UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

                   For the fiscal year ended December 31, 2005

                                       OR

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

              For the transition period from ________ to ________.

                         Commission file number: 0-31080

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

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

              1190 Airport Road, Suite 101, Napa, California 94558
              ----------------------------------------------------
                    (Address of principal executive offices)

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

                                      None
(Former  name,  former  address and former  fiscal year,  if changed  since last
report)

           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 if the  registrant is a well-known  seasoned  issuer,  as
defined in Rule 405 of the Securities Act.
                                 Yes [ ] No [X]

Indicate  by  check  mark if the  registrant  is not  required  to file  reports
pursuant to Section 13 or Section 15(d) of the Exchange Act.
                                 Yes [ ] No [X]


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 [ ]
<PAGE>

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Indicate by check mark whether the registrant is a large  accelerated  filer, an
accelerated  filer, or a  non-accelerated  filer. See definition of "accelerated
filer and large  accelerated  filer" in Rule 12b-2 of the  Exchange  Act.

  Large accelerated filer [ ] Accelerated filer [X] Non-accelerated filer [ ]

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
                                 Yes [ ] No [X]

As of June 30, 2005, the aggregate market value of the registrant's common stock
held by  non-affiliates  of the registrant was $78,883,000  based on the closing
sale  price as  reported  on the  National  Association  of  Securities  Dealers
Automated Quotation System National Market System.

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

        Class                                   Outstanding at March 13, 2006
Common Stock, No Par Value                                3,925,194

                       DOCUMENTS INCORPORATED BY REFERENCE

      Document                                   Parts Into Which Incorporated
Proxy Statement for the Annual Meeting of                   Part III
Shareholders to be held May 17, 2006

<PAGE>

                                TABLE OF CONTENTS

                                     PART I
                                                                            Page

Item 1 - Business                                                              4
Item 1(a) Risk Factors                                                        17
Item 1(b) Unresolved Staff Comments                                           19
Item 2 - Properties                                                           19
Item 3 - Legal Proceedings                                                    19
Item 4 - Submission of Matters to a Vote of Security Holders                  19

                                    PART II

Item 5 - Market for the Registrant's  Common Equity,  Related  Stockholder
          Matters and Issuer Repurchases of Equity Securities                 20
Item 6 - Selected Financial Data                                              22
Item 7 - Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                           23
Item 7A - Quantitative and Qualitative Disclosure about Market Risk           36
Item 8 - Financial Statements and Supplementary Data                          38
Item 9 - Changes in and Disagreements with Accountants on A
          ccounting and Financial Disclosure                                  72
Item 9A - Controls and Procedures                                             72
Item 9B - Other Information                                                   72

                                    PART III

Item 10 - Directors and Executive Officers of the Registrant                  73
Item 11 - Executive Compensation                                              73
Item 12 - Security Ownership of Certain Beneficial Owners and
           Management and Related Stockholder Matters                         73
Item 13 - Certain Relationships and Related Transactions                      73
Item 14 - Principal Accountant Fees and Services                              73

                                    PART IV

Item 15 - Exhibits and Financial Statement Schedules                          74

<PAGE>

                           FORWARD LOOKING STATEMENTS


In addition to the historical  information,  this Annual Report contains certain
forward-looking  information within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, and are subject to the "Safe Harbor" created by those Sections.  The
reader of this Annual 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  regulation;  (iv) adverse
conditions and  volatility,  including 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 on the Company;  (v) continued changes
in the interest  rate  environment  may reduce  interest  margins and  adversely
impact net interest income;  (vi) the ability to satisfy the requirements of the
Sarbanes-Oxley Act and other regulations  governing internal controls;  (vii) as
well as other  factors.  This entire  Annual  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.

                                     PART I

Item 1 - BUSINESS

North Bay Bancorp
-----------------

North Bay Bancorp (Bancorp),  headquartered in Napa, California, is a California
corporation  incorporated in 1999. During 2005,  Bancorp was the Holding Company
for The Vintage  Bank (Bank) and North Bay  Statutory  Trust I, which are wholly
owned subsidiaries,  collectively (the Company). North Bay Statutory Trust I was
formed in June 2002 for the purpose of issuing trust  preferred  securities.  In
January 2005, Solano Bank,  previously a wholly owned subsidiary of Bancorp, was
merged with and into the Bank to simplify  the  Company's  corporate  structure.
Solano Bank is now a division of the Bank.  Bancorp is a registered bank holding
company under the Bank Holding  Company Act of 1956, as amended,  and is subject
to the regulations of, and examination by, the Board of Governors of the Federal
Reserve  System.  At present,  Bancorp does not engage in any material  business
activities other than the ownership of the Bank.


The Vintage Bank
----------------

General
-------

The Bank is a  California  corporation  organized as a state  chartered  bank in
1984.  The Bank engages in commercial  banking  business in Napa County from its
main banking office located at 1500 Soscol Avenue in Napa, California.  The Bank
established a Real Estate  Investment Trust (REIT)  subsidiary in February 2003.
The Bank has nine other  banking  offices  including  the Solano  Bank  division
offices.  The Bank is a member of the Federal  Reserve  System.  The deposits of
each  depositor  of the  Bank  are  insured  by the  Federal  Deposit  Insurance
Corporation up to the maximum allowed by law.

The Bank offers a full range of commercial  banking  services to individuals and
the business and agricultural  communities in Napa and Solano Counties. The Bank
emphasizes retail commercial banking operations and accepts checking and savings
deposits,  makes consumer,  commercial,  construction and real estate loans, and

                                       4
<PAGE>

provides  other  customary  banking  services.  The Bank  does not  offer  trust
services  and  does not plan to do so in the near  future.  There  have  been no
material  changes in services  offered by The Bank. The Bank makes annuities and
mutual funds available to its customers through Linsco Private Ledger.

Website Access to Reports
-------------------------

The  Company   maintains   the  following   websites,   www.northbaybancorp.com,
www.vintagebank.com and www.solanobank.com. The Company makes available, free of
charge, on its  www.northbaybancorp.com  website the annual report on Form 10-K,
the  quarterly  reports on Form 10-Q and current  reports on Form 8-K as soon as
reasonably  practical  after we file such reports with the Securities & Exchange
Commission. The Vintage Bank and Solano Bank websites have an investor relations
page that hyperlinks to the Bancorp website.

Consolidated Lending Activities
-------------------------------

The  Bank  concentrates  its  lending  activities  in  commercial,  installment,
construction, and real estate loans made primarily to businesses and individuals
located  in Napa  and  Solano  Counties.  At  December  31,  2005,  total  loans
outstanding were $414,428,000  resulting in a  loan-to-deposit  ratio of 80%. At
December 31, 2004,  total loans  outstanding  were  $377,765,000  resulting in a
loan-to-deposit ratio of 78.0%.

As of December 31, 2005,  the Bank's  lending limit to individual  customers was
$15,336,000 for secured loans and $9,201,000 for unsecured loans. As of December
31, 2004, The Vintage  Bank's  lending limit was $6,163,000 for unsecured  loans
and $16,435,000 for unsecured and secured loans combined.  Solano Bank's lending
limits were  $1,797,000  for unsecured  loans and  $4,791,000  for unsecured and
secured loans  combined.  For customers  desiring  loans in excess of the Bank's
lending  limits,  the Bank may loan on a  participation  basis with another bank
taking the amount of the loan in excess of Bank's lending limits.

At  December  31,  2005,  the  Bank's  commercial  loans   outstanding   totaled
$85,979,000  (20.75% of total  loans),  commercial  loans secured by real estate
totaled   $23,477,000  (5.66%  of  total  loans),   construction  loans  totaled
$32,393,000  (7.82% of total  loans),  real estate  loans  totaled  $233,723,000
(56.40% of total loans),  and installment  loans totaled  $38,856,000  (9.38% of
total  loans).  At December  31,  2004,  commercial  loans  outstanding  totaled
$67,068,000  (17.8% of total  loans),  commercial  loans  secured by real estate
totaled   $26,447,000  (7.0%  of  total  loans),   construction   loans  totaled
$27,595,000 (7.3% of total loans), real estate loans totaled $220,316,000 (58.3%
of total  loans)  and  installment  loans  totaled  $36,339,000  (9.62% of total
loans).

As of December 31, 2005, the total of undisbursed loans and similar  commitments
was  $143,147,000,  as contrasted with $109,275,000 as of December 31, 2004. The
Bank  takes  real  estate,   listed  securities,   savings  and  time  deposits,
automobiles,  machinery  and  equipment,  inventory  and accounts  receivable as
collateral for loans.

The interest  rates charged for the various loans made by the Bank vary with the
degree of risk and the size and maturity of the loans involved and are generally
affected by competition and by current money market rates.

Commercial  Loans

The Bank makes  commercial  loans  primarily to  professionals,  individuals and
businesses  in the  counties  of Napa and  Solano.  The Bank offers a variety of
commercial  lending  products,  including  revolving  lines of  credit,  working
capital  loans,   equipment  financing  and  issuances  of  letters  of  credit.
Typically,  lines of credit have a floating rate of interest based on the Bank's
Base Rate and are for a term of one year or less.  Working capital and equipment
loans have a floating  or a fixed  rate  typically  with a term of five years or
less.  Approximately 79% of the Bank's commercial loans are unsecured or secured
by personal  property and,  therefore,  represent a higher risk of ultimate loss
than loans secured by real estate.  However, as a result of the lending policies
and procedures  implemented by the Company,  management believes it has adequate
commercial loan  underwriting and review procedures in place to manage the risks
inherent in commercial  lending.  In addition,  commercial  loans not secured by
real estate  typically  require higher quality  credit  characteristics  to meet
underwriting requirements.  The remaining 21% of the Bank's commercial loans are
secured by real estate. See Item 1A. - Risk Factors.

Real Estate Loans

Real estate loans consist of loans secured by deeds of trust on residential  and
commercial properties.  The purpose of these loans is to purchase real estate or
refinance an existing  real estate loan,  as compared  with real estate  secured
commercial loans,  which have a commercial  purpose unrelated to the purchase or
refinance of the real estate taken as  collateral.

                                       5
<PAGE>

The Bank originates residential mortgage loans. Most of the residential mortgage
loans  originated by the Bank are sold to institutional  investors  according to
their guidelines. The Bank does not retain servicing of these loans, however the
Bank does receive a loan fee.

Real Estate  Construction Loans

The Bank makes loans to finance the  construction of commercial,  industrial and
residential  projects and to finance land  development.  The Bank's portfolio is
diversified  between the categories of residential and commercial  construction.
This segment of the portfolio  represents less than 100% of combined capital and
does not require extra monitoring.  Construction loans typically have maturities
of less than one year,  have a floating  rate of  interest  based on Bank's base
rate and are  secured  by first  deeds of  trust.  Generally,  the Bank does not
extend credit in an amount  greater than 50% of the appraised  value of the real
estate  securing land and land  development  loans, or in an amount greater than
70% of the  appraised  value  of the real  estate  securing  non-owner  occupied
residential  construction  loans  and  commercial  constructions,  or 80% of the
appraised value in the case of owner occupied  residential  construction  loans.
Commercial  loans secured by real estate are  generally  granted in an amount no
greater than 75% of the appraised value.

Installment Loans

Installment  loans  are made to  individuals  for  household,  family  and other
personal  expenditures.   These  loans  typically  have  fixed  rates  and  have
maturities of five years or less.

Lending Policies and Procedures

The Bank's lending policies and procedures are established by senior  management
of the Company and are  approved by the Boards of  Directors  of the Bancorp and
the Bank. The Boards of Directors have established  internal  procedures,  which
limit  loan  approval  authority  of the  Bank's  loan  officers.  The  Board of
Directors of the Bank has delegated lending authority to executive  officers who
in turn have delegated lending authority to selected loan officers.

The  Directors'  Loan  Committee of the Bank must approve all new loans and loan
renewals in excess of specified  amounts  (excluding  savings secured,  which is
unlimited in amount).  As of December 31, 2005, this included any loan in excess
of $6,000,000 if secured and $3,000,000 if unsecured.

Loans to directors and executive  officers of the Bank or its affiliates must be
approved in all instances by a majority of the Board of Directors. In accordance
with law,  directors  and  officers  are not  permitted  to  participate  in the
discussion  of or to vote on loans made to them or their related  interests.  In
addition, loans to directors and officers must be made on substantially the same
terms, including interest rates and collateral requirements, as those prevailing
for comparable  transactions with other  nonaffiliated  persons at the time each
loan was made, subject to the limitations and other provisions in California and
Federal  law.  These  loans also must not  involve  more than the normal risk of
collectibility  or  present  other   unfavorable   terms.  See  Supervision  and
Regulation - Extension of Credit to Insiders.

Consolidated Deposits
---------------------

Napa County and Solano County currently constitute the Company's primary service
areas and most of the  Bank's  deposits  are  attracted  from  these  areas.  No
material  portion of the Bank's deposits have been obtained from a single person
or a few  persons,  the loss of any one or more of which  would  have a material
adverse  effect on the business of the Bank.  Total  deposits as of December 31,
2005  were   $516,393,000.   Total   deposits  as  of  December  31,  2004  were
$484,493,000.

Employees
---------

At December 31, 2005, the Company employed 181 persons, 30 of whom are part-time
employees, including 7 executive officers and 40 other officers. At December 31,
2004 the Company  employed  172  persons,  34 of whom are  part-time  employees,
including  6  executive  officers  43  other  officers.  None  of the  Company's
employees  are  presently  represented  by a union or covered under a collective
bargaining agreement.  Management of the Company believes its employee relations
are excellent.

                                       6
<PAGE>


The Competition
---------------

The banking business in California, generally and in the service areas served by
the Bank,  specifically,  is highly  competitive  with respect to both loans and
deposits and is dominated by a few major banks which have many offices operating
over wide geographic areas. The Bank competes for deposits and loans principally
with these major banks, savings and loan associations, finance companies, credit
unions and other  financial  institutions  located in the Bank's  market  areas.
Among the  advantages  the major  banks have over the Bank are their  ability to
finance extensive  advertising campaigns and to allocate their investment assets
to regions of  highest  yield and  demand.  Many of the major  commercial  banks
operating in the Bank's service areas offer certain  services (such as trust and
international  banking services) which are not offered directly by the Bank and,
by virtue of their greater total  capitalization,  such banks have substantially
higher lending limits than the Bank.

Moreover,  banks  generally,  and  the  Bank  in  particular,   face  increasing
competition for loans and deposits from non-bank financial  intermediaries  such
as thrift and loan associations,  mortgage  companies,  insurance  companies and
other  lending  institutions.  Further,  the  recent  trend  has been for  other
institutions,  such as brokerage firms,  credit card companies,  and even retail
establishments,  to offer alternative investment vehicles,  such as money market
funds, as well as offering  traditional banking services such as check access to
money market funds and cash advances on credit card accounts.  In addition,  the
other  entities (both public and private)  seeking to raise capital  through the
issuance and sale of debt or equity securities also compete with the Bank in the
acquisition of deposits.

In order to compete with the other financial institutions in their market areas,
the Bank relies principally upon local promotional  activity,  personal contacts
by its officers, directors,  employees and Company shareholders, and specialized
services.  In conjunction  with the Bank's  business plan to serve the financial
needs of local residents and small-to medium-sized businesses, it also relies on
officer  calling  programs to existing and prospective  customers,  focusing its
overall marketing efforts towards its local communities.  The Bank's promotional
activities  emphasize  the  advantages  of  dealing  with a  locally  owned  and
headquartered  institution  sensitive  to the  particular  needs  of  its  local
communities.  For customers  whose loan demands exceed the Bank's lending limit,
the Bank attempts to arrange for such loans on a participation  basis with other
financial institutions.

The Bank's  strategy  for meeting the  competition  has been to maintain a sound
capital base and liquidity position, employ experienced management,  concentrate
on  particular  segments of the market and offer  customers a degree of personal
attention that, in the opinion of management, is not generally available through
the Bank's larger competitors.

                                       7
<PAGE>


Supervision And Regulation
--------------------------

A.       General

North Bay

North Bay, as a bank holding  company,  is subject to regulation  under the Bank
Holding  Company Act of 1956, as amended,  and is registered with and subject to
the  supervision  of the Board of Governors of the Federal  Reserve System ("the
Federal  Reserve").  It is the  policy  of the  Federal  Reserve  that each bank
holding  company serve as a source of financial and  managerial  strength to its
subsidiary banks. The Federal Reserve has the authority to examine North Bay.

The Bank Holding  Company Act requires North Bay to obtain the prior approval of
the Federal Reserve before acquisition of all or substantially all of the assets
of any bank or ownership  or control of the voting  shares of any bank if, after
giving effect to such acquisition,  North Bay would own or control,  directly or
indirectly,  more than 5% of the voting  shares of such bank.  Amendments to the
Bank  Holding  Company Act expand the  circumstances  under which a bank holding
company may acquire  control of or all or  substantially  all of the assets of a
bank located outside the State of California.

North Bay may not engage in any  business  other than  managing  or  controlling
banks or furnishing services to its subsidiaries,  with the exception of certain
activities which, in the opinion of the Federal Reserve,  are so closely related
to banking or to managing or  controlling  banks as to be incidental to banking.
The  Gramm-Leach-Bliley  Act, federal  legislation  enacted in 2000, offers bank
holding  companies an opportunity to broaden the scope of activities  engaged in
by electing to be treated as a financial  holding company.  A financial  holding
company  enjoys  broader  powers  than  a  bank  holding  company,  specifically
including the ability to own securities  and insurance  companies in addition to
financial  institutions.  North Bay became a financial Holding Company on August
23, 2000. In a letter to the Federal Reserve Bank of San Francisco dated October
14, 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.  North
Bay is  generally  prohibited  from  acquiring  direct or indirect  ownership or
control of more than 5% of the voting shares of any company  unless that company
is engaged in such authorized  activities and the Federal  Reserve  approves the
acquisition.

North Bay and its  subsidiaries  are prohibited  from engaging in certain tie in
arrangements  in  connection  with any  extension  of  credit,  sale or lease of
property or provision of services.  For  example,  with certain  exceptions  The
Vintage Bank may not  condition  an extension of credit on a customer  obtaining
other  services  provided  by it,  North  Bay or any other  subsidiary,  or on a
promise by the customer  not to obtain  other  services  from a  competitor.  In
addition,  federal law imposes certain  restrictions on transactions between The
Vintage Bank and its affiliates.  As affiliates,  The Vintage Bank and North Bay
are subject with certain  exceptions,  to the provisions of federal law imposing
limitations on and requiring  collateral for extensions of credit by The Vintage
Bank to any affiliate.

The Bank

As a  California  state  chartered  bank  ,  The  Vintage  Bank  is  subject  to
regulation, supervision and periodic examination by the California Department of
Financial  Institutions.  As a member of the Federal Reserve System, The Vintage
Bank is also subject to regulation,  supervision and periodic examination by the
Federal  Reserve Bank of San Francisco.  The Bank's  deposits are insured by the
Federal Deposit  Insurance  Corporation to the maximum amount  permitted by law,
which is currently  $100,000  per  depositor  in most cases.  Insured  banks are
subject to FDIC regulations applicable to all insured institutions.

The regulations of these state and federal bank regulatory  agencies govern,  or
will govern, most aspects of the Bank's businesses and operations, including but
not limited  to, the scope of their  business,  its  investments,  its  reserves
against deposits,  the nature and amount of any collateral for loans, the timing
of availability of deposited funds,  the issuance of securities,  the payment of
dividends, bank expansion and bank activities, including real estate development
and insurance activities,  and the payment of interest on certain deposits.  The
Vintage Bank is also subject to the  requirements  and  restrictions  of various
consumer laws, regulations and the Community Reinvestment Act.


                                       8
<PAGE>


B.       Payment of Dividends

North Bay Bancorp

The  shareholders  of North Bay are  entitled to receive  dividends  when and as
declared by its Board of Directors,  out of funds legally available,  subject to
the dividends  preference,  if any, on preferred  shares that may be outstanding
and also subject to the  restrictions  of the California  Corporations  Code. At
December 31, 2005, North Bay had no outstanding shares of preferred stock.

Subject to certain  exceptions  and  limitations,  the Company may, from time to
time, defer subordinated  debenture  interest payments,  which would result in a
deferral of distribution  payments on the Trust  Preferred  Securities and, with
certain   exceptions,   prevent  the  Company  from  declaring  or  paying  cash
distributions  on the Company's common stock or debt securities that rank junior
to the subordinated debentures.

The principal  sources of cash revenue to North Bay are dividends and management
fees  received  from The  Vintage  Bank.  The Bank's  ability  to make  dividend
payments to North Bay is subject to state and federal regulatory restrictions.

The Bank

Under state law, the Board of Directors of a California state chartered bank may
declare a cash dividend,  subject to the restriction  that the amount  available
for the  payment  of cash  dividends  is  limited  to the  lesser of the  bank's
retained  earnings,  or the bank's net income for the latest three fiscal years,
less dividends  previously declared during that period, or, with the approval of
the  Commissioner  of  Financial  Institutions,  to the greater of the  retained
earnings of the bank, the net income of the bank for its last fiscal year or the
net income of the bank for its current fiscal year.

Federal  Reserve  regulations  also govern the payment of  dividends  by a state
member bank. Under Federal Reserve regulations, dividends may not be paid unless
both capital and earnings  limitations  have been met. First, no dividend may be
paid if it would result in a withdrawal  of capital or exceed the member  bank's
net profits then on hand,  after deducting its losses and bad debts.  Exceptions
to this  limitation  are available  only upon the prior  approval of the Federal
Reserve  and the  approval  of  two-thirds  of the member  bank's  shareholders.
Second,  a state  member bank may not pay a dividend  without the prior  written
approval of the Federal  Reserve if the total of all  dividends  declared in one
year  exceeds  the total of net  profits  for that year plus the  preceding  two
calendar  years,  less any required  transfers to surplus under state or federal
law.

The Federal  Reserve  has broad  authority  to prohibit a bank from  engaging in
banking  practices  which it considers to be unsafe or unsound.  It is possible,
depending  upon the  financial  condition  of the  bank in  question  and  other
factors,  that the Federal  Reserve may assert that the payment of  dividends or
other  payments  by a member  bank is  considered  an unsafe or unsound  banking
practice and therefore, implement corrective action to address such a practice.

Accordingly,  the future  payment of cash dividends by The Vintage Bank to North
Bay will  generally  depend  not only on the Bank's  earnings  during any fiscal
period but also on the  Bank's  meeting  certain  capital  requirements  and the
maintenance of adequate allowances for loan and lease losses.

C.       Change in Control

The Bank Holding  Company Act of 1956, as amended and the Change in Bank Control
Act of 1978,  as amended,  together  with  regulations  of the Federal  Reserve,
require that, depending on the particular circumstances,  either Federal Reserve
approval must be obtained or notice must be furnished to the Federal Reserve and
not disapproved  prior to any person or company  acquiring  "control" of a state
member bank,  such as the Bank,  subject to  exemptions  for some  transactions.
Control is conclusively  presumed to exist if an individual or company  acquires
25% or more of any class of voting securities of the bank. Control is rebuttably
presumed  to  exist if a person  acquires  10% or more but less  than 25% of any
class of voting  securities  and either the  company has  registered  securities
under  Section  12 of the  Securities  Exchange  Act of 1934,  as  amended  (the
"Exchange Act"), or no other person will own a greater  percentage of that class
of voting securities immediately after the transaction.

D.       Capital Standards

The Federal Reserve and other federal banking  agencies have risk-based  capital
adequacy  guidelines  intended  to provide a measure of  capital  adequacy  that
reflects the degree of risk associated with a banking organization's  operations
for both transactions reported on the balance sheet as assets, and transactions,
such as letters of credit  and  recourse  arrangements,  which are  reported  as


                                       9
<PAGE>


off-balance-sheet  items.  Under these  guidelines,  nominal  dollar  amounts of
assets and credit equivalent amounts of  off-balance-sheet  items are multiplied
by one of several risk  adjustment  percentages,  which range from 0% for assets
with low credit risk, such as certain U.S.  government  securities,  to 100% for
assets with relatively higher credit risk, such as business loans.

A banking organization's  risk-based capital ratios are obtained by dividing its
qualifying  capital  by its total  risk-adjusted  assets  and  off-balance-sheet
items. The regulators measure risk-adjusted assets and  off-balance-sheet  items
against  both total  qualifying  capital  (the sum of Tier 1 capital and limited
amounts of Tier 2 capital) and Tier 1 capital. Tier 1 capital consists of common
stock, retained earnings,  noncumulative  perpetual preferred stock and minority
interests in certain  subsidiaries,  less most other  intangible  assets.  Trust
preferred  securities are also considered Tier 1 capital for regulatory purposes
up to 25% of  capital.  Tier 2 capital  may  consist of a limited  amount of the
allowance for possible loan and lease losses and certain other  instruments with
some  characteristics  of equity. The inclusion of elements of Tier 2 capital is
subject to certain other  requirements  and  limitations of the federal  banking
agencies.  Since December 31, 1992, the federal banking agencies have required a
minimum  ratio  of  qualifying  total  capital  to   risk-adjusted   assets  and
off-balance-sheet  items  of 8%,  and a  minimum  ratio  of  Tier 1  capital  to
risk-adjusted assets and off-balance-sheet items of 4%.

In addition to the risk-based  guidelines,  federal banking  regulators  require
banking  organizations to maintain a minimum amount of Tier 1 capital to average
total  assets,  referred to as the leverage  ratio.  For a banking  organization
rated in the highest of the five  categories  used by regulators to rate banking
organizations,  the minimum  leverage ratio of Tier 1 capital to total assets is
3%. It is  improbable,  however,  that an  institution  with a 3% leverage ratio
would  receive  the  highest  rating by the  regulators  since a strong  capital
position  is a  significant  part of the  regulators'  rating.  For all  banking
organizations not rated in the highest  category,  the minimum leverage ratio is
at least 100 to 200 basis  points  above the 3%  minimum.  Thus,  the  effective
minimum  leverage ratio,  for all practical  purposes,  is at least 4% or 5%. In
addition to these uniform risk-based capital guidelines and leverage ratios that
apply across the industry,  the regulators have the discretion to set individual
minimum capital  requirements for specific  institutions at rates  significantly
above the minimum guidelines and ratios.

A member bank that does not achieve and maintain the required capital levels may
be issued a capital  directive by the Federal  Reserve to ensure the maintenance
of required  capital levels.  As discussed  above,  the Company and the Bank are
required  to  maintain  certain  levels  of  capital.   The  regulatory  capital
guidelines as well as the actual  capitalization for the Bank and the Company on
a consolidated basis as of December 31, 2005 follow:
<TABLE>
<CAPTION>
                                                                        (In 000's)
                                                                                           To Be Well Capitalized
                                                                                                Under Prompt
                                                                                             Corrective Action
                                                   Actual                For Capital            Provisions
                                              Amount     Ratio       Amount     Ratio        Amount     Ratio
                                              ------     -----       ------     -----        ------     -----
<C>                                         <C>         <C>        <C>          <C>         <C>         <C>
As of December 31, 2005:
TOTAL CAPITAL (TO RISK WEIGHTED ASSETS)
      Consolidated                          $ 66,599    13.01%     $ 40,801    >8.00%       $ 51,001   >10.00%
      The Vintage Bank                        61,342    11.99%       40,794    >8.00%         50,992   >10.00%
TIER 1 (TO RISK WEIGHTED ASSETS)
      Consolidated                          $ 61,532    12.02%     $ 20,401    >4.00%       $ 30,601   >6.00%
      The Vintage Bank                        56,275    11.00%       20,397    >4.00%         30,595   >6.00%
TIER 1 CAPITAL (TO RISK WEIGHTED ASSETS)
      Consolidated                          $ 61,532     9.87%     $ 24,929    >4.00%       $ 31,162   >5.00%
      The Vintage Bank                        56,275     9.11%       24,702    >4.00%         30,878   >5.00%
</TABLE>

Imposition of Liability for Undercapitalized Subsidiaries.

