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North Valley Bancorp Reports Unaudited Results for the Fourth Quarter and Year Ended December 31, 2012

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REDDING, CA -- (Marketwire) -- 02/06/13 -- North Valley Bancorp (NASDAQ: NOVB), a bank holding company with $902 million in assets, today reported results for the fourth quarter and year ended December 31, 2012. North Valley Bancorp (the "Company") is the parent company for North Valley Bank (the "Bank").

The Company reported net income of $545,000, or $0.08 per diluted share, for the quarter ended December 31, 2012 compared to net income of $809,000, or $0.12 per diluted share, for the quarter ended December 31, 2011. The Company reported net income for the year ended December 31, 2012 of $6,290,000, or $0.92 per diluted share, compared to net income of $3,047,000, or $0.45 per diluted share for the year ended December 31, 2011.

Michael J. Cushman, President and Chief Executive Officer, stated, "2012 was a year of many successes and positions us well for 2013. We had positive loan growth, improved the mix of our deposits, reduced nonperforming assets, and had a good year of profitability, among other achievements. Our team continues to work hard in a challenging environment, and the results are positive. I want to thank them, our customers, and our shareholders for their continued support of our Company."

The Company did not record a provision for loan losses in the fourth quarter ended December 31, 2012 or the fourth quarter ended December 31, 2011. The Company recorded provisions for loan losses of $2,100,000 for the year ended December 31, 2012 compared to provisions for loan losses of $2,650,000 for the year ended December 31, 2011. The allowance for loan losses at December 31, 2012 was $10,458,000 or 2.12% of total loans, compared to $12,656,000, or 2.77% of total loans at December 31, 2011.

At December 31, 2012, total assets were $902,343,000, a decrease of $2,623,000, or 0.3% from $904,966,000 at December 31, 2011. Total loans were $492,211,000 at December 31, 2012, an increase of $35,996,000, or 7.9%, compared to $456,215,000 at December 31, 2011. The loan to deposit ratio at December 31, 2012 was 64.0% as compared to 59.5% at December 31, 2011. Total deposits increased $2,341,000, or 0.3%, to $768,580,000 at December 31, 2012 compared to $766,239,000 at December 31, 2011. Available-for-sale investment securities decreased $26,390,000 to $285,815,000 at December 31, 2012 from $312,205,000 at December 31, 2011, as proceeds and paydowns from the investment portfolio were used to fund loan growth.

At December 31, 2012, the Company's Total Risk-based Capital was $113,028,000, and its capital ratios were: Total Risk-based Capital ratio - 18.3%; Tier 1 risk-based Capital ratio - 17.0%; and Tier 1 Leverage ratio - 11.8%. At December 31, 2012, the Bank's Total Risk-based Capital was $112,938,000, and its capital ratios were: Total Risk-based Capital ratio - 18.3%; Tier 1 risk-based Capital ratio - 17.0%; and Tier 1 Leverage ratio - 11.8%.

Credit Quality

Nonperforming loans (defined as nonaccrual loans and loans 90 days or more past due and still accruing interest) decreased $12,576,000, or 68.3%, to $5,835,000 at December 31, 2012 from $18,411,000 at December 31, 2011. Nonperforming loans as a percentage of total loans were 1.19% at December 31, 2012, compared to 4.04% at December 31, 2011.

The overall level of nonperforming loans decreased $5,744,000 to $5,835,000 at December 31, 2012 from $11,579,000 at September 30, 2012. During the fourth quarter of 2012, the Company identified four loans totaling $777,000 as additional nonperforming loans. These additions were offset by reductions in nonperforming loans totaling $6,521,000 due primarily to the transfer to OREO of five properties totaling $4,755,000, and secondarily due to collections received on certain loans and charge-offs. Of the four loans totaling $777,000 identified as nonaccrual loans and added to nonperforming loans, one loan represented $623,000 of the total. This loan is for a commercial real estate building located in Shasta County. This loan had a charge-off of $78,000 in the fourth quarter of 2012 to write the loan down to its net realizable value. The remaining three loans in this group of nonperforming loans totaled $154,000 and no specific reserve has been established for them.

