U.S.
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 10-QSB
x
Quarterly report under Section 13 or
15(d) of the Securities Exchange Act of 1934 for the quarterly period
ended March 31, 2008
o
Transition report under Section 13
or 15(d) of the Securities Exchange Act of 1934 (No fee required) for the
period from to
Commission File Number 0-27666
NORTHERN CALIFORNIA BANCORP, INC.
(Name of Small Business Issuer in its Charter)
Incorporated in the State of California
IRS Employer Identification Number 77-0421107
Address:
601 Munras Avenue, Monterey, CA
93940
Telephone: (831) 649-4600
Check whether the
issuer: (1) filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act).
Large accelerated filer
|
o
|
Accelerated filer
|
o
|
Non-accelerated filer
|
x
|
Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act. Yes
o
No
x
As of May 5,
2008, the Corporation had 1,849,918 shares of common stock outstanding.
Transitional Small Business
Disclosure Format (check one): Yes
o
No
x
PART I-FINANCIAL
INFORMATION
Item 1. FINANCIAL STATEMENTS
NORTHERN
CALIFORNIA BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED
BALANCE SHEETS
|
|
March 31
|
|
December 31
|
|
(in thousands except share data)
|
|
2008
|
|
2007
|
|
|
|
(Unaudited)
|
|
(Audited)
|
|
ASSETS:
|
|
|
|
|
|
Cash and Due
From Banks
|
|
$
|
4,958
|
|
$
|
8,063
|
|
Federal Funds
Sold
|
|
11,065
|
|
12,090
|
|
Total Cash and
Cash Equivalents
|
|
16,023
|
|
20,153
|
|
Trading Assets
|
|
986
|
|
1,224
|
|
Investment
Securities, available for sale (Note 5)
|
|
62,966
|
|
36,801
|
|
Investment
Securities, held to maturity at cost (fair value approximates $8,112 in 2008;
$8,105 in 2007) (Note 5)
|
|
7,866
|
|
7,869
|
|
Other
Investments (Note 6)
|
|
3,444
|
|
2,824
|
|
Loans Held for
Sale, at lower of cost or market
|
|
117
|
|
1,887
|
|
Loans, net of
allowance for loan losses of $2,029 in 2008; $2,028 in 2007 (Note 7)
|
|
167,456
|
|
166,861
|
|
Bank Premises
and Equipment, Net
|
|
4,944
|
|
4,874
|
|
Cash Surrender
Value of Life Insurance
|
|
3,875
|
|
3,845
|
|
Interest
Receivable and Other Assets
|
|
3,305
|
|
7,527
|
|
Total Assets
|
|
$
|
270,982
|
|
$
|
253,865
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS EQUITY:
|
|
|
|
|
|
|
|
|
|
|
|
Non interest
bearing demand
|
|
$
|
28,600
|
|
$
|
24,814
|
|
Interest-bearing
demand
|
|
15,911
|
|
15,600
|
|
Savings
|
|
5,811
|
|
5,487
|
|
Time less than
$100,000
|
|
72,261
|
|
58,812
|
|
Time in
denominations of $100,000 or more
|
|
61,330
|
|
62,620
|
|
Total Deposits
|
|
183,913
|
|
167,333
|
|
|
|
|
|
|
|
Federal Home
Loan Bank Borrowed Funds
|
|
56,500
|
|
52,500
|
|
Junior
Subordinated Debt Securities
|
|
8,248
|
|
8,248
|
|
Payable for
investment securities purchased
|
|
1,511
|
|
5,225
|
|
Interest Payable
and Other Liabilities
|
|
6,063
|
|
6,125
|
|
Total
Liabilities
|
|
256,235
|
|
239,431
|
|
|
|
|
|
|
|
Shareholders
Equity:
|
|
|
|
|
|
Common Stock -
No Par Value, authorized 2,500,000 Outstanding:1,849,918 in 2008 and
1,845,918 in 2007
|
|
5,514
|
|
5,502
|
|
Retained
Earnings
|
|
9,388
|
|
8,831
|
|
Accumulated
Other Comprehensive Income (Loss) (Note 8)
|
|
(155
|
)
|
101
|
|
Total
Shareholders Equity
|
|
14,747
|
|
14,434
|
|
Total
Liabilities & Shareholders Equity
|
|
$
|
270,982
|
|
$
|
253,865
|
|
3
NORTHERN
CALIFORNIA BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
|
|
THREE-MONTH PERIOD ENDING
|
|
|
|
March 31
|
|
(in thousands except share data)
|
|
2008
|
|
2007
|
|
INTEREST INCOME:
|
|
|
|
|
|
Loans
|
|
$
|
3,748
|
|
$
|
3,290
|
|
Time deposits
with other financial institutions
|
|
12
|
|
14
|
|
Investment
securities
|
|
757
|
|
400
|
|
Federal funds
sold
|
|
104
|
|
123
|
|
Total Interest
Income
|
|
4,621
|
|
3,827
|
|
|
|
|
|
|
|
INTEREST
EXPENSE:
|
|
|
|
|
|
Interest-bearing
transaction accounts
|
|
12
|
|
13
|
|
Savings and time
deposit accounts
|
|
842
|
|
530
|
|
Time deposits in
denominations of $100,000 or more
|
|
771
|
|
473
|
|
Notes payable
and other
|
|
864
|
|
624
|
|
Total Interest
Expense
|
|
2,489
|
|
1,640
|
|
|
|
|
|
|
|
Net Interest
Income
|
|
2,132
|
|
2,187
|
|
Provision for
loan losses
|
|
|
|
|
|
Net interest
income, after provision for loan losses
|
|
2,132
|
|
2,187
|
|
|
|
|
|
|
|
NON-INTEREST
INCOME:
|
|
|
|
|
|
Service charges
on deposit accounts
|
|
163
|
|
166
|
|
Income from
sales and servicing of Small Business Administration Loans
|
|
165
|
|
182
|
|
Other income
|
|
1,461
|
|
978
|
|
Total
non-interest income
|
|
1,789
|
|
1,326
|
|
|
|
|
|
|
|
NON-INTEREST
EXPENSE:
|
|
|
|
|
|
Salaries and
Employee Benefits
|
|
1,105
|
|
1,077
|
|
Occupancy and
Equipment Expense
|
|
238
|
|
206
|
|
Professional
Fees
|
|
44
|
|
38
|
|
Data Processing
|
|
101
|
|
88
|
|
Other general
and administrative
|
|
738
|
|
794
|
|
Total
non-interest expense
|
|
2,226
|
|
2,203
|
|
|
|
|
|
|
|
Income before
tax provision
|
|
1,695
|
|
1,310
|
|
Income tax
provision
|
|
776
|
|
501
|
|
Net income
|
|
$
|
919
|
|
$
|
809
|
|
|
|
|
|
|
|
Earnings per
common share
|
|
|
|
|
|
Basic
|
|
$
|
0.498
|
|
$
|
0.468
|
|
Diluted
|
|
$
|
0.496
|
|
$
|
0.435
|
|
4
NORTHERN CALIFORNIA BANCORP, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF
CHANGES IN SHAREHOLDERS EQUITY
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
Other Compre-
|
|
|
|
|
|
Number of
|
|
Common
|
|
Retained
|
|
hensive
Income
|
|
|
|
(in thousands except share data)
|
|
Shares
|
|
Stock
|
|
Earnings
|
|
(Loss)
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2006
|
|
1,721,715
|
|
$
|
5,060
|
|
$
|
7,363
|
|
$
|
(21
|
)
|
$
|
12,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
1,929
|
|
|
|
1,929
|
|
Change in net
unrealized gain on securities and other assets net of reclassification
adjustment and tax effects
|
|
|
|
|
|
|
|
122
|
|
122
|
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
2,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$0.25 per share dividend
|
|
|
|
|
|
(461
|
)
|
|
|
(461
|
)
|
Exercise of
stock options, net of tax benefit
|
|
124,203
|
|
442
|
|
|
|
|
|
442
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
December 31, 2007 (audited)
|
|
1,845,918
|
|
5,502
|
|
8,831
|
|
101
|
|
14,434
|
|
Cumulative
effect application of new accounting standard EITF 06-4 and EITF 06-10
|
|
|
|
|
|
(362
|
)
|
|
|
(362
|
)
|
|
|
1,845,918
|
|
5,502
|
|
8,469
|
|
101
|
|
14,072
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
|
919
|
|
|
|
919
|
|
Change in net
unrealized gain on securities and other assets net of reclassification
adjustment and tax effects
|
|
|
|
|
|
|
|
(256
|
)
|
(256
|
)
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of
stock options, net of tax benefit
|
|
4,000
|
|
12
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
March 31, 2008 (unaudited)
|
|
1,849,918
|
|
$
|
5,514
|
|
$
|
9,388
|
|
$
|
(155
|
)
|
$
|
14,747
|
|
5
NO0RTHERN
CALIFORNIA BANCORP, INC.
AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED
MARCH 31, 2008 AND 2007
(in thousands except share data)
|
|
2008
|
|
2007
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
Net income
|
|
$
|
919
|
|
$
|
809
|
|
Adjustments to
reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
Depreciation and
amortization expense
|
|
76
|
|
69
|
|
Realized (gain)
loss on sales of available-for-sale securities, net
|
|
(229
|
)
|
|
|
Amortization of
deferred loan costs
|
|
85
|
|
71
|
|
Amortization
(accretion) of discounts and premiums on investment securities, net
|
|
(31
|
)
|
|
|
(Gain) loss on
sale of equipment
|
|
|
|
(1
|
)
|
Increase in cash
surrender value of life insurance
|
|
(30
|
)
|
(31
|
)
|
(Increase)
decrease in assets:
|
|
|
|
|
|
Trading assets
|
|
238
|
|
(163
|
)
|
Loans held for
sale
|
|
1,770
|
|
(853
|
)
|
Interest
receivable
|
|
73
|
|
(59
|
)
|
Other assets
|
|
4,168
|
|
165
|
|
Increase
(decrease) in liabilities:
|
|
|
|
|
|
Interest payable
|
|
(161
|
)
|
219
|
|
Other
liabilities
|
|
(263
|
)
|
122
|
|
Net cash
provided by operating activities
|
|
6,615
|
|
348
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
Proceeds from
maturity/sale of available for sale investment securities
|
|
31,909
|
|
1,081
|
|
Purchase of
investments
|
|
(62,426
|
)
|
(7,042
|
)
|
Net increase in
loans
|
|
(8,799
|
)
|
(9,634
|
)
|
Loan purchases
|
|
|
|
(1,750
|
)
|
Loan sales
|
|
8,122
|
|
9,474
|
|
Proceeds from
sale of equipment
|
|
|
|
1
|
|
Additions to
bank premises and equipment
|
|
(143
|
)
|
(291
|
)
|
Net cash used by
investing activities
|
|
(31,337
|
)
|
(8,161
|
)
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
Net increase in
deposits
|
|
16,580
|
|
1,659
|
|
Proceeds from
borrowings
|
|
4,000
|
|
|
|
Proceeds from
exercise of stock options
|
|
12
|
|
269
|
|
Net cash
provided by financing activities
|
|
20,592
|
|
1,928
|
|
|
|
|
|
|
|
Net decrease in
cash and cash equivalents
|
|
(4,130
|
)
|
(5,885
|
)
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, BEGINNING
|
|
20,153
|
|
22,434
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, ENDING
|
|
$
|
16,023
|
|
$
|
16,549
|
|
See Note 9 for supplemental disclosures
6
SUMMARY OF ACCOUNTING POLICIES
(NOTE 1) NATURE OF
BUSINESS AND
BASIS OF PRESENTATION
Nature of Business
Northern California
Bancorp, Inc. (the Corporation) was incorporated on August 29,
1995, as a for-profit corporation under the California Corporate laws for the
principal purpose of engaging in banking and non-banking activities as allowed
for a bank holding company. The
Corporation owns 100% of Monterey County Bank (the Bank). The Corporations sources of revenues at this
time are dividends on investments, gains on securities transactions and
potential dividends, management fees and tax equalization payments, if any,
from the Bank.
Basis
of Presentation
The
interim condensed financial statements of Northern California Bancorp, Inc.
and subsidiary (Corporation) are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments), which are, in the opinion of
management, necessary for a fair presentation, in all material respects, of the
financial position and operating results of the Corporation for the interim
periods. The results of operations for the three months ended March 31,
2008 are not necessarily indicative of the results to be expected for the
entire fiscal year ending December 31, 2008. The year-end
balance sheet data at December 31, 2007 was derived from the audited
financial statements.
This
financial information should be read in conjunction with the audited financial
statements and notes thereto included in the Corporations Form 10-KSB for
the fiscal year ended December 31, 2007.
(NOTE 2) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In
September 2006, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 157,
Fair Value Measurements,
which defines fair
value, establishes a framework for measuring fair value, and expands
disclosures about fair value measurements. SFAS No. 157 does not require
any new fair value measurements, but applies under other existing accounting
pronouncements that require or permit fair value measurements. SFAS No. 157
emphasizes that fair value is a market-based measurement, not an
entity-specific measurement and, therefore, should be determined based on the
assumptions that market participants would use in pricing that asset or liability.
SFAS No. 157 also establishes a fair value hierarchy that distinguishes
between market participant assumptions developed based on market data obtained
from independent sources and the Corporations own assumptions about market
participant assumptions based on the best information available. SFAS No. 157
is effective for financial statements issued for fiscal years beginning after November 15,
2007 and interim periods within those fiscal years with earlier adoption
permitted. The adoption of SFAS No. 157 did not have an impact on
the Corporations consolidated financial statements and results of operations.
In
February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and
Financial Liabilities including an amendment of FASB Statement No. 115
which is effective for financial statements issued for fiscal years beginning
after November 15, 2007.
7
The
adoption of SFAS No. 159 did not have an impact on the Corporations
consolidated financial statements and results of operations.
On
September 7, 2006, the Task Force reached a consensus on EITF Issue No. 06-4,
Accounting for Deferred Compensation and Postretirement Benefit Aspects of
Endorsement Split-Dollar Life Insurance Arrangements (EITF 06-4) and on March 15,
2007, the Task Force reached a consensus on EITF Issue No. 06-10,
Accounting for Collateral Assignment Split-Dollar Life Insurance Arrangements(EITF
06-10). The scope of these two issues relates to the recognition of a
liability and related compensation costs for endorsement split-dollar life
insurance arrangements and for collateral assignment split-dollar life
insurance arrangements, respectively.
EITF 06-4 and EITF 06-10 are both effective for fiscal years beginning
after December 15, 2007, although early adoption is permitted. The Corporation adopted EITF 06-4 and EITF
06-10 effective as of January 1, 2008 as a change in accounting principle
through a $362,000 cumulative-effect adjustment to retained earnings. Beginning
January 1, 2008, a monthly charge to expense of approximately $9,143 is
made to recognize the liability for future benefits.
(NOTE
3) STOCK BASED COMPENSATION
The
Corporation records compensation expense associated with stock-based awards in
accordance with Statement of Financial Accounting Standards (SFAS) No. 123
(revised 2004),
Share-Based Payment
(SFAS No. 123R) as interpreted by SEC Staff Accounting Bulletin No. 107.
SFAS No. 123R supersedes APB No. 25, and amends SFAS No. 95
Statement of Cash Flows
. Generally, the
approach in SFAS No. 123R is similar to the approach described in SFAS No. 123,
Accounting for Stock Based Compensation
(SFAS
No. 123). However, SFAS No. 123R requires all stock-based
payments to employees, including grants of employee stock options, to be
recognized in the income statement based on their fair values at the date of
grant. No stock-based compensation expense was recorded for the three months
ended March 31, 2008 and 2007, respectively. The Corporation selected
to use the modified prospective method of adopting SFAS 123R. Thus, stock
option expense is recognized only for options that vested after January 1,
2006. Future compensation expense may be greater if additional stock
options are granted by the Corporation.
Under
the Corporations 1998 Stock Option Plan, the Corporation may grant incentive
stock options and non-qualified stock options to directors, officers, and
employees of the Corporation and its subsidiary, so long as the Corporation
owns a majority of the equity interest of such subsidiary. Incentive stock options are granted at fair
value of the common stock on the date of grant.
However, an incentive stock option granted to an individual owning 10%
or more of the Corporations stock after such grant must have an exercise price
of at least 110%
of such fair market value and an
exercise period of not more than five years.
Non-qualified stock options may be granted at prices not lower than 85%
of the fair market value of the common stock on the date of grant. The Board of Directors is authorized to
determine when options become exercisable within a period not exceeding 10
years from the date of grant. Under the
Plan, 211,081 shares of common stock have been reserved for the granting of
these options. At March 31, 2008,
64,661 options were outstanding. During
2008, no options were granted, and 4,000 options were exercised by officers,
employees, and board members. As of March 31,
2008, all options have been vested.
Under
the Corporations 2007 Stock Option Plan, the Corporation may grant incentive
stock options and non-qualified stock options to directors, officers, and
employees of the Corporation
8
and
its subsidiary, so long as the Corporation owns a majority of the equity
interest of such subsidiary. Incentive
stock options are granted at fair value of the common stock on the date of
grant. However, an incentive stock
option granted to an individual owning 10% or more of the Corporations stock
after such grant must have an exercise price of at least 110%
of such fair market value and an exercise period of not
more than five years. The Board of
Directors is authorized to determine when options become exercisable within a
period not exceeding 10 years from the date of grant. Under the Plan, 300,000 shares of common
stock have been reserved for the granting of these options. At March 31, 2008, no options were
issued or outstanding.
