SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
     ACT OF 1934 FOR THE QUARTER PERIOD ENDED SEPTEMBER 30, 2004

Commission File No.  0-31080

                                NORTH BAY BANCORP
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

             California                                 68-0434802
----------------------------------------    ------------------------------------
(State or Jurisdiction of incorporation)    (I.R.S. Employer Identification No.)

              1190 Airport Road, Suite 101, Napa, California 94558
           ----------------------------------------------------------
           (Address of principal executive office including Zip Code)


Registrant's telephone number, including area code:  (707) 252-5026

Securities registered pursuant to Section 12(b) of the Act: NONE

Securities registered pursuant to Section 12(g) of the Act:

                           Common Stock, No Par Value
                           --------------------------

                         Preferred Share Purchase Rights
                         -------------------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.

                      Yes   X                         No
                          -----                          -----

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act).

                      Yes                             No   X
                          -----                          -----


                      APPLICABLE ONLY TO CORPORATE ISSUERS:


Indicate  the number of shares  outstanding  of the North Bay  Bancorp's  Common
Stock outstanding as of November 11, 2004: 2,427,688


<PAGE>



                                     Part 1.
                              FINANCIAL INFORMATION

FORWARD LOOKING STATEMENTS
--------------------------
In  addition to the  historical  information,  this  Quarterly  Report  contains
certain  forward-looking  information  within the  meaning of Section 27A of the
Securities Act of 1933, as amended and Section 321E of the  Securities  Exchange
Act of 1934, as amended,  and are subject to the "Safe Harbor"  created by those
Sections.  The reader of this Quarterly  Report should  understand that all such
forward-looking  statements are subject to various  uncertainties and risks that
could affect their outcome. The Company's actual results could differ materially
from those  suggested  by such  forward-looking  statements.  Factors that could
cause or contribute  to such  differences  include,  but are not limited to, (i)
variances in the actual  versus  projected  growth in assets,  return on assets,
loan  losses,  expenses,  rates  charged  on  loans  and  earned  on  securities
investments,  rates  paid on  deposits,  and fee and  other  noninterest  income
earned;  (ii)  competitive   pressures  among  depository  and  other  financial
institutions may increase significantly and have an effect on pricing, spending,
third-party  relationships and revenues;  (iii) enactment of adverse  government
regulations;  (iv)  adverse  conditions  and  volatility,  as a result of recent
economic uncertainty created by the United States' war on terrorism,  the war in
Iraq, in the stock market,  the public debt market and other capital markets and
the impact of such  conditions  of the  Company;  (v)  continued  changes in the
interest rate  environment may reduce interest  margins and adversely impact net
interest  income;  (vi) as well as other factors.  This entire  Quarterly Report
should be read to put such  forward-looking  statements in context and to gain a
more  complete  understanding  of the  uncertainties  and risks  involved in the
Company's business.

Moreover,  wherever phrases such as or similar to "In Management's  opinion", or
"Management  considers" are used,  such  statements are as of and based upon the
knowledge  of  Management  at the time  made and are  subject  to  change by the
passage of time and/or  subsequent  events,  and accordingly such statements are
subject  to the same  risks  and  uncertainties  noted  above  with  respect  to
forward-looking statements.

FINANCIAL INFORMATION
---------------------
The  information  for the three months and nine months ended  September 30, 2004
and September 30, 2003 is unaudited,  but in the opinion of management  reflects
all adjustments which are necessary to present fairly the financial condition of
North Bay Bancorp (Company) at September 30, 2004 and September 30, 2003 and the
results of  operations  and cash flows for the three and nine months then ended.
Results for interim  periods  should not be  considered as indicative of results
for a full year.


                                       2
<PAGE>

                                     Item 1.
                              FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                     North Bay Bancorp
                                                                                                Consolidated Balance Sheets
                                                                                                        (Unaudited)
                                                                                                (In 000's except share data)

                                                                                          September 30,  September 30,  December 31,
Assets                                                                                        2004            2003            2003
                                                                                            --------        --------        --------
<S>                                                                                         <C>             <C>             <C>
Cash and due from banks                                                                     $ 42,626        $ 34,777        $ 28,756
Federal funds sold                                                                            15,585          21,750           9,195
                                                                                            --------        --------        --------
                     Total cash and cash equivalents                                          58,211          56,527          37,951

Time deposits with other financial institutions                                                  100             100             100

Investment Securities:
   Held-to-maturity                                                                                0           1,250               0
   Available-for-sale                                                                         92,617          83,177          90,655
   Equity securities                                                                           2,554           1,349           1,351
                                                                                            --------        --------        --------
                     Total investment securities                                              95,171          85,776          92,006

Loans, net of allowance for loan losses of $4,040 in September, 2004
   $3,421 in September, 2003 and $3,524 in December, 2003                                    354,403         274,491         303,139
Loans held-for-sale                                                                           20,232          10,786           3,095
Investment in subsidiary                                                                         310               0               0
Bank premises and equipment, net                                                              10,657          11,137          10,909
Accrued interest receivable and other assets                                                  13,415          12,499          12,282
                                                                                            --------        --------        --------
                            Total assets                                                    $552,499        $451,316        $459,482
                                                                                            ========        ========        ========

Liabilities and Shareholders' Equity

Deposits:
   Non-interest bearing                                                                     $127,768        $104,594        $103,401
   Interest bearing                                                                          349,024         294,827         303,044
                                                                                            --------        --------        --------
                           Total deposits                                                    476,792         399,421         406,445


Subordinated debentures                                                                       10,310          10,000          10,000
Long Term Borrowings                                                                          19,000               0               0
Accrued interest payable and other liabilities                                                 3,667           3,836           3,596
                                                                                            --------        --------        --------
                          Total liabilities                                                  509,769         413,257         420,041


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 - 2,426,762 shares in September, 2004,
   2,285,646 shares in September, 2003, and 2,285,646 in December, 2003                       33,459          29,209          29,210
Retained earnings                                                                              8,934           8,324           9,623
Accumulated other comprehensive income                                                           337             526             608
                                                                                            --------        --------        --------
                     Total shareholders' equity                                               42,730          38,059          39,441
                                                                                            --------        --------        --------

             Total liabilities and shareholders' equity                                     $552,499        $451,316        $459,482
                                                                                            ========        ========        ========

<FN>
The accompanying notes are an integral part of these statements
</FN>
</TABLE>

                                       3
<PAGE>
<TABLE>
<CAPTION>
                                                                                         North Bay Bancorp
                                                                                 Consolidated Income Statements
                                                                                           (Unaudited)
                                                                                  (In 000's except share data)

                                                                      Three Months Ended                 Nine months Ended
                                                                 ------------------------------     ------------------------------
                                                                 September 30,    September 30,     September 30,    September 30,
                                                                      2004             2003             2004             2003
                                                                    -------          -------          -------          -------
<S>                                                                 <C>              <C>              <C>              <C>
Interest Income
   Loans (including fees)                                           $ 5,865          $ 4,853          $16,515          $13,780
   Federal funds sold                                                    39               38              139              157
   Investment securities - taxable                                      805              482            2,117            1,999
   Investment securities - tax exempt                                   113              181              409              473
                                                                    -------          -------          -------          -------
Total interest income                                                 6,822            5,554           19,180           16,409

Interest Expense
   Deposits                                                             677              550            1,845            1,907
   Short term borrowings                                                  0                2                1               10
   Long term debt                                                       284              129              662              411
                                                                    -------          -------          -------          -------
Total interest expense                                                  961              681            2,508            2,328
                                                                    -------          -------          -------          -------

Net interest income                                                   5,861            4,873           16,672           14,081

Provision for loan losses                                               180               45              540              135
                                                                    -------          -------          -------          -------
Net interest income after
   provision for loan losses                                          5,681            4,828           16,132           13,946

Non interest income                                                     986              848            2,967            2,285
Gains on securities transactions, net                                     0              207              262              637
                                                                    -------          -------          -------          -------
Total non interest income                                               986            1,055            3,229            2,922

