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 June 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 August 10, 2000: 1,846,850
<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 six months ended June 30, 2000 and June
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 June 30, 2000 and the results of operations and
cash flows for the three months and six months then ended. Results for interim
periods should not be considered as indicative of results for a full year.
2
<PAGE>
<TABLE>
North Bay Bancorp
Consolidated Balance Sheets
(Unaudited)
<CAPTION>
June 30, June 30, December 31,
Assets 2000 1999 1999
------------- ------------- -------------
<S> <C> <C> <C>
Cash and due from banks $ 9,794,000 $ 11,488,000 $ 8,466,000
Federal funds sold 6,224,000 0 1,500,000
Time deposits with other financial institutions 100,000 100,000 100,000
------------- ------------- -------------
Total cash and cash equivalents 16,118,000 11,588,000 10,066,000
Investment securities:
Held-to-maturity 1,372,000 14,906,000 1,390,000
Available-for-sale 50,127,000 46,616,000 55,264,000
Loans, net of allowance for loan losses of $2,068,000 in June, 2000
$1,872,000 in June, 1999 and $1,987,000 in December, 1999 138,972,000 108,180,000 120,166,000
Bank premises and equipment, net 4,972,000 2,818,000 2,883,000
Accrued interest receivable and other assets 6,896,000 6,366,000 7,337,000
------------- ------------- -------------
Total assets $ 218,457,000 $ 190,474,000 $ 197,106,000
============= ============= =============
Liabilities and Shareholders' Equity
Liabilities:
Deposits:
Non-interest bearing $ 52,304,000 $ 41,089,000 $ 38,337,000
Interest bearing 142,028,000 128,269,000 134,043,000
------------- ------------- -------------
Total deposits 194,332,000 169,358,000 172,380,000
Short term borrowings 500,000 3,000,000 5,000,000
------------- ------------- -------------
Accrued interest payable and other liabilities 1,508,000 911,000 1,636,000
------------- ------------- -------------
Total liabilities 196,340,000 173,269,000 179,016,000
------------- ------------- -------------
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 - 1,742,119 shares in June 2000,
1,510,134 shares in June, 1999, and 1,536,568 in December, 1999 17,611,000 12,218,000 12,893,000
Retained earnings 5,600,000 5,465,000 6,368,000
Accumulated other comprehensive loss (1,094,000) (478,000) (1,171,000)
------------- ------------- -------------
Total shareholders' equity 22,117,000 17,205,000 18,090,000
Total liabilities and shareholders' equity $ 218,457,000 $ 190,474,000 $ 197,106,000
============= ============= =============
</TABLE>
The accompanying notes are an integral part of these statements
3
<PAGE>
<TABLE>
North Bay Bancorp
Consolidated Income Statements
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Interest Income
Loans (including fees) $ 3,145,000 $ 2,396,000 $ 5,953,000 $ 4,633,000
Federal funds sold 50,000 31,000 121,000 81,000
Investment securities - taxable 660,000 751,000 1,334,000 316,000
----------- ----------- ----------- -----------
Investment securities - tax exempt 170,000 162,000 340,000 1,545,000
----------- ----------- ----------- -----------
Total Interest income 4,025,000 3,340,000 7,748,000 6,575,000
Interest Expense 1,326,000 1,031,000 2,615,000 2,063,000
----------- ----------- ----------- -----------
Net interest income 2,699,000 2,309,000 5,133,000 4,512,000
Provision for loan losses 90,000 60,000 180,000 120,000
----------- ----------- ----------- -----------
Net interest income after provision for loan losses 2,609,000 2,249,000 4,953,000 4,392,000
Non interest income 637,000 431,000 1,151,000 815,000
Gains (losses) on securities transactions, net (8,000) 0 (8,000) 5,000
Non interest expenses
Salaries and employee benefits 1,039,000 817,000 2,022,000 1,666,000
Occupancy 140,000 97,000 252,000 189,000
Equipment 186,000 122,000 348,000 246,000
Other 567,000 527,000 1,078,000 964,000
----------- ----------- ----------- -----------
Total non interest expense 1,932,000 1,563,000 3,700,000 3,065,000
----------- ----------- ----------- -----------
Income before provision for
