Greater Bay Bancorp Annual Report 2004
It’s personal
People are always saying, “It’s not personal, it’s business.” Those people don’t work at Greater Bay.
R.W. Garcia Company
Robert Garcia
“They came through for us when others walked away.”
In 1986, R.W. Garcia Company began manufacturing its first product, Quality All Natural Tortilla Chips, in its start-up facilities in San Jose, California. Today, the company has three manufacturing plants and sells a variety of products throughout the United States and Europe. “Success is having the guts to turn opportunity into reality,” says company President Robert Garcia. “It also helps to have a really great banker.”
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Robert Garcia, President, R.W. Garcia Company and Roxann Burns, President, Greater Bay SBA Lending
Robert Garcia started his snack food company in the early 1980’s with two things: a good idea— to produce all natural, organic products, an almost non-existent niche at the time — and a $1,000 loan from his mother. “I soon discovered that bankers aren’t quite as generous as mothers,” says Robert. “Greater Bay’s Roxann Burns was the first banker to take us seriously. She spent the time to understand our business. She absolutely dazzled me,” Robert recalls. “Still does.”
Since Robert and Roxann’s first meeting in 2003, which Robert describes as “spending time with an old friend,” Greater Bay SBA Lending has arranged two SBA loans to help Robert grow his company. The second, larger, loan financed R.W. Garcia’s state-of-the-art manufacturing facility in North Carolina, currently turning out 2,300 pounds of tortilla chips per hour.
“Unlike many SBA lenders, Greater Bay is an SBA 504 originator,” explains Roxann. “Our SBA lending capability is broader than most of our competitors, because we’re not as reliant on the secondary market. Having the ability to help good companies grow is why I got into this business — it’s wonderful to be able to love your job.”
The relationship between banker and client continues to grow in new and interesting ways. “Roxann and Greater Bay nominated me for the 2004 SBA Small Business Person of the Year,” says Robert. “That was so gratifying. Better yet, I won.”
4 Greater Bay Bancorp Annual Report 2004
Robert and Roxann at R.W. Garcia Company
“Manufacturers are essential to our economy, and banking them is central to our business.”
— Roxann Burns, Greater Bay SBA Lending
Second Harvest Food Bank
Dave Sandretto
“Overnight we had what we needed.”
Serving an average of 163,500 people each month, the Second Harvest Food Bank of Santa Clara and San Mateo Counties distributes more than 27 million pounds of food each year to low-income children, adults and seniors. “We focus on helping people in need,” says the nonprofit’s Executive Director Dave Sandretto. “It really helps that our bankers are so focused on our needs.”
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Dave Sandretto, Executive Director, Second Harvest Food Bank of Santa Clara and San Mateo Counties and Maggie Rotzin, Senior Vice President and Senior Relationship Manager, Mid-Peninsula Bank
During lunch with an old friend, Dave Sandretto, Executive Director of Second Harvest Food Bank of Santa Clara and San Mateo Counties, mentioned some difficulties with the nonprofit’s current bank. Second Harvest needed secure lockboxes at locations in both counties where it does food bank business, and its current bank couldn’t accommodate this need. Dave’s dining companion said he would introduce him to some people at Mid-Peninsula Bank.
“Maggie Rotzin and a few other folks from Mid-Peninsula Bank came down to Second Harvest Food Bank,” recalls Dave. “They said, ‘yes, we can do this; yes we can do that.’ Clearly, these were decision makers, who didn’t need to take things back to a committee.”
Second Harvest Food Bank was on the verge of its holiday fundraising mailing, and needed the lockboxes in place to receive donations in both Santa Clara and San Mateo counties. “Virtually overnight, the Mid-Peninsula Bank team had installed the lockboxes, we plugged in the proper post office boxes on our mailing pieces, and ran with it,” says Dave. “It was not only an incredibly efficient process, it was a true partnership.”
The partnership extended to Greater Bay’s 2004 holiday food drive to support Second Harvest Food Bank both as a VIP Sponsor and with donations directly from Greater Bay employees. “It started with a lunch,” says Dave, “and now Maggie keeps cooking up new ways to help us put food on more people’s tables.”
8 Greater Bay Bancorp Annual Report 2004
“Supporting clients that support the community is one of the best aspects of my job.”
— Maggie Rotzin, Mid-Peninsula Bank
Dave and Maggie at Second Harvest
If you took top-level experienced professionals, focused them on key strategic markets, gave them local authority and local responsibility, supported them with a strong and flexible services organization and added specialized expertise for depth and diversification — you’d have something pretty special.
You’d have Greater Bay.
Goal Line Productions and Red Bear Property Management
Joe and Mike Madden
“We call her Glinda the Good.”
Sons of famed sports commentator John Madden, Mike and Joe Madden have each established successful businesses — and they share the same building in Pleasanton, California. They also share the same banker, Mt. Diablo National Bank’s Gerriann Smith. “Our family has been in this community for decades,” Mike and Joe say, “so a community bank is important to us. We consider Gerriann part of our family.”
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Mike Madden, President, Red Bear Property Management;
Joe Madden, President, Goal Line Productions; and Gerriann Smith, Vice President and Relationship Manager, Mt. Diablo National Bank
It was November 2003 and Mike Madden’s Red Bear Property Management — an investor/partner in a Marriott hotel in Livermore, California — needed financing for a balloon payment due on December 1. The hotel market was in a slump and hotel lenders were not easy to come by. Mike turned to Mt. Diablo National Bank’s Gerriann Smith, a long-time friend of the family. “Gerriann worked hard, including all day on Veterans Day— a bank holiday — to get the deal done,” recalls Mike. “That is just how Gerriann is; she’s impressive personally and professionally. She not only rescued us from a potentially bad situation, she turned what could have been just a short-term fix into an excellent long-term solution.”
