Item 1 - Business
North Bay Bancorp
General
North Bay Bancorp (Bancorp), headquartered in Napa, California, is a California corporation incorporated in 1999. Bancorp is the Holding Company for The Vintage Bank and Solano Bank (Banks) and North Bay Statutory Trust I, which are wholly owned subsidiaries, collectively (the Company). North Bay Statutory Trust I was formed in June 2002 for the purpose of issuing trust preferred securities. Bancorp is a registered financial holding company under the Bank Holding Company Act of 1956, as amended, and is subject to the regulations of, and examination by, the Board of Governors of the Federal Reserve System. At present, Bancorp does not engage in any material business activities other than the ownership of the Banks. North Bay has announced its intention, subject to regulatory approval, to consolidate its subsidiary banks to simplify the company's corporate structure.
The Vintage Bank
General
The Vintage Bank is a California corporation organized as a state chartered bank in 1984. The Vintage Bank engages in commercial banking business in Napa County from its main banking office located at 1500 Soscol Avenue in Napa, California. The Vintage Bank established a Real Estate Investment Trust (REIT) subsidiary in February 2003. The Vintage Bank has four other banking offices; one located at 3271 Browns Valley Road, Napa, California, one at 3626 Bel Aire Plaza, Napa, California, one located at 1065 Main Street, St. Helena, California and one at 1190 Airport Road, Napa, California. Automated teller machines are located at all offices and at Ranch Market Too in Yountville, providing 24-hour service. The Vintage Bank is a member of the STAR, VISA and PLUS ATM networks, providing customers with access to Point of Sale and ATM service worldwide. The Vintage Bank offers its customers Internet banking services; this service supports account inquiries, transfers between accounts, and automatic reconciliation and bill
payment services. The Vintage Bank is a member of the Federal Reserve System. The deposits of each depositor of The Vintage Bank are insured by the Federal Deposit Insurance Corporation up to the maximum allowed by law.
The Vintage Bank offers a full range of commercial banking services to individuals and the business and agricultural communities in Napa County. The Vintage Bank emphasizes retail commercial banking operations. The Vintage Bank accepts checking and savings deposits, makes consumer, commercial, construction and real estate loans, and provides other customary banking services. The Vintage Bank does not offer trust services and does not plan to do so in the near future. There have been no material changes in services offered by The Vintage Bank. The Vintage Bank makes annuities and mutual funds available to its customers through Linsco Private Ledger.
Solano Bank
General
Solano Bank is a California corporation organized as a state chartered bank in 2000. Solano Bank engages in commercial banking business in Solano County from its main banking office located at 403 Davis Street in Vacaville, California. Solano Bank has three other banking offices; one located at 1411 Oliver Road, Fairfield, California, one at 1395 E. Second Street, Benicia, California, and one located at 976-A Admiral Callaghan Lane, Vallejo, California. Automated teller machines are located at all offices and 1100 Texas Street, Fairfield California, providing 24-hour service. Solano Bank is a member of the STAR, VISA and PLUS ATM networks, providing customers with access to Point of Sale and ATM service worldwide. Solano Bank offers its customers Internet banking services; this service supports account inquiries, transfers between accounts, and automatic reconciliation and bill payment services. Solano Bank is a member of the Federal Reserve System. The deposits of each depositor of Solano Bank are insured by the Federal Deposit Insurance Corporation up to the maximum allowed by law.
Solano Bank offers a full range of commercial banking services to individuals and the business and agricultural communities in Solano County. Solano Bank emphasizes retail commercial banking operations. Solano Bank accepts checking and savings deposits, makes consumer, commercial, construction and real estate loans, and provides other customary banking services. Solano Bank does not offer trust services and does not plan to do so in the near future.
Website Access to Reports
The Company maintains the following websites, www.northbaybancorp.com, www.vintagebank.com and www.solanobank.com. The Company makes available, free of charge, on its www.northbaybancorp.com website the annual report on Form 10-K, the quarterly reports on Form 10-Q and current reports on Form 8-K as soon as reasonably practical after we file such reports with the Securities & Exchange Commission. Each of the Banks' websites have an investor relations page that hyperlinks to the Bancorp website.
Consolidated Lending Activities
The Banks concentrate their lending activities in commercial, installment, construction, and real estate loans made primarily to businesses and individuals located in Napa and Solano Counties. At December 31, 2003, total loans outstanding were $306,663,000 resulting in a loan-to-deposit ratio of 75.5%. At December 31, 2002, total loans outstanding were $237,627,000 resulting in a loan-to-deposit ratio of 64.6%.
As of December 31, 2003, The Vintage Bank's loan limits to individual customers were $4,716,000 for unsecured loans and $12,577,000 for unsecured and secured loans combined. Solano Bank loan limits to individual customers were $1,108,000 for unsecured loans and $2,954,000 for unsecured and secured loans combined. As of December 31, 2002, The Vintage Bank's lending limits were $3,892,000 for unsecured loans and $10,380,000 for unsecured and secured loans combined. Solano Bank lending limits were $1,120,000 for unsecured loans and $2,987,000 for unsecured and secured loans combined. For customers desiring loans in excess of the Bank's lending limits, the Banks may loan on a participation basis with another bank taking the amount of the loan in excess of Banks' lending limits.
At December 31, 2003, the Banks' commercial loans outstanding totaled $45,991,000 (15.0% of total loans), commercial loans secured by real estate totaled $33,519,000 (10.9% of total loans), construction loans totaled $35,205,000 (11.5% of total loans), real estate loans totaled $163,088,000 (53.2% of total loans), and installment loans totaled $28,860,000 (9.4% of total loans). At December 31, 2002, commercial loans outstanding totaled $46,061,000 (19.4% of total loans), commercial loans secured by real estate totaled $16,991,000 (7.2% of total loans), construction loans totaled $19,306,000 (8.1% of total loans), real estate loans totaled
$131,167,000 (55.2% of total loans) and installment loans totaled $24,102,000 (10.1% of total loans). At December 31, 2001, commercial loans outstanding totaled $29,730,000 (16.0% of total loans), commercial loans secured by real estate totaled $7,930,000 (4.3% of total loans), construction loans totaled $21,453,000 (11.5% of the total loans), real estate loans totaled $106,851,000 (57.4% of total loans), and installment loans totaled $20,301,000 (10.9% of total loans).
As of December 31, 2003, the total of undisbursed loans and similar commitments was $88,092,000 as contrasted with $84,564,000 as of December 31, 2002 and $59,692,000 as of December 31, 2001. The Banks expect all but approximately $1,108,000 of their undisbursed loans and similar commitments to be exercised during 2004. The Banks take real estate, listed securities, savings and time deposits, automobiles, machinery and equipment, inventory and accounts receivable as collateral for loans.
The interest rates charged for the various loans made by the Banks vary with the degree of risk and the size and maturity of the loans involved and are generally affected by competition and by current money market rates.
Commercial Loans
The Banks make commercial loans primarily to professionals, individuals and businesses in the Counties of Napa and Solano. The Banks offer a variety of commercial lending products, including revolving lines of credit, working capital loans, equipment financing and issuance of letters of credit. Typically, lines of credit have a floating rate of interest based on the Banks' Base Rate and are for a term of one year or less. Working capital and equipment loans have a floating or a fixed rate typically with a term of five years or less. Approximately 58% of the Banks' commercial loans are unsecured or secured by personal property and, therefore, represent a higher risk of ultimate loss than loans secured by real estate. However, as a result of the lending policies and procedures implemented by the Company, management believes it has adequate commercial loan underwriting and review procedures in place to manage the risks inherent in commercial lending. In addition, commercial loans not secured by real estate typically require higher quality credit characteristics to meet underwriting requirements. The remaining 42% of the Banks' commercial loans are secured by real estate.
Real Estate Loans
Real estate loans consist of loans secured by deeds of trust on residential and commercial properties. The purpose of these loans is to purchase real estate or refinance an existing real estate loan, as compared with real estate secured commercial loans, which have a commercial purpose unrelated to the purchase or refinance of the real estate taken as collateral. The Banks' real estate loans bear interest at rates ranging from 3% to 13% and have maturities of thirty years or less.
The Banks originate and service residential mortgage loans. Most of the residential mortgage loans originated by the Banks are sold to institutional investors according to their guidelines. Servicing of these loans is not retained by the Banks, however the Banks do receive a loan fee.
Real Estate Construction Loans
The Banks make loans to finance the construction of commercial, industrial and residential projects and to finance land development. The Banks portfolio is diversified between the categories of residential, spec, and commercial construction. This segment of the portfolio represents less than 100% of combined capital and does not require additional monitoring. Construction loans typically have maturities of less than one year, have a floating rate of interest based on Bank's base rate and are secured by first deeds of trust. Generally, the Banks do not extend credit in an amount greater than 50% of the appraised value of the real estate securing land and land development loans, or in an amount greater than 70% of the appraised value of the real estate securing non-owner occupied residential construction loans and commercial constructions, or 80% of the appraised value in the case of owner occupied residential construction loans. Commercial loans secured by real estate are generally granted in an amount no greater than 75% of the appraised value.
Installment Loans
Installment loans are made to individuals for household, family and other personal expenditures. These loans typically have fixed rates and have maturities of five years or less.
