NBAN North Bay Bancorp (MM)

North Bay Bancorp (Nasdaq:NBAN), parent of The Vintage Bank and its Solano Bank Division, today reported profits increased 17.3% in the quarter ended March 31, 2006, compared to the first quarter a year ago. The results equate to a 13.43% return on average equity and a 1.17% return on average assets. Solid loan demand and general increases in short-term interest rates contributed to a higher net interest margin. In the first quarter, loans grew 7.4%, deposits increased 4.1%, and the net interest margin improved 18 basis points to 5.56% from a year ago. Net income increased to $1.7 million, or $0.40 per diluted share, compared to $1.5 million, or $0.34 per diluted share, in the first quarter of 2005. All per share results reflect the 5% stock dividend paid on April 12, 2006. "These results reflect our current focus on building an infrastructure and management team to take us beyond $1 billion in assets," stated President and CEO Terry Robinson. "Also, we are emphasizing growth in profitability over growth in assets; the slower growth than the previous five years is consistent with that strategy," Robinson noted. First Quarter 2006 Financial Review and Operating Highlights (for the quarter ended 3/31/06 compared to 3/31/05) -- Net income increased 17.3% to $1.7 million -- Earnings per diluted share increased 17.6% to $0.40 -- Revenues increased 11.1% to $8.4 million -- Deposits grew 4.1% to $510 million, of which 84% are low-cost core deposits -- Net loans grew 7.4% to $427 million -- Asset quality remained exemplary Operating Results Total revenues (net interest income before the provision for loan losses plus non-interest income, excluding securities gains) increased 11.1% to $8.4 million in the first quarter of 2006 from $7.6 million in the same quarter a year ago. The net interest margin expanded to 5.56%, up 18 basis points from the first quarter a year ago and up 4 basis points from the fourth quarter of 2005. First quarter net interest income increased 11.3% to $7.4 million, with interest income rising 16.6% and interest expense increasing 50.1% from the first quarter of 2005. "The run-up in short-term interest rates this past 18 months has positively impacted our net interest margin," stated Pat Phelan, Executive Vice President and Chief Financial Officer. Phelan continued, "Our outlook is for a modest narrowing of the margin during the remainder of 2006 as the impact of any future increases in rates paid on deposits will likely exceed the anticipated benefit of any future increases in asset yields." The provision for loan losses of $100,000 in the first quarter 2006 was 45.9% below the $185,000 provision in the first quarter a year ago. Net interest income after the provision for loan losses increased 13.0% to $7.3 million compared to $6.4 million in the first quarter of 2005. Non-interest income increased 9.5% to $1,047,000 during the first quarter of 2006 compared to $956,000 in the first quarter of 2005. Increases in ATM fees, commissions received on investment products sold, earnings on the cash value of life insurance and earnings on non-marketable equity securities all contributed to the increase. The tax equivalent efficiency ratio rose to 65.85% in the first quarter of 2006 compared to 65.54% in the first quarter a year ago, as some components of operating costs increased more rapidly than revenues. The efficiency ratio, calculated by dividing non-interest expense (not including $120,000 in amortization of an investment in an affordable housing bond that generates tax credits) by net interest income adjusted for tax-free interest and non-interest income, measures overhead costs as a percentage of total revenues. Operating (non-interest) expense in the first quarter of 2006 increased 14.8% to $5.8 million from $5.0 million in the first quarter of 2005, primarily due to increases in salaries and wages. Also, as of January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS 123R), using the modified-prospective transition method, and commenced expensing the fair value (at the grant date) of all unvested stock options outstanding as of December 31, 2005 over the remaining vesting periods. Consequently, first quarter 2006 salaries and benefits expense includes $85,000 related to vesting of stock options while no such expense was recorded in the first quarter of 2005. "We expect the efficiency ratio to decline modestly for the remainder of 2006," Robinson noted. "New additions and changes to the Senior Management team as well as staffing increases in risk management, compliance and internal audit functions along with the requirement to expense stock options and stock grants have permanently increased our core salaries and benefits expense. However, we now have the staffing infrastructure in place to grow significantly with very modest increases in full-time equivalent employees." Pre-tax income rose 7.7% in the first quarter to $2.54 million from $2.36 million in the first quarter of 2005. The tax provision decreased to 32.5% of first quarter pre-tax income from 38.1% of pre-tax income in 2005. The lower tax rate in the first quarter of 2006 compared to the first