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Tue, August 4, 2009 North Valley Bancorp: North Valley Bancorp Reports Results for the Quarter and Six Months Ended June 30, 2009
REDDING, CA--(Marketwire - August 4, 2009) - North Valley Bancorp (
The Company reported a net loss for the second quarter ended June 30, 2009 of $4,089,000, or $0.55 per diluted share, compared to a net loss of $1,509,000, or $0.20 per diluted share, for the same period in 2008. The Company reported a net loss for the six months ended June 30, 2009 of $7,196,000, or $0.96 per diluted share, compared to a net loss of $1,229,000, or $0.17 per diluted share, for the same period in 2008.
The Company recorded provisions for loan and lease losses of $9,000,000 and $16,000,000 for the second quarter and six months ended June 30, 2009, respectively, compared to provisions for loan and lease losses of $5,200,000 and $7,600,000 for the second quarter and six months ended June 30, 2008. The allowance for loan and lease losses at June 30, 2009 was $22,119,000, or 3.40% of total loans, compared to $11,327,000, or 1.63% of total loans at December 31, 2008 and $13,677,000, or 1.87% of total loans at June 30, 2008.
"Although North Valley had a loss for the quarter, there were several accomplishments worth noting. The Bank continues to maintain strong capital and liquidity levels. The Bank grew deposits by $13 million during the quarter and has grown deposits by $45 million since year-end. We have implemented several cost-cutting initiatives to reduce noninterest expense and our Credit Department continues to work swiftly in resolving problem credits," stated Michael J. Cushman, President and CEO.
At June 30, 2009, total assets were $913,366,000, down $20,995,000, or 2.3%, from $934,361,000 at June 30, 2008. The loan portfolio totaled $650,652,000 at June 30, 2009, a decrease of $79,631,000, or 10.9%, compared to June 30, 2008. The loan to deposit ratio at June 30, 2009 was 81.4% as compared to 98.1% at June 30, 2008, and 91.9% at December 31, 2008. Total deposits grew $55,512,000, or 7.5%, to $799,743,000 at June 30, 2009 compared to $744,231,000 at June 30, 2008. When compared to December 31, 2008, total assets increased $33,815,000 from $879,551,000, driven by an increase in deposits of $44,799,000 from $754,944,000, while loans decreased by $42,770,000 from $693,422,000. Available-for-sale investment securities and Federal funds sold increased $61,209,000 and $29,395,000, respectively, from December 31, 2008 to June 30, 2009 as a result of the increase in deposits and decrease in loans.
At June 30, 2009, the Company's Total Risk-based Capital was $96,670,000, and its risk-based capital ratios were: Total Risk-based Capital ratio - 12.59%; Tier 1 risk-based Capital ratio - 10.41%; and Tier 1 Leverage ratio - 8.98%. At June 30, 2009, NVB's Total Risk-based Capital was $93,686,000, and its risk-based capital ratios were: Total Risk-based Capital ratio - 12.24%; Tier 1 risk-based Capital ratio - 10.97%; and Tier 1 Leverage ratio - 9.46%. "Our capital ratios exceed all regulatory requirements at both the Bank and Company, despite operating losses resulting from actively managing our loan portfolio in these challenging times and appropriately providing for our allowance for credit losses," remarked 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 $44,304,000 at June 30, 2009, an increase of $21,724,000 from the June 30, 2008 balance of $22,580,000, and an increase of $25,368,000 from the December 31, 2008 balance of $18,936,000. Nonperforming loans as a percentage of total loans were 6.81% at June 30, 2009, compared to 3.09% at June 30, 2008, and 2.73% at December 31, 2008.
Nonperforming assets (nonperforming loans and OREO) totaled $50,433,000 at June 30, 2009, an increase of $19,645,000 from the June 30, 2008 balance of $30,788,000, and an increase of $21,089,000 from the December 31, 2008 balance of $29,344,000. Nonperforming assets as a percentage of total assets were 5.52% at June 30, 2009 compared to 3.30% at June 30, 2008 and 3.34% at December 31, 2008.
The overall level of nonperforming loans increased $24,378,000 to $44,304,000 at June 30, 2009 from $19,926,000 at March 31, 2009. During the second quarter of 2009 the Company added nineteen loans totaling $29,781,000 to nonperforming loans. These additions were offset by reductions in nonperforming loans totaling $5,403,000, due primarily to transfers to OREO of four properties totaling $3,362,000, and secondarily to collections received on certain loans and charge-offs recorded. The Company's OREO properties increased $186,000 to $6,129,000 at June 30, 2009 from $5,943,000 at March 31, 2009. The increase was due to the addition of four properties totaling $3,362,000 during the second quarter of 2009. Three of the properties are from one relationship consisting of residential lot development properties and a residential development property with a single-family residence. The properties are all located in Solano County and total $3,094,000. The fourth property moved into OREO is commercial land located in Sacramento County for $268,000. The additions to OREO were partially offset by the disposition of three OREO properties.
