S-1/A 1 circle_s1a3.htm Unassociated Document
As filed with the Securities and Exchange Commission on February 9 , 2011
Registration No. 333 -169751
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Pre-Effective Amendment No.   3 to
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

CIRCLE BANCORP
(Exact name of registrant as specified in its charter)
California
 
6022
 
68-0242281
(State or other jurisdiction of incorporation or organization)
 
(Primary Standard Industrial Classification Code Number)
 
(I.R.S. Employer Identification Number.)
1400A Grant Avenue
Novato, California 94945
(415) 898-5400
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Kit M. Cole
Chairman and Chief Executive Officer
1400A Grant Avenue
Novato, California 94945
(415) 898-5400
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
S. Alan Rosen, Esq.
HORGAN, ROSEN, BECKHAM & COREN, L.L.P.
23975 Park Sorrento, Suite 200
Calabasas, California 91302
(818) 591-2121 ; (818) 591-3838 -Facsimile

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer o
 
Accelerated filer o
 
         
 
Non-accelerated filer o
 
Smaller reporting company x
 
 
(Do not check if a smaller reporting company)
   

CALCULATION OF REGISTRATION FEE
Title of each class of
securities to be registered
Amount to be registered (1)
  Proposed maximum offering price per share (2)
Proposed maximum aggregate offering price(1)(2)
  Amount of registration fee  
Common Stock, no par value (1)
2,860,000 shares
$
10.50
$
30,030,000
 
$
3,486.00
 
Fees previously paid
           
$
(3,48 6 .00
)
Total Due
           
$
0 .00
 


(1)
Includes up to 568,270 shares of common stock that may be offered by the selling shareholder in this offering.  Any shares not offered by the selling shareholder will increase the number of shares offered by the registrant up to a maximum of 2,860,000 shares offered by the registrant.
   
(2)
Estimated solely for the purpose of determining the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.
 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Commission acting pursuant to said Section 8(a), may determine.
 
 
 

 
 
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.   SUBJECT TO COMPLETION, DATED FEBRUARY 9 , 2011.

PRELIMINARY PROSPECTUS
 
Circle Bancorp
Minimum 1,905,000 - Maximum 2,860,000 Shares of Common Stock
$10.50 Per Share

This is an initial public offering of our shares of common stock. We are offering a minimum of 1,905,000 and a maximum of 2,860,000 shares in this offering, provided, however, that the selling shareholder identified in this prospectus has the option to offer up to 568,270 shares in this offering by providing written notice to the Company within 5 days of receiving written notice that the offering has commenced and indicating therein the precise number of shares that the selling shareholder would like to offer in this offering, up to 568,270 shares.  If the selling shareholder participates in this offering, any shares offered by the selling shareholder would reduce the number of shares offered by the Company.  Assuming the selling shareholder opts to participate fully in this offering and offers to sell all 568,270 shares, the minimum amount and the maximum amount offered by the Company would be reduced to 1,336,730 and 2,291,730 shares, respectively.   We will not receive any of the proceeds from the sale of the shares being offered by the selling shareholder.  The shares offered hereby will be offered and sold by our directors and executive officers who will not be paid any commissions or compensations for their selling efforts, other than as described herein. In addition, we may engage brokers and/or dealers  to serve as placement agents to assist us in the offer of the shares of our common stock .
 
This offering is being made on a best efforts, minimum-maximum basis, with a minimum gross offering amount of $20,002,500 and a maximum gross offering amount of $30,030,000.  If the minimum gross offering amount is raised and the selling shareholder sells all 568,270 shares for a gross amount of $5,996,835, we will sell 1,336,730 shares for a gross amount of $14,035,665 before offering expenses and placement agent fees.  If the maximum gross offering amount is raised and the selling shareholder sells all 568,270 shares for a gross amount of $5,996,835, we will sell 2,291,730 shares for a gross amount of $24,063,165 before offering expenses and placement agent fees.   If the selling shareholder does not participate at all in this offering, we will sell 1,905,000 shares for a gross amount of $20,002,500 if the minimum offering amount is raised or 2,860,000 shares for a gross amount of $30,003,000 if the maximum offering amount is raised, before offering expenses and placement agent fees.  There can be no assurance that any or all of the shares being offered by us or by the selling shareholder will be sold; provided, however, we will not close this offering if less than the minimum is sold.
 
Prior to this offering there has been no public market for our common stock as our selling shareholder owns 98.86% of our outstanding shares of common stock. We intend to apply to list the common stock on the Nasdaq Capital Markets as soon as practicable following the close of this offering. Our proposed Nasdaq listing, however, is not guaranteed and there is no assurance that our securities will ever trade on any exchange.   In addition, Howe Barnes Hoefer & Arnett, Inc. has informally agreed to sponsor the listing of the Company’s shares on the Over-the-Counter Bulletin Board upon completion of this offering. If the selling shareholder participates fully in this offering and sells a maximum of 568,270 shares, it is anticipated that the selling shareholder’s ownership interest will be diluted to between 22.86% and 16.51%, depending on the minimum and maximum offering, respectively.   If the selling shareholder does not participate in the offering at all, it is anticipated that the selling shareholder’s ownership interest will be diluted to between 37.21% and 28.35%, depending on the minimum and maximum offering, respectively.
 
Investing in our common stock involves risks. See “Risk Factors” beginning on page [__] to read about the factors you should consider before buying our common stock.
 
   
Per Share
             
   
Minimum Offering
   
Maximum Offering
   
Minimum Offering
   
Maximum Offering
 
Public offering price
  $ 10.50     $ 10.50     $ 20,002,500     $ 30,030,000  
Placement agent fees
  $ 0.65     $ 0.50     $ 1,240,150     $ 1,440,300  
Proceeds to us if no selling shareholder participation(1)
    9.85       10.00     $ 18,762,350     $ 28,589,700  
Proceeds to us if selling shareholder participates(1)(2):
                               
Proceeds to us
  $ 9.85     $ 10.00     $ 13,165,457     $ 22,909,047  
Proceeds to selling shareholder
  $ 9.85     $ 10.00     $ 5,596,893     $ 5,680,653  
 

(1)  
Proceeds are calculated before offering expenses estimated to be $369,986 in the aggregate. Each of the Company and the selling shareholder will bear their proportionate share of the placement agent fees and offering expenses based on the aggregate number of shares sold by each entity.
(2)  
Assumes the selling shareholder elects to sell 568,270 shares.
 
 
We may engage brokers and/or dealers to serve as placement agents to assist us in the offer of the shares of our common stock. The placement agents will not purchase the securities offered by us , and will not be required to sell any specific number or dollar amount of shares, but will assist us in this offering on a “best efforts” basis.   Although we currently have no agreements with brokers and/or dealers to serve as placement agents on our behalf, we nevertheless are prepared pay a lead placement agent a cash fee equal to 6% on the sale of up to 1,904,762 shares of common stock through its selling efforts and 1% on the sale of any shares sold in the offering other than through its selling efforts, except for up to 190,476 shares that may be sold through other brokers and/or dealers that we may engage to assist in connection with retail sales for which we are prepared to pay commissions of up to 8.0%.   Should we engage brokers and/or dealers as placement agents and compensate them as disclosed herein, we anticipate that the maximum commission payable in the minimum offering will be $1,240,150 in the aggregate and the maximum commission payable in the maximum offering will be $1,440,300 in the aggregate.  In addition, we estimate the total expenses of this offering, excluding anticipated placement agent fees, to be $369,986.  Each of the Company and the selling shareholder will bear their proportionate share of the placement agent fees , if any, and offering expenses based on the aggregate number of shares sold by each entity.  See “Plan of Distribution” beginning on page [__] of this prospectus for more information on this offering and the placement agent arrangement.
 
The offering will terminate upon the earlier of: (i) at our discretion, at any time after the minimum offering is sold; or (ii) March 15, 2011, unless extended in the sole discretion of our Board to a date not later than May 31, 2011. If we complete this offering, then on the closing date we will issue the shares to investors in the offering.
 
There is a minimum purchase requirement of 500 shares. Until a minimum of 1,905,000 shares are subscribed and paid for, all proceeds received from this offering will be placed in an escrow account with Pacific Coast Bankers’ Bank, our escrow agent, and will not be released to us  or to the selling shareholder unless at least 1,905,000 shares are sold on or before the date when this offering expires. If this threshold is not reached by March 15, 2011, or, if the offering termination date is extended in the discretion of our Board, by May 31, 2011, all funds placed in the escrow account will be promptly returned, without interest or deduction. Purchasers of the shares will have no right to the return of their funds during the term of the escrow. If a minimum of 1,905,000 shares are purchased in this offering, there will be no continuing arrangements to place the funds in an escrow, trust or similar account, and all cleared funds will be available to us and to the selling shareholder  immediately.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
 
These shares of common stock are not savings accounts, deposits, or other obligations of any bank and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency.
 
The date of this prospectus is __________, 201 1 .
 
 
2

 
 
CIRCLE BANK BRANCHES
(MAP)
 
CIRCLE BANCORP MISSION STATEMENT
 
The mission of Circle Bancorp and Circle Bank is to champion the entrepreneurial goals and personal aspirations of our clients by delivering uncommonly friendly, responsive and respectful service and tailored financial solutions that enable customers to reach their full economic potential, while providing a sustainable return to our shareholders, continuing opportunities for our employees and enriching the communities which we serve.
 
Above all else, we have an unwavering commitment to our client.
 
 
3

 
 
TABLE OF CONTENTS
 
 
Page No.
     
5
 
6
 
6
 
6
 
13
 
14
 
26
 
27
 
27
 
28
 
28
 
29
 
30
 
54
 
65
 
69
 
73
 
73
 
75
 
80
 
81
 
92
 
92
 
92
 
93
 
FINANCIAL STATEMENTS F-1  
 
 
4

 
 
 
This prospectus includes “forward-looking statements,” as that term is used in the applicable securities laws. All statements regarding our expected financial position, business and strategies are forward-looking statements. In addition, throughout this prospectus, the words “anticipates,” “believes,” “estimates,” “seeks,” “expects,” “plans,” “intends” and similar expressions, as they relate to us, the Bank or our management are intended to identify forward-looking statements. Although we believe that the expectations reflected in these forward-looking statements are reasonable and have based these expectations on our beliefs, as well as assumptions we have made, those expectations may prove to be incorrect. Important factors that could cause actual results to differ materially from our expectations include, without limitation, things such as failure of a significant number of borrowers to repay their loans, success of our community banking strategy, general economic conditions, economic conditions in our service area, the monetary policies of the Federal Reserve Board, changes in interest rates, and restrictions imposed on us by regulations or regulators of the banking industry.
 
For information about factors that could cause our actual results to differ from our expectations, we urge you to carefully read the section entitled “Risk Factors” herein. We urge you to carefully consider these factors in evaluating the forward-looking statements contained in this prospectus. All future written or oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. The forward-looking statements included in this prospectus are made only as of the date of this prospectus. We have not, do not intend, and do not assume any obligation, to update these forward-looking statements.
 
Actual results may differ materially and adversely from the expectations of the Company that are expressed or implied by any forward-looking statement. The discussions in “Risk Factors” list some of the factors that could cause the Company’s actual results to vary materially from those expressed or implied by any forward-looking statements. Other risks, uncertainties, and factors that could cause the Company’s actual results to vary materially from those expressed or implied by any forward-looking statement include but not limited to:
 
 
the unknown future direction of interest rates and the timing and magnitude of any changes in interest rates;
 
changes in competitive conditions;
 
the introduction, withdrawal, success and timing of asset/liability management strategies or of mergers and acquisitions and other business initiatives and strategies;
 
changes in customer borrowing, repayment, investment and deposit practices;
 
changes in fiscal, monetary and tax policies;
 
changes in financial and capital markets;
 
continued deterioration in general economic conditions, nationally, globally or locally, resulting in, among other things, credit quality deterioration;
 
capital management activities, including possible future sales of new securities, or possible repurchases or redemptions by the Company of outstanding debt or equity securities;
 
factors driving impairment charges on investments;
 
the impact, extent and timing of technological changes;
 
litigation liabilities, including related costs, expenses, settlements and judgments, or the outcome of matters before regulatory agencies, whether pending or commencing in the future;
 
actions of the Federal Reserve Board;
 
changes in accounting principles and interpretations;
 
actions of the Department of the Treasury and the Federal Deposit Insurance Corporation under the Emergency Economic Stabilization Act of 2008 and the Federal Deposit Insurance Act and other legislative and regulatory actions and reforms;
 
the continued availability of earnings and excess capital sufficient for the lawful and prudent declaration and payment of cash dividends, and
 
the extensive regulation and supervision to which we are subject, such as the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act, and the extensive rule making required to be undertaken pursuant thereto by various regulatory agencies, may adversely affect our business, financial condition and results of operations.
 
Such statements reflect our views with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the business, results of operations, growth strategy and liquidity of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements. It is intended that these forward-looking statements speak only as of the date they are made. We do not undertake any obligation to release publicly any revisions to these forward-looking statements to reflect future events or circumstances or to reflect the occurrence of unanticipated events.
 
 
5

 
 
 
You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with any other information. If anyone provides you with different or inconsistent information, you should not rely on it, and we take no responsibility for any other information that others may give you. We are not making an offer to sell these securities in any jurisdiction where the offer or sale is not permitted. You should not assume that the information appearing in this prospectus is accurate as of any date other than the date of this prospectus. Our business, financial condition, results of operations and prospects may have changed since such date.
 
Unless otherwise indicated or unless the context requires otherwise, all references in this prospectus to “Circle Bancorp,” the “Company,” “we,” “us,” “our” or similar references means Circle Bancorp and its sole subsidiary, Circle Bank, on a consolidated basis. References to “Circle Bank” or the “Bank” means our wholly-owned banking subsidiary.

 
We obtained the industry, market and competitive position data throughout this prospectus from our own internal estimates and research, as well as from industry and general publications and research, surveys and studies conducted by third parties. Industry publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that each of these studies and publications is reliable, we have not independently verified market and industry data from third-party sources. While we believe our internal company research is reliable and the definitions of our market and industry are appropriate, neither such research nor these definitions have been verified by any independent source within the Company.
 
 
The following Prospectus Summary summarizes material information about us and this offering. You should carefully read the entire prospectus, including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” along with the consolidated financial statements and the notes relating to those statements, included elsewhere in this prospectus before deciding to invest in our common stock.
 
Our Company
 
Circle Bancorp is a holding company incorporated under the laws of the State of California. Circle Bank, a wholly-owned subsidiary of the Company, is an industrial bank headquartered in Novato, California. We conduct substantially all of our business through Circle Bank. The Federal Deposit Insurance Corporation (“FDIC”) insures the Bank’s deposits up to the maximum legal limit. The Bank provides a broad range of financial products and services throughout the San Francisco Bay Area from five (5) full service branch offices located in San Rafael, Novato, Petaluma, Santa Rosa, and San Francisco, California and a sixth branch currently under construction in Corte Madera, California. At September 30, 2010, on a consolidated basis, our total assets were $ 317 million, loans were $ 244 million and deposits were $ 235 million (based on unaudited financial information).
 
The Company was incorporated in 1989 as “New West Bancshares, Inc.,” the holding company of the Bank, then operating under the name “New West Thrift and Loan” as an industrial loan corporation. The Bank changed its name to “Novato Community Bank” in 1998 and became an industrial bank in 2000. The Bank changed its name to “Circle Bank” in 2003. The Company changed its name to “Circle Bancorp” in 2008.
 
On February 19, 2009, the Bank received approval from the California Department of Financial Institutions (“DFI”) to convert from a California state chartered industrial bank to a California state chartered commercial bank. On March 10, 2010, the Company applied for approval from the Federal Reserve Board of Governors to convert to a registered bank holding company. It is anticipated that the Bank will consummate its conversion to a commercial bank immediately after Circle Bancorp receives regulatory approval to become a registered bank holding company under the Bank Holding Company Act of 1956, as amended. See “Supervision and Regulation” and “Description of Capital Stock – California and Federal Banking Law” herein.
 
Our principal office is located at 1400 Grant Avenue, Novato, California 94945 and our telephone number is (415) 898-5400.
 
 
6

 
 
Our Values & Beliefs
 
 
We believe in providing our customers with innovative products and services to promote our mutual financial success, economic growth and job creation in the communities which we serve.
     
 
We value the quality and variety of financial services that we offer to our customers.
     
 
We believe in promoting relationships that are based on honesty and trust.
     
 
We value and promote open and truthful communications.
     
 
We believe in teamwork.
     
 
We value a highly-skilled, professional and diverse workforce.
     
 
We believe in our ability to deliver quality services with integrity and professionalism.
     
 
We value and actively support the communities we serve.
     
 
We believe in operating within all banking regulations and in a safe and sound manner.
     
 
We value our shareholders and are dedicated to providing them with superior returns.
 
Our Business and Strategy
 
We serve consumers and businesses in Marin, Sonoma and San Francisco Counties.
 
