Greater Bay Bancorp Reports Fourth Quarter and Year End 2004 Results

Greater Bay Bancorp Reports Fourth Quarter and Year End 2004 Results

    Business Editors

    PALO ALTO, Calif.--(BUSINESS WIRE)--Feb. 1, 2005--Greater Bay Bancorp (Nasdaq:GBBK), a $6.9 billion in assets financial services holding company, today announced results for the fourth quarter and the year ended December 31, 2004.
    For the fourth quarter of 2004, Greater Bay Bancorp's net income was $21.1 million, or $0.33 per fully diluted common share, compared to $21.4 million, or $0.37 per fully diluted common share, for the fourth quarter of 2003, and $22.5 million, or $0.36 per fully diluted common share, for the third quarter of 2004. For the year ended December 31, 2004, net income was $92.9 million, or $1.50 per fully diluted common share, compared to $92.0 million, or $1.62 per fully diluted common share for the year ended December 31, 2003.
    The reported fully diluted earnings per common share reflect the Company's implementation of a recent accounting pronouncement relating to contingently convertible debt for reporting purposes. This accounting change requires that the common shares issuable upon conversion of the Company's outstanding Zero Coupon Senior Convertible Contingent Debt Securities (CODES) be considered on an if-converted basis in calculating fully diluted earnings per common share. The accounting pronouncement also required the Company to restate its fully diluted earnings per common share for prior periods. The effect of this implementation was to decrease the Company's reported fully diluted earnings per common share by $0.04 for the fourth quarter of 2004, $0.04 for the third quarter of 2004, and $0.13 for the year ended December 31, 2004.
    Return on average common equity for the fourth quarter of 2004 was 12.69% versus 13.05% for the fourth quarter of 2003, and 13.90% for the third quarter of 2004. Return on average common equity for the year ended December 31, 2004 was 14.21% compared to 14.52% for the same period in 2003. Return on average assets for the fourth quarter of 2004 was 1.18% compared to 1.10% for the fourth quarter of 2003, and 1.20% in the third quarter of 2004. Return on average assets rose to 1.25% for the year ended December 31, 2004 versus 1.16% for the same period in 2003.
    Operating results for the fourth quarter of 2004 included a gain on sale of Small Business Administration loans of $1.2 million and a gain on sale of an equity investment of $1.1 million, partially offset by a $1.7 million adjustment for deferred rent on leased corporate properties.
    "We are pleased to report solid core operating performance for 2004, including three consecutive quarters of growth in our loan portfolio," commented Byron A. Scordelis, President and Chief Executive Officer of Greater Bay Bancorp. "During the year, we continued our proactive efforts to address the evolving interest rate environment, added to our executive management team, and reinforced our credit, internal control and growth disciplines in ways that we believe further enhance our potential for delivering superior long-term shareholder returns."

    Non-Interest Income

    Non-interest income for the fourth quarter of 2004 increased to $44.7 million from $40.5 million in the fourth quarter of 2003. This increase was primarily attributable to higher insurance commissions and fees of $2.0 million in the Company's subsidiary, ABD Insurance and Financial Services ("ABD"), an increase of $1.6 million in rental revenue on operating leases booked by the Company's small ticket equipment leasing unit and an increase of $0.5 million in gains on sale of securities. These increases were partially offset by a $1.1 million reduction in loan and international banking fees.
    Non-interest income during the fourth quarter of 2004 was $44.7 million compared to $47.8 million during the third quarter of 2004. This decrease was primarily attributable to a cyclical $3.5 million decline in insurance commissions and fees and a $0.9 million decline in loan and international banking fees. These decreases were partially offset by a $0.4 million increase in rental revenue on operating leases and $1.2 million increase in gains on sale of loans.
    For the year ended December 31, 2004, non-interest income rose to $186.6 million from $171.5 million for the year ended December 31, 2003. This growth included an increase of $13.0 million in insurance commissions and fees and an increase of $6.0 million in rental revenue on operating leases. These increases were partially offset by lower gains on sale of loans of $2.0 million and a decline in loan and international banking fees of $2.3 million.
    Non-interest income as a percentage of total revenues in the fourth quarter of 2004 was 39.6%, compared to 35.0% in the fourth quarter of 2003 and 40.5% in the third quarter of 2004. For the year ended December 31, 2004, non-interest income as a percentage of total revenues increased to 39.5% from 36.5% for the year ended December 31, 2003.

    Operating Expenses

    Operating expenses for the fourth quarter of 2004 were $78.5 million or $4.4 million higher than operating expenses for the fourth quarter of 2003. Major components of the change from the 2003 period included increases of:

--	$2.8 million in legal and professional fees entirely related to Sarbanes-Oxley compliance activities;
--	$1.6 million in occupancy and equipment expenses entirely related to the deferred rent adjustment cited above; and
--	$1.2 million in depreciation on equipment leased to others.

    The above cost increases were partially offset by a $2.2 million decrease in compensation expense.
    Operating expenses decreased during the fourth quarter of 2004 by approximately $0.2 million compared to the third quarter of 2004.
    Operating expenses for the year ended December 31, 2004 were $22.1 million higher than operating expenses for the year ended December 31, 2003. Major components of the change from the 2003 period included increases of:

    -- $12.6 million in ABD expenses, reflecting business activity
    growth;

    -- $5.0 million in depreciation on equipment leased to others;
    and

    -- $4.3 million in legal and professional fees entirely related
    to Sarbanes-Oxley compliance activities that in total amounted
    to $6.2 million in 2004.