Bank  regulators  are  required to take  "prompt  corrective  action" to resolve
problems associated with insured depository  institutions whose capital declines
below certain levels. In the event an institution becomes "undercapitalized," it
must submit a capital restoration plan. The capital restoration plan will not be


                                       10
<PAGE>

accepted  by  the   regulators   unless  each  company  having  control  of  the
undercapitalized  institution  guarantees the  subsidiary's  compliance with the
capital  restoration plan up to a certain specified  amount.  Any such guarantee
from a  depository  institutions  holding  company is  entitled to a priority of
payment in bankruptcy.

The aggregate  liability of the holding company of an  undercapitalized  bank is
limited  to the lesser of 5% of the  institution's  assets at the time it became
undercapitalized  or  the  amount  necessary  to  cause  the  institution  to be
"adequately  capitalized."  The bank regulators have greater power in situations
where an institution becomes "significantly" or "critically" undercapitalized or
fails to submit a capital  restoration plan. For example, a bank holding company
controlling  such an institution can be required to obtain prior Federal Reserve
approval  of  proposed  dividends,   or  might  be  required  to  consent  to  a
consolidation or to divest the troubled institution or other affiliates.


E.       Impact of Monetary Policies

The earnings and growth of the Bank are subject to the influence of domestic and
foreign economic conditions,  including  inflation,  recession and unemployment.
The earnings of the Bank are affected  not only by general  economic  conditions
but also by the  monetary and fiscal  policies of the United  States and federal
agencies,  particularly  the Federal  Reserve.  The Federal Reserve can and does
implement national monetary policy, such as seeking to curb inflation and combat
recession,  by its open market operations in United States Government securities
and by its control of the discount rates  applicable to borrowings by banks from
the Federal  Reserve  System.  The actions of the Federal Reserve in these areas
influence  the growth of bank loans,  investments  and  deposits  and affect the
interest  rates  charged on loans and paid on  deposits.  The Federal  Reserve's
policies  have had a significant  effect on the operating  results of commercial
banks and are expected to continue to do so in the future. The nature and timing
of any future changes in monetary policies are not predictable.

F.       Extensions of Credit to Insiders and Transactions with Affiliates

Extensions of Credit to Insiders

The Federal Reserve Act and Federal Reserve  Regulation O place  limitations and
conditions  on  loans or  extensions  of  credit  to a  bank's  or bank  holding
company's  executive  officers,  directors and principal  shareholders (i.e., in
most cases,  those persons who own,  control or have power to vote more than 10%
of any class of voting securities); any company controlled by any such executive
officer,  director  or  shareholder;  or any  political  or  campaign  committee
controlled by such executive officer, director or principal shareholder.

Loans extended to any of the above persons must comply with loan-to-one-borrower
limits, require prior full board approval when aggregate extensions of credit to
such person exceed specified  amounts,  must be made on  substantially  the same
terms    (including    interest   rates   and   collateral)   as,   and   follow
credit-underwriting   procedures  that  are  not  less  stringent  than,   those
prevailing at the time for comparable  transactions with non-insiders,  and must
not involve more than the normal risk of repayment or present other  unfavorable
features.  Regulation  O also  prohibits a bank from paying an  overdraft  on an
account  of an  executive  officer or  director,  except  pursuant  to a written
pre-authorized interest-bearing extension of credit plan that specifies a method
of repayment or a written pre-authorized  transfer of funds from another account
of the officer or director at the bank.

Restrictions on Transactions with Affiliates and Insiders.

Transactions  between the holding  company and its  subsidiaries,  including the
Bank,  are  subject  to  Section  23A of the  Federal  Reserve  Act,  and to the
requirements  of  Regulation  W. In general,  Section 23A imposes  limits on the
amount of such transactions,  and also requires certain levels of collateral for
loans to  affiliated  parties.  It also  limits the amount of  advances to third
parties,  which are  collateralized  by the  securities,  or  obligations of the
Company or its subsidiaries.

Affiliate  transactions  are also subject to Section 23B of the Federal  Reserve
Act, and to the  requirements  of  Regulation W which  generally  requires  that
certain  transactions between the holding company and its affiliates be on terms
substantially  the  same,  or at  least  as  favorable  to the  Bank,  as  those
prevailing  at the time for  comparable  transactions  with or  involving  other
nonaffiliated persons.
<PAGE>

G.       Financial Services Modernization Legislation

On November 12, 1999,  President Clinton signed into law the  Gramm-Leach-Bliley
Act. This  legislation  eliminates  many of the barriers that have separated the
insurance,  securities and banking  industries since the Great  Depression.  The
federal  banking  agencies  (the  Federal  Reserve,  FDIC and the  Office of the
Comptroller  of the Currency)  among others,  continue to draft  regulations  to

                                       11
<PAGE>


implement the  Gramm-Leach-Bliley  Act. The Gramm-Leach-Bliley Act is the result
of a decade of debate in the Congress regarding a fundamental reformation of the
nation's  financial  system.  The  law  is  subdivided  into  seven  titles,  by
functional area.

The major provisions of the Gramm-Leach-Bliley Act are:

Financial Holding Companies and Financial Activities

Title I  establishes  a  comprehensive  framework to permit  affiliations  among
commercial  banks,  insurance  companies,  securities firms, and other financial
service  providers by revising and  expanding  the BHC Act framework to permit a
holding company system to engage in a full range of financial activities through
qualification as a new entity known as a financial holding company.

Activities  permissible  for  financial  subsidiaries  of  state  member  banks,
include,  but are not  limited  to,  the  following:  (a)  Lending,  exchanging,
transferring,  investing for others,  or safeguarding  money or securities;  (b)
Insuring,  guaranteeing,  or indemnifying  against loss, harm, damage,  illness,
disability,  or  death,  or  providing  and  issuing  annuities,  and  acting as
principal,  agent,  or broker for purposes of the foregoing,  in any State;  (c)
Providing  financial,  investment,  or  economic  advisory  services,  including
advising an investment company; (d) Issuing or selling instruments  representing
interests in pools of assets  permissible  for a bank to hold directly;  and (e)
Underwriting, dealing in, or making a market in securities.

Securities Activities

Title II narrows the exemptions from the securities  laws previously  enjoyed by
banks,  requires the Federal Reserve and the SEC to continue to work together to
draft rules governing certain securities activities of banks, and creates a new,
voluntary investment bank holding company.

Insurance Activities

Title III restates the proposition that the states are the functional regulators
for  all  insurance   activities,   including   the   insurance   activities  of
federally-chartered  banks,  and  bars the  states  from  prohibiting  insurance
activities  by depository  institutions.  The law  encourages  states to develop
uniform or reciprocal rules for the licensing of insurance agents.

Privacy.

Title V of the  Gramm-Leach-Bliley  Act requires  federal banking  regulators to
implement the privacy  provisions  of Title V. Pursuant to the rules,  financial
institutions must provide

     o    initial notices to customers about their privacy policies,  describing
          the  conditions  under  which  they may  disclose  nonpublic  personal
          information to nonaffiliated third parties and affiliates;

     o    annual notices of their privacy policies to current customers; and

     o    a  reasonable  method for  customers  to "opt out" of  disclosures  to
          nonaffiliated third parties.

As of December 31, 2005, the Bank was in compliance with the privacy  provisions
of the  Gramm-Leach-Bliley Act and the implementing  regulations  promulgated by
the Federal Reserve,  and subsequently,  as necessary,  has updated and enhanced
its procedure and practice in this critical area.

Safeguarding Confidential Customer Information.

Under Title V of the Gramm-Leach-Bliley Act, financial institutions are required
to establish an information security program to:

     o    identify and assess the risks that may threaten customer information;

     o    develop a written plan  containing  policies and  procedures to manage
          and control these risks;

     o    implement and test the plan; and

     o    adjust  the plan on a  continuing  basis to  account  for  changes  in
          technology,  the  sensitivity of customer  information and internal or
          external threats to information security.

The  Bank  has  implemented  a  security  program  appropriate  to its  size and
complexity and the nature and scope of its operations.

                                       12
<PAGE>


H.       Bank Secrecy Act

     The Bank  Secrecy Act  ("BSA")  was  enacted by  Congress  to combat  money
laundering,  the process of converting  cash  proceeds from illegal  activities,
primarily drug dealing and international  terrorism,  into financial assets that
appear  legitimate.  The purpose of the BSA is to "require  certain  reports and
records  where  they have a high  degree of  usefulness  in  criminal,  tax,  or
regulatory proceedings". The BSA has recently been enhanced by the provisions of
the USA PATRIOT Act, which is discussed below.

     Under the BSA, a financial  institution  must have a written BSA compliance
program and policies.  The major provisions of the BSA,  applicable to the Bank,
require banks to:

     o    Report  any  transaction  which  results  in  cash  into or out of the
          financial  institution  in an  amount  over  $10,000  to the  Internal
          Revenue Service ("IRS");

     o    Obtain  and  maintain  certain   identifying   information  about  any
          purchaser of a bank check or draft,  cashier's check,  money order, or
          traveler's check for $3,000 or more;

     o    Retain all records required by the BSA for five years in such a way as
          to be accessible within a reasonable period of time;

     o    Establish a Customer Identification Program; and

     o    Report  certain  suspicious  activities  related  to  the  BSA  to the
          Financial Crimes Enforcement Network ("FinCen").

     The Bank has adopted a BSA compliance program and policies that comply with
the provisions of the BSA.

I.       Community Reinvestment Act Sunshine Requirements.

CRA Sunshine regulations require nongovernmental entities or persons and insured
depository  institutions  and affiliates that are parties to written  agreements
made in connection with the fulfillment of the  institution's CRA obligations to
make  available  to the public and the federal  banking  agencies a copy of each
such agreement.  The regulations impose annual reporting requirements concerning
the  disbursement,  receipt and use of funds or other  resources under each such
agreement.

The Bank is not a party to any agreement  that would be the subject of reporting
pursuant to the CRA Sunshine Requirements.

The Bank intends to comply with all provisions of the Gramm-Leach-Bliley Act and
all implementing regulations.

J.       Consumer Protection Laws and Regulations

The bank regulatory  agencies are focusing greater  attention on compliance with
consumer  protection laws and their  implementing  regulations.  Examination and
enforcement have become more intense in nature,  and insured  institutions  have
been advised to monitor carefully compliance with such laws and regulations. The
Bank is subject to many federal  consumer  protection  statutes and regulations,
some of which are discussed below.

The  Community  Reinvestment  Act  ("CRA")  is  intended  to  encourage  insured
depository  institutions,  while operating safely and soundly,  to help meet the
credit  needs of their  communities.  The CRA  specifically  directs the federal
regulatory agencies, in examining insured depository  institutions,  to assess a
bank's  record  of  helping  meet  the  credit  needs of its  entire  community,
including low- and moderate-income neighborhoods, consistent with safe and sound
banking  practices.  The CRA further  requires  the agencies to take a financial
institution's  record of meeting its  community  credit  needs into account when
evaluating applications for, among other things,  domestic branches,  mergers or
acquisitions, or holding company formations. The agencies use the CRA assessment
factors in order to provide a rating to the financial  institution.  The ratings
range from a high of "outstanding" to a low of "substantial  noncompliance." The
Vintage  Bank was  examined  as of July 11,  2005  and was  rated  satisfactory.

The Equal Credit Opportunity Act ("ECOA") generally prohibits  discrimination in
any credit transaction,  whether for consumer or business purposes, on the basis
of race, color,  religion,  national origin, sex, marital status, age (except in
limited  circumstances),  receipt of income from public assistance programs,  or
good faith exercise of any rights under the Consumer Credit Protection Act.


                                       13
<PAGE>


The Truth in Lending Act  ("TILA")  is designed to ensure that credit  terms are
disclosed in a meaningful  way so that  consumers may compare  credit terms more
readily and  knowledgeably.  As a result of the TILA, all creditors must use the
same credit  terminology  to express  rates and  payments,  including the annual
percentage rate, the finance charge, the amount financed,  the total of payments
and the payment schedule, among other things.

The Fair Housing Act ("FH Act")  regulates many practices,  including  making it
unlawful  for  any  lender  to  discriminate  in  its  housing-related   lending
activities against any person because of race, color, religion, national origin,
sex,  handicap or familial status. A number of lending practices have been found
by the courts to be, or may be considered,  illegal under the FH Act,  including
some that are not specifically mentioned in the FH Act itself.

The Home Mortgage Disclosure Act ("HMDA") grew out of public concern over credit
shortages in certain urban  neighborhoods  and provides public  information that
will help show whether  financial  institutions  are serving the housing  credit
needs of the neighborhoods  and communities in which they are located.  The HMDA
also  includes  a  "fair  lending"  aspect  that  requires  the  collection  and
disclosure  of data about  applicant  and borrower  characteristics  as a way of
identifying   possible    discriminatory    lending   patterns   and   enforcing
anti-discrimination statutes.

Finally, the Real Estate Settlement Procedures Act ("RESPA") requires lenders to
provide borrowers with disclosures  regarding the nature and cost of real estate
settlements. Also, RESPA prohibits certain abusive practices, such as kickbacks,
and places  limitations on the amount of escrow  accounts.  Penalties  under the
above laws may include fines, reimbursements and other penalties.

Due to heightened  regulatory  concern related to compliance with the CRA, TILA,
FH Act, ECOA, HMDA and RESPA generally, the Bank may incur additional compliance
costs or be required to expend  additional  funds for  investments  in its local
community.

K.       Recent and Proposed Legislation

The operations of North Bay and the Bank are subject to extensive  regulation by
federal,  state, and local  governmental  authorities and are subject to various
laws  and  judicial  and  administrative  decisions  imposing  requirements  and
restrictions on part or all of their respective  operations.  North Bay believes
that it is in substantial  compliance in all material  respects with  applicable
federal,  state, and local laws, rules and regulations.  Because the business of
North Bay and the Bank is highly  regulated,  the  laws,  rules and  regulations
applicable to each of them are subject to regular modification and change.

From time to time, legislation is enacted which has the effect of increasing the
cost  of  doing  business,  limiting  or  expanding  permissible  activities  or
affecting  the   competitive   balance   between   banks  and  other   financial
institutions.  Proposals  to  change  the laws  and  regulations  governing  the
operations and taxation of banks and other financial institutions are frequently
made  in  Congress,  in the  California  legislature  and  before  various  bank
regulatory agencies.

Sarbanes-Oxley Act

On July 30, 2002, the President signed into law the  Sarbanes-Oxley  Act of 2002
("SOX")  implementing  legislative  reforms  intended to address  corporate  and
accounting fraud. In addition to the establishment of a new accounting oversight
board which will enforce  auditing,  quality control and independence  standards
and  will be  funded  by fees  from  all  publicly  traded  companies,  the bill
restricts  provision of both  auditing  and  consulting  services by  accounting
firms. To ensure auditor independence,  any non-audit services being provided to
an audit client will  require  pre-approval  by the  company's  audit  committee
members. In addition, the audit partners must be rotated. The Act requires chief
executive officers and chief financial officers, or their equivalent, to certify
to the  accuracy of periodic  reports  filed with the SEC,  subject to civil and
criminal  penalties if they  knowingly or willfully  violate this  certification
requirement.  In  addition,  under the Act,  legal  counsel  will be required to
report  evidence of a material  violation of the securities  laws or a breach of
fiduciary  duty by a company to its chief  executive  officer or its chief legal
officer,  and, if such officer does not  appropriately  respond,  to report such
evidence  to the audit  committee  or other  similar  committee  of the board of
directors or the board itself.

                                       14
<PAGE>


Longer  prison terms and increased  penalties  will also be applied to corporate
executives who violate federal  securities laws, the period during which certain
types of suits  can be  brought  against  a  company  or its  officers  has been
extended,  and  bonuses  issued  to top  executives  prior to  restatement  of a
company's  financial   statements  are  now  subject  to  disgorgement  if  such
restatement was due to corporate misconduct. Executives are also prohibited from
insider trading during retirement plan "blackout" periods,  and loans to company
executives are  restricted.  SOX  accelerates  the time frame for disclosures by
public  companies,  as they must  immediately  disclose any material  changes in
their financial  condition or operations.  Directors and executive officers must
also provide information for most changes in ownership in a company's securities
within two business days of the change.

SOX also  prohibits  any officer or  director  of a company or any other  person
acting under their direction from taking any action to  fraudulently  influence,
coerce,  manipulate or mislead any  independent  public or certified  accountant
engaged in the audit of the company's  financial  statements  for the purpose of
rendering the financial statement's materially misleading. SOX also requires the
SEC to prescribe  rules  requiring  inclusion of an internal  control report and
assessment by management in the annual report to stockholders.  In addition, SOX
requires that each financial  report  required to be prepared in accordance with
(or reconciled to) accounting principles generally accepted in the United States
of America and filed with the SEC reflect all  material  correcting  adjustments
that are identified by a "registered  public accounting firm" in accordance with
accounting principles generally accepted in the United States of America and the
rules and regulations of the SEC.

As directed by Section 302(a) of SOX, the Company's chief executive  officer and
chief  financial  officer  were each  required  to  certify  that the  Company's
Quarterly and Annual  Reports do not contain any untrue  statement of a material
fact.  The rules have several  requirements,  including  having  these  officers
certify that: they are responsible for  establishing,  maintaining and regularly
evaluating the effectiveness of Company's disclosure and internal controls; they
have made certain disclosures to North Bay's auditors and the audit committee of
the Board of Directors about the Company's disclosure and internal controls; and
they have included  information  in the Company's  Quarterly and Annual  Reports
about their  evaluation and whether there have been  significant  changes in the
Company's  disclosure  and  internal  controls  or in other  factors  that could
significantly  affect internal controls subsequent to the evaluation.  North Bay
is subject to the requirements with respect to internal control,  beginning with
this 2005 Annual report on Form 10-K.

USA PATRIOT Act

In the wake of the tragic  events of September  11th,  on October 26, 2001,  the
President signed the Uniting and Strengthening  America by Providing Appropriate
Tools  Required to Intercept and Obstruct  Terrorism  (USA PATRIOT) Act of 2001.
Under the USA PATRIOT Act,  financial  institutions  are subject to prohibitions
against specified  financial  transactions and account  relationships as well as
enhanced due diligence and "know your customer" standards in their dealings with
foreign financial institutions and foreign customers.  For example, the enhanced
due diligence  policies,  procedures,  and controls  generally require financial
institutions to take reasonable steps:

     o    To conduct enhanced scrutiny of account relationships to guard against
          money laundering and report any suspicious transaction;

     o    To ascertain the identity of the nominal and beneficial owners of, and
          the source of funds  deposited  into,  each account as needed to guard
          against money laundering and report any suspicious transactions;

     o    To  ascertain  for any  foreign  bank,  the  shares  of which  are not
          publicly  traded,  the identity of the owners of the foreign bank, and
          the nature and extent of the  ownership  interest  of each such owner;
          and

     o    To ascertain whether any foreign bank provides  correspondent accounts
          to other foreign banks and, if so, the identity of those foreign banks
          and related due diligence information.

Under the USA PATRIOT Act,  financial  institutions  must  establish  anti-money
laundering programs.  The USA PATRIOT Act sets forth minimum standards for these
programs, including:

     o    The development of internal policies, procedures, and controls;

     o    The designation of a compliance officer;

     o    An ongoing employee training program; and

     o    An independent audit function to test the programs.

On June 20,  2002,  the Board of  Directors  of the Bank  adopted  comprehensive
policies and procedures to address the  requirements of the USA PATRIOT Act, and
management believes that the Bank is currently in full compliance with the Act.

                                       15
<PAGE>


California Financial Information Privacy Act/Fair Credit Reporting Act

In 1970,  the federal  Fair  Credit  Reporting  Act (the  "FCRA") was enacted to
insure  the  confidentiality,  accuracy,  relevancy  and proper  utilization  of
consumer credit report information.  Under the framework of the FCRA, the United
States has developed a highly advanced and efficient  credit  reporting  system.
The   information   contained   in  that  broad  system  is  used  by  financial
institutions,  retailers  and  other  creditors  of every  size in making a wide
variety  of  decisions  regarding  financial  transactions.  Employers  and  law
enforcement  agencies have also made wide use of the  information  collected and
maintained  in  databases  made  possible  by the FCRA.  The FCRA  affirmatively
preempts  state law in a number of areas,  including  the  ability  of  entities
affiliated by common ownership to share and exchange information freely, and the
requirements  on credit  bureaus to  reinvestigate  the  contents  of reports in
response to consumer complaints, among others.

The California Financial Information Privacy Act ("CFIPA"), which was enacted in
2003,  requires a financial  institution  to provide  specific  information to a
consumer  related  to  the  sharing  of  that  consumer's   nonpublic   personal
information.  The Act would allow a consumer to direct the financial institution
not to share  his or her  nonpublic  personal  information  with  affiliated  or
nonaffiliated  companies  with which a financial  institution  has contracted to
provide financial products and services,  and would require that permission from
each such consumer be acquired by a financial  institution prior to sharing such
information.  These  provisions  are much  more  restrictive  than  the  privacy
provisions of the Financial Services  Modernization Act. Provisions of the CFIPA
are currently subject to litigation.

Congress enacted the FACT Act, ("Fair and Accurate Credit  Transaction  Act") of
2003,  which has the effect of avoiding the sunset  preemption  provision of the
Fair Credit  Reporting  Act (FCRA) that were due to expire on December 31, 2003.
The President signed the FACT Act into law on December 4, 2003. In general,  the
FACT Act amends the FCRA and, in addition,  provides that, when the implementing
regulations  have  been  issued  and  become  effective,  the FACT Act  preempts
elements  of the  California  Financial  Information  Privacy  Act.  A series of
regulations and announcements  were promulgated  during 2004,  including a joint
FTC/Federal  Reserve  announcement of effective dates for FCRA  amendments,  the
FTC's "Free Credit  Report"  rule,  revisions  to the FTC's FACT Act Rules,  the
FTC's  final  rules on  identity  theft and proof of  identity,  the FTC's final
regulation on consumer  information  and records  disposal,  and the FTC's final
summaries  and  notices.  On January  24,  2005,  the FTC issued a final rule on
prescreen notices.

Check 21 Act

The Check  Clearing  for the 21st  Century  Act  ("Check 21 Act" or "the  Act"),
enacted in late 2003,  became  effective on October 28, 2004.  The Act creates a
new negotiable instrument, called a "substitute check", which banks are required
to accept as the legal  equivalent of a paper check if it meets the requirements
of the Act.  The Act is  designed  to  facilitate  check  truncation,  to foster
innovation in the check  payment  system,  and to improve the payment  system by
shortening processing times and reducing the volume of paper checks.

 Federal Reserve Board Final Rule on Trust Preferred Securities

On March 1 the  Federal  Reserve  Board  issued a final  rule  that  allows  the
continued inclusion of trust preferred  securities in the tier 1 capital of bank
holding  companies.  Trust  preferred  securities,  however,  will be subject to
stricter quantitative limits. Key components of the final rule are:

     o    Trust  preferred  securities,  together  with other  "restricted  core
          capital elements",  can be included in a bank holding company's tier 1
          capital  up to 25% of the  sum of  core  capital  elements,  including
          "restricted core capital elements";

     o    Restricted core capital elements are defined to include:

     o    qualifying trust preferred securities;

     o    qualifying cumulative perpetual preferred stock (and related surplus);

     o    minority interest related to qualifying cumulative perpetual preferred
          stock directly issued by a consolidated U.S. depository institution or
          foreign bank subsidiary; and

     o    minority interest related to qualifying common or qualifying perpetual
          preferred stock issued by a consolidated  subsidiary that is neither a
          U.S. depository institution or foreign bank subsidiary

     o    The sum of core capital  elements will be calculated  net of goodwill,
          less any associated deferred tax liability;

     o    Internationally active bank holding companies are further limited, and
          must limit  restricted core capital elements to 15% of the sum of core
          capital elements,  including restricted core capital elements,  net of
          goodwill,  although they may include qualifying mandatory  convertible
          preferred securities up to the 25% limit;

     o    A five-year  transition period for application of quantitative limits,
          ending March 31, 2009.


                                       16
<PAGE>


L.       Other

Various other legislation,  including  proposals to overhaul the bank regulatory
system and to limit the investments that a depository  institution may make with
insured funds,  is introduced into Congress or the California  Legislature  from
time to time.  North Bay and the Bank cannot  determine the ultimate effect that
any potential legislation,  if enacted, or regulations  promulgated  thereunder,
would have upon the  financial  condition or  operations of the North Bay or the
Bank.

Item 1(a) RISK FACTORS

Our financial  results are subject to a number of risks.  The factors  discussed
below are intended to highlight risks that management believes are most relevant
to our current  operating  environment.  This listing is not intended to capture
all risks  associated  with our  business.  Additional  risks,  including  those
generally  affecting  the industry in which we operate,  risks that we currently
deem immaterial and risks  generally  applicable to companies that have recently
undertaken  similar  transactions,  may also negatively  impact our consolidated
financial position, consolidated results of operations, or liquidity.

We  depend  on  cash  dividends  from  our  subsidiary  bank to  meet  our  cash
obligations.  As a holding company, dividends from our subsidiary bank provide a
substantial  portion of our cash flow used to service the  interest  payments on
our  trust  preferred  securities  and our  other  obligations,  including  cash
dividends.  Various  statutory  provisions  restrict the amount of dividends our
subsidiary bank can pay to us without regulatory approval.

Anti-Takeover  Provisions may hinder a  non-negotiated  merger or other business
combination,  which,  in turn,  could  adversely  affect the market price of our
common stock.  Provisions of our articles of  incorporation,  bylaws and federal
banking laws,  including  regulatory approval  requirements,  could make it more
difficult  for a third party to acquire us, even if doing so would be  perceived
to be beneficial to our  shareholders.  The combination of these  provisions may
hinder a non-negotiated  merger or other business  combination,  which, in turn,
could adversely affect the market price of our common stock.

Ability of North Bay to execute its business  strategy may effect the  financial
performance  and  profitability  of  North  Bay  and  the  Bank.  The  financial
performance and profitability of North Bay will depend on its ability to execute
its strategic  plan and manage its future growth.  Moreover,  North Bay's future
performance  is  subject to a number of factors  beyond its  control,  including
pending and future federal and state banking  legislation,  regulatory  changes,
unforeseen  litigation  outcomes,  inflation,  lending and deposit rate changes,
interest  rate  fluctuations,  increased  competition  and economic  conditions.
Accordingly,  these issues could have a material  adverse  effect on North Bay's
business, financial condition, results of operations or liquidity.

North Bay's and the Bank's success depends on key personnel. North Bay's and the
Bank's success depends to a significant  extent on the management  skills of its
existing  executive  officers and directors,  many of whom have held officer and
director  positions  with  North  Bay or the Bank for  many  years.  The loss or
unavailability of any of their key executives or directors could have a material
adverse  effect on North  Bay's and the Bank's  business,  financial  condition,
results of operations or liquidity.  See also Part III, Item 10,  "Directors and
Executive Officers of Registrant".

Deterioration of local economic conditions could hurt profitability of North Bay
and the Bank.  The  operations of the Bank are primarily  located in Napa County
and surrounding areas. The operations of Solano Bank, a Division of the Bank are
primarily   located  in  Solano   County.   As  a  result  of  this   geographic
concentration,  the Bank's results  depend  largely upon economic  conditions in
these areas.  Adverse local economic  conditions in Napa and Solano counties may
have a  material  adverse  effect on the  financial  condition  and  results  of
operations of North Bay and the Bank.

