-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K1pUskvH8lRtC2vZv/Hua0IVH5EiLYsNKk1AjKjZAezgKIR09YCzmj1Z9ZF6OmK5 TOLAum+EocS/28BaVtHHMw== 0001157523-07-006922.txt : 20070717 0001157523-07-006922.hdr.sgml : 20070717 20070717151633 ACCESSION NUMBER: 0001157523-07-006922 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070717 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070717 DATE AS OF CHANGE: 20070717 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEMECULA VALLEY BANCORP INC CENTRAL INDEX KEY: 0001172678 STANDARD INDUSTRIAL CLASSIFICATION: NATIONAL COMMERCIAL BANKS [6021] IRS NUMBER: 460476193 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-49844 FILM NUMBER: 07984040 BUSINESS ADDRESS: STREET 1: 27710 JEFFERSON AVENUE STREET 2: SUITE A-100 CITY: TEMECULA STATE: CA ZIP: 92590 BUSINESS PHONE: 9096949940 MAIL ADDRESS: STREET 1: 27710 JEFFERSON AVENUE STREET 2: SUITE A-100 CITY: TEMECULA STATE: CA ZIP: 92590 8-K 1 a5449697.txt TEMECULA VALLEY BANCORP INC. 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 17, 2007 ------------------------ TEMECULA VALLEY BANCORP INC. (Exact name of Registrant as specified in its charter) California 46-0476193 (State or other (Commission File Number) (I.R.S. Employer jurisdiction of incorporation) Identification Number) 27710 Jefferson Avenue Suite A100 Temecula, California 92590 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (951) 694-9940 Not Applicable (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) - -------------------------------------------------------------------------------- Item 2.02 - Results of Operations and Financial Condition. On July 17, 2007, we issued a press release disclosing information regarding our results of operations for the quarter ended June 30, 2007. A copy of the press release is attached hereto as Exhibit 99.1. Such information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not incorporated by reference into any of our filings, whether made before or after the date hereof, regardless of any general incorporation language in such filing. Item 9.01 - Financial Statements and Exhibits. (d) Exhibits The following exhibits are filed with this Form 8-K: 99.1 Press Release dated July 17, 2007. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. TEMECULA VALLEY BANCORP INC. Date: July 17, 2007 By: /s/ STEPHEN H. WACKNITZ -------------------------------------- Stephen H. Wacknitz Chief Executive Officer and President EX-99.1 2 a5449697-ex991.txt EXHIBIT 99.1 EXHIBIT 99.1 Temecula Valley Bancorp Announces Second Quarter 2007 Earnings TEMECULA, Calif.--(BUSINESS WIRE)--July 17, 2007--Temecula Valley Bancorp, Inc. (NASDAQ:TMCV) today announced second quarter 2007 net income of $5.25 million, a 15.9 percent increase from the $4.53 million reported for the second quarter of 2006. Diluted earnings per share for the second quarter were $0.47, unchanged from the 2006 second quarter, and $0.09 above the first quarter of 2007. For the six months year-to-date, net income was $9.4 million, up 10.6 percent from the $8.5 million reported for the 2006 six-month period; diluted earnings per share were $0.85 compared with $0.89 for the prior six months, a decline of 5.6 percent. Compared with the year-earlier quarter, second quarter 2007 results reflect strong loan growth and a narrower net interest margin. Compared with the first quarter of this year, results reflect improved profitability from loan sales, a stabilizing margin, and lower net loan charge-offs. Per share earnings were negatively impacted in 2007 by the private placement of 1.4 million common shares in November 2006, which increased average shares outstanding by 15.3 percent compared to second quarter of 2006, and by 15.9 percent for the six-month period. Highlights of the quarter include: -- The sale of $102.5 million of loans including $70 million in long-term lower-yielding commercial real estate loans, resulting in a gain of $4.5 million. -- Improved profitability, as reflected