Lending Policies and Procedures
The Banks' lending policies and procedures are established by senior management of the Company and are approved by the Boards of Directors of the Bancorp, The Vintage Bank and Solano Bank. The Boards of Directors have established internal procedures, which limit loan approval authority of the Banks' loan officers. The Board of Directors of each bank has delegated lending authority to executive officers who in turn have delegated lending authority to selected loan officers.
The Directors' Loan Committee of each Bank must approve all new loans and loan renewals in excess of specified amounts (excluding savings secured, which is unlimited in amount). For The Vintage Bank this includes any loan in excess of $1,500,000 if secured and $1,000,000 if unsecured.
For Solano Bank this includes any loan in excess of $500,000 if secured and $250,000 if unsecured. Solano Bank has also established individual approval limits of up to $400,000 for equipment leases.
Loans to directors and executive officers of the Banks or their affiliates must be approved in all instances by a majority of the Board of Directors. In accordance with law, directors and officers are not permitted to participate in the discussion of or to vote on loans made to them or their related interests. In addition, loans to directors and officers must be made on substantially the same terms, including interest rates and collateral requirements, as those prevailing for comparable transactions with other nonaffiliated persons at the time each loan was made, subject to the limitations and other provisions in California and Federal law. These loans also must not involve more than the normal risk of collectibility or present other unfavorable terms.
Consolidated Deposits
Napa County and "south-central" Solano County currently constitutes the Company's primary service areas and most of the Banks' deposits are attracted from these areas. No material portion of the Banks' deposits have been obtained from a single person or a few persons, the loss of any one or more of which would have a material adverse effect on the business of the Banks. Total deposits as of December 31, 2003 were $406,445,000. Total deposits as of December 31, 2002 were $367,803,000. The Banks offer courier service in both Napa County and Solano County.
Business Hours
In order to attract loan and deposit business, both The Vintage Bank and Solano Bank maintain lobby hours at their Main Offices between 9:00 a.m. and 5:00 p.m. Monday through Thursday, between 9:00 a.m. and 6:00 p.m. on Friday, and between 9:00 a.m. and 1:00 p.m. on Saturday. Drive-up hours are between 8:00 a.m. and 6:00 p.m. Monday through Friday, and between 9:00 a.m. and 1:00 p.m. on Saturday at The Vintage Bank's Main Office. All branch offices are open between 9:00 a.m. and 5:00 p.m. Monday through Thursday, between 9:00 a.m. and 6:00 p.m. on Friday. All branch offices, with the exception of St. Helena, Gateway and Fairfield, are open between 9:00 a.m. and 1:00 p.m. on Saturday.
Employees
At December 31, 2003, the Company employed one hundred seventy-two (172) persons, forty-six (46) of whom are part-time employees, including six (6) executive officers and forty-two (42) other officers. At December 31, 2002 the Company employed one hundred fifty-eight (158) persons, twenty-one (21) of whom were part-time employees, including seven (7) executive officers and thirty-eight (38) other officers. At December 31, 2001, the Company employed one hundred fifty-two (152) persons, twenty-six (26) of whom were part-time employees, including seven (7) executive officers and thirty (30) other officers. None of the Company's employees are presently represented by a union or covered under a collective bargaining agreement. Management of the Company believes its employee relations are excellent.
Composition of Loans
LOAN PORTFOLIO
The following table shows the composition of loans as of December 31, 2003, 2002, 2001, 2000 and 1999.
The following table shows maturity distribution of loans and sensitivity in interest rates as of December 31, 2003.
(In 000's) AFTER ONE IN ONE YEAR THROUGH AFTER OR LESS FIVE YEARS FIVE YEARS TOTAL -------- -------- -------- -------- Commercial (Including Real Estate Secured) $ 31,387 $ 34,142 $ 13,981 $ 79,510 Installment 26,460 2,039 361 28,860 Real Estate 24,251 95,942 42,895 163,088 Construction 19,270 14,128 1,807 35,205 -------- -------- -------- -------- $101,368 $146,251 $ 59,044 $306,663 ======== ======== ======== ========
The following table shows maturity sensitivity to changes in interest rates as of December 31, 2002.
Nonaccrual Past Due and Restructured Loans
There were no nonaccrual loans as of December 31, 2003, 2002, 2001, 2000 or 1999. The Company held no OREO as December 31, 2003, 2002, 2001, 2000 or 1999. There were no loans accruing interest 90 days past due as of December 31, 2003, 2002, 2001, 2000, or 1999. There are no loans upon which principal and interest payments were 90 days past due at December 31, 2003 and with respect to which serious doubt existed as to the ability of the borrower to comply with the present loan payment terms. There were no restructured loans at December 31, 2003. See the Company's "Management Discussion and Analysis" for policies as it relates to nonaccrual loans.
The table summarizing the allocation of the allowance for loan losses between loan types at December 31, 2003, 2002, 2001, 2000 and 1999 is included in the Management and Discussion and Analysis of the 2003 Annual Report.
Summary of Loan Loss Experience
A table providing a summary of the Banks' loan loss experience as of December 31, 2003, 2002, 2001, 2000 and 1999 is included in the Management and Discussion and Analysis of the 2003 Annual Report.
Time Deposits
The following table sets forth the maturity of time certificates of deposit of $100,000 or more at December 31, 2003, 2002 and 2001.
Trust Preferred Securities
On June 26, 2002, North Bay Statutory Trust I (Trust), a Connecticut statutory business trust and wholly-owned subsidiary of North Bay Bancorp, issued $10 million in floating rate Cumulative Trust Preferred Securities (Securities). The Securities bear a rate of 90 day Libor plus 3.45% and had an initial interest rate of 5.34% and the rate as of December 31, 2003 was 4.62%; the Securities will mature on June 26, 2032, but earlier redemption is permitted under certain circumstances, such as changes in tax or regulatory capital rules. The principal asset of the trust is a $10,310,000 floating rate subordinated debenture of the Company.
The Securities, the subordinated debentures, and the common securities issued by the Trust are redeemable in whole or in part on or after June 26, 2007, or at any time in whole, but not in part, upon the occurrence of certain events. The Securities are included in Tier 1 capital for regulatory capital adequacy determination purposes, subject to certain limitations. The Company fully and unconditionally guarantees the obligations of the Trust with respect to the issuance of the Securities.
Subject to certain exceptions and limitations, the Company may, from time to time, defer subordinated debenture interest payments, which would result in a deferral of distribution payments on the Securities and, with certain exceptions, prevent the Company from declaring or paying cash distributions on the Company's common stock or debt securities that rank junior to the subordinated debentures.
Borrowings
There were no short-term borrowings at December 31, 2003 or December 31, 2002. Short-term borrowings consist primarily of federal funds purchased and borrowings from the Federal Home Loan Bank of San Francisco (FHLB). The Banks' maintain a collateralized line of credit with the FHLB. Based on the FHLB stock requirements at December 31, 2003, the lines provided for maximum borrowings of approximately $116 million; the Company also has available unused lines of credit totaling $17.5 million for Federal funds transactions at December 31, 2003.
Return on Equity and Assets
The following sets forth key ratios for the periods ending December 31, 2003, 2002 and 2001.
2003 2002 2001 ----- ----- ----- Net Income as a Percentage of Average Assets 1.00% .99% 1.00% Net Income as a Percentage of Average Equity 11.70% 11.36% 10.61% Average Equity as a Percentage of Average Assets 8.50% 10.09% 9.45% Dividends Declared Per Share as a Percentage of Net Income Per share 11.17% 11.49% 13.70%
Competition
The banking business in California, generally and in the service areas served by the Banks specifically, is highly competitive with respect to both loans and deposits and is dominated by few major banks which have many offices operating over wide geographic areas. The Banks compete for deposits and loans principally with these major banks, savings and loan associations, finance companies, credit unions and other financial institutions located in the Banks' market areas. Among the advantages which the major banks have over the Banks are their ability to finance extensive advertising campaigns and to allocate their investment assets to regions of highest yield and demand. Many of the major commercial banks operating in the Banks' service areas offer certain services (such as trust and international banking services) which are not offered directly by the Banks and, by virtue of their greater total capitalization, such banks have substantially higher lending limits than the Banks.
Moreover, banks generally, and the Banks in particular, face increasing competition for loans and deposits from non-bank financial intermediaries such as savings and loan associations, thrift and loan associations, credit unions, mortgage companies insurance companies and other lending institutions. Further, the recent trend has been for other institutions, such as brokerage firms, credit card companies, and even retail establishments, to offer alternative investment vehicles, such as money market funds, as well as offering traditional banking services such as check access to money market funds and cash advances on credit card accounts. In addition, the other entities (both public and private) seeking to raise capital through the issuance and sale of debt or equity securities also compete with the Banks in the acquisition of deposits.
In order to compete with the other financial institutions in their market areas, the Banks rely principally upon local promotional activity, personal contacts by their officers, directors, employees and the Company's shareholders, and specialized services. In conjunction with the Banks' business plans to serve the financial needs of local residents and small-to medium-sized businesses, they also rely on officer calling programs to existing and prospective customers, focusing their overall marketing efforts towards their local communities. The Banks' promotional activities emphasize the advantages of dealing with a locally owned and headquartered institution sensitive to the particular needs of their local communities. For customers whose loan demands exceed a Bank's lending limit, the Banks attempt to arrange for such loans on a participation basis with other financial institutions.