Financial  services business is highly  competitive which could adversely affect
the North  Bay's and the Bank's  earnings  and  profitability.  The  banking and
financial  services  business in  California,  and in the Bank's market area, is
highly competitive.  These banks compete, or will compete,  for loans,  deposits
and customers for financial  services with other commercial  banks,  savings and
loan  associations,  securities  and brokerage  companies,  mortgage  companies,
insurance  companies,  finance companies,  money market funds, credit unions and
other nonbank  financial service  providers.  Many of these competitors are much


                                       17
<PAGE>


larger in total  assets  and  capitalization,  have  greater  access to  capital
markets and offer a broader array of financial services than the Bank. There can
be no  assurance  that  the  Bank  will be able to  compete  effectively  in its
markets,  and the  results  of  operations  of North  Bay and the Bank  could be
materially and adversely affected if the nature or level of competition changes.
See Item 1, Business - Competition."

Loan and lease losses could hurt North Bay's and the Bank's operating results. A
significant  source of risk for  financial  institutions  like North Bay and the
Bank  arises  from  the  possibility  that  losses  will  be  sustained  because
borrowers, guarantors and related parties fail to perform in accordance with the
terms of their  loans.  North Bay and the Bank  have  adopted  underwriting  and
credit monitoring  procedures and credit policies,  including  establishment and
review of the  allowance  for credit  losses;  tracking  loan  performance;  and
diversifying  their credit portfolios.  These policies and procedures,  however,
may not prevent unexpected losses which could materially  adversely affect their
results of operations.

Deterioration  of real  estate  market  could  hurt  North  Bay's and the Bank's
performance.  At December 31, 2005,  approximately  78% of the Bank's loans were
secured by real estate.  The ability of the Bank to continue to  originate  real
estate  secured  loans may be impaired by adverse  changes in local and regional
economic conditions in the real estate market,  increasing interest rates, or by
acts of nature,  including earthquakes and flooding. Due to the concentration of
real estate collateral, these events could have a material adverse impact on the
value of the collateral resulting in losses to the Bank.

We also have a  concentration  in higher risk  commercial  real estate loans. We
also  have a  high  concentration  in  commercial  real  estate  or  CRE  loans.
Approximately 54% of our lending portfolio can be classified as CRE lending. CRE
loans generally involve a higher degree of credit risk than residential mortgage
lending due,  among other  things,  to the large  amounts  loaned to  individual
borrowers.  Losses incurred on loans to a small number of borrowers could have a
material  adverse  impact on our income and  financial  condition.  In addition,
unlike residential mortgage loans, commercial real estate loans generally depend
on the cash  flow  from the  property  to  service  the  debt.  Cash flow may be
significantly affected by general economic conditions.

Banking regulators have recently issued proposed guidance regarding institutions
that  have  particularly  high   concentrations  of  CRE  within  their  lending
portfolios.  This guidance suggests that institutions that exceed certain levels
of CRE lending may be required, in the future, to maintain higher capital ratios
than  institutions  with lower  concentrations  in CRE lending.  At December 31,
2005,  the Bank's CRE level exceeded the threshold for such  concentrations.  If
and when this proposed  guidance  becomes  final,  we may be subject to enhanced
regulatory scrutiny and subject to higher capital requirements.

Interest rate fluctuations could hurt operating results. The income of North Bay
and the Bank depends to a great extent on "interest rate  differentials" and the
resulting net interest  margins;  that is, the  difference  between the interest
rates  earned on their  interest-earning  assets  such as loans  and  investment
securities,  and the interest rates paid on their  interest-bearing  liabilities
such as  deposits  and  borrowings.  These  rates are highly  sensitive  to many
factors  which  are  beyond  the  Bank's  control,  including  general  economic
conditions and the policies of various  government and regulatory  agencies,  in
particular,  the Federal  Reserve.  In  addition,  changes in  monetary  policy,
including  changes in interest rates,  influence the  origination of loans,  the
purchase of  investments  and the  generation  of deposits  and affect the rates
received on loans and investment  securities  and paid on deposits,  which could
have a material adverse effect on business,  financial  condition and results of
operations.

Government regulation and legislation could hurt business and prospects of North
Bay and the Bank.  North Bay and the Bank are  subject  to  extensive  state and
federal regulation,  supervision and legislation which govern almost all aspects
of their respective operations. Their businesses are particularly susceptible to
the  enactment  of federal  and state  legislation  which may have the effect of
increasing  or  decreasing  the cost of doing  business,  modifying  permissible
activities   or  enhancing   the   competitive   position  of  other   financial
institutions.  These  laws  are  subject  to  change  from  time to time and are
primarily  intended for the protection of consumers,  depositors and the deposit
insurance  funds and not for the  protection  of  shareholders  of bank  holding
companies  or  banks.  North  Bay  cannot  predict  what  effect  any  presently
contemplated   or  future   changes  in  the  laws  or   regulations   or  their
interpretations  would  have on its  business  and  prospects,  but it  could be
material and adverse

Environmental  liability  associated  with  commercial  lending  could result in
losses.  In the course of business,  the Bank has acquired,  and the Bank may in
the future acquire,  through  foreclosure,  properties  securing loans they have
originated or purchased which are in default. In commercial real estate lending,
there  is a  risk  that  hazardous  substances  could  be  discovered  on  these
properties.  In this event,  an affected  bank might be required to remove these
substances from the affected  properties at its sole cost and expense.  The cost
of this removal  could  substantially  exceed the value of affected  properties.


                                       18
<PAGE>


North  Bay or the  Bank,  as the case may be,  may not  have  adequate  remedies
against the prior owner or other responsible  parties or could find it difficult
or  impossible  to sell the  affected  properties.  This  could  have a material
adverse effect on North Bay's and the Bank's business,  financial  condition and
operating results.

North Bay and the Bank rely  heavily on  technology  and  computer  systems  and
computer  failure  could  result in loss of business  and  adversely  affect the
business  and  operations  of North Bay and the Bank .  Advances  and changes in
technology can significantly impact the business and operations of North Bay and
the Bank.  They may face many  challenges  including  the  increased  demand for
providing  computer  access to bank accounts and the systems to perform  banking
transactions  electronically.  North  Bay's and the  Bank's  ability  to compete
depends  on their  ability  to  continue  to adapt  technology  on a timely  and
cost-effective  basis to meet these  demands.  In addition,  the  businesses and
operations of North Bay and the Bank are  susceptible  to negative  impacts from
computer system failures,  communication  and energy  disruption,  and unethical
individuals with the  technological  ability to cause disruptions or failures of
their respective data processing systems.

Breach of information  security and technology  dependence could have a material
adverse effect on the North Bay's and the Bank's business,  financial condition,
results of operations or liquidity. Despite instituted safeguards, North Bay and
the Bank  cannot be  certain  that all of its  systems  are  entirely  free from
vulnerability to attack or other technological  difficulties or failures.  North
Bay and the Bank rely on the  services  of a variety of vendors to meet its data
processing and communication needs. If information security is breached or other
technology   difficulties  or  failures  occur,   information  may  be  lost  or
misappropriated,  services and operations  may be interrupted  and North Bay and
the Bank could be exposed to claims from  customers.  Any of these results could
have a material adverse effect on North Bay's and the Bank's business, financial
condition, results of operations or liquidity.

Item 1(b).  UNRESOLVED STAFF COMMENTS

None.

Item 2 - PROPERTIES

The Company is engaged in the banking  business through thirteen (13) offices in
Napa  County  and  Solano  County  in  Northern  California.   All  offices  are
constructed and equipped to meet prescribed security requirements.

The Company owns three branch  office  locations  and leases seven branch office
locations  and  three  administrative  facilities.  Most of the  leases  contain
multiple  renewal options and provisions for rental  increases,  principally for
changes in the cost of living index, property taxes and maintenance.


Item 3 - LEGAL PROCEEDINGS

Neither the Company nor its subsidiaries are party to any material pending legal
proceeding,  nor is their  property  the subject of any material  pending  legal
proceeding,  except routine legal proceedings  arising in the ordinary course of
their business. None of these proceedings is expected to have a material adverse
impact upon the Company's business,  consolidated  financial position or results
of operations.

Item 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of the shareholders  during the fourth
quarter of 2005.


                                       19
<PAGE>


                                     PART II

Item 5 - MARKET  FOR THE  REGISTRANT'S  COMMON  EQUITY AND  RELATED  STOCKHOLDER
MATTERS AND ISSUER'S PURCHASES OF EQUITY SECURITIES

(a) The Company's  common stock is traded on the Nasdaq  National  Market System
under the symbol NBAN effective September 3, 2002.

The following  table  (adjusted for the 2006,  2005 and 2004 stock dividends and
stock  splits)  summarizes  the  common  stock  high and low  prices  based upon
transactions of which the Company is aware:

   Quarter ended              High         Low
   -------------              ----         ---
March 31, 2004              $ 20.41      $ 18.08
June 30, 2004               $ 21.30      $ 18.74
September 30, 2004          $ 19.80      $ 16.95
December 31, 2004           $ 27.44      $ 18.02
March 31, 2005              $ 31.30      $ 24.88
June 30, 2005               $ 28.81      $ 22.88
September 30, 2005          $ 29.98      $ 23.81
December 31, 2005           $ 28.76      $ 24.86


There  may be  other  transactions  of  which  the  Company  is not  aware  and,
accordingly,  they are not reflected in the range of actual sales prices stated.
Further, quotations reflect inter-dealer prices without retail mark-up, markdown
or commission and may not represent  actual  transactions.  Additionally,  since
trading in the Company's common stock is limited, the range of prices stated are
not  necessarily  representative  of prices that would result from a more active
market.

On October 28,  2002,  the Board of  Directors  of North Bay Bancorp  declared a
dividend of one share purchase right (a "Right") for each  outstanding  share of
common  stock,  no par value of the  Company,  payable  on  December  6, 2002 to
shareholders  of record  as of  November  15,  2002.  Each  Right  entitles  the
registered  holder to purchase from the Company one  one-hundredth of a share (a
"Unit") of Series A Preferred Stock (the "Preferred Stock") of the Company, at a
price of $90.00 per Unit, subject to adjustment. The Rights are only exercisable
in the event of certain  changes in control.  The  Description  and terms of the
Rights are set forth in a Rights Agreement between the Company and Registrar and
Transfer Company, as Rights Agent.

The Company  paid cash  dividends of $0.14 per share in 2005 and $0.11 per share
in 2004.  The holders of common  stock of Bancorp are  entitled to receive  cash
dividends  when and as declared by the Board of Directors,  out of funds legally
available for the payment of dividends. The Company had a 3-for-2 stock split on
December 16, 2004.

On February  27, 2006,  the Board of  Directors of Bancorp  declared a $0.15 per
share  cash  dividend  and  a 5%  stock  dividend  payable  April  12,  2006  to
shareholders of record on March 22, 2006.

North  Bay  Bancorp  is  restricted  in  its  ability  to pay  dividends  to its
shareholders.  For a discussion of restrictions  imposed,  see  "SUPERVISION and
REGULATION - Payment of Dividends."

As of March 13,  2006,  there were 912 holders of record of North Bay  Bancorp's
common stock.

(b) Inapplicable

(c) Inapplicable

                                       20
<PAGE>


The following chart provides  information as of December 31, 2005 concerning the
Company's Stock Option Plan, the Company's only equity compensation plan:

<TABLE>
<CAPTION>
                                                                                         Number of securities remainging
                                           Number of Securities     Weighted avearage      available for future issuance
                                          to be issued exercise     exercise price of      under equity compensation
                                         of outstanding options,   outstanding options,    plans (excluding secutities
                                          warrants, and rights     warrants and rights      reflecting in column(a)
Plan Category                                       a                     b                         c
--------------------                      --------------------     -------------------      -----------------------
<C>                                              <C>                    <C>                       <C>
Equity compensation plan
  approved by security holder                    534,419                $ 15.47                   234,486
Equity compensation plans not
  approved by security holders-                       --                     --                       --
Total                                            534,419                $ 15.47                   234,486
</TABLE>


                                       21
<PAGE>


Item 6 -    SELECTED FINANCIAL DATA

The following table presents a summary of selected  consolidated  data for North
Bay Bancorp and subsidiaries (the Company) for the five years ended December 31,
2005.  This  information   should  be  read  in  conjunction  with  Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
consolidated  financial  statements and notes thereto appearing elsewhere in the
annual report:
<TABLE>
<CAPTION>

                                                  (In 000's except share and per share data)
                                     2005          2004           2003           2002           2001
                                 ----------     ----------     ----------     ----------     ----------
<S>                              <C>            <C>            <C>            <C>            <C>
STATEMENTS OF OPERATIONS DATA:
Interest income                  $   33,865     $   26,585     $   22,251     $   21,179     $   20,307
Interest expense                      5,082          3,543          2,995          3,691          5,887
                                 ----------     ----------     ----------     ----------     ----------
Net interest income                  28,783         23,042         19,256         17,488         14,420
Provision for loan losses               815            620            238            576            447
                                 ----------     ----------     ----------     ----------     ----------
Net interest income after
 provision loan losses               27,968         22,422         19,018         16,912         13,973
Noninterest income                    3,941          4,198          3,847          3,111          2,691
Noninterest expense                  21,171         18,536         16,315         14,316         11,955
Provision for income taxes            4,105          3,020          2,179          1,999          1,687
                                 ----------     ----------     ----------     ----------     ----------
Net income                       $    6,633     $    5,064     $    4,371     $    3,708     $    3,022
                                 ==========     ==========     ==========     ==========     ==========

BASIC PER SHARE DATA: (1)
  Earnings per share             $     1.63     $     1.26     $     1.11     $     0.97     $     0.81
  Average shares outstanding      4,074,163      4,011,405      3,939,386      3,825,886      3,744,370

DILUTED PER SHARE DATA: (1)
  Earnings per share             $     1.56     $     1.23     $     1.08     $     0.95     $     0.80
  Average shares outstanding      4,254,100      4,116,168      4,034,495      3,921,395      3,785,347

BALANCE SHEET DATA:
  Total assets                   $  602,697     $  562,063     $  459,482     $  416,458     $  326,806
  Net loans                         409,504        373,629        303,139        234,337        183,548
  Total deposits                    516,393        484,493        406,445        367,803        292,441
  Shareholders' equity               50,053         44,134         39,441         35,343         29,980
</TABLE>

_________________
(1)  All per share amounts have been adjusted to reflect the 5% stock  dividends
     declared January 29, 2001,  January 28, 2002, January 27, 2003, January 26,
     2004,  January 24, 2005 and  February  27, 2006 as well as a 3-for-2  stock
     split declared November 22, 2004.


                                       22
<PAGE>


Item 7 - Management's Discussion and Analysis of Financial Condition and Results
of Operations


FORWARD LOOKING STATEMENT

This Annual Report contains statements relating to future results of the Company
that are considered to be "forward looking statements" within the meaning of the
Private  Securities  Litigation  Reform Act of 1995. These statements relate to,
among   other   things,    loan   loss   reserve   adequacy,    accounting   for
available-for-sale  securities  and deferred  assets,  simulation  of changes in
interest rates and litigation results. Actual results may differ materially from
those  expressed  or  implied  as a result of  certain  risks and  uncertainties
including,  but not limited to,  changes in political  and economic  conditions,
interest rate fluctuations, competitive product and pricing pressures within the
Company's  markets,  equity and fixed income market  fluctuations,  personal and
corporate customers' bankruptcies,  inflation,  acquisitions and integrations of
acquired businesses,  technological  change,  changes in law, changes in fiscal,
monetary, regulatory and tax policies, monetary fluctuations, success in gaining
regulatory  approvals  when  required as well as other risks and  uncertainties.
These  forward  looking  statements  speak  only as of the date on  which  these
statements  are made,  and the Company  undertakes  no  obligation to update any
forward looking  statement to reflect events or circumstances  after the date on
which these  statements are made or to reflect the  occurrence of  unanticipated
events.

Moreover,  wherever phrases such as or similar to "in Management's  opinion", or
"Management  considers"  are used,  these  statements  are as of and based  upon
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 risk and  uncertainties  noted above with respect to forward
looking statements.


This discussion should be read in conjunction with the financial  statements and
the notes included herein.

OVERVIEW

Bancorp,  organized November 1, 1999, is the holding company for the Bank, which
is a wholly owned  subsidiary.  Effective  January 15, 2005,  the Company merged
Solano Bank, previously a wholly owned subsidiary of Bancorp, into the Bank. The
Company  reported net income of $6,633,000,  or $1.56 per diluted share, in 2005
compared with $5,064,000, or $1.23 per diluted share, in 2004 and $4,371,000, or
$1.08 per diluted  share,  in 2003,  equating  to a return on average  assets of
1.11%, .97% and 1.00% for years 2005, 2004 and 2003, respectively. The return on
average  equity was 13.94% in 2005  compared  with 12.34% and 11.70% in 2004 and
2003, respectively.

As of December 31,  2005,  total assets were  $602,697,000  compared  with total
assets of  $562,063,000  at year end 2004,  representing  a 7% increase in 2005.
Deposits  increased 7% in 2005 and loans,  net of the allowance for loan losses,
increased 10%.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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 quarterly  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,  using 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,   with  each   component   having  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 consider them in determining the adequacy of 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  future 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 allowance


                                       23
<PAGE>


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  reserved,  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
shareholders' equity.

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
reporting purposes and such amounts as measured by tax laws and regulations.  We
use an estimate of future  earnings to support our position  that the benefit of
our  deferred  tax  assets  will be  realized.  If future  income  should  prove
non-existent  or less than the amount of the deferred tax assets  within the tax
years to which they may be applied,  the asset may not be  realized  and our net
income will be reduced.

SUMMARY OF EARNINGS

Return on Equity and Assets

The following  sets forth key ratios for the periods  ending  December 31, 2005,
2004 and 2003.

                                                      2005     2004       2003
                                                      ----     ----       ----
Net income as a percentage of average assets          1.11%     0.97%     1.00%
Net income as a percentage of average equity         13.94%    12.34%    11.70%
Average equity as a percentage of average assets      7.99%     7.84%     8.50%
Dividends declared per share as a percentage of
 net income per share                                 9.15%    11.27%    11.17%


Net Interest Income

Net  interest  income  before   provision  for  loan  losses  was   $28,783,000,
$23,042,000 and $19,256,000 in 2005, 2004 and 2003,  respectively,  representing
increases of 25% in 2005 and 20% in 2004.

                                       24
<PAGE>


The following  table sets forth average daily  balances of assets,  liabilities,
and  shareholders'  equity during 2005, 2004 and 2003, along with total interest
income  earned and expense  paid,  and the average  yields  earned or rates paid
thereon and the net interest  margin for the years ended December 31, 2005, 2004
and 2003.
<TABLE>
<CAPTION>

                                                                            ($ In 000's)
                                        December 31, 2005                  December 31, 2004                    December 31, 2003
                                        -----------------                  -----------------                    -----------------
                                Average     Income/     Rate/     Average      Income/      Rate/      Average     Income/     Rate/
                                Balance     Expense    Yield      Balance     Expense      Yield       Balance     Expense     Yield
                                -------     -------    -----      -------     -------      -----       -------     -------     -----
<S>                           <C>          <C>         <C>      <C>          <C>            <C>       <C>         <C>          <C>
ASSETS
Loans  (1)                    $ 402,770    $ 28,516    7.08%    $ 352,863    $ 22,828       6.47%     $ 277,220   $ 18,782     6.78%
Investment securities:
Taxable                          90,039       3,621    4.02%       78,007       2,945       3.78%        78,457      2,535     3.23%
Non-taxable (2)                  14,874         541    5.51%       13,719         522       5.04%        16,948        725     5.65%
                              ---------     -------    ----     ---------     -------       ----      ---------      -----     ----
Total loans and
 investment securities          507,683      32,678    6.49%      444,589      26,295       5.95%       372,625     22,042     5.98%

Due from banks, time                100           3    3.00%          100           3       3.00%           100          2     2.00%
Federal funds sold               32,861       1,184    3.60%       19,710         287       1.46%        18,104        207     1.14%
                              ---------     -------    ----     ---------     -------       ----      ---------      -----     ----
Total earning assets            540,644      33,865    6.32%      464,399      26,585       5.76%       390,829     22,251     5.75%

Cash and due from banks          34,664                            38,602                                28,216
Allowance for loan losses        (4,535)                           (3,814)                               (3,403)
Premises and equipment, net       9,847                            10,724                                11,125
Accrued interest receivable
 and ossets                      15,285                            13,417                                12,157
                              ---------                         ---------                             ---------
Total assets                  $ 595,905                         $ 523,328                             $ 438,924
                              =========                         =========                             =========


LIABILITIES AND
 SHAREHOLDERS' EQUITY
Deposits:
Interest bearing demand       $ 238,681     $ 1,947    0.82%    $ 215,854     $ 1,201       0.56%     $ 176,724      $ 916     0.52%
Savings                          42,157          91    0.22%       41,858          97       0.23%        32,678        107     0.33%
Time                             79,384       1,752    2.21%       76,114       1,290       1.69%        77,198      1,430     1.85%
                              ---------     -------    ----     ---------     -------       ----      ---------      -----     ----
Total deposits                  360,222       3,790    1.05%      333,826       2,588       0.78%       286,600      2,453     0.86%

Borrowings                       29,310       1,292    4.41%       23,325         955       4.09%        10,750        542     5.04%
                              ---------     -------    ----     ---------     -------       ----      ---------      -----     ----
Total interest bearing
 liabilities                    389,532       5,082    1.30%      357,151       3,543       0.99%       297,350      2,995     1.01%
                                            -------    ----                   -------       ----                     -----     ----
Noninterest bearing demand      154,232                           120,777                               100,342
Accrued interest payable
 and other liabilities           4,547                              4,347                                 3,876
Shareholders' equity            47,594                             41,053                                37,356
                             ---------                          ---------                             ---------


Total liabilities and
 shareholders equity          $595,905                          $ 523,328                             $ 438,924
                              =========                         =========                             =========
Net interest income                        $ 28,783                           $ 23,042                            $ 19,256
                                           ========                           ========                            ========

Net interest income to
 average earning assets
Net interest margin (3)                                5.38%                                5.00%                              4.99%
                                                       ====                                 ====                               ====
</TABLE>

(1) Loan interest income  includes loan fee income of $1,310 in 2005,  $1,054 in
2004 and $1,119 in 2003.

(2) Average yields shown on non-taxable investment securities are presented on a
fully  taxable-equivalent  basis using the federal statutory tax rate of 34% for
all years presented. On a non-taxable - equivalent basis, the 2005 average yield
was 3.64%, 3.80% in 2004, and 4.28% in 2003.


                                       25
<PAGE>

(3) Net  interest  margin is  calculated  by dividing  net  interest  income (as
adjusted for the  non-taxable  investment  securities) by the average balance of
total earning assets for the applicable year.

The following  table sets forth a summary of the changes in interest  earned and
interest  paid in 2005 over 2004 and 2004 over 2003  resulting  from  changes in
assets and  liabilities  volumes and rates.  The change in interest  due to both
rate and volume has been included in the rate variance.
<TABLE>
<CAPTION>
                                                                    (In 000's)
                                                     2005 over 2004              2004 over 2003
                                                     --------------              --------------
                                                Volume   Rate     Total    Volume     Rate     Total
                                                ------   ----     -----    ------     ----     -----
<C>                                           <C>      <C>      <C>      <C>       <C>       <C>
INCREASE (DECREASE) IN INTEREST AND FEE INCOME
Loans                                         $ 3,231  $ 2,457  $ 5,688  $ 5,141   $ (1,095) $ 4,046
Time deposits with other
 Financial institutions                            --       --       --       --          1        1

Investment securities:
Taxable                                           458      218      676       (15)      425      410
Non-taxable (1)                                    44      (25)      19      (138)      (65)    (203)
Federal funds sold                                193      704      897        18        62       80
                                              -------  -------  -------   -------    ------   ------
Total interest and fee income                   3,926    3,354    7,280     5,006      (672)   4,334

INCREASE (DECREASE) IN INTEREST EXPENSE
Deposits:
Interest bearing Transaction accounts             136      610      746       205        80      285
Savings                                            (1)      (5)      (6)       31       (41)     (10)
Time deposits                                      52      410      462       (22)     (118)    (140)
                                              -------  -------  -------   -------    ------   ------
Total deposits                                    187    1,015    1,202       214       (79)     135

Borrowings                                        244       93      337       698      (285)     413
                                              -------  -------  -------   -------    ------   ------
Total interest expense                            431    1,108    1,539       912      (364)     548
                                              -------  -------  -------   -------    ------   ------
Net Interest income                           $ 3,495  $ 2,246  $ 5,741   $ 4,094    $ (308)  $3,786
                                              =======  =======  =======   =======    ======   ======
</TABLE>

(1) The interest earned is presented on a non taxable-equivalent basis.

Net  interest  income is  impacted  by  changes in the volume and mix of earning
assets and  interest-bearing  liabilities  and  changes in interest  rates.  The
increase in net interest  income in 2005 compared with 2004 was primarily due to
both the volume and rate increase in loans. The net interest margin increased in
2005 compared with 2004,  equating to 5.38% in 2005 compared with 5.00% in 2004.
The  Company  continues  to  enjoy  a  net  interest  margin  higher  than  peer
institutions of comparable size due to its low cost of funds.

Interest  income  increased  $7,280,000,  or 27%,  in 2005  compared  with 2004.
Increases in the volume of earning  assets  accounted  for  increasing  interest
income by $3,926,000,  and an increase of $3,354,000 was  attributable to higher
rates.  The increase in interest  income of  $4,334,000  or 20% in 2004 compared
with 2003 was primarily due to the growth in average total earning assets.

Total interest expense increased $1,539,000, or 43%, in 2005 compared with 2004.
Increases  in the volume of deposits  and other  borrowings  increased  interest
expense by  $431,000  and an  increase  of  $1,108,000  was  attributable  to an
increase in rates.  Interest  expense  increased  $548,000 in 2004 compared with
2003; the effect of volume increases accounted for $912,000 that was offset by a
decrease of $364,000, or 20%, attributable to lower rates.

                                       26
<PAGE>


Provision and Allowance for Loan Losses

Credit  risk is inherent in the  business of lending.  As a result,  the Company
maintains an Allowance for Loan Losses to absorb probable losses inherent in the
Company's  loan  portfolio.  This is  maintained  through  periodic  charges  to
earnings.  These charges are shown in the Consolidated  Statements of Operations
as provision for loan losses.  All  specifically  identifiable  and quantifiable
losses are immediately charged off against the allowance. However, for a variety
of reasons,  not all losses are  immediately  known to the Company and, of those
that are  known,  the full  extent of the loss may not be  quantifiable  at that
point in time.  The balance of the Company's  Allowance for Loan Losses is meant
to be an estimate of the probable losses inherent in the portfolio.

The  Company's  written  lending  policies,   along  with  applicable  laws  and
regulations governing the extension of credit,  require risk analysis as well as
ongoing  portfolio and credit management  through loan product  diversification,
lending limits,  ongoing credit reviews, both internal and external,  along with
approval policies prior to funding of any loan. The Company manages and controls
credit  risk  through   diversification,   close  monitoring  of  any  portfolio
concentrations,  loan limits to  individuals  and  reviewing  historical  losses
incurred by the Company.  Loans that are performing but have shown some signs of
weakness are subjected to more stringent reporting and oversight. Management has
established a monitoring system for any concentration within the portfolio.

The existing  portfolio  consists of commercial loans to businesses,  commercial
and residential real estate loans and consumer products.  The portfolio contains
variable rate loans as well as loans with rates fixed for up to ten years. Fixed
rate loans are primarily associated with real estate lending.

