SOURCE: North Valley Bancorp

January 30, 2007 09:00 ET

North Valley Bancorp Reports Increased Net Income for 2006

REDDING, CA -- (MARKET WIRE) -- January 30, 2007 --


--  Net Income Increased 23.6% to $3,054,000 for Fourth Quarter 2006 over
    Fourth Quarter 2005
    
--  Net Income Increased 13.6% to $10,396,000 for 2006
    
--  Interest Income Increased 12.8% for 2006
    
--  Noninterest Income Increased 12.8% for 2006
    
--  Net Interest Margin Increased to 5.41% Compared to 5.40% for Fourth
    Quarter 2005 and 5.28% for the Linked Quarter
    
--  Loan Portfolio Credit Quality Remained Outstanding
    
North Valley Bancorp (NASDAQ: NOVB), a bank holding company with $906 million in assets, today reported results for the quarter and year ended December 31, 2006. North Valley Bancorp ("the Company") is the parent company for North Valley Bank ("NVB").

The Company reported net income for the fourth quarter ended December 31, 2006 of $3,054,000, or $0.40 per diluted share, compared to $2,470,000, or $0.32 per diluted share, for the same period in 2005. This represents an increase in net income of $584,000, or 23.6%, compared to the fourth quarter of 2005. For the fourth quarter, the Company realized an annualized return on average shareholders' equity of 16.48% and an annualized return on average assets of 1.33%, as compared to 13.91% and 1.06%, respectively, in the fourth quarter of 2005.

The Company reported net income for the year ended December 31, 2006 of $10,396,000, or $1.36 per diluted share, compared to $9,149,000, or $1.17 per diluted share, for the year ended December 31, 2005. This represents an increase in net income of $1,247,000, or 13.6%. For the year 2006, the Company realized a return on average shareholders' equity of 14.48% and a return on average assets of 1.15%, as compared to 13.42% and 1.01%, respectively, for 2005.

During 2006, total assets decreased $12,742,000, or 1.4%, to $905,673,000 at year end. The Company was successful in shifting more of its earning assets into the loan portfolio as loans increased $35,281,000, or 5.6%, and totaled $659,793,000 at December 31, 2006. The loan to deposit ratio at year end 2006 was 87.9% as compared to 83.6% at year end 2005. Total deposits grew $3,598,000, or 0.5%, to total $750,288,000 at December 31, 2006.

2006 Financial Performance

Net interest income, which represents the Company's largest component of revenues and is the difference between interest earned on loans and investments and interest paid on deposits and borrowings, increased $1,519,000, or 3.7%, for the year ended December 31, 2006 compared to 2005. This was due to an increase in interest income of $6,501,000 which was partially offset by an increase in interest expense of $4,982,000. The increase in interest income was primarily due to an increase in average loans of $41,729,000 and an increase in rates reflective of the Federal Reserve Board Open Market Committee raising rates 100 basis points during 2006. The increase in average total loans was primarily funded by the decrease in average investments of $51,287,000. Average yields on earning assets increased 80 basis points to 7.23% for 2006 and the average rate paid on interest-bearing liabilities increased by 79 basis points to 2.32%. The increase in asset yields was primarily due to average loan yields, which increased from 7.19% in 2005 to 7.82% in 2006. The Company's net interest margin in 2006 was 5.40%, an increase from 5.22% in 2005. During the fourth quarter of 2006, the Company's net interest margin was 5.41%, slightly above the 5.40% net interest margin in the fourth quarter of 2005, and an increase from the 5.28% net interest margin for the linked quarter. The increase in the net interest margin was due to the rising interest rate environment experienced in 2006 as well as earning assets consisting of a higher concentration of loans compared to 2005. "Our net interest margin expanded in the fourth quarter over the linked quarter as we recognized an increase in yield on our earning assets of 16 basis points, while our cost of funds only increased 3 basis points. Our margin continues to be strong as we have remained price disciplined in a very competitive deposit and loan pricing environment," commented Kevin Watson, Chief Financial Officer.

Noninterest income for the quarter ended December 31, 2006 was $3,239,000 compared to $3,234,000 for the same period in 2005. Other fees and charges increased by $137,000 to $852,000 for the fourth quarter of 2006 compared to $715,000 for the fourth quarter of 2005, while service charges on deposits increased by $96,000 to $1,631,000 for the quarter compared to $1,535,000 for the same period in 2005.

