NBAN North Bay Bancorp (MM)

North Bay Bancorp (Nasdaq:NBAN), parent of The Vintage Bank and its Solano Bank Division, today announced quarterly earnings of $1.65 million or $.39 per diluted share for the quarter ended June 30, 2006. The results equate to a 4.0% increase compared to earnings of $1.59 million or $.37 per diluted share for the quarter ended June 30, 2005. Earnings for the six months ended June 30, 2006 increased 10.4% to $3.36 million or $.79 per diluted share from $3.05 million or $.72 per diluted share for the six months ended June 30, 2005. All per share results reflect the 5% stock dividend paid on April 12, 2006. The year to date results equate to a 12.91% return on average equity and a 1.12% return on average assets. Increases in short-term interest rates and the resulting increase in cost of funds have resulted in a 24 basis point decrease in net interest margin to 5.32% for the quarter ended June 30, 2006 as compared to 5.56% for the quarter ended March 31, 2006 and remain consistent with the quarter ended June 30, 2005. The net interest margin for the six months ended June 30, 2006 increased 7 basis points to 5.43% compared to 5.36% during the same period a year ago. Total net loans and leases grew 13.6% to $451 million at June 30, 2006 from $397 million at June 30, 2005. Total deposits decreased 5.4% to $482 million at June 30, 2006 from $510 million at June 30, 2005. "These results reflect the current banking and economic environment, presenting us with intense price competition for deposits compounded by the challenges of a flat yield curve," stated President and CEO Terry Robinson. "Despite these challenges, we have continued to grow quality loans and non interest-bearing business deposits," noted Robinson. Financial Review and Operating Highlights (Quarter ended 6/30/06 compared to 6/30/05) -- Net income for the quarter increased 4.0% to $1.65 million -- Earnings per diluted share increased 3.0% to $0.39 -- Revenues for the quarter increased 6.5% to $8.51 million -- Non-interest bearing checking deposits increased 10.8% from a year previous, representing 34.9% of total deposits -- Net loans and leases grew 13.6% to $451 million during the previous year -- Total assets grew 7.7% to $636 million from a year previous -- Asset quality remained exemplary Second Quarter 2006 Event Highlights -- North Bay Bancorp was again included on the list of the July 2006 US BANKER Magazine's Top 200 Community Banks, moving up to 74th on the list -- A major reorganization of North Bay's Executive Team and structure was completed during the quarter -- Michael W. Wengel assumed the Chief Financial Officer position effective June 19 -- The total number of North Bay directors was reduced from 16 to 11 concurrent with the Company's Annual Meeting in May Operating Results Total revenues (net interest income before the provision for loan and lease losses plus non-interest income, excluding gains on sales of loans) increased 7.9% to $16.8 million for the first six months of 2006 compared to $15.6 million for the same period a year ago. The net interest margin was 5.43% for the six months ended June 30, 2006 and 5.32% for the second quarter of 2006, up 7 basis points from the first six months of 2005 and consistent with the second quarter of 2005. Year to date net interest income increased 8.6% to $14.7 million, with interest income rising 17.3% and interest expense increasing 70.8% from the same period of 2005. Michael W. Wengel, Executive Vice President and Chief Financial Officer, commented, "It is likely that margins will continue to moderately compress during the remainder of 2006 as the impact of any future increases in rates paid on deposits will likely exceed any benefits from increases in asset yields." The provision for loan and lease losses of $200,000 for the six months ended June 30, 2006 was 51.8% below the $415,000 provision for the same period of 2005. Year to date net interest income after the provision for loan and lease losses increased 10.5% to $14.5 million through June 30, 2006 compared to $13.1 million for the same period of 2005. Non-interest income increased 9.9% to $2,239,000 during the first six months of 2006 compared to $2,037,000 during the same period of 2005. Gain on sale of loans as well as 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 65.7% for the first six months of 2006 compared with 64.7% during the same period 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 $209,000 in amortization of an investment in an affordable housing bond that generates tax credits) by net interest income increased for the tax effect of tax-free interest and non-interest income, measures overhead costs as a percentage of total revenues. Operating (non-interest) expense for the first six months of 2006 increased 13.2% to $11.6 million from $10.2 million during the same period of 2005, primarily due to increases in salaries and benefits. 