Circle Bank, the wholly-owned subsidiary of Circle Bancorp, is a regional community bank which serves consumers and businesses in Marin, Sonoma and San Francisco Counties. Circle Bank provides a high-touch client experience, that is friendly, responsive and respectful to attract clients and their families. The Bank provides a full complement of loan and deposit products to its clients.
 
We seek out the unmet needs of our communities and create products and programs to meet those needs.
 
Circle Bank distinguishes itself by seeking out unmet needs of its communities and creating products and programs to meet those needs, thereby attracting credit worthy borrowers that we might otherwise not have been able to reach. A prime example of such an offering is the Fractional (individual) Tenants-in-Common (“FTIC”) loan, now a very popular loan to finance entry-level residential real estate in San Francisco CA. Circle Bank was pivotal in the creation and standardization of the FTIC loan in late 2005. Circle Bank obtained the title insurer whose title endorsement caused the FTIC loan to be offered by Circle Bank and other financial institutions. Circle Bank was one of the leaders in developing the FTIC market. In 2006, in order to rebalance its loan portfolio and mitigate the risks of concentrations in commercial and multifamily real estate, Circle Bank severely cut back its lending in commercial, mixed use and multifamily real estate, in favor of building its FTIC loan portfolio. The FTIC product enabled Circle Bank to reach a new consumer market and to diversify the risk in its loan portfolio. Management believes that this decision contributed to reducing the impact of the recent recession and subsequent banking crisis on the Company.
 
We are benefitting from opportunities that have been created by the current economic environment.
 
Although there can be no assurances that our growth and expansion plans will be successful, we have already positioned ourselves for growth and expansion in this chaotic banking environment by recruiting experienced and well-seasoned senior management (see “Management”), who are seeking a growth-oriented financial institution in a contracting banking world. Circle Bank also has gained what we believe to be desirable branch locations – convenient for existing and prospective clients of the Bank, located in business centers and/or on corners in downtown corridors - for its organic branch roll-out that heretofore would have been offered to larger, regional or national banks. Today, there are unmet needs in all areas of lending because banks are unwilling or unable to lend , as reported by local news media and/or statements from local bank CEOs as well as stipulated in many of the regulatory consent orders issued by federal bank regulators.   While other banks are building their loan resolution staffing, Circle Bank has been building its capacity to scale in loans and deposits to meet client demand. The muddled state of the financial services industry in general, the FDIC assisted sales of local community bank competitors and the deteriorating condition of several other local and regional competitors present additional opportunities for the Company to gain market share. Weakened financial institutions are curtailing lending or selling loans as a means of preserving capital and protecting liquidity. Many of their credit-worthy clients have experienced the frustration of having lines of credit frozen or called and have had service interruptions due to staff reductions and changes at the troubled institutions. Community bank business and deposit customers are seeing their banks being absorbed by large regional and national firms and their own personal bankers flee. The relationship gone, there is little reason for these customers to stay put. This represents a core deposit opportunity for Circle Bank, which is expanding into their neighborhoods. Additionally the poor financial  performance of many remaining community banks leaves  them little option for survival, making a merger or sale prior to a possible FDIC resolution a reasonable alternative.
 
 
7

 
 
There are numerous uncertainties and risks that may make it difficult for us to execute our growth and expansion plans and we cannot assure you that we will be successful in executing any part of our strategy.   In addition to other uncertainties and risks associated with our growth and expansion plans, we may encounter competition from other financial institutions and other entities having similar business strategies and investment objective that may have more relevant experience, greater financial resources and more personnel than we do.  In addition, expanding the Bank through targeted acquisitions will be subject to regulatory approval, and there can be no assurance that we will be successful in obtaining such approval.   Further, we may become subject to regulatory actions any of which could restrict our ability to acquire banks or other assets. Although we believe there are numerous potential targets for FDIC-assisted and unassisted acquisitions, we have not selected any other particular targets to acquire at this time, and there can be no assurance that we will be successful in identifying appropriate targets.  Moreover, we do not know the terms of any such future acquisitions or whether we will be able to make acquisitions on terms that are acceptable to us.

Management is moving forward on its business and development plan that is expanding its reach and positioning the Company to gain share in the communities that it serves.
 
Since the Company’s loan problems have been manageable thus far, management has been free to map out a plan to continue to build a branch footprint along U.S. Highway 101 corridor north and south (see Branch Map page 3) and around the San Francisco Bay area, including the East Bay.  Although no assurances can be given that our branching plans will be fully implemented, it is our goal to have at least 20 branches strategically located to reach our target market within the nine San Francisco Bay Area counties over the next 24 to 36 months. Management is working to accomplish this expansion through de novo activities, branch purchases, and bank acquisitions which are not assisted by the FDIC, focusing on small de novo banks that were unable to gain critical mass before the economic downturn. Currently, Circle Bank has branches in Santa Rosa, Petaluma, Novato, San Rafael, Corte Madera (opening in March 2011) and in Noe Valley in San Francisco, adjacent to the new Whole Foods Market in that neighborhood.   As discussed above, expanding the Bank’s branching network through de novo activities, branch purchases and branch acquisitions involves various risks and uncertainties, including competition from other financial institutions, the failure to obtain regulatory approvals, if required, the lack of acquisitions targets, and/or the unacceptability of the terms of such acquisitions to us.
 
We are committed to a gender balanced and diverse Board of Directors, management team, and workforce.
 
Our Board of Directors and management team is gender balanced and we are a “women-owned” financial institution, as specified in the Community Reinvestment Act. This gives us a competitive advantage by enabling us to recruit management and attract customers from a more diverse base than our non gender-balanced peers. There are also certain elements of the Community Reinvestment Act that are beneficial to women-owned financial institutions, as we are able to participate in the U.S. Department of Energy’s Bank Deposit Financial Assistance Program.
 
We have taken steps to enhance current operations in preparation for expansion.
 
In the past twenty-four months Management has taken the following steps to strength the Company’s current operations:
 
 
The Bank is requiring core deposits, where allowable, on all new extensions of credit.
     
 
Management has strengthened branch sales leadership. As a result, the Bank’s noninterest-bearing deposits increased 95.3 % from $ 16.1 million to $ 31.5 million, and from 8.8 % of deposits to 13.4 % of deposits, from September 30, 2009 to September 30, 2010.
     
 
Cash management products such as remote deposit capture and online cash management have been launched and offered to existing and new business clients to streamline their operations, improve their profitability and give them greater convenience.
     
 
Two de novo branches have been opened or are under construction to extend the Company’s reach into central Marin County and the Noe Valley neighborhood in San Francisco.
     
 
An SBA department has been developed and Circle Bank has achieved Preferred Lender status.
     
 
Management has filed an application with the appropriate regulatory agencies to convert the Bank’s charter from a state chartered industrial bank to a state charted commercial bank, which we believe will make the Bank more competitive and better able to serve its customer base.
 
 
8

 
 
We have focused on offering SBA programs to meet the borrowing needs of local businesses to help them reposition their balance sheets and mitigate loan risk to the Company through the SBA guarantees.
 
Circle Bank has Preferred Lender status, which enables it to approve SBA loans for its clients before submitting the loans to the SBA. The leader of the SBA division is a veteran of the financial services industry with more than 20 years experience in management and lending positions with banks and financial services firms in the San Francisco Bay Area specializing in small business lending. Circle Bank employs SBA programs to meet the needs of entrepreneurs that are seeking assistance through the current difficult economy allowing them to term out their existing lines of credit and restructure their balance sheets, and capital for growth. It is the intention of Circle Bank to retain the SBA loans in its loan portfolio.
 
We have continued to be a cash flow lender in offering extensions of credit to our customers.
 
Circle Bank continues to be a cash flow lender that incorporates into its lending decision the customer’s global financial ability (borrower liquidity from all sources, including wages, rental income, interest and dividends) and the intention of our customers to repay their loans. Whatever the use of funds, Circle Bank seeks to have its loans secured by real estate or certificates of deposits and personally guaranteed by all borrowers. Circle Bank has been successful lending on small local commercial, mixed use and multifamily properties and managing its risk in those areas. The Board of Directors and management have experience in real estate development, construction, financing, sales and leasing, much of it in the San Francisco Bay Area. Both the Board of Directors and management have demonstrated the entrepreneurial will and skill to develop programs that may not otherwise be offered by other banks, for borrowers that have good global cash flow (liquidity from all sources, including wages, rental income, interest and dividends).

We have grown and remained profitable throughout the economic recession.
 
Unlike many of our competitors and throughout the recent banking meltdown, we have grown over 50% from $204.7 million in assets at December 31, 2006 to $ 316.7 million in assets as of September 30, 2010, while maintaining stronger asset quality and lower delinquencies than the majority of our local peer group. We reported net income of $ 1.033 million for the nine months ended September 30, 2010 (unaudited). This compares to income of $ 1.010 million for the nine months ended September 30, 2009, an increase of 2.3 %. Net income for the year ended December 31, 2009 was $1,602,000, as compared to net income of $1,744,000 for the year ended December 31, 2008. We have been consistently profitable throughout the past 13 years.
 
Management’s plans for additional growth, coupled with its desire to continue to take advantage of strategic opportunities created by the current economic and banking environment, prompted our Board of Directors to authorize this offering. Assuming the full amount of the offering is sold and assuming the selling shareholder opts to participate fully in the offering , we plan to invest approximately $10,905,839 if we sell the minimum amount or approximately $19,612,575 if we sell the maximum amount, of the net proceeds from this offering in the Bank in order to implement our plans and to provide capital reserves to support the Bank. If selling shareholder opts not to participate in the offering, we plan to invest approximately $16,392,364 if we sell the minimum amount or approximately $25,219,714 if we sell the maximum amount, of the net proceeds from this offering in the Bank.
 
Our Management Team
 
Our experienced management team consists of the following individuals:
 
Kit M. Cole, age 69, serves as the Chairman and Chief Executive Officer of the Company and as Chairman Emeritus and director of the Bank. Ms. Cole has over 30 years of experience in both the banking and financial services industries. In 1996 Ms. Cole led a group of private investors to recapitalize Circle Bancorp, effecting a change of control at that time. Ms. Cole has served as a director and Chairman Emeritus of Circle Bancorp and Circle Bank since 1999. She served as Chairman/CEO of Circle Bancorp from November 2008 until October 9, 2009 and again from November 5, 2009 until the present. Ms. Cole was the founder and Chairman/CEO of Epic Bancorp (subsequently re-named Tamalpais Bancorp) and Tamalpais Bank from its inception through 2005, when she became Executive Chairman of Epic Bancorp. Ms. Cole took a leave for medical reasons effective April 2007 and ultimately retired from Epic Bancorp in November 2007.  During the entire last 14 years of Ms. Cole’s tenure as the CEO of Epic Bancorp and Tamalpais Bank, Tamalpais Bank incurred no loan losses.   In early 2010, Tamalpais Bank failed and was put into receivership by the FDIC due, in large part, to the losses in its loan portfolio from loans that were booked after Ms. Cole retired. Ms. Cole was the principal organizer and first Chairman of New Horizons Savings in 1981, which was sold to Luther Burbank in 1996. In 1997 Ms. Cole was inducted into the Marin County Women’s Hall of Fame. Ms. Cole has a Masters in Business Administration from University of California, Berkeley.
 
Kimberly Kaselionis, age 49, serves as the Chairman and Chief Executive Officer of the Company from 1996 until November 2008 and then again from October 9, 2009 until November 5, 2009. She has served as Chairman/CEO of Circle Bank since 1996 and as a director of the Company since November 2008. Ms. Kaselionis has been a member of the Board of Directors of Circle Bancorp and Circle Bank since 1991. In late 2009, Ms. Kaselionis was named one of only three California community bank CEOs to sit on America’s Community Bankers Council. She was also named a Northern California finalist in the Entrepreneur of the Year Award sponsored by Ernst & Young during that year. Ms. Kaselionis was chosen as one of the North Bay Business Journals’ Women in Business Leader, Innovators and Visionaries in 2007. She has served on many community non-profit boards including the Sutter-Marin Hospital Board. Ms. Kaselionis was the 2009 President of the Novato Chamber of Commerce. Ms. Kaselionis has a Bachelor of Science degree in accounting from California State University, East Bay and a Masters in Business Administration from University of Phoenix.
 
 
9

 
 
Patrick McCarty, age 61, is the Chief Credit Officer of Circle Bank. During his tenure at the Bank, Mr. McCarty has served as Chief Lending Officer and Senior Vice President of Circle Bank since 2003. He oversees all aspects of the Bank’s credit functions, including loan servicing, underwriting, policies and personnel. Mr. McCarty has 35 years of bank experience managing loan portfolios in all types of credit markets at five different financial institutions ranging from multi-bank holding companies to small community banks. He was appointed to the board of the Affordable Housing Consortium of Sonoma County in 2005. From 1992 to 2002, Mr. McCarty served as the President and Chief Credit Officer of Premier Funding Group, a private banking company in Arlington, Texas that was formed to acquire and work out assets from the Resolution Trust Corporation and FDIC. In that role, Mr. McCarty’s duties included managing all aspects of the company’s financial and credit functions. From 1988 to 1992, Mr. McCarty was the Chief Financial Officer of First Savings Bank in Arlington, Texas. He is a graduate of Texas A & M University with a Bachelor of Arts degree in finance.
 
Michael Moulton, age 49, joined Circle Bank as the Chief Financial Officer and Senior Vice President in September 2009. Mr. Moulton has 23 years of industry experience in accounting, investment management, financial planning and analysis, SEC reporting, investor relations, and secondary market activities. Prior to joining Circle Bank, Mr. Moulton was the Chief Financial Officer of Tamalpais Bancorp and Tamalpais Bank. He played key roles in public and private placements of debt and equity securities including private placements of trust preferred securities. He joined Tamalpais Bank in 1994 as Vice President, Controller and was named Chief Financial Officer of Tamalpais Bank in 1998, Chief Financial Officer of Tamalpais Bancorp in 2003, and Chief Financial Officer of Tamalpais Wealth Advisors in 2005. Prior to 1994, Mr. Moulton served in various accounting and financial and managerial capacities at San Francisco Federal Savings and Loan and two other financial institutions. Mr. Moulton has a Bachelor of Science from California State University, East Bay.

Chris Lee, age 44, joined the Bank in August 2010 as SVP, Chief Loan Officer. He is a long time San Francisco resident and has been in the commercial banking field for over 15 years. His banking career began with Sumitomo Bank as an account officer trainee, where he completed a year long “credit boot camp” that focused on all aspects of commercial lending, including borrowing needs, operating cycle, cash flow analysis, industry/business risk, and asset base lending. After several years at Sumitomo, Mr. Lee joined United Commercial Bank as a credit manager, overseeing that bank’s commercial real estate underwriting and loan funding. Over his ten and a half years tenure at United Commercial Bank he held various roles, including credit administrator duty and was responsible for approving or recommending real estate, construction, C&I, small business, and SBA credits. During his last four years at United Commercial Bank, Mr. Lee served as the director of the commercial real estate division, consisting of eight regional offices in San Francisco, Los Angeles, New York, Boston, Atlanta, Houston and Seattle.
 
Alan Gaul, age 45, joined the Bank in July 2010 as SVP of Marketing and is a veteran senior manager with a combination of marketing project management business development and IT experience. Mr. Gaul’s marketing experience includes: marketing communications, strategic marketing development including website and content development, e-mail marketing and hands-on involvement and execution of collateral development. His relevant IT experience is in the areas of Website, CRM, loan origination and automated underwriting systems delivery. Known for being a “brand evangelist,” Mr. Gaul couples his marketing and IT skills to create online platforms as a gateway for doing business on the internet.
 
Erick Kostuchek, age 40, joined Circle Bank in June 2009 as SVP of Branch Sales and Administration. He has been a banker since 1992, with experience in branch sales strategies, operations, and bi-coastal banking. Mr. Kostuchek’s 17 year career history includes progressive senior leadership roles with Bay Area banks such as Bank of America, Citi National Bank, and First National Bank of Northern California. In 2001, Mr. Kostuchek’s career brought him to the New York metropolitan area, where he was the Regional Director for the most affluent market in Wachovia Bank’s service area, Bergen County, NJ. Mr. Kostuchek also served as the company media representative in the Hispanic markets. In 2004, Mr. Kostuchek joined Sovereign Bank as the Market Manager for the Manhattan market, with particular focus on active de-novo expansion. Mr. Kostuchek’s community involvement includes past treasurer and vice president of the Mission Merchants Association in Daly City, the Children’s Aid Society Advisory Board and the YMCA youth basketball program.
 
 
10

 
 
Michael Rice, age 49, joined Circle Bank in 2009 as SVP of Business Lending. He is a veteran of the financial services industry with more than 20 years in senior management and lending positions with banks and financial services firms in the San Francisco Bay Area, specializing in small business lending and lease financing. Mr. Rice has long been active in community organizations, serving on the boards of the San Rafael Chamber of Commerce, the San Rafael Rotary Club, and the Area Government Guaranteed Lenders Association. He is a graduate of the University of California, Santa Barbara.
 
