SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR the quarter ended September 30, 2000
Commission File No. 333-93365
NORTH BAY BANCORP
-----------------
(Name of Small Business Issuer in its Charter)
California 68-0434802
---------- ----------
(State or Jurisdiction of incorporation) (I.R.S. Employer Identification No.)
1500 Soscol Avenue, Napa, California 94559-1314
-----------------------------------------------
(Address of principal office including Zip Code)
Issuer's telephone number, including area code: (707) 257-8585
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
--------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes X No
------- -------
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares of the North Bay Bancorp's Common Stock outstanding
as of November 9, 2000: 1,848,403
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT
(Check one):
Yes No X
------- -------
<PAGE>
Item 1.
Financial Information
FORWARD LOOKING STATEMENTS
In addition to the historical information contained herein, this Quarterly
Report contains certain forward-looking statements. The reader of this Quarterly
Report should understand that all such forward-looking statements are subject to
various uncertainties and risks that could affect their outcome. The Company's
actual results could differ materially from those suggested by such
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, variances in the actual versus
projected growth in assets, return on assets, loan losses, expenses, rates
charged on loans and earned on securities investments, rates paid on deposits,
competition effects, fee and other noninterest income earned as well as other
factors. This entire Quarterly Report should be read to put such forward-looking
statements in context and to gain a more complete understanding of the
uncertainties and risks involved in the Company's business.
Moreover, wherever phrases such as or similar to "In Management's opinion", or
"Management considers" are used, such statements are as of and based upon the
knowledge of Management, at the time made and are subject to change by the
passage of time and/or subsequent events, and accordingly such statements are
subject to the same risks and uncertainties noted above with respect to
forward-looking statements.
FINANCIAL INFORMATION
The information for the three months and nine months ended September 30, 2000
and September 30, 1999, is unaudited, but in the opinion of management reflects
all adjustments which are necessary to present fairly the financial condition of
North Bay Bancorp (Company) at September 30, 2000 and the results of operations
and cash flows for the three months and nine months then ended. Results for
interim periods should not be considered as indicative of results for a full
year.
2
<PAGE>
<TABLE>
<CAPTION>
North Bay Bancorp
Consolidated Balance Sheets
(Unaudited)
September 30, September 30, December 31,
Assets: 2000 1999 1999
------------- ------------- -------------
<S> <C> <C> <C>
Cash and due from banks $ 11,708,000 $ 8,418,000 $ 8,466,000
Federal funds sold 7,730,000 5,000,000 1,500,000
Time deposits with other financial institutions 100,000 100,000 100,000
------------- ------------- -------------
Total cash and cash equivalents 19,538,000 13,518,000 10,066,000
Investment securities:
Held-to-maturity 1,353,000 1,390,000 1,390,000
Available-for-sale 49,420,000 57,950,000 55,264,000
Loans, net of allowance for loan losses of $2,168,000
in September, 2000 $1,940,000 in September, 1999
and $1,987,000 in December, 1999 147,503,000 115,285,000 120,166,000
Bank premises and equipment, net 5,175,000 2,813,000 2,883,000
Accrued interest receivable and other assets 6,928,000 6,699,000 7,337,000
------------- ------------- -------------
Total assets $ 229,917,000 $ 197,655,000 $ 197,106,000
============= ============= =============
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Non-interest bearing $ 50,055,000 $ 39,971,000 $ 38,337,000
Interest bearing 149,515,000 133,624,000 134,043,000
------------- ------------- -------------
Total deposits 199,570,000 173,595,000 172,380,000
Long term debt 3,000,000 0 0
Short term borrowings 0 5,000,000 5,000,000
------------- ------------- -------------
Total borrowings 3,000,000 5,000,000 5,000,000
Accrued interest payable and other liabilities 2,025,000 1,274,000 1,636,000
------------- ------------- -------------
Total liabilities 204,595,000 179,869,000 179,016,000
------------- ------------- -------------
Shareholders' equity:
Preferred stock - no par value:
Authorized, 500,000 shares;
Issued and outstanding - none
Common stock - no par value:
