North Valley Bancorp Reports Increased Net Income for 2006
| · | Net Income Increased 23.6% to $3,054,000 for Fourth Quarter 2006 over Fourth Quarter 2005 |
| · | Net Income Increased 13.6% to $10,396,000 for 2006 |
| · | Interest Income Increased 12.8% for 2006 |
| · | Noninterest Income Increased 12.8% for 2006 |
| · | Net Interest Margin Increased to 5.41% Compared to 5.40% for Fourth Quarter 2005 and 5.28% for the Linked Quarter |
| · | Loan Portfolio Credit Quality Remained Outstanding |
January 30, 2007 - REDDING, CA - North Valley Bancorp (NASDAQ:NOVB), a bank holding company with $906 million in assets, today reported results for the quarter and year ended December 31, 2006. North Valley Bancorp ("the Company") is the parent company for North Valley Bank ("NVB").
The Company reported net income for the fourth quarter ended December 31, 2006 of $3,054,000, or $0.40 per diluted share, compared to $2,470,000, or $0.32 per diluted share, for the same period in 2005. This represents an increase in net income of $584,000, or 23.6%, compared to the fourth quarter of 2005. For the fourth quarter, the Company realized an annualized return on average shareholders’ equity of 16.48% and an annualized return on average assets of 1.33%, as compared to 13.91% and 1.06%, respectively, in the fourth quarter of 2005.
The Company reported net income for the year ended December 31, 2006 of $10,396,000, or $1.36 per diluted share, compared to $9,149,000, or $1.17 per diluted share, for the year ended December 31, 2005. This represents an increase in net income of $1,247,000, or 13.6%. For the year 2006, the Company realized a return on average shareholders’ equity of 14.48% and a return on average assets of 1.15%, as compared to 13.42% and 1.01%, respectively, for 2005.
During 2006, total assets decreased $12,742,000, or 1.4%, to $905,673,000 at year end. The Company was successful in shifting more of its earning assets into the loan portfolio as loans increased $35,281,000, or 5.6%, and totaled $659,793,000 at December 31, 2006. The loan to deposit ratio at year end 2006 was 87.9% as compared to 83.6% at year end 2005. Total deposits grew $3,598,000, or 0.5%, to total $750,288,000 at December 31, 2006.
2006 Financial Performance
Net interest income, which represents the Company’s largest component of revenues and is the difference between interest earned on loans and investments and interest paid on deposits and borrowings, increased $1,519,000, or 3.7%, for the year ended December 31, 2006 compared to 2005. This was due to an increase in interest income of $6,501,000 which was partially offset by an increase in interest expense of $4,982,000. The increase in interest income was primarily due to an increase in average loans of $41,729,000 and an increase in rates reflective of the Federal Reserve Board Open Market Committee raising rates 100 basis points during 2006. The increase in average total loans was primarily funded by the decrease in average investments of $51,287,000. Average yields on earning assets increased 80 basis points to 7.23% for 2006 and the average rate paid on interest-bearing liabilities increased by 79 basis points to 2.32%. The increase in asset yields was primarily due to average loan yields, which increased from 7.19% in 2005 to 7.82% in 2006. The Company’s net interest margin in 2006 was 5.40%, an increase from 5.22% in 2005. During the fourth quarter of 2006, the Company’s net interest margin was 5.41%, slightly above the 5.40% net interest margin in the fourth quarter of 2005, and an increase from the 5.28% net interest margin for the linked quarter. The increase in the net interest margin was due to the rising interest rate environment experienced in 2006 as well as earning assets consisting of a higher concentration of loans compared to 2005. “Our net interest margin expanded in the fourth quarter over the linked quarter as we recognized an increase in yield on our earning assets of 16 basis points, while our cost of funds only increased 3 basis points. Our margin continues to be strong as we have remained price disciplined in a very competitive deposit and loan pricing environment.” commented Kevin Watson, Chief Financial Officer.
Noninterest income for the quarter ended December 31, 2006 was $3,239,000 compared to $3,234,000 for the same period in 2005. Other fees and charges increased by $137,000 to $852,000 for the fourth quarter of 2006 compared to $715,000 for the fourth quarter of 2005, while service charges on deposits increased by $96,000 to $1,631,000 for the quarter compared to $1,535,000 for the same period in 2005.
Noninterest income increased to $12,650,000 for the year ended December 31, 2006 compared to $11,214,000 for 2005. Service charges on deposits increased by $897,000 in 2006 while other fees and charges increased $533,000 in 2006 compared to 2005 due to increased servicing fees. Earnings on the cash surrender value of life insurance policies increased from $1,078,000 in 2005 to $1,211,000 in 2006 due to higher market rates associated with those policies. Other noninterest income decreased $127,000 from 2005 levels due mainly to reduction in the level of loans and securities sales.
