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
 
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