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Santa Clara reports solid earning for ’08

Loan activity grew 25 percent last year but saw fourth-quarter slow down

Posted: March 5, 2009 9:06 p.m.
Updated: March 6, 2009 4:55 a.m.
Santa Clara Valley Bank announced its total revenue for 2008 was $7,698,000, which was 3-percent higher than the $7,478,000 for 2007.

The small increase in revenue was affected by the decreasing interest rate environment, according to a Tuesday news release of the bank’s 2008 fourth quarter and year-end financial results.   

Net interest income increased 10 percent to $5,026,000 and operating expenses increased 8 percent over 2007. Much of the expense increase is attributable to the relocation of the Fillmore Branch in late 2007, data processing and other professional services, and promotion expense.  Due to the stress of the economic conditions on the bank’s loan portfolio, the provision for loan loss increased to $944,000 in 2008 compared to $224,000 in 2007.  

The bank’s net income for 2008 was $256,000 or $0.24 per share, a 46-percent decrease, compared to $472,000 or $0.46 per share in 2007, primarily the result of the large provision for loan loss. SCVBank’s average net-interest margin remained at a healthy level of 4.79 percent in December 2008.

On December 31, 2008, the Bank announced a $0.10 per share cash dividend. This is SCVBank’s first cash dividend.

In 2008, the bank’s loans grew to $101.9 million, up from $81.6 million the previous year, an increase of approximately 25 percent. The bank has slightly less than $100 million in deposits, up from $91.6 million, or 9.2 percent, over 2007.  

The state of the economy began to adversely affect the performance of the Bank’s loan portfolio in the fourth quarter.

The economic contraction reduced revenues for more than a few loan customers, and collateral values dropped significantly. Loan charge-offs were $19,000 in the fourth quarter, the first quarterly charge-off recorded in thirteen quarters. A provision for loan loss of $766,000 was recorded in the fourth quarter to offset potential losses in three SBA loans and two construction loans.  

“While we believe the provisions to be conservative, the extent of the economic downturn has yet to be determined,” said President and CEO Michael D. Hause.

Bank assets at year-end were $121.0 million, an increase of 13 percent over the 2007 year-end level of $107.3 million. The Bank said it is well capitalized.

“While the current economic crisis has affected the Bank’s year-end results, we are proud that we operating profitably during such a stressful period,” said Chairman Guy Cole. “While so many of our competitors have experienced significant losses or have gone out of business, we are looking to the future with optimism. Our ‘5-Star Superior’ rating by BauerFinancial, Inc. has attracted scores of new customers looking for a financially strong banking institution.”

Headed into 2009, Hause said SCVBank’s liquidity remains strong.

“We have plenty of funds to lend and are looking for opportunities to help with the economic recovery,” he said.


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