<PAGE>1


                      FORM 10-K
              SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549
     (Mark One)
     
      X  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
          SECURITIES EXCHANGE ACT OF 1934 
     
     For the fiscal year ended December 31, 1996 or 
     
         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
          THE SECURITIES EXCHANGE ACT OF 1934      
     For the transition period from            to                    
     
     Commission file number            2-77519-LA           
     
                               SARATOGA BANCORP                
       (Exact name of registrant as specified in its charter)
  
            California                          94-2817587     
     (State or other jurisdiction of        (I.R.S. employer   
     incorporation or organization)        Identification No.)
  
     12000 Saratoga-Sunnyvale Road                            
        Saratoga, California                       95070    
  (Address of principal executive offices)       (Zip Code)   
  
  Registrant's telephone number, including area code   (408)973-1111
  
  Securities registered pursuant to Section 12 (b) of the Act:
                                              Name of each exchange
            Title of each class               on which registered
                  NONE                             NONE     
   
  Securities registered pursuant to Section 12 (g) of the Act:
                            NONE      
                       (Title of class)
  
       Saratoga Bancorp (1) has filed all reports required to be
  filed by section 13 or 15(d) of the Securities Exchange Act of 1934
  during the preceding 12 months, and (2) has been subject to such
  filing requirements for the past 90 days.  Yes  X  No     . 
  
       Indicate by checkmark if disclosure of delinquent filers pursuant to Item
  405 of Regulation S-K is not contained herein, and will not be contained, to
  the best of registrant's knowledge, in definitive proxy or
  information statements incorporated by reference in Part III of
  this Form 10-K or any amendment to this Form 10-K.  [X]                     
  
       The aggregate market value of the voting stock held by non-
  affiliates of Saratoga Bancorp on March 1, 1997 was $12,769,635
  
       As of March 1, 1997, Saratoga Bancorp had 1,036,392 shares of
  common stock outstanding.
  
  
              DOCUMENTS INCORPORATED BY REFERENCE
  
       The Company's Proxy Statement is incorporated herein by
  reference in Part III, Items 10 through 13.
  
              The Index to Exhibits appears on page 64
  
  
                         Page 1 of 66  pages
<PAGE>  2  
                             PART 1
  Item 1. Business
  
  General 
  
     Certain matters discussed or incorporated by reference in
  this Annual Report on Form 10-K including, but not limited to,
  matters described in Item 7 - "Managements Discussion and
  Analysis of Financial Condition and Results of Operations," are
  forward-looking statements that are subject to risks and
  uncertainties that could cause actual results to differ
  materially from those projected.  Changes to such risks and
  uncertainties, which could impact future financial performance,
  include, among others, (1)competitive pressures in the banking
  industry; (2)changes in interest rate environment; (3)general
  economic conditions, nationally, regionally and in operating
  market areas; (4)changes in the regulatory environment;
  (5)changes in business conditions and inflation; and (6)changes
  in securities markets.  Therefore, the information set forth
  herein should be carefully considered when evaluating the
  business prospects of the Company and the Bank.
  
     Saratoga Bancorp (the "Company") is a registered bank hold-
  ing company whose principal asset (and only subsidiary) is the
  common stock of Saratoga National Bank (the "Bank").  The
  Company itself does not engage in any business activities other
  than the ownership of the Bank and investment of its available
  funds.   As used herein, the term "Saratoga Bancorp" or the
  "Company" includes the subsidiary of the Company unless the
  context requires otherwise.  The Company was incorporated in
  California on December 8, 1981. The Bank commenced operations on
  November 8, 1982.  The Bank provides a variety of banking
  services to businesses, governmental units and individuals.  The
  Bank conducts a commercial and retail banking business, which
  includes accepting demand, savings and time deposits and making
  commercial, real estate and consumer loans.  It also offers
  installment note collections, issues cashier's checks, sells
  traveler's checks and provides other customary banking services. 
  The Bank's deposits are insured by the Federal Deposit Insurance
  Corporation (the "FDIC") up to the legal limits thereupon.  The
  Bank does not offer trust services nor international banking
  services and does not plan to do so in the near future.  At
  December 31, 1996, the Company had total assets of approximately
  $122 million and total deposits of approximately $89 million. 
  At December 31, 1996, the Company and the Bank had 29 full-time
  equivalent employees.
  
     Most of the Bank's deposits are obtained from the Bank's
  primary service area.  A material portion of the Bank's deposits
  has not been obtained from a single person or group of related
<PAGE>  3
  persons, the loss of any one or more of which would have a
  materially adverse effect on the business of the Bank, nor is a
  material portion of the Bank's loans concentrated within a
  single industry or group of related industries, although real
  estate construction loans represent approximately 17% of total
  loans.  Furthermore, the extent to which the business of the
  Bank is seasonal is insignificant.  The importance of, and risks
  attendant to, foreign sources and application of the Bank's
  funds is negligible.
  
     For additional information concerning the Company and the
  Bank, see Selected Financial Data in Item 6 at page 19.
  
  SUPERVISION AND REGULATION
  
     The common stock of the Company is subject to the
  registration requirements of the Securities Act of 1933, as
  amended, and the qualification requirements of the California
  Corporate Securities Law of 1968, as amended.  The Bank's common
  stock, however, is exempt from such requirements.  The Company
  is also subject to the periodic reporting requirements of
  Section 15(d) of the Securities Exchange Act of 1934, as
  amended, which include, but are not limited to, filing annual,
  quarterly and other current reports with the Securities and
  Exchange Commission.
  
     The Bank is chartered under the national banking laws of
  the United States of America, and its deposits are insured by
  the FDIC. The Bank has no subsidiaries.  Consequently, the Bank
  is regularly examined by the Office of the Comptroller of the
  Currency (the "OCC"), its primary regulator, and is subject to
  the supervision of the OCC and the FDIC.  Such supervision and
  regulation include comprehensive reviews of all major aspects of
  the Bank's business and condition, including its capital ratios,
  allowance for possible loan losses and other factors.  However,
  no inference should be drawn that such authorities have approved
  any such factors.  The Company and the Bank are required to file
  reports with the OCC, the FDIC and the Board of Governors of the
  Federal Reserve System ("Board of Governors") and provide such
  additional information as the OCC, FDIC and the Board of
  Governors may require.
  
     The Company is a bank holding company within the meaning of
  the Bank Holding Company Act of 1956, as amended (the "Bank
  Holding Company Act"), and is registered as such with, and
  subject to the supervision of, the Board of Governors.  The
  Company is required to obtain the approval of the Board of
  Governors before it may acquire all or substantially all of the
  assets of any bank, or ownership or control of the voting shares
  of any bank if, after giving effect to such acquisition of
<PAGE> 4
  shares, the Company would own or control more than 5% of the
  voting shares of such bank.  The Bank Holding Company Act
  prohibits the Company from acquiring any voting shares of, or
  interest in, all or substantially all of the assets of, a bank
  located outside the State of California unless such an
  acquisition is specifically authorized by the laws of the state
  in which such bank is located.  Any such interstate acquisition
  is also subject to the provisions of the Riegle-Neal Interstate
  Banking and Branching Efficiency Act of 1994 discussed below. 
  The OCC regulates the number and locations of the branch offices
  of a national bank and may only permit a national bank to
  maintain branches in locations and under conditions imposed by
  state law upon state banks.
  
     The Company, and any subsidiaries which it may acquire or
  organize, are deemed to be "affiliates" of the Bank within the
  meaning of that term as defined in the Federal Reserve Act. 
  This means, for example, that there are limitations (a) on loans
  by the Bank to affiliates, and (b) on investments by the Bank in
  affiliates' stock as collateral for loans to any borrower.  The
  Company and the Bank are also subject to certain restrictions
  with respect to engaging in the underwriting, public sale and
  distribution of securities.
  
     In addition, regulations of the Board of Governors
  promulgated under the Federal Reserve Act require that reserves
  be maintained by the Bank in conjunction with any liability of
  the Company under any obligation (promissory note,
  acknowledgement of advance, banker's acceptance or similar
  obligation) with a weighted average maturity of less than seven
  (7) years to the extent that the proceeds of such obligations
  are used for the purpose of supplying funds to the Bank for use
  in its banking business, or to maintain the availability of such
  funds.
  
     The Board of Governors, OCC and the FDIC have adopted risk-
  based capital guidelines for evaluating the capital adequacy of
  bank holding companies and banks.  The guidelines are designed
  to make capital requirements sensitive to differences in risk
  profiles among banking organizations, to take into account off-
  balance sheet exposures and to aid in making the definition of
  bank capital uniform internationally.  Under the guidelines, the
  Company and the Bank are required to maintain capital equal to
  at least 8.0% of its assets and commitments to extend credit,
  weighted by risk, of which at least 4.0% must consist primarily
  of common equity (including retained earnings) and the remainder
  may consist of subordinated debt, cumulative preferred stock, or
  a limited amount of loan loss reserves.
  
     Assets, commitments to extend credit, and off-balance sheet
<PAGE>  5  
  items are categorized according to risk and certain assets
  considered to present less risk than others permit maintenance
  of capital at less than the 8% ratio.  For example, most home
  mortgage loans are placed in a 50% risk category and therefore
  require maintenance of capital equal to 4% of such loans, while
  commercial loans are placed in a 100% risk category and
  therefore require maintenance of capital equal to 8% of such
  loans.
  
     The guidelines establish two categories of qualifying
  capital: Tier 1 capital comprising core capital elements, and
  Tier 2 comprising supplementary capital requirements.  At least
  one-half of the required capital must be maintained in the form
  of Tier 1 capital.  Tier 1 capital includes common shareholders'
  equity and qualifying perpetual preferred stock.  However, no
  more than 25% of the Company's total Tier 1 capital may consist
  of perpetual preferred stock.  The definition of Tier 1 capital
  for the Bank is the same, except that perpetual preferred stock
  may be included only if it is noncumulative.  Tier 2 capital
  includes, among other items, limited life (and in the case of
  banks, cumulative) preferred stock, mandatory convertible
  securities, subordinated debt and a limited amount of reserve
  for credit losses.
  
  
     The Board of Governors, OCC and the FDIC also adopted
  minimum leverage ratios for banking organizations as a
  supplement to the risk-weighted capital guidelines.  The
  leverage ratio is generally calculated using Tier 1 capital (as
  defined under risk-based capital guidelines) divided by
  quarterly average net total assets (excluding intangible assets
  and certain other adjustments).  The leverage ratio establishes
  a limit on the ability of banking organizations, including the
  Company and the Bank, to increase assets and liabilities without
  increasing capital proportionately. 
  
     The Board of Governors and the OCC emphasized that the
  leverage ratio constitutes a minimum requirement for well-run
  banking organizations having diversified risk, including no
  undue interest rate risk exposure, excellent asset quality, high
  liquidity, good earnings and a composite rating of 1 under the
  regulatory rating system for banks and 1 under the regulatory
  rating system for bank holding companies.  Banking organizations
  experiencing or anticipating significant growth, as well as
  those organizations which do not exhibit the characteristics of
  a strong, well-run banking organization described above, will be
  required to maintain minimum capital ranging generally from 100
  to 200 basis points in excess of the leverage ratio.  The FDIC
  adopted a substantially similar leverage ratio for state non-
  member banks which established (i) a 3 percent Tier 1 minimum
<PAGE> 6
  capital leverage ratio for highly-rated banks (those with a
  composite regulatory rating of 1 and not experiencing or
  anticipating significant growth); and (ii) a 4 percent Tier 1
  minimum capital leverage ratio for all other banks, as a
  supplement to the risk-based capital guidelines.
  
     The federal banking agencies during 1996 issued a joint
  agency policy statement regarding the management of interest-
  rate risk exposure (interest rate risk is the risk that changes
  in market interest rates might adversely affect a bank's
  financial condition) with the goal of ensuring that institutions
  with high levels of interest-rate risk have sufficient capital
  to cover their exposures.  This policy statement reflected the
  agencies' decision at that time not to promulgate a standardized
  measure and explicit capital charge for interest rate risk, in
  the expectation that industry techniques for measurement of such
  risk will evolve.  
     