Non interest expenses
   Salaries and employee benefits                                     2,566            2,338            7,633            6,896
   Occupancy                                                            369              356            1,080              931
   Equipment                                                            502              485            1,509            1,230
   Other                                                              1,230            1,088            3,613            3,536
                                                                    -------          -------          -------          -------
Total non interest expense                                            4,667            4,267           13,835           12,593
                                                                    -------          -------          -------          -------

Income before provision for
   Income taxes                                                       2,000            1,616            5,526            4,275

Provision for income taxes                                              750              452            2,034            1,204
                                                                    -------          -------          -------          -------

Net income                                                          $ 1,250          $ 1,164          $ 3,492          $ 3,071
                                                                    =======          =======          =======          =======

Basic earnings per common share:                                    $  0.52          $  0.49          $  1.45          $  1.29
                                                                    =======          =======          =======          =======
Diluted earnings per common share:                                  $  0.50          $  0.48          $  1.40          $  1.26
                                                                    =======          =======          =======          =======
Dividends paid:                                                     $  0.00          $  0.00          $  0.20          $  0.20
                                                                    =======          =======          =======          =======

<FN>
The accompanying notes are an integral part of these statements
</FN>
</TABLE>

                                       4
<PAGE>
<TABLE>
<CAPTION>
                                                                                    North Bay Bancorp
                                                                 Consolidated Statement of Change in Shareholders' Equity
                                                                                For the Nine months Ended
                                                                                   September 30, 2004
                                                                                       (Unaudited)
                                                                             (In 000's except share data)

                                                                                          Accumulated
                                                                                             Other         Total
                                                       Common Shares  Common   Retained  Comprehensive  Shareholders'  Comprehensive
                                                        Outstanding    Stock   Earnings  Income (loss)     Equity         Income
                                                       ----------------------------------------------------------------------------
<S>                                                      <C>          <C>        <C>          <C>         <C>              <C>
BALANCE, DECEMBER 31, 2003                               2,285,646    $29,210    $9,623       $608        $39,441

Stock dividend                                             113,997      3,706    (3,723)                      (17)
Cash dividend                                                                      (458)                     (458)
Comprehensive income:
    Net income                                                                    3,492                     3,492           $3,492
    Other comprehensive loss, net of tax:
       Change in net unrealized losses on
       available-for-sale securities, net of
       tax of $193                                                                            (271)          (271)            (271)
                                                                                                                            ------
Comprehensive income                                                                                                        $3,221
                                                                                                                            ======
Stock options exercised, including tax of $65               27,119        543                                 543
                                                         ---------    -------                             -------

BALANCE, SEPTEMBER 30, 2004                              2,426,762    $33,459    $8,934       $337        $42,730
                                                         =========    =======    ======       ====        =======

<FN>
The accompanying notes are an integral part of these statements
</FN>
</TABLE>

                                       5
<PAGE>
<TABLE>
<CAPTION>
                                     North Bay Bancorp
                           Consolidated Statement of Cash Flows
                                       (Unaudited )
                                        (In 000's)
                                                                     Nine months Ended
                                                                       September 30,
                                                                     2004         2003
                                                                  ---------    ---------
<S>                                                               <C>          <C>
Cash Flows From Operating Activities:
Net income                                                        $   3,492    $   3,071
Adjustment to reconcile net income to net cash
  used by operating activities:
  Depreciation and amortization                                       1,212        1,171
  Provision for loan losses                                             540          135
  Amortization of deferred loan fees                                   (442)        (498)
  Proceeds from sale of loans held-for-sale                         182,777      269,120
  Purchase of loans held-for-sale                                  (199,914)    (279,906)
  Premium amortization (discount accretion), net                        199          919
  Gain on securities transactions                                      (262)        (637)
   Changes in:
    Interest receivable and other assets                               (940)        (101)
    Interest payable and other liabilities                              136          784
                                                                  ---------    ---------
   Net cash used by operating activities                            (13,202)      (5,942)
Cash Flows From Investing Activities:
Investment securities held-to-maturity:
  Proceeds from maturities and principal payments                         0           22
Investment securities available-for-sale:
  Proceeds from maturities and principal payments                    30,226       28,558
  Proceeds from sale of securities                                    4,322       34,626
  Purchases                                                         (36,911)     (43,569)
Equity securities:
  Proceeds from sale of securities                                        0           50
  Purchases                                                          (1,203)         (50)
Net increase in loans                                               (51,362)     (39,791)
Capital expenditures                                                   (960)      (1,508)
                                                                  ---------    ---------
   Net cash used in investing activities                            (55,888)     (21,662)
Cash Flows From Financing Activities:
Net increase in deposits                                             70,347       31,618
Increase in long-term borrowings                                     19,000            0
Stock options exercised                                                 478          644
Dividends paid                                                         (475)        (441)
                                                                  ---------    ---------
   Net cash provided by financing activities                         89,350       31,821
                                                                  ---------    ---------
Net increase in cash and cash equivalents                            20,260        4,217
Cash and cash equivalents at beginning of year                       37,951       52,310
                                                                  ---------    ---------
Cash and cash equivalents at end of period                        $  58,211    $  56,527
                                                                  =========    =========
Supplemental Disclosures of Cash Flow Information:
  Interest paid                                                   $   2,299    $   2,394
  Taxes paid                                                      $   2,860    $     845

<FN>
The accompanying notes are an integral part of these statements
</FN>
</TABLE>

                                       6
<PAGE>
                               NORTH BAY BANCORP
                 Notes to the Consolidated Financial Statements
                                   (Unaudited)
                               September 30, 2004


NOTE 1 - Basis of Presentation
------------------------------
The accompanying  consolidated financial statements,  which include the accounts
of North Bay Bancorp and its  subsidiaries  together  the  "Company",  have been
prepared  pursuant to the rules and  regulations  of the Securities and Exchange
Commission and in Management's opinion, include all adjustments (consisting only
of normal recurring  adjustments)  necessary for a fair  presentation of results
for such interim periods.  The subsidiaries  consist of two community banks, The
Vintage Bank,  established  in 1985,  and Solano Bank,  which opened in 2000 and
Vintage  Capital Trust, a subsidiary of The Vintage Bank,  which was established
in February 2003. North Bay has received  regulatory approval to consolidate its
subsidiary banks to simplify the Company's  corporate  structure.  The Merger of
Solano Bank into The Vintage Bank is expected to occur during the first  quarter
of 2005.  All  significant  intercompany  transactions  and  balances  have been
eliminated.  The Company  de-consolidated  its  subsidiary,  North Bay Statutory
Trust 1,  effective  March 31,  2004.  The Trust  has no  independent  assets or
operations  and exists  solely for the  purpose of  issuing  and  selling  trust
preferred securities.

Certain  information and note disclosures  normally included in annual financial
statements prepared in accordance with generally accepted accounting  principles
have been omitted  pursuant to SEC rules or  regulations;  however,  the Company
believes  that  the  disclosures  made  are  adequate  to make  the  information
presented  not  misleading.  The interim  results for the three  months and nine
months ended  September  30, 2004 and 2003,  are not  necessarily  indicative of
results for the full year. It is suggested  that these  financial  statements be
read in conjunction with the financial  statements and the notes included in the
Company's Annual Report for the year ended December 31, 2003.


NOTE 2 - Commitments
--------------------
The  Company  has  outstanding   standby  Letters  of  Credit  of  approximately
$2,221,000,  undisbursed  real estate and  construction  loans of  approximately
$24,123,000,  and  undisbursed  commercial  and  consumer  lines  of  credit  of
approximately $82,961,000, as of September 30, 2004. The Company had outstanding
standby Letters of Credit of approximately $927,000, undisbursed real estate and
construction loans of approximately $21,310,000,  and undisbursed commercial and
consumer lines of credit of approximately $70,610,000, as of September 30, 2003.