quarter of 2005 was primarily due to a $2 million investment in affordable housing bonds near year-end 2005 that generate income tax credits. Return on average equity in the first quarter of 2006 improved to 13.43%, up 41 basis points from the first quarter a year ago. Return on average assets was 1.17% in the first quarter, up 11 basis points compared to 1.06% in the first quarter of 2005. Balance Sheet (at March 31, 2006 compared to March 31, 2005) Total assets increased 7.6% to $611 million compared to $568 million a year ago. Loans, net of the allowance for loan losses, grew 7.4% to $427 million, up from $398 million a year ago. Commercial and industrial loans increased 27.9% while commercial real estate loans grew a modest 1.8% to $259 million. Construction loans at $31 million and consumer loans at $38 million were virtually unchanged from the prior year. Deposits grew 4.1% during the year to $510 million at quarter-end. Core deposits, which exclude time certificates, increased 2.9% to $429 million, or 84% of total deposits, compared to $417 million or 85% of total deposits a year ago. Non-interest bearing checking accounts increased 16.7% to $162 million, representing 31.7% of total deposits. Book value per share increased 12.6% to $12.49 from $11.09 a year ago. Asset quality remains excellent at quarter-end with one $300,000 nonperforming loan that is fully secured by a certificate of deposit. This represents the first nonperforming loan reported at quarter-end in over six years. The allowance for loan and lease losses was $5.0 million, or 1.16% of loans outstanding, compared to $4.3 million or 1.07% of loans outstanding a year ago. Net charge-offs were $4,000 in the first quarter, equaling the amount of net charge-offs in the first quarter of 2005. About North Bay Bancorp North Bay Bancorp is the holding company for The Vintage Bank in Napa County and Solano Bank, a Division of The Vintage Bank, in Solano County. This full-service commercial bank offers a wide selection of deposit, loan and investment services to local consumers and small business customers. The Vintage Bank opened in 1985 and now operates six banking offices in Napa County, Northern California's number one tourist destination and the nation's premier wine producing region. The main office and two branch offices are located in the City of Napa. Vintage also has branches in the City of St. Helena, American Canyon and the Southern industrial area of Napa County. Solano Bank, a Division of The Vintage Bank, launched in July 2000, has offices in the primary cities along the I-80 corridor of Solano County, including Vacaville, Fairfield, Vallejo and Benicia and an off-site ATM facility in downtown Fairfield. Solano County is projected to be the fastest growing county in Northern California through year 2030, and is attracting businesses and residents with a quality lifestyle, affordable housing and business-friendly attitudes. This news release contains forward-looking statements with respect to the financial condition, results of operation and business of North Bay Bancorp and its subsidiaries. All financial results are unaudited and therefore subject to change. These include, but are not limited to, statements that relate to or are dependent on estimates or assumptions relating to the prospects of loan growth, credit quality and certain operating efficiencies resulting from the operations of The Vintage Bank and its Solano Bank Division. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) competitive pressure among financial services companies increases significantly; (2) changes in the interest rate environment on interest margins; (3) general economic conditions, internationally, nationally or in the State of California are less favorable than expected; (4) legislation or regulatory requirements or changes adversely affect the business in which the combined organization will be engaged; (5) finalization of the year-end audit results and (6) other risks detailed in the North Bay Bancorp reports filed with the Securities and Exchange Commission. -0- *T NORTH BAY BANCORP ---------------------------------------------------------------------- CONSOLIDATED INCOME 3-Month Period Ended: STATEMENT (in $000's, unaudited) 3/31/2006 12/31/2005 3/31/2005 % Change ------------------------------------------- Interest Income $ 8,953 $ 9,197 $ 7,676 16.6% Interest Expense 1,579 1,444 1,052 50.1% ---------- ----------- ---------- Net Interest Income 7,374 7,753 6,624 11.3% Provision for Loan & Lease Losses 100 100 185 -45.9% ---------- ----------- ---------- Net Interest Income after Loan Loss Provision 7,274 7,653 6,439 13.0% Service Charges 500 495 523 -4.4% Loan Sale & Servicing Income 7 7 7 0.0% Bank Owned Life Insurance Income 105 35 88 19.3% Other Non-Interest Income 435 400 338 28.7% Gain on Investments - - - NM ---------- ----------- ---------- Total Non-Interest Income 1,047 937 956 9.5% Salaries & Benefits 3,206 2,950 2,724 17.7% Occupancy Expense 475 470 394 20.6% Equipment Expense 479 471 547 -12.4% Other Non-Interest Expenses 1,619 1,861 1,370 18.2% ---------- ----------- ---------- Total Non-Interest Expenses 5,779 5,752 5,035 14.8% Income