     However, the Federal Financial Institution Examination
  Counsel ("FFIEC") on December 13, 1996, approved an updated
  Uniform Financial Institutions Rating System ("UFIRS").  In
  addition to the five components traditionally included in the
  so-called "CAMEL" rating system which has been used by bank
  examiners for a number of years to classify and evaluate the
  soundness of financial institutions (including capital adequacy,
  asset quality, management, earnings and liquidity), UFIRS
  includes for all bank regulatory examinations conducted on or
  after January 1, 1997, a new rating for a sixth category
  identified as sensitivity to market risk.  Ratings in this
  category are intended to reflect the degree to which changes in
  interest rates, foreign exchange rates, commodity prices or
  equity prices may adversely affect an institution's earnings and
  capital.  The rating system henceforth will be identified as the
  "CAMELS" system.
  
     At December 31, 1996, the Bank and the Company are in
  compliance with the risk-based capital and leverage ratios
  described above.  See Item 7 below for a listing of the
  Company's risk-based capital ratios at December 31, 1996 and
  1995.
  
     During 1996, the Company's primary source of income was
  dividends from the Bank. The Bank's ability to make such
  payments is subject to restrictions established by federal
  banking law, and subject to approval by the OCC.  Such approval
  is required if the total of all dividends declared by the Bank's
  Board of Directors in any calendar year will exceed the Bank's
  net profits for that year combined with its retained net profits
  for the preceding two years, less any required transfers to
  surplus or to a fund for the retirement of preferred stock. The
<PAGE> 7
  OCC generally prohibits national banks from, among other
  matters, adding the allowance for loan and lease losses to
  undivided profits then on hand when calculating the amount of
  dividends which may be paid.  Additionally, while the Board of
  Governors has no general restriction with respect to the payment
  of cash dividends by an adequately capitalized bank to its
  parent holding company, the Board of Governors, OCC and/or the
  FDIC, might, under certain circumstances, place restrictions on
  the ability of a particular bank to pay dividends based upon
  peer group averages and the performance and maturity of the
  particular bank, or object to management fees on the basis that
  such fees cannot be supported by the value of the services
  rendered or are not the result of an arms length transaction. 
  The FDIC may also restrict the payment of dividends if such
  payment would be deemed unsafe or unsound or if after the
  payment of such dividends, the Bank would be included in one of
  the "undercapitalized" categories for  capital adequacy purposes
  pursuant to the Federal Deposit Insurance Corporation
  Improvement Act of 1991.  See the discussion of dividends in
  Item 5 below for additional information regarding dividends.  
  Under the formulas discussed in Item 5, at December 31, 1996,
  approximately $2,356,000 of the Bank's net profits were
  available for distribution as dividends without the necessity of
  any prior governmental approvals.  These net profits constitute
  part of the capital of the Bank and sound banking practices
  require the maintenance of adequate levels of capital.
   
  
  
  COMPETITION
  
     The banking business in Santa Clara County, as it is
  elsewhere in California, is highly competitive, and each of the
  major branch banking institutions has one or more offices in the
  Bank's service area.  The Bank competes in the marketplace for
  deposits and loans, principally against these banks, independent
  community banks, savings and loan associations, thrift and loan
  companies, credit unions, mortgage banking companies, and other
  miscellaneous institutions that claim a portion of the market.
  
     Larger banks may have a competitive advantage because of
  higher lending limits and major advertising and marketing
  campaigns.  They also perform services, such as trust services,
  international banking, discount brokerage and insurance services
  which the Bank is not authorized or prepared to offer currently.
  The Bank has made arrangements with its correspondent banks and
  with others to provide such services for its customers.  For
  borrowers requiring loans in excess of the Bank's legal lending
  limits, the Bank has offered, and intends to offer in the
  future, such loans on a participating basis with its
<PAGE> 8
  correspondent banks and with other independent banks, retaining
  the portion of such loans which is within its lending limits. 
  As of December 31, 1996, the Bank's legal lending limits to a
  single borrower and such borrower's related parties were
  $1,887,000 based on regulatory capital of $12,580,000.
  
     The Bank's business is concentrated in its service area,
  which primarily encompasses Santa Clara County, and also
  includes, to a lesser extent, the contiguous areas of Alameda,
  San Mateo and Santa Cruz Counties.
  
     In order to compete with the major financial institutions
  in its primary service area, the Bank uses to the fullest extent
  possible the flexibility which is accorded by its independent
  status.  This includes an emphasis on specialized services,
  local promotional activity, and personal contacts by the Bank's
  officers, directors and employees.  The Bank also seeks to
  provide special services and programs for individuals in its
  primary service area who are employed in the agricultural,
  professional and business fields, such as loans for equipment,
  furniture, tools of the trade or expansion of practices or
  businesses.  In the event there are customers whose loan demands
  exceed the Bank's lending limits, the Bank seeks to arrange for
  such loans on a participation basis with other financial
  institutions.  The Bank also assists those customers requiring
  services not offered by the Bank to obtain such services from
  correspondent banks.
  
     Banking is a business which depends on interest rate
  differentials.  In general, the difference between the interest
  rate paid by the Bank to obtain its deposits and its other
  borrowings and the interest rate received by the Bank on loans
  extended to its customers and on securities held in the Bank's
  portfolio comprise the major portion of the Bank's earnings.
  
     Commercial banks compete with savings and loan
  associations, credit unions, other financial institutions and
  other entities for funds.  For instance, yields on corporate and
  government debt securities and other commercial paper affect the
  ability of commercial banks to attract and hold deposits. 
  Commercial banks also compete for loans with savings and loan
  associations, credit unions, consumer finance companies,
  mortgage companies and other lending institutions.
  
     The interest rate differentials of the Bank, and therefore
  its earnings, are affected not only by general economic
  conditions, both domestic and foreign, but also by the monetary
  and fiscal policies of the United States as set by statutes and
  as implemented by federal agencies, particularly the Federal
  Reserve Board.  This agency can and does implement national
 <PAGE> 9
  monetary policy, such as seeking to curb inflation and combat
  recession, by its open market operations in United States
  government securities, adjustments in the amount of interest
  free reserves that banks and other financial institutions are
  required to maintain, and adjustments to the discount rates
  applicable to borrowing by banks from the Federal Reserve Board. 
  These activities influence the growth of bank loans, investments
  and deposits and also affect interest rates charged on loans and
  paid on deposits.  The nature and timing of any future changes
  in monetary policies and their impact on the Bank can't be
  predicted.
  
     On December 19, 1991, President Bush signed the Federal
  Deposit Insurance Corporation Improvement Act of 1991
  ("FDICIA").  The FDICIA substantially revised banking
  regulations, certain aspects of the Federal Deposit Insurance
  Act and established a framework for determination of capital
  adequacy of financial institutions, among other matters.  Under
  the FDICIA, financial institutions are placed into five capital
  adequacy categories as follows: (1) well capitalized, (2)
  adequately capitalized, (3) undercapitalized, (4) significantly
  undercapitalized, and (5) critically undercapitalized.  The
  FDICIA authorized the Board of Governors, the OCC and FDIC to
  establish limits below which financial institutions will be
  deemed critically undercapitalized, provided that such limits
  can not be less than two percent (2%) of the ratio of tangible
  equity to total assets or sixty-five percent (65%) of the
  minimum leverage ratio established by regulation.  Financial
  institutions classified as undercapitalized or below are subject
  to limitations including restrictions related to (i) growth of
  assets, (ii) payment of interest on subordinated indebtedness,
  (iii) capital distributions, and (iv) payment of management fees
  to a parent holding company.  
  
     The FDICIA requires the Board of Governors, OCC and FDIC to
  initiate corrective action regarding financial institutions
  which fail to meet minimum capital requirements.  Such action
  may result in orders to augment capital such as through sale of
  voting stock, reduction in total assets, and restrictions
  related to correspondent bank deposits.  Critically
  undercapitalized financial institutions may also be subject to
  appointment of a receiver or conservator unless the financial
  institution submits an adequate capitalization plan.
  
       In 1995 the FDIC, pursuant to Congressional mandate,
  reduced bank deposit insurance assessment rates to a range from
  $0 to $0.27 per $100 of deposits, dependent upon a bank's risk. 
  The FDIC has continued these reduced assessment rates through
  the first semiannual assessment period of 1997.  Based upon the
  above risk-based assessment rate schedule, the Bank's current
<PAGE> 10
  capital ratios, the Bank's current level of deposits, and
  assuming no further change in the assessment rate applicable to
  the Bank during 1997, the Bank estimates that its annual
  noninterest expense attributed to assessments will increase
  during 1997 by approximately $9,000.
  
     The Board of Governors, OCC and FDIC adopted regulations
  effective December 19, 1992, implementing a system of prompt
  corrective action pursuant to Section 38 of the Federal Deposit
  Insurance Act and Section 131 of the FDICIA.  The regulations
  establish five capital categories with the following
  characteristics: (1) "Well capitalized" - consisting of
  institutions with a total risk-based capital ratio of 10% or
  greater, a Tier 1 risk-based capital ratio of 6% or greater and
  a leverage ratio of 5% or greater, and the institution is not
  subject to an order, written agreement, capital directive or
  prompt corrective action directive; (2) "Adequately capitalized"
  - consisting of institutions with a total risk-based capital
  ratio of 8% or greater, a Tier 1 risk-based capital ratio of 4%
  or greater and a leverage ratio of 4% or greater, and the
  institution does not meet the definition of a "well capitalized"
  institution; (3) "Undercapitalized" - consisting of institutions
  with a total risk-based capital ratio less than 8%, a Tier 1
  risk-based capital ratio of less than 4%, or a leverage ratio of
  less than 4%; (4) "Significantly undercapitalized" - consisting
  of institutions with a total risk-based capital ratio of less
  than 6%, a Tier 1 risk-based capital ratio of less than 3%, or
  a leverage ratio of less than 3%; (5) "Critically
  undercapitalized" - consisting of an institution with a ratio of
  tangible equity to total assets that is equal to or less than
  2%.
  
     The regulations established procedures for classification
  of financial institutions within the capital categories, filing
  and reviewing capital restoration plans required under the
  regulations and procedures for issuance of directives by the
  appropriate regulatory agency, among other matters.  The
  regulations impose restrictions upon all institutions to refrain
  from certain actions which would cause an institution to be
  classified within any one of the three "undercapitalized"
  categories, such as declaration of dividends or other capital
  distributions or payment of management fees, if following the
  distribution or payment the institution would be classified
  within one of the "undercapitalized" categories.  In addition,
  institutions which are classified in one of the three
  "undercapitalized" categories are subject to certain mandatory
  and discretionary supervisory actions.  Mandatory supervisory
  actions include (1) increased monitoring and review by the
  appropriate federal banking agency; (2) implementation of a
  capital restoration plan; (3) total asset growth restrictions;
<PAGE> 11
  and (4) limitation upon acquisitions, branch expansion, and new
  business activities without prior approval of the appropriate
  federal banking agency.  Discretionary supervisory actions may
  include (1) requirements to augment capital; (2) restrictions
  upon affiliate transactions; (3) restrictions upon deposit
  gathering activities and interest rates paid; (4) replacement of
  senior executive officers and directors; (5) restrictions upon
  activities of the institution and its affiliates; (6) requiring
  divestiture or sale of the institution; and (7) any other
  supervisory action that the appropriate federal banking agency
  determines is necessary to further the purposes of the
  regulations.  Further, the federal banking agencies may not
  accept a capital restoration plan without determining, among
  other things, that the plan is based on realistic assumptions
  and is likely to succeed in restoring the depository
  institution's capital.  In addition, for a capital restoration
  plan to be acceptable, the depository institution's parent
  holding company must guarantee that the institution will comply
  with such capital restoration plan.  The aggregate liability of
  the parent holding company under the guaranty is limited to the
  lesser of (i) an amount equal to 5 percent of the depository
  institution's total assets at the time it became
  undercapitalized, and (ii) the amount that is necessary (or
  would have been necessary) to bring the institution into
  compliance with all capital standards applicable with respect to
  such institution as of the time it fails to comply with the
  plan.  If a depository institution fails to submit an acceptable
  plan, it is treated as if it were "significantly
  undercapitalized."  The FDICIA also restricts the solicitation
  and acceptance of and interest rates payable on brokered
  deposits by insured depository institutions that are not "well
  capitalized."  An "undercapitalized" institution is not allowed
  to solicit deposits by offering rates of interest that are
  significantly higher than the prevailing rates of interest on
  insured deposits in the particular institution's normal market
  areas or in the market areas in which such deposits would
  otherwise be accepted.
  
