United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period Ended June 30, 1997 .
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period From to
Commission file number 0-10652
NORTH VALLEY BANCORP
(Exact name of registrant as specified in its charter)
California 94-2751350
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
880 E. Cypress Ave.
Redding, CA 96002
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (916) 221-8400
Not applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act of 1934
during the preceding 12 months (or for such shorter periods 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
Common Stock - - 1,828,948 shares as of June 30, 1997.
INDEX
NORTH VALLEY BANCORP AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets--June 30, 1997 and
December 31, 1996
Condensed consolidated statements of income--Six months
ended June 30, 1997 and 1996
Condensed consolidated statement of cash flows--Six months
ended June 30, 1997 and 1996
Notes to condensed consolidated financial statements--
June 30, 1997
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
PART I. FINANCIAL INFORMATION
NORTH VALLEY BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS June 30 December 31
1997 1996
(unaudited) (Note)
ASSETS (000's omitted)
Cash and due from banks $12,854 $ 10,407
Federal funds sold 20,400 18,100
Securities:
Available for sale, at market 15,356 9,223
Held to maturity, at amortized cost 40,173 39,997
(market value of $41,810 and $41,871
at June 30, 1997 and December 31,
1996, respectively)
Loans receivable, net of deferred loan fees 165,978 168,237
Less: Allowance for loan losses 1,386 1,254
Net loans receivable 164,592 166,983
Premises and equipment, net 3,941 3,768
Other real estate owned 1,637 69
FHLB stock 766 734
Accrued interest receivable 1,805 1,765
Other assets 6,329 5,831
TOTAL ASSETS $267,853 $256,877
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing demand deposits $ 32,603 $ 28,314
Interest-bearing deposits 206,074 200,914
Total deposits 238,677 229,228
Accrued interest and other liabilities 3,636 3,749
Total liabilities 242,313 232,977
STOCKHOLDERS' EQUITY:
Preferred stock, no par value:
authorized, 20,000,000 shares; none outstanding
Common stock, no par value: authorized 20,000,000
shares; outstanding 1,828,948 for June 30,
1997 and 1,823,688 for December 31, 1996 9,956 9,896
Retained earnings 15,245 13,703
Unrealized gain on securities available
for sale (net of tax effect) 339 301
Total stockholders' equity 25,540 23,900
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $267,853 $256,877
=======================================================================
Note: The balance sheet at December 31, 1996 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)
Six Months Ended
June 30
1997 1996
(000's omitted,
except per share data)
INTEREST INCOME:
Loans including fees $ 7,603 $ 7,028
Securities:
Taxable 375 367
Exempt from federal taxes 1,213 1,176
Interest on federal funds sold 552 482
Total interest income 9,743 9,053
INTEREST EXPENSE - DEPOSITS 4,256 3,944
NET INTEREST INCOME 5,487 5,109
PROVISION FOR LOAN LOSSES 360 210
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 5,127 4,899
NONINTEREST INCOME:
Service charges on deposit accounts 697 668
Other fees and charges 385 384
Gain on sale of loans 103 80
Gain (loss) on sale of available
for sale securities 140 ( 17)
Other 145 107
Total noninterest income 1,470 1,222
NONINTEREST EXPENSES:
Salaries & employee benefits 1,998 1,966
Occupancy expense 232 216
Furniture & equipment expense 271 243
Other 1,114 909
Total noninterest expenses 3,615 3,334
INCOME BEFORE PROVISION FOR INCOME TAXES 2,982 2,787
PROVISION FOR INCOME TAXES 799 767
NET INCOME $ 2,183 $ 2,020
INCOME PER COMMON AND EQUIVALENT SHARE $ 1.18 $ 1.08
WEIGHTED AVERAGE SHARES USED TO COMPUTE
INCOME PER COMMON AND EQUIVALENT SHARE 1,850,291 1,867,709
====================================================================
See notes to condensed consolidated financial statements (unaudited).