Next up were what both brothers characterize as “miraculous” construction loan/mortgage packages for the two new homes they are currently building. “We call her Glinda the Good,” says Joe, President of Goal Line Productions, the largest, fully integrated production studio in Northern California, “because she seems to wave a magic wand and things just fall into place.”
Recently, Gerriann was at a community event with the Maddens, when one of the brother’s babies needed a diaper change. “Let me do that,” Gerriann said, taking control with motherly ease. “Now that’s what I call real relationship banking,” says Joe.
14 Greater Bay Bancorp Annual Report 2004
“Clients can become like family — and great relationships can span generations.”
— Gerriann Smith, Mt. Diablo National Bank
Mike, Gerriann and Joe
Pankow
Rik Kunnath
“It seemed like a miracle, but they perform this sort of magic every day.”
One of the largest general contractors in the United States, Pankow is a pioneer of the Design-Build project delivery system that helps ensure on-time, on-budget performance to meet clients’ specifications. “In our business, we depend on the quality of personal relationships, whether it’s with our building subcontractors or our insurance broker,” says Pankow CEO Rik Kunnath. “That’s why ABD is now our insurance provider.”
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Rik Kunnath, CEO, Pankow; Jann McCully, Chief Information Officer, and Fred de Grosz, President and Chief Executive Officer, ABD Insurance and Financial Services
The ability to manage and mitigate risk is critical in the construction business. Pankow, one of the country’s largest general contractor firms, thought it was well represented by its nationally known insurance provider— until they got to know ABD.
Pankow CEO Rik Kunnath was introduced to ABD through his long-term relationship with Greater Bay’s Golden Gate Bank. “ABD’s Fred de Grosz told me to call him if I needed anything,” recalls Rik, “even though they weren’t our broker at the time.” Soon, though, Rik had reason to get in touch. One of Pankow’s insurance carriers was not responding to a very significant claim, and Pankow’s current broker was unable to get the claim paid. “Within 48 hours of calling Fred, the claim was paid,” says Rik. “We thought it was a miracle.” ABD showed that it can truly walk the talk, and is now Pankow’s new insurance brokerage firm.
It’s been a good move for many reasons. “The ability to make a call and have an expert in safety or environmental issues respond immediately was something our other broker didn’t offer,” says Rik. State-of-the-art technology, like ABD’s CyberSure ® that allows Pankow to quickly issue on-site certificates of insurance, also sets ABD apart. “ABD’s resources are deep,” says Rik, “and the personal relationships we’ve developed are truly valuable.”
18 Greater Bay Bancorp Annual Report 2004
555 City Center Office Building, Oakland, CA
Rik, Jann and Fred at ABD
“Our industry-specific expertise provides a depth of knowledge that saves clients time and money.”
— Jann McCully, ABD Insurance and Financial Services
Paseo Colorado Mixed-Use Project, Pasadena, CA
Greater Bay Bancorp is
a diversified financial services
organization committed to
business excellence and superior
relationship-based client service
delivered through 11 Bay Area
community banking franchises,
national specialty finance
businesses and our leading
regional commercial insurance
brokerage — ABD Insurance
and Financial Services.
Our Solutions
Asset-Based Lending Cash Management Services Commercial Banking Commercial Insurance Brokerage Construction Financing Equipment Financing Foreign Exchange Services International Banking Lease Financing Personal and Private Banking Residential Lending
Small Business Administration (SBA) Lending Trust and Investment Services Venture Banking
We maintain personal relationships throughout the country from our home in the Bay Area.
South Bay
Bank of Santa Clara Cupertino National Bank Greater Bay Bank San Jose San Jose National Bank Venture Banking Group
San Francisco / Peninsula Bay Area Bank Golden Gate Bank Mid-Peninsula Bank Peninsula Bank of Commerce Greater Bay Private Capital Banking
East Bay
Bay Bank of Commerce Greater Bay Bank Fremont Greater Bay Bank Walnut Creek Mt. Diablo National Bank
Monterey Bay
Coast Commercial Bank Greater Bay Bank Carmel
North Bay
Bank of Petaluma Greater Bay Bank Marin
Other Divisions / Businesses
ABD Insurance and Financial Services CAPCO
Greater Bay Capital
Greater Bay International Banking Greater Bay Residential Lending Greater Bay SBA Lending Greater Bay Trust Company Matsco Pacific Business Funding
22 Greater Bay Bancorp Annual Report 2004
At Greater Bay, business is personal.
At Greater Bay, business is personal.
Greater Bay Bancorp Annual Report 2004
It’s business
“Never mix business with pleasure,” is an adage you’ll never hear from anyone at Greater Bay.
Greater Bay has created a sweet spot between the impersonal scale of “major” institutions and the limited geography and capacity of smaller competitors. Add to this a diversity-by-design that provides benefits to both clients and shareholders, and you have the essence of what makes this company something more than meets the eye.
Our Strategy
One principle that has guided Greater Bay since its inception is that long-term shareholder value comes from providing consistently exceptional client value. This belief takes the tangible form of a business that is based on relationships — the relationship between a successful business owner and an experienced banker, the relationship between Greater Bay’s community banking franchises and its streamlined support organization, the relationship between a local relationship manager and Greater Bay’s international bankers and cash management experts, the relationship between a banking client and ABD’s top-flight insurance experts. All of these interlocking relationships are the fabric that makes Greater Bay strong and sets it apart. And while “relationship” is a word often heard in today’s business environment, it is more than a word to our company and our clients — it is a promise, a commitment, a mission, and a reality.
An equally important relationship exists between our community banking franchises and our communities, and between those communities and the regional economy they comprise. An integral part of the Greater Bay story is the fact that the San Francisco Bay Area — one of the most strategically dynamic economies in the country — is the place we call home.
A Strong Regional Economy
We see our Bay Area home as a genuine advantage for our long-term growth and success, especially considering the diversity and depth of business opportunity here. And in addition to world-class educational institutions and a track record for business innovation, the Bay Area has one of the highest levels of worker productivity in the nation, the highest level of workforce education and a particularly strong international trade position.
