-----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, JrYtD54jiPmidSIUdY6RlgBNKtBmyOPjNZHi4WBMDniDIa5Ba84zra4B7Odd43CC +kRxxAecrW8ltBdSlyafDw== /in/edgar/work/0000950005-00-001114/0000950005-00-001114.txt : 20001114 0000950005-00-001114.hdr.sgml : 20001114 ACCESSION NUMBER: 0000950005-00-001114 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 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: 759860 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 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 ------- ------- 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
North Bay Bancorp Consolidated Balance Sheets (Unaudited) September 30, September 30, December 31, Assets: 2000 1999 1999 ------------- ------------- ------------- 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 ============= ============= ============= The accompanying notes are an integral part of these statements
3 North Bay Bancorp Consolidated Income Statements (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, September 30, September 30, 2000 1999 2000 1999 ------------ ------------ ------------ ------------ 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 ============ ============ ============ ============ The accompanying notes are an integral part of these statements
4 North Bay Bancorp Consolidated Statement of Change in Shareholders' Equity September 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 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 ========= =========== =========== =========== =========== The accompanying notes are an integral part of these statements
5 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 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. 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 September 30, 2000 --------------------------------------------- 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
Weighted Average Per-Share Net Income Shares Amount ---------- ------ ------ For the nine months ended September 30, 2000 -------------------------------------------- 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
7 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. The components of the Company's business segments for the three months ended September 30, 2000 were as follows:
(In 000's) Community Intersegment Banking Other Adjustments Consolidated ------- ----- ----------- ------------ 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 ----- ----- ----- ------
The components of the Company's business segments for the nine months ended September 30, 2000 were as follows:
(In 000's) Community Intersegment Banking Other Adjustments Consolidated ------- ----- ----------- ------------ 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 (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
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 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 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:
In 000's 2000 1999 ---- ---- Average Income/ Average Average Income/ Average Balance Expense Yield/Rate Balance Expense Yield/Rate ------------------------------------------------------------------------------ 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% (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.
11 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 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 13 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
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 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% - -
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. 15 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 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 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 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 SEPTEMBER 30, 2000 AND 1999 AND THE RELATED CONSOLIDATED STATEMENTS OF INCOME,CHANGES IN SHAREHOLDERS' EQUITY AND CASH FLOWS FOR EACH OF THE PERIODS ENDED SEPTEMBER 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 11,708 100 7,730 0 49,420 1,353 1,353 149,671 2,168 229,917 199,570 0 2,025 3,000 0 0 19,761 5,561 229,917 9,355 2,465 210 12,030 3,884 4,059 7,971 280 (3) 5,994 3,355 3,355 0 0 2,050 1.20 1.18 8.26 0 0 0 0 1,987 102 3 2,168 2,168 0 0
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