Assessment of the Adequacy of the  Allowance for Loan Losses and the  Allocation
Process

The Company  formally  assesses  the  adequacy of the  allowance  on a quarterly
basis.  Determination  of the  adequacy is based on ongoing  assessments  of the
probable risk in the  outstanding  loan  portfolio.  These  assessments  include
periodic  re-grading  of credits  based on changes  in their  individual  credit
characteristics including delinquency,  seasoning,  recent financial performance
of the borrower,  economic  factors,  changes in the interest rate  environment,
growth of the portfolio as a whole or by segment and other factors as warranted.
Loans are  initially  graded when  originated.  They are  re-graded  as they are
renewed,  when there is a new loan to the same borrower,  when identified  facts
demonstrate  heightened  risk of  nonpayment  or if they become  delinquent on a
frequent  basis.  Re-grading  of classified  loans will occur at least  monthly.
Confirmation  of the quality of the grading  process is obtained by  independent
credit reviews conducted by consultants  specifically hired for this purpose and
by regulatory examiners.

The  Company  evaluates  individual  loans that meet its  criteria  (loans  over
$100,000  and graded  substandard  or lower) to  determine  if  impaired  and to
establish a specific allowance as necessary. The Company establishes percentages
for the  general  allowance  requirements  for other  loans  according  to their
classification  as determined by the Company's  internal  grading system.  These
loans are identified through the following categories:

Pass  -  These  loans  consist  of the  those  graded  as  excellent,  good  and
satisfactory.

Watch  -  These  loans  are  not  classified,   but  they  contain   potentially
unsatisfactory characteristics.

Special Mention - These assets constitute an undue and unwarranted  credit risk,
but not to the point of justifying a classification to substandard.

Substandard  - These are loans  inadequately  protected by current  sound worth,
paying  capacity  of the  borrower  or  pledged  collateral.  Substandard  loans
normally have one or more  well-defined  weaknesses  that could  jeopardize  the
repayment of the debt.

Doubtful - The  possibility  of loss is extremely  high,  but because of certain
important  and  reasonably  specific  pending  factors  which  may  work  to the
advantage and strengthening of the asset,  writing down the loan and recognizing
the loss is deferred until its more exact status may be determined.

Loss - Loans classified as loss are considered  uncollectible and of such little
value that their continuance as bankable assets is not warranted.

The above,  along with specific  allocations for  concentrations in real estate,
SBA 7A program and leases,  are taken into  consideration  when  evaluating  the
Company's allowance for loan losses.

As of  December  31,  2005,  the  allowance  for  loan  losses  was  $4,924,000,
representing 1.19% of loans outstanding,  as compared with an allowance for loan
losses balance of $4,136,000 at December 31, 2004,  representing  1.10% of loans
outstanding.  During  2005,  2004 and 2003,  $815,000,  $620,000  and  $238,000,
respectively, was charged to expense for the provision for loan losses.

                                       27
<PAGE>


Non-performing Loans

The  Company's  policy is to place  loans on  nonaccrual  status  when,  for any
reason,  principal  or  interest is past due for ninety days or more unless they
are both well secured and in the process of  collection.  Any interest  accrued,
but  unpaid,  is  reversed  against  current  income.  Thereafter,  interest  is
recognized  as income only as it is collected  in cash.  As of December 31, 2005
and 2004, there were no nonaccrual  loans,  loans that were past due ninety days
or more, or troubled debt restructurings.

Historical Loan Loss & Recovery Experience

The following  table  provides a summary of the Bank's loan loss  experience for
the years ended December 31, 2005, 2004, 2003, 2002 and 2001.
<TABLE>
<CAPTION>
                                                                        ($ in 000's)
                                                                         December 31
                                           2005           2004           2003           2002           2001
                                        ---------      ---------      ---------      ---------      ---------
<S>                                     <C>            <C>            <C>            <C>            <C>
Average loans for the period            $ 402,770      $ 352,863      $ 277,220      $ 212,735      $ 174,050
Loans outstanding at end of  period       414,428        377,765        306,663        237,627        186,265
Allowance for loan losses
Balance, beginning of period                4,136          3,524          3,290          2,717          2,268
Less loans charged off:
    Real estate loans                          --             74             --             --
    Commercial loans                           --             15             --             --
    Installment loans                          33             11             12             10              4
                                        ---------      ---------      ---------      ---------      ---------
Total loans charged off                        33            100             12             10              4
Recoveries:
    Real estate loans                          --             78             --             --
    Commercial loans                           --              3             --             --
    Installment loans                           6             11              8              7              6
                                        ---------      ---------      ---------      ---------      ---------
Total recoveries                                6             92              8              7              6

Net loans charged off (recovered)              27              8              4              3             (2)

Provision for loan losses                     815            620            238            576            447
                                        ---------      ---------      ---------      ---------      ---------

Balance, end of period                  $   4,924      $   4,136      $   3,524      $   3,290      $   2,717
                                        =========      =========      =========      =========      =========


Net loans charged off (recovered)
  to average loans by types:
       Real estate loans                    0.000%        -0.001%         0.000%         0.000%         0.000%
       Commercial loans                     0.000%         0.003%         0.000%         0.000%         0.000%
       Installment loans                    0.007%         0.000%         0.001%         0.001%        -0.001%
Net losses (recoveries) to average
 loans outstanding                          0.007%         0.002%         0.001%         0.001%        -0.001%
</TABLE>


                                       28
<PAGE>

The following  tables,  in thousands,  summarize the allocation of the allowance
for loan losses  among loan types at December  31, 2005,  2004,  2003,  2002 and
2001.
<TABLE>
<CAPTION>
                                                                December 31, 2005
                                                                                    Percentage of Loans
(in thousands)                                 Composition     Amount Allocated for  in Each Category
                                                of Loans          Loan Losses          to Total Loans
                                                --------          -----------          --------------
<C>                                              <C>              <C>                   <C>
Commercial loans                                 $ 85,979         $  1,367              20.75%
Commercial loans secured by  real estate           23,477              138               5.66%
Installment loans                                  38,856              219               9.38%
Real estate loans                                 233,723            2,774              56.40%
Construction loans                                 32,393              426               7.82%
                                                 --------         --------              -----
Total loans outstanding                           414,428                              100.00%
Less allowance for loan losses                      4,924         $  4,924
                                                 --------
Total loans, net                                 $409,504
                                                 ========

                                                                  December 31, 2004
                                                                                    Percentage of Loans
(in thousands)                                 Composition     Amount Allocated for  in Each Category
                                                of Loans          Loan Losses          to Total Loans
                                                --------          -----------          --------------


Commercial loans                                 $ 67,068         $    926              17.80%
Commercial loans secured by  real estate           26,447              278               7.00%
Installment loans                                  36,339              221               9.60%
Real estate loans                                 220,316            2,397              58.30%
Construction loans                                 27,595              314               7.30%
                                                 --------         --------              -----
Total loans outstanding                           377,765                              100.00%
Less allowance for loan losses                      4,136         $  4,136
                                                 --------
Total loans, net                                 $373,629
                                                 ========

                                                                   December 31, 2003
                                                                                    Percentage of Loans
(in thousands)                                 Composition     Amount Allocated for  in Each Category
                                                of Loans          Loan Losses          to Total Loans
                                                --------          -----------          --------------

Commercial loans                                 $ 45,991         $    801              15.00%
Commercial loans secured
 by  real estate                                   33,519              186              10.90%
Installment loans                                  28,860              158               9.40%
Real estate loans                                 163,088            2,018              53.20%
Construction loans                                 35,205              361              11.50%
                                                 --------         --------              -----
Total loans outstanding                           306,663                              100.00%
Less allowance for loan losses                      3,524         $  3,524
                                                 --------
Total loans, net                                 $303,139
                                                 ========

                                                                   December 31, 2002
                                                                                    Percentage of Loans
(in thousands)                                 Composition     Amount Allocated for  in Each Category
                                                of Loans          Loan Losses          to Total Loans
                                                --------          -----------          --------------

Commercial loans                                 $ 46,061         $    587              19.40%
Commercial loans secured by  real estate           16,991              294               7.20%
Installment loans                                  24,102              272              10.10%
Real estate loans                                 131,167            1,688              55.20%
Construction loans                                 19,306              449               8.10%
                                                 --------         --------              -----
Total loans outstanding                           237,627                              100.00%
Less allowance for loan losses                      3,290         $  3,290
                                                 --------
Total loans, net                                 $234,337
                                                 ========

                                                                   December 31, 2001
                                                                                    Percentage of Loans
(in thousands)                                 Composition     Amount Allocated for  in Each Category
                                                of Loans          Loan Losses          to Total Loans
                                                --------          -----------          --------------

Commercial loans                                $ 29,730         $    632              16.00%
Commercial loans secured by real estate            7,930               71               4.30%
Installment loans                                 20,301              259              10.90%
Real estate loans                                106,851            1,588              57.30%
Construction loans                                21,453              167              11.50%
                                                 --------         --------              -----
Total loans outstanding                          186,265                              100.00%
Less allowance for loan losses                     2,717         $  2,717
                                                 --------
Total loans, net                                $183,548
                                                ========
</TABLE>


                                       29
<PAGE>

The  increase  in the  allowance  for loan losses was due  primarily  to overall
growth  in the loan  portfolio  and  related  inherent  risk of loss.  Net loans
charged  off were  $27,000 in 2005  compared  with net charge  offs of $8,000 in
2004.

Management recognizes that the estimation of probable losses in the portfolio is
not a  science  and  therefore  the  current  Allowance  for Loan  Losses is not
expected to be equal to the result of the assessment.  It is expected,  however,
that the  assessment  will  demonstrate  that the actual reserve is adequate for
coverage of probable loan losses in the existing  portfolio.  To the extent that
the  current  allowance  is  deemed   insufficient  to  cover  the  estimate  of
unidentified  losses,  management  will record an additional  provision for loan
loss.  If the  allowance is greater than appears to be required at that point in
time, the provision expense may be adjusted accordingly.

Based on the current conditions of the loan portfolio,  management believes that
the  $4,924,000  allowance  for loan losses at December  31, 2005 is adequate to
absorb  potential  losses  inherent in the loan  portfolio.  No assurance can be
given, however, that adverse economic conditions or other circumstances will not
result in increased losses in the portfolio.


In the course of examination, regulators may require the Company to increase its
amount in its allowance for loan losses based on  information  available to them
at the time of their evaluation.


Noninterest Income

Details of noninterest income are as follows:

                                                 (In 000's)
                                        2005        2004          2003


Service charges and other fees        $ 2,073     $ 2,249      $ 1,645
Gain on sale of investment
 securities, net                           --         262          637
Other income                            1,868       1,687        1,565
                                      -------     -------      -------
   Total                              $ 3,941     $ 4,198      $ 3,847
                                      =======     =======      =======


Noninterest income for year 2005 decreased $257,000,  or 6%, compared with 2004.
The decline  reflects a decrease in service charge income resulting from reduced
non-sufficient funds (NSF) check activity. In addition, no securities gains were
recorded  in 2005  compared  with  the  securities  gains of  $262,000  in 2004.
Increases  during  2004  compared  with  2003  were  $351,000,  or 9%.  Gains on
securities  transactions  in  2004  and  2003  were  primarily  due  to  selling
securities  with less than one year remaining to maturity to provide funding for
loans or to reinvest in securities with a longer  duration and higher  effective
yield to maturity.

Noninterest Expense

Details of noninterest expense are as follows:

                                                (In 000's)
                                     2005         2004         2003
Salaries and related benefits      $ 11,171     $ 9,993      $ 8,795
Occupancy                             1,787       1,487        1,289
Equipment                             2,037       2,018        1,703
Other                                 6,176       5,038        4,528
                                   --------    --------     --------
   Total                           $ 21,171    $ 18,536     $ 16,315
                                   ========    ========     ========

Salaries  and  benefits  expense  increased  12%  and  14%  in  2005  and  2004,
respectively,  from the previous  year.  The  increases  were  primarily  due to
increases in the number of full-time equivalent  employees,  which has increased
from  approximately  131 at year-end 2001 to 167 at year-end 2005 as the Company
has continued to grow its operations.


The 20%  increase  in  occupancy  expense  during  2005  compared  with 2004 was
primarily due to having vacant space in the Vacaville  office  building owned by
the Company and to opening a branch  office in American  Canyon in August  2004.
The 15% increase in occupancy  expense in 2004  compared with 2003 was primarily
in rent and  depreciation  associated  with  opening a new  branch  in  American
Canyon.

                                       30
<PAGE>


Equipment  expense  increased 1% in 2005 compared with 2004. The 18% increase in
2004 compared to 2003 was primarily due to the Company  reversing  approximately
$168,000  in accrued  maintenance  fees  during  2003 as the result of  settling
litigation with a former software  supplier and additional costs associated with
maintaining ATMs.

The key components of other expenses are as follows:

                                             (In 000's)
                                   2005         2004          2003
Professional services           $ 2,558       $ 1,240       $ 1,387
Business promotion                  561           658           554
Stationery & supplies               499           393           380
Insurance                           269           320           224
Other                             2,289         2,427         1,983
                                -------       -------       -------
   Total                        $ 6,176       $ 5,038       $ 4,528
                                =======       =======       =======

Professional services increased  $1,318,000,  or 106%, in 2005 compared with the
prior year primarily due to increases in consulting  and audit costs  associated
with Sarbanes-Oxley  compliance work. The 11% decrease in 2004 was primarily due
to lower legal fees,  offset by  increased  audit  expense.  Business  promotion
expense  decreased 15% in 2005  compared with 2004.  This decrease was primarily
due to a decrease in advertising  costs.  The 19% increase in 2004 compared with
2003 was primarily the result of increased  marketing  expenditures.  Stationery
and  supplies  expense  increased  27% and 3% in  2005  and  2004  respectively,
reflecting  overall volume  increases and increased  costs  associated  with the
opening of a branch office in American Canyon in August 2004. Insurance expenses
decreased 16% in 2005  compared to a 43% increase in 2004.  The decrease in 2005
was due to a decrease in workers  compensation  insurance costs. The increase in
2004 was due to  increases  in  volumes  and  number  of  locations,  as well as
increases in workers'  compensation  costs.  Other expenses decreased 6% in 2005
compared to an increase of 22% in 2004.  The decrease in 2005 was  primarily due
to decreases in postage and dues and subscription expenses. The increase in 2004
was primarily due to increased  expenses for loans,  postage,  courier services,
conferences and other miscellaneous expenses.


Provision for Income Taxes
The Company reported a provision for income taxes of $4,105,000,  $3,020,000 and
$2,179,000 for years 2005, 2004 and 2003, respectively. These provisions reflect
accrual  for taxes at the  applicable  rates for Federal  and  California  state
income taxes based upon reported  pre-tax income and adjusted for the beneficial
effect of the Company's  investment in qualified  municipal  securities and life
insurance  products.  The Company has not been subject to an alternative minimum
tax (AMT).


BALANCE SHEET

Total  assets  as  of  December  31,  2005  were   $602,697,000   compared  with
$562,063,000  as of year-end 2004,  representing a 7% increase in 2005 and a 22%
increase in 2004. Total deposits grew from  $484,493,000 in 2004 to $516,393,000
in 2005,  representing  a 7%  increase,  compared  with an 19% increase in 2004.
Total loans,  net of allowance  for loan losses,  grew to  $409,504,000  in 2005
compared to  $373,629,000 in 2004,  representing a 10% increase  compared with a
23%  increase in 2004.  Investment  securities  increased  from  $99,383,000  at
December 31, 2004 to $129,278,000 at December 31, 2005, a 30% increase, compared
with an increase of 8% during 2004.

                                       31
<PAGE>


The following  table provides a summary of the  maturities and weighted  average
yields of debt securities as of December 31, 2005.
<TABLE>
<CAPTION>
                                                                          December 31, 2005
                                                        After One Year        Afters Five Years
                                  One Year or Less         to Five             to Ten Years    After Ten Years         Total
                                  ----------------         -------             ------------    ---------------         -----
                                           Weighted-             Weighted-          Weighted-           Weighted-          Weighted-
(Dollars in Thousands)           Carrying  Average     Carrying  Average  Carrying  Average   Carrying  Average  Carrying  Average
                                  Value     Yield       Value     Yield     Value    Yield     Value     Yield     Value    Yield
                                  -----     -----       -----     -----     -----    -----     -----     -----     -----    -----
<S>                             <C>          <C>      <C>          <C>    <C>          <C>    <C>        <C>    <C>         <C>
Securities of the U.S. Treasury
 and other government
 agencies                       $ 14,106     3.02%    $ 12,567     3.38%  $     --     0.00%  $     --   0.00%  $  26,673   3.19%
Mortgage-backed securities(1)         --       --        1,278     5.20%     6,093     5.22%    59,611   4.72%     66,982   4.78%
Municipal securities (2)           3,566     3.19%      13,438     5.04%    11,851     4.93%        --   0.00%     28,855   4.77%
Equity securities                     --       --           --       --         --       --      6,768   3.03%      6,768   3.03%
                               ---------   ------     --------    -----   --------   ------   --------   -----  ---------  -----

Total                           $ 17,672     3.06%    $ 27,283     4.28%  $ 17,944     5.03%  $ 66,379   4.24%  $ 129,278   4.20%
                               =========   ======     ========    =====   ========   ======   ========   =====  =========   =====
</TABLE>

(1) The maturity of mortgage-backed securities is based on contractual maturity.
The average expected life is approximately five years.

(2) Yields shown are taxable-equivalent.

Loans

As of December 31, 2005, net loans increased $35.9 million from year-end 2004, a
10%  increase.  On an  average  balance  basis,  the  Company's  loan  portfolio
increased  $49.9  million,  or 14% over the  average  balance in 2004.  In 2004,
average net loan balances  increased  from the prior year by $75.6  million,  or
27%.  The  increases  in 2005 and 2004 were due to  strong  loan  demand  and an
aggressive calling program.


Composition of Loans

                                 LOAN PORTFOLIO

The  following  table shows the  composition  of loans as of December  31, 2005,
2004, 2003, 2002 and 2001.

                                          (In 000's)
                        2005         2004        2003       2002         2001
                        ----         ----        ----       ----         ----
Commercial Loans      $ 85,979    $ 67,068    $ 45,991    $ 46,061    $ 29,730
Commercial Loans
 Secured by  Real       23,477      26,447      33,519      16,991       7,930
Installment Loans       38,856      36,339      28,860      24,102      20,301
Real Estate Loans      233,723     220,316     163,088     131,167     106,851
Construction Loans      32,393      27,595      35,205      19,306      21,453
                        ------      ------      ------      ------      ------
                       414,428     377,765     306,663     237,627     186,265
Less - Allowance
  for Loan Losses        4,924       4,136       3,524       3,290       2,717
                        ------      ------      ------      ------      ------
                      $409,504    $373,629    $303,139    $234,337    $183,548
                      ========    ========    ========    ========    ========

                                       32
<PAGE>


The following table shows the maturity  distribution of loans as of December 31,
2005.

<TABLE>
<CAPTION>
                                                                                  (In 000's)
                                                     IN ONE YEAR       AFTER ONE THROUGH
                                                       OR LESS              FIVE YEARS       AFTER FIVE YEARS       TOTAL
                                                     --------             --------            ---------         ---------
<S>                                                  <C>                  <C>                  <C>              <C>
Commercial (Including Real Estate Secured)           $ 21,899             $ 42,014             $ 45,543         $ 109,456
Installment                                             2,664                4,021               32,171            38,856
Real Estate                                            13,366               42,691              177,666           233,723
Construction                                           29,588                1,635                1,170            32,393
                                                     --------             --------            ---------         ---------
Total                                                $ 67,517             $ 90,361            $ 256,550         $ 414,428
                                                     ========             ========            =========         =========
</TABLE>


The following  table shows maturity  sensitivity to changes in interest rates as
of December 31, 2005.
<TABLE>
<CAPTION>
                                                                          (In 000's)
                                                    IN ONE YEAR     AFTER ONE THROUGH
                                                      OR LESS            FIVE YEARS       AFTER FIVE YEARS       TOTAL
                                          -------------------------------------------------------------------------------
<S>                                                   <C>                <C>                  <C>              <C>
Loans With Fixed Interest Rates                       $  2,934           $ 53,264             $  39,177        $  95,375
Loans With Floating Interest Rates                      64,583             37,097               217,373        $ 319,053
                                                      --------           --------             ---------        ---------
                                                      $ 67,517           $ 90,361             $ 256,550        $ 414,428
                                                      ========           ========             =========        =========
</TABLE>

Nonaccrual, Past Due and Restructured Loans

There were no  nonaccrual  loans as of December 31, 2005,  2004,  2003,  2002 or
2001. The Company held no OREO at December 31, 2005,  2004,  2003, 2002 or 2001.
There were no loans  accruing  interest that were 90 days or more past due as of
December 31, 2005,  2004,  2003,  2002, or 2001.  There were no loans upon which
principal  and interest  payments were 90 days past due at December 31, 2005 and
with respect to which serious doubt existed as to the ability of the borrower to
comply with the present loan payment terms.  There were no restructured loans at
December 31, 2005. See Note 1 - Loans,  in the Company's  Notes to  Consolidated
Financial Statements, for policies as it relates to nonaccrual loans.

The table  summarizing  the  allocation of the allowance for loan losses between
loan types at December 31, 2005,  2004,  2003,  2002 and 2001 is included in the
Management's  Discussion  and  Analysis  -  Assessment  of the  Adequacy  of the
Allowance for Loan Losses and the Allocation Process section of this 2005 Annual
Report.

Summary of Loan Loss Experience

A table  providing a summary of the Bank's loan loss  experience  as of December
31, 2005, 2004,  2003, 2002 and 2001 is included in the Management's  Discussion
and Analysis section of this 2005 Annual Report.

Intangible Assets

At December  31,  2005 and 2004,  the Company  had  intangible  assets  totaling
$734,000 and $0,  respectively.  The intangible  assets resulted from additional
minimum  pension  liabilities  recorded  by the  Company in 2005  related to the
Company's  supplemental  retirement plans. These intangible assets are amortized
on a straight-line basis over eight years.

                                       33
<PAGE>


Time Deposits

The following  table sets forth the maturity of time  certificates of deposit of
$100,000 or more at December 31, 2005 and 2004.

                                                     (In 000's)
                                             2005                   2004
                                  ----------------------------------------------
3 months or less                     $ 15,995      29.0%   $ 18,557       42.6%
Over 3 months through 6 months         18,791      34.0%      8,624       19.8%
Over 6 months through 12 months        14,060      25.5%      4,793       11.0%
Over 12 months                          6,381      11.6%     11,620       26.7%
-                                    --------      ----    --------       ----
Total                                $ 55,227       100%   $ 43,594        100%
                                     ========      ====    ========       ====

Borrowings

Total long-term  borrowings were $19 million at December 31, 2005. The following
table summarizes the borrowings:

                                                         ($ In 000's)
                                                  Fixed Rate Borrowings
                                        Amount    Maturity Date   Interest Rate
                                        ------    -------------   -------------
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%

There were no  short-term  borrowings at December 31, 2005 or December 31, 2004.
Short-term   borrowings   consist  primarily  of  federal  funds  purchased  and
borrowings  from the Federal Home Loan Bank of San  Francisco  (FHLB).  The Bank
maintains  collateralized lines of credit with the FHLB. Based on the FHLB stock
requirements at December 31, 2005, the lines provided for maximum  borrowings of
approximately  $161.7  million;  the Company also has available  unused lines of
credit  totaling  $17.5 million for federal funds  transactions  at December 31,
2005.

Junior Subordinated Debentures

On June 26, 2002,  the Company  formed North Bay  Statutory  Trust I (Trust),  a
Connecticut statutory business trust, for the purpose of issuing trust preferred
securities.  During June 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
December 31, 2005, the interest rate was 7.97%.  The  Securities  will mature on
June 26, 2032, but earlier redemption is permitted under certain  circumstances,
such as changes in tax or regulatory capital rules.

As a result of the  adoption of FASB  Interpretation  No. 46  (revised  December
2003),  Consolidation  of  Variable  Interest  Entities  (FIN 46R),  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,
Junior  Subordinated  Debentures.  The  Company  also  recognized  its  $310,000
investment  in the Trust,  which is recorded in  Interest  Receivable  and Other
Assets.  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.

The  Securities are redeemable in whole or in part on or after June 26, 2007, or
at any time in whole,  but not in part,  upon the occurrence of certain  events.
The Securities are included in Tier 1 capital for  regulatory  capital  adequacy
determination  purposes,  up to 25% of Tier 1  Capital.  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 the junior  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 junior subordinated debentures.

                                       34
<PAGE>


Off Balance Sheet Arrangement

The  Company  does  not have  off-balance  sheet  arrangements,  as  defined  by
Regulation  S-K. The Company does have loan  commitments  and letters of credit.
For additional  information,  please see Note 15 to the  Consolidated  Financial
Statements at Item 8 of this report.


Certain Contractual Obligations

The following chart summarizes certain contractual obligations of the Company as
of December 31, 2005:
<TABLE>
<CAPTION>

                                                                                   (In 000's)
                                                                    Less than        One to         Four to
                                                        Total        one year       three years    five years  Thereafter
                                                        -----        --------       -----------    ----------  ----------
<S>                      <C>                          <C>             <C>            <C>            <C>         <C>
FHLB loan, fixed rate of 2.24%                        $  5,000        $5,000         $    --        $   --      $     --
     payable on April 17, 2006
FHLB loan, fixed rate of 2.83%                           5,000            --           5,000            --            --
     payable on April 16, 2007
FHLB loan, fixed rate of 3.23%                           9,000            --           9,000            --            --
     payable on April 14, 2008
Junior subordinated debt, adjustable rate
     of three-month LIBOR plus 3.45%,
     callable in whole or in part by the
     Company on a quarterly basis beginning
     June 26, 2007, matures June 26, 2032.              10,310            --              --            --        10,310
Operating lease obligations                              3,690          925            1,309           782           674
Other obligations                                          353           33              320            --            --
                                                      --------        -----          -------         -----      --------
Total contractual obligations                         $ 33,353       $5,958          $15,629         $ 782      $ 10,984
                                                      ========       ======          =======         =====      ========
</TABLE>

(1) These amounts  represent known certain  payments to  participants  under the
Company's deferred  compensation and supplemental  retirement plans. See Note 13
to the consolidated financial statements at Item 8 of this report for additional
information  related to the Company's  deferred  compensation  and  supplemental
retirement plan liabilities.

Liquidity and Capital Adequacy

The  Company's  liquidity  is  determined  by the level of assets (such as cash,
federal  funds sold and  unpledged  marketable  securities  together  with other
funding  sources) that are readily  convertible to cash and cash equivalents and
other funding  sources to meet customer  withdrawal  and  borrowing  needs.  The
Company's  liquidity  position is reviewed by  management  on a regular basis to
verify  that it is  adequate  to  meet  projected  loan  funding  and  potential
withdrawal of deposits.

In addition to  investment  secutities  classified  as available  for sale,  the
Company also has  available  funding from other sources such as the Federal Home
Loan Bank and federal fund lines of credit. As of December 31, 2005, the Company
had approximately $179.2 million available from these sources for borrowing. The
Company  relies on these  funding  sources to assist in funding  loans when loan
demand outpaces deposit growth.

                                       35
<PAGE>


At year-end 2005, liquid assets (defined as cash,  Federal funds sold,  deposits
in   other    financial    institutions    and    securities    categorized   as
available-for-sale)  represented 26% of total assets, as compared with 28% as of
year-end  2004.  The level of liquid  assets at December  31,  2005  exceeds the
liquidity required by the Company's  liquidity policy.  Management expects to be
able to meet the liquidity  needs of the Company during 2006  primarily  through
balancing loan growth with corresponding  increases in deposits. The Company did
not need to rely on  borrowings  from FHLB or resort to the federal  funds lines
during 2005. For additional  information  please see Note 7 to the  Consolidated
Financial Statements.

The Company's  capital ratios  remained  relatively  steady during 2005 compared
with 2004 levels.  As of December  31,  2005,  the  Company's  total  risk-based
capital  ratio,  Tier I risk-based  capital ratio and leverage ratio were 13.0%,
12.0% and 9.9%, respectively. These compare with ratios of 12.5%, 11.6% and 9.4%
as of December 31, 2004.