NOTE 3 - Earnings Per Common Share
----------------------------------
The Company declared a 5% stock dividend on January 26, 2004. As a result of the
stock  dividend the number of common shares  outstanding  and earnings per share
data was adjusted retroactively for all periods presented in the table below.

The following  table  reconciles the numerator and  denominator of the Basic and
Diluted earnings per share computations:
<TABLE>
<CAPTION>

                                                        Weighted Average          Per-Share
                                          Net Income         Shares                 Amount
                                          ----------         ------                 ------
                                                        (Dollars in 000's except share data)

                        For the three months ended September 30, 2004
                        ---------------------------------------------
<S>                                  <C>                    <C>                     <C>
  Basic earnings per share           $1,250                 2,425,772               $0.52
  Dilutive effect of stock options                             65,690
                                                            ---------
  Diluted earnings per share                                2,491,462               $0.50
                                                            ---------

                        For the three months ended September 30, 2003
                        ---------------------------------------------
  Basic earnings per share           $1,164                 2,399,102               $0.49
  Dilutive effect of stock options                             43,272
                                                            ---------
  Diluted earnings per share                                2,442,374               $0.48

                         For the nine months ended September 30, 2004
                         --------------------------------------------
  Basic earnings per share           $3,492                 2,410,739               $1.45
  Dilutive effect of stock options                             75,231
                                                            ---------
  Diluted earnings per share                                2,485,970               $1.40

                         For the nine months ended September 30, 2003
                         --------------------------------------------
  Basic earnings per share           $3,071                 2,376,083               $1.29
  Dilutive effect of stock options                             57,416
                                                            ---------
  Diluted earnings per share                                2,433,499               $1.26
</TABLE>

                                       7
<PAGE>

NOTE 4- Stock-Based Compensation
--------------------------------
The Company  uses the  intrinsic  value  method to account for its stock  option
plans (in accordance with the provisions of Accounting  Principles Board Opinion
No. 25 and related interpretations).  Under this method, compensation expense is
recognized for awards of options to purchase shares of common stock to employees
under  compensatory  plans  only if the fair  market  value of the  stock at the
option  grant date (or other  measurement  date,  if later) is greater  than the
amount the  employee  must pay to  acquire  the stock.  Statement  of  Financial
Accounting   Standards  No.  123  (SFAS  123),   "Accounting   for   Stock-Based
Compensation", permits companies to continue using the intrinsic-value method to
account  for stock  option  plans or adopt a fair value based  method.  The fair
value based method results in recognizing as expense over the vesting period the
fair  value of all  stock-based  awards on the date of grant.  The  Company  has
elected  to  continue  to use the  intrinsic  value  method  and  the pro  forma
disclosures  required by SFAS 123. Using the fair value method the Company's net
income and earnings per share  amounts  would have been reduced to the pro forma
amounts as indicated below:

<TABLE>
<CAPTION>
                                                       (In 000's except share data)
                                                 For the three months ended September 30,
                                                           2004           2003
                                                        ---------      ---------
<S>                                                     <C>            <C>
Net income as reported                                  $   1,250      $   1,164
Total stock-based employee
   compensation
   expense determined under
   the fair value based method
   for all awards, net of related
   tax effects                                                 83             75
                                                        ---------      ---------
Net income pro forma                                    $   1,167      $   1,089
                                                        =========      =========
Earnings per share:
      As reported:
Basic                                                   $     .52      $     .49
Diluted                                                 $     .50      $     .48
      Pro forma:
Basic                                                   $     .48      $     .45
Diluted                                                 $     .47      $     .45
</TABLE>

<TABLE>
<CAPTION>
                                                      (In 000's except share data)
                                                For the nine months ended September 30,
                                                           2004           2003
                                                        ---------      ---------
<S>                                                     <C>            <C>
Net income as reported                                  $   3,492      $   3,071
Total stock-based employee
   compensation
   expense determined under
   the fair value based method
   for all awards, net of related
   tax effects                                                249            197
                                                        ---------      ---------
Net income pro forma                                    $   3,243      $   2,874
                                                        =========      =========
Earnings per share:
      As reported:
Basic                                                   $    1.45      $    1.29
Diluted                                                 $    1.40      $    1.26
      Pro forma:
Basic                                                   $    1.35      $    1.21
Diluted                                                 $    1.30      $    1.18
</TABLE>


NOTE 5 - Impact of Recently Issued Accounting Standards
-------------------------------------------------------
In January 2003,  the Financial  Accounting  Standards  Board (FASB) issued FASB
Interpretation  No.  46  "Consolidation  of  Variable  Interest   Entities,   an
interpretation  of ARB No. 51" (FIN 46).  FIN 46  provides a new  framework  for
identifying  variable  interest  entities (VIEs) and determining  when a company
should include the assets, liabilities,  noncontrolling interests and results of
activities  of a VIE in its  consolidated  financial  statements.  Prior  to the
implementation  of FIN 46, VIEs were generally  consolidated by the company when
the  company had a  controlling  financial  interest  through  ownership  of the
majority of the voting  interest in the company.  The  provisions of FIN 46 were
effective  immediately.  In October 2003, the FASB agreed to defer the effective
date of FIN 46 for VIEs to allow time for  certain  implementation  issues to be
addressed.  On December 24, 2003,  the FASB  released its latest  interpretation
(FIN 46R) of the  appropriate  accounting  treatment  for  VIEs,  which in part,
specifically  addresses  limited  purpose trusts formed to issue trust preferred
securities. In July 2003, the Board of Governors of the Federal Reserve issued a
supervisory letter instructing bank holding companies to continue to include the
trust  preferred  securities  in their  Tier 1 capital  for  regulatory  capital
purposes until notice is given to the contrary.  The Federal  Reserve intends to
review the regulatory  implications of any accounting  treatment changes and, if
necessary or warranted,  provide further appropriate  guidance.  There can be no
assurance  that the  Federal  Reserve  will  continue to allow  institutions  to
include trust preferred securities in Tier 1 capital for regulatory purposes. If


                                       8
<PAGE>

the trust  preferred  securities were no longer allowed to be included in Tier 1
capital,  the Company  would also be permitted to redeem the capital  securities
without penalty.


The Company  adopted FIN 46R  effective  March 31,  2004,  and the effect was to
de-consolidate  the subsidiary trust,  North Bay Statutory Trust 1, and move the
mandatory redeemable preferred securities directly to the parent company balance
sheet under the caption  "subordinated  debentures".  The Company  prospectively
applied this ruling in the accompanying financial information.



NOTE 6 - Borrowings
-------------------
Total  borrowings  were  $19  million  at  September  30,  2004.  There  were no
borrowings at September 30, 2003. The following table summarizes the borrowings:

<TABLE>
<CAPTION>
                   Fixed Rate Borrowings at September 30, 2004
                                  ($ in 000's)
                                                           Amount       Maturity Date       Interest Rate
                                                           ------       -------------       -------------
<S>                                                       <C>             <C>  <C>              <C>
Federal Home Loan Bank Advance                            $ 5,000         4-17-2006             2.24%
Federal Home Loan Bank Advance                              5,000         4-16-2007             2.83%
Federal Home Loan Bank Advance                              9,000         4-14-2008             3.23%
                                                          -------
Total                                                     $19,000
Weighted average interest rate                                                                  2.86%
</TABLE>

                                       9
<PAGE>

                                     Item 2.

         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS

FORWARD LOOKING STATEMENTS
--------------------------
In addition to the historical information this Quarterly Report contains certain
forward-looking   statements.   The  reader  of  this  Quarterly  Report  should
understand  that all such  forward-looking  statements  are  subject  to various
uncertainties  and risks that could affect their outcome.  The Company's  actual
results could differ  materially  from those  suggested by such  forward-looking
statements.  Factors that could cause or contribute to such differences include,
but are not limited  to,  variances  in the actual  versus  projected  growth in
assets,  return on assets,  loan losses,  expenses,  rates  charged on loans and
earned on securities investments,  rates paid on deposits,  competition effects,
fee and other noninterest income earned, the economic uncertainty created by the
United  States' war on terrorism and the war in Iraq, as well as other  factors.
This  entire  Quarterly  Report  should  be  read  to put  such  forward-looking
statements  in  context  and  to  gain  a  more  complete  understanding  of the
uncertainties and risks involved in the Company's business.

