FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
Commission file number 0-10652
NORTH VALLEY BANCORP
(Exact name of small business issuer in its charter)
California 94-2751350
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification No.)
880 E. Cypress Avenue, Redding, CA. 96002
(Address of principal executive offices) (Zip code)
Issuer's telephone number (916) 221-8400
Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
The number of shares outstanding of common stock as of October 1,
1995, was 1,226,470 .
INDEX
NORTH VALLEY BANCORP AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets-- September 30, 1995
and December 31, 1994
Condensed consolidated statements of income-- Nine months
ended September 30, 1995 and 1994; three months ended
September 30, 1995 and 1994
Consolidated statement of cash flows-- Nine months ended
September 30, 1995 and 1994
Notes to condensed consolidated financial statements--
September 30, 1995
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8K
SIGNATURES<PAGE>
PART I. FINANCIAL INFORMATION
NORTH VALLEY BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30 December 31
1995 1994
(unaudited) (Note)
(000's omitted)
ASSETS:
Cash and due from banks $ 9,965 $ 10,497
Federal funds sold 14,100 9,500
Investment securities:
Available for sale, at fair value 12,493 16,955
Held to maturity, at amortized cost 41,416 41,374
(market value of $43,262 and $41,023
at September 30, 1995 and December
31, 1994, respectively)
Loans receivable 145,870 126,607
Less: Allowance for possible loan losses 1,316 1,144
Net Loans Receivable 144,554 125,463
Premises and equipment owned, net 3,710 3,532
FHLB stock 654 609
Accrued interest receivable 1,670 1,497
Other assets 4,751 4,529
TOTAL ASSETS $233,313 $213,956
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Non interest bearing $ 25,876 $ 25,158
Interest bearing 184,303 168,383
Total deposits 210,179 193,541
Accrued interest and other liabilities 2,286 2,489
TOTAL LIABILITIES $212,465 $196,030
SHAREHOLDERS' EQUITY:
Common stock, no par value--
Authorized 20,000,000 shares,
issued and outstanding
1,226,470 for 1995 and 1,219,855 for 1994 9,759 9,694
Retained Earnings 11,062 8,493
Unrealized gain/(loss) on investment
securities, available for sale 27 ( 261)
TOTAL STOCKHOLDERS' EQUITY 20,848 17,926
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $233,313 $213,956
=======================================================================
Note: The balance sheet at December 31, 1994 has been derived from the
audited financial statements at that date.
=====================================================================
See notes to condensed consolidated financial statements (unaudited).
NORTH VALLEY BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Nine Months Ended
September 30
1995 1994
(000's omitted,
except per share data)
Interest Income:
Loans including fees $ 9,687 $ 7,453
Investment securities:
Taxable 806 980
Exempt from federal taxes 1,617 1,390
Federal funds sold 797 495
TOTAL INTEREST INCOME 12,907 10,318
Interest Expense on Deposits 5,567 4,023
NET INTEREST INCOME 7,340 6,295
Provision for loan losses 350 180
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 6,990 6,115
Other Operating Income:
Service charges on deposit accounts 1,008 922
Other customer fees and charges 563 544
Gain on sale of loans 145 126
Gain on sale of securities 40 7
Other 315 207
TOTAL OTHER OPERATING INCOME 2,071 1,806
Other Operating Expenses:
Salaries & employee benefits 2,748 2,644
Occupancy 318 302
Furniture & equipment 332 326
Other 1,419 1,520
TOTAL OTHER OPERATING EXPENSES 4,817 4,792
Income before provision for income taxes 4,244 3,129
Provision for income taxes 1,222 922
NET INCOME $ 3,022 $ 2,207
Net income per common share $ 1.63 $ 1.19
Weighted average shares outstanding
used to compute net income per share 1,856,005 1,849,058
====================================================================
See notes to condensed consolidated financial statements (unaudited).