Eileen Graham, age 59, joined the Company in July 2009 as SVP of Human Resources and is a veteran senior manager with over 25 years of human resource management experience, spanning over many sectors of organizations, large and small, public and private, global and domestic. She has lead human resources for Hasbro Toys, SPG Solar, Vacuum Coating Technologies, Ebara Technologies, and has also consulted for Disney and for the City of Napa. Ms. Graham graduated from the University of Kansas with a double major in education and psychology and attended the University of Florida for post-graduate studies in Psychology and is certified as a Senior Professional HR. She serves on several boards including Employers Advisory Council and the Northern California HR Association.
 
Juanna Collin, age 51, will join Circle Bank in 2011 as the SVP of Operations.  Ms. Collin is a 25 year banking veteran in systems, operations and compliance.  Over the last ten years she has served as a consultant for a wide range of community banks including OneCalifornia Bank, New Resource Bank, Mission National Bank, Bank of Alameda as well as Circle Bank.  Prior to becoming a consultant, Ms. Collin was the SVP of Operations and Technology at the Commercial Bank of San Francisco.  She has consulted on a number of projects including core banking data processing systems, electronic banking systems, compliance and risk management programs, and procedure writing.
 
Ms. Collin’s areas of expertise are strategic planning, project management, maximizing operational efficiencies, personnel development and risk management. Her work includes de-novo bank core systems selection and integration management, strategic development of fully integrated consumer loan origination and documentation systems for the under banked market place.    She also serves as a committee member for Circle Bank’s Technology management and was instrumental in the selection and strategic direction of the Bank’s core data processing systems.
 
Risk Factors
 
We face risks in operating our business, including risks that may prevent us from achieving our business objectives or that may materially and adversely affect our business, financial condition and operating results. You should carefully consider these risks, including the risks discussed in the section entitled “Risk Factors” beginning on page [__] and the other information included in this prospectus before deciding whether to invest in our common stock.

The Offering

Shares Currently Outstanding
 
1,149,640 shares.
     
Common Stock Offered
   
     
By the Company
 
A minimum of 1,905,000 and a maximum of 2,860,000 shares, provided, however, that the selling shareholder may offer up to 568,270 shares in this offering in which case, the shares offered by the Company would be reduced to a  minimum of 1,336,730 shares and a maximum of 2,291,730 shares.
     
By the Selling Shareholder
 
The selling shareholder is Shoreline Capital Partners, L.P. (sometimes referred to herein as either the “principal shareholder,” the “selling shareholder” or “SCP”).  The selling shareholder has the option to sell up to 568,270 shares.  Any shares not offered for sale by the selling shareholder will increase the number shares the Company may offer and sell in this offering up to a minimum of 1,905,000 and a maximum of 2,860,000 shares.
 
 
 
Total
 
A minimum of 1,905,000 shares and a maximum of 2,860,000 shares.
     
Minimum Subscription
 
500 shares.
 
 
 
Minimum Offering by the Company
 
$20,002,500 in gross proceeds on the sale of a minimum of 1,905,000  shares total; provided, however, that if the selling shareholder opts to offer and sell  all 568,270 shares, gross proceeds to the Company will be reduced to $14,035,665 on the sale of a minimum of 1,336,730 shares total.
 
 
 
Maximum Offering by the Company
 
$30,003,000 in gross proceeds on the sale of a maximum of 2,860,000  shares total; provided, however, that if the selling shareholder opts to offer and sell  all 568,270 shares, gross proceeds to the Company will be reduced to $24,063,165 on the sale of a maximum of 2,291,730 shares total.
     
Offering by the Selling Shareholder
 
$5,966,835 in gross proceeds to the selling shareholder, or 568,270 shares total.  The selling shareholder may opt to offer any number of shares up to a maximum of 568,270 shares.
 
 
 
Closing of the Offering
 
The offering will terminate upon the earlier of: (i) at our discretion, at any time after the minimum offering is sold; or (ii) March 15, 2011, unless extended in the sole discretion of our Board to a date not later than May 31, 2011.
 
 
 
Common Stock to be Outstanding After this Offering
 
3,054,640 shares if the minimum number of shares are sold or 4,009,640 shares if the maximum number of shares are sold; provided, however, that if the selling shareholder opts to sell all 568,270 shares offered by it, the shares of common stock outstanding after this offering will be 2,486,370 shares if the minimum number of shares are sold or 3,441,370 shares if the maximum number of shares are sold.
 
 
 
Use of Proceeds
 
Proceeds we receive from the offering of shares by us are to be used to support continued operations of the Company and the Bank, with most of the proceeds being invested in the Bank to provide additional capital to support the Bank’s capital ratios and to support the Bank’s anticipated growth. At the minimum offering amount, we anticipate raising $12.9 or $18.4 million, depending on whether or not the selling shareholder participates in this offering , net of fees and expenses.  Of this amount, $ 2 .0 million would be retained by the Company to augment its capital position and to provide a reserve for operating expenses and dividends.  The remaining $ 10.9 million or $16.4 million, as applicable , would be infused in the Bank to enhance the Bank’s capital to support organic growth and acquisitions. At the maximum offering amount, we anticipate raising $22.6 million or $28.2 million, depending on whether or not the selling shareholder participates in this offering, net of fees and expenses.  Of this amount, $3.0 million would be retained by the Company and the remaining $19.6 or $25.2 million, as applicable, would be infused as capital for the Bank. See “Use of Proceeds” herein.
 
 
11

 
 
Selling Shareholder
 
We will not receive any proceeds from the selling shareholder.  The selling shareholder is Shoreline Capital Partners, L.P., a California limited partnership, which owns 1,136,541 shares or 98.86% of the issued and outstanding shares of the Company’s common stock as of September 30, 2010 and is our controlling or principal shareholder.  Cole Financial Ventures, Inc. (“CFV”) is the general partner of SCP and Kit M. Cole (our Chairman and Chief Executive Officer) and Kimberly Kaselionis (a member of our Board of Directors and Chairman and Chief Executive Officer of the Bank) own 61.5% and 12.5%, respectively, of CFV. As the general partner, CFV has the exclusive discretion to manage and control the business of SCP and has the full authority to bind SCP.  CFV has no direct ownership in Circle Bancorp. Ms. Cole and Ms. Kaselionis do not own any Circle Bancorp shares directly and have ownership only indirectly through options or warrants.  Upon completion of this offering, if SCP participates in this offering, CFV will receive a profit distribution relating to the shares of common stock sold in the approximate amount of $200,000.  Further, upon dissolution of SCP, SCP will be required to liquidate its investment and distribute the net proceeds to its partners.  CFV has committed to use a portion of its anticipated share, approximately $800,000, to purchase shares of the Company’s common stock.  In addition to SCP, there are three other shareholders of the Company.  The three other shareholders own the remaining 13,099 shares (or 1.14%) of the issued and outstanding common stock as of September 30, 2010 and are not selling shareholders in this offering.  If the principal shareholder participates fully in this offering and sells a maximum of 568,270 shares, it is anticipated that the principal shareholder’s ownership interest will be diluted to between 22.86% and 16.51%, depending on the minimum and maximum offering, respectively.   If the principal shareholder does not participate in the offering at all, it is anticipated that the principal shareholder’s ownership interest will be diluted to between 37.21% and 28.35%, depending on the minimum and maximum offering, respectively.  The partnership agreement of the selling shareholder will expire on December 31, 2011, if not terminated earlier, at which time the shares held by the controlling shareholder will be distributed to its partners in proportion to their partnership interests, and each partner will, by virtue of the distribution, become shareholders of the Company in his, her or its own right.
     
Dividends
 
Our Board has approved and declared a dividend of $0.32 per share on the 1,149,640 shares of our common stock issued and outstanding as of January 31, 2011, or a dividend in the aggregate amount of approximately $367,885, payable on February 2, 2011.  This dividend is consistent with those paid to the shareholders over the prior four years.
 
In addition, our Board has indicated that it intends to declare and pay another dividend on our issued and outstanding common stock in an amount equal to the Company’s earnings from January 1, 2011 through the close of the offering.  The dividend will be paid on the shares then currently outstanding and will not be paid on any shares purchased in this offering.

Dividends on the common stock will be payable when, as and if authorized and declared by our Board of Directors out of legally available funds, subject to the prior payment of dividends on our preferred stock. We first issued our preferred stock in December 2009 and have begun paying dividends in the 4th quarter of 2009 on that class of securities.

See “Trading History and Dividends” herein.
     
Investment Risk Factors
 
Prospective investors should carefully consider the information contained in “Risk Factors” beginning on page [__] and other information included in this prospectus before investing in our common stock.
     
Proposed Symbol for Trading on the Nasdaq Capital Markets
 
CIRB
 
Except as otherwise indicated, all information in this prospectus:
 
 
assumes an offering price of $10.50 per share;
     
 
excludes 13,566 shares of common stock reserved for future grants under our Directors’ Non-Qualified Stock Option Plan; and
     
 
excludes 34,764 shares of common stock reserved for future grants under our Employee Incentive Stock Option and Stock Appreciation Rights Plan.
 
Additional Information About Us
 
Circle Bancorp and Circle Bank headquarters are located at 1400 Grant Avenue, Novato, California, 94945. Our telephone number is (415) 898-5400. Any questions regarding this offering should be directed to:
 
 
Circle Bancorp
 
1400 Grant Avenue
 
Novato, California 94945
 
Attn:
Kit M. Cole, Chairman and Chief Executive Officer
 
Tel:
(415) 898-5400
 
Fax:
(415) 898-3742
     
  Circle Bank
1400 Grant Avenue
Novato, California 94945
  Attn:  Kimberly Kaselionis, Chairman and Chief Executive Officer 
  Tel:  (415) 898-5400 
  Fax:  (415) 898-3742 
 
Our website is: www.circlebank.com
 
The information contained on our website is not a part of this prospectus and should not be relied upon in determining whether to make an investment in our common stock.
 
 
12

 
 

The following summary presents our consolidated financial data as of and for the years ended December 31, 2009, 2008, and 2007, and for the nine months ended September 30, 2010 and 2009. The data for the years ended December 31, 2009, 2008, and 2007 are derived from our audited consolidated financial statements, adjusted for the one for six reverse stock split on May 24, 2010. The data for the nine months ended September 30, 2010 and 2009 are unaudited; however, in the opinion of our management, this data includes all adjustments necessary to fairly present those periods in accordance with generally accepted accounting principles. You should read this information together with “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” starting on page [ __ ], and our audited consolidated financial statements and accompanying notes thereto and our unaudited consolidated financial statements for the nine months ended September 30, 2010 and 2009 starting on page F-1 of this Prospectus . The historical results presented in the following summary do not necessarily indicate expected results for future years and the results for the nine months ended September 30, 2010 do not necessarily indicate the expected results for the entire year.
 
   
As of and for the Nine
                   
   
Months Ended
     As of and for the Years Ended  
   
September 30,
    December 31,  
   
2010
   
2009
   
2009
   
2008
   
2007
 
Summary of financial condition (at period end)
 
(Dollars in thousands except per share amounts)
 
                               
Total assets
  $ 316,714     $ 255,007     $ 262,486     $ 252,991     $ 227,702  
Cash and due from banks
    44,774       13,661       6,158       15,322       4,939  
Federal funds sold
    12,702       1,518       16,403       2,828       243  
Securities available for sale
    1,034       1,283       1,226       1,460       2,258  
Loans, net of allowance for losss
    244,061       230,297       229,918       225,681       212,596  
Deposits
    235,058       182,962       202,924       175,933       153,603  
FHLB advances
    56,000       51,000       37,500       57,000       55,600  
Junior subordinated debt securities
    8,764       8,764       8,764       8,764       8,764  
Other Liabilities
    1,380       1,369       1,232       771       861  
Total shareholders’ equity
    15,512       10,912       12,066       10,523       8,874  
Average shareholders’ equity
    14,234       10,620       10,735       9,611       8,363  
Average total assets
    289,924       256,220       258,409       246,032       214,043  
Summary of operating results for the period:
                                       
Interest income
  $ 13,242     $ 13,184     $ 17,487     $ 18,353     $ 16,964  
Interest expense
    3,208       4,755       5,918       8,726       9,156  
Net interest income
    10,034       8,429       11,569       9,627       7,808  
Provision for loan losses
    886       689       904       323       368  
Net interest income after provision for loan losses
    9,148       7,740       10,665       9,304       7,440  
Noninterest income
    560       401       622       500       467  
Noninterest expense
    7,987       6,494       8,720       6,951       6,351  
Income before income taxes
    1,721       1,647       2,567       2,853       1,556  
Income taxes
    688       637       965       1,109       539  
Net income
  $ 1,033     $ 1,010     $ 1,602     $ 1,744     $ 1,017  
Preferred stock dividend
    192             3              
Net income available to common shareholders
  $ 841     $ 1,010     $ 1,599     $ 1,744     $ 1,017  
Per share data:
                                       
Basic income per common share
  $ 0.73     $ 0.88     $ 1.39     $ 1.52     $ 0.88  
Diluted income per common share
  $ 0.71     $ 0.86     $ 1.36     $ 1.49     $ 0.87  
Book value per common share
  $ 10.54     $ 9.49     $ 10.02     $ 9.18     $ 7.72  
Net charge offs to average loans
    0.08 % (1)     0.25 % (1)     0.12 %     0.03 %     0.05 %
Average shares outstanding
    1,149,640       1,149,640       1,149,640       1,149,640       1,149,640  
Dividends
                                       
Common stock cash dividend
  $ 212     $ 650     $ 650     $ 111     $ 105  
Percent of net income
    20.52 %     64.36 %     40.57 %     6.36 %     10.32 %
 
 
13

 
 
   
As of and for the Nine
                   
   
Months Ended
   
As of and for the Years Ended
 
Summary of financial condition (at period end):
 
September 30,
    December 31,  
   
2010
   
2009
   
2009
   
2008
   
2007
 
    (Dollars in thousands except per share amounts)  
Return on average total assets
    0.48 % (1)     0.53 % (1)     0.62 %     0.71 %     0.48 %
Return on average shareholders’ equity
    9.70 % (1)     12.72 % (1)     14.92 %     18.15 %     12.16 %
Net interest margin
    4.76 % (1)     4.47 % (1)     4.57 %     4.02 %     3.74 %
Net yield on average earning assets
    6.29 % (1)     7.00 % (1)     6.90 %     7.65 %     8.13 %
Cost of interest bearing liabilities
    1.72 % (1)     2.78 % (1)     2.58 %     4.02 %     4.79 %
Efficiency Ratio
    75.39 %     73.54 %     71.53 %     68.64 %     76.75 %
Average stockholders’ equity to average total assets
    4.91 %     4.14 %     4.15 %     3.91 %     3.91 %
                                         
Company capital ratios
                                       
Total capital to average total assets
    9.17 %     8.47 %     8.86 %     8.65 %     9.12 %
Pro forma tier I leverage ratio
    5.16 %     5.54 %     5.81 %     5.55 %     5.19 %
Pro forma tier I risk based capital ratio
    7.80 %     7.95 %     8.27 %     7.83 %     6.79 %
Pro forma total risk based capital ratio
    12.86 %     11.86 %     12.33 %     11.85 %     11.21 %
Bank capital ratios
                                       
Tier I leverage ratio
    7.63 %     7.32 %     7.55 %     7.52 %     7.76 %
Tier I risk based capital ratio
    11.59 %     10.56 %     10.80 %     10.62 %     8.98 %
Total risk based capital ratio
    12.84 %     11.82 %     12.06 %     11.87 %     10.10 %
Nonperforming assets to total assets
    2.46 %     0.68 %     1.88 %     0.37 %     0.02 %
Nonperforming assets to gross loans
    3.15 %     0.74 %     2.12 %     0.41 %     0.02 %
Allowance for loan losses to total loans
    1.54 %     1.20 %     1.30 %     1.05 %     1.00 %
Allowance for loan losses to nonperforming loans
    67.40 %     161.55 %     61.22 %     258.92 %     4111.54 %
 

(1) These ratios have been annualized.
 
 
Investing in our common stock involves significant risks, including the risks described below. These risks include limitations on the ability to sell or otherwise transfer the common stock, fluctuations in interest rates, operational risks, legal risks and regulatory risks. Many of these risks are inherent in Circle Bancorp’s business and could be substantial. Set forth below are the risks we believe are material to our business and to the common stock we are offering. In addition, there are risks beyond our control. If any of these risks actually occurs, our business, financial condition or results of operations could be negatively affected, and you could lose part or all of your investment. You should carefully consider the following information, together with the other information in this prospectus, before deciding whether purchasing the common stock will be a suitable investment for you.
 
Business Risks
 
Changes in financial markets and economy may negatively affect our operations.
 