NORTH VALLEY BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended
June 30
1997 1996
(000's omitted,
except per share data)
INTEREST INCOME:
Loans including fees $ 3,847 $ 3,553
Securities:
Taxable 225 200
Exempt from federal taxes 603 595
Interest on federal funds sold 277 220
Total interest income 4,952 4,568
INTEREST EXPENSE - DEPOSITS 2,154 1,949
NET INTEREST INCOME 2,798 2,619
PROVISION FOR LOAN LOSSES 180 105
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 2,618 2,514
NONINTEREST INCOME:
Service charges on deposit accounts 360 333
Other fees and charges 189 181
Gain on sale of loans 68 28
Gain (loss) on sale of
available for sale securities 51 ( 17)
Other 69 65
Total noninterest income 737 590
NONINTEREST EXPENSES:
Salaries & employee benefits 1,002 981
Occupancy expense 119 110
Furniture & equipment expense 138 121
Other 591 501
Total noninterest expenses 1,850 1,713
INCOME BEFORE PROVISION FOR INCOME TAXES 1,505 1,391
PROVISION FOR INCOME TAXES 419 395
NET INCOME $ 1,086 $ 996
INCOME PER COMMON AND EQUIVALENT SHARE $ .59 $ .53
WEIGHTED AVERAGE SHARES USED TO COMPUTE
INCOME PER COMMON AND EQUIVALENT SHARE 1,852,518 1,868,505
====================================================================
See notes to condensed consolidated financial statements (unaudited).
NORTH VALLEY BANCORP AND SUBSIDIARIES Six Months Ended
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) June 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES: (000's omitted)
Net income $ 2,183 $ 2,020
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 220 199
(Accretion) amortization of premium on securities ( 3) 7
Provision for loan losses 360 210
(Gain) loss on sale of available for sale securities( 140) 1
Loss on sale of trading securities 0 16
Gain on sale of loans ( 103) ( 80)
Provision for deferred taxes ( 31) 0
Purchase of trading securities 0 ( 1,980)
Effect of changes in:
Accrued interest receivable ( 40) ( 131)
Other assets (2,050) ( 158)
Accrued interest and other liabilities 527 201
Net cash provided by (used in) operating activities 923 ( 305)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of FHLB stock ( 32) ( 50)
Purchase of available for sale securities ( 8,187) ( 2,505)
Proceeds from sales of available for sale securities 2,253 0
Proceeds from maturities of available for sale
securities 0 3,494
Purchase of held to maturity securities ( 1,565) ( 6,763)
Proceeds from maturities or calls of held to
maturity securities 1,385 2,390
Proceeds from sale of loans 6,302 5,567
Net increase in loans ( 4,168) (16,029)
Purchases of premises and equipment ( 393) ( 135)
Net cash used in investing activities ( 4,405) (14,031)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in demand deposits, NOW accounts, and
savings accounts 7,428 6,738
Net increase in time certificates 2,021 2,451
Cash dividends paid ( 1,280) ( 1,143)
Cash received for stock options exercised 60 46
Net cash provided by financing activities 8,229 8,092
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,747 ( 5,634)
CASH AND CASH EQUIVALENTS:
Beginning of period 28,507 28,468
End of period $33,254 $22,834
ADDITIONAL INFORMATION:
Cash Payments:
Income tax payments $ 529 $ 931
Interest payments $ 4,256 $ 3,960
===========================================================================
See notes to condensed consolidated financial statements (unaudited).
NORTH VALLEY BANCORP AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1997
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial
statements of North Valley Bancorp and subsidiaries (the "Company")
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-Q 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.
They do not, however, include all the information and footnotes
required by generally accepted accounting principles for complete
financial statements. For further information, refer to the
consolidated financial statements and notes thereto included in the
Company's annual report on Form 10-K for the fiscal year ended
December 31, 1996. Operating results for the six months ended June
30, 1997 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1997.
The condensed consolidated financial statements include the accounts
of the Company. Significant intercompany items and transactions have
been eliminated.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Pronouncements
On January 1, 1997, the Company adopted Statement of Financial
Accounting Standard No. 125, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities. This
Statement provides accounting and reporting standards for transfers
and servicing of financial assets and extinguishments of liabilities.
This standard is based on consistent application of a financial-components
approach that focuses on control. Under this approach,
after a transfer of financial assets, an entity recognizes the
financial and servicing assets it controls and the liabilities it has
incurred, derecognizes financial assets when control has been
surrendered, and derecognizes liabilities when extinguished. The
Company has determined that the adoption of this standard does not
have a material effect on the Company's financial position or results
of operations as of and for the period ended June 30, 1997.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per
Share" (SFAS 128). The Company is required to adopt SFAS 128 in the
fourth quarter of fiscal 1997 and will restate at that time earnings
per share (EPS) data for prior periods to conform with SFAS 128.