in the net interest margin stabilizing at 5.51 percent, and a 25 basis point increase to 1.59 percent, in the annualized return on average assets, compared to the previous quarter. -- A return to more normalized asset quality, as reflected in the $291,000 decline in net loan charge-offs, to 0.06 percent of average loans, compared to first quarter of 2007. -- The Company declared a first-time quarterly cash dividend of $0.04 per share. -- Temecula's board of directors authorized a stock buyback program to purchase up to $5.5 million of shares of TMCV common stock; this quarter, 106,900 shares were repurchased at a cost of $2.1 million. Chairman of the Board, CEO and President Stephen H. Wacknitz stated, "This quarter's performance provides a good example of the strength of our organization, as well as our flexibility in challenging times. Our balance sheet provides us with multiple options, enabling us to respond quickly to changes in the industry environment and local market conditions. "We concluded that this interest-rate environment, with its inverted yield curve and increased competition for core deposits, will be with us for a while," commented Mr. Wacknitz. "So this quarter, we opted to shift from our traditional growth posture to a more conservative stance, with a focus on profitability. Loan originations remain solid and we are seeing good quality loans in every category of our portfolio. So asset quality remains strong. However, funding costs have become the major factor impacting our earnings. The sale of $70 million of lower-yielding loans this quarter allowed us to decrease our reliance on high-cost deposits and therefore, stabilize our net interest margin." Returns on average assets and average equity were 1.59 percent and 19.07 percent, respectively, for the quarter ending June 30, 2007, compared to 1.90 percent and 27.71 percent, respectively, for the year-ago second quarter; six-month returns on average assets and equity were 1.47 percent and 17.56 percent, respectively, for the 2007 period compared with 1.86 percent and 27.19 percent for the prior year. Income Statement Total interest income for the second quarter of 2007 was $30.0 million, compared with $22.0 million for the second quarter of 2006, an increase of 36.4 percent. Net interest income was $17.1 million, up 17.3 percent over the $14.5 million reported for the year-ago quarter. Growth in net interest income reflects a 44.5 percent increase in average earnings assets, partially offset by a 128 basis point, or 18.8 percent, decline in net interest margin, from 6.79 percent for the 2006 quarter, to 5.51 percent for the current quarter. Compared to first quarter 2007, the margin declined a mere three basis points as loan growth slowed and funding costs dropped significantly. Mr. Wacknitz commented, "Our book is well-matched between tenor of loans and deposits, which gives us great flexibility to manage our net interest margin." Non-interest income for the second quarter of 2007 was $6.1 million, a decline of $358,000, or 5.9 percent, from the year-ago quarter, and a $2.2 million improvement from the first quarter of this year. Over the past twelve months, SBA servicing assets decreased by $9.0 million, to $16.9 million, due to adjustments to fair value according to FAS 156. The sale of $102.5 million of loans served the dual purpose of generating a $4.5 million gain on sale that more than offset the $1.1 million swing in SBA servicing income caused by accelerated prepayments, and it enabled Temecula to lower the level of high-cost borrowings. While Temecula is consistently a net seller of loans, second quarter sales were distinguished by their magnitude. By comparison with the current quarter, Temecula sold $51.6 million of loans the second quarter of 2006, resulting in a $3.8 million gain, and $40.1 million in the first quarter 2007 for a $2.3 million gain on sales. The provision for loan losses was zero for the current quarter, compared with $1.1 million