Temecula Valley Bancorp Inc. (NASDAQ:TMCV) today announced net income of $4.2 million for the first quarter of 2007, a 5.0 percent increase compared with the $4.0 million reported for the same period in 2006. Diluted earnings for the quarter were $0.38 per share compared with $0.42 for the year-ago quarter, a decline of 9.5 percent. Per share earnings were negatively impacted by the private placement of 1.4 million common shares in November 2006, which increased average shares outstanding by 15.6 percent compared to first quarter of 2006. Year over year results reflect strong loan growth, tempered by margin compression and a lower level of non-interest income primarily from accelerated prepayments of SBA loans, offset by disciplined expense control, despite a non-recurring charge of under $200,000 from the closing of several SBA loan production offices in January 2007.
"We are pleased with our financial performance considering the headwinds the industry is currently facing," stated Stephen H. Wacknitz, Chairman of the Board, CEO and President.
Returns on average assets and average equity were 1.34 percent and 16.04 percent, respectively, for the quarter ending March 31, 2007, compared to 1.82 percent and 26.47 percent, respectively, for the year-ago first quarter.
Income Statement
Total revenue for the first quarter of 2007 was $20.2 million, compared with $18.3 million for the first quarter of 2006, an increase of 10.3 percent. Net interest income was $16.2 million, up 21.6 percent over the $13.4 million reported for the year-ago quarter. Growth in net interest income reflects a 49.9 percent increase in average earnings assets, partially offset by a 129 basis point, or 18.9 percent, decline in net interest margin from 6.83 percent in the 2006 first quarter, to 5.54 percent in the current first quarter. Compared to fourth quarter 2006, the margin declined 25 basis points.
For the quarter ended March 31, 2007, gross loan interest income was $28.1 million, an increase of $8.8 million, or 45.5 percent above the year-earlier quarter. The effective yield on the loan portfolio was 9.75 percent compared with 10.00 percent for the 2006 first quarter. Interest expense on total interest-bearing liabilities rose 100.0 percent, from $6.1 million in the year-ago quarter, to $12.1 million for the current quarter; the average rate increased from 3.71 percent to 4.89 percent this quarter. More recently, the bank is experiencing modest improvement in funding costs which should relieve some of the margin pressure going forward.
Non-interest income declined $1.0 million, or 20.3 percent, from the year-ago quarter, to $3.9 million for the first quarter of 2007. The major contributor was a $1.3 million swing in net SBA servicing income, from $415,000 in the first quarter of 2006 to a loss this quarter of $855,000. Over the past twelve months, the related SBA servicing assets have decreased by $9.4 million, to $19.0 million due to normal amortization and additional amortization due to accelerated prepayments.
First quarter non-interest expense was $12.7 million, an increase of $1.6 million, or 14.3 percent, over the $11.1 million reported for the year-ago quarter. Salary and benefits expenses accounted for more than half of the increase, rising $0.9 million from the first quarter of 2006. In January 2007, SBA loan production offices located in the northeast and southeast areas of the country were closed. It is anticipated this will result in cost savings greater than the income generated from the closed offices. The cost of the office closings was less than $200 thousand, all of which was taken in the first quarter of 2006. For the quarter ending March 31, 2007, the efficiency ratio increased to 62.7 percent from 60.5 percent in the first quarter of 2006 due to a combination of non-interest income decreasing and non-interest expense increasing.
The provision for loan losses was $415,000 for the current quarter, compared with $314,000 reported for the year-ago quarter, an increase of $101,000, or 32.2 percent. During the course of the last year, the allowance for loan loss increased 35.4 percent, from $9.2 million at March 31, 2006 to $12.5 million at March 31, 2007; however, as a percentage of total loans excluding held for sale loans, the allowance for loan losses slightly decreased year over year from 1.29 percent to 1.27 percent.
