NOTE 1 - BASIS OF PRESENTATION

9 Months Ended

Sep. 30, 2012

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

NOTE 1 - BASIS OF PRESENTATION

General

The accompanying unaudited condensed consolidated financial statements of North Valley Bancorp and subsidiaries (the “Company”) have been prepared in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, certain information and notes required by accounting principles generally accepted in the United States for annual financial statements are not included herein. Management believes that the disclosures are adequate to make the information not misleading. In the opinion of management, all adjustments (consisting solely of normal recurring adjustments) considered necessary for a fair presentation of the results for the interim periods presented have been included. 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, 2011. Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for any subsequent period or for the year ended December 31, 2012.

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries North Valley Bank, a California banking corporation (“NVB”) and North Valley Trading Company, a California corporation, which is inactive. Significant intercompany items and transactions have been eliminated in consolidation. The Company owns the common stock of three business trusts that have issued trust preferred securities fully and unconditionally guaranteed by the Company. North Valley Capital Trust II, North Valley Capital Trust III and North Valley Capital Statutory Trust IV are unconsolidated subsidiaries and have issued an aggregate of $21,651,000 in trust preferred securities, which are reflected as debt on the Company’s condensed consolidated balance sheets. On July 25, 2012, the Company redeemed, in full, the notes associated with North Valley Capital Trust I in the amount of $10,310,000. 

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Management has determined that since all of the banking products and services offered by the Company are available in each branch of NVB, all branches are located within the same economic environment and management does not allocate resources based on the performance of different lending or transaction activities, it is appropriate to aggregate NVB branches and report them as a single operating segment. No single customer accounts for more than ten percent of revenues for the Company or NVB.

Restatement

Management of the Company concluded that there was an error in the calculation of the Company's tax benefits recorded in the quarter ended September 30, 2012. Specifically, the tax benefits recognized in the third quarter ended September 30, 2012, resulting from the reversal of a state deferred tax asset valuation allowance of $4,277,000, did not include an offset of $1,347,000 for the increase in federal deferred tax liabilities associated with the reversal. As a result of this error, other assets and total assets decreased, other liabilities and total liabilities decreased, equity decreased, and the benefit from income taxes (Note 7), net income, total comprehensive income and earnings per share (Note 10) decreased. The financial statements and related footnotes that follow have been updated and figures that were impacted by the amendments to this Form 10-Q have been identified with “Restated.”

The table below outlines the changes to the balance sheet for the period noted:

Balance Sheet (in thousands)	September 30, 2012
	(As previously reported)			(Restated)
ASSETS
Other Assets		17,323			15,826
TOTAL ASSETS	$	894,551		$	893,054
LIABILITIES AND STOCKHOLDERS' EQUITY
Other Liabilities		15,510			15,360
Total liabilities		795,637			795,487
STOCKHOLDERS’ EQUITY:
Preferred stock, no par value: authorized 5,000,000 shares; no shares outstanding at September 30, 2012 and December 31, 2011		—			—
Common stock, no par value: authorized 60,000,000 shares; outstanding 6,835,192 and 6,833,752 at September 30, 2012 and December 31, 2011,  respectively		98,443			98,443
Accumulated deficit		(3,198	)		(4,545	)
Accumulated other comprehensive income, net of tax		3,669			3,669
Total stockholders’ equity		98,914			97,567
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	894,551		$	893,054

The table below outlines the changes to the income statement and earnings per share for the periods noted:

Income Statement	Three months ended September 30, 2012						Nine months ended September 30, 2012
(In thousands except per share data)	(As previously reported)			(Restated)			(As previously reported)			(Restated)
Income before benefit for income taxes	$	1,458		$	1,458		$	3,841		$	3,841
Benefit for income taxes		(3,893	)		(2,546	)		(3,251	)		(1,904	)
Net income		5,351			4,004			7,092			5,745
Total other comprehensive income, net of tax		477			477			2,199			2,199
Comprehensive income	$	5,828		$	4,481		$	9,291		$	7,944
Calculation of basic earnings per share:
Numerator - net income	$	5,351		$	4,004		$	7,092		$	5,745
Denominator -
Weighted average common shares outstanding		6,835			6,835			6,834			6,834
Basic earnings per share	$	0.78		$	0.59		$	1.04		$	0.84
Calculation of diluted earnings per share:
Numerator - net income	$	5,351		$	4,004		$	7,092		$	5,745
Denominator -
Weighted average common shares outstanding		6,835			6,835			6,834			6,834
Dilutive effect of outstanding options		1			1			1			1
Weighted average common shares outstanding and common stock equivalents		6,836			6,836			6,835			6,835
Diluted earnings per share	$	0.78		$	0.59		$	1.04		$	0.84