The Banks' strategy for meeting competition has been to maintain a sound capital base and liquidity position, employ experienced management, and concentrate on particular segments of the market and by offering customers a degree of personal attention that, in the opinion of management, is not generally available through the Banks' larger competitors.
Supervision And Regulation
A. General
North Bay Bancorp
North Bay Bancorp, as a financial holding company, is subject to regulation under the Bank Holding Company Act of 1956, as amended, and is registered with and subject to the supervision of the Board of Governors of the Federal Reserve System. It is the policy of the Federal Reserve that each bank holding company serve as a source of financial and managerial strength to its subsidiary banks. The Federal Reserve has the authority to examine Bancorp.
The Bank Holding Company Act requires Bancorp to obtain the prior approval of the Federal Reserve before acquisition of all or substantially all of the assets of any bank or ownership or control of the voting shares of any bank if, after giving effect to such acquisition, Bancorp would own or control, directly or indirectly, more than 5% of the voting shares of such bank. Recent amendments to the Bank Holding Company Act expand the circumstances under which a bank holding company may acquire control of or all or substantially all of the assets of a bank located outside the State of California.
Bancorp may not engage in any business other than managing or controlling banks or furnishing services to its subsidiaries, with the exception of certain activities which, in the opinion of the Federal Reserve, are so closely related to banking or to managing or controlling banks as to be incidental to banking. The Gramm-Leach-Bliley Act, federal legislation enacted in 2000, offers bank holding companies an opportunity to broaden the scope of activities engaged in by electing to be treated as a financial holding company. A financial holding company enjoys broader powers than a bank holding company, specifically including the ability to own securities and insurance companies in addition to financial institutions. Bancorp became a financial Holding Company on August 23, 2000. Bancorp is generally prohibited from acquiring direct or indirect ownership or control of more than 5% of the voting shares of any company unless that company is engaged in such authorized activities and the Federal Reserve approves the acquisition.
Bancorp and its subsidiaries are prohibited from engaging in certain tie in arrangements in connection with any extension of credit, sale or lease of property or provision of services. For example, with certain exceptions The Vintage Bank may not condition an extension of credit on a customer obtaining other services provided by it, Bancorp or any other subsidiary, or on a promise by the customer not to obtain other services from a competitor. In addition, federal law imposes certain restrictions on transactions between The Vintage Bank and its affiliates. As affiliates, The Vintage Bank, Solano Bank and Bancorp are subject with certain exceptions, to the provisions of federal law imposing limitations on and requiring collateral for extensions of credit by The Vintage Bank and Solano Bank to any affiliate.
The Banks
As California state chartered banks, The Vintage Bank and Solano Bank are subject to regulation, supervision and periodic examination by the California Department of Financial Institutions. As members of the Federal Reserve System, The Vintage Bank and Solano Bank are also subject to regulation, supervision and periodic examination by the Federal Reserve Bank of San Francisco. The Banks' deposits are insured by the Federal Deposit Insurance Corporation to the maximum amount permitted by law, which is currently $100,000 per depositor in most cases. Insured banks are subject to FDIC regulations applicable to all insured institutions. The regulations of these state and federal bank regulatory agencies govern, or will govern, most aspects of the Banks' businesses and operations, including but not limited to, the scope of their business, its investments, its reserves against deposits, the nature and amount of any collateral for loans, the timing of availability of deposited funds, the issuance of securities, the payment of dividends, bank expansion and bank activities, including real estate development and insurance activities, and the payment of interest on certain deposits. The Vintage Bank and Solano Bank are also subject to the requirements and restrictions of various consumer laws, regulations and the Community Reinvestment Act.
B. Payment of Dividends
North Bay Bancorp
The shareholders of Bancorp are entitled to receive dividends when and as declared by its Board of Directors, out of funds legally available, subject to the dividends preference, if any, on preferred shares that may be outstanding and also subject to the restrictions of the California Corporations Code. At December 31, 2003, Bancorp had no outstanding shares of preferred stock.
Subject to certain exceptions and limitations, the Company may, from time to time, defer subordinated debenture interest payments, which would result in a deferral of distribution payments on the Trust Preferred Securities and, with certain exceptions, prevent the Company from declaring or paying cash distributions on the Company's common stock or debt securities that rank junior to the subordinated debentures.
The principal sources of cash revenue to Bancorp will be dividends and management fees received from The Vintage Bank and Solano Bank. The Banks' ability to make dividend payments to Bancorp is subject to state and federal regulatory restrictions. The Banks
Under state law, the Board of Directors of a California state chartered bank may declare a cash dividend, subject to the restriction that the amount available for the payment of cash dividends is limited to the lesser of the bank's retained earnings, or the bank's net income for the latest three fiscal years, less dividends previously declared during that period, or, with the approval of the Commissioner of Financial Institutions, to the greater of the retained earnings of the bank, the net income of the bank for its last fiscal year or the net income of the bank for its current fiscal year.
Federal Reserve regulations also govern the payment of dividends by a state member bank. Under Federal Reserve regulations, dividends may not be paid unless both capital and earnings limitations have been met. First, no dividend may be paid if it would result in a withdrawal of capital or exceed the member bank's net profits then on hand, after deducting its losses and bad debts. Exceptions to this limitation are available only upon the prior approval of the Federal Reserve and the approval of two-thirds of the member bank's shareholders. Second, a state member bank may not pay a dividend without the prior written approval of the Federal Reserve if the total of all dividends declared in one year exceeds the total of net profits for that year plus the preceding two calendar years, less any required transfers to surplus under state or federal law.
The Federal Reserve has broad authority to prohibit a bank from engaging in banking practices which it considers to be unsafe or unsound. It is possible, depending upon the financial condition of the bank in question and other factors, that the Federal Reserve may assert that the payment of dividends or other payments by a member bank is considered an unsafe or unsound banking practice and therefore, implement corrective action to address such a practice.
Accordingly, the future payment of cash dividends by The Vintage Bank or Solano Bank to Bancorp will generally depend not only on the banks' earnings during any fiscal period but also on the banks' meeting certain capital requirements and the maintenance of adequate allowances for loan and lease losses.
C. Change in Control
The Bank Holding Company Act of 1956, as amended and the Change in Bank Control Act of 1978, as amended, together with regulations of the FRB and the Comptroller, require that, depending on the particular circumstances, either FRB approval must be obtained or notice must be furnished to the Comptroller and not disapproved prior to any person or company acquiring "control" of a national bank, such as the Bank, subject to exemptions for some transactions. Control is conclusively presumed to exist if an individual or company acquires 25% or more of any class of voting securities of the bank. Control is rebuttably presumed to exist if a person acquires 10% or more but less than 25% of any class of voting securities and either the company has registered securities under Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or no other person will own a greater percentage of that class of voting securities immediately after the transaction.
D. Capital Standards
The Board of Governors, the FDIC and other federal banking agencies have risk-based capital adequacy guidelines intended to provide a measure of capital adequacy that reflects the degree of risk associated with a banking organization's operations for both transactions reported on the balance sheet as assets, and transactions, such as letters of credit and recourse arrangements, which are reported as off-balance-sheet items. Under these guidelines, nominal dollar amounts of assets and credit equivalent amounts of off-balance-sheet items are multiplied by one of several risk adjustment percentages, which range from 0% for assets with low credit risk, such as certain U.S. government securities, to 100% for assets with relatively higher credit risk, such as business loans.
A banking organization's risk-based capital ratios are obtained by dividing its qualifying capital by its total risk-adjusted assets and off-balance-sheet items. The regulators measure risk-adjusted assets and off-balance-sheet items against both total qualifying capital (the sum of Tier 1 capital and limited amounts of Tier 2 capital) and Tier 1 capital. Tier 1 capital consists of common stock, retained
earnings, noncumulative perpetual preferred stock and minority interests in certain subsidiaries, less most other intangible assets. Trust preferred securities, limited to 25% of capital, are also considered Tier 1 capital for regulatory purposes up to 25% of capital. Tier 2 capital may consist of a limited amount of the allowance for possible loan and lease losses and certain other instruments with some characteristics of equity. The inclusion of elements of Tier 2 capital is subject to certain other requirements and limitations of the federal banking agencies. Since December 31, 1992, the federal banking agencies have required a minimum ratio of qualifying total capital to risk-adjusted assets and off-balance-sheet items of 8%, and a minimum ratio of Tier 1 capital to risk-adjusted assets and off-balance-sheet items of 4%.
In addition to the risk-based guidelines, federal banking regulators require banking organizations to maintain a minimum amount of Tier 1 capital to average total assets, referred to as the leverage ratio. For a banking organization rated in the highest of the five categories used by regulators to rate banking organizations, the minimum leverage ratio of Tier 1 capital to total assets is 3%. It is improbable, however, that an institution with a 3% leverage ratio would receive the highest rating by the regulators since a strong capital position is a significant part of the regulators' rating. For all banking organizations not rated in the highest category, the minimum leverage ratio is at least 100 to 200 basis points above the 3% minimum. Thus, the effective minimum leverage ratio, for all practical purposes, is at least 4% or 5%. In addition to these uniform risk-based capital guidelines and leverage ratios that apply across the industry, the regulators have the discretion to set individual minimum capital requirements for specific institutions at rates significantly above the minimum guidelines and ratios.