Balance Sheet
Total assets were $1.31 billion at March 31, 2007, a 41.9 percent increase from $924.8 million at March 31, 2006; loans increased 47.6 percent over the same period to $1.18 billion. ?The increase in loans was due to continued strong lending activity in the markets we serve as well as the addition of new profit centers, including the SBA unguaranteed purchase program, the SBA wholesale lending program, and the lending operations in the Inland Empire,? stated Steve Wacknitz.
Non-performing assets (net of SBA guarantees) were $10.4 million at March 31, 2007, compared with $1.3 million at March 31, 2006. The majority of the increase is attributable to a $6.1 million real estate project located in the North San Diego county coast area that came off non-accrual status in April 2007; no loss is expected on this project. There was $0.2 million of other real estate owned (net of SBA guarantees) at March 31, 2007 compared to $0.3 million at March 31, 2006. All the other real estate owned on the books at December 31, 2006 was sold during the first quarter of 2007.
Deposits at March 31, 2007 were $1.15 billion, an increase of 39 percent from $826.4 million at March 31, 2006. Deposit growth reflects existing branch growth as well as growth at the newer Carlsbad, Solana Beach, and Ontario full-service branches. The majority of deposit growth was time deposits through various CD promotions, money desk operations, and brokered deposits. Temecula continues to focus on core deposit growth to diminish reliance on brokered deposits for funding. The Company made significant progress during the first quarter of 2007; core deposits increased 10.7 percent to $744.6 million, and currently account for 64.6 percent of total deposits, compared with 62.2 percent at year end.
Shareholder equity increased 72 percent from $62.8 million at March 31, 2006 to $107.7 million at March 31, 2007; the growth was primarily attributable to the $25.1 million private placement completed in November 2006, as well as to the exercise of stock options and the contribution from net income. Capital ratios remain strong at March 31, 2007, with the tier one leverage ratio at 11.27 percent, the tier one risk based ratio at 10.42 percent, and the total risk based capital ratio at 11.65 percent, all above the minimum to qualify as "well capitalized." In addition, during the third quarter of 2006, $12 million of junior subordinated debt securities were issued, of which $11.5 million was transferred to Temecula Valley Bank as tier one capital.
?With the recent trends in the California real estate market, the Bank remains solid with 94 percent of its loans secured by real estate with an overall loan to value of 66 percent. Additionally, we believe that other major economic indicators in California remain strong,? stated Steve Wacknitz.
Temecula Valley Bank was established in 1996 and operates full service offices in Temecula, Murrieta, Corona, Fallbrook, Escondido, Rancho Bernardo, El Cajon, Carlsbad, Solana Beach and Ontario. The Bank also operates a number of regional real estate loan production centers in California. As a nationally authorized SBA Preferred Lender, the Bank has multiple SBA loan production offices across the United States and has funded over $1.3 billion in SBA loans in 36 states in the last five years. The Bank's website is at www.temvalbank.com. Temecula Valley Bancorp was established in June 2002 and operates as a bank holding company for the Bank.
Temecula Valley Bancorp stock is traded on the NASDAQ Global Select Market under the symbol TMCV.
Statements concerning future performance, developments or events concerning expectations for growth and market forecasts, and any other guidance on future periods, constitute forward-looking statements that are subject to a number of risks and uncertainties. Actual results may differ materially from stated expectations. Specific factors include, but are not limited to, the effect of interest rate changes, the ability to control costs and expenses, the impact of consolidation in the banking industry, financial policies of the United States government, and general economic conditions. Additional information on these and other factors that could affect financial results are included in the filings made with Securities and Exchange Commission by Temecula Valley Bancorp Inc.