Pre-tax stock-based
compensation expense was $0 for the three months ended March 31, 2008 and
2007, respectively. There were no options granted during the three months ended
March 31, 2008 or 2007.
(NOTE 4) EARNINGS PER SHARE
Basic
earnings per share represents income available to common stockholders divided by
the weighted-average number of common shares outstanding during the
period. Diluted earnings per share
reflects additional common shares that would have been outstanding, if
potential dilutive common shares had been issued, as well as any adjustment to income
that would result from the assumed issuance.
Potential common shares that may be issued by the Bank relate to
outstanding stock options and warrants and are determined using the treasury
stock method.
The
weighted-average number of shares used in computing basic and diluted earnings
per share is as follows:
|
|
Earnings per share Calculation
|
|
|
|
For the three months ended March 31
|
|
|
|
2008
|
|
2007
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
Net
|
|
Average
|
|
Per Share
|
|
Net
|
|
Average
|
|
Per Share
|
|
|
|
Income
|
|
Shares
|
|
Amount
|
|
Income
|
|
Shares
|
|
Amount
|
|
Basic earnings
per share
|
|
$
|
919
|
|
1,846,885
|
|
$
|
0.498
|
|
$
|
809
|
|
1,728,657
|
|
$
|
0.468
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of
dilutive shares assumed exercise of outstanding options
|
|
|
|
5,119
|
|
(0.002
|
)
|
|
|
133,486
|
|
(0.033
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings
per share
|
|
$
|
919
|
|
1,852,004
|
|
$
|
0.496
|
|
$
|
809
|
|
1,862,143
|
|
$
|
0.435
|
|
9
|
|
March 31
|
|
December 31
|
|
|
|
2008
|
|
2007
|
|
|
|
(Unaudited)
|
|
(Audited)
|
|
(NOTE 5)
INVESTMENT SECURITIES:
|
|
|
|
|
|
Available for
sale:
|
|
|
|
|
|
Government
National Mortgage Association
|
|
$
|
|
|
$
|
385
|
|
State/Local
Agency
|
|
8,686
|
|
225
|
|
U.S. Government
Agencies
|
|
54,280
|
|
36,191
|
|
|
|
$
|
62,966
|
|
$
|
36,801
|
|
|
|
|
|
|
|
Held to
maturity:
|
|
|
|
|
|
State/Local
Agency
|
|
$
|
7,866
|
|
$
|
7,869
|
|
|
|
|
|
|
|
(NOTE 6) OTHER
INVESTMENTS
|
|
|
|
|
|
AT Services LLC
|
|
$
|
20
|
|
$
|
20
|
|
Federal Home
Loan Bank stock, restricted
|
|
2,689
|
|
2,495
|
|
Independent
Bankers Financial Corporation
|
|
51
|
|
51
|
|
Metrocities
Mortgage, LLC
|
|
10
|
|
10
|
|
Northern California
Bancorp, Inc. Trust I
|
|
93
|
|
93
|
|
Northern
California Bancorp, Inc. Trust II
|
|
155
|
|
155
|
|
Visa, Inc.
|
|
426
|
|
|
|
|
|
$
|
3,444
|
|
$
|
2,824
|
|
(NOTE 7) LOANS
AND ALLOWANCE FOR POSSIBLE LOAN LOSSES:
|
|
|
|
|
|
|
|
|
|
|
|
Commercial and
Industrial
|
|
$
|
30,657
|
|
$
|
28,310
|
|
Construction
|
|
23,230
|
|
23,396
|
|
Real Estate -
Mortgage
|
|
115,021
|
|
116,625
|
|
Installment
|
|
910
|
|
876
|
|
Government
Guaranteed Loans Purchased
|
|
30
|
|
32
|
|
|
|
169,848
|
|
169,239
|
|
Allowance for
loan losses
|
|
(2,029
|
)
|
(2,028
|
)
|
Deferred
origination fees, net
|
|
(363
|
)
|
(350
|
)
|
Net Loans
|
|
$
|
167,456
|
|
$
|
166,861
|
|
|
|
|
|
|
|
Balance at
Beginning of Period
|
|
$
|
2,028
|
|
$
|
1,409
|
|
Recoveries
|
|
1
|
|
4
|
|
Provision for
Possible Loan Losses
|
|
|
|
865
|
|
Loans Charged
Off
|
|
|
|
(250
|
)
|
Balance at End
of Period
|
|
$
|
2,029
|
|
$
|
2,028
|
|
10
(NOTE 8) COMPREHENSIVE INCOME (LOSS):
The components of other comprehensive income and related tax effects for
the three month period ended March 31, 2008 and the year ended December 31,
2007 are as follows:
|
|
March 31
|
|
December 31
|
|
|
|
2008
|
|
2007
|
|
|
|
(Unaudited)
|
|
(Audited)
|
|
Unrealized
holding gains (losses) on available for sale securities and other assets, net
|
|
$
|
(237
|
)
|
$
|
438
|
|
Reclassification
for gains realized in income
|
|
(229
|
)
|
(216
|
)
|
Net unrealized
gains (losses)
|
|
(466
|
)
|
222
|
|
Tax effect
|
|
210
|
|
(100
|
)
|
|
|
|
|
|
|
Net-of-tax
amount
|
|
$
|
(256
|
)
|
$
|
122
|
|
The components of
accumulated
other comprehensive income (loss) and related tax effects are as follows:
|
|
March 31
|
|
December 31
|
|
|
|
2008
|
|
2007
|
|
|
|
(Unaudited)
|
|
(Audited)
|
|
Unrealized
holding gains (losses) on available for sale securities
|
|
$
|
(326
|
)
|
$
|
163
|
|
Unrealized
holding gains on available for sale asset strip receivable
|
|
44
|
|
21
|
|
Tax effect
|
|
127
|
|
(83
|
)
|
|
|
|
|
|
|
Net-of-tax amount
|
|
$
|
(155
|
)
|
$
|
101
|
|
(NOTE 9)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
|
|
March 31
|
|
|
|
2008
|
|
2007
|
|
Payments during
the period ending:
|
|
|
|
|
|
Interest
|
|
$
|
2,600
|
|
$
|
1,295
|
|
Income Taxes
|
|
$
|
846
|
|
$
|
279
|
|
ITEM
2:
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
Statements
Regarding Forward-Looking Information
Except for historical
information contained herein, the matters discussed or incorporated by
reference in this report contain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended (the Securities
Act), and Section 21E of the Securities Exchange Act of 1934 (the Exchange
Act), that involve substantial risks and uncertainties. When used in
this report, or in the documents incorporated by reference herein, the words anticipate,
believe, estimate, may, intend, expect, and similar expressions
identify certain of such forward-looking statements. Actual results of
11
Monterey County Bank could
differ materially from such forward-looking statements contained herein.
Factors that could cause future results to vary from current expectations
include, but are not limited to, the following: changes in economic conditions
(both generally and more specifically in the markets in which the Bank
operates); changes in interest rates, deposit flows, loan demand, real estate
values and competition; changes in accounting principles, policies or
guidelines and in government legislation and regulation (which change from time
to time and over which the Bank has no control); other factors affecting the
Banks operations, markets, products and services; and other risks detailed in
this Form 10-QSB and in the Banks other reports filed with the Federal
Deposit Insurance Corporation and pursuant to the rules and regulations of
the Securities and Exchange Commission. Readers are cautioned not to
place undue reliance on these forward-looking statements, which reflect managements
analysis only as of the date hereof. The Corporation undertakes no
obligation to publicly revise these forward-looking statements to reflect
events or circumstances that arise after the date thereof.
CRITICAL
ACCOUNTING POLICIES
The preparation of financial
statements in accordance with accounting principles generally accepted in the
United States of America requires management to make a number of judgments,
estimates and assumptions that affect the reported amount of assets,
liabilities, income and expenses in the Corporations financial statements and
accompanying notes. Management believes
that the judgments, estimates and assumptions used in preparation of the
Corporations financial statements are appropriate given the factual
circumstances as of March 31, 2008.
Various elements of the Corporations accounting policies, by their
nature, are inherently subject to estimation techniques, valuation assumptions
and other subjective assessments.
Critical accounting policies are those that involve the most complex and
subjective decisions and assessments and have the greatest potential impact on
the Corporations results of operation.
In particular, management has identified one accounting policy that, due
to judgments, estimates and assumptions inherent in this policy, and the
sensitivity of the Corporations financial statements to those judgments,
estimates and assumptions, is critical to an understanding of the Corporations
financial statements. This policy
relates to the methodology that determines the Corporations allowance for loan
losses. Management has discussed the
development and selection of this critical accounting policy with the
Corporations Audit Committee of the Board of Directors. Although Management believes the level of the
allowance at March 31, 2008 is adequate to absorb losses inherent in the
loan portfolio, a decline in the regional economy may result in increasing
losses that cannot reasonably be predicted at this time. For further information regarding the
allowance for loan losses see Provision and Allowance for Loan Losses
included elsewhere herein.