NORTH VALLEY BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
September 30
1995 1994
(000's omitted,
except per share data)
Interest Income:
Loans including fees $ 3,441 $ 2,662
Investment securities:
Taxable 257 327
Exempt from federal taxes 555 483
Federal funds sold 215 196
TOTAL INTEREST INCOME 4,468 3,668
Interest Expense on Deposits 1,973 1,400
NET INTEREST INCOME 2,495 2,268
Provision for loan losses 200 60
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 2,295 2,208
Other Operating Income:
Service charges on deposit accounts 343 328
Other customer fees and charges 192 181
Gain on sale of loans 66 48
Gain on sale of securities 16 4
Other 118 60
TOTAL OTHER OPERATING INCOME 735 621
Other Operating Expenses:
Salaries & employee benefits 903 864
Occupancy 105 115
Furniture & equipment 105 103
Other 386 502
TOTAL OTHER OPERATING EXPENSES 1,499 1,584
Income before provision for income taxes 1,531 1,245
Provision for income taxes 457 369
NET INCOME $ 1,074 $ 876
Net income per common share $ .58 $ .47
Weighted average shares outstanding
used to compute net income per share 1,856,005 1,849,058
====================================================================
See notes to condensed consolidated financial statements (unaudited).
NORTH VALLEY BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) Nine Months Ended
September 30
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES: (000's omitted)
Net income $ 3,022 $ 2,207
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 277 272
Amortization of discount on
investment securities 14 54
Provision for loan losses 350 180
Gain on sale of available for sale securities ( 28) -0-
Gain on sale of investment securities -0- ( 7)
Gain on sale of trading securities ( 12) -0-
Gain on sale of loans ( 145) ( 126)
Provision for deferred taxes ( 15) ( 20)
Effect of changes in:
Accrued interest receivable ( 173) ( 158)
Other assets ( 329) ( 533)
Accrued interest and other liabilities 224 465
Total adjustments 163 127
NET CASH PROVIDED BY OPERATING ACTIVITIES 3,185 2,334
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of FHLB stock ( 45) -0-
Purchases of available for sale securities ( 2,216) -0-
Purchases of trading securities ( 2,996) -0-
Proceeds from sales of available for sale securities 102 -0-
Proceeds from sales of trading securities 3,008 -0-
Proceeds from maturities of available
for sale securities 7,000 -0-
Purchases of held to maturity securities ( 5,182) -0-
Proceeds from maturities or calls of held
to maturity securities 5,140 -0-
Proceeds from sales of investment securities -0- 3,020
Proceeds from maturities of investment securities -0- 16,548
Purchases of investment securities -0- (19,743)
Proceeds from sales of loans 2,828 6,088
Net increase in loans (22,124) (26,115)
Purchases of premises and equipment ( 455) ( 146)
Net cash used in investment activities (14,940) (20,348)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in demand deposits, NOW accounts,
and savings accounts 106 4,210
Net increase in time certificates 16,532 6,887
Cash dividends paid ( 880) ( 848)
Cash received for stock options exercised 65 54
Net cash provided by financing activities 15,823 10,303
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,068 ( 7,711)
CASH AND CASH EQUIVALENTS, beginning of year 19,997 32,251
CASH AND CASH EQUIVALENTS, end of period $24,065 $24,540
====================================================================
See notes to condensed consolidated financial statements (unaudited).
NORTH VALLEY BANCORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1995
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation of
the results for the interim periods presented have been included.
Operating results for the nine months ended September 30, 1995 are
not necessarily indicative of the results that may be expected for
the year ended December 31, 1995. For further information, refer to
the consolidated financial statements and notes thereto included in
the Company's annual report on Form 10-KSB for the fiscal year ended
December 31, 1994.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The condensed consolidated financial statements include the accounts
of the Company and its subsidiaries. Significant intercompany items
and transactions have been eliminated. In preparing the financial
statements, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Investments - The Company accounts for investments in accordance with
Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
The Company's policy with regard to investments is as follows:
Trading Securities are carried at fair value. Gains and
losses on sales and changes in market value are included in
other operating income.
Held to Maturity Securities are carried at cost adjusted
for amortization of premiums and accretion of discounts,
which are recognized as adjustments to interest income.
The Company's policy of carrying such investment securities
at amortized cost is based upon its ability and
management's intent to hold such securities to maturity.
Available for Sale Securities are carried at fair value and
represent securities not classified as trading securities
nor as held to maturity securities. Unrealized gains and
losses resulting from changes in fair value are recorded,
net of tax, as a separate component of equity. Gains or
losses on disposition are recorded in other operating
income based on the net proceeds received and the carrying
amount of the securities sold, using the specific
identification method.
Income Taxes - The Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, Accounting for Income Taxes, effective
January 1, 1993. This statement supersedes SFAS No. 96, Accounting
for Income Taxes, which was adopted by the Company in 1987.
