SOURCE: North Valley Bancorp

October 20, 2005 16:35 ET

North Valley Bancorp Reports Third Quarter Results

REDDING, CA -- (MARKET WIRE) -- October 20, 2005 -- North Valley Bancorp (NASDAQ: NOVB), a multi-bank holding company with $908 million in assets, today reported results for the three and nine-month periods ending September 30, 2005. North Valley Bancorp ("the Company") is the parent company for North Valley Bank ("NVB"), and NVB Business Bank ("NVBBB," formerly Yolo Community Bank).

Third Quarter Results

The Company reported net income for the quarter ended September 30, 2005 of $2,433,000 or $0.31 per diluted share compared to $2,068,000 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 $2,583,000 or 33.1% for the quarter ended September 30, 2005 compared to the same period in 2004. This was due to an increase in interest income of $3,246,000 partially offset by an increase in interest expense of $663,000. The increase in interest income was due to an increase in total average outstanding loans from $443,741,000 in the third quarter of 2004 to $603,103,000 in the same period this year (an increase of $159,362,000 or 35.9%) and an increase in average yields on earning assets. Of the $159,362,000 increase in outstanding average loans, $71,766,000 was due to the acquisition of NVBBB. The increase in average total loans was funded with an increase in average total deposits of $83,633,000, and an increase in average borrowings of $10,096,000. Average yields on earning assets increased 87 basis points up to 6.51% for the third quarter of 2005 and the average rate paid on interest-bearing liabilities increased by 35 basis points to 1.63% compared to the third quarter of 2004. The increase in asset yields was primarily due to a change in the mix of earning assets towards loans coupled with an increase in average loan yields, which increased from 6.62% in the third quarter of 2004 to 7.25% in the same period in 2005. The Company's Net Interest Margin for the quarter ending September 30, 2005 was 5.23%, an increase of 68 basis points over the third quarter of 2004.

Non-interest income was $3,067,000 in the third quarter of 2005 compared to $2,399,000 for the same period in 2004. Service charges on deposits increased from $1,367,000 in the third quarter of 2004 to $1,683,000 in the third quarter of 2005. Earnings on cash surrender value of life insurance policies increased from $276,000 in the third quarter of 2004 to $320,000 in the third quarter of 2005. Other non-interest income increased $97,000 from 2004 levels due mainly to increased sales of third-party investment products.

Non-interest expense totaled $9,524,000 for the three months ending September 30, 2005 compared to $7,004,000 for the same period in 2004, an increase of $2,520,000 or 36.0%. Salaries and benefits increased by $1,384,000 or 38.3% over the third quarter of 2004, of which $592,000 is due to the acquisition of NVBBB in August 2004. Occupancy expense increased from $481,000 in the third quarter of 2004 to $666,000 in the same period in 2005 and other expense increased from $2,395,000 in the third quarter of 2004 to $3,323,000 in the third quarter of 2005, both increases partially due to the acquisition NVBBB's operations.

Year-to-Date Results

For the nine months ended September 30, 2005, the Company reported net income of $6,679,000 or $0.86 per diluted share compared to $6,124,000 or $0.88 per diluted share for the same period in 2004. This represents an increase in net income of $555,000 but a decrease in earnings per share of $0.02. Non-interest income increased $870,000 in the nine months ended September 30, 2005 compared to the same period in 2004. Net interest income increased $7,951,000, or 36.0% in the nine months ended September 30, 2005 compared to the same period in 2004, and non-interest expense increased by $7,167,000 or 35.4% over the same period last year due, in part, to the acquisition of NVBBB in August 2004.

Credit Quality

Non-performing loans (defined as non-accrual loans and loans 90 days or more past due and still accruing interest) decreased by $1,173,000 to $997,000 or 0.16% of total loans at September 30, 2005 from $2,170,000 or 0.39% of total loans at December 31, 2004. The allowance for loan and lease losses at September 30, 2005 was $7,715,000 or 1.26% of total loans at September 30, 2005, compared to $7,217,000 or 1.30% of total loans at December 31, 2004. The ratio of net charge-offs to average loans outstanding for the nine months ended September 30, 2005 was 0.06% compared to 0.09% for the same period in 2004. The Company recorded a provision for loan losses of $730,000 for the nine months ending September 30, 2005 compared to $216,000 for the similar period of 2004. While the overall credit quality of the loan portfolio remains strong, the provision recorded during 2005 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 773.82% as of September 30, 2005 compared to 332.58% as of December 31, 2004.

Summary

Mr. Cushman, President and CEO, commented as follows:

"I am pleased with the results of the third quarter. Earnings increased $446,000 or 22.4% from the second quarter of 2005 as a result of organic growth and an expanding net interest margin. Credit quality has and continues to be excellent."