Gross loan and lease charge-offs for the second quarter of 2009 were $2,849,000 and recoveries totaled $81,000 resulting in net charge-offs of $2,768,000 compared to gross loan and lease charge-offs for the second quarter of 2008 of $4,591,000 and recoveries of $46,000 resulting in net charge-offs of $4,545,000. Gross charge-offs for the six months ended June 30, 2009 were $5,484,000 and recoveries totaled $276,000 resulting in net charge-offs of $5,208,000, compared to gross charge-offs for the six months ended June 30, 2008 of $4,776,000 and recoveries of $98,000 resulting in net charge-offs of $4,678,000.
The increase in nonperforming loans to $44,304,000 at June 30, 2009 was due in large part by the addition of nineteen loans in the amount of $29,781,000 as nonaccrual loans. These additions to nonaccruals are centered in two customer relationships totaling $24,018,000. The largest relationship in this group consists of five loans secured by real estate located in Sonoma County totaling $16,291,000, and an unsecured line of credit totaling $3,000,000. A specific reserve of $1,426,000 has been established for the five real estate secured loans, and a $3,000,000 specific reserve has been established for the line of credit. The five real estate secured loans consist of three residential land loans totaling $10,377,000, a residential subdivision project totaling $3,600,000, and a commercial real estate mixed use loan for $2,314,000. All five of these loans were performing through the first quarter of 2009. During the second quarter of 2009, the borrower announced a desire to engage in a work-out of the borrower's secured and unsecured debt outstanding with the Company and with other commercial lenders. The Company is working with this borrower to resolve these issues with the goal of possibly achieving a resolution acceptable to all parties during the third quarter of 2009. The second customer relationship consists of two loans totaling $4,727,000 located in Sonoma County. The first loan is a residential land loan for $2,802,000. A specific reserve of $226,000 has been established for this loan. The second loan is a residential development project loan for $1,925,000. The Company charged-off $967,000 of this loan during the second quarter of 2009 in order to write the loan down to its net realizable value.
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, decreased $1,160,000, or 12.8%, for the three months ended June 30, 2009 compared to the same period in 2008. Interest income decreased by $2,122,000, primarily due to both the lower yield on earning assets and the decrease in the average balances of earning assets and secondarily due to foregone interest income of $595,000 related to loans currently on nonaccrual status. Partially offsetting this was a decrease in interest expense of $962,000, or 22.4%, due to a decrease in the rates paid on deposits and a decrease in the average balance of borrowings for the quarter ended June 30, 2009 compared to the same period in 2008. Average loans decreased $89,346,000 in the second quarter of 2009 compared to the second quarter of 2008, and the yield on the loan portfolio decreased 46 basis points to 6.11% for the second quarter of 2009. Overall, average earning assets decreased $37,090,000 in the second quarter of 2009 compared to the second quarter of 2008. Average yields on earning assets decreased 78 basis points from the quarter ended June 30, 2008, to 5.58% for the quarter ended June 30, 2009 while the average rate paid on interest-bearing liabilities decreased by 54 basis points to 1.98%. The decrease in both yields earned and rates paid is reflective of the declining interest rate environment as the Federal Reserve has reduced interest rates by 500 basis points since September 2007. As a result of the above, the Company's net interest margin for the quarter ended June 30, 2009 was 3.94%, a decrease of 40 basis points from the margin of 4.34% for the second quarter in 2008 and a decrease of 29 basis points from the 4.23% net interest margin for the quarter ended March 31, 2009. "The $595,000 of foregone interest from the nonperforming loans placed pressure on our net interest margin reducing it by roughly 29 basis points, although we did recognize a decrease of 12 basis points on the average rate paid on interest-bearing liabilities from the first quarter," commented Mr. Watson. Net interest income decreased $2,180,000 for the six months ended June 30, 2009 compared to the same period in 2008. Interest income decreased by $4,853,000, primarily due to a decrease in income on loans of $4,657,000 as a result of both the lower yield on average loans and the decrease in the average balance of loans and due to foregone interest income of $969,000 related to loans currently on nonaccrual status. Interest expense decreased $2,673,000 due to a decrease in average interest bearing liabilities of $27,788,000 for the six months ended June 30, 2009 compared to the same period in 2008 and a decrease of 68 basis points on rates paid on interest-bearing liabilities comparing the same periods. The net interest margin for the six months ended June 30, 2009 decreased 25 basis points to 4.09% from the net interest margin of 4.34% for the six months ended June 30, 2008.
