Premier Service Bank, Riverside, California (OTCBB:PSBK) today announced its unaudited financial results for the first quarter of 2011.

For the quarter ended March 31, 2011, the bank reported net loss of $594 thousand, or <$0.48> per diluted share, compared to net income of $18 thousand, or $0.01 per diluted share for the quarter ended March 31, 2010. The decrease in earnings between the respective periods is primarily attributed to the decrease in net interest income which resulted from the increase in non-performing assets and the decrease in total loans, and the increase in the provision to the allowance for loan losses. The provision to the allowance for loan losses for the first quarter of 2011 totaled $725 thousand, compared to $340 thousand for the same period in 2010.

At March 31, 2011, the Bank had $8.0 million of non-performing loans, representing 7.08% of the Bank's total loans, compared to $8.4 million of non-performing loans, or 6.54% of total loans, at March 31, 2010. The Bank had foreclosed real estate of $3.9 million at March 31, 2011, compared to foreclosed real estate of $1.4 million at March 31, 2010. At March 31, 2011, non-accrual loans totaled $8.0 million, representing 7.08% of total loans at that date, compared to non-accrual loans of $7.6 million at March 31, 2010, representing 5.95% of total loans at that date. The allowance for loan losses totaled $2.56 million at March 31, 2011, or 2.25% of total loans as of that date, compared to $2.19 million at March 31, 2010, or 1.71% of total loans as of that date.

At March 31, 2011, the Bank had total assets of $154 million, representing a decrease of $3.7 million or 2.35% compared to total assets of $158 million at March 31, 2010. The Bank had $19 million in FHLB borrowings at March 31, 2011, representing an increase of $4 million or 26.67% from the FHLB borrowings of $15 million at March 31, 2010. Total deposits at March 31, 2011 were $122.3 million, representing a decrease of 2.96% compared to total deposits of $126 million at March 31, 2010. Non-interest bearing demand deposits totaled $44.9 million at March 31, 2011, representing 36.72% of total deposits at that date, compared to $36.3 million of non-interest bearing demand deposits at March 31, 2010, which represented 28.81% of total deposits at that date.

The Bank's gross loan portfolio decreased to $113.6 million at March 31, 2011, representing an 11.32% decrease compared to gross loans of $128.1 million at March 31, 2010. Unfunded credit commitments stood at $14 million at March 31, 2011, representing a 30.35% decrease compared to unfunded commitments of $20.1 million at March 31, 2010.

The Bank's net interest margin for the quarter ended March 31, 2011 was 4.75%, a decrease of 0.48% as compared to the net interest margin of 5.23% for the first quarter of 2010.

Total shareholders' equity at March 31, 2011 was $12.3 million, representing a decrease of $4 million, or 24.54% compared to total shareholders' equity of $16.3 million at March 31, 2010. On December 1, 2010, the Bank entered into a Consent Order with the Federal Deposit Insurance Corporation and the California Department of Financial Institutions. The Consent Order requires the Bank, within 90 days from the effective date of the Order (by February 28, 2011), to 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-base capital ratio equals or exceeds 12 percent. As of March 31, 2011, these capital ratios were 7.87% and 11.27%, respectively. As a result, the Bank was not in compliance, as of March 31, 2011, with the capital ratios required by the Consent Order. To increase the Bank's capital ratios to the extent required by the Consent Order, the Bank has engaged the services of Hovde Financial, Inc., an investment banking firm which specializes in the community banking industry, to assist the Bank in its efforts to raise up to $5 million in a nonpublic offering of common stock and warrants to accredited investors only. The offering commenced as of February 26, 2011 and is presently scheduled to expire on May 31, 2011. The Bank cannot predict at this time whether this offering will satisfy the conditions of the Consent Order, or whether other actions, such as reducing the asset size of the Bank by selling loans, will be required to achieve compliance. Although the Bank is not in compliance with the capital requirements of the Consent Order at March 31, 2011, the Bank was adequately capitalized as of that date under applicable regulatory guidelines.

The Bank's President and Chief Executive Officer, Kerry L. Pendergast, stated, "The first quarter loss is directly attributable to increased provisions to the Bank's allowance for loan losses, along with additional write-downs and related expenses on foreclosed real estate. While our core earnings have remained relatively stable between periods, contributions to the allowance, along with OREO write-downs and expenses associated with managing and resolving the Bank's Special Assets, have continued to produce operating losses for the Bank."

Pendergast went on to say, "2009 and 2010 were extremely challenging years for Premier Service Bank, as we tried to navigate through a myriad of unprecedented economic challenges facing all businesses in the Inland Empire. As we move into 2011, we believe that we have identified those borrowing relationships within the Bank that could prove to be problematic. With the identification process behind us and steps having been taken to protect the Bank against future loss where possible, we are now focused, where appropriate, on working with clients to ensure that they continue to have access to credit."