SFAS No. 109 applies the asset and liability method in accounting for
income taxes. Deferred tax assets and liabilities are calculated by
applying applicable tax laws to the differences between the financial
statements basis and the tax basis of assets and liabilities
currently recognized in the consolidated statement of income in the
amount of the net change during the year of the deferred tax balances
in the consolidated balance sheet. The effect on deferred taxes of a
change in tax rates is recognized in income in the period that
includes the enactment date.
Loan Impairment - On January 1, 1995, the Company adopted SFAS No.
114, Accounting by Creditors for Impairment of a Loan and SFAS No.
118, Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosure. These statements address the accounting
and reporting by creditors for impairment of certain loans. A loan
is impaired when, based upon current information and events, it is
probable that a creditor will be unable to collect all amounts due
according to the contractual terms of the loan agreement. These
statements are applicable to all loans, uncollateralized as well as
collateralized, except large groups of smaller-balance homogeneous
loans that are collectively evaluated for impairment such as credit
cards, residential mortgage and consumer installment loans, loans
that are measured at fair value or at the lower of cost or fair value
and leases. Impairment is measured based on the present value of
expected future cash flows discounted at the loan's effective
interest rate, except that as a practical expedient, the Company
measures impairment based on a loan's observable market price or the
fair value of the collateral if the loan is collateral dependent.
Loans are measured for impairment as part of the Company's normal
internal asset review process. The adoption of these statements did
not have a material effect on the Company's financial position at
September 30, 1995 or the results of its operation for the nine
months then ended.
Interest income is recognized on impaired loans in a manner similar
to that of all loans. It is the Company's policy to place loans that
are delinquent 90 days or more as to principal or interest on a
nonaccrual of interest basis unless secured and in the process of
collection, and to reverse from current income accrued but
uncollected interest. Cash payments subsequently received on
nonaccrual loans are recognized as income only where the future
collection of principal is considered by management to be probable.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDING SEPTEMBER 30,
1995.
The following discussion should be read in conjunction with the
Consolidated Financial Statements and notes thereto included
elsewhere herein which are incorporated by reference herein. Since
the Company is a holding company whose principal asset is the Bank,
the following discussion relates principally to the financial
condition and results of operations of the Bank.
Overview
The Company's net income was $3,022,000 for the period ended
September 30, 1995, a 36.93% increase from $2,207,000 for the period
ending September 30, 1994. On a per share basis, September 30, 1995
profits increased to $1.63, compared to $1.19 for September 30, 1994.
Per share amounts have been adjusted to give effect to a 3-for-2
stock split declared September 18, 1995.
Net Interest Income
Net interest income is the principal source of the Company's
earnings, which represents the difference between interest earned on
loans (including yield-related loan fees) and investments and
interest paid on deposits. Tax exempt interest income from
investment securities is adjusted to an amount which would have been
earned if such income were subject to federal income tax. Net
interest income on a fully taxable equivalent basis (FTE) was
$8,193,000 for the third quarter ending September 30, 1995, an
increase of 15.35% over $7,103,000 for the third quarter ending
September 30, 1994.
The increase in loan balances and increasing yields on interest
earning assets offset increases in interest paid on time deposits.
Net interest income (FTE) expressed as a percentage of average
earning assets, is referred to as net interest margin. The net
interest margin for September 30, 1995, increased to 5.24% from 4.88%
for the same period ending September 30, 1994. The higher yield on
earning assets was offset by the repricing of interest bearing
liabilities.
Non-Interest Income
Non-interest income is primarily derived from fees earned by the
Company for deposit-related customer services. Total non-interest
income increased $265,000 to $2,071,000 for the nine months ended
September 30, 1995, compared to $1,806,000 for the nine months ended
September 30, 1994.
Increases in deposit accounts attributed to increases in service
charges in deposit accounts. An insurance policy payment totaling
$53,000 for the death of one of the Company's directors attributed to
the increase in other non-interest income.
A summary of non-interest income for the nine months ended September
30, 1995 and 1994, is presented below:
Non-Interest Income September 30
(in thousands) 1995 1994
Service charges on deposit accounts $1,008 $ 922
Other fees and charges 563 544
Gain on sale of loans 145 126
Gain on sale of securities 40 7
Other 315 207
Total Non-Interest income $2,071 $1,806
Non-Interest Expense
Non-interest expense increased $25,000, or .52% for the nine months
ended September 30, 1995, compared to the nine months ended September
30, 1994.