income taxes 1,306,000 1,117,000 2,396,000 2,147,000
Provision for income taxes 517,000 426,000 936,000 815,000
----------- ----------- ----------- -----------
Net income $ 789,000 $ 691,000 $ 1,460,000 $ 1,332,000
=========== =========== =========== ===========
Basic earnings per common share: $ 0.48 $ 0.44 $ 0.89 $ 0.84
=========== =========== =========== ===========
Diluted earnings per common share: $ 0.47 $ 0.43 $ 0.87 $ 0.82
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements
4
<PAGE>
<TABLE>
North Bay Bancorp
Consolidated Statement of Change in Shareholders' Equity
June 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 1,460,000 1,460,000 $ 1,460,000
Other comprehensive income,
net of tax:
Change in net unrealized
loss on available-for-sale
securities, net of tax 77,000
------------
Total other comprehensive income 77,000 77,000 77,000
------------
Comprehensive income $ 1,537,000
============
Issuance of common stock 126,709 2,787,000 2,787,000
----------- ------------
Stock options exercised 2,333 18,000 18,000
----------- ------------ ------------
BALANCE, JUNE 30, 2000 1,742,119 $ 17,611,000 $ 5,600,000 $ (1,094,000) $ 22,117,000
=========== ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements
5
<PAGE>
<TABLE>
North Bay Bancorp
Consolidated Statement of Cash Flows
(Unaudited)
(In 000's)
<CAPTION>
Six months Ended June 30,
2000 1999
-------- --------
<S> <C> <C>
Cash Flows From Operating Activities:
Net income $ 1,460 $ 1,332
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 215 171
Provision for loan losses 180 120
Amortization of deferred loan fees (133) (133)
Premium amortization (discount accretion), net 15 (6)
Net loss (gain) on sale of investment securities 8 (5)
Net loss (gain) on sale of assets 8 (15)
Changes in:
Interest receivable and other assets 388 411
Interest payable and other liabilities (128) (297)
-------- --------
Total adjustments 553 246
-------- --------
Net cash provided by operating activities 2,013 1,578
-------- --------
Cash Flows From Investing Activities:
Investment securities held-to-maturity:
Proceeds from maturities and principal payments 18 0
Purchases 0 (1,400)
Investment securities available-for-sale:
Proceeds from maturities and principal payments 6,213 6,623
Proceeds from sales 5,151 1,005
Purchases (6,119) (7,199)
Net increase in loans (18,853) (13,392)
Sale of capital assets 0 21
Capital expenditures (2,313) (261)
-------- --------
Net cash used in investing activities (15,903) (14,603)
-------- --------
Cash Flows From Financing Activities:
Net increase in deposits 21,952 7,185
Decrease (increase) in short-term borrowings (4,500) 3,000
Stock issued 2,787 0
Stock options exercised 18 123
Dividends paid (315) (297)
-------- --------
Net cash provided by financing activities 19,942 10,011
-------- --------
Net increase (decrease) in cash and cash equivalents 6,052 (3,014)
Cash and cash equivalents at beginning of year 10,066 14,702
-------- --------
Cash and cash equivalents at end of period $ 16,118 $ 11,588
======== ========
Supplemental Disclosures of Cash Flow Information:
Interest paid $ 2,538 $ 2,211
Income taxes paid $ 892 $ 310
</TABLE>
The accompanying notes are an integral part of these statements
6
<PAGE>
NORTH BAY BANCORP
Notes to the Consolidated Financial Statements
(Unaudited)
June 30, 2000
NOTE 1 - Basis of Presentation
The accompanying consolidated financial statements, which include the accounts
of North Bay Bancorp and its subsidiary (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. 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 six months
ended June 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
$1,499,000, undisbursed real estate and construction loans of approximately
$31,773,000, and undisbursed commercial and consumer lines of credit of
approximately $14,587,000, as of June 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 June 30, 2000
----------------------------------------
<S> <C> <C> <C>
Basic earnings per share $789,000 1,657,182 $.48
Stock options 31,305
Diluted earnings per share 1,688,487 $.47
For the three months ended June 30, 1999