    Balance Sheet

    At December 31, 2004, Greater Bay Bancorp's total assets were $6.9 billion, total securities were $1.6 billion, total loans were $4.5 billion and total deposits were $5.1 billion.
    Between December 31, 2003 and December 31, 2004, total loans declined by $57.9 million. Portfolio contraction was caused by declines in real estate construction loans of $58.0 million and commercial term real estate loans of $38.6 million. These declines were partially offset by an increase in commercial loans of $31.6 million.
    Total loans increased by $10.2 million from September 30, 2004 to December 31, 2004. This fourth quarter growth reflects increases in the real estate construction and land portfolio of $19.6 million, in commercial loans of $17.5 million, and in other real estate loans of $19.1 million. These increases were partially offset by a decline in term real estate loans of $49.8 million.
    Total core deposits (excluding institutional time deposits) at December 31, 2004 increased by $253.9 million, compared to December 31, 2003 and decreased by $74.5 million compared to September 30, 2004. Institutional time deposits and other wholesale borrowings at December 31, 2004 declined by $946.1 million compared to December 31, 2003 and decreased by $143.6 million compared to September 30, 2004.
    "We are encouraged to note the continued rise in commercial loans outstanding as well as the second consecutive quarterly increase in construction loan totals which we believe to be consistent with the emergence of the Bay Area economy from its recent period of economic slowdown," stated Mr. Scordelis. "While our core deposit portfolio nominally declined during the quarter, this was the result of an expected reduction in a few large deposit accounts. We remain pleased with our full year results in this important area."
    During the fourth quarter of 2004, the Company continued the planned reduction of its securities portfolio. Total securities at December 31, 2004 were $1.6 billion compared to $2.2 billion at December 31, 2003 and $1.8 billion at September 30, 2004. Of the decrease from September 30, 2004, approximately $100.0 million was attributable to the sale of securities (at a total gain of $1.6 million) with the remaining reduction resulting from normal portfolio run-off.
    "Fourth quarter security portfolio reductions were consistent with our planned balance sheet de-leveraging effort that began in the second quarter of 2004," stated James S. Westfall, Executive Vice President and Chief Financial Officer. "The portfolio's shorter duration and reduced available-for-sale component has improved the Company's position relative to potential upward interest rate movements."

    Credit Quality Overview

    Net charge-offs in the fourth quarter of 2004 were $4.6 million, or 0.41% of average annualized loans, compared to $9.3 million or 0.81% for the fourth quarter of 2003 and $3.6 million or 0.32% for the third quarter of 2004. Net charge-offs for the year ended December 31, 2004 totaled $17.7 million or 0.40% of average annualized loans, compared to $31.6 million or 0.67% for 2003.
    Nonperforming assets were $44.3 million at December 31, 2004, compared to $61.7 million at December 31, 2003 and $59.3 million at September 30, 2004. The ratio of nonperforming assets to total assets was 0.64% at December 31, 2004, compared to 0.81% at December 31, 2003 and 0.83% at September 30, 2004. The ratio of non-accrual loans to total loans was 0.98% at December 31, 2004, compared to 1.36% at December 31, 2003 and 1.31% at September 30, 2004.
    The Company's provision for credit losses was $0.2 million for the fourth quarter of 2004 compared to $7.0 million for the fourth quarter of 2003 and $1.3 million for the third quarter of 2004. The provision for the year ended December 31, 2004 was $5.5 million compared to $28.2 million for 2003.
    The allowance for loan and lease losses was $107.5 million or 2.39% of total loans at December 31, 2004, compared to $124.5 million or 2.73% of total loans at December 31, 2003 and $113.5 million or 2.53% of total loans at September 30, 2004. At December 31, 2004, the Company reclassified $6.5 million of its allowance for loan and lease losses related to unfunded credit commitments from the allowance for loan and lease losses to other liabilities. Prior periods have been similarly reclassified along with the relevant financial ratios. The process used in the determination of the adequacy of the reserve for unfunded credit commitments is consistent with the process for the allowance for loan and lease losses.

    Capital Overview

    The capital ratios of Greater Bay Bancorp and its subsidiary bank continue to substantially exceed well-capitalized guidelines established by bank regulatory agencies.
    The Company's total equity to assets ratio was 10.99% at December 31, 2004 compared to 9.88% at December 31, 2003 and 10.40% at September 30, 2004. The Company's total tangible equity to tangible assets ratio was 7.64% at December 31, 2004 compared to 7.12% at December 31, 2003 and 7.55% as of September 30, 2004. The increase during the fourth quarter primarily reflected a contraction of $200.7 million in tangible assets partially offset by an $8.9 million decrease in tangible equity.
    Purchases under the Company's $70.0 million common share repurchase program during 2004 totaled approximately 2.2 million shares at an average price of $27.26 per share. There were no common share repurchases during the fourth quarter. Remaining unused repurchase authority at December 31, 2004 was $10.8 million.

    Net Interest Margin and Interest Rate Risk Management

    Greater Bay Bancorp's average net interest margin for the fourth quarter of 2004 was 4.36%, compared to 4.33% for the fourth quarter of 2003 and 4.27% for the third quarter of 2004.
    The nine basis point increase in the net interest margin from the third quarter reflects a 25 basis point increase in interest-earning asset yields less a corresponding 16 basis point increase in related funding costs.
    "Fourth quarter margin growth reflected the effect of rising short-term interest rates on the Company's net asset sensitive position, an increased concentration of loans in the earning asset mix, lower nonperforming asset levels and restrained upward deposit pricing," stated Mr. Westfall.

    Other Matters

    The Company is continuing its discussions with the Internal Revenue Service related to the previously disclosed notice of proposed adjustment concerning merger expenses deducted in 2000 and 2001. Based upon analysis by the Company and its outside advisors, no tax expense was recorded related to these items in the fourth quarter of 2004.
    In response to recent developments in the insurance industry related to contingency and override revenue received by commercial insurance brokers from carriers, the Company engaged outside counsel to conduct a compliance review of ABD's contingency commission arrangements and marketing practices. The compliance review included extensive interviews with ABD personnel, analysis of contingency arrangements and review of producer compensation, client files and email activity. While not yet formally presented, the review process has been completed, and no evidence was found to indicate any improper activities of the type alleged against other firms in New York, nor were any systemic compliance-related issues identified in these general areas of concern.

    Outlook For 2005

    Our guidance for 2005 is as follows:

    -- Loan growth - based on the current forecast of moderate
    economic growth in our primary market area, and our clients'
    current business outlook, we anticipate future loan portfolio
    growth in the low to mid-single digits.

    -- Deposit growth - we anticipate future core deposit growth in
    the mid-single digits. We intend to adjust our use of
    institutional time deposits and other non-relationship funding
    sources to meet funding needs not satisfied by core deposit
    and capital funding sources.