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, year to date 2006 salaries and benefits expense includes $186,000 related to vesting of stock options while no such expense was recorded during the same period of 2005. "As noted last quarter, we expect the Efficiency Ratio to improve modestly for the balance of 2006," Robinson stated. "Our moves to substantially increase management capacity along with requirements to expense stock options and grants have permanently increased our salaries and benefits expense from 2005. Going forward, however, we expect lower audit and consulting fees, particularly those relating to Sarbanes-Oxley Section 404 compliance and over the longer term our full-time equivalent employee numbers relative to our asset size will improve," Robinson added. Pre-tax income rose 4.6% during the first six months of 2006 to $5.2 million from $5.0 million during the same period of 2005. The tax provision decreased to 35.1% of pre-tax income during the first half of 2006 from 38.5% for the same period of 2005. The lower tax rate in 2006 compared with 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 for the first six months of 2006 decreased to 12.91%, down 32 basis points from the same period a year ago. Return on average assets increased 3 basis points to 1.12% for the first half of 2006 from 1.09% for the same period of 2005. Balance Sheet (at June 30, 2006 compared to June 30, 2005) Total assets increased 7.7% to $636 million as of June 30, 2006 compared to $590 million a year ago. Loans and leases, net of the allowance for loan and lease losses, grew 13.6% to $451 million at June 30, 2006, up from $397 million as of June 30, 2005. Commercial and industrial loans increased 44.3% to $105 million while commercial real estate loans grew 6.0% to $269 million. Construction loans decreased 22.8% to $25 million and consumer loans increased 8.2% to $42 million. Asset quality remained excellent at June 30, 2006 with one $44,000 non-performing loan. The allowance for loan and lease losses was $5.1 million, or 1.12% of loans outstanding, compared to $4.5 million or 1.13% of loans outstanding at June 30, 2005. Net charge-offs were $8,000 in the second quarter of 2006 and $12,000 for the first six months of 2006. Total deposits as of June 30, 2006 decreased 5.4% to $482 million from a year ago. Core deposits, which exclude time certificates, decreased 6.6% to $401 million, or 83% of total deposits, compared to $429 million or 85% of total deposits a year ago. Non-interest bearing checking accounts increased 10.8% to $169 million, representing 34.9% of total deposits. Fed Funds Purchased and Other Borrowings combined have increased $66 million to $85 million at June 30, 2006 from a year ago. "The combination of healthy loan growth and decreasing deposit balances has led to increases in wholesale funding," CFO Wengel stated," Management is developing a plan to lower the amount of wholesale borrowings which is expected to positively impact the net interest margin." Book value per share increased 9.8% to $12.71 from $11.58 at June 30, 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, in the State of California or locally are less favorable than expected; (4) legislation or regulatory requirements or changes adversely affect the business in which the organization will be engaged; (5) other risks detailed in the North Bay Bancorp reports filed with the Securities and Exchange Commission. -0- *T NORTH BAY BANCORP ---------------------------------------------------------------------- CONSOLIDATED INCOME STATEMENT 3-Month Period Ended: (in $000's except per share data; unaudited) 6/30/2006 6/30/2005 % Change ---------------------------------- Interest