Economic indices have shown that since the fourth quarter of 2007 the United States economy has been in a recession. This has been reflected in significant business failures, substantial reductions in real estate values, and a significant downturn in the residential and commercial real estate markets, resulting in high levels of loan defaults and foreclosures and significant job losses. Over 6.6 million jobs were lost in 2008 and 2009 and while the level of job losses has decreased recently, the unemployment rate nationally was 9.6% (1) as of August 2010 and in California was 12.4% as of August 2010.
 

(1) Source: U.S. Bureau of Labor Statistics.
 
 
14

 
 
The Company conducts banking operations principally in Northern California. As a result, our financial condition, results of operations and cash flows are subject to changes in the economic conditions in Northern California. Our business results are dependent in large part upon the business activity, population, income levels, deposits and real estate activity in Northern California, and continued adverse economic conditions could have a material effect upon us. In addition, the State of California is currently experiencing significant budgetary and fiscal difficulties, which includes terminating and furloughing State employees.
 
Financial markets, securities trading markets, and the economy generally, both in the United States and throughout the world, have experienced significant turmoil resulting primarily from the declines in real property values, elevated foreclosures on residential and commercial properties, extended leverage by securities brokerage firms, and energy price fluctuations. This turmoil has resulted in the failures of banks and securities brokerage firms, government brokered mergers of such firms to avoid bankruptcies or failures, and virtually unprecedented intervention by governments, particularly in the United States, with the enactment of the Emergency Economic Stabilization Act of 2008 and the extension of credit to insurance companies and the government take-over of domestic auto manufactures, in an effort to support the economy, provide liquidity to lending institutions, and stabilize the financial sector. As of October 30, 2010, 139 banks have failed year-to-date nationally, following 140 failures in 2009 (2) , and more failures are expected for the balance of the year and into 2011. These events may reduce: (i) our ability to service existing customers and to attract new customers; (ii) our borrowers’ ability to successfully operate their businesses; and (iii) our customers’ ability to repay their loans with us in accordance with their terms. Such developments would have a material negative effect on our earnings and financial condition. The full extent of the repercussions to our nation’s economy in general and our business projections in particular are not fully known at this time.
 
We can provide no assurance that economic conditions in the United States in general, in the State of California, or within our operating market will not further deteriorate or that such deterioration will not materially and adversely affect us. A further deterioration in the economic conditions locally, regionally or nationally could result in a further economic downturn in Northern California with the following consequences, any of which could further adversely affect our business:
 
 
loan delinquencies and defaults may increase;
 
problem assets and foreclosures may increase;
 
demand of our products and services may decline;
 
low cost or non interest bearing deposits may decrease;
 
collateral for loans may decline in value, in turn reducing customer’s borrowing power, and reducing the value of assets and collateral as a source of repayment of existing loans;
 
foreclosed assets may not be able to be sold;
 
volatile securities market conditions could adversely affect valuations of investment portfolio assets; and
 
reputational risks may increase due to public sentiment regarding the banking industry.
 
We face lending risks and limits on our ability to lend.
 
The risk of loan defaults or borrowers’ inabilities to make scheduled payments on their loans is inherent in banking. Moreover, we focus primarily on lending to small- and medium-sized businesses. The Bank maintains significant concentrations in real estate loans. Consequently, we may assume greater lending risks than financial institutions that have a smaller concentration of those loans and which tend to make loans to larger businesses. The recent economic downturn and its potential effect on our customers and their businesses may make it more difficult for our borrowers to repay their loans in accordance with their terms. Borrower defaults or the inability of borrowers to make scheduled payments could result in losses which may exceed our allowance for loan losses. These risks, if they occur, may require us to make larger loan loss provisions which, in turn, could materially impair our profitability, capital adequacy and overall financial condition.
 
Presently, the Bank’s legal lending limit is approximately $6.9 million. Accordingly, the size of the loans which we can offer to potential clients is less than the size of loans which most of our competitors with larger lending limits can offer. Our legal lending limit affects our ability to seek relationships with the area’s larger and more established businesses. Through our previous experience and relationships with a number of the region’s other financial institutions, we are generally able to accommodate loan amounts greater than our legal lending limit by selling participations in those loans to other banks although we tend to retain a significant portion of the loans we originate. However, we cannot assure you of any success in attracting or retaining clients seeking larger loans or, in light of the economic downturn and its effects on other financial institutions, that we can engage in participation transactions for those loans on terms favorable to us. See “Description of Business - Circle Bank Strategy” herein.
 

(2) Source: www.fdic.gov/bank/individual/failed/banklist.html
 
 
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Our reserve for loan losses may not be adequate to cover actual loan losses.
 
The risk of nonpayment of loans is inherent in all lending activities and nonpayment, if it occurs, may have an adverse effect on our financial condition and/or results of operation. We maintain a reserve for loan losses to absorb estimated probable loan losses inherent in the loan and commitment portfolios as of the balance sheet date. After a provision of $886,000 for the nine months then ended, as of September 30, 2010 our allowance for loan losses was $3,814,000, or 1.54 % of loans held for investment. This ratio is lower than our local peer group average and lower than the average of all banks in California. As of September 30, 2010, we had $5,659,000 in loans on nonaccrual status and $2,142,000 (representing one asset) in other real estate owned. In addition, we had $486,000 in loans 30 to 90 days past due with interest accruing. In determining the level of the reserve for loan losses, our management makes various assumptions and judgments about the loan portfolio. We rely on an analysis of our loan portfolio based on historical loss experience, volume and types of loans, trends in classifications, volume and trends in delinquencies and non-accruals, national and local economic conditions and other pertinent information known at the time of the analysis. If management’s assumptions are incorrect, the reserve for loan losses may not be sufficient to cover losses, which could have a material adverse effect on our financial condition and/or results of operations. While the allowance was determined to be appropriate at September 30, 2010, based on the information available to us at the time, there can be no assurance that the allowance will be appropriate in the future.

From December 31, 2008 through September 30, 2010, the Bank increased its allowance for loan losses by approximately 59%.  This increase is primarily attributable to substantial increases in non-performing loans and non-performing assets since 2008 which have increased at a more rapid pace in 2010.  As a percentage of total assets, non-performing assets were 0.37%, 1.88% and 2.46%, respectively, as of December 31, 2008, December 31, 2009 and September 30, 2010.   From September 30, 2009 through September 30, 2010 non-performing assets have increased from $1.7 million to $7.8 million. A large portion of this increase of $6.1 million in non-performing assets over the prior period is comprised of a $2.1 foreclosed real estate property in Sonoma County, California which was foreclosed on in 2010.  The remaining $4.0 million increase during this period is evenly divided by type among commercial real estate, multi-family real estate and single family residential real estate loans.  Non-performing loans as of September 30, 2010 were $5.7 million, of which $1.2 million were placed on nonaccrual status within the last ninety days and $3.2 million of which were placed on nonaccrual status within the last five months.

Although non-performing assets have increased since 2008, net charge-offs have been relatively low at $66,000, $271,000 and $100,000 for the years ended December 31, 2008 and 2009, and for the nine-months ended September 30, 2010, respectively.  Despite the relatively low net charge-offs, in light of the increasing trend in loans with payment problems, the Bank has increased its loan loss reserve by 60% over the last 21 months which is attributable to the corresponding increase in non-performing assets.  Of the $1.42 million added to the allowance during this 21 month period, $1.22 million was attributable to increased credit risk while $200,000 was the result of increased loan volume. Although we believe this increase in reserves to be appropriate , the actual loss exposure is unpredictable.
 
An increase in our classified loans take significant time to resolve and may adversely affect our results of operations and our financial performance.
 
Some of the loans that we make may, with the passage of time, evidence a higher risk of collectability. Such loans may be classified and require us to provide larger loss reserves. Non-performing assets adversely affect our net income in various ways, including reducing the amount of resources available for our activities which, in turn, reduces our liquidity, earnings and ultimately our capitalization and financial performance. We continually evaluate the credit risks associated with loans that evidence a higher risk of collectability.
 
We believe that we have appropriately provided for the related credit risks of such loans. However, as previously noted, until economic and market conditions improve, our loan portfolio is vulnerable to adverse changes in the economy and in the particular industries in which our borrowers operate. We generally do not record interest income on non-performing loans or other real estate owned, thereby adversely affecting our income and increasing our loan administration costs. When we take collateral in foreclosures and similar proceedings, we are required to mark the related assets to the then fair market value of the collateral, which may ultimately result in a loss. An increase in the level of non-performing assets increases our risk profile and may impact the capital levels our regulators believe are appropriate. Accordingly, we cannot guarantee that the level of problem loans will not increase in the future which could have a material adverse effect upon the Bank and, in turn, the Company. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein.
 
 
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All of our lending involves underwriting risks.
 
As of September 30, 2010, commercial real estate loans represented 36.9 % of our total loan portfolio, multifamily real estate loans represented 23.7% of our total loan portfolio, and 1 to 4 unit residential real estate loans represented 32.7 %. All such lending, even when secured by the real estate or assets of a business, involves considerable risk of loss in the event of failure of the business. To reduce such risk, we typically take additional security interests in other collateral of the borrower, such as real property, certificates of deposit or life insurance, and/or obtain personal guarantees. In light of the economic downturn, our efforts to reduce risk of loss may not prove sufficient as the value of the additional collateral or personal guarantees may be significantly reduced. There can be no assurances that we have taken sufficient collateral or the values thereof will be sufficient to repay loans in accordance with their terms.
 
We have a high concentration of California real estate collateralizing our loans .
 
As of September 30, 2010, approximately $234 million, or 94.8 % of our loan portfolio is secured by various forms of real estate, including residential and commercial real estate. A further decline in current economic conditions or rising interest rates could have an adverse effect on the demand for new loans, the ability of borrowers to repay outstanding loans and the value of real estate and other collateral securing loans. All of the real estate securing our loan portfolio is in California. The decline in real estate values could harm the financial condition of our borrowers and the collateral for our loans will provide less security and we would be more likely to suffer losses on defaulted loans.

Declines in real estate values have had and may continue to materially impair our profitability and financial condition.
 
As of September 30, 2010, construction and land loans comprised 1.5% of the loan portfolio and other forms of real estate loans comprised 93.3 % of the portfolio. Overall loans secured by real estate collateral constituted approximately 94.8 % of our loan portfolio. These real estate-secured loans, consisting of commercial, single and multi-family real estate loans, are concentrated in the Bay Area. The downturn in the local economy has had and is expected to continue to have a material adverse effect on our borrowers’ ability to repay these loans. Further, such reduction in the local economy has had and may continue to severely impair the value of the real property held as collateral. As a result, the value of real estate collateral securing our loans has been and may continue to be reduced. Our ability to recover on defaulted loans by foreclosing and selling the real estate collateral has been and may continue to be diminished and we have been and are more likely to suffer losses on defaulted loans. In addition, acts of nature, including earthquakes, brush fires and floods, which may cause uninsured damage and other loss of value to real estate that secures these loans, may also negatively impact our financial condition. This is particularly significant in light of the fact that substantially all of the real estate that makes up the collateral of our real estate secured loans are located in the San Francisco Bay Area where earthquakes and brush fires occur. See “Description of Business” herein.
 
Curtailment of government guaranteed loan programs could affect a segment of our business.
 
An important segment of our planned business consists of originating government guaranteed loans, in particular those guaranteed by the Small Business Administration. From time to time the government agencies that guarantee these loans reach their internal limits and cease to guarantee loans. In addition, these agencies may change their rules for loans or Congress may adopt legislation that would have the effect of discontinuing or changing the loan programs. Non-governmental programs could replace government programs for some borrowers, but the terms might not be equally acceptable. Therefore, if these changes occur, the volume of loans to small business, industrial and agricultural borrowers of the types that now qualify for government guaranteed loans could decline. Also, the profitability of these loans could decline. As the funding of the guaranteed portion of SBA 7(a) loans is an increasing portion of our business, the long-term resolution to the funding for the SBA 7(a) loan program may have an unfavorable impact on our future performance and results of operations. While SBA loans do not constitute a significant portion of our loan portfolio, the above described risks associated with government guaranteed loans pose a threat to our business.
 
Our small business customers may lack the resources to weather a continued downturn in the economy.
 
One of the primary focal points of our business development and marketing strategy is serving the banking and financial services needs of small and medium-sized businesses and professional organizations. Small businesses generally have fewer financial resources in terms of capital or borrowing capacity than do larger entities. If economic conditions remain unfavorable in our service areas, the businesses of our lending clients and their ability to repay outstanding loans may be negatively affected. As a consequence, our results of operations and financial condition may be adversely affected.
 
Recession and changes in domestic and foreign financial markets have had, and may continue to have, a material negative impact on our results of operations and financial condition.
 
The recession, which is generally believed to have begun in the fourth quarter of 2007, continued impacting the economy throughout 2009 and into 2010. While there are signs of modest improvement, economic growth remains at low levels with a difficult job market, declining demand for loans and demand for commercial and industrial space still losing momentum.
 
 
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In addition, in the past year the domestic and foreign financial markets, securities trading markets and economies generally have experienced significant turmoil including, without limitation, government takeovers of troubled institutions, government brokered mergers of such firms to avoid bankruptcy or failures, bankruptcies of securities trading firms and insurance companies, failures of financial institutions and securities brokerage firms, significant declines in real property values, and wide fluctuations in energy prices, all of which have contributed to reduced availability of credit for businesses and consumers, significant levels of foreclosures on residential and commercial properties, falling home prices, reduced liquidity and a lack of stability across the entire financial sector. These recent events and the corresponding uncertainty and decline in financial markets are likely to continue for the foreseeable future. The full extent of the repercussions to our nation’s economy in general and our business in particular are not fully known at this time. Such events are likely to have a negative effect on (i) our ability to service our existing customers and attract new customers, (ii) the ability of our borrowers to operate their business as successfully as in the past, (iii) the financial security and net worth of our customers, and (iv) the ability of our customers to repay their loans with us in accordance with the terms thereof. Even though we have enhanced our total shareholders’ equity with the proceeds of the $3.39 million we raised through the private placement of preferred stock, such developments could have a material negative impact on our results of operations and financial condition.

Tightening of credit markets and liquidity risk could adversely affect our business, financial condition and results of operations.
 
A tightening of the credit markets or any inability to obtain adequate funds for continued loan growth at an acceptable cost could adversely affect our assets growth and liquidity position and, therefore, our earnings capability. In addition to core deposit growth, maturity of investment securities and loan and lease payments, we rely upon alternative funding sources including unsecured borrowing lines with correspondent banks, secured borrowing lines with the Federal Reserve Bank of San Francisco as well as the Federal Home Loan Bank of San Francisco, and public time certificates of deposits. Our ability to access these sources could be impaired by deterioration in our financial condition as well as factors that are not specific to us, such as a disruption in the financial markets or negative views and expectations for the financial services industry or serious dislocation in the general credit markets. In the event such disruptions should occur, our ability to access these sources could be adversely affected, both as to price and availability, which would limit or potentially raise the cost of the funds available to us.
 
In the future we may be required to recognize impairment with respect to investment securities, including the FHLB stock we hold.
 
Our securities portfolio contains government sponsored agency mortgage-backed securities and currently includes securities with unrecognized losses. We may continue to observe declines in the fair market value of these securities. We evaluate the securities portfolio for any other than temporary impairment each reporting period, as required by generally accepted accounting principles, and as of September 30, 2010, we did not recognize any securities as other than temporarily impaired. There can be no assurance, however, that future evaluations of the securities portfolio will not require us to recognize an impairment charge with respect to these and other holdings. In addition, as a condition of membership in the Federal Home Loan Bank of San Francisco (the “FHLB”), we are required to purchase and hold a certain amount of FHLB stock. Our stock purchase requirement is based, in part, upon the outstanding principal balance of advances from the FHLB. At September 30, 2010, we held stock in the FHLB totaling $2,764,000. The FHLB stock held by us is carried at cost and is subject to recoverability testing under the applicable accounting standards. Periodically, the FHLB has discontinued or suspended distribution of dividends on its shares. There can be no assurances the FHLB will not discontinue or suspend dividends in the future. As of September 30, 2010, we did not recognize an impairment charge related to our FHLB stock holdings. There can be no assurances that future negative changes to the financial condition of the FHLB may not require us to recognize an impairment charge with respect to such holdings.
 
The effects of severe weather, natural disasters, acts of war or terrorism and other external events beyond our control may adversely affect our results of operations.
 
Severe weather, natural disasters, acts of war or terrorism and other adverse external events could have a significant impact on our ability to conduct business. Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue and/or cause us to incur additional expenses. For example, Northern California is subject to earthquakes. Many of our borrowers could suffer uninsured property damage, experience interruption of their business or lose their jobs after a major disaster. Those borrowers might not be able to repay their loans, and the collateral for loans could decline significantly in value. Operations in our market could be disrupted by both the evacuation of large portions of the population as well as damage and/or lack of access to our banking and operation facilities. Although management has established disaster recovery policies and procedures, the occurrence of any such event could have a material adverse effect on our business, which, in turn, could have a material adverse effect on our financial condition and results of operations.
 
