REDDING, CA -- (Marketwire) -- 04/28/09 -- North Valley Bancorp (NASDAQ: NOVB), a bank holding company with $904 million in assets, today reported results for the quarter ended March 31, 2009. North Valley Bancorp ("the Company") is the parent company for North Valley Bank ("NVB").

The Company reported a net loss for the quarter ended March 31, 2009 of $3,107,000, or $0.41 per diluted share compared to net income for the quarter ended March 31, 2008 of $280,000, or $0.04 per diluted share. For the first quarter of 2009, the Company realized an annualized loss on average shareholders' equity of 16.26% and an annualized loss on average assets of 1.43%, as compared to an annualized return on average shareholders' equity of 1.35% and an annualized return on average assets 0.12% for the first quarter of 2008.

The Company recorded a provision for loan and lease losses in the amount of $7,000,000 for the quarter ended March 31, 2009 compared to a provision for loan and lease losses of $2,400,000 for the quarter ended March 31, 2008. The increase in provision for loan and lease losses was a result of revisions made to the qualitative and quantitative factors used in the calculation of its allowance for loan and lease losses at March 31, 2009 considering the depth and breadth of the continuing recession and the declines in real estate values. These changes are consistent with industry best practices being used to account for the uncertainties associated with current economic conditions and the continued depressed valuation of real estate. The allowance for loan and lease losses at March 31, 2009 was $15,887,000, or 2.40% of total loans, compared to $11,327,000, or 1.63% of total loans, at December 31, 2008 and $13,022,000, or 1.73% of total loans, at March 31, 2008.

"The quarter was challenging, however, we achieved successes in several important areas as planned, which will position the Company for the future. Deposits grew by $32 million as we continued to attract new customers and we were successful in reducing concentrations in certain loan categories, specifically commercial loans of $16 million and construction loans of $15 million during the first quarter of 2009. Our capital ratios continue to be a strength as they exceed the "well capitalized" criteria under regulatory standards," stated Mike Cushman, President and CEO.

At March 31, 2009, total assets were $903,849,000, down $41,632,000, or 4.4%, from $945,481,000 at March 31, 2008. The loan portfolio totaled $660,653,000 at March 31, 2009, a decrease of $89,935,000, or 12.0%, compared to March 31, 2008. The loan to deposit ratio at March 31, 2009 was 84.0% as compared to 98.4% at March 31, 2008, and 91.9% at December 31, 2008. Total deposits grew $24,083,000, or 3.2%, to $786,832,000 at March 31, 2009 compared to $762,749,000 at March 31, 2008. When compared to December 31, 2008, total assets increased $24,298,000 from $879,551,000, driven by an increase in deposits of $31,888,000 from $754,944,000, while loans decreased by $32,769,000 from $693,422,000. Available-for-sale investment securities and Federal funds sold increased $21,169,000 and $49,915,000, respectively, from December 31, 2008 to March 31, 2009 as a result of the increase in deposits and decrease in loans. At March 31, 2009, other real estate owned and other borrowings also decreased from the December 31, 2008 balances.

At March 31, 2009, the Company's Total Risk-based Capital was $100,793,000, and its risk-based capital ratios were: Tier 1 risk-based Capital ratio - 10.85%; Total Risk-based Capital ratio - 12.84%; and Tier 1 Leverage ratio - 9.88%. At March 31, 2009, the Bank's Total Risk-based Capital was $99,194,000, and its risk-based capital ratios were: Tier 1 risk-based Capital ratio - 11.39%; Total Risk-based Capital ratio - 12.65%; and Tier 1 Leverage ratio - 10.38%. "Our capital ratios continue to exceed all regulatory requirements at both the Bank and Company, as we continue to aggressively provide for our allowance for credit losses," commented Kevin R. Watson, Chief Financial Officer.

Credit Quality

Nonperforming loans (defined as nonaccrual loans and loans 90 days or more past due and still accruing interest) totaled $19,926,000 at March 31, 2009, a decrease of $5,824,000 from the March 31, 2008 balance of $25,750,000, and an increase of $990,000 from the December 31, 2008 balance of $18,936,000. Nonperforming loans as a percentage of total loans were 3.02% at March 31, 2009, compared to 3.43% at March 31, 2008, and 2.73% at December 31, 2008.