Gross loan and lease charge-offs for the fourth quarter of 2012 were $1,051,000 and recoveries totaled $82,000 resulting in net charge-offs of $969,000 compared to gross loan and lease charge-offs for the fourth quarter of 2011 of $1,151,000 and recoveries of $136,000 resulting in net charge-offs of $1,015,000. Gross charge-offs for the year ended December 31, 2012 were $4,702,000 and recoveries for the same year totaled $404,000 resulting in net charge-offs of $4,298,000, compared to gross charge-offs for the year ended December 31, 2011 of $5,525,000 and recoveries of $538,000 resulting in net charge-offs of $4,987,000.

Nonperforming assets (nonperforming loans and other real estate owned ("OREO")) totaled $28,258,000 at December 31, 2012, a decrease of $10,259,000, or 26.6%, from the December 31, 2011 balance of $38,517,000. Nonperforming assets as a percentage of total assets were 3.13% at December 31, 2012 compared to 4.26% at December 31, 2011.

The Company's OREO properties increased $734,000 to $22,423,000 at December 31, 2012 from $21,689,000 at September 30, 2012. The increase in OREO was due to the transfer of five properties totaling $4,755,000. The increase in OREO was partially offset by the sale of four properties totaling $2,475,000 with losses of $218,000 associated with those sales and the write-down of certain other OREO properties totaling $1,328,000 during the quarter ended December 31, 2012.

Operating Results

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 $224,000, or 3.0%, for the three months ended December 31, 2012 compared to the same period in 2011. Interest income decreased by $603,000, or 6.8%, for the three months ended December 31, 2012, primarily due to the decrease in interest income on loans due to the decrease in yield on average loan balances. The Company had foregone interest income of $80,000 related to loans currently on nonaccrual status for the three months ended December 31, 2012 compared to $173,000 for the same period in 2011. Average loans increased $19,471,000 in the fourth quarter of 2012 compared to the fourth quarter of 2011 while the yield on the loan portfolio decreased 47 basis points to 5.44% for the fourth quarter of 2012. Offsetting this decrease in interest income for the quarter was a decrease in interest expense of $827,000, or 62.1%, primarily due to a decrease in the rates paid on deposits and secondarily a decrease in interest expense on subordinated debentures. Overall, average earning assets decreased $32,677,000 in the fourth quarter of 2012 compared to the fourth quarter of 2011. Average yields on earning assets decreased 33 basis points from the quarter ended December 31, 2011, to 3.99% for the quarter ended December 31, 2012 while the average rate paid on interest-bearing liabilities decreased by 50 basis points to 0.33%. The Company's net interest margin (tax equivalent basis) for the quarter ended December 31, 2012 was 3.74%, an increase of 6 basis points from 3.68% for the fourth quarter of 2011 and a decrease of 4 basis points from the net interest margin (tax equivalent basis) of 3.78% for the linked quarter ended September 30, 2012. Net interest income decreased $1,153,000, or 3.7%, for the year ended December 31, 2012 compared to the year ended December 31, 2011. Total interest income decreased by $3,414,000, or 9.2%, primarily due to a decrease in income on loans as a result of both the decrease in average balance of loans and a decrease in yield on loans. Interest expense decreased $2,261,000, or 39.1%, due to a decrease in rates paid on deposits and due to a decrease in interest expense on subordinated debentures for the year ended December 31, 2012 compared to the year ended December 31, 2011. The net interest margin for the year ended December 31, 2012 decreased 17 basis points to 3.75% from the net interest margin of 3.92% for the year ended December 31, 2011.