Earlier application is not permitted.
SFAS 128 replaces current EPS reporting requirements and requires a
dual presentation of basic and diluted EPS. Basic EPS excludes
dilution and is computed by dividing net income by the weighted
average of common shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted
into common stock.
If SFAS 128 had been in effect during the current and prior year
periods, basic EPS would have been $.59 and $.54 for the quarters
ended June 30, 1997 and 1996, respectively. Diluted EPS under SFAS
128 would not have been significantly different than primary EPS
currently reported for the periods.
In June 1997, the Financial Accounting Standards Board adopted
Statements of Financial Accounting Standards No. 130 (Reporting
Comprehensive Income), which requires that an enterprise report, by
major components and as a single total, the change in its net assets
during the period from nonowner sources; and No. 131 (Disclosures
about Segments of an Enterprise and Related Information), which
establishes annual and interim reporting standards for an
enterprise's business segments and related disclosures about its
products, services, geographic areas, and major customers. Adoption
of these statements will not impact the Company's consolidated
financial position, results of operations or cash flows. Both
statements are effective for fiscal years beginning after December
15, 1997, with earlier application permitted.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997.
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.
Net Income
The Company's net income was $2,183,000, an 8.07% increase from
$2,020,000 for the period ending June 30, 1996. On a per share
basis, net income for the six months ended June 30, 1997 and 1996
were $1.18 and $1.08, respectively.
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
$6,030,000 for the period ending June 30, 1997, an increase of 5.49%
over $5,716,000 for the period ending June 30, 1996.
The increase in average loan balances were offset by an increase in
average time deposits and decreasing yields on average interest
earning assets.
Net interest income (FTE) expressed as a percentage of average
earning assets, is referred to as net interest margin. The net
interest margin for June 30, 1997, decreased to 5.06% from 5.21% for
the same period ending June 30, 1996.
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 $248,000 to $1,470,000 for the period ending June
30, 1997, compared to $1,222,000 for the period ending June 30, 1996.
Non-Interest Expense
Non-interest expense increased $281,000 for the period ended June 30,
1997, compared to the period ended June 30, 1996.
The Company's efficiency ratio (derived by dividing total non-interest
expenses by net interest income exclusive of provision for
loan losses and non-interest income) was 52.0% for the six months
ended June 30, 1997, compared to 52.7% for the six months ended
June 30, 1996. The efficiency ratio is a measurement as to how efficiently
the Company allocates its resources.
The addition of NVB Online, which provides customers affordable home
banking and bill payment capabilities using screenphone and PC
technology, increased ATM activity, the issuance of the Visa
ATM/debit card, and increases in ACH activity all contributed to the
increase in data processing and ATM expenses.
A summary of non-interest expense for the period ending June 30, 1997
and 1996, is presented below:
Non-Interest Expense June 30
(in thousands) 1997 1996
Salaries & employee benefits $ 1,998 $ 1,966
Occupancy expense 232 216
Furniture & equipment expense 271 243
Professional services 77 74
Data processing expenses 173 115
Printing & supplies 111 110
Postage 92 86
Messenger expense 69 68
ATM expense 112 62
Other 480 394
Total Non-interest expense $ 3,615 $ 3,334
Income Taxes
The provision for income taxes for the period ended June 30, 1997,
was $799,000 as compared to $767,000 for the same period in 1996.
Impaired, Nonaccrual, Past Due and Restructured Loans and Other Real
Estate Owned
At June 30, 1997 the recorded investment in loans for which
impairment has been recognized in accordance with SFAS No. 114,
Accounting by Creditors for Impairment of a Loan, was approximately
$4,498,000. Of that balance approximately $357,000 has a related
valuation allowance of $108,000. For the period ended June 30, 1997,
the average recorded investment in loans for which impairment has
been recognized was approximately $2,928,000. During the portion of
the year that the loans were impaired the Company recognized
approximately $200,000 of interest income for cash payments received.
Based on management's reassessment of the loan portfolio, the loans
considered to be impaired increased.
