VLLY Valley Bancorp

Valley Bancorp (NASDAQ: VLLY) HIGHLIGHTS -- Second quarter earnings of $2,005,000, up 43% from $1,404,000 in 2nd quarter 2005. -- Second quarter earnings per diluted share of $0.68 up 42% from $0.48 in 2nd quarter 2005. -- ROE and ROA of 17.92% and 1.88% respectively in 2nd quarter 2006. -- Total net loans increased $83 million, up 34% from 2nd quarter 2005. Valley Bancorp, the holding company for Valley Bank, today announced net income of $2,005,000 or $0.68 per diluted share for the quarter ended June 30, 2006, a 43% increase from net income of $1,404,000 for the second quarter of 2005. Valley also announced earnings for the six months ended June 30, 2006 of $3.6 million or $1.23 per diluted share, a 45% increase over the $2.5 million earned during the same period in 2005. Return on average assets and return on average equity for the quarter ended June 30, 2006 were 1.88% and 17.92% as compared to 1.75% and 14.77% for the same period in 2005, respectively. For the six months ended June 30, 2006, return on average assets and return on average equity were 1.76% and 16.57%, respectively. Valley's total assets grew $106 million or 32% to $441 million at June 30, 2006 as compared to $335 million at June 30, 2005. At June 30, 2006, Valley's total net loans were $328 million, total deposits were $378 million, and stockholders' equity was $45 million. Barry L. Hulin, president and chief executive officer, stated, "We are pleased with the results for the first half of the year. Since the announcement on June 28, 2006 of the proposed acquisition of Valley Bancorp by Community Bancorp (CBON), both companies have been working diligently to complete all regulatory filings. Each company's employees have begun preliminary merger planning and we are gratified by the positive approach taken by everyone involved." -0- *T Financial Performance Indicators for the Three and Six Months Ended June 30, 2006 and 2005 (Dollars in thousands, except per share data) (Unaudited) At June 30, Change --------------------- ----------------- 2006 2005 $ or # % ---------- ---------- --------- ------- Balance Sheet: Loans net of Unearned Fees $331,658 $248,154 $83,504 33.65% Allowance for Loan Losses (3,317) (2,497) (820) 32.84% ---------- ---------- --------- Loans, net 328,341 245,657 82,684 33.66% Total Assets $440,664 $334,784 $105,880 31.63% Total Earning Assets 423,922 320,586 103,336 32.23% Total Investments 95,581 74,929 20,652 27.56% Total Deposits 377,548 278,860 98,688 35.39% Total Borrowed Funds 15,404 15,446 (42) -0.27% Total Liabilities 395,230 295,903 99,327 33.57% Total Stockholders' Equity 45,434 38,881 6,553 16.85% Common Shares Outstanding 2,827,881 2,808,173 19,708 0.70% Book Value per Share $16.07 $13.85 $2.22 16.04% Allowance for Loan Losses to Total Loans 1.00% 1.01% -0.01% Total Stockholders' Equity to Total Assets 10.31% 11.61% -1.30% Total Loans to Total Deposits & Borrowed Funds 83.56% 83.47% 0.09% Three Months Ended June 30, Change --------------------- ----------------- 2006 2005 $ or # % ---------- ---------- --------- ------- Income Statement: Interest Income $8,465 $5,282 $3,183 60.26% Interest Expense 2,988 1,430 1,558 108.95% ---------- ---------- --------- Net Interest Income 5,477 3,852 1,625 42.19% Provision for Loan Losses 52 229 (177) -77.29% Non-interest Income 84 62 22 35.48% Non-interest Expense 2,439 1,554 885 56.95% ---------- ---------- --------- Income before Income Taxes 3,070 2,131 939 44.06% Income Tax Expense 1,065 727 338 46.49% ---------- ---------- --------- Net Income $2,005 $1,404 $601 42.81% ========== ========== ========= Basic Earnings Per Share $0.71 $0.50 $0.21 42.00% Diluted Earnings Per Share 0.68 0.48 0.20 41.67% Weighted Average Shares - Basic 2,827,881 2,798,203 29,678 1.06% Weighted Average Shares - Diluted 2,969,580 2,936,942 32,638 1.11% Average Total Assets $426,204 $320,054 $106,150 33.17% Average Earning Assets 410,395 306,613 103,782 33.85% Average Stockholders' Equity 44,788 38,015 6,773 17.82% Net Interest Margin (1) 5.35% 5.04% 0.31% Return on Assets (1) 1.88% 1.75% 0.13% Return on Equity (1) 17.92% 14.77% 3.14% Non-interest Expense to Average Earning Assets (1) 2.38% 2.03% 0.35% Efficiency Ratio 43.85% 39.70% 4.15% Full Time Equivalent Employees 69 53 16 30.19% Six Months Ended June 30, Change --------------------- ----------------- 2006 2005 $ or # % ---------- ---------- --------- ------- Income Statement: Interest Income $15,878 $9,744 $6,134 62.95% Interest Expense 5,428 2,519 2,909 115.48% ---------- ---------- --------- Net Interest Income 10,450 7,225 3,225 44.64% Provision for Loan Losses 279 280 (1) -0.36% Non-interest Income 146 137 9 6.57% Non-interest Expense 4,770 3,295 1,475 44.76% ---------- ---------- --------- Income before Income Taxes 5,547 3,787 1,760 46.47% Income Tax Expense 1,907 1,291 616 47.71% ---------- ---------- --------- Net Income $3,640 $2,496 $1,144 45.83% ========== ========== ========= Basic