reported for the year-ago quarter, and $415,000 for the first quarter of this year. During the second quarter of 2007, we made a contribution of $485,000 to our reserve for undisbursed loans. Net charge-offs have been relatively modest since virtually all of Temecula's non-performing loans are collateralized by real estate, and over half is guaranteed under various SBA programs. Second quarter non-interest expense was $14.3 million, an increase of $2.2 million, or 18.1 percent, over the $12.1 million reported for the year-ago quarter, and $1.7 million above first quarter 2007. Salary and benefits expenses accounted for $1.5 million of the linked quarter increase. They increased due to staffing increases, an accrual for the ESOP contribution, and increased benefit expenses. For the quarter ending June 30, 2007, the efficiency ratio increased to 61.8 percent from 57.4 percent in the second quarter of 2006. Balance Sheet Total assets were $1.31 billion at June 30, 2007, up $280.0 million or 27.2 percent from the $1.03 billion reported at June 30, 2006, and a $70.8 million increase since year-end 2006. Loans increased $227.0 million to $1.15 billion, or 24.5 percent year-over-year, but grew only $8.8 million over the past six months, with all of the growth in the first quarter of 2007; second quarter loans, in fact, decreased by $28.3 million compared with the previous quarter, primarily due to the sale of $102.5 million in loans. Temecula remains solidly entrenched in real estate lending, with approximately 94.5 percent of loans collateralized by real property. Construction lending is the bank's major focus, accounting for approximately 50 percent of its loan portfolio. According to Mr. Wacknitz, "We always have been selective in terms of our construction projects, and our borrowers are becoming more conservative as well, so we are seeing a slowdown in this sector." Construction outstandings grew $175 million year-over-year; virtually all of this growth, however, occurred in 2006. The $70 million loan sale impacted the 'Real Estate Other' category (primarily commercial real estate and SBA 504 loans); this category currently accounts for $250.2 million, or 21.7 percent of total loans, a decline of $42.6 million from its December 31, 2006 high point. SBA 7a loans, by comparison, are flourishing; year-over-year, they have nearly doubled to $260.2 million from $93.3 million a year ago. The current quarter was $24.4 million higher than the first. The loans held in portfolio are diversified geographically and by type of loan. Approximately 17.2 percent of loans were originated outside the state of California through various SBA programs; these are all commercial in nature, divided between non-construction CRE ($93.1 million) and commercial construction ($64.8 million). Of the California portfolio, residential construction loans account for 46.4 percent, commercial construction loans account for 15.4 percent and CRE loans account for 21.9 percent. "Through our SBA programs," Mr. Wacknitz explained, "we have highly experienced lenders in eight states originating SBA and similar loans. We have 28 lenders throughout the state of California focused on construction lending as well as CRE. And most importantly, we have four people in our appraisal department who are responsible for ordering and reviewing the appraisals independent of the loan origination officers. We average a loan-to-value ratio of 68 percent for our entire real estate-secured portfolio. Because of these factors, our asset quality has been excellent. Yes, we are seeing some of our borrowers under pressure, and yes, non-performing assets have increased somewhat, but net charge-offs remain extremely low." Total non-performing assets were $27.4 million this quarter, supported by government guarantees of approximately $15.2 million, thereby reducing potential loss exposure to $12.2 million, or 0.93 percent of total assets. Both gross and net non-performing assets have been increasing