The companies and individuals who are harnessing these inherent regional strengths are the clients forming the relationships that make Greater Bay a unique and exemplary financial services enterprise. It is here that we have assembled 11 community banking franchises with 40 banking offices into an organization that is both nimble and effective. And, it is from here that we have added diversification and strength in specialized financial services. It is also from here that we have added the strength and expertise of one of the nation’s leading insurance brokerage firms — ABD.
Greater Bay is Community Banking
Another label frequently heard today is “community banking.” While many would like to claim this for themselves, we believe that there is more to being a community bank than a convenient phrase. At Greater Bay, we have built a business that is about people serving people. It is about local decisions made with superior local knowledge that comes from genuine local involvement. Our bankers know their communities because they are an integral part of their communities and have been for decades. And equally important, Greater Bay’s community bankers are part of a regional financial leader that brings extensive expertise and the strength of nearly $7 billion in assets. This is combined with a style of business that is personal, consultative and collaborative, resulting in a competitive advantage in a very attractive market.
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Our Strategy – Continued
This local focus and local authority — with regional strength — is something that truly sets Greater Bay apart, and has created a sweet spot between the impersonal scale of “major” institutions and the limited geography and capacity of smaller competitors. This, in turn, allows us to create long-term relationships that continue to serve clients as their needs evolve and grow — a model that is genuinely the best of both worlds.
Strength in Diversification
A logical and important extension of Greater Bay’s community banking enterprise is our group of Specialty Finance businesses. Here, while personal relationships and quality service are part of the business model, the playing field is much wider and the expertise is very well defined. Commercial finance, SBA lending, residential lending, lease financing and asset-based lending are specialties that are connected to our community banking business in the Bay Area, but are also “free standing” businesses in their own right, and on a larger — even national — scale. Economies of scale and expertise have refined these activities to a level of virtual science, and we enjoy a best-of-breed reputation in several key areas.
Greater Bay’s Matsco, for example, focuses on the unique financial requirements of dental and veterinarian practices across the nation, providing expertise and services in everything from practice acquisition and start-up, to equipment and expansion financing.
Our SBA lending unit — a National Preferred Lender — provides financing to small business clients not only in California, but throughout the United States. Synergies with these businesses and our community banking franchises are indeed logical, but equally significant are synergies within the group itself. Matsco clients, for example, now have access to SBA-guaranteed loans through the lender they already know and trust.
ABD’s Top-Tier Insurance Services
The proverbial “third leg” of Greater Bay’s strategic stool is ABD Insurance and Financial Services. While adding the earnings power of the fourth largest bank-owned insurance brokerage in America makes intuitive sense in its own right, ABD’s client-centric relationship approach to business makes it a good cultural fit with its Greater Bay counterparts. From its dominant position in the greater San Francisco Bay Area, ABD has expanded to key strategic markets in the western United States, and enjoys a reputation for efficiency and client service that we believe is difficult to rival. This standing has come from a consistent strategy of helping clients manage liability and risk with tailored insurance solutions backed by extensive experience and in-depth industry expertise. This too, is another variation on a key theme of personal relationships and expert knowledge.
ABD also offers clients the benefits of cutting-edge technology. Its CyberSure ® website, for example, is a valuable tool available to clients for risk management, employee benefits consulting and online transaction processing.
4 Greater Bay Bancorp Annual Report 2004
Setting the Stage for Future Growth
Greater Bay’s track record for shareholder value is an important part of our history. But success does not preclude the need for change — in fact it mandates it. Change is an intrinsic component of growth, and growth is an essential part of our culture. In 2004, we undertook a number of key infrastructure and capacity initiatives to help us better leverage our core strengths and build for the future.
We implemented new credit standards and processes to further support local decision-making, and provided new loan pricing and profitability tools for our local lenders. We consolidated our 11 separate community bank charters into a single national bank charter regulated by the Office of the Comptroller of the Currency. While we have streamlined, we have also maintained our local operating structures and local market identities to continue to best serve our local communities. We have moved to standardize key functions and product offerings, while not centralizing the local management of our business —preserving the character and spirit of our founding principles.
These changes, we believe, will make us an even more nimble organization, one with greater consistency of controls and even better positioned to grow both organically and through acquisition when appropriate opportunities arise.
This year, we continued to strengthen our management team with the addition of key executives who possess an important breadth and depth of experience in a wide range of financial services. The shared sense of mission and opportunity seen today in our management team positions us for the intelligent growth that will preserve an important legacy while finding new and even more exciting horizons.
A Smart Investment
Greater Bay began as an insightful idea that became an impressive organization and is now poised to be a leader in its chosen markets and communities. We have taken the essence of local community banks, serving the needs of one of the most sought-after customer segments — local businesses and their owners — and married that to a complementary collection of expert services and diversified financial specialties. Led by an experienced leadership team, this combination has produced a “just right” business model that continues to serve our clients and shareholders alike.
For us, business is personal. We founded our company with an understanding of the importance of relationships — and that remains a cornerstone today. We have invested in the infrastructure and leadership necessary to begin our next chapter of success, and we are poised for growth and expansion in those areas where our unique style of business will add value to communities, companies, individuals, and shareholders.
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Byron Scordelis and Duncan Matteson
To Our Shareholders
Your company posted another solid year of operating performance, which was highlighted by earnings of $92.9 million for the year ended December 31, 2004. We achieved these results in the face of continued interest rate volatility as well as the ongoing challenges of the Bay Area economy. Once again, our results validated the relationship-oriented, local knowledge and local decision-making based essence of our operating beliefs and practices.
