SOURCE: North Valley Bancorp

July 21, 2005 16:44 ET

North Valley Bancorp Reports Second Quarter Results

REDDING, CA -- (MARKET WIRE) -- July 21, 2005 -- North Valley Bancorp (NASDAQ: NOVB), a multi-bank holding company with $899 million in assets, today reported results for the three- and six-month periods ending June 30, 2005. North Valley Bancorp ("the Company") is the parent company for North Valley Bank ("NVB"), and NVB Business Bank ("NVBBB" formerly named Yolo Community Bank).

Second Quarter Results

The Company reported net income for the quarter ended June 30, 2005 of $1,987,000 or $0.26 per diluted share compared to $1,982,000 or $0.29 per diluted share for the same period in 2004.

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 $2,814,000 or 38.8% for the quarter ended June 30, 2005 compared to the same period in 2004. This was due to an increase in interest income of $3,261,000 partially offset by an increase in interest expense of $447,000. The increase in interest income was due to an increase in total average outstanding loans from $410,383,000 in the second quarter of 2004 to $581,858,000 in the same period this year (an increase of $171,475,000 or 41.8%). Of the $171,475,000 increase in outstanding average loans, $93,096,000 was due to the acquisition of NVBBB in August 2004. The increase in average total loans was funded with an increase in average total deposits of $124,240,000, and an increase in average borrowings of $20,093,000. Average yields on earning assets increased 62 basis points up to 6.32% for the second quarter of 2005 and the average rate paid on interest-bearing liabilities increased by 4 basis points to 1.38% compared to the second quarter of 2004. The increase in asset yields was primarily due to the increase in total loans coupled with an increase in average loan yields, which increased from 6.61% in the second quarter of 2004 to 7.10% in the same period in 2005. The Company's Net Interest Margin for the quarter ending June 30, 2005 was 5.21%, an increase of 63 basis points over the second quarter of 2004.

Non-interest income was $2,463,000 in the second quarter of 2005 compared to $2,250,000 for the same period in 2004. Service charges on deposits decreased from $1,194,000 in the second quarter of 2004 to $1,189,000 in the second quarter of 2005. The Company recorded $54,000 in gains on mortgage loan sales. The Company is currently selling its fixed-rate mortgage production in order to maintain a loan portfolio with a shorter overall duration. Earnings on cash surrender value of life insurance policies increased from $271,000 in the second quarter of 2004 to $287,000 in the second quarter of 2005. Other non-interest income increased $79,000 from 2004 levels due mainly to increased sales of third-party investment products.

Non-interest expense totaled $9,463,000 for the three months ending June 30, 2005 compared to $6,660,000 for the same period in 2004, an increase of $2,803,000 or 42.1%. Salaries and benefits increased by $1,220,000 or 35.1% over the second quarter of 2004 due to the acquisition of NVBBB in August 2004. Occupancy expense increased from $454,000 in the second quarter of 2004 to $692,000 in the same period in 2005, and other expense increased from $2,222,000 in the second quarter of 2004 to $3,667,000 in the second quarter of 2005; both increases were also due to the acquisition of NVBBB's operations.

Linked Quarter Results

Net interest income increased by $470,000 (20% annualized) from the first quarter of 2005 to the second quarter of 2005. This was the result of increased interest income generated by higher loan totals and an improved Net Interest Margin of 5.21%, up from 4.96% in the first quarter of 2005. Non-interest income remained relatively stable for the second quarter of 2005.

Non-interest expense increased from $8,434,000 for the first quarter of 2005 to $9,463,000 for the second quarter of 2005 in part as a result of the opening of new offices in Fairfield, Santa Rosa and Ukiah. Additionally, the Company incurred one-time costs of $325,000, which related to the roll-out of the new NVB brand.

Net loans outstanding increased from $566,024,000 in the first quarter of 2005 to $591,477,000 in the second quarter of 2005 or 18% annualized. Deposits decreased $15,925,000 between the first and second quarters of 2005, primarily as a result of a single relationship; however, non-interest demand deposits increased by $9,405,000 between the first and second quarters as a result of new relationships opened at the NVB Business Bank branches.

Year-to-Date Results

For the six months ended June 30, 2005, the Company reported net income of $4,246,000 or $0.55 per diluted share compared to $4,056,000 or $0.59 per diluted share for the same period in 2004. This represents an increase in net income of $190,000 but a decrease in earnings per share of $0.04. Non-interest income increased $202,000 in the six months ended June 30, 2005 compared to 2004. Net interest income increased $5,368,000, or 37.5% in the six months ended June 30, 2005 compared to 2004 and non-interest expense increased by $4,647,000 or 35.1% over the same period last year.