At December 31, 1996, the recorded investment in loans for which
impairment has been recognized in accordance with SFAS No. 114,
Accounting by Creditors for Impairment of a Loan, was approximately
$2,612,000. Of that balance approximately $320,000 has a related
valuation allowance of $33,000. The remaining $2,292,000 did not
require a valuation allowance. For the year ended December 31, 1996,
the average recorded investment in loans for which impairment has
been recognized was approximately $2,244,000. During the portion of
the year that the loans were impaired the Company recognized
approximately $203,000 of interest income for cash payments received.
Nonaccrual loans are loans on which the accrual of interest has been
discontinued. Accrual of interest is discontinued on a loan when
management believes that borrowers' financial condition is such that
the collection of interest is doubtful, or when a loan becomes
contractually past due by 90 days or more with respect to interest or
principal. When a loan is placed on nonaccrual status, all interest
previously accrued but not collected is reversed against current
period interest income. Income on such loans is then recognized only
to the extent that cash is received and where the future collection
of principal is probable. Interest accruals are resumed on such
loans when in the judgement of management, the loans are estimated to
be fully collectible as to both principal and interest.
The Company's allowance for loan losses is maintained at a level
deemed by management to be adequate to provide for possible losses in
the loan portfolio based on the Bank's current loan portfolio
performance, anticipated growth in the portfolio, prevailing economic
conditions, historical credit loss experience, and other factors
deemed appropriate by management.
A summary of non-performing assets at June 30, 1997 and December 31,
1996, is as follows:
Non-Performing Assets June 30 December
(in thousands) 1997 1996
Nonaccrual loans $ 596 $ 1,190
Accruing loans past due 90 days
or more 5 14
Restructured loans -0- -0-
Other real estate owned 1,637 69
Total $ 2,238 $ 1,273
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
$1,386,000 or .84% of total loans at June 30, 1997, compared to
$1,254,000 or .75% at December 31, 1996. Net charge-offs were
$228,000 or .14% of average loans for the six months ended June 30,
1997. A provision for loan losses of $360,000 and $210,000 was
charged to income as of June 30, 1997 and 1996, respectively.
Management's continuing evaluation of the loan portfolio and
assessment of current economic conditions will dictate future funding
levels.
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 comply with demands from
depositors, borrowers and other commitments on a timely basis.
Collection of principal and interest on loans, the liquidations of
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 $6,000,000 as of June 30, 1997, were available
to provide liquidity. In addition, the Bank is a member of the
Federal Home Loan Bank ("FHLB") system providing an additional line
of credit of $4,990,000 secured by first deeds of trust on eligible
1-4 unit residential loans. The Company had not borrowed from FHLB
as of June 30, 1997.
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
$88,783,000 and $77,727,000 (or 33.1% and 30.31% of total assets) at
June 30, 1997 and December 31, 1996, 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
$40,173,000 and $39,997,000 for June 30, 1997 and December 31, 1996,
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 $219,711,000 and $209,320,000 at
June 30, 1997 and December 31, 1996, 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:
June 30, 1997 Within 3 3 months 1-5 5+
(in thousands) months to 1 Year Years Years TOTAL
EARNING ASSETS:
Held to maturity
securities $ 260 $ 470 $14,192 $25,251 $ 40,173
Available for sale
securities 260 3,992 6,595 3,222 14,069
Fed Funds Sold 20,400 -0- -0- -0- 20,400
Loans 43,194 12,878 52,989 56,917 165,978
Total earning assets $64,114 $17,340 $73,776 $85,390 $240,620
INTEREST BEARING LIABILITIES:
Interest bearing demand
deposits $ -0- 41,955 $ -0- $ -0- $ 41,955
Savings deposits -0- 48,057 -0- -0- 48,057
Time deposits 40,754 71,010 4,298 -0- 116,062
Total interest bearing
liabilities $40,754 $161,022 $ 4,298 $ -0- $206,074
INTEREST RATE SENSITIVITY
GAP $23,360 $(143,682)$ 69,478 $85,390$ 34,546
CUMULATIVE INTEREST RATE
SENSITIVITY GAP $23,360 $(120,322)$(50,844)$34,546
At June 30, 1997, 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.