During the past year core deposits grew by $243 million — our third consecutive year of healthy growth in clear contrast to the perceived status of our regional economy. While the size of our loan portfolio continues to reflect the condition of that economy, our credit quality metrics were enviable. Delinquent loans stood at a stellar 0.35% of total loans at year-end, net loan losses reflected a decline of nearly 70% over the past two years and non-performing assets fell by a meaningful amount from the prior year’s end. These indicators are a direct reflection of our steadfast dedication to the principle of extending sound loans for constructive purposes in each of our local markets, and to the rigorous application of prudent credit practices.
We are also very pleased with the continued success of our quest toward greater diversification of our revenue sources — by both type and geographic location. Our commercial insurance brokerage subsidiary, ABD Insurance and Financial Services, posted record revenue of $131 million, and helped to boost your company’s non-interest revenue to nearly 40% of total revenue in 2004. In keeping with its strategic intent to build a pre-eminent West Coast franchise position, ABD has successfully integrated its 2003 acquisition of Sullivan and Curtis in Seattle — one of the most respected commercial brokerage firms in the Pacific Northwest. We look with optimism and anticipation to ABD’s continued future achievement of both organic and acquisitive growth and to its valued contribution to our overall financial performance.
To Our Shareholders – Continued
In the specialty finance area, we continued to be similarly pleased with results in each major area of business activity. At Matsco, one of the nation’s largest providers of commercial financing to dentists and veterinarians, we achieved another year of solid portfolio growth, as well as both meaningful increases in operating efficiency and continued strength in credit quality. We are proud to note that Greater Bay Capital, our small-ticket leasing division, has grown to nearly $200 million in high-quality leasing receivables from a standing start a little more than two years ago. Once again, these businesses provided both the quality asset growth that we sought in 2004, as well as the geographic diversification of revenue, which we believe to be consistent with your shareholder interests.
While we have diligently endeavored to achieve these measurable results, it is our guiding beliefs that are enduring and continue to be at the core of all that we do. At its essence, ours is a business of assessing and bearing risk — and we do so with an ever-mindful eye to optimizing the long-term capital that you have entrusted to us. We believe in the active engagement of our valued employees in the process of growing your company — and in recognizing, rewarding and providing clear opportunities for professional advancement to those who contribute to our success. We believe in being an active participant in the communities that we serve — for our ultimate success is inexorably tied to the vibrancy and well-being of the very people who live and work there. And we believe in an absolutely uncompromising focus on excellence in every facet of our business and in being the unquestioned best at every undertaking in which we are engaged.
In this regard, we would highlight two particular areas of accomplishment in 2004. First, with an effective system of internal controls being at the very heart of any risk-bearing enterprise, we committed a significant investment of both effort and financial resources to assure our full measure of compliance with the spirit and letter of the Sarbanes-Oxley Act — a key litmus test for the integrity of corporate financial reporting and controls. We feel that this investment yielded long-term value in assuring that a control-based cornerstone, upon which our long-term growth can be built, is indeed in place, and we believe that the results of this substantial effort are reflected in the independent evaluation of our financial reports and controls.
Second, we are proud to report that the Greater Bay Bancorp Foundation contributed more than $1 million to nearly 900 deserving nonprofit recipients throughout the greater Bay Area during 2004 —bringing our Foundation’s total level of giving to nearly $9 million since its inception. In addition, we are gratified that countless employees throughout the Company devoted thousands of hours to community service during this past year as a tangible expression of our resolve to invest in the long-term vitality of the communities that we serve. We extended more than $6.7 million in credit to assist in the formation of affordable housing, invested in both tax credit and venture capital opportunities explicitly aimed at accelerating the commercial development of neighborhoods in need and consolidated our Small Business Administration (SBA) lending into a single company-wide business unit as part of our effort to become
8 Greater Bay Bancorp Annual Report 2004
the pre-eminent SBA lender in the greater Bay Area. We were pleased to have been granted national “preferred lender” status by the SBA in early 2004, and are proud to profile one of our borrowers in this report who was recognized as this region’s “Small Business Person of the Year” by the SBA in 2004.
Finally, we would like to acknowledge the retirement of seven members of our Board in early 2005 —Bob Archer, Susan Ford Dorsey, Jim Jackson, Stan Kangas, Rex Lindsay, Warren Thoits, and John Whalen. Many of these Directors were also founders of the banking franchises that joined the Greater Bay family, and provided years of invaluable service, hard work and dedication in singular service of shareholder interests. We are deeply appreciative of their many contributions in that regard, and have endeavored to affirm that gratitude by naming each of them as a Director Emeritus of the Board. The subsequently reduced size of our Board is consistent with a long-term governance objective to sustain a membership level that optimizes both its efficiency and operating effectiveness.
This has been another important year for strengthening our base, identifying efficiency opportunities and continuing to lay the groundwork for growth and expansion in our diverse but complementary business activities. Our future is promising, and we continue to invest in the people and systems that will allow Greater Bay to fully leverage not only our business potential, but also the important role we play in the lives of the people, the businesses and the communities we serve. We thank you for your continued support.