    -- Credit quality - based on our continued aggressive credit risk
    management and the current economic outlook, we anticipate
    future net charge-offs from 40 basis points to 50 basis points
    of average loans outstanding.

    -- Net interest margin - based on balance sheet trends and the
    rate sensitivity of the Company's assets and liabilities, we
    expect the margin to fluctuate between 4.35% and 4.50%.

    Conference Call

    The Company will broadcast its earnings conference call live via the Internet at 8:00 a.m. (PST) on February 1, 2005. Participants may access this conference call through the Company's website at http://www.gbbk.com, under the "Investor Info" link, or through http://www.FullDisclosure.com. You should go to either of these websites 15 minutes prior to the start of the call, as it may be necessary to download audio software to hear the conference call.
    A replay of the conference call will be available on the websites. A telephone replay will also be available beginning at 11 a.m. PST on February 1 through midnight on February 7, 2005 by dialing 800-642-1687 or 706-645-9291 and providing Conference ID 3553193.

    About Greater Bay Bancorp

    Greater Bay Bancorp, a diversified financial services holding company, provides community banking services in the Greater San Francisco Bay Area through Greater Bay Bank, N.A.'s community banking organization, including Bank of Petaluma, Bank of Santa Clara, Bay Area Bank, Bay Bank of Commerce, Coast Commercial Bank, Cupertino National Bank, Golden Gate Bank, Mid-Peninsula Bank, Mt. Diablo National Bank, Peninsula Bank of Commerce and San Jose National Bank. Nationally, Greater Bay Bancorp provides specialized leasing and loan services through its specialty finance group, which includes Matsco, CAPCO and Greater Bay Capital. ABD Insurance and Financial Services, the Company's insurance brokerage subsidiary, provides commercial insurance brokerage, employee benefits consulting and risk management solutions to business clients throughout the United States.

    Safe Harbor

    Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to the Company's current expectations regarding future operating results, net interest margin, net loan charge-offs, asset quality, level of loan loss reserves, growth in loans and deposits and the strength of the local economy. These forward-looking statements are subject to certain risks and uncertainties that could cause the actual results, performance or achievements to differ materially from those expressed, suggested or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to: (1) the impact of changes in interest rates, a decline in economic conditions at the international, national and local levels and increased competition among financial service providers on the Company's results of operations and the quality of the Company's earning assets; (2) any difficulties that may be encountered in consolidating the bank subsidiaries and in realizing operating efficiencies; (3) government regulation, including developments related to the ongoing insurance industry-wide investigations into contingent commissions and override payments, and the ultimate resolution of the notice of proposed adjustment from the IRS; and (4) the other risks set forth in the Company's reports filed with the Securities and Exchange Commission, including its Annual Report on Form 10-K for the year ended December 31, 2003. Greater Bay does not undertake, and specifically disclaims, any obligation to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements.
    For additional information and press releases about Greater Bay Bancorp, visit the Company's website at http://www.gbbk.com.

    -Financial Tables Follow-

GREATER BAY BANCORP DECEMBER 31, 2004 - FINANCIAL SUMMARY (UNAUDITED) ($ in 000's)

---------------------------------------------------------------------- SELECTED CONSOLIDATED FINANCIAL CONDITION DATA:

Dec 31 Sept 30 Jun 30 2004 2004 2004 ----------- ----------- ----------- Cash and Due From Banks $171,657 $184,639 $242,517 Fed Funds Sold - 8,000 22,000 Securities 1,615,273 1,835,647 2,256,839 Loans: Commercial 1,969,351 1,951,813 1,941,573 Term Real Estate - Commercial 1,597,756 1,647,568 1,658,921 ----------- ----------- ----------- Total Commercial 3,567,107 3,599,381 3,600,494 Real Estate Construction and Land 479,113 459,533 415,155 Real Estate Other 291,737 272,684 268,947 Consumer and Other 155,829 152,553 171,003 Deferred Fees and Discounts, Net (13,902) (14,457) (12,575) ----------- ----------- ----------- Total Loans, Net of Deferred Fees and Discounts 4,479,884 4,469,694 4,443,024 Allowance for Loan and Lease Losses (1) (107,517) (113,460) (116,045) ----------- ----------- ----------- Total Loans, Net (1) 4,372,367 4,356,234 4,326,979 Goodwill 212,432 178,317 178,317 Other Intangible Assets 39,228 41,310 43,544 Other Assets 531,864 507,346 544,539 ----------- ----------- ----------- Total Assets (1) $6,942,821 $7,111,493 $7,614,735 =========== =========== =========== Deposits: Demand, Non-Interest Bearing $1,063,036 $1,053,348 $1,045,651 NOW, MMDA and Savings 3,263,716 3,272,922 3,361,211 Time Deposits, $100,000 and over 647,531 716,911 725,753 Other Time Deposits 139,320 152,376 174,297 ----------- ----------- ----------- Total Deposits 5,113,603 5,195,557 5,306,912 ----------- ----------- ----------- Other Borrowings 578,664 714,883 1,112,334 Subordinated Debt 210,311 210,311 210,311 Other Liabilities (1) 264,556 238,221 257,976 ----------- ----------- ----------- Total Liabilities (1) 6,167,134 6,358,972 6,887,533 ----------- ----------- -----------

Preferred Stock of Real Estate Investment Trust Subsidiaries 12,621 12,582 12,162

Convertible Preferred Stock 103,816 91,917 91,924 Common Shareholders' Equity 659,250 648,022 623,116 ----------- ----------- ----------- Total Equity 763,066 739,939 715,040

----------- ----------- ----------- Total Liabilities and Total Equity (1) $6,942,821 $7,111,493 $7,614,735 =========== =========== ===========

Average Quarterly Total Loans, excluding Nonaccrual $4,415,129 $4,412,082 $4,414,731 Average Quarterly Securities $1,792,892 $2,135,059 $2,325,402 Average Quarterly Interest Earning Assets $6,208,021 $6,547,141 $6,740,133

Average Quarterly Deposits $5,295,406 $5,311,140 $5,280,262 Average Quarterly Interest Bearing Liabilities $5,004,480 $5,383,185 $5,613,803

