North Valley Bancorp (NASDAQ: NOVB), a bank
holding company with $934 million in assets, today reported results for the
second quarter and six months ended June 30, 2008. North Valley Bancorp
("the Company") is the parent company for North Valley Bank ("NVB").
The Company reported a net loss for the second quarter ended June 30, 2008
of $1,509,000, or $0.20 per diluted share, compared to net income of
$1,720,000, or $0.22 per diluted share, for the same period in 2007. For
the second quarter of 2008, the Company realized an annualized
return/(loss) on average shareholders' equity of (7.35%) and an annualized
return/(loss) on average assets of (0.65%), as compared to 8.81% and 0.77%,
respectively, for the second quarter of 2007. The Company reported a net
loss for the six months ended June 30, 2008 of $1,229,000, or $0.17 per
diluted share, compared to net income of $3,924,000, or $0.51 per diluted
share, for the same period in 2007.
The Company recorded $5,200,000 and $7,600,000 in provision for loan and
lease losses for the second quarter and six months ended June 30, 2008,
respectively. The Company did not record any provision for the same
periods in 2007. The allowance for loan and lease losses at June 30, 2008
was $13,677,000, or 1.87% of total loans, compared to $10,755,000, or 1.44%
of total loans at December 31, 2007 and $8,746,000, or 1.29% of total loans
at June 30, 2007. The increase in the provision for loan and lease losses
is due primarily to the increase in nonperforming loans to $22,580,000 at
June 30, 2008, and secondarily to the increase in the Company's loan
portfolio, which has increased $51,886,000 from June 30, 2007 but decreased
$15,970,000 from December 31, 2007.
"We continue to work diligently through the challenges resulting from this
national credit cycle. We are identifying impaired credits as early as
possible, working extensively with our borrowers to find solutions and
increasing our allowance for loan and lease losses through our loan loss
provision as we determine what is necessary and appropriate until a final
resolution of an impaired credit can be accomplished," stated Michael J.
Cushman, President and CEO.
The Company continues to maintain strong capital levels. At June 30, 2008,
the Company's Total Risk-based Capital was $106,639,000, and its risk-based
capital ratios were: Tier 1 risk-based Capital ratio -- 10.41%; Total
Risk-based Capital ratio -- 12.12%; and Tier 1 Leverage ratio -- 9.96%.
"Our capital position remains strong and the Company and the Bank remain
well-capitalized as we work through the challenges of this credit cycle,"
remarked Kevin R. Watson, Chief Financial Officer.
At June 30, 2008, total assets were $934,361,000, up from the $891,730,000
at June 30, 2007. The loan portfolio increased $51,886,000, or 7.7%
compared to June 30, 2007, and totaled $730,283,000 at June 30, 2008. The
loan to deposit ratio at June 30, 2008 was 98.1% as compared to 91.7% at
June 30, 2007. Total deposits grew slightly by $4,300,000, or 0.6%, to
total $744,231,000 at June 30, 2008, driven by an increase in time deposits
of $32,203,000, offset by decreases in noninterest bearing demand, interest
bearing demand, and savings and money market deposits of $7,499,000,
$11,128,000 and $9,276,000, respectively. When compared to December 31,
2007, total assets decreased $14,658,000 from $949,019,000, and total loans
decreased $15,970,000 from $746,253,000. Deposits increased by $7,492,000,
or 1.0%, from $736,739,000 at December 31, 2007, due to an increase in time
deposits of $12,904,000 and interest bearing demand deposits of $1,365,000.
The increases were offset by decreases in noninterest bearing demand and
savings and money market deposits of $3,585,000 and $3,192,000,
respectively.
Nonperforming loans (defined as nonaccrual loans and loans 90 days or more
past due and still accruing interest) totaled $22,580,000 at June 30, 2008,
an increase of $19,677,000 from June 30, 2007, and an increase of
$20,816,000 from December 31, 2007. Nonperforming loans as a percentage of
total loans were 3.09% at June 30, 2008, compared to 0.43% at June 30,
2007, and 0.24% at December 31, 2007. Nonperforming assets (nonperforming
loans and OREO) totaled $30,788,000 at June 30, 2008, an increase of
$26,983,000 from June 30, 2007, and an increase of $28,122,000 from
December 31, 2007. Nonperforming assets as a percentage of total assets
were 3.30% at June 30, 2008 compared to 0.43% at June 30, 2007, and 0.28%
at December 31, 2007.