Noninterest income for the quarter ended December 31, 2012 increased $552,000, or 14.9%, to $4,269,000 compared to $3,717,000 for the same period in 2011. Service charges on deposits decreased $33,000 to $1,059,000 for the fourth quarter of 2012 compared to $1,092,000 for the same period in 2011, and other fees and charges decreased by $85,000 to $1,095,000 for the fourth quarter of 2012 compared to $1,180,000 for the same period in 2011. The Company recorded gains on the sale of mortgage loans of $966,000, and gains on the sale of SBA loans of $330,000 for the quarter ended December 31, 2012 compared to gains of $215,000 and zero, respectively, for the same period in 2011. The Company recognized gains on the sale of investment securities of $221,000 for the fourth quarter of 2012 compared to $828,000 for the same period in 2011. Noninterest income for the year ended December 31, 2012 increased by $2,054,000, or 14.3%, to $16,419,000 from $14,365,000 for the year ended December 31, 2011. The primary reason for the increase in noninterest income in 2012 compared to 2011 was due to an increase in gains on the sale of mortgage loans of $2,189,000. Service charges on deposit accounts decreased $302,000 to $4,333,000 for the year ended December 31, 2012 compared to $4,635,000 for the year ended December 31, 2011, while other fees and charges increased $52,000 to $4,715,000 for the year ended December 31, 2012 compared to $4,663,000 for the year ended December 31, 2011. The Company recorded gains on the sale of mortgage loans of $2,682,000, and gains on the sale of SBA loans of $472,000 for the year ended December 31, 2012 compared to $493,000 and $680,000, respectively, for the year ended December 31, 2011. The Company recognized gains on the sale of investment securities of $1,877,000 for the year ended December 31, 2012 compared to $1,677,000 for the year ended December 31, 2011.

Noninterest expenses increased $424,000 to $11,336,000 for the fourth quarter of 2012 from $10,912,000 for the fourth quarter of 2011. Salaries and employee benefits increased $401,000 in the fourth quarter of 2012 from the fourth quarter of 2011, while the Company experienced decreases in occupancy expense and furniture and equipment expense of $40,000, and decreases in FDIC and state assessments of $94,000 in the fourth quarter of 2012 compared to the fourth quarter of 2011. The Company's other real estate owned expense decreased $535,000 to $1,763,000 for the fourth quarter of 2012 compared to $2,298,000 for the fourth quarter of 2011. Other noninterest expense increased $692,000 to $3,323,000 in the fourth quarter of 2012 compared to $2,631,000 for the fourth quarter of 2011. Noninterest expenses for the year ended December 31, 2012 increased $264,000 to $39,979,000 compared to $39,715,000 for the year ended December 31, 2011. The reason for the increase was due primarily to an increase in salaries and employee benefits of $1,620,000 to $20,277,000 for the year ended December 31, 2012 compared to $18,657,000 for the year ended December 31, 2011. The increase was partially offset due to decreases in occupancy expense and furniture and equipment expense of $363,000, decreases in other real estate owned expense of $1,248,000 and FDIC and state assessments of $433,000 for the year ended December 31, 2012 compared to the year ended December 31, 2011.

The Company recorded a provision for income taxes for the quarter ended December 31, 2012 of $160,000, compared to a benefit for income taxes of $456,000, for the quarter ended December 31, 2011. The Company recorded a benefit for income taxes for the year ended December 31, 2012 of $1,744,000, compared to a provision for income taxes of $312,000 for the year ended December 31, 2011.

On January 30, 2013, the Company filed a Current Report on Form 8-K, reporting that its interim financial statements as of and for the three and nine months ended September 30, 2012 would be restated because there was an error in the calculation of the tax benefits recorded in that quarter. In its previously filed third quarter 2012 Form 10-Q, the Company reported tax benefits of $3,893,000 and $3,251,000 for the three and nine months ended September 30, 2012, respectively. The correct amounts were $2,546,000 and $1,904,000, respectively. The Company intends to amend and correct its third quarter Form 10-Q as soon as practicable. The difference in recorded tax benefits is expected to reduce the Company's net income to $4,004,000 and $5,745,000 for the three and nine months ended September 30, 2012, respectively. For additional information, reference should be made to the Company's Current Report on Form 8-K as filed on January 30, 2013.