Average Quarterly Assets (1) $7,085,307 $7,442,983 $7,637,696 Average Quarterly Common Shareholders' Equity $660,867 $642,523 $638,371 Average Quarterly Total Equity $752,913 $734,443 $730,420

Average YTD Interest Earning Assets $6,553,500 $6,669,512 $6,731,632 Average YTD Assets (1) $7,431,444 $7,544,040 $7,595,354 Average YTD Common Shareholders' Equity $654,095 $651,820 $656,520 Average YTD Total Equity $746,111 $743,826 $748,570

Total Regulatory Capital Tier I Capital $727,319 $733,579 $727,214 Total Risk-based Capital $797,923 $804,839 $799,306

Nonperforming Assets Nonaccrual Loans $43,711 $58,741 $42,230 OREO - - - Other Nonperforming Assets 569 534 - ----------- ----------- ----------- Total Nonperforming Assets $44,280 $59,275 $42,230 =========== =========== ===========

Greater Bay Trust Company Assets $634,343 $653,910 $647,022

Mar 31 Dec 31 2004 2003 ----------- ----------- Cash and Due From Banks $251,895 $238,534 Fed Funds Sold 216,000 35,000 Securities 2,177,330 2,229,509 Loans: Commercial 1,929,257 1,937,766 Term Real Estate - Commercial 1,632,921 1,636,356 ----------- ----------- Total Commercial 3,562,178 3,574,122 Real Estate Construction and Land 479,692 537,079 Real Estate Other 261,127 273,504 Consumer and Other 146,022 167,593 Deferred Fees and Discounts, Net (12,812) (14,491) ----------- ----------- Total Loans, Net of Deferred Fees and Discounts 4,436,207 4,537,807 Allowance for Loan and Lease Losses (1) (118,411) (124,489) ----------- ----------- Total Loans, Net (1) 4,317,796 4,413,318 Goodwill 178,317 177,991 Other Intangible Assets 45,778 47,238 Other Assets 455,289 458,372 ----------- ----------- Total Assets (1) $7,642,405 $7,599,962 =========== =========== Deposits: Demand, Non-Interest Bearing $1,030,169 $1,077,648 NOW, MMDA and Savings 3,133,005 2,858,647 Time Deposits, $100,000 and over 696,885 735,657 Other Time Deposits 321,384 640,715 ----------- ----------- Total Deposits 5,181,443 5,312,667 ----------- ----------- Other Borrowings 1,270,255 1,071,880 Subordinated Debt 210,311 210,311 Other Liabilities (1) 232,075 242,425 ----------- ----------- Total Liabilities (1) 6,894,084 6,837,283 ----------- -----------

Preferred Stock of Real Estate Investment Trust Subsidiaries 12,162 12,162

Convertible Preferred Stock 92,050 91,752 Common Shareholders' Equity 644,109 658,765 ----------- ----------- Total Equity 736,159 750,517

----------- ----------- Total Liabilities and Total Equity (1) $7,642,405 $7,599,962 =========== ===========

Average Quarterly Total Loans, excluding Nonaccrual $4,450,875 $4,494,411 Average Quarterly Securities $2,272,026 $2,397,036 Average Quarterly Interest Earning Assets $6,722,901 $6,891,447

Average Quarterly Deposits $5,210,518 $5,382,868 Average Quarterly Interest Bearing Liabilities $5,533,915 $5,720,832

Average Quarterly Assets (1) $7,554,333 $7,697,315 Average Quarterly Common Shareholders' Equity $674,670 $651,027 Average Quarterly Total Equity $766,721 $735,280

Average YTD Interest Earning Assets $6,722,901 $7,084,821 Average YTD Assets (1) $7,554,333 $7,915,037 Average YTD Common Shareholders' Equity $674,670 $633,503 Average YTD Total Equity $766,721 $714,113

Total Regulatory Capital Tier I Capital $704,790 $745,586 Total Risk-based Capital $775,571 $818,743

Nonperforming Assets Nonaccrual Loans $48,042 $61,700 OREO 1,200 - Other Nonperforming Assets - - ----------- ----------- Total Nonperforming Assets $49,242 $61,700 =========== ===========

Greater Bay Trust Company Assets $640,063 $629,333

(1) As of December 31, 2004, we reclassified the reserve for unfunded credit commitments from the allowance for loan losses to other liabilities. Amounts presented prior to the fourth quarter of 2004 have been reclassified to conform with the current presentation.

GREATER BAY BANCORP DECEMBER 31, 2004 - FINANCIAL SUMMARY (UNAUDITED) ($ in 000's)

---------------------------------------------------------------------- SELECTED QUARTERLY CONSOLIDATED OPERATING DATA:

Fourth Third Second First Fourth Quarter Quarter Quarter Quarter Quarter 2004 2004 2004 2004 2003 -------- -------- -------- -------- -------- Interest Income $92,576 $93,574 $93,604 $96,745 $98,197 Interest Expense 24,473 23,307 21,722 21,374 22,975 -------- -------- -------- -------- -------- Net Interest Income Before Provision for Credit Losses 68,103 70,267 71,882 75,371 75,222 Provision for Credit Losses 213 1,308 2,000 2,000 7,000 -------- -------- -------- -------- -------- Net Interest Income After Provision for Credit Losses 67,890 68,959 69,882 73,371 68,222

Non-interest Income: Insurance Commissions and Fees 29,727 33,276 32,916 34,581 27,747 Rental Revenue on Operating Leases 3,500 3,067 2,665 2,317 1,934 Service Charges and Other Fees 2,611 2,599 2,624 2,623 2,754 Gains on Sale of Securities, net 1,636 2,820 1,572 2,342 1,175 Gains on Sale of Loans 1,315 129 699 338 1,129 Loan and International Banking Fees 1,094 1,953 1,962 2,036 2,172 Trust Fees 1,041 972 974 851 925 ATM Network Revenue 302 314 333 360 430 Other Income 3,494 2,637 2,880 2,025 2,267 -------- -------- -------- -------- -------- Total Non-interest Income 44,720 47,767 46,625 47,473 40,533