Authorized, 10,000,000 shares;
Issued and outstanding - 1,848,403 shares in
September 2000, 1,533,922 shares in September, 1999,
and 1,536,568 in December, 1999 19,761,000 12,294,000 12,893,000
Retained earnings 6,190,000 6,171,000 6,368,000
Accumulated other comprehensive loss (629,000) (679,000) (1,171,000)
------------- ------------- -------------
Total shareholders' equity 25,322,000 17,786,000 18,090,000
Total liabilities and shareholders' equity $ 229,917,000 $ 197,655,000 $ 197,106,000
============= ============= =============
<FN>
The accompanying notes are an integral part of these statements
</FN>
</TABLE>
3
<PAGE>
<TABLE>
North Bay Bancorp
Consolidated Income Statements
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Interest Income
Loans (including fees) $ 3,402,000 $ 2,503,000 $ 9,355,000 $ 7,136,000
Federal funds sold 89,000 37,000 210,000 118,000
Investment securities - taxable 624,000 729,000 1,958,000 2,275,000
Investment securities - tax exempt 167,000 198,000 507,000 514,000
------------ ------------ ------------ ------------
Total Interest income 4,282,000 3,467,000 12,030,000 10,043,000
Interest Expense 1,444,000 1,108,000 4,059,000 3,171,000
------------ ------------ ------------ ------------
Net interest income 2,838,000 2,359,000 7,971,000 6,872,000
Provision for loan losses 100,000 60,000 280,000 180,000
------------ ------------ ------------ ------------
Net interest income after
provision for loan losses 2,738,000 2,299,000 7,691,000 6,692,000
Non interest income 510,000 462,000 1,661,000 1,276,000
Gains (losses) on securities 5,000 5,000 (3,000) 10,000
transactions, net
Non interest expenses
Salaries and employee benefits 1,217,000 892,000 3,239,000 2,558,000
Occupancy 190,000 100,000 442,000 289,000
Equipment 266,000 103,000 614,000 349,000
Other 621,000 528,000 1,699,000 1,492,000
------------ ------------ ------------ ------------
Total non interest expense 2,294,000 1,623,000 5,994,000 4,688,000
------------ ------------ ------------ ------------
Income before provision for
income taxes 959,000 1,143,000 3,355,000 3,290,000
Provision for income taxes 369,000 437,000 1,305,000 1,252,000
------------ ------------ ------------ ------------
Net income $ 590,000 $ 706,000 $ 2,050,000 $ 2,038,000
============ ============ ============ ============
Basic earnings per common share: $ 0.32 $ 0.44 $ 1.20 $ 1.28
============ ============ ============ ============
Diluted earnings per common share: $ 0.31 $ 0.43 $ 1.18 $ 1.23
============ ============ ============ ============
<FN>
The accompanying notes are an integral part of these statements
</FN>
</TABLE>
4
<PAGE>
<TABLE>
North Bay Bancorp
Consolidated Statement of Change in Shareholders' Equity
September 30, 2000
(Unaudited)
<CAPTION>
Accumulated
Other Total
Common Shares Common Retained Comprehensive Shareholders' Comprehensive
Outstanding Stock Earnings Loss Equity Income
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1999 1,536,568 $12,893,000 $ 6,368,000 ($1,171,000) $18,090,000
Stock dividend 76,509 1,913,000 (1,921,000) (8,000)
Cash dividend (307,000) (307,000)
Comprehensive income:
Net income 2,050,000 2,050,000 $ 2,050,000
---------
Other comprehensive
income, net of tax:
Change in net unrealized
loss on available-for-sale
securities, net of tax 542,000 542,000 542,000
----------- -----------
Comprehensive income $ 2,592,000
===========
Issuance of common stock,
net issuance costs of $133,000 227,273 4,867,000 4,867,000
Stock options exercised 8,053 88,000 88,000
--------- ----------- ----------- -----------
BALANCE, SEPTEMBER 30, 2000 1,848,403 $19,761,000 $ 6,190,000 ($ 629,000) $25,322,000
========= =========== =========== =========== ===========
<FN>
The accompanying notes are an integral part of these statements
</FN>
</TABLE>
5
<PAGE>
North Bay Bancorp
Consolidated Statement of Cash Flows
(Unaudited)
(In 000's)
Nine months Ended
September 30,
2000 1999
-------- --------
Cash Flows From Operating Activities:
Net income $ 2,050 $ 2,038
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 391 260
Provision for loan losses 280 180
Amortization of deferred loan fees (201) (191)
Premium amortization (discount accretion), net 17 (12)
Net loss (gain) on sale of investment securities 3 (10)
Net loss (gain) on sale of assets 8 (15)
Changes in:
Interest receivable and other assets 24 219
Interest payable and other liabilities 389 67
-------- --------
Total adjustments 911 498
-------- --------
Net cash provided by operating activities 2,961 2,536
-------- --------
Cash Flows From Investing Activities:
Investment securities held-to-maturity:
Proceeds from maturities and principal payments 37 10