----------------------------------------
Basic earnings per share $691,000 1,588,469 $.44
Stock options 36,586
Diluted earnings per share 1,625,055 $.43
Weighted Average Per-Share
Net Income Shares Amount
---------- ------ ------
For the six months ended June 30, 2000
--------------------------------------
Basic earnings per share $1,460,000 1,635,363 $.89
Stock options 33,580
Diluted earnings per share 1,668,943 $.87
For the six months ended June 30, 1999
--------------------------------------
Basic earnings per share $1,332,000 1,587,068 $.84
Stock options 42,851
Diluted earnings per share 1,629,919 $.82
</TABLE>
7
<PAGE>
NOTE 4 - Comprehensive Income
As of January 1, 1998, North Bay Bancorp adopted FASB Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income", (SFAS 130). This
Statement established standards for the reporting and display of comprehensive
income and its components in the financial statements. 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 June 30,
2000 1999
-------- --------
Net Income $ 789 $ 691
Net change in unrealized losses on
available-for-sale investments, net of tax 167 (571)
-------- --------
Comprehensive Income $ 956 $ 120
======== ========
Six Months Ended June 30,
2000 1999
-------- --------
Net Income $ 1,460 $ 1,332
Net change in unrealized losses on
available-for-sale investments, net of tax 77 (863)
-------- --------
Comprehensive Income $ 1,537 $ 469
======== ========
NOTE 5 - Segment Reporting
Effective January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures About Segments of an Enterprise and Related
Information," (SFAS 131). This Statement establishes standards for the reporting
and display of information about operating segments and related disclosures. The
Company's operating segments consist of its traditional community banking
activities provided through its three branches and activities related to the
Holding Company. Community banking activities include the Bank's commercial and
retail lending, deposit gathering and investment and liquidity management
activities. The Company has aggregated the results of the branches into a single
reportable segment, and the Holding Company activities reported as "Other".
<TABLE>
The components of the Company's business segments for the six months ended June
30, 2000 were as follows:
<CAPTION>
(In 000's)
Community Intersegment
Banking Other Adjustments Consolidated
--------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Interest Income $ 7,748 $ 0 $ 0 $ 7,748
Interest Expense 2,599 16 0 2,615
-------- -------- -------- --------
Net Interest Income 5,149 (16) 0 5,133
Provision for loan losses 180 0 0 180
Noninterest Income 1,226 1,078 (1,161) 1,143
Noninterest Expense 3,193 1,668 (1,161) 3,700
-------- -------- -------- --------
Income (Loss) Before Tax 3,002 (606) 0 2,396
Provision for
Income Taxes 1,188 (252) 0 936
-------- -------- -------- --------
Net Income (Loss) $ 1,814 $ (354) $ 0 $ 1,460
-------- -------- -------- --------
Assets $215,940 $ 22,853 $(20,336) $218,457
Loans, Net 138,972 0 0 138,972
Deposits 196,730 0 (2,398) 194,332
Equity 17,938 22,117 (17,938) 22,117
</TABLE>
NOTE 6- Stock Offering
On June 30, 2000, the Company successfully 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"). The Stock Offering was over subscribed by approximately
$240,000. As of June 12, 2000 subscriptions for $2,787,000 were accepted. After
allocating the remaining subscriptions to eliminate the over subscription,
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
8
<PAGE>
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 $789,000 or $.47 per diluted share for the three months ended
June 30, 2000, compared with $691,000 or $.43 per diluted share for the three
months ended June 30, 1999, an increase of 14%. Net income was $1,460,000 or
$.87 per diluted share for the six months ended June 30, 2000, compared with
$1,332,000 or $.82 per diluted share for the six months ended June 30, 1999, an
increase of 10%. Total assets were $218,457,000 as of June 30, 2000; equating to
a 15% growth in assets during the twelve months ended June 30, 2000.
