REDDING, CA--(Marketwire - Oct 30, 2012) - North Valley Bancorp (NASDAQ: NOVB), a bank holding company with approximately $895 million in assets, today reported results for the third quarter and nine months ended September 30, 2012. North Valley Bancorp ("the Company") is the parent company for North Valley Bank ("the Bank").

The Company reported net income for the third quarter ended September 30, 2012 of $5,351,000, or $0.78 per diluted share, compared to net income of $1,320,000, or $0.19 per diluted share for the same period in 2011. The Company reported net income for the nine months ended September 30, 2012 of $7,092,000, or $1.04 per diluted share, compared to net income of $2,238,000, or $0.33 per diluted share, for the same period in 2011. Net income for the three and nine months ended September 30, 2012 included a $4,277,000 release of the deferred tax asset valuation allowance that was established in the third quarter of 2010. "We continue to make progress and execute our plan to rebuild the value of the Company for shareholders. The Company's already strong capital position increased as the valuation allowance for the deferred tax assets was eliminated. We will continue to focus on capital management, efficiency, reduction of nonperforming assets and loan production, as we plan for 2013," stated Michael J. Cushman, President and CEO.

The Company recorded provisions for loan losses of $700,000 and $2,100,000 for the third quarter and nine months ended September 30, 2012, respectively, compared to provisions for loan losses of $400,000 and $2,650,000 for the third quarter and nine months ended September 30, 2011, respectively. The allowance for loan losses at September 30, 2012 was $11,427,000, or 2.33% of total loans, compared to $12,656,000, or 2.77% of total loans at December 31, 2011 and $13,671,000, or 2.90% of total loans at September 30, 2011. 

At September 30, 2012, total assets were $894,551,000, a decrease of $16,738,000, or 1.8%, from $911,289,000 at September 30, 2011. The loan portfolio totaled $489,900,000 at September 30, 2012, an increase of $18,142,000, or 3.9%, compared to $471,758,000 at September 30, 2011. The increase in the loan portfolio was due to the purchase of $33,325,000 of jumbo residential mortgages during the third quarter ended September 30, 2012. The loan to deposit ratio at September 30, 2012 was 64.6% as compared to 61.3% at September 30, 2011, and 59.5% at December 31, 2011. Total deposits decreased $10,932,000, or 1.4%, to $758,476,000 at September 30, 2012 compared to $769,408,000 at September 30, 2011. When compared to December 31, 2011, total assets at September 30, 2012 decreased $10,415,000 from $904,966,000, loans increased by $33,685,000 from $456,215,000 and deposits decreased by $7,763,000 from $766,239,000. Available-for-sale investment securities and Federal funds sold decreased $13,180,000 and $39,805,000, respectively, from December 31, 2011 to September 30, 2012 resulting from the increase in loans. 

At September 30, 2012, the Company's Total Risk-based Capital was $112,076,000, and its risk-based capital ratios were: Total Risk-based Capital ratio - 18.4%; Tier 1 risk-based Capital ratio - 17.1%; and Tier 1 Leverage ratio - 11.6%. The Bank's Total Risk-based Capital at September 30, 2012 was $112,148,000, and its risk-based capital ratios were: Total Risk-based Capital ratio - 18.4%; Tier 1 risk-based Capital ratio - 17.2%; and Tier 1 Leverage ratio - 11.6%. 

Credit Quality

Nonperforming loans (defined as nonaccrual loans and loans 90 days or more past due and still accruing interest) decreased $563,000 to $11,579,000 at September 30, 2012 from $12,142,000 at September 30, 2011, and decreased $6,832,000 when compared to the December 31, 2011 balance of $18,411,000. Nonperforming loans as a percentage of total loans were 2.36% at September 30, 2012, compared to 2.57% at September 30, 2011, and 4.04% at December 31, 2011. 

The overall level of nonperforming loans decreased $5,192,000 to $11,579,000 at September 30, 2012 from $16,771,000 at June 30, 2012. During the third quarter of 2012, the Company identified eight loans totaling $3,298,000 as additional nonperforming loans. These additions were offset by reductions in nonperforming loans totaling $8,490,000 due primarily to transfers to OREO of six properties totaling $6,909,000, and secondarily due to charge-offs and collections received on certain loans. Of the eight loans totaling $3,298,000 identified as nonaccrual loans and added to nonperforming loans during the third quarter of 2012, one loan represents $1,952,000 of the total. This loan is for a special-use commercial real estate building located in Sacramento County. A specific reserve of $417,000 has been established on this loan. The remaining seven loans in this group of nonperforming loans total $1,346,000 and specific reserves totaling $50,000 have been established. 