Byron A. Scordelis President and Chief Executive Officer
Duncan L. Matteson Chairman of the Board
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Selected Financial Highlights
As of and for the five years ended December 31, (Dollars in thousands, except per share amounts)
Net Income (in millions)
2004 2003 2002 2001 2000 $92.9 $92.0 $124.3 $79.8 $67.2
Net Income Per Diluted Share
2004 2003 2002 2001 2000 $1.50 $1.62 $2.30 $1.57 $1.33
Return on Average Assets
2004 2003 2002 2001 2000
1.25% 1.16% 1.50% 1.18% 1.34%
Regulatory Capital–
Total Capital to Risk Weighted Assets
2004 2003 2002 2001 2000
14.27% 14.13% 12.97% 12.79% 10.87%
Allowance for Loan and Lease Losses (in millions)
2004 2003 2002 2001 2000 $107.5 $124.5 $128.0 $122.5 $89.5
Allowance for Loan and Lease Losses to Total Loans
2004 2003 2002 2001 2000 2.40% 2.73% 2.66% 2.72% 2.19%
Assets (in billions)
2004 2003 2002 2001 2000 $6.93 $7.60 $8.08 $7.88 $5.82
Loans, net (in billions)
2004 2003 2002 2001 2000 $4.36 $4.41 $4.66 $4.37 $3.98
*Core Deposits (in billions)
2004 2003 2002 2001 2000 $4.81 $4.56 $4.43 $4.07 $4.37
*Core Deposit Portfolio Composition (in billions)
Loan Portfolio Composition (in billions)
A MMDA, NOW and savings $ 3.26 67.9%
B Demand, non-interest bearing 1.05 21.9%
C Time certificates, $ 100,000 and over 0.36 7.3%
D Other time certificates 0.14 2.9%
Total Core Deposits $ 4.81 100.0%
A Commercial $ 1.97 43.9%
B Term real estate–commercial 1.60 35.6%
C Real estate construction and land 0.48 10.7%
D Real estate other 0.29 6.5%
E Consumer and other 0.14 3.2%
Total Loans, Gross $ 4.48 100.0%
* Core deposits exclude brokered deposits and institutional certificates of deposit.
10 Greater Bay Bancorp Annual Report 2004
Selected Financial Highlights
As of and for the five years ended December 31, (Dollars in thousands, except per share amounts)
2004 2003 2002 (1) 2001 2000 (2)
Statement of Operations Data
Interest income $ 376,499 $ 407,719 $ 505,412 $ 507,241 $ 423,639
Interest expense 90,876 109,838 160,555 199,793 165,892
Net interest income 285,623 297,881 344,857 307,448 257,747
Provision for credit losses 5,521 28,195 59,776 54,727 28,821
Net interest income after provision credit losses 280,102 269,686 285,081 252,721 228,926
Non-interest income 186,585 171,542 156,122 44,842 47,131
Operating expenses 314,315 292,208 244,876 191,279 165,228
Income before income tax expense 152,372 149,020 196,327 106,284 110,829
Income tax expense 59,453 57,017 72,053 26,468 43,665
Net income $ 92,919 $ 92,003 $ 124,274 $ 79,816 $ 67,164
Per Share Data
Earnings per common share:
Basic $ 1.68 $ 1.65 $ 2.35 $ 1.61 $ 1.40
Diluted (3) 1.50 1.62 2.30 1.57 1.33
Cash dividends per common share 0.57 0.54 0.49 0.43 0.35
Book value per common share 12.89 12.54 11.64 9.31 7.92
Common shares outstanding at year end 51,179,450 52,529,850 51,577,795 49,831,682 48,748,713
Average common shares outstanding 51,468,000 52,040,000 51,056,000 49,498,000 47,899,000
Average common and common equivalent shares outstanding (3) 57,881,000 53,008,000 54,146,000 50,940,000 50,519,000
Performance Ratios
Return on average assets 1.25% 1.16% 1.50% 1.18% 1.34%
Return on average common shareholders’ equity 14.21% 14.52% 22.43% 17.77% 19.21%
Return on average total equity 12.45% 12.88% 20.29% 17.77% 19.21%
Net interest margin 4.36% 4.20% 4.52% 4.86% 5.56%
Balance Sheet Data—At Period End
Assets $ 6,932,057 $ 7,599,962 $ 8,080,539 $ 7,882,886 $ 5,823,208
Loans, net 4,361,603 4,413,318 4,663,188 4,373,174 3,975,273
Securities 1,615,273 2,227,152 2,562,986 2,970,630 1,091,064
Deposits 5,102,839 5,312,667 5,272,273 4,990,071 4,750,404
Borrowings 788,975 1,282,191 1,947,554 2,320,671 565,876
Preferred stock of real estate investment trust subsidiaries of the Bank 12,621 12,162 12,510 11,860 -
Convertible preferred stock 103,816 91,752 80,900 - -
Common shareholders’ equity 659,250 658,765 600,159 463,684 385,948
Asset Quality Ratios
Nonperforming assets (4) to total loans 0.98% 1.36% 0.80% 0.69% 0.32%
Nonperforming assets (4) to total assets 0.64% 0.81% 0.47% 0.39% 0.22%
Allowance for loan and lease losses to total loans 2.40% 2.73% 2.66% 2.72% 2.19%
Allowance for loan and lease losses to nonperforming loans (4) 245.97% 201.76% 339.00% 395.70% 687.44%
Net charge-offs to average loans 0.40% 0.67% 1.19% 0.59% 0.33%
Regulatory Capital Ratios
Tier I leverage ratio 10.67% 9.98% 8.61% 8.01% 8.79%
Tier I risk-based capital ratio 13.01% 12.87% 11.71% 10.49% 9.57%
Total risk-based capital ratio 14.27% 14.13% 12.97% 12.79% 10.87%
(1) In March 2002 we acquired ABD and began to earn insurance brokerage commissions, which are included in non-interest income. Previously, we had earned no such revenue.
(2) Restated on a historical basis to reflect the merger with SJNB Financial Corp during 2001 on a pooling-of-interests basis.
(3) Diluted earnings per common share and average common and common equivalent shares outstanding for the years ended December 31, 2003, 2002, 2001 and 2000, have been restated to reflect the December 31, 2004 adoption of Emerging Issues Task Force, or EITF, Issue No 04-8, “The Effect of Contingently Convertible Debt on Diluted Earnings per Share,” or EITF Issue 04-8.
(4) Excludes accruing loans past due 90 days or more and restructured loans.