Moreover,  wherever  phrases  such as or  similar to "In  Management's  opinion"
"Management  considers" are used,  such  statements are as of and based upon the
knowledge  of  Management  at the time  made and are  subject  to  change by the
passage of time and/or  subsequent  events,  and accordingly such statements are
subject  to the same  risks  and  uncertainties  noted  above  with  respect  to
forward-looking statements.

CRITICAL ACCOUNTING POLICIES
----------------------------
The  Company's  accounting  policies are integral to  understanding  the results
reported.  The most complex accounting policies require management's judgment to
ascertain the valuation of assets,  liabilities,  commitments and contingencies.
The Company has established  detailed  policies and control  procedures that are
intended  to  ensure   valuation   methods  are  well   controlled  and  applied
consistently from period to period. In addition, the policies and procedures are
intended  to ensure that the process  for  changing  methodologies  occurs in an
appropriate  manner.  The  following  is a  brief  description  of  our  current
accounting policies involving significant management valuation judgments.

Allowance for Loan  Losses.
The allowance for loan losses  represents  management's  best estimate of losses
inherent  in the  existing  loan  portfolio.  The  allowance  for loan losses is
increased  by the  provision  for loan losses  charged to expense and reduced by
loans charged-off, net of recoveries.

We evaluate our allowance for loan loss on a monthly basis.  We believe that the
allowance for loan loss is a "critical  accounting estimate" because it is based
upon management's  assessment of various factors affecting the collectibility of
the loans,  including  current and projected  economic  conditions,  past credit
experience,  delinquency status, the value of the underlying collateral, if any,
and a continuing review of the portfolio of loans and commitments.

We determine the appropriate  level of the allowance for loan losses,  primarily
on an analysis of the various  components of the loan  portfolio,  including all
significant  credits on an individual basis. We segment the loan portfolios into
as many  components as practical.  Each  component  would  normally have similar
characteristics,  such as risk  classification,  past due status,  type of loan,
industry or collateral.

Management  has an  established  methodology  for  calculating  the level of the
allowance for loan losses. We analyze the following  components of the portfolio
and provide for them in the allowance for loan losses:

Specific allowances defined as:
     o    Management assessment of all loans classified as substandard or worse,
          with an outstanding balance of $100,000 or more
     o    A specific  allowance  is provided  for any amount by which the loan's
          collateral   fair  value  is   insufficient  to  cover  the  loan;  or
          discounting  estimated  further cash flows, or by observing the loan's
          market price if it is of a kind for which there is a secondary market

General allowance defined as:
     o    An allowance  for all loans  outstanding  within the portfolio and not
          contained in the specific allowances

Judgmental allowance defined as:
     o    National and local economic trends and conditions
     o    Trends in volume of loans
     o    Changes in underwriting standards and/or lending personnel
     o    Concentrations of credit within the portfolio

No assurance can be given that the Company will not sustain loan losses that are
sizable in relation to the amount  provided,  or that subsequent  evaluations of
the loan  portfolio  will not require an increase in the  allowance.  Prevailing
factors  in  association  with  the  methodology  may  include   improvement  or
deterioration  of  individual  commitments  or pools of similar  loans,  or loan
concentrations.


Available for Sale Securities.
SFAS 115 requires that  Available for Sale  securities be carried at fair value.
We believe this is a "critical  accounting estimate" in that the fair value of a
security is based on quoted  market  prices or if quoted  market  prices are not
available,  fair  values  are  extrapolated  from the  quoted  prices of similar
instruments.  Adjustments to the Available for Sale securities fair value impact
the  consolidated  financial  statements by increasing or decreasing  assets and


                                       10
<PAGE>

shareholders'  equity. A decline in the market value  Investments  classified as
available-for-sale  are reported at fair value with unrealized  gains and losses
net of related  tax,  if any,  reported  as other  comprehensive  income and are
included in shareholders' equity.

A decline  in the market  value of any  available-for-sale  or  held-to-maturity
security below cost that is deemed other than  temporary  results in a charge to
earnings  and  the  corresponding  establishment  of a new  cost  basis  for the
security.  Premiums and discounts are amortized or accreted over the life of the
related  held-to-maturity  or  available-for-sale  security as an  adjustment to
yield using the  effective  interest  method.  Dividend and interest  income are
recognized when earned.  Realized gains and losses for securities  classified as
available-for-sale and held-to-maturity are included in earnings and are derived
using the specific  identification method for determining the cost of securities
sold.

Deferred Tax Assets.
Deferred  income  taxes  reflect the  estimated  future tax effects of temporary
differences  between the reported amount of assets and liabilities for financial
purposes and such amounts as measured by tax laws and  regulations.  We consider
the scheduled  reversal of deferred tax  liabilities,  projected  future taxable
income,  and  amounts  available  in the  carryback  periods,  and tax  planning
strategies  to support our position  that it is more likely than not the benefit
of our deferred tax assets will be realized.

OVERVIEW
--------
Net income was  $1,250,000  or $.50 per diluted share for the three months ended
September 30, 2004,  compared with  $1,164,000 or $.48 per diluted share for the
three  months  ended  September  30,  2003,  an  increase  of 7%. Net income was
$3,492,000 or $.1.40 per diluted  share for the nine months ended  September 30,
2004,  compared  with  $3,071,000 or $1.26 per diluted share for the nine months
ended September 30, 2003, an increase of 14%. Total assets were  $552,499,000 as
of  September  30,  2004;  equating to a 22% growth in assets  during the twelve
months ended September 30, 2004.

SUMMARY OF EARNINGS

NET INTEREST INCOME
-------------------
The following  table  provides a summary of the  components of interest  income,
interest  expense and net interest  margins for the three months ended September
30, 2004 and September 30, 2003:
<TABLE>
<CAPTION>
                                                                   (In 000's)
                                                   2004                                 2003
                                   ----------------------------------     ---------------------------------
                                     Average    Income/     Average        Average     Income/      Average
                                     Balance    Expense    Yield/Rate      Balance     Expense   Yield/Rate
                                   ----------------------------------     ----------------------------------
<S>                                <C>        <C>              <C>        <C>         <C>            <C>
Loans (1) (2)                      $ 369,384  $   5,865        6.35%      $ 294,276   $   4,853      6.60%
Investment securities:
  Taxable                             84,778        804        3.79%         70,601         481      2.73%
  Non-taxable (3)                     12,241        150        4.90%         20,596         254      4.93%
                                   ---------  ---------                   ---------   ---------

TOTAL LOANS AND INVESTMENT
SECURITIES                           466,403      6,819        5.85%        385,473       5,588      5.80%

 Due from banks, time                    100          1        4.00%            100           1      4.00%
 Federal funds sold                   10,551         39        1.48%         11,987          38      1.27%
                                   ---------  ---------                   ---------   ---------

TOTAL EARNING ASSETS                 477,054  $   6,859        5.75%        397,560   $   5,627      5.66%
                                   ---------  ---------                   ---------   ---------

 Cash and due from banks              41,686                                 32,208
 Allowance for loan losses            (3,863)                                (3,405)
 Premises and equipment, net          10,791                                 11,156
 Accrued interest receivable
   and other assets                   13,910                                 12,340
                                   ---------                              ---------

TOTAL ASSETS                       $ 539,578                              $ 449,859
                                   =========                              =========

LIABILITIES AND SHAREHOLDERS'
EQUITY
 Deposits:
   Interest bearing demand         $ 216,747  $     312        0.58%      $ 187,448   $     217      0.46%
   Savings                            44,638         27        0.24%         34,015          17      0.20%
   Time                               78,006        338        1.73%         72,882         316      1.73%
                                   ---------  ---------                   ---------   ---------
                                     339,391        677         .80%        294,345         550       .75%
                                   ---------  ---------                   ---------   ---------