"Our strategic action of entering the high growth markets of Sacramento, Woodland, Fairfield and Santa Rosa are continuing to provide us with excellent growth opportunities. We are now fully staffed with highly skilled professionals who know their markets and are committed to building the business."

"We continue to actively seek a qualified professional to fill the CFO position. As part of this process, we have hired James Kim as Controller, who is an excellent addition to our team."

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 Nine Months Ended September 30,


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

INTEREST INCOME:
   Loans and leases
    including fees              $30,699    $20,621    $10,078        48.9%
   Investment securities
    Taxable                       4,985      5,714       (729)      -12.8%
    Exempt from federal taxes       870      1,079       (209)      -19.4%
   Federal funds sold               374        226        148        65.5%
                                -------    -------    -------      -------
    Total interest income        36,928     27,640      9,288        33.6%

INTEREST EXPENSE:
   Deposits                       4,370      3,403        967        28.4%
   Subordinated debentures        1,272      1,151        121        10.5%
   Other borrowings               1,236        987        249        25.2%
                                -------    -------    -------      -------
    Total interest expense        6,878      5,541      1,337        24.1%

Net interest income              30,050     22,099      7,951        36.0%

Provision for loan and lease
 losses                             730        216        514       238.0%
Net interest income after
 provision for loan
 and lease losses                29,320     21,883      7,437        34.0%

NONINTEREST INCOME:
   Service charges on deposit
    accounts                      4,005      3,933         72         1.8%
   Other fees and charges         1,938      1,680        258        15.4%
   Earnings on cash surrender
    value of life insurance
    policies                        884        870         14         1.6%
   Gain on sale of loans            155          9        146      1622.2%
   Gains on sales or calls
    of securities                   117         22         95       431.8%
   Other                            881        596        285        47.8%
                                -------    -------    -------      -------
    Total noninterest income      7,980      7,110        870        12.2%

NONINTEREST EXPENSES:
   Salaries and employee
    benefits                     14,369     10,504      3,865        36.8%
   Occupancy expense              1,985      1,365        620        45.4%
   Furniture and equipment
    expense                       1,513      1,601        (88)       -5.5%
   Other                          9,554      6,784      2,770        40.8%
                                -------    -------    -------      -------
    Total noninterest expenses   27,421     20,254      7,167        35.4%

Income before provision for
 income taxes                     9,879      8,739      1,140        13.0%

Provision for income taxes        3,200      2,615        585        22.4%
                                -------    -------    -------      -------

Net income                       $6,679     $6,124       $555         9.1%
                                =======    =======    =======      =======
Earnings per share:
       Basic                      $0.90      $0.93     $(0.03)       -3.2%
       Diluted                    $0.86      $0.88     $(0.02)       -2.3%


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

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

INTEREST INCOME:
   Loans and leases
    including fees                $10,993    $7,383    $3,610        48.9%
   Investment securities
    Taxable                         1,583     1,718      (135)       -7.9%
    Exempt from federal taxes         276       470      (194)      -41.3%
   Federal funds sold                 113       148       (35)      -23.6%
                                  -------   -------   -------     -------
    Total interest income          12,965     9,719     3,246        33.4%

INTEREST EXPENSE:
   Deposits                         1,651     1,175       476        40.5%
   Subordinated debentures            450       411        39         9.5%
   Other borrowings                   480       332       148        44.6%
                                  -------   -------   -------     -------
    Total interest expense          2,581     1,918       663        34.6%

Net interest income                10,384     7,801     2,583        33.1%

Provision for loan and lease
 losses                               280       216        64        29.6%
Net interest income after
 provision for loan
 and lease losses                  10,104     7,585     2,519        33.2%

NONINTEREST INCOME:
   Service charges on deposit
    accounts                        1,683     1,367       316        23.1%
   Other fees and charges             721       581       140        24.1%
   Earnings on cash surrender
    value of life insurance
    policies                          320       276        44        15.9%
   Gain on sale of loans               54         5        49       980.0%
   Gains on sales or calls of
    securities                         22         -        22       100.0%
   Other                              267       170        97        57.1%
                                  -------   -------   -------     -------

    Total noninterest income        3,067     2,399       668        27.8%

NONINTEREST EXPENSES:
   Salaries and employee benefits   4,995     3,611     1,384        38.3%
   Occupancy expense                  666       481       185        38.5%
   Furniture and equipment expense    540       517        23         4.4%
   Other                            3,323     2,395       928        38.7%
                                  -------   -------   -------     -------
    Total noninterest expenses      9,524     7,004     2,520        36.0%

Income before provision for
 income taxes                       3,647     2,980       667        22.4%

Provision for income taxes          1,214       912       302        33.1%
                                  -------   -------   -------     -------

Net income                         $2,433    $2,068      $365        17.6%
                                  =======   =======   =======     =======
Earnings per share:
       Basic                        $0.33     $0.31     $0.02         6.5%
       Diluted                      $0.31     $0.29     $0.02         6.9%


