SANTA ROSA, CA -- 01/24/2007 -- Northern Empire Bancshares (NASDAQ: NREB), the financial holding company for Sonoma National Bank, reported annual net income of $18.3 million for the year end 2006 compared to $17.2 million for the year end 2005, an increase of 6.4%. Diluted earnings per share for the year ended December 31, 2006 were $1.61 compared to $1.52 for the year ended December 31, 2005. Earnings for 2006 were impacted by pre-tax expenses of approximately $751,000, related to the proposed merger with Sterling Financial Corporation (Sterling). Annualized return on average assets was 1.39% and return on average equity was 15.52% for the year ended December 31, 2006.
On September 18, 2006, Northern Empire Bancshares announced the signing of a definitive agreement in connection with the proposed merger of Northern Empire Bancshares and Sterling Financial Corporation headquartered in Spokane, Washington. Deborah Meekins, President & CEO of Northern Empire Bancshares commented, "The announcement of the proposed merger with Sterling Financial Corporation has been very positive. Our cultures are very similar and the enhanced innovation and technology Sterling brings will prove very beneficial to our customers and provide greater opportunities for future growth. The proposed merger is subject to regulatory approvals and approval by the shareholders of both NREB and Sterling. A special meeting of NREB shareholders will be held for this purpose on Tuesday, February 20, 2007, at 5:00 p.m. at 801 Fourth Street, Santa Rosa, California."
Net interest income totaled $48.3 million in 2006, an increase of 5.7% from $45.7 million reported for the prior year. This reflects an increase in average earnings assets of $148.7 million, or 13.0% which was partially offset by a 26 basis point decline in net interest margin, from 3.99% in 2005 to 3.73% for 2006. Ms. Meekins stated, "The margin compression is a trend which continues to impact the banking industry and is a result of a flat yield curve, the Federal Reserve's past rate increases and strong competition in all lines of business."
The Company's efficiency ratio for 2006 increased slightly and totaled 38.57% compared to 36.96% in 2005, primarily due to merger related expenses. The efficiency ratio in both 2005 and 2006 are considered low when compared to industry averages. Non-interest income of $4.6 million in 2006 versus $4.4 million in 2005 increased 4.5%. Gain on sales of loans increased $100,000 in 2006 when compared to 2005 and totaled $3.1 million.
Total assets at December 31, 2006 were $1.36 billion, an increase of 10.6% from the $1.23 billion reported one year ago. Total loans grew 10.9% to $1.22 billion at December 31, 2006 compared to $1.10 billion at year end 2005.
Loan quality at Sonoma National has historically been extremely sound, with a low level of non-performing loans and no net charge-offs in 2006. At December 31, 2006, non-performing loans increased to $2.3 million, or 0.17% of total loans which is considered a low level when compared to industry standards. The Bank added $1.75 million to reserves in recognition of the 10.9% loan growth over the past twelve months. The allowance for loan losses was $12.5 million at December 31, 2006.
Deposits totaled $978.4 million at December 31, 2006, an increase of 10.2% when compared to $888.0 million reported one year ago. Sonoma National Bank will open its 13th branch in early February 2007 in Novato, California, located in northern Marin County. The Bank continues to utilize Federal Home Loan Bank advances as a funding source. At December 31, 2006, advances totaled $249.3 million, up 8.2%, when compared to advances of $230.4 million at December 31, 2005.
The Company remained well capitalized, with total risk-based capital of 12.24% at December 31, 2006. Total capital equaled $127.3 million on December 31, 2006, an increase of 18.6% compared to $107.3 million on December 31, 2005.
About the Company
Northern Empire Bancshares, the financial holding company for Sonoma National Bank, was incorporated in 1982. The Bank specializes in commercial real estate lending and is a leading SBA lender in the North Bay area; it has twelve branch locations -- nine in Sonoma County, of which four are in-store banking offices, two in Contra Costa and one in Marin County. The Bank also has loan production offices in San Francisco, Walnut Creek, San Rafael, Sacramento, and Phoenix, Arizona. Northern Empire Bancshares announced the signing of a proposed merger agreement with Sterling Financial Corporation on September 18, 2006. For more information on Northern Empire Bancshares and Sonoma National Bank, please refer to the Company's Website at www.snbank.com.