North Valley Bancorp is a bank holding company headquartered in Redding, California. Its subsidiary, North Valley Bank (the "Bank"), operates twenty-two commercial banking offices in Shasta, Humboldt, Del Norte, Mendocino, Yolo, Sonoma, Placer and Trinity Counties in Northern California, including two in-store supermarket branches and six Business Banking Centers. North Valley Bancorp, through the Bank, 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, the Bank engages in a full complement of lending activities including consumer, commercial and real estate loans. Additionally, the Bank 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; and (f) 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 December 31,Statement of Operations Data 2012 2011 $ Change % Change ---------- ---------- --------- --------Interest income Loans (including fees) $ 6,605 $ 6,885 $ (280) (4.07%) Investment securities 1,660 1,958 (298) (15.22%) Federal funds sold and other 11 36 (25) (69.44%) ---------- ---------- --------- -------- Total interest income 8,276 8,879 (603) (6.79%) ---------- ---------- --------- --------Interest expense Interest on deposits 365 859 (494) (57.51%) Subordinated debentures 139 472 (333) (70.55%) Other borrowings - - - - ---------- ---------- --------- -------- Total interest expense 504 1,331 (827) (62.13%) ---------- ---------- --------- --------Net interest income 7,772 7,548 224 2.97%Provision for loan losses - - - - ---------- ---------- --------- --------Net interest income after provision for loan losses 7,772 7,548 224 2.97% ---------- ---------- --------- --------Noninterest income Service charges on deposit accounts 1,059 1,092 (33) (3.02%) Other fees and charges 1,095 1,180 (85) (7.20%) Gain on sales of mortgage loans 966 215 751 349.30% Gain on sales of SBA loans 330 - 330 - Gain on sales of securities, net 221 828 (607) (73.31%) Other 598 402 196 48.76% ---------- ---------- --------- -------- Total noninterest income 4,269 3,717 552 14.85% ---------- ---------- --------- --------Noninterest expenses Salaries and employee benefits 5,164 4,763 401 8.42% Occupancy 636 662 (26) (3.93%) Furniture and equipment 229 243 (14) (5.76%) Other real estate owned expense 1,763 2,298 (535) (23.28%) FDIC and state assessments 221 315 (94) (29.84%) Other 3,323 2,631 692 26.30% ---------- ---------- --------- -------- Total noninterest expenses 11,336 10,912 424 3.89% ---------- ---------- --------- -------- Income before provision (benefit) for income taxes 705 353 352 99.72%Provision (benefit) for income taxes 160 (456) 616 (135.09%) ---------- ---------- --------- -------- Net income $ 545 $ 809 $ (264) (32.63%) ========== ========== ========= ========Common Share DataEarnings per share Basic $ 0.08 $ 0.12 $ (0.04) (33.33%) Diluted $ 0.08 $ 0.12 $ (0.04) (33.33%)Weighted average shares outstanding 6,835,192 6,833,752Weighted average shares outstanding - diluted 6,836,192 6,833,752Book value per share $ 14.07 $ 13.09Tangible book value $ 14.03 $ 13.03Shares outstanding 6,835,192 6,833,752 NORTH VALLEY BANCORP CONDENSED CONSOLIDATED FINANCIAL DATA (Unaudited) (Dollars in thousands, except share and per share data) Twelve Months Ended December 31,Statement of Operations Data 2012 2011 $ Change % Change ---------- ---------- --------- --------Interest income Loans (including fees) $ 26,062 $ 28,863 $ (2,801) (9.70%) Investment securities 7,603 8,209 (606) (7.38%) Federal funds sold and other 66 73 (7) (9.59%) ---------- ---------- --------- -------- Total interest income 33,731 37,145 (3,414) (9.19%) ---------- ---------- --------- --------Interest expense Interest on deposits 2,165 3,893 (1,728) (44.39%) Subordinated debentures 1,352 1,892 (540) (28.54%) Other borrowings 8 1 7 700.00% ---------- ---------- --------- -------- Total interest expense 3,525 5,786 (2,261) (39.08%) ---------- ---------- --------- --------Net interest income 30,206 31,359 (1,153) (3.68%)Provision for loan losses 2,100 2,650 (550) (20.75%) ---------- ---------- --------- --------Net interest income after provision for loan losses 28,106 28,709 (603) (2.10%) ---------- ---------- --------- --------Noninterest income Service charges on deposit accounts 4,333 4,635 (302) (6.52%) Other fees and charges 4,715 4,663 52 1.12% Gain on sales of mortgage loans 2,682 493 2,189 444.02% Gain on sales of SBA loans 472 680 (208) (30.59%) Gain on sales of securities, net 1,877 1,677 200 11.93% Other 2,340 2,217 123 5.55% ---------- ---------- --------- -------- Total noninterest income 16,419 14,365 2,054 14.30% ---------- ---------- --------- --------Noninterest expenses Salaries and employee benefits 20,277 18,657 1,620 8.68% Occupancy 2,547 2,786 (239) (8.58%) Furniture and equipment 938 1,062 (124) (11.68%) Other real estate owned expense 3,556 4,804 (1,248) (25.98%) FDIC and state assessments 922 1,355 (433) (31.96%) Other 11,739 11,051 688 6.23% ---------- ---------- --------- -------- Total noninterest expenses 39,979 39,715 264 0.66% ---------- ---------- --------- -------- Income before (benefit) provision for income taxes 4,546 3,359 1,187 (35.34%)(Benefit) provision for income taxes (1,744) 312 (2,056) 658.97% ---------- ---------- --------- -------- Net income 6,290 3,047 3,243 (106.43%) ---------- ---------- --------- --------Common Share DataEarnings per share Basic $ 0.92 $ 0.45 $ 0.47 (104.44%) Diluted $ 0.92 $ 0.45 $ 0.47 (104.44%)Weighted average shares outstanding 6,835,371 6,833,031Weighted average shares outstanding - diluted 6,836,371 6,833,031Book value per share $ 14.07 $ 13.09Tangible book value $ 14.03 $ 13.03Shares outstanding 6,835,192 6,833,752 NORTH VALLEY BANCORP CONDENSED CONSOLIDATED FINANCIAL DATA (Unaudited) (Dollars in thousands) December 31, December 31,Balance Sheet Data 2012 2011 ------------- -------------Assets Cash and due from banks $ 22,654 $ 18,758 Federal funds sold 15,865 40,210 Time deposits at other financial institutions 2,219 1,959 Available-for-sale securities - at fair value 285,815 312,205 Held-to-maturity securities - at amortized cost 6 6 Loans net of deferred loan fees 492,211 456,215 Allowance for loan losses (10,458) (12,656) ------------- ------------- Net loans 481,753 443,559 Premises and equipment, net 9,181 8,661 Other real estate owned 22,423 20,106 Core deposit intangibles, net 255 401 Accrued interest receivable and other assets 62,172 59,101 ------------- -------------Total assets $ 902,343 $ 904,966 ============= =============Liabilities and Shareholders' Equity Deposits: Demand, noninterest bearing $ 177,855 $ 167,506 Demand, interest bearing 185,315 170,124 Savings and money market 233,034 216,299 Time 172,376 212,310 ------------- ------------- Total deposits 768,580 766,239 Accrued interest payable and other liabilities 15,951 17,301 Subordinated debentures 21,651 31,961 ------------- -------------Total liabilities 806,182 815,501 Shareholders' equity 96,161 89,465 ------------- -------------Total liabilities and shareholders' equity $ 902,343 $ 904,966 ============= =============Asset Quality Nonaccrual loans $ 5,835 $ 18,359 Loans past due 90 days and accruing interest - 52 Other real estate owned 22,423 20,106 ------------- ------------- Total nonperforming assets $ 28,258 $ 38,517 ============= ============= Classified assets $ 45,297 $ 59,742 Bank Tier 1 Capital + ALLL $ 115,580 $ 126,323 Classified assets ratio 39.19% 47.29% Allowance for loan losses to total loans 2.12% 2.77% Allowance for loan losses to NPL's 179.23% 68.74% Allowance for loan losses to NPA's 37.01% 32.86% NORTH VALLEY BANCORP CONDENSED CONSOLIDATED FINANCIAL DATA (Unaudited) (Dollars in thousands) Three Months Ended Twelve Months Ended December 31, December 31,Selected Financial Ratios 2012 2011 2012 2011 --------- --------- --------- --------- Return on average total assets 0.24% 0.35% 0.69% 0.34% Return on average shareholders' equity 2.19% 3.66% 6.70% 3.54% Net interest margin (tax equivalent basis) 3.74% 3.68% 3.75% 3.92% Efficiency ratio 94.15% 96.87% 85.75% 86.86%Selected Average Balances Loans $ 481,998 $ 462,527 $ 464,647 $ 482,845 Taxable investments 279,807 286,708 297,451 280,708 Tax-exempt investments 10,749 13,974 11,903 14,205 Federal funds sold and other 17,893 59,915 27,861 31,103 --------- --------- --------- --------- Total earning assets $ 790,447 $ 823,124 $ 801,862 $ 808,861 --------- --------- --------- --------- Total assets $ 904,083 $ 917,642 $ 910,295 $ 901,271 --------- --------- --------- --------- Demand deposits - interest bearing $ 183,948 $ 168,997 $ 180,038 $ 164,616 Savings and money market 235,146 219,283 226,070 220,501 Time deposits 174,096 215,689 193,476 216,408 Other borrowings 21,651 31,961 30,205 32,012 --------- --------- --------- --------- Total interest bearing liabilities $ 614,841 $ 635,930 $ 629,789 $ 633,537 --------- --------- --------- --------- Demand deposits - noninterest bearing $ 173,296 $ 163,157 $ 164,437 $ 159,242 --------- --------- --------- --------- Shareholders' equity $ 98,512 $ 87,583 $ 93,906 $ 86,106 --------- --------- --------- --------- NORTH VALLEY BANCORP CONDENSED CONSOLIDATED FINANCIAL DATA (Unaudited) (Dollars in thousands, except per share data) For the Quarter Ended ---------------------------------------- December September June March 2012 2012 2012 2012 --------- --------- --------- ---------Interest income $ 8,276 $ 8,426 $ 8,420 $ 8,609Interest expense 504 713 1,091 1,217 --------- --------- --------- --------- Net interest income 7,772 7,713 7,329 7,392Provision for loan losses - 700 1,000 400Noninterest income 4,269 4,204 4,687 3,259Noninterest expense 11,336 9,759 9,228 9,656 --------- --------- --------- ---------Income before provision (benefit) for income taxes 705 1,458 1,788 595Provision (benefit) for income taxes 160 (2,546) 527 115 --------- --------- --------- --------- Net income $ 545 $ 4,004 $ 1,261 $ 480 ========= ========= ========= =========Earnings per common share: Basic $ 0.08 $ 0.59 $ 0.18 $ 0.07 ========= ========= ========= ========= Diluted $ 0.08 $ 0.59 $ 0.18 $ 0.07 ========= ========= ========= =========





For further information contact:
Michael J. Cushman
President & Chief Executive Officer
(530) 226-2900
Fax: (530) 221-4877

or

Kevin R. Watson
Executive Vice President & Chief Financial Officer
(530) 226-2900
Fax: (530) 221-4877



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