The level of nonperforming loans decreased $3,170,000 to $22,580,000 at
June 30, 2008 from $25,750,000 at March 31, 2008 primarily as a result of
moving certain loans to OREO which increased $7,306,000 to $8,208,000 at
June 30, 2008. Nonperforming assets increased $4,136,000 to $30,788,000 at
June 30, 2008 from $26,652,000 at March 31, 2008. As discussed in the
Company's first quarter earnings release and Form 10-Q, there were four
real estate projects with loans totaling $24,047,000 which resulted in the
increase in nonperforming loans at March 31, 2008: two loans were for
residential development projects and the other two were residential
acquisition and development loans. As of June 30, 2008, the largest loan,
a residential development project for $9,509,000 in Placer County, remains
on nonaccrual. The other residential development project loan for
$6,750,000 located in Shasta County was taken into OREO through a deed in
lieu of foreclosure during the second quarter of 2008 with a subsequent
sale for a portion of the property also during the second quarter of 2008.
The carrying value of the remaining property in OREO is $1,892,000. The
other two loans were residential acquisition and development loans located
in Shasta County totaling $4,876,000 and $2,911,000, respectively, and both
loans were taken into OREO during the second quarter of 2008. On transfer
to OREO of the larger of the two loans for $4,876,000, the carrying value
of the property in OREO is $5,414,000 which includes the value of
additional property that was cross-collateralized to the original note.
The second residential acquisition and development loan for $2,911,000 was
transferred into OREO during the second quarter of 2008 at a carrying value
of $2.0 million which represented the fair value of the property less
estimated costs to sell at the time of the transfer. On June 30, 2008 we
sold that OREO property for $2.0 million with no additional gain or loss on
the sale being recorded. Gross loan and lease charge offs for the second
quarter of 2008 were $4,591,000 and recoveries totaled $46,000 resulting in
net charge offs of $4,545,000. Gross charge offs for the six months ended
June 30, 2008 were $4,776,000 and recoveries totaled $98,000 resulting in
net charge offs of $4,678,000.
The total dollar amount of reductions in nonperforming loans from pay downs
and the transfers to OREO during the second quarter of 2008 was $15.2
million. This decrease was offset by increases in certain other identified
nonperforming loans totaling $12.0 million. This was primarily due to the
addition of two construction loans in the amount of $7.3 million and $2.9
million, respectively. The larger of the two loans is a mixed-use
construction loan located in Sonoma County, and the other loan is a
residential development project located in Placer County. Although
interest payments were current at June 30, 2008, our assessment that the
borrowers' did not have the ability to continue to make the scheduled
interest payments coupled with a decline in appraised value caused our
decision to consider these loans as impaired and to place these loans on
nonaccrual. Specific reserves have been recorded on these properties at
June 30, 2008.
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, decreased
$1,023,000, or 10.1%, for the three months ended June 30, 2008 compared to
the same period in 2007. Interest income decreased by $1,237,000,
primarily due to the reversal of interest income of $530,000 previously
recorded for the loans placed on nonaccrual status and a reduction in the
interest earned on investment securities and Federal funds sold. Interest
expense decreased $214,000 due to a decrease on rates paid on deposits and
borrowings for the quarter ended June 30, 2008 compared to the same period
in 2007. Average loans increased $87,052,000 in the second quarter of 2008
compared to the second quarter of 2007, however the yield on the loan
portfolio for the quarter ended June 30, 2008 compared to the same quarter
in 2007 decreased 133 basis points to 6.57%, reflective of the declining
interest rate environment and the impact of reversing the interest income
on the loans placed on nonaccrual. The increase in average total loans was
primarily funded by a decrease in average investments and Federal funds
sold of $38,959,000 and an increase in average borrowings of $33,923,000.
Average yields on earning assets decreased 100 basis points from the
quarter ended June 30, 2007, to 6.36% for the quarter ended June 30, 2008
and the average rate paid on interest-bearing liabilities decreased by 34
basis points to 2.52%. As a result of the above, the Company's net
interest margin for the quarter ended June 30, 2008 was 4.34%, a decrease
of 77 basis points from the net interest margin of 5.11% for the second
quarter in 2007 and consistent with the 4.35% net interest margin for the
linked quarter ended March 31, 2008. "We continue to feel the impact of
the foregone interest from the level of nonperforming loans on our net
interest margin, which reduced it by roughly 25 basis points, although we
did recognize some relief from the repricing of deposits and borrowings,"
commented Mr. Watson. Net interest income decreased $2,232,000 for the six
months ended June 30, 2008 compared to the same period in 2007. Interest
income decreased by $1,583,000, primarily due to the reversal of interest
income of $1,056,000 previously recorded for the loans placed on nonaccrual
status and a reduction in the interest earned on investment securities and
Federal funds sold. Interest expense increased $649,000 due to an increase
in average interest bearing liabilities of $58,487,000 for the six months
ended June 30, 2008 compared to the same period in 2007. The net interest
margin for the six months ended June 30, 2008 decreased 88 basis points to
4.34% from the net interest margin of 5.22% for the six months ended June
30, 2007.