In February 2006, the Company declared a 5% stock dividend and a $0.15 per share
cash  dividend  for  shareholders  of  record as of March  22,  2006.  The stock
dividend  will affect the Company's  capital and its capital  ratios only to the
extent that cash is distributed in lieu of fractional shares.  Accordingly,  the
stock dividend will not materially  impact the Company's  overall  capital.  The
cash dividend will total approximately $590,000,  equating to a reduction in the
Company's leverage ratio of approximately 0.10%.

Item 7 A - QUANTITATIVE AND QUALITATIVE DISCLOUSURE ABOUT MARKET RISK

The Company's  exposure to market risk exists primarily in interest rate risk in
the balance  sheet.  The  objective of market risk  management is to mitigate an
undue  adverse  impact on earnings and capital  arising from changes in interest
rates and other market variables.  This risk management  objective  supports the
Company's  broad objective of enhancing  shareholder  value,  which  encompasses
stable earnings growth over time.

The Board of  Directors,  through  its Asset &  Liability  Management  Committee
(ALCO), approves the ALM Policy, which governs the management of market risk and
liquidity.  ALCO is responsible for ongoing  management of interest rate risk as
well as liquidity risk, including formulation of risk management strategies. The
Chief Financial Officer is primarily  responsible for the implementation of risk
management  strategies  approved by ALCO and for operating  management of market
risk through the funding and investment activities of the Company.

The  Company  manages the market risk  associated  with our asset and  liability
management activities as described below.

Interest Rate Risk Management

ALCO  monitors  interest  rate risk  quarterly  through a  variety  of  modeling
techniques  that are used to quantify the  sensitivity  of Net  Interest  Income
(NII) and  Economic  Value of Equity  (EVE) to changes  in  interest  rates.  In
managing  interest rate risk, ALCO monitors NII sensitivity  over a twelve-month
time  horizon  and in  response  to a variety  of  interest  rate  changes.  The
Company's NII policy  measure  involves a simulation of NII in which the Company
estimates the impact that  proportional  shifts in the yield curve would have on
earnings over a twelve-month horizon, given the projected balance sheet profile.

Simulation  of NII is the primary  tool used to measure the  Company's  interest
rate risk. The NII  simulations  use a twelve-month  projected  balance sheet in
order to model the impact of  interest  rate  changes.  Assumptions  are made to
model  the  future   behavior  of  deposit  rates  and  loan  spreads  based  on
management's outlook and historical experience.

At December 31, 2005,  the NII  simulation  showed modest  asset-sensitivity  to
proportional  rate  shifts.  A +200 basis point  proportional  shift would raise
twelve-month NII by 2.03 percent, while a similar downward shift would reduce it
by 2.17 percent.  Continued  enhancements  to the  Company's  interest rate risk
modeling may make prior-year comparisons of NII less meaningful.

                                       36
<PAGE>


NII Simulation

                                               Estimated Change in
                                                       NII
Change in Interest Rates (Basis Points)       (as a % of "flat" NII)
---------------------------------------       ----------------------
          + 300                                        3.00%
          + 200                                        2.03%
          + 100                                        1.03%
        + 0 (flat)                                     0.00%
          - 100                                       (1.07%)
          - 200                                       (2.17%)
          - 300                                       (3.30%)

In addition to NII, the Company measures the sensitivity of EVE to interest rate
shocks.  EVE is reviewed  and  monitored  for its  compliance  with ALCO limits.
Consistent  with the  projected  asset-sensitivity  of earnings  over time,  the
Company's EVE shows asset-sensitivity as well.

Management  believes  that,  together,  our  NII  and  EVE  simulations  provide
management  with a  reasonably  comprehensive  view  of the  sensitivity  of our
operating  results and value profile to changes in interest rates, at least over
the measurement  horizon.  However,  as with any financial model, the underlying
assumptions  are  inherently  uncertain  and subject to  refinement  as modeling
techniques  and  theory  improve  and  historical   data  becomes  more  readily
accessible.  Consequently,  the simulation  models cannot predict with certainty
how rising or falling  interest rates might impact net interest  income.  Actual
and simulated  results will differ to the extent there are  differences  between
actual and assumed interest rate changes,  balance sheet volumes, and management
strategies, among other factors.

In general,  the core balance sheet is relatively asset sensitive,  meaning that
investments  and loans  generally  re-price more quickly than core deposits.  In
managing the interest  sensitivity  of the balance  sheet,  the Company uses the
investment securities portfolio as the primary tool to adjust the risk profile.

At December 31, 2005 and December 31, 2004,  the  securities  available for sale
portfolio totaled $122.5 million and $94.8 million,  respectively. The estimated
effective  duration of the available for sale  portfolio was 3.0 at December 31,
2005, compared to 2.8 at December 31, 2004.

Effective  duration is a measure of price  sensitivity  of a bond  portfolio  to
immediate  parallel  shifts in  interest  rates.  An  effective  duration of 3.0
suggests an expected price decline of approximately 3.0 percent for an immediate
one percent increase in interest rates.

GAP Analysis

Interest rate sensitivity is a function of the repricing  characteristics of our
portfolio   of  assets  and   liabilities.   One   aspect  of  these   repricing
characteristics is the time frame within which the  interest-bearing  assets and
liabilities  are  subject to change in  interest  rates  either at  replacement,
repricing  or   maturity.   An  analysis  of  the   repricing   time  frames  of
interest-bearing  assets and  liabilities  is sometimes  called a "gap" analysis
because it shows the gap between assets and liabilities repricing or maturing in
each of a number of periods.  Another aspect of these repricing  characteristics
is the relative magnitude of the repricing for each category of interest earning
asset and  interest-bearing  liability  given various changes in market interest
rates.  Gap analysis gives no indication of the relative  magnitude of repricing
given various changes in interest rates.  Interest rate  sensitivity  management
focuses on the maturity of assets and  liabilities  and their  repricing  during
periods of changes in market interest rates.  Interest rate sensitivity gaps are
measured as the difference  between the volumes of assets and liabilities in our
current portfolio that are subject to repricing at various time horizons.

The following  interest rate  sensitivity  table shows our repricing  gaps as of
December 31, 2005. In this table transaction deposits,  which may be repriced at
will by us, have been included in the less than 3-month category.  The inclusion
of all of the transaction  deposits in the less than 3-month repricing  category
causes us to appear liability sensitive.  Because we may reprice our transaction
deposits at will,  transaction  deposits may or may not reprice immediately with
changes in interest  rates.  In recent years of moderate  interest rate changes,
our earnings have reacted as though the gap position is slightly asset sensitive
mainly because the magnitude of  interest-bearing  liability  repricing has been
less than the magnitude of interest-earning asset repricing.  This difference in
the magnitude of asset and liability  repricing is mainly due to our strong core
deposit  base,  which  although  they  may  be  repriced  within  three  months,
historically,  the timing of their  repricing  has been longer than three months
and the magnitude of their repricing has been minimal.

                                       37
<PAGE>


Due to the limitations of gap analysis,  as described  above, we do not actively
use gap analysis in managing  interest rate risk.  Instead,  we rely on the more
sophisticated interest rate risk simulation model described above as our primary
tool in measuring and managing interest rate risk.

The following table sets forth the repricing  opportunities  for  rate-sensitive
assets and  rate-sensitive  liabilities at December 31, 2005.  Rate  sensitivity
analysis usually  excludes  noninterest-bearing  demand deposits,  which totaled
$155,320,000.   Rate-sensitive   assets  and   rate-sensitive   liabilities  are
classified by the earliest possible repricing date or maturity,  whichever comes
first.
<TABLE>
<CAPTION>
                                                                            (In 000's)
                                                              Over 3
                                              3 Months      Months to 1   Over 1 Year       Over 5
                                              or Less         Year To     To 5 Years         Years          Total
                                              -------         -------     ----------         -----          -----
<S>                                          <C>            <C>            <C>             <C>            <C>
INTEREST RATE-SENSITIVE ASSETS
Loans, gross                                 $ 152,635      $  23,258      $ 129,022       $ 109,513      $ 414,428
Interest-bearing deposits in other banks            --            100             --              --            100
Investment securities                               --         17,672         27,283          84,323        129,278
Federal funds sold                               7,170             --             --              --          7,170
                                             ---------      ---------      ---------       ---------      ---------
Total                                        $ 159,805      $  41,030      $ 156,305       $ 193,836      $ 550,976

INTEREST RATE-SENSITIVE LIABILITIES
Interest-bearing demand  Deposits            $ 277,020      $      --      $      --       $      --      $ 277,020
Time deposits >$100,000                         15,995         32,851          6,381              --         55,227
Other time deposits                             13,231         10,637          4,948              10         28,826
Other borrowings                                    --          5,000         14,000              --         19,000
Junior subordinated debentures                  10,310             --             --              --         10,310
                                             ---------      ---------      ---------       ---------      ---------
Total                                        $ 316,556      $  48,488      $  25,329       $      10      $ 390,383

Interest sensitivity gap                     $(156,751)     $  (7,458)     $ 130,976       $ 193,826      $ 160,593
                                             =========      =========      =========       =========      =========
Cumulative sensitivity gap                   $(156,751)     $(164,209)     $ (33,233)      $ 160,593
                                             =========      =========      =========       =========
As a percentage of earning assets:
Interest sensitivity gap                        -28.45%         -1.35%         23.77%          35.18%
Cumulative sensitivity gap                      -28.45%        -29.80%         -6.03%          29.15%
</TABLE>

Item 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


INDEX TO FINANCIAL STATEMENTS

                                                                           Page

Consolidated Balance Sheets as of December 31, 2005 and 2004                 39

Consolidated  Statements  of Operations  for the years ended
  December 31, 2005, 2004 and 2003                                           40

Consolidated Statements of Comprehensive Income for the years
  ended December 31, 2005, 2004 and 2003                                     41

Consolidated  Statements of Changes in Shareholders'  Equity
  for the years ended December 31, 2005, 2004 and 2003                       42

Consolidated  Statements  of Cash Flows for the years ended
  December  31, 2005, 2004 and 2003                                          43

Notes to Consolidated Financial Statements                                   44

Management's Report on Internal Control over Financial Reporting             69

Independent Registered Public Accounting Firm's Reports                      70

                                       38
<PAGE>

                                NORTH BAY BANCORP AND SUBSIDIARIES
                                   CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                                  As of December 31,
                                                                                                2005            2004
                                                                                                ----            ----
                                                                                               (Dollars in thousands)
ASSETS
<S>                                                                                          <C>            <C>
Cash and due from banks                                                                      $  28,174      $  27,342
Federal funds sold                                                                               7,170         32,865
                                                                                             ---------      ---------
Cash and cash equivalents                                                                       35,344         60,207
Time deposits with other financial institutions                                                    100            100
Investment securities                                                                          129,278         99,383
Loans, net of allowance for loan losses of $4,924 in 2005 and $4,136 in 2004                   409,504        373,629
Loans held for sale                                                                                 --          4,604
Premises and equipment, net                                                                      9,475         10,336
Interest receivable and other assets                                                            18,996         13,804
                                                                                             ---------      ---------
Total assets                                                                                 $ 602,697      $ 562,063
                                                                                             =========      =========

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits:
   Non-interest bearing                                                                      $ 155,320      $ 127,250
   Interest-bearing                                                                            361,073        357,243
                                                                                             ---------      ---------
Total deposits                                                                                 516,393        484,493
Interest payable and other liabilities                                                           6,941          4,126
Other borrowings                                                                                19,000         19,000
Junior subordinated debentures                                                                  10,310         10,310
                                                                                             ---------      ---------
Total liabilities                                                                              552,644        517,929

Commitments and contingencies (Notes 8, 13 and 15)

SHAREHOLDERS' EQUITY:
Preferred stock, no par value:  500,000 shares authorized; none issued and outstanding             --              --
Common stock, no par value: 15,000,000 shares authorized; 4,099,883 and 3,823,353 shares
   issued and outstanding at December 31, 2005 and 2004, respectively                           39,965         33,473
Accumulated other comprehensive (loss)/income                                                   (1,478)           161
Retained earnings                                                                               11,566         10,500
                                                                                             ---------      ---------
Total shareholders' equity                                                                      50,053         44,134
                                                                                             ---------      ---------
Total liabilities and shareholders' equity                                                   $ 602,697      $ 562,063
                                                                                             =========      =========
</TABLE>

Share data for all periods have been  adjusted to reflect the 5% stock  dividend
declared on February 27, 2006.

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                       39
<PAGE>


           NORTH BAY BANCORP AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>

                                                           Years ended December 31,
                                                       -------------------------------
                                                         2005        2004         2003
                                                         ----        ----         ----
                                                       (Dollars in thousands, except per
                                                                 share amounts)
<S>                                                     <C>         <C>         <C>
Interest Income
Loans, including fees                                   $28,516     $22,828     $18,782
Investment securities:
   Taxable                                                3,621       2,945       2,535
   Tax exempt                                               541         522         725
Federal funds sold                                        1,184         287         207
Time deposits with other financial institutions               3           3           2
                                                        -------     -------     -------
Total interest income                                    33,865      26,585      22,251
                                                        -------     -------     -------

Interest Expense
Deposits                                                  3,790       2,588       2,453
Other borrowings                                            552         396          11
Junior subordinated debentures                              740         559         531
                                                        -------     -------     -------
Total interest expense                                    5,082       3,543       2,995
                                                        -------     -------     -------
Net interest income                                      28,783      23,042      19,256
Provision for loan losses                                   815         620         238
                                                        -------     -------     -------
Net interest income after provision for loan losses      27,968      22,422      19,018
                                                        -------     -------     -------

Noninterest Income
Service charges and other fees                            2,073       2,249       1,645
Gain on sale of investment securities, net                    0         262         637
Other income                                              1,868       1,687       1,565
                                                        -------     -------     -------
Total noninterest income                                  3,941       4,198       3,847
                                                        -------     -------     -------

Operating Expenses
Salaries and related benefits                            11,171       9,993       8,795
Occupancy                                                 1,787       1,487       1,289
Equipment                                                 2,037       2,018       1,703
Other                                                     6,176       5,038       4,528
                                                        -------     -------     -------
Total operating expenses                                 21,171      18,536      16,315
                                                        -------     -------     -------

Income before provision for income taxes                 10,738       8,084       6,550
Provision for income taxes                                4,105       3,020       2,179
                                                        -------     -------     -------
Net income                                              $ 6,633     $ 5,064     $ 4,371
                                                        =======     =======     =======

Net income per common share - basic                     $  1.63     $  1.26     $  1.11
Net income per common share - diluted                   $  1.56     $  1.23     $  1.08
</TABLE>

Share data for all periods have been  adjusted to reflect the 5% stock  dividend
declared on February 27, 2006.

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                       40
<PAGE>


                          NORTH BAY BANCORP AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
                                                                                          Years ended December 31,
                                                                                      ---------------------------------
                                                                                          2005        2004         2003
                                                                                                 (In thousands)
<S>                                                                                   <C>          <C>          <C>
Net Income                                                                            $ 6,633      $ 5,064      $ 4,371

Other comprehensive loss:
Unrealized holding losses on available-for-sale securities                             (2,233)        (498)        (615)
Tax effect                                                                                929          204          252
                                                                                      -------      -------      -------
Unrealized holding losses on available-for-sale securities, net of tax                 (1,304)        (294)        (363)

Less: reclassification adjustment for realized gains included in net income                --         (262)        (637)
Tax effect                                                                                 --          109          264
                                                                                      -------      -------      -------
Reclassification adjustment for realized gains included in net income, net of tax          --         (153)        (373)
                                                                                      -------      -------      -------
Net change                                                                             (1,304)        (447)        (736)

Additional minimum pension liability adjustments                                         (573)          --           --
Tax effect                                                                                238           --           --
                                                                                      -------      -------      -------
Additional minimum pension liability adjustments, net of tax                             (335)          --           --
                                                                                      -------      -------      -------
Other comprehensive loss                                                               (1,639)        (447)        (736)
                                                                                      -------      -------      -------
Comprehensive income                                                                  $ 4,994      $ 4,617      $ 3,635
                                                                                      =======      =======      =======
</TABLE>

See notes to consolidated financial statements


                                       41
<PAGE>


                       NORTH BAY BANCORP AND SUBSIDIARIES
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
           For the three years ended December 31, 2005, 2004 and 2003
<TABLE>
<CAPTION>

                                                                                       Accumulated
                                                                Common Stock              Other                          Total
                                                          --------------------------  Comprehensive        Retained  Shareholders'
                                                                Shares       Amount   Income (Loss)        Earnings     Equity
                                                                ------       ------   -------------        --------     ------
                                                                         (Dollars in thousands, except share amounts)
<S>                                                          <C>            <C>           <C>           <C>           <C>
BALANCE, DECEMBER 31, 2002                                   3,355,204      $ 25,387      $  1,344      $  8,612      $35,343
Net income                                                                                                 4,371        4,371
Other comprehensive income, net of taxes:
Unrealized net losses on investment securities                                                (736)         (736)        (436)
Stock dividend                                                 167,414         2,918                      (2,933)         (15)
Cash dividend $0.11 per share of common stock                                                               (427)        (427)
Stock options exercised, including related tax benefits         77,274           905                                      905
                                                             ---------      --------      --------      --------      -------
BALANCE, DECEMBER 31, 2003                                   3,599,892      $ 29,210      $    608      $  9,623      $39,441
Net income                                                                                                 5,064        5,064
Other comprehensive income, net of taxes:
Unrealized net losses on investment securities                                                (447)                      (447)
Stock dividend                                                 179,291         3,706                      (3,729)         (23)
Cash dividend $0.11 per share of common stock                                                               (458)        (458)
Stock options exercised, including related tax benefits         44,170           557                                      557
                                                             ---------      --------      --------      --------      -------
BALANCE, DECEMBER 31, 2004                                   3,823,353      $ 33,473      $    161      $ 10,500      $44,134
Net income                                                                                                 6,633        6,633
Other comprehensive income, net of taxes:
Unrealized net losses on investment securities                                              (1,304)                    (1,304)
Minimum pension liability adjustment, net                                                     (335)                      (335)
Stock dividend                                                 193,571         4,996                      (5,012)         (16)
Cash dividend $0.14 per share of common stock                                                               (555)        (555)
Stock options exercised, including related tax benefits         82,959         1,496                                    1,496
                                                             ---------      --------      --------      --------      -------
BALANCE, DECEMBER 31, 2005                                   4,099,883      $ 39,965      $ (1,478)     $ 11,566      $50,053
                                                             =========      ========      ========      ========      =======

</TABLE>

Share data for all periods have been  adjusted to reflect the 5% stock  dividend
declared on February 27, 2006.

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                       42
<PAGE>

                 NORTH BAY BANCORP AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                       Years Ended December 31,
                                                                  2005          2004           2003
                                                                  ----          ----           ----
                                                                         (Dollars in thousands)
<S>                                                           <C>            <C>            <C>
Cash flows - operating activities
Net income                                                    $   6,633      $   5,064      $   4,371
Reconcilement of net income to net cash from operations:
Depreciation and amortization                                     1,466          1,628          1,569
Provision for loan losses                                           815            620            238
Proceeds from sale of loans held for sale                        95,863        293,296        280,225
Purchase of loans held for sale                                 (91,259)      (294,805)      (283,320)
Amortization of deferred loan fees                                 (865)          (631)          (665)
Amortization of investment securities premiums, net                  36            208          1,079
Provision for deferred income taxes                                (869)          (177)            56
Increase in cash value of bank-owned life insurance                (298)          (357)          (338)
Gain on sale of investment securities, net                            0           (262)          (637)
Changes in:
  Interest receivable and other assets                             (874)          (359)           340
  Interest payable and other liabilities                          1,508            595            543
                                                              ---------      ---------      ---------
Operating cash flows, net                                        12,156          4,820          3,461
                                                              ---------      ---------      ---------

Cash flows - investing activities
Maturities and partial paydowns on investment securities:
Available for sale                                               13,577         35,672         36,783
Held to maturity                                                      0              0          1,272
Purchases of investment securities:
Available for sale                                              (43,568)       (44,839)       (59,290)
Equity securities                                                (2,173)        (3,244)           (58)
Proceeds from sale of investment securities:
Available for sale                                                    0          4,322         34,626
Equity securities                                                     0              0             56
Loans, net                                                      (35,825)       (70,479)       (68,375)
Purchases of premises and equipment                                (605)        (1,055)        (1,678)
Purchase of bank-owned life insurance                            (1,250)             0              0
                                                              ---------      ---------      ---------
Investing cash flows, net                                       (69,844)       (79,623)       (56,664)
                                                              ---------      ---------      ---------

Cash flows -financing activities
Net increase in deposits                                         31,900         78,048         38,642
Proceeds from other borrowings                                        0         19,000              0
Proceeds from exercise of stock options                           1,496            492            644
Cash dividends on common stock                                     (571)          (481)          (442)
                                                              ---------      ---------      ---------
Financing cash flows, net                                        32,825         97,059         38,844
                                                              ---------      ---------      ---------
Net change in cash and cash equivalents                         (24,863)        22,256        (14,359)
Cash and cash equivalents at beginning of period                 60,207         37,951         52,310
                                                              ---------      ---------      ---------
Cash and cash equivalents at end of period                    $  35,344      $  60,207      $  37,951
                                                              =========      =========      =========

Supplemental disclosure of cash flow activity:
Cash paid for interest expense                                $   4,749      $   3,376      $   3,084
Cash paid for income taxes                                    $   4,465      $   3,777      $   1,345
Income tax benefit from exercise of stock options             $     382      $      65      $     261

Supplemental disclosure of noncash activities:
Unrealized loss on investment securities available for sale   $  (2,233)     $    (766)     $  (1,257)
Stock dividends                                               $   4,996      $   3,706      $   2,918
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                       43
<PAGE>


                       NORTH BAY BANCORP AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Operations
North Bay Bancorp  (Bancorp),  established  on November 1, 1999, is a registered
bank holding company headquartered in Napa, California. Bancorp's principal line
of business is serving as a holding  company for The Vintage Bank (the Bank),  a
California state chartered bank.  Effective January 15, 2005, Solano Bank, which
had previously been a separate  subsidiary of Bancorp,  was merged into the Bank
and  is now  an  operating  division.  The  Bank  operates  six  offices  in the
California  county of Napa and four offices in the California  county of Solano.
The Bank offers a full range of commercial  banking  services to individuals and
the business and  agricultural  communities.  Most of the Bank's  customers  are
retail customers and small to medium-sized businesses.

The consolidated financial statements of Bancorp and subsidiaries (collectively,
the Company) are prepared in conformity  with  accounting  principles  generally
accepted in the United States of America.  The more  significant  accounting and
reporting policies are discussed below.

Principles of Consolidation
The consolidated  financial  statements  include the accounts of Bancorp and the
Bank. All material  intercompany  transactions and accounts have been eliminated
in consolidation.

Use of Estimates in the Preparation of Financial Statements
The preparation of financial  statements in conformity  with generally  accepted
accounting  principles  in the United States of America  requires  management to
make  estimates  and  assumptions  that affect the  reported  amounts of assets,
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents
The Company  defines  cash,  due from banks,  and federal funds sold as cash and
cash equivalents for the statements of cash flows.

Investment Securities

Investments  in debt and equity  securities are classified as "held to maturity"
or "available  for sale".  Investments  classified as held to maturity are those
that the  Company  has the  ability  and intent to hold until  maturity  and are
reported at cost,  adjusted  for the  amortization  or  accretion of premiums or
discounts.  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 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 is  recognized  when
earned.  Realized  gains and losses for  investment  securities  are included in
earnings  and  are  derived  using  the  specific   identification   method  for
determining the cost of securities sold.

The Bank  invests in a  qualified  affordable  housing  project  which  provides
benefits in the form of tax credits.  The Company  accounts for this  investment
under the equity method.

The Bank is a member of the Federal Home Loan Bank of San Francisco  (FHLB) and,
as a condition of membership, the Bank is required to purchase stock. The amount
of FHLB  stock  required  to be  purchased  is based on the  borrowing  capacity
desired by the Bank.  No ready market  exists for the stock and it has no quoted
market value. The stock is redeemable at par and is valued at cost.


                                       44
<PAGE>


Loans

Loans are stated at the principal  amount  outstanding  net of unearned  income.
Nonrefundable  loan origination fees and loan origination costs are deferred and
amortized  into income over the estimated  life of the loan. The majority of the
Company's interest income is accrued on a simple interest basis.

Loans on which the accrual of interest has been  discontinued  are designated as
nonaccrual  loans.  Accrual of  interest  on loans is  discontinued  either when
reasonable  doubt  exists as to the full and timely  collection  of  interest or
principal or when a loan becomes  contractually  past due by ninety days or more
with  respect to  interest  or  principal.  When a loan is placed on  nonaccrual
status,  all interest  previously  accrued but not collected is reversed against
current period interest income. Interest accruals are resumed on such loans only
when they are brought  fully  current with respect to interest and principal and
when,  in the  judgment  of  management,  the  loans are  estimated  to be fully
collectible as to both principal and interest.  Restructured  loans are loans on
which concessions in terms have been granted because of the borrowers' financial
difficulties. Interest is generally accrued on such loans in accordance with the
new terms. The Bank defines a loan as impaired when it is probable the Bank will
be unable to collect all amounts due according to the  contractual  terms of the
loan  agreement.  Impaired  loans are  measured  based on the  present  value of
expected future cash flows discounted at the loan's original  effective interest
rate or based on the  loan's  observable  market  price or the fair value of the
collateral if the loan is collateral dependent. When the measure of the impaired
loan is less  than the  recorded  investment  in the  loan,  the  impairment  is
recorded through a valuation allowance.

Allowance for Loan Losses
The Bank maintains an allowance for loan losses at a level  considered  adequate
to provide for probable  losses  inherent in the existing  loan  portfolio.  The
allowance  is  increased  by  provisions  for loan  losses  and  reduced  by net
charge-offs.  The allowance  for loan losses is based on  estimates,  and actual
losses  may  vary  from  current   estimates.   These   estimates  are  reviewed
periodically and, as adjustments become necessary, they are reported in earnings
in the periods in which they become known.  The Bank performs  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.

Loans Held for Sale

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
are recognized through a valuation allowance by charges to income.

Other Real Estate Owned

Other real estate owned represents real estate acquired through  foreclosure and
is carried at the lower of cost or fair value less estimated selling costs.

Premises and Equipment

Premises, leasehold improvements,  furniture, fixtures and equipment are carried
at cost net of accumulated  depreciation and amortization,  which are calculated
on a straight-line  basis over the estimated  useful life of the property or the
term of the lease (if less).  Premises are depreciated over 40 years,  furniture
and fixtures are depreciated  over five to 15 years,  and equipment is generally
depreciated over three to five years.

Bank-Owned Life Insurance

The  Company  owns  bank-owned   life  insurance   policies  (BOLI)  on  certain
executives.  Typically,  the Company  purcheses single premium BOLI policies and
those premiums are recorded at their cash surrender  values.  The cash surrender
values  are  included  in other  assets.  Changes in cash  surrender  values are
included in noninterest income.

Intangible Assets

Goodwill and intangible assets acquired in a purchase  business  combination and
determined  to have an  indefinite  useful life are not  amortized,  but instead
tested for impairment at least annually. Intangible assets with estimable useful
lives are  amortized  over  their  respective  estimated  useful  lives to their
estimated residual values, and periodically reviewed for impairment.

As of  December  31,  2005,  the  Company  had  identifiable  intangible  assets
consisting of  unrecognized  prior  service costs of the Company's  supplemental
retirement  plan (minimum  pension  liabilities).  These  intangible  assets are
amortized on a straight-line basis over eight years.