Gross loan charge-offs for the third quarter of 2012 were $1,094,000 and recoveries totaled $89,000 resulting in net charge-offs of $1,005,000 compared to gross loan charge-offs for the third quarter of 2011 of $1,571,000 and recoveries of $96,000 resulting in net charge-offs of $1,475,000. Gross charge-offs for the nine months ended September 30, 2012 were $3,651,000 and recoveries totaled $322,000 resulting in net charge-offs of $3,329,000, compared to gross charge-offs for the nine months ended September 30, 2011 of $4,374,000 and recoveries of $402,000 resulting in net charge-offs of $3,972,000. 

Nonperforming assets (nonperforming loans and OREO) totaled $33,268,000 at September 30, 2012, an increase of $238,000 from the September 30, 2011 balance of $33,030,000, and a $5,249,000 decrease from the December 31, 2011 balance of $38,517,000. Nonperforming assets as a percentage of total assets were 3.72% at September 30, 2012 compared to 3.62% at September 30, 2011 and 4.26% at December 31, 2011. 

The Company's OREO properties increased $6,041,000 to $21,689,000 at September 30, 2012 from $15,648,000 at June 30, 2012. The increase in OREO was due to transfer of six properties into OREO totaling $6,909,000. The increase in OREO was partially offset by the sale of one property totaling $130,000, and a net write-down of certain other OREO properties during the quarter ended September 30, 2012 of $738,000. 

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 $134,000, or 1.7%, for the three months ended September 30, 2012 compared to the same period in 2011. Interest income decreased by $812,000, 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 $138,000 related to loans currently on nonaccrual status for the three months ended September 30, 2012 compared to $89,000 for the same period in 2011. Average loans increased $1,184,000 in the third quarter of 2012 compared to the third quarter of 2011, while the yield on the loan portfolio decreased 41 basis points to 5.56% for the third quarter of 2012. Partially offsetting this decrease in interest income was a decrease in interest expense of $678,000, or 48.7%, primarily due to a decrease in the rates paid on deposits and secondarily to a decrease in interest expense on its subordinated debentures. Overall, average earning assets increased $10,637,000 in the third quarter of 2012 compared to the third quarter of 2011. Average yields on earning assets decreased 46 basis points from the quarter ended September 30, 2011, to 4.13% for the quarter ended September 30, 2012 while the average rate paid on interest-bearing liabilities decreased by 43 basis points to 0.45%. The Company's net interest margin for the quarter ended September 30, 2012 was 3.78%, a decrease of 12 basis points from the margin of 3.90% for the third quarter in 2011 and an increase of 11 basis points from the 3.67% net interest margin for the quarter ended June 30, 2012. Net interest income decreased $1,377,000 for the nine months ended September 30, 2012 compared to the same period in 2011. Total interest income decreased by $2,811,000 for the nine months ended September 30, 2012 compared to the same period in 2011, primarily due to a decrease in income on loans of $2,521,000 as a result of both the decrease in the average balance of loans and a decrease in yield on loans. Interest expense decreased $1,434,000 due primarily to a decrease on rates paid on deposits for the nine months ended September 30, 2012 compared to the same period in 2011. The net interest margin for the nine months ended September 30, 2012 decreased 30 basis points to 3.70% from the net interest margin of 4.00% for the nine months ended September 30, 2011.

Noninterest income for the quarter ended September 30, 2012 increased $192,000, or 4.8%, to $4,204,000 from $4,012,000 for the same period in 2011. Service charges on deposits decreased $119,000 to $1,086,000 for the third quarter of 2012 compared to $1,205,000 for the third quarter of 2011, and other fees and charges decreased by $102,000 to $1,102,000 for the third quarter of 2012 compared to $1,204,000 for the same period in 2011. The Company recorded gains on the sale of loans of $769,000 for the third quarter of 2012, an increase of $587,000 from $182,000 for the same period in 2011 as the activity of the Company's real estate mortgage department continues to grow. The Company recorded a gain on the sale of securities of $697,000 for the third quarter ended September 30, 2012, a decrease of $162,000 from $859,000 for the same period in 2011. Noninterest income for the nine months ended September 30, 2012 increased $1,502,000 to $12,150,000 from $10,648,000 for the same period in 2011. Service charges on deposits decreased $269,000 to $3,274,000 for the nine months ended September 30, 2012 compared to $3,543,000 for the same period in 2011, while other fees and charges increased by $137,000 to $3,620,000 for the nine months ended September 30, 2012 compared to $3,483,000 for the same period in 2011. The Company recorded gains on the sale of loans of $1,858,000 for the nine months ended September 30, 2012, an increase of $901,000 from $957,000 for the same period in 2011, and the Company recorded a gain on the sale of securities of $1,656,000 for the nine months ended September 30, 2012, an increase of $807,000 from $849,000 for the same period in 2011.