A bank that does not achieve and maintain the required capital levels may be issued a capital directive by the FDIC to ensure the maintenance of required capital levels. As discussed above, the Company and the Banks are required to maintain certain levels of capital. The regulatory capital guidelines as well as the actual capitalization for the Banks and the Company on a consolidated basis as of December 31, 2003 follow:
E. Impact of Monetary Policies
The earnings and growth of the Banks are subject to the influence of domestic and foreign economic conditions, including inflation, recession and unemployment. The earnings of the Banks are affected not only by general economic conditions but also by the monetary and fiscal policies of the United States and federal agencies, particularly the Federal Reserve. The Federal Reserve can and does implement national monetary policy, such as seeking to curb inflation and combat recession, by its open market operations in United States Government securities and by its control of the discount rates applicable to borrowings by banks from the Federal Reserve System. The actions of the Federal Reserve in these areas influence the growth of bank loans, investments and deposits and affect the interest rates charged on loans and paid on deposits. The Federal Reserve's policies have had a significant effect on the operating results of commercial banks and are expected to continue to do so in the future. The nature and timing of any future changes in monetary policies are not predictable.
F. Extensions of Credit to Insiders and Transactions with Affiliates
The Federal Reserve Act and FRB Regulation O, which are applicable to national banks, place limitations and conditions on loans or extensions of credit to: a bank's or bank holding company's executive officers, directors and principal shareholders (i.e., in most cases, those persons who own, control or have power to vote more than 10% of any class of voting securities); any company controlled by any such executive officer, director or shareholder; or any political or campaign committee controlled by such executive officer, director or principal shareholder.
Loans extended to any of the above persons must comply with loan-to-one-borrower limits, require prior full board approval when aggregate extensions of credit to such person exceed specified amounts, must be made on substantially the same terms (including interest rates and collateral) as, and follow credit-underwriting procedures that are not less stringent than, those prevailing at the time for comparable transactions with non-insiders, and must not involve more than the normal risk of repayment or present other unfavorable features. Regulation O also prohibits a bank from paying an overdraft on an account of an executive officer or director, except pursuant to a written pre-authorized interest-bearing extension of credit plan that specifies a method of repayment or a written pre-authorized transfer of funds from another account of the officer or director at the bank.
The provisions of Regulation O summarized above reflect substantial strengthening as a result of the adoption of FDICIA. FDICIA also resulted in an amendment to Regulation O which provides that the aggregate limit on extensions of credit to all insiders of a bank as a group cannot exceed the bank's unimpaired capital and unimpaired surplus. An exception to this limitation is provided for banks with less than $100,000,000 in deposits. The aggregate limit applicable to such banks is two times the bank's unimpaired capital and unimpaired surplus, provided the bank meets or exceeds all applicable capital requirements. The Sarbanes-Oxley Act of 2002, generally prohibits North Bay from making loans to its directors and officers. Loans made by the Banks in accordance with Regulation 0 exempt for this prohibition.
G. Consumer Protection Laws and Regulations
The bank regulatory agencies are focusing greater attention on compliance with consumer protection laws and their implementing regulations. Examination and enforcement have become more intense in nature, and insured institutions have been advised to monitor carefully compliance with such laws and regulations. The Bank is subject to many federal consumer protection statutes and regulations, some of which are discussed below.
The Community Reinvestment Act ("CRA") is intended to encourage insured depository institutions, while operating safely and soundly, to help meet the credit needs of their communities. The CRA specifically directs the federal regulatory agencies, in examining insured depository institutions, to assess a bank's record of helping meet the credit needs of its entire community, including low- and moderate-income neighborhoods, consistent with safe and sound banking practices. The CRA further requires the agencies to take a financial institution's record of meeting its community credit needs into account when evaluating applications for, among other things, domestic branches, mergers or acquisitions, or holding company formations. The agencies use the CRA assessment factors in order to provide a rating to the financial institution. The ratings range from a high of "outstanding" to a low of "substantial noncompliance." The Vintage Bank has not been examined for CRA compliance by their primary regulator in the last 12 months. Solano Bank was examined June 11, 2002 and was rated satisfactory.
The Equal Credit Opportunity Act ("ECOA") generally prohibits discrimination in any credit transaction, whether for consumer or business purposes, on the basis of race, color, religion, national origin, sex, marital status, age (except in limited circumstances), receipt of income from public assistance programs, or good faith exercise of any rights under the Consumer Credit Protection Act.
The Truth in Lending Act ("TILA") is designed to ensure that credit terms are disclosed in a meaningful way so that consumers may compare credit terms more readily and knowledgeably. As a result of the TILA, all creditors must use the same credit terminology to express rates and payments, including the annual percentage rate, the finance charge, the amount financed, the total of payments and the payment schedule, among other things.
The Fair Housing Act ("FH Act") regulates many practices, including making it unlawful for any lender to discriminate in its housing-related lending activities against any person because of race, color, religion, national origin, sex, handicap or familial status. A number of lending practices have been found by the courts to be, or may be considered, illegal under the FH Act, including some that are not specifically mentioned in the FH Act itself.
The Home Mortgage Disclosure Act ("HMDA") grew out of public concern over credit shortages in certain urban neighborhoods and provides public information that will help show whether financial institutions are serving the housing credit needs of the
neighborhoods and communities in which they are located. The HMDA also includes a "fair lending" aspect that requires the collection and disclosure of data about applicant and borrower characteristics as a way of identifying possible discriminatory lending patterns and enforcing anti-discrimination statutes.
Finally, the Real Estate Settlement Procedures Act ("RESPA") requires lenders to provide borrowers with disclosures regarding the nature and cost of real estate settlements. Also, RESPA prohibits certain abusive practices, such as kickbacks, and places limitations on the amount of escrow accounts. Penalties under the above laws may include fines, reimbursements and other penalties. Due to heightened regulatory concern related to compliance with the CRA, TILA, FH Act, ECOA, HMDA and RESPA generally, the Bank may incur additional compliance costs or be required to expend additional funds for investments in its local community.
H. Recent and Proposed Legislation
The operations of Bancorp and the Banks are subject to extensive regulation by federal, state, and local governmental authorities and are subject to various laws and judicial and administrative decisions imposing requirements and restrictions on part or all of their respective operations. Bancorp believes that it is in substantial compliance in all material respects with applicable federal, state, and local laws, rules and regulations. Because the business of Bancorp and the Banks is highly regulated, the laws, rules and regulations applicable to each of them are subject to regular modification and change.
From time to time, legislation is enacted which has the effect of increasing the cost of doing business, limiting or expanding permissible activities or affecting the competitive balance between banks and other financial institutions. Proposals to change the laws and regulations governing the operations and taxation of banks and other financial institutions are frequently made in Congress, in the California legislature and before various bank regulatory agencies.
Sarbanes-Oxley Act
On July 30, 2002, the President signed into law the Sarbanes-Oxley Act of 2002 implementing legislative reforms intended to address corporate and accounting fraud. In addition to the establishment of a new accounting oversight board which will enforce auditing, quality control and independence standards and will be funded by fees from all publicly traded companies, the bill restricts provision of both auditing and consulting services by accounting firms. To ensure auditor independence, any non-audit services being provided to an audit client will require pre-approval by the company's audit committee members. In addition, the audit partners must be rotated. The Act requires chief executive officers and chief financial officers, or their equivalent, to certify to the accuracy of periodic reports filed with the SEC, subject to civil and criminal penalties if they knowingly or willfully violate this certification requirement. In addition, under the Act, legal counsel will be required to report evidence of a material violation of the securities laws or a breach of fiduciary duty by a company to its chief executive officer or its chief legal officer, and, if such officer does not appropriately respond, to report such evidence to the audit committee or other similar committee of the board of directors or the board itself.
Longer prison terms and increased penalties will also be applied to corporate executives who violate federal securities laws, the period during which certain types of suits can be brought against a company or its officers has been extended, and bonuses issued to top executives prior to restatement of a company's financial statements are now subject to disgorgement if such restatement was due to corporate misconduct. Executives are also prohibited from insider trading during retirement plan "blackout" periods, and loans to company executives are restricted. The Act accelerates the time frame for disclosures by public companies, as they must immediately disclose any material changes in their financial condition or operations. Directors and executive officers must also provide information for most changes in ownership in a company's securities within two business days of the change.
The Act also prohibits any officer or director of a company or any other person acting under their direction from taking any action to fraudulently influence, coerce, manipulate or mislead any independent public or certified accountant engaged in the audit of the company's financial statements for the purpose of rendering the financial statement's materially misleading. The Act also requires the SEC to prescribe rules requiring inclusion of an internal control report and assessment by management in the annual report to stockholders. In addition, the Act requires that each financial report required to be prepared in accordance with (or reconciled to) accounting principles generally accepted in the United States of America and filed with the SEC reflect all material correcting adjustments that are identified by a "registered public accounting firm" in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the SEC.
Effective for filings due after August 29, 2002, as directed by Section 302(a) of Sarbanes-Oxley, the Company's chief executive officer and chief financial officer were each required to certify that the Company's Quarterly and Annual Reports do not contain any untrue statement of a material fact. The rules have several requirements, including having these officers certify that: they are
responsible for establishing, maintaining and regularly evaluating the effectiveness of Company's internal controls; they have made certain disclosures to Bancorp's auditors and the audit committee of the Board of Directors about the Company's internal controls; and they have included information in the Company's Quarterly and Annual Reports about their evaluation and whether there have been significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to the evaluation.