                                       45
<PAGE>


The  following  table  summarizes  the  Company's   minimum  pension   liability
intangible as of December 31, 2005 and 2004.
<TABLE>
<CAPTION>

                                           December 31,                                 December 31,
(Dollars in thousands)                       2004        Additions      Reductions         2005
                                            ------       ---------      ----------        -------
<S>                                         <C>           <C>             <C>             <C>
Minimum pension liability intangible        $   --        $   734         $   --          $   734
                                            ======        =======         ======          =======
</TABLE>

Income Taxes

Income taxes are accounted for under the asset and  liability  method.  Deferred
tax assets  and  liabilities  are  recognized  for the  future tax  consequences
attributable to differences  between the financial statement carrying amounts of
existing  assets and  liabilities  and their  respective tax bases and operating
loss and tax credit  carryforwards.  Deferred  tax assets  and  liabilities  are
measured  using  enacted tax rates  expected  to apply to taxable  income in the
years in which those  temporary  differences  are  expected to be  recovered  or
settled.  The effect on deferred tax assets and  liabilities  of a change in tax
rates is recognized in income in the period that includes the enactment date.

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  (FAS  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 are:


                                                 (In 000's except share data)
                                                2005        2004        2003
                                                ----        ----        ----

NET INCOME AS REPORTED                        $ 6,633     $ 5,064     $  4,371

Total stock-based employee compensation
expense determined under the fair value
based method for all awardss, net of
related tax effects                               381         380          268
                                              -------     -------     --------
Net income pro forma                          $ 6,252     $ 4,684     $  4,103
                                              =======     =======     ========

EARNINGS PER SHARE
Reported:
Basic                                         $  1.63     $  1.26     $   1.11
Diluted                                       $  1.56     $  1.23     $   1.08
Pro forma:
Basic                                         $  1.53     $  1.17     $   1.04
Diluted                                       $  1.47     $  1.13     $   1.02

                                       46
<PAGE>


The fair value of the stock option grants used in determining  the pro forma net
income and the basic and diluted earnings per share amounts were estimated using
the Black-Scholes  option pricing model with the following  average  assumptions
for the years ended December 31, 2005, 2004 and 2003:

                                                   Years Ended December 31,
                                                    ------------------------
                                                 2005        2004        2003
                                                 ----        ----        ----
Expected term of options in years                5.0         5.0         5.0
Volatility of the Company's
  underlying common stock                       33.6%       18.2%       16.1%
Risk-free interest rate                         4.10%       3.35%       3.09%
Dividend yield                                  0.54%       0.60%       0.73%
Weighted average fair value                    $8.97       $6.94       $5.87


The Company adopted SFAS 123R on January 1, 2006 using the modified  prospective
method that  requires  compensation  expense be recorded for all unvested  stock
options at January 1, 2006.  The adoption of SFAS 123R  impacted  the  Company's
consolidated  results of  operations  and  earnings  per share  similarly to the
current pro forma disclosures under SFAS 123.


Earnings Per Common Share

Basic  Earnings  per Share  (EPS) is  computed  by  dividing  net  income by the
weighted average common shares outstanding.  Diluted EPS is computed by dividing
net income by weighted average common shares outstanding  including the dilutive
effects of potential common shares (e.g. stock options).

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


<TABLE>
<CAPTION>
                                                        (In 000's except share data)
                                                        ----------------------------
                                    Net Income    Weighted Average Shares        Per-Share Amount
                                    ----------    -----------------------        ----------------
<S>                                  <C>                       <C>                     <C>
                                                 For the year ended 2005
Basic earnings per share             $ 6,633                   4,074,163               $ 1.63
Stock options                                                    179,937
Diluted earnings per share                                     4,254,100               $ 1.56
                                                 For the year ended 2004
Basic earnings per share             $ 5,064                   4,011,405               $ 1.26
Stock options                                                    104,763
Diluted earnings per share                                     4,116,168               $ 1.23

                                                 For the year ended 2003
Basic earnings per share             $ 4,371                   3,939,386               $ 1.11
Stock options                                                     95,109
Diluted earnings per share                                     4,034,495               $ 1.08
</TABLE>

Comprehensive Income

Accounting principles generally require that recognized revenue, expenses, gains
and losses be  included in net income.  Although  certain  changes in assets and
liabilities,   such  as  unrealized  gains  and  losses  on   available-for-sale
securities,  are reported as a separate  component of the equity  section of the
balance  sheet,   such  items,   along  with  net  income,   are  components  of
comprehensive income.


The  components  of other  comprehensive  income and  related tax effects are as
follows:
<TABLE>
<CAPTION>
                                                                       Years Ended December
                                                                  2005        2004        2003
                                                                -------     ------      -------
                                                                           (in 000's)
<S>                                                             <C>         <C>         <C>
Unrealized holding losses on available-for-sale securities      $(2,233)    $ (498)     $  (615)
Tax effect                                                          929        204          252
                                                                -------     ------      -------
Unrealized holding losses on available-for-sale
  securities, net of tax                                         (1,304)      (294)        (363)
Less: reclassification adjustment for realized gains
  included in net income                                             --       (262)        (637)
Tax effect                                                           --        109          264
                                                                -------     ------      -------
Reclassification adjustment for realized gains included
  in net income, net of tax                                          --       (153)        (373)
Net change                                                       (1,304)      (447)        (736)

Change in minimum pension liability                                (573)        --           --
Tax effect                                                          238         --           --
                                                                -------     ------      -------
Change in minimum pension liability, net of tax                    (335)        --           --
                                                                -------     ------      -------
                                                                $(1,639)    $ (447)     $  (736)
                                                                =======     ======      =======
</TABLE>

The components of accumulated  other  comprehensive  (loss) / income included in
shareholders' equity, are as follows:


                                                         2005           2004
                                                      --------        ------
                                                              (in 000's)
Net unrealized (loss) gain on
  available-for-sale securities                       $ (1,956)       $  274
Tax effect                                                 813          (113)
                                                      --------        ------
Unrealized holding (losses) gains on
  available-for-sale securities, net of tax             (1,143)          161

Minimum pension liability                                 (573)           --
Tax effect                                                 238            --
                                                      --------        ------
Minimum pension liability, net of tax                     (335)           --
                                                      --------        ------
Accumulated other comprehensive (loss) / income       $ (1,478)       $  161
                                                      ========        ======


Derivative instruments

Derivative  instruments,  including certain derivative  instruments  embedded in
other  contracts  and for hedging  activities,  are required to be recognized as
either  assets or  liabilities  in the  statements  of  financial  position  and
recorded  at fair value.  The  Company  does not  currently  utilize  derivative
instruments in its operations and does not engage in hedging activities.


                                       47
<PAGE>


Recent Accounting Pronouncements

In December 2004, the Financial  Accounting  Standards  Board (FASB) issued FASB
Statement of Financial Accounting Standards No. 123 (revised 2004),  Share-Based
Payment (SFAS 123R),  which replaces SFAS No. 123,  Accounting  for  Stock-Based
Compensation, (SFAS 123) and supersedes APB Opinion No. 25, Accounting for Stock
Issued to Employees.  SFAS 123R requires all share-based  payments to employees,
including  grants of employee stock  options,  to be recognized in the financial
statements based on their fair values beginning with the first interim reporting
period of the Company's  fiscal year beginning  after June 15, 2005,  with early
adoption  encouraged.  The pro  forma  disclosures  previously  permitted  under
SFAS123 no longer will be an alternative to financial statement recognition. The
Company  adopted  SFAS 123R on January 1, 2006  using the  modified  prospective
method  ("modified   prospective   application").   Under  modified  prospective
application, as it is applicable to the Company, SFAS 123R applies to new grants
and to grants  modified,  repurchased,  or  cancelled  after  January  1,  2006.
Additionally,  compensation  cost  for the  portion  of  grants  for  which  the
requisite  service has not been  rendered  (generally  referring  to  non-vested
grants) that are  outstanding  as of January 1, 2006 must be  recognized  as the
remaining  requisite service is rendered during the period of and/or the periods
after the adoption of SFAS 123R. The attribution of compensation  cost for those
earlier grants will be based on the same method and on the same  grant-date fair
values  previously  determined  for  the  pro  forma  disclosures  required  for
companies that did not adopt the fair value  accounting  method for  stock-based
employee compensation.

During 2005,  the Board of Directors  approved the grant of 25,200 stock options
to certain employees that provided for immediate vesting. The Board of Directors
believed  it  was in the  best  interest  of the  shareholders  to  provide  for
immediate  vesting,  as it will have a positive impact on future earnings of the
Company  by  reducing  the impact of  recording  compensation  expense  upon the
implementation  of SFAS 123R.  At December  31, 2005,  the 25,200 stock  options
granted in 2005 had a weighted-average  exercise price of $25.81 and represented
approximately 0.62% of common shares outstanding.

Based on the stock-based compensation awards outstanding as of December 31, 2005
for which the requisite service was not fully rendered prior to January 1, 2006,
the  Company   expects  to  recognize   total  pre-tax   compensation   cost  of
approximately $563,000,  related to outstanding stock option grants, during 2006
- 2008 of which approximately  $85,000 is expected to be recognized in the first
quarter of 2006, in accordance  with the accounting  requirements  of SFAS 123R.
Future  levels  of   compensation   cost   recognized   related  to  stock-based
compensation  awards  (including  the  aforementioned  expected costs during the
period  of  adoption)  maybe  impacted  by  new  awards  and/or   modifications,
repurchases and  cancellations  of existing awards before and after the adoption
SFAS 123R.

In May 2005,  the FASB issued FASB Statement of Financial  Accounting  Standards
No. 154,  Accounting Changes and Error Corrections,  (SFAS 154) a Replacement of
APB  Opinion  No. 20 and FASB  Statement  No. 3.  SFAS 154  establishes,  unless
impracticable,  retrospective application as the required method for reporting a
change  in   accounting   principle  in  the  absence  of  explicit   transition
requirements specific to a newly adopted accounting principle.  Previously, most
changes in accounting  principle  were  recognized  by including the  cumulative
effect of changing to the new  accounting  principle in net income of the period
of the  change.  Under  SFAS 154,  retrospective  application  requires  (i) the
cumulative effect of the change to the new accounting principle on periods prior
to those  presented  to be  reflected  in the  carrying  amounts  of assets  and
liabilities  as of  the  beginning  of  the  first  period  presented,  (ii)  an
offsetting  adjustment,  if any, to be made to the  opening  balance of retained
earnings  (or other  appropriate  components  of equity)  for that  period,  and
(iii)financial  statements  for each  individual  prior  period  presented to be
adjusted  to reflect  the direct  period-specific  effects of  applying  the new
accounting principle.  Special retroactive application rules apply in situations
where it is impracticable to determine either the period-specific effects or the
cumulative  effect of the  change.  Indirect  effects of a change in  accounting
principle  are  required to be  reported  in the period in which the  accounting
change  is made.  SFAS 154  carries  forward  the  guidance  in APB  Opinion  20
"Accounting  Changes,"  requiring   justification  of  a  change  in  accounting
principle on the basis of  preferability.  SFAS 154 also carries forward without
change the guidance contained in APB Opinion 20, for reporting the correction of
an  error  in  previously  issued  financial  statements  and  for a  change  in
accounting   estimate.   SFAS  154  is  effective  for  accounting  changes  and
corrections of errors made in fiscal years beginning after December 15, 2005.

Reclassifications

Certain amounts  previously  reported in the 2004 and 2003 financial  statements
have  been   reclassified   to   conform   to  the  2005   presentation.   These
reclassifications  did not  affect  previously  reported  net  income  or  total
shareholders' equity.


                                       48
<PAGE>


NOTE 2 - INVESTMENT SECURITIES

The  amortized  cost and  carrying  value  of  investments  in debt  and  equity
securities at December 31, 2005 and 2004 are summarized in the following tables:

<TABLE>
<CAPTION>
                                                             December 31, 2005
                                           -----------------------------------------------
                                           Amortized   Unrealized   Unrealized    Carrying
(Dollars in thousands)                       Cost       Gains         Losses       Value
                                           --------     --------     --------     --------
<S>                                          <C>        <C>          <C>          <C>
Available-for-sale securities:
Securities of the U.S. Treasury
  and other government agencies            $ 27,231     $     --     $    558     $ 26,673
Mortgage-backed securities                   68,238           48        1,304       66,982
Municipal securities                         28,997          159          301       28,855
                                           --------     --------     --------     --------
Total available-for-sale securities        $124,466     $    207     $  2,163      122,510
                                           ========     ========     ========     ========

Equity securities:
Federal Home Loan Bank stock                                                         2,021
Federal Reserve Bank stock                                                             747
CRA mutual fund                                                                      2,000
Low income housing tax credit fund                                                   2,000
                                                                                  --------
Total investment securities                                                       $129,278
                                                                                  ========
</TABLE>
<TABLE>
<CAPTION>
                                                             December 31, 2004
                                           -----------------------------------------------
                                           Amortized   Unrealized   Unrealized    Carrying
(Dollars in thousands)                       Cost       Gains         Losses       Value
                                           --------     --------     --------     --------
<S>                                        <C>          <C>          <C>          <C>
Available-for-sale securities:
Securities of the U.S. Treasury
  and other government agencies            $ 39,335     $     61     $    255     $ 39,141
Mortgage-backed securities                   40,289          203          116       40,376
Municipal securities                         14,890          435           54       15,271
                                           ---------    --------     --------     --------
Total available-for-sale                   $ 94,514     $    699     $    425       94,788
                                           =========    ========     ========     ========

Equity securities:
Federal Home Loan Bank stock                                                         1,932
Federal Reserve Bank stock                                                             663
CRA mutual fund                                                                      2,000

                                                                                  --------
Total investment securities                                                       $ 99,383
                                                                                  ========
</TABLE>


                                       49
<PAGE>


The following table shows fair values and unrealized losses of securities in the
available-for-sale  portfolio  at  December  31,  2005,  by  length of time that
individual securities in each category have been in a continuous loss position:

<TABLE>
<CAPTION>
                                                             December 31, 2005
                              --------------------------------------------------------------------------
                              Less than twelve months   Twelve months or longer           Total
                              -----------------------    -----------------------  ----------------------
                                Fair      Unrealized       Fair      Unrealized     Fair       Unrealized
(Dollars in thousands)          Value       Losses        Value(1)     Losses       Value        Losses
                               --------     --------      -------     --------    ---------     --------
<S>                            <C>          <C>          <C>          <C>          <C>          <C>
U.S. Government and agency
  obligations                  $  6,704     $     64     $ 19,969     $    494     $ 26,673     $    558
Mortgage-backed securities
  and collateralize              44,600          650       20,966          654       65,566        1,304
Municipal obligations            14,866          135        6,575          166       21,441          301
                               --------     --------     --------     --------     --------     --------
Totals                         $ 66,170     $    849     $ 47,510     $  1,314     $113,680     $  2,163
                               ========     ========     ========     ========     ========     ========
</TABLE>


(1) As of December  31, 2005,  the Company  identified  twenty-four  investments
totaling $47.5 million that had  unrealized  losses of $1.3 million for a period
of greater than twelve months.  Of the  twenty-four  investments,  $20.0 million
related  to  seven   securities   classified  as  U.S.   Government  and  agency
obligations, $21 million related to six securities classified as mortgage-backed
securities and collateralized  mortgage  obligations and $6.6 million related to
eleven  securities  classified as municipal  obligations.  The unrealized losses
associated  with  these  securities  were due  solely  to market  interest  rate
movements  and the Company has the ability and intent to hold these  investmetns
until a market  recovery or  maturity,  thus,  the  impairment  was deemed to be
temporary. Market valuations and impairment analysis on assets in the investment
portfolio are reviewed and monitored on an ongoing basis.

The amortized cost and estimated  carrying value of debt  securities at December
31,2005 by contractual  maturity are shown below.  Actual  maturities may differ
from  contractual  maturities  because  borrowers  may have the right to call or
prepay obligations with or without call or prepayment penalties. At December 31,
2005,  the  Company  had  investments  in  mortgage-backed  securities  with  an
amortized  cost basis  totaling  $68,238,000.  The  contractual  maturities,  or
principal  repayments,  of these  securities  will follow the  repayment  of the
underlying   mortgages.   For  purposes  of  the  following  table,  the  entire
outstanding balance of these mortgage-backed  securities is categorized based on
final  maturity  date. At December 31, 2005,  the Company  estimates the average
life of these mortgage-backed  securities to be approximately 4.8 years. Average
life is defined as the weighted average time span to principal  repayment,  with
the amount of the principal  paydowns (both  scheduled and  unscheduled)  as the
weights.

                                            Available-for-sale
                                      ------------------------------
(Dollars in thousands)                Amortized Cost  Carrying Value
                                      --------------  --------------
Within one year                         $  17,828      $  17,672
After one but within five years            27,731         27,283
After five but within ten years            18,061         17,944
Over ten years                             60,846         59,611
                                        ---------      ---------
Total                                   $ 124,466       $122,510
                                        =========      =========


As of  December  31,  2005  and  2004,  securities  carried  at  $4,719,000  and
$5,763,000,  respectively, were pledged to secure public deposits as required by
law.

There were no sales of available-for-sale securities during 2005. Total proceeds
from the  sale of  securities  available-for-sale  during  2004  and  2003  were
$4,322,000 and $34,626,000,  respectively.  Gross gains of $262,000 and $637,000
were realized on those sales in 2004 and 2003, respectively.


                                       50
<PAGE>


NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES

At December 31, 2005 and 2004,  the loan  portfolio  consisted of the following;
net of deferred loan fees of $1,448,000, and $1,485,000, respectively:

                                                            (In 000's)
(Dollars in thousands)                              2005               2004
                                                    ----               ----

Real estate loans                                $ 233,723          $ 220,316
Installment loans                                   38,856             36,339
Construction loans                                  32,393             27,595
Commercial loans secured by real estate             23,477             26,447
Commercial loans                                    85,979             67,068
                                                 ---------          ---------
Total Outstanding Loans                            414,428            377,765
Less allowance for loan losses                       4,924              4,136
                                                 ---------          ---------
Total                                            $ 409,504          $ 373,629
                                                 =========          =========

There were no loans on  nonaccrual  status at December  31, 2005 or December 31,
2004.  There was no interest  foregone during 2005, 2004 or 2003. As of December
31,  2005 and  2004,  there  were no loans  90 days or more  past due but  still
accruing interest. There were no restructured loans during 2005 or 2004.

Changes in the allowance for loan losses are as follows:

                                                        (In 000's)
(Dollars in thousands)                         2005         2004         2003
                                             -------      -------      -------
Balance, beginning of year                   $ 4,136      $ 3,524      $ 3,290
Provision for loan losses                        815          620          238
Loans charged off                                (33)        (100)         (12)
Recoveries of loans previously charged off         6           92            8
                                             -------      -------      -------
Balance, end of year                         $ 4,924      $ 4,136      $ 3,524
                                             =======      =======      =======


As of December 31, 2005, 2004 and 2003 there were no impaired loans.

Interest  payments  received on impaired  loans are recorded as interest  income
unless  collection of the remaining  recorded  investment is doubtful,  in which
case payments received are recorded as reductions of principal.


                                       51
<PAGE>


NOTE 4 - PREMISES AND EQUIPMENT

Premises and equipment at December 31, 2005 and 2004 consisted of the following:


                                                 (In 000's)
                                                Accumulated      Net
                                                Depreciation &   Book
                                        Cost    Amortization    Value
                                        ----    ------------    -----
2005
Land                                  $ 2,800     $    --      $ 2,800
Premises                                5,241       1,298        3,943
Furniture, fixtures and equipment       9,084       7,056        2,028
Leasehold improvements                  1,677         973          704
                                      -------     -------      -------
Total                                 $18,802     $ 9,327      $ 9,475
                                      =======     =======      =======

2004
Land                                  $ 2,800     $    --      $ 2,800
Premises                                5,223       1,119        4,104
Furniture, fixtures and equipment       8,537       6,102        2,435
Leasehold improvements                  1,869         872          997
                                      -------     -------      -------
Total                                 $18,429     $ 8,093      $10,336
                                      =======     =======      =======


Depreciation  and  amortization  expense,  included  in  occupancy  expense  and
equipment expense,  was $1,466,000,  $1,628,000 and $1,569,000 in 2005, 2004 and
2003, respectively.


NOTE 5 - DEPOSITS

Following is a summary of deposits at December 31, 2005 and 2004:

                                                  (In 000's)
                                              2005        2004
                                           --------     --------
Non-interest bearing demand                $155,320     $127,250
NOW and savings                             148,336      151,053
Money market                                128,684      128,884
Time certificates of deposit:
   Denominations of less than $100,000       28,826       33,712
   Denominations of $100,000 or more         55,227       43,594
                                           --------     --------
Total                                      $516,393     $484,493
                                           ========     ========


Interest  expense on time  certificates  of deposits  greater than  $100,000 was
$1,194,000, $785,000 and $757,000 for 2005, 2004 and 2003, respectively.

                                       52
<PAGE>


At December 31, 2005,  the  scheduled  maturities of total time deposits were as
follows:

                                            (In 000's)
                                    Year      Total
                                    ----      -----
                                    2006    $ 72,714
                                    2007       5,546
                                    2008       2,402
                                    2009       1,373
                                    2010       2,008
                                    2011          --
                                    2012          10
                                            --------
                                    Total   $ 84,053
                                            ========

NOTE 6 - OTHER BORROWINGS

Total other  borrowings  were $19 million at December  31, 2005.  The  following
table summarizes the borrowings:

                   Fixed Rate Borrowings at December 31, 2005

                                                  ($ in 000's)
                                       Amount      Maturity Date   Interest Rate
                                       ------      -------------   -------------
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%

There were no  short-term  borrowings at December 31, 2005 or December 31, 2004.
Short-term   borrowings   consist  primarily  of  federal  funds  purchased  and
borrowings from the FHLB. The Company maintains  collateralized  lines of credit
with the FHLB. The Company  pledges both loans and investment  securities to the
FHLB as needed  to secure  borrowings.  At  December  31,  2005  $18,079,000  in
investment  securities were pledged to the FHLB.  There were no loans pledged to
secure the other  borrowings  at December  31,  2005 or 2004.  Based on the FHLB
stock  requirements  at December  31,  2005,  these lines  provided  for maximum
borrowings  of  approximately  $161.7  million;  the Company also has  available
unused  unsecured  lines of credit  totaling  $17.5  million for  federal  funds
transactions at December 31, 2005.

NOTE 7 - JUNIOR SUBORDINATED  DEBENTURES

On June 26, 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  June  2002,  the Trust  issued  $10,310,000  in
floating rate Cumulative Trust Preferred Securities (Securities). The Securities
bear interest at a rate of 3-month Libor plus 3.45% and had an initial  interest
rate of  5.34%;  as of  December  31,  2005 the  interest  rate was  7.97%.  The
Securities  will mature on June 26, 2032,  but earlier  redemption  is permitted
under certain circumstances, such as changes in tax or regulatory capital rules.

The junior subordinated  debenture issued by the Trust is redeemable in whole or
in part on or after  June 26,  2007,  or at any time in whole,  but not in part,
upon the  occurrence of certain  events.  The  Securities are included in Tier 1
capital for  regulatory  capital  adequacy  determination  purposes,  subject to
certain  limitations.  The  Company  fully and  unconditionally  guarantees  the
obligations of the Trust with respect to the issuance of the Securities.

Subject to certain  exceptions  and  limitations,  the Company may, from time to
time, defer the junior  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 junior subordinated debentures.


                                       53
<PAGE>


NOTE 8 - COMMITMENTS AND CONTINGENCIES (See also NOTE 15)
The Company leases premises for its various  offices.  Total rent on such leases
was $923,000, $833,000 and $662,000 in 2005, 2004 and 2003, respectively, and is
included in occupancy and equipment expenses.  The total commitments at December
31, 2005 under non-cancelable operating leases are as follows:

                                                  (In 000's)
                                    Year            Total
                                    ----            -----
                                    2006           $   925
                                    2007               737
                                    2008               572
                                    2009               418
                                    2010               364
                              Thereafter               674
                                                   -------
           Future minimum lease payments           $ 3,690
                                                   =======

The Company has entered into employment  agreements with certain officers of the
Company providing  severance to the officers in the event of a change in control
of the Company and  termination  for other than cause.  Other  employees  losing
their  job  on  account  of a  reduction  in  force,  branch  closing,  position
elimination or displacement  by reason of a business  combination or sale may be
eligible to receive severance pursuant to the Company's employee handbook.

NOTE 9 - SHAREHOLDERS' EQUITY

The Company  declared 5% stock dividends on January 27, 2003,  January 26, 2004,
January 24, 2005 and February 27, 2006 as well as a 3-for-2 stock split November
22, 2004. All prior periods have been restated to reflect the stock split.


NOTE 10 - STOCK OPTIONS

The  Company has a stock  option  plan under which it may grant up to  1,441,724
options.  The Company has granted  1,374,691  options through December 31, 2005.
The option  exercise price equals the stock's market price on the date of grant.
The options vest over various  periods not in excess of five years from the date
of grant and  expire  five to ten years  from the date of  grant.  The  security
holders have approved the equity compensation plan.

A summary of the status of the Company's stock option plan at December 31, 2005,
2004 and 2003 and stock option activity during the years then ended is presented
in the table below:
<TABLE>
<CAPTION>
                                                2005                2004                  2003
                                                ----                ----                  ----
                                                    Weighted             Weighted              Weighted
                                                    Exercise             Exercise              Exercise
                                       Shares        Price    Shares      Price    Shares       Price
                                      -------      -------   -------    -------   -------      ------
<S>                                   <C>          <C>       <C>        <C>       <C>          <C>
Outstanding at beginning of year      617,408      $ 14.74   526,676    $ 12.58   499,332      $10.58
Granted                                25,200        25.81   146,605      21.10   143,447       15.14
Exercised                             (85,985)       12.96   (46,753)      6.64   (85,878)       7.10
Cancelled                             (22,205)       16.71    (9,119)      8.60   (30,224)       9.59
                                      -------      -------   -------    -------   -------      ------
Outstanding at end of year            534,419      $ 15.47   617,408    $ 14.74   526,676      $12.58
                                      =======      =======   =======    =======   =======      ======
Exercisable at end of year            354,837      $ 14.58   283,907    $ 12.89   199,075      $11.14
                                      =======      =======   =======    =======   =======      ======
</TABLE>

                                       54
<PAGE>

The following table summarizes  information  about stock options  outstanding at
December 31, 2005:
<TABLE>
<CAPTION>
                                            Options Outstanding                      Options Exercisable
                                            -------------------                      -------------------
                                            Weighted-/Average    Weighted-                       Weighted-
                            Number            Remaining          Average          Number         Average
  Range of                Outstanding      Contractual Life      Exercise       Exercise at      Exercise
  Exercise               at 12/21/05          (In years)          Price         12/31/2005        Price
  --------               -----------          ----------          -----         ----------        -----
<C>                       <C>                  <C>              <C>               <C>           <C>
$ 9.92 - $14.09            260,803              5.11             $ 11.46           223,495       $ 11.30
$14.83 - $19.03            121,308              6.07             $ 16.06            45,720       $ 15.97
$20.79 - $27.87            152,308              6.29             $ 21.88            85,622       $ 22.36
                           -------              ----             -------           -------       -------
                           534,419              6.74             $ 15.47           354,837       $ 14.58
                           =======              ====             =======           =======       =======
</TABLE>

NOTE 11 - OTHER NONINTEREST INCOME AND EXPENSE

The  components  of Other  Noninterest  Income for the years ended  December 31,
2005, 2004 and 2003 were as follows:

                                                          (In 000's)
                                                 2005        2004       2003
                                               -------    -------   --------
ATM surcharge                                  $   439      $ 371      $ 279
Increase of cash value on insurance policies       298        357        338
Merchant services income                           512        433        293
Commission on sale of non- deposit products        283        247        214
Commission on sale of mortgage products             31         45        232
Other                                              305        234        209
                                               -------    -------   --------
Total                                          $ 1,868    $ 1,687   $ 1,565
                                               =======    =======   ========

The  components of Other  Noninterest  Expense for the years ended  December 31,
2005, 2004 and 2003 were as follows:

                                                     (In 000's)
                                           2005         2004        2003
                                         -------      -------    --------
Professional services                    $ 2,558      $ 1,240    $ 1,387
Business promotions                          561          658        554
Stationary & supplies                        499          393        380
Insurance                                    269          320        224
Other                                      2,289      $ 2,427      1,983
                                         -------      -------    --------
Total                                    $ 6,176      $ 5,038    $ 4,528


                                       55
<PAGE>

NOTE 12 - INCOME TAXES

The  provision  (benefit) for federal and state income taxes for the years ended
December 31, 2005, 2004 and 2003 consisted of:

                                               (In 000's)
                                2005             2004            2003
                                ----             ----            ----
CURRENT
    Federal                  $ 3,692          $ 2,186         $ 1,521
    State                      1,282            1,011             602
                             -------          -------         -------
                               4,974            3,197           2,123
DEFERRED
    Federal                     (720)             (13)             70
    State                       (149)            (164)            (14)
                             -------          -------         -------
                                (869)            (177)             56
                             -------          -------         -------
Total                        $ 4,105          $ 3,020         $ 2,179
                             =======          =======         =======

Deferred tax assets and liabilities result from differences in the timing of the
recognition of certain income and expense items for tax and financial accounting
purposes. The sources of these differences and the amount of each are as follows
as of December 31, 2005 and 2004:

                                                     (In 000's)
                                                 2005            2004
                                              ------------------------
DEFERRED TAX ASSETS
   Allowance for loan losses                  $ 1,989         $ 1,690
   Deferred compensation                          850             658
   Unrealized loss on securities                  813              --
   State income tax                               397             301
   Additional minimum pension liability           238              --
   Depreciation                                    85              --
   Other                                           59
                                              ------------------------
                                              $ 4,431         $ 2,649
DEFERRED TAX LIABILITIES
   Unrealized gain on securities              $    --         $   113
   FHLB Stock Dividend                            122              88
   Accumulated accretion on
     investment securities                        185             189
   Depreciation                                    --             147
   Leases                                         296             287
   Other                                           --               1
                                              -------         --------
                                              $   603         $   825
                                              -------         --------
   Net deferred tax asset                     $ 3,828         $ 1,824
                                              =======         ========

The  Company  believes  that a valuation  allowance  is not needed to reduce the
deferred  tax assets as it is more likely than not that the  deferred tax assets
will be realized through recovery of taxes previously paid and/or future taxable
income.