Purchases 0 (1,400)
Investment securities available-for-sale:
Proceeds from maturities and principal payments 7,990 13,466
Proceeds from sales 5,151 1,005
Purchases (6,389) (12,202)
Net increase in loans (27,416) (20,499)
Sale of capital assets 5 21
Capital expenditures (2,697) (345)
-------- --------
Net cash used in investing activities (23,319) (19,844)
-------- --------
Cash Flows From Financing Activities:
Net increase in deposits 27,190 11,422
Increase in long term debt 3,000 0
Decrease (increase) in short-term borrowings (5,000) 5,000
Stock issued, net of issuance costs 4,867 0
Stock options exercised 88 199
Dividends paid (315) (297)
-------- --------
Net cash provided by financing activities 29,830 16,324
-------- --------
Net increase (decrease) in cash and cash equivalents 9,472 (984)
Cash and cash equivalents at beginning of year 10,066 14,602
-------- --------
Cash and cash equivalents at end of period $ 19,538 $ 13,518
======== ========
Supplemental Disclosures of Cash Flow Information:
Interest paid $ 4,190 $ 3,168
Income taxes paid $ 1,359 $ 830
The accompanying notes are an integral part of these statements
6
<PAGE>
NORTH BAY BANCORP
Notes to the Consolidated Financial Statements
(Unaudited)
September 30, 2000
NOTE 1 - Basis of Presentation
The accompanying consolidated financial statements, which include the accounts
of North Bay Bancorp and its subsidiaries (the "Company"), have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission
(SEC) and in Management's opinion, include all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of results for
such interim periods. The subsidiaries consist of two community banks, The
Vintage Bank, established in 1985, and Solano Bank which was opened July 17,
2000. All significant intercompany transactions and balances have been
eliminated. Certain information and note disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to SEC rules or regulations; however, the
Company believes that the disclosures made are adequate to make the information
presented not misleading. The interim results for the nine months ended
September 30, 2000 and 1999, are not necessarily indicative of results for the
full year. It is suggested that these financial statements be read in
conjunction with the financial statements and the notes included in the
Company's Annual Report for the year ended December 31, 1999.
NOTE 2 - Commitments
The Company has outstanding standby Letters of Credit of approximately
$1,943,000, undisbursed real estate and construction loans of approximately
$30,578,000, and undisbursed commercial and consumer lines of credit of
approximately $15,196,000, as of September 30, 2000.
NOTE 3 - Earnings Per Common Share
The Company declared 5% stock dividends on January 28, 1999 and January 18,
2000. As a result of the stock dividends the number of common shares outstanding
and earnings per share data was adjusted retroactively for all periods
presented.
<TABLE>
The following table reconciles the numerator and denominator of the Basic and
Diluted earnings per share computations:
<CAPTION>
Weighted Average Per-Share
Net Income Shares Amount
---------- ------ ------
For the three months ended September 30, 2000
---------------------------------------------
<S> <C> <C> <C>
Basic earnings per share $590,000 1,846,285 $.32
Stock options 28,632
-----------
Diluted earnings per share 1,874,917 $.31
For the three months ended September 30, 1999
---------------------------------------------
Basic earnings per share $706,000 1,609,354 $.44
Stock options 35,882
-----------
Diluted earnings per share 1,645,236 $.43
</TABLE>
<TABLE>
<CAPTION>
Weighted Average Per-Share
Net Income Shares Amount
---------- ------ ------
For the nine months ended September 30, 2000
--------------------------------------------
<S> <C> <C> <C>
Basic earnings per share $2,050,000 1,706,183 $1.20
Stock options 31,931
-----------
Diluted earnings per share 1,738,114 $1.18
For the nine months ended September 30, 1999
--------------------------------------------
Basic earnings per share $2,038,000 1,594,573 $1.28
Stock options 56,151
-----------
Diluted earnings per share 1,650,724 $1.23
</TABLE>
7
<PAGE>
NOTE 4 - Comprehensive Income
For the Company, comprehensive income includes net income reported on the
statement of income and changes in the fair value of its available-for-sale
investments reported as a component of shareholders' equity. The following table
presents net income adjusted by the change in unrealized gains or losses on the
available-for-sale investments as a component of comprehensive income (in
thousands).