Noninterest income increased to $12,650,000 for the year ended December 31, 2006 compared to $11,214,000 for 2005. Service charges on deposits increased by $897,000 in 2006 while other fees and charges increased $533,000 in 2006 compared to 2005 due to increased servicing fees. Earnings on the cash surrender value of life insurance policies increased from $1,078,000 in 2005 to $1,211,000 in 2006 due to higher market rates associated with those policies. Other noninterest income decreased $127,000 from 2005 levels due mainly to reduction in the level of loans and securities sales.

Noninterest expense decreased $311,000 to $9,860,000 for the fourth quarter of 2006 from $10,171,000 for the fourth quarter in 2005. Salaries and employee benefits decreased $98,000, furniture and equipment expense decreased $104,000, and other expenses decreased $138,000, while occupancy expense increased $29,000.

Noninterest expense totaled $39,615,000 for the year 2006 compared to $37,592,000 for 2005 which is an increase of $2,023,000 or 5.4%. Salaries and benefits increased by $1,991,000, or 10.1%, over 2005 levels due primarily to the hiring of seasoned lending teams that specialize in business lending in Sonoma and Placer counties. Equipment expense decreased slightly from $2,160,000 in 2005 to $2,153,000 in 2006. Occupancy expense increased from $2,724,000 in 2005 to $3,023,000 in 2006. Other expenses, which include professional services, data processing, and marketing expenses, decreased by $260,000 in 2006 compared to 2005.

The Company recorded a provision for loan and lease losses for the quarter ended December 31, 2006 of $50,000, a decrease of $150,000 compared to the $200,000 recorded for the quarter ended December 31, 2005. A provision for loan and lease losses of $975,000 was recorded for the year ended December 31, 2006, a $45,000 increase from the $930,000 for 2005. The increase in provision for loan and lease losses for the year 2006 compared to 2005 reflected continued growth in the Company's loan portfolio and management's concern for current economic uncertainty.

The provision for income taxes for the year ended December 31, 2006 was $4,158,000, resulting in an effective tax rate of 29%, compared to $4,518,000, or an effective tax rate of 33%, for the year ended December 31, 2005. The decrease is due to a change in estimated tax rate to be applied to 2006 net income to reflect greater California jobs credits and a lowering of the expected Federal statutory rate on the Company's taxable income in 2006.

Credit Quality

Nonperforming loans (defined as nonaccrual loans and loans 90 days or more past due and still accruing interest) decreased $278,000 to $475,000, or 0.07%, of total loans at December 31, 2006 from $753,000, or 0.12%, of total loans at December 31, 2005. Other real estate owned at December 31, 2006 was $902,000, consisting of land originally purchased for bank expansion, which management has listed for sale as the land is no longer needed due to the acquisition of Yolo Community Bank in 2004. The allowance for loan and lease losses at December 31, 2006 was $8,831,000, or 1.34% of total loans, compared to $7,864,000, or 1.26% of total loans, at December 31, 2005. The Company had net charge-offs for the twelve months ended December 31, 2006 of $9,000 compared to net charge-offs of $283,000 for 2005.

Summary

"The year-end results reflect our disciplined approach to managing our net interest margin in a competitive market resulting in solid performance for 2006. The Bank is continuing to focus on credit quality, control of noninterest expense, core deposit growth and maintaining a strong net interest margin. This approach continues to strengthen the Bank's financial performance," stated Michael J. Cushman, President & CEO.


North Valley Bancorp is a bank holding company headquartered in Redding, California. Its subsidiary, North Valley Bank ("NVB"), operates twenty-six commercial banking offices in Shasta, Humboldt, Del Norte, Mendocino, Yolo, Solano, Sonoma, Placer and Trinity Counties in Northern California, including two in-store supermarket branches and seven Business Banking Centers. North Valley Bancorp, through NVB, offers a wide range of consumer and business banking deposit products and services including internet banking and cash management services. In addition to these depository services, NVB engages in a full complement of lending activities including consumer, commercial and real estate loans. Additionally, NVB has SBA Preferred Lender status and provides investment services to its customers. Visit the Company's website address at www.novb.com for more information.