Credit Quality

Non-Performing loans (defined as non-accrual loans and loans 90 days or more past due and still accruing interest) decreased $730,000 to $1,440,000 or 0.24% of total loans at June 30, 2005 from $2,170,000 or 0.39% of total loans at December 31, 2004. The allowance for loan and lease losses at June 30, 2005 was $7,612,000 or 1.27% of total loans compared to $7,217,000 or 1.30% of total loans at December 31, 2004. The ratio of net (recoveries) charge-offs to average loans outstanding for the three months ended June 30, 2005 was (0.01)% compared to 0.06% for the same period in 2004. The Company recorded a provision for loan losses of $450,000 for the six months ending June 30, 2005 compared to no provision for the similar period of 2004. While the overall credit quality of the loan portfolio remains strong the provision was supported primarily by the growth in the commercial lending portfolio. The allowance for loan and lease losses as a percentage of nonperforming loans was 528.61% as of June 30, 2005 compared to 332.58% as of December 31, 2004.

"The Company discontinued its indirect Dealer Financing Program during the quarter as loan yields declined and competition increased. The portfolio is expected to pay off during the next 24 months thereby providing additional funding capacity for new business," stated Mike Cushman, President & CEO.

Summary

Mike Cushman, President and CEO, commented as follows:

"The second quarter of 2005 saw the final integration of NVB Business Bank, the opening of new offices in Fairfield, Santa Rosa and Ukiah and the hiring of key personnel in all Business Bank markets. Additionally, the new NVB brand was introduced, eliminating the Six Rivers Bank and Yolo Community Bank names thereby providing for greater efficiency and brand recognition.

"We have made a significant investment in growing the Company through the NVB Business Bank acquisition and the opening of new branches in some of the state's most rapidly growing markets. This investment has resulted in higher non-interest expenses in the short run which we expect to stabilize and be off-set by increasing revenues in the future.

"North Valley Bancorp has achieved a major strategic goal with the addition of new offices, fully staffed by experienced professionals in most of Northern California's major markets. It has taken us a number of years to achieve this goal. We believe that our financial position going forward will be further strengthened by an expanding Net Interest Margin and by maintaining excellent asset quality," stated Mike Cushman, President and CEO.

North Valley Bancorp is a multi-bank holding company headquartered in Redding, California. North Valley Bank ("NVB") operates twenty-one commercial banking offices in Shasta, Humboldt, Del Norte, Mendocino and Trinity Counties in Northern California including two in-store supermarket branches and two Business Banking Centers. NVB Business Bank operates five commercial banking offices in Yolo, Solano, Sonoma, Placer and Mendocino Counties in Northern California. North Valley Bancorp, through its subsidiary banks, 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, North Valley Bank engages in a full complement of lending activities including consumer, commercial and real estate loans, with particular emphasis on short and medium term commercial loans. NVB has SBA Preferred Lender status and provides investment services to its customers through an affiliated relationship. Visit the Company's website address at www.nvbancorp.com for additional 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 or 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 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 and Subsidiaries
                       Statement of Income
         Dollars in thousands except per share amounts (unaudited)
               For the Six Months Ended June 30,

                                                              $        %
                                   2005         2004       Change   Change
                                --------     --------     --------  -------

INTEREST INCOME:
        Loans and leases
         including fees         $ 19,706     $ 13,238     $ 6,468     48.9%
        Investment securities
          Taxable                  3,402        3,637        (235)    -6.5%
          Exempt from federal
           taxes                     594          968        (374)   -38.6%
        Federal funds sold           261           78         183    234.6%
                                --------     --------     --------  -------
Total interest
           income                 23,963       17,921       6,042     33.7%

INTEREST EXPENSE:
        Deposits                   2,719        2,228         491     22.0%
        Subordinated
         debentures                  822          740          82     11.1%
        Other borrowings             756          655         101     15.4%
                                --------     --------     --------  -------
            Total interest
             expense               4,297        3,623         674     18.6%

Net interest income               19,666       14,298       5,368     37.5%

Provision for loan and
 lease losses                        450            -         450      100%
Net interest income after
 provision for loan
     and lease losses             19,216       14,298       4,918     34.4%

