[LETTERHEAD OF SIX RIVERS NATIONAL BANK]
402 "F" STREET
EUREKA, CALIFORNIA 95501
March 16, 2000
Dear Six Rivers National Bank Shareholders:
You may have received a recent letter from Charles D. Aalfs relating to
our proposed merger with North Valley Bancorp. We believe that this letter was
sent solely to disrupt our pending merger which, simply put, will leave our
shareholders holding the bag. Normally we would not respond to such a letter,
but, because of the importance of the pending merger, we thought you should have
the facts.
o BETTER VALUE: First off, as expressed in our proxy, after
thoroughly evaluating the available options, your Board firmly believe that the
NORTH VALLEY TRANSACTION HOLDS THE BEST FINANCIAL PROSPECTS for our
shareholders. Your Board unanimously believes the relative value of North
Valley's stock is far greater than the overvalued, thinly traded, unlisted stock
of Humboldt Bancorp. Just look at the current trading multiples: Humboldt is
trading at 2 times book value, North Valley at book value; Humboldt is trading
at 15 times 1999 earnings of $1.00, North Valley at 7.5 times 1999 earnings of
$1.21 (think about it, North Valley has 21% greater per share earnings but only
50% of the trading multiples). North Valley historically has had superior
profitability and in our view better quality earnings. Thus we think North
Valley's stock is an extremely attractive value and the obvious choice as a
merger partner.
o POSITIVE EFFECT ON PER SHARE EARNINGS: North Valley has stated
repeatedly and unambiguously that our merger should INCREASE ITS PROJECTED
EARNINGS PER SHARE in the first full year of joint operations. We believe that
this positive impact holds great promise for the future market performance of
North Valley's stock and its history of cash dividends ($0.40 per share in 1999,
a yield of more than 4%). This will benefit all shareholders, including Six
Rivers shareholders.
o POOR TRACK RECORD: It is important to remember that Humboldt
Bancorp's acquisition of Global Bancorp has been pending since June 1999, an
UNPRECEDENTED PERIOD FOR A SIMPLE TRANSACTION. We think this raises significant
questions about their ability to successfully pursue a much larger and more
complicated transaction.
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March 16, 2000
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o NO REALISTIC ALTERNATIVES: Next, because of our local shareholders'
skepticism toward Humboldt Bancorp and the perceived negative impact of a
Humboldt merger on our customers, employees and communities, we think that
obtaining two-thirds shareholder support for a transaction with Humboldt is
extremely unlikely. This would leave us WITHOUT ANY NEAR-TERM MERGER prospects,
particularly in time to take advantage of pooling accounting.
o HIGH COSTS FOR SPECULATION: Finally, for Six Rivers to abandon its
North Valley transaction to pursue a highly speculative merger with Humboldt
would be foolish. If Six Rivers drops North Valley to negotiate a merger with
Humboldt, Six Rivers would have to PAY A $2,000,000 BREAK-UP FEE TO NORTH VALLEY
AND LOSE ALL THE FEES AND COSTS INCURRED TO DATE. Instead, we are focusing our
efforts on completing our merger which we believe will produce a successful,
geographically diverse banking franchise.
While we do not doubt Mr. Aalfs' sincerity, we believe his judgment
has been shaped by his historic attachment to Humboldt Bancorp and his position
as one of its large shareholders. Frankly, not having been a part of our Board's
diligent analysis of all options, he misunderstands and misstates the care that
went into our decision.
We encourage you to carefully review the proxy materials that have
been mailed to you with particular attention to the Reasons for the Merger
(pages 35 -38) and vote FOR the merger by immediately returning your proxy card.
If we can answer any questions, please let us know.
Sincerely Yours,
/s/ WILLIAM T. KAY /s/ MICHAEL W. MARTINEZ
- ------------------------- -----------------------
William T. Kay Michael W. Martinez
Chairman of the Board President & CEO
(707) 822-2971 (707) 443-8400
P.S. If you haven't voted yet, enclosed is a PROXY CARD TO MAKE SURE YOUR VOTE
COUNTS.
This letter contains certain forward-looking statements that are subject to
risks and uncertainties about possible financial condition, results of
operations and business of North Valley Bancorp and Six Rivers National Bank. We
accept no obligation to update these statements. Many factors could affect the
future results and cause results to differ materially from the statements. These
statements are not guarantees of future performance. Risks and uncertainties
include, among other considerations: (a) the successful completion of the merger
and the integration of Six Rivers and North Valley and the related cost savings
and earnings accretion; and (b) and competitive impacts in the market place
including lower than expected revenues, increase in competition, interest rate
changes reduced margins, economic conditions are less favorable and deteriorate
credit quality or cause reduced credit demand, and legislative/regulatory
changes adversely affect the business.
