Premier Service Bank Announces Earnings for the Quarter and Year Ended December 31, 2012

  Premier Service Bank Announces Earnings for the Quarter and Year Ended   December 31, 2012  Business Wire  RIVERSIDE, Calif. -- January 30, 2013  Premier Service Bank, Riverside, California (OTCBB:PSBK), today announced its unaudited financial results for the quarter and year ended December 31, 2012.  For the year ended December 31, 2012, the Bank reported a net income of $152 thousand, or $0.09 per diluted share, compared to a net loss of $2.19 million, or ($1.77) per diluted share for the year ended December 31, 2011. The net income for the fourth quarter of 2012 was $347 thousand, or $0.27 per diluted share, compared to a net loss of $820 thousand, or ($0.66) per diluted share for the fourth quarter of 2011. 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, 2012, totaled $225 thousand, compared to $2.79 million for the year ended December 31, 2011. No provision to the allowance for loan losses was provided for the fourth quarter of 2012, compared to $910 thousand for the same period in 2011.  At December 31, 2012, the Bank had $3.49 million of non-performing loans, representing 4.20% of the Bank’s total loans, compared to $8.93 million of non-performing loans, or 8.61% of total loans, at December 31, 2011. Impairment analyses are performed on the Bank’s non-performing loans and impairment adjustments, if any, are written off and/or fully reserved when appropriate as a part of this process. The Bank had foreclosed real estate of $2.60 million at December 31, 2012, compared to foreclosed real estate of $2.93 million at December 31, 2011. All non-performing loans were on non-accrual at December 31, 2012 and 2011. The allowance for loan losses totaled $2.73 million at December 31, 2012, or 3.29% of total loans as of that date, compared to $2.36 million at December 31, 2011, or 2.28% of total loans as of that date.  At December 31, 2012, the Bank had total assets of $132 million, representing a decrease of $9.2 million or 6.54% compared to total assets of $141 million at December 31, 2011. Total deposits at December 31, 2012 were $109.3 million, representing a 2.22% reduction compared to total deposits of $111.8 million at December 31, 2011. Non-interest bearing demand deposits totaled $38.7 million at December 31, 2012, representing 35.4% of total deposits at that date, compared to $41.1 million of non-interest bearing demand deposits at December 31, 2011, which represented 36.8% of total deposits at that date.  The Bank’s gross loan portfolio totaled $82.9 million at December 31, 2012, representing a 20.0% decrease compared to gross loans of $103.7 million at December 31, 2011. Unfunded credit commitments stood at $7.7 million at December 31, 2012, representing a 1.3% increase when compared to unfunded commitments of $7.6 million at December 31, 2011.  The Bank’s net interest margin for the year ended December 31, 2012 was 4.63%, a decrease of 0.19% compared to the net interest margin of 4.82% for the year ended December 31, 2011. The Bank’s net interest margin for the quarter ended December 31, 2012 was 4.33%, a decrease of 0.33% compared to the net interest margin of 4.64% for the fourth quarter of 2011.  Total shareholders’ equity at December 31, 2012 was $10.8 million, representing an increase of $115 thousand, or 1.08%, compared to total shareholders’ equity of $10.7 million at December 31, 2011. 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 Consent Order. As of December 31, 2012, these capital ratios were 7.69% and 13.42%, respectively. As a result, the Bank was not in compliance, as of December 31, 2012, 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 December 31, 2012, 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”)(Nasdaq: 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 have jointly agreed to terminate the Merger Agreement and the proposed Merger, effective January 30, 2013.  Now that it has been determined that 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 or find another solution which improves its capital ratios, such as finding a new merger partner, arranging for 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 presently intends to commence a common stock offering, subject to regulatory approval, by the end of the first quarter of 2013 to effect compliance with the capital ratios. The Bank believes that its improved condition in 2012 compared to 2011 will allow the Bank to raise sufficient capital to resolve the requirements of the Consent Order.  The Bank’s President and Chief Executive Officer, Kerry L. Pendergast, stated, “We continue to be encouraged with the progress the Bank has made throughout the 2012 calendar year, which has included posting strong fourth quarter earnings, as well as reporting our first year-end profit since December 2007. As we have previously reported, improving delinquency trends, along with a continuing decline in the level of non-performing loans, have allowed the Bank to significantly decrease its provisions to its loan loss reserve over the last four quarters. For the quarter ended December 31, 2012 the Bank made no provision to the reserve, as compared to provision expense of $910 thousand for the same period in 2011. Year to date provision expenses totaled $225 thousand, as compared to provision expenses totaling $2.79 million for the same 12-month period ended December 31, 2011. I would like to note that despite the reduction in the Bank’s provision to its reserve in 2012, the amount of the reserve increased 1.01%, from 2.28% to 3.29% of total loans, from December 31, 2011 to December 31, 2012. It is also important to note that the Bank believes the reserve amount reported at December 31, 2012 reflects a surplus of $941 thousand based on the Bank’s analysis of its reserve requirements of that date.”  Pendergast went on to say, “The Bank has made steady progress in reducing the level of non-performing loans and believes that an improving local economy has been central to those efforts. For the fourth quarter and year ended December 31, 2012, non-performing loans represented 4.20% of the Bank’s total loans, as compared to 8.61% as of December 31, 2011. Clearly, further improvement in the current level of non-performing loans is needed, but the Bank’s success in reducing these problem credits throughout 2012 reflects the hard work and extraordinary commitment of our team!”  