OVERVIEW
The
following discussion reviews and analyzes the operating results and financial
condition of the Corporation, focusing on the Bank. It should be read in conjunction with the
financial statements and the other financial data presented elsewhere herein.
For the three
months ended March 31, 2008 net income was $919,000, compared to $809,000
for the same period in 2007. For the
three months ended March 31, 2008 net interest income after provision for
loan losses decreased $55,000, total non-interest income increased
12
$463,000, non-interest expense increased $23,000 and the income tax
provision increased $275,000.
The following
table sets forth certain selected financial ratios of the Corporation for the
three months ended March 31, 2008 and 2007.
|
|
Three Months Ended March 31
|
|
|
|
2008
|
|
2007
|
|
Summary of
Operating Results:
|
|
|
|
|
|
|
|
|
|
|
|
Total interest
income
|
|
$
|
4,621
|
|
$
|
3,827
|
|
Total interest
expense
|
|
2,489
|
|
1,640
|
|
Net interest
income
|
|
2,132
|
|
2,187
|
|
|
|
|
|
|
|
Provision for
possible loan losses
|
|
|
|
|
|
Net interest
income after provision for loan losses
|
|
2,132
|
|
2,187
|
|
|
|
|
|
|
|
Total
non-interest income
|
|
1,789
|
|
1,326
|
|
Total
non-interest expense
|
|
2,226
|
|
2,203
|
|
|
|
|
|
|
|
Income before
taxes
|
|
1,695
|
|
1,310
|
|
Provision for
income taxes
|
|
776
|
|
501
|
|
|
|
|
|
|
|
Net income
|
|
$
|
919
|
|
$
|
809
|
|
|
|
|
|
|
|
Per Common Share
Data:
|
|
|
|
|
|
|
|
|
|
|
|
Net income -
Primary (1)
|
|
$
|
0.498
|
|
$
|
0.468
|
|
Net income -
Diluted (2)
|
|
0.496
|
|
0.435
|
|
Book value, end
of period
|
|
7.97
|
|
7.53
|
|
Avg shares
outstanding (3)
|
|
1,846,885
|
|
1,728,657
|
|
Balance Sheet
Data:
|
|
|
|
|
|
Total loans, net
of unearned income (4)
|
|
$
|
167,573
|
|
$
|
132,742
|
|
Total assets
|
|
270,982
|
|
193,671
|
|
Total deposits
|
|
183,913
|
|
133,287
|
|
Stockholders
equity
|
|
14,747
|
|
13,502
|
|
13
|
|
Three Months Ended March 31
|
|
|
|
2008
|
|
2007
|
|
Selected
Financial Ratios:
|
|
|
|
|
|
|
|
|
|
|
|
Return on
average assets (5) (6)
|
|
1.41
|
%
|
1.73
|
%
|
Return on
average stockholders equity (5) (6)
|
|
24.83
|
%
|
25.09
|
%
|
Net interest
spread
|
|
2.94
|
%
|
4.47
|
%
|
Net yield on
interest earning assets (5)
|
|
3.51
|
%
|
5.14
|
%
|
Avg
shareholders equity to average assets (5)
|
|
5.67
|
%
|
6.88
|
%
|
Risked-Based
capital ratios
|
|
|
|
|
|
Tier 1
|
|
9.68
|
%
|
10.76
|
%
|
Total
|
|
13.14
|
%
|
14.71
|
%
|
Total loans to
total deposits at end of period (4)
|
|
91.11
|
%
|
99.59
|
%
|
Allowance for
loan losses to total loans at end of period (4)
|
|
1.19
|
%
|
1.05
|
%
|
Nonperforming
loans to total loans at end of period (4)
|
|
2.08
|
%
|
0.12
|
%
|
Net charge-offs
to average loans (4)
|
|
0.00
|
%
|
0.00
|
%
|
(1)
Basic earnings per share
amounts were computed on the basis of the weighted average number of shares of
common stock outstanding during the year.
The weighted average number of common shares used for this computation
was 1,846,885 and 1,728,657 for March 31, 2008 and 2007, respectively.
(2)
Diluted
earnings per share amounts were computed on the basis of the weighted average number
of shares of common stock and common stock equivalents outstanding during the
year. Common stock equivalents include
director/employee stock options. The weighted average number of shares used for
this computation was 1,852,004 and 1,862,143 for March 31, 2008 and 2007,
respectively.
(3) Weighted average common shares.
(4) Includes loans being held for sale.
(5) Averages are of daily balances.
(6) March 31, 2008 calculated on an
annualized basis.
NET
INTEREST INCOME
Net
interest income, the difference between (a) interest and fees earned on
interest-earning assets and (b) interest paid on interest-bearing
liabilities, is the most significant component of the Banks earnings. Changes in net interest income from period to
period result from increases or decreases in the average balances of
interest-earning assets, the availability of particular sources of funds and
changes in prevailing interest rates.
Net interest income for the three months
ended March 31, 2008 was $2,132,000 compared to $2,187,000 for the same
period in 2007. The decrease of $55,000
resulted
14
primarily
from the decline in loan rates as shown on page 16 in the rate and volume
analysis table.
The following tables show the components
of the Banks net interest income, setting forth, for each of the three months
ended March 31, 2008 and 2007, (i) average assets, liabilities and
investments, (ii) interest income earned on interest-earning assets and
interest expense paid on interest-bearing liabilities, (iii) average
yields earned on interest-earning assets and average rates paid on
interest-bearing liabilities, (iv) the net interest spread (i.e., the
average yield earned on interest-earning assets less the average rate paid on interest-bearing
liabilities) and (v) the net interest yield on average interest-earning
assets (i.e., net interest income divided by average interest-earning
assets). Yields are computed on a
tax-equivalent basis, resulting in adjustments to interest earned on municipal
bonds of $59,000 and $37,000 for the three months ended March 31, 2008 and
2007, respectively. Non-accrual loans
and overdrafts are included in average loan balances. Average loans are presented net of unearned
income.
DISTRIBUTION,
RATE AND YIELD ANALYSIS OF NET INTEREST INCOME:
The following table shows
the consolidated average balances of earning assets, and interest-bearing
liabilities; the amount of interest income and interest expense; the average
yield or rate for each category of average interest-earning assets and average
interest-bearing liabilities; and the net interest income and the net interest
spread for the periods indicated:
15
|
|
Three Months Ended March 31,
|
|
Three Months Ended March 31,
|
|
|
|
2008
|
|
2007
|
|
|
|
Average
|
|
|
|
Yield/
|
|
Average
|
|
|
|
Yield/
|
|
(dollars in thousands)
|
|
Balance
|
|
Interest
|
|
Rate
|
|
Balance
|
|
Interest
|
|
Rate
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
$
|
172,284
|
|
$
|
3,698
|
|
8.59
|
%
|
$
|
130,718
|
|
$
|
3,290
|
|
10.07
|
%
|
Time deposits -
in other banks
|
|
1,478
|
|
12
|
|
3.34
|
%
|
1,144
|
|
14
|
|
4.79
|
%
|
Invest
securities - taxable
|
|
45,867
|
|
626
|
|
5.46
|
%
|
23,118
|
|
295
|
|
5.10
|
%
|
Invest
securities - nontaxable
|
|
11,060
|
|
189
|
|
6.84
|
%
|
7,011
|
|
118
|
|
6.72
|
%
|
Federal funds
sold
|
|
12,879
|
|
104
|
|
3.23
|
%
|
9,190
|
|
123
|
|
5.37
|
%
|
Total
interest-earning assets
|
|
243,568
|
|
4,629
|
|
7.60
|
%
|
171,181
|
|
3,840
|
|
8.97
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for
credit losses
|
|
(2,029
|
)
|
|
|
|
|
(1,409
|
)
|
|
|
|
|
Non-interest
bearing assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due
from banks
|
|
7,374
|
|
|
|
|
|
6,491
|
|
|
|
|
|
Premises and
equipment
|
|
4,897
|
|
|
|
|
|
4,728
|
|
|
|
|
|
Accrued interest
receivable
|
|
1,174
|
|
|
|
|
|
1,016
|
|
|
|
|
|
Other assets
|
|
5,970
|
|
|
|
|
|
5,560
|
|
|
|
|
|
Total average
assets
|
|
$
|
260,954
|
|
|
|
|
|
$
|
187,567
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Shareholders Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing
demand
|
|
$
|
13,586
|
|
$
|
9
|
|
0.26
|
%
|
$
|
14,434
|
|
$
|
9
|
|
0.25
|
%
|
Money market
savings
|
|
1,695
|
|
3
|
|
0.73
|
%
|
2,000
|
|
4
|
|
0.72
|
%
|
Savings deposits
|
|
6,276
|
|
17
|
|
1.06
|
%
|
4,724
|
|
12
|
|
0.99
|
%
|
Time deposits
>$100M
|
|
61,693
|
|
771
|
|
5.00
|
%
|
37,724
|
|
473
|
|
5.01
|
%
|
Time deposits
<$100M
|
|
66,884
|
|
826
|
|
4.94
|
%
|
43,927
|
|
519
|
|
4.73
|
%
|
Other Borrowing
|
|
63,737
|
|
864
|
|
5.43
|
%
|
42,998
|
|
624
|
|
5.81
|
%
|
Total interest-bearing
liabilities
|
|
213,871
|
|
2,490
|
|
4.66
|
%
|
145,807
|
|
1,641
|
|
4.50
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-interest
bearing liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noninterest-bearing
checking
|
|
26,197
|
|
|
|
|
|
25,273
|
|
|
|
|
|
Accrued interest
payable
|
|
2,022
|
|
|
|
|
|
1,375
|
|
|
|
|
|
Other
liabilities
|
|
4,059
|
|
|
|
|
|
2,211
|
|
|
|
|
|
Total
Liabilities
|
|
246,149
|
|
|
|
|
|
174,666
|
|
|
|
|
|
Total
shareholders equity
|
|
14,805
|
|
|
|
|
|
12,901
|
|
|
|
|
|
Total average
liabilities and shareholders equity
|
|
$
|
260,954
|
|
|
|
|
|
$
|
187,567
|
|
|
|
|
|
Net interest
income
|
|
|
|
$
|
2,139
|
|
|
|
|
|
$
|
2,199
|
|
|
|
Interest income
as a percentage of average earning assets
|
|
|
|
|
|
7.60
|
%
|
|
|
|
|
8.97
|
%
|
Interest expense
as a percentage of average earning assets
|
|
|
|
|
|
4.09
|
%
|
|
|
|
|
3.83
|
%
|
Net yield on
interest earning assets
|
|
|
|
|
|
3.51
|
%
|
|
|
|
|
5.14
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest
spread
|
|
|
|
|
|
2.94
|
%
|
|
|
|
|
4.47
|
%
|
16
Rate and Volume Analysis:
The following tables show the increase or decrease in interest income,
interest expense and net interest income, resulting from changes in rates and
volumes, for the three months ended March 31, 2008 compared with the same
period in 2007.