Operating Expenses: Salaries & Benefits 46,826 48,282 49,423 52,603 48,390 Deferred Loan Origination Costs (4,384) (3,772) (3,797) (3,019) (3,709) -------- -------- -------- -------- -------- Total Compensation 42,442 44,510 45,626 49,584 44,681 Occupancy and Equipment 11,984 11,570 10,251 10,205 10,390 Legal and Other Professional Fees 6,441 6,525 4,646 3,298 3,641 Depreciation - Equipment Leased to Others 2,941 2,549 2,252 1,905 1,712 Amortization of Intangibles 2,072 2,071 2,072 2,071 1,889 Marketing and Promotion 1,963 1,741 1,729 1,669 1,755 Telephone, Postage and Supplies 1,943 1,670 1,853 1,749 1,854 Insurance 1,346 1,267 1,257 1,271 837 Data Processing 1,222 1,303 1,272 1,227 1,267 Correspondent Bank Charges 580 623 692 862 1,036 FDIC Insurance and Regulatory Assessments 449 458 496 500 505 Client Services Expenses 242 318 272 327 337 Expenses on Other Real Estate Owned - - 214 134 - Contribution to Greater Bay Bancorp Foundation - - - 900 - Other Expenses 4,400 3,654 3,987 3,886 3,711 -------- -------- -------- -------- -------- 78,025 78,259 76,619 79,588 73,615 Dividends Paid on Preferred Stock of Real Estate Investment Trust Subsidiaries 456 456 456 456 464 -------- -------- -------- -------- -------- Total Operating Expenses 78,481 78,715 77,075 80,044 74,079

Income Before Provision for Income Taxes 34,129 38,011 39,432 40,800 34,676 Provision for Income Taxes 13,050 15,556 14,899 15,948 13,256 -------- -------- -------- -------- -------- Net Income $21,079 $22,455 $24,533 $24,852 $21,420 ======== ======== ======== ======== ========

GREATER BAY BANCORP DECEMBER 31, 2004 - FINANCIAL SUMMARY (UNAUDITED) ($ in 000's)

---------------------------------------------------------------------- SELECTED CONSOLIDATED OPERATING DATA FOR THE TWELVE MONTH PERIODS:

Dec 31 Dec 31 2004 2003 --------- --------- Interest Income $376,499 $407,719 Interest Expense 90,876 109,838 --------- --------- Net Interest Income Before Provision for Credit Losses 285,623 297,881 Provision for Credit Losses 5,521 28,195 --------- --------- Net Interest Income After Provision for Credit Losses 280,102 269,686

Non-interest Income: Insurance Commissions and Fees 130,500 117,508 Rental Revenue on Operating Leases 11,549 5,582 Service Charges and Other Fees 10,457 11,372 Gains on Sale of Securities, net 8,370 8,759 Loan and International Banking Fees 7,045 9,392 Trust Fees 3,838 3,314 Gains on Sale of Loans 2,481 4,458 ATM Network Revenue 1,309 1,773 Other Income 11,036 9,384 --------- --------- Total Non-interest Income 186,585 171,542

Operating Expenses: Salaries & Benefits 197,134 189,626 Deferred Loan Origination Costs (14,972) (14,203) --------- --------- Total Compensation 182,162 175,423 Occupancy and Equipment 44,010 40,898 Legal and Other Professional Fees 20,910 16,594 Depreciation - Equipment Leased to Others 9,647 4,615 Amortization of Intangibles 8,286 7,180 Telephone, Postage and Supplies 7,215 7,245 Marketing and Promotion 7,102 6,120 Insurance 5,141 4,487 Data Processing 5,024 5,356 Correspondent Bank Charges 2,757 4,519 FDIC Insurance and Regulatory Assessments 1,903 2,073 Client Services Expenses 1,159 1,293 Contribution to Greater Bay Bancorp Foundation 900 - Expenses on Other Real Estate Owned 348 1,065 Other Expenses 15,927 13,516 --------- --------- 312,491 290,384 Dividends Paid on Preferred Stock of Real Estate Investment Trust Subsidiaries 1,824 1,824 --------- --------- Total Operating Expenses 314,315 292,208

Income Before Provision for Income Taxes 152,372 149,020 Provision for Income Taxes 59,453 57,017 --------- --------- Net Income $92,919 $92,003 ========= =========

GREATER BAY BANCORP DECEMBER 31, 2004 - FINANCIAL SUMMARY (UNAUDITED) ($ in 000's, except share and per share data)

---------------------------------------------------------------------- SELECTED QUARTERLY CONSOLIDATED FINANCIAL CONDITION RATIOS:

Dec 31 Sept 30 Jun 30 2004 2004 2004 ----------- ----------- ----------- FINANCIAL RATIOS: Loan to Deposit Ratio 87.61% 86.03% 83.72% Ratio of Allowance for Loan and Lease Losses to: (1) Average Loans 2.41% 2.54% 2.60% End of Period Loans 2.39% 2.53% 2.60% Total Nonaccrual Loans 245.97% 193.15% 274.79%

Ratio of Provision for Loan and Lease Losses to Average Loans, annualized 0.02% 0.12% 0.18%

Total Nonaccrual Loans to Total Loans 0.98% 1.31% 0.95% Total Nonperforming Assets to Total Assets 0.64% 0.83% 0.55%

Ratio of Quarterly Net Charge- offs to Average Loans, annualized 0.41% 0.32% 0.36% Ratio of YTD Net Charge-offs to YTD Average Loans 0.40% 0.39% 0.43%

Loan Growth, current quarter to prior year quarter -1.28% -2.86% -5.62% Loan Growth, current quarter to prior quarter, annualized 0.91% 2.39% 0.62% Loan Growth, YTD -1.28% -2.01% -4.20%

Core Deposit Growth, current quarter to prior year quarter (2) 5.56% 7.10% 10.32% Core Deposit Growth, current quarter to prior quarter, annualized (2) -6.06% -9.79% 22.70% Core Deposit Growth, YTD (2) 5.56% 9.61% 19.91%

Deposit Growth, current quarter to prior year quarter -3.75% -4.47% -4.35% Deposit Growth, current quarter to prior quarter, annualized -6.28% -8.35% 9.74% Deposit Growth, YTD -3.75% -2.94% -0.22%

