Exhibit 99.1 - -------------------------------------------------------------------------------- NORTH BAY BANCORP - -------------------------------------------------------------------------------- For Immediate Release Contact: Terry L. Robinson President & CEO North Bay Bancorp trobinson@northbaybancorp.com 707-252-5024 NEWS RELEASE NORTH BAY BANCORP ANNOUNCES SECOND QUARTER 2003 FINANCIAL RESULTS EARNINGS INCREASE 15% Napa, CA - July 28, 2003 - North Bay Bancorp (Nasdaq: NBAN), holding company for The Vintage Bank and Solano Bank, today announced financial results for the three months and six months ended June 30, 2003. Net income for the three months ended June 30, 2003 was $1,012,000, or $.44 per share (diluted), as compared with net income of $877,000, or $.39 per share (diluted), for the second quarter of 2002, representing a 15% increase. Net income for the six months ended June 30, 2003 was $1,907,000, or $.82 per share (diluted), compared with net income of $1,655,000. or $.74 per share (diluted), for the first six months of 2002, also representing a 15% increase. Total assets were $435,444,000 as of June 30, 2003, equating to growth of 20% over the preceding twelve months. Total assets grew by approximately $16 million from March 31, 2003. "North Bay Bancorp continues on track with its business plan despite the challenges presented by our unprecedented interest rate environment," stated Terry Robinson, President & CEO. "We remain optimistic regarding the earnings prospects for the remainder of the year given our current strong loan volume." FINANCIAL HIGHLIGHTS Earnings Net interest income for the second quarter of 2003 increased $343,000, or 8%, compared with the second quarter of 2002. Year-to-date net interest income increased $853,000, or 10%. The net interest margin has decreased to 4.91% during the first half of 2003 from an average of 5.31% for the year 2002. The major factor contributing to the declining margin was lower yields on investments and loans; rates paid on deposits did not reflect a corresponding decline. Noninterest income for the second quarter of 2003 increased $83,000, or 13%, compared with the second quarter of 2002. Year-to-date noninterest income increased $159,000, or 12%, compared with the first half of 2002. Most noninterest income was derived from service charges on deposit accounts. Service charge income increased proportionately less than the growth in deposits, as deposit growth was attributed primarily to an increase in the average balance of deposit accounts during the previous twelve months rather than an increase in the number of new accounts. Also, a restructuring of the checking account product line during the first quarter 4 of 2003 resulted in a higher portion of checking accounts which do not generate service charges. Gains on securities transactions were $331,000 during the second quarter of 2003 compared with no securities gains during the second quarter of 2002. Year-to-date securities gains were $430,000 compared to $66,000 for the first half of 2002. The securities gains recognized during the 2003 second quarter resulted primarily from the sale of securities within a year of maturity to provide funding for loans in process. Noninterest expense for the second quarter of 2003 increased $856,00, or 25%, compared with the second quarter of 2002. Year-to-date noninterest expense for 2003 increased $1,504,000, or 22%, from 2002. The disproportionate increase during the second quarter was primarily due to legal fees incurred in connection with litigation with our former host system provider; the case was settled in June, 2003. The year-to-date increase was due primarily to a combination of the litigation-related legal fees, a 17% increase in salaries and employee benefits resulting from increased staffing and a 27% increase in occupancy expense resulting from the addition of a bank branch office and new administrative offices both of which were occupied in March, 2003. Balance Sheet Total assets were $435.4 million as of June 30, 2003, a 20% increase from June 30, 2002. Deposits grew $67 million, or 