   Short-term debt                         0          0        0.00%              0           2      0.00%
   Long-term debt                     29,000        284        3.92%         10,000         129      5.16%
                                   ---------  ---------                   ---------   ---------
                                      29,000        284                      10,000         131
                                   ---------  ---------                   ---------   ---------

TOTAL INTEREST BEARING
 LIABILITIES                         368,391  $     961        1.04%        304,345   $     681       .90%
                                   ---------  ---------                   ---------   ---------

 Noninterest bearing DDA             125,238                                104,066
 Accrued interest payable
   and other liabilities               4,013                                  3,755
 Shareholders' equity                 41,936                                 37,693
                                   ---------                              ---------

TOTAL LIABILITIES AND
 SHAREHOLDERS' EQUITY              $ 539,578                              $ 449,859
                                   =========                              =========

NET INTEREST INCOME                           $   5,898                              $   4,946
                                              =========                              =========

NET INTEREST INCOME TO
 AVERAGE EARNING ASSETS
(Net Interest Margin (4))                          4.95%                                  4.98%

                                       11
<PAGE>

<FN>
(1) Average loans would include  nonaccrual loans. The Company had no nonaccrual
loans during 2004 or 2003.

(2) Loan interest income includes loan fee income of $237 and $273 for the three
months ended September 30, 2004 and September 30, 2003, respectfully.

(3) Average  yields shown are on a  taxable-equivalent  basis.  On a non-taxable
basis,  2004 interest  income on tax exempt  securities was $113 with an average
yield of 3.69%; in 2003, on a non-taxable  basis,  interest income on tax exempt
securities was $181 with an average yield of 3.52%.  (4) Net interest  margin is
calculated  by dividing  net  interest  income by the  average  balance of total
earning assets for the applicable period.
</FN>
</TABLE>

The following  table  provides a summary of the  components of interest  income,
interest  expense and net interest  margins for the nine months ended  September
30, 2004 and September 30, 2003:

<TABLE>
<CAPTION>
                                                                      (In 000's)
                                                   2004                                   2003
                                  --------------------------------------     ----------------------------------
                                     Average       Income/     Average        Average     Income/     Average
                                     Balance       Expense    Yield/Rate      Balance     Expense    Yield/Rate
                                  --------------------------------------     ----------------------------------
<S>                                 <C>           <C>            <C>         <C>         <C>           <C>
Loans (1) (2)                       $ 342,515     $  16,515      6.43%       $ 269,824   $  13,780     6.81%
Investment securities:
  Taxable                              75,831         2,115      3.72%          80,777       1,997     3.30%
  Non-taxable (3)                      14,261           542      5.07%          15,922         649     5.43%
                                    ---------     ---------                  ---------   ---------

TOTAL LOANS AND INVESTMENT
SECURITIES                            432,607        19,172      5.91%         366,523      16,426     5.98%

 Due from banks, time                     100             2      2.67%             100           2     2.67%
 Federal funds sold                    16,788           139      1.10%          18,542         157     1.13%
                                    ---------     ---------                  ---------   ---------

TOTAL EARNING ASSETS                  449,495     $  19,313      5.73%         385,165   $  16,585     5.74%
                                    ---------     ---------                  ---------   ---------

 Cash and due from banks               35,969                                   26,931
 Allowance for loan losses             (3,720)                                  (3,370)
 Premises and equipment, net           10,784                                   11,166
 Accrued interest receivable
   and other assets                    13,490                                   11,957
                                    ---------                                ---------

TOTAL ASSETS                        $ 506,018                                $ 431,849
                                    ---------                                ---------

LIABILITIES AND SHAREHOLDERS'
EQUITY
 Deposits:
   Interest bearing demand          $ 209,482     $     830      0.53%       $ 170,537   $     688     0.54%
   Savings                             41,016            71      0.23%          31,695          88     0.37%
   Time                                75,193           944      1.67%          78,969       1,131     1.91%
                                    ---------     ---------                  ---------   ---------
                                      325,691         1,845       .76%         281,201       1,907      .90%
                                    ---------     ---------                  ---------   ---------

   Short-term debt                          0             1      0.00%           1,000          10     1.33%
   Long-term debt                      21,422           662      4.12%          10,000         411     5.48%
                                    ---------     ---------                  ---------   ---------
                                       21,422           663                     11,000         421
                                    ---------     ---------                  ---------   ---------

TOTAL INTEREST BEARING
  LIABILITIES                         347,113     $   2,508       .96%         292,201   $   2,328     1.06%
                                    ---------     ---------                  ---------   ---------

 Noninterest bearing DDA              114,304                                   99,073
 Accrued interest payable
   and other liabilities                4,323                                    3,749
 Shareholders' equity                  40,278                                   36,826
                                    ---------                                ---------

TOTAL LIABILITIES AND
 SHAREHOLDERS' EQUITY               $ 506,018                                $ 431,849
                                    =========                                =========

NET INTEREST INCOME                               $  16,805                                $  14,257
                                                  =========                                =========

NET INTEREST INCOME TO
 AVERAGE EARNING ASSETS
(Net Interest Margin (4))                              4.98%                                   4.94%

                                       12
<PAGE>
<FN>
(1) Average loans would include  nonaccrual loans. The Company had no nonaccrual
loans during 2004 or 2003.

(2) Loan interest  income includes loan fee income of $814 and $811 for the nine
months ended September 30, 2004 and September 30, 2003, respectfully.

(3) Average  yields shown are on a  taxable-equivalent  basis.  On a non-taxable
basis,  2004 interest  income on tax exempt  securities was $409 with an average
yield of 3.82%; in 2003, on a non-taxable  basis,  interest income on tax exempt
securities was $473 with an average yield of 3.96%.

(4) Net interest  margin is  calculated  by dividing net interest  income by the
average balance of total earning assets for the applicable period
</FN>
</TABLE>

Net interest  income  represents the amount by which interest  earned on earning
assets (primarily loans and investments)  exceeds the amount of interest paid on
deposits. Net interest income is a function of volume,  interest rates and level
of non-accrual  loans.  Non-refundable  loan  origination  fees are deferred and
amortized into income over the life of the loan.

Net interest income before the provision for loan losses on a taxable-equivalent
basis for the three months ended  September  30, 2004 and September 30, 2003 was
$5,898,000 and $4,946,000,  respectively. These results equate to a 19% increase
in net  interest  income  for the third  quarter of 2004  compared  to the third
quarter of 2003.  Loan fee income,  which is  included  in interest  income from
loans, was $237,000 for the three months ended September 30, 2004, compared with
$273,000 for the three  months ended  September  30, 2003.  Net interest  income
before the provision for loan losses on a taxable-equivalent  basis for the nine
months ended  September  30, 2004 and  September  30, 2003 was  $16,805,000  and
$14,257,000,  respectively.  These  results  equate  to an 18%  increase  in net
interest income for the first nine months of 2004 compared to the same period of
2003.  Loan fee income,  which is included  in interest  income from loans,  was
$814,000 for the nine months ended  September  30, 2004,  compared with $811,000
for the nine months ended September 30, 2003.

Taxable-equivalent  interest  income  increased  $1,232,000  or 22% in the third
quarter of 2004  compared  with the same  period of 2003.  The net  increase  of
$1,232,000  was  attributable  to an  increase  in the volume of earning  assets
accounting  for  $1,227,000  of  this  increase,   and  an  increase  of  $5,000
attributable  to higher  rates.  Interest paid on  interest-bearing  liabilities
increased  $280,000 or 12% in the third  quarter of 2004 compared with the third
quarter of 2003. The increase of $280,000 was attributable to an increase in the
volume  of  deposits  and  other  borrowings  accounting  for  $304,000  of this
increase, offset by a decrease of $24,000 attributable to lower rates.