TEMECULA VALLEY BANCORP INC. | ||||||||
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION | ||||||||
(UNAUDITED) | ||||||||
(all amounts in whole dollars except share and per share information) | ||||||||
March 31, | December 31, | |||||||
2007 | 2006 | % Change | 2006 | |||||
ASSETS | ||||||||
Cash and due from banks | 14,912,136 | 13,868,353 | 8% | 15,190,212 | ||||
Interest-bearing deposits in financial institutions | 99,000 | 0 | 0% | 99,000 | ||||
Federal funds sold | 55,320,000 | 51,600,000 | 7% | 18,180,000 | ||||
Securities | 1,016,061 | 0 | 0% | 1,018,683 | ||||
Loans | ||||||||
Commercial | 51,189,278 | 34,999,379 | 46% | 59,549,998 | ||||
Real Estate-Construction | 592,923,205 | 428,956,681 | 38% | 568,227,221 | ||||
Real Estate-Other | 296,302,059 | 252,017,318 | 18% | 292,826,737 | ||||
SBA | 235,810,696 | 79,875,778 | 195% | 218,407,943 | ||||
Consumer and other | 3,564,237 | 3,250,136 | 10% | 3,680,923 | ||||
Total Gross Loans | 1,179,789,475 | 799,099,292 | 48% | 1,142,692,822 | ||||
Less allowance for loan losses | (12,457,676) | (9,197,804) | 35% | (12,521,717) | ||||
Total Loans, net | 1,167,331,799 | 789,901,488 | 48% | 1,130,171,105 | ||||
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Federal Reserve & Home Loan Bank stock, at cost | 2,025,500 | 3,120,200 | (35%) | 1,996,300 | ||||
Bank premises and equipment, net | 5,600,397 | 5,301,864 | 6% | 5,491,968 | ||||
Other real estate owned, net | 722,250 | 727,500 | (1%) | 1,255,000 | ||||
Cash surrender value life insurance | 24,264,757 | 17,748,233 | 37% | 24,036,291 | ||||
SBA-loan servicing asset | 7,620,753 | 8,257,381 | (8%) | 8,287,703 | ||||
SBA-loan I/O strip receivable | 11,399,461 | 20,200,808 | (44%) | 13,215,760 | ||||
Accrued interest | 6,472,615 | 3,734,422 | 73% | 6,155,174 | ||||
Other Assets | 15,663,635 | 10,295,378 | 52% | 13,091,329 | ||||
Total Assets | 1,312,448,364 | 924,755,627 | 42% | 1,238,188,525 | ||||
LIABILITIES AND STOCKHOLDER EQUITY | ||||||||
Deposits | ||||||||
Non-interest Bearing Deposits | 151,293,417 | 159,969,726 | (5%) | 144,525,203 | ||||
Money Market & NOW | 141,027,852 | 112,693,820 | 25% | 130,357,296 | ||||
Savings | 32,012,266 | 31,105,171 | 3% | 29,781,457 | ||||
Time Deposits | 827,520,018 | 522,630,070 | 58% | 776,836,695 | ||||
Total deposits | 1,151,853,553 | 826,398,787 | 39% | 1,081,500,651 | ||||
Junior subordinated debt securities | 41,240,000 | 28,868,000 | 43% | 41,240,000 | ||||
Accrued interest | 2,141,171 | 1,066,674 | 101% | 2,093,553 | ||||
Other liabilities | 9,469,350 | 5,600,110 | 69% | 10,091,312 | ||||
Total liabilities | 1,204,704,074 | 861,933,571 | 40% | 1,134,925,516 | ||||
Stockholder's equity | 107,744,290 | 62,822,056 | 72% | 103,263,009 | ||||
Total liabilities and Stockholder's equity | 1,312,448,364 | 924,755,627 | 42% | 1,238,188,525 |
TEMECULA VALLEY BANCORP INC. | |||||||||||||||||||||||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||||||||||||||||||||||
(UNAUDITED) | |||||||||||||||||||||||||||||||||
(all amounts in whole dollars except share and per share information) | |||||||||||||||||||||||||||||||||
3 Mos. Ended March 31, | |||||||||||||||||||||||||||||||||
2007 | 2006 | $ Change | % Change | ||||||||||||||||||||||||||||||
INTEREST INCOME | |||||||||||||||||||||||||||||||||
Interest income and fees on loans | 28,077,995 | 19,298,111 | 8,779,884 | 45% | |||||||||||||||||||||||||||||