Income $ 9,540 $ 8,085 18.0% Interest Expense 2,218 1,171 89.4% ----------- ----------- Net Interest Income 7,322 6,914 5.9% Provision for Loan & Lease Losses 100 230 -56.5% ----------- ----------- Net Interest Income after Loan Loss Provision 7,222 6,684 8.0% Service Charges 518 516 0.4% Gain on Sale of Loans 126 - Bank Owned Life Insurance Income 101 85 18.8% Other Non-Interest Income 447 480 -6.9% ----------- ----------- Total Non-Interest Income 1,192 1,081 10.3% Salaries & Benefits 3,154 2,735 15.3% Occupancy Expense 431 446 -3.4% Equipment Expense 489 532 -8.1% Other Non-Interest Expenses 1,703 1,460 16.6% ----------- ----------- Total Non-Interest Expenses 5,777 5,173 11.7% Income Before Taxes 2,637 2,592 1.7% Provision for Income Taxes 988 1,007 -1.9% ----------- ----------- ---------------------------------------------------------------------- Net Income $ 1,649 $ 1,585 4.0% =========== =========== ---------------------------------------------------------------------- TAX DATA Tax-Exempt Muni Income $ 228 $ 109 109.2% Tax-Exempt BOLI Income $ 101 $ 85 18.8% Interest Income - Fully Tax Equivalent $ 9,657 $ 8,181 18.0% ---------------------------------------------------------------------- NET CHARGE-OFFS (RECOVERIES) $ 8 $ 6 NM ---------------------------------------------------------------------- PER SHARE DATA 3-Month Period Ended: (unaudited) 6/30/2006 6/30/2005 % Change ----------- ----------- ---------- Basic Earnings per Share $ 0.40 $ 0.39 2.9% Diluted Earnings per Share $ 0.39 $ 0.37 3.0% Common Dividends Paid $ 0.14 $ - Wtd. Avg. Shares Outstanding 4,123,466 4,078,370 Wtd. Avg. Diluted Shares 4,279,727 4,235,915 Book Value per Basic Share (EOP) $ 12.71 $ 11.58 9.8% Tangible Book Value per Share $ 12.54 $ 11.58 8.3% Common Shares Outstanding. (EOP) 4,126,116 4,078,935 ---------------------------------------------------------------------- KEY FINANCIAL RATIOS 3-Month Period Ended: (unaudited) 6/30/2006 6/30/2005 ----------- ----------- Return on Average Equity 11.79% 13.65% Return on Average Assets 1.07% 1.10% Net Interest Margin (Tax- Equivalent) 5.32% 5.32% Efficiency Ratio (Tax-Equivalent) 65.50% 63.90% ---------------------------------------------------------------------- AVERAGE BALANCES 3-Month Period Ended: (in $000's, unaudited) 6/30/2006 6/30/2005 % Change ----------- ----------- ---------- Average Assets $ 618,092 $ 575,951 7.3% Average Earning Assets $ 560,449 $ 525,398 6.7% Average Gross Loans & Leases $ 443,008 $ 406,467 9.0% Average Deposits $ 484,002 $ 496,177 -2.5% Average Equity $ 56,117 $ 46,585 20.5% ---------------------------------------------------------------------- ---------------------------------------------------------------------- CONSOLIDATED INCOME STATEMENT 6-Month Period Ended: (in $000's except per share data; unaudited) 6/30/2006 6/30/2005 % Change ----------- ----------- ---------- Interest Income $ 18,493 $ 15,761 17.3% Interest Expense 3,797 2,223 70.8% ----------- ----------- Net Interest Income 14,696 13,538 8.6% Provision for Loan & Lease Losses 200 415 -51.8% ----------- ----------- Net Interest Income after Loan Loss Provision 14,496 13,123 10.5% Service Charges 1,018 1,039 -2.0% Gain on Sale of Loans 126 - Bank Owned Life Insurance Income 206 176 17.0% Other Non-Interest Income 889 822 8.2% ----------- ----------- Total Non-Interest Income 2,239 2,037 9.9% Salaries & Benefits 6,360 5,459 16.5% Occupancy Expense 906 840 7.9% Equipment Expense 968 1,079 -10.3% Other Non-Interest Expenses 3,322 2,830 17.4% ----------- ----------- Total Non-Interest Expenses 11,556 10,208 13.2% Income Before Taxes 5,179 4,952 4.6% Provision for Income Taxes 1,815 1,905 -4.7% ----------- ----------- ---------------------------------------------------------------------- Net Income $ 3,364 $ 3,047 10.4% =========== =========== ---------------------------------------------------------------------- TAX DATA Tax-Exempt Muni Income $ 459 $ 219 109.6% Tax-Exempt BOLI Income $ 206 $ 176 17.0% Interest Income - Fully Tax Equivalent $ 18,729 $ 15,891 17.9% ---------------------------------------------------------------------- NET CHARGE-OFFS (RECOVERIES) $ 12 $ 10 NM ---------------------------------------------------------------------- PER SHARE DATA 6-Month Period Ended: (unaudited) 6/30/2006 6/30/2005 % Change ----------- ----------- ---------- Basic Earnings per Share $ 0.82 $ 0.75 8.9% Diluted Earnings per Share $ 0.79 $ 0.72 9.4% Common Dividends Paid $ 0.14 $ 0.14 0.0% Wtd. Avg. Shares Outstanding 4,117,749 4,059,883 Wtd. Avg. Diluted Shares 4,277,672 4,240,203 Book Value per Basic Share (EOP) $ 12.71 $ 11.58 9.8% Tangible Book Value per Share $ 12.54 $ 11.58 8.3% Common Shares Outstanding. (EOP) 4,126,116 4,078,935 ---------------------------------------------------------------------- KEY FINANCIAL RATIOS 6-Month Period Ended: (unaudited) 6/30/2006 6/30/2005 ----------- ----------- Return on Average Equity 12.91% 13.23% Return on Average Assets 1.12% 1.09% Net Interest Margin (Tax- Equivalent) 5.43% 5.36% Efficiency Ratio (Tax-Equivalent) 65.67% 64.70% ---------------------------------------------------------------------- AVERAGE BALANCES 6-Month Period Ended: (in $000's, unaudited) 6/30/2006 6/30/2005 % Change ----------- ----------- ---------- Average Assets $ 607,292 $ 565,704 7.4% Average Earning Assets $ 554,519 $ 513,620 8.0% Average Gross Loans & Leases $ 431,957 $ 397,506 8.7% Average Deposits $ 496,180 $ 486,117 2.1% Average Equity $ 52,537 $ 46,442 13.1% ---------------------------------------------------------------------- ---------------------------------------------------------------------- STATEMENT OF CONDITION (in $000's, End of Period: 6-Month Annual unaudited) 6/30/2006 12/31/2005 6/30/2005 Chg Chg -------------------------------- ------- --------- ASSETS Cash and Due from Banks $ 40,451 $ 28,174 $ 24,369 43.6% 66.0% Securities and Fed Funds Sold 108,495 131,780 131,353 -17.7% -17.4% Commercial & Industrial 105,082 86,546 72,821 21.4% 44.3% Commercial Secured by Real Estate 268,910 249,773 253,577 7.7% 6.0% Real Estate 16,856 8,557 5,851 97.0% 188.1% Construction 24,682 32,593 31,990 -24.3% -22.8% Consumer 41,868 38,859 38,678 7.7% 8.2% ---------- ----------- ---------- Gross Loans & Leases 457,398 416,328 402,917 9.9% 13.5% Deferred Loan Fees (1,399) (1,448) (1,415) -3.4% -1.1% ---------- ----------- ---------- Loans & Leases Net of Deferred Fees 455,999 414,880 401,502 9.9% 13.6% Allowance for Loan & Lease Losses (5,112) (4,924) (4,541) 3.8% 12.6% ---------- ----------- ---------- Net Loans & Leases 450,887 409,956 396,961 10.0% 13.6% Loans Held-for-Sale - - 9,707 -100.0% Bank Premises & Equipment 9,349 9,475 9,731 -1.3% -3.9% Other Assets 26,573 23,312 18,036 14.0% 47.3% ---------- ----------- ---------- Total Assets $ 635,755 $ 602,697 $ 590,157 5.5% 7.7% ========== =========== ========== LIABILITIES & CAPITAL Demand Deposits $ 168,523 $ 155,320 $ 152,065 8.5% 10.8% NOW / Savings Deposits 142,969 148,336 144,722 -3.6% -1.2% Money Market Deposits 89,210 128,684 132,353 -30.7% -32.6% Time Certificates of Deposit 81,487 84,053 80,521 -3.1% 1.2% ---------- ----------- ---------- Total Deposits 482,189 516,393 509,661 -6.6% -5.4% Federal Funds Purchased 12,000 - - Other Borrowings 73,000 19,000 19,000 284.2% 284.2% Subordinated Debentures 10,310 10,310 10,310 0.0% 0.0% ---------- ----------- ---------- Total Deposits & Interest Bearing Liabilities 577,499 545,703 538,971 5.8% 7.1% Other Liabilities 5,826 6,941 3,958 -16.1% 47.2% Total Capital 52,430 50,053 47,228 4.7% 11.0% ---------- ----------- ---------- Total Liabilities & Capital $ 635,755 $ 602,697 $ 590,157 5.5% 7.7% ========== =========== ========== ---------------------------------------------------------------------- CREDIT QUALITY DATA End of Period: (in $000's, unaudited) 6/30/2006 12/31/2005 6/30/2005 ---------- ----------- ---------- Non-Accruing Loans $ 44 $ - $ - Over 90 Days PD and Still Accruing - - - Other Real Estate Owned - - - ---------- ----------- ---------- Total Non- Performing Assets $ 44 $ - $ - --------------------------------- Non-Performing Loans to Total Loans 0.01% 0.00% 0.00% Non-Performing Assets to Total Assets 0.01% 0.00% 0.00% Allowance for Loan Losses to Loans 1.12% 1.18% 1.13% ---------------------------------------------------------------------- OTHER PERIOD-END End of Period: STATISTICS (unaudited) 6/30/2006 12/31/2005 6/30/2005 Shareholders' Equity / Total Assets 8.2% 8.3% 8.0% Loans / Deposits 94.9% 80.6% 79.1% Non-Interest Bearing Deposits / Total Deposits 34.9% 30.1% 29.8% ---------------------------------------------------------------------- *T