Northern Empire Bancshares Announces Record Earnings of $18.3 Million for 2006
SANTA ROSA, CA -- 01/24/2007 -- Northern Empire Bancshares (NASDAQ: NREB),
the financial holding company for Sonoma National Bank, reported annual net
income of $18.3 million for the year end 2006 compared to $17.2 million for
the year end 2005, an increase of 6.4%. Diluted earnings per share for the
year ended December 31, 2006 were $1.61 compared to $1.52 for the year
ended December 31, 2005. Earnings for 2006 were impacted by pre-tax
expenses of approximately $751,000, related to the proposed merger with
Sterling Financial Corporation (Sterling). Annualized return on average
assets was 1.39% and return on average equity was 15.52% for the year ended
December 31, 2006.
On September 18, 2006, Northern Empire Bancshares announced the signing of
a definitive agreement in connection with the proposed merger of Northern
Empire Bancshares and Sterling Financial Corporation headquartered in
Spokane, Washington. Deborah Meekins, President & CEO of Northern Empire
Bancshares commented, "The announcement of the proposed merger with
Sterling Financial Corporation has been very positive. Our cultures are
very similar and the enhanced innovation and technology Sterling brings
will prove very beneficial to our customers and provide greater
opportunities for future growth. The proposed merger is subject to
regulatory approvals and approval by the shareholders of both NREB and
Sterling. A special meeting of NREB shareholders will be held for this
purpose on Tuesday, February 20, 2007, at 5:00 p.m. at 801 Fourth Street,
Santa Rosa, California."
Net interest income totaled $48.3 million in 2006, an increase of 5.7% from
$45.7 million reported for the prior year. This reflects an increase in
average earnings assets of $148.7 million, or 13.0% which was partially
offset by a 26 basis point decline in net interest margin, from 3.99% in
2005 to 3.73% for 2006. Ms. Meekins stated, "The margin compression is a
trend which continues to impact the banking industry and is a result of a
flat yield curve, the Federal Reserve's past rate increases and strong
competition in all lines of business."
The Company's efficiency ratio for 2006 increased slightly and totaled
38.57% compared to 36.96% in 2005, primarily due to merger related
expenses. The efficiency ratio in both 2005 and 2006 are considered low
when compared to industry averages. Non-interest income of $4.6 million in
2006 versus $4.4 million in 2005 increased 4.5%. Gain on sales of loans
increased $100,000 in 2006 when compared to 2005 and totaled $3.1 million.
Total assets at December 31, 2006 were $1.36 billion, an increase of 10.6%
from the $1.23 billion reported one year ago. Total loans grew 10.9% to
$1.22 billion at December 31, 2006 compared to $1.10 billion at year end
2005.
Loan quality at Sonoma National has historically been extremely sound, with
a low level of non-performing loans and no net charge-offs in 2006. At
December 31, 2006, non-performing loans increased to $2.3 million, or 0.17%
of total loans which is considered a low level when compared to industry
standards. The Bank added $1.75 million to reserves in recognition of the
10.9% loan growth over the past twelve months. The allowance for loan
losses was $12.5 million at December 31, 2006.
Deposits totaled $978.4 million at December 31, 2006, an increase of 10.2%
when compared to $888.0 million reported one year ago. Sonoma National Bank
will open its 13th branch in early February 2007 in Novato, California,
located in northern Marin County. The Bank continues to utilize Federal
Home Loan Bank advances as a funding source. At December 31, 2006, advances
totaled $249.3 million, up 8.2%, when compared to advances of $230.4
million at December 31, 2005.
The Company remained well capitalized, with total risk-based capital of
12.24% at December 31, 2006. Total capital equaled $127.3 million on
December 31, 2006, an increase of 18.6% compared to $107.3 million on
December 31, 2005.
About the Company
Northern Empire Bancshares, the financial holding company for Sonoma
National Bank, was incorporated in 1982. The Bank specializes in commercial
real estate lending and is a leading SBA lender in the North Bay area; it
has twelve branch locations -- nine in Sonoma County, of which four are
in-store banking offices, two in Contra Costa and one in Marin County. The
Bank also has loan production offices in San Francisco, Walnut Creek, San
Rafael, Sacramento, and Phoenix, Arizona. Northern Empire Bancshares
announced the signing of a proposed merger agreement with Sterling
Financial Corporation on September 18, 2006. For more information on
Northern Empire Bancshares and Sonoma National Bank, please refer to the
Company's Website at www.snbank.com.