The Bank had a negative gap in the twelve month period as of June 30,
1997, the asset liability simulation model showed the Bank was only
slightly liability sensitive in 1997.
Financial Condition
Total assets at June 30, 1997, were $267,853,000, representing an
increase of 4.27% over December 31, 1996 assets of $256,877,000.
During the first half of 1997, net loans decreased to $164,592,000,
from $166,983,000 at December 31, 1996. Loans are the major
component of earning assets. The Bank's average loan to deposit
ratio was 71.29% and 71.10% at June 30, 1997 and December 31, 1996,
respectively.
Investment securities and federal funds sold totaled $75,929,000 at
June 30, 1997, compared to $67,320,000 at December 31, 1996.
Funding for increases in the investment activity came from increases
in deposits. Total deposits increased $9,449,000 as of June 30,
1997, to $238,677,000, as compared to $229,228,000 at December 31,
1996. The increase was primarily 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 $25,540,000 as of June 30, 1997, as
compared to $23,900,000 for year end 1996.
The Company maintains capital to support capital needs, future growth
and dividend payouts while maintaining the confidence of depositors
and investors by increasing shareholders' value. The Company has
provided the majority of its capital requirements through the
retention of earnings.
The Company's and the Bank's regulatory capital ratios continue to be
strong and remain above regulatory minimums. The Company's total
risk based capital ratio at June 30, 1997 was 14.15% and its Tier 1
Risk Based Capital (RBC) ratio was 13.40%, exceeding the minimum
guidelines of 8% and 4%. The ratios at December 31, 1996 were 13.29%
and 12.58%, respectively.
The Company's leverage ratios were 9.43% and 8.98% at June 30, 1997
and December 31, 1996, significantly in excess of the minimum
guidelines of 4%.
Under current regulations adopted by federal regulatory agencies, a
"well-capitalized" institution must have a Tier 1 RBC ratio of at
least 6%, a total capital ratio of at least 10% and leverage ratio of
at least 5% and not be subject to a capital directive order. The
Bank had a Tier 1 RBC ratio of 12.68% and total capital ratio of
13.43% and a leverage ratio of 8.89% at June 30, 1997, compared with
12.04%, 12.72% and 8.56% at December 31, 1996, respectively.
The most recent notification from the Federal Deposit Insurance
Corporation for the Bank as of December 31, 1996 categorized the Bank
as well capitalized under the regulatory framework for prompt
corrective action. There are no conditions or events since that
notification that management believes have changed the Bank's
category.
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
1.5% at June 30, 1997) 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 JUNE 30, 1997, AS
COMPARED TO THE THREE MONTHS ENDED JUNE 30, 1996.
Net Income
The Company's net income for the three months ended June 30, 1997,
was $1,086,000, as compared to a net income of $996,000 for the same
period in 1996. The net income for the three month period ended June
30, 1997, resulted in net income per share of fifty-nine cents
($.59).
Net Interest Income
Net interest income on a fully tax-equivalent basis (FTE) increased
$132,000, or 4.49%, to $3,070,000 for the three months ended June 30,
1997, as compared to $2,938,000 for the same period in 1996.
Changes in net interest income are a result of changes in volume
between average earning assets and average interest bearing
liabilities and in the difference between interest yields from
average earning assets and the cost of average interest bearing
liabilities. Net interest income increased over 1996 levels
primarily due to an increase in volume on average loans.
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 5.09% and
5.28% for the three months ending June 30, 1997 and 1996,
respectively.
Non Interest Income
Total non interest income increased to $737,000, compared to $590,000
for the three months ended June 30, 1997 and 1996, respectively.
Non Interest Expense
Non interest expense increased during the second three months of 1997
to $1,850,000 compared to $1,713,000 for the same period in 1996.
The addition of NVB Online, which provides customers affordable home
banking and bill payment capabilities using screenphone and PC
technology, increased ATM activity, the issuance of the Visa
ATM/debit card, and increases in ACH activity all contributed to the
increase in data processing and ATM expenses.