Shareholders' equity as of June 30, 2000 was increased by $2,787,000 as the
result of the acceptance of subscriptions for 126,709 shares of the Company's
common stock pursuant to the Stock Offering. Subscriptions for the additional
100,546 shares, or $2,213,000, were accepted in the third quarter. 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.
Net interest income before the provision for loan losses on a taxable-equivalent
basis for the three months ended June 30, 2000 and June 30, 1999 was $2,744,000
and $2,356,000, respectively. These results equate to a 16% increase in net
interest income for the second quarter of 2000 compared to the second quarter of
1999. Loan fee income, which is included in interest income from loans, was
$179,000 for the three months ended June 30, 2000, compared with $190,000 for
the three months ended June 30, 1999. Net interest income before the provision
for loan losses on a taxable-equivalent basis for the six months ended June 30,
2000 and June 30, 1999 was $5,223,000 and $4,609,000, respectively. These
results equate to a 13% increase in net interest income for the first six months
of 2000 compared to the same period in 1999. Loan fee income, which is included
in interest income from loans, was $313,000 for the six months ended June 30,
2000, compared with $379,000 for the six months ended June 30, 1999.The average
balance of earning assets increased $22,125,000 or 13% during the twelve months
ended June 30, 2000. Taxable-equivalent interest income increased $1,166,000 or
17% in the first six months of 2000 compared with the same period of 1999.
Increase in the volume of earning assets accounted for $1,080,000 of this
increase, with an increase of $86,000 attributable to higher rates. The average
balance of interest-bearing liabilities increased $18,158,000 or 14% during the
first six month of 2000 compared with the same period in 1999. Interest paid on
interest-bearing liabilities increased $552,000 in 2000 compared with 1999.
Increase in the volume of deposits and other borrowings accounted for $379,000
of this increase, while a $173,000 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.
9
<PAGE>
<TABLE>
The following table provides a summary of the components of interest income,
interest expense and net interest margin for the six months ended June 30, 2000
and June 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) $ 132,652 $ 5,953 8.98% $ 103,545 $ 4,633 8.95%
Investment securities:
Taxable 40,050 1,331 6.65% 48,302 1,532 6.34%
Non-taxable (3) 14,061 430 6.12% 13,975 422 6.04%
--------- --------- --------- ---------
TOTAL LOANS AND INVESTMENT
SECURITIES 186,763 7,714 8.26% 165,822 6,587 7.94%
Due from banks, time 100 3 6.00% 150 4 5.33%
Federal funds sold 3,939 121 6.14% 2,705 81 5.99%
--------- --------- --------- ---------
TOTAL EARNING ASSETS 190,802 $ 7,838 8.22% 168,677 $ 6,672 7.91%
--------- --------- --------- ---------
Cash and due from banks 9,659 9,612
Allowance for loan losses (1,988) (1,823)
Premises and equipment, net 3,790 2,800
Accrued interest receivable
and other assets 6,802 5,669
--------- ---------
TOTAL ASSETS $ 209,065 $ 184,935
========= =========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits:
Interest bearing demand $ 61,595 $ 696 2.26% $ 57,053 $ 657 2.30%
Savings 15,829 149 1.88% 15,414 141 1.83%
Time 64,491 1,665 5.16% 51,487 1,212 4.71%
--------- --------- --------- ---------
141,915 2,510 3.54% 123,954 2,010 3.24%
Short-term borrowings 2,764 105 7.60% 2,567 53 4.13%
TOTAL INTEREST BEARING
LIABILITIES 144,679 $ 2,615 3.61% 126,521 $ 2,063 3.26%
--------- --------- --------- ---------
Noninterest bearing DDA 43,656 40,187
Accrued interest payable
and other liabilities 1,425 1,091
Shareholders' equity 19,305 17,136
--------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 209,065 $ 184,935
========= =========
NET INTEREST INCOME $ 5,223 $ 4,609
========= =========
NET INTEREST INCOME TO
AVERAGE EARNING ASSETS
(Net Interest Margin (4)) 5.47% 5.46%
<FN>
(1) Average loans include nonaccrual loans
(2) Loan interest income includes loan fee income of $313 in 2000 and $379 in
1999
(3) Average yields shown are taxable-equivalent. On a non- taxable basis, 2000
interest income was $340 with an average yield of 4.84%; in 1999 non-taxable
income was $325 and the average yield was 4.65%.