Earnings Per Share $1.29 $0.89 $0.40 44.94% Diluted Earnings Per Share 1.23 0.85 0.38 44.71% Weighted Average Shares - Basic 2,827,857 2,794,518 33,339 1.19% Weighted Average Shares - Diluted 2,968,087 2,945,444 22,643 0.77% Average Total Assets $413,748 $304,440 $109,308 35.90% Average Earning Assets 397,541 291,122 106,419 36.55% Average Stockholders' Equity 43,947 37,431 6,516 17.41% Net Interest Margin (1) 5.30% 5.00% 0.30% Return on Assets (1) 1.76% 1.64% 0.12% Return on Equity (1) 16.57% 13.34% 3.23% Non-interest Expense to Average Earning Assets (1) 2.40% 2.26% 0.14% Efficiency Ratio 45.02% 44.76% 0.26% ------------------------------- (1) Annualized *T Net Interest Income and Net Interest Margin Net interest income for the second quarter of 2006 was $5.5 million. This represents an increase of $1.6 million or 42% as compared to $3.9 million for the second quarter of 2005. The increase was primarily a result of higher interest income from loans and other earning assets due to increased outstanding totals, as well as an improved interest margin. Valley's average earning assets increased by $103 million or 34% to $410 million for the quarter ended June 30, 2006 as compared to $307 million for the second quarter of 2005. The net interest margin for the quarter ended June 30, 2006 increased to 5.35% as compared to 5.04% for the same period in 2005. For the six months ended June 30, 2006, net interest income increased by $3.2 million or 45% to $10.4 million as compared to $7.2 million for the same period in 2005. Average earning assets for the six-month period in 2006 totaled $398 million as compared to $291 million for the same period in 2005, an increase of $107 million or 37%. The net interest margin for the first half of 2006 was 5.30% as compared to 5.00% for the first half of 2005. Rising interest rates and increasing loans and investment securities outstanding contributed to the improved net interest margin for both the second quarter and the year-to-date of 2006. -0- *T Distribution of Assets, Liabilities and Stockholders' Equity; Interest Rates and Interest Differential Three Months Ended June 30, ----------------------------------------------------- 2006 2005 -------------------------- -------------------------- Average Average Average Interest Yield/ Average Interest Yield/ Balance Income/ Cost Balance Income/ Cost (1) Expense (2) (1) Expense (2) Assets (Dollars in thousands) Earning assets: Loans (3) (4) (5) $333,243 $7,606 9.15% $240,560 $4,722 7.87% Federal funds sold (6) 36,141 435 4.83% 16,270 119 2.93% Interest bearing deposits (6) 6,196 77 4.98% 10,682 84 3.15% Investment securities (6) 34,815 347 4.00% 39,101 357 3.66% --------- -------- --------- -------- Total earning assets and interest income 410,395 8,465 8.27% 306,613 5,282 6.91% Non-interest earning assets: Cash and due from banks 9,197 7,141 Premises and equipment 7,326 6,282 Other assets 2,626 2,392 Allowance for credit losses (3,340) (2,374) --------- --------- Total assets $426,204 $320,054 ========= ========= Liabilities and Stockholders' Equity Interest bearing liabilities: Interest bearing demand deposits $84,003 $345 1.65% $75,394 $262 1.39% Savings deposits 35,599 310 3.49% 11,768 22 0.75% Time deposits $100,000 or more 93,385 1,035 4.45% 61,741 457 2.97% Other time deposits 99,538 1,137 4.58% 82,522 664 3.23% Long-term borrowings 15,410 161 4.19% 2,101 25 4.77% --------- -------- --------- -------- Total interest bearing liabilities 327,935 2,988 3.65% 233,526 1,430 2.46% Noninterest- bearing liabilities: Demand deposits 50,770 46,959 Other liabilities 2,711 1,554 Stockholders' equity 44,788 38,015 --------- --------- Total liabilities and stockholders' equity $426,204 $320,054 ========= ========= Net Interest Spread (7) 4.62% 4.45% -------- -------- Net interest income/margin (8) $5,477 5.35% $3,852 5.04% ======== ======= ======== ======= Six Months Ended June 30, ----------------------------------------------------- 2006 2005 -------------------------- -------------------------- Average Average Average Interest Yield/ Average Interest Yield/ Balance Income/ Cost Balance Income/ Cost (1) Expense (2) (1) Expense (2) Assets (Dollars in thousands) Earning assets: Loans (3) (4) (5) $320,670 $14,220 8.94% $224,521 $8,653 7.77% Federal funds sold (6) 34,173 793 4.68% 17,939 240 2.70% Interest bearing deposits (6) 7,548 175 4.68% 9,898 140 2.85% Investment securities (6) 35,150 690 3.96% 38,764 711 3.70% --------- -------- --------- -------- Total earning assets and interest income 397,541 15,878 8.05% 291,122 9,744 6.75% Non-interest earning assets: Cash and due from banks 9,586 7,379 Premises and equipment 7,334 6,042 Other assets 2,489 2,207 Allowance for credit losses (3,202) (2,310) --------- --------- Total assets $413,748 $304,440 ========= ========= Liabilities and Stockholders' Equity Interest bearing liabilities: Interest bearing demand deposits $89,970 $750 1.68% $74,300 $475 1.29% Savings