SOURCE: North Valley Bancorp

North Valley Bancorp

April 28, 2009 08:30 ET

North Valley Bancorp Reports Results for the Quarter Ended March 31, 2009

REDDING, CA--(Marketwire - April 28, 2009) - North Valley Bancorp (NASDAQ: NOVB), a bank holding company with $904 million in assets, today reported results for the quarter ended March 31, 2009. North Valley Bancorp ("the Company") is the parent company for North Valley Bank ("NVB").

The Company reported a net loss for the quarter ended March 31, 2009 of $3,107,000, or $0.41 per diluted share compared to net income for the quarter ended March 31, 2008 of $280,000, or $0.04 per diluted share. For the first quarter of 2009, the Company realized an annualized loss on average shareholders' equity of 16.26% and an annualized loss on average assets of 1.43%, as compared to an annualized return on average shareholders' equity of 1.35% and an annualized return on average assets 0.12% for the first quarter of 2008.

The Company recorded a provision for loan and lease losses in the amount of $7,000,000 for the quarter ended March 31, 2009 compared to a provision for loan and lease losses of $2,400,000 for the quarter ended March 31, 2008. The increase in provision for loan and lease losses was a result of revisions made to the qualitative and quantitative factors used in the calculation of its allowance for loan and lease losses at March 31, 2009 considering the depth and breadth of the continuing recession and the declines in real estate values. These changes are consistent with industry best practices being used to account for the uncertainties associated with current economic conditions and the continued depressed valuation of real estate. The allowance for loan and lease losses at March 31, 2009 was $15,887,000, or 2.40% of total loans, compared to $11,327,000, or 1.63% of total loans, at December 31, 2008 and $13,022,000, or 1.73% of total loans, at March 31, 2008.

"The quarter was challenging, however, we achieved successes in several important areas as planned, which will position the Company for the future. Deposits grew by $32 million as we continued to attract new customers and we were successful in reducing concentrations in certain loan categories, specifically commercial loans of $16 million and construction loans of $15 million during the first quarter of 2009. Our capital ratios continue to be a strength as they exceed the "well capitalized" criteria under regulatory standards," stated Mike Cushman, President and CEO.

At March 31, 2009, total assets were $903,849,000, down $41,632,000, or 4.4%, from $945,481,000 at March 31, 2008. The loan portfolio totaled $660,653,000 at March 31, 2009, a decrease of $89,935,000, or 12.0%, compared to March 31, 2008. The loan to deposit ratio at March 31, 2009 was 84.0% as compared to 98.4% at March 31, 2008, and 91.9% at December 31, 2008. Total deposits grew $24,083,000, or 3.2%, to $786,832,000 at March 31, 2009 compared to $762,749,000 at March 31, 2008. When compared to December 31, 2008, total assets increased $24,298,000 from $879,551,000, driven by an increase in deposits of $31,888,000 from $754,944,000, while loans decreased by $32,769,000 from $693,422,000. Available-for-sale investment securities and Federal funds sold increased $21,169,000 and $49,915,000, respectively, from December 31, 2008 to March 31, 2009 as a result of the increase in deposits and decrease in loans. At March 31, 2009, other real estate owned and other borrowings also decreased from the December 31, 2008 balances.

At March 31, 2009, the Company's Total Risk-based Capital was $100,793,000, and its risk-based capital ratios were: Tier 1 risk-based Capital ratio - 10.85%; Total Risk-based Capital ratio - 12.84%; and Tier 1 Leverage ratio - 9.88%. At March 31, 2009, the Bank's Total Risk-based Capital was $99,194,000, and its risk-based capital ratios were: Tier 1 risk-based Capital ratio - 11.39%; Total Risk-based Capital ratio - 12.65%; and Tier 1 Leverage ratio - 10.38%. "Our capital ratios continue to exceed all regulatory requirements at both the Bank and Company, as we continue to aggressively provide for our allowance for credit losses," commented Kevin R. Watson, Chief Financial Officer.

Credit Quality

Nonperforming loans (defined as nonaccrual loans and loans 90 days or more past due and still accruing interest) totaled $19,926,000 at March 31, 2009, a decrease of $5,824,000 from the March 31, 2008 balance of $25,750,000, and an increase of $990,000 from the December 31, 2008 balance of $18,936,000. Nonperforming loans as a percentage of total loans were 3.02% at March 31, 2009, compared to 3.43% at March 31, 2008, and 2.73% at December 31, 2008.