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Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets As of December 31,
(dollars in thousands) 2004 2003
Assets:
Cash and cash equivalents $ 171,657 $ 275,891
Securities at fair value 1,615,273 2,227,152
Total loans, net 4,361,603 4,413,318
Other assets 783,524 683,601
Total assets $ 6,932,057 $ 7,599,962
Liabilities and shareholders’ equity:
Total deposits $ 5,102,839 $ 5,312,667
Borrowings 788,975 1,282,191
Other liabilities 264,556 242,425
Preferred stock of real estate investment trust subsidiaries 12,621 12,162
Shareholders’ equity 763,066 750,517
Total liabilities and shareholders’ equity $ 6,932,057 $ 7,599,962
See notes to consolidated financial statements
Condensed Consolidated Statements of Operations For the years ended December 31,
(dollars in thousands, except per share amounts) 2004 2003 2002
Interest income $ 376,499 $ 407,719 $ 505,412
Interest expense 90,876 109,838 160,555
Net interest income 285,623 297,881 344,857
Provision for credit losses 5,521 28,195 59,776
Net interest income after provision for credit losses 280,102 269,686 285,081
Non-interest income 186,585 171,542 156,122
Operating expenses 314,315 292,208 244,876
Income before provision for income taxes 152,372 149,020 196,327
Provision for income taxes 59,453 57,017 72,053
Net income $ 92,919 $ 92,003 $ 124,274
Earnings per common share—basic $ 1.68 $ 1.65 $ 2.35
Earnings per common share—diluted $ 1.50 $ 1.62 $ 2.30
See notes to consolidated financial statements
Condensed Consolidated Statements of Comprehensive Income For the years ended December 31,
(dollars in thousands) 2004 2003 2002
Net income $ 92,919 $ 92,003 $ 124,274
Other comprehensive income / (loss) (18,683) (18,415) 14,657
Comprehensive income $ 74,236 $ 73,588 $ 138,931
See notes to consolidated financial statements
12 Greater Bay Bancorp Annual Report 2004
Condensed Consolidated Financial Statements
Condensed Consolidated Statements of Shareholders’ Equity For the years ended December 31,
(dollars in thousands) 2004 2003 2002
Beginning balance $ 750,517 $ 681,059 $ 463,684
Net income 92,919 92,003 124,274
Other comprehensive income / (loss), net of taxes (18,683) (18,415) 14,657
7.25% convertible preferred stock issued in purchase accounting
transaction 12,197 10,852 80,900
Stock issued via employee benefit plans and Dividend Reinvestment Plan 20,658 19,129 26,883
Stock repurchased (59,208) - -
Cash dividend declared (35,334) (34,111) (29,339)
Ending balance $ 763,066 $ 750,517 $ 681,059
See notes to consolidated financial statements
Condensed Consolidated Statements of Cash Flows For the years ended December 31,
(dollars in thousands) 2004 2003 2002
Cash flows—operating activities:
Net income $ 92,919 $ 92,003 $ 124,274
Other, net (928) 72,046 (5,138)
Operating cash flows, net 91,991 164,049 119,136
Cash flows—investing activities:
Purchase, sales and maturities of securities, net 599,171 294,695 470,189
Loans, net 6,443 163,965 (374,776)
Other, net (23,871) (17,957) (45,441)
Investing cash flows, net 581,743 440,703 49,972
Cash flows—financing activities:
Net change in deposits (209,828) 40,394 282,202
Net change in borrowings (493,410) (667,012) (364,744)
Cash dividends (35,334) (34,111) (29,339)
Other, net (39,396) 17,354 41,883
Financing cash flows, net (777,968) (643,375) (69,998)
Net change in cash cash equivalents (104,234) (38,623) 99,110
Cash and cash equivalents at beginning of period 275,891 314,514 215,404
Cash and cash equivalents and end of period $ 171,657 $ 275,891 $ 314,514
See notes to consolidated financial statements
13
Greater Bay Bancorp
Board of Directors
Duncan L. Matteson Chairman Greater Bay Bancorp Chairman The Matteson Companies
Byron A. Scordelis President and Chief Executive Officer Greater Bay Bancorp
Robert A. Archer* Chairman Coast Counties Truck and Equipment Co.
Frederick J. de Grosz President and Chief Executive Officer ABD Insurance and Financial Services
Susan Ford Dorsey* President Sand Hill Foundation
John M. Gatto Vice Chairman Greater Bay Bancorp Architect Maria Enterprises
James E. Jackson* Attorney at Law James E. Jackson, A Professional Corp.
David L. Kalkbrenner Vice Chairman Retired President and Chief Executive Officer Greater Bay Bancorp
Stanley A. Kangas* Retired Consulting Engineer and Private Investor
Daniel G. Libarle President and Owner Lace House Linen, Inc.
Rex D. Lindsay* Private Investor
Arthur K. Lund Attorney at Law Hoge, Fenton, Jones
& Appel, Inc.
George M. Marcus Chairman The Marcus & Millichap Company
Glen McLaughlin Retired President and Chief Executive Officer Venture Leasing Associates
Linda R. Meier Community Volunteer
Donald H. Seiler Founder Seiler & Company, LLP
Warren R. Thoits* Attorney at Law Thoits, Love, Hershberger & McLean
James C. Thompson Partner Comstock, Thompson, Kontz & Brenner
Thaddeus J. Whalen, Jr.* Professor of Economics Santa Clara University
Executive Officers
Byron A. Scordelis President and Chief Executive Officer
Colleen M. Anderson Executive Vice President Community Banking
Kimberly S. Burgess Executive Vice President and Chief Administrative Officer
Peggy Hiraoka
Executive Vice President Human Resources
Kamran F. Husain Senior Vice President, Controller and Chief Accounting Officer
Linda M. Iannone Senior Vice President, General Counsel and Corporate Secretary
Gregg A. Johnson Executive Vice President Business and Technology Services
Kenneth A. Shannon Executive Vice President and Chief Risk Officer
James S. Westfall Executive Vice President and Chief Financial Officer
* Retired and named Director Emeritus of the Board effective March 1, 2005
14 Greater Bay Bancorp Annual Report 2004
ABD Insurance and Financial Services
Board of Directors
Bruce M. Basso Chairman ABD Insurance and Financial Services
Frederick J. de Grosz President and Chief Executive Officer ABD Insurance and Financial Services
James J. Czesak
Executive Vice President Employee Benefits ABD Insurance and Financial Services
Daniel R. Francis Chief Operating Officer ABD Insurance and Financial Services
James H. Hall President Employee Benefits ABD Insurance and Financial Services
Samuel L. Jones President Property and Casualty ABD Insurance and Financial Services
David L. Kalkbrenner Vice Chairman Retired President and Chief Executive Officer Greater Bay Bancorp
Duncan L. Matteson Chairman Greater Bay Bancorp Chairman The Matteson Companies
15
Strategic Development Boards
Bank of Petaluma
Howard B. Daulton, II President and Chief Executive Officer Bank of Petaluma
Walter E. Bragdon Retired President and Chief Executive Officer Bank of Petaluma
John H. Dado Retired CPA
Robert W. Giacomini President Robert Giacomini Dairy, Inc.