 
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We may raise additional capital, which could have a dilutive effect on the existing holders of our common stock and adversely affect the market price of our common stock.
 
We are not restricted from issuing additional shares of common stock or securities that are convertible into or exchangeable for, or that represent the right to receive, common stock. We frequently evaluate opportunities to access the capital markets taking into account our regulatory capital ratios, financial condition and other relevant considerations, and subject to market conditions, we may take further capital actions in addition to issuance of the shares offered by this prospectus. Such actions could include, among other things, the issuance of additional shares of common stock in public or private transactions in order to further increase our capital levels above the requirements for a well-capitalized institution established by the bank regulatory agencies.

The issuance of any additional shares of common stock or securities convertible into or exchangeable for common stock or that represent the right to receive common stock, or the exercise of such securities, including, without limitation, securities issued upon exercise of outstanding stock options under our stock options plans, could be substantially dilutive to shareholders of our common stock, including purchasers of common stock in this offering. Holders of our shares of common stock have no preemptive rights that entitle holders to purchase their pro rata share of any offering of the shares of any class or series and, therefore, such sales or offerings could result in increased dilution to our shareholders. The market price of our common stock could decline as a result of sales of shares of our common stock made after this offering or the perceptions that such sales could occur.
 
Future acquisitions and expansion may disrupt our business and adversely affect our operating results.
 
We regularly evaluate potential acquisitions and expansion opportunities. To the extent that we grow through acquisitions, we cannot ensure we will be able to adequately or profitability manage this growth. Acquiring other banks, branches or other assets, as well as other expansion activities, involve various risks including the risks of incorrectly assessing the credit quality of acquired assets, encountering greater than expected costs of incorporating acquired banks or branches into the Bank, executing cost savings measures, and being unable to profitably deploy funds in an acquisition.
 
We have incurred greater than normal legal and consulting expenses in 2010 and may continue to incur greater than normal legal and consulting expenses in 2011 and beyond.
 
We have incurred greater than normal legal and consulting expenses in 2010 and we expect these expenses to continue to run at a high level in 2011 and beyond as we evaluate expansion and acquisition opportunities.  These expenses will be incurred even if we are not successful in implementing our plans for expansion and/or acquisition, which will impact our profitability and results of operations.
 
The price of our common stock may fluctuate significantly, and this may make it difficult for you to resell shares of common stock owned by you at times or at prices you find attractive.
 
The stock markets and, in particular, the market for financial institutions stock, have experienced significant volatility, which, in recent quarters, has reached unprecedented levels. In some cases, the markets have produced downward pressure on stock prices for certain issuers without regard to those issuers’ underlying financial strength. As a result, the trading volume in our common stock may fluctuate and cause significant price variations to occur. This may make it difficult for you to resell shares of common stock owned by you at times or at prices you find attractive. Moreover, even if our application to list our common stock on Nasdaq is approved, no assurances can be given that a liquid market for our common stock will develop.
 
The trading price of the shares of our common stock will depend on many factors, which may change from time to time and which may be beyond our control, including, without limitation, our financial condition, performance, creditworthiness and prospects, future sales or offerings of our equity or equity related securities, and other factors identified above under “CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS” and below. These broad market fluctuations may have an adverse effect on our stock price in the future. Among the factors that would affect our stock price are:
 
 
actual or anticipated quarterly fluctuations in our operating results and financial condition;
 
changes in financial estimated or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to our common stock or those of other financial institutions;
 
failure to meet analysts’ revenue or earnings estimates;
 
speculation in the press or investment community generally or relating to our reputation, our market area, our competitors or the financial services industry in general;
 
 
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strategic actions by us or our competitors, such as acquisitions, restructurings, dispositions or financings;
 
actions by our current shareholders, including sales of common stock by existing shareholders and/or directors or executive officers;
 
fluctuations in the stock price and operating results of our competitors;
 
future sales of our equity, equity-related or debt securities;
 
changes in the frequency or the amount of dividends or share repurchases;
 
proposed or adopted regulatory changes or developments;
 
anticipated or pending investigations, proceedings, or litigation that involves or affects us;
 
trading activities in our common stock, including short-selling;
 
domestic and international economic factors unrelated to our performance; and
 
general market conditions and, in particular, developments related to market conditions for the financial services industry.

Interest rates and other conditions impact our results of operations.
 
Our profitability also depends on the difference between the rates of interest we earn on our loans and investments, and the interest rates we pay on deposits and other borrowings. Like other financial institutions, our net interest income is affected by general economic conditions and other uncontrollable factors, like the fiscal and monetary policies of the Federal Reserve Board which influence market interest rates. In response to a slowing economy and recession concerns, the Federal Reserve Board, through its Federal Open Market Committee, has cut the target federal funds rate significantly. The inability to immediately re-price deposits in response to a declining interest rate market negatively affects our net interest income. We cannot assure you that any positive trends or developments discussed in this prospectus will continue, or that we will not experience negative trends or developments in the future.
 
Asset/liability management policies may not be successfully implemented and from time to time our risk position is not balanced. An unanticipated rapid decrease or increase in interest rates could have an adverse effect on the spreads between the interest rates earned on assets and the rates of interest paid on liabilities, and therefore on the level of net interest income. For instance, any rapid increase in interest rates in the future could result in interest expense increasing faster than interest income because of fixed rate loans and longer-term investments. Further, substantially higher interest rates generally reduce loan demand and may result in slower loan growth than previously experienced. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” herein.
 
Our success depends heavily on our management.

All decisions with respect to the management of the Company and the Bank are made by our officers and directors. The officers and directors of the Company and the Bank exert substantial influence over corporate and business decision-making. The loss of the services of a key employee, or the failure to attract and retain other qualified persons, could have a material adverse affect on our business, financial condition and result of operations. We are heavily dependent on our executive officers and other key employees. We believe that our success will depend in large part on our ability to retain and attract qualified management personnel. Competition for qualified personnel in the banking industry is intense, and there can be no assurance that the personnel the Bank or the Company needs will be available in the future or that the Company will be able to hire and retain such personnel at affordable compensation levels. The death, incapacity or unavailability to the Company and/or the Bank of the members of senior management may have a material adverse effect on the business of the Company and the Bank.

Some of the limited partners of our controlling shareholder are attempting to effectuate a management change to implement their own business plan and, if successful, this offering will be terminated.

Approximately 98.86% of our outstanding common stock is currently owned by Shoreline Capital Partners, L.P., a California limited partnership, or SCP, headquartered in Mill Valley, California.  The limited partnership is controlled by its general partner, Cole Financial Ventures, Inc. or CFV, which controls the election of the Company’s directors who, in turn, control the selection of the officers and the management of the Company and the Bank.  Kit M. Cole (our Chairman and Chief Executive Officer) and Kimberly Kaselionis (a member of our Board of Directors and Chairman and Chief Executive Officer of the Bank) own 61.5% and 12.5%, respectively, of CFV.  Frank Doodha, a director on the Board of Directors of the Company and the Bank, has been a limited partner of SCP since 1996.
 
At a meeting of the limited partners of SCP held on November 18, 2010, a super-majority in interest of the limited partners of SCP voted to begin the process of removing CFV as the general partner of SCP.  However, the vote of the limited partners may not have been in technical compliance with the terms of the SCP partnership agreement which appears to require, among other conditions, the approval of a successor general partner at the same time the removal of the current general partner is approved, and at least one limited partner claims to have not received notice of that meeting.  The failure of the limited partners to identify and approve a successor general partner at the time they voted to approve the removal of CFV as the general partner of SCP and the claimed failure to notify all limited partners raise some doubt as to the validity of their vote approving the removal of CFV as general partner.  Thereafter, a super-majority in interest of the limited partners of SCP identified a successor general partner, Ms. Simone Lagomarsino, formerly Chief Executive Officer of Kinecta Federal Credit Union, and filed with the DFI and FDIC in late December 2010 for the change in general partner, for the new general partner to replace Ms. Cole as the Company’s Chief Executive Officer and to implement their own business plan.  Subsequent to that filing, several parties filed protests to the DFI and FDIC applications.  Under federal law, the FDIC has up to 60 days to evaluate the protests and process the application, but may extend the processing for up to a total of 6 months.
 
Although no assurances can be given as to whether or when the SCP partnership will effectuate the change in its general partner, CFV will remain as the general partner until a successor general partner has been properly selected and has received all requisite regulatory approvals.  As the general partner, CFV has the exclusive discretion to manage and control the business of SCP and has the full authority to bind SCP.  If a new general partner is installed prior to the successful conclusion of this offering, the current Board of Directors has determined that it will terminate this offering and return all subscriptions to investors.  Upon the successful conclusion of this offering, even at the minimum level, SCP’s ownership interest will be substantially diluted.  If SCP does not participate as a selling shareholder, SCP’s ownership interest will be diluted to between 37.21% and 28.35%, depending on the minimum and maximum offering, respectively.  However, if SCP participates fully in this offering and sells a maximum of 568,270 shares, SCP’s ownership interest will be diluted to between 22.86% and 16.51%, depending on the minimum and maximum offering, respectively.   Therefore, based on cumulative voting principles, if this offering is successfully concluded, SCP would only be able to elect a minority of the Company’s directors if it were able to elect any at all.
 
The SCP partnership agreement gives a majority in interest of the limited partners the right to cause any affiliates of the general partner to terminate their contracts with the Company or the Bank 60 days after notice is given of the vote.  On December 20, 2010, a majority in interest of the limited partners of SCP voted to cause the termination of Ms. Cole’s employment agreement with the Company.  At least one limited partner claims to have not received notice of that meeting raising a question as to the validity of the action taken. On January 30, 2011, the Board of Directors entered into a new employment agreement with Ms. Cole and has indicated its intent to reinstate Ms. Cole’s employment agreement at the end of the 60-day period, if the termination is otherwise deemed valid, and to continue to do so repeatedly, should the limited partners take similar action in the future.  In furtherance of their effort to implement their own business plan, legal counsel for a majority in interest of the limited partners has urged the Company’s directors to delay this offering.  Given the need for additional capital for Circle Bancorp and Circle Bank, the ability to raise the capital on a timely basis and the need for liquidity for its shareholders, the Board of Directors and management have elected to pursue this offering.
 
Finally, the SCP partnership agreement will expire on December 31, 2011, if not terminated earlier, at which time the shares held by SCP will be sold and the net proceeds distributed to its partners in proportion to their partnership interests unless the SCP partnership agreement is amended to permit the distribution of the shares of the Company’s common stock held by SCP to its partners. Although the general partner has indicated that it intends to seek such an amendment, no assurances can be provided that the amendment will be duly approved.  The partnership agreement of SCP is filed as Exhibit 99.1 and the first amendment to the partnership agreement of SCP is filed as Exhibit 99.2 to the registration statement of which this prospectus is a part.
 
Our future growth may be hindered if we do not raise additional capital.

The Bank is required to meet capital adequacy guidelines and maintain its capital at specified percentages of its assets. Failure to meet these guidelines limits our ability to grow and could result in banking regulators requiring us to increase our capital or reduce our loans and other earning assets. Therefore, in order for us to continue to increase our earning assets and net income, we may be required, from time to time, to raise additional capital. We cannot assure you that additional sources of capital will be available or, if they are, that the additional capital will be available on reasonable terms.
 
 
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Tier 1 capital is an important component of the capital adequacy guidelines established by regulatory authorities. The proceeds of this offering when down-streamed to the Bank will qualify as Tier 1 capital for the Bank. While the Company is not currently a registered bank holding company under the Bank Holding Company Act, should the Company become a bank holding company, the proceeds from this offering will qualify as Tier 1 capital for the Company. See “Capitalization,” “Regulatory Capital Ratios” and “Supervision and Regulation - Regulatory Capital Guidelines” herein.
 
We have a continuing need to adapt to technological changes.
 
The banking industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services. The Bank’s future success partially depends upon management’s ability to successfully use technology to provide products and services that will satisfy our customers’ demands for convenience, as well as to create additional operating efficiencies. Larger competitors already have existing technological infrastructures or substantially greater resources to invest in technological improvements. We cannot assure you that we will be able to effectively implement new technology-driven products and services as they develop or be successful in marketing those products and services to our current and prospective customers.

The Company’s growth strategy involves risks that may adversely impact net income.
 
We have pursued and continue to pursue a growth strategy which depends primarily on generating an increasing level of loans and deposits, at acceptable risk levels, through a limited number of branches. Consequently, we may not be able to sustain our planned growth without establishing new branches or products. Therefore, we may expand into new markets or make strategic acquisitions of other financial institutions. This expansion may require significant investments in equipment, technology, personnel and site locations. We expect that implementing this growth strategy will increase our non-interest expenses, and it is possible that non-interest expenses will increase faster that revenue, resulting in a reduction in net income.
 
Competition.
 
The banking business in California is highly competitive with respect to virtually all products and services. We market our services primarily to small- to medium-sized businesses, professionals and residents in and around the San Francisco Bay Area. The Bank faces significant competition in attracting deposits and making loans in our target market. With respect to bank competitors, major banks dominate the industry. The major banks, because of their greater total capitalization, have higher lending limits than the Bank and a more extensive ATM network available to consumers and business owners proving greater banking convenience. In addition to commercial banks, we compete with savings institutions, credit unions and numerous non-banking companies that offer money market and mutual funds, wholesale finance, credit card and other consumer finance services, including online banking services and personal finance software. Mergers between financial institutions, changes in interstate banking laws and recently enacted federal financial modernization legislation, and technological innovation have also resulted (and are expected to result further) in increased competition in financial services markets. No assurance can be given that management’s efforts to compete with these other financial institutions will be successful.
 
Legislative and regulatory initiatives to address difficult market and economic conditions may not stabilize the U.S. banking system.
 
The Emergency Economic Stabilization Act (“EESA”), the Financial Stability Plan (“FSP”), the American Recovery and Reinvestment Act (“ARRA”) and the Homeowner Affordability and Stabilization Plan (“HASP”), and the numerous actions by the Board of Governors of the Federal Reserve System, the Treasury, the FDIC, the SEC and others are intended to address the liquidity and credit crisis, and to stabilize the U.S. banking, financial securities and housing markets. These measures include homeowner relief that encourage loan restructuring and modification; the establishment of significant liquidity and credit facilities for financial institutions and investment banks; the lowering of the federal funds rate; emergency action against short selling practices; a temporary guaranty program for money market funds; the establishment of a commercial paper funding facility to provide “back-stop” liquidity to commercial paper issuers; and coordinated international efforts to address illiquidity and other weaknesses in the banking sector. The EESA and the other regulatory initiatives described above may not have their desired effects. If the volatility in the markets continues and economic conditions fail to improve or worsen, our business, financial condition and results of operations could be materially and adversely affected.
 
Current levels of market volatility may impact our ability to raise capital .
 
The capital and credit markets have been experiencing volatility and disruption for more than a year. In recent months, the volatility and disruption has reached unprecedented levels. The markets have produced downward pressure on stock prices and credit availability for certain issuers without regard to those issuers’ underlying financial strength. If current levels of market disruption and volatility continue or worsen, there can be no assurance that we will not experience an adverse effect, which may be material, on our ability to access capital and on our business, financial condition and results of operations.
 
 
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Regulatory Risks
 
We operate in a highly regulated industry and government regulations significantly affect our business.
 
The banking industry is extensively regulated with regulations intended primarily to protect depositors, consumers and the Deposit Insurance Fund of the FDIC and not shareholders. The Bank is subject to regulation and supervision by the DFI and FDIC. Upon approval to become a bank holding company, Circle Bancorp will be subject to regulation and supervision by the Board of Governors of the Federal Reserve System, or Federal Reserve Board (“FRB”). Regulatory requirements affect our lending practices, capital structure, investment practices, asset allocations, operating practices, growth and dividend policy.

The bank regulatory agencies have broad authority to prevent or remedy unsafe or unsound practices or violations of law. Recently, regulators have intensified their focus on the USA PATRIOT Act’s anti-money laundering and Bank Secrecy Act compliance requirements resulting in an increased burden to us. There is also increased scrutiny of our compliance with the rules enforced by the Office of Foreign Assets Control (OFAC). We are also subject to regulatory capital requirements, and a failure to meet minimum capital requirements or to comply with other regulations could result in actions by regulators that could adversely affect our business. In addition, changes in law, regulations and regulatory practices affecting the banking industry may limit the manner in which we may conduct our business.
 
Recently enacted legislative reforms and future regulatory reforms required by such legislation could have a significant impact on our business, financial condition and results of operations.
 