     Any financial institution which is classified as
  "critically undercapitalized" must be placed in conservatorship
  or receivership within 90 days of such determination unless it
  is also determined that some other course of action would better
  serve the purposes of the regulations.  Critically
  undercapitalized institutions are also prohibited from making
  (but not accruing) any payment of principal or interest on
  subordinated debt without the prior approval of the FDIC and the
  FDIC must prohibit a critically undercapitalized institution
  from taking certain other actions without its prior approval,
  including (1) entering into any material transaction other than
  in the usual course of business, including investment expansion,
<PAGE> 12
  acquisition, sale of assets or other similar actions; (2)
  extending credit for any highly leveraged transaction; (3)
  amending articles or bylaws unless required to do so to comply
  with any law, regulation or order; (4) making any material
  change in accounting methods; (5) engaging in certain affiliate
  transactions; (6) paying excessive compensation or bonuses; and
  (7) paying interest on new or renewed liabilities at rates which
  would increase the weighted average costs of funds beyond
  prevailing rates in the institution's normal market areas.
  
     The capital ratio requirements for the "adequately
  capitalized" category generally are the same as the existing
  minimum risk-based capital ratios applicable to the Company and
  the Bank.  It is not possible to predict what effect the prompt
  corrective action regulation will have upon the Company and the
  Bank or the banking industry taken as a whole in the foreseeable
  future.
  
     Under the FDICIA, the federal financial institution
  agencies have adopted regulations which require institutions to
  establish and maintain comprehensive written real estate
  policies which address certain lending considerations, including
  loan-to-value limits, loan administrative policies, portfolio
  diversification standards, and documentation, approval and
  reporting requirements.  The FDICIA further generally prohibits
  an insured state bank from engaging as a principal in any
  activity that is impermissible for a national bank, absent FDIC
  determination that the activity would not pose a significant
  risk to the Bank Insurance Fund, and that the bank is, and will
  continue to be, within applicable capital standards.  Similar
  restrictions apply to subsidiaries of insured state banks.  The
  Company does not currently intend to engage in any activities
  which would be restricted or prohibited under the FDICIA.
  
     The federal financial institution agencies have established
  safety and soundness standards for insured financial
  institutions covering (1) internal controls, information systems
  and internal audit systems; (2) loan documentation; (3) credit
  underwriting; (4) interest rate exposure; (5) asset growth; (6)
  compensation, fees and benefits; (7) excessive compensation for
  executive officers, directors or principal shareholders which
  could lead to material financial loss.   If an agency determines
  that an institution fails to meet any standard the agency may
  require the financial institution to submit to the agency an
  acceptable plan to achieve compliance with the standard.  If the
  agency requires submission of a compliance plan and the
  institution fails to timely submit an acceptable plan or to
  implement an accepted plan, the agency must require the
  institution to correct the deficiency.  Under the final rule, an
  institution must file a compliance plan within 30 days of a
<PAGE> 13
  request to do so from the institution's primary federal
  regulatory agency.  The agencies may elect to initiate
  enforcement action in certain cases rather than rely on an
  existing plan particularly where failure to meet one or more of
  the standards could threaten the safe and sound operation of the
  institution.
  
     The Board of Governors issued final amendments to its risk-
  based capital guidelines to be effective December 31, 1994,
  requiring that net unrealized holding gains and losses on
  securities available for sale determined in accordance with SFAS
  No. 115, "Accounting for Certain Investments in Debt and Equity
  Securities," are not to be included in the Tier 1 capital
  component consisting of common stockholders' equity.  Net
  unrealized losses on marketable equity securities (equity
  securities with a readily determinable fair value), however,
  will continue to be deducted from Tier 1 capital.  This rule has
  the general effect of valuing available for sale securities at
  amortized cost (based on historical cost) rather than at fair
  value (generally at market value) for purposes of calculating
  the risk-based and leverage capital ratios.
  
     On December 13, 1994, the Board of Governors issued
  amendments to its risk-based capital guidelines regarding
  concentration of credit risk and risks of non-traditional
  activities, which were effective January 17, 1995.  As amended,
  the risk-based capital guidelines identify concentrations of
  credit risk and evaluate an institution's ability to manage such
  risks and the risk posed by non-traditional activities as
  important factors in assessing an institution's overall capital
  adequacy.
  
     Since 1986, California has permitted California banks and
  bank holding companies to be acquired by banking organizations
  based in other states on a "reciprocal" basis (i.e., provided
  the other state's laws permit California banking organizations
  to acquire banking organizations in that state on substantially
  the same terms and conditions applicable to local banking
  organizations).  Some increase in merger and acquisition
  activity among California and out-of-state banking organizations
  has occurred as a result of this law, as well as increased
  competition for loans and deposits.
  
     Since 1986, California has permitted California banks and
  bank holding companies to be acquired by banking organizations
  based in other states on a "reciprocal" basis (i.e., provided
  the other state's laws permit California banking organizations
  to acquire banking organizations in that state on substantially
  the same terms and conditions applicable to local banking
  organizations).  Since October 2, 1995, California law
<PAGE> 14
  implementing certain provisions of prior federal law has
  (1) permitted interstate merger transactions; (2) prohibited
  interstate branching through the acquisition of a branch
  business unit located in California without acquisition of the
  whole business unit of the California bank; and (3) prohibited
  interstate branching through de novo establishment of California
  branch offices.  Initial entry into California by an out-of-
  state institution must be accomplished by acquisition of or
  merger with an existing whole bank which has been in existence
  for at least five years.
  
       Community Reinvestment Act ("CRA") regulations effective
  as of July 1, 1995 evaluate banks' lending to low and moderate
  income individuals and businesses across a four-point scale from
  "outstanding" to "substantial noncompliance," and are a factor
  in regulatory review of applications to merge, establish new
  branches or form bank holding companies.  In addition, any bank
  rated in "substantial noncompliance" with the CRA regulations
  may be subject to enforcement proceedings.
     
     The Bank has a current rating of "satisfactory" CRA
  compliance, and is scheduled for further examination for CRA
  compliance during 1997.
  
     The Bank has a current rating of "satisfactory" CRA
  compliance, and believes that it would not have received any
  lower rating if the regulations had been in effect when the Bank
  was last examined for CRA compliance on December 31, 1995.
  
     The United States Congress has periodically considered
  legislation which could result in further deregulation of banks
  and other financial institutions.  Such legislation could result
  in further relaxation or elimination of geographic restrictions
  on banks and bank holding companies and increase the level of
  direct competition with other financial institutions, including
  mutual funds, securities brokerage firms, investment banking
  firms and other entities.  The effect of such legislation on the
  Company and the Bank cannot be determined at this time.
  
  ACCOUNTING PRONOUNCEMENTS
  
     In October, 1995, the Financial Accounting Standards Board
  ("FASB")issued Statement of Financial Accounting Standards
  ("SFAS") No. 123, "Accounting for Stock-Based Compensation." 
  SFAS No. 123 establishes accounting and disclosure requirements
  using a fair value method of accounting for stock based employee
  compensation plans.  Under SFAS No. 123, the Company may either
  adopt the new fair value based accounting method or continue the
  intrinsic value based method and provide proforma disclosures of
  net income and earnings per share as if the accounting
  provisions of SFAS No. 123 had been adopted.  The provisions of
<PAGE> 15
  SFAS No. 123 became effective January 1, 1996.  The Company
  adopted only the disclosure requirements of SFAS No. 123 and
  such adoption had no effect on the Company's consolidated net
  earnings or cash flows.
  
     In June, 1996, the FASB issued SFAS No. 125, "Accounting for
  Transfers and Servicing of Financial Assets and Extinguishment
  of Liabilities."  SFAS No. 125 establishes accounting and
  reporting standards for transfers and servicing of financial
  assets and extinguishment of liabilities based on a financial-
  component approach that focuses on control.  Under that
  approach, after a transfer of financial assets, an entity
  recognizes the financial and servicing assets it controls and
  the liabilities it has incurred, derecognizes financial assets 
  when control has been surrendered, and derecognizes liabilities
  when extinguished.  The Company believes that the effect of the
  adoption of SFAS No. 125 will not be material.
  
  Item 2.  Properties
  
     As of December 31, 1996, the Bank had three banking offices
  located in Santa Clara County.  The first banking office, which
  is owned by the Bank, is also the principal executive office of
  the Company, and is located at 12000 Saratoga-Sunnyvale Road,
  Saratoga, California, comprising approximately 5,500 square
  feet.  The office was purchased by the Company in 1988 for
  $1,800,000.  The foregoing description of the office and
  purchase of the office is qualified by reference to the
  Agreement of Purchase and Sale dated July 27, 1988 attached as
  Exhibit 10.1 to the Company's Annual Report on Form 10-K for the
  year ended December 31, 1988, filed with the Securities and
  Exchange Commission on March 27, 1989.
  
  The second banking facility, which is located at 15405 Los Gatos
  Blvd., Suite 103, Los Gatos, California, was opened March 9,
  1988.  The 3,082 square foot facility is leased under a
  noncancellable operating lease which expires in 1998. Current
  lease payments are $6,168 per month for the building and ground
  lease.  Effective January, 1993, the lease was tied to the
  Consumer Price Index with increases to range between 4 and 8
  percent per year.  The foregoing description of the lease is
  qualified by reference to the lease agreement dated October 19,
  1987 attached as Exhibit 10.1 to the Company's Annual Report on
  Form 10-K for the year ended December 31, 1987, filed with the
  Securities and Exchange Commission on March 31, 1988.
  
  On October 3, 1989, the Company opened a third banking facility
  located at 160 West Santa Clara Street, in San Jose, California. 
  The lease agreement for the 7,250 square foot location in the
  downtown area of San Jose is under a noncancellable operating
  lease which expires in 1999.  Current lease payments are $10,989
<PAGE> 16
  per month for the ground floor and $4,018 for the second floor. 
  The lease payments for the ground floor will increase over the
  lease term to $10,989 per month in 1999.  The lease payments for
  the second floor are tied to the Consumer Price Index with the
  increase not to exceed 4% per year.  The foregoing description
  of the lease is qualified by reference to the lease agreement
  dated January 17, 1989 attached as Exhibit 10.4 to the Company's
  Annual Report on Form 10-K for the year ended December 31, 1989,
  filed with the Securities and Exchange Commission on March 27,
  1990.
  
  Item 3.  LEGAL PROCEEDINGS
  
  Neither the Company nor the Bank is a party to, nor is any of
  their property the subject of, any material pending legal
  proceedings other than ordinary routine litigation incidental to
  their respective businesses nor are any such proceedings known
  to be contemplated by governmental authorities.
  
  Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  
     Not Applicable.
  
  Item 5.  MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
  SHAREHOLDER MATTERS.
  
       There is limited trading in and no established public
  trading market for the Company's Common Stock.  The Company's
  Common Stock is not listed on any exchange, nor is it listed by
  The NASDAQ Stock Market.  Hoefer and Arnett, Incorporated,
  Burford Capital and Sutro and Company facilitate trades in the
  Company's Common Stock.
<PAGE> 17
     The following table summarizes those trades of which the
  Company has knowledge based on information provided by Hoefer
  and Arnett, Incorporated, Burford Capital and Sutro and Company,
  setting forth the approximate high and low bid prices for the
  periods indicated.  The prices indicated below may not
  necessarily represent actual transactions. 
<TABLE>
<CAPTION>                                                     
                                       Bid Price of 
                                       Common Stock  (1) 
  Quarter ended                        Low       High 
  <S>                              <C>         <C>
  March 31, 1995................    $6.00       $7.00
  June 30, 1995.................     6.125       6.50
  September 30, 1995............     6.75        7.50
  December 31, 1995.............     7.125       7.375
  March 31, 1996................     7.25        8.50
  June 30, 1996.................     8.25        9.75
  September 30, 1996............     9.06       13.50
  December 31, 1996.............    12.00       12.88 
</TABLE>
  
  (1)  As estimated by the Company based upon trades of which it was
  aware, and not including purchases of stock pursuant to the
  exercise of employee stock options.  
  