Forward-Looking Statements
Except for historical information contained herein, the statements contained in this press release are forward-looking statements within the meaning of the "safe harbor" provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to risks and uncertainties. Actual results may differ materially from those set forth in or implied by forward-looking statements. These risks are described from time to time in Northern Empire Bancshares' Securities and Exchange Commission filings, including its annual reports on Form 10-K and quarterly reports on Form 10-Q. Northern Empire Bancshares disclaims any intent or obligation to update these forward-looking statements.
NORTHERN EMPIRE BANCSHARES CONSOLIDATED BALANCE SHEETS December 31, December 31, 2006 2005 --------------- --------------- (Unaudited) (Audited) ASSETS Cash and due from banks $ 23,509,000 $ 28,936,000 Federal funds sold 91,843,000 30,188,000 --------------- --------------- Total cash and cash equivalents 115,352,000 59,124,000 Securities available for sale 1,093,000 50,488,000 Federal Reserve Bank stock 166,000 166,000 Federal Home Loan Bank stock 15,243,000 11,731,000 Total loans and leases 1,221,237,000 1,101,521,000 Allowance for loan and lease losses (12,499,000) (10,749,000) --------------- --------------- Total Loans and leases, net 1,208,738,000 1,090,772,000 Premises and equipment, net 2,654,000 3,292,000 Accrued interest receivable and other assets 18,641,000 16,161,000 --------------- --------------- Total assets $ 1,361,887,000 $ 1,231,734,000 =============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY Deposits: Noninterest-bearing $ 97,004,000 $ 80,808,000 Interest-bearing 881,386,000 807,219,000 --------------- --------------- Total deposits 978,390,000 888,027,000 Federal Home Loan Bank advances 249,340,000 230,379,000 Accrued expenses and other liabilities 6,833,000 6,021,000 --------------- --------------- Total liabilities 1,234,563,000 1,124,427,000 --------------- --------------- SHAREHOLDERS' EQUITY Common stock 74,562,000 60,655,000 Additional paid-in-capital 8,388,000 7,681,000 Retained earnings 44,378,000 39,072,000 Accumulated other comprehensive income (loss) (4,000) (101,000) --------------- --------------- Total shareholders' equity 127,324,000 107,307,000 --------------- --------------- Total liabilities and shareholders' equity $ 1,361,887,000 $ 1,231,734,000 =============== =============== NORTHERN EMPIRE BANCSHARES CONSOLIDATED REPORTS OF INCOME THREE MONTHS THREE MONTHS ENDED ENDED YEAR ENDED YEAR ENDED December 31, December 31, December 31, December 31, 2006 2005 2006 2005 ------------ ------------ ------------ ------------ (Unaudited) (Unaudited) (Unaudited) (Unaudited) INTEREST INCOME Loans, including fees $ 23,802,000 $ 19,240,000 $ 89,545,000 $ 70,621,000 Investment securities 349,000 708,000 2,095,000 1,546,000 Federal funds sold 1,232,000 289,000 3,310,000 2,171,000 ------------ ------------ ------------ ------------ Total interest income 25,383,000 20,237,000 94,950,000 74,338,000 INTEREST EXPENSE Deposits 10,114,000 6,535,000 33,403,000 21,533,000 Federal Home Loan Bank advances 3,267,000 1,991,000 13,271,000 7,113,000 ------------ ------------ ------------ ------------ Total interest expense 13,381,000 8,526,000 46,674,000 28,646,000 ------------ ------------ ------------ ------------ Net interest income 12,002,000 11,711,000 48,276,000 45,692,000 Provision for loan and lease losses 350,000 600,000 1,750,000 2,250,000 ------------ ------------ ------------ ------------ Net