quarterly over the past twelve months, from a gross level of $9.0 million (0.87 percent of assets) for the year-ago quarter, to $24.5 million (1.87 percent) for the linked quarter. After guarantees, exposures were reduced to $1.7 million (0.17 percent of assets) for the year-ago quarter, and $10.4 million (0.79 percent) for the linked quarter. Nonetheless, net loan charge-offs remained extremely low throughout these five quarters; except for a clean-up in the first quarter of this year, net charge-offs ranged form 0.00 percent to 0.06 percent for the current quarter. By comparison, the allowance for loan losses was 1.07 percent of total loans including loans held for sale at June 30, 2007. The allowance for loan losses was 1.28 percent of total loans excluding loans held for sale at June 30, 2007. Deposits at June 30, 2007 were $1.15 billion, an increase of $227.9 million, or 24.7 percent, from $921.9 million at June 30, 2006. Again, the majority of this growth occurred in 2006; second quarter 2007 deposit balances declined by $2.1 million from the first quarter of this year. Core deposits, excluding time deposits greater than $100,000, were $729.9 million at June 30, 2007; they accounted for 63.5 percent of total deposits compared with $744.7 million, or 64.6 percent, for the linked quarter. The cost of interest-bearing deposits was relatively stable between the current and the previous quarters at approximately 4.78% to 4.75%. "Slowing loan growth has assisted in stabilizing the cost of interest-bearing deposits," commented Mr. Wacknitz. Shareholder equity increased 65.2 percent from $67.9 million at June 30, 2006 to $112.2 million at June 30, 2007; over half the growth was attributable to the $25.1 million private placement completed in November 2006, and the remainder to the exercise of stock options and the contribution from net income. At June 30, 2007, the Company had 10,662,772 shares outstanding, net of the 106,900 shares repurchased this quarter under the newly-authorized stock buyback program. Capital ratios remain strong at June 30, 2007, with the Tier 1 leverage ratio at 10.93 percent, the Tier 1 risk-based capital ratio at 10.58 percent, and the total risk-based capital ratio at 11.51 percent, all above the minimum to qualify as "well capitalized." "We have demonstrated the solidity of our business model and our ability to respond to market conditions. We turned on a dime this quarter, because we underwrite the majority of our commercial real estate loans to provide us with balance sheet flexibility. While we are not yet back to historical levels of performance, we have definitely made a lot of progress this past quarter. Our confidence in our future performance is reflected in the quarterly cash dividend we declared for the first time this past quarter, as well as the stock repurchases we continue to make," concluded Mr. Wacknitz. About the Company Temecula Valley Bank, established in 1996, operates ten 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 United States and has funded over $1.3 billion in SBA loans in 36 states in 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. Forward-looking Statements 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 the Securities and Exchange Commission by Temecula Valley Bancorp Inc. The Corporation undertakes no obligation to update forward-looking statements, whether as a result of new information, future events or otherwise. TEMECULA VALLEY BANCORP INC. CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (UNAUDITED) (in thousands except share and per share data) June 30, June 30, % Dec. 31, % 2007 2006 Change 2006 Change ----------- ----------- ------ ----------- ------ ASSETS Cash and due from banks $ 13,644 $ 15,063 (9%) $ 15,190 (10%) Interest-bearing deposits in financial institutions 1,000 99 910% 99 910% Federal funds sold 76,750 27,400 180% 18,180 322% Securities 1,012 0 0% 1,019 (1%) Loans Commercial 57,019 41,623 37% 59,550 (4%) Real Estate- Construction 