||||||
| Investments and Fed fund sold | 8,446 | 7,724 | 9,766 | 10,250 | 8,476 | |||||||||||||||||||||||||
| Gross Loans | 103,668 | 109,429 | 111,500 | 113,645 | 117,624 | |||||||||||||||||||||||||
| Deferred fees | (198 | ) | (211 | ) | (233 | ) | (254 | ) | (263 | ) | ||||||||||||||||||||
| Allowance for loan losses | (2,359 | ) | (3,130 | ) | (2,803 | ) | (2,561 | ) | (2,549 | ) | ||||||||||||||||||||
| Net Loans | 101,111 | 106,088 | 108,464 | 110,830 | 114,812 | |||||||||||||||||||||||||
| Other assets | 8,832 | 9,398 | 10,559 | 10,592 | 8,644 | |||||||||||||||||||||||||
| Total Assets | $ | 141,256 | $ | 145,085 | $ | 146,736 | $ | 154,308 | $ | 155,992 | ||||||||||||||||||||
| Non-interest-bearing deposits | $ | 41,130 | $ | 43,246 | $ | 43,762 | $ | 44,947 | $ | 37,588 | ||||||||||||||||||||
| Interest-bearing deposits | 70,629 | 69,499 | 70,519 | 77,347 | 85,809 | |||||||||||||||||||||||||
| Other liabilities | 18,812 | 20,818 | 20,797 | 19,749 | 19,737 | |||||||||||||||||||||||||
| Shareholders’ equity | 10,685 | 11,522 | 11,658 | 12,265 | 12,858 | |||||||||||||||||||||||||
| Total Liabilities and Shareholders’ equity | $ | 141,256 | $ | 145,085 | $ | 146,736 | $ | 154,308 | $ | 155,992 | ||||||||||||||||||||
| Asset Quality & Capital – At Period-End | ||||||||||||||||||||||||||||||
| Non-accrual loans | $ | 8,926 | $ | 9,591 | $ | 6,309 | $ | 8,047 | $ | 8,209 | ||||||||||||||||||||
| Loans past due 90 days or more | - | - | - | - | - | |||||||||||||||||||||||||
| Other real estate owned | 2,927 | 3,194 | 4,036 | 3,927 | 1,865 | |||||||||||||||||||||||||
| Other bank owned assets | - | - | - | - | - | |||||||||||||||||||||||||
| Total non-performing assets | $ | 11,853 | $ | 12,785 | $ | 10,345 | $ | 11,974 | $ | 10,074 | ||||||||||||||||||||
| Allowance for losses to loans, gross | 2.28 | % | 2.86 | % | 2.51 | % | 2.25 | % | 2.17 | % | ||||||||||||||||||||
| Non-accrual loans to total loans, gross | 8.61 | % | 8.76 | % | 5.66 | % | 7.08 | % | 6.98 | % | ||||||||||||||||||||
| Non-performing loans to total loans, gross | 8.61 | % | 8.76 | % | 5.66 | % | 7.08 | % | 6.98 | % | ||||||||||||||||||||
| Non-performing asset to total assets | 8.39 | % | 8.81 | % | 7.05 | % | 7.76 | % | 6.46 | % | ||||||||||||||||||||
| Allowance for losses to non-performing loans | 26.43 | % | 32.63 | % | 44.43 | % | 31.83 | % | 31.05 | % | ||||||||||||||||||||
| Total risk-based capital ratio | 10.78 | % | 11.15 | % | 10.92 | % | 11.27 | % | 11.64 | % | ||||||||||||||||||||
| Tier 1 risk-based capital ratio | 9.52 | % | 9.88 | % | 9.66 | % | 10.00 | % | 10.38 | % | ||||||||||||||||||||
| Tier 1 leverage ratio | 7.21 | % | 7.86 | % | 7.73 | % | 7.87 | % | 8.05 | % | ||||||||||||||||||||