Henry C. Hansel President Hansel Auto Group
Max K. Herzog President and Owner Sleepy Hollow Dairy and Sleepy Hollow Vineyards
John J. King, Jr. Of Counsel Anderson, Zeigler, Disharoon, Gallagher
& Gray
Daniel G. Libarle President and Owner Lace House Linen, Inc.
James E. McCaffrey Sole Proprietor McCaffrey Offices
William H. McDevitt President McDevitt & McDevitt Construction Corp.
William J. McDowell Owner McDowell Dairy
Bank of Santa Clara
Michael J. King President and
Chief Executive Officer Bank of Santa Clara
Louis F. Boitano Senior Partner Boitano, Sargent & Lilly, LLP
A. Stanley Chinchen Private Investor
Gerald R. Graham Chairman Reed & Graham, Inc.
Louis J. Mariani Owner Mariani’s Restaurant and Inn
Donald R. Von Raesfeld Retired City Manager City of Santa Clara
Bay Area Bank
Frank M. Bartaldo, Jr. President and Chief Executive Officer Bay Area Bank
Robert R. Haight Private Investor
Stanley A. Kangas Retired Consulting Engineer and Private Investor
David J. Macdonald Real Estate Broker David J. Macdonald Real Estate
Dennis W. Royer Real Estate Broker
Bay Bank of Commerce
Oswald A. Rugaard Independent Sales Consultant
Mark A. Wilton Owner MarWil Investment
Coast Commercial Bank
William Brooks Owner Brooks Properties
Gilbert W. “Bud” Cummings Retired
Frank Minuti, Jr. Certified Public Accountant and President Berger-Lewis Accountancy
Harvey J. Nickelson Retired President and Chief Executive Officer Coast Commercial Bank
Gus J. Norton Retired
James C. Thompson Partner Comstock, Thompson, Kontz & Brenner
Cupertino National Bank
David R. Hood President and
Chief Executive Officer Cupertino National Bank
C. Donald Allen Financial Consultant
Stephen C. Andrews Retired President McWhorters Stationers
Carl E. Cookson Owner Business Connections
Janet M. De Carli Broker Coldwell Banker Real Estate
John M. Gatto Vice Chairman Greater Bay Bancorp Architect Maria Enterprises
James E. Jackson Attorney at Law James E. Jackson, A Professional Corp.
Cynthia Kenyon-Lazares President CBIZ–Mayer Hoffman McCann
Rex D. Lindsay Private Investor
Richard W. Lowenthal Council Member City of Cupertino
16 Greater Bay Bancorp Annual Report 2004
Cupertino National Bank – Continued
Glen McLaughlin Retired President and Chief Executive Officer Venture Leasing Associates
Steve C. Smith Financial Consultant
John M. Sobrato General Partner Sobrato Development Companies
Devendra Verma Private Investor and Partner Edgewood Ventures Partners
Dennis S. Whittaker President Whittaker Insurance Agency, Inc.
Golden Gate Bank
James R. Woolwine Chairman, Strategic Development Board Golden Gate Bank
James P. Williams President and Chief Operating Officer Golden Gate Bank
Mara Brazer Principal, Public Relations and Marketing Consultant Brazer Communications
George H. Clyde, Jr. Attorney at Law Rules Advisor The 2007 America’s Cup
Kay Dryden Attorney at Law
Mary C. Falvey Management Consultant Falvey Associates
Donald R. Krohn Managing Partner Krohn and Croak
Arthur K. Lund Attorney at Law Hoge, Fenton, Jones & Appel, Inc.
Robert A. Luster Chief Executive Officer Luster National, Inc.
Stephen D. Mayer President and Chief Executive Officer Burr, Pilger & Mayer, LLP
Mid-Peninsula Bank
Teresa C. Lachenbruch President and Chief Executive Officer Mid-Peninsula Bank
Lawrence A. Aufmuth Principal Aufmuth Law Corporation
Allan F. Brown Chairman Vance Brown, Inc.
James G. B. DeMartini, III Managing Partner Seiler & Company, LLP
Leonard W. Ely Retired President Ely Motor Company
Timothy Howard General Partner CHP Capital
R. Hewlett Lee, MD Retired Surgeon and Former Executive Director Palo Alto Medical Clinic
Helen C. Leong Managing Partner Leong Ventures
Dennis A. LeVett President Strutz-LeVett Company
Warren R. Thoits Attorney at Law Thoits, Love, Hershberger & McLean
Donald A. Way Chairman and
Chief Executive Officer Thoits Insurance Service, Inc.
Mt. Diablo National Bank
J. Craig Van Selow President and Chief Executive Officer Mt. Diablo National Bank
Robert Y. Anderson CPA, CFP, CVA and Managing Partner Blanding, Boyer & Rockwell, LLP
Michael K. Brown Attorney at Law Morgan Miller Blair
Frank L. Capilla Chairman Can-Am Plumbing
John P. Ferreri President Ferreri Investment Corp.