deposits 26,432 391 2.98% 12,192 40 0.66% Time deposits $100,000 or more 89,610 1,904 4.28% 56,098 781 2.81% Other time deposits 95,070 2,062 4.37% 77,105 1,190 3.11% Long-term borrowings 15,416 321 4.20% 1,287 33 5.17% --------- -------- --------- -------- Total interest bearing liabilities 316,498 5,428 3.46% 220,982 2,519 2.30% Noninterest- bearing liabilities: Demand deposits 50,943 44,739 Other liabilities 2,360 1,288 Stockholders' equity 43,947 37,431 --------- --------- Total liabilities and stockholders' equity $413,748 $304,440 ========= ========= Net Interest Spread (7) 4.59% 4.45% -------- -------- Net interest income/margin (8) $10,450 5.30% $7,225 5.00% ======== ======= ======== ======= -------------------------- (1) Average balances are obtained from the best available daily data. (2) Annualized. (3) Loans are gross of allowance for credit losses but after unearned fees. (4) Non-accruing loans are included in the average balances. (5) Fee income is included in interest income. (6) All investments are taxable. (7) Represents the difference between the yield on interest-earning assets and the cost of interest-bearing liabilities. (8) Net interest margin represents net interest income as a percentage of average interest-earning assets. *T Provision for Loan Losses and Related Allowance for Loan Losses The provision for loan losses was $52,000 for the three months ended June 30, 2006 as compared to $229,000 for the same period in 2005. This lower loan loss provision for the second quarter of 2006 as compared to prior year was due to a lower loan growth in the current quarter. For the six months ended June 30, 2006, the provision for loan losses was $279,000 as compared to $280,000 for the same period in 2005. The allowance for loan losses of $3.3 million at June 30, 2006 reflected management's assessment of the current risk in the loan portfolio and represented 1.0% of total loans. Valley Bancorp had only one non-accrual loan of $70,000 as of June 30, 2006. There were no loans past due 90 days or more as of June 30, 2006. Non-interest Income and Non-interest Expense Non-interest income was $84,000 for the three months ended June 30, 2006 as compared to $62,000 for the same period in 2005. For the six months ended June 30, 2006, non-interest income was $146,000 as compared to $137,000 for the same period in 2005. The increase was due primarily to higher aggregate service charges on deposit accounts. Non-interest expense was $2.4 million for the three months ended June 30, 2006, an increase of $885,000 over the same period in 2005. For the six months ended June 30, 2006, non-interest expense was $4.8 million, an increase of $1.5 million over the same period in 2005. The increase primarily resulted from a combination of the following: increased compensation and employee benefits cost due to increasing staff levels; higher professional fees associated with being a publicly traded company; higher data processing expenses due to increased number of accounts and transactions being processed; higher marketing and advertising costs; higher occupancy and related costs associated with the new headquarters and the 4th branch occupied in the 3rd quarter of 2005, as well as the opening of the 5th branch in the 1st quarter of 2006. Additionally, $175,000 of expense associated with the pending merger with Community Bancorp (CBON) in Las Vegas was also incurred in the quarter ended June 30, 2006. Balance Sheet Valley's total assets were $441 million at June 30, 2006, an increase of $106 million or 32% from $335 million at June 30, 2005. The increase was due primarily to an $83 million net increase in the loan portfolio, a $25 million increase in Federal funds sold, and a $5 million decrease in available for sale securities. Total deposits increased by $99 million or 35% to $378 million at June 30, 2006, as compared to $279 million at June 30, 2005. Valley stockholders' equity increased by $6 million or 17% to $45 million at June 30, 2006 from $39 million at June 30, 2005, due primarily to increased retained earnings of approximately $7 million. About Valley Bancorp Headquartered in Las Vegas, Valley Bancorp is the holding company for Valley Bank, a Nevada state-chartered commercial bank with branches in Las Vegas, Henderson, and Pahrump. -0- *T Web site: Valley Bancorp's Web site - www.valleybancorp.com Valley Bank's Web site - www.vbnv.com *T This news release contains forward-looking statements. These statements are subject to a number of uncertainties and risks including, but not limited to, the company's inability to generate increased earning assets, sustain credit losses, maintain adequate net interest margin, control fluctuations in operating results, maintain liquidity to fund assets, retain key personnel, and other risks detailed from time to time in Valley Bancorp's filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the period ended Dec. 31, 2005. Actual results may differ.