Pendergast said in closing, "In August of last year the Bank hired a Special Assets Manager to assist us in the orderly liquidation of Bank owned property and in working closely with those borrowers who were experiencing repayment issues. To date, the Bank has closed escrow on one Bank-owned property and has another property in escrow and scheduled to close in late May of this year. While the pace of newly identified problem loans has slowed considerably, our challenge in the coming months will be centered in the orderly, but timely, liquidation of Bank-owned property, which, until fully liquidated, will continue to impact the Bank's profitability."

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 other risks discussed from time to time in Premier Service Bank's filings and reports with the Federal Deposit Insurance Corporation. 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.

For a more complete discussion of risks and uncertainties, investors and security holders are urged to read Premier Service Bank's annual report on Form 10-K, quarterly reports on Form 10-Q and other reports filed by Premier Service Bank with the FDIC.

See the unaudited Financial Data:

 
Financial Data - Premier Service Bank
(Unaudited)
  Quarter Ended
(In Thousands)   Mar. 31, 2011   Dec. 31, 2010   Sept. 30, 2010   June 30, 2010   Mar. 31, 2010
 
Interest income(not taxable equivalent) $ 1,938 $ 2,063 $ 2,057 $ 2,192 $ 2,194
Interest expense   291     329     351     391     425  
Net interest income 1,647 1,734 1,706 1,801 1,769
Provision for loan losses   725     960     195     2,516     340  

Net interest income after provision for loan losses

922 774 1,511 (715 ) 1,429
Non-interest income 178 163 167 175 195
Non-interest expense   1,694     1,644     1,533     1,704     1,573  
Income before income taxes (594 ) (707 ) 145 (2,244 ) 51
(Benefit)/Provision for income taxes   -     -     502     (32 )   33  
Net income $ (594 ) $ (707 ) $ (357 ) $ (2,212 ) $ 18  
 
Quarter Ended  
(In Thousands)   Mar. 31, 2011 Dec. 31, 2010 Sept. 30, 2010 June 30, 2010 Mar. 31, 2010
Per share:
Net income - basic $ (0.48 ) $ (0.57 ) $ (0.29 ) $ (1.81 ) $ 0.01
Weighted average shares used in basic 1,261 1,261 1,261 1,261 1,261
Net income - diluted $ (0.48 ) $ (0.57 ) $ (0.29 ) $ (1.81 ) $ 0.01
Weighted average shares used in diluted 1,261 1,261 1,261 1,261 1,261
Book value at period end $ 6.49 $ 6.97 $ 7.60 $ 7.91 $ 9.71
Ending shares 1,261 1,261 1,261 1,261 1,261
 
 
Balance Sheet - At Period-End
Cash and due from banks $ 22,636 $ 24,060 $ 22,041 $ 16,372 $ 12,486
Investments and Fed fund sold 10,250 8,476 8,491 9,709 11,050
Gross Loans 113,645 117,624 122,064 124,362 128,140
Deferred fees (254 ) (263 ) (281 ) (297 ) (321 )
Allowance for loan losses (2,561 ) (2,549 ) (2,952 ) (3,060 ) (2,188 )
Net Loans 110,830 114,812 118,831 121,005 125,631
Other assets   10,592     8,644     8,125     8,870     8,855  
Total Assets $ 154,308   $ 155,992   $ 157,488   $ 155,956   $ 158,022  
 
Non-interest-bearing deposits $ 44,947 $ 37,588 $ 38,881 $ 37,598 $ 36,258
Interest-bearing deposits 77,347 85,809 85,225 86,495 89,765
Other liabilities 19,749 19,737 19,761 17,849 15,721
Shareholders' equity   12,265     12,858     13,621     14,014     16,278  
 
Total Liabilities and Shareholders' equity $ 154,308   $ 155,992   $ 157,488   $ 155,956   $ 158,022  
 
Asset Quality & Capital - At Period-End
Non-accrual loans $ 8,047 $ 8,209 $ 9,635 $ 6,590 $ 7,626
Loans past due 90 days or more - 757
Other real estate owned 3,927 1,865 1,162 1,242 1,436
Other bank owned assets   -     -     -     -     -  
Total non-performing assets $ 11,974   $ 10,074   $ 10,797   $ 7,832   $ 9,819  
 
Allowance for losses to loans, gross 2.25 % 2.17 % 2.42 % 2.46 % 1.71 %
Non-accrual loans to total loans, gross 7.08 % 6.98 % 7.89 % 5.30 % 5.95 %
Non-performing loans to total loans, gross 7.08 % 6.98 % 7.89 % 5.30 % 6.54 %
Non-performing asset to total assets 7.76 % 6.46 % 6.86 % 5.02 % 6.21 %
Allowance for losses to non-performing loans 31.83 % 31.05 % 30.64 % 46.43 % 26.10 %
 
Total risk-based capital ratio 11.27 % 11.64 % 11.90 % 11.86 % 13.17 %
Tier 1 risk-based capital ratio 10.00 % 10.38 % 10.63 % 10.60 % 11.91 %
Tier 1 leverage ratio 7.87 % 8.05 % 8.57 % 8.61 % 10.05 %

Premier Service Bank
Kerry L. Pendergast, President and CEO
Jessica Lee, Executive Vice President and CFO
951-274-2400