On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) into law. The Dodd-Frank Act will have a broad impact on the financial services industry, including significant regulatory and compliance changes. Many of the requirements called for in the Dodd-Frank Act will be implemented over time and most will be subject to implementing regulations over the course of several years. Given the uncertainty associated with the manner in which the provisions of the Dodd-Frank Act will be implemented by the various regulatory agencies, the full extent of the impact such requirements will have on our operations is unclear. Certain provisions of the Dodd-Frank Act are expected to have a near term impact on us. For example, the Dodd-Frank Act:
 
 
eliminates, effective one year after the date of enactment, the federal prohibitions on paying interest on demand deposits, thus allowing businesses to have interest-bearing checking accounts. Depending on competitive responses, this significant change to existing law could have an adverse impact on our interest expense;
     
 
broadens the base for FDIC insurance assessments. Assessments will now be based on the average consolidated total assets less tangible equity capital of a financial institution;
     
 
permanently increases the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor, retroactive to January 1, 2008, and noninterest-bearing transaction accounts have unlimited deposit insurance through December 31, 2013;
     
 
requires publicly traded companies to give shareholders a non-binding vote on executive compensation and so-called “golden parachute” payments in certain circumstances;
     
 
authorizes the SEC to promulgate rules that would allow stockholders to nominate their own candidates using a company’s proxy materials, and the SEC has recently promulgated such rules;
     
 
directs the Federal Reserve Board to promulgate rules prohibiting excessive compensation paid to bank holding company executives; and
     
 
creates a new Consumer Financial Protection Bureau with broad powers to supervise and enforce consumer protection laws. The Consumer Financial Protection Bureau has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. The Consumer Financial Protection Bureau has examination and enforcement authority over all banks and savings institutions with more than $10 billion in assets. Institutions with $10 billion or less in assets, such as the Bank, will continued to be examined for compliance with the consumer laws by their primary bank regulators.
 
 
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In addition, we anticipate that the potential impact of the Dodd-Frank Act on our operations and activities, both currently and prospectively, may include, among others:
 
 
a reduction in our ability to generate or originate revenue-producing assets as a result of compliance with heightened capital standards;
     
 
an increase the cost of operations due to greater regulatory oversight, supervision and examination of banks and bank holding companies, and higher deposit insurance premiums;
     
 
a limitation on our ability to raise capital through the use of trust preferred securities as these securities may no longer be included as Tier 1 capital going forward; and
     
 
a limitation on our ability to expand consumer product and service offerings due to anticipated stricter consumer protection laws and regulations.
 
Further, we may be required to invest significant management attention and resources to evaluate and make any changes necessary to comply with new statutory and regulatory requirements under the Dodd-Frank Act. Failure to comply with the new requirements may negatively impact results of operations and financial condition. While it is difficult to predict at this time what specific impact the Dodd-Frank Act and the yet to be written implementing rules and regulations will have on us, we expect that at a minimum our operating and compliance costs and interest expense will increase.
 
FDIC deposit insurance premiums have increased substantially and may increase further, which will adversely affect our results of operations
 
Our FDIC insurance expense for the years ended December 31, 2009, 2008 and 2007 amounted to $371,000, $101,000 and $29,000, respectively. Our FDIC insurance expense for the nine months ended September 30, 2010 was $254,000 as compared to $239,000 in the first nine months of 2009. The expense for the 2009 period included a $102,000 special assessment imposed in June 2009. We expect deposit insurance premiums will continue to increase for all banks, including the possibility of additional special assessments, due to recent strains on the FDIC deposit insurance fund resulting from the cost of recent bank failures and an increase in the number of banks likely to fail over the next few years. Our current level of FDIC insurance expense as well as any further increases thereto will continue to adversely affect our operating results.
 
Under the Federal Deposit Insurance Act, the FDIC, absent extraordinary circumstances, must establish and implement a plan to restore the deposit insurance reserve ratio to 1.15% of insured deposits at any time that the reserve ratio falls below 1.15%. Recent bank failures coupled with deteriorating economic conditions have significantly reduced the deposit insurance fund’s reserve ratio. The FDIC expects insured institution failures to peak in 2010 which will result in continued charges against the Deposit Insurance Fund, and they have implemented a restoration plan that changes both its risk-based assessment system and its base assessment rates. As part of this plan, the FDIC imposed a special assessment in 2009. The recently enacted Dodd-Frank Act provides for a new minimum reserve ratio of not less than 1.35% of estimated insured deposits and requires that the FDIC take steps necessary to attain this 1.35% ratio by September 30, 2010; however, the Dodd-Frank Act exempts institutions with assets of less than $10 billion, like the Bank, from the cost of this increase. See “SUPERVISION AND REGULATION – Recent Regulatory Developments.” It is generally expected that assessment rates will continue to increase in the near term due to the significant cost of bank failures, the relatively large number of troubled banks, and the requirement that the FDIC increase the reserve ratio. Any increase in assessments will adversely impact our future earnings.
 
We rely on the dividends we receive from the Bank.
 
The Company is a separate and distinct legal entity from the Bank, and a substantial portion of the revenues it receives consists of dividends from the Bank. The Company has raised working capital in the past through the sale of preferred stock and has down streamed the resulting proceeds from such transactions to the Bank as capital investments.
 
Various federal and state laws and regulations limit the amount of dividends that a bank may pay to its parent company. In addition, the Company’s right to participate in a distribution of assets upon the liquidation or reorganization of a subsidiary may be subject to the prior claims of the subsidiary’s creditors. If the Bank is unable to pay dividends to the Company for any reason, in turn the Company may not be able to service its debt, pay its other obligations, or pay dividends on its common and preferred stock, which could have a material adverse effect on our business and your investment in our common stock being offered pursuant to this prospectus.

 
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Charter conversion.
 
On February 19, 2009, the Bank received approval from the DFI to convert from a California state chartered industrial bank to a California state chartered commercial bank. The Bank will consummate its conversion to a commercial bank immediately after Circle Bancorp receives regulatory approval to become a registered bank holding company under the Bank Holding Company Act of 1956, as amended; however, no assurances can be given that all required regulatory approvals will be obtained. The inability of the Bank to obtain a commercial bank charter could negatively affect its ability to attract deposits, particularly lower cost deposits; and to establish additional branches.

Accounting, Systems and Internal Control Risks
 
Changes in accounting standards may affect our performance.
 
Our accounting policies and procedures are fundamental to how we record and report our financial condition and results of operations. From time to time, there are changes in the financial accounting and reporting standards that govern the preparation of financial statements in accordance with GAAP. These changes can be difficult to predict and can materially impact how we record and report our financial condition and statements of operations. The Financial Accounting Standards Board (FASB) has and continues to issue a large number of accounting standards that necessarily require all companies to exercise significant judgment and interpretation in their application of those standards. For example, banks now need to use “significant” judgment when assessing the estimated fair value of the assets and liabilities sitting on their balance sheets even though market values can change rapidly day to day and or may not be representative due to the inactivity of certain markets. These judgments and estimates could lead to inaccuracy and/or incomparability of financial statements in the banking industry. Future changes in financial accounting and reporting standards could require us to apply a new or revised standard retroactively, which could result in a material adverse effect on our financial condition or could even require us to restate prior period financial statements.
 
Failure to maintain an effective system of internal control over financial reporting may not allow us to be able to accurately report our financial results or prevent fraud.
 
We regularly review and update our internal control over financial reporting, disclosure controls and procedures, and corporate governance policies and procedures. We maintain controls and procedures to mitigate against risks such as processing system failures and errors, and customer or employee fraud, and maintains insurance coverage for certain of these risks. Any system of controls and procedures, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Events could occur which are not prevented or detected by our internal controls or are not insured against or are in excess of our insurance limits. Any failure or circumvention of our controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on our business, results of operations and financial condition.
 
A breach of information security could negatively affect our business.
 
We depend upon data processing, communication and information exchange on a variety of computing platforms and networks, including over the internet. Communications and information systems are essential to the conduct of our business, as we use such systems to manage our customer relationships, general ledger, deposits, and loans.
 
We cannot be certain that all of our systems are entirely free from vulnerability to attack, despite safeguards we have instituted. We also rely on the services of a variety of vendors to meet our data processing and communication needs. If information security is breached, information can be lost or misappropriated and could result in financial loss or costs to us or damages to others. These costs or losses could materially exceed the amount of insurance coverage, if any, which would adversely affect our earnings. Our ability to meet the needs of our customers competitively, and in a cost-efficient manner, is dependent on our ability to keep pace with technological advances and to invest in new technology as it becomes available. Many of our competitors have greater resources to invest in technology than we do and may be better equipped to market new technology-driven products and services. The ability to keep pace with technological change is important, and the failure to do so on our part could also have a material adverse impact on our business and therefore on our financial condition and results of operations.
 
Risks Relating to this Offering and the Common Stock
 
Our ability to pay dividends is limited.
 
While historically we have paid cash dividends on our common stock on a regular basis,  other than the dividend recently declared by our Board on the 1,149,640 shares of our common stock of record as of January 31, 2011 in the aggregate amount of approximately $367,885 and  the dividend our Board has indicated it intends to declare on the shares of our common stock outstanding just prior to the close of the offering, we do not intend to continue to pay cash dividends on our common stock at this time. We first issued our preferred stock in 2009 and have only begun paying cash dividends on the preferred stock in the 4th quarter of that year. Although we have retained earnings of $8.5 million as of September 30, 2010, we depend on dividends from the Bank in order to pay dividends on our preferred stock and common stock, and we are obligated to pay dividends on our preferred stock before declaring and paying dividends on our common stock. See “Trading History and Dividends – Dividend History” herein. No assurances can be given that the results of the Company’s future operations will permit the declaration of any cash dividends or that even if it does, the Board of Directors of the Company will determine to declare and pay such cash dividends. See “Description of Capital Stock – Common Stock – Dividend Rights” and “Supervision and Regulation - Dividends and Capital Distributions” herein.
 
 
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Because of the structure of the minimum/maximum offering which requires the offering to raise at least $20,002,500 in gross proceeds to consummate a closing, during the offering period investor funds will be placed in an escrow account and investors will not have use of their funds during this period.
 
The Company and the selling shareholder are offering the shares of common stock on a minimum-maximum basis. Based on the minimum/maximum structure of this offering, no commitment by anyone exists to purchase all or any part of the shares offered hereby. Consequently, there is no assurance that the shares being offered by us or by the selling shareholder  will be sold, and investors’ funds may be escrowed until as late as March 15, 2011, or, if the offering termination date is extended in the discretion of our Board, May 31, 2011, and then returned without interest if by then an aggregate of at least $20,002,500 of gross proceeds are not received in the escrow account. During the period while investors’ funds are held in the escrow account investors will not have use of the funds and will not definitively know whether the offering will close.
 
The Company and the selling shareholder are selling the common stock on a “best efforts” basis and there is no commitment.
 
This offering is being conducted on a “best-efforts” basis by our directors , and executive officers . We  may also engage other brokers and/or dealers to assist us in the offering of our shares of common stock. There are no commitments to purchase any of the shares and, therefore, there is no assurance that we will be able to sell any or all of our common stock offered hereby. The Company can sell any number of shares of the common stock in this offering, assuming we achieve the minimum. If the maximum number of shares of our common stock being offered for sale in this offering is not received, the Bank’s capital will not increase as much as we expect, the maximum loan amounts will not rise as much as anticipated, and we may not be able to finance the planned growth of the Company and the Bank.
 
No public market currently exists for our common stock.
 
The Company intends to apply for listing on the Nasdaq Capital Markets as soon as practicable following the close of the offering. However, there is currently no public market for the common stock and no assurance can be given that a market will develop. If such a market were to exist, the shares of common stock could trade at prices that may be higher or lower than the offering price. Accordingly, investors should consider an investment in our common stock to be illiquid relative to securities of other companies.
 
The price of our common stock has not been determined by reference to a public market.
 
The offering price for our common stock was determined by the Board of Directors with input from the investment banking community based on internal analysis of the Company’s financial condition, operating results, projected results of operations, per share book value of the existing common stock and other factors. See “Determination of Offering Price” herein. The Company has not retained an investment banking firm to assist in determining the offering price and has not obtained a fairness opinion regarding the offering price. No assurance can be given that the offering price for the common stock is fair or that the market value of the common stock will not fluctuate in the future.
 
A significant amount of our voting common stock is controlled by one entity.
 
Shoreline Capital Partners, L.P. , or SCP, currently owns approximately 98.86% of our common stock outstanding. If SCP participates fully in this offering and sells a maximum of 568,270 shares, it is anticipated that SCP’s ownership interest will be diluted to between 22.86% and 16.51%, depending on the minimum and maximum offering, respectively. If SCP does not participate in the offering at all, it is anticipated that SCP’s ownership interest will be diluted to between 37.21% and 28.35%, depending on the minimum and maximum offering, respectively.  The objectives of SCP may differ from yours. As a result, SCP may cause the defeat of a proposal you support, or cause the passage of a proposal you oppose. However, because of the dilution of its ownership as a result of this offering, SCP will not have the power to substantially control any matter presented to shareholders for a vote, including with respect to the election of directors or other material transactions, such as a potential acquisition of, or take-over proposal made by, another company. See “Principal and Selling Shareholders” herein.
 
The general partner of SCP is Cole Financial Ventures, Inc., a California corporation (“CFV”). 61.50% of the outstanding common stock of CFV is owned or held by Kit M. Cole, the Chairman and Chief Executive Officer of the Company, and 12.5% of the outstanding common stock of CFV is owned by Kimberly Kaselionis, the Chairman and Chief Executive Officer of the Bank. Ms. Kaselionis is also Ms. Cole’s daughter. Frank Doodha, a member of the Board of Directors of the Company and the Bank, has been a limited partner of SCP since 1996.
 
A significant number of shares of our common stock are anticipated to be offered for sale by our principal shareholder.
 
The partnership agreement of SCP will expire on December 31, 2011, if not terminated earlier, at which time the shares held by SCP will be offered for sale and the net proceeds distributed to its partners in proportion to their partnership interests. Although the SCP partnership agreement allows for the partners to amend that requirement and allows the general partner to defer the sale and distribution, no assurances can be given that SCP will exercise either of these options.   Further, although the general partner has indicated that it intends to seek an amendment to the partnership agreement to permit the distribution of shares of common stock held by it to its partners, no assurances can be provided such an amendment would be duly approved.
 
 
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The Company can issue additional securities without your approval which may affect your ownership interest and benefits as owners of our common stock.
 
Our Articles of Incorporation, as amended, authorize us to issue up to 10,000,000 shares of common stock. Following the offering and assuming the maximum number of shares of the common stock offered hereby are sold, we will be able to issue up to 6,410,152 additional shares of our common stock if the selling shareholder fully participates or up to 5,841,881 additional shares of our common stock if the selling shareholder does not participate at all in the offering, exclusive of shares reserved for issuance pursuant to outstanding options and warrants and shares reserved for issuance pursuant to the Company’s stock option plans. This could have a negative effect on the value and liquidity of the common stock and the ability to receive dividends thereon.
 
We have broad discretion to use the proceeds of this offering.
 
We expect to use a significant portion of the net proceeds from this offering for the down streaming of working capital to the Bank. See “Use of Proceeds” herein. Accordingly, we will have broad discretion as to the application of such proceeds. You will not have an opportunity to evaluate the economic, financial or other information on which we base our decisions on how to use the net proceeds from this offering. Our failure to use these funds effectively could have a material adverse effect on our financial condition and results of operations.
 
The shares of common stock being offered are not FDIC insured bank deposits and are subject to market risk.
 
The shares of common stock are not deposits, savings accounts or other obligations of the Bank or any other depository institution, are not guaranteed by us or any other entity, and are not insured by the FDIC or any other governmental agency. The common stock offered may lose part or all of their value.
 
We have made only limited covenants in the common stock, which may not protect your investment in the event we experience significant adverse changes in our financial condition or results of operations.
 
The terms of the common stock do not require us to maintain any financial ratios or specified levels of net worth, revenues, income, cash flow or liquidity, and therefore does not protect holders of the common stock in the event we experience significant adverse changes in our financial condition or results of operations. The terms of the common stock do not prevent us or the Bank from borrowing money, issuing securities, or otherwise incurring future indebtedness that has rights to payment that are expressly or effectively senior to, or equal with, the rights of payment of the holders of the common stock.


We are hereby offering a minimum of 1,905,000 and a maximum of 2,860,000 shares of our common stock at a price of $10.50 per share. You must purchase a minimum of 500 shares or $5,250; however, we reserve the right to sell less than the minimum subscription to any investor, in our sole discretion. This offering will be conducted on a best-efforts basis through our directors , and  executive officers .  We may also engage brokers and/or dealers during the pendency of this offering to  serve as placement agents to assist us in the offer and sale of the shares.  Other than Ms. Kit Cole, who, pursuant to the terms of her employment agreement with the Company, will be entitled to receive a bonus of $250,000 upon the closing of this offering , our other directors and executive officers will not receive any commissions or compensation for their selling efforts other than reimbursement for reasonable out-of-pocket expenses they incur in connection with their selling efforts. We do not anticipate that these expenses will be significant.  Please refer to the section entitled “EXECUTIVE COMPENSATION - Employment Arrangements for Kit M. Cole,” herein for more information.