A summary of non interest expense for the three month period ended
June 30, 1997 and 1996, is presented below:
Non Interest Expense June
(in thousands) 1997 1996
Salaries & employee benefits $1,002 $ 981
Occupancy 119 110
Furniture & equipment 138 121
Professional services 46 35
Data processing 88 60
Printing & supplies 55 54
Postage 44 39
Messenger expense 36 33
ATM 57 29
Other 265 251
TOTAL NON INTEREST EXPENSE $1,850 $1,713
PART II - OTHER INFORMATION
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of North Valley Bancorp was held
on Monday, May 19, 1997. Shareholders of North Valley Bancorp
approved the slate of directors as proposed, and the ratification of
Deloitte & Touche LLP as independent public accountants for the
Company was approved. Results of the election are presented in
Exhibit 23.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K:
Form 8-K, dated June 13, 1997 and listing Item 5, was filed by the
Company on June 17, 1997.
Exhibit 11 Statement re computation of earnings per common share
Exhibit 23 Consents of experts and counsel
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
North Valley Bancorp
(Registrant)
Date August 13, 1997 /s/ Sharon Benson
Sharon Benson
Senior Vice President &
Chief Financial Officer
EXHIBIT 11
Statement re computation of earnings per common share
(Amounts in thousands except per share amounts)
Three Three
Months Months
Ended Ended
6/30/97 6/30/96
Net income $ 1,086 $ 996
Weighted average number of common
shares outstanding 1,828,166 1,844,132
Assuming exercise of options reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such option 24,352 24,373
Weighted average shares used to compute
income per common and equivalent share 1,852,518 1,868,505
Income per common and equivalent share $ 0.59 $ 0.53
Six Six
Months Months
Ended Ended
6/30/97 6/30/96
Net income $ 2,183 $ 2,020
Weighted average number of common
shares outstanding 1,825,939 1,843,336
Assuming exercise of options reduced by
the number of shares which could have
been purchased with the proceeds from
exercise of such option 24,352 24,373
Weighted average shares used to compute
income per common and equivalent share 1,850,291 1,867,709
Income per common and equivalent share $ 1.18 $ 1.08
EXHIBIT 23
ANNUAL MEETING OF SHAREHOLDERS
MAY 19, 1997
TOTAL SHARES OUTSTANDING 1,823,688
TOTAL SHARES VOTING: 1,422,598
BY PROXY 1,229,352
IN PERSON 193,246
PERCENTAGE OF SHARES VOTED: 78.01%
1. TO ELECT DIRECTORS AS STATED IN THE PROXY STATEMENT:
FOR AUTHORITY WITHHELD TOTAL
1,419,474 3,124 1,422,598
2. RATIFICATION OF DELOITTE & TOUCHE:
FOR AGAINST ABSTAIN TOTAL
1,409,615 234 12,549 1,422,598
%
TOTAL SHARES VOTING BY PROXY 1,229,352 86.42
TOTAL SHARES VOTING IN PERSON 193,246 13.58
TOTAL VOTES CAST 1,422,598 100.00
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000353191
<NAME> NORTH VALLEY BANCORP
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 12,854
<INT-BEARING-DEPOSITS> 206,074
<FED-FUNDS-SOLD> 20,400
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 15,356
<INVESTMENTS-CARRYING> 40,173
<INVESTMENTS-MARKET> 41,810
<LOANS> 165,978
<ALLOWANCE> 1,386
<TOTAL-ASSETS> 267,853
<DEPOSITS> 238,677
<SHORT-TERM> 0
<LIABILITIES-OTHER> 3,636
<LONG-TERM> 0
0
0
<COMMON> 9,956
<OTHER-SE> 15,584
<TOTAL-LIABILITIES-AND-EQUITY> 267,853
<INTEREST-LOAN> 3,847
<INTEREST-INVEST> 1,105
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 4,952
<INTEREST-DEPOSIT> 2,154
<INTEREST-EXPENSE> 2,154
<INTEREST-INCOME-NET> 2,798
<LOAN-LOSSES> 180
<SECURITIES-GAINS> 51
<EXPENSE-OTHER> 1,850
<INCOME-PRETAX> 1,505
<INCOME-PRE-EXTRAORDINARY> 1,505
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,086
<EPS-PRIMARY> .59
<EPS-DILUTED> .59
<YIELD-ACTUAL> 4.58
<LOANS-NON> 596
<LOANS-PAST> 5
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,254
<CHARGE-OFFS> 242
<RECOVERIES> 14
<ALLOWANCE-CLOSE> 1,386
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