Taxable-equivalent interest income increased $2,728,000 or 16% in the first nine
months of 2004  compared  with the same  period  of 2003.  The net  increase  of
$2,728,000  was  attributable  to an  increase  in the volume of earning  assets
accounting  for  $3,507,000 of this  increase,  offset by a decrease of $779,000
attributable  to lower  rates.  Interest  paid on  interest-bearing  liabilities
increased  $180,000  in the first  nine  months of 2004  compared  with the same
period  of  2003.  Although  increases  in the  volume  of  deposits  and  other
borrowings  account  for an  increase of $588,000 it was offset by a decrease of
$408,000 attributable to lower rates.

The  average  balance of earning  assets  for the nine  month  period  increased
$64,330,000 or 17% when compared with September 30, 2003 and the average balance
of interest-bearing  liabilities  increased $54,912,000 or 19% compared with the
same  period  in 2003.  Management  does not  expect a  material  change  in the
Company's  net interest  margin during the next twelve months as the result of a
modest increase or decrease in general interest rates.

                                       13
<PAGE>

The following  table sets forth a summary of the changes in interest  earned and
interest paid for the three months ended September 30, 2004 over the same period
of 2003 resulting from changes in assets and liabilities  volumes and rates. The
change in interest due to both rate and volume has been  allocated in proportion
to the relationship of absolute dollar amounts of change in each.

<TABLE>
<CAPTION>
                                                                          (In 000's)
                                                                        2004 Over 2003
                                                         Volume                  Rate                Total
                                                -----------------------------------------------------------
<S>                                                      <C>                    <C>                 <C>
Increase (Decrease) in Interest and Fee Income

   Time deposits with other
    Financial institutions                               $    0                 $   0               $    0
   Investment securities:
     Taxable                                                 97                   226                  323
     Non-taxable (1)                                       (103)                   (1)                (104)
   Federal funds sold                                        (5)                    6                    1
   Loans                                                  1,238                  (226)               1,012
                                                -----------------------------------------------------------
   Total interest and fee income                          1,227                     5                1,232
                                                -----------------------------------------------------------

Increase (Decrease) in Interest Expense

   Deposits:
     Interest bearing
     Transaction accounts                                    34                    61                   95
     Savings                                                  5                     5                   10
     Time deposits                                           22                     0                   22
                                                -----------------------------------------------------------
   Total deposits                                            61                    66                  127

   Short-term borrowings                                     (2)                    0                   (2)
   Long-term debt                                           245                   (90)                 155
                                                -----------------------------------------------------------
   Total Interest Expense                                   304                   (24)                 280
                                                -----------------------------------------------------------
   Net Interest Income                                   $  923                 $  29               $  952
                                                ===========================================================
<FN>
(1) The interest earned is taxable-equivalent.
</FN>
</TABLE>

The following  table sets forth a summary of the changes in interest  earned and
interest paid for the nine months ended  September 30, 2004 over the same period
of 2003 resulting from changes in assets and liabilities  volumes and rates. The
change in interest due to both rate and volume has been  allocated in proportion
to the relationship of absolute dollar amounts of change in each.

<TABLE>
<CAPTION>
                                                                        (In 000's)
                                                                      2004 Over 2003
                                                         Volume                  Rate                Total
                                                -----------------------------------------------------------
<S>                                                      <C>                  <C>                  <C>
Increase (Decrease) in Interest and Fee Income

   Time deposits with other
    Financial institutions                               $    0               $    0               $    0
   Investment securities:
     Taxable                                               (122)                 240                  118
     Non-taxable (1)                                        (68)                 (39)                (107)
   Federal funds sold                                       (15)                  (3)                 (18)
   Loans                                                  3,712                 (977)               2,735
                                                -----------------------------------------------------------
   Total interest and fee income                          3,507                 (779)               2,728
                                                -----------------------------------------------------------

Increase (Decrease) in Interest Expense

   Deposits:
     Interest bearing
     Transaction accounts                                   157                  (15)                  142
     Savings                                                 26                  (43)                  (17)
     Time deposits                                          (54)                (133)                 (187)
                                                -----------------------------------------------------------
   Total deposits                                           129                  (191)                 (62)

   Short-term borrowings                                    (10)                   1                    (9)
   Long-term debt                                           469                 (218)                  251
                                                -----------------------------------------------------------
   Total Interest Expense                                   588                 (408)                  180
                                                -----------------------------------------------------------
   Net Interest Income                                   $2,919                ($371)               $2,548
                                                ===========================================================

<FN>
(2) The interest earned is taxable-equivalent.
</FN>
</TABLE>

                                       14
<PAGE>

PROVISION AND ALLOWANCE FOR LOAN LOSSES
---------------------------------------
The  Company  maintains  an  allowance  for loan  losses  at a level  considered
adequate to provide for losses that can be reasonably anticipated. The allowance
is  increased by the  provision  for loan losses and reduced by net charge offs.
The  allowance for loan losses is based on  estimates,  and ultimate  losses may
vary from current  estimates.  These  estimates  are reviewed  periodically.  As
adjustments  become necessary,  they are reported in earnings during the periods
they become known. The Company conducts credit reviews of the loan portfolio and
considers current economic conditions, historical loan loss experience and other
factors in determining  the adequacy of the allowance  balance.  This evaluation
establishes  a specific  allowance  for all  classified  loans over $100,000 and
establishes  percentage allowance requirements for all other loans, according to
the classification as determined by the Company's internal grading system. As of
September 30, 2004 the allowance for loan losses of $4,040,000 represented 1.12%
of loans outstanding.  As of September 30, 2003, the allowance represented 1.23%
of loans outstanding.  During the three months ended September 30, 2004 $180,000
was charged to expense for the loan loss  provision,  compared  with $45,000 for
the same  period in 2003.  During  the nine  months  ended  September  30,  2004
$540,000  was  charged to expense  for the loan loss  provision,  compared  with
$135,000  for the same period in 2003.  The increase in the expense for the loan
loss  provision was to provide for growth in the overall loan  portfolio.  There
were net  charge-offs  of $24,000  during the first nine months of 2004 compared
with $4,000 of net charge-offs during the first nine months of 2003.

The following table summarizes changes in the allowance for loan losses:

<TABLE>
<CAPTION>
                                                                            (In 000's)
                                                                     For the Nine months ended
                                                                   September 30,      September 30,
                                                                       2004              2003
                                                                      ------            ------
<S>                                                                   <C>               <C>
Balance, beginning of period                                          $3,524            $3,290
Provision for loan losses                                                540               135
Loans charged off                                                      (109)              (11)
Recoveries of loans previously charged off                                85                 7
                                                                      ------            ------
Balance, end of period                                                $4,040            $3,421
                                                                      ======            ======

Allowance  for loan  losses  to  total  outstanding loans              1.12%             1.23%
</TABLE>

There were no loans on  non-accrual  status as of September 30, 2004,  September
30, 2003 or December 31, 2003.  There were no loans 90 days or more past due and
still accruing interest or restructured  loans at September 30, 2004,  September
30, 2003 or December 31, 2003.

NON-INTEREST INCOME
-------------------
Non-interest  income,  other than gains on the sale of securities,  was $986,000
for the three months ended  September  30, 2004  compared  with $848,000 for the
same period in 2003, a 16% increase. Non-interest income, excluding gains on the
sale of securities,  was $2,967,000 for the nine months ended September 30, 2004
compared  with  $2,285,000  for  the  same  period  in  2003,  a  30%  increase.
Non-interest income primarily consists of service charges and other fees related
to deposit accounts. The increase in non-interest income resulted primarily from
an increase in the number of deposit accounts,  transaction volumes and directly


                                       15
<PAGE>

related  service  charges.   Service  charges  on  deposit  accounts   increased
proportionately  more than the increase in deposit  balances because of improved
collection  efforts and  implementation  of an overdraft  privilege program that
commenced in the fourth quarter of 2003.

GAINS ON SECURITIES
-------------------
Net gains of $262,000 for the nine months ended September 30, 2004 resulted from
the sale of several  available-for-sale  securities.  There were no gains during
the three months ended  September  30, 2004.  Net gains of $207,000 and $637,000
for the three and nine months  ended  September  30,  2003,  respectively,  also
resulted from the sale of several available-for-sale securities.