                                       56
<PAGE>


The total tax  differs  from the  federal  statutory  rate of 34% because of the
following:
<TABLE>
<CAPTION>
                                                                                          (In 000's)
                                                                     2005                   2004                  2003
                                                                     ----                   ----                  ----
                                                             Amount      Rate       Amount      Rate       Amount     Rate
<S>                                                         <C>         <C>        <C>         <C>       <C>          <C>
Tax provision at statutory rate                             $ 3,651     34.00%     $ 2,748     34.00%    $ 2,227      34.00%

Interest on obligations of states and
  political subdivisions exempt from federal taxation          (194)    -1.81%        (192)    -2.40%       (233)     -3.50%
State franchise taxes                                           751      6.99%         559      6.90%        382       5.80%
Life insurance policies                                        (101)    -0.94%        (121)    -1.50%       (115)     -1.80%
Other, net                                                       (2)    -0.02%          26      0.40%        (82)     -1.20%
                                                            -------     -----      -------     -----     -------      ------
Total                                                       $ 4,105     38.23%     $ 3,020     37.40%    $ 2,179      33.30%
                                                            =======     ======     =======     ======    =======      ======

</TABLE>
NOTE 13 - RETIREMENT PLANS

401(k) and Profit Sharing Plan

The  Company  offers a 401(k)  and  profit  sharing  plan  into  which  eligible
employees may elect to defer a portion of their  eligible  compensation,  not to
exceed Internal Revenue Service limitations.  The Company matches the employees'
contributions  at a rate set by the  Board of  Directors  (currently  50% of the
first 5% of deferral of an  individual's  eligible  compensation).  The matching
contributions  are made in cash and vest over the first six years of employment.
The Company makes  discretionary  contributions  to the profit sharing plan that
are set by the Board of  Directors  each  year.  Amounts  charged  to  operating
expenses  under  these  plans  representing  the  Company's  contributions  were
$460,000,  $301,000 and $415,000 for the years ended December 31, 2005, 2004 and
2003, respectively.

Deferred Compensation Plan

The Company has a deferred compensation plan for directors that allows directors
of the Company to defer all or a portion of their compensation.  The Company has
purchased insurance on the lives of some of the participants and intends to hold
these  policies  until  death  as a  cost  recovery  of the  Company's  deferred
compensation obligations of $723,000 and $601,000 at December 31, 2005 and 2004,
respectively.  Earnings  credits on the deferred  balances  totaling  $38,000 in
2005, $33,000 in 2004 and $26,000 in 2003 are included in noninterest expense.

Supplemental Retirement Plan

The Company has a  supplemental  retirement  plan  covering key  executives  and
directors  ("Plan").  The Plan is a  nonqualified  defined  benefit  plan and is
unsecured  and  unfunded  and there are no Plan  assets.  The  deferred  benefit
represents a stated amount for key executives and directors that generally vests
over a stated  service period and is reduced for early  retirement.  The Company
has purchased  insurance on the lives of the directors and executive officers in
the plan and intends to use the cash values of these policies  ($10,053,000  and
$8,505,000 at December 31, 2005 and 2004 respectively) to pay the retirement and
death benefit  obligations.  If the life insurance contract is terminated by the
Company,  the Company will have the  obligation to pay the  retirement and death
benefits. The accrued pension obligation was $1,337,000 and $922,000 at December
31, 2005 and 2004, respectively,  and is included in "Interest Payable and Other
Liabilities".  Accordingly,  the  plan had  additional  minimum  liabilities  of
$1,307,000  as of December 31, 2005 and $0 at December  31,  2004.  Due to these
additional   minimum   liabilities,   the  plan  also  had   accumulated   other
comprehensive  expense  before  taxes of $573,000 at December 31, 2005 and $0 at
December 31, 2004. The measurement date of the plan is December 31.

On  October  1,  2005,  the  Company  established  the 2005  North  Bay  Bancorp
Supplemental  Executive Retirement Plan ("2005 SERP"). The 2005 SERP is designed
to memorialize the Company's  supplemental executive retirement plan pursuant to
which the Company entered into Executive  Supplemental  Compensation  Agreements
("Prior  Agreements").  Participants  who  were  eligible  to  receive  benefits
pursuant to the Prior  Agreements will have their benefits  provided by the 2005
SERP.

                                       57
<PAGE>


The following table sets forth the supplemental retirement plan's status:

                                                      December 31,  December 31,
                                                      ------------  ------------
                                                          2005          2004
                                                        -------        -----
                                                        (Dollars in thousands)
Change in projected  benefit obligation:
Projected benefit obligation at beginning of year       $   922        $ 700
Service cost                                                135          187
Interest cost                                               130           49
Actuarial (gain)/loss                                       619          (14)
Plan amendment                                              838            -
Benefits paid                                                 -            -
                                                        -------        -----
Projected benefit obligation at end of year             $ 2,644        $ 922
                                                        =======        =====


                                                      December 31,  December 31,
                                                          2005          2004
                                                        -------        ------
                                                        (Dollars in thousands)
Change in Plan assets:
Fair value of Plan assets at beginning of year          $    --       $    --
                                                        -------       -------
Fair value of Plan assets at end of year                $    --       $    --
                                                        =======       =======

Unfunded status                                         $(2,644)      $  (922)
Unrecognized prior service cost                             734            --
Unrecognized net actuarial loss/(gain)                      573            --
                                                        -------       -------
Net amount recognized                                   $(1,337)      $  (922)
                                                        =======       =======

Accrued benefit liability                               $(2,644)      $  (922)
Intangible asset                                            734            --
Accumulated other comprehensive expense                     573            --
                                                        -------       -------
Net amount recognized                                   $(1,337)      $  (922)
                                                        =======       =======

Weighted-average assumptions at December 31:
Discount rate                                              5.40%         7.00%
Rate of compensation increase                               N/A           N/A
Expected return on Plan assets                              N/A           N/A


                                       58
<PAGE>


The following  benefit  payments,  which reflect  anticipated  future events, as
appropriate, are expected to be paid over the following years:

                 Benefit
    Year        Payments
    ----        --------
               (Dollars in
                thousands)
    2006           $ 30
    2007             83
    2008             93
    2009             95
    2010            105
  2011-2015       1,076


The  elements  of pension  costs for the  supplemental  retirement  plan were as
follows:

                                                     December 31,  December 31,
                                                         2005         2004
                                                         ----         ----
                                                       (Dollars in thousands)
Components of net periodic benefits cost:
Service cost                                             $135         $187
Interest cost                                             130           49
Prior service cost                                        104           --
Amortization of loss/(gain)                                46           --
                                                         ----         ----
Net periodic benefit cost                                 415          236
Expense due to special termination benefits                --           --
                                                         ----         ----
Total expense                                            $415         $236
                                                         ====         ====

The net periodic pension cost was determined using the following assumptions:
<TABLE>
<CAPTION>
                                                                  Year ended       Year ended
                                                                 December 31,     December 31,
                                                                     2005             2004
                                                                     ----             ----
                                                                     (Dollars in thousands)
<S>                                                                  <C>              <C>
Discount rate in determining expense                                 5.50%            7.00%
Discount rate in determining benefit obligation at year end          5.40%            7.00%
Rate of increase in future compensation levels for
   determining expense                                                N/A              N/A
Rate of increase in future compensation levels for
   determining benefit obligation at year end                         N/A              N/A
Expected return on Plan assets                                        N/A              N/A
</TABLE>

The unrecognized prior service costs are amortized on a straight-line basis over
eight  years  and the ten  percent  corridor  method  is  used to  amortize  the
cumulative  unrecognized  net gain or loss  over  the  average  expected  future
service  of those  expected  to receive  benefits  under the plan.  The  average
projected future service is 5.62 years.

NOTE 14 - RELATED PARTY TRANSACTIONS

In the ordinary course of business, the Bank makes loans to directors,  officers
and principal  shareholders on substantially the same terms,  including interest
rates and collateral,  as those for comparable  transactions  with  unaffiliated
persons. An analysis of net loans to related parties for the year ended December
31, 2005 is as follows:

                                          (In 000's)
Balance at beginning of year              $ 14,418
     Additions                               7,979
     Repayments                             11,168
                                          ---------
Balance at end of year                    $ 11,229
                                          =========

Total undisbursed commitments as of December 31, 2005 were $7,953,000.

A law firm in which one of the  Company's  directors and one of its officers are
principals serves as the Company's  general counsel.  During 2005, 2004 and 2003
fees of $137,000, $195,000 and $196,000 respectively, were paid to this firm.


                                       59
<PAGE>
NOTE 15 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

The Bank makes  commitments to extend credit in the normal course of business to
meet the financing  needs of their  customers.  Commitments to extend credit are
agreements  to  lend to a  customer  as long as  there  is no  violation  of any
condition  established  in  the  contract.   Commitments  generally  have  fixed
expiration dates or other termination  clauses and may require payment of a fee.
Since many of the  commitments  are expected to expire without being drawn upon,
the  total  commitment  amount  does  not  necessarily   represent  future  cash
requirements.

The Bank is  exposed  to credit  loss,  in the event of  non-performance  by the
borrower,  in the  contract  amount  of the  commitment.  The Bank uses the same
credit  policies  in  making   commitments  as  they  do  for   on-balance-sheet
instruments  and evaluates each  customer's  creditworthiness  on a case-by-case
basis.  The amount of collateral  obtained,  if deemed necessary by the Bank, is
based on management's credit evaluation of the borrower. Collateral held varies,
but may include  accounts  receivable,  inventory,  plant and equipment and real
property.

The  Bank  also  issues  standby  letters  of  credit,   which  are  conditional
commitments to guarantee the  performance of a customer to a third party.  These
guarantees are primarily issued to support construction bonds, private borrowing
arrangements and similar  transactions.  Most of these guarantees are short-term
commitments  expiring in decreasing amounts through 2009 and are not expected to
be drawn  upon.  The  credit  risk  involved  in  issuing  letters  of credit is
essentially the same as that involved in extending loan facilities to customers.
The Bank holds collateral as deemed necessary, as described above.

The  contract  amounts of  commitments  not  reflected  on the Balance  Sheet at
December 31, 2005 and 2004 were:

                                                (In 000's)
                                           Contractual Amounts
                                         2005               2004
                                         ----               ----
Loan commitments                      $ 128,183          $ 106,883
Standby letters of credit             $   7,917          $   2,391


The Bank issues both financial and performance  standby  letters of credit.  The
financial  standby letters of credit are primarily to guarantee payment to third
parties.  At December 31, 2005 there was $1,508,000  issued in financial standby
letters of credit and the Bank carried no  liability.  The  performance  standby
letters of credit are typically issued to municipalities as specific performance
bonds. At December 31, 2005 there was $6,409,000  issued in performance  standby
letters of credit and the Bank carried no liability. The terms of the guarantees
will expire  primarily in 2006 with 15%  expiring in 2007,  6% expiring in 2008,
and 3% expiring in 2009.  The Bank has  experienced no draws on these letters of
credit, and do not expect to in the future;  however,  should a triggering event
occur,  the Bank  either  has  collateral  in excess of the  letter of credit or
imbedded agreements of recourse from the customer.

NOTE 16 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The  following  table  presents  the  carrying  amounts  and fair  values of the
Company's financial instruments at December 31, 2005 and 2004:
<TABLE>
<CAPTION>
                                                                               (In 000's)
                                                                 2005                          2004
                                                       Carrying        Fair          Carrying        Fair
                                                        Amounts        Value          Amounts        Value
                                                        -------        -----          -------        -----
FINANCIAL ASSETS
<S>                                                    <C>            <C>            <C>           <C>
Cash and cash equivalents                              $ 35,344       $ 35,344       $ 60,207      $ 60,207
Time deposits with other financial institutions             100            100            100           100
Investment securities                                   129,278        129,278         99,383        99,383
Loans, net                                              409,504        404,763        373,629       373,264
Cash value life insurance                                10,053         10,053          8,505         8,505
Accrued interest receivable                               2,862          2,862          2,244         2,244

FINANCIAL LIABILITIES
Deposits                                              $ 516,393      $ 516,829      $ 484,493     $ 484,277
Borrowings                                               19,000         18,404         19,000        19,889
Junior subordinate debentures                            10,310         10,310         10,310        10,310
Accrued interest payable                                    737            737            404           404
</TABLE>

                                       60
<PAGE>


The following  methods and  assumptions  were used to estimate the fair value of
each class of financial instruments:

Cash  and cash  equivalents  - Cash and cash  equivalents  are  valued  at their
carrying amounts because of the short-term nature of these instruments.

Investment  securities  -  Investment  securities  are  valued at quoted  market
prices. See Note 2 for further analysis.

Loans - The fair value of loans is  estimated  by  discounting  the future  cash
flows using current rates at which similar loans would be made to borrowers with
similar  credit  ratings for the same  remaining  maturities.  The fair value of
impaired loans is stated net of the related valuation allowance, if any.

Accrued  interest  receivable  and payable - The balance  approximates  its fair
value as these instruments have short-term maturities

Deposits,  time deposits  with other banks - The fair value of demand  deposits,
savings accounts and interest-bearing transaction accounts is the amount payable
on demand at the reporting date. The fair value of time deposits is estimated by
discounting  the  contractual  cash flows at current  rates  offered for similar
instruments with the same remaining maturities.

Borrowings  - The fair value of  borrowings  is  estimated  by  discounting  the
contractual cash flows at current rates offered for similar instruments with the
same remaining maturities.

Junior subordinated  debentures - The balance approximates its fair value due to
the structure having frequent repricing interest rates.

Off balance sheet items - The estimated  fair value of the Company's off balance
sheet items are not material to the fair value of financial instruments included
in the consolidated balance sheets.

NOTE 17 - CONCENTRATIONS OF CREDIT RISKS

The  majority  of  the  Bank's  loan  activity  is  with  customers  located  in
California,  primarily in the counties of Napa and Solano. Although the Bank has
a diversified  loan  portfolio,  large  portions of its loans are for commercial
property,  and many of the Bank's  loans are  secured by real estate in Napa and
Solano County.  Approximately 78% of the loans are secured by real estate.  This
concentration is presented below:

                                                       (In 000's)
                                                    December 31, 2005
                                                    -----------------
Construction/land development:
     Land development                                   $ 5,154
     Residential                                          7,878
     Commercial                                          19,361
Real estate                                             233,723
Commercial loans secured by real estate                  23,477
Installment loans secured by real estate                 35,501
                                                      ---------
      Total                                           $ 325,094
                                                      =========


NOTE 18 - DIVIDEND RESTRICTIONS

The  Company is  regulated  by the Board of  Governors  of the  Federal  Reserve
System. Federal Reserve Board regulations prohibit cash dividends,  except under
limited  circumstances,  if the  distribution  would result in a  withdrawal  of
capital or exceed the  Bancorp's  net profits then on hand after  deducting  its
losses and bad debts.  Furthermore,  cash  dividends  cannot be paid without the
prior  written  approval  of the  Federal  Reserve  Board  if the  total  of all
dividends  declared in one year  exceeds the total of net profits for that year,
plus the  preceding  two  calendar  years,  and less any  required  transfers to
surplus under state or federal law.

                                       61
<PAGE>

The shareholders of North Bay Bancorp are entitled to receive dividends when and
as declared by its Board of Directors out of funds legally available, subject to
the  restrictions  set forth in the  California  General  Corporation  Law.  The
Corporation  Law provides  that a  corporation  may make a  distribution  to its
shareholders if the corporation's retained earnings equal at least the amount of
the proposed  distribution.  The Corporation  Law further  provides that, in the
event that  sufficient  retained  earnings  are not  available  for the proposed
distribution,  a  corporation  may  nevertheless  make  a  distribution  to  its
shareholders if it meets two conditions,  which generally stated are as follows:
1) the  corporation's  assets equal at least 1.25 times its liabilities;  and 2)
the corporation's  current assets equal at least its current  liabilities or, if
the  average of the  corporation's  earnings  before  taxes on income and before
interest expense for the two preceding fiscal years was less than the average of
the corporation's interest expense for such fiscal years, then the corporation's
current  assets  must  equal at least 1.25 times its  current  liabilities.  The
Company could also be restricted  from  declaring or paying cash dividends if it
elected to defer interest payments on the subordinated debenture.

One of the primary sources of income for the Company, on a stand-alone basis, is
the dividends  from the Bank.  The  availability  of dividends  from the Bank is
limited by various statutes and regulations. California law restricts the amount
available for cash dividends by state-chartered  banks to the lesser of retained
earnings  or the bank's net income  for its last three  fiscal  years  (less any
distributions to shareholders  made during such period).  In the event a bank is
unable to pay cash dividends due to insufficient retained earnings or net income
for its last three  fiscal  years,  cash  dividends  may be paid  under  certain
circumstances with the prior approval of the California  Department of Financial
Institutions  (the "DFI").  At December 31,  2005,  $19.9  million of the Bank's
retained earnings were available for dividend declaration to the Company without
prior regulatory approval.


NOTE 19 - RESTRICTIONS

The Bank is required to maintain  reserves with the Federal  Reserve Bank of San
Francisco  equal to a percentage of its reservable  deposits.  Reserve  balances
that were required by the Federal  Reserve Bank were $0 and $25,000 for December
31, 2005 and 2004, respectively,  and are reported in cash and due from banks on
the balance sheet.

NOTE 20 - REGULATORY MATTERS

The Company is subject to various  regulatory capital  requirements.  Failure to
meet minimum capital requirements can initiate certain  mandatory--and  possible
additional  discretionary--actions by regulators that, if undertaken, could have
a direct material effect on the Company's  financial  statements.  Under capital
adequacy  guidelines and the regulatory  framework for prompt corrective action,
the Company must meet  specific  capital  guidelines  that involve  quantitative
measures of the  Company's  assets,  liabilities  and certain  off-balance-sheet
items as calculated under regulatory accounting practices. The Company's capital
amounts and  classification  are also  subject to  qualitative  judgments by the
regulators about components, risk weightings and other factors.


Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require  the Company to  maintain  minimum  amounts and ratios (set forth in the
table below) of total and Tier I capital to risk-weighted  assets, and of Tier I
capital to average assets.  Management  believes,  as of December 31, 2005, that
the Company meets all capital adequacy requirements to which it is subject.


As of December 31, 2005,  the Company and Bank were well  capitalized  under the
regulatory  framework for prompt  corrective  action.  To be categorized as well
capitalized, the Company and Bank must maintain minimum total risk-based, Tier I
risk-based  and Tier I leverage  ratios as set forth in the table.  There are no
conditions  or events since  December  31, 2005 that  management  believes  have
changed the institution's category.

                                       62
<PAGE>


The Company's  actual capital amounts and ratios are also presented in thousands
in the following tables:

<TABLE>
<CAPTION>

                                                                                   To Be Well Capitalized
                                                                                         Under Prompt
                                                                 For Capital          Corrective Action
                                                Actual         Adequacy Purposes          Provisions
                                                ------         -----------------          ----------
                                           Amount     Ratio     Amount     Ratio      Amount      Ratio
                                           ------     -----     ------     -----      ------      -----
<S>                                       <C>         <C>       <C>        <C>        <C>         <C>
As of December 31, 2005:
TOTAL CAPITAL (TO RISK WEIGHTED ASSETS)
      Consolidated                        $ 66,599    13.01%    $40,801   >8.00%      $ 51,001   >10.00%
      The Vintage Bank                      61,342    11.99%     40,794   >8.00%        50,992   >10.00%
TIER 1 (TO RISK WEIGHTED ASSETS)
      Consolidated                        $ 61,532    12.02%    $20,401   >4.00%      $ 30,601   >6.00%
      The Vintage Bank                      56,275    11.00%     20,397   >4.00%        30,595   >6.00%
TIER 1 CAPITAL (TO RISK WEIGHTED ASSETS)
      Consolidated                        $ 61,532     9.87%    $24,929   >4.00%      $ 31,162   >5.00%
      The Vintage Bank                      56,275     9.11%     24,702   >4.00%        30,878   >5.00%
</TABLE>

<TABLE>
<CAPTION>

                                                                                   To Be Well Capitalized
                                                                                         Under Prompt
                                                                 For Capital          Corrective Action
                                                Actual         Adequacy Purposes          Provisions
                                                ------         -----------------          ----------
                                           Amount     Ratio     Amount     Ratio      Amount      Ratio
                                           ------     -----     ------     -----      ------      -----
<S>                                       <C>         <C>       <C>        <C>        <C>         <C>
As of December 31, 2004:
TOTAL CAPITAL (TO RISK WEIGHTED ASSETS)
      Consolidated                        $ 58,216    12.49%    $37,280    >8.00%    $ 46,600    >10.00%
      The Vintage Bank                      41,169    11.57%     28,458    >8.00%      35,573    >10.00%
      Solano Bank                           12,004    10.93%      8,785    >8.00%      10,981    >10.00%
TEIR 1 (TO RISK WEIGHTED ASSETS)
      Consolidated                        $ 53,973    11.58%    $18,640    >4.00%    $ 27,960    >6.00%
      The Vintage Bank                      37,949    10.67%     14,229    >4.00%      21,344    >6.00%
      Solano Bank                           10,981    10.00%      4,392    >4.00%       6,589    >6.00%
TEIR 1 CAPITAL (TO RISK WEIGHTED ASSETS)
      Consolidated                        $ 53,973     9.38%    $23,010    >4.00%    $ 28,763    >5.00%
      The Vintage Bank                      37,949     8.43%     18,004    >4.00%      22,506    >5.00%
      Solano Bank                           10,981     9.31%      4,716    >4.00%       5,895    >5.00%
</TABLE>

                                       63
<PAGE>


NOTE 21 - FINANCIAL STATEMENTS OF NORTH BAY BANCORP (Parent Company Only)
For the years ended December 31, 2005, 2004 and 2003


CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                              (In 000's except share data)
Assets                                                             2005         2004
------                                                             ----         ----
<S>                                                              <C>          <C>
Cash and due from banks                                          $  4,582     $  5,167
Investment in The Vintage Bank                                     54,797       38,122
Investment in Solano Bank                                              --       10,969
Investment in North Bay Statutory Trust 1                             310          310
Other assets                                                          681          150
                                                                 --------     --------
          Total assets                                           $ 60,370     $ 54,718
                                                                 ========     ========

Liabilities and shareholders' equity

Floating rate subordinated
   debenture (trust preferred securities)                        $ 10,310     $ 10,310
Other liabilities                                                       7          274
                                                                 --------     --------
        Total liabilities                                          10,317       10,584

Shareholders' equity
   Preferred stock, no par value -  Authorized 500,000 shares
       Issued and outstanding - None
   Common stock, no par value - Authorized 15,000,000 shares
       Issued and outstanding -  4,099,884 shares in 2005 and
       3,823,353 shares in 2004                                    39,965       33,473
   Accumulated other comprehensive income                          (1,478)         161
   Retained earnings                                               11,566       10,500
                                                                 --------     --------
     Total shareholders' equity                                    50,053       44,134
                                                                 --------     --------
         Total liabilities and shareholders' equity              $ 60,370     $ 54,718
                                                                 ========     ========
</TABLE>

                                       64
<PAGE>


<TABLE>
<CAPTION>

CONDENSED INCOME STATEMENTS
                                                                                           (In 000's)
                                                                                 2005        2004        2003
                                                                               -------     -------     -------
<S>                                                                                <C>         <C>         <C>
Income
Interest on investment securities                                              $    --     $    74     $   123
Service fees from subsidiaries                                                      --       5,231       6,177
                                                                               -------     -------     -------
Total income                                                                        --       5,305       6,300

Expenses
Interest on borrowings                                                             740         559         531
Salaries and related benefits                                                       --       4,441       4,104
Other expenses                                                                     469       3,760       3,342
                                                                               -------     -------     -------
Total expenses                                                                   1,209       8,760       7,977

Net (loss) income before tax benefit and equity in
   net income of subsidiaries                                                   (1,209)     (3,455)     (1,677)
Tax benefit                                                                        498       1,415         642
                                                                               -------     -------     -------
Net (loss) income before equity in undistributed net income of subsidiaries       (711)     (2,040)     (1,035)
Equity in undistributed net income of subsidiaries                               7,344       7,104       5,406
                                                                                                       -------
Net income                                                                     $ 6,633     $ 5,064     $ 4,371
                                                                               =======     =======     =======
</TABLE>

                                       65
<PAGE>

CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                      (In 000's)
                                                            2005        2004        2003
                                                          -------     -------     -------
<S>                                                       <C>         <C>         <C>
Cash Flows From Operating Activities:
Net income                                                $ 6,633     $ 5,064     $ 4,371
Adjustments to reconcile net income to net cash
      provided by operating activities:
   Depreciation and amortization                                0         823         812
   Amortization of investment securities
    premiums, net                                               0          71         117
Equity in undistributed net income of subsidiaries         (7,344)     (7,104)     (5,406)
Changes in:
    Interest receivable and other assets                     (531)        326         (35)
    Interest payable and other liabilities                   (268)     (1,311)        533
                                                          -------     -------     -------
    Net cash provided by operating activities              (1,510)     (2,131)        392
                                                          -------     -------     -------

Cash Flows From Investing Activities:
Investment in Solano Bank                                       0      (3,000)          0
Investment securities available for sale:
  Proceeds from maturities and principal payments               0       6,400         785
  Purchases                                                     0           0      (4,573)
Sale and disposition of capital assets                          0       1,335           0
Capital expenditures                                            0        (397)       (779)
                                                          -------     -------     -------
   Net cash used in investing activities                        0       4,338      (4,567)
                                                          -------     -------     -------

Cash Flows From Financing Activities:
Stock options exercised                                     1,496         492         644
Dividends                                                    (571)       (481)       (441)
                                                          -------     -------     -------
   Net cash provided by (used in) financing activities        925          11         203
Net (decrease) increase in cash and cash equivalents         (585)      2,218      (3,972)
Cash and cash equivalents at beginning of year              5,167       2,949       6,921
                                                          -------     -------     -------
Cash and cash equivalents at end of year                  $ 4,582     $ 5,167     $ 2,949
                                                          =======     =======     =======
</TABLE>

                                       66
<PAGE>

NOTE 22 - SUMMARY OF UNAUDITED QUARTERLY RESULTS OF OPERATIONS

The  following  table sets forth the results of operation  for the four quarters
unaudited of 2005,  2004 and 2003.  All per share amounts have been adjusted for
the 2003,  2004,  2005 and 2006 stock  dividends,  as well as the 3-for-2  stock
split in 2004.


