PVBK Pacific Valley Bancorp (PK)

Pacific Valley Bank (OTCQB: PVBK) announced its unaudited second quarter 2013 net income of $480,000, or $0.13 basic earnings per share, as compared to the same quarter last year when we reported net income of $435,000, or $0.12 basic earnings per share. Our net income for the first half of 2013 was $1,085,000, or $0.30 basic earnings per share, as compared to the first half of 2012 for which we reported net income of $745,000, or $0.21 basic earnings per share. As previously announced, in recognition of our solid earnings over the past few years, we distributed a 10% stock dividend to our shareholders on May 31, 2013. Consequently, per share amounts for all periods presented have been retroactively adjusted for the effect of the dividend.

Second Quarter 2013 Financial Highlights (annualized): Return on Average Assets (ROAA): 1.05% Net Interest Margin (NIM): 4.28% Efficiency Ratio: 77.09%

First Half 2013 Financial Highlights (annualized): Return on Average Assets (ROAA): 1.20% Net Interest Margin (NIM): 4.58% Efficiency Ratio: 74.72%

"We are pleased to be able to report strong earnings for the second quarter and first half of 2013 -- and this quarter marks our 11th consecutive quarter of profitability," stated David B. Warner, President and Chief Executive Officer. "Pacific Valley Bank's Board of Directors recognizes the support of our loyal shareholders, valued customers, and dedicated employees for their contributions to our success as a leading community bank in our home market of Monterey County." Mr. Warner continued, "During the first half of 2013, we were successful in achieving sustained profitability by staying true to the core values of our franchise -- and our team continues to do a great job during a very difficult economy. In comparison to the prior year, interest income generated by organic loan growth has outpaced the pressure placed on our interest rate margins by the low-rate environment in which we continue to operate. Equally important, thus far in 2013, the overall asset quality of our portfolio has mitigated the need for us to recognize additional loan loss reserves. Despite strong year-over-year deposit growth, our funding costs have declined slightly -- primarily due to a combination of favorable changes in our deposit mix and the current interest rate environment. Operating expenses have risen somewhat, principally reflecting a conscious investment in corporate governance that we believe will serve us well for the long term, and to a lesser extent, an overall increase in the cost of doing business. Capital ratios remain very strong and we continue to be well positioned with funds for additional lending."

Balance Sheet and Loan Quality Review: Total assets were $194.3 million at June 30, 2013, which is an increase of $24.3 million from the same period last year when assets were $170.0 million. Our gross loans at June 30, 2013 were $157.1 million, which is an increase of $23.7 million as compared to $133.4 million at June 30, 2012.

The allowance for loan losses as of June 30, 2013 was $3.5 million, which is nominally lower than the same period last year when it was $3.6 million. The percentage of allowance for loan losses to gross loans outstanding at June 30, 2013 was 2.20% as compared to 2.68% at June 30, 2012. The allowance for loan loss ratio has gradually been trending down since the same quarter last year due to net charge-offs of measured impairments and an overall improvement in loan quality.

A significant component of our current liquidity position is reflected in our excess balances held at the Federal Reserve, which totaled $25.2 million as of June 30, 2013, and which is generally unchanged from June 30, 2012. The Bank's liquidity is in a solid position and continues to be available to support future loan growth. Deposits moved higher to $171.1 million as of June 30, 2013, as compared to $149.1 million at June 30, 2012.

Stockholders' equity at June 30, 2013 was $22.3 million as compared to $20.1 million for the period ending June 30, 2012. At June 30, 2013 our Tier 1 capital to average assets ratio was 12.05% as compared to 12.14% as of June 30, 2012.

Review of Operations: The core earnings of the Bank are measured by the interest income plus non-interest income less interest expense. During the second quarter 2013, core earnings were $2.1 million, which is higher compared to $1.9 million for the same quarter a year ago. The core earnings for the six month period ending June 30, 2013 were $4.3 million as compared to the same period ending June 30, 2012 when the core earnings were $3.8 million.

Interest income for the quarter ending June 30, 2013 was $2.1 million which is slightly higher versus the same quarter a year ago. The interest income for the six month period ending June 30, 2013 was $4.5 million as compared to the same period ending June 30, 2012 when it was $4.2 million. The increase in interest income for the six month period of $0.3 million is due in large part to the recognition of interest income from a previously classified nonaccrual status loan that was paid off during the first quarter of 2013. This allowed for the recovery of prior interest income that was previously applied to principal. Interest expense during the current quarter was $0.2 million as compared to $0.3 million in the same quarter a year ago. The interest expense for the six month period ending June 30, 2013 was $0.5 million which is slightly lower than the same period ending June 30, 2012. Our interest costs continue to trend nominally lower, as over the past few years we have been able to gradually re-price maturing deposits into current lower market rates. The Bank achieved net interest margins of 4.28% and 4.63% for the quarter-ending periods June 30, 2013 and June 30, 2012, respectively. On a year-to-date basis, the Bank achieved net interest margins of 4.58% and 4.62% for the six-month periods ending June 30, 2013 and June 30, 2012, respectively.

There were no provisions for loan losses in the second quarter or first half of 2013 nor were there any in the comparable periods of 2012. The Bank's methodology did not identify the need for a provision for loan loss due to management's judgment regarding adequate reserves to cover measured probable losses in our loan portfolio.