21% while loans, net of the allowance for loan losses, grew $49.5 million, or 24%, during the twelve months ended June 30, 2003. Liquidity levels significantly exceeded policy requirements throughout the year. As of June 30, 2003 liquid assets represented 31% of total assets. Asset quality remains excellent. As of June 30, 2003, the allowance for loan losses was $3.4 million, or 1.3% of loans outstanding. No loan loss provision was accrued for The Vintage Bank during the first half of 2003 based upon our revised loan loss reserve analysis; $90,000 was expensed for the provision at Solano Bank. Net charge-offs were a nominal $7,000 for the first half of 2003. There were no nonperforming loans as of June 30, 2003. OUTLOOK Regarding the outlook for 2003, Robinson stated, "We are optimistic that a strong second half will enable us to meet our net income projections for 2003. Elements of noninterest expense, particularly legal and professional fees, should decline significantly the remainder of the year. We are currently adding quality loans to our balance sheet at a rate outpacing deposit growth, which is the best antidote for our current difficult rate environment." ABOUT NORTH BAY BANCORP North Bay Bancorp is the parent company of two community banks in the North Bay Region of Northern California--The Vintage Bank based in Napa County and Solano Bank based in Solano County. Both subsidiaries are full service commercial banks offering a wide selection of deposit, loan and investment services to local consumers and small business customers. Each bank has a separate board of directors composed of local business and community leaders. The Vintage Bank, which opened for business in 1985, currently operates five banking offices in Napa County, Northern California's number one tourist destination and the nation's premier wine producing region. The bank's main office and two branch offices are located in the City of Napa with additional branch offices in St. Helena and on Airport Road in the Southern area of Napa County. 5 Solano Bank, which opened in July, 2000, operates four offices along the I-80 corridor of Solano County. The bank's main office is located in Vacaville, with branch offices in Fairfield, Vallejo and Benicia. This region, projected to be the fastest growing county in Northern California through year 2020, is attracting growth with a quality lifestyle, affordable housing and business-friendly cities. Solano Bank will be relocating its Fairfield Office to a more modern and visible facility during third quarter of 2003. North Bay Bancorp stock trades on the Nasdaq National Market under the symbol NBAN. - -------------------------------------------------------------------------------- This news release contains forward-looking statements with respect to the financial condition, results of operation and business of North Bay Bancorp and its subsidiaries. These include, but are not limited to, statements that relate to or are dependent on estimates or assumptions relating to the prospects of loan growth, credit quality and certain operating efficiencies resulting from the operations of The Vintage Bank and Solano Bank. These forward-looking statements involve certain risks and uncertainties. Factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include, among others, the following possibilities: (1) competitive pressure among financial services companies increases significantly; (2) changes in the interest rate environment reduce interest margins; (3) general economic conditions, internationally, nationally or in the State of California are less favorable than expected; (4) legislation or regulatory requirements or changes adversely affect the business in which the combined organization will be engaged; and (5) other risks detailed in the North Bay Bancorp reports filed with the Securities and Exchange Commission. 