USA PATRIOT Act
In the wake of the tragic events of September 11th, on October 26, 2001, the President signed the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT) Act of 2001. Under the USA PATRIOT Act, financial institutions are subject to prohibitions against specified financial transactions and account relationships as well as enhanced due diligence and "know your customer" standards in their dealings with foreign financial institutions and foreign customers. For example, the enhanced due diligence policies, procedures, and controls generally require financial institutions to take reasonable steps:
* To conduct enhanced scrutiny of account relationships to guard against money laundering and report any suspicious transaction;
* To ascertain the identity of the nominal and beneficial owners of, and the source of funds deposited into, each account as needed to guard against money laundering and report any suspicious transactions;
* To ascertain for any foreign bank, the shares of which are not publicly traded, the identity of the owners of the foreign bank, and the nature and extent of the ownership interest of each such owner; and
* To ascertain whether any foreign bank provides correspondent accounts to other foreign banks and, if so, the identity of those foreign banks and related due diligence information.
Under the USA PATRIOT Act, financial institutions were given 180 days from enactment to establish anti-money laundering programs. The USA PATRIOT Act sets forth minimum standards for these programs, including:
* The development of internal policies, procedures, and controls;
* The designation of a compliance officer;
* An ongoing employee training program; and
* An independent audit function to test the programs.
On June 20, 2002, the Board of Directors of each of the Banks adopted comprehensive policies and procedures to address the requirements of the USA PATRIOT Act, and management believes that both of the Banks are currently in full compliance with the Act.
Financial Services Modernization Legislation
On November 12, 1999, President Clinton signed into law the Gramm-Leach-Bliley Act. This legislation eliminated many of the barriers that have separated the insurance, securities and banking industries since the Great Depression. The federal banking agencies (the Board of Governors, FDIC and the Office of the Comptroller of the Currency) among others, continue to draft regulations to implement the Gramm-Leach-Bliley Act. The Gramm-Leach-Bliley Act is the result of a decade of debate in the Congress regarding a fundamental reformation of the nation's financial system. The law is subdivided into seven titles, by functional area.
The major provisions of the Gramm-Leach-Bliley Act are:
Financial Holding Companies and Financial Activities
Title I establishes a comprehensive framework to permit affiliations among commercial banks, insurance companies, securities firms, and other financial service providers by revising and expanding the BHC Act framework to permit a holding company system to engage in a full range of financial activities through qualification as a new entity known as a financial holding company. North Bay has qualified as a financial holding company.
Activities permissible for financial subsidiaries of national banks, and, also permissible for financial subsidiaries of state member banks, include, but are not limited to, the following: (a) Lending, exchanging, transferring, investing for others, or safeguarding money or securities; (b) Insuring, guaranteeing, or indemnifying against loss, harm, damage, illness, disability, or death, or providing and issuing annuities, and acting as principal, agent, or broker for purposes of the foregoing, in any State; (c) Providing financial, investment, or economic advisory services, including advising an investment company; (d) Issuing or selling instruments representing interests in pools of assets permissible for a bank to hold directly; and (e) Underwriting, dealing in, or making a market in securities.
Securities Activities
Title II narrows the exemptions from the securities laws previously enjoyed by banks. The Board of Governors and the SEC continue to work together to draft rules governing certain securities activities of banks and creates a new, voluntary investment bank holding company.
Insurance Activities
Title III restates the proposition that the states are the functional regulators for all insurance activities, including the insurance activities of federally-chartered banks, and bars the states from prohibiting insurance activities by depository institutions.
Privacy.
As required under Title V of the Gramm-Leach-Bliley Act, federal banking regulators issued final rules on May 10, 2000 to implement the privacy provisions of Title V. Pursuant to the rules, financial institutions must provide (i) initial notices to customers about their privacy policies, describing the conditions under which they may disclose nonpublic personal information to nonaffiliated third parties and affiliates; (ii) annual notices of their privacy policies to current customers; and (iii) a reasonable method for customers to "opt out" of disclosures to nonaffiliated third parties.
Compliance with the rules was optional until July 1, 2001. As of July 1, 2001 the Banks were in compliance with the privacy provisions of the Gramm-Leach-Bliley Act and the implementing regulations promulgated by the FDIC, and subsequently, as necessary, has updated and enhanced its procedure and practice in this critical area.
Safeguarding Confidential Customer Information.
Under Title V of the Gramm-Leach-Bliley Act, federal banking regulators were required to adopt rules requiring financial institutions to implement a program to protect confidential customer information. In January 2000, the federal banking agencies adopted guidelines requiring financial institutions to establish an information security program to:
o identify and assess the risks that may threaten customer information;
o develop a written plan containing policies and procedures to manage and control these risks;
o implement and test the plan; and
o adjust the plan on a continuing basis to account for changes in technology, the sensitivity of customer information and internal or external threats to information security.
The guidelines were effective July 1, 2001. The Banks each implemented a security program appropriate to its size and complexity and the nature and scope of its operations in advance of the July 1, 2001 effective date, and subsequently, as necessary, has refined and improved its security program.
Community Reinvestment Act Sunshine Requirements.
In February 2001, the federal banking agencies adopted final regulations implementing Section 711 of Title VII, the CRA Sunshine Requirements. The regulations require nongovernmental entities or persons and insured depository institutions and affiliates that are parties to written agreements made in connection with the fulfillment of the institution's CRA obligations to make available to the public and the federal banking agencies a copy of each such agreement. The regulations impose annual reporting requirements concerning the disbursement, receipt and use of funds or other resources under each such agreement. The effective date of the regulations was April 1, 2001.
The Banks are not a party to any agreement that would be subject of reporting pursuant to the CRA Sunshine Requirements.
The Banks intend to comply with all provisions of the Gramm-Leach-Bliley Act and all implementing regulations.
California Financial Information Privacy Act/Fair Credit Reporting Act
In 1970, the federal Fair Credit Reporting Act (the "FCRA") was enacted to insure the confidentiality, accuracy, relevancy and proper utilization of consumer credit report information. Under the framework of the FCRA, the United States has developed a highly advanced and efficient credit reporting system. The information contained in that broad system is used by financial institutions, retailers and other creditors of every size in making a wide variety of decisions regarding financial transactions. Employers and law enforcement agencies have also made wide use of the information collected and maintained in databases made possible by the FCRA. The FCRA affirmatively preempts state law in a number of areas, including the ability of entities affiliated by common ownership to share and exchange information freely, and the requirements on credit bureaus to reinvestigate the contents of reports in response to consumer complaints, among others.
The California Financial Information Privacy Act, which was enacted in 2003, requires a financial institution to provide specific information to a consumer related to the sharing of that consumer's nonpublic personal information. The Act would allow a consumer to direct the financial institution not to share his or her nonpublic personal information with affiliated or nonaffiliated companies with which a financial institution has contracted to provide financial products and services, and would require that permission from each such consumer be acquired by a financial institution prior to sharing such information. These provisions are much more restrictive than the privacy provisions of the Financial Services Modernization Act, and would require the Banks to adopt new policies, procedures and disclosure documentation if implemented as enacted. The cost of complying with this legislation is not predictable at this time.
Congress enacted the FACT Act, ("Fair and Accurate Credit Transaction Act") of 2003, which will have the effect of avoiding the sunset preemption provision of the Fair Credit Reporting Act (FCRA) that were due to expire on December 31, 2003. The President signed the FACT Act into law on December 4, 2003. In general, the FACT Act amends the FCRA and, in addition, provides that, when the implementing regulations have been issued and become effective, the FACT Act will preempt elements of the California Financial Information Privacy Act. The FACT Act requires the Board of Governors and the Federal Trade Commission to issue final regulations within nine months of the effectiveness of the FACT Act, and that those regulations must become effective within six months of issuance. The provisions of the regulations that will implement the FACT Act, and the timing of their effect on the Banks, cannot be determined at this time.
Check 21 Act
On December 22, 2003, the Board of Governors approved a proposed rule to amend Regulation CC and its commentary to implement the Check Clearing for the 21st Century Act ("Check 21 Act"). The Check 21 Act was enacted on October 28, 2003 and becomes effective on October 28, 2004.
To facilitate check truncation and electronic check exchange, the Check 21 Act authorizes a new negotiable instrument called a "substitute check" and provides that a properly prepared substitute check is the legal equivalent of the original check for all purposes. A substitute check is a paper reproduction of the original check that can be processed just like the original check. The Check 21 Act does not require any bank to create substitute checks or to accept checks electronically. The Board's proposed amendments: 1) set forth the requirements of the Check 21 Act that apply to banks; 2) provide a model disclosure and model notices relating to substitute
checks; and 3) set forth bank endorsement and identification requirements for substitute checks. The proposed amendments also clarify some existing provisions of the rule and commentary.
I. Other
Various other legislation, including proposals to overhaul the bank regulatory system and to limit the investments that a depository institution may make with insured funds, is introduced into Congress or the California Legislature from time to time. The Bancorp and the Banks cannot determine the ultimate effect that any potential legislation, if enacted, or regulations promulgated thereunder, would have upon the financial condition or operations of the Bancorp or the Banks.