  The Company had 322 shareholders of record as of March 1, 1997.
  The Company's shareholders are entitled to receive dividends when
  and as declared by its Board of Directors, out of funds legally
  available therefore, subject to the restrictions set forth in the
  California General Corporation Law (the "Corporation Law").  The
  Corporation Law provides that a corporation may make a distribution
  to its shareholders if the corporation's retained earnings equal at
  least the amount of the proposed distribution.  The Corporation Law
  further provides that, in the event that sufficient retained
  earnings are not available for the proposed distribution, a
  corporation may nevertheless make a distribution to its
  shareholders if it meets two conditions, which generally stated are
  as follows:  (i) the corporation's assets equal at least 1-1/4
  times its liabilities; and (ii) the corporation's current assets
  equal at least its current liabilities or, if the average of the
  corporation's earnings before taxes on income and before interest
  expenses for the two preceding fiscal years was less than the
  average of the corporation's interest expenses for such fiscal
  years, then the corporation's current assets must equal at least 1-
  1/4 times its current liabilities.  Funds for payment of any cash
  dividends by the Company would be obtained from its investments as
  well as dividends and/or management fees from the Bank.  The
  payment of cash dividends by the Bank may be subject to the
  approval of the OCC, as well as restrictions established by federal
  banking law, the Board of Governors and the FDIC.
  <PAGE> 18
       Approval of the OCC is required if the total of all dividends
  declared by the Bank's Board of Directors in any calendar year will
  exceed the Bank's net profits for that year combined with its
  retained net profits for the preceding two years, less any required
  transfers to surplus or to a fund for the retirement of preferred
  stock.
  
       Additionally, the Board of Governors, OCC and/or FDIC, might,
  under certain circumstances, place restrictions on the ability of
  a particular bank to pay dividends based upon peer group averages
  and the performance and maturity of the particular bank, or object
  to management fees on the basis that such fees cannot be supported
  by the value of the services rendered or are not the result of an
  arms length transaction.
  
       It is the intention of the Company to pay cash and stock
  dividends, subject to the restrictions on the payment of cash
  dividends as described above, depending upon the level of earnings,
  management's assessment of future capital needs and other factors
  considered by the Board of Directors.   
<PAGE> 19
    Item 6.  SELECTED FINANCIAL DATA
  
       The following table presents certain consolidated financial
  information concerning the business of the Company and the Bank. 
  This information should be read in conjunction with the
  Consolidated Financial Statements and the notes thereto, and
  Management's Discussion  and Analysis of Financial Condition and
  Results of Operations contained elsewhere herein.
<TABLE>
<CAPTION>  
  Operations                      Year ended December 31,
                            (in thousands, except per share data)
<S>                   <C>     <C>       <C>       <C>       <C>              
                        1996     1995      1994      1993      1992 
Interest income        $7,585  $6,572    $5,446    $4,949    $6,236 
 Interest expense      (3,558) (2,861)   (1,929)   (1,685)   (2,055)

Net interest income     4,027   3,711     3,517     3,264     4,181  
Provision(credit) for
 credit losses           (150)     -       (636)      560       731 

Net interest income
  after provision(credit)
  for credit losses     4,177    3,711     4,153     2,704     3,450 
Other income              353      577       405       581       644
Other expenses         (2,870)  (2,868)   (3,523)   (2,912)   (3,234)
Income before income
  taxes                 1,660    1,420     1,035       373       860 

Provision for income
  taxes                  (559)    (539)     (377)     (128)     (326)
                           
Net income             $1,101   $  881    $  658    $  245    $  534 
                       ======   ======    ======    ======    ======
Net income per
  common and
  equivalent share     $  .96   $  .82    $  .59    $  .21    $  .46 
                       ======   ======    ======    ======    ======
Cash dividends declared
  per common share     $ .175   $  .10    $  -      $  -      $  -  
                       ======   ======    ======    ======    ======
</TABLE>
<TABLE>
<CAPTION>
Balances at year end                        December 31,
                                (in thousands,except per share data)
<S>                 <C>      <C>       <C>     <C>      <C>
                        1996     1995     1994     1993     1992 
Total assets         $121,784 $100,497  $87,536 $79,209  $70,097 
Net loans              52,033   36,759   32,803  33,685   38,888   
Total deposits         89,444   74,949   73,872  65,714   59,085
Shareholders' equity   11,952   11,057    9,627  10,721   10,472   
Book value per share    11.53    10.72     9.34    9.17     8.99    
</TABLE>
<PAGE> 20
DISTRIBUTION OF AVERAGE ASSETS, LIABILITIES AND SHAREHOLDERS'
EQUITY, INTEREST RATES, AND INTEREST DIFFERENTIAL.  The following
are the Company's daily average balance sheets for 1996 and 1995.
<TABLE>
<CAPTION>
                                                 1996
                                         (dollars in thousands)
                                               YIELDS    INTEREST
                                       AVERAGE    OR      INCOME/
                                       BALANCE   RATES    EXPENSE
<S>                                  <C>       <C>     <C>
ASSETS
Interest earning assets:
 Federal funds sold                   $ 14,555    5.2%   $  761
 Investment securities (1)              40,422    6.0     2,419
 Loans (2)                              41,313   10.6     4,395
  Other                                    193    5.2        10
Total interest earning assets           96,483    7.9     7,585
                                                          
Noninterest-earning assets:
  Cash and due from banks                4,190
  Premises and equipment                 2,186
  Other assets (3)                       1,802 
      TOTAL                           $104,661
                                      ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
  Deposits:
   Demand                             $ 17,984    3.6        644
   Savings                              14,238    2.8        403 
   Time                                 28,773    5.8      1,665
     Total                              60,995    4.4      2,712  

Federal home loan bank borrowings       13,253    6.3        841
Other interest bearing liabilities          82    6.1          5

Total interest bearing liabilities      74,330    4.8      3,558
                                                           
Noninterest-bearing liabilities:
   Demand deposits                      18,123
   Accrued expenses and other  
     liabilities                           877

Shareholders' equity                    11,331
    TOTAL                             $104,661
                                      ========
Net interest income                                       $4,027
                   ======
Net yield on interest earning assets              4.2% 
                                                 =====
</TABLE>
(1) Interest income is reflected on an actual basis, not a fully  
    taxable equivalent basis.
(2) Includes no average non-accrual loans for 1996.
(3) Net of average deferred loan fees of $318,000 and average     
    allowance for credit losses of $729,000.
<PAGE> 21
<TABLE>
<CAPTION>
                                                 1995
                                        (dollars in thousands)
                                               YIELDS    INTEREST
                                       AVERAGE   OR       INCOME/
                                       BALANCE  RATES     EXPENSE
<S>                                   <C>       <C>     <C>
ASSETS
Interest earning assets:
  Federal funds sold                   $ 7,429    5.7%    $  421
  Investment securities (1)             37,229    6.3      2,363
  Loans (2)                             34,057   11.1      3,788
Total interest earning assets           78,715    8.3      6,572
                                                          
Noninterest-earning assets:
  Cash and due from banks                3,618
  Premises and equipment                 2,093
  Other assets (3)                       3,000  

      TOTAL                            $87,426
                                       =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest bearing liabilities:
  Deposits:
   Demand                              $14,579    3.4        501
   Savings                              13,836    2.6        366 
   Time                                 27,054    5.9      1,603
Total                                   55,469    4.5      2,470  
Federal home loan bank borrowings        5,213    7.2        377
Other interest bearing liabilities         233    6.0         14 
Total interest bearing liabilities      60,915    4.7      2,861  
Noninterest-bearing liabilities:
   Demand deposits                      15,280
   Accrued expenses and other  
     liabilities                         1,001

Shareholders' equity                    10,230
    TOTAL                              $87,426
                                       =======
Net interest income                                       $3,711
                   =====
Net yield on interest earning assets              4.7% 
                                                 ====
</TABLE>
(1) Interest income is reflected on an actual basis, not a fully  
    taxable equivalent basis.
(2) Including average non-accrual loans of $59,000. 
(3) Net of average deferred loan fees of $238,000 and average     
    allowance for credit losses of $769,000.
<PAGE> 22
INTEREST DIFFERENTIAL - RATE/VOLUME CHANGES

Interest differential is affected by changes in volume, changes
in rates and a combination of changes in volume and rates. 
Volume changes are caused by changes in the levels of average
earning assets and average interest bearing deposits and
borrowings.  Rate changes result from changes in yields earned on
assets and rates paid on liabilities.  Changes not solely
attributable to volume or rates have been allocated to the rate
component.  The following table shows the effect on the interest
differential of volume and rate changes for the years 1996 and
1995.



                          1996 over 1995             1995 over 1994
                       Increase (Decrease) Due    Increase (Decrease) Due
                           to Changes in:             to Changes in:
                                        (in thousands)
                                      Net                               Net
                      Volume    Rate    Change     Volume     Rate     Change 
Interest earning assets:                                     
Federal funds sold    $ 409   $ (69)   $  340      $   63   $  123     $  186
Interest bearing    
deposits in       
other banks              10      -         10         (26)      -         (26)
Securities (1)          196    (140)       56         329      210        539
Loans                   798    (191)      607         153      274        427

Total                 1,413    (400)    1,013         519      607      1,126

Interest bearing    
liabilities:       
Demand deposits         110      33       143          36       70        106
Savings deposits          4      33        37         (40)     (15)       (55)
Time deposits            95     (33)       62         179      321        500
Borrowings              954    (490)      464         377       -         377
Other liabilities        (9)     -        ( 9)          4       -           4

Total                 1,154    (457)      697         556      376        932


Interest differential$  259  $   57   $   316     $   (37) $   231     $  194
    
(1)Interest income is reflected on an actual basis, not a fully taxable
   equivalent basis.
<PAGE> 23
INVESTMENT PORTFOLIO

  The amortized cost and estimated market values of securities at December 31
are as follows:
                                               December 31,   
          
                                         1996                  1995        
                                                (in thousands)
SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
                                              Estimated              Estimated
                                 Amortized      Market   Amortized    Market
                                   Cost         Value       Cost       Value
<S>                                 <C>        <C>        <C>         <C>
U.S. Treasury and agency securities  $11,704    $11,671    $10,290     $10,287
Governmental mutual fund               3,128      2,958      3,128       3,041
Federal Home Loan Bank stock           3,170      3,170      1,958       1,958 
Bankers Bank stock                       150        150       -           -   
Total                                $18,152    $17,949    $15,376     $15,286
                                     =======    =======    =======     =======
</TABLE>
SECURITIES HELD TO MATURITY
<TABLE>
<CAPTION>
                                                Estimated             Estimated 
                                     Amortized   Market    Amortized    Market
                                       Cost      Value      Cost        Value  
<S>                                 <C>        <C>        <C>         <C>
U.S. Treasury and agency securities  $ 5,489    $ 5,501    $ 5,564     $ 5,632
Mortgage-backed securities            13,204     13,070     11,145      11,152
Obligations of states and political
  subdivisions                         5,328      5,354      3,549       3,589
Federal Reserve Bank stock                90         90         90          90
                                     $24,111    $24,015    $20,348     $20,463
                                     =======    =======    =======     =======
</TABLE>
As investment securities mature, to the extent that the proceeds are
reinvested in investment securities, management expects that the
categories of taxable investment securities purchased will be in
approximately the same proportion as existed at December 31, 1996.  The
maturities and yields of the investment portfolio at December 31, 1996
are shown below.
<PAGE> 24
MATURITY AND YIELDS OF INVESTMENT SECURITIES
At December 31, 1996
(Dollars in thousands)

SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
             Total                 After 1 Year,   After 5 years
           Carrying Within 1 Year Within 5 Years Within 10 Years After 10 years
            Value  Amount Yield(1)Amount Yield(1)Amount Yield(1 )Amount Yield(1)
<S>       <C>     <C>    <C>     <C>     <C>   <C>       <C>    <C>    <C>
 Treasury 
 and agency
 securities$ 6,069 $  589  7.48%  $1,980  6.16% $3,500    5.88%     -       -
Governmental
 mutual 
 funds       2,958  2,958  5.88      -     -       -        -       -       -
Federal Home 
 Loan Bank
 stock       3,170    -     -        -     -       -       -     $3,170  6.20%
Bankers Bank
 stock         150    -     -        -     -       -       -        150    -  
           $12,347 $3,547  6.15%  $1,980  6.16% $3,500    5.88%  $3,320  6.20%
           ======= ======         ======        ======           ======
Mortgage-
 backed
 securities 5,602
Total     $17,949
          =======
</TABLE>

SECURITIES HELD TO MATURITY
<TABLE>
<CAPTION>
              Total                 After 1 Year,     After 5 Years  
            Carrying Within 1 Year Within 5 Years Within 10 Years After 10 Years
             Amount Amount Yield(1)Amount Yield(1)Amount Yield(1)Amount Yield(1)
<S>          <C>      <C>  <C>   <C>    <C>    <C>      <C>     <C>    <C>
U.S. Treasury 
  and agency
  securitie s $ 5,489   -    -    $ 1,996 4.55%  $ 3,493 4.50%      -      -   
  
Obligations of
  states and
  political
  subdivisions  5,328  $635 3.80%   2,210 4.77     2,483 5.20%      -      -    

Federal Reserve
 Bank stock        90                                               90   6.00%

Total         $10,907  $635 3.80%  $9,154 5.83%  $11,197 6.16%  $2,126   6.00%
             ======= ======        ======        =======        ======
Mortgage-
 backed
 securities   13,204
Total        $24,111
             =======
</TABLE>
(1)  Yields are actual, not fully taxable equivalent.

Mortgage-backed securities generally have stated maturities of over 5
years but are subject to likely and substantial prepayments which
effectively accelerate actual maturities.
<PAGE> 25
LOAN PORTFOLIO

The composition of the loan portfolio at December 31, 1996 and
1995 is summarized in the following table.

                                      December 31, 
                                   1996       1995   
                                     (in thousands)
Real estate:
 Construction                     $ 9,249    $ 7,837
 Other                             21,473     17,507
Commercial                         18,242     11,585
Installment                         1,861         77
Lease financing                     2,160        837
                                  $52,985    $37,843
                                  =======    ======= 

At December 31, 1996, loans were due as follows:

<TABLE>
<CAPTION>
                                                         Lease
                 R/E Const R/E Other   Com'l   Install Financing  Total
                    ====== ========= ========= ======= ========= =======
                                      (in thousands)
<S>                <C>     <C>      <C>      <C>       <C>      <C>
Due in one year
  or less           $9,249  $   292   $ 9,217  $  -        216   $18,974
Due after one year     -     21,181     9,025   1,861   $1,944    34,011
 
TOTAL               $9,249  $21,473   $18,242  $1,861   $2,160   $52,985
                    ======  =======   =======  ======   ======   =======
</TABLE>
Of the loans due after one year, $20,364,000 have fixed rates and
$13,647,000 have variable interest rates.

RISK ELEMENTS

     There were no nonaccrual loans at December 31, 1996 or 1995.   

     At December 31, 1996 and 1995, there were no loans past due 90
days or more as to principal or interest and still accruing
interest.  There was one loan at December 31, 1996 in the amount
of $187,000 which was a troubled debt restructuring as defined in
Statement of Financial Accounting Standards No. 15, "Accounting
by Debtors and Creditors for Troubled Debt Restructuring."

     There were five potential problem loans at December 31, 1996
having a combined principal balance of $1,140,000 ($1,161,000 at
December 31, 1995).  Potential problem loans are loans which are
generally current as to principal and interest but have been
identified by the Company as potential problem loans due either
to a decrease in the underlying value of the property securing
the credit or some other deterioration in the creditworthiness of
the borrower.  All of the five loans identified as potential
problem loans are  secured by real estate and personal property.  
<PAGE> 26
     The Company does not believe there to be any concentration of
loans in excess of 10% of total loans which is not disclosed
above which would cause them to be similarly impacted by economic
or other conditions.  See Management's Discussion and Analysis of
Financial Condition and Results of Operations-Provision for
Credit Losses, regarding discussion of California economic
conditions.

SUMMARY OF CREDIT EXPERIENCE

Analysis of the Allowance for Credit Losses

                               Year Ended December 31,
                                 1996           1995 
Beginning balance            $776,000       $738,000     
Reductions credited
  to operations              (150,000)          -    
Write-offs - Commercial       (39,000)       (45,000)
Recoveries - Commercial        41,000         83,000     

Ending balanc               $ 628,000     $  776,000
                             =========     ==========
Ratio of net recoveries 
  during the period to average
  loans outstanding during the
  year.                         (.005)%         (.11)%
                                ======         ======

Ratio of allowance for credit
  losses to loans outstanding
  at end of year                 1.19%          2.05%
                                ======         ======

Allocation of the Allowance for Credit Losses 
                 December 31, 1996        December 31, 1995    
                           Percent                  Percent 
                           of loans in              of loans in
                           each category            each category
                 Amount   to total loans  Amount   to total loans
                                                         
Commercial      $331,000        34%       $228,000       31% 
Real estate- 
 construction     70,000        18         124,000       21 
Real estate-
  other          215,000        41         424,000       46
Installment       12,000         3            -           - 
Lease financing     -            4            -           2 
                $628,000       100%       $776,000      100%
                ========       ====       ========      ====
<PAGE> 27
DEPOSITS

The average balance sheets for 1996 and 1995 set forth the average
amount and average interest rate paid for deposits.

At December 31, 1996, time deposits of $100,000 or more have a
remaining maturity as follows:
                                      (in thousands)
3 months or less                          $ 5,585
Over 3 months to 6 months                   2,128
Over 6 months to 12 months                  2,622
Over 1 year to 5 years                      2,929 
  TOTAL                                   $13,264  
                                          =======

RETURN ON EQUITY AND ASSETS

    The following table sets forth certain ratios of profita-
bility, liquidity and capital.

                                     1996   1995 
Return on average assets             1.1%   1.0% 
Return on average equity             9.7%   8.6%
Cash dividends declared per share
  to earnings per share             18.2%  12.2 
Average equity to average assets    10.8%  11.7%
<PAGE> 28

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

      Certain matters discussed or incorporated by reference in
this Annual Report on Form 10-K are forward-looking statements that
are subject to risks and uncertainties that could cause actual
results to differ materially from those projected.  Such risks and
uncertainties include, but are not limited to, matters described in
Item 7 - "Management's Discussion and Analysis of Financial
Condition and Results of Operations."  Therefore, the information
set forth therein should be carefully considered when evaluating the
the business prospects of the Company and the Bank.

OVERVIEW

      Net income in 1996 was $1,101,000 ($.96 per share) compared
to $881,000 ($.82 per share) in 1995 and $658,000 ($.59 per share)
in 1994.  The increase in net income in 1996 resulted primarily
from an increase in the volume of earning assets, offset, in part
by a decrease in the yield on earning assets and an increase in
interest expense due to the increased volume of interest-bearing
liabilities.  The increase in net income in 1995 resulted primarily
from an increase in the volume and yield on earning assets and a
decrease in expense related to Other Real Estate Owned (OREO),
offset, in part, by an increase in the volume and yield on
interest-bearing liabilities and a reduced benefit for credit
losses.  The table below highlights the changes in the nature and
sources of income and expense from 1995 to 1996 and from 1994 to
1995.
<TABLE>
<CAPTION>
                                         Net                Net
                                        Income             Income      
                                      Increase           Increase 
                        1996    1995  (Decrease)    1994 (Decrease)    
                                    (in thousands)
<S>                   <C>     <C>      <C>      <C>       <C>
Net interest income    $4,027  $3,711   $ 316     $3,517   $ 194
Provision (credit)
  for credit losses      (150)    -       150       (636)    636     
Noninterest income        353     577    (224)       405     172    
Noninterest expense    (2,870) (2,868)     (2)    (3,523)    655 
Income before
  income taxes          1,660   1,420     240      1,035     385   
Provision for
  income taxes           (559)   (539)    (20)      (377)   (162)

Net income             $1,101  $  881   $ 220    $   658   $ 223
                       ======  ======   =====     ======   =====
</TABLE>
<PAGE> 29
NET INTEREST INCOME                                              

Net interest income is affected by changes in the nature and volume of
earning assets held during the year, the rates earned on such assets
and the rates paid on interest-bearing liabilities. The table below
details the average balances, interest income and expense and the
effective yields/rates for earning assets and interest bearing
liabilities.
<TABLE>
<CAPTION>
                    1996                1995                       1994       
          Average         Yield/ Average         Yield/ Average         Yield/
          Balance Interest Rate  Balance Interest Rate  Balance Interest Rate
                          (in thousands, except percentages)
<S>      <C>      <C>     <C>    <C>      <C>    <C>  <C>      <C>    <C> 
Earning
  assets:
  Loans   $41,313  $4,395  10.6%  $34,057  $3,788 11.1%$32,572  $3,361 10.3%
  Other    55,170   3,190   5.8    44,658   2,784 6.2   38,074   2,085  5.5 
Total
earning
  assets  $96,483                 $78,715              $70,646
          =======                 =======              =======

Interest
 bearing
 liabilities:
 Deposits $60,995   2,712   4.4   $55,649   2,470 4.5  $51,864   1,919  3.7 
  
 Other
  interest
  bearing
  funds    13,335     846   6.3     5,446     391 7.2      380      10  2.6 

Total
  interest
  bearing
  liabili-
  ties    $74,330                 $60,915              $52,244
          =======                 =======              =======
Net interest
  income and
  margin           $4,027   4.2%           $3,711 4.7%          $3,517  5.0%
                   ======   ====           ====== ====          ======  ====
</TABLE>

Average earning assets increased $17.8 million or 23%, to $96.5
million during 1996 compared to $78.7 million in 1995.  The
increase in loans was primarily in the longer term real estate
loan portfolio.  These loans are generally made for a term of
between five and fifteen years and are matched against specific
blocks of deposits or borrowings in order to alleviate interest
rate risk.  The increase in the investment portfolio is primarily
the result of increased average deposits and other borrowings. 
During 1995, average earning assets increased $8.1 million,or 11%
to $78.7 million, compared to $70.6 million for 1994.  This
<PAGE> 30
increase was primarily in the investment portfolio and was the
result of increased average balances and the reinvestment of
matured loan balances that were not being utilized to fund loans.
Average interest-bearing liabilities increased $13.4 million, or
22%, during 1996 to $74.3  million from $60.9 million in 1995
primarily due to an increase in Federal Home Loan Bank borrowings
which were matched against specific longer term real estate loans
and an increase in interest bearing checking deposits.  Average
interest-bearing liabilities increased $8.7 million, or 17%, to
$60.9 million, in 1995 from $52.2 million in 1994.  This increase
was primarily due to an increase in Federal Home Loan Bank
borrowings which were matched against specific longer term real
estate loans.


EARNING ASSETS-LOANS

The average loan portfolio increased $7.2 million, or 21%, from
$34.1 million in 1995 to $41.3 million in 1996.  The increase was
primarily in the longer term real estate loan portfolio as a
result of marketing efforts in that area.  Average loans
increased $1.5 million from $32.6 million in 1994 to $34.1
million in 1995.  The average loan to average deposit ratio for
1996 was 68% compared to 49% and 47% in 1995 and 1994,
respectively.  The average yield on loans increased from 10.3% in
1994 to 11.1% in 1995 and then decreased to 10.6% in 1996.  The
decrease in yield in 1996 primarily reflects a decrease in
interest rates on loans originated during the year as compared to
1995.  The increase in yield in 1995 reflects an increase in the
interest rates for the year as compared to 1994. 