Three Months Ended September 30,
2000 1999
---- ----
Net Income $590 $706
Net change in unrealized losses on
available-for-sale investments, net of tax 465 (201)
--- -----
Comprehensive Income $1,055 $505
====== ====
Nine Months Ended September 30,
2000 1999
---- ----
Net Income $2,050 $2,038
Net change in unrealized losses on
available-for-sale investments, net of tax 542 (1,064)
--- -------
Comprehensive Income $2,592 $974
====== ====
NOTE 5 - Segment Reporting
The Company's operating segments consist of its traditional community banking
activities provided through its five branches of its two community banks and
activities related to the Holding Company. Community banking activities include
the Banks' commercial and retail lending, deposit gathering and investment and
liquidity management activities. The Company has aggregated the results of the
two community banks into a single reportable segment, and the Holding Company
activities reported as "Other". Segment data for prior reporting periods were
not applicable since the Holding Company was established in November, 1999.
<TABLE>
The components of the Company's business segments for the three months ended
September 30, 2000 were as follows:
<CAPTION>
(In 000's)
Community Intersegment
Banking Other Adjustments Consolidated
------- ----- ----------- ------------
<S> <C> <C> <C> <C>
Interest Income $4,381 $0 ($99) $4,282
Interest Expense 1,473 70 (99) 1,444
----- ----- ----- ------
Net Interest Income 2,908 (70) 0 2,838
Provision for loan losses 100 0 0 100
Noninterest Income 556 598 (639) 515
Noninterest Expense 2,274 659 (639) 2,294
----- ----- ----- ------
Income (Loss) Before Tax 1,090 (131) 0 959
Provision for
Income Taxes 424 (55) 0 369
----- ----- ----- ------
Net Income (Loss) 666 ($76) $0 $590
----- ----- ----- ------
</TABLE>
<TABLE>
The components of the Company's business segments for the nine months ended
September 30, 2000 were as follows:
<CAPTION>
(In 000's)
Community Intersegment
Banking Other Adjustments Consolidated
------- ----- ----------- ------------
<S> <C> <C> <C> <C>
Interest Income $12,129 $0 ($99) $12,030
Interest Expense 4,072 86 (99) 4,059
----- ----- ----- ------
Net Interest Income 8,057 (86) 0 7,971
Provision for loan losses 280 0 0 280
Noninterest Income 1,782 1,676 (1,800) 1,658
Noninterest Expense 5,467 2,327 (1,800) 5,994
----- ----- ----- ------
Income (Loss) Before Tax 4,092 (737) 0 3,355
Provision for
Income Taxes 1,612 (307) 0 1,305
----- ----- ----- ------
Net Income (Loss) $2,480 ($430) $0 $2,050
----- ----- ----- ------
8
<PAGE>
(In 000's)
Assets $234,932 $28,750 ($33,765) $229,917
Loans, Net 147,503 0 0 147,503
Deposits 201,666 0 (2,096) 199,570
Equity 26,069 25,322 (26,069) 25,322
</TABLE>
NOTE 6- Stock Offering
On June 30, 2000, the Company closed its $5 million stock offering of up to
227,273 shares of its common stock at a price of $22.00 per share (the "Stock
Offering"). As of March 12, 2000 subscriptions for $2,787,000 were accepted,
subscriptions for the remaining $2,213,000 were accepted as of July 19, 2000.
Total proceeds to the Company, net of offering expenses, were $4,867,000. See
Part II. "Item 2. Use of Proceeds" of this Quarterly Report.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
In addition to the historical information contained herein, this Quarterly
Report contains certain forward-looking statements. The reader of this Quarterly
Report should understand that all such forward-looking statements are subject to
various uncertainties and risks that could affect their outcome. The Company's
actual results could differ materially from those suggested by such
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, variances in the actual versus
projected growth in assets, return on assets, loan losses, expenses, rates
charged on loans and earned on securities investments, rates paid on deposits,
competition effects, fee and other noninterest income earned as well as other
factors. This entire Quarterly Report should be read to put such forward-looking
statements in context and to gain a more complete understanding of the
uncertainties and risks involved in the Company's business.
Moreover, wherever phrases such as or similar to "In Management's opinion",
"Management considers" are used, such statements are as of and based upon the
knowledge of Management, at the time made and are subject to change by the
passage of time and/or subsequent events, and accordingly such statements are
subject to the same risks and uncertainties noted above with respect to
forward-looking statements.
OVERVIEW
Net income was $590,000 or $.31 per diluted share for the three months ended
September 30, 2000, compared with $706,000 or $.43 per diluted share for the
three months ended September 30, 1999, a decrease of 28%. Net income was
$2,050,000 or $1.18 per diluted share for the nine months ended September 30,
2000, compared with $2,038,000 or $1.23 per diluted share for the nine months
ended September 30, 1999, a decrease of 4%. Total assets were $229,917,000 as of
September 30, 2000; equating to a 16% growth in assets during the twelve months
ended September 30, 2000. Shareholders' equity as of September 30, 2000 was
increased by $4,867,000 as the result of net proceeds of the Company's Stock
Offering. See Footnote 6 to the Financial Statements included in Part I of this
Quarterly Report.