Revenue Growth, current quarter to prior year quarter -2.53% 1.22% 2.05% Revenue Growth, current quarter to prior quarter, annualized -17.56% -1.59% -14.20%

Net Interest Income Growth, current quarter to prior year quarter -9.46% -3.33% -2.60% Net Interest Income Growth, current quarter to prior quarter, annualized -12.25% -8.94% -18.62%

Average Earning Assets to Average Total Assets 87.62% 87.96% 88.25% Average Earning Assets to Average Interest-Bearing Liabilities 124.05% 121.62% 120.06%

Capital Ratios: Tier 1 Leverage ratio 10.67% 10.18% 9.83% Tier 1 Risk-Based Capital ratio 12.98% 12.98% 12.72% Total Risk-Based Capital ratio 14.24% 14.24% 13.98% Total Equity to Assets ratio 10.99% 10.40% 9.39%

Risk Weighted Assets $5,602,439 $5,651,203 $5,715,605

Common Book Value Per Common Share $12.89 $12.73 $12.18 Total Common Shares Outstanding 51,150,167 50,907,052 51,177,202

NON-GAAP RATIOS (3):

Tangible Total Equity (4) to Tangible Assets (5) 7.64% 7.55% 6.67% Tangible Common Book Value Per Common Share (6) $7.97 $8.42 $7.84

Mar 31 Dec 31 2004 2003 ----------- ----------- FINANCIAL RATIOS: Loan to Deposit Ratio 85.62% 85.41% Ratio of Allowance for Loan and Lease Losses to: (1) Average Loans 2.63% 2.73% End of Period Loans 2.66% 2.73% Total Nonaccrual Loans 246.47% 201.76%

Ratio of Provision for Loan and Lease Losses to Average Loans, annualized 0.18% 0.61%

Total Nonaccrual Loans to Total Loans 1.08% 1.36% Total Nonperforming Assets to Total Assets 0.64% 0.81%

Ratio of Quarterly Net Charge-offs to Average Loans, annualized 0.50% 0.81% Ratio of YTD Net Charge-offs to YTD Average Loans 0.50% 0.67%

Loan Growth, current quarter to prior year quarter -6.00% -5.29% Loan Growth, current quarter to prior quarter, annualized -9.01% -5.49% Loan Growth, YTD -9.01% -5.29%

Core Deposit Growth, current quarter to prior year quarter (2) 6.20% 3.09% Core Deposit Growth, current quarter to prior quarter, annualized (2) 16.20% -0.35% Core Deposit Growth, YTD (2) 16.20% 3.09%

Deposit Growth, current quarter to prior year quarter -6.16% 0.77% Deposit Growth, current quarter to prior quarter, annualized -9.93% -9.21% Deposit Growth, YTD -9.93% 0.77%

Revenue Growth, current quarter to prior year quarter 1.58% -3.12% Revenue Growth, current quarter to prior quarter, annualized 24.63% -2.92%

Net Interest Income Growth, current quarter to prior year quarter -1.05% -7.16% Net Interest Income Growth, current quarter to prior quarter, annualized 0.80% 13.83%

Average Earning Assets to Average Total Assets 88.99% 89.53% Average Earning Assets to Average Interest- Bearing Liabilities 121.49% 120.46%

Capital Ratios: Tier 1 Leverage ratio 9.64% 9.98% Tier 1 Risk-Based Capital ratio 12.58% 12.87% Total Risk-Based Capital ratio 13.84% 14.13% Total Equity to Assets ratio 9.63% 9.88%

Risk Weighted Assets $5,604,682 $5,793,334

Common Book Value Per Common Share $12.57 $12.54 Total Common Shares Outstanding 51,238,680 52,529,850

NON-GAAP RATIOS (3):

Tangible Total Equity (4) to Tangible Assets (5) 6.90% 7.12% Tangible Common Book Value Per Common Share (6) $8.20 $8.25

(1) As of December 31, 2004, we reclassified the reserve for unfunded credit commitments from the allowance for loan losses to other liabilities. Amounts presented prior to the fourth quarter of 2004 have been reclassified to conform with the current presentation. (2) Core Deposits includes total deposits, less institutional time deposits. (3) Management believes that these ratios are meaningful measures because they reflect the equity deployed in the Company's businesses. The following table sets forth the reconciliation of Common Shareholders' Equity to Tangible Total Equity and Total Assets to Tangible Assets:

Common Shareholders' Equity $659,250 $648,022 $623,116 Convertible Preferred Stock 103,816 91,917 91,924 ----------- ----------- ----------- Total Equity 763,066 739,939 715,040 Less: Goodwill and Other Intangible Assets (251,660) (219,627) (221,861) ----------- ----------- ----------- Tangible Total Equity (4) $511,406 $520,312 $493,179 =========== =========== ===========

Total Assets $6,942,821 $7,111,493 $7,614,735 Less: Goodwill and Other Intangible Assets (251,660) (219,627) (221,861) ----------- ----------- ----------- Tangible Assets (5) $6,691,161 $6,891,866 $7,392,874 =========== =========== ===========

Common Shareholders' Equity $644,109 $658,765 Convertible Preferred Stock 92,050 91,752 ----------- ----------- Total Equity 736,159 750,517 Less: Goodwill and Other Intangible Assets (224,095) (225,229) ----------- ----------- Tangible Total Equity (4) $512,064 $525,288 =========== ===========

Total Assets $7,642,405 $7,599,962 Less: Goodwill and Other Intangible Assets (224,095) (225,229) ----------- ----------- Tangible Assets (5) $7,418,310 $7,374,733 =========== ===========

(4) Tangible Total Equity includes Common Shareholders' Equity and Convertible Preferred Stock, less Goodwill and Other Intangible Assets. (5) Tangible Assets includes Total Assets, less Goodwill and Other Intangible Assets. (6) Computed by dividing Common Shareholders' Equity, less Goodwill and Other Intangible Assets by Total Common Shares outstanding.