OTHER EARNING ASSETS

Average other earning assets, consisting of Federal funds sold,
interest bearing deposits in other banks and investment
securities, increased $10.5 million or 24% during 1996 from $44.7
million to $55.2 million.  During 1995, average other earning
assets increased $6.6 million from $38.1 million in 1994.  The
increase in the securities portfolio in 1996 was primarily due to
the increased level of deposits.  The increase in 1995 was
primarily due to the reinvestment of matured loan balances into
the securities portfolio that were not currently being utilized
to fund loans.  The yield earned on average other earning assets
increased from 5.5% in 1994 to 6.2% in 1995 and then decreased to
5.8% in 1996.  In 1996, the change in the volume and yields of
other earning assets resulted in an increase in net interest
income of $406,000. In 1995, the increase in the volume and
yields resulted in an increase in net interest income of $699,000
on other earning assets. 
<PAGE> 31
INTEREST BEARING LIABILITIES

Average interest bearing liabilities increased $13.4 million from
$60.9 million in 1995 to $74.3 million in 1996 and increased $8.7
million from $52.2 million in 1994 to $60.9 million in 1995.  The
increases in 1996 and 1995 were primarily a result of increased
Federal Home Loan Bank borrowings which were matched against
certain longer term real estate loans to alleviate the impact of
interest rate risk.  Average non-interest bearing deposits
increased $2.8 million in 1996 to $18.1 million and decreased
$1.2 million to $15.3 million in 1995 from an average of $16.5
million in 1994.  Overall rates on interest bearing deposits
increased from 3.7% in 1994 to 4.5% in 1995 and then decreased to
4.4% in 1996.  The net result of the changes in average balances
and rates was an increase in total interest expense of $697,000
in 1996 from 1995 and an increase of $932,000 in 1995 from 1994.  

NET INTEREST MARGIN

The net interest margin decreased from 5.0% in 1994 to 4.7% in
1995 and 4.2% in 1996.  The changes in the net interest margin
are primarily attributable to fluctuations in the loan, deposit
and borrowing mix and the relationship between rates charged and
rates paid.

PROVISION FOR CREDIT LOSSES

The Bank maintains an allowance for possible credit losses which
is based, in part, on the Bank's historical loss experience, the
impact of forecasted economic conditions within the Bank's market
area, and, as applicable, the State of California, the value of
underlying collateral, loan performance and inherent risks in the
loan portfolio.  The allowance is reduced by charge-offs and
increased by provisions for credit losses charged to operating
expense and recoveries of previously charged-off loans.  During
1996 and 1995, the Bank did not provide any additional provision
for credit losses.  In 1996, $150,000 was reversed from the
allowance for credit losses.  The allowance for credit losses was
$628,000 in 1996, compared to $776,000 for 1995 and $738,000 for
1994.  At December 31, 1996, the allowance was approximately 1.2%
of total loans, compared to approximately 2.1% at December 31,
1995.  There were no nonaccrual loans at December 31, 1996 or
1995.  There was no interest income foregone on nonaccrual loans
during 1996 or 1995.  Interest income forgone on nonaccrual loans
in 1994 was $59,000. 

At December 31, 1996 and 1995, there were no loans past due 90
days or more as to principal or interest and still accruing
interest. 
<PAGE> 33
Other Real Estate Owned totalled $1,252,000 at December 31, 1996
($1,745,000 at December 31, 1995).  Other real estate owned
consists of a 12 lot subdivision with an appraised value in
excess of the Bank's carrying value.  The Company is actively
marketing the property.

Nonperforming loans and other real estate owned are summarized
below:
                            December 31, 1996 December 31, 1995
Nonperforming loans:
  Past due 90 days or more        
    and still accruing interest    $     -          $     -    
  Nonaccrual                             -                -   
    
    Total                                -                -   

Other real estate owned             1,252,000        1,745,000

Total nonperforming loans and
  other real estate owned          $1,252,000       $1,745,000
                                   ==========       ==========  

Management is of the opinion that the allowance for credit losses
is maintained at an adequate level for known and currently
anticipated future risks inherent in the loan portfolio. 
However, the Bank's loan portfolio, which includes approximately
$31,000,000 in real estate loans, representing approximately 58%
of the portfolio, could be adversely affected if California
economic conditions and the real estate market in the Bank's
market area were to weaken.  The effect of such events, although
uncertain at this time, could result in an increase in the level
of nonperforming loans and OREO and the level of the allowance
for loan losses, which could adversely affect the Company's and
the Bank's future growth and profitability.

NONINTEREST INCOME

Noninterest income decreased $224,000, or 39%, to $353,000 during
1996 compared to $577,000 during 1995. During 1995, noninterest
income increased $172,000, or 42%, from $405,000 in 1994.  The
decrease in 1996 is primarily attributable to net gain on sale of
securities of $72,000 in 1995, a gain on sale of OREO of $55,000
realized in 1995 and a decrease of $102,000 in rental income from
OREO.  The increase in 1995 is primarily attributable to rental
income from OREO of $102,000, net gain on sale of securities of
$72,000 and gain on sale of OREO of $55,000, offset by a decline
in rental income from leased assets of $60,000.
<PAGE> 33



NONINTEREST EXPENSE

Noninterest expense was $2.9 million in 1996 and 1995, compared
to $3.5 million in 1994.  In 1996, increases in salary and
directors' expenses were offset by decreases in OREO and
assessment expenses.  The decrease in 1995 is primarily
attributable to the loss on sale of securities of $196,000 which
was realized in 1994 and decreased OREO reserve expense.

Generally, expenses have grown commensurate with the growth in
assets and increases in the volume of transactions.  As a
percentage of average earning assets, noninterest expense
decreased to 3.0% in 1996 from 3.6% in 1995.  In 1995,
noninterest expense as a percentage of earning assets decreased
to 3.6% from 5.0% in 1994.  As pressure continues on net interest
margins and net asset growth, management of operating expenses
will continue to be a priority. 

INCOME TAXES

The Company's effective tax rate was 33.7% for 1996, 38.0% for
1995 and 36.4% for 1994.  See Note 9 to the consolidated
financial statements for additional information on income taxes.

LIQUIDITY/INTEREST RATE SENSITIVITY

The Bank manages its liquidity to provide adequate funds at an
acceptable cost to support borrowing requirements and deposit
flows of its customers. At December 31, 1996 and 1995, liquid
assets as a percentage of deposits were 46% and 51%,
respectively.  In addition to cash and due from banks, liquid
assets include interest bearing deposits with other banks,
Federal funds sold and investment securities.  The Bank has $10.0
million in Federal funds lines of credit available with
correspondent banks to meet liquidity needs.

Management regularly reviews general economic and financial
conditions, both external and internal, and determines whether
the positions taken with respect to liquidity and interest rate
sensitivity continue to be appropriate.  The Bank also utilizes a
monthly "Gap" report which identifies rate sensitivity over the
short- and long-term.        

The following table sets forth the distribution of repricing
opportunities, based on contractual terms, of the Company's
earning assets and interest-bearing liabilities at December 31,
1996, the interest rate sensitivity gap (i.e. interest rate
sensitive assets less interest rate sensitive liabilities), the
cumulative interest rate sensitivity gap, the interest rate
sensitivity gap ratio (i.e. interest rate sensitive assets
<PAGE> 34
divided by interest rate sensitive liabilities) and the
cumulative interest rate sensitivity gap ratio.

Based on the contractual terms of its assets and liabilities, the
Bank is currently asset sensitive in terms of its short-term
exposure to interest rates.  In other words, the Bank's assets
reprice faster than its liabilities.

DISTRIBUTION OF REPRICING OPPORTUNITIES
At December 31, 1996
(Dollars in thousands)

                            After Three After Six   After One
                     Within Months But  Months But  Year But   After 
                     Three  Within Six  Within One    Within   Five 
                     Months   Months     Year    Five Years    Years    Total  

Federal funds sold   $18,300      -        -          -         -     $ 18,300
Municipal securities     -       $230     $405    $ 2,210   $ 2,483      5,328
U.S. Treasury and                                                             
  agency securities    2,958      589      999      7,952    20,824     33,322
FRB/FHLB stock           -        -        -          -       3,410      3,410
Loans                 29,335    1,367    1,919      7,825    12,539     52,985  
                     -------   ------   ------    -------   -------   --------  
Total earning assets $50,593   $2,186   $3,323    $17,987   $39,256   $113,345  
                     -------   ------   ------    -------   -------   --------  

Interest bearing
  demand accounts    $23,171       -          -        -        -      $23,171  
Savings accounts      13,935       -          -        -        -       13,935  
Time certificates of
  deposit of $100,000
  or more              5,585    $2,128     $2,622   $2,929      -       13,264
Other time deposits    4,374     3,654      4,296    3,927      -       16,251  
Federal funds
  purchased            1,500       -         -         -        -        1,500 
Other borrowings         -         -         -       6,358  $11,843     18,201 
                     -------   -------    ------   -------  -------    -------  
Total interest-bearing
  liabilities        $48,565   $ 5,782    $6,918   $13,214  $11,843    $86,322  
                     -------   -------    ------   -------  -------     ------  
Interest rate
  sensitivity gap    $ 2,028   $(3,596   $(3,595)  $ 4,773  $27,413    $27,023
                     =======   =======   =======   =======  =======    =======  
Cumulative interest
  rate sensitivity
  gap                $ 2,028   $(1,568)  $(5,163)  $  (390) $27,023
                     =======   =======   =======   =======  =======
Interest rate
  sensitivity gap
  ratio                1.04%     0.38%     0.48%     1.36%      N/A

Cumulative interest
  rate sensitivity
  gap ratio            1.04%     0.97%     0.92%     0.99%      1.31%
<PAGE> 35
INFLATION

The impact of inflation on a financial institution differs
significantly from that exerted on manufacturing, or other
commercial concerns, primarily because its assets and liabilities
are largely monetary.  In general, inflation primarily affects
the Company indirectly through its effect on the ability of its
customers to repay loans, or its impact on market rates of
interest, and thus the ability of the Bank to attract loan
customers.  Inflation affects the growth of total assets by
increasing the level of loan demand, and potentially adversely
affects the Company's capital adequacy because loan growth in
inflationary periods may increase more rapidly than capital.   
Interest rates in particular are significantly affected by
inflation, but neither the timing nor the magnitude of the
changes coincides with changes in the Consumer Price Index, which
is one of the indicators used to measure the rate of inflation. 
Adjustments in interest rates may be delayed because of the
possible imposition of regulatory constraints.  In addition to
its effects on interest rates, inflation directly affects the
Company by increasing the Company's operating expenses.  The
effect of inflation during the three-year period ended
December 31, 1996 has not been significant to the Company's
financial position or results of operations. 

CAPITAL RESOURCES

The Company's capital resources consist of shareholders' equity
and (for regulatory purposes) the allowance for credit losses.
During the year ended December 31, 1996, the Company's regulatory
capital increased $850,000. Tier 1 capital increased $895,000 due
to the retention of earnings and sale of stock, offset, in part
by an increase in the unrealized loss on equity securities
available for sale of $59,000.  Tier 2 capital decreased $45,000
due to the decrease in the allowance for credit losses.  

The Company and the Bank are subject to capital adequacy
guidelines issued by the Board of Governors and the OCC. The
Company and the Bank are required to maintain total capital equal
to at least 8% of assets and commitments to extend credit,
weighted by risk, of which at least 4% must consist primarily of
common equity including retained earnings (Tier 1 capital) and
the remainder may consist of subordinated debt, cumulative
preferred stock or a limited amount of loan loss reserves. 
Certain assets and commitments to extend credit present less risk
than others and will be assigned to lower risk-weighted
categories requiring less capital allocation than the 8% total
ratio.  For example, cash and government securities are assigned
to a 0% risk-weighted category, most home mortgage loans are
assigned to a 50% risk-weighted category requiring a 4% capital
allocation and commercial loans are assigned to a 100% risk-
weighted category requiring an 8% capital allocation.  As of
<PAGE> 36
December 31, 1996, the Company's total risk-based capital ratio
was approximately 18.0% (approximately 17.1% for the Bank)
compared to approximately 22.0% (approximately 21.7% for the
Bank) at December 31, 1995.

