Premier Service Bank Announces Financial Results for the Second Quarter of 2013

Premier Service Bank Announces Financial Results for the Second Quarter of 2013

RIVERSIDE, Calif.--(BUSINESS WIRE)-- Premier Service Bank, Riverside, California (OTCBB:PSBK) today announced its unaudited financial results for the second quarter of 2013.

For the quarter ended June 30, 2013, the bank reported net loss of $23 thousand, or <$0.03> per diluted share, compared to net loss of $166 thousand, or <$0.14> per diluted share for the quarter ended June 30, 2012. The improvement in earnings between the respective periods is attributed to the decrease in the write-downs and expenses related to the other real estate owned during the second quarter of 2013. There was no additional provision to the allowance for loan losses required for the second quarter of 2013 and for the same period in 2012.

At June 30, 2013, the Bank had $5.5 million of non-performing loans, representing 8.05% of the Bank's total loans, compared to $5.5 million of non-performing loans, or 5.70% of total loans, at June 30, 2012. The Bank had foreclosed real estate of $946 thousand at June 30, 2013, compared to foreclosed real estate of $3.2 million at June 30, 2012. At June 30, 2013, non-accrual loans totaled $5.5 million, representing 8.05% of total loans at that date, compared to non-accrual loans of $5.5 million at June 30, 2012, representing 5.70% of total loans at that date. The allowance for loan losses totaled $2.5 million at June 30, 2013, or 3.71% of total loans as of that date, compared to $2.9 million at June 30, 2012, or 3.03% of total loans as of that date.

At June 30, 2013, the Bank had total assets of $129 million, representing a decrease of $8.2 million or 5.96% compared to total assets of $137 million at June 30, 2012. The Bank had $6 million in FHLB borrowings at June 30, 2013, representing a decrease of $10 million or 62.5% from the FHLB borrowings of $16 million at June 30, 2012. Total deposits at June 30, 2013 were $110.9 million, representing an increase of 0.82% compared to total deposits of $110.0 million at June 30, 2012. Non-interest bearing demand deposits totaled $42.6 million at June 30, 2013, representing 38.42% of total deposits at that date, compared to $42.4 million of non-interest bearing demand deposits at June 30, 2012, which represented 38.55% of total deposits at that date.

The Bank's gross loan portfolio decreased to $68.0 million at June 30, 2013, representing a 29.24% decrease compared to gross loans of $96.1 million at June 30, 2012. Unfunded credit commitments stood at $7.4 million at June 30, 2013, representing a 6.33% decrease compared to unfunded commitments of $7.9 million at June 30, 2012.

The Bank's net interest margin for the quarter ended June 30, 2013 was 3.60%, a decrease of 114 basis points as compared to the net interest margin of 4.74% for the second quarter of 2012.

Total shareholders' equity at June 30, 2013 was $11.1 million, representing an increase of $747 thousand, or 7.77% compared to total shareholders' equity of $10.3 million at June 30, 2012. On December 1, 2010, the Bank entered into a Consent Order with the Federal Deposit Insurance Corporation and the California Department of Financial Institutions, now known as the Division of Financial Institutions of the Department of Business Oversight. The Consent Order requires the Bank, within 90 days from the effective date of the Order (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% and its total risk-based capital ratio equals or exceeds 12%. As of June 30, 2013, these capital ratios were 8.61% and 16.33%, respectively. As a result, the Bank was not in compliance, as of June 30, 2013, with the leverage capital ratio, but was in compliance with the total risk based capital ratio requirement as of that date. Although not in full compliance with the capital ratios required by the Consent Order as of June 30, 2013, the Bank was adequately capitalized as of that date under applicable regulatory guidelines.

The Bank attempted to comply with the capital requirements of the Order during 2011 with a capital offering that was not successful. During 2012, the Bank directed its efforts to a merger transaction to satisfy its capital requirements. On February 27, 2012, the Bank entered into an Agreement and Plan of Merger (the "Merger Agreement") with First California Bank, a state chartered commercial bank ("FCB"), and its holding company, First California Financial Group, Inc. ("FCAL") (NAS: FCAL) , pursuant to which the Bank was to merge into FCB (the "Merger"). On January 30, 2013, FCB, FCAL and the Bank issued a joint press release announcing that they jointly agreed to terminate the Merger Agreement and the proposed Merger, effective January 30, 2013.

Since the Merger is not going forward, in order to comply with the capital requirements of the Consent Order the Bank will need to complete a new capital offering, find another merger partner, or continue to reduce the total assets of the Bank. On April 9, 2013, the Bank engaged the services of Hovde Group, LLC, a Financial Industry Regulatory Authority registered broker-dealer, as its exclusive placement agent and financial advisor, to assist the Bank in addressing these issues.