(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>
10
<PAGE>
The following table sets forth a summary of the changes in interest income and
interest expense for the six months ended June 30, 2000 over June 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) $0 $(1)
Investment Securities:
Taxable (262) 61 (201)
Non-Taxable (1) 3 5 8
Federal Funds Sold 37 3 40
Loans 1,303 17 1,320
--------------------------------
Total Interest and Fee Income 1,080 86 1,166
--------------------------------
Increase (Decrease) In
Interest Expense
Deposits:
Interest Bearing
Transaction Accounts 51 (12) 39
Savings 4 4 8
Time Deposits 320 133 453
--------------------------------
Total Deposits 375 125 500
Short-term Borrowings 4 48 52
--------------------------------
Total Interest Expense 379 173 552
--------------------------------
Net Interest Income $701 $(87) $614
================================
(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 June 30, 2000 the allowance for loan losses of $2,068,000
represented 1.46% of loans outstanding. As of June 30, 1999, the allowance
represented 1.70% of loans outstanding. During the six months ended June 30,
2000, $180,000 was charged to expense for the loan loss provision, compared with
$120,000 for the same period in 1999. Net charge-offs for all loans was $99,000,
or 0.1% of total loans as of June 30, 2000, for the first six months of 2000
compared with no net charge-off in the year earlier period.
11
<PAGE>
<TABLE>
The following table summarizes changes in the allowance for loan losses:
<CAPTION>
In 000's
June 30, 2000 June 30, 1999
<S> <C> <C>
Balance, beginning of year $1,987 $1,752
Provision for loan losses 180 120
Loans charged off 102 2
Recoveries of loans previously charged off 3 2
------ ------
Balance, end of period $2,068 $1,872
====== ======
Allowance for loan losses to total outstanding loans 1.46% 1.70%
</TABLE>
There were no loans on non-accrual at June 30, 2000 or June 30, 1999.
NON-INTEREST INCOME
Non-interest income was $637,000 for the three months ended June 30, 2000
compared with $431,000 for the same period in 1999, a 48% increase. Non-interest
income was $1,151,000 for the six months ended June 30, 2000 compared with
$815,000 for the same period in 1999, a 41% increase. The Company realized a
one-time increase in non-interest income of $142,000 during the second quarter
of 2000, as a result of the demutualization of an insurance company in which the
Company holds policies. 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 $8,000 for the three and six months ended June 30, 2000 resulted
from the sale of several available-for-sale securities. Gains of $5,000 for the
six months ended June 30, 1999 resulted from the sale of several
available-for-sale securities.