SUMMARY OF EARNINGS
NET INTEREST INCOME
Net interest income represents the amount by which interest earned on earning
assets (primarily loans and investments) exceed the amount of interest paid on
deposits. Net interest income is a function of volume, interest rates and level
of non-accrual loans.
9
<PAGE>
Net interest income before the provision for loan losses on a taxable-equivalent
basis for the three months ended September 30, 2000 and September 30, 1999 was
$3,048,000 and $2,600,000, respectively. These results equate to a 17% increase
in net interest income for the third quarter of 2000 compared to the third
quarter of 1999. Loan fee income, which is included in interest income from
loans, was $144,000 for the three months ended September 30, 2000, compared with
$153,000 for the three months ended September 30, 1999. Net interest income
before the provision for loan losses on a taxable-equivalent basis for the nine
months ended September 30, 2000 and September 30, 1999 was $8,104,000 and
$7,021,000, respectively. These results equate to a 15% increase in net interest
income for the first nine months of 2000 compared to the same period in 1999.
Loan fee income, which is included in interest income from loans, was $457,000
for the nine months ended September 30, 2000, compared with $532,000 for the
nine months ended September 30, 1999.The average balance of earning assets
increased $24,611,000 or 14% during the twelve months ended September 30, 2000.
Taxable-equivalent interest income increased $1,971,000 or 19% in the first nine
months of 2000 compared with the same period of 1999. Increase in the volume of
earning assets accounted for $1,730,000 of this increase, with an increase of
$241,000 attributable to higher rates. The average balance of interest-bearing
liabilities increased $17,605,000 or 14% during the first nine month of 2000
compared with the same period in 1999. Interest paid on interest-bearing
liabilities increased $888,000 in 2000 compared with 1999. Increase in the
volume of deposits and other borrowings accounted for $521,000 of this increase,
while a $367,000 increase was attributed to an increase in rates. Management
does not expect a material change in the Company's net interest margin during
the next twelve months as the result of a modest increase or decrease in general
interest rates.
10
<PAGE>
<TABLE>
The following table provides a summary of the components of interest income,
interest expense and net interest margin for the nine months ended September 30,
2000 and September 30, 1999:
<CAPTION>
In 000's
2000 1999
---- ----
Average Income/ Average Average Income/ Average
Balance Expense Yield/Rate Balance Expense Yield/Rate
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loans(1)(2) $ 137,783 $ 9,355 9.05% $ 107,120 $ 7,136 8.88%
Investment securities:
Taxable 39,123 1,954 6.66% 47,379 2,269 6.39%
Non-taxable(3) 14,018 640 6.09% 14,161 663 6.24%
--------- --------- --------- ---------
TOTAL LOANS AND INVESTMENT
SECURITIES 190,924 11,949 8.34% 168,660 10,068 7.96%
Due from banks, time 100 4 5.33% 133 6 6.02%
Federal funds sold 5,424 210 5.16% 3,044 118 5.17%
--------- --------- --------- ---------
TOTAL EARNING ASSETS 196,448 $ 12,163 8.26% 171,837 $ 10,192 7.91%
--------- --------- --------- ---------
Cash and due from banks 11,398 9,953
Allowance for loan losses (2,035) (1,853)
Premises and equipment, net 4,244 2,802
Accrued interest receivable
and other assets 6,776 5,749
--------- ---------
TOTAL ASSETS $ 216,831 $ 188,488
========= =========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits:
Interest bearing demand $ 63,797 $ 1,128 2.36% $ 58,376 $ 1,003 2.29%
Savings 15,790 221 1.87% 15,905 221 1.85%
Time 64,197 2,534 5.26% 52,320 1,820 4.64%
--------- --------- ---- --------- --------- ----
143,784 3,883 3.60% 126,601 3,044 3.21%
Borrowings 3,800 176 6.18% 3,378 127 5.01%
TOTAL INTEREST BEARING
LIABILITIES 147,584 $ 4,059 3.67% 129,979 $ 3,171 3.25%
--------- --------- --------- ---------
Noninterest bearing DDA 46,569 40,112
Accrued interest payable
and other liabilities 1,621 1,109
Shareholders' equity 21,057 17,288
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 216,831 $ 188,488
========= =========
NET INTEREST INCOME $ 8,104 $ 7,021
========= =========
NET INTEREST INCOME TO
AVERAGE EARNING ASSETS
(Net Interest Margin (4)) 5.50% 5.45%
<FN>
(1) Average loans include nonaccrual loans
(2) Loan interest income includes loan fee income of $457 in 2000 and $532 in
1999.