|
|
Increase (decrease) in the three months ended
|
|
|
|
March 31, 2008 compared with March 31, 2007
|
|
|
|
Volume
|
|
Rate
|
|
Total
|
|
Increase
(decrease) in interest income:
|
|
|
|
|
|
|
|
Loans
|
|
$
|
1,046
|
|
$
|
(638
|
)
|
$
|
408
|
|
Time deposits -
in other banks
|
|
3
|
|
(5
|
)
|
(2
|
)
|
Invest
securities - taxable
|
|
289
|
|
42
|
|
331
|
|
Invest
securities - nontaxable
|
|
68
|
|
3
|
|
71
|
|
Federal funds
sold
|
|
50
|
|
(69
|
)
|
(19
|
)
|
|
|
1,456
|
|
(667
|
)
|
789
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in interest expense:
|
|
|
|
|
|
|
|
Money market
savings
|
|
(1
|
)
|
0
|
|
(1
|
)
|
Savings deposits
|
|
4
|
|
1
|
|
5
|
|
Time deposits
>$100M
|
|
300
|
|
(2
|
)
|
298
|
|
Time deposits
<$100M
|
|
271
|
|
36
|
|
307
|
|
Other Borrowing
|
|
301
|
|
(61
|
)
|
240
|
|
|
|
875
|
|
(26
|
)
|
849
|
|
Increase
(decrease) in net interest income:
|
|
$
|
581
|
|
$
|
(641
|
)
|
$
|
(60
|
)
|
Provision
and Allowance for Loan Losses
The provision for
loan losses is an expense charged against operating income and added to the
allowance for loan losses. The allowance
for loan losses represents amounts set aside for the specific purpose of
absorbing losses that may occur in the Banks loan portfolio.
The allowance for
loan losses reflects managements ongoing evaluation of the risks inherent in
the loan portfolio both generally and with respect to specific loans, the state
of the economy, and the level of net loan losses experienced in the past. Management and the Board of Directors review
the results of the State Banking Department and FDIC examinations, independent
accountants observations, and the Banks internal review as additional
indicators to determine if the amount in the allowance for loan losses is
adequate to protect against estimated future losses. It is the Banks current practice, which
could change in accordance with the factors mentioned above, to maintain an
allowance which is at least equal to the sum of the following percentage of
loan balances by loan category.
Additionally, specific loss allocations are made for classified loans.
17
Loan Category
|
|
Reserve %
|
|
|
|
|
|
Classified
Loans:
|
|
|
|
Loans classified
loss
|
|
100.00
|
%
|
Loans classified
doubtful
|
|
50.00
|
%
|
Loans classified
substandard
|
|
5.00-20.00
|
%
|
|
|
|
|
Unclassified
Loans:
|
|
|
|
Real Estate -
Loan to value 80% or less
|
|
0.10
|
%
|
Real Estate -
Loan to value over 80%
|
|
0.70
|
%
|
Real Estate -
Construction
|
|
0.25
|
%
|
Loans to
Individuals
|
|
3.00
|
%
|
Commercial
|
|
2.00
|
%
|
SBA Loans
Unguaranteed portion
|
|
2.00
|
%
|
Unfunded Loan
Commitments
|
|
.10
|
%
|
Concentration
Risk Factor Real Estate
|
|
.10
|
%
|
Economic Risk
Factor
|
|
.20
|
%
|
SBA Loans -
Guaranteed portion
|
|
0.00
|
%
|
Cash Secured
Loans
|
|
0.00
|
%
|
Although no
assurance can be given that actual losses will not exceed the amount provided
for in the allowance, Management believes that the allowance is adequate to
provide for all estimated credit losses in light of all known relevant factors.
At
March 31, 2008
and 2007 the Banks allowance stood at 1.19 percent and 1.05 percent,
respectively.
No provisions were
made to the allowance during the three months ended March 31, 2008 or
2007. No loans were charged off during
the three months ended March 31, 2008 and March 31, 2007. Recoveries for the same periods were $1,000
and $0, respectively.
The
Banks non-performing (delinquent 90 days or more and on non-accrual) loans as
a percentage of total loans were 2.01 percent and 0.12 percent as of the end of
March 31, 2008 2007, respectively.
The significant increase in non-accrual loans consisted of a single
$3,200,000 real estate loan participation purchased. The property securing the loan was acquired
through a foreclosure sale April 29, 2008.
We do not at this time anticipate any material loss due to expressions
of interest by two entities in purchasing the property.
Non-Interest
Income
Total non-interest
income for the three months ended
March 31, 2008 was $1,789,000 compared with $1,326,000 for
the same period in 2007. The increase of
$463,000 primarily resulted from income of $694,000 related to the Visa, Inc.
initial public stock offering and increases in merchant credit card income of
$26,000, sales and servicing of Small Business Administration Loans of $66,000
and gains on sale of securities of $229,000; partially offset by a mark to
market loss of $294,000 in the trading assets compared with a $110,000 gain
during the same period in 2007 and a decrease in discount accretion on Small
Business Administration loans sold of $106,000.
18
The sale of Small
Business Administration (SBA) guaranteed loans is a significant contributor to
the Banks income. SBA guaranteed loans
yield up to 3 3/4% over the New York prime rate, and the guaranteed portions
can be sold at premiums, which vary with market conditions. SBA loans are guaranteed by the full faith of
the United States Government from 75 to 85 percent of the principal amount.
There can be no
assurance that the gains on sale will continue at, or above, the levels
realized in the past three years. In
addition, increasing competition among lenders for qualified SBA borrowers
makes it difficult for the Bank to continually expand its program in this area,
and may limit the level of premium that can be earned with regard thereto.
Non-Interest
Expense
Salary and
benefits expense for the three months ended
March 31, 2008 increased $28,000
compared with the same period in 2007.
The increase was due to merit
pay increases and the addition, in
March, of four employees to staff the Salinas branch office scheduled to open
during the second quarter.
Total occupancy
and equipment expense for the three months ended
March 31, 2008 was $238,000
compared to $206,000 for the same period in 2007. The increase was primarily due to rental
expense for the Salinas branch office.
Professional fees
for the three months ended
March 31,
2008 were $44,000 compared to $38,000 for the same period in 2007.
Data processing
expense for the three months ended
March 31, 2008 was $101,000 compared to $88,000 for the
same period in 2007. The increase of
$23,000 was due to one time charges for the implementation of branch image
capture of items, image cash letter processing and communication network design
for the Salinas branch office.
