Temecula Valley Bancorp Inc. (NASDAQ:TMCV) announces record earnings of $16.9 million, a 21% increase in earnings for the year ending December 31, 2006, compared to the $14.0 million earned in the same period in 2005. Fourth quarter net income was $4.4 million, an 18% increase from the $3.7 million earned in the same period last year.

?We are very pleased with our continued strong financial performance,? stated Stephen H. Wacknitz, Chairman of the Board, CEO and President. ?Our experienced team was able to produce these results while managing unprecedented prepayments in our SBA loan servicing portfolio, resulting in accelerated amortization of the related servicing asset; the increased costs associated with stock options; the negative effect of the inverted yield curve on our net interest margin; and the decreasing demand for certain loans as a result of the slowing residential real estate market.?

Net SBA servicing income and related items for 2006 decreased $4.6 million from 2005. For the fourth quarter of 2006, the decrease was $1.8 million over the same period in 2005.

2006 was the first year during which we were required to recognize expenses in connection with stock options. This was $1.1 million before tax and $1.0 million after tax. For the fourth quarter of 2006 the expense was $0.2 million before and after tax.

Net interest income for 2006 was $59.8 million, a 37% increase over the $43.5 million in 2005. For the quarter ending December 31, 2006, net interest income was $16.3 million, a 26% increase from the $12.9 million earned in the same period last year. The increase was primarily due to the increase in loans outstanding.

Return on average assets was 1.64% and return on average equity was 23.89% for the year ending December 31, 2006, compared to 1.91% and 27.71%, respectively, for 2005. For the quarter ending December 31, 2006, the return on average assets was 1.46% and the return on average equity was 20.11%, compared to 1.79% and 26.44%, respectively, in 2005. ?Based on our industry's historical performance, these returns continue to place us among the top performers in the country,? stated Mr. Wacknitz.

Total assets were $1.24 billion at December 31, 2006, a 42% increase from $869.0 million at December 31, 2005. For the same period, loans increased 52%. ?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 un-guaranteed purchase program, whose outstanding loans have surpassed $125 million within the first nine months of operation,? added Mr. Wacknitz.

The allowance for loan loss increased 39%, from $9.0 million at December 31, 2005, to $12.5 million at December 31, 2006. Net chargeoffs were $220 thousand for 2005 and $167 thousand for 2006. Non-accrual loans (net of SBA guarantees) were $1.4 million at December 31, 2005, and $8.8 million at December 31, 2006. Much of the increase in net non-accrual loans is due to a $5.9 million real estate project located in the North San Diego county coast area. Mr. Wacknitz stated that ?we do not anticipate incurring any loss on this project.? There was $0.6 million of other real estate owned (net of SBA guarantees) at December 31, 2006, compared to $1.5 million at December 31, 2005.

Deposits increased 46% from $742.4 million at December 31, 2005, to $1.08 billion at December 31, 2006. The deposit growth has been fueled by existing branch growth, through various CD promotions; money desk operations; brokered deposits; and from our new Carlsbad, Solana Beach, and Ontario full service branches.

Shareholder equity increased 77% from $58.2 million at December 31, 2005, to $103.3 million at December 31, 2006, due to a private placement stock offering in November, net income, and the exercise of stock options. The stock offering raised a net amount of $25.1 million, of which $18.0 million was transferred to the Temecula Valley Bancorp's principal subsidiary, Temecula Valley Bank (?Bank?), as tier one capital. Capital ratios remain strong at December 31, 2006, with the tier one leverage ratio at 11.42%, the tier one risk-based ratio at 10.93%, and the total risk-based capital ratio at 12.40%, all above the minimum to qualify as ?well capitalized.? During the third quarter of 2006, $12 million of junior subordinated debt securities were issued, of which $11.5 million was transferred to the Bank as tier one capital.

?Although we have seen somewhat of a recent softening in the California residential real estate market, the Bank remains strong with 94% of its loans secured by real estate with an overall loan to value of 65%. Additionally, we believe that other major economic indicators in California remain strong,? stated Mr. 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 Mid and Western United States and has funded over $1.3 billion in SBA loans in 36 states during 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.
FINANCIAL DATA
DECEMBER 2006
(UNAUDITED)
(all amounts in whole dollars except share and per share information)

Dec 31,

2006

Dec 31,

2005

Increase

(Decrease)

Increase

(Decrease)

ASSETS
Cash and due from banks 15,190,212  18,311,714  (3,121,502) (17%)
Due from Banks-Time 99,000  0  99,000  0%
Securities 1,018,683  0  1,018,683  0%
Federal funds sold 18,180,000  33,200,000  (15,020,000) (45%)
 