Noninterest income for the quarter ended June 30, 2008 was $3,477,000
compared to $3,170,000 for the same period in 2007. Service charges on
deposits increased $207,000 to $1,894,000 for the second quarter of 2008
compared to $1,687,000 for the second quarter of 2007, while other fees and
charges increased by $13,000 to $979,000 for the second quarter of 2008
compared to $966,000 for the same period in 2007. Noninterest income for
the six months ended June 30, 2008 increased $664,000, or 10.5%, to
$6,968,000 from $6,304,000 for the same period in 2007. Service charges on
deposits and other fees and charges increased $279,000 and $86,000,
respectively, for the six months ended June 30, 2008 compared to the same
period in 2007. Other noninterest income for the three and six month
periods ended June 30, 2008 increased $87,000 and $299,000, respectively,
compared to the same periods in 2007.
Noninterest expense decreased $1,155,000 to $9,577,000 for the second
quarter of 2008 from $10,732,000 for the second quarter of 2007. Salaries
and employee benefits decreased $370,000 while occupancy expense decreased
$34,000. Other expenses decreased $721,000, due to certain professional
services expense recorded in the second quarter of 2007 associated with the
terminated merger with Sterling Financial Corporation. Noninterest expense
for the six months ended June 30, 2008 was $19,382,000 compared to
$20,962,000 for the same period in 2007. The decrease was primarily due to
approximately $1,060,000 in merger expenses recorded in the first six
months of 2007 associated with the terminated merger with Sterling
Financial Corporation.
The Company recorded a benefit for income taxes for the quarter ended June
30, 2008 of $722,000, resulting in an effective tax benefit rate of 32.4%,
compared to $810,000, or an effective tax rate of 32%, for the quarter
ended June 30, 2007. The benefit for income taxes for the six month period
ended June 30, 2008 was $588,000, resulting in an effective tax benefit
rate of 32.4%, compared to $1,847,000, or an effective tax rate of 32%, for
the same period in 2007.
"We continue to actively address our credit related issues, grow our client
base and rebuild core value which will generate shareholder value in the
future. We have a strong capital position and our talented management team
is focused on a relatively quick resolution to the credit related issues.
I am confident that this strategy will position us to take advantage of
future opportunities," stated Mr. Cushman.
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, except as required by law.
NORTH VALLEY BANCORP
CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited)
(Dollars in thousands, except share and per share data)
Three Months Ended
June 30,
Statement of Income Data 2008 2007 $ Change % Change
---------- ---------- --------- ---------
Interest income
Loans and leases (including
fees) $ 12,246 $ 13,008 $ (762) (5.9%)
Investment securities 1,116 1,350 (234) (17.3%)
Federal funds sold and other 1 242 (241) (99.6%)
---------- ---------- --------- ---------
Total interest income 13,363 14,600 (1,237) (8.5%)
---------- ---------- --------- ---------
Interest expense
Interest on deposits 3,391 3,608 (217) (6.0%)
Subordinated debentures 578 610 (32) (5.2%)
Other borrowings 325 290 35 12.1%
---------- ---------- --------- ---------
Total interest expense 4,294 4,508 (214) (4.7%)
---------- ---------- --------- ---------
Net interest income 9,069 10,092 (1,023) (10.1%)
Provision for loan and lease
losses 5,200 - 5,200 -
---------- ---------- --------- ---------
Net interest income after
provision for loan and lease
losses 3,869 10,092 (6,223) (61.7%)
---------- ---------- --------- ---------
Noninterest income
Service charges on deposit
accounts 1,894 1,687 207 12.3%
Other fees and charges 979 966 13 1.3%
Other 604 517 87 16.8%
---------- ---------- --------- ---------
Total noninterest income 3,477 3,170 307 9.7%
---------- ---------- --------- ---------
Noninterest expenses
Salaries and employee
benefits 5,105 5,475 (370) (6.8%)
Occupancy 720 754 (34) (4.5%)