6 North Bay Bancorp Income Statements (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2003 2002 2003 2002 ----------- ----------- ----------- ----------- INTEREST INCOME: Loans (including fees) $ 4,571,000 $ 4,096,000 $ 8,927,000 $ 7,897,000 Federal funds sold 56,000 98,000 119,000 156,000 Investment securities taxable 735,000 790,000 1,517,000 1,655,000 Investment securities tax exempt 132,000 189,000 292,000 338,000 ----------- ----------- ----------- ----------- Total Interest income 5,494,000 5,173,000 10,855,000 10,046,000 INTEREST EXPENSE: Deposits 670,000 817,000 1,357,000 1,652,000 Short term borrowings 8,000 0 8,000 0 Long term borrowings 141,000 24,000 282,000 39,000 ----------- ----------- ----------- ----------- Total Interest Expense 819,000 841,000 1,647,000 1,691,000 Net interest income 4,675,000 4,332,000 9,208,000 8,355,000 PROVISION FOR LOAN LOSSES 45,000 144,000 90,000 288,000 Net interest income after provision for loan losses 4,630,000 4,188,000 9,118,000 8,067,000 NONINTEREST INCOME: 728,000 645,000 1,437,000 1,278,000 Gains on securities transactions, net 331,000 0 430,000 66,000 NONINTEREST EXPENSE: Salaries and employee benefits 2,252,000 1,976,000 4,558,000 3,880,000 Occupancy 318,000 218,000 575,000 452,000 Equipment 295,000 466,000 745,000 942,000 Other 1,446,000 795,000 2,448,000 1,548,000 ----------- ----------- ----------- ----------- Total nonInterest expense 4,311,000 3,455,000 8,326,000 6,822,000 Income before provision for income taxes 1,378,000 1,378,000 2,659,000 2,589,000 PROVISION FOR INCOME TAXES 366,000 501,000 752,000 934,000 NET INCOME $ 1,012,000 $ 877,000 $ 1,907,000 $ 1,655,000 =========== =========== =========== =========== BASIC EARNINGS PER SHARE: $ 0.45 $ 0.40 $ 0.85 $ 0.76 =========== =========== =========== =========== DILUTED EARNINGS PER SHARE: $ 0.44 $ 0.39 $ 0.82 $ 0.74 =========== =========== =========== =========== DIVIDENDS PAID PER SHARE: $ 0.00 $ 0.00 $ 0.20 $ 0.20 =========== =========== =========== =========== 7 North Bay Bancorp Consolidated Balance Sheets (Unaudited) June 30, June 30, December 31, 2003 2002 2002 ------------ ------------ ------------ ASSETS CASH AND DUE FROM BANKS $ 27,559,000 $ 14,135,000 $ 23,785,000 FEDERAL FUNDS SOLD 20,670,000 26,648,000 28,525,000 TIME DEPOSITS WITH OTHER FINANCIAL INSTITUTIONS 100,000 100,000 100,000 ------------ ------------ ------------ Total cash and cash equivalents 48,329,000 40,883,000 52,410,000 INVESTMENT SECURITIES: Held-to-maturity 1,250,000 1,293,000 1,272,000 Available-for-sale 85,839,000 88,713,000 104,473,000 Equity securities 1,398,000 1,267,000 1,349,000 ------------ ------------ ------------ TOTAL INVESTMENT SECURITIES 88,487,000 91,273,000 107,094,000 LOANS, net of allowance for loan losses of $3,373,000 in June 2003, $3,005,000 in June 2002 and $3,290,000 in December 2002 256,440,000 206,899,000 234,337,000 LOANS HELD-FOR-SALE 19,538,000 0 0 BANK PREMISES AND EQUIPMENT, net 11,166,000 10,647,000 10,800,000 ACCRUED INTEREST RECEIVABLE AND OTHER ASSETS 11,484,000 12,989,000 11,817,000 ------------ ------------ ------------ Total assets $435,444,000 $362,691,000 $416,458,000 ============ ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY DEPOSITS: Non-interest bearing $102,107,000 $ 86,419,000 $104,142,000 Interest bearing 282,332,000 231,153,000 263,661,000 ------------ ------------ ------------ Total deposits 384,439,000 317,572,000 367,803,000 ACCRUED INTEREST PAYABLE AND OTHER LIABILITIES 3,300,000 2,724,000 3,312,000 ------------ ------------ ------------ Total liabilities 387,739,000 320,296,000 371,115,000 Floating rate subordinated debenture (trust preferred securities) 10,000,000 10,000,000 10,000,000 SHAREHOLDERS' EQUITY: Preferred stock no par value - Authorized, 500,000 shares; Issued and outstanding - None Common stock - no par value - Authorized 10,000,000 shares; Issued and outstanding - 2,282,521 shares in June 2003, 2,098,313 shares in June 2002 and 2,130,288 in December 2002 29,145,000 24,833,000 25,387,000 Retained earnings 7,160,000 6,560,000 8,612,000 Accumulated other comprehensive income 1,400,000 1,002,000 1,344,000 ------------ ------------ ------------ Total shareholders' equity 37,705,000 32,395,000 35,343,000 Total liabilities and shareholders' equity $435,444,000 $362,691,000 $416,458,000 ============ ============ ============ 8