Cautionary Statement: This release contains certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those stated herein. Management's assumptions and projections are based on their anticipation of future events and actual performance may differ materially from those projected. Risks and uncertainties which could impact future financial performance include, among others, (a) competitive pressures in the banking industry; (b) changes in the interest rate environment; (c) general economic conditions, either nationally, regionally or locally, including fluctuations in real estate values; (d) changes in the regulatory environment; (e) changes in business conditions or the securities markets and inflation; (f) possible shortages of gas and electricity at utility companies operating in the State of California, and (g) the effects of terrorism, including the events of September 11, 2001, and thereafter, and the conduct of the war on terrorism by the United States and its allies. Therefore, the information set forth herein, together with other information contained in the periodic reports filed by the Company with the Securities and Exchange Commission, should be carefully considered when evaluating the business prospects of the Company. North Valley Bancorp undertakes no obligation to update any forward-looking statements contained in this release.


                           NORTH VALLEY BANCORP
                  CONDENSED CONSOLIDATED FINANCIAL DATA
                                (Unaudited)
          (Dollars in thousands, except share and per share data)


                                     Three Months Ended
                                        December 31,
Statement of Income Data              2006      2005    $ Change  % Change
                                    --------- --------- --------  --------
Interest income
   Loans and leases (including
    fees)                           $  13,379 $  11,773 $  1,606      13.6%
   Investment securities                1,573     1,803     (230)    -12.8%
   Federal funds sold and other            84       174      (90)    -51.7%
                                    --------- --------- --------  --------
      Total interest income            15,036    13,750    1,286       9.4%
                                    --------- --------- --------  --------
Interest expense
   Interest on deposits                 3,113     2,003    1,110      55.4%
   Subordinated debentures                613       436      177      40.6%
   Other borrowings                       414       386       28       7.3%
                                    --------- --------- --------  --------
      Total interest expense            4,140     2,825    1,315      46.5%
                                    --------- --------- --------  --------
Net interest income                    10,896    10,925      (29)     -0.3%
Provision for loan and lease losses        50       200     (150)    -75.0%
                                    --------- --------- --------  --------
Net interest income after provision
 for loan and lease losses             10,846    10,725      121       1.1%
                                    --------- --------- --------  --------

Noninterest income
   Service charges on deposit
    accounts                            1,631     1,535       96       6.3%
   Other fees and charges                 852       715      137      19.2%
   Other                                  756       984     (228)    -23.2%
                                    --------- --------- --------  --------
      Total noninterest income          3,239     3,234        5       0.2%
                                    --------- --------- --------  --------

Noninterest expenses
   Salaries and employee benefits       5,317     5,415      (98)     -1.8%
   Occupancy                              768       739       29       3.9%
   Furniture and equipment                543       647     (104)    -16.1%
   Other                                3,232     3,370     (138)     -4.1%
                                    --------- --------- --------  --------
      Total noninterest expenses        9,860    10,171     (311)     -3.1%
                                    --------- --------- --------  --------
      Income before provision for
       income taxes                     4,225     3,788      437      11.5%
Provision for income taxes              1,171     1,318     (147)    -11.2%
                                    --------- --------- --------  --------
      Net income                    $   3,054 $   2,470 $    584      23.6%
                                    ========= ========= ========  ========

Common Share Data
   Earnings per share
      Basic                         $    0.42 $    0.33 $   0.09      27.3%
      Diluted                       $    0.40 $    0.32 $   0.08      25.0%

   Weighted average shares
    outstanding                     7,287,827 7,494,756
   Weighted average shares
    outstanding - diluted           7,546,364 7,807,349
   Book value per share             $   10.34 $    9.58
   Tangible book value              $    8.00 $    7.22
   Shares outstanding               7,300,914 7,497,599



                           NORTH VALLEY BANCORP
                  CONDENSED CONSOLIDATED FINANCIAL DATA
                                (Unaudited)
          (Dollars in thousands, except share and per share data)