580,987 405,390 43% 568,227 2% Real Estate (Including HFS) 250,198 269,578 (7%) 292,827 (15%) SBA 260,177 93,281 179% 218,408 19% Consumer and other 3,134 114,632 (97%) 3,681 (15%) ----------- ----------- ----------- Total Gross Loans 1,151,515 924,504 25% 1,142,693 1% Less allowance for loan losses (12,268) (10,170) 21% (12,522) (2%) ----------- ----------- ----------- Total Loans, net 1,139,247 914,334 25% 1,130,171 1% Federal Reserve & Home Loan Bank stock, at cost 2,833 3,189 (11%) 1,996 42% Bank premises and equipment, net 5,400 5,068 7% 5,492 (2%) Other real estate owned, net 722 728 (1%) 1,255 (42%) Cash surrender value life insurance 27,505 21,595 27% 24,036 14% SBA-loan servicing asset 7,111 8,570 (17%) 8,288 (14%) SBA-loan I/O strip receivable 9,775 17,311 (44%) 13,215 (26%) Accrued interest 6,466 3,890 66% 6,155 5% Other Assets 17,500 10,980 59% 13,093 34% ----------- ----------- ----------- Total Assets $1,308,965 $1,028,227 27% $1,238,189 6% =========== =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits Non-interest Bearing Deposits 144,683 158,858 (9%) 144,525 0% Money Market & NOW 151,893 106,873 42% 130,357 17% Savings 29,487 34,672 (15%) 29,781 (1%) Time Deposits 823,772 621,539 33% 776,838 6% ----------- ----------- ----------- Total deposits 1,149,835 921,942 25% 1,081,501 6% Junior subordinated debt securities 34,023 28,868 18% 41,240 (18%) Accrued interest 2,027 1,263 60% 2,094 (3%) Dividend Payable 427 0 0% 0 0% Other liabilities 10,465 8,222 27% 10,091 4% ----------- ----------- ----------- Total liabilities 1,196,777 960,295 25% 1,134,926 5% Stockholders' equity 112,188 67,932 65% 103,263 9% ----------- ----------- ----------- Total liabilities and Stockholders' equity $1,308,965 $1,028,227 27% $1,238,189 6% =========== =========== =========== SELECTED BALANCE SHEET DATA Book value per share, end of period 10.52 7.43 9.75 Allowance for loan losses as a % of total loans 1.07% 1.10% 1.10% Gross non-performing assets as a % of total assets 2.09% 0.87% 1.66% Net non-performing assets as a % of total assets 0.93% 0.17% 0.77% Net charge-offs (annualized) as a % of total loans 0.06% 0.06% 0.01% PAST DUE AND NON-ACCRUAL LOANS ------------------------------------- ------------------------------- Gross Government Net June 30, 2007 Balance Guaranty Balance ------------------------------------- ------------------------------- 30-89 days past due 11,471 (405) 11,066 ========== ========== ========= 90+ days past due and accruing 0 0 0 Non-accrual 26,630 (14,611) 12,019 Other real estate owned (REO) 722 (542) 180 ---------- ---------- --------- Total non-performing assets 27,352 (15,153) 12,199 ========== ========== ========= December 31, 2006 ------------------------------------- 30-89 days past due 3,284 (1,737) 1,547 ========== ========== ========= 90+ days past due and accruing 140 0 140 Non-accrual 19,124 (10,335) 8,789 Other real estate owned (REO) 1,255 (638) 617 ---------- ---------- --------- Total non-performing assets 20,519 (10,973) 9,546 ========== ========== ========= June 30, 2006 ------------------------------------- 30-89 days past due 2,044 (1,181) 863 ========== ========== ========= 90+ days past due and accruing 0 0 0 Non-accrual 8,257 (6,832) 1,425 Other real estate owned (REO) 728 (409) 319 ---------- ---------- --------- Total non-performing assets 8,985 (7,241) 1,744 ========== ========== ========= TEMECULA VALLEY BANCORP INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (in thousands except share and per share data) 3 Mos. Ended June 30, 6 Mos. Ended June 30, ------------------------ ------------------------ 2007 2006 2007 2006 ------------ ----------- ------------ ----------- INTEREST INCOME Interest income and fees on loans $ 29,487 $ 21,762 $ 57,565 $ 41,060 Other Interest income 417 150 698 272 ------------ ----------- ------------ ----------- Total Interest income 29,904 21,912 58,263 41,332 INTEREST EXPENSE Interest on deposits 12,071 6,658 23,347 12,118 Interest on junior subordinated