GREATER BAY BANCORP DECEMBER 31, 2004 - FINANCIAL SUMMARY (UNAUDITED) ($ in 000's, except share and per share data)

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SELECTED QUARTERLY CONSOLIDATED OPERATING RATIOS: Fourth Third Second Quarter Quarter Quarter 2004 2004 2004 ----------- ----------- ----------- GAAP EPS Earnings Per Common Share Basic (1) $0.38 $0.41 $0.45 Fully Diluted (1) $0.33 $0.36 $0.39

Weighted Average Common Shares Outstanding (1) 51,060,000 51,046,000 51,108,000

Weighted Average Common & Common Equivalent Shares Outstanding (1) 58,924,000 58,776,000 58,929,000

GAAP Ratios Return on Quarterly Average Assets, annualized 1.18% 1.20% 1.29% Return on Quarterly Average Common Shareholders' Equity, annualized 12.69% 13.90% 15.46% Return on Quarterly Average Total Equity, annualized 11.14% 12.16% 13.51% Net Interest Margin - Average Earning Assets (2) 4.36% 4.27% 4.29% Operating Expense Ratio (3) 4.41% 4.21% 4.06% Efficiency Ratio (4) 69.56% 66.69% 65.04% Total Operating Expenses $78,481 $78,715 $77,075 Total Revenue $112,823 $118,034 $118,507

NON-GAAP Ratios Efficiency Ratio (Excluding the operating results of ABD) (5) 60.80% 60.26% 57.24% ABD Operating Expenses $28,300 $27,857 $28,268 ABD Revenue $30,286 $33,643 $33,245

SELECTED QUARTERLY CONSOLIDATED OPERATING RATIOS: First Fourth Quarter Quarter 2004 2003 ----------- ----------- GAAP EPS Earnings Per Common Share Basic (1) $0.44 $0.38 Fully Diluted (1) $0.42 $0.37

Weighted Average Common Shares Outstanding (1) 52,654,000 52,363,000

Weighted Average Common & Common Equivalent Shares Outstanding (1) 54,835,000 53,976,000

GAAP Ratios Return on Quarterly Average Assets, annualized 1.32% 1.10% Return on Quarterly Average Common Shareholders' Equity, annualized 14.82% 13.05% Return on Quarterly Average Total Equity, annualized 13.04% 11.56% Net Interest Margin - Average Earning Assets (2) 4.51% 4.33% Operating Expense Ratio (3) 4.26% 3.82% Efficiency Ratio (4) 65.16% 64.00% Total Operating Expenses $80,044 $74,079 Total Revenue $122,844 $115,755

NON-GAAP Ratios Efficiency Ratio (Excluding the operating results of ABD) (5) 59.00% 54.11% ABD Operating Expenses $28,139 $26,761 ABD Revenue $34,870 $28,301

(1) The following table provides detailed components included in the calculation of the Company's basic and fully diluted earnings per common share and is presented to provide investors with information to enable them to better understand the reported EPS calculations. The table also shows the effect of the adoption of Emerging Issues Task Force (EITF) Issue 04-8, "The Effect of Contingently Convertible Debt on Diluted Earnings per Share," on the current and prior periods. The Company's outstanding convertible preferred stock was antidilutive for all periods presented.

GAAP EPS as reported Q4 2004 Q3 2004 Q2 2004 --------------------------- ----------- ----------- -----------

Net Income as reported $21,079 $22,455 $24,533 Less: Dividends on convertible preferred stock (1,653) (1,653) (1,653) ----------- ----------- ----------- (A)Net Income available to common shareholders $19,426 $20,802 $22,880 Add: CODES interest, net of taxes 190 202 176 ----------- ----------- ----------- (B)Net Income available to common shareholders including CODES $19,616 $21,004 $23,056 =========== =========== ===========

(C)Weighted Average Common Shares Outstanding 51,060,000 51,046,000 51,108,000 Common Stock Equivalents- Stock Options 1,548,000 1,414,000 1,505,000 CODES due 2024 on if- converted basis 6,301,000 6,301,000 6,301,000 CODES due 2022 on if- converted basis 15,000 15,000 15,000 ----------- ----------- ----------- (D)Total Weighted Average Common & Common Equivalent Shares Outstanding 58,924,000 58,776,000 58,929,000 =========== =========== ===========

(A)/(C)Earnings Per Common Share - Basic $0.38 $0.41 $0.45 (B)/(D)Earnings Per Common Share - Fully Diluted $0.33 $0.36 $0.39

Fully Diluted EPS Excluding Impact of New Accounting Pronouncement (EITF 04-8) ---------------------------

Net Income as reported $21,079 $22,455 $24,533 Less: Dividends on convertible preferred stock (1,653) (1,653) (1,653) ----------- ----------- ----------- (E)Net Income available to common shareholders $19,426 $20,802 $22,880 =========== =========== ===========

Weighted Average Common Shares Outstanding 51,060,000 51,046,000 51,108,000 Common Stock Equivalents- Stock Options 1,548,000 1,414,000 1,505,000 ----------- ----------- ----------- (F)Weighted Average Common & Common Equivalent Shares Outstanding 52,608,000 52,460,000 52,613,000 =========== =========== ===========

(E)/(F)Earnings Per Common Share - Fully Diluted excluding the impact of EITF 04-8 $0.37 $0.40 $0.43

Reconciliation: -------------------------- Earnings Per Common Share - Fully Diluted as reported $0.33 $0.36 $0.39 Earnings Per Common Share - Fully Diluted excluding the impact of EITF 04-8 $0.37 $0.40 $0.43

----------- ----------- ----------- Difference $(0.04) $(0.04) $(0.04) =========== =========== ===========

GAAP EPS as reported Q1 2004 Q4 2003 --------------------------------------- ----------- -----------

Net Income as reported $24,852 $21,420 Less: Dividends on convertible preferred stock (1,653) (1,479) ----------- ----------- (A)Net Income available to common shareholders $23,199 $19,941 Add: CODES interest, net of taxes 17 2 ----------- ----------- (B)Net Income available to common shareholders including CODES $23,216 $19,943 =========== ===========

(C)Weighted Average Common Shares Outstanding 52,654,000 52,363,000 Common Stock Equivalents-Stock Options 1,612,000 1,598,000 CODES due 2024 on if-converted basis 554,000 - CODES due 2022 on if-converted basis 15,000 15,000 ----------- ----------- (D)Total Weighted Average Common & Common Equivalent Shares Outstanding 54,835,000 53,976,000 =========== ===========