                                    Twelve Months Ended
                                        December 31,
Statement of Income Data              2006      2005    $ Change  % Change
                                    --------- --------- --------  --------
Interest income
   Loans and leases (including
    fees)                           $  50,241 $  42,472 $  7,769      18.3%
   Investment securities                6,658     7,658   (1,000)    -13.1%
   Federal funds sold and other           280       548     (268)    -48.9%
                                    --------- --------- --------  --------
      Total interest income            57,179    50,678    6,501      12.8%
                                    --------- --------- --------  --------
Interest expense
   Interest on deposits                10,026     6,373    3,653      57.3%
   Subordinated debentures              2,456     1,708      748      43.8%
   Other borrowings                     2,203     1,622      581      35.8%
                                    --------- --------- --------  --------
      Total interest expense           14,685     9,703    4,982      51.3%
                                    --------- --------- --------  --------
Net interest income                    42,494    40,975    1,519       3.7%
Provision for loan and lease losses       975       930       45       4.8%
                                    --------- --------- --------  --------
Net interest income after provision
 for loan and lease losses             41,519    40,045    1,474       3.7%
                                    --------- --------- --------  --------

Noninterest income
   Service charges on deposit
    accounts                            6,437     5,540      897      16.2%
   Other fees and charges               3,186     2,653      533      20.1%
   Other                                3,027     3,021        6       0.2%
                                    --------- --------- --------  --------
      Total noninterest income         12,650    11,214    1,436      12.8%
                                    --------- --------- --------  --------

Noninterest expenses
   Salaries and employee benefits      21,775    19,784    1,991      10.1%
   Occupancy                            3,023     2,724      299      11.0%
   Furniture and equipment              2,153     2,160       (7)     -0.3%
   Other                               12,664    12,924     (260)     -2.0%
                                    --------- --------- --------  --------
      Total noninterest expenses       39,615    37,592    2,023       5.4%
                                    --------- --------- --------  --------
      Income before provision for
       income taxes                    14,554    13,667      887       6.5%
Provision for income taxes              4,158     4,518     (360)     -8.0%
                                    --------- --------- --------  --------
       Net income                   $  10,396 $   9,149 $  1,247      13.6%
                                    ========= ========= ========  ========

Common Share Data
   Earnings per share
      Basic                         $    1.41 $    1.23 $   0.18      14.6%
      Diluted                       $    1.36 $    1.17 $   0.19      16.2%

   Weighted average shares
    outstanding                     7,379,959 7,423,968
   Weighted average shares
    outstanding - diluted           7,637,623 7,797,510
   Book value per share             $   10.34 $    9.58
   Tangible book value              $    8.00 $    7.22
   Shares outstanding               7,300,914 7,497,599



                           NORTH VALLEY BANCORP
                  CONDENSED CONSOLIDATED FINANCIAL DATA
                                (Unaudited)
                          (Dollars in thousands)


                                                December 31,  December 31,
Balance Sheet Data                                  2006          2005
                                                ------------  ------------
Assets
  Cash and due from banks                       $     30,826  $     48,294
  Federal funds sold and other                        10,670         7,800
  Available-for-sale securities - at fair value      133,571       164,258
  Held-to-maturity securities - at amortized
   cost                                                   82            91

  Loans and leases net of deferred loan fees         659,793       624,512
    Allowance for loan and lease losses               (8,831)       (7,864)
                                                ------------  ------------
    Net loans and leases                             650,962       616,648

  Premises and equipment, net                         13,797        14,946
  Other real estate owned                                902           902
  Goodwill and core deposit intangibles, net          17,074        17,690
  Accrued interest receivable and other assets        47,789        47,786
                                                ------------  ------------
Total assets                                    $    905,673  $    918,415
                                                ============  ============

Liabilities and Shareholders' Equity
  Deposits:
    Demand, noninterest bearing                 $    194,842  $    186,555
    Demand, interest bearing                         160,939       194,735
    Savings and money market                         196,833       195,866
    Time                                             197,674       169,534
                                                ------------  ------------
        Total deposits                               750,288       746,690
  Other borrowed funds                                37,500        56,500
  Accrued interest payable and other
   liabilities                                        10,433        11,463
  Subordinated debentures                             31,961        31,961
                                                ------------  ------------
Total liabilities                                    830,182       846,614
  Shareholders' equity                                75,491        71,801
                                                ------------  ------------
Total liabilities and shareholders' equity      $    905,673  $    918,415
                                                ============  ============

