-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IbtcnUD7PuU80Xl3gQKQyseP+n3WLUT5s2S6NxGKuf3XExPvNWeMWXWm1Z+2drxy poJqKcTMYLtgSPH4pDxVOA== /in/edgar/work/20000814/0000950005-00-000902/0000950005-00-000902.txt : 20000921 0000950005-00-000902.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950005-00-000902 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH BAY BANCORP/CA CENTRAL INDEX KEY: 0001102595 STANDARD INDUSTRIAL CLASSIFICATION: [6021 ] IRS NUMBER: 680434802 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 333-93537 FILM NUMBER: 696235 BUSINESS ADDRESS: STREET 1: 1500 SOSCOL AVE CITY: NAPA STATE: CA ZIP: 94559 BUSINESS PHONE: 7072578500 MAIL ADDRESS: STREET 1: 1500 SOSCOL AVE CITY: NAPA STATE: CA ZIP: 94559 10QSB 1 0001.txt FORM 10QSB 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 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 North Bay Bancorp Consolidated Balance Sheets (Unaudited)
June 30, June 30, December 31, Assets 2000 1999 1999 ------------- ------------- ------------- 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 ============= ============= =============
The accompanying notes are an integral part of these statements 3 North Bay Bancorp Consolidated Income Statements (Unaudited)
Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, 2000 1999 2000 1999 ----------- ----------- ----------- ----------- 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 =========== =========== =========== ===========
The accompanying notes are an integral part of these statements 4 North Bay Bancorp Consolidated Statement of Change in Shareholders' Equity June 30, 2000 (Unaudited)
Accumulated Other Total Common Shares Common Retained Comprehensive Shareholders' Comprehensive Outstanding Stock Earnings Loss Equity Income --------------------------------------------------------------------------------------------- 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 =========== ============ ============ ============ ============
The accompanying notes are an integral part of these statements 5 North Bay Bancorp Consolidated Statement of Cash Flows (Unaudited) (In 000's)
Six months Ended June 30, 2000 1999 -------- -------- 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
The accompanying notes are an integral part of these statements 6 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. The following table reconciles the numerator and denominator of the Basic and Diluted earnings per share computations:
Weighted Average Per-Share Net Income Shares Amount ---------- ------ ------ For the three months ended June 30, 2000 ---------------------------------------- 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
7 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". The components of the Company's business segments for the six months ended June 30, 2000 were as follows:
(In 000's) Community Intersegment Banking Other Adjustments Consolidated --------- -------- ------------ ------------ 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
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 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 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:
In 000's 2000 1999 ---- ---- Average Income/ Average Average Income/ Average Balance Expense Yield/Rate Balance Expense Yield/Rate -------------------------------------------------------------------------------------- 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% (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
10 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 The following table summarizes changes in the allowance for loan losses:
In 000's June 30, 2000 June 30, 1999 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%
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 12 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. 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.
To Be Well Capitalized For Capital Under Prompt Corrective Actual Adequacy Purposes Action Provisions ------ ----------------- ----------------- (In 000's) Amount Ratio Amount Ratio Amount Ratio ------ ----- ------ ----- ------ ----- 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% - -
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 13 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 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 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 EXHIBIT 27 Financial Data Schedule 17 EX-27 2 0002.txt FINANCIAL DATA SCHEDULE
9 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED BALANCE SHEETS OF NORTH BAY BANCORP AS OF JUNE 30, 2000 AND 1999 AND THE RELATED CONSOLIDATED STATEMENTS OF INCOME, CHANGES IN SHAREHOLDERS' EQUITY AND CASH FLOWS FOR EACH OF THE PERIODS ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 9,794 100 6,224 0 50,127 1,372 1,372 141,040 2,068 218,457 194,332 500 1,508 0 0 0 17,611 4,506 218,457 5,953 1,674 121 7,748 2,615 2,615 5,133 180 (8) 3,700 2,396 2,396 0 0 1,460 0.89 0.87 8.22 0 0 0 0 1,987 102 3 2,068 2,068 0 0
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