Noninterest expense increased $162,000 to $9,759,000 for the third quarter of 2012 from $9,597,000 for the third quarter of 2011. Salaries and employee benefits increased $303,000 to $5,005,000 for the third quarter of 2012 compared to the third quarter of 2011 due primarily to the expansion of the Company's real estate department and the development of incentive plans. The increase in salaries and benefits expense was partially offset by a decrease in occupancy and equipment expense of $73,000, a decrease in other real estate owned expense of $60,000, and a decrease in FDIC insurance premiums and state assessments of $82,000. Noninterest expense for the nine months ended September 30, 2012 was $28,643,000, a decrease of $160,000 compared to $28,803,000 for the same period in 2011. For the nine months ended September 30, 2012, salaries and employee benefits increased $1,219,000 while occupancy and equipment expense decreased $323,000. Other real estate owned expense was $1,793,000 for the first nine months of 2012 compared to $2,506,000 for the first nine months of 2011 and FDIC insurance premiums and state assessments were $701,000 for the first nine months of 2012 compared to $1,040,000 for the first nine months of 2011.

The Company recorded a benefit for income taxes for the quarter and nine months ended September 30, 2012 of $3,893,000 and $3,251,000, respectively, which was the result of the reversal of the $4,277,000 deferred tax asset valuation allowance (the Company had recorded a provision for income taxes of $1,026,000 in 2012). The deferred tax asset valuation allowance was established in the third quarter of 2010 when it was determined to be more likely than not that a portion of the Company's deferred tax asset would not be realized due to the Company's previous losses and the uncertainty of the Company's ability to generate sufficient future taxable income. To determine if the benefit of its net deferred tax asset will more likely than not be realized, the Company's management analyzed both positive and negative evidence that may affect the realization of the deferred tax asset. This evidence includes sustained pre-tax income for eight consecutive quarters as of September 30, 2012. Other evidence considered by management includes the termination of the supervisory agreement by and among North Valley Bancorp, North Valley Bank, and the Federal Reserve Bank of San Francisco, effective April 16, 2012; the approval by the Federal Reserve Bank of San Francisco and the California Department of Financial Institutions allowing North Valley Bank upstream $16.5 million to the Company to pay all deferred interest on its subordinated debentures and to fully redeem its North Valley Capital Trust I subordinated notes in the amount of $10.3 million; the redemption of the Company's North Valley Capital Trust I on July 25, 2012; estimates of sustained future earnings; and the length of the carryforward period in which the Company must utilize its net operating losses and tax credits. During the quarter ended December 31, 2011, the Company reversed the Federal portion of its valuation allowance in the amount of $223,000, and in the quarter ended September 30, 2012, the Company reversed the remaining valuation allowance of $4,277,000. 