Noninterest income for the quarter ended June 30, 2009 was $3,438,000 compared to $3,477,000 for the same period in 2008 representing a decrease of $39,000. Service charges on deposits decreased $254,000 to $1,640,000 for the second quarter of 2009 compared to $1,894,000 for the second quarter of 2008, while other fees and charges increased by $100,000 to $1,079,000 for the second quarter of 2009 compared to $979,000 for the same period in 2008. Noninterest income for the six months ended June 30, 2009 decreased $366,000 to $6,602,000 from $6,968,000 for the same period in 2008. Service charges on deposits decreased $442,000 to $3,168,000 for the six months ended June 30, 2009 compared to $3,610,000 for the same period in 2008, while other fees and charges increased by $99,000 to $2,043,000 for the six months ended June 30, 2009 compared to $1,944,000 for the same period in 2008.
Noninterest expense increased $1,205,000 to $10,782,000 for the second quarter of 2009 from $9,577,000 for the second quarter of 2008. Comparing the second quarter of 2009 to the second quarter of 2008, salaries and employee benefits decreased $200,000 while occupancy and equipment expense increased $52,000. Other real estate owned expense was $572,000 compared to zero for the same period in 2008. Other expenses increased $781,000 due to FDIC insurance premiums and the FDIC special assessment of $862,000, as well as additional costs associated with loan collection expense. Noninterest expense for the six months ended June 30, 2009 was $21,117,000 compared to $19,382,000 for the same period in 2008. For the six months ended June 30, 2009, salaries and employee benefits decreased $672,000 while occupancy and equipment expense increased $63,000. FDIC insurance premiums, including the special assessment, were $1,248,000 for the first six months of 2009 compared to $112,000 for the first six months of 2008.
The Company recorded a benefit for income taxes for the quarter ended June 30, 2009 of $4,346,000, resulting in an effective tax benefit rate of 51.5%, compared to $722,000, or an effective tax benefit rate of 32.4%, for the quarter ended June 30, 2008. The benefit for income taxes for the six month period ended June 30, 2009 was $7,302,000, resulting in an effective tax benefit rate of 50.4%, compared to $588,000, or an effective tax benefit rate of 32.4%, for the same period in 2008.
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, and a loan production office in Vacaville, CA. 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, 2009 2008 $ Change % Change ----------- ----------- -------- -------- Statement of Income Data ------------------------ Interest income Loans and leases (including fees) $ 10,029 $ 12,246 $ (2,217) (18.1%) Investment securities 1,198 1,116 82 7.3% Federal funds sold and other 14 1 13 1300.0% ----------- ----------- -------- -------- Total interest income 11,241 13,363 (2,122) (15.9%) ----------- ----------- -------- -------- Interest expense Interest on deposits 2,806 3,391 (585) (17.3%) Subordinated debentures 526 578 (52) (9.0%) Other borrowings -- 325 (325) (100.0%) ----------- ----------- -------- -------- Total interest expense 3,332 4,294 (962) (22.4%) ----------- ----------- -------- -------- Net interest income 7,909 9,069 (1,160) (12.8%) Provision for loan and lease losses 9,000 5,200 3,800 73.1% ----------- ----------- -------- -------- Net interest income after provision for loan and lease losses (1,091) 3,869 (4,960) (128.2%) ----------- ----------- -------- -------- Noninterest income Service charges on deposit accounts 1,640 1,894 (254) (13.4%) Other fees and charges 1,079 979 100 10.2% Other 719 604 115 19.0% ----------- ----------- -------- -------- Total noninterest income 3,438 3,477 (39) (1.1%) ----------- ----------- -------- -------- Noninterest expenses Salaries and employee benefits 4,905 5,105 (200) (3.9%) Occupancy 801 720 81 11.3% Furniture and equipment 459 488 (29) (5.9%) Other real estate owned expense 572 -- 572 -- Other 4,045 3,264 781 