NONINTEREST INCOME:
        Service charges
         on deposit accounts       2,322        2,566        (244)    -9.5%
        Other fees and
         charges                   1,217        1,099         118     10.7%
        Earnings on cash
         surrender value of life
         insurance policies          564          594         (30)    -5.1%
        Gain on sale of loans        101            4          97   2425.0%
        Gains on sales or calls
         of securities                95           22          73    331.8%
        Other                        614          426         188     44.1%
                                --------     --------     --------  -------
            Total noninterest
             income                4,913        4,711         202      4.3%

NONINTEREST EXPENSES:
        Salaries and
         employee benefits         9,374        6,893       2,481     36.0%
        Occupancy expense          1,319          884         435     49.2%
        Furniture and
         equipment expense           973        1,084        (111)   -10.2%
        Other                      6,231        4,389       1,842     42.0%
                                --------     --------     --------  -------
          Total noninterest
           expenses               17,897       13,250       4,647     35.1%

Income before provision
 for income taxes                  6,232        5,759         473      8.2%

Provision for
 income taxes                      1,986        1,703         283     16.6%
                                --------     --------     --------  -------

Net income                      $  4,246     $  4,056     $   190      4.7%
                                ========     ========     =======  ========
Earnings per share:
          Basic                 $  0.58      $  0.62      $ (0.04)    -6.5%
          Diluted               $   0.55     $   0.59     $ (0.04)    -6.8%



                       North Valley Bancorp and Subsidiaries
                               Statements of Income
               Dollars in thousands except per share amounts (unaudited)
                           For the quarter ended June 30,

                                                              $        %
                                   2005         2004       Change   Change
                                --------     --------     --------  -------

INTEREST INCOME:
     Loans and leases
      including fees            $ 10,249     $  6,745     $ 3,504     51.9%
     Investment securities
        Taxable                    1,714        1,754         (40)    -2.3%
        Exempt from federal
         taxes                       283          561        (278)   -49.6%
     Federal funds sold               90           15          75    500.0%
                                --------     --------     --------  -------
           Total interest
            income                12,336        9,075       3,261     35.9%

INTEREST EXPENSE:
        Deposits                   1,467        1,087         380     35.0%
        Subordinated
         debentures                  411          386          25      6.5%
        Other borrowings             390          348          42     12.1%
                                --------     --------     --------  -------
           Total interest
            expense                2,268        1,821         447     24.5%

Net interest income               10,068        7,254       2,814     38.8%

Provision for loan and
 lease losses                        180            -         180      100%
Net interest income after
 provision for loan and
 lease losses                      9,888        7,254       2,634     36.3%

NONINTEREST INCOME:
        Service charges
         on deposit accounts       1,189        1,194          (5)    -0.4%
        Other fees and
         charges                     649          564          85     15.1%
        Earnings on cash surrender
         value of life
          insurance policies         287          271          16      5.9%
        Gain on sale of loans         54            4          50   1250.0%
        Gains on sales or calls
         of securities                 2           14         (12)   -85.7%
        Other                        282          203          79     38.9%
                                --------     --------     --------  -------
           Total noninterest
            income                 2,463        2,250         213      9.5%

NONINTEREST EXPENSES:
        Salaries and employee
         benefits                  4,692        3,472       1,220     35.1%
        Occupancy expense            692          454         238     52.4%
        Furniture and equipment
         expense                     412          512        (100)   -19.5%
        Other                      3,667        2,222       1,445     65.0%
                                --------     --------     --------  -------
           Total noninterest
            expenses               9,463        6,660       2,803     42.1%

Income before provision
 for income taxes                  2,888        2,844          44      1.5%

Provision for income taxes           901          862          39      4.5%
                                --------     --------     --------  -------

Net income                      $  1,987     $  1,982     $     5      0.3%
                                ========     ========     ========  =======
Earnings per share:
          Basic                 $   0.27     $   0.30     $ (0.03)   -10.0%
          Diluted               $   0.26     $   0.29     $ (0.03)   -10.3%



                    North Valley Bancorp and Subsidiaries
                              Balance Sheet
                (dollars in thousands except per share data)
                              (unaudited)

                               30-Jun-05   31-Dec-04   $ Change  % Change
                               ---------   ---------   --------  --------
ASSETS
Cash and cash equivalents:
  Cash and due from banks      $  40,310   $  23,575   $ 16,735     71.0%
  Federal funds sold               4,200         640      3,560    556.3%
                               ---------   ---------   --------  --------
    Total cash and
     cash equivalents             44,510      24,215     20,295     83.8%