debt and other borrowings 779 717 1,614 1,309 ------------ ----------- ------------ ----------- Total Interest expense 12,850 7,375 24,961 13,427 ------------ ----------- ------------ ----------- Net interest income 17,054 14,537 33,302 27,905 Provision for loan losses 0 1,096 415 1,410 ------------ ----------- ------------ ----------- Net interest income after provision for loan losses 17,054 13,441 32,887 26,495 NON-INTEREST INCOME Service charges and fees 151 162 300 315 Gain on sale of loans, fixed assets and OREO 4,454 3,966 6,737 6,936 SBA Net Servicing income (855) 209 (1,710) 624 Loan-related income 559 679 1,017 1,200 Other income 1,808 1,459 3,711 2,341 ------------ ----------- ------------ ----------- Total Non-Interest income 6,117 6,475 10,055 11,416 NON-INTEREST EXPENSE Salaries and employee benefits 9,646 8,122 18,283 15,863 Occupancy and equipment 1,273 1,172 2,537 2,291 Marketing and business promotion 257 259 601 484 Office expense 705 576 1,363 1,184 Loan-related expense 493 766 1,115 1,228 Other expense 1,943 1,158 3,081 2,081 ------------ ----------- ------------ ----------- Total Non-Interest income 14,317 12,053 26,980 23,131 ------------ ----------- ------------ ----------- Earnings before income taxes 8,854 7,863 15,962 14,780 Income taxes 3,603 3,333 6,532 6,270 ------------ ----------- ------------ ----------- Net earnings $ 5,251 $ 4,530 $ 9,430 $ 8,510 ============ =========== ============ =========== OTHER SELECTED FINANCIAL DATA Actual common shares outstanding at end of period 10,662,772 9,140,755 10,662,772 9,140,755 Average common shares outstanding 10,661,179 9,025,994 10,631,627 8,990,537 Average common shares & equivalents outstanding 11,072,471 9,606,151 11,063,223 9,546,876 Basic earnings per share 0.49 0.50 0.89 0.95 Diluted earnings per share 0.47 0.47 0.85 0.89 Return on average assets (annualized) 1.59% 1.90% 1.47% 1.86% Return on average equity (annualized) 19.07% 27.71% 17.56% 27.19% Investment Yield 5.24% 4.78% 5.23% 4.64% Loan Yield 9.79% 10.31% 9.77% 10.17% Cost of Interest- bearing Deposits 4.78% 3.89% 4.77% 3.72% Cost of Borrowings 7.66% 7.03% 7.91% 6.92% Loan to deposit ratio, end of period 100.15% 105.66% 100.15% 100.28% Net interest margin 5.51% 6.79% 5.53% 6.81% Efficiency ratio 61.79% 57.36% 62.23% 58.83% Tier 1 leverage capital ratio 10.93% 9.37% 10.93% 9.37% Tier 1 risk-based capital ratio 10.58% 8.36% 10.58% 8.36% Total risk-based capital ratio 11.51% 9.84% 11.51% 9.84% NET LOAN CHARGE-OFFS -------------------- Charge-offs 198 140 678 296 Recoveries (9) (16) (9) (17) ------------ ----------- ------------ ----------- Net Charge-offs (Recoveries) 189 124 669 279 ============ =========== ============ =========== TEMECULA VALLEY BANCORP, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) (dollars in thousands except per share data) Quarterly -------------------------- 2007 ------------------------ 2nd Qtr 1st Qtr ------------ ----------- EARNINGS Net interest income (fully tax-equivalent) $ 17,054 16,250 Provision for loan and lease losses $ 0 415 Non-Interest income $ 6,117 3,938 Non-Interest expense $ 14,317 12,664 Net income $ 5,251 4,179 Basic earnings per share $ 0.49 0.39 Diluted earnings per share $ 0.47 0.38 Average shares outstanding 10,661,179 10,601,748 Average diluted shares outstanding 11,072,471 11,124,945 PERFORMANCE RATIOS Return on average assets 1.59% 1.34% Return on average common equity 19.07% 16.04% Net interest margin (fully tax-equivalent) 5.51% 5.54% Investment Yield 5.24% 5.23% Loan Yield 9.79% 9.75% Cost of Interest-bearing Deposits 4.78% 4.75% Cost of Borrowings 7.66% 8.14% Non-interest income/Operating revenue 26.40% 19.51% Efficiency ratio 61.79% 62.73% Full-time equivalent employees 318 313 CAPITAL Loans/Deposits 100.15% 102.43% Securities/Assets 0.08% 0.08% Equity to assets 8.57% 8.21% Regulatory leverage ratio 10.93% 11.27% Tier 1 capital ratio 10.58% 10.42% Total risk-based capital ratio 11.51% 11.65% Book value per share $ 10.52 10.15 