Item 2
Item 2 - PROPERTIES
North Bay Bancorp
222 Gateway Rd. West Napa, Ca.
Effective March 1, 2003 North Bay Bancorp, centralized its administrative offices at the new location - 222 Gateway Rd. West, Napa. This new office eliminated the need for usage of space at the Bel Aire branch and the Soscol - main branch. Managers and staff were relocated to this office which consists of 8,523 square feet. The lease commenced on March 1, 2003, for an initial term of five years with one option to renew for an additional five-year term provided notice is given not less than 3 months but not more than 6 months prior to the expiration of the initial term. Base rent is $9,805 per month subject to annual adjustments not greater than 3% based upon increases in the Consumer Price Index and Fair Market Value. Common Area Maintenance charges are being estimated and paid monthly of $2,301 and will be adjusted at the end of the first year. By the terms of the lease Bancorp is required to:
o Maintain and repair the leased premises.
o Maintain comprehensive general liability insurance.
o Pay its share of real property taxes assessed against the premises, and
o Pay for all utilities used.
1100 Texas St. Fairfield, Ca.
Bancorp leases a building located at 1100 Texas St. Fairfield, Ca. for the use of the Information Services and Technology Division. This building contains approximately 5,700 square feet. The lease term commenced on August 15, 2000, for an initial term of five years and one-half month, with one option to renew for five years provided notice is given not less than ninety days but not more than one hundred eighty days prior to expiration of the initial term. Rent is subject to an annual adjustment on September l of each year based on the consumer price index. January 1, 2003 - August 31, 2003 the base rent was $4,582 per month and on September 1, 2003 it was adjusted to $4,650 per month.
Bancorp subleased to Solano Bank, a portion of the building, approximately 2,254 square feet, until August 15, 2003 at which time Solano Bank moved into its new facility at 1411 Oliver Road, Fairfield, Ca. An ATM Machine remains at the Texas St. location for which Solano Bank pays $100 rent per month. The Information Services and Technology Division, has expanded to utilize the entire building for its staff and management. By the terms of the lease Bancorp is required to :
o Keep the premises in good order, condition and repair.
o Maintain comprehensive general liability insurance.
o Pay all real property taxes assessed against the premises and,
o Pay all utilities used.
1190 Airport Blvd. Napa, Ca.
Bancorp utilizes approximately 1,918 square feet in The Vintage Bank's Gateway Branch located at 1190 Airport Boulevard, Suite 101. Pursuant to the terms of a sublease between Bancorp and The Vintage Bank, Bancorp will pay to The Vintage Bank 38.31% of the rent that The Vintage Bank pays on its lease of the Gateway facility, making the initial base rent $4,525 plus estimated CAM charges of $1,237 for a total of $5,762 per month as the Bancorp share. Rent is then subject to annual adjustments in accordance with adjustments to The Vintage Bank's rent, based on increases in the Consumer Price Index with a minimum annual increase of 2.5% and a maximum annual increase of 5%.
499 Edison Court, Cordelia, Ca. (Central Warehouse)
Bancorp has entered into a 3-year lease for the benefit of central warehousing of all retention files, idle furniture, fixtures & equipment and all operating supplies for all business entities. The lease commencement date is January 19, 2004 with a termination date of 2/18/2007. This is an Industrial Gross lease at the rate of $1,900 per month with a fixed annual increase of 3%. Bancorp will pay all utilities.
Bancorp owns certain leasehold improvements and furniture, fixtures & equipment located at its offices, all of which are used in Bancorp's business. In the opinion of management, the properties of Bancorp are adequately covered by insurance.
The Vintage Bank
1500 Soscol Avenue Napa, Ca. (Main Office)
The Vintage Bank's main office is located in a two-story building at 1500 Soscol Avenue, Napa, California. The real property on which the building is located was acquired by The Vintage Bank in 1988, and construction of the building was completed in 1989. In 1993 an additional 2,500 square feet of previously unoccupied space on the Main Office was remodeled, thereby increasing usable space from approximately 7,500 to 10,000 square feet. The real property and all improvements at the Main Office are owned by The Vintage Bank. In January, 1996 The Vintage Bank purchased approximately 11,000 square feet of land adjacent to the Main Office to facilitate expansion of The Vintage Bank's motor banking facility.
3271 Browns Valley Rd. Napa, California
The Vintage Bank leases the premises for its Browns Valley Office, consisting of approximately 2,000 square feet, located at 3271 Browns Valley Road, Napa, California. The lease commenced on October 22, 1990 for a term of five years, with three successive options to renew for five years each. To exercise an option, the lease requires three months prior notice of the bank's intent to renew. The lease was renewed for an additional five years in October 2000. Rent is subject to annual adjustments in accordance with increases in the Consumer Price Index. Effective January 1, 2003, monthly rental was $3,207 per month. By the terms of the lease The Vintage Bank is required to:
o Maintain and repair the leased premises.
o Maintain combined single limit, bodily injury and property damage insurance, and
o Pay its pro rata share of real property taxes and common area maintenance expenses.
3626 Bel Aire Plaza, Napa, California
The Vintage Bank leases the premises for its Bel Aire Shopping Center Office, consisting of approximately 5,850 square feet, located at 3626 Bel Aire Plaza, Napa, California. The lease term commenced on January 1, 1997, for a term of ten years, with two successive options to renew for five years each upon at least 180 days' notice. Effective January l, 2003, monthly rental was $8,39. per month. Rent is subject to annual adjustments as set forth in the lease schedule and thereafter in accordance with increases in the Consumer Price Index. By the terms of the lease The Vintage Bank is required to:
o Maintain and repair the leased premises.
o Pay for all utilities used.
o Maintain public liability insurance.
o Pay its pro rata share of common area maintenance, and
o Pay its pro rata share of all real property taxes assessed against the shopping center.
1065 Main St. St. Helena, California
In January 2001 The Vintage Bank entered into an agreement for the purchase of a building and real property located at 1065 Main Street, St. Helena, California, for the sum of $1,500,000. The purchase of the Main Street property consummated on February 2, 2001. The purchase of the property was not financed. The Vintage Bank completed an extensive remodel of the building in January, 2002 at a cost of approximately $965,000.
In November 2001 The Vintage Bank entered into a Real Estate Purchase agreement for the purchase of real property located adjacent to the bank's St. Helena branch for the sum of $175,000. The subject property became part of the bank's St. Helena branch property. The purchase of the property was not financed. The property is currently improved with a parking lot, which is used to supplement existing branch parking. It is not anticipated that any additional improvements will be made to the property.
1190 Airport Blvd. Napa, California
In December 2001 The Vintage Bank entered into a lease for its Gateway branch located at 1190 Airport Boulevard, suite 100. The lease commenced on February 2003, after the majority of construction was completed, for an initial term of ten years with two successive options to renew for ten years each upon at least 120 days' notice. The premises is located in a multi-tenant professional office building consisting of 16,000 square feet, of which The Vintage Bank occupies approximately 5,100 square feet. The branch opened for business March 6, 2003. The Vintage Bank paid for the leasehold improvements to the premises at an approximate cost of $400,000. Monthly rent for the initial year is $11,810 per month plus $3,231 monthly for the estimated common area charges. As mentioned above 38.31% of this facility (and related rent expense) is Sub-Leased to North Bay Bancorp for Executive Offices. Rent is subject to annual adjustments in accordance with increases in the Consumer Price Index with a minimum annual increase of 5%. By the terms of the lease The Vintage Bank is required to:
o Maintain and repair the leased premises.
o Pay for all utilities used.
o Maintain public liability insurance, and
o Pay its pro rata share of common area operating expenses, including real property taxes.
The Vintage Bank owns certain leasehold improvements and furniture, fixtures and equipment located at its offices all of which are used in the banking business. In the opinion of management, the properties of The Vintage Bank are adequately covered by insurance.
Solano Bank
403 Davis Street, Vacaville, California
Solano Bank's Main office is located in a multi-tenant building at 403 Davis Street, Vacaville, California. On July 23, 2001 Solano Bank consummated the purchase of the building for the sum of $2,200,000. The purchase was not financed. The building contains a total of approximately 22,000 square feet of which Solano Bank occupies approximately 5,000 square feet. Of the remaining 17,000 square feet, BC Stocking, Inc. occupies 10,300 square feet, Rob Wood, a director of Solano Bank, occupies 650 square feet and Chase Manhattan Mortgage Corp., occupies 1,956 square feet. The remaining 4,744 square feet has been unoccupied, however, improvements have been made in February, 2004 and a lease has been entered into with Pac Bell Yellow Pages. This is a short term lease but has provided the funds to convert our unoccupied space to a long term revenue potential.
1395 E. 2nd Street, Benicia, California
Solano Bank leases the premises for its Benicia Office, consisting of approximately 2,000 square feet located at 1395 E. 2nd Street, Benicia, California. The lease commenced December 1, 1999 at an initial monthly rent of $2,980. Effective January 1, 2003, monthly rental was $3,996 per month and as of May 1, 2003 was escalated to $4,144. The initial lease is for a period of five (5) years and four (4) months, with three options to extend for five years each. To exercise the option, the lease requires three months prior notice of the bank's intent to renew. Rent is subject to adjustments with increases in the Consumer Price Index. By the terms of the lease Solano Bank is required to:
o Maintain and repair the leased premises.
o Pay for all utilities used.
o Maintain public liability insurance.
o Pay its pro rata share of common area maintenance, and
o Pay its pro rata share of all real property taxes assessed against the shopping center of which the bank premises are a part of.