Furniture and equipment 488 518 (30) (5.8%)
Other 3,264 3,985 (721) (18.1%)
---------- ---------- --------- ---------
Total noninterest
expenses 9,577 10,732 (1,155) (10.8%)
---------- ---------- --------- ---------
(Loss) Income before
provision for income
taxes (2,231) 2,530 (4,761) (188.2%)
(Benefit) Provision for income
taxes (722) 810 (1,532) (189.1%)
---------- ---------- --------- ---------
Net (loss) income $ (1,509) $ 1,720 $ (3,229) (187.7%)
========== ========== ========= =========
Common Share Data
(Loss) Earnings per share
Basic $ (0.20) $ 0.23 $ (0.43) (187.0%)
Diluted $ (0.20) $ 0.22 $ (0.42) (190.7%)
Weighted average shares
outstanding 7,438,706 7,358,823
Weighted average shares
outstanding - diluted 7,438,706 7,668,380
Book value per share $ 10.53 $ 10.65
Tangible book value $ 8.38 $ 8.37
Shares outstanding 7,484,066 7,362,625
NORTH VALLEY BANCORP
CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited)
(Dollars in thousands, except share and per share data)
Six Months Ended
June 30,
Statement of Income Data 2008 2007 $ Change % Change
---------- ---------- --------- ---------
Interest income
Loans and leases (including
fees) $ 25,222 $ 25,832 $ (610) (2.4%)
Investment securities 2,285 2,885 (600) (20.8%)
Federal funds sold and other 6 379 (373) (98.4%)
---------- ---------- --------- ---------
Total interest income 27,513 29,096 (1,583) (5.4%)
---------- ---------- --------- ---------
Interest expense
Interest on deposits 7,219 6,864 355 5.2%
Subordinated debentures 1,173 1,218 (45) (3.7%)
Other borrowings 924 585 339 57.9%
---------- ---------- --------- ---------
Total interest expense 9,316 8,667 649 7.5%
---------- ---------- --------- ---------
Net interest income 18,197 20,429 (2,232) (10.9%)
Provision for loan and lease
losses 7,600 - 7,600 -
---------- ---------- --------- ---------
Net interest income after
provision for loan and lease
losses 10,597 20,429 (9,832) (48.1%)
---------- ---------- --------- ---------
Noninterest income
Service charges on deposit
accounts 3,610 3,331 279 8.4%
Other fees and charges 1,944 1,858 86 4.6%
Other 1,414 1,115 299 26.8%
---------- ---------- --------- ---------
Total noninterest income 6,968 6,304 664 10.5%
---------- ---------- --------- ---------
Noninterest expenses
Salaries and employee
benefits 10,641 11,034 (393) (3.6%)
Occupancy 1,474 1,523 (49) (3.2%)
Furniture and equipment 953 1,053 (100) (9.5%)
Other 6,314 7,352 (1,038) (14.1%)
---------- ---------- --------- ---------
Total noninterest
expenses 19,382 20,962 (1,580) (7.5%)
---------- ---------- --------- ---------
(Loss) Income before
provision for income
taxes (1,817) 5,771 (7,588) (131.5%)
(Benefit) Provision for income
taxes (588) 1,847 (2,435) (131.8%)
---------- ---------- --------- ---------
Net (loss) income $ (1,229) $ 3,924 $ (5,153) (131.3%)
========== ========== ========= =========
Common Share Data
(Loss) Earnings per share
Basic $ (0.17) $ 0.53 $ (0.70) (132.1%)
Diluted $ (0.17) $ 0.51 $ (0.68) (133.3%)
Weighted average shares
outstanding 7,427,781 7,349,639
Weighted average shares
outstanding - diluted 7,427,781 7,651,793
Book value per share $ 10.53 $ 10.65
Tangible book value $ 8.38 $ 8.37
Shares outstanding 7,484,066 7,362,625
NORTH VALLEY BANCORP
CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited)
(Dollars in thousands)
June 30, December 31, June 30,
Balance Sheet Data 2008 2007 2007
----------- ----------- -----------
Assets
Cash and due from banks $ 34,545 $ 28,569 $ 27,209
Federal funds sold - - 700
Available-for-sale securities - at
fair value 90,678 104,341 113,617
Held-to-maturity securities - at
amortized cost 31 31 55
Loans and leases net of deferred
loan fees 730,283 746,253 678,397
Allowance for loan and lease
losses (13,677) (10,755) (8,746)
----------- ----------- -----------
Net loans and leases 716,606 735,498 669,651
Premises and equipment, net 11,764 12,431 13,445
Other real estate owned 8,208 902 902
Goodwill and core deposit
intangibles, net 16,098 16,423 16,749
Accrued interest receivable and
other assets 56,431 50,824 49,402
----------- ----------- -----------
Total assets $ 934,361 $ 949,019 $ 891,730