(3) Average yields shown are taxable-equivalent. On a non- taxable basis, 2000
interest income was $507 with an average yield of 4.82%; in 1999 non-taxable
income was $514 and the average yield was 4.84%.
(4) Net interest margin is calculated by dividing net interest income by the
average balance of total earning assets for the applicable period.
</FN>
</TABLE>
11
<PAGE>
The following table sets forth a summary of the changes in interest income and
interest expense for the nine months ended September 30, 2000 over September 30,
1999 resulting from changes in assets and liabilities volumes and rates. The
change in interest due to both rate and volume has been allocated in proportion
to the relationship of absolute dollar amounts of change in each.
In 000's
2000 Over 1999
---------------
Volume Rate Total
---------------------------------
Increase (Decrease) In
Interest and Fee Income
Time Deposits With Other
Financial Institutions ($1) ($1) ($2)
Investment Securities:
Taxable (394) 79 (315)
Non-Taxable (1) (7) (16) (23)
Federal Funds Sold 92 0 92
Loans 2,040 179 2,219
---------------------------------
Total Interest and Fee Income 1,730 241 1,971
---------------------------------
Increase (Decrease) In
Interest Expense
Deposits:
Interest Bearing
Transaction Accounts 93 32 125
Savings (2) 2 0
Time Deposits 414 300 714
---------------------------------
Total Deposits 505 334 839
Borrowings 16 33 49
---------------------------------
Total Interest Expense 521 367 888
---------------------------------
Net Interest Income $1,209 ($126) $1,083
=================================
(1) The interest earned is taxable-equivalent.
PROVISION AND ALLOWANCE FOR LOAN LOSSES
The Company maintains an allowance for loan losses at a level considered
adequate to provide for losses that can be reasonably anticipated. The allowance
is increased by the provision for loan losses and reduced by net charge offs.
The allowance for loan losses is based on estimates, and ultimate losses may
vary from current estimates. These estimates are reviewed periodically and as
adjustments become necessary they are reported in earnings in the periods in
which they become known. The Company makes credit reviews of the loan portfolio
and considers current economic conditions, historical loan loss experience and
other factors in determining the adequacy of the allowance balance. This
evaluation establishes a specific allowance for all classified loans over
$50,000 and establishes percentage allowance requirements for all other loans,
according to the classification as determined by the Company's internal grading
system. As of
12
<PAGE>
September 30, 2000 the allowance for loan losses of $2,168,000 represented 1.45%
of loans outstanding. As of September 30, 1999, the allowance represented 1.65%
of loans outstanding. During the nine months ended September 30, 2000, $280,000
was charged to expense for the loan loss provision, compared with $180,000 for
the same period in 1999. Net charge-offs for all loans was $99,000, or 0.01% of
total loans as of September 30, 2000, for the first nine months of 2000 compared
with net recoveries of $8,000 in the year earlier period.
The following table summarizes changes in the allowance for loan losses:
In 000's
September 30, September 30,
2000 1999
------ ------
Balance, beginning of year $1,987 $1,752
Provision for loan losses 280 180
Loans charged off 102 11
Recoveries of loans previously charged off 3 19
------ ------
Balance, end of period $2,168 $1,940
====== ======
Allowance for loan losses to total
outstanding loans 1.45% 1.65%
There were no loans on non-accrual at September 30, 2000. Non-accrual loans at
September 30, 1999 were $13,000.
NON-INTEREST INCOME
Non-interest income was $510,000 for the three months ended September 30, 2000
compared with $462,000 for the same period in 1999, a 10% increase. Non-interest
income was $1,661,000 for the nine months ended September 30, 2000 compared with
$1,276,000 for the same period in 1999, a 30% increase. Other increases in
non-interest income resulted primarily from an increase in the number of deposit
accounts, transaction volumes and directly related service charges.
GAIN (LOSSES) ON SECURITIES
Net losses of $3,000 for the nine months ended September 30, 2000 resulted from
the sale of several available-for-sale securities. Gains of $10,000 for the nine
months ended September 30, 1999 resulted from the sale of several
available-for-sale securities.
ON-INTEREST EXPENSE
Non-interest expense for the three months ended September 30, 2000 and September
30, 1999 was $2,294,000 and $1,623,000, respectively, a 41% increase.