North Valley Bancorp is a bank holding company headquartered in Redding, California. Its subsidiary, North Valley Bank ("NVB"), operates twenty-four 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 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
				September 30,
Statement of Income				2012				2011			$ Change				% Change
Interest income
	Loans (including fees)			$	6,663			$	7,134		$	(471	)		(6.60	%)
	Investment securities				1,753				2,082			(329	)		(15.80	%)
	Federal funds sold and other				10				22			(12	)		(54.55	%)
		Total interest income			8,426				9,238			(812	)		(8.79	%)
Interest expense
	Interest on deposits				462				940			(478	)		(50.85	%)
	Subordinated debentures				243				451			(208	)		(46.12	%)
	Other borrowings				8				-			8			-
		Total interest expense			713				1,391			(678	)		(48.74	%)
Net interest income					7,713				7,847			(134	)		(1.71	%)
Provision for loan losses					700				400			300			75.00	%
Net interest income after provision for loan losses					7,013				7,447			(434	)		(5.83	%)
Noninterest income
	Service charges on deposit accounts				1,086				1,205			(119	)		(9.88	%)
	Other fees and charges				1,102				1,204			(102	)		(8.47	%)
	Gain on sale of loans, net				769				182			587			322.53	%
	Gain on sales of securities, net				697				859			(162	)		(18.86	%)
	Other				550				562			(12	)		(2.14	%)
		Total noninterest income			4,204				4,012			192			4.79	%
Noninterest expenses
	Salaries and employee benefits				5,005				4,702			303			6.44	%
	Occupancy				651				732			(81	)		(11.07	%)
	Furniture and equipment				237				229			8			3.49	%
	Other real estate owned expense				817				877			(60	)		(6.84	%)
	FDIC and state assessments				212				294			(82	)		(27.89	%)
	Other				2,837				2,763			74			2.68	%
		Total noninterest expenses			9,759				9,597			162			1.69	%
		Income before (benefit) provision for income taxes			1,458				1,862			(404	)		(21.70	%)
(Benefit) provision for income taxes					(3,893	)			542			(4,435	)		(818.27	%)
		Net income		$	5,351			$	1,320		$	4,031			305.38	%
Common Share Data
	Basic and diluted earnings per share			$	0.78			$	0.19		$	0.59			310.53	%
	Shares outstanding				6,835,192				6,833,369
	Basic weighted average shares outstanding				6,834,769				6,834,369
	Dilutive weighted average shares outstanding				6,835,769				6,834,369
	Book value per share			$	14.47			$	13.28
	Tangible book value			$	14.43			$	13.22

NORTH VALLEY BANCORP
CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited)
(Dollars in thousands, except share and per share data)
				Nine Months Ended
				September 30,
Statement of Income				2012				2011			$ Change				% Change
Interest income
	Loans (including fees)			$	19,457			$	21,978		$	(2,521	)		(11.47	%)
	Investment securities				5,943				6,251			(308	)		(4.93	%)
	Federal funds sold and other				55				37			18			48.65	%
		Total interest income			25,455				28,266			(2,811	)		(9.94	%)
Interest expense
	Interest on deposits				1,800				3,034			(1,234	)		(40.67	%)
	Subordinated debentures				1,213				1,420			(207	)		(14.58	%)
	Other borrowings				8				1			7			700.00	%
		Total interest expense			3,021				4,455			(1,434	)		(32.19	%)
Net interest income					22,434				23,811			(1,377	)		(5.78	%)
Provision for loan losses					2,100				2,650			(550	)		(20.75	%)
Net interest income after provision for loan losses					20,334				21,161			(827	)		(3.91	%)
Noninterest income
	Service charges on deposit accounts				3,274				3,543			(269	)		(7.59	%)
	Other fees and charges				3,620				3,483			137			3.93	%
	Gain on sale of loans, net				1,858				957			901			94.15	%
	Gain on sales of securities, net				1,656				849			807			95.05	%
	Other				1,742				1,816			(74	)		(4.07	%)
		Total noninterest income			12,150				10,648			1,502			14.11	%
Noninterest expenses
	Salaries and employee benefits				15,113				13,894			1,219			8.77	%
	Occupancy				1,911				2,124			(213	)		(10.03	%)
	Furniture and equipment				709				819			(110	)		(13.43	%)
	Other real estate owned expense				1,793				2,506			(713	)		(28.45	%)
	FDIC and state assessments				701				1,040			(339	)		(32.60	%)
	Other				8,416				8,420			(4	)		(0.05	%)
		Total noninterest expenses			28,643				28,803			(160	)		(0.56	%)
		Income before (benefit) provision for income taxes			3,841				3,006			835			27.78	%
(Benefit) provision for income taxes					(3,251	)			768			(4,019	)		(523.31	%)
		Net income		$	7,092			$	2,238		$	4,854			216.89	%
Common Share Data
	Basic and diluted earnings per share			$	1.04			$	0.33		$	0.71			215.15	%
	Shares outstanding				6,835,192				6,833,752
	Basic weighted average shares outstanding				6,834,095				6,832,787
	Dilutive weighted average shares outstanding				6,835,095				6,832,787
	Book value per share			$	14.47			$	13.28
	Tangible book value			$	14.43			$	13.22

