SOURCE: North Valley Bancorp

North Valley Bancorp

July 31, 2012 08:00 ET

North Valley Bancorp Reports Results for the Quarter and Six Months Ended June 30, 2012

REDDING, CA--(Marketwire - Jul 31, 2012) - North Valley Bancorp (NASDAQ: NOVB), a bank holding company with approximately $908 million in assets, today reported results for the second quarter and six months ended June 30, 2012. North Valley Bancorp ("the Company") is the parent company for North Valley Bank ("NVB").

The Company reported net income for the second quarter ended June 30, 2012 of $1,261,000, or $0.18 per diluted share, compared to net income of $519,000, or $0.08 per diluted share, for the same period in 2011. The Company reported net income for the six months ended June 30, 2012 of $1,741,000, or $0.25 per diluted share, compared to net income of $918,000, or $0.13 per diluted share, for the same period in 2011. "I am pleased to report another profitable quarter, along with quarterly loan growth, and we continue to work hard on gaining efficiencies as we navigate through this prolonged economic cycle," stated Mike Cushman, President and CEO.

The Company recorded provisions for loan losses of $1,000,000 and $1,400,000 for the second quarter and the six months ended June 30, 2012, respectively, compared to provisions for loan losses of $1,250,000 and $2,250,000 for the second quarter and the six months ended June 30, 2011, respectively. The allowance for loan losses at June 30, 2012 was $11,732,000, or 2.58% of total loans, compared to $12,656,000, or 2.77% of total loans at December 31, 2011 and $14,746,000, or 3.06% of total loans at June 30, 2011. 

At June 30, 2012, total assets were $908,140,000, an increase of $13,083,000, or 1.5%, from $895,057,000 at June 30, 2011. The loan portfolio totaled $455,257,000 at June 30, 2012, a decrease of $26,897,000, or 5.6%, compared to $482,154,000 at June 30, 2011. The loan to deposit ratio at June 30, 2012 was 59.7% as compared to 63.6% at June 30, 2011, and 59.5% at December 31, 2011. Total deposits increased $5,397,000, or 0.7% to $763,271,000 at June 30, 2012 compared to $757,874,000 at June 30, 2011. Available-for-sale investment securities totaled $305,378,000 at June 30, 2012, an increase of $9,085,000 from June 30, 2011, and Federal funds sold totaled $53,375,000 at June 30, 2012, an increase of $34,020,000 from June 30, 2011. When compared to December 31, 2011, total assets at June 30, 2012 increased $3,174,000 from $904,966,000, loans decreased by $958,000 from $456,215,000 and deposits decreased by $2,968,000 from $766,239,000. Available-for-sale investment securities decreased $6,827,000 from December 31, 2011 to June 30, 2012, while Federal funds sold increased $13,165,000 from December 31, 2011 to June 30, 2012. 

As announced on June 7, 2012, the Company has received approval from the Federal Reserve Bank of San Francisco ("FRB") and the California Department of Financial Institutions ("DFI") to pay all deferred interest on its junior subordinated notes underlying its trust preferred securities in the approximate amount of $5.7 million and to fully redeem its North Valley Capital Trust I notes totaling $10.3 million and bearing an interest rate of 10.25%. The notes were redeemed on July 25, 2012. Under applicable regulatory capital guidelines issued by bank regulatory agencies, based on the notice of redemption date these trust preferred securities no longer qualified as Tier 1 capital for the Company at June 30, 2012 and are not included in the following capital amounts and ratios. At June 30, 2012, the Company's Total Risk-based Capital was $110,527,000, and its capital ratios were: Total Risk-based Capital ratio - 18.49%; Tier 1 Risk-based Capital ratio - 17.22%; and Tier 1 Leverage ratio - 11.44%. NVB upstreamed a dividend to the Company totaling $16,500,000 during the second quarter of 2012 to facilitate the interest payments and redemption of the notes, and the following capital amounts and ratios reflect this reduction. At June 30, 2012, the Bank's Total Risk-based Capital was $110,027,000, and its capital ratios were: Total Risk-based Capital ratio - 18.43%; Tier 1 Risk-based Capital ratio - 17.16%; and Tier 1 Leverage ratio - 11.40%.