Forward-Looking Statements
Except for historical information contained herein, the statements
contained in this press release are forward-looking statements within the
meaning of the "safe harbor" provisions of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
1934, as amended. These forward-looking statements are subject to risks
and uncertainties. Actual results may differ materially from those set
forth in or implied by forward-looking statements. These risks are
described from time to time in Northern Empire Bancshares' Securities and
Exchange Commission filings, including its annual reports on Form 10-K and
quarterly reports on Form 10-Q. Northern Empire Bancshares disclaims any
intent or obligation to update these forward-looking statements.
NORTHERN EMPIRE BANCSHARES
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
2006 2005
--------------- ---------------
(Unaudited) (Audited)
ASSETS
Cash and due from banks $ 23,509,000 $ 28,936,000
Federal funds sold 91,843,000 30,188,000
--------------- ---------------
Total cash and cash equivalents 115,352,000 59,124,000
Securities available for sale 1,093,000 50,488,000
Federal Reserve Bank stock 166,000 166,000
Federal Home Loan Bank stock 15,243,000 11,731,000
Total loans and leases 1,221,237,000 1,101,521,000
Allowance for loan and lease losses (12,499,000) (10,749,000)
--------------- ---------------
Total Loans and leases, net 1,208,738,000 1,090,772,000
Premises and equipment, net 2,654,000 3,292,000
Accrued interest receivable and other
assets 18,641,000 16,161,000
--------------- ---------------
Total assets $ 1,361,887,000 $ 1,231,734,000
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing $ 97,004,000 $ 80,808,000
Interest-bearing 881,386,000 807,219,000
--------------- ---------------
Total deposits 978,390,000 888,027,000
Federal Home Loan Bank advances 249,340,000 230,379,000
Accrued expenses and other
liabilities 6,833,000 6,021,000
--------------- ---------------
Total liabilities 1,234,563,000 1,124,427,000
--------------- ---------------
SHAREHOLDERS' EQUITY
Common stock 74,562,000 60,655,000
Additional paid-in-capital 8,388,000 7,681,000
Retained earnings 44,378,000 39,072,000
Accumulated other comprehensive
income (loss) (4,000) (101,000)
--------------- ---------------
Total shareholders' equity 127,324,000 107,307,000
--------------- ---------------
Total liabilities and
shareholders' equity $ 1,361,887,000 $ 1,231,734,000
=============== ===============
NORTHERN EMPIRE BANCSHARES
CONSOLIDATED REPORTS OF INCOME
THREE MONTHS THREE MONTHS
ENDED ENDED YEAR ENDED YEAR ENDED
December 31, December 31, December 31, December 31,
2006 2005 2006 2005
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
INTEREST INCOME
Loans, including
fees $ 23,802,000 $ 19,240,000 $ 89,545,000 $ 70,621,000
Investment
securities 349,000 708,000 2,095,000 1,546,000
Federal funds sold 1,232,000 289,000 3,310,000 2,171,000
------------ ------------ ------------ ------------
Total interest
income 25,383,000 20,237,000 94,950,000 74,338,000
INTEREST EXPENSE
Deposits 10,114,000 6,535,000 33,403,000 21,533,000
Federal Home Loan
Bank advances 3,267,000 1,991,000 13,271,000 7,113,000
------------ ------------ ------------ ------------
Total interest
expense 13,381,000 8,526,000 46,674,000 28,646,000
------------ ------------ ------------ ------------
Net interest
income 12,002,000 11,711,000 48,276,000 45,692,000
Provision for loan
and lease losses 350,000 600,000 1,750,000 2,250,000