We may engage brokers and/or dealers to serve as placement agents to assist us in the offer of the shares of our common stock. The placement agents will not purchase the securities offered by us , and will not be required to sell any specific number or dollar amount of shares, but will assist us in this offering on a “best efforts” basis.   Although we currently have no agreements with brokers and/or dealers to serve as placement agents on our behalf, we nevertheless are prepared pay a lead placement agent a cash fee equal to 6% on the sale of up to 1,904,762 shares of common stock through its selling efforts and 1% on the sale of any shares sold in the offering other than through its selling efforts, except for up to 190,476 shares that may be sold through other brokers and/or dealers that we may engage to assist in connection with retail sales for which we are prepared to pay commissions of up to 8.0%.   Should we engage brokers and/or dealers as placement agents and compensate them as disclosed herein, we anticipate that the maximum commission payable in the minimum offering will be $1,240,150 in the aggregate and the maximum commission payable in the maximum offering will be $1,440,300 in the aggregate.   In addition, we estimate the total expenses of this offering, excluding anticipated placement agent fees, to be $369,986.   Each of the Company and the selling shareholder will bear their proportionate share of the placement agent fees , if any, and offering expenses based on the aggregate number of shares sold by each entity.
 
Any placement agent  that we engage may be deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act of 1933, as amended ( the “Securities Act”) and any commissions received by it and any profit realized on the sale of the securities by them while acting as principal might be deemed to be underwriting discounts or commissions under the Securities Act.  The placement agent would be required to comply with the requirements of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”) including, without limitation, Rule 10b-5 and Regulation M under the Exchange Act.  These rules and regulations may limit the timing of purchases and sales of shares of common stock by the placement agent.  Under these rules and regulations, the placement agent may not: (i) engage in any stabilization activity in connection with our securities; and (ii) bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities, other than as permitted under the Exchange Act, until they have completed their participation in the distribution.
 
We anticipate that any placement agent agreement that we enter into will provide that we will indemnify the placement agent against specified liabilities, including liabilities under the Securities Act. We have been advised that, in the opinion of the Securities and Exchange Commission, indemnification for liabilities under the Securities Act is against public policy as expressed in the Securities Act and is therefore unenforceable.
 
Funds received in connection with sales of shares offered hereby will be transmitted immediately into our escrow account until the minimum sales threshold is reached. There can be no assurance that all, or any, of the shares will be sold.
 
In order to comply with the applicable securities laws of certain states, the securities may not be offered or sold unless they have been registered or qualified for sale in such states or an exemption from such registration or qualification requirement is available and with which we have complied. The purchasers in this offering and in any subsequent trading market must be residents of such states where the shares have been registered or qualified for sale or an exemption from such registration or qualification requirement is available.
 
The proceeds from the sale of the shares in this offering will be payable to an escrow account maintained on our behalf by Pacific Coast Bankers’ Bank. Pacific Coast Bankers’ Bank is acting only as an escrow agent in connection with the offering and is not endorsing or recommending the purchase of any shares in the offering, has not passed on the accuracy or adequacy of this Prospectus, and is not guaranteeing any obligation of us to subscribers.
 
Once you subscribe for the shares you cannot revoke your subscription without our consent, which consent we may withhold in our sole and absolute discretion.
 
 
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All subscription agreements and checks should be delivered to Pacific Coast Bankers’ Bank.   Failure to do so will result in checks being returned to the investor, who submitted the check. All subscription funds will be held in the escrow account pending achievement of the minimum offering and no funds shall be released to us until such time as the minimum proceeds are raised. If the minimum offering is not achieved by March 15, 2011, or, if the offering termination date is extended in the discretion of our Board, May 31, 2011, all subscription funds will be returned to investors promptly without interest or deduction of fees. The fee of the escrow agent is $5,000 plus $15 for each subscription received in the offering.
 
Investors can purchase common stock in this offering by completing a subscription agreement (included herewith) and sending it together with payment in full to Pacific Coast Bankers’ Bank. Full payment of the subscription price for all shares of common stock subscribed for must accompany the subscription agreement and must be made payable in United States dollars by money order or check drawn on a bank or branch located in the United States and payable to “Pacific Coast Bankers’ Bank for Circle Bancorp Impound Account.”  Investors may also mail in their subscription agreement to Pacific Coast Bankers’ Bank and send payment of the subscription price by wire transfer of funds to an account maintained by Pacific Coast Bankers’ Bank for the Company in connection with this offering at:

Routing/Transit Number
 
121042484
Online Federal Reserve Bank
   
Abbreviated Name:
 
Pac Cst Bkers Bk SF
Credit To:
 
Pacific Coast Bankers’ Bank
   
Escrow Agent FBO
   
Circle Bancorp
Further Credit
 
Investor Name/Registration – Please Provide
Account Number
 
001004702

No third-party checks will be accepted.  Because uncertified personal checks may take at least five business days to clear, we recommend subscriber’s pay, or arrange for payment, by means of certified or cashier’s check.  A subscriber’s failure to pay the full subscription amount will entitle the Company to disregard such subscriber’s subscription for the common stock. A subscription for the common stock is not binding and will not become effective unless and until it is accepted by us.
 
When we complete the offering, we will notify subscribers whether their subscriptions have been accepted, either partially or fully, or rejected. The notification will take place no later than twenty (20) days after the offering closes. Notwithstanding the foregoing, we may elect to immediately accept subscriptions upon their receipt and notify subscribers of its acceptance prior to the closing of the offering. If we reject all or a portion of a requested subscription, we will refund the appropriate amount without interest to the subscriber. After we pay all refunds that are due, we and our directors and officers or any underwriters acting on our behalf will have no additional liability to the subscriber.
 
Certificates for the shares of our common stock subject to a subscription agreement that has been accepted will be issued by us or our transfer agent, as soon as practicable after completion of this offering.
 
 
We estimate, based upon an offering price of $10.50 per share and assuming the selling shareholder fully participates and offers all 568,270 shares , that we will receive net proceeds of approximately $12,905,839 if the minimum offering is sold and approximately $22,612,575 if the maximum offering is sold, after deducting estimated offering expenses, placement agent fees and after deducting the proceeds of the selling shareholder, net of the estimated offering expenses and placement agent fees borne by the selling shareholder.  The selling shareholders will receive net proceeds of approximately $5,486,524 if the minimum offering is sold and approximately $5,607,138 if the maximum offering is sold, after deducting its proportionate share of offering expenses and placement agent fees.  The net proceeds to the selling shareholder will be distributed among its partners, including approximately $200,000 to Cole Financial Ventures, Inc.   We will not receive any of the proceeds from the sale of shares of our common stock by the selling shareholder. All offering expenses and placement agent fees will be paid by us and the selling shareholder in proportion to the shares sold in the offering by each entity.
 
If the selling shareholder does not participate at all in this offering, all offering expenses and placement agent fees will be paid by us.  In this case, we estimate that we will receive net proceeds of approximately $18,392,364 if the minimum offering is sold and approximately $28,219,714 if the maximum offering is sold, after deducting estimated offering expenses and placement agent fees.
 
We plan to retain $ 2,000,000 , if the minimum amount is sold, and $ 3,000,000 , if the maximum amount is sold, of the net proceeds we receive from this offering at Circle Bancorp to augment its capital to support its current operating expenses, to pay interest on our junior subordinated debentures, dividends on preferred and common stock, and to provide a reserve of readily available funds. We plan to invest the remainder of the proceeds in Circle Bank in order to enhance its capital position, fund investments in loans and securities and provide additional capital for asset growth and acquisitions.  The remainder of the proceeds will be up to $10,905,839 or $16,392,364, depending on whether or not the selling shareholder participates in the offering, if we sell the minimum amount or up to $19,612,575 or $25,219,714, depending on whether or not the selling shareholder participates in the offering , if we sell the maximum amount.
 
In addition to providing a cushion of capital to protect the Bank, the additional capital will allow the Bank to increase its loan, deposit, and investment portfolios. The increased capital will also allow us to pursue a strategy of growing through increased and more focused loan and deposit generation efforts as we capitalize on the relatively weak financial position of many of our competitors. We anticipate pursuing opportunities to grow geographically beyond our current market area of Marin, Sonoma, and San Francisco Counties by acquiring other financial institutions, purchasing loan portfolios or branches from other financial institutions, and/or through de-novo branch activity. This additional capital will also allow us to diversify our loan and deposit portfolios and lessen concentrations in commercial real estate and certificates of deposit.
 
Although we continually evaluate possible acquisition targets as they are presented, there are no currently pending acquisition transactions and we have not determined any particular dollar amounts for expansion activities.   Although we plan to give priority to expansion opportunities along the U.S. Highway 101 corridor and the East Bay area which encompasses Alameda and Contra Costa Counties, we do not plan to limit our expansions activities to areas that are geographically contiguous to our current market area.
 
 
Prior to this offering there has been no established trading market for shares of our common stock. The price for the shares offered by this prospectus was determined by us after taking into consideration numerous factors. The principal factors considered in determining the offering price were :
 
 
the book value of the Company;
     
 
the history of and the prospects for the industry in which we compete;
     
 
our past and present operations;
     
 
our historical results of operations;
 
 
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our business potential and prospects for future earnings;
     
 
an assessment of our management;
     
 
the recent market prices of securities of generally comparable companies;
     
 
the general condition of the securities markets at the time of this offering; and
     
 
the receptivity by prospective buyers to the shares being offered at the offering price.
 
In determining the price, the book value of the Company was a significant factor. The other factors described above were not assigned any particular weight. Rather, these factors are considered as a totality when determining the price .
 
There can be no assurance that the price of the shares will correspond to the price at which our shares will trade in the market subsequent to this offering or that an active public market for shares of our common stock will develop and continue after this offering.
 
 
The following table shows our actual consolidated capitalization as of September 30, 2010 and our capitalization adjusted to give pro forma effect to the issuance and sale of shares of our common stock at an offering price of $10.50 per share, less expenses and placement agent fees associated with this offering and less the net proceeds due to the selling shareholder in the event the selling shareholder participates in the offering.  No assurances can be given as to any number of shares that will be sold or the number of shares, up to 568,270, the selling shareholder elects to sell, if any.
 
      September 30, 2010(1)  
         
Including Selling Shareholders(2)
   
Excluding Selling Shareholders(3)
 
         
After
    After     
After
    After   
         
Offering As
   
Offering
   
Offering As
   
Offering
 
         
Adjusted for
   
As Adjusted
   
Adjusted for
   
As Adjusted
 
         
Minimum
   
for Maximum
   
Minimum
   
for Maximum
 
   
Actual
   
Offering
   
Offering
   
Offering
   
Offering
 
   
(Dollars in thousands)
 
Shareholders’ Equity:
                             
Preferred stock, no par; 10,000,000 shares authorized; (liquidation preference $1,000 per share); 10,000 shares authorized, 3,520 shares issued and outstanding
  $ 3,390     $ 3,390     $ 3,390     $ 3,390     $ 3,390  
Common stock, no par value; 10,000,000 shares authorized; 1,149,640 shares issued and outstanding (actual); 2,486,370 shares issued and outstanding for Minimum Offering and 3,441,370 shares issued and outstanding for Maximum Offering with Selling Shareholders participating in the Offering; 3,054,640 shares issued and outstanding for Minimum Offerign and 4,009,640 shares issued and outstanding for Maxiumum Offering without Selling Shareholders participating in the Offering.
    3,589       16,495 (4)     26,202 (5)     21,981 (6)     31,809 (7)
Additional paid-in-capital
    46       46       46       46       46  
Retained earnings
    8,466       8,466       8,466       8,466       8,466  
Accumulated other comprehensive income
    21       21       21       21       21  
Total Shareholders’ Equity
  $ 15,512     $ 28,418     $ 38,125     $ 33,904     $ 43,732  
 

(1)
Does not reflect the dividend aggregating approximately $367,885 declared after September 30, 2010 and the dividend that the Board has indicated it will declare in an aggregate amount equal to the Company’s earnings from January 1, 2011 through the close of the offering.
(2)
Assumes the selling shareholder sells all 568,270 shares.
(3)
Assumes the selling shareholder elects not to sell any shares.
(4)
After deducting $1,166,680 for commissions and costs associated with this offering.
(5)
After deducting $1,450,590 for commissions and costs associated with this offering.
(6)
After deducting $1,610,134 for commissions and costs associated with this offering.
(7)
After deducting $1,810,286 for commissions and costs associated with this offering.
 

Circle Bancorp, as a holding company of an industrial bank, is not subject to federal consolidated regulatory capital ratio standards. However, the following table shows Circle Bancorp’s regulatory capital ratios, assuming the Bank’s charter conversion FRB approval for Circle Bancorp to become a registered bank holding company, and the treatment of the net proceeds of this offering as Tier 1 capital.

Two wholly-owned subsidiaries of the Company, New West Statutory Trust I (“Trust I”) and New West Statutory Trust II (“Trust II”) are statutory business trusts that were formed for the sole purpose of issuing trust preferred securities guaranteed by the Company. As of September 30, 2010, Trust I and Trust II had issued and outstanding 3,500 and 5,000 floating rate trust preferred securities (the “TRUPS”), respectively, for gross proceeds of $8,500,000. The liquidation preference is $1,000 per share. The dividends on the TRUPS are cumulative at the rate of the three-month London Interbank Offered Rate (“LIBOR”) plus 3.10% for the Trust I TRUPS and at LIBOR plus 2.85% for the Trust II TRUPS and are subject to mandatory redemption in 2033 and 2034, respectively.
 
 
28

 
 
The Company issued junior subordinated deferrable interest debentures (the “Debentures”) to Trust I and Trust II in like aggregate amounts of the TRUPS paying the same interest rate as the TRUPS.

In the event the Company becomes a registered bank holding company the TRUPS will qualify as Tier 1 capital up to 25% of the Company’s other components of Tier 1 capital.

The following table shows both the actual ratios at September 30, 2010 (unaudited) and the ratios as adjusted to give pro forma effect to the minimum and the maximum offering, and assumes that the applicable percentage of the TRUPS will qualify as Tier 1 capital for the Company.   No assurances can be given as to any number of shares that will be sold or the number of shares, up to 568,270, the selling shareholder elects to sell, if any.
 
 
 
                  Capital Ratios at September 30, 2010(1)
                     
Including Selling Shareholders(2)
 
Excluding Selling Shareholders(3)
         
Ratios
                             
         
Required to
                             
   
Minimum
 
be
       
Adjusted for
 
Adjusted for
 
Adjusted for
 
Adjusted for
   
Acceptable
 
Considered
       
Minimum
 
Maximum
 
Minimum
 
Maximum
   
Regulatory
 
“Well
       
Offering
 
Offering
 
Offering
 
Offering
   
Ratios
 
Capitalized”
 
Actual
 
Amount (4) (5)
 
Amount (4) (6)
 
Amount (4) (7)
 
Amount (4) (8)
Circle Bancorp
                                         
Pro-Forma Regulatory Capital Ratios: (9)
                               
                                       
Tier I capital to average total assets
  4.00 %   5.00 %   5.17 %   10.25 %   13.82 %   12.29 %   15.33 %
Tier I capital to risk-weighted assets
  4.00 %   6.00 %   7.80 %   15.92 %   21.89 %   19.31 %   24.56 %
Total capital to risk-weighted assets
  8.00 %   10.00 %   12.86 %   18.87 %   23.30 %   21.39 %   25.82 %
                                           
Circle Bank
                                         
Regulatory Capital Ratios:
                                     
                                           
Tier I capital to average total assets
  4.00 %   5.00 %   7.63 %   10.75 %   13.09 %   12.24 %   14.53 %
Tier I capital to risk-weighted assets
  4.00 %   6.00 %   11.59 %   16.71 %   20.73 %   19.25 %   23.28 %
Total capital to risk-weighted assets
  8.00 %   10.00 %   12.84 %   17.98 %   22.00 %   20.52 %   24.55 %
 

(1)
Does not reflect the dividend aggregating approximately $367,885 declared after September 30, 2010 and the dividend that the Board has indicated it will declare in an aggregate amount equal to the Company’s earnings from January 1, 2011 through the close of the offering.
(2)
Assumes the selling shareholder sells all 568,270 shares.
(3)
Assumes the selling shareholder elects not to sell any shares.
(4)
These ratios assume that the capital infusion will be invested in 20% risk weighted assets.
(5)
Assumes offering net proceeds of $12,905,839, of which $2,000,000 is retained by Circle Bancorp and is invested in an interest bearing money market account and $10,905,839 will be infused as Tier 1 Capital in Circle Bank.
(6)
Assumes offering net proceeds of $22,612,575 of which $3,000,000 is retained by Circle Bancorp and is invested in an interest bearing money market account and $19,612,575 will be infused as Tier 1 Capital in Circle Bank.
(7)
Assumes offering net proceeds of $18,392,364, of which $2,000,000 is retained by Circle Bancorp and is invested in an interest bearing money market account and $16,392,364 will be infused as Tier 1 Capital in Circle Bank.
(8)
Assumes offering net proceeds of $28,219,714, of which $3,000,000 is retained by Circle Bancorp and is invested in an interest bearing money market account and $25,219,714 will be infused as Tier 1 Capital in Circle Bank.
(9)
Assumes net proceeds qualify as Tier I capital in the event that the Company becomes a bank holding company.
 