Salaries and employee benefits expenses were $2,748,000 as of
September 30, 1995, and $2,644,000 for the period ending September
30, 1994. The increase in salary and benefit expense is attributed
to normal salary increases, increased employer taxes and an increase
in the net pension cost for the supplemental retirement plans for
directors and key executives.
The Federal Deposit Insurance Corporation (FDIC) refunded $1.5
billion to banks on September 15 for overpayments on insurance
premiums for the months June through September. The FDIC verified
that the Bank Insurance Fund (BIF) was fully recapitalized at the end
of May. The Bank received a refund of approximately $126,000 for
premiums paid June through September to the FDIC, resulting in a
decrease in FDIC assessments (included in other operating expense).
A summary of non-interest expense for the nine months ended September
30, 1995 and 1994, is presented below:
Non-Interest Expense September 30
(in thousands) 1995 1994
Salaries & employee benefits $ 2,748 $ 2,644
Occupancy expense 318 302
Furniture & equipment expense 332 326
Professional services 107 98
Data processing expenses 193 165
Printing & supplies 151 186
Postage 121 109
FDIC & State banking assessments 223 321
Correspondent bank expense 14 43
ATM expense 98 89
Other 512 509
Total non-interest expense $ 4,817 $ 4,792
Income Taxes
The provision for income taxes for the nine months ended September
30, 1995 was $1,222,000 as compared to $922,000 for the same period
in 1994.
Impaired, Nonaccrual, Past Due and Restructured Loans and Other
Assets
At September 30, 1995, the Company's total recorded investment in
impaired loans was $1,230,000, for which there is a related allowance
for credit losses of $358,000 determined in accordance with FAS
Statements 114 and 118.
The average recorded investment in the impaired loans during the nine
months ended September 30, 1995 was $239,000, as all such loans were
on nonaccrual status; the related amount of interest income
recognized during the period that such loans were impaired was $-0-
and the amount of interest income recognized using a cash-basis
method of accounting during the time within the period that the loans
were impaired was $-0-.
Nonaccrual loans consist of loans where reasonable doubt exists as to
the full, timely collection of interest or principal, or when a loan
becomes contractually past due by 90 days or more with respect to
interest or principal payments (except on loans deemed by management
to be fully collectible). Management believed the Company's
Allowance for Loan Losses as of September 30, 1995, was adequate
against foreseeable losses.
Information with respect to nonaccrual, past due 90 days or more as
to principal or interest, restructured loans (not otherwise included
in the nonaccrual category) and other real estate owned at September
30, 1995 and December 31, 1994, is as follows:
September 30 December 31
(in thousands) 1995 1994
Nonaccrual loans $ 312 $ 421
Accruing loans past due 90 days
or more 1 22
Other real estate owned 48 -0-
Total $ 361 $ 443
Allowance for Loan Losses
Management assesses the adequacy of the allowance for loan loss based
on loan loss experience, specific identification of potential losses
in the portfolio and economic conditions. Additions to the Allowance
are made by charges to operating expenses in the form of a provision
for possible loan losses. The Allowance for loan losses totaled
$1,316,000 or .90% of total loans at September 30, 1995, compared to
$1,144,000 or .90% at December 31, 1994. Management's continuing
evaluation of the loan portfolio and assessment of current economic
conditions will dictate future funding levels. Net charge-offs were
$178,000 or .13% of average loans for the nine months ended September
30, 1995, as compared to $162,000 or .14% of average loans for the
year ended December 31, 1994. A provision for loan losses of
$350,000 was charged to income as of September 30, 1995.
Liquidity and Interest Rate Sensitivity
Liquidity represents the Company's ability to satisfy cash flow
requirements created by fluctuations in deposits and to meet
borrowers' credit needs. Effective liquidity management insures that
sufficient funds are available to meet demands from depositors,
borrowers and other commitments on a timely basis. Collection of
principal and interest on loans, the liquidations of short-term
investment securities, deposit inflow and short term borrowing when
needed are primary sources of funds that contribute to liquidity.
Unused lines of credit from correspondent banks to provide federal
funds in the amount of $9,000,000 as of September 30, 1995, were
available to provide liquidity. In addition, the Bank is a member of
the Federal Home Loan Bank ("FHLB") system providing another source
of liquidity. The Company had not borrowed from FHLB as of September
30, 1995.