The Board of Governors and the OCC adopted a 3% minimum leverage
ratio for banking organizations as a supplement to the risk-
weighted capital guidelines.  The minimum leverage ratio is
intended to limit the ability of banking  organizations to
leverage their equity capital base by increasing assets and
liabilities without increasing capital proportionately.  The 3%
minimum leverage ratio constitutes a minimum ratio for well-run
banking organizations.  Organizations experiencing or
anticipating significant growth or failing to meet certain Board
of Governors standards will be required to maintain a minimum
leverage ratio ranging from 100 to 200 basis points in excess of
the 3% ratio.  

The following table reflects the Company's Leverage, Tier 1 and
total risk-based capital ratios for the three year period ended
December 31, 1996.

                                        1996     1995     1994
Leverage ratio                          10.5%    11.7%    12.3%
Tier 1 capital ratio                    17.1%    20.8%    20.9% 
Total risk-based capital ratio          18.0%    22.0%    22.2%

On December 19, 1991, President Bush signed the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA").  The
FDICIA, among other matters, substantially revised banking
regulations and established a framework for determination of
capital adequacy of financial institutions.  Under the FDICIA,
financial institutions are placed into one of five capital
adequacy catagories as follows: (1) "Well capitalized" -
consisting of institutions with a total risk-based capital ratio
of 10% or greater, a Tier 1 risk-based capital ratio of 6% or
greater and a leverage ratio of 5% or greater, and the
institution is not subject to an order, written agreement,
capital directive or prompt corrective action directive; (2)
"Adequately capitalized" - consisting of institutions with a
total risk-based capital ratio of 8% or greater, a Tier 1 risk-based capital
 ratio of 4% or greater and a leverage ratio of 4%
or greater, and the institution does not meet the definition of a
"well capitalized" institution; (3) "Undercapitalized" -
consisting of institutions with a total risk-based capital ratio
less than 8%, a Tier 1 risk-based capital ratio of less than 4%,
or a leverage ratio of less than 4%; (4) "Significantly
undercapitalized" - consisting of institutions with a total risk-
based capital ratio of less than 6%, a Tier 1 risk-based capital
ratio of less than 3%, or a leverage ratio of less than 3%; (5)
"Critically undercapitalized" - consisting of an institution with
a ratio of tangible equity to total assets that is equal to or
less than 2%.
<PAGE> 37
Financial institutions classified as undercapitalized or below
are subject to various limitations including, among other
matters, certain supervisory actions by bank regulatory
authorities and restrictions related to (i) growth of assets,
(ii) payment of interest on subordinated indebtedness, (iii)
payment of dividends or other capital distributions, and (iv)
payment of management fees to a parent holding company.  The
FDICIA requires the bank regulatory authorities to initiate
corrective action regarding financial institutions which fail to
meet minimum capital requirements.  Such action may result in
orders to, among other matters, augment capital and reduce total
assets.  Critically undercapitalized financial institutions may
also be subject to appointment of a receiver or implementation of
a capitalization plan.

OTHER MATTERS

     From time to time, the Company's Board of Directors reviews
and consults with advisors, including investment banking,
accounting and legal advisors, regarding banking industry trends
and developments, as well as internal and external opportunities
to maximize shareholder value.  Such reviews and consultations
include evaluating and comparing internal results of operations
projections and external opportunities for mergers, acquisitions,
reorganizations, or other transactions with third parties which
may be in the interests of the Company's shareholders.  The
Company's Board of Directors considers such periodic review and
consultation to be important as part of their analysis of the
Company's value and prospects in the changing banking environment
and in view of the current consolidation activity within the
banking industry.
<PAGE> 38
Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS


                                                           Page
Independent Auditors' Report                                40

Consolidated Balance Sheets, December 31, 1996 and 1995     41 

Consolidated Income Statements for the years ended  
   December 31, 1996, 1995, and 1994                        42

Consolidated Statements of Shareholders' Equity for the  
   years ended December 31, 1996, 1995 and 1994             42

Consolidated Statements of Cash Flows for the years 
   ended December 31, 1996, 1995 and 1994                   44


Notes to Consolidated Financial Statements                 45-58

All schedules have been omitted since the required information is
not present or not present in amounts sufficient to require
submission of the schedule or because the information required is
included in the Consolidated Financial Statements or notes
thereto.
<PAGE> 39
INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
 of Saratoga Bancorp:

We have audited the accompanying consolidated balance sheets of 
Saratoga Bancorp and subsidiary as of December 31, 1996 and
1995, and the related consolidated statements of  income, shareholders' 
equity and cash flows for each of the three years in the period
ended December 31, 1996.  These financial statements are the responsibility 
of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates 
made by management, as well as evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, such consolidated financial statements present fairly, 
in all material respects, the financial position of Saratoga Bancorp
and subsidiary as of December 31, 1996 and 1995, and the results of 
their operations and their cash flows for each of the three years
in the period ended December 31, 1996 in conformity with generally 
accepted accounting principles.



DELOITTE  &  TOUCHE LLP
San Jose, California
January 24, 1997

<PAGE> 40
<TABLE>
<CAPTION>
SARATOGA BANCORP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS                              
DECEMBER 31, 1996 AND 1995                          
                           
ASSETS                                 1996                1995
<S>                              <C>              <C> 
CASH AND DUE FROM BANKS           $  4,543,000     $     5,239,000
FEDERAL FUNDS SOLD                  18,300,000          17,700,000

Total cash and  equivalents         22,843,000          22,939,000 
INTEREST-BEARING         
   DEPOSITS IN OTHER BANK                 -                200,000   
SECURITIES AVAILABLE FOR SALE       17,949,000          15,286,000
SECURITIES HELD TO MATURITY         24,111,000          20,348,000
 (market value - 1996, $24,165,000,
  1995, $20,643,000)
LOANS                               52,661,000          37,535,000
ALLOWANCE FOR CREDIT LOSSES           (628,000)           (776,000)
          Loans, net                52,033,000          36,759,000
PREMISES AND EQUIPMENT, Net          2,135,000           1,988,000
OTHER REAL ESTATE OWNED              1,252,000           1,745,000
ACCRUED INTEREST RECEIVABLE AND
OTHER ASSETS                         1,461,000           1,232,000
TOTAL                         $    121,784.000     $   100,497,000 
                              ================     ===============
LIABILITIES AND  
 SHAREHOLDERS' EQUITY                         
DEPOSITS:                            
  Demand, noninterest-bearing $    22,823,000      $    20,410,000
  Demand, interest-bearing         23,171,000           14,218,000
     Savings                       13,935,000           13,113,000
     Time                          29,515,000           27,208,000
          Total deposits           89,444,000           74,949,000
 FEDERAL FUNDS PURCHASED            1,500,000            1,500,000
OTHER BORROWINGS                   18,201,000           12,087,000
ACCRUED EXPENSES AND 
  OTHER LIABILITIES                   687,000              904,000 
          Total liabilities       109,832,000           89,440,000
COMMITMENTS (Notes 5 and 10)                             
SHAREHOLDERS' EQUITY:                          
 Preferred stock, no par 
  value; authorized 
  1,000,000 shares; no shares 
  issued
 Common stock, no par 
  value; authorized 20,000,000 
  shares; outstanding 1,036,392 
  in 1996 and 1,030,972 shares 
  in 1995.                          4,461,000           4,427,000
 Retained earnings                  7,717,000           6,797,000
 Net unrealized loss on 
  securities available
  for sale                           (226,000)           (167,000)
   Total shareholders' equity      11,952,000          11,057,000
 TOTAL                        $   121,784,000    $    100,497,000          
                              ===============    ================
</TABLE>
See notes to consolidated financial statements.
<PAGE> 41
SARATOGA BANCORP AND SUBSIDIARY                     
<TABLE>
<CAPTION>
CONSOLIDATED INCOME STATEMENTS                      
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
                                   1996           1995           1994 
<S>                       <C>            <C>            <C>  
INTEREST INCOME:                          
     Loans, including fees $    4,395,000 $    3,788,000 $    3,361,000
     Federal funds sold           761,000        421,000        235,000
     Securities:                          
          Taxable               2,244,000      2,194,000      1,697,000
          Non-taxable             175,000        169,000        127,000  
     Other                         10,000           -            26,000 
       Total interest income    7,585,000      6,572,000      5,446,000
INTEREST EXPENSE:                              
     Deposits                   2,712,000      2,470,000      1,919,000
     Borrowings                   841,000        377,000           -        
     Other                          5,000         14,000         10,000
       Total interest expense   3,558,000      2,861,000      1,929,000
NET INTEREST INCOME BEFORE
   CREDIT FOR CREDIT LOSSES     4,027,000      3,711,000      3,517,000
CREDIT FOR CREDIT LOSSES         (150,000)          -          (636,000)
NET INTEREST INCOME AFTER
  CREDIT FOR CREDIT LOSSES      4,177,000      3,711,000      4,153,000
OTHER INCOME:                             
     Service charges              199,000        194,000        194,000
     Rental income from 
      leased assets                83,000        119,000        179,000
     Rental income from 
      other real estate owned        -           102,000           -    
     Net gain on sale of 
      securities available
      for sale                       -            72,000           -
     Gain on sale of other 
      real estate owned              -            55,000           -
     Other                         71,000         35,000         32,000
       Total other income         353,000        577,000        405,000
OTHER EXPENSES:                           
     Salaries and employee 
      benefits                  1,342,000      1,188,000      1,106,000
     Occupancy                    348,000        376,000        388,000
     Professional fees            158,000        156,000        186,000
     Furniture and equipment      138,000        126,000        128,000
     Insurance                     88,000        161,000        176,000
     Data processing               71,000         45,000        118,000
     Depreciation on leased
      assets                       65,000        110,000        147,000
     Net cost of other real 
      estate owned                  5,000        115,000        514,000
     Net loss on sale of 
      securities available
      for sale                      4,000           -           196,000
     Other                        651,000        591,000        564,000
       Total other expenses     2,870,000      2,868,000      3,523,000
INCOME BEFORE INCOME TAXES      1,660,000      1,420,000      1,035,000
PROVISION FOR INCOME TAXES        559,000        539,000        377,000
NET INCOME                 $    1,101,000   $    881,000    $   658,000
NET INCOME PER COMMON      ==============   ============    ===========
  AND EQUIVALENT SHARE     $        0 .96   $       0.82    $      0.59 
                           ==============   ============    ===========
See notes to consolidated financial statements.     
</TABLE>
<PAGE> 42                      
SARATOGA BANCORP AND SUBSIDIARY                     

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY             
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
                                                           Net     
                                                        Unrealized   
                                                           Loss    
                                                       on Securities  Total
                        Common Stock         Retained    Available Shareholders'
                      Shares      Amount     Earnings    for Sale     Equity 
<S>                <C>         <C>         <C>        <C>         <C>
BALANCES,                  
 JANUARY 1, 1994    $1,169,264  $5,021,000  $5,711,000 $  (11,000) $10,721,000 

Shares repurchased    (138,292)   (594,000)   (350,000)      -        (944,000)

Change in net
 unrealized loss 
 on securities                        
 available for sale       -           -           -      (808,000)    (808,000)
Net income                -           -        658,000       -         658,000  
                    ----------  ----------  ----------  ----------  ----------
BALANCES,
 DECEMBER 31, 1994   1,030,972   4,427,000   6,019,000    (819,000)  9,627,000  
                      
Cash dividend
 ($.10 per share)         -           -       (103,000)       -       (103,000

Change in net
 unrealized loss
 on securities                        
 available for sale       -           -           -        652,000     652,000
                      
Net income                -           -        881,000        -        881,000
                    ----------  ----------  ----------  ----------  ---------- 
BALANCES, 
 DECEMBER 31, 1995   1,030,972   4,427,000   6,797,000    (167,000) 11,057,000
Exercise of stock 
 options                 5,420      34,000        -           -         34,000 
Cash dividend 
 ($.175 per share)        -           -       (181,000)       -       (181,000)
Change in net 
 unrealized loss
 on securities                        
 available for sale       -           -           -        (59,000)    (59,000)
                      