NORTH VALLEY BANCORP
CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited)
(Dollars in thousands)
			September 30,					December 31,			September 30,
Balance Sheet Data				2012				2011				2011
Assets
	Cash and due from banks			$	19,436			$	18,758			$	21,662
	Federal funds sold				405				40,210				68,535
	Time deposits at other financial institutions				2,210				1,959				459
	Available-for-sale securities - at fair value				299,025				312,205				272,880
	Held-to-maturity securities - at amortized cost				6				6				6
	Loans net of deferred loan fees				489,900				456,215				471,758
	Allowance for loan losses				(11,427	)			(12,656	)			(13,671	)
		Net loans			478,473				443,559				458,087
	Premises and equipment, net				9,303				8,661				8,158
	Other real estate owned				21,689				20,106				20,888
	Core deposit intangibles, net				292				401				437
	Accrued interest receivable and other assets				63,712				59,101				60,177
Total assets				$	894,551			$	904,966			$	911,289
Liabilities and Shareholders' Equity
	Deposits:
	Demand, noninterest bearing			$	166,968			$	167,506			$	163,241
	Demand, interest bearing				181,302				170,124				169,030
	Savings and money market				232,865				216,299				219,438
	Time				177,341				212,310				217,699
		Total deposits			758,476				766,239				769,408
	Accrued interest payable and other liabilities				15,510				17,301				19,170
	Subordinated debentures				21,651				31,961				31,961
Total liabilities					795,637				815,501				820,539
	Shareholders' equity				98,914				89,465				90,750
Total liabilities and shareholders' equity				$	894,551			$	904,966			$	911,289
Asset Quality
	Nonaccrual loans			$	11,573			$	18,359			$	11,953
	Loans past due 90 days and accruing interest				6				52				189
	Other real estate owned				21,689				20,106				20,888
		Total nonperforming assets		$	33,268			$	38,517			$	33,030
	Classified assets			$	49,921			$	59,742			$	67,691
	Bank Tier 1 Capital + ALLL			$	115,852			$	126,323			$	127,382
	Classified assets ratio				43.09	%			47.29	%			53.14	%
	Allowance for loan losses to total loans				2.33	%			2.77	%			2.90	%
	Allowance for loan losses to NPL's				98.69	%			68.74	%			112.59	%

NORTH VALLEY BANCORP
CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited)
(Dollars in thousands)
				Three Months Ended								Nine Months Ended
				September 30,								September 30,
Selected Financial Ratios				2012				2011				2012				2011
	Return on average total assets				2.32	%			0.58	%			1.04	%			0.33	%
	Return on average shareholders' equity				22.59	%			5.85	%			10.23	%			3.45	%
	Net interest margin (tax equivalent basis)				3.78	%			3.90	%			3.70	%			4.00	%
	Efficiency ratio				81.89	%			80.93	%			82.82	%			83.59	%
Selected Average Balances
	Loans			$	475,600			$	474,416			$	458,826			$	489,692
	Taxable investments				311,736				279,548				313,546				278,685
	Tax-exempt investments				11,663				14,092				12,290				14,283
	Federal funds sold and other				17,770				38,076				31,207				21,394
		Total earning assets		$	816,769			$	806,132			$	815,869			$	804,054
		Total assets		$	913,239			$	898,452			$	912,386			$	895,754
	Demand deposits - interest bearing			$	180,431			$	163,610			$	178,725			$	163,140
	Savings and money market				226,630				221,669				223,022				220,911
	Time deposits				184,802				211,521				199,983				216,650
	Subordinated debentures				24,116				31,961				29,327				31,961
	Other borrowings				11,056				-				3,749				-
		Total interest bearing liabilities		$	627,035			$	628,761			$	634,806			$	632,662
	Demand deposits - noninterest bearing			$	168,658			$	161,939			$	161,464			$	157,923
	Shareholders' equity			$	93,957			$	89,446			$	92,365			$	86,743

NORTH VALLEY BANCORP
CONDENSED CONSOLIDATED FINANCIAL DATA
(Unaudited)
(Dollars in thousands, except per share data)
			For the Quarter Ended
			September				June			March			December
			2012				2012			2012			2011
Interest income			$	8,426			$	8,420		$	8,609		$	8,879
Interest expense				713				1,091			1,217			1,331
	Net interest income			7,713				7,329			7,392			7,548
Provision for loan losses				700				1,000			400			-
Noninterest income				4,204				4,687			3,259			3,717
Noninterest expense				9,759				9,228			9,656			10,912
Income before (benefit) provision for income taxes				1,458				1,788			595			353
(Benefit) provision for income taxes				(3,893	)			527			115			(456	)
	Net income		$	5,351			$	1,261		$	480		$	809
Common Share Data
	Basic and diluted earnings per share		$	0.78			$	0.18		$	0.07		$	0.12