(A)/(C)Earnings Per Common Share - Basic $0.44 $0.38 (B)/(D)Earnings Per Common Share - Fully Diluted $0.42 $0.37

Fully Diluted EPS Excluding Impact of New Accounting Pronouncement (EITF 04- 8) ---------------------------------------

Net Income as reported $24,852 $21,420 Less: Dividends on convertible preferred stock (1,653) (1,479) ----------- ----------- (E)Net Income available to common shareholders $23,199 $19,941 =========== ===========

Weighted Average Common Shares Outstanding 52,654,000 52,363,000 Common Stock Equivalents-Stock Options 1,612,000 1,598,000 ----------- ----------- (F)Weighted Average Common & Common Equivalent Shares Outstanding 54,266,000 53,961,000 =========== ===========

(E)/(F)Earnings Per Common Share - Fully Diluted excluding the impact of EITF 04-8 $0.43 $0.37

Reconciliation: -------------------------------------- Earnings Per Common Share - Fully Diluted as reported $0.42 $0.37 Earnings Per Common Share - Fully Diluted excluding the impact of EITF 04-8 $0.43 $0.37

----------- ----------- Difference $(0.01) $0.00 =========== ===========

(2) Net interest income for the period, annualized and divided by average quarterly interest earning assets. (3) Total operating expenses for the period, annualized and divided by average quarterly assets. (4) Total operating expenses divided by total revenue (the sum of net interest income and non-interest income). (5) Total operating expenses less ABD operating expenses divided by total revenue less ABD revenue.

GREATER BAY BANCORP DECEMBER 31, 2004 - FINANCIAL SUMMARY (UNAUDITED) ($ in 000's, except share and per share data)

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SELECTED CONSOLIDATED OPERATING RATIOS FOR THE YTD YTD TWELVE MONTH PERIODS: Dec 31 Dec 31 2004 2003 ----------- ----------- GAAP EPS Earnings Per Common Share Basic (1) $1.68 $1.65 Fully Diluted (1) $1.50 $1.62

Weighted Average Common Shares Outstanding (1) 51,468,000 52,040,000

Weighted Average Common & Common Equivalent Shares Outstanding (1) 57,881,000 53,008,000

GAAP Ratios Return on Average Yearly Assets, annualized 1.25% 1.16% Return on Average Yearly Common Shareholders' Equity, annualized 14.21% 14.52% Return on Average Yearly Total Equity, annualized 12.45% 12.88% Net Interest Margin - Average Earning Assets (2) 4.36% 4.20% Operating Expense Ratio (3) 4.23% 3.69% Efficiency Ratio (4) 66.56% 62.25% Total Operating Expenses $314,315 $292,208 Total Revenue $472,208 $469,423

NON-GAAP Ratios Efficiency Ratio (Excluding the operating results of ABD) (5) 59.31% 55.08% ABD Operating Expenses $112,564 $99,049 ABD Revenue $132,044 $118,745

(1) The following table provides detailed components included in the calculation of the Company's basic and fully diluted earnings per common share and is presented to provide investors with information to enable them to better understand the reported EPS calculations. The table also shows the effect of the adoption of Emerging Issues Task Force (EITF) Issue 04-8, "The Effect of Contingently Convertible Debt on Diluted Earnings per Share," on the current and prior periods. The Company's outstanding convertible preferred stock was antidilutive for all periods presented.

GAAP EPS as reported 2004 2003 --------------------------------------- ----------- -----------

Net Income as reported $92,919 $92,003 Less: Dividends on convertible preferred stock (6,613) (5,913) ----------- ----------- (A)Net Income available to common shareholders $86,306 $86,090 Add: CODES interest, net of taxes 584 9 ----------- ----------- (B)Net Income available to common shareholders including CODES $86,890 $86,099 =========== ===========

(C)Weighted Average Common Shares Outstanding 51,468,000 52,040,000 Common Stock Equivalents-Stock Options 1,526,000 953,000 CODES due 2024 on if-converted basis 4,872,000 - CODES due 2022 on if-converted basis 15,000 15,000 ----------- ----------- (D)Total Weighted Average Common & Common Equivalent Shares Outstanding 57,881,000 53,008,000 =========== ===========

(A)/(C)Earnings Per Common Share - Basic $1.68 $1.65 (B)/(D)Earnings Per Common Share - Fully Diluted $1.50 $1.62

Fully Diluted EPS Excluding Impact of New Accounting Pronouncement (EITF 04- 8) ---------------------------------------

Net Income as reported $92,919 $92,003 Less: Dividends on convertible preferred stock (6,613) (5,913) ----------- ----------- (E)Net Income available to common shareholders $86,306 $86,090 =========== ===========

Weighted Average Common Shares Outstanding 51,468,000 52,040,000 Common Stock Equivalents-Stock Options 1,526,000 953,000 ----------- ----------- (F)Weighted Average Common & Common Equivalent Shares Outstanding 52,994,000 52,993,000 =========== ===========

(E)/(F)Earnings Per Common Share - Fully Diluted excluding the impact of EITF 04-8 $1.63 $1.62

Reconciliation: -------------------------------------- Earnings Per Common Share - Fully Diluted as reported $1.50 $1.62 Earnings Per Common Share - Fully Diluted excluding the impact of EITF 04-8 $1.63 $1.62

----------- ----------- Difference $(0.13) $(0.00) =========== ===========

(2) Net interest income for the period, annualized and divided by YTD average interest earning assets. (3) Total operating expenses for the period, annualized and divided by YTD average assets. (4) Total operating expenses divided by total revenue (the sum of net interest income and non-interest income). (5) Total operating expenses less ABD operating expenses divided by total revenue less ABD revenue.

--30--TM/la*

CONTACT: At Greater Bay Bancorp: Byron A. Scordelis, 650-614-5751 James S. Westfall, 650-813-8275 or At Silverman Heller Associates: Philip Bourdillon/Gene Heller, 310-208-2550

KEYWORD: CALIFORNIA INDUSTRY KEYWORD: INSURANCE BANKING EARNINGS CONFERENCE CALLS SOURCE: Greater Bay Bancorp

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