1st Valley Bank raising $75-M Tier 2 capital

The 1st Valley Bank Inc., a rural bank, has launched a $75-million, unsubordinated debt paper with a five- or 10-year term repayment period. It is the first rural bank to launch a Tier 2 debt instrument for capital raising.

It is also the first rural bank to voluntarily be reviewed by the Philippine Rating Agency (Philrating), a credit rating agency in partnership with the Philippine Deposit Insurance Corp. (PDIC).

The 1st Valley Bank was given the "A plus" rating by Philrating after undergoing due diligence. It was one of the five rural banks that voluntarily underwent rating. The other four banks are the Green Bank, the Rural Bank of Floridablanca, the Rural Bank of San Juan, and One Network Bank, another bank resulting from a three-way merger.

1st Valley Bank is a product of a consolidation between the Rural Bank of Kapatagan Valley Inc. and Rural Bank of Sinacaban (Misamis Occidental). The Rural Bank of Kapatagan Valley, effectively the surviving entity of the consolidation exercise, has its head office in Lanao del Norte. It has branches in Lanao del Norte, Misamis Occidental, Zamboanga del Sur, and Zamboanga Sibugay.

"The funds raised from the subordinated debt paper will fund expansion, new products and new loans," Nicholas J. Lim, 1st Valley president and chief executive officer, said.

Lim revealed that the International Finance Corp. (IFC) has expressed interest in wither co-borrowing or financing the capital-raising exercise. The IFC is the private investment arm of the World Bank Group, with various investments in different sectors in the country including finance, utilities and infrastructure.

The sole financial advisor for the Tier 2 exercise is the First Metro Investment Co., a subsidiary of the Metrobank Group.

First Metro has also been tapped by the Rural Bankers Association of the Philippines (RBAP), the only recognized national organization of the rural banking system, to assist in consolidations, financial advisory, mergers and acquisitions, foreign currency deposit unit (FCDU) formation, and the like.

Meanwhile, the recently-consolidated rural bank realized a net income of P35.8 million last year. It is looking to improve to P50 million this year.

Total resources hit P1 billion while total loans was recorded at P858.7 million.

Of the total loans, 41.42 percent or P355 million were salary loans making it the biggest loan category followed by agricultural loans with P233 million.

Microfinance lending amounted P63.8 million, or 7.44 percent of the total loan portfolio last year. In contrast, commercial loans amounted to just P45.4 million or 5.3 percent of the total.

Capital to risk assets ratio stood at a healthy 15.1 percent while net interest margin at 10.96. Return on average equity was recorded at 17.52 percent while return on average assets at 6.11 percent.