Pacific Valley Bank to Restate Financial Statements
SALINAS, CA -- (Marketwired) -- 04/25/14 -- Pacific Valley Bank
(OTCQB: PVBK) today announced that the Audit Committee of the Board
of Directors of Pacific Valley Bank, after consultation with
management, determined that the company's financial statements for
the fiscal year ended December 31, 2013 and the three month period
ended March 31, 2014, can no longer be relied upon as being in
compliance with generally accepted accounting principles.
Accordingly, the company will restate such financial statements.
Similarly, related press releases and shareholder communications
describing the company's financial statements for these periods
should no longer be relied upon.
The Audit Committee's decision to restate these financial statements
follows a recent examination of the company by the Federal Deposit
Insurance Corporation ("FDIC") and a recommendation by management
that the allowance for loan losses and the level of non-performing
and classified loans in these previously issued financial statements
should be adjusted due to errors in calculating the level of
nonperforming and classified loans.
Preliminary indications from the company's evaluation are that the
changes will result in an increase in the company's allowance for
loan losses and a decrease in the company's net income for the year
ended December 31, 2013 and possibly the three months ended March 31,
In addition, the company is in the process of conducting a thorough
review of the loan portfolio to determine if loan grades are
appropriate, if additional provisions to the allowance for loan
losses should be made and if adjustments should be made to any prior
periods. Further, the company will be conducting a complete review of
its policies, procedures and internal controls and the company's
corporate governance policy, procedures and framework, to ensure that
certain problem loans and loan grading issues and corporate
governance deficiencies will not occur in the future.
The cause of the restatement is primarily related to the company
granting lines of credit to certain borrowers who then made loans to
other company borrowers whose loans were not performing. The Board of
Directors believes that all such lines of credit will be paid off and
that no loss will result to the company, although no assurance can be
given that this will occur. The deficiencies noted in the loan
portfolio, in the company's policies, procedures and internal
controls, and in the company's corporate governance framework, may
result in increased levels of expenses to remedy.
In connection with the potential for increased expenses to remedy,
the company may need to reevaluate the projected level of such
expenses and their potential impact on the company's ability to
realize its net deferred tax assets. Consequently, if deemed
appropriate under generally accepted accounting principles, the
company's restatement of its December 31, 2013 financial statements
could also include the reestablishment of a full valuation allowance
against its net deferred tax assets as of December 31, 2013, and a
corresponding increase to its income tax expense for the year then
ended. This would also require reassessment of the income tax expense
reported in the March 31, 2014 financial statements.
The company intends to amend its consolidated reports of condition
and income ("Call Reports") for December 31, 2013 and March 31, 2014,
as appropriate, as soon as reasonably practicable after this release.
The Board of Directors and Management have also considered the effect
of the matters that led to the restatement on the company's prior
conclusions of the adequacy of its internal controls and procedures,
and its corporate governance policy, procedures, practices and
framework, as of the end of each of the applicable restatement
The Board of Directors has also appointed Mr. Joe Robello as Chairman
of the Board and formed an executive committee composed of Messrs.
Rodney Braga, Mike Cling and Joe Robello to assist the company with
the day-to-day management of the company.
About Pacific Valley Bank
Pacific Valley Bank is a California state-chartered bank that
commenced operations in September 2004. The company serves three
locations; administrative headquarters and branch offices in Salinas,
King City and Monterey, California. The company offers a broad range
of banking products and services, including credit and deposit
services to small and medium-sized businesses, agriculture-related
businesses, non-profit organizations, professional-service providers
and individuals. The company serves customers primarily in Monterey
County. For more information, visit www.pacificvalleybank.com.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained herein constitute forward-looking
statements within the meaning of Section 21E of the Securities
Exchange Act of 1934. Forward-looking statements are indicated by
words or phrases such as "anticipates," "estimates," "projects,"
"believes," "intends," "expects" and similar words and phrases. These
statements are based upon beliefs and assumptions by the company's
management and on information currently available to management.
These involve risks and uncertainties.
Such risks and uncertainties include, but are not limited to: the
timing and nature of the final resolution of the accounting issues
discussed in this press release; any delay in the filing of call
reports with the FDIC; the timing and results of the review of the
loan portfolio and the allowance for loan losses; the timing,
requirements, and expenses of potential remedies; the timing and
results of the review of the company's ability to realize its net
deferred tax assets and the appropriateness of reestablishing a
valuation allowance against its net deferred tax assets; the timing
and results of review of the effectiveness of the company's system of
internal controls and procedures including its corporate governance
policies and structural framework; changes in the ranges of estimates
and adjustments in this press release due to the audit of the
company's financial statements; whether a restatement of financial
results will be required for other accounting issues for the same or
other periods in addition to the restatement currently expected by
management; additional uncertainties related to accounting issues
generally; adverse effects on the company's business as a result of
the restatement process or the review of the effectiveness of
internal control over financial reporting, rumors or otherwise; and
adverse developments in existing legal proceedings or the initiation
of new legal proceedings; and volatility of the company's stock
Actual outcomes and results may differ materially from what is
expressed, estimated or implied in any guidance, preliminary revenue
estimate or any other forward-looking statement. The company
undertakes no obligation to update or correct any forward-looking
statement made herein due to the occurrence of events after the
issuance of this press release, except as required under applicable
Chairman of the Board
Chairman of the Audit Committee
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