23.9% ----------- ----------- -------- -------- Total noninterest expenses 10,782 9,577 1,205 12.6% ----------- ----------- -------- -------- Loss before benefit for income taxes (8,435) (2,231) (6,204) 278.1% Benefit for income taxes (4,346) (722) (3,624) 501.9% ----------- ----------- -------- -------- Net loss $ (4,089) $ (1,509) $ (2,580) 171.0% =========== =========== ======== ======== Common Share Data ----------------- Loss per share Basic $ (0.55) $ (0.20) $ (0.35) 175.0% Diluted $ (0.55) $ (0.20) $ (0.35) 175.0% Weighted average shares outstanding 7,495,817 7,438,706 Weighted average shares outstanding - diluted 7,495,817 7,438,706 Book value per share $ 9.35 $ 10.53 Tangible book value $ 7.22 $ 8.38 Shares outstanding 7,495,817 7,484,066 NORTH VALLEY BANCORP CONDENSED CONSOLIDATED FINANCIAL DATA (Unaudited) (Dollars in thousands, except share and per share data) Six Months Ended June 30, 2009 2008 $ Change % Change ----------- ----------- -------- -------- Statement of Income Data ------------------------ Interest income Loans and leases (including fees) $ 20,565 $ 25,222 $ (4,657) (18.5%) Investment securities 2,072 2,285 (213) (9.3%) Federal funds sold and other 23 6 17 283.3% ----------- ----------- -------- -------- Total interest income 22,660 27,513 (4,853) (17.6%) ----------- ----------- -------- -------- Interest expense Interest on deposits 5,574 7,219 (1,645) (22.8%) Subordinated debentures 1,068 1,173 (105) (9.0%) Other borrowings 1 924 (923) (99.9%) ----------- ----------- -------- -------- Total interest expense 6,643 9,316 (2,673) (28.7%) ----------- ----------- -------- -------- Net interest income 16,017 18,197 (2,180) (12.0%) Provision for loan and lease losses 16,000 7,600 8,400 110.5% ----------- ----------- -------- -------- Net interest income after provision for loan and lease losses 17 10,597 (10,580) (99.8%) ----------- ----------- -------- -------- Noninterest income Service charges on deposit accounts 3,168 3,610 (442) (12.2%) Other fees and charges 2,043 1,944 99 5.1% Other 1,391 1,414 (23) (1.6%) ----------- ----------- -------- -------- Total noninterest income 6,602 6,968 (366) (5.3%) ----------- ----------- -------- -------- Noninterest expenses Salaries and employee benefits 9,969 10,641 (672) (6.3%) Occupancy 1,562 1,474 88 6.0% Furniture and equipment 928 953 (25) (2.6%) Other real estate owned expense 1,570 -- 1,570 -- Other 7,088 6,314 774 12.3% ----------- ----------- -------- -------- Total noninterest expenses 21,117 19,382 1,735 9.0% ----------- ----------- -------- -------- Loss before benefit for income taxes (14,498) (1,817) (12,681) 697.9% Benefit for income taxes (7,302) (588) (6,714) 1141.8% ----------- ----------- -------- -------- Net loss $ (7,196) $ (1,229) $ (5,967) 485.5% =========== =========== ======== ======== Common Share Data ----------------- Loss per share Basic $ (0.96) $ (0.17) $ (0.79) 464.7% Diluted $ (0.96) $ (0.17) $ (0.79) 464.7% Weighted average shares outstanding 7,495,817 7,427,781 Weighted average shares outstanding - diluted 7,495,817 7,427,781 Book value per share $ 9.35 $ 10.53 Tangible book value $ 7.22 $ 8.38 Shares outstanding 7,495,817 7,484,066 NORTH VALLEY BANCORP CONDENSED CONSOLIDATED FINANCIAL DATA (Unaudited) (Dollars in thousands) June 30, December 31, June 30, 2009 2008 2008 ---------- ---------- ---------- Balance Sheet Data ------------------ Assets Cash and due from banks $ 22,184 $ 27,153 $ 34,545 Federal funds sold 29,395 -- -- Time deposits at other financial institutions 425 -- -- Available-for-sale securities - at fair value 137,554 76,345 90,678 Held-to-maturity securities - at amortized cost 15 21 31 Loans and leases net of deferred loan fees 650,652 693,422 730,283 Allowance for loan and lease losses (22,119) (11,327) (13,677) ---------- ---------- ---------- Net loans and leases 628,533 682,095 716,606 Premises and equipment, net 11,097 11,418 11,764 Other real estate owned 6,129 10,408 8,208 Goodwill and core deposit intangibles, net 15,952 16,025 16,098 Accrued interest