Stephen D. Roath President California Symphony Retired Chief Executive Officer Longs Drug Stores Corp.
Mark O. Sweeney Principal CM Realty
James N. Vlamis Director of Sales –Retail Dreyer’s Grand Ice Cream
Peninsula Bank of Commerce
Mark F. Doiron President and
Chief Executive Officer Peninsula Bank of Commerce
Francis G. Azzopardi Partner South City Lumber, Inc., and Pacific Manor Hardware, Inc.
George R. Corey Senior Partner Corey, Luzaich and Pliska, LLP
Daniel J. Harrington CPA and Partner Good & Fowler, LLP
Robert A. Marshall, Sr. Principal Marshall Realty
Joseph W. Welch President San Bruno Investment Co., Inc.
Partner Welch Family Partnership
San Jose National Bank
Stephen G. Heitel President and Chief Executive Officer San Jose National Bank
Ray S. Akamine Chief Financial Officer Hill View Packing Co., Inc.
Robert A. Archer Chairman Coast Counties Truck and Equipment Co.
Rod Diridon, Sr. Executive Director Mineta Transportation Institute
Arthur K. Lund Attorney at Law Hoge, Fenton, Jones
& Appel, Inc.
Diane P. Rubino President Hill View Packing Co., Inc.
17
Corporate Directory
Community Banking
Bank of Petaluma 800 North McDowell Blvd.
Petaluma, CA 94954 707-765-2222
Bank of Santa Clara 1995 El Camino Real Santa Clara, CA 95050 408-496-4800
Bay Area Bank 900 Veterans Blvd. Redwood City, CA 94063 650-367-1600
Bay Bank of Commerce 1495 East 14th St. San Leandro, CA 94577 510-357-2265
Coast Commercial Bank 75 River St. Santa Cruz, CA 95060 831-458-4500
Cupertino National Bank 20230 Stevens Creek Blvd. Cupertino, CA 95014 408-996-1144
Golden Gate Bank 225 Bush St., Ste. 100 San Francisco, CA 94104 415-421-9000
Mid-Peninsula Bank 420 Cowper St. Palo Alto, CA 94301 650-614-5780
Mt. Diablo National Bank 1255 Treat Blvd, Suite 160 Walnut Creek, CA 94597 925-979-2616
Peninsula Bank of Commerce 1001 Broadway Millbrae, CA 94030 650-697-4333
San Jose National Bank One North Market St. San Jose, CA 95113 408-947-7562
Greater Bay Bank Mission between 5th & 6th Carmel-by-the-Sea, CA 93921 831-620-0140
39470 Paseo Padre Pkwy.
Fremont, CA 94538 510-818-2900
60 South Market St., Ste. 100 San Jose, CA 95113 408-286-1595
999 Fifth Ave., Ste. 100 San Rafael, CA 94901 415-258-8595
1255 Treat Blvd., Ste. 100 Walnut Creek, CA 94597 925-979-7200
Greater Bay Private Capital Banking 400 Emerson St. Palo Alto, CA 94301 650-614-5700
Venture Banking Group Three Palo Alto Square, Ste. 150 Palo Alto, CA 94306 650-813-3800
Specialized Financial Businesses
CAPCO
3006 Northup Wy., Ste. 103 Bellevue, WA 98004 800-958-2890
Greater Bay
International Banking 225 Bush St., Ste. 100 San Francisco, CA 94104 800-891-1112
Greater Bay SBA Lending 60 South Market St. San Jose, CA 95113 800-722-4711
Greater Bay Capital 100 Tri-State International, Ste. 140 Lincolnshire, IL 60069 800-570-3607
Greater Bay Trust Company 400 Emerson St., 2nd Fl.
Palo Alto, CA 94301 650-614-5711
Matsco
2000 Powell St., 4th Fl.
Emeryville, CA 94608 800-326-0376
Pacific Business Funding 20195 Stevens Creek Blvd., Ste. 220 Cupertino, CA 95014 408-255-9300
Insurance Brokerage
ABD Insurance and Financial Services 305 Walnut Street Redwood City, CA 94063 650-839-6000
Greater Bay Bancorp Foundation
Greater Bay Bancorp Foundation 1900 University Ave., 6th Fl.
East Palo Alto, CA 94303 650-838-6142
18 Greater Bay Bancorp Annual Report 2004
Corporate and Investor Information
Administrative Office Corporate Counsel Registrar and Certified Public Accounts
Transfer Agent
Greater Bay Bancorp Manatt, Phelps & Wells Fargo PricewaterhouseCoopers LLP
1900 University Ave., Phillips, LLP Shareowners 199 Fremont St.
6th Fl. 11355 West Olympic Services San Francisco, CA
East Palo Alto, CA Blvd. 161 North Concord 94105
94303 Los Angeles, CA Exchange St. 415-498-5000
650-813-8200 90064 South St. Paul, MN
www.gbbk.com 310-312-4000 55975-1139
800-468-9716
Additional Financial Reports
For information beyond that shown in this report, shareholders may receive, without charge, the Company’s Annual Report on Form 10-K for 2004, which was filed with the SEC, by writing to:
James S. Westfall
Executive Vice President and Chief Financial Officer 1900 University Ave., 6th Fl.
East Palo Alto, CA 94303
Stock Information
Cash
Dividends
Quarter ended High Low Declared
2004
December 31 $ 31.82 27.88 0.1425
September 30 30.00 25.07 0.1425
June 30 30.01 27.02 0.1425
March 31 30.21 26.76 0.1425
2003
December 31 $ 29.34 21.23 0.135
September 30 22.89 18.53 0.135
June 30 23.30 14.40 0.135
March 31 18.36 12.94 0.135
19