Non-interest expense for the nine months ended September 30, 2000 and September
30, 1999 was $5,994,000 and $4,688,000, respectively, a 28% increase. The
increase compared with prior reporting periods is primarily due to the Company
opening its subsidiary de novo bank, Solano Bank, on July, 17, 2000. The 28%
increase in non-interest income during 2000 was primarily in salaries and
employee benefit expenses. Salaries and employee benefits expense for the three
months ended September 30, 2000 and 1999 were $1,217,000 and $892,000,
respectively, a 36% increase. Salaries and employee benefits expense for the
nine months ended September 30, 2000 and 1999 were $3,239,000 and $2,558,000,
respectively, a 27% increase. The increase in 2000 resulted from increased
salaries paid to Company officers and employees, and an increase of
approximately 17 full-time equivalent employees from 79 at September, 1999 to 96
at September 30, 2000. The increase in employees is primarily due to growth of
the Company and opening of Solano Bank in mid July, 2000. Other expenses for the
three months ended September 30, 2000 and September 30, 1999 were $621,000 and
$528,000, respectively, an 18% increase. Other expenses for the nine months
ended September 30, 2000 and September 30, 1999 were $1,699,000 and $1,492,000,
respectively, a 14% increase. The increase from last year is primarily due to
costs associated with training staff for a new core banking system, and costs
associated with opening Solano Bank.
INCOME TAXES
The Company reported a provision for income tax for the three months ended
September 30, 2000 and 1999 of $369,000 and $437,000, respectively. The Company
reported a provision for income tax for the
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nine months ended September 30, 2000 and 1999 of $1,305,000 and $1,252,000,
respectively. Both the 2000 and 1999 provisions reflect tax accruals at maximum
rates for both federal and state income taxes, adjusted for the effect of the
Company's investments in tax-exempt municipal securities.
BALANCE SHEET
Total assets as of September 30, 2000 were $229,917,000 compared with
$197,655,000 as of September 30, 1999, and $197,106,000 at December 31, 1999
equating to a 16% increase during the twelve months and an 17% increase for the
nine month ended September 30, 2000. Total deposits as of September 30, 2000
were $199,570,000 compared with $173,595,000 as of September 30, 1999, and
$172,380,000 at December 31, 1999 representing a 15% increase during the twelve
months and a 16% increase for the nine months ended September 30, 2000. Loans
outstanding as of September 30, 2000 were $149,671,000 compared with
$117,225,000 as of September 30, 1999, and $122,153,000 at December 31, 1999
equating to a 28% increase during the twelve months and a 23% increase for the
nine months ended September 30, 2000.
BORROWINGS
There were no short-term borrowings at September 30, 2000 compared with
$5,000,000 at September 30, 1999 and $5,000,000 at December 31, 1999. Short-term
borrowings consist primarily of federal funds purchased and borrowings from
Federal Home Loan Bank. The Company has used short-term borrowings to assist in
funding its increased loan demand. Continued reliance on short-term borrowings
may be required if loan demand continues to outpace deposit growth, and,
therefore short-term borrowings are expected to vary from time to time.The
Company has a $3,000,000 unsecured loan with Union Bank of California. The term
of the loan is three and one half years with principal and interest payments due
quarterly. The loan is a variable rate loan tied to Union Bank's reference rate,
currently 9.50%. The proceeds of this loan were primarily invested into the
Company's subsidiary, Solano Bank.
LIQUIDITY AND CAPITAL ADEQUACY
The Company's liquidity is determined by the level of assets (such as cash,
Federal Funds, and investment in marketable securities) that are readily
convertible to cash to meet customer withdrawals and borrowings. Management
reviews the Company's liquidity position on a regular basis to ensure that it is
adequate to meet projected loan funding and potential withdrawal of deposits.
The Company has a comprehensive Asset/Liability Management and Liquidity Policy,
which it uses to determine adequate liquidity. As of September 30, 2000 liquid
assets were 30% of total assets, compared with 36% as of September 30, 1999 and
33% at December 31, 1999.
The Federal Deposit Insurance Corporation Improvement Act (FDICIA) established
ratios used to determine whether a Company is "Well Capitalized," "Adequately
Capitalized," "Undercapitalized," "Significantly Undercapitalized," or
"Critically Undercapitalized." A Well Capitalized Company has risk-based capital
of at least 10%, tier 1 risked-based capital of at least 6%, and a leverage
ratio of at least 5%. As of September 30, 2000, the Company's risk-based capital
ratio was 15.55%. The Company's tier 1 risk-based capital ratio and leverage
ratio were 14.35% and 11.31%, respectively.