Loans 1,142,692,822  753,246,789  389,446,033  52%
Less allowance for loan losses (12,521,717) (9,039,155) (3,482,562) 39%
Loans, net 1,130,171,105  744,207,634  385,963,471  52%
 
Federal Reserve & Home Loan Bank stock, at cost 1,996,300  3,098,600  (1,102,300) (36%)
Other real estate owned, net 1,255,000  2,111,250  (856,250) (41%)
Bank premises and equipment, net 5,491,968  4,885,015  606,953  12%
SBA-loan servicing asset 8,287,703  8,169,273  118,430  1%

SBA-loan servicing I/O strip receivable

13,215,760  22,067,900  (8,852,140) (40%)
Cash surrender value life insurance 24,036,291  17,590,733  6,445,558  37%
Other Assets 19,246,503  15,345,927  3,900,576  25%
1,238,188,525  868,988,046  369,200,479  42%
 

LIABILITIES AND STOCKHOLDERS' EQUITY

Demand deposits 144,525,203  155,992,027  (11,466,824) (7%)
Interest bearing deposits 936,975,447  586,439,912  350,535,535  60%
Total deposits 1,081,500,650  742,431,939  339,068,711  46%
FHLB Advances 0  30,000,000  (30,000,000) (100%)
Junior subordinated debt securities 41,240,000  28,868,000  12,372,000  43%
Other liabilities 12,184,866  9,507,797  2,677,069  28%
Total liabilities 1,134,925,516  810,807,736  324,117,780  40%
 

Stockholders' equity

103,263,009  58,180,310  45,082,699  77%
1,238,188,525  868,988,046  369,200,479  42%
3 Mos. Ended 3 Mos. Ended 12 Mos. Ended 12 Mos. Ended
Dec 31, 2006 Dec 31, 2005 Dec 31, 2006 Dec 31, 2005
Interest income 27,696,399  17,908,753  94,229,455  58,125,260 
Interest expense 11,414,283  4,975,226  34,449,350  14,583,784 
Net interest income 16,282,116  12,933,527  59,780,105  43,541,476 
Provision for loan losses 890,000  908,100  3,650,000  2,897,000 
Other income 3,695,227  4,974,688  19,443,803  23,822,163 
Other expense 12,255,953  10,660,150  46,990,796  40,627,302 
Earnings before income taxes 6,831,390  6,339,965  28,583,112  23,839,337 
Income taxes 2,439,072  2,616,583  11,662,790  9,886,072 
Net earnings 4,392,318  3,723,382  16,920,322  13,953,265 
 
Actual common shares outstanding at end of period 10,586,659  8,879,697  10,586,659  8,879,697 
Average common shares outstanding 10,322,256  8,894,814  9,797,912  8,845,736 
Average common shares & equivalents outstanding 9,800,612  9,650,105  9,234,894  9,587,559 
Basic earnings per share 0.45  0.42  1.83  1.58 
Diluted earnings per share 0.43  0.39  1.73  1.46 
Return on average assets (annualized) 1.46% 1.79% 1.64% 1.91%
Return on average equity (annualized) 20.11% 26.44% 23.89% 27.71%
Efficiency ratio 61.35% 59.53% 59.31% 60.31%
12/31/2006  12/31/2005 
Tier 1 leverage capital ratio 11.42% 9.28%
Tier 1 risk-based capital ratio 10.93% 8.93%
Total risk-based capital ratio 12.40% 11.02%
Allowance for loan losses as a % of total loans 1.29% 1.35%
Gross nonperforming assets as a % of total assets 1.66% 1.16%
Net nonperforming assets as a % of total assets 0.82% 0.34%
Net chargeoffs (annualized) as a % of total loans 0.01% 0.03%
Loan to deposit ratio 105.66% 101.46%
Book value per share 9.75  6.54 
PAST DUE AND NON-ACCRUAL LOANS          
December 31, 2006 Gross Balance   Government Guaranty   Net Balance

30-89 days past due

3,284,267  (1,737,093) 1,547,174 
90+ days past due and accruing 140,167  0  140,167 
Non-accrual 19,123,973  (10,334,511) 8,789,462 
Other real estate owned (REO) 1,255,000  0  1,255,000 

Total nonperforming assets

20,519,140  (10,334,511) 10,184,629 
 
December 31, 2005

30-89 days past due

933,294  (732,923) 200,371 
90+ days past due and accruing 0  0  0 
Non-accrual 7,950,601  (6,513,752) 1,436,849 
Other real estate owned (REO) 2,111,250  (604,004) 1,507,246 

Total nonperforming assets

10,061,851  (7,117,756) 2,944,095 

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© Business Wire - 2007

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