Common dividends per share $ 0.04 N/A ASSET QUALITY Gross loan charge-offs $ 198 479 Net loan charge-offs (recoveries) $ 190 479 Net loan charge-offs to average loans 0.06% 0.16% Allowance for loan losses $ 12,268 12,458 Allowance for losses to total loans 1.07% 1.06% Non-performing loans $ 26,629 23,813 90-Day Delinquencies 0 0 Other real estate owned $ 722 722 Non-performing assets (including OREO) $ 27,352 24,535 Non-performing assets to total assets 2.09% 1.87% Non-performing Assets, Net of Guarantees (NOG) $ 12,199 10,420 Non-performing assets NOG to Total Assets 0.93% 0.79% END OF PERIOD BALANCES Loans (before allowance) $ 1,151,515 1,179,789 Total earning assets (before allowance) $ 1,230,277 1,236,224 Total assets $ 1,308,965 1,312,448 Non-interest bearing demand $ 144,683 151,293 Money Market and NOW $ 151,893 141,028 Savings $ 29,487 32,012 Time deposits under $100,000 $ 403,827 420,301 Time deposits $100,000 and over $ 419,945 407,219 Total Deposits $ 1,149,835 1,151,853 Shareholders' equity $ 112,188 107,744 Period end common shares outstanding 10,662,772 10,613,659 QUARTERLY AVERAGE BALANCES Loans (before allowance) $ 1,208,928 1,167,399 Total earning assets (before allowance) $ 1,240,905 1,189,218 Total assets $ 1,323,088 1,266,657 Deposits $ 1,158,276 1,106,127 Shareholders' equity $ 110,424 105,661 Quarterly ----------------------------------- 2006 ----------------------------------- 4th Qtr 3rd Qtr 2nd Qtr ------------ ----------- ---------- EARNINGS Net interest income (fully tax- equivalent) 16,282 15,593 14,537 Provision for loan and lease losses 890 1,350 1,096 Non-Interest income 3,695 4,333 6,475 Non-Interest expense 12,256 11,604 12,054 Net income 4,392 4,018 4,530 Basic earnings per share 0.45 0.44 0.50 Diluted earnings per share 0.43 0.41 0.47 Average shares outstanding 9,800,612 9,149,922 9,025,994 Average diluted shares outstanding 10,322,256 9,696,764 9,606,151 PERFORMANCE RATIOS Return on average assets 1.46% 1.48% 1.90% Return on average common equity 20.11% 22.72% 27.71% Net interest margin (fully tax- equivalent) 5.79% 6.29% 6.79% Investment Yield 5.22% 5.22% 4.78% Loan Yield 9.92% 10.30% 10.31% Cost of Interest-bearing Deposits 4.68% 4.42% 3.89% Cost of Borrowings 7.84% 8.04% 7.03% Non-interest income/Operating revenue 18.50% 21.75% 30.82% Efficiency ratio 61.35% 58.24% 57.36% Full-time equivalent employees 312 304 289 CAPITAL Loans/Deposits 105.66% 104.33% 100.28% Securities/Assets 0.08% 0.09% 0.00% Equity to assets 8.34% 6.38% 6.61% Regulatory leverage ratio 11.42% 8.94% 9.37% Tier 1 capital ratio 10.49% 7.92% 8.36% Total risk-based capital ratio 11.90% 10.19% 9.84% Book value per share 9.75 7.96 7.43 Common dividends per share N/A N/A N/A ASSET QUALITY Gross loan charge-offs 25 61 140 Net loan charge-offs (recoveries) (1) (111) 124 Net loan charge-offs to average loans 0.00% (0.05%) 0.06% Allowance for loan losses 12,522 11,631 10,170 Allowance for losses to total loans 1.10% 1.10% 1.10% Non-performing loans 19,124 11,700 8,257 90-Day Delinquencies 140 0 0 Other real estate owned 1,255 2,131 728 Non-performing assets (including OREO) 20,519 13,800 8,985 Non-performing assets to total assets 1.66% 1.21% 0.87% Non-performing Assets, Net of Guarantees (NOG) 9,547 3,784 1,744 Non-performing assets NOG to Total Assets 0.77% 0.33% 0.17% END OF PERIOD BALANCES Loans (before allowance) 1,142,693 1,061,515 924,504 Total earning assets (before allowance) 1,161,991 1,065,964 952,003 Total assets 1,238,189 1,143,971 1,028,227 Non-interest bearing demand 144,525 155,445 158,858 Money Market and NOW 130,357 123,443 106,873 Savings 29,781 30,112 34,672 Time deposits under $100,000 367,029 331,432 298,136 Time deposits $100,000 and over 409,809 377,023 323,403 Total Deposits 1,081,501 1,017,455 921,942 Shareholders' equity 103,263 72,960 67,932 Period end common shares outstanding 10,586,659 9,169,088 9,140,755 QUARTERLY AVERAGE BALANCES Loans (before allowance) 1,099,465 957,182 846,206 Total earning assets (before