Other Interest income | 281,533 | 122,352 | 159,181 | 130% | |||||||||||||||||||||||||||||
Total Interest income | 28,359,528 | 19,420,463 | 8,939,065 | 46% | |||||||||||||||||||||||||||||
INTEREST EXPENSE | |||||||||||||||||||||||||||||||||
Interest on deposits | 11,275,804 | 5,460,663 | 5,815,141 | 106% | |||||||||||||||||||||||||||||
Interest on junior subordinated debt and other borrowings | 834,382 | 591,759 | 242,623 | 41% | |||||||||||||||||||||||||||||
Total Interest expense | 12,110,186 | 6,052,422 | 6,057,764 | 100% | |||||||||||||||||||||||||||||
Net interest income | 16,249,342 | 13,368,041 | 2,881,301 | 22% | |||||||||||||||||||||||||||||
Provision for loan losses | 415,000 | 314,000 | 101,000 | 32% | |||||||||||||||||||||||||||||
Net interest income after provision for loan losses | 15,834,342 | 13,054,041 | 2,780,301 | 21% | |||||||||||||||||||||||||||||
NON INTEREST INCOME | |||||||||||||||||||||||||||||||||
Service charges and fees | 149,258 | 152,508 | (3,250) | (2%) | |||||||||||||||||||||||||||||
Gain on sale of loans, fixed assets and OREO | 2,282,900 | 2,945,250 | (662,350) | (22%) | |||||||||||||||||||||||||||||
SBA Net Servicing income | (855,035) | 415,224 | (1,270,259) | (306%) | |||||||||||||||||||||||||||||
Loan related income | 458,491 | 520,935 | (62,444) | (12%) | |||||||||||||||||||||||||||||
Other income | 1,902,198 | 906,725 | 995,473 | 110% | |||||||||||||||||||||||||||||
Total Non Interest income | 3,937,812 | 4,940,642 | (1,002,830) | (20%) | |||||||||||||||||||||||||||||
NON INTEREST EXPENSE | |||||||||||||||||||||||||||||||||
Salaries and employee benefits | 8,637,997 | 7,740,298 | 897,699 | 12% | |||||||||||||||||||||||||||||
Occupancy and equipment | 1,264,277 | 1,118,656 | 145,621 | 13% | |||||||||||||||||||||||||||||
Marketing and business promotion | 343,555 | 224,951 | 118,604 | 53% | |||||||||||||||||||||||||||||
Office expense | 658,186 | 607,546 | 50,640 | 8% | |||||||||||||||||||||||||||||
Loan related expense | 621,299 | 461,669 | 159,630 | 35% | |||||||||||||||||||||||||||||
Other expense | 1,137,701 | 924,276 | 213,425 | 23% | |||||||||||||||||||||||||||||
Total Non Interest income | 12,663,015 | 11,077,396 | 1,585,619 | 14% | |||||||||||||||||||||||||||||
Earnings before income taxes | 7,109,139 | 6,917,287 | 191,852 | 3% | |||||||||||||||||||||||||||||
Income taxes | 2,929,964 | 2,936,761 | (6,797) | (0%) | |||||||||||||||||||||||||||||
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© Business Wire - 2007
Temecula Valley Bancorp Inc. serves as the holding company for Temecula Valley Bank (the Bank). The Companyâs activities consist of owning the outstanding common stock of the Bank, Temecula Valley Statutory Trust II, Temecula Valley Statutory Trust III, Temecula Valley Statutory Trust IV, Temecula Valley Statutory Trust V and Temecula Valley Statutory Trust VI. The Bank has 11 full-service banking offices in California providing services to customers in the Riverside, San Bernardino and San Diego Counties. Its principal office is located in Temecula, California with other California full-service offices in Carlsbad, Corona, El Cajon, Escondido, Fallbrook, Murrieta, Ontario, Solana Beach, San Marcos, and in the Rancho Bernardo area of San Diego. The Bank also operates loan production offices, which principally generate construction and/or real estate secured loans in Ontario and Temecula, California.
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