976-A Admiral Callaghan Lane, Vallejo, California
Solano Bank leases the premises for its Vallejo Office, consisting of approximately 2,166 square feet located at 976-A Admiral Callaghan Lane, Vallejo, California. The lease commenced March 15,2001 at an initial monthly rent of $4,332. Effective January l, 2003, monthly rental was $4,462 per month and at May 1, 2003 was increased to $4,595 per month in accordance with the lease agreement. The initial lease is for a period of five (5) years, with three options to extend for five years each. To exercise the option, the lease requires 180 days prior notice of the bank's intent to renew. Rent is subject to annual adjustment with increases in the Consumer Price Index. By the terms of the lease Solano Bank is required to:
o Maintain and repair the leased premises.
o Pay for all utilities used.
o Maintain public liability insurance.
o Pay its pro rata share of common area maintenance, and
o Pay its prorate share of all real property taxes assessed against the shopping center of which the premises are a part. The premises were improved to make them suitable for a bank branch at a cost of $119,019.
1411 Oliver Rd. Fairfield, California
The Solano Bank original location in Downtown Fairfield, was relocated on August 15, 2003. The new location is in a very desirable business district on the west side of the City. The new branch at 1411 Oliver Rd. Fairfield, California, is in a new business building that contains a total of 38,606 square feet. Solano Bank has leased 3,078 square feet. The lease is a Ten year lease with three additional five year options. Base rent will be adjusted on June 1 of each year based on the consumer price index. The current base rent is $7,695 per month. In addition the bank's proportionate share (7.9%) of any operating expense increases over the base year, will be due in the form of rent when determined after the first year.
Solano Bank owns certain leasehold improvements and furniture, fixtures & equipment located in its offices, all of which are used in the banking business. In the opinion of management, the properties of Solano Bank are adequately covered by insurance.
Item 3
Item 3 - LEGAL PROCEEDINGS
None
Item 4
Item 4 - Submission of Matters to a Vote of Security Holders
None
PART II
Item 5
Item 5 - MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
The stock is listed in the Nasdaq National Market System under the symbol NBAN effective September 3, 2002. Prior to the Nasdaq listing, the stock traded over-the-counter and is quoted on the OTC "Bulletin Board".
The following table (adjusted for the 2002, 2003, and 2004 stock dividends) summarizes the common stock high and low bid prices based upon transactions of which Bancorp is aware:
Quarter ended High Low - ------------- ---- --- March 31, 2002 $24.94 $17.28 June 30, 2002 24.94 21.54 September 30, 2002 26.08 20.05 December 31, 2002 24.04 21.54 March 31, 2003 28.81 24.29 June 30, 2003 27.62 24.19 September 30, 2003 26.59 23.81 December 31, 2003 29.40 24.38
There may be other transactions of which Bancorp is not aware and accordingly, they are not reflected in the range of actual sales prices stated. Further, quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions. Additionally, since trading in Bancorp's common stock is limited, the range of prices stated is not necessarily representative of prices which would result from a more active market.
On October 28, 2002, the Board of Directors of North Bay Bancorp declared a dividend of one share purchase right (a "Right") for each outstanding share of common stock, no par value of the Company, payable on December 6, 2002 to shareholders of record as of November 15, 2002. Each Right entitles the registered holder to purchase from the Company one one-hundredth of a share (a "Unit") of Series A Preferred Stock (the "Preferred Stock") of the Company, at a price of $90.00 per Unit, subject to adjustment. The rights are only exercisable in the event of certain changes in contract. The description and terms of the Rights are set forth in a Rights Agreement between the Company and Registrar and Transfer Company, as Rights Agent.
The Company paid cash dividends of $0.20 per share in 2002 and $0.20 per share in 2003. The holders of common stock of Bancorp are entitled to receive cash dividends when and as declared by the Board of Directors, out of funds legally available for the payment of dividends.
On January 26, 2004, the Board of Director of Bancorp declared a $0.20 per share cash dividend and a 5% stock dividend payable March 29, 2004 to shareholders of record as of March 12, 2004.
North Bay Bancorp is restricted in its ability to pay dividends to its shareholders. For a discussion of restrictions imposed, see "SUPERVISION and REGULATION - Payment of Dividends."
As of March 12, 2004, there were 1,001 holders of record of North Bay Bancorp's common stock.
The following chart provides information as of December 31, 2003 concerning the Company's Stock Option Plans, the Company's only equity compensation plans:
Item 6
Item 6 - SELECTED FINANCIAL DATA
The selected financial data is included in Bancorp's 2003 Annual Report to Shareholders which information is incorporated herein by reference.
Item 7
Item 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The management's discussion and analysis of financial condition and results of operations is included in Bancorp's 2003 Annual Report to Shareholders which information is incorporated herein by reference.
Item 7 A
Item 7 A - QUANTITATIVE AND QUALITATIVE DISCLOUSURE ABOUT MARKET RISK
Management's discussion of Quantitative and Qualitative and market risk is included in Bancorp's 2003 Annual Report to Shareholders which information is incorporated herein by reference.
Item 8
Item 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Bancorp's consolidated balance sheets, statements of operations, statements of changes in shareholders' equity, statements of cash flows and related notes thereto are included in Bancorp's 2003 Annual Report to Shareholders which information is incorporated herein by reference.
Item 9
Item 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
N/A
Item 9A
Item 9A - CONTROLS AND PROCEEDURES
Quarterly evaluation of the Company's Disclosure Controls and Internal Controls.
As of December 31, 2003 the Company evaluated the effectiveness of the design and operation of its "disclosure controls and procedures" ("Disclosure Controls"), and its "internal controls and procedures for financial reporting" ("Internal Controls"). This evaluation (the "Controls Evaluation") was done under the supervision and with the participation of management, including our President and Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"). Rules adopted by the SEC require that in this section of the Annual Report we present the conclusions of the CEO and the CFO about the effectiveness of our Disclosure Controls and Internal Controls based on and as of the date of the Controls Evaluation.
CEO and CFO Certifications.
Appearing immediately following the Signatures section of this Annual Report there are two separate forms of "Certifications" of the CEO and the CFO. The first form of Certification is required in accord with Section 302 of the Sarbanes-Oxley Act of 2002 (the "Section 302 Certification"). The section of the Annual Report which you are currently reading is the information concerning the Controls Evaluation referred to in the Section 302 Certification and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
Disclosure Controls and Internal Controls.
Disclosure Controls are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, such as this Annual Report, is recorded, processed, summarized and reported within the time periods specified in the Commission's rules and forms. Disclosure Controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Internal Controls are procedures which are designed with the objective of providing reasonable assurance that (1) our transactions are properly authorized; (2) our assets are safeguarded against unauthorized or improper
use; and (3) our transactions are properly recorded and reported, all to permit the preparation of our financial statements in conformity with generally accepted accounting principles.
Limitations on the Effectiveness of Controls.
The Company's management, including the CEO and CFO, does not expect that our Disclosure Controls or our Internal Controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Scope of the Controls Evaluation.
The CEO/CFO evaluation of our Disclosure Controls and our Internal Controls included a review of the controls' objectives and design, the controls' implementation by the Company and the effect of the controls on the information generated for use in this Annual Report. In the course of the Controls Evaluation, we sought to identify data errors, controls problems or acts of fraud and to confirm that appropriate corrective action, including process improvements, were being undertaken. This type of evaluation will be done on a quarterly basis so that the conclusions concerning controls effectiveness can be reported in our Quarterly Reports on Form 10-Q and Annual Report on Form 10-K. Our Internal Controls are also evaluated on an ongoing basis by our Internal Audit Department and by other personnel in our organization. The overall goals of these various evaluation activities are to monitor our Disclosure Controls and our Internal Controls and to make modifications as necessary; our intent in this regard is that the Disclosure Controls and the Internal Controls will be maintained as dynamic systems that change (including with improvements and corrections) as conditions warrant.
Among other matters, we sought in our evaluation to determine whether there were any "significant deficiencies" or "material weaknesses" in the Company's Internal Controls, or whether the Company had identified any acts of fraud involving personnel who have a significant role in the Company's Internal Controls. This information was important both for the Controls Evaluation generally and because items 5 and 6 in the Section 302 Certifications of the CEO and CFO require that the CEO and CFO disclose that information to our Board's Audit Committee and to our independent auditors and to report on related matters in this section of the Annual Report. In the professional auditing literature, "significant deficiencies" are referred to as "reportable conditions"; these are control issues that could have a significant adverse effect on the ability to record, process, summarize and report financial data in the financial statements. A "material weakness" is defined in the auditing literature as a particularly serious reportable condition where the internal control does not reduce to a relatively low level the risk that misstatements caused by error or fraud may occur in amounts that would be material in relation to the financial statements and not be detected within a timely period by employees in the normal course of performing their assigned functions. We also sought to deal with other controls matters in the Controls Evaluation, and in each case if a problem was identified, we considered what revision, improvement and/or correction to make in accord with our on-going procedures. We concluded that were no material weaknesses in the Company's Internal Controls.
In accord with Commission requirements, the CEO and CFO note that, since the date of the Controls Evaluation to the date of this Annual Report, there have been no significant changes in Internal Controls or in other factors that could significantly affect Internal Controls, including any corrective actions with regard to significant deficiencies and material weaknesses.
Conclusions.