Nonperforming assets (nonperforming loans and OREO) totaled $25,869,000 at March 31, 2009, a decrease of $783,000 from the March 31, 2008 balance of $26,652,000, and a $3,475,000 decrease from the December 31, 2008 balance of $29,344,000. Nonperforming assets as a percentage of total assets were 2.86% at March 31, 2009 compared to 2.82% at March 31, 2008 and 3.34% at December 31, 2008.

The overall level of nonperforming loans increased $990,000 to $19,926,000 at March 31, 2009 from $18,936,000 at December 31, 2008. During the first quarter of 2009 the Company added sixteen loans totaling $7,604,000 to the nonperforming loans. These additions were offset by collections received on certain loans, charge-offs recorded, and one transfer from loans to OREO. The overall level of nonperforming assets decreased $3,475,000 to $25,869,000 at March 31, 2009 from $29,344,000 at December 31, 2008. This decrease was a result of a reduction in OREO of $3,768,000 from the sale of three properties during the first quarter, which resulted in $890,000 being recognized as a loss on sale/writedown of OREO. This reduction in nonperforming assets was partially offset by the addition of one property to OREO for $193,000.

Gross loan and lease charge offs for the first quarter of 2009 were $2,635,000 and recoveries totaled $195,000 resulting in net charge offs of $2,440,000. Gross loan and lease charge offs for the first quarter of 2008 were $185,000 and recoveries totaled $52,000 resulting in net charge offs of $133,000.

The total dollar amount of reductions in nonperforming loans during the first quarter of 2009 of $6,614,000 was due primarily to the paydowns, charge-offs, and one transfer to OREO. This decrease was offset by the addition of sixteen loans in the amount of $7,604,000 as nonaccrual loans during the first quarter of 2009. The addition was centered in three loans totaling $4,385,000. The largest loan of this group is a $2,007,000 commercial real estate loan located in Shasta County. No specific reserve is currently required on this loan. The second loan in this group is a $1,465,000 residential development loan consisting of two single-family residences that are listed for sale located in Napa County. No specific reserve is currently required on this loan. The third loan in this group is a $913,000 residential land loan located in Nevada County. No specific reserve is currently required on this loan. For the other thirteen loans placed on nonaccrual in the aggregate amount of $3,219,000, specific reserves of $164,000 were established for these loans.

2008 - 2009 Credit Activity

As discussed in the Company's first quarter earnings release and Form 10-Q for the period ended March 31, 2008, there were four nonperforming real estate projects with loans totaling $24,047,000 which were the primary contributors to the increase in nonperforming loans at March 31, 2008. At December 31, 2008, only two of these projects remained: one of the loans which was on nonaccrual was a residential development project in Placer County with a balance of $2,463,000 and the other project was a residential acquisition and development loan which was taken into OREO during the second quarter of 2008 and had a balance of $4,059,000 at December 31, 2008. Collections were received on the residential development project in Placer County during the first quarter of 2009 resulting in the full payoff of the remaining balance of the loan with no additional losses to the Company. Portions of the OREO property were sold during the first quarter of 2009 for $1,001,000 resulting in the Company recording a pre-tax loss on the sale of this portion of the OREO of $183,000. The remaining property in OREO has a balance of $2,875,000 at March 31, 2009.

As discussed in the Company's second quarter earnings release and Form 10-Q for the period ended June 30, 2008, there were two construction loans identified as impaired, totaling $10,201,000, added to the nonperforming loans during the second quarter of 2008. As of March 31, 2009 the larger of the two loans, a mixed-use construction loan located in Sonoma County with a remaining balance of $3,489,000 continues on nonaccrual. During the first quarter of 2009, $357,000 in payments from the borrower were received and applied to the principal balance of the loan reducing it from the December 31, 2008 balance of $3,846,000. This loan has a specific reserve of $250,000. The other loan was a residential development project located in Placer County that was taken into OREO through foreclosure during the fourth quarter of 2008 at its carrying value of $2,259,000 with no further charge to the allowance. This property was sold for $1,831,000 during the first quarter of 2009 and the Company recorded a pre-tax loss on the sale of OREO of $428,000.

As discussed in the Company's third quarter earnings release and Form 10-Q for the period ended September 30, 2008, 23 loans were placed on nonaccrual status totaling $7,592,000 (which are primarily secured by real-estate) during the third quarter of 2008. The largest of this group was a $1,125,000 residential lot development loan located in Shasta County. The principal balance of the loan was reduced by $74,000 to $1,051,000 during the fourth quarter of 2008 from collections from the borrower.