Pendergast said in closing, “I’m very encouraged with our year-end results, which not only include a return to profitability, but also reflect improvement in all of the Bank’s key operating ratios. While recognizing that more improvement is necessary, the Bank is encouraged by the signs of improvement in the local economy, which will result in improved collection efforts by the Bank. The improving local economy is welcome news for our clients who are dependent upon and part of the local economy. The improving conditions in their businesses, professional practices and investments mean increased profitability and further strengthening of the Bank.”  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 manage other risks presented from time to time for all banks. 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 (Unaudited)                       Quarter Ended (In Thousands)        Dec. 31,     Sept 30,     June 30,     Mar. 31,     Dec. 31,                        2012          2012          2012          2012          2011                                                                                 Interest income (not   $ 1,531       $ 1,622       $ 1,675       $ 1,768       $ 1,750 taxable equivalent) Interest expense        142         185         197         208         222      Net interest income      1,389         1,437         1,478         1,560         1,528 Provision for loan      -           -           -           225         910      losses Net interest income after provision for      1,389         1,437         1,478         1,335         618 loan losses Non-interest income      178           163           154           174           129 Non-interest expense    1,220       1,439       1,797       1,699       1,566    Income before income     347           161           (165    )     (190    )     (819    ) taxes (Benefit)/Provision     -           -           1           -           1        for income taxes Net income             $ 347        $ 161        $ (166    )   $ (190    )   $ (820    )                                                                                                        Quarter Ended (In Thousands)        Dec. 31,      Sept 30,      June 30,      Mar. 31,      Dec. 31,                        2012          2012          2012          2012          2011 Per share: Net income - basic     $ 0.27        $ 0.12        $ (0.14   )   $ (0.16   )   $ (0.66   ) Weighted average         1,261         1,261         1,261         1,261         1,261 shares used in basic Net income - diluted   $ 0.27        $ 0.12        $ (0.14   )   $ (0.16   )   $ (0.66   ) Weighted average shares used in           1,261         1,261         1,261         1,261         1,261 diluted Book value at period   $ 5.27        $ 5.01        $ 4.90        $ 5.05        $ 5.22 end Ending shares            1,261         1,261         1,261         1,261         1,261                                                                                                                                                                 Balance Sheet - At Period-End Cash and due from      $ 40,023      $ 37,414      $ 28,600      $ 25,021      $ 22,867 banks Investments and Fed      4,046         6,727         6,935         9,272         8,446 fund sold Gross Loans              82,945        89,669        96,082        99,041        103,668 Deferred fees            (134    )     (144    )     (181    )     (195    )     (198    ) Allowance for loan       (2,733  )     (2,891  )     (2,907  )     (2,748  )     (2,359  ) losses Net Loans                80,078        86,634        92,994        96,098        101,111 Other assets            7,874       7,627       8,640       8,592       8,832    Total Assets           $ 132,021    $ 138,402    $ 137,169    $ 138,983    $ 141,256                                                                                  Non-interest-bearing   $ 38,702      $ 44,711      $ 42,382      $ 44,245      $ 41,130 deposits Interest-bearing         70,576        71,214        67,589        67,420        70,629 deposits Other liabilities        11,943        12,013        16,890        16,827        18,812 Shareholders' equity    10,800      10,464      10,308      10,491      10,685                                                                                   Total Liabilities and Shareholders'      $ 132,021    $ 138,402    $ 137,169    $ 138,983    $ 141,256  equity                                                                                 Asset Quality & Capital - At Period-End Non-accrual loans      $ 3,485       $ 5,314       $ 5,472       $ 5,476       $ 8,926 Loans past due 90        -             -             -             -             - days or more Other real estate        2,595         2,223         3,189         2,974         2,927 owned Other bank owned        -           -           -           -           -        assets Total non-performing   $ 6,080      $ 7,537      $ 8,661      $ 8,450      $ 11,853   assets                                                                                 Allowance for losses     3.29    %     3.22    %     3.03    %     2.77    %     2.28    % to loans, gross Non-accrual loans to     4.20    %     5.93    %     5.70    %     5.53    %     8.61    % total loans, gross Non-performing loans to total loans,          4.20    %     5.93    %     5.70    %     5.53    %     8.61    % gross Non-performing asset     4.61    %     5.45    %     6.31    %     6.08    %     8.39    % to total assets Allowance for losses to non-performing        78.42   %     54.40   %     53.13   %     50.18   %     26.43   % loans                                                                                 Total risk-based         13.42   %     12.15   %     11.27   %     11.09   %     10.78   % capital ratio Tier 1 risk-based        12.15   %     10.88   %     10.00   %     9.82    %     9.52    % capital ratio Tier 1 leverage          7.69    %     7.48    %     7.39    %     7.42    %     7.21    % ratio  Contact:  Premier Service Bank Kerry L. Pendergast, President and CEO or Jessica W. Lee, Executive Vice President and CFO 951-274-2400