------------ ------------ ------------ ------------
Net interest
income after
provision for
loan and lease
losses 11,652,000 11,111,000 46,526,000 43,442,000
NON INTEREST INCOME
Service charges on
deposit accounts 108,000 126,000 466,000 494,000
Net gain on sales of
loans 707,000 854,000 3,122,000 3,022,000
Other income 281,000 214,000 1,057,000 876,000
------------ ------------ ------------ ------------
Total non
interest income 1,096,000 1,194,000 4,645,000 4,392,000
NON INTEREST EXPENSE
Salaries and
benefits 3,037,000 2,679,000 12,541,000 11,078,000
Occupancy 560,000 504,000 2,130,000 1,907,000
Furniture and
equipment 280,000 277,000 1,146,000 1,132,000
Other expense 1,145,000 969,000 4,601,000 4,397,000
------------ ------------ ------------ ------------
Total non
interest expense 5,022,000 4,429,000 20,418,000 18,514,000
------------ ------------ ------------ ------------
Income before
income tax
provision 7,726,000 7,876,000 30,753,000 29,320,000
Income tax provision 3,111,000 3,267,000 12,457,000 12,073,000
------------ ------------ ------------ ------------
Net income $ 4,615,000 $ 4,609,000 $ 18,296,000 $ 17,247,000
============ ============ ============ ============
Basic earnings per
share $ 0.42 $ 0.42 $ 1.67 $ 1.58
Diluted earnings per
share $ 0.41 $ 0.40 $ 1.61 $ 1.52
NORTHERN EMPIRE BANCSHARES
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
Year ended
Fourth quarter December 31,
------------------------ ------------------------
(dollars in thousands
except per share data) 2006 2005 2006 2005
----------- ----------- ----------- -----------
EARNINGS
Net interest income $ 12,003 $ 11,711 $ 48,276 $ 45,692
Provision for loan
and lease losses $ 350 $ 600 $ 1,750 $ 2,250
Noninterest income $ 1,096 $ 1,194 $ 4,645 $ 4,392
Noninterest expense $ 5,022 $ 4,430 $ 20,418 $ 18,514
Net income $ 4,615 $ 4,609 $ 18,296 $ 17,247
Basic earnings per
share* $ 0.42 $ 0.42 $ 1.67 $ 1.58
Diluted earnings per
share* $ 0.41 $ 0.40 $ 1.61 $ 1.52
Average shares
outstanding* 10,985,143 10,916,320 10,946,668 10,896,884
Average diluted
shares outstanding* 11,349,448 11,380,189 11,362,834 11,369,375
PERFORMANCE RATIOS
Return on average
assets 1.35% 1.51% 1.39% 1.47%
Return on average
common equity 14.64% 17.27% 15.52% 17.33%
Net interest margin 3.56% 3.92% 3.73% 3.99%
Efficiency ratio 38.34% 34.33% 38.57% 36.96%
Full-time equivalent
employees 172 172 172 172
CAPITAL
Average equity to
average assets 9.19% 8.73% 8.95% 8.47%
Tier 1 leverage
capital ratio 9.33% 8.84% 9.33% 8.84%
Tier 1 risk-based
capital ratio 11.12% 11.04% 11.12% 11.04%
Total risk-based
capital ratio 12.24% 12.18% 12.24% 12.18%
Book value per
share* $ 11.56 $ 9.83 $ 11.56 $ 9.83
ASSET QUALITY
Gross loan
charge-offs $ 0 $ 0 $ 0 $ 0
Net loan charge-offs $ 0 $ 0 $ 0 $ 0
Net loan charge-offs
to average loans 0.00% 0.00% 0.00% 0.00%
Allowance for loan
losses $ 12,499 $ 10,749 $ 12,499 $ 10,749
Allowance for losses
to total loans 1.02% 0.98% 1.02% 0.98%
Nonperforming loans $ 2,315 $ 618 $ 2,315 $ 618
Other real estate
and repossessed
assets $ 0 $ 0 $ 0 $ 0
Nonperforming assets
to total assets 0.17% 0.05% 0.17% 0.05%
END OF PERIOD BALANCES
Loans $ 1,221,237 $ 1,101,521 $ 1,221,237 $ 1,101,521
Total earning assets
(before allowance) $ 1,339,136 $ 1,192,448 $ 1,339,136 $ 1,192,448
Total assets $ 1,361,887 $ 1,231,734 $ 1,361,887 $ 1,231,734
Deposits $ 978,390 $ 888,027 $ 978,390 $ 888,027
Shareholders' equity $ 127,324 $ 107,307 $ 127,324 $ 107,307
* Adjusted for 5% stock dividend declared in March 2006.