=========== =========== ===========
Liabilities and Shareholders' Equity
Deposits:
Demand, noninterest bearing $ 164,030 $ 167,615 $ 171,529
Demand, interest bearing 148,421 147,056 159,549
Savings and money market 178,000 181,192 187,276
Time 253,780 240,876 221,577
----------- ----------- -----------
Total deposits 744,231 736,739 739,931
Other borrowed funds 68,115 87,192 31,605
Accrued interest payable and other
liabilities 11,252 11,656 9,845
Subordinated debentures 31,961 31,961 31,961
----------- ----------- -----------
Total liabilities 855,559 867,548 813,342
Shareholders' equity 78,802 81,471 78,388
----------- ----------- -----------
Total liabilities and shareholders'
equity $ 934,361 $ 949,019 $ 891,730
=========== =========== ===========
Asset Quality
Nonaccrual loans and leases $ 22,580 $ 1,608 $ 368
Loans and leases past due 90 days
and accruing interest - 156 2,535
Other real estate owned 8,208 902 902
----------- ----------- -----------
Total nonperforming assets $ 30,788 $ 2,666 $ 3,805
=========== =========== ===========
Allowance for loan and lease
losses to total loans 1.87% 1.44% 1.29%
Allowance for loan and lease
losses to NPL's 60.57% 609.69% 301.27%
Allowance for loan and lease
losses to NPA's 44.42% 403.41% 229.86%
NORTH VALLEY BANCORP
CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited)
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
Selected Financial Ratios 2008 2007 2008 2007
--------- --------- --------- ---------
Return on average total
assets (0.65%) 0.77% (0.26%) 0.89%
Return on average
shareholders' equity (7.35%) 8.81% (2.98%) 10.23%
Net interest margin (tax
equivalent basis) 4.34% 5.11% 4.34% 5.22%
Efficiency ratio 76.34% 80.92% 77.02% 78.41%
Selected Average Balances
Loans $ 747,414 $ 660,362 $ 745,209 $ 657,054
Taxable investments 83,128 103,379 86,601 108,315
Tax-exempt investments 20,189 20,497 20,364 21,139
Federal funds sold and other 230 18,630 411 14,485
--------- --------- --------- ---------
Total earning assets $ 850,961 $ 802,868 $ 852,585 $ 800,993
--------- --------- --------- ---------
Total assets $ 935,566 $ 893,159 $ 938,442 $ 891,934
--------- --------- --------- ---------
Demand deposits - interest
bearing $ 157,526 $ 159,683 $ 156,238 $ 160,138
Savings and money market 184,164 196,941 182,916 198,228
Time deposits 247,988 216,025 248,095 209,447
Other borrowings 92,435 58,512 98,679 59,628
--------- --------- --------- ---------
Total interest bearing
liabilities $ 682,113 $ 631,161 $ 685,928 $ 627,441
--------- --------- --------- ---------
Demand deposits - noninterest
bearing $ 159,403 $ 173,562 $ 157,474 $ 175,748
--------- --------- --------- ---------
Shareholders' equity $ 82,361 $ 78,306 $ 82,748 $ 77,327
--------- --------- --------- ---------
NORTH VALLEY BANCORP
CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited)
(Dollars in thousands, except per share data)
For the Quarter Ended
------------------------------------------
June March December September
2008 2008 2007 2007
--------- ---------- ---------- ----------
Interest income $ 13,363 $ 14,150 $ 15,345 $ 15,083
Interest expense 4,294 5,022 5,133 4,838
--------- ---------- ---------- ----------
Net interest income 9,069 9,128 10,212 10,245
Provision for loan and lease
losses 5,200 2,400 1,200 850
Noninterest income 3,477 3,491 1,505 3,350
Noninterest expense 9,577 9,805 9,943 9,481
--------- ---------- ---------- ----------
(Loss) Income before provision
for income taxes (2,231) 414 574 3,264
(Benefit) Provision for income
taxes (722) 134 184 1,044
--------- ---------- ---------- ----------
Net (loss) income $ (1,509) $ 280 $ 390 $ 2,220
========= ========== ========== ==========
(Loss) Earnings per share:
Basic $ (0.20) $ 0.04 $ 0.05 $ 0.30
========= ========== ========== ==========
Diluted $ (0.20) $ 0.04 $ 0.05 $ 0.29
========= ========== ========== ==========
For further information contact:
Michael J. Cushman
President & Chief Executive Officer
(530) 226-2900
Fax: (530) 221-4877
Kevin R. Watson
Executive Vice President & Chief Financial Officer
(530) 226-2900
Fax: (530) 221-4877