Non-interest expenses totaled $1.6 million for the second quarter ending June 30, 2013. This compares to $1.5 million for the same period ending in 2012. Non-interest expenses for the six month period ending June 30, 2013 were $3.2 million as compared to the same six month period ending June 30, 2012 when they were $3.0 million. The efficiency ratio, which measures the amount of overhead expense per net interest income plus noninterest income, was 77.09% for the second quarter of 2013 as compared to 76.83% for the same period ending in 2012. On a year-to-date basis, the Bank's efficiency ratios were 74.72% and 79.75% for the six month periods ending June 30, 2013 and June 30, 2012, respectively.

                      FINANCIAL HIGHLIGHTS (UNAUDITED)

Assets                          6/30/2012       6/30/2013     Y-O-Y Change
                             --------------  --------------  --------------
Cash and Due From Bank       $        6,786  $        6,634  $         (152)
Investment Securities                 5,058           5,753             695
Federal Funds Sold                   25,185          25,225              40
Loans Outstanding                   133,361         157,081          23,720
Loan Loss Reserve                    (3,577)         (3,451)            126
Other Assets                          3,214           3,014            (200)
                             --------------  --------------  --------------
Total Assets                 $      170,027  $      194,256  $       24,229
                             ==============  ==============  ==============

Liabilities and Capital         6/30/2012       6/30/2013     Y-O-Y Change
                             --------------  --------------  --------------
Deposits                     $      149,118  $      171,124  $       22,006
Borrowings                                -               -               -
Other Liabilities                       817             877              60
Equity                               20,092          22,255           2,163
                             --------------  --------------  --------------
Total Liaibilities and
 Capital                     $      170,027  $      194,256  $       24,229
                             ==============  ==============  ==============

                                            Three Months Ended
Income Statement                6/30/2012       6/30/2013     Q-O-Q Change
                             --------------  --------------  --------------
Interest Income              $        2,073  $        2,149  $           76
Interest Expense                        251             233             (18)
                             --------------  --------------  --------------
Net Interest Income                   1,822           1,916              94
                             --------------  --------------  --------------
Provision for Loan Losses                 -               -               -
Other Income                            116             177              61
Operating Expenses                    1,489           1,613             124
Tax                                      14               -             (14)
                             --------------  --------------  --------------
Net Income                   $          435  $          480  $           45
                             ==============  ==============  ==============

                                             Six Months Ended
Income Statement                6/30/2012       6/30/2013     Y-O-Y Change
                             --------------  --------------  --------------
Interest Income              $        4,155  $        4,520  $          365
Interest Expense                        526             465             (61)
                             --------------  --------------  --------------
Net Interest Income                   3,629           4,055             426
                             --------------  --------------  --------------
Provision for Loan Losses                 -               -               -
Other Income                            165             238              73
Operating Expenses                    3,026           3,207             181
Tax                                      23               1             (22)
                             --------------  --------------  --------------
Net Income                   $          745  $        1,085  $          340
                             ==============  ==============  ==============



Ratios                          6/30/2012     6/30/2013
---------------------------- ------------  ------------
Tier One Leverage Ratio             12.14%        12.05%
YTD Return on Average Assets         0.92%         1.20%
YTD Return on Average Equity         7.60%        10.09%
YTD Earnings Per Share
 (Basic)                     $       0.21  $       0.30
Book Value Per Share (Basic) $       5.59  $       6.19
YTD Efficiency Ratio                79.75%        74.72%

Note: Amounts in the above presentation are shown in thousands, except for per share amounts and financial ratios. Additionally, per share amounts for all periods presented have been retroactively adjusted for the effect of the Bank's 10% stock dividend that was distributed on May 31, 2013.

About Pacific Valley Bank: Pacific Valley Bank is a California State chartered bank that commenced operations in September 2004. Pacific Valley Bank serves three locations; administrative headquarters and branch offices in Salinas, King City and Monterey, California. The Bank 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 Bank serves customers primarily in Monterey County. For more information, visit www.pacificvalleybank.com.

Safe Harbor Statement: Except for the historical information in this news release, the matters described herein contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially. Such risks and uncertainties include: the credit risks of lending activities, including changes in the level and trend of loan delinquencies and charge-offs, results of examinations by our banking regulators, our ability to maintain adequate levels of capital and liquidity, our ability to manage loan delinquency rates, our ability to price deposits to retain existing customers and achieve low-cost deposit growth, manage expenses and lower the efficiency ratio, expand or maintain the net interest margin, mitigate interest rate risk for changes in the interest rate environment, competitive pressures in the banking industry, access to available sources of credit to manage liquidity, the local and national economic environment, and other risks and uncertainties. Accordingly, undue reliance should not be placed on forward-looking statements. These forward-looking statements speak only as of the date of this release. Pacific Valley Bank undertakes no obligation to update publicly any forward-looking statements to reflect new information, events or circumstances after the date of this release or to reflect the occurrence of unanticipated events. Investors are encouraged to read the Pacific Valley Bank annual reports which are available on our website.

Contacts: David B. Warner CEO (831) 771-4323 Robert J. Lampert CFO (831) 771-4317