Before Taxes 2,542 2,838 2,360 7.7% Provision for Income Taxes 827 1,069 898 -7.9% ---------- ----------- ---------- ---------------------------------------------------------------------- Net Income $ 1,715 $ 1,769 $ 1,462 17.3% ========== =========== ========== ---------------------------------------------------------------------- TAX DATA Tax-Exempt Muni Income $ 231 $ 201 $ 110 110.0% Tax-Exempt BOLI Income $ 105 $ 35 $ 88 19.3% Interest Income -- Fully Tax Equivalent $ 9,072 $ 9,301 $ 7,733 17.3% ---------------------------------------------------------------------- NET CHARGE-OFFS (RECOVERIES) $ 4 $ 8 $ 4 0.0% ---------------------------------------------------------------------- PER SHARE DATA 3-Month Period Ended: (unaudited) 3/31/2006 12/31/2005 3/31/2005 % Change ------------------------------------------- Basic Earnings per Share $0.42 $0.43 $0.36 16.7% Diluted Earnings per Share $0.40 $0.42 $0.34 17.6% Common Dividends Declared $0.14 $0.00 $0.14 Wtd. Avg. Shares Outstanding 4,111,968 4,094,744 4,041,189 Wtd. Avg. Diluted Shares 4,275,593 4,262,650 4,244,287 Book Value per Share (EOP) $ 12.49 $ 12.21 $ 11.09 12.6% Tangible Book Value per Share $ 12.31 $ 12.03 $ 11.09 11.0% Common Shares Outstanding (EOP) 4,120,919 4,100,376 4,077,442 ---------------------------------------------------------------------- KEY FINANCIAL RATIOS 3-Month Period Ended: (unaudited) 3/31/2006 12/31/2005 3/31/2005 ------------------------------------------- Return on Average Equity 13.43% 14.04% 13.02% Return on Average Assets 1.17% 1.12% 1.06% Net Interest Margin (Tax- Equivalent) 5.56% 5.52% 5.38% Efficiency Ratio (Tax- Equivalent) 65.85% 65.28% 65.54% ---------------------------------------------------------------------- AVERAGE BALANCES 3-Month Period Ended: (in $000's, unaudited) 3/31/2006 12/31/2005 3/31/2005 % Change ------------------------------------------- Average Assets $ 596,364 $ 624,224 $ 559,631 6.6% Average Earning Assets $ 546,143 $ 564,787 $ 503,767 8.4% Average Gross Loans & Leases $ 420,328 $ 409,219 $ 387,994 8.3% Average Deposits $ 505,601 $ 538,380 $ 480,151 5.3% Average Equity $ 51,804 $ 49,998 $ 45,523 13.8% ---------------------------------------------------------------------- ---------------------------------------------------------------------- STATEMENT OF CONDITION End of Period: Annual (in $000's, unaudited) 3/31/2006 12/31/2005 3/31/2005 Chg ------------------------------------------- ASSETS Cash and Due from Banks $ 28,422 $ 28,174 $ 27,838 2.1% Securities and Fed Funds Sold 122,347 131,780 114,986 6.4% Commercial & Industrial 92,876 86,094 72,592 27.9% Commercial Secured by Real Estate 259,430 249,773 254,740 1.8% Real Estate 12,056 8,557 6,324 90.6% Construction 30,977 32,593 31,206 -0.7% Consumer 38,299 38,859 38,785 -1.3% ---------- ----------- ---------- Gross Loans & Leases 433,638 415,876 403,647 7.4% Deferred Loan Fees (1,449) (1,448) (1,484) -2.4% ---------- ----------- ---------- Loans & Leases Net of Deferred Fees 432,189 414,428 402,163 7.5% Allowance for Loan & Lease Losses (5,020) (4,924) (4,317) 16.3% ---------- ----------- ---------- Net Loans & Leases 427,169 409,504 397,846 7.4% Loans Held-for-Sale - - 481 -100.0% Bank Premises & Equipment 9,293 9,475 10,038 -7.4% Other Assets 24,079 23,764 17,131 40.6% ---------- ----------- ---------- Total Assets $ 611,310 $ 602,697 $ 568,320 7.6% ========== =========== ========== LIABILITIES & CAPITAL Demand Deposits $ 161,582 $ 155,320 $ 138,437 16.7% NOW / Savings Deposits 151,689 148,336 148,811 1.9% Money Market Deposits 116,201 128,684 130,057 -10.7% Time Certificates of Deposit 80,419 84,053 72,277 11.3% ---------- ----------- ---------- Total Deposits 509,891 516,393 489,582 4.1% Other Borrowings 31,800 19,000 19,000 67.4% Subordinated Debentures 10,310 10,310 10,310 0.0% ---------- ----------- ---------- Total Deposits & Interest Bearing Liabilities 552,001 545,703 518,892 6.4% Other Liabilities 7,859 6,941 4,213 86.5% ---------- ----------- ---------- Total Capital 51,450 50,053 45,215 13.8% ---------- ----------- ---------- Total Liabilities & Capital $ 611,310 $ 602,697 $ 568,320 7.6% ========== =========== ========== ---------------------------------------------------------------------- CREDIT QUALITY DATA End of Period: (in $000's, unaudited) 3/31/2006 12/31/2005 3/31/2005 --------------------------------- Non-Accruing Loans $ 300 $ - $ - Over 90 Days PD and Still Accruing 0 0 0 Other Real Estate Owned 0 0 0 ---------- ----------- ---------- Total Non-Performing Assets $ 300 $ - $ - --------------------------------- ---------------------------------------------------------------------- Non-Performing Loans to Total Loans 0.07% 0.00% 0.00% Non-Performing Assets to Total Assets 0.05% 0.00% 0.00% Allowance for Loan Losses to Loans 1.16% 1.18% 1.07% ---------------------------------------------------------------------- OTHER PERIOD-END STATISTICS End of Period: (unaudited) 3/31/2006 12/31/2005 3/31/2005 Shareholders' Equity/ Total Assets 8.4% 8.3% 8.0% Loans/Deposits 85.0% 80.5% 82.4% Non-Interest Bearing Deposits/Total Deposits 31.7% 30.1% 28.3% ---------------------------------------------------------------------- *T