Nonperforming assets (nonperforming loans and OREO) totaled $25,869,000 at March 31, 2009, a decrease of $783,000 from the March 31, 2008 balance of $26,652,000, and a $3,475,000 decrease from the December 31, 2008 balance of $29,344,000. Nonperforming assets as a percentage of total assets were 2.86% at March 31, 2009 compared to 2.82% at March 31, 2008 and 3.34% at December 31, 2008.

The overall level of nonperforming loans increased $990,000 to $19,926,000 at March 31, 2009 from $18,936,000 at December 31, 2008. During the first quarter of 2009 the Company added sixteen loans totaling $7,604,000 to the nonperforming loans. These additions were offset by collections received on certain loans, charge-offs recorded, and one transfer from loans to OREO. The overall level of nonperforming assets decreased $3,475,000 to $25,869,000 at March 31, 2009 from $29,344,000 at December 31, 2008. This decrease was a result of a reduction in OREO of $3,768,000 from the sale of three properties during the first quarter, which resulted in $890,000 being recognized as a loss on sale/writedown of OREO. This reduction in nonperforming assets was partially offset by the addition of one property to OREO for $193,000.

Gross loan and lease charge offs for the first quarter of 2009 were $2,635,000 and recoveries totaled $195,000 resulting in net charge offs of $2,440,000. Gross loan and lease charge offs for the first quarter of 2008 were $185,000 and recoveries totaled $52,000 resulting in net charge offs of $133,000.

The total dollar amount of reductions in nonperforming loans during the first quarter of 2009 of $6,614,000 was due primarily to the paydowns, charge-offs, and one transfer to OREO. This decrease was offset by the addition of sixteen loans in the amount of $7,604,000 as nonaccrual loans during the first quarter of 2009. The addition was centered in three loans totaling $4,385,000. The largest loan of this group is a $2,007,000 commercial real estate loan located in Shasta County. No specific reserve is currently required on this loan. The second loan in this group is a $1,465,000 residential development loan consisting of two single-family residences that are listed for sale located in Napa County. No specific reserve is currently required on this loan. The third loan in this group is a $913,000 residential land loan located in Nevada County. No specific reserve is currently required on this loan. For the other thirteen loans placed on nonaccrual in the aggregate amount of $3,219,000, specific reserves of $164,000 were established for these loans.

2008 - 2009 Credit Activity

As discussed in the Company's first quarter earnings release and Form 10-Q for the period ended March 31, 2008, there were four nonperforming real estate projects with loans totaling $24,047,000 which were the primary contributors to the increase in nonperforming loans at March 31, 2008. At December 31, 2008, only two of these projects remained: one of the loans which was on nonaccrual was a residential development project in Placer County with a balance of $2,463,000 and the other project was a residential acquisition and development loan which was taken into OREO during the second quarter of 2008 and had a balance of $4,059,000 at December 31, 2008. Collections were received on the residential development project in Placer County during the first quarter of 2009 resulting in the full payoff of the remaining balance of the loan with no additional losses to the Company. Portions of the OREO property were sold during the first quarter of 2009 for $1,001,000 resulting in the Company recording a pre-tax loss on the sale of this portion of the OREO of $183,000. The remaining property in OREO has a balance of $2,875,000 at March 31, 2009.

As discussed in the Company's second quarter earnings release and Form 10-Q for the period ended June 30, 2008, there were two construction loans identified as impaired, totaling $10,201,000, added to the nonperforming loans during the second quarter of 2008. As of March 31, 2009 the larger of the two loans, a mixed-use construction loan located in Sonoma County with a remaining balance of $3,489,000 continues on nonaccrual. During the first quarter of 2009, $357,000 in payments from the borrower were received and applied to the principal balance of the loan reducing it from the December 31, 2008 balance of $3,846,000. This loan has a specific reserve of $250,000. The other loan was a residential development project located in Placer County that was taken into OREO through foreclosure during the fourth quarter of 2008 at its carrying value of $2,259,000 with no further charge to the allowance. This property was sold for $1,831,000 during the first quarter of 2009 and the Company recorded a pre-tax loss on the sale of OREO of $428,000.