NON-INTEREST EXPENSE
Non-interest expense for the three months ended June 30, 2000 and June 30, 1999
was $1,932,000 and $1,563,000, respectively, a 24% increase. Non-interest
expense for the six months ended June 30, 2000 and June 30, 1999 was $3,700,000
and $3,065,000, respectively, a 21% increase. The 21% increase in 2000 was
primarily in salaries and employee benefit expenses. Salaries and employee
benefits expense for the three months ended June 30, 2000 and 1999 were
$1,039,000 and $817,000, respectively, a 27% increase. Salaries and employee
benefits expense for the six months ended June 30, 2000 and 1999 were $2,022,000
and $1,666,000, respectively, a 21% increase. The increase in 2000 resulted from
increased salaries paid to Company officers and employees, and an increase of
approximately twenty full-time equivalent employees during the twelve months
ended June 30, 2000. The increase in employees is primarily due to growth of the
Company and opening of Solano Bank in mid July, 2000. At June 30, 2000 the
full-time employee equivalent of the company was 96. Other expenses for the
three months ended June 30, 2000 and June 30, 1999 were $567,000 and $527,000,
respectively, an 8% increase. Other expenses for the six months ended June 30,
2000 and June 30, 1999 were $1,078,000 and $964,000, respectively, a 12%
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 an
increased advertising campaign.
INCOME TAXES
The Company reported a provision for income tax for the three months ended June
30, 2000 and 1999 of $517,000 and $426,000, respectively. The Company reported a
provision for income tax for the six months ended June 30, 2000 and 1999 of
$936,000 and $815,000, 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 June 30, 2000 were $218,457,000 compared with $190,474,000 as
of June 30, 1999, and $197,106,000 at December 31, 1999 equating to a 15%
increase during the twelve months and an 11% increase for the six month ended
June 30, 2000. Total deposits as of June 30, 2000 were $194,332,000 compared
with $169,358,000 as of June 30, 1999, and $172,380,000 at December 31, 1999
representing a 15% increase during the twelve months and a 13% increase for the
six months ended June 30, 2000. Loans outstanding as of June 30, 2000 were
$141,040,000 compared with $110,052,000 as of June 30, 1999, and $122,153,000 at
December 31, 1999 equating to a 28% increase during the twelve months and a 15%
increase for the three months ended June 30, 2000,
BORROWINGS
Short-term borrowings were $500,000 at June 30, 2000 compared with $3,000,000 at
June 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. Going forward, continued reliance on short-term funds may be
required if loan demand continues to outpace deposit growth, and, therefore
short-term borrowings are expected to vary from time to time.
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
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<PAGE>
Company has a comprehensive Asset/Liability Management and Liquidity Policy,
which it uses to determine adequate liquidity. As of June 30, 2000 liquid assets
were 30% of total assets, compared with 31% as of June 30, 1999 and 33% at
December 31, 1999.
The Federal Deposit Insurance Corporation Improvement Act (FDICA) 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 June 30, 2000, the Company's risk-based capital
ratio was 14.95%. The Company's tier 1 risk-based capital ratio and leverage
ratio were 13.72% and 11.02%, respectively.
<TABLE>
As the following table indicates, the The Vintage Bank (the "Bank") currently
exceeds the regulatory capital minimum requirements. The Bank is considered
"Well Capitalized" according to regulatory guidelines.
<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 June 30, 2000:
Total Capital (to Risk
Weighted Assets)
Consolidated $25,279 14.95% $13,531 >8.00% $16,913 >10.00%
- -
The Vintage Bank 21,075 12.90% 13,069 >8.00% 16,336 >10.00%
- -
Tier I Capital (to Risk
Weighted Assets)
Consolidated 23,322 13.72% 6,765 >4.00% 10,148 >6.00%
- -
The Vintage Bank 19,032 11.65% 6,535 >4.00% 9,803 >6.00%
- -
Tier I Capital (to
Average Assets)
Consolidated 23,211 11.02% 8,421 >4.00% 10,527 >5.00%
-
The Vintage Bank 19,032 9.04% 8,421 >4.00% 10,527 >5.00%
- -
</TABLE>
YEAR 2000 DATA PROCESSING ISSUES
The Company previously recognized the material nature of the business issues
surrounding computer processing of dates into and beyond the Year 2000 and began
taking corrective action as required pursuant to the interagency statements
issued by the Federal Financial Institutions Examination Council.