Noninterest expense decreased $311,000 to $9,860,000 for the fourth quarter of 2006 from $10,171,000 for the fourth quarter in 2005. Salaries and employee benefits decreased $98,000, furniture and equipment expense decreased $104,000, and other expenses decreased $138,000, while occupancy expense increased $29,000.
Noninterest expense totaled $39,615,000 for the year 2006 compared to $37,592,000 for 2005 which is an increase of $2,023,000 or 5.4%. Salaries and benefits increased by $1,991,000, or 10.1%, over 2005 levels due primarily to the hiring of seasoned lending teams that specialize in business lending in Sonoma and Placer counties. Equipment expense decreased slightly from $2,160,000 in 2005 to $2,153,000 in 2006. Occupancy expense increased from $2,724,000 in 2005 to $3,023,000 in 2006. Other expenses, which include professional services, data processing, and marketing expenses, decreased by $260,000 in 2006 compared to 2005.
The Company recorded a provision for loan and lease losses for the quarter ended December 31, 2006 of $50,000, a decrease of $150,000 compared to the $200,000 recorded for the quarter ended December 31, 2005. A provision for loan and lease losses of $975,000 was recorded for the year ended December 31, 2006, a $45,000 increase from the $930,000 for 2005. The increase in provision for loan and lease losses for the year 2006 compared to 2005 reflected continued growth in the Company’s loan portfolio and management’s concern for current economic uncertainty.
The provision for income taxes for the year ended December 31, 2006 was $4,158,000, resulting in an effective tax rate of 29%, compared to $4,518,000, or an effective tax rate of 33%, for the year ended December 31, 2005. The decrease is due to a change in estimated tax rate to be applied to 2006 net income to reflect greater California jobs credits and a lowering of the expected Federal statutory rate on the Company’s taxable income in 2006.
Credit Quality
Nonperforming loans (defined as nonaccrual loans and loans 90 days or more past due and still accruing interest) decreased $278,000 to $475,000, or 0.07%, of total loans at December 31, 2006 from $753,000, or 0.12%, of total loans at December 31, 2005. Other real estate owned at December 31, 2006 was $902,000, consisting of land originally purchased for bank expansion, which management has listed for sale as the land is no longer needed due to the acquisition of Yolo Community Bank in 2004. The allowance for loan and lease losses at December 31, 2006 was $8,831,000, or 1.34% of total loans, compared to $7,864,000, or 1.26% of total loans, at December 31, 2005. The Company had net charge-offs for the twelve months ended December 31, 2006 of $9,000 compared to net charge-offs of $283,000 for 2005.
Summary
“The year-end results reflect our disciplined approach to managing our net interest margin in a competitive market resulting in solid performance for 2006. The Bank is continuing to focus on credit quality, control of non interest expense, core deposit growth and maintaining a strong net interest margin. This approach continues to strengthen the Bank’s financial performance,” stated Michael J. Cushman, President & CEO.
North Valley Bancorp is a bank holding company headquartered in Redding, California. Its subsidiary, North Valley Bank ("NVB"), operates twenty-six commercial banking offices in Shasta, Humboldt, Del Norte, Mendocino, Yolo, Solano, Sonoma, Placer and Trinity Counties in Northern California, including two in-store supermarket branches and seven Business Banking Centers. North Valley Bancorp, through NVB, offers a wide range of consumer and business banking deposit products and services including internet banking and cash management services. In addition to these depository services, NVB engages in a full complement of lending activities including consumer, commercial and real estate loans. Additionally, NVB has SBA Preferred Lender status and provides investment services to its customers. Visit the Company's website address at www.novb.com for more information.
Cautionary Statement: This release contains certain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those stated herein. Management's assumptions and projections are based on their anticipation of future events and actual performance may differ materially from those projected. Risks and uncertainties which could impact future financial performance include, among others, (a) competitive pressures in the banking industry; (b) changes in the interest rate environment; (c) general economic conditions, either nationally, regionally or locally, including fluctuations in real estate values; (d) changes in the regulatory environment; (e) changes in business conditions or the securities markets and inflation; (f) possible shortages of gas and electricity at utility companies operating in the State of California, and (g) the effects of terrorism, including the events of September 11, 2001, and thereafter, and the conduct of the war on terrorism by the United States and its allies. Therefore, the information set forth herein, together with other information contained in the periodic reports filed by the Company with the Securities and Exchange Commission, should be carefully considered when evaluating the business prospects of the Company. North Valley Bancorp undertakes no obligation to update any forward-looking statements contained in this release.
For further information contact:
| Michael J. Cushman | or | Kevin R. Watson |
| President & Chief Executive Officer | | Executive Vice President & Chief Financial Officer |
| (530) 226-2900 Fax: (530) 221-4877 | | (530) 226-2900 Fax: (530) 221-4877 |