Other general and
administrative expenses for the three months ended
March 31, 2008 totaled $738,000
compared with $794,000 for the same period in 2007, which is a decrease of
$56,000. Significant changes occurred in
the following categories; increases
occurred in merchant credit card processing expense of $45,000, FDIC
insurance premiums of $26,000 and business development of $11,000;
while decreases occurred in director fees of $17,000, advertising expense of
$15,000, donations of $25,000 and other losses of $11,000. Included in the Visa, Inc. initial public offering
transaction was the reversal of a litigation reserve, established in 2007, of
$110,000 representing the Banks share of the liability associated with the
settlement by VISA of litigation brought by American Express and Discover.
Provision
for Income Taxes
The
tax provision was $776,000 for the first quarter ended March 31, 2008
compared to tax provision of $501,000 for the first quarter ended March 31,
2007, representing 45.78% and 38.21% of pre-tax income for those periods. The amount of the tax provision is determined
by applying the Corporations statutory income tax rates to pre-tax book income,
adjusted for permanent differences between pre-tax book income and actual
taxable income. Such permanent differences include but are not limited to
tax-exempt interest income; increases in the cash surrender value of bank-owned
life insurance, certain other expenses that are not allowed as tax deductions,
and tax credits.
19
LOANS
Loans represented
70.73% of average earning assets, and 66.02% of average total assets for the
three months ended
March 31,
2008 compared with 76.36% and 69.69%, respectively during 2007. For the
three months ended March 31, 2008,
average loans increased 31.80% from $130,718,000 for the same period in 2007 to
$172,284,000. Average real estate loans
increased $28,680,000 (33.47%), average construction loans increased $5,444,000
(30.01%), average commercial loans increased $7,132,000 (27.11%), and average
installment loans increased $310,000 (54.11%).
The Banks
commercial and industrial loans are generally made for the purpose of providing
working capital, financing the purchase of equipment or inventory, and other
business purposes. Such loans generally have maturities of one year or
longer. Short-term business loans are
generally intended to finance current transactions and typically provide for
monthly interest payments with principal being payable at maturity or at 90-day
intervals. Term loans (usually for a term of two to five years) normally
provide for monthly installments of principal and interest. The Bank from time to time utilizes accounts
receivable and inventory as security for loans.
The Bank is a
recognized leader for Small Business Administration lending in Monterey County,
and holds SBAs coveted Preferred Lender Status. Generally, SBA loans are guaranteed, by the
SBA, for 75 to 85 percent of their principal amount, which can be retained in
portfolio or sold to investors. Such
loans are made at floating interest rates, generally with longer terms (up to
25 years) than are available on a conventional loan basis to small
businesses. The unguaranteed portion of the loans, although generally
supported by collateral, is considered to be more risky than conventional
commercial loans because they may be based upon credit standards the Bank would
not otherwise apply, such as lower cash flow coverage, or longer repayment
terms.
The Banks real
estate loan portfolio consists both of real estate construction loans and real
estate mortgage loans. The Bank has
initiated a program to generate more commercial and industrial real estate
loans, which generally yield higher returns than normal commercial loans. The Bank has also developed a broker program
for generating residential real estate loans.
The Bank does not make real estate development loans. Real estate
construction loans are made for a much shorter term, and often at higher
interest rates, than conventional single-family residential real estate
loans. The cost of administering such
loans is often higher than for other real estate loans, as principal is drawn
on periodically as construction progresses.
The Bank also
makes real estate loans secured by a first deed of trust on single family
residential properties and commercial and industrial real estate. California commercial banks are permitted,
depending on the type and maturity of the loan, to lend up to 90 percent of the
fair market value of real property (or more if the loan is insured either by
private mortgage insurers or governmental agencies). In certain instances, the appraised value may
exceed the actual amount that could be realized on foreclosure, or declines in
market value subsequent to making the loan can impair the Banks security.
Consumer loans are made
for the purpose of financing the purchase of various types of consumer goods,
home improvement loans, auto loans and other personal loans. Consumer installment loans generally provide
for monthly payments of principal and interest, at a fixed rate. Most of the Banks consumer installment loans
are generally secured by the personal
20
property being
purchased. The Bank generally makes
consumer loans to those customers with a prior banking relationship with the
Bank.
Non-performing
and Non-accrual Loans
The Banks present
policy is to cease accruing interest on loans which are past due as to
principal or interest 90 days or more, except for loans which are well secured
or when collection of interest and principal is deemed likely. When a loan is placed on non-accrual,
previously accrued and unpaid interest is generally reversed out of income
unless adequate collateral from which to collect the principal of, and interest
on, the loan appears to be available.
The following
table presents information with respect to loans which, as of the dates
indicated, were past due 90 days or more or were placed on non-accrual status
(referred to collectively as non-performing loans):
|
|
Three months as of
March 31
,
|
|
Twelve months as of
December 31,
|
|
|
|
2008
|
|
2007
|
|
2007
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
Accruing, past
due 90 days or more:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Commercial
|
|
|
|
|
|
|
|
Installment
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
Total accruing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonaccrual
loans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate
|
|
3,200
|
|
|
|
3,200
|
|
Commercial
|
|
115
|
|
|
|
41
|
|
Installment
|
|
175
|
|
155
|
|
155
|
|
Other
|
|
|
|
|
|
|
|
Total nonaccrual
|
|
3,490
|
|
155
|
|
3,396
|
|
|
|
|
|
|
|
|
|
Total
nonperforming
|
|
$
|
3,490
|
|
$
|
155
|
|
$
|
3,396
|
|
|
|
|
|
|
|
|
|
Total loans end
of period
|
|
$
|
167,572
|
|
$
|
132,742
|
|
$
|
171,126
|
|
|
|
|
|
|
|
|
|
Ratio of
nonperforming loans to total loans at end of period
|
|
2.08
|
%
|
0.12
|
%
|
1.98
|
%
|
Subsequent
Event
The Company
previously reported the transfer of a $3.2 million loan participation purchased
to non-accrual status on October 23, 2007 when it was informed by the
originating bank that it had placed the loan on non-accrual status. On April 29, 2008 the collateral
securing the loan was acquired through a foreclosure sale. The originating bank has received expressions
of interest in purchasing the foreclosed property from two entities. Management does not at this time anticipate
any material loss.
21
Summary
of Loan Loss Experience
|
|
|
|
|
|
As of the
|
|
|
|
As of the period
|
|
Year ended
|
|
|
|
Ended March 31,
|
|
December 31,
|
|
|
|
2008
|
|
2007
|
|
2007
|
|
|
|
(Dollars in thousands)
|
|
|
|
|
|
Average loans
outstanding
|
|
$
|
172,284
|
|
$
|
130,718
|
|
$
|
146,944
|
|
|
|
|
|
|
|
|
|
Allowance,
beginning of period
|
|
$
|
2,028
|
|
$
|
1,409
|
|
$
|
1409
|
|
|
|
|
|
|
|
|
|
Loans charged
off during period:
|
|
|
|
|
|
|
|
Commercial
|
|
|
|
|
|
249
|
|
Installment
|
|
|
|
|
|
1
|
|
Real Estate
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
|
|
Total charge
offs
|
|
|
|
|
|
250
|
|
|
|
|
|
|
|
|
|
Recoveries
during period:
|
|
|
|
|
|
|
|
Commercial
|
|
1
|
|
|
|
|
|
Installment
|
|
|
|
|
|
|
|
Real Estate
|
|
|
|
|
|
|
|
Other
|
|
|
|
|
|
4
|
|
Total recoveries
|
|
1
|
|
|
|
4
|
|
|
|
|
|
|
|
|
|
Net loans
charged off during the period
|
|
(1
|
)
|
|
|
246
|
|
|
|
|
|
|
|
|
|
Additions to
allowance for possible loan losses
|
|
|
|
|
|
865
|
|
|
|
|
|
|
|
|
|
Allowance, end
of period
|
|
$
|
2,029
|
|
$
|
1,409
|
|
$
|
2,028
|
|
Ratio of net
loans charged off to average loans outstanding during the period
|
|
0.00
|
%
|
0.00
|
%
|
0.17
|
%
|
Ratio of
allowance to total loans at end of period
|
|
1.19
|
%
|
1.05
|
%
|
1.19
|
%
|
Ratio of
allowance for loan losses to non-performing loans at end of period
|
|
58.14
|
%
|
909.03
|
%
|
59.72
|
%
|
Deposits
Average deposits
for the three months ended
March 31,
2008 were $176,331,000 an increase of 37.67% compared with the same
period in 2007. Average certificates of
deposit represented 72.92% of average deposits for the three months ended March 31, 2008 compared with
63.75% for the same period in 2007.
Average interest bearing checking, money market and savings accounts as
a group were 12.23% of average deposits for the three months ended March 31, 2008 compared with
16.52% for the same period in 2007.
Average demand deposits
22
represented 14.86% of
average deposits for the three months ended
March 31, 2008 compared with
19.73% for the same period in 2007.