interest income after provision for loan and lease losses 11,652,000 11,111,000 46,526,000 43,442,000 NON INTEREST INCOME Service charges on deposit accounts 108,000 126,000 466,000 494,000 Net gain on sales of loans 707,000 854,000 3,122,000 3,022,000 Other income 281,000 214,000 1,057,000 876,000 ------------ ------------ ------------ ------------ Total non interest income 1,096,000 1,194,000 4,645,000 4,392,000 NON INTEREST EXPENSE Salaries and benefits 3,037,000 2,679,000 12,541,000 11,078,000 Occupancy 560,000 504,000 2,130,000 1,907,000 Furniture and equipment 280,000 277,000 1,146,000 1,132,000 Other expense 1,145,000 969,000 4,601,000 4,397,000 ------------ ------------ ------------ ------------ Total non interest expense 5,022,000 4,429,000 20,418,000 18,514,000 ------------ ------------ ------------ ------------ Income before income tax provision 7,726,000 7,876,000 30,753,000 29,320,000 Income tax provision 3,111,000 3,267,000 12,457,000 12,073,000 ------------ ------------ ------------ ------------ Net income $ 4,615,000 $ 4,609,000 $ 18,296,000 $ 17,247,000 ============ ============ ============ ============ Basic earnings per share $ 0.42 $ 0.42 $ 1.67 $ 1.58 Diluted earnings per share $ 0.41 $ 0.40 $ 1.61 $ 1.52 NORTHERN EMPIRE BANCSHARES CONSOLIDATED FINANCIAL HIGHLIGHTS (Unaudited) Year ended Fourth quarter December 31, ------------------------ ------------------------ (dollars in thousands except per share data) 2006 2005 2006 2005 ----------- ----------- ----------- ----------- EARNINGS Net interest income $ 12,003 $ 11,711 $ 48,276 $ 45,692 Provision for loan and lease losses $ 350 $ 600 $ 1,750 $ 2,250 Noninterest income $ 1,096 $ 1,194 $ 4,645 $ 4,392 Noninterest expense $ 5,022 $ 4,430 $ 20,418 $ 18,514 Net income $ 4,615 $ 4,609 $ 18,296 $ 17,247 Basic earnings per share* $ 0.42 $ 0.42 $ 1.67 $ 1.58 Diluted earnings per share* $ 0.41 $ 0.40 $ 1.61 $ 1.52 Average shares outstanding* 10,985,143 10,916,320 10,946,668 10,896,884 Average diluted shares outstanding* 11,349,448 11,380,189 11,362,834 11,369,375 PERFORMANCE RATIOS Return on average assets 1.35% 1.51% 1.39% 1.47% Return on average common equity 14.64% 17.27% 15.52% 17.33% Net interest margin 3.56% 3.92% 3.73% 3.99% Efficiency ratio 38.34% 34.33% 38.57% 36.96% Full-time equivalent employees 172 172 172 172 CAPITAL Average equity to average assets 9.19% 8.73% 8.95% 8.47% Tier 1 leverage capital ratio 9.33% 8.84% 9.33% 8.84% Tier 1 risk-based capital ratio 11.12% 11.04% 11.12% 11.04% Total risk-based capital ratio 12.24% 12.18% 12.24% 12.18% Book value per share* $ 11.56 $ 9.83 $ 11.56 $ 9.83 ASSET QUALITY Gross loan charge-offs $ 0 $ 0 $ 0 $ 0 Net loan charge-offs $ 0 $ 0 $ 0 $ 0 Net loan charge-offs to average loans 0.00% 0.00% 0.00% 0.00% Allowance for loan losses $ 12,499 $ 10,749 $ 12,499 $ 10,749 Allowance for losses to total loans 1.02% 0.98% 1.02% 0.98% Nonperforming loans $ 2,315 $ 618 $ 2,315 $ 618 Other real estate and repossessed assets $ 0 $ 0 $ 0 $ 0 Nonperforming assets to total assets 0.17% 0.05% 0.17% 0.05% END OF PERIOD BALANCES Loans $ 1,221,237 $ 1,101,521 $ 1,221,237 $ 1,101,521 Total earning assets (before allowance) $ 1,339,136 $ 1,192,448 $ 1,339,136 $ 1,192,448 Total assets $ 1,361,887 $ 1,231,734 $ 1,361,887 $ 1,231,734 Deposits $ 978,390 $ 888,027 $ 978,390 $ 888,027 Shareholders' equity $ 127,324 $ 107,307 $ 127,324 $ 107,307 * Adjusted for 5% stock dividend declared in March 2006.
For additional information contact: Deborah A. Meekins President & CEO Northern Empire Bancshares (707) 579-2265