 
Trading History; Holders
 
Our common stock has not been publicly quoted prior to the date of this prospectus. Currently, we have 4 shareholders of record of our common stock, of which 98.86% of our issued and outstanding common stock is owned by one investor, Shoreline Capital Partners, L.P., a California limited partnership , or SCP . Cole Financial Ventures, Inc. (“CFV”) is the general partner of SCP and Kit M. Cole (our Chairman and Chief Executive Officer) and Kimberly Kaselionis (a member of our Board of Directors and Chairman and Chief Executive Officer of the Bank) own 61.5% and 12.5%, respectively, of CFV. Frank Doodha, a member of the Board of Directors of the Company and the Bank, has been a limited partner of SCP since 1996 and his interest represents 12.12% of SCP. See “Principal and Selling Shareholders” herein.   Howe Barnes Hoefer & Arnett, Inc. has informally agreed to sponsor Circle Bancorp in listing its shares of common stock on the Over-the-Counter Bulletin Board upon the closing of the offering and has agreed to make a market in these shares. The Company further intends to register the shares of its common stock for trading on the Nasdaq Capital Market. However, no assurances can be given that our securities will ever trade on any exchange or that an active trading market will develop.
 
 
29

 
 
Dividend History
 
Circle Bancorp is a legal entity separate and distinct from the Bank. Our shareholders are entitled to receive dividends when and as declared by our Board of Directors out of funds legally available therefore, subject to the restrictions set forth in the California General Corporation Law. Set forth below is a listing of the stock and/or cash dividends and/or stock split issued by the Company since 2005:
 
   
2005
   
2006
   
2007
   
2008
   
2009
   
YTD 2010
 
Stock Dividend - Common Stock
    0 %     0 %     0 %     0 %     0 %     0 %
Stock Dividend - Preferred Stock
    0 %     0 %     0 %     0 %     0 %     0 %
Cash Dividends - Common Stock
  $ 0     $ 200,000     $ 105,000     $ 111,000     $ 650,000     $ 212,000  
Cash Dividends - Preferred Stock
  $ 0     $ 0     $ 0     $ 0     $ 3,000     $ 192,000  
Stock Split
 
NA
   
NA
   
NA
   
NA
   
NA
   
NA
 
Reverse Stock Split
 
NA
   
NA
   
NA
   
NA
   
NA
      1 - 6  
 
Our Board has approved and declared a dividend of $0.32 per share on the 1,149,640 shares of our common stock issued and outstanding as of January 31, 2011, or a dividend in the aggregate amount of approximately $367,885, payable on February 2, 2011.
 
In addition, our Board has indicated that it intends to declare and pay another dividend on our issued and outstanding common stock in an amount equal to the Company’s earnings from January 1, 2011 through the close of the offering.  The dividend will be paid on the shares then currently outstanding and will not be paid on any shares purchased in this offering.
 
Beginning in the fourth quarter of 2009 and continuing through the second quarter of 2010, Circle Bancorp has raised capital in the form of a 10.0% Series A Cumulative Perpetual Preferred Stock sold through a Confidential Private Placement Memorandum. The Company has raised $3.39 million net of selling costs through the preferred stock offering through close of the offering in April 2010. The Company paid dividends on the preferred stock of $3,000 in 2009 and $ 192,000 in the first nine months of 2010.

On May 20, 2010, the holders of our common stock approved a one-for-six reverse stock split. The reverse stock split became effective on May 24, 2010. All per share data and financial statements in this prospectus have been adjusted to reflect this reverse stock split.

We rely on distributions from the Bank in the form of cash dividends in order to pay cash dividends to our shareholders. There is no assurance, however, that any dividends will be paid in the future since they are subject to regulatory and statutory restrictions and to evaluation by our Board of Directors of financial factors including, but not limited to, earnings, financial condition and capital requirements of Circle Bancorp and the Bank.


The following discussion provides information regarding our financial condition and results of operations for the nine months ended September 30, 2010 and 2009, and for the years ended December 31, 2009 and 2008. This discussion is intended to provide a better understanding of the significant changes in trends relating to our financial condition, results of operations, liquidity, interest rate sensitivity and capital resources. This discussion should be read in conjunction with “Selected Consolidated Financial Data” and the Company’s consolidated financial statements and the accompanying notes thereto beginning on page F-1 of this prospectus. See the discussion of forward looking statements and risk factors under the heading “Cautionary Statement Regarding Forward-Looking Statements” at page [__].

General

For the nine months ended September 30, 2010, we recorded a net income of $ 1,033,000, of which $841,000 was available to common shareholders, or $0.73 per common share, compared to a net income of $1,010,000 or $0.88 per share for the same period in 2009. The return on average equity for the nine months ended September 30, 2010 was 9.70 % and the return on average assets was 0.48 % compared with 12.72 % and 0.53 %, respectively, for the same period a year ago. The increase of $23,000 in net income was primarily due to an increase in net interest income of $1,605,000 and an increase in noninterest income of $ 159,000, partially offset by a $ 197,000 increase in the provision for loan losses and a $1,493,000 increase in non-interest expenses.

For the year ended December 31, 2009, we realized net income of $1,602,000 or $1.39 per common share, compared to net income of $1,744,000 or $1.52 per share for 2008. The decrease of approximately $142,000 in net income for 2009 compared to that of 2008 was primarily due to an increase of $1,769,000 in noninterest expense and a $581,000 increase in the provision for loan losses, partially offset by an increase of $1,942,000 in net interest income and a $122,000 increase in noninterest income. Our return on average equity and return on average assets for the year 2009 were 14.92% and 0.62 % as compared to 18.15% and 0.71% for the year 2008, respectively.

 
30

 

As of September 30, 2010, our total assets were $ 316.7 million, compared to $ 255.0 million at September 30, 2009, an increase of $ 61.7 million or 24.2 %. Total deposits increased $52.1 million or 28.5 % from $ 183.0 million at September 30, 2009 to $ 235.1 million at September 30, 2010. Our borrowing from the Federal Home Loan Bank (the “FHLB”) increased to $56.0 million at September 30, 2010 from $51.0 million at September 30, 2009 as longer term fixed rate borrowings were obtained to mitigate interest rate risk and higher rate borrowings matured . Shareholders’ equity increased from $10.9 million as of September 30, 2009 to $15.5 million as of September 30, 2010, an increase of $4.6 million, or 42.1 %, as a result of the preferred stock offering and our earnings, net of cash dividends paid.

Total assets at December 31, 2009 were $262.5 million compared to $253.0 million at December 31, 2008, an increase of $9.5 million or 3.8 %. Total deposits increased 15.3% from $175.9 million at December 31, 2008 to $202.9 million at December 31, 2009. Our borrowing from the FHLB decreased to $37.5 million at December 31, 2009 from $57.0 million at December 31, 2008. Shareholders’ equity was $12.1 million at December 31, 2009, up from $10.5 million a year earlier. The increase was primarily attributable to our earnings, net of cash dividends paid.

We have junior subordinated debt outstanding of $8.8 million at the end of each of the periods discussed.

The allowance for loan losses represents our estimate of the losses that are inherent in the loan portfolio. We regularly monitor the quality of our loans and maintain an allowance for loan losses which in our judgment is sufficient to absorb losses inherent in the portfolio. At September 30, 2010, our allowance for loan losses was $3,814,000, which represented 1.54 % of loans held in the portfolio. The allowance for loan losses increased $786,000 from $3,028,000 at December 31, 2009 and increased $1,016,000 from $2,798,000 at September 30, 2009. The increase was due primarily to a $886,000 provision for loan losses recorded in the nine months ended September 30, 2010. The increased provision for loan losses during the first nine months of 2010 was the result of increases in non-performing loans and changes to the risk factors associated with the current economic environment , and only marginally to the overall increase in loans .

At December 31, 2009, our allowance for loan losses was $3,028,000, which represented 1.30% of loans held in the portfolio. The allowance for loan losses increased $633,000 from $2,395,000 at December 31, 2008. The increase was due to a $904,000 provision for loan losses recorded in 2009 offset by net charge-offs of $271,000. The increased provision for loan losses during 2009 was the result of the overall growth in the loan portfolio and changes to the risk factors associated with the current economic environment.

As indicated in the charts below, the Bank has increased its allowance for loan losses by 59% from December 31, 2008 through September 30, 2010.  This increase is primarily attributable to substantial increases in non-performing loans and non-performing assets since 2008 which have increased at a more rapid pace in 2010.  As a percentage of total assets, non-performing assets were 0.37%, 1.88% and 2.46%, respectively, as of December 31, 2008, December 31, 2009 and September 30, 2010.   From September 30, 2009 through September 30, 2010 non-performing assets have increased from $1.7 million to $7.8 million. A large portion of this increase of $6.1 million in non-performing assets over the prior period is comprised of a $2.1 foreclosed real estate property in Sonoma County, California which was foreclosed on in 2010.  The remaining $4.0 million increase during this period is evenly divided by type among commercial real estate, multi-family real estate and single family residential real estate loans.  Non-performing loans as of September 30, 2010 were $5.6 million, of which $1.2 million were placed on nonaccrual status within the last ninety days and $3.2 million of which were placed on nonaccrual status within the last five months.

Although non-performing assets have increased since 2008, net charge-offs have been relatively low at $66,000, $271,000 and $100,000 for the years ended December 31, 2008 and 2009, and for the nine-months ended September 30, 2010, respectively.  Despite the relatively low net charge-offs, in light of the increasing trend in loans with payment problems, the Bank has increased its loan loss reserve by 60% over the last 21 months which is attributable to the corresponding increase in non-performing assets.  Of the $1.42 million added to the allowance during this 21 month period, $1.22 million was attributable to increased credit risk while $200,000 was the result of increased loan volume. Although we believe this increase in reserves to be appropriate , the actual loss exposure is unpredictable.

 
31

 
 
     
As of September 30,
 
   
2010
   
2009
 
   
(Dollars in thousands)
 
Credit quality factors
           
Nonperforming loans
  $ 5,659     $ 1,732  
Nonperforming assets
    7,801       1,732  
Gross loans
    247,875       233,095  
Allowance for loan losses
    3,814       2,798  
Net (charge-offs)/recoveries
    (100 )     (286 )
Provision for loan loss based on volume
    150       51  
Provision for loan loss based on increased risk
    736       638  
Total provision for loan losses
  $ 886     $ 689  
Allowance for loan losses, % of gross loans
    1.54 %     1.20 %
Allowance for loan losses, % of nonperforming loans
    67.40 %     161.55 %
                 
Net charge-offs, % of gross loans
    0.04 %     0.12 %
 
    As of December 31,  
   
2009
   
2008
   
2007
   
2006
   
2005
 
    (Dollars in thousands)  
Credit quality factors
                             
Nonperforming loans
  $ 4,946     $ 925     $ 52     $ 1,223     $  
Nonperforming assets
    4,946       925       52       1,223        
Gross loans
    232,946       228,076       214,737       186,091       139,715  
Allowance for loan losses
    3,028       2,395       2,138       1,867       1,393  
Net (charge-offs)/recoveries
    (271 )     (66 )     (97 )     (5 )     5  
Provision for loan loss based on volume
    50       133       285       459       255  
Provision for loan loss based on increased risk
    854       190       83       20       (5 )
Total provision for loan losses
  $ 904     $ 323     $ 368     $ 479     $ 250  
Allowance for loan losses, % of Gross loans
    1.30 %     1.05 %     1.00 %     1.00 %     1.00 %
Allowance for loan losses, % of nonperforming loans
    61.2 %     258.9 %     4111.5 %     152.7 %     N/A  
                                         
Net charge-offs, % of gross loans
    0.12 %     0.03 %     0.05 %     0.00 %     0.00 %
 
There are numerous components that enter into the evaluation of the allowance for loan losses. Some are quantitative while others require us to make qualitative judgments. Although we believe that we use the best information available to evaluate the adequacy of our allowance, future adjustments which could be material may be necessary if the assumptions used differ from future performance of the loan portfolio.
 
During the years 2005 through 2008, we had an insignificant amount of nonperforming loans and charge-offs.  During this time period nonperforming loans ranged from zero to 0.66% of gross loans, and charge-offs ranged from zero to 0.05%.  Due to the low level of nonperforming loans, the allowance for loan losses as a percentage of nonperforming loans was a less meaningful ratio in those years and ranged from being not applicable to 4111.5%.
 
Nonperforming loans increased in 2009 and in the first nine months of 2010 although charge-offs have remained relatively low.  Nonperforming loans were 2.12% and 2.28% of gross loans as of, and charge-offs were 0.12% and 0.04% of gross loans for the periods ended, December 31, 2009 and September 30, 2010, respectively.
 
As nonperforming loans have increased, the ratio of the allowance for loan losses as a percentage of gross loans has also increased from 1.05% of gross loans as of December 31, 2008 to 1.30% of gross loans as of December 31, 2009 and to 1.54% as of September 30, 2010.  Based on the level of nonperforming assets and on the overall credit risk assessment of the loan portfolio, management believes that the allowance for loan losses is being maintained at an appropriate level of 61.2% and 67.4% of nonperforming assets as of December 31, 2009 and September 30, 2010, respectively.

 
32

 

Distribution of Assets, Liabilities and Shareholders’ Equity
 
The following tables present the average amounts outstanding for the major categories of our assets and liabilities, the amount of interest income and expense for each category of interest-earning assets and interest-bearing liabilities, the average interest rates earned or paid and the net yield on average interest-earning assets for the periods indicated:
 
    For the Nine Months Ended September 30,  
    2010     2009  
   
Average
         
Average
   
Average
         
Average
 
   
Balance
   
Interest
   
Rate (1)
   
Balance
   
Interest
   
Rate (1)
 
    (Dollars in thousands)  
Interest-Earning Assets:
                                   
Federal fund sold
  $ 34,444     $ 60       0.23 %   $ 8,356       16       0.26 %
Due from banks (Interest-bearing)
    4,088       24       0.78 %     6,343       50       1.05 %
Mortgage-backed securities
    1,094       30       3.67 %     1,428       54       5.06 %
Federal Home Loan Bank stock
    2,912       7       0.32 %     2,986       6       0.27 %
Loans
    238,230       13,120       7.36 %     231,325       13,058       7.55 %
Unearned income on loans, net of costs
    836                       930                  
Total interest-earning assets
    281,604       13,242       6.29 %     251,368       13,184       7.01 %
Cash and due from banks
    3,363                       3,080                  
Premises and equipment
    3,101                       1,654                  
Other assets
    1,856                       118                  
Total assets
  $ 289,924                     $ 256,220                  
Interest-Bearing Liabilities:
                                               
NOW and money market accounts
  $ 89,374       605       0.91 %   $ 88,140       1,186       1.80 %
Savings deposits
    3,721       17       0.61 %     2,570       22       1.14 %
Time deposits
    99,851       1,265       1.69 %     72,391       1,363       2.52 %
Other borrowings
    47,965       1,103       3.07 %     56,696       1,909       4.50 %
Junior subordinated debt
    8,764       218       3.33 %     8,764       275       4.20 %
Total interest-bearing liabilities
    249,675       3,208       1.72 %     228,561       4,755       2.78 %
Noninterest bearing deposits
    24,889                       15,889                  
Other liabilities
    1,126                       1,150                  
Shareholders’ equity
    14,234                       10,620                  
Total liabilities and shareholders’ equity
  $ 289,924                     $ 256,220                  
Net interest income
          $ 10,034                     $ 8,429          
Net yield on interest-earnings assets
                    4.76 %                     4.48 %
 

(1) These ratios have been annualized.
 
 
33

 
 
    For the Twelve Months Ended December 31,  
      2009       2008     2007  
   
Average
     
Average
   
Average
     
Average
   
Average
       
Average
 
   
Balance
 
Interest
 
Rate
   
Balance
 
Interest
 
Rate
   
Balance
 
Interest
   
Rate
 
    (Dollars in thousands)  
Interest-Earning Assets:
                                           
Federal fund sold
  $ 11,092   $ 28     0.25 %   $ 4,043   $ 74     1.83 %   $ 5,238   $ 266       5.08 %
Due from banks (Interest-bearing)
    5,515     61     1.11 %     5,666     170     3.00 %     3,564     170       4.77 %
Mortgage-backed securities
    1,385     57     4.12 %     1,744     92     5.28 %     3,219     153       4.75 %
Federal Home Loan Bank stock
    3,250     17     0.52 %     2,885     130     4.51 %     2,729     167       6.12 %
Loans
    231,125     17,324     7.50 %     224,411     17,887     7.97 %     193,115     16,208       8.39 %
Unearned income on loans, net of costs