Credit Quality

Nonperforming loans (defined as nonaccrual loans and loans 90 days or more past due and still accruing interest) decreased $814,000, or 4.6% to $16,771,000 at June 30, 2012 from $17,585,000 at June 30, 2011, and decreased $1,640,000 from the December 31, 2011 balance of $18,411,000. Nonperforming loans as a percentage of total loans were 3.68% at June 30, 2012, 3.65% at June 30, 2011, and 4.04% at December 31, 2011. 

The overall level of nonperforming loans increased $1,137,000 to $16,771,000 at June 30, 2012 from $15,634,000 at March 31, 2012. During the second quarter of 2012, the Company identified nine loans totaling $3,033,000 as additional nonperforming loans. The additions were partially offset by reductions in nonperforming loans totaling $1,896,000 due primarily to charge-offs and collections received on certain loans and the transfer of two properties to OREO totaling $240,000. Of the nine loans totaling $3,033,000 identified as nonaccrual loans and added to nonperforming loans during the second quarter of 2012, one loan represents $2,088,000 of the total. This loan is for a commercial real estate building located in Sacramento County that defaulted during the second quarter of 2012. An appraisal was performed on the property and the Company recorded a $1,178,000 charge-off to write-down the loan to its net realizable value of $910,000 at June 30, 2012. The remaining eight loans in this group of nonperforming loans total $945,000 and specific reserves totaling $99,000 have been established. 

Gross loan charge-offs for the second quarter of 2012 were $1,672,000 and recoveries totaled $130,000 resulting in net charge-offs of $1,542,000 compared to gross loan charge-offs for the second quarter of 2011 of $1,198,000 and recoveries of $223,000 resulting in net charge-offs of $975,000. Gross charge-offs for the six months ended June 30, 2012 were $2,558,000 and recoveries totaled $234,000 resulting in net charge-offs of $2,324,000, compared to gross charge-offs for the six months ended June 30, 2011 of $2,803,000 and recoveries of $306,000 resulting in net charge-offs of $2,497,000. 

Nonperforming assets (nonperforming loans and OREO) totaled $32,419,000 at June 30, 2012, a decrease of $9,031,000 from the June 30, 2011 balance of $41,450,000, and a $6,098,000 decrease from the December 31, 2011 balance of $38,517,000. Nonperforming assets as a percentage of total assets were 3.57% at June 30, 2012 compared to 4.63% at June 30, 2011 and 4.26% at December 31, 2011. 

The Company's OREO properties decreased $1,258,000 to $15,648,000 at June 30, 2012 from $16,906,000 at March 31, 2012. The decrease in OREO was due to the sale of four properties totaling $1,228,000, a loss on sale of $105,000, and the write-down of the value of OREO properties of $165,000 during the quarter ended June 30, 2012, which was partially offset by the transfer of two properties to OREO totaling $240,000.

"Overall, credit quality continues to improve and we have reached a settlement with a large nonperforming loan relationship of approximately $6.5 million and expect to transfer the property to OREO during the third quarter," commented Cushman.