As discussed in the Company's third quarter earnings release and Form 10-Q for the period ended September 30, 2008, 23 loans were placed on nonaccrual status totaling $7,592,000 (which are primarily secured by real-estate) during the third quarter of 2008. The largest of this group was a $1,125,000 residential lot development loan located in Shasta County. The principal balance of the loan was reduced by $74,000 to $1,051,000 during the fourth quarter of 2008 from collections from the borrower. This property was taken into OREO through a deed in lieu of foreclosure during the fourth quarter of 2008 at a carrying value of $1,051,000 with no charge to the allowance. This property was sold for $936,000 during the first quarter of 2009 and the Company recorded a pre-tax loss on the sale of OREO of $115,000.

As discussed in the Company's fourth quarter earnings release and Form 10-K for the period ended December 31, 2008, there was an additional $7,575,000 of loans placed on nonaccrual during the fourth quarter of 2008, which was made up primarily of four relationships. The largest relationship of this group represents residential lot development and residential construction loans located in Solano County which had a balance of $3,773,000 at December 31, 2008. During the first quarter of 2009, the Company charged-off $660,000 resulting in a balance of $3,113,000 at March 31, 2009 and a specific reserve of $47,000 has been established for these loans. The second relationship in this group is a residential land loan located in Sutter County. This loan had an original balance of $2,500,000, however the Company charged off $1,225,000 in the fourth quarter of 2008 to write the loan down to its current net realizable value of $1,275,000. This loan remains on nonaccrual at March 31, 2009 and does not have any additional specific reserve. The third relationship in this group was a commercial loan for $921,000 located in Sonoma County which was fully reserved for through a specific reserve. This entire loan was charged-off during the first quarter of 2009. The fourth relationship in this group is an SBA-504 loan for $870,000 located in Humboldt County. This loan remains on nonaccrual at March 31, 2009 with a balance of $870,000. No specific reserve has been established for this loan.

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, decreased $1,020,000, or 11.2%, for the three months ended March 31, 2009 compared to the same period in 2008. Interest income decreased by $2,731,000, primarily due to both the lower yield on earning assets and the decrease in the average balances of earning assets and secondarily due to foregone interest income of $374,000 related to loans currently on nonaccrual status. Offsetting this was a decrease in interest expense of $1,711,000, or 34.1%, due to a decrease in the rates paid on deposits and a decrease in the average balance of borrowings for the quarter ended March 31, 2009 compared to the same period in 2008. Average loans decreased $62,166,000 in the first quarter of 2009 compared to the first quarter of 2008, and the yield on the loan portfolio decreased 72 basis points to 6.28% over the same period. Overall, average earning assets decreased $67,717,000 in the first quarter of 2009 compared to the first quarter of 2008. Average yields on earning assets decreased 78 basis points from the quarter ended March 31, 2008, to 5.94% for the quarter ended March 31, 2009 while the average rate paid on interest-bearing liabilities decreased by 82 basis points to 2.10%. The decrease in both yields earned and rates paid is reflective of the declining interest rate environment as the Federal Reserve has reduced interest rates by 500 basis points since September 2007. As a result of the above, the Company's net interest margin for the quarter ended March 31, 2009 was 4.23%, a decrease of 12 basis points from the margin of 4.35% for the first quarter in 2008 but an increase of 8 basis points from the 4.15% net interest margin for the linked quarter ended December 31, 2008. "Our net interest margin expanded slightly from the linked quarter as the benefit from the decrease in our cost of funds outpaced the decrease in asset yields," stated Mr. Watson.

Noninterest income for the quarter ended March 31, 2009 decreased $1,217,000, or 34.9%, to $2,274,000 compared to $3,491,000 for the same period in 2008. The decrease in noninterest income was primarily driven by the recording of the loss on the sale/writedown of OREO of $890,000. Service charges on deposits decreased by $188,000 to $1,528,000 for the first quarter of 2009 compared to $1,716,000 for the same period in 2008. Other fees and charges remained constant at $964,000 for the first quarter of 2009 compared to $965,000 for the first quarter of 2008. Other noninterest income decreased $138,000, to $672,000 for the quarter ended March 31, 2009 compared to $810,000 for the same period in 2008, due to the mandatory redemption of the Company's VISA shares related to VISA's initial public offering completed in March 2008, and a decrease in sales volume of annuity and security products to customers.

Noninterest expense decreased $360,000, or 3.7%, to $9,445,000 for the first quarter of 2009 from $9,805,000 for the first quarter in 2008. Salaries and employee benefits decreased $472,000, due primarily to the elimination of the bonus accrual and a reduction in staffing through normal attrition. Occupancy and furniture and equipment expense increased $11,000 and other expenses increased $101,000 for the first quarter of 2009 compared to the first quarter of 2008.