allowance) 1,116,363 984,203 858,827 Total assets 1,197,032 1,076,472 955,543 Deposits 1,053,338 963,949 839,601 Shareholders' equity 86,650 70,170 65,561 REAL ESTATE SECURED LOANS (Including Held-For-Sale) - ---------------------------------------------------------------------- 6/30/2007 3/31/2007 12/31/2006 9/30/2006 6/30/2006 --------- --------- ---------- --------- --------- Residential Construction Loans - ------------------- 10 Owner Occupied Res Const 1.34% 2.48% 3.31% 4.73% 4.89% 11 High-End Owner Occupied 8.35% 7.22% 7.92% 7.21% 5.20% 20 Spec Residential Construction (1-4 units) 12.68% 12.30% 12.40% 12.52% 13.24% 21 High-End Spec Residential Const (1-4 units) 20.78% 20.64% 18.96% 18.60% 22.17% 23 High-End Residential Tract Construction (over 4 units) 12.15% 11.45% 11.35% 11.24% 10.11% 24 Tract Construction (over 4 Units) 5.95% 6.34% 7.71% 10.23% 10.85% 25 Multi-Family Construction 4.65% 3.97% 2.29% 2.03% 1.86% 26 Condominium Construction 7.70% 7.43% 8.25% 7.50% 8.04% 27 High-End Condominium Construction 21.55% 22.08% 21.21% 19.47% 17.62% 28 Condominium Conversion 4.85% 6.09% 6.60% 6.48% 6.03% --------- --------- ---------- --------- --------- Total Residential Construction Loans 100.00% 100.00% 100.00% 100.00% 100.00% ========= ========= ========== ========= ========= Sub-Total Residential Construction Loans 38.41% 35.08% 35.77% 36.91% 36.61% Commercial Construction Loans - ------------------- 30 Owner-Occupied Comm Const 27.44% 24.41% 18.72% 19.79% 20.69% 31 Restaurant/Bar Construction 0.66% 2.25% 1.84% 1.88% 2.13% 32 Hotel/Motel Construction 33.43% 30.77% 29.99% 28.52% 27.42% 33 Car Wash Construction 3.47% 3.95% 5.49% 6.41% 9.76% 34 Gas Station/C Store Construction 3.46% 2.53% 4.38% 7.91% 8.55% 36 Retail Spec Construction 1.26% 4.35% 9.32% 7.82% 5.68% 38 Office Spec Construction 11.26% 12.83% 9.59% 8.20% 6.07% 40 Industrial/ Warehouse Spec Const 6.58% 8.63% 11.42% 9.32% 13.60% 42 Healthcare Construction 8.34% 7.21% 4.76% 4.50% 0.73% 44 Miscellaneous Comm Const 1.69% 0.85% 2.39% 3.08% 2.41% 45 Mini-Storage Construction 2.41% 2.20% 2.09% 2.58% 2.96% --------- --------- ---------- --------- --------- Total Commercial Construction Loans 100.00% 100.00% 100.00% 100.00% 100.00% ========= ========= ========== ========= ========= Sub-Total Commercial Construction Loans 19.80% 21.17% 21.02% 18.03% 16.70% Non-Construction Real Estate Loans - ------------------- 59 Multi-Family 1.91% 2.58% 2.39% 2.23% 1.55% 60 Owner-Occupied Commercial 31.58% 34.23% 31.00% 27.49% 27.26% 61 Restaurant/Bar 3.94% 3.22% 2.56% 2.75% 2.14% 62 Hotel/Motel 19.09% 15.17% 18.19% 22.01% 23.86% 63 Car Wash 4.18% 4.01% 3.69% 3.25% 2.63% 64 Gas Station/C Store 13.59% 12.13% 11.68% 13.79% 17.11% 66 Retail Investment 3.35% 3.10% 3.51% 3.53% 3.81% 68 Office Investment 2.42% 3.66% 3.90% 3.78% 3.78% 70 Industrial/ Warehouse Investment 11.79% 13.09% 13.76% 11.77% 9.83% 72 Healthcare 3.61% 2.39% 1.68% 2.24% 2.67% 74 Miscellaneous Commercial 2.31% 4.36% 5.29% 4.77% 2.68% 75 Mini-Storage 2.22% 2.08% 2.36% 2.38% 2.67% --------- --------- ---------- --------- --------- Total Non- Construction Real Estate Loans 100.00% 100.00% 100.00% 100.00% 100.00% ========= ========= ========== ========= ========= Sub-Total Non- Construction Real Estate Loans 28.26% 32.45% 30.30% 32.18% 32.90% Land Loans - ------------------- 50 Residential Land Development 28.80% 34.52% 30.59% 33.28% 34.43% 51 Commercial Land Development 7.84% 4.57% 4.25% 4.77% 6.77% 55 Unimproved Land 63.36% 60.92% 65.17% 61.94% 58.81% --------- --------- ---------- --------- --------- Total Land Loans 100.00% 100.00% 100.00% 100.00% 100.00% ========= ========= ========== ========= ========= Sub-Total Land Loans 13.53% 11.30% 12.90% 12.88% 13.79% --------- --------- ---------- --------- --------- Total Real Estate Secured Loans 100.00% 100.00% 100.00% 100.00% 100.00% ========= ========= ========== ========= ========= CONTACT: Temecula Valley Bank Stephen H. Wacknitz, 951-694-9940 -----END PRIVACY-ENHANCED MESSAGE-----