As the following table indicates, both The Vintage Bank and Solano Bank
currently exceed the regulatory capital minimum requirements. The Banks are
considered "Well Capitalized" according to regulatory guidelines.
14
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<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
------ ----------------- -----------------
(In 000's)
Amount Ratio Amount Ratio Amount Ratio
------- ------- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C> <C>
As of September 30, 2000:
Total Capital (to Risk
Weighted Assets)
Consolidated $28,119 15.55% $14,469 >8.00% $18,086 >10.00%
- -
The Vintage Bank 20,161 11.94% 13,509 >8.00% 16,887 >10.00%
- -
Solano Bank 8,658 183.08% 378 >8.00% 473 >10.00%
- -
Tier I Capital (to Risk
Weighted Assets)
Consolidated 25,951 14.35% 7,234 >4.00% 10,851 >6.00%
- -
The Vintage Bank 18,050 10.69% 6,755 >4.00% 10,132 >6.00%
- -
Solano Bank 8,648 182.87% 189 >4.00% 284 >6.00%
- -
Tier I Capital (to
Average Assets)
Consolidated 25,951 11.31% 9,180 >4.00% 11,475 >5.00%
-
The Vintage Bank 18,050 8.24% 8,766 >4.00% 10,957 >5.00%
- -
Solano Bank 8,648 83.60% 414 >4.00% 517 >5.00%
- -
</TABLE>
PART II - OTHER INFORMATION
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Other than ordinary routine litigation incidental to the business of the
Company, there are no material pending legal proceedings.
ITEM 2. USE OF PROCEEDS
Use of Proceeds of Public Offering
On December 22, 1999, the Company filed Registration Statement No. 333-93365
with the United States Securities and Exchange Commission with respect to a
proposed public offering of North Bay common stock for an aggregate
consideration of $5,000,000. The registration statement was declared effective
on February 9, 2000, and the Company commenced an offering of up to 200,000
shares of its common stock, no par value, at a price of $25.00 per share. The
offering was subsequently amended to increase the number of shared offered to
227,273 and to decrease the offering price to $22.00 per share. All securities
were sold for the account of the issuer and there are no underwriters involved
in the offering. The offering was closed as of June 30,2000.
As of May 31, 2000 subscriptions for $2,787,000 were accepted, subscriptions for
the remaining $2,213,000 were accepted as of July 17, 2000. The net proceeds of
the Stock Offering were invested into Solano Bank. The following expenses were
incurred by the Company in connection with the issuance and distribution of the
securities registered:
Underwriting Discounts and Commissions: $0
Finders Fees: $0
Expenses Paid to Underwrites: $0
Other Expenses: $132,561
Total Expenses: $132,561
All expenses were paid to persons other than directors, officers, or 10%
shareholders of the Company.
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<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM-8-K
(1) Exhibits. An index of Exhibits begins on page 18.
(2) Current Reports.
(a) On July 12, 2000, the Company filed a Current Report on From
8-K, reporting under Item. 5 "Other Matters":
(i) Completion of Stock Offering. The successful completion the
Company's $5 million stock offering, pursuant to which the
Company sold 227,273 shares of its common stock at a price of
$22.00 per share.
(ii) Appointment of New Directors. The expansion of the Board of
Directors of the Company from 8 to 10 directors and the
appointment of Thomas N. Gavin and Fred J. Hearn to fill the
new vacancies.
(b) On August 24, 2000, the Company filed a Current Report on From
8-K, reporting under Item. 5 "Other Matters":
(i) Opening of Solano Bank. The opening for business. of Solano
Bank, a wholly-owned subsidiary of the Company. The Company
capitalized Solano Bank at $9,000,000, in part through the
$5,000,000 proceeds of its recently completed public stock
offering of common stock.
(ii) Earnings Release. The issuance a press release announcing the
Company's earnings for the quarter ended June 30, 2000.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Company has duly caused this quarterly report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NORTH BAY BANCORP
A California Corporation
Date: November 7, 2000 BY: /s/ Terry L. Robinson
---------------------------------
Terry L. Robinson
President & CEO
(Principal Executive Officer)
Date: November 7, 2000 BY: /s/ Lee- Ann Cimino
--------------------------------
Lee-Ann Cimino
Sr. Vice President & CFO
(Principal Financial Officer)
17
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EXHIBIT INDEX
Exhibit 11. Statement re: computation of per share data is included
in Footnote 3 to the unaudited consolidated financial statements of Registrant
Exhibit 27. Financial Data Schedule
18