                                       67
<PAGE>

<TABLE>
<CAPTION>
                                                           (In 000's except share data)
                                                              2005 Quarters Ended
                                                       DEC 31    SEPT 30   JUN 30    MAR 31
                                                       ------    ------    ------    ------
<S>                                                    <C>       <C>       <C>       <C>
Interest income                                        $9,197    $8,847    $8,145    $7,676
Interest expense                                        1,444     1,415     1,171     1,052
                                                       ------    ------    ------    ------
Net interest income                                     7,753     7,432     6,974     6,624
Provision for loan losses                                 100       300       230       185
                                                       ------    ------    ------    ------
Net Interest Income after provision for loan losses     7,653     7,132     6,744     6,439
Noninterest income                                        937     1,027     1,021       956
Noninterest expense                                     5,752     5,211     5,173     5,035
                                                       ------    ------    ------    ------
Income before provision for income taxes                2,838     2,948     2,592     2,360
Provision for income taxes                              1,069     1,131     1,007       898
                                                       ------    ------    ------    ------
Net income                                             $1,769    $1,817    $1,585    $1,462
                                                       ======    ======    ======    ======

Basic earnings per share:                              $ 0.43    $ 0.45    $ 0.39    $ 0.36
Diluted earnings per share:                            $ 0.42    $ 0.43    $ 0.37    $ 0.34


                                                               2004 Quarters Ended
                                                       DEC 31    SEPT 30   JUN 30    MAR 31
                                                       ------    ------    ------    ------
Interest income                                        $7,405    $6,822    $6,294    $6,064
Interest expense                                        1,035       961       859       688
                                                       ------    ------    ------    ------
Net interest income                                     6,370     5,861     5,435     5,376
Provision for loan losses                                  80       180       174       186
                                                       ------    ------    ------    ------
Net Interest Income after provision for loan losses     6,290     5,681     5,261     5,190
Noninterest income                                        969       986     1,257       986
Noninterest expense                                     4,701     4,667     4,571     4,597
                                                       ------    ------    ------    ------
Income before provision for income taxes                2,558     2,000     1,947     1,579
Provision for income taxes                                986       750       740       544
                                                       ------    ------    ------    ------
Net income                                             $1,572    $1,250    $1,207    $1,035
                                                       ======    ======    ======    ======


Basic earnings per share:                              $ 0.39    $ 0.31    $ 0.30    $ 0.26
Diluted earnings per share:                            $ 0.37    $ 0.30    $ 0.30    $ 0.26


                                                                2003 Quarters Ended
                                                       DEC 31    SEPT 30   JUN 30    MAR 31
                                                       ------    ------    ------    ------
Interest income                                        $5,842    $5,554    $5,494    $5,361
Interest expense                                          667       681       819       828
                                                       ------    ------    ------    ------
Net interest income                                     5,175     4,873     4,675     4,533
Provision for loan losses                                 103        45        45        45
                                                       ------    ------    ------    ------
Net Interest Income after provision for loan losses     5,072     4,828     4,630     4,488
Noninterest income                                        925     1,055     1,059       808
Noninterest expense                                     3,722     4,267     4,311     4,015
                                                       ------    ------    ------    ------
Income before provision for income taxes                2,275     1,616     1,378     1,281
Provision for income taxes                                975       452       366       386
                                                       ------    ------    ------    ------
Net income                                             $1,300    $1,164    $1,012    $  895
                                                       ======    ======    ======    ======

Basic earnings per share:                              $ 0.32    $ 0.29    $ 0.26    $ 0.23
Diluted earnings per share:                            $ 0.32    $ 0.29    $ 0.26    $ 0.22
</TABLE>

                                       68
<PAGE>

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of North Bay Bancorp is responsible for  establishing and maintaining
effective  internal  control over  financial  reporting.  Internal  control over
financial  reporting  is a process  designed  to  provide  reasonable  assurance
regarding  the  reliability  of  financial  reporting  and  the  preparation  of
financial  statements for external  purposes in accordance  with U.S.  generally
accepted accounting principles.

Under the supervision and with the  participation  of management,  including the
principal  executive  officer  and  principal  financial  officer,  the  Company
conducted an evaluation of the  effectiveness of internal control over financial
reporting  based on the  framework in Internal  Control -  Integrated  Framework
issued by the Committee of Sponsoring  Organizations of the Treadway Commission.
Based on this  evaluation  under the framework in Internal  Control - Integrated
Framework,  management  of the Company  has  concluded  the  Company  maintained
effective internal control over financial reporting,  as such term is defined in
Securities  Exchange  Act of 1934 Rules  13a-15(f),  as of  December  31,  2005.
Internal control over financial  reporting cannot provide absolute  assurance of
achieving financial reporting objectives because of its inherent limitations.

Internal  control over  financial  reporting is a process  that  involves  human
diligence  and  compliance  and is subject to lapses in judgment and  breakdowns
resulting from human  failures.  Internal  control over financial  reporting can
also be circumvented by collusion or improper  management  override.  Because of
such  limitations,  there  is a risk  that  material  misstatements  may  not be
prevented  or detected  on a timely  basis by internal  control  over  financial
reporting.  However,  these  inherent  limitations  are  known  features  of the
financial  reporting  process.  Therefore,  it is  possible  to design  into the
process safeguards to reduce, though not eliminate, this risk.

Management is also responsible for the preparation and fair  presentation of the
consolidated  financial statements and other financial  information contained in
this report. The accompanying consolidated financial statements were prepared in
conformity with U.S. generally accepted  accounting  principles and include,  as
necessary, best estimates and judgments by management.

KPMG LLP, an  independent  registered  public  accounting  firm, has audited the
Company's  consolidated  financial  statements  as of and  for  the  year  ended
December 31,  2005,  and the  Company's  assertion  as to the  effectiveness  of
internal control over financial  reporting as of December 31, 2005, as stated in
its reports, which are included herein.

/s/ Terry L. Robinson
-------------------------------------
Terry L. Robinson
President and Chief Executive Officer

/s/ Patrick E. Phelan
-------------------------------------
Patrick E. Phelan
Executive Vice President and
Chief Financial Officer

March 15, 2006

                                       69
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
North Bay Bancorp:

We  have  audited   management's   assessment,   included  in  the  accompanying
Management's Report on Internal Control over Financial Reporting, that North Bay
Bancorp and subsidiaries  (the Company)  maintained  effective  internal control
over financial reporting as of December 31, 2005, based on criteria  established
in Internal  Control-Integrated  Framework issued by the Committee of Sponsoring
Organizations of the Treadway  Commission  (COSO).  The Company's  management is
responsible for maintaining  effective internal control over financial reporting
and for its assessment of the  effectiveness  of internal control over financial
reporting.   Our  responsibility  is  to  express  an  opinion  on  management's
assessment and an opinion on the effectiveness of the Company's internal control
over financial reporting based on our audit.

We conducted  our audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain  reasonable  assurance  about whether  effective
internal  control  over  financial  reporting  was  maintained  in all  material
respects. Our audit included obtaining an understanding of internal control over
financial reporting,  evaluating management's assessment, testing and evaluating
the design and operating  effectiveness of internal control, and performing such
other  procedures as we considered  necessary in the  circumstances.  We believe
that our audit provides a reasonable basis for our opinion.

A company's  internal control over financial  reporting is a process designed to
provide reasonable  assurance  regarding the reliability of financial  reporting
and the preparation of financial  statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over
financial  reporting  includes those policies and procedures that (1) pertain to
the  maintenance  of records that, in reasonable  detail,  accurately and fairly
reflect the  transactions  and  dispositions  of the assets of the company;  (2)
provide  reasonable  assurance  that  transactions  are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting  principles,  and that receipts and  expenditures  of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of  unauthorized  acquisition,  use, or  disposition  of the company's
assets that could have a material effect on the financial statements.

Because of its inherent  limitations,  internal control over financial reporting
may not prevent or detect misstatements.  Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate  because of changes in  conditions,  or that the degree of compliance
with the policies or procedures may deteriorate.

In our opinion,  management's assessment that North Bay Bancorp and subsidiaries
maintained  effective  internal control over financial  reporting as of December
31,  2005,  is  fairly  stated,  in all  material  respects,  based on  criteria
established in Internal Control-Integrated  Framework issued by the Committee of
Sponsoring  Organizations  of  the  Treadway  Commission  (COSO).  Also,  in our
opinion,  North  Bay  Bancorp  and  subsidiaries  maintained,  in  all  material
respects, effective internal control over financial reporting as of December 31,
2005,  based on criteria  established in Internal  Control-Integrated  Framework
issued by the Committee of Sponsoring  Organizations of the Treadway  Commission
(COSO).

We also have  audited,  in accordance  with the standards of the Public  Company
Accounting  Oversight Board (United States),  the consolidated balance sheets of
North Bay Bancorp and  subsidiaries  as of December  31, 2005 and 2004,  and the
related consolidated statements of operations,  comprehensive income, changes in
shareholders'  equity,  and cash  flows for each of the years in the  three-year
period ended December 31,2005, and our report dated March 15, 2006, expressed an
unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

San Francisco, California
March 15, 2006

                                       70
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders
North Bay Bancorp:

We have  audited  the  accompanying  consolidated  balance  sheets  of North Bay
Bancorp  and  subsidiaries  as of December  31,  2005 and 2004,  and the related
consolidated   statements  of  operations,   comprehensive  income,  changes  in
shareholders'  equity,  and cash  flows for each of the years in the  three-year
period ended December 31, 2005. These consolidated  financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial  position of North Bay Bancorp
and  subsidiaries  as of December  31,  2005 and 2004,  and the results of their
operations and their cash flows for each of the years in the  three-year  period
ended December 31, 2005, in conformity with U.S. generally  accepted  accounting
principles.

We also have  audited,  in accordance  with the standards of the Public  Company
Accounting  Oversight  Board (United  States),  the  effectiveness  of North Bay
Bancorp  and  subsidiaries  internal  control  over  financial  reporting  as of
December 31, 2005, based on criteria established in Internal  Control-Integrated
Framework  issued by the Committee of Sponsoring  Organizations  of the Treadway
Commission  (COSO), and our report dated March 15, 2006 expressed an unqualified
opinion on management's  assessment of, and the effective operation of, internal
control over financial reporting.

/s/ KPMG LLP

San Francisco, California
March 15, 2006

                                       71
<PAGE>

Item 9 -  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

N/A

Item 9A  - CONTROLS AND PROCEDURES

(a) Evaluation of Disclosure Controls and Procedures

As of December 31, 2005,  the end of the period covered by this Annual Report on
Form 10-K, the Company's  Chief Executive  Officer and Chief  Financial  Officer
evaluated the effectiveness of the Company's  disclosure controls and procedures
(as defined in Rule 13a-15(e) under the Securities  Exchange Act of 1934). Based
upon that evaluation,  the Company's Chief Executive Officer and Chief Financial
Officer each concluded  that as of December 31, 2005,  the Company's  disclosure
controls and procedures were effective to ensure that the  information  required
to be disclosed by the Company in this Annual  Report on Form 10-K was recorded,
processed,  summarized  and reported  within the time  periods  specified in the
SEC's rules and instructions for Form 10-K.

(b) Management's Report on Internal Control over Financial Reporting

The  Company's  management  is  responsible  for  establishing  and  maintaining
effective  internal  control  over  financial  reporting  (as  defined  in  Rule
13a-15(f) under the Securities  Exchange Act of 1934 as amended).  The Company's
internal control over financial  reporting is under the general oversight of the
Board of  Directors  acting  through  the  Audit  Committee,  which is  composed
entirely  of  independent   directors.   KPMG  LLP,  the  Company's  independent
registered  public  accounting firm, has direct and  unrestricted  access to the
Audit Committee at all times, with no members of management  present, to discuss
its audit and any other matters that have come to its attention  that may affect
the Company's  accounting,  financial reporting or internal controls.  The Audit
Committee meets periodically with management,  internal auditors and KPMG LLP to
determine that each is fulfilling its responsibilities and to support actions to
identify,  measure and control risk and augment  internal control over financial
reporting.  Internal control over financial reporting,  however,  cannot provide
absolute assurance of achieving  financial  reporting  objectives because of its
inherent limitations.

Under the supervision and with the  participation  of management,  including the
Company's  Chief  Executive  Officer and Chief  Financial  Officer,  the Company
conducted an evaluation of the  effectiveness of internal control over financial
reporting  as of December 31, 2005 based on the  framework in "Internal  Control
-Integrated  Framework"  issued by the Committee of Sponsoring  Organizations of
the Treadway Commission.  Based upon that evaluation,  management concluded that
the  Company's  internal  control over  financial  reporting was effective as of
December  31,  2005.  Management's  report on internal  control  over  financial
reporting  is set forth on page 69 of this  Annual  Report on Form 10-K,  and is
incorporated herein by reference.  Management's  assessment of the effectiveness
of the Company's  internal control over financial  reporting has been audited by
KPMG LLP, an independent  registered  public  accounting  firm, as stated in its
report, which is set forth on page 70 of this Annual Report of Form 10-K, and is
incorporated herein by reference.

(c) Changes in Internal Control over Financial Reporting

No change in the Company's  internal control over financial  reporting  occurred
during  the  fourth  quarter  of the year  ended  December  31,  2005,  that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

All information  required to be disclosed in a current report on Form 8-K during
the fourth quarter of 2005 was so disclosed.

                                       72
<PAGE>

                                    PART III


Item 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT


For  information   regarding  the  directors  and  executive   officers  of  the
registrant,  see "ELECTION OF  DIRECTORS"  and "REPORTS OF CHANGES IN BENEFICIAL
OWNERSHIP"  in the  Company's  definitive  proxy  statement  for the 2005 Annual
Meeting of  Shareholders  to be filed  pursuant  to  Regulation  14A (the "Proxy
Statement"), which is incorporated herein by reference.

Code of Ethics
North  Bay  Bancorp  has  adopted  a Code  of  Ethics  that  applies  to all its
directors,  officers  and  employees,  a current  copy of which is  available to
shareholders  on the Company's  web-sit.  The  Company's  web-site is located at
www.northbaybancorp.com.


Item 11 - EXECUTIVE COMPENSATION


For information  concerning  compensation of the executive  officers of Bancorp,
see  "EXECUTIVE  COMPENSATION"  in the Proxy  Statement,  which is  incorporated
herein by reference.


Item 12 - SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL  OWNERS AND  MANAGEMENT AND
RELATED STOCKHOLDER MATTERS


For information  concerning the security  ownership of certain beneficial owners
and management of Bancorp,  see "SECURITY  OWNERSHIP OF MANAGEMENT" in the Proxy
Statement, which is incorporated herein by reference.

Item 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

For information  concerning certain relationships and related transactions,  see
"OTHER  INFORMATION  REGARDING  MANAGEMENT"  in the  Proxy  Statement,  which is
incorporated herein by reference.


Item 14 - PRINCIPAL ACCOUNTANT FEES AND SERVICES

For information concerning amounts paid for audit and related fees see "PROPOSAL
NO. 3" in the Proxy Statement, which is incorporated herein by reference.

                                       73
<PAGE>

                                     Part IV

Item 15 - EXHIBITS  AND FINANCIAL STATEMENT SCHEDULES


(a)     1.        Financial Statements

(i)      Consolidated Balance Sheets, December 31, 2005 and 2004

(ii)     Consolidated  Statements  of  Operations  for the years ended  December
         2005, 2004, and 2003

(iii)    Consolidated  Statements  of  Comprehensive  Income for the years ended
         December 2005, 2004, and 2003

(iv)     Consolidated  Statements  of  Changes in  Shareholders'  Equity for the
         years ended December 31, 2005, 2004, and 2003

(v)      Consolidated  Statements of Cash Flows for the years ended December 31,
         2005, 2004, and 2003

(vi)     Consolidated Notes to Financial Statements

(vii)    Report of Independent Registered Public Accounting Firm

Schedules have been omitted as inapplicable or because the information  required
is included in the financial statements or notes thereto.

3. Exhibits

See Exhibit Index on page 77 of this Report.

                                       74
<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                           NORTH BAY BANCORP

                                           By:   /s/Terry L. Robinson
                                           --------------------------
                                           Terry L. Robinson, President
                                           & Chief Executive Officer
Dated: March 15, 2006

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

Signature                           Title                                   Date
---------                           -----                                   ----
 <S>                                 <C>                                 <C>

-------------------------           Director
Lauren A. Ackerman


                                    Director
-------------------------
John B. Anthony, III


/s/Thomas N. Gavin                  Director                            March 15, 2006
-------------------------
Thomas N. Gavin


/s/David B. Gaw                     Director and                        March 15, 2006
-------------------------           Chairman of the Board
David B. Gaw


/s/Fred J. Hearn Jr.                Director                            March 15, 2006
-------------------------
Fred J. Hearn Jr.


/s/Conrad W. Hewitt                 Director                            March 15, 2006
-------------------------
Conrad W. Hewitt


                                    Director
-------------------------
Connie L. Klimisch


/s/Richard S. Long                  Director and                        March 15, 2006
-------------------------           Vice Chairman of the Board
Richard S. Long


                                    Director
-------------------------
Thomas H. Lowenstein


/s/Thomas F. Malloy                 Director                            March 15, 2006
-------------------------
Thomas F. Malloy
</TABLE>

                                       75
<PAGE>

<TABLE>
<CAPTION>

<S>                                 <C>                                 <C>
                                    Director
-------------------------
Andrew J. Nicks M.D.


/s/Terry L. Robinson                President, Chief                    March 15, 2006
-------------------------           Executive Officer and Director
Terry L. Robinson                   (Principal Executive Officer)



/s/ Thomas H. Shelton               Director                            March 15, 2006
-------------------------
Thomas H. Shelton .


/s/ Stephen C. Spencer              Director                            March 15, 2006
-------------------------
Stephen C. Spencer


/s/ Denise C. Suihkonen             Director                            March 15, 2006
-------------------------
Denise C. Suihkonen


/s/ James E. Tidgewell              Director                            March 15, 2006
-------------------------
James E. Tidgewell


/s/ Patrick E. Phelan               Executive Vice President            March 15, 2006
-------------------------           Chief Financial Officer
Patrick E. Phelan                   (Principal Financial Officer)

</TABLE>

                                       76
<PAGE>

                                 EXHIBIT INDEX

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

2.1      Plan of Reorganization and Merger Agreement entered into as of July 30,
         1999 by and among The Vintage  Bank,  Vintage  Merger Co. and North Bay
         Bancorp. (1)

3.1      Restated Articles of Incorporation of Registrant. (11)

3.2      Amended and Restated Bylaws. (12)

4.1      Certificate Evidencing Floating Rate Capital Securities. (6)

4.2      Floating Rate Junior Subordinated Deferrable Interest Debenture. (6)

4.3      Certificate Evidencing Floating Rate Common Securities. (6)

4.4      Guarantee Agreement. (6)

4.5      Indenture dated June 26, 2002 , North Bay Bancorp Issuer,  State Street
         Bank and Trust  Company of  Connecticut,  N.A., as Trustee for Floating
         Rate Junior Subordinated Deferrable Interest Debenture. (6)

4.6      Rights Agreement, dated as of October 24, 2002, between the Company and
         Registrar and Transfer Company, as Rights Agent. (7)

4.7      Certificate of Determination for the Series A Preferred Stock (attached
         as Exhibit A to Rights Agreement). (7)

4.8      Rights  Certificate  (attached  as  Exhibit  B to  Rights  Agreement.).
         Printed Rights Agreement will not be mailed until the Distribution Date
         as defined therein. (7)

4.9      Summary of Rights to Purchase  Preferred  Shares (attached as Exhibit C
         to Rights Agreement). (7)

10.1     Amended North Bay Bancorp Stock Option Plan. (6) *

10.2     North Bay Bancorp 2002 Stock Option Plan and Related Agreement (8)*

10.3     Sublease  by and between The  Vintage  Bank,  as Lessor,  and North Bay
         Bancorp, as Lessee, with respect to premises at 1190 Airport Road, Napa
         California. (10)

10.4     Lease  entered  into May 9,  2003 by  Solano  Bank and  Fairfield  West
         Partners,  LLC for premises at 1411 Oliver Road, Fairfield  California.
         (2)

10.5     North Bay Bancorp Directors Deferred Fee Plan* (11)

10.6     Employment  Agreement  entered  into as of May 1,  2004 by and  between
         North Bay Bancorp and Terry L. Robinson.* (11)

10.6(a)  First  Amendment to Employment  Agreement dated as of March 28, 2005 by
         and between North Bay Bancorp and Terry L. Robinson. * (11)

10.7     Employment  Agreement  entered  into as of May 1,  2001 by and  between
         Solano Bank and Glen C. Terry. (5) *

10.7(a)  First  Amendment to Employment  Agreement dated as of March 28, 2005 by
         and between The Vintage Bank and Glen C. Terry. * (11)

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10.8     Employment  Agreement  entered  into as of May 1,  2001 by and  between
         North Bay Bancorp and Kathi Metro. (5) *

10.9     North Bay Bancorp 401K and Profit Sharing Plan.* (11)

10.10    Life Insurance Endorsement Method Split Dollar Plan Agreement for Terry
         L. Robinson (9). *

10.11    Lease  entered  into  January 5, 2004 by North Bay Bancorp and James N.
         Ditmer, dba Cordelia Edison Partners for a central warehousing facility
         located at 499 Edison Court Suite A-1, Cordelia California. (2)

10.12    Life  Insurance  Endorsement  Method  Split Dollar Plan  Agreement  for
         Lee-Ann Cimino. (9). *

10.13    Life Insurance Endorsement Method Split Dollar Plan Agreement for Kathi
         Metro. (9)*

10.14    Life Insurance  Endorsement Method Split Dollar Plan Agreement for Glen
         C. Terry. (9)*

10.15    Employment  Agreement  effective  as of June 1, 2005 by and between The
         Vintage Bank and John A. Nerland. (13) *

10.16    Form  of  Amended  and  Restated  Executive  Supplemental  Compensation
         Agreement* (11)

10.17    Amended and  Restated  Declaration  of Trust by and Among State  Street
         Bank and Trust Company of Connecticut,  N.A, as Institutional  Trustee,
         North Bay Bancorp as Sponsor, and Administrators,  Dated as of June 26,
         2002. (6)

10.18    2005 Executive Bonuses*

10.19    2006 Executive Officer Base Salaries*

10.20    [Intentionally Left Blank]

10.21    Form of Indemnity Agreement for directors and officers (11)

10.22    Summary of Principal Terms of Employment for Stephanie Rode (12) *

10.23    North Bay Bancorp Supplemental Executive Retirement Plan (13) *

10.24    Summary of Principal Terms of Employment for Patrick E. Phelan *

10.25    Summary of Principal Terms of Employment for Virginia Robbins *

10.26    John A. Nerland Supplemental Executive Retirement Agreement *

10.27    John A. Nerland Split Dollar Life Plan Agreement *

11.      Statement re:  computation  of per share earnings is included in Note 1
         to the  financial  statements to the  prospectus  included in Part I of
         this Registration Statement.

21.      Subsidiaries of Registrant are: The Vintage Bank, a California  banking
         corporation  and North Bay  Bancorp  Statutory  Trust I, a  Connecticut
         trust.

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23.      Consent of KPMG LLP as  independent  public  accountants  for North Bay
         Bancorp, The Vintage Bank and Solano Bank.

25.      Power of Attorney.

31.1     Certificate  of  Principal  Executive  Officer  Pursuant to SEC Release
         33-8238.

31.2     Certificate  of  Principal  Financial  Officer  Pursuant to SEC Release
         33-8238.

32.1     Certificate  of  Principal  Executive  Officer  Pursuant  to 18  U.S.C.
         Section 1350.

32.2     Certificate  of  Principal  Financial  Officer  Pursuant  to 18  U.S.C.
         Section 1350.

*        Employment Contracts and Compensation Plans.

(1)      Attached as Exhibit  7(c)(2) to North Bay Bancorp's  Current  Report on
         Form 8-K filed with the Securities and Exchange  Commission on November
         29, 1999, and incorporated herein by reference.

(2)      Attached as Exhibits 3.2,  10.4,  10.6,  and 10.11  respectively,  5 to
         North Bay  Bancorp's  Annual  Report  as Form  10-K for the year  ended
         December 31, 2003 filed with the  Securities  and Exchange  Commission,
         and incorporated herein by reference.

(3)      Intentionally left blank.

(4)      Intentionally left blank

(5)      Attached as Exhibits 10.1, 10.2, 10.3, and 10.4, respectively, to North
         Bay Bancorp's  Quarterly Report as Form 10-Q for the quarter ended June
         30,  2001  filed  with the  Securities  and  Exchange  Commission,  and
         incorporated herein by reference.

(6)      Attached as Exhibits 4.1, 4.2, 4.3, 4.4, 4.5, 10.1,  10.15,  and 10.17,
         respectively,  to North Bay Bancorp's Quarterly Report as Form 10-Q for
         the quarter ended June 30, 2002 filed with the  Securities and Exchange
         Commission, and incorporated herein by reference.

(7)      Attached as Exhibits 4.1, 4.2, 4.3, and 4.4, respectively,  to the Form
         8-A  Registration  Statement  filed  by  North  Bay  Bancorp  with  the
         Securities and Exchange Commission on October 31, 2002 and incorporated
         herein by reference.

(8)      Attached as Exhibit 99.1 to  Registration  Statement  No.  333-90006 on
         Form S-8 filed by North Bay Bancorp  with the  Securities  and Exchange
         Commission on June 7, 2002 and incorporated herein by reference.

(9)      Attached  as  Exhibits  10.10,   10.11,   10.12,   10.13,   and  10.14,
         respectively, to North Bay Bancorp's Annual Report on Form 10-K for the
         year ended  December  31, 2001 filed with the  Securities  and Exchange
         Commission and incorporated herein by reference.

(10)     Attached as Exhibits 10.3 to North Bay Bancorp's  Annual Report as Form
         10-K for the year ended December 31, 2002 filed with the Securities and
         Exchange Commission and incorporated herein by reference.

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(11)     Attached as Exhibits 3.1, 10.5, 10.6,  10.6(a).,  10.7(a).,10.9,  10.16
         and 10.21,  respectively,  to North Bay Bancorp's Annual Report on Form
         10-K for the year ended December 31, 2004 filed with the Securities and
         Exchange Commission and incorporated herein by reference.

(12)     Attached as Exhibits 3.2 and 10.1, respectively, to North Bay Bancorp's
         Quarterly Report on Form 10-Q for the quarter ended June 30, 2005 filed
         with the Securities and Exchange  Commission and incorporated herein by
         reference.

(13)     Attached  as  Exhibits  10.1  and  10.2,  respectively,  to  North  Bay
         Bancorp's Quarterly Report on Form 10-Q for the quarter ended September
         30,  2005  filed  with  the  Securities  and  Exchange  Commission  and
         incorporated herein by reference.


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