Operating Results

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 $829,000, or 10.2%, for the three months ended June 30, 2012 compared to the same period in 2011. Interest income decreased by $1,190,000, primarily due to both the lower yield on earning assets and the decrease in the average loan balances. The Company had foregone interest of $203,000 and $476,000 for the loans on nonaccrual status for the three months ended June 30, 2012 and 2011, respectively. Average loans decreased by $43,321,000 in the second quarter of 2012 compared to the second quarter of 2011, and the yield on the loan portfolio decreased 37 basis points to 5.65% for the second quarter of 2012. Partially offsetting the decrease in interest income was a decrease in interest expense of $361,000, or 24.9%, due primarily to a decrease in the rates paid on deposits for the quarter ended June 30, 2012 compared to the same period in 2011. Overall, average earning assets increased $6,505,000 in the second quarter of 2012 compared to the second quarter of 2011. Average yields on earning assets decreased 63 basis points from the quarter ended June 30, 2011, to 4.21% for the quarter ended June 30, 2012 and the average rate paid on interest-bearing liabilities decreased by 23 basis points to 0.69%. The Company's net interest margin for the quarter ended June 30, 2012 was 3.67%, a decrease of 45 basis points from the margin of 4.12% for the second quarter in 2011 and an increase of 6 basis points from the 3.61% net interest margin for the linked quarter ended March 31, 2012.

Net interest income decreased $1,243,000 for the six months ended June 30, 2012 compared to the same period in 2011. Total interest income decreased by $1,999,000 for the six months ended June 30, 2012 compared to the same period in 2011, primarily due to a decrease in income on loans of $2,050,000 as a result of both the decrease in the average balance of loans, and a decrease in the yield on loans. Interest expense decreased $756,000 due primarily to a decrease on rates paid on deposits during the six months ended June 30, 2012 compared to the same period in 2011. The net interest margin for the six months ended June 30, 2012 decreased 41 basis points to 3.64% from the net interest margin of 4.05% for the six months ended June 30, 2011.

Noninterest income for the quarter ended June 30, 2012 increased $1,204,000, or 34.6%, to $4,687,000 compared to $3,483,000 for the same period in 2011. The primary reason for the increase in noninterest income was the Company recognized a gain on sale of investment securities of $968,000 for quarter ended June 30, 2012. Service charges on deposits decreased $36,000 to $1,136,000 for the second quarter of 2012 compared to $1,172,000 for the second quarter of 2011, while other fees and charges increased $163,000 to $1,321,000 for the second quarter of 2012 compared to $1,158,000 for the second quarter of 2011. Gain on sales of loans increased $165,000 to $684,000 for the second quarter of 2012 compared to $519,000 for the second quarter of 2011. Other noninterest income decreased $56,000 to $578,000 for the second quarter of 2012 compared to $634,000 for the second quarter of 2011. 

Noninterest income for the six months ended June 30, 2012 increased $1,310,000 to $7,946,000 from $6,636,000 for the same period in 2011. Service charges on deposits decreased $150,000 to $2,188,000 for the six months ended June 30, 2012 compared to $2,338,000 for the same period in 2011, while other fees and charges increased by $239,000 to $2,518,000 for the six months ended June 30, 2012 compared to $2,279,000 for the same period in 2011. Gain on sales of loans increased $314,000 to $1,089,000 for the six months ended June 30, 2012 compared to $775,000 for the same period in 2011. Other noninterest income decreased $62,000 to $1,192,000 for the six months ended June 30, 2012 compared to $1,254,000 for the same period in 2011.

Noninterest expense decreased $507,000, or 5.2%, to $9,228,000 for the second quarter of 2012 from $9,735,000 for the second quarter of 2011. Salaries and employee benefits increased $576,000, to $5,051,000 for the second quarter of 2012 compared to the second quarter of 2011 due primarily to the hiring of production personnel and the reactivation of incentive and other compensation plans. Occupancy, furniture and equipment expense decreased $147,000, for the second quarter of 2012 compared to the second quarter of 2011 due to a decrease in depreciation and rent expense. OREO expense decreased $835,000 to $342,000 for the second quarter of 2012 compared to $1,177,000 for the second quarter of 2011, FDIC premiums and state assessments decreased $127,000, while other expenses increased by $26,000. 

Noninterest expense for the six months ended June 30, 2012 was $18,884,000 compared to $19,206,000 for the same period in 2011. For the six months ended June 30, 2012, salaries and employee benefits increased $916,000, while occupancy, furniture and equipment expense decreased $250,000, and other real estate owned expense decreased $653,000 when compared to the same period in 2011. FDIC premiums and state assessments were $489,000 for the first six months of 2012 compared to $746,000 for the first six months of 2011.

