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North Valley Bancorp
North Valley Bancorp Reports Second Quarter Results
July 21, 2005 - REDDING, CA - 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 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.
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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 payoff 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.
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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.
For further information contact:
Michael J. Cushman
President & Chief Executive Officer
(530) 226-2900 Fax: (530) 221-4877
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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 --
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%
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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
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%
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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%
============ ============ ============ ============
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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
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