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

                               30-Sep-05   31-Dec-04   $ Change   % Change
                              ----------  ----------  ---------  ---------
ASSETS
Cash and cash equivalents:
  Cash and due from banks     $   44,598  $   23,575  $  21,023       89.2%
  Federal funds sold               8,829         640      8,189     1279.5%
                              ----------  ----------  ---------  ---------
    Total cash and cash
     equivalents                  53,427      24,215     29,212      120.6%

Interest-bearing cash in
 other financial
 institutions                          -         500       (500)    -100.0%
Investment securities:
  Available for sale, at
   fair value                    172,132     218,961    (46,829)     -21.4%
  Held to maturity, at
   amortized cost                    126         133         (7)      -5.3%

Loans and leases, net of
 allowance for loan and
 lease losses of $7,715
 and $7,217 at
 September 30, 2005 and
 December 31, 2004               602,481     546,128     56,353       10.3%
Premises and equipment, net       15,676      13,927      1,749       12.6%
FHLB & FRB Stock                   5,191       4,826        365        7.6%
Goodwill and core deposit
 intangibles, net                 18,311      18,469       (158)       -.9%
Accrued interest receivable        4,221       3,163      1,058       33.4%
Cash surrender value of
 life insurance                   28,338      27,541        797        2.9%
Other assets                       8,377       8,368          9        0.1%
                              ----------  ----------  ---------  ---------
TOTAL ASSETS                  $  908,280  $  866,231  $  42,049        4.9%
                              ==========  ==========  =========  =========

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES:
Deposits:
  Noninterest-bearing
   demand deposits            $  193,989  $  165,595  $  28,394       17.1%
  Interest-bearing:
    Demand deposits              195,328     187,738      7,590        4.0%
    Savings                      197,533     200,628     (3,095)      -1.5%
    Time Certificates            164,494     157,693      6,801        4.3%
                              ----------  ----------  ---------  ---------
      Total deposits             751,344     711,654     39,690        5.6%

Other borrowed funds              55,538      57,594     (2,056)      -3.6%
Accrued interest payable
 and other liabilities             9,234       9,884       (650)      -6.6%
Subordinated debentures           21,651      21,651          -        0.0%
                              ----------  ----------  ---------  ---------
      Total liabilities          837,767     800,783     36,984        4.6%
                              ----------  ----------  ---------  ---------

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
 7,492,999 and 7,311,726
 at September 30, 2005 and
 December 31, 2004                39,669      37,917      1,752        4.6%
Retained Earnings                 32,716      28,403      4,313       15.2%
Accumulated other
 comprehensive loss, net of
 tax                              (1,872)       (872)    (1,000)     114.7%
                              ----------  ----------  ---------  ---------
Total stockholders' equity        70,513      65,448      5,065        7.7%
                              ----------  ----------  ---------  ---------
TOTAL LIABILITIES AND
 STOCKHOLDERS' EQUITY         $  908,280   $ 866,231  $  42,049        4.9%
                              ==========  ==========  =========  =========




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

Financial Ratios
                                  For the nine months ended September 30,
                                         2005            2004
                                     -----------      -----------
Return on average assets                   1.00%           1.09%
Return on average equity                  13.29%          16.35%
Return on tangible equity                 17.11%          16.37%
Noninterest Income to
 average assets                            1.19%           1.26%
Noninterest Expense to
 average assets                            4.08%           3.60%
Net interest margin
 (Taxable-equivalent)                      5.15%           4.59%
Average equity to average assets           7.50%           6.67%

Allowance for Loan and Lease Losses

Balance beginning of year             $   7,217       $   6,493
Provision for loan losses                   730             216
Net charge offs                             232             459
Adjustments (NVBBB)                           -           1,019
                                      ---------       ---------
Balance end of period                 $   7,715       $   7,269
                                      =========       =========


Non-Performing Assets               September 30,     December 31,
                                        2005             2004
                                      ---------       ----------
Total nonaccrual loans                $     696       $   1,155
Loans 90 days past due
 and still accruing                         301           1,015

Total nonperforming loans             $     997       $   2,170

Total nonperforming assets            $     997       $   2,170

Nonaccrual loans to
 total gross loans                         0.11%           0.15%
Nonperforming loans to
 total gross loans                         0.16%           0.39%
Total nonperforming assets to
 total assets                              0.11%           0.21%

Allowance for loan and lease losses
 to nonperforming loans                  773.82%         332.58%
Allowance for loan and lease
 losses to total gross loans               1.26%           1.30%
Allowance for loan and lease
 losses to nonperforming assets          773.82%         332.58%


Total gross loans                       610,196         553,345
Total assets                            908,280         866,231
Average loans outstanding (ytd)         581,080         438,044
Average assets (ytd)                    898,314         777,604
Average equity (ytd)                     67,387          50,655

Contact Information

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