The Company recorded a provision for income taxes for the quarter ended June 30, 2012 of $527,000, resulting in an effective tax rate of 29.5%, compared to a provision for income taxes of $137,000, or an effective tax rate of 20.9%, for the quarter ended June 30, 2011. The provision for income taxes for the six month period ended June 30, 2012 was $642,000, resulting in an effective tax rate of 26.9%, compared to a provision for income taxes of $226,000, or an effective tax rate of 19.8%, for the same period in 2011.

On July 26, 2012, the Board of Directors of the Company approved the filing of applications to consolidate two of its branches, subject to regulatory approval. The applications were filed with the Company's regulators on July 30, 2012.

North Valley Bancorp is a bank holding company headquartered in Redding, California. Its subsidiary, North Valley Bank ("NVB"), operates twenty-four commercial banking offices in Shasta, Humboldt, Del Norte, Mendocino, Yolo, Sonoma, Placer and Trinity Counties in Northern California, including two in-store supermarket branches and six 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, 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      
    June 30,      
Statement of Income   2012   2011   $ Change     % Change  
Interest income                          
  Loans (including fees)   $ 6,324   $ 7,394   $ (1,070 )   (14.47 %)
  Investment securities     2,079     2,209     (130 )   (5.89 %)
  Federal funds sold and other     17     7     10     142.86 %
    Total interest income     8,420     9,610     (1,190 )   (12.38 %)
Interest expense                          
  Interest on deposits     604     1,012     (408 )   (40.32 %)
  Subordinated debentures     487     439     48     10.93 %
  Other borrowings     -     1     (1 )   (100.00 %)
    Total interest expense     1,091     1,452     (361 )   (24.86 %)
Net interest income     7,329     8,158     (829 )   (10.16 %)
Provision for loan losses     1,000     1,250     (250 )   (20.00 %)
Net interest income after provision for loan losses     6,329     6,908     (579 )   (8.38 %)
                           
Noninterest income                          
  Service charges on deposit accounts     1,136     1,172     (36 )   (3.07 %)
  Other fees and charges     1,321     1,158     163     14.08 %
  Gain on sale of loans, net     684     519     165     31.79 %
  Gain on sales of securities, net     968     -     968     -  
  Other     578     634     (56 )   (8.83 %)
    Total noninterest income     4,687     3,483     1,204     34.57 %
                           
Noninterest expenses                          
  Salaries and employee benefits     5,051     4,475     576     12.87 %
  Occupancy     620     700     (80 )   (11.43 %)
  Furniture and equipment     227     294     (67 )   (22.79 %)
  Other real estate owned expense     342     1,177     (835 )   (70.94 %)
  FDIC and state assessments     176     303     (127 )   (41.91 %)
  Other     2,812     2,786     26     0.93 %
    Total noninterest expenses     9,228     9,735     (507 )   (5.21 %)
    Income before provision for income taxes     1,788     656     1,132     172.56 %
Provision for income taxes     527     137     390     284.67 %
    Net income   $ 1,261   $ 519   $ 742     142.97 %
                           
Common Share Data                          
  Basic and diluted earnings per share   $ 0.18   $ 0.08   $ 0.10     125.00 %
                           
  Shares outstanding     6,833,752     6,832,492              
  Basic and dilutive weighted average shares outstanding     6,833,752     6,832,492              
  Book value per share   $ 13.61   $ 12.90              
  Tangible book value   $ 13.56   $ 12.83              
                           
                           
                           
NORTH VALLEY BANCORP  
CONDENSED CONSOLIDATED FINANCIAL DATA  
(Unaudited)  
(Dollars in thousands, except share and per share data)  
                       