Based upon the Controls Evaluation, our CEO and CFO have concluded that, subject to the limitations noted above, our Disclosure Controls are effective to ensure that material information relating to the Company and its consolidated subsidiaries is made known to management, including the CEO and CFO, particularly during the period when our periodic reports are being prepared, and that our Internal Controls are effective to provide reasonable assurance that our financial statements are fairly presented in conformity with generally accepted accounting principles.
PART III
Item 10
Item 10 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
For information regarding the directors, executive officers, promoters and control persons of Bancorp, see "ELECTION OF DIRECTORS" and "REPORTS OF CHANGES IN BENEFICIAL OWNERSHIP" in the Company's definitive proxy statement for the 2004 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A (the "Proxy Statement"), which is incorporated herein by reference.
Code of Ethics North Bay Bancorp has adopted a Code of Ethics that applies to all its directors, officers and employees, a current copy of which is available to shareholders on the Company's web-sit. The Company's web-site is located at www.northbaybancorp.com.
Item 11
Item 11 - EXECUTIVE COMPENSATION
For information concerning compensation of the executive officers of Bancorp, see "EXECUTIVE COMPENSATION" in the Proxy Statement, which is incorporated herein by reference.
Item 12
Item 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
For information concerning the security ownership of certain beneficial owners and management of Bancorp, see "SECURITY OWNERSHIP OF MANAGEMENT" in the Proxy Statement, which is incorporated herein by reference.
Item 13
Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information concerning certain relationships and related transactions, see "MANAGEMENT INDEBTEDNESS" in the Proxy Statement, which is incorporated herein by reference.
Item 14
Item 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES
For information concerning amounts paid for audit and related fees See "Proposal No. 3" in the Proxy Statement, which is incorporated herein by reference.
Part IV
Item 16 - EXHIBITS AND REPORTS ON FORM 8-K
Page of 2003 Annual Report ------------- (a) 1. Financial Statements
(i) Balance Sheets, December 31, 2003 and 2002 15
(ii) Income Statements for the years ended December 2003, 2002, and 2001 16
(iii) Statements of Changes in Shareholders' Equity for the years ended December 31, 2003, 2002, and 2001 17
(iv) Statements of Cash Flows for the years ended December 31, 2003, 2002, and 2001 18
(v) Notes to Financial Statements 19
(vi) Report of Independent Auditors 40
Schedules have been omitted as inapplicable or because the information required is included in the financial statements or notes thereto.
3. Exhibits
See Exhibit Index on page 28 of this Report.
(b) Reports on Form 8-K
The Registrant has filed the following Reports on Form 8-K during the quarter ended December 31, 2003:
1. Form 8-K filed on October 31, 2003 under item 12, with an attached press release announcing earnings for the quarter ended September 30, 2003. 2. Form 8-K filed on December 17, 2004 under item 9, with an attached newsletter to Shareholders outlining financial data for the quarter ended September 30, 2003.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NORTH BAY BANCORP
By: /s/Terry L. Robinson -------------------------------------------------- Terry L. Robinson, President & Chief Executive Officer Dated: March 25, 2004 SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
EXHIBIT INDEX
Exhibit No. Description
2.1 Plan of Reorganization and Merger Agreement entered into as of July 30, 1999 by and among The Vintage Bank, Vintage Merger Co. and North Bay Bancorp. (1)
3.1 Articles of Incorporation of Registrant. (2)
3.2 Amended and Restated Bylaws.
4.1 Certificate Evidencing Floating Rate Capital Securities. (6)
4.2 Floating Rate Junior Subordinated Deferrable Interest Debenture. (6)
4.3 Certificate Evidencing Floating Rate Common Securities. (6)
4.4 Guarantee Agreement. (6)
4.5 Indenture dated June 26, 2002 , North Bay Bancorp Issuer, State Street Bank and Trust Company of Connecticut, N.A., as Trustee for Floating Rate Junior Subordinated Deferrable Interest Debenture. (6)
4.6 Rights Agreement, dated as of October 24, 2002, between the Company and Registrar and Trans Company, as Rights Agent. (7)
4.7 Certificate of Determination for the Series A Preferred Stock (attached as Exhibit A to Rights Agreement). (7)
4.8 Rights Certificate (attached as Exhibit B to Rights Agreement.). Printed Rights Agreement will not be mailed until the Distribution Date as defined therein. (7)
4.9 Summary of Rights to Purchase Preferred Shares (attached as Exhibit C to Rights Agreement). (7)
10.1 Amended North Bay Bancorp Stock Option Plan. (6) *
10.2 North Bay Bancorp 2002 Stock Option Plan and Related Agreement (8)*
10.3 Sublease by and between The Vintage Bank, as Lessor, and North Bay Bancorp, as Lessee, with respect to premises at 1190 Airport Road, Napa California. (10)
10.4 Lease entered into May 9, 2003 by Solano Bank and Fairfield West Partners, LLC for premises at 1411 Oliver Road, Fairfield California.
10.5 North Bay Bancorp Directors Deferred Fee Plan.(4)*
10.6 Employment Agreement entered into as of May 1, 2004 by and between North Bay Bancorp and Terry L. Robinson.*
10.7 Employment Agreement entered into as of May 1, 2001 by and between Solano Bank and Glen C. Terry. (5) *
10.8 Employment Agreement entered into as of May 1, 2001 by and between North Bay Bancorp and Kathi Metro. (5) *
10.9 [RESERVED]
10.10 Life Insurance Endorsement Method Split Dollar Plan Agreement for Terry L. Robinson (9). *
10.11 Lease entered into January 5, 2004 by North Bay Bancorp and James N. Ditmer, dba Cordelia Edison Partners for a central warehousing facility located at 499 Edison Court Suite A-1, Cordelia California.
10.12 Life Insurance Endorsement Method Split Dollar Plan Agreement for Lee-Ann Cimino. (9). *
10.13 Life Insurance Endorsement Method Split Dollar Plan Agreement for Kathi Metro. (9)*
10.14 Life Insurance Endorsement Method Split Dollar Plan Agreement for Glen C. Terry. (9)*
10.15 Employment Agreement dated as of April 15, 2002 by and between Solano Bank and John A. Nerland. (6) *
10.16 North Bay Bancorp 2002 Deferred Fee Plan. (6)*
10.17 Amended and Restated Declaration of Trust by and Among State Street Bank and Trust Company of Connecticut, N.A, as Institutional Trustee, North Bay Bancorp as Sponsor, and Administrators, Dated as of June 26, 2002. (6)
11. Statement re: computation of per share earnings is included in Note 1 to the financial statements to the prospectus included in Part I of this Registration Statement.
13. North Bay Bancorp 2003 Annual Report to Shareholders.
21. Subsidiaries of Registrant are: The Vintage Bank, a California banking corporation, Solano Bank, a California Corporation, and North Bay Bancorp Statutory Trust I, a Connecticut trust.
23. Consent of KPMG LLP as independent public accountants for North Bay Bancorp, The Vintage Bank and Solano Bank.
25. Power of Attorney.
31.1 Certificate of Principal Executive Officer Pursuant to SEC Release 33-8238.
31.2 Certificate of Principal Financial Officer Pursuant to SEC Release 33-8238.
32.1 Certificate of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350.
32.2 Certificate of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350.
* Employment Contracts and Compensation Plans.
(1) Attached as Exhibit 7(c)(2) to North Bay Bancorp's Current Report on Form 8-K filed with the Securities and Exchange Commission on November 29, 1999, and incorporated herein by reference.
(2) Attached as Exhibits 3.1 and 10.2, respectively, to Registration Statement No. 333-93365 filed by North Bay Bancorp with the Securities and Exchange Commission under the Securities Act of 1933, and incorporated herein by reference.
(3) Intentionally left blank.
(4) Attached as Exhibits 10.5 to North Bay Bancorp's Annual Report as Form 10-KSB for the year ended December 31, 2000 filed with the Securities and Exchange Commission, and incorporated herein by reference.
(5) Attached as Exhibits 10.1, 10.2, 10.3, and 10.4, respectively, to North Bay Bancorp's Quarterly Report as Form 10-Q for the quarter ended June 30, 2001 filed with the Securities and Exchange Commission, and incorporated herein by reference.
(6) Attached as Exhibits 4.1, 4.2, 4.3, 4.4, 4.5, 10.1, 10.15, 10.16, and 10.17, respectively, to North Bay Bancorp's Quarterly Report as Form 10-Q for the quarter ended June 30, 2002 filed with the Securities and Exchange Commission, and incorporated herein by reference.
(7) Attached as Exhibits 4.1, 4.2, 4.3, and 4.4, respectively, to the Form 8-A Registration Statement filed by North Bay Bancorp with the Securities and Exchange Commission on October 31, 2002 and incorporated herein by reference.
(8) Attached as Exhibit 99.1 to Registration Statement No. 333-90006 on Form S-8 filed by North Bay Bancorp with the Securities and Exchange Commission on June 7, 2002 and incorporated herein by reference.
(9) Attached as Exhibits 10.10, 10.11, 10.12, 10.13, and 10.14, respectively, to North Bay Bancorp's Annual Report as Form 10-K for the year ended December 31, 2001 filed with the Securities and Exchange Commission and incorporated herein by reference.
(10) Attached as Exhibits 10.3 to North Bay Bancorp's Annual Report as Form 10-K for the year ended December 31, 2002 filed with the Securities and Exchange Commission and incorporated herein by reference.