The following table sets
forth the scheduled maturities of the Companys time deposits in denominations
of $100,000 or greater at March 31, 2008:
Maturities of Time
Deposits of
$100,000 or More
(Dollars in Thousands)
Three months or
less
|
|
$
|
14,063
|
|
Over three
months through six months
|
|
5,979
|
|
Over six months
through twelve months
|
|
16,398
|
|
Over twelve
months
|
|
24,890
|
|
Total
|
|
$
|
61,330
|
|
Borrowing
The Bank has lines of credit from the Federal Home Loan
Bank (FHLB) of San Francisco, Bank of the West, Pacific Coast Bankers Bank and
The Independent Bank with remaining available borrowing capacity on
March 31, 2008
of $4,917,000 (based on pledged collateral), $4,500,000,
$6,000,000 and $5,000,000, respectively.
The Federal Home Loan Bank line of credit has a maximum borrowing
capacity of twenty five percent (25%) of the Banks total assets, adjusted
quarterly. The Federal Home Loan Bank
line of credit is secured by a portion of the Banks real estate secured loans
and securities at March 31, 2008.
The total principal balance of pledged loans was $37,289,000 and
securities of $52,577,000. The following
table provides information on eighteen FHLB advances totaling $56,500,000 and
outstanding at
March 31, 2008
.
23
|
|
|
|
Funding
|
|
Maturity
|
|
Amount
|
|
Rate
|
|
Date
|
|
Date
|
|
$
|
3,000,000
|
|
4.30
|
%
|
6/17/05
|
|
6/17/10
|
|
2,500,000
|
|
4.88
|
%
|
8/20/07
|
|
8/20/10
|
|
5,000,000
|
|
4.96
|
%
|
11/14/05
|
|
11/15/10
|
|
4,000,000
|
|
2.70
|
%
|
1/24/08
|
|
1/24/11
|
|
2,250,000
|
|
4.75
|
%
|
1/26/06
|
|
1/26/11
|
|
1,750,000
|
|
4.72
|
%
|
1/26/06
|
|
1/26/11
|
|
1,500,000
|
|
5.52
|
%
|
7/17/06
|
|
7/18/11
|
|
3,500,000
|
|
5.49
|
%
|
7/17/06
|
|
7/18/11
|
|
1,000,000
|
|
5.22
|
%
|
8/25/06
|
|
8/25/11
|
|
5,000,000
|
|
5.20
|
%
|
7/30/07
|
|
7/30/12
|
|
3,000,000
|
|
4.85
|
%
|
10/1/07
|
|
10/1/12
|
|
5,000,000
|
|
5.00
|
%
|
9/18/07
|
|
9/18/14
|
|
1,000,000
|
|
7.72
|
%
|
6/1/00
|
|
6/3/30
|
|
4,000,000
|
|
5.96
|
%
|
8/2/04
|
|
7/28/34
|
|
5,000,000
|
|
5.63
|
%
|
12/24/04
|
|
12/22/34
|
|
2,000,000
|
|
5.13
|
%
|
5/4/05
|
|
5/1/35
|
|
2,000,000
|
|
5.31
|
%
|
11/17/06
|
|
11/17/36
|
|
5,000,000
|
|
5.88
|
%
|
6/29/07
|
|
6/29/37
|
|
$
|
56,500,000
|
|
|
|
|
|
|
|
The
Bank of the West, Pacific Coast Bankers Bank and The
Independent Bank
lines of credit are unsecured. The Bank did not utilize any overnight
borrowings in 2008 or 2007.
The Bank has a letter of credit in the amount of
$330,000, expiring April 17, 2011, issued by Federal Home Loan Bank of San
Francisco, which is used to secure local agency deposits. The beneficiary of the letter of credit is
the Administrator of Local Agency Security, Department of Financial
Institutions.
Capital
Resources
The Corporation maintains capital to
comply with legal requirements, to provide a margin of safety for its
depositors and stockholders, and to provide for future growth and the ability
to pay dividends. At
March 31, 2008
,
stockholders equity was $14,747,000 versus $14,434,000 at December 31,
2007. The Corporation paid cash
dividends to shareholders of $0 and $.25 for the 3 months ended
March 31, 2008
and for the year ended December 31, 2007, respectively. The Bank paid cash dividends to the
Corporation of $0 and $800,000 for the 3 months ended
March 31, 2008
and for the year ended December 31, 2007, respectively.
The FDIC and
Federal Reserve Board have adopted capital adequacy guidelines for use in their
examination and regulation of banks and bank holding companies. If the capital of a bank or bank holding
company falls below the minimum levels established by these guidelines, it may
be denied approval to acquire or establish additional banks or non-bank businesses,
or the FDIC or Federal Reserve Board may take other administrative
actions. The guidelines employ two
measures of capital: (1) risk-based
capital and (2) leverage capital.
In general, the
risk-based capital guidelines provide detailed definitions of which obligations
will be treated as capital, and assign different weights to various assets and
off-balance sheet items, depending upon the perceived degree of credit risk
associated with each asset. Each asset
24
is assigned to one
of four risk-weighted categories. For
example, 0 percent for cash and unconditionally guaranteed government
securities; 20 percent for deposits with other banks and fed funds; 50 percent
for state bonds and certain residential real estate loans; and 100 percent for
commercial loans and other assets.
Capital is categorized as either Tier 1 capital, consisting of common
stock and retained earnings (or deficit), or Tier 2 capital, which includes
limited-life preferred stock and allowance for loan losses (subject to certain
limitations). The guidelines also define
and set minimum capital requirements (risk-based capital ratios), which
increased over a transition period, ended December 31, 1992. Under the final 1992 rules, all banks were
required to maintain Tier 1 capital of at least 4 percent and total capital of
8.0% of risk-adjusted assets. The Bank had a Tier 1 capital to total
risk-adjusted assets capital ratio of 11.19% and 12.65% at March 31, 2008
and 2007, respectively. The Banks Tier
1 capital exceeds the minimum regulatory requirement by $13,502,000. The Bank had a Total Risk-Based capital to
risk-adjusted assets ratio of 12.27% and 13.62% at March 31, 2008 and
2007, respectively. The Banks Total
Risk-Based capital exceeds the minimum regulatory requirement by $7,957,000.
The Tier 1 leverage
capital ratio guidelines require a minimum leverage capital ratio of 4% of Tier
1 capital to total assets less goodwill.
The Bank had a leverage capital ratio of 8.07% and 10.16% at March 31,
2008 and 2007, respectively. The Banks
Tier 1 leverage capital exceeds the minimum regulatory requirement by
$10,639,000.
Under regulatory
guidelines, the $8 million in Trust Preferred Securities outstanding qualify as
Tier 1 capital up to 25% of Tier 1 capital.
Any additional Trust Preferred Securities will qualify as Tier 2
capital.
The Corporations Board
of Directors approved a stock repurchase program pursuant to which the
Corporation, from time to time and at managements discretion, may repurchase
up to $500,000 of the Corporations outstanding shares. At prevailing market prices on the date of
the approval, approximately 62,500 shares (or about 3.38% of its 1,849,918
shares of common stock currently outstanding) could be purchased pursuant to
the Boards approval. No time limit was
set for completion of the program.
Liquidity
Liquidity
represents a banks ability to provide sufficient cash flows or cash resources
in a manner that enables it to meet obligations in a timely fashion and
adequately provides for anticipated future cash needs. For the Bank, liquidity considerations
involve the capacity to meet expected and potential requirements of depositors
seeking access to balances and to provide for the credit demands of borrowing
customers. In the ordinary course of the
Banks business, funds are generated from the repayment of loans, maturities
within the investment securities portfolio and the acquisition of deposit
balances and short-term borrowings. In
addition, the Bank has a secured borrowing arrangement with the Federal Home
Loan Bank of San Francisco of approximately $61
,747,000, based on twenty five per
cent of the Banks total assets as reported in the most recent quarterly
Consolidated Reports of Condition and Income for a bank with Domestic Offices
Only. The line of credit is subject to pledging of acceptable collateral. Additionally the Bank has unsecured federal
funds lines of credit with Bank of the
West, Pacific Coast Bankers Bank and The Independent Bank of $4,500,000,
$6,000,000 and $5,000,000, respectively; to meet temporary liquidity
requirements. Available borrowing
capacities on March 31, 2008 were $4,500,000, $6,000,000 and $5,000,000,
respectively.
25
As a matter of policy, the Bank seeks to
maintain a level of liquid assets, including marketable investment securities,
equal to a least 15 percent of total assets (total liquidity). Additionally
the Bank maintains secondary sources of liquidity (borrowing lines from other
institutions) equal to at least an additional 10 percent of assets. Within these ratios, the Bank generally has
excess funds available to sell as federal funds on a daily basis, and is able
to fund its own liquidity needs without the need of short-term borrowing. The Banks total liquidity at
March 31, 2008 and 2007
was 32.46% and 24.21%, respectively, while its average loan to deposit ratio
for such years was 97.70% and 102.06%, respectively.