    Six Months Ended        
    June 30,        
Statement of Income   2012   2011     $ Change     % Change  
Interest income                            
  Loans (including fees)   $ 12,794   $ 14,844     $ (2,050 )   (13.81 %)
  Investment securities     4,190     4,169       21     0.50 %
  Federal funds sold and other     45     15       30     200.00 %
    Total interest income     17,029     19,028       (1,999 )   (10.51 %)
Interest expense                            
  Interest on deposits     1,338     2,094       (756 )   (36.10 %)
  Subordinated debentures     970     969       1     0.10 %
  Other borrowings     -     1       (1 )   (100.00 %)
    Total interest expense     2,308     3,064       (756 )   (24.67 %)
Net interest income     14,721     15,964       (1,243 )   (7.79 %)
Provision for loan losses     1,400     2,250       (850 )   (37.78 %)
Net interest income after provision for loan losses     13,321     13,714       (393 )   (2.87 %)
                             
Noninterest income                            
  Service charges on deposit accounts     2,188     2,338       (150 )   (6.42 %)
  Other fees and charges     2,518     2,279       239     10.49 %
  Gain on sale of loans, net     1,089     775       314     40.52 %
  Gain (loss) on sales of securities, net     959     (10 )     969     (9690.00 %)
  Other     1,192     1,254       (62 )   (4.94 %)
    Total noninterest income     7,946     6,636       1,310     19.74 %
                             
Noninterest expenses                            
  Salaries and employee benefits     10,108     9,192       916     9.97 %
  Occupancy     1,260     1,392       (132 )   (9.48 %)
  Furniture and equipment     472     590       (118 )   (20.00 %)
  Other real estate owned expense     976     1,629       (653 )   (40.09 %)
  FDIC and state assessments     489     746       (257 )   (34.45 %)
  Other     5,579     5,657       (78 )   (1.38 %)
    Total noninterest expenses     18,884     19,206       (322 )   (1.68 %)
    Income before provision for income taxes     2,383     1,144       1,239     108.30 %
Provision for income taxes     642     226       416     184.07 %
    Net income   $ 1,741   $ 918     $ 823     89.65 %
                             
Common Share Data                            
  Basic and diluted earnings per share   $ 0.25   $ 0.13     $ 0.12     92.31 %
                             
  Shares outstanding     6,833,752     6,832,492                
  Basic and dilutive weighted average shares outstanding     6,833,752     6,832,492                
  Book value per share   $ 13.61   $ 12.90                
  Tangible book value   $ 13.56   $ 12.83                
                             
                             
                             
NORTH VALLEY BANCORP  
CONDENSED CONSOLIDATED FINANCIAL DATA  
(Unaudited)  
(Dollars in thousands)  
                   
    June 30,     December 31,     June 30,  
Balance Sheet Data   2012     2011     2011  
Assets                        
  Cash and due from banks   $ 19,037     $ 18,758     $ 18,159  
  Federal funds sold     53,375       40,210       19,355  
  Time deposits at other financial institutions     1,960       1,959       459  
  Available-for-sale securities - at fair value     305,378       312,205       296,293  
  Held-to-maturity securities - at amortized cost     6       6       6  
                         
  Loans net of deferred loan fees     455,257       456,215       482,154  
  Allowance for loan losses     (11,732 )     (12,656 )     (14,746 )
    Net loans     443,525       443,559       467,408  
                         
  Premises and equipment, net     9,362       8,661       8,361  
  Other real estate owned     15,648       20,106       23,865  
  Core deposit intangibles, net     328       401       474  
  Accrued interest receivable and other assets     59,492       59,101       60,677  
Total assets   $ 908,111     $ 904,966     $ 895,057  
                         
Liabilities and Shareholders' Equity                        
  Deposits:                        
    Demand, noninterest bearing   $ 163,446     $ 167,506     $ 157,924  
    Demand, interest bearing     184,113       170,124       159,133  
    Savings and money market     220,430       216,299       229,648  
    Time     195,282       212,310       211,169  
      Total deposits     763,271       766,239       757,874  
                         