The benefit for income taxes for the quarter ended March 31, 2009 was $2,956,000, resulting in an effective benefit rate of 48.8%, compared to a provision for income taxes of $134,000, or an effective tax rate of 32.4%, for the quarter ended March 31, 2008.

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, and a loan production office in Vacaville, CA. 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, except as required by law.

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


                                 Three Months Ended
                                      March 31,
Statement of Income Data          2009       2008     $ Change   % Change
                                ---------  ---------- ---------  ---------
Interest income
   Loans and leases (including
    fees)                       $  10,536  $   12,976 $  (2,440)     -18.8%
   Investment securities              874       1,169      (295)     -25.2%
   Federal funds sold and other         9           5         4       80.0%
                                ---------  ---------- ---------  ---------
       Total interest income       11,419      14,150    (2,731)     -19.3%
                                ---------  ---------- ---------  ---------
Interest expense
   Interest on deposits             2,768       3,828    (1,060)     -27.7%
   Subordinated debentures            542         595       (53)      -8.9%
   Other borrowings                     1         599      (598)     -99.8%
                                ---------  ---------- ---------  ---------
       Total interest expense       3,311       5,022    (1,711)     -34.1%
                                ---------  ---------- ---------  ---------
Net interest income                 8,108       9,128    (1,020)     -11.2%
Provision for loan and lease
 losses                             7,000       2,400     4,600      191.7%
                                ---------  ---------- ---------  ---------
Net interest income after
 provision for loan and lease
 losses                             1,108       6,728    (5,620)     -83.5%
                                ---------  ---------- ---------  ---------

Noninterest income
   Service charges on deposit
    accounts                        1,528       1,716      (188)     -11.0%
   Other fees and charges             964         965        (1)      -0.1%
   Loss on sale/writedown of
    OREO                             (890)          -      (890)         -
   Other                              672         810      (138)     -17.0%
                                ---------  ---------- ---------  ---------
       Total noninterest income     2,274       3,491    (1,217)     -34.9%
                                ---------  ---------- ---------  ---------

Noninterest expenses
   Salaries and employee
    benefits                        5,064       5,536      (472)      -8.5%
   Occupancy                          761         754         7        0.9%
   Furniture and equipment            469         465         4        0.9%
   Other                            3,151       3,050       101        3.3%
                                ---------  ---------- ---------  ---------
       Total noninterest
        expenses                    9,445       9,805      (360)      -3.7%
                                ---------  ---------- ---------  ---------
       (Loss) income before
        provision for income
        taxes                      (6,063)        414    (6,477)   -1564.5%
(Benefit) provision for income
 taxes                             (2,956)        134    (3,090)   -2306.0%
                                ---------  ---------- ---------  ---------
       Net (loss) income        $  (3,107) $      280 $  (3,387)   -1209.6%
                                =========  ========== =========  =========

Common Share Data
  (Loss) earnings per share
     Basic                      $   (0.41) $     0.04 $   (0.45)   -1125.0%
     Diluted                    $   (0.41) $     0.04 $   (0.45)   -1125.0%

  Weighted average shares
   outstanding                  7,495,817   7,416,867
  Weighted average shares
   outstanding - diluted        7,495,817   7,544,813
  Book value per share          $   10.00  $    10.98
  Tangible book value           $    7.86  $     8.79
  Shares outstanding            7,495,817   7,422,366




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


                                    March 31,   December 31,    March 31,
Balance Sheet Data                    2009          2008          2008
                                  ------------  ------------  ------------
Assets
  Cash and due from banks         $     19,595  $     27,153  $     28,793
  Federal funds sold                    49,915             -             -
  Available-for-sale securities -
   at fair value                        97,514        76,345        98,586
  Held-to-maturity securities -
   at amortized cost                        15            21            31

  Loans and leases net of
   deferred loan fees                  660,653       693,422       750,588
    Allowance for loan and lease
     losses                            (15,887)      (11,327)      (13,022)
                                  ------------  ------------  ------------
    Net loans and leases               644,766       682,095       737,566

  Premises and equipment, net           11,191        11,418        12,066
  Other real estate owned                5,943        10,408           902
  Goodwill and core deposit
   intangibles, net                     15,989        16,025        16,260
  Accrued interest receivable and
   other assets                         58,921        56,086        51,277
                                  ------------  ------------  ------------
Total assets                      $    903,849  $    879,551  $    945,481
                                  ============  ============  ============