The Company manages both assets and liabilities to preserve liquidity
and earnings stability. Total liquid assets (cash and due from
banks, federal funds sold, and investment securities) totaled
$77,974,000 and $78,326,000 (or 33.42% and 36.61% of total assets) at
September 30, 1995 and December 31, 1994, respectively. Total liquid
assets include investment securities classified as held to maturity
based on the Company's intent to hold such securities to maturity of
$41,416,000 and $41,374,000 for September 30, 1995 and December 31,
1994, respectively.
The Company's ability to generate retail core deposits consisting of
demand deposits, NOW, regular savings, money market deposit accounts
and time deposits of less than $100,000 provides a continued source
of liquidity. Core deposits totaled $195,944,000 and $179,759,000 at
September 30, 1995 and December 31, 1994, respectively.
Management considers the Company's liquidity sufficient to satisfy
its funding demand for normal banking transactions for the next
twelve months.
Interest rate sensitivity management concentrates on reducing the
impact on net interest income due to shifts in interest rates. The
Company measures its interest rate sensitivity with an asset
liability simulation model. The model analyzes the mix and repricing
characteristics of interest rate sensitive assets and liabilities
using multipliers (how interest rates change when Fed Funds rate
changes by 1%) and lags (time it takes for rates to change after Fed
Funds rate changes). The model simulates the effects on net interest
income when the Fed Funds rate experiences a 1% increase or decrease
compared to current levels. In management's view, the Company has
low interest rate risk in the short term as measured by the model,
specifically the next twelve months.
The following table shows the interest sensitive assets and
liabilities gap, which is the measure of interest sensitive assets
over interest bearing liabilities, for each individual repricing
period on a cumulative basis:
Within 3 3 months 1-5 5+
September 30, 1995 months to 1 Year Years Years TOTAL
(in thousands)
EARNING ASSETS:
Investment securities $ 85 $ 2,098 $ 7,890 $31,343 $ 41,416
Available for sale
securities 3,993 3,986 3,956 558 12,493
Trading account
securities -0- -0- -0- -0- -0-
Fed Funds Sold 14,100 -0- -0- -0- 14,100
Loans 56,126 17,175 39,975 32,594 145,870
Total earning assets $74,304 $ 23,259 $ 51,821 $64,495 $213,879
INTEREST BEARING LIABILITIES:
Interest bearing demand
deposits $ -0- $ 37,403 $ -0- $ -0- $ 37,403
Savings deposits -0- 44,178 -0- -0- 44,178
Time deposits 35,267 60,280 7,175 -0- 102,722
Total interest bearing
liabilities $35,267 $ 141,861 $ 7,175 $ -0- $184,303
INTEREST RATE SENSITIVITY
GAP $39,037 $(118,602)$ 44,646 $64,495
CUMULATIVE INTEREST RATE
SENSITIVITY GAP $39,037 $( 79,565)$(34,919)$29,576
At September 30, 1995, the gap table indicates the Company as
liability sensitive in the twelve month period. Interest rate
sensitivity measured by the gap method does not consider the impact
of different multipliers (how interest rates change when Fed Funds
rate changes by 1%) and lags (time it takes for rates to change after
Fed Funds rate changes). The Company's model analyzes the impact on
earnings of future rate changes by including factors for lags and
multipliers for key bank rates. Both methods of measuring interest
rate sensitivity do not take into account actions taken by management
to modify the effect to net interest income if interest rates were to
rise or fall.
Even though the Bank had a negative gap in the nine month period as
of September 30, 1995, the asset liability simulation model showed
the Bank slightly asset sensitive in 1995. Due to an increasing rate
environment in 1995, the Bank's asset sensitive posture had a
positive impact on net interest margins as predicted by the asset
liability simulation model.
Financial Condition
Total assets at September 30, 1995, were $233,313,000, representing
an increase of 9.05% over December 31, 1994 assets of $213,956,000.
During 1995, net loans increased 15.22% to $144,554,000, from
$125,463,000 at December 31, 1994. Loans are the major component of
earning assets. The Bank's average loan to deposit ratio was 65.61%
and 60.49% at September 30, 1995 and December 31, 1994, respectively.
Investment securities and federal funds sold totaled $68,009,000 at
September 30, 1995, compared to $67,829,000 at December 31, 1994.