Asset Quality
  Nonaccrual loans and leases                   $         72  $        686
  Loans and leases past due 90 days and
   accruing interest                                     403            67
  Other real estate owned                                902           902
                                                ------------  ------------
    Total nonperforming assets                  $      1,377  $      1,655
                                                ============  ============

  Allowance for loan and lease losses to total
   loans                                                1.34%         1.26%
  Allowance for loan and lease losses to NPL's       1859.16%      1044.36%
  Allowance for loan and lease losses to NPA's        641.32%       475.17%




                           NORTH VALLEY BANCORP
                  CONDENSED CONSOLIDATED FINANCIAL DATA
                                (Unaudited)
                          (Dollars in thousands)


                                 Three Months Ended   Twelve Months Ended
                                    December 31,          December 31,
Selected Financial Ratios         2006       2005       2006       2005
                                ---------  ---------  ---------  ---------
  Return on average total
   assets                            1.33%      1.06%      1.15%      1.01%
  Return on average
   shareholders' equity             16.48%     13.91%     14.48%     13.42%
  Net interest margin (tax
   equivalent basis)                 5.41%      5.40%      5.40%      5.22%
  Efficiency ratio                  69.76%     71.83%     71.84%     72.03%

Selected Average Balances
  Loans                         $ 663,917  $ 622,188  $ 642,167  $ 590,313
  Taxable investments             119,115    154,357    129,943    167,516
  Tax-exempt investments           22,101     23,456     22,864     24,536
  Federal funds sold and other      6,785     16,528      5,747     17,789
                                ---------  ---------  ---------  ---------
    Total earning assets        $ 811,918  $ 816,529  $ 800,721  $ 800,154
                                ---------  ---------  ---------  ---------
    Total assets                $ 907,937  $ 921,456  $ 901,273  $ 904,160
                                ---------  ---------  ---------  ---------

  Demand deposits - interest
   bearing                      $ 162,207  $ 195,698  $ 166,156  $ 195,468
  Savings and money market        202,326    198,806    202,722    202,727
  Time deposits                   192,987    169,024    179,832    158,988
  Other borrowings                 72,621     77,854     84,751     77,284
                                ---------  ---------  ---------  ---------
    Total interest bearing
     liabilities                $ 630,141  $ 641,382  $ 633,461  $ 634,467
                                ---------  ---------  ---------  ---------
  Demand deposits - noninterest
   bearing                      $ 192,071  $ 199,440  $ 185,281  $ 190,183
                                ---------  ---------  ---------  ---------
  Shareholders' equity          $  73,504  $  70,455  $  71,795  $  68,161
                                ---------  ---------  ---------  ---------




                           NORTH VALLEY BANCORP
                  CONDENSED CONSOLIDATED FINANCIAL DATA
                                (Unaudited)
              (Dollars in thousands, except per share data)


                                          For the Quarter Ended
                                -------------------------------------------
                                December   September     June       March
                                  2006       2006        2006       2006
                                ---------- ---------- ---------- ----------
Interest income                 $   15,036 $   14,506 $   14,010 $   13,627
Interest expense                     4,140      3,996      3,315      3,234
                                ---------- ---------- ---------- ----------
  Net interest income               10,896     10,510     10,695     10,393

Provision for loan and lease
 losses                                 50        555        370          -
Noninterest income                   3,239      3,598      3,015      2,798
Noninterest expense                  9,860      9,859      9,880     10,016
                                ---------- ---------- ---------- ----------
Income before provision for
 income taxes                        4,225      3,694      3,460      3,175
Provision for income taxes           1,171        775      1,166      1,046
                                ---------- ---------- ---------- ----------
  Net Income                    $    3,054 $    2,919 $    2,294 $    2,129
                                ========== ========== ========== ==========
Earnings per share:
  Basic                         $     0.42 $     0.40 $     0.31 $     0.28
                                ========== ========== ========== ==========
  Diluted                       $     0.40 $     0.39 $     0.30 $     0.27
                                ========== ========== ========== ==========

Contact Information

  • For further information contact:
    Michael J. Cushman
    President & Chief Executive Officer
    (530) 226-2900
    Fax: (530) 221-4877

    or

    Kevin R. Watson
    Executive Vice President & Chief
    Financial Officer
    (530) 226-2900
    Fax: (530) 221-4877