Interest-bearing cash in
 other financial institutions          -         500       (500)  -100.0%
Investment securities:
  Available for sale,
   at fair value                 184,704     218,961    (34,257)   -15.6%
  Held to maturity,
   at amortized cost                 126         133         (7)    -5.3%

Loans and leases, net of
 allowance for loan and
 lease losses of $7,612 and
 $7,217 at June 30, 2005 and
 December 31, 2004               591,477     546,128     45,349      8.3%
Premises and equipment, net       15,291      13,927      1,364      9.8%
FHLB & FRB Stock                   5,154       4,826        328      6.8%
Other real estate owned                -           -          -      0.0%
Goodwill and core deposit
 intangibles, net                 18,474      18,799       (325)    -1.7%
Accrued interest receivable        3,871       3,163        708     22.4%
Cash surrender value of
 life insurance                   28,055      27,541        514      1.9%
Other assets                       7,714       8,038       (324)    -4.0%
                               ---------   ---------   --------  --------
TOTAL ASSETS                   $ 899,376   $ 866,231   $ 33,145      3.8%
                               =========   =========   ========  ========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Deposits:
  Noninterest-bearing
   demand deposits             $ 187,255   $ 165,595   $ 21,660     13.1%
  Interest-bearing                     -
    Demand deposits              191,662     187,738      3,924      2.1%
    Savings                      197,282     200,628     (3,346)    -1.7%
    Time Certificates            152,872     157,693     (4,821)    -3.1%
                               ---------   ---------   --------  --------
      Total deposits             729,071     711,654     17,417      2.4%

Other borrowed funds              70,738      57,594     13,144     22.8%
Accrued interest payable
 and other liabilities             8,950       9,884       (934)    -9.4%
Subordinated debentures           21,651      21,651          -      0.0%
      Total liabilities          830,410     800,783     29,627      3.7%

STOCKHOLDERS' EQUITY:
Preferred stock, no par value:
 authorized 5,000,000 shares:
 none outstanding
Common stock, no par value:
 authorized 20,000,000 shares,
 outstanding  7,411,075 and
 7,311,726 at June 30, 2005
 and December 31, 2004            38,802      37,917        885      2.3%
Retained Earnings                 31,034      28,403      2,631      9.3%
Accumulated other comprehensive
 loss, net of tax                   (870)       (872)         2     -0.2%
                               ---------   ---------   --------  --------
Total stockholders' equity        68,966      65,448      3,518      5.4%

TOTAL LIABILITIES AND
 STOCKHOLDERS' EQUITY          $ 899,376   $ 866,231   $ 33,145      3.8%
                               =========   =========   ========  ========



                    North Valley Bancorp and Subsidiaries
                (dollars in thousands except per share data
                                (unaudited)

Financial Ratios
                                    For the six months ended June 30,
                                         2005              2004
                                    ---------------   ---------------
Return on average assets                  0.95%             1.13%
Return on average equity                 12.88%            17.24%
Return on tangible equity                11.90%            17.24%
Noninterest Income to
 average assets                           1.09%             1.31%
Noninterest Expense to
 average assets                           3.97%             3.67%
Net interest margin
 (Taxable-equivalent)                     5.06%             4.60%
Average equity to average assets          7.37%             6.56%

Allowance for Loan and Lease Losses

Balance beginning of year           $    7,217        $    6,493
Provision for loan losses                  450                 -
Net charge offs (recoveries)                55               316
                                    ---------------   ---------------

Balance end of period               $    7,612        $    6,177
                                    ===============   ===============

Non-Performing Assets                  June 30,        December 31,
                                         2005              2004
                                    ---------------   ---------------

Total nonaccrual loans              $    1,032         $   1,155
Loans 90 days past due and
 still accruing                            408             1,015

Total nonperforming loans           $    1,440         $   2,170
Other real estate owned                      -                 -

Total nonperforming assets          $    1,440         $   2,170

Nonaccrual loans to total
 gross loans                              0.17%             0.15%
Nonperforming loans to total
 gross loans                              0.24%             0.39%
Total nonperforming assets
 to total assets                          0.16%             0.21%

Allowance for loan and lease losses
 to nonperforming loans                 528.61%           332.58%
Allowance for loan and lease losses
 to total gross loans                     1.27%             1.30%
Allowance for loan and lease losses
 to nonperforming assets                528.61%           332.58%

Total gross loans                      599,089           553,345
Total assets                           899,376           866,231
Average loans outstanding (ytd)        569,727           438,044
Average assets (ytd)                   901,986           777,604
Average equity (ytd)                    66,461            50,655

Contact Information

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