  Accrued interest payable and other liabilities     19,862       17,301       17,075  
  Subordinated debentures     31,961       31,961       31,961  
Total liabilities     815,094       815,501       806,910  
  Shareholders' equity     93,017       89,465       88,147  
Total liabilities and shareholders' equity   $ 908,111     $ 904,966     $ 895,057  
                         
Asset Quality                        
  Nonaccrual loans   $ 16,627     $ 18,359     $ 17,585  
  Loans past due 90 days and accruing interest     144       52       -  
  Other real estate owned     15,648       20,106       23,865  
    Total nonperforming assets   $ 32,419     $ 38,517     $ 41,450  
                         
  Classified assets   $ 47,896     $ 59,742     $ 74,083  
  Bank Tier 1 Capital + ALLL   $ 114,185     $ 126,323     $ 125,736  
  Classified assets ratio     41.95 %     47.29 %     58.92 %
                         
  Allowance for loan losses to total loans     2.58 %     2.77 %     3.06 %
  Allowance for loan losses to NPL's     69.95 %     68.74 %     83.86 %
                         
                         
                         
NORTH VALLEY BANCORP  
CONDENSED CONSOLIDATED FINANCIAL DATA  
(Unaudited)  
(Dollars in thousands)  
                         
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
Selected Financial Ratios   2012     2011     2012     2011  
  Return on average total assets     0.56 %     0.23 %     0.38 %     0.21 %
  Return on average shareholders' equity     5.47 %     2.42 %     3.81 %     2.17 %
  Net interest margin (tax equivalent basis)     3.67 %     4.12 %     3.64 %     4.05 %
  Efficiency ratio     76.80 %     83.63 %     83.31 %     84.98 %
                                 
Selected Average Balances                                
  Loans   $ 449,215     $ 492,536     $ 450,347     $ 497,456  
  Taxable investments     320,264       283,680       318,520       277,542  
  Tax-exempt investments     12,229       14,402       12,607       14,380  
  Federal funds sold and other     27,049       11,634       38,000       12,915  
    Total earning assets   $ 808,757     $ 802,252     $ 819,474     $ 802,293  
    Total assets   $ 907,749     $ 894,463     $ 911,962     $ 894,383  
                                 
  Demand deposits - interest bearing   $ 179,726     $ 164,460     $ 177,863     $ 162,901  
  Savings and money market     222,669       223,483       221,199       220,525  
  Time deposits     202,415       214,349       207,657       219,257  
  Subordinated debentures     31,961       31,961       31,961       31,961  
  Other borrowings     -       205       -       103  
    Total interest bearing liabilities   $ 636,771     $ 634,458     $ 638,680     $ 634,747  
  Demand deposits - noninterest bearing   $ 157,268     $ 156,265     $ 157,826     $ 155,881  
  Shareholders' equity   $ 92,411     $ 85,912     $ 91,568     $ 85,370  
                                 
                                 
                                 
NORTH VALLEY BANCORP
CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited)
(Dollars in thousands, except per share data)
 
    For the Quarter Ended
    June   March   December     September
    2012   2012   2011     2011
Interest income   $ 8,420   $ 8,609   $ 8,879     $ 9,238
Interest expense     1,091     1,217     1,331       1,391
  Net interest income     7,329     7,392     7,548       7,847
                           
Provision for loan losses     1,000     400     -       400
Noninterest income     4,687     3,259     3,717       4,012
Noninterest expense     9,228     9,656     10,912       9,597
                           
Income before provision (benefit) for income taxes     1,788     595     353       1,862
Provision (benefit) for income taxes     527     115     (456 )     542
  Net income   $ 1,261   $ 480   $ 809     $ 1,320
                           
Common Share Data                          
  Basic and diluted earnings per share   $ 0.18   $ 0.07   $ 0.12     $ 0.19
                             

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