NON-INTEREST EXPENSE
--------------------
Non-interest expense for the three months ended September 30, 2004 and September
30,  2003  were  $4,667,000  and  $4,267,000,   respectively,   a  9%  increase.
Non-interest  expense for the nine months ended September 30, 2004 and September
30,  2003  were  $13,835,000  and  $12,593,000,  respectively,  a 10%  increase.
Salaries and employee  benefits expense for the three months ended September 30,
2004 and 2003 were  $2,566,000  and  $2,338,000,  respectively,  a 10% increase.
Salaries and employee  benefits  expense for the nine months ended September 30,
2004 and 2003 were $7,633,000 and $6,896,000, respectively, an 11% increase. The
increase in 2004 resulted from increased  salaries paid to Company  officers and
employees,  and an increase of approximately  eleven full-time  equivalent (FTE)
employees  from 154 at  September  30, 2003 to 165 at September  30,  2004.  The
increases  in FTE were  related to  increasing  sales  activity and staffing new
offices.  Occupancy  expense for the three months ended  September  30, 2004 and
2003 were $369,000 and $356,000,  respectively, a 4% increase. Occupancy expense
for the nine  months  ended  September  30,  2004 and 2003 were  $1,080,000  and
$931,000,  respectively,  representing  a 16% increase.  The increase in 2004 is
attributable  to  opening a branch  and  renting  locations  for  Executive  and
Administration  offices in March 2003 and  opening  our 10th branch in the third
quarter of 2004. Equipment expense for the three months ended September 30, 2004
and 2003 were $502,000 and $485,000,  respectively,  representing an increase of
4%. Equipment expense for the nine months ended September 30, 2004 and 2003 were
$1,509,000 and $1,230,000,  respectively, an increase of 23%. The primary reason
for the  increase  in  equipment  expense  in 2004  compared  with  2003 was the
reversal  of expenses  accrued  during the  pendency of a lawsuit.  The suit was
settled on  September  17,  2003.  Other  expenses  for the three  months  ended
September  30, 2004 and  September  30,  2003 were  $1,230,000  and  $1,088,000,
respectively, a 13% increase. Other expenses for the nine months ended September
30, 2004 and September 30, 2003 were $3,613,000 and $3,536,000,  respectively, a
2%  increase.  The  increase  in other  expense in 2004  compared  with 2003 was
primarily in marketing and education expenses.  Offseting these increases, was a
reduction  in legal fees since  there has been no  litigation  expenses in 2004.
Legal fees were $63,000 and  $120,000 for three and nine months ended  September
30, 2004, respectively. This compares with $214,000 and $521,000,  respectively,
for the same period in 2003.

INCOME TAXES
------------
The  Company  reported a  provision  for income tax for the three  months  ended
September 30, 2004 and 2003 of $750,000 and $452,000,  respectively. The Company
reported a provision for income tax for the nine months ended September 30, 2004
and 2003 of  $2,034,000  and  $1,204,000,  respectively.  Both the 2004 and 2003
provisions  reflect tax accruals at statutory  rates for federal  income  taxes,
adjusted  primarily  for the effect of the Company's  investments  in tax-exempt
municipal  securities,  bank  owned life  insurance  policies  and state  taxes.
Comparison  with the first nine months of 2003 were  impacted by the real estate
investment  trust ("REIT") state tax benefits which were reflected in net income
in the first three  quarters of 2003 and were reversed in the fourth  quarter of
2003.

BALANCE SHEET
-------------
Total  assets  as  of  September  30,  2004  were  $552,499,000   compared  with
$451,316,000  as of September 30, 2003,  and  $459,482,000  at December 30, 2003
equating to a 22% increase  during the twelve  months ended  September 30, 2004,
and a 20% increase for the nine months ended September 30, 2003.  Total deposits
as of September  30, 2004 were  $476,792,000  compared with  $399,421,000  as of
September 30, 2003,  and  $406,445,000  at December 30, 2003  representing a 19%
increase  during the twelve  months then ended,  and a 17% increase for the nine
months ended  September 30, 2004.  Gross loans  outstanding  as of September 30,
2004 were $358,443,000  compared with $277,912,000 as of September 30, 2003, and
$306,663,000  at December 30, 2003 equating to a 29% increase  during the twelve
months then ended and a 17%  increase for the nine months  ended  September  30,
2004.

LOANS HELD FOR SALE
-------------------
The  Company  had   $20,232,000,   $10,786,000   and   $3,095,000  in  purchased
participations  in mortgage  loans as of September 30, 2004,  September 30, 2003
and  December  31,  2003,  respectively.   Loans  originated  or  purchased  and
considered  held for sale are carried at the lower of cost or  estimated  market
value in the aggregate.  Net unrealized losses, if any, are recognized through a
valuation  allowance  by  charges  to  income.  There  were no gains  or  losses
recognized during 2003 or 2004.

SUBORDINATED DEBENTURES
-----------------------
During September 2002, the Company formed North Bay Statutory Trust I (Trust), a
Connecticut  statutory  business  trust,  for the purpose of issuing  guaranteed
undivided  beneficial   interests  in  junior  subordinated   debentures  (trust
preferred  securities).  During  September 2002, the Trust issued $10 million in
floating rate Cumulative Trust Preferred Securities (Securities). The Securities
bear interest at a rate of Libor plus 3.45% and had an initial  interest rate of
5.34%; as of September 30, 2004 the interest rate was 5.40%; the Securities will
mature on September 26, 2032, but earlier  redemption is permitted under certain
circumstances, such as changes in tax or regulatory capital rules.

As previously  discussed the Company  de-consolidated  the Trust as of March 31,
2004. As a result, the junior  subordinated  debentures issued by the Company to
the Trust,  totaling  $10,310,000  are reflected on the  Company's  consolidated
balance  sheet,  under the caption  Subordinated  Debentures.  The Company  also
recognized its $310,000 investment in the Trust, which is recorded in Investment
in Subsidiary.  The Trust has no independent assets or operations and exists for
the sole  purpose  of issuing  trust  preferred  securities  and  investing  the
proceeds thereof in an equivalent  amount of subordinated  debentures  issued by
the Company.

                                       16
<PAGE>

The Securities,  the subordinated debenture issued by the Trust is redeemable in
whole or in part on or after  September 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
----------
Total  borrowings  were  $19  million  at  September  30,  2004.  There  were no
borrowings at September 30, 2003. The following table summarizes the borrowings:
<TABLE>
<CAPTION>
                   Fixed Rate Borrowings at September 30, 2004
                                  ($ in 000's)
                                                           Amount       Maturity Date       Interest Rate
                                                           ------       -------------       -------------
<S>                                                       <C>             <C>                  <C>
Federal Home Loan Bank Advance                            $ 5,000         4-17-2006             2.24%
Federal Home Loan Bank Advance                              5,000         4-16-2007             2.83%
Federal Home Loan Bank Advance                              9,000         4-14-2008             3.23%
                                                          -------
Total                                                     $19,000
Weighted average interest rate                                                                  2.86%
</TABLE>


LIQUIDITY AND CAPITAL ADEQUACY
------------------------------
The  Company's  liquidity  is  determined  by the level of assets (such as cash,
Federal  Funds,  and  investment in unpledged  marketable  securities)  that are
readily  convertible  to cash  to  meet  customer  withdrawals  and  borrowings.
Management reviews the Company's liquidity position on a regular basis to ensure
that it is adequate to meet projected  loan funding and potential  withdrawal of
deposits.  The  Company  has  a  comprehensive  Asset/Liability  Management  and
Liquidity Policy, which it uses to determine adequate liquidity. As of September
30,  2004  liquid  assets  were 28% of  total  assets,  compared  with 32% as of
September 30, 2003.