Liabilities and Shareholders'
 Equity
  Deposits:
    Demand, noninterest bearing   $    149,681  $    161,748  $    158,529
    Demand, interest bearing           163,023       151,873       174,326
    Savings and money market           172,534       157,089       181,799
    Time                               301,594       284,234       248,095
                                  ------------  ------------  ------------
        Total deposits                 786,832       754,944       762,749
  Other borrowed funds                       -         3,516        58,395
  Accrued interest payable and
   other liabilities                    10,133        11,872        10,857
  Subordinated debentures               31,961        31,961        31,961
                                  ------------  ------------  ------------
Total liabilities                      828,926       802,293       863,962
  Shareholders' equity                  74,923        77,258        81,519
                                  ------------  ------------  ------------
Total liabilities and
 shareholders' equity             $    903,849  $    879,551  $    945,481
                                  ============  ============  ============

Asset Quality
  Nonaccrual loans and leases     $     19,926  $     18,936  $     25,750
  Other real estate owned                5,943        10,408           902
                                  ------------  ------------  ------------
    Total nonperforming assets    $     25,869  $     29,344  $     26,652
                                  ============  ============  ============

  Allowance for loan and lease
   losses to total loans                  2.40%         1.63%         1.73%
  Allowance for loan and lease
   losses to NPL's                       79.73%        59.82%        50.57%
  Allowance for loan and lease
   losses to NPA's                       61.41%        38.60%        48.86%




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


                                                       Three Months Ended
                                                            March 31,
Selected Financial Ratios                               2009       2008
                                                      ---------  ---------
  Return on average total assets, annualized              (1.43%)     0.12%
  Return on average shareholders' equity, annualized     (16.26%)     1.35%
  Net interest margin (tax equivalent basis)               4.23%      4.35%
  Efficiency ratio                                        90.97%     77.70%

Selected Average Balances
  Loans                                               $ 680,838  $ 743,004
  Taxable investments                                    73,279     88,608
  Tax-exempt investments                                 15,898     20,539
  Federal funds sold and other                           15,010        591
                                                      ---------  ---------
    Total earning assets                              $ 785,025  $ 852,742
                                                      ---------  ---------
    Total assets                                      $ 878,376  $ 941,318
                                                      ---------  ---------

  Demand deposits - interest bearing                  $ 153,395  $ 154,950
  Savings and money market                              167,802    181,670
  Time deposits                                         285,662    248,202
  Other borrowings                                       33,328    104,924
                                                      ---------  ---------
    Total interest bearing liabilities                $ 640,187  $ 689,746
                                                      ---------  ---------
  Demand deposits - noninterest bearing               $ 149,582  $ 155,541
                                                      ---------  ---------
  Shareholders' equity                                $  77,501  $  83,136
                                                      ---------  ---------



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


                                          For the Quarter Ended
                                ------------------------------------------
                                  March    December   September    June
                                  2009       2008       2008       2008
                                ---------  ---------  ---------  ---------
Interest income                 $  11,419  $  11,834  $  12,744  $  13,363
Interest expense                    3,311      3,706      3,932      4,294
                                ---------  ---------  ---------  ---------
  Net interest income               8,108      8,128      8,812      9,069
Provision for loan and lease
 losses                             7,000      3,000      1,500      5,200
Noninterest income                  2,274      2,900        284      3,477
Noninterest expense                 9,445      9,583      9,694      9,577
                                ---------  ---------  ---------  ---------
Loss before benefit for income
 taxes                             (6,063)    (1,555)    (2,098)    (2,231)
Benefit for income taxes           (2,956)    (2,409)      (679)      (722)
                                ---------  ---------  ---------  ---------
  Net (loss) income             $  (3,107) $     854  $  (1,419) $  (1,509)
                                =========  =========  =========  =========
(Loss) earnings per share:
  Basic                         $   (0.41) $    0.11  $   (0.19) $   (0.20)
                                =========  =========  =========  =========
  Diluted                       $   (0.41) $    0.11  $   (0.19) $   (0.20)
                                =========  =========  =========  =========

Contact Information

  • For further information contact:

    Michael J. Cushman
    President & Chief Executive Officer
    (530) 226-2900
    Fax: (530) 221-4877

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