The Company's Year 2000 readiness costs were approximately $75,000. The Company
does not currently expect to expend any further funds to address Year 2000
issues.
As of August 9, 2000, the Company has not experienced any material disruptions
of its internal computer systems or software applications and has not
experienced any problems with the computer systems or software applications of
its third party vendors, suppliers or service providers. The Company will
continue to monitor these third parties to determine the impact, if any, on its
business and the actions it must take, if any, in the event of non-compliance by
any of these third parties. Based upon the Company's assessment of compliance by
third parties, there appears to be no material business risk posed by any such
non-compliance.
Although the Company's Year 2000 rollover did not present any material business
disruption, there may be some remaining Year 2000 related risks. Management
believes that appropriate actions have been taken to address these remaining
Year 2000 issues and contingency plans are in place to minimize the financial
impact to the Company. Management, however, cannot be certain that Year 2000
issues affecting its customers, suppliers or service providers will not have a
material adverse impact on the Company.
PART II - OTHER INFORMATION
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Other than ordinary routine litigation incidental to the business of the
Company, there were no material pending legal proceedings.
ITEM 2. USE OF PROCEEDS
Use of Proceeds of Public Offering
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<PAGE>
On December 22, 1999, North Bay 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 North Bay 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. After allocating
the remaining subscriptions to eliminate an over subscription of $240,000,
subscriptions for the remaining $2,213,000 were accepted as of July 17, 2000. As
of June 30, 2000, the proceeds of the Stock Offering, the purpose of which was
to invest in Solano Bank, had not been utilized. 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 North Bay.
ITEM 4. SUBMISSION OF MATTERS OF A VOTE OF SECURITY HOLDERS
(a) The First Annual Meeting of the shareholders of the Company was
held on May 9, 2000.
(b) Proxies for the meeting were solicited pursuant to Regulation 14A
under the Act, there were no solicitations in opposition to
management's nominees as listed in the proxy statement, and all of such
nominees were elected.
(c) In addition to the election of directors and aside from procedural
matters relating to the selection or approval of auditors, the
following matters were voted upon at the annual shareholders' meeting:
(i) A proposal to amend the Company's Stock Option Plan (the
"Plan") to increase the number of shares available for grant by 150,000
to 370,274. The affirmative vote of a majority of the shares voting and
a majority of disinterested shares voting was required for approval. At
the First Annual Meeting, the proposal to amend the Plan was approved
with 1,006,063 affirmative votes (all of which were disinterested
shares), 8,575 negative votes, and 6,552 abstaining votes.
(d) There was no settlement between the Company and any other person
terminating any solicitation subject to Rule 14a-11.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) An index of exhibits begins on page 16.
(b) On May 25, 2000, the Company filed a Current Report on Form 8-K,
reporting, under Item. 5 "Other Matters":
(i) modifications to the Company's stock offering lowering the per share
offering price to $22 per share from $25 per share and, to maintain the
$5,000,000 aggregate offering price, increasing the number of shares
being offered from 200,000 to 227,273. The additional shares were
registered on Registration Statement No. 333-35848 which became
effective on filing on April 28, 2000;
(ii) receipt of preliminary approval to organize Solano Bank from the
California Department of Financial Institutions and preliminary
approval from the Federal Deposit Insurance Corporation of Solano
Bank's application for federal deposit insurance; and
(iii) the issuance a press release announcing the Company's earnings for the
quarter ended March 31, 2000.
No financial statements were filed with the Current Report on Form 8-K.
14
<PAGE>
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: August 11, 2000 BY: /s/ Terry L. Robinson
--------------------------------
Terry L. Robinson
President & CEO
(Principal Executive Officer)
Date: August 11, 2000 BY: /s/ Lee-Ann Almeida
--------------------------------
Lee-Ann Almeida
Sr. Vice President & CFO
(Principal Financial Officer)
15
<PAGE>
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
16
<PAGE>
EXHIBIT 27
Financial Data Schedule
17