The Bank's President and Chief Executive Officer, Kerry L. Pendergast, stated, "Clearly the challenge facing Premier Service Bank, as well as many other community banks of our size, in the second quarter ended June 30, 2013, as well as the trailing two quarters, has been to find new credit opportunities to expand our relationship base. It has also been our challenge to replace a large number of 'transactional' credits that have been lost to other institutions through the refinancing and pay-off of those credits. The willingness of the larger super-regional and money center banks to refinance these credits at reduced rates and bargain terms, has put community banks at a competitive disadvantage because interest rate risk associated with offering low fixed rate loans, with extended terms, is not easily mitigated by smaller institutions. Notwithstanding these issues, at June 30, 2013 the Bank had a loan pipeline in excess of $9 million and the Bank was proactively communicating with its current borrowers to ensure that the Bank would have the opportunity to refinance their credits and thereby protect valued lending relationships. The Bank believes its efforts will result in increased refinancing opportunities throughout the second half of 2013."

Pendergast went on to say, "We have stepped up our business development activities by adding additional lending staff and increasing our marketing and advertising efforts. Our marketing is focused on capturing new lending and banking relationships from individuals and companies who are looking to establish 'personal' banking relationships with a local community bank."

Pendergast continued by saying, "This was the fifth consecutive quarter during which the Bank was not required to make any provision expense to its Allowance for loan losses. Based on management's analysis as of June 30, 2013, the Bank concluded not only that a provision to the Allowance was not required, but that as that date the Bank had a reserve surplus of $845 thousand. As stated above in this release the Bank's Allowance for loan losses, as a percentage of total loans, was 3.71% as of June 30, 2013, compared to 3.03% of total loans as of June 30, 2012. The outlook for a continuing improvement in the local economy correlates to the improving trends the Bank is experiencing within its lending portfolio, as well as with the stabilized trends evidenced within the Bank's Allowance."

Pendergast said in closing, "We are continuing to have success in disposing of real estate that we acquired through foreclosure. We closed the quarter ended June 30, 2013 with $946 thousand of OREO, as compared to $1.2 million and $3.2 million at the quarters ended March 31, 2013 and June 30, 2012, respectively. We believe we are on track to dispose of the remaining Bank Owned property by the end of the fourth quarter of 2013. While there was an increase in the level of non-performing loans at the end of the second quarter of 2013, we expect that this trend will reverse itself and become more favorable in the fourth quarter of this year, as a result of anticipated payoffs."

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

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.

See the unaudited Financial Data:

Financial Data - Premier Service Bank
  Quarter Ended
(In Thousands)  June 30, 2013  Mar. 31, 2013  Dec. 31, 2012  Sept 30, 2012  June 30, 2012

Interest income (not taxable equivalent)

Interest expense 109  126  142  185  197 
Net interest income1,0581,2211,3891,4371,478
Provision for loan losses -  -  -  -  - 
Net interest income after
provision for loan losses1,0581,2211,3891,4371,478
Non-interest income126442178163154
Non-interest expense 1,206  1,316  1,220  1,439  1,797 
Income before income taxes(22)347347161(165)
(Benefit)/Provision for income taxes 1  -  -  -  1 
Net income$(23)$347 $347 $161 $(166)
Quarter Ended
(In Thousands)  June 30, 2013Mar. 31, 2013Dec. 31, 2012Sept 30, 2012June 30, 2012
Per share:
Net income - basic$(0.03)$0.27$0.27$0.12$(0.14)
Weighted average shares used in basic1,2611,2611,2611,2611,261
Net income - diluted$(0.03)$0.27$0.27$0.12$(0.14)
Weighted average shares used in diluted1,2611,2611,2611,2611,261
Book value at period end$5.46$5.53$5.27$5.01$4.90
Ending shares1,2611,2611,2611,2611,261
Balance Sheet - At Period-End
Cash and due from banks$45,276$47,568$40,023$37,414$28,600
Investments and Fed fund sold12,1375,8844,0466,7276,935
Gross Loans68,04273,94082,94589,66996,082
Deferred fees(130)(122)(134)(144)(181)
Allowance for loan losses(2,525)(2,502)(2,733)(2,891)(2,907)
Net Loans65,38771,31680,07886,63492,994
Other assets 6,187  6,603  7,874  7,627  8,640 
Total Assets$128,987 $131,371 $132,021 $138,402 $137,169 
Non-interest-bearing deposits$42,560$40,260$38,702$44,711$42,382
Interest-bearing deposits68,32868,03870,57671,21467,589
Other liabilities7,04411,93211,94312,01316,890
Shareholders' equity 11,055  11,141  10,800  10,464  10,308 
Total Liabilities and Shareholders' equity$128,987 $131,371 $132,021 $138,402 $137,169 
Asset Quality & Capital - At Period-End
Non-accrual loans$5,476$3,386$3,485$5,314$5,472
Loans past due 90 days or more-----
Other real estate owned9461,2332,5952,2233,189
Other bank owned assets -  -  -  -  - 
Total non-performing assets$6,422 $4,619 $6,080 $7,537 $8,661 
Allowance for losses to loans, gross3.71%3.38%3.29%3.22%3.03%
Non-accrual loans to total loans, gross8.05%4.58%4.20%5.93%5.70%
Non-performing loans to total loans, gross8.05%4.58%4.20%5.93%5.70%
Non-performing asset to total assets4.98%3.52%4.61%5.45%6.31%
Allowance for losses to non-performing loans46.11%73.89%78.42%54.40%53.13%
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