The Federal Deposit Insurance  Corporation  Improvement Act (FDICIA) established
ratios used to determine  whether a Company is "Well  Capitalized,"  "Adequately
Capitalized,"    "Undercapitalized,"    "Significantly   Undercapitalized,"   or
"Critically Undercapitalized." A Well Capitalized Company has risk-based capital
of at least  10%,  tier 1  risked-based  capital  of at least 6%, and a leverage
ratio of at least 5%. As of September 30, 2004, the Company's risk-based capital
ratio was 12.54%.  The  Company's  tier 1 risk-based  capital ratio and leverage
ratio were 11.64% and 9.71%, respectively.


                                       17
<PAGE>
As the following table  indicates,  the Company and the Banks currently  exceeds
the  regulatory  capital  minimum  requirements.  The  Company and the Banks are
considered "Well Capitalized" according to regulatory guidelines.

<TABLE>
<CAPTION>
                                                                                      To Be Well Capitalized
                                                                 For Capital          Under Prompt Corrective
                                      Actual                  Adequacy Purposes         Action Provisions
                                -------------------         --------------------      ----------------------

                                                                 (In 000's)
                                                             Minimum regulatory         Minimum regulatory
                                                                requirement                requirement
                                Amount        Ratio         Amount        Ratio        Amount        Ratio
                                -------       -----         -------       -----       -------        -----
<S>                             <C>           <C>           <C>           <C>         <C>            <C>
As of September 30, 2004:
Total Capital (to Risk
   Weighted Assets)
      Consolidated              $56,432       12.54%        $36,005       8.00%       $45,006        10.00%
      The Vintage Bank           39,239       11.30%         27,770       8.00%        34,713        10.00%
      Solano Bank                10,107       10.05%          8,045       8.00%        10,056        10.00%
Tier I Capital (to Risk
   Weighted Assets)
      Consolidated               52,392       11.64%         18,002       4.00%        27,004         6.00%
      The Vintage Bank           36,112       10.40%         13,885       4.00%        20,828         6.00%
      Solano Bank                 9,194        9.14%          4,023       4.00%         6,034         6.00%
Tier I Capital (to
   Average Assets)
      Consolidated               52,392        9.71%         21,583       4.00%        26,979         5.00%
      The Vintage Bank           36,112        8.56%         16,871       4.00%        21,088         5.00%
       Solano Bank                9,194        8.45%          4,351       4.00%         5,439         5.00%
</TABLE>

                                     Item 3.

           QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the exposure to loss  resulting  from changes in interest  rates,
foreign currency  exchange rates,  commodity prices and equity prices.  Although
the Company manages other risks, as in credit quality and liquidity risk, in the
normal  course  of  business,   management   considers  interest  rate  risk  to
principally  be a market  risk.  Other  types of market  risks,  such as foreign
currency  exchange rate risk, do not arise in the normal course of the Company's
business  activities.  The majority of the  Company's  interest rate risk arises
from  instruments,  positions and  transactions  entered into for purposes other
than  trading.  They  include  loans,  securities  available-for-sale,   deposit
liabilities, short-term borrowings and long-term debt. Interest rate risk occurs
when assets and liabilities reprice at different times as interest rates change.

The Company manages interest rate risk through its Audit Committee, which serves
as the Asset Liability  Committee (ALCO). The ALCO monitors exposure to interest
rate risk on a  quarterly  basis  using  both a  traditional  gap  analysis  and
simulation  analysis.  Traditional gap analysis  identifies  short and long-term
interest  rate  positions  or  exposure.  Simulation  analysis  uses  an  income
simulation  approach to measure the change in interest  income and expense under
rate shock conditions. The model considers the three major factors of (a) volume
differences,  (b) repricing differences and (c) timing in its income simulation.
The model begins by disseminating data into appropriate  repricing buckets based
on internally  supplied  algorithms (or overridden by  calibration).  Next, each
major asset and liability  type is assigned a  "multiplier"  or beta to simulate
how much that particular  balance sheet category type will reprice when interest
rates change. The model uses eight asset and liability multipliers consisting of
bank-specific  or default  multipliers.  The  remaining  step is to simulate the
timing effect of assets and liabilities by modeling a month-by-month  simulation
to estimate  the change in interest  income and expense  over the next  12-month
period.  The results are then  expressed  as the change in pre-tax net  interest
income over a 12-month period for +1%, and +2% shocks.

Utilizing the  simulation  model to measure  interest rate risk at September 30,
2004 and December 31, 2003 the Company is within the  established  exposure of a
4% change in  "return  on  equity"  tolerance  limit set by the  Company's  risk
policy.  There were no significant changes in interest rate risk from the annual
report on form 10-K for December 31, 2003.

                                       18
<PAGE>
                                     Item 4.

                             CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures:

Based  on their  evaluation  as of  September  30,  2004,  the  Company's  Chief
Executive  Officer and Chief Financial Officer have concluded that the Company's
disclosure  controls and  procedures  are  effective to ensure that  information
required to be disclosed in the reports that the Company  files or submits under
the  Securities  Exchange Act of 1934 is  recorded,  processed,  summarized  and
reported  within the time  periods  specified  in the  Securities  and  Exchange
Commission's rules and forms.

Changes in Internal Controls:

There  were no  significant  changes in our  internal  controls  over  financial
reporting  that  occurred  during our last fiscal  quarter that have  materially
affected,  or are reasonably likely to materially  affect, our internal controls
over financial reporting.


                                       19
<PAGE>
                                     PART 2
                                OTHER INFORMATION



OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

Other  than  ordinary  routine  litigation  incidental  to the  business  of the
Company, there are no material pending legal proceedings, except as follow:

On March 8, 2004, in connection  with the termination of her employment by North
Bay,  Jennifer Rose, a former  employee of North Bay filed a suit in Napa County
Superior  Court (Case No.  26-24645)  entitled  Rose v. North Bay  Bancorp.  The
complaint  alleges  causes of action for negligent  misrepresentation;  wrongful
termination;  violations  of the  California  Labor  Code;  breach of  contract;
discrimination,  based on association  and gender;  and negligent  infliction of
emotional distress, and requests unspecified  compensatory and punitive damages,
double  recovery  under certain  California  statutory  provisions,  costs,  and
attorneys' fees.

North Bay denies all  allegations  and has filed a motion for  summary  judgment
against all claims  against  it,  which is  scheduled  to be heard on January 7,
2005,  the date of a mandatory  settlement  conference.  Trial is scheduled  for
February 15, 2005.

Although North Bay intends to aggressively  defend this action, at this point in
the  proceedings,  no  assurance  can given as to the possible  outcome,  or the
amount of damages, if any, that could be assessed against North Bay in the event
of an unfavorable outcome.

ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

None

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5.    OTHER INFORMATION

In a letter to the Federal Reserve Bank of San Francisco dated October 12, 2004,
North Bay  suspended  its  financial  holding  company  status and will  operate
instead as a bank  holding  company.  The  change in status  will not affect any
non-financial subsidiaries or activities currently being conducted by North Bay,
although it will mean that,  future  acquisitions or expansions of non-financial
activities may require prior Federal  Reserve Board approval and will be limited
to those that are permissible for bank holding companies.

ITEM 6.   EXHIBITS

An index of exhibits begins on page 22.


                                       20
<PAGE>
Pursuant to the  requirements  of the  Securities  and Exchange Act of 1934, the
Company has duly caused this quarterly  report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                            NORTH BAY BANCORP
                                            A California Corporation


Date: November 12, 2004                     BY:    /s/ Terry L. Robinson
                                               ---------------------------------
                                                   Terry L. Robinson
                                                   President & CEO
                                                   Principal Executive Officer


Date: November 12, 2004                     BY:  /s/ Lee-Ann Cimino
                                               ---------------------------------
                                                  Lee-Ann Cimino
                                                  Senior Vice President
                                                  Principal Financial Officer




                                       21
<PAGE>

                                  EXHIBIT INDEX

    Exhibit No.   Description
    -----------   -----------

         11       Statement re: computation of per share earnings is included in
                  Note  3 to  the  unaudited  condensed  consolidated  financial
                  statements of Registrant.

         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




                                       22