Funding for increased loan and investment activity came from
increases in deposits. Total deposits increased $16,638,000 as of
September 30, 1995, to $210,179,000, as compared to $193,541,000 at
December 31, 1994. The increase was mainly in interest-bearing
instruments.
The Company maintains capital levels to support conservative internal
growth and to encourage confidence from depositors and investors.
Shareholders' equity increased to $20,848,000 as of September 30,
1995, as compared to $17,926,000 for year end 1994.
Banking regulators require bank holding companies and banks to
maintain capital equal to at least 8% of their assets, weighted by
risk. At least 4% of the total 8% ratio must consist of Tier 1
capital (primarily shareholders' equity).
In addition, banking regulators also require bank holding companies
and banks to maintain a certain Tier 1 leverage ratio. The leverage
ratio is measured by the ratio of Tier 1 capital to adjusted average
assets.
The table below provides a comparison of the Bank's risk based
capital ratio and leverage ratio to the minimum regulatory guidelines
for the periods indicated:
MINIMUM
REGULATORY
September 30 December 31 REQUIREMENTS
1995 1994
RISK-BASED CAPITAL RATIOS:
Tier 1 13.00% 13.09% 4.00%
Total 13.82% 13.91% 8.00%
LEVERAGE RATIO 9.21% 8.49% 3.00%-5.00%
Impact of Inflation
Impact of inflation on a financial institution differs significantly
from that exerted on an industrial concern, primarily because its
assets and liabilities consist largely of monetary items. The
relatively low proportion of the Company's fixed assets (less than
1.59% at September 30, 1995) reduces both the potential of inflated
earnings resulting from understated depreciation and the potential
understatement of absolute asset values.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995,
AS COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 1994.
North Valley Bancorp recorded a net profit for the three months ended
September 30, 1995, of $1,074,000, as compared to a net profit of
$876,000 for the same period in 1994. The net income for the three
month period ended September 30, 1995, resulted in net income per
share of fifty-eight cents ($.58).
Net Interest Income
Net interest income on a fully tax-equivalent basis (FTE) increased
$306,000, or 12.26%, to $2,801,000 for the three months ended
September 30, 1995, as compared to $2,495,000 for the same period in
1994.
Changes in net interest income are a result of changes in volume
between average earning assets and interest bearing liabilities and
in the difference between interest yields from average earning assets
and the cost of interest bearing liabilities. Net interest income
increased over 1994 levels primarily due to an increase in volume of
interest earning assets.
Net interest income on a fully taxable equivalent basis expressed as
a percentage of total average earning assets is referred to as the
net interest margin. The net interest margin (FTE) was 5.22% and
5.09% for the three months ending September 30, 1995 and 1994,
respectively.
Other Operating Income
Total other operating income increased to $735,000, compared to
$621,000 for the three months ended September 30, 1995 and 1994,
respectively.
A summary of other operating income for the three month periods
ending September 30, 1995 and 1994, is presented below:
Other Operating Income September
(in thousands) 1995 1994
Service charges on deposit
accounts $ 343 $ 328
Other customer fees and charges 192 181
Gain on sale of loans 66 48
Loss on sale of securities 16 4
Other 118 60
TOTAL OTHER OPERATING INCOME $ 735 $ 621
Other Operating Expense
Other operating expense decreased during the third three months of
1995 to $1,499,000 compared to $1,584,000 for the same period in
1994. This was primarily attributable to a refund in insurance
premiums from the FDIC.
Personnel expense increased to $903,000, or 4.51%, during the third
three months of 1995, compared to $864,000 for the same period in
1994.
A summary of other operating expense for the three month periods
ended September 30, 1995 and 1994, is presented below:
Other Operating Expense September
(in thousands) 1995 1994
Salaries & employee benefits $ 903 $ 864
Occupancy 105 115
Furniture & equipment 105 103
Professional services 35 37
Data processing 66 55
Printing & supplies 50 63
Postage 38 35
FDIC & State Banking Assessments ( 6) 109
Correspondent bank 4 10
ATM 32 29
Other 167 164
TOTAL OTHER OPERATING EXPENSE $1,499 $1,584
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K:
The Company did not file any reports on Form 8-K during the nine
months ended September 30, 1995.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
North Valley Bancorp
(Registrant)
Date November 8, 1995 /s/ J. F. Cowee
J. F. Cowee
Chief Financial Officer