receivable and other assets 62,082 56,086 56,431 ---------- ---------- ---------- Total assets $ 913,366 $ 879,551 $ 934,361 ========== ========== ========== Liabilities and Shareholders' Equity Deposits: Demand, noninterest bearing $ 144,190 $ 161,748 $ 164,030 Demand, interest bearing 148,142 151,873 148,421 Savings and money market 175,121 157,089 178,000 Time 332,290 284,234 253,780 ---------- ---------- ---------- Total deposits 799,743 754,944 744,231 Other borrowed funds -- 3,516 68,115 Accrued interest payable and other liabilities 11,584 11,872 11,252 Subordinated debentures 31,961 31,961 31,961 ---------- ---------- ---------- Total liabilities 843,288 802,293 855,559 Shareholders' equity 70,078 77,258 78,802 ---------- ---------- ---------- Total liabilities and shareholders' equity $ 913,366 $ 879,551 $ 934,361 ========== ========== ========== Asset Quality ------------- Nonaccrual loans and leases $ 44,304 $ 18,936 $ 22,580 Loans and leases past due 90 days and accruing interest -- -- -- Other real estate owned 6,129 10,408 8,208 ---------- ---------- ---------- Total nonperforming assets $ 50,433 $ 29,344 $ 30,788 ========== ========== ========== Allowance for loan and lease losses to total loans 3.40% 1.63% 1.87% Allowance for loan and lease losses to NPL's 49.93% 59.82% 60.57% Allowance for loan and lease losses to NPA's 43.86% 38.60% 44.42% NORTH VALLEY BANCORP CONDENSED CONSOLIDATED FINANCIAL DATA (Unaudited) (Dollars in thousands) Three Months Ended Six Months Ended June 30, June 30, 2009 2008 2009 2008 --------- --------- --------- --------- Selected Financial Ratios ------------------------- Return on average total assets (1.81%) (0.65%) (1.63%) (0.26%) Return on average shareholders' equity (21.74%) (7.35%) (18.98%) (2.98%) Net interest margin (tax equivalent basis) 3.94% 4.34% 4.09% 4.34% Efficiency ratio 95.02% 76.34% 93.36% 77.02% Selected Average Balances ------------------------- Loans $ 658,068 $ 747,414 $ 669,390 $ 745,209 Taxable investments 107,969 83,128 88,839 86,601 Tax-exempt investments 15,850 20,189 15,874 20,364 Federal funds sold and other 31,984 230 23,544 411 --------- --------- --------- --------- Total earning assets $ 813,871 $ 850,961 $ 797,647 $ 852,585 --------- --------- --------- --------- Total assets $ 906,033 $ 935,566 $ 892,281 $ 938,442 --------- --------- --------- --------- Demand deposits - interest bearing $ 151,422 $ 157,526 $ 152,403 $ 156,238 Savings and money market 172,001 184,164 169,913 182,916 Time deposits 320,512 247,988 303,183 248,095 Other borrowings 31,961 92,435 32,641 98,679 --------- --------- --------- --------- Total interest bearing liabilities $ 675,896 $ 682,113 $ 658,140 $ 685,928 --------- --------- --------- --------- Demand deposits - noninterest bearing $ 144,334 $ 159,403 $ 147,158 $ 157,474 --------- --------- --------- --------- Shareholders' equity $ 75,433 $ 82,361 $ 76,462 $ 82,748 --------- --------- --------- --------- NORTH VALLEY BANCORP CONDENSED CONSOLIDATED FINANCIAL DATA (Unaudited) (Dollars in thousands, except per share data) For the Quarter Ended --------------------------------------------------- June March December September 2009 2009 2008 2008 --------- --------- --------- --------- Interest income $ 11,241 $ 11,419 $ 11,834 $ 12,744 Interest expense 3,332 3,311 3,706 3,932 --------- --------- --------- --------- Net interest income 7,909 8,108 8,128 8,812 Provision for loan and lease losses 9,000 7,000 3,000 1,500 Noninterest income 3,438 2,274 2,900 284 Noninterest expense 10,782 9,445 9,583 9,694 --------- --------- --------- --------- Loss before benefit for income taxes (8,435) (6,063) (1,555) (2,098) Benefit for income taxes (4,346) (2,956) (2,409) (679) --------- --------- --------- --------- Net (loss) income $ (4,089) $ (3,107) $ 854 $ (1,419) ========= ========= ========= ========= (Loss) Earnings per share: Basic $ (0.55) $ (0.41) $ 0.11 $ (0.19) ========= ========= ========= ========= Diluted $ (0.55) $ (0.41) $ 0.11 $ (0.19) ========= ========= ========= =========