Brokered deposits are
deposit instruments, such as certificates of deposit, deposit notes, bank
investment contracts and certain municipal investment contracts that are issued
through brokers and dealers who then offer and/or sell these deposit
instruments to one or more investors.
Additionally, deposits on which a financial institution pays an interest
rate significantly higher than prevailing rates are considered to be brokered
deposits. Federal law and regulation
restricts banks from soliciting or accepting brokered deposits, unless the bank
is well capitalized under Federal guidelines.
The Bank had no brokered deposits at March 31, 2008 compared with
approximately $3,665,000 or 2.74% of total deposits at
March 31, 2007. None of the Banks brokered deposits paid an
interest rate significantly higher than prevailing rates.
Interest
Rate Risk
Management of interest rate sensitivity
(asset/liability management) involves matching and repricing rates of
interest-earning assets with interest-bearing liabilities in a manner designed
to optimize net interest income within the constraints imposed by regulatory
authorities, liquidity determinations and capital considerations. The Bank instituted formal asset/liability
policies at the end of 1989.
The purpose for
asset/liability management is to provide stable net interest income growth by
protecting the Banks earnings from undue interest rate risk. The Bank expects to generate earnings from
increasing loan volume, appropriate loan pricing and expense control and not
from trying to accurately forecast interest rates. Another important function of asset/liability
management is managing the risk/return relationships between interest rate
risk, liquidity, market risk and capital adequacy. The Bank gives priority to liquidity concerns
followed by capital adequacy, then interest rate risk and market risk in the
investment portfolio. The policy of the
Bank will be to control the exposure of the Banks earnings to changing
interest rates by generally maintaining a position within a narrow range around
an earnings neutral position. An earnings neutral position is defined as the
mix of assets and liabilities that generate a net interest margin that is not
affected by interest rate changes.
However, Management does not believe that the Bank can maintain a
totally earnings neutral position.
Further, the actual timing of repricing of assets and liabilities does
not always correspond to the timing assumed by the Bank for analytical
purposes. Therefore, changes in market
rates of interest will generally impact on the Banks net interest income and
net interest margin for long or short periods of time.
The
Bank monitors its interest rate risk on a quarterly basis through the use of a
model which calculates the effect on earnings of changes in the fed funds
rate. The model converts a fed funds
rate change into rate changes for each major class of asset and liability, then
simulates the banks net interest margin based on the banks actual repricing
over a one year period, assuming that maturities are reinvested in instruments
identical to those maturing during the
26
period. The following table shows the affect on net
interest income of an upward or downward 100 and a 200 basis point rate shocks
at March 31, 2008.
Rate Shock
Increase(Decrease) in Basis Points
|
|
Percent
Increase(Decrease) in Net
Interest Income
|
|
Asset/Liability Policy Limits
for Increase(Decrease) in Net
Interest Income
|
|
100
|
|
5.5
|
%
|
10.0
|
%
|
(100)
|
|
(6.1
|
)%
|
(10.0
|
)%
|
200
|
|
11.0
|
%
|
20.0
|
%
|
(200)
|
|
(12.2
|
)%
|
(20.0
|
)%
|
Investment
Securities
The Corporation maintains a trading account, at fair value, consisting of marketable securities. At March 31, 2008 and 2007 the account value was $986,000 and $1,925,000, respectively. The Corporation has investments of $20,000 in AT Service LLC, which provides title insurance services for commercial, industrial and residential properties, as well as other real estate related financial and informational services, including escrow, real estate information, trustee sale guarantees and real estate tax exchanges, and $10,000 in Metrocities Mortgage, LLC. In addition the Corporation has investments in Northern California Bancorp Trust I of $93,000 and Northern California Bancorp Trust II of $155,000. These are special-purpose trust subsidiaries which were formed to facilitate the issuance of trust preferred securities.
The
following table sets forth the book and market value of the investment
securities at March 31, 2008:
|
|
INVESTMENT PORTFOLIO MIX
MARCH 31, 2008
|
|
|
|
Book Value
|
|
Market Value
|
|
Securities
Available for Sale
|
|
|
|
|
|
State/Local
Agency Bonds
|
|
$
|
8,996
|
|
$
|
8,686
|
|
U.S. Government
Agency Securities
|
|
54,296
|
|
54,280
|
|
Total
|
|
$
|
63,292
|
|
$
|
62,966
|
|
|
|
|
|
|
|
Held to Maturity
|
|
|
|
|
|
State/Local
Agency Bonds
|
|
$
|
7,866
|
|
$
|
8,112
|
|
|
|
|
|
|
|
Other
Investments, at cost
|
|
|
|
|
|
AT Services LLC
|
|
$
|
20
|
|
$
|
20
|
|
Metrocities
Mortgage, LLC
|
|
10
|
|
10
|
|
Federal Home
Loan Bank stock, restricted
|
|
2,689
|
|
2,689
|
|
Northern
California Bancorp, Inc. Trust I
|
|
93
|
|
93
|
|
Northern
California Bancorp, Inc. Trust II
|
|
155
|
|
155
|
|
Independent
Bankers Financial Corporation
|
|
51
|
|
50
|
|
Visa, Inc.
Stock
|
|
426
|
|
426
|
|
|
|
$
|
3,444
|
|
$
|
3,444
|
|
27
The following
table summarizes the maturity of the investment securities at
March 31, 2008:
INVESTMENT
PORTFOLIO MATURITIES
(Dollars
in thousands)
|
|
Amortized Cost
|
|
Fair Value
|
|
Available for
Sale
|
|
|
|
|
|
Due between ten
and fifteen years
|
|
$
|
49,611
|
|
$
|
49,618
|
|
Due over fifteen
years
|
|
13,681
|
|
13,348
|
|
|
|
$
|
63,292
|
|
$
|
62,966
|
|
|
|
|
|
|
|
Held to Maturity
|
|
|
|
|
|
Due between ten
and fifteen years
|
|
$
|
870
|
|
$
|
882
|
|
Due in over
fifteen years
|
|
6,996
|
|
7,230
|
|
|
|
$
|
7,866
|
|
$
|
8,112
|
|
Item 3. Controls and Procedures
(a)
The Banks Chief Executive Officer and its
Chief Financial Officer, after evaluating the effectiveness of the Banks
disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) promulgated
under the Exchange Act as of the end of the period covered by this report (the Evaluation
Date) have concluded that as of the Evaluation Date, the Banks disclosure
controls and procedures were adequate and effective to ensure that material
information relating to the Bank would be made known to them by others within
the Bank, particularly during the period in which this report was being
prepared. Disclosure controls and
procedures are designed to ensure that information required to be disclosed by
us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commissions rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file under the Exchange
Act is accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate to allow timely
decisions regarding required disclosure.
(b) Changes
in Internal Controls: In the quarter
ended
March 31,
2008
, the Company did not make any
significant changes in, nor take any corrective actions regarding, its internal
controls or other factor that could significantly affect these controls.
28
PART II-OTHER
INFORMATION
Item
1. Legal Proceedings.
There are no known pending legal proceedings to which the Corporation or its subsidiary is a party, or to which any of their properties is subject, other than ordinary litigation arising in the normal course of business activities. Although the amount of any ultimate liability with respect to such proceedings cannot be determined, in the opinion of management, any such liability will not have a material effect on the consolidated financial position of the Corporation and its subsidiary.
Item
2. Unregistered Sales of Equity
Securities and Use of Proceeds
None
Item
3. Defaults of Senior Securities
None
Item 4. Submission of Matters to a Vote of Security
Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
A.
EXHIBITS
10 (ii) A(1)
|
|
Employment Contract of
Charles T. Chrietzberg, Jr., dated January 1, 2008
|
|
|
|
31.1
|
|
Certification of the Chief Executive Officer of
Northern California Bancorp, Inc. pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
|
|
|
|
31.2
|
|
Certification of the Chief Financial Officer of Northern California
Bancorp, Inc. pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
32.1
|
|
Certification of the Chief Executive Officer of Northern California
Bancorp, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
32.2
|
|
Certification of the Chief Financial Officer of Northern California
Bancorp, Inc. pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
B.
Reports
on Form 8-K
None
29
In accordance with the
requirements of the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
|
NORTHERN CALIFORNIA
BANCORP, INC.
|
|
|
|
Date: May 13, 2008
|
By:
|
/s/ Charles
T. Chrietzberg, Jr.
|
|
|
Charles
T. Chrietzberg, Jr.
|
|
|
Chairman
of the Board &
|
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
Date: May 13, 2008
|
By:
|
/s/ Bruce
N. Warner
|
|
|
Bruce
N. Warner
|
|
|
Chief
Financial Officer and
|
|
|
Principal
Accounting Officer
|
30
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