Net income                -           -      1,101,000        -      1,101,000 
                    ----------  ----------  ----------  ----------  ----------
BALANCES, 
 DECEMBER 31, 1996  $1,036,392  $4,461,000  $7,717,000  $ (226,000)$11,952,000
                    ==========  ==========  ==========  ========== ===========
</TABLE>

See notes to consolidated financial statements.
<PAGE> 43
SARATOGA BANCORP AND SUBSIDIARY                               
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS                                        
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994   
<S>                                    <C>           <C>          <C>
                                             1996         1995         1994 
CASH FLOWS FROM OPERATIONS:                                   
     Net income                          $ 1,101,000   $  881,000   $  658,000
     Adjustments to reconcile net 
       income to net cash provided
       by operating activities:
         Credit for credit losses           (150,000)        -        (636,000) 
         Depreciation and amortization       170,000      233,000      296,000 
         Deferred income taxes               (86,000)     392,000      131,000 
         Valuation allowance - other 
          real estate owned                  (50,000)      35,000      481,000
         Accrued interest receivable
           and other assets                 (233,000)     514,000     (485,000)
         Accrued expenses and other
           liabilities                      (216,000)     367,000     (237,000)
         Deferred loan fees                   16,000       78,000       31,000 
         Net loss (gain) on sale of 
           investments                         4,000      (72,000)     196,000
         Gain on sale of leased assets       (22,000)        -            -    
         Gain on sale of other real 
           estate owned                         -         (55,000)        -    
                                         -----------  -----------  -----------
  Net cash provided by operating activities  534,000    2,373,000      435,000

CASH FLOWS FROM INVESTING ACTIVITIES:               
     Purchase of securities available
      for sale                           (14,065,000)  (2,590,000)  (3,018,000)
     Purchase of securities held to 
      maturity                            (6,080,000)  (4,885,000) (12,597,000)
     Proceeds from maturities of 
      securities available for sale        6,993,000         -         100,000
     Proceeds from maturities of
      securities held to maturity          4,170,000    8,417,000    1,155,000
     Proceeds from maturity of 
      interest-bearing deposits
      in other banks                         200,000         -            -
     Proceeds from sale of securities
      available for sale                   2,496,000    2,625,000    3,965,000 
     Net increase in loans               (15,142,000)  (4,797,000)    (902,000)
     Purchases of premises and equipment    (450,000)     (40,000)     (34,000)
     Proceeds from sale of premises 
      and equipment                          134,000       14,000         -    
     Proceeds from sale of other 
      real estate owned                      652,000      735,000    1,154,000 
     Other                                      -        (238,000)        -     
                                         -----------   ----------  -----------
Net cash used in investing activities    (21,092,000)    (759,000) (10,177,000)
            
CASH FLOWS FROM FINANCING ACTIVITIES:               
     Net increase in deposits             14,495,000    1,077,000    8,158,000
     Net decrease in federal funds 
      purchased                                 -            -        (500,000)
     Net increase in other borrowings      6,114,000   10,087,000    2,000,000
     Issuance of common stock                 34,000         -            -
     Payment of cash dividends              (181,000)    (103,000)        -   
     Repurchase of common stock                 -            -        (944,000)
                                          ----------   ----------  -----------
Net cash provided by financing activities 20,462,000   11,061,000    8,714,000

NET (DECREASE) INCREASE IN CASH
   AND EQUIVALENTS                           (96,000)  12,675,000   (1,028,000)
CASH AND EQUIVALENTS,
   BEGINNING OF YEAR                      22,939,000   10,264,000   11,292,000
                                        ------------  -----------  -----------
CASH AND EQUIVALENTS, END OF YEAR       $ 22,843,000  $22,939,000  $10,264,000 
                                        ============  ===========  =========== 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW           
 INFORMATION - Cash paid during the year for:              
    Interest                            $  3,518,000  $ 2,703,000  $ 1,940,000
    Income taxes                        $    923,000  $    75,000  $   861,000
</TABLE>
NON-CASH INVESTING AND FINANCING ACTIVITIES -            
   Additions to other real estate owned $       -     $      -     $ 1,984,000 

See notes to consolidated financial statements.
<PAGE> 44
SARATOGA BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
                                                          

1.     SIGNIFICANT  ACCOUNTING  POLICIES
  
  The accounting and reporting policies of Saratoga Bancorp
  and subsidiary conform to generally accepted accounting principles
  and prevailing practices within the banking industry.

  BUSINESS - Saratoga Bancorp  ("the Company") is a registered bank 
  holding company whose principal asset (and only subsidiary) is 
  the common stock of Saratoga National Bank (the "Bank").  
  The Bank conducts commercial and retail banking business, 
  which includes accepting demand, savings and time deposits and 
  making commercial, real estate and consumer loans.  It also offers
  installment note collections, issues cashier's checks, sells travelers
  checks and provides other customary banking services.

  CONSOLIDATION - The consolidated financial statements include
  Saratoga Bancorp (the Company) and its wholly-owned subsidiary,
  Saratoga National Bank (the Bank).  All material intercompany
  accounts and transactions have been eliminated.

  ESTIMATES - The preparation of financial statements in conformity
  with generally accepted accounting principles requires management
  to make estimates and assumptions that affect reported amounts of 
  assets, liabilities, revenues and expenses as of the dates and
  for the periods presented.  Actual results could differ from
  those estimates.

  CASH AND EQUIVALENTS - The Bank considers all highly liquid debt
  instruments purchased with an original maturity of three months
  or less to be cash equivalents.         

  SECURITIES   - The Company  classifies its securities into two categories,
  securities available for sale and held to maturity.  Securities available
  for sale are measured at market value with a corresponding recognition of
  the net unrealized holding gain or loss as a separate component of
  shareholders' equity, net of income taxes, until realized.  Securities
  held to maturity are measured at amortized cost based on the Company's
  positive intent and ability to hold the securities to maturity.
  
  Any gains and losses on sales of securities are computed on a specific
  identification basis.

  LOANS - Loans are stated at the principal amount outstanding.  Interest
  on loans is credited to income as earned.   The accrual of interest is
  discontinued and any accrued and unpaid interest is reversed when the
  payment of principal or interest is 90 days past due unless the amount
  is well secured and in the process of collection.  Income on non accrual
  loans is recognized only to the extent that cash is received and where
  the future collection of principal is probable.

  Loan origination fees and costs are deferred and amortized to income by
  a method approximating the effective interest method over the lives of
  the underlying loans.

  ALLOWANCE FOR CREDIT LOSSES - The allowance for credit losses is
  established through a provision charged to expense.  Loans are charged
  against the allowance when management believes that the collection of
  principal is unlikely.  The allowance is an amount that management
  believes will be adequate to absorb losses inherent in existing loans
  and commitments to extend credit, based on evaluations of collectibility
  and prior loss experience.  The evaluations take into consideration
  such factors as ch anges in the composition of the portfolio, overall
  portfolio quality, loan concentrations,  specific problem loans, and
  current and anticipated economic conditions that may affect the borrowers'
  ability to repay.  In evaluating the probability of collection, management
  is required to make estimates and assumptions.

  ACCOUNTING FOR IMPAIRED LOANS -  A loan is considered impaired when it is
  probable that interest and principal will not be collected according to
  the contractual terms of the loan agreement.  Impaired loans are required
  to be measured based on the present value of expected future cash flows
  discounted at the loan's effective interest rate or, as a practical
  expedient, at the loan's observable market price or the fair value of the
<PAGE> 45
  collateral if the loan is collateral dependent.  Income recognition on
  impaired loans is consistent with the policy for income recognition on
  nonaccrual loans described above.  The Bank has determined that there
  were no impaired loans as of December 31, 1996 or 1995.

  PREMISES AND EQUIPMENT - Premises and equipment are stated at cost less
  accumulated depreciation and amortization.  Depreciation and amortization
  are computed on a straight-line  basis over the shorter of the lease term
  or the estimated useful lives of the assets, which are generally three to
  fifteen years for furniture, equipment and leasehold improvements and 35
  years for a building.

  LEASED EQUIPMENT - Leased equipment is stated at cost net of accumulated
  depreciation.  Depreciation is computed on a straight-line basis over the
  lease term to an estimated residual value.  Such leases are accounted for
  as operating leases.  Revenue is recognized when earned and depreciation
  expense is recorded as other expense.   

  LONG-LIVED ASSETS - The Company adopted Statement of Financial Accounting
  Standards (SFAS) No. 121 "Accounting for the Impairment of Long-Lived
  Assets and for Long-Lived Assets to be Disposed Of", effective January 1,
  1995.  The adoption of this statement had no effect on the Company's
  financial condition or results of operations.

  OTHER REAL ESTATE OWNED  - Other real estate owned is carried at the lower
  of cost or fair value less estimated costs to sell.  When the property is
  acquired through foreclosure any excess of the related loan balance over
  its estimated fair value less estimated costs to sell is charged to the
  allowance for credit losses.  Costs of maintaining other real estate owned
  and any subsequent declines in the estimated fair value are charged to
  other expenses.

  ACCOUNTING FOR FINANCIAL ASSETS AND LIABILITIES - In June, 1996, the FASB
  issued SFAS No.125, "Accounting for Transfers and Servicing of Financial
  Assets and Extinguishment of Liabilities".  This statement is effective for
  transfers and servicing of financial assets and extinguishments of
  liabilities occurring after December 31, 1996.  The Company believes the
  effect of adoption of this standard will not be material.

  INCOME TAXES - Income taxes are provided at current rates.  Deferred income
  taxes are provided on income and expense items recognized in different
  periods for financial statement and tax reporting purposes.

  NET INCOME PER COMMON AND EQUIVALENT SHARE - Net income per common and
  equivalent share is calculated using the weighted average shares
  outstanding plus the dilutive effect of stock options.  The number of
  shares used to compute net income per common and equivalent share was
  1,150,497 shares in 1996, 1,066,772 shares in 1995 and 1,117,076 shares
  in 1994.  The difference between primary and fully diluted net income
  per share is not significant in any year.
  
  STOCK-BASED AWARDS - The Company accounts for stock-based awards to
  employees using the intrinsic value method in accordance with Accounting
  Principals Board Opinion No. 25, "Accounting for Stock Issued to Employees."
  

  RECLASSIFICATIONS - Certain amounts have been reclassified to conform to
  the current year presentation.  The reclassifications had no effect on
  results of operations or shareholders' equity.

2.     CASH  AND  DUE  FROM  BANKS

  At December 31, 1996, average aggregate reserves (in the form of deposits
  with the Federal Reserve Bank) of $1,362,000 were maintained, which
  satisfied federal regulatory requirements to maintain certain average
  reserve balances.
<PAGE> 46
3.     INVESTMENTS

  The amortized cost and estimated market values of securities at December 31
  are as follows:
<TABLE>
<CAPTION>
                                                    1996                      
                                             Gross       Gross      Estimated
                              Amortized    Unrealized  Unrealized     Market
                                Cost         Gains       Losses        Value
<S>                         <C>          <C>        <C>          <C>
  SECURITIES AVAILABLE FOR SALE
  U. S. Treasury and agency
   securities                $11,704,000   $ 12,000   $  (45,000)  $11,671,000
  Governmental mutual fund     3,128,000       -        (170,000)    2,958,000
  Federal Home Loan Bank Stock 3,170,000       -            -        3,170,000
  Bankers Bank Stock             150,000       -            -          150,000
                             -----------   --------   ----------   -----------
  Total                      $18,152,000   $ 12,000   $ (215,000)  $17,949,000
                             ===========   ========   ==========   ===========
  SECURITIES HELD TO MATURITY
  U. S. Treasury and agency
   securities               $  5,489,000   $ 51,000   $  (39,000)  $ 5,501,000
  Mortgage-backed securities  13,204,000     14,000     (148,000)   13,070,000
  Obligations of states and
   political subdivisions      5,328,000     33,000       (7,000)    5,354,000
  Federal Reserve Bank Stock      90,000       -            -           90,000
                            ------------   --------   ----------   -----------
 Total                       $24,111,000   $ 98,000   $ (194,000)  $24,015,000
                             ===========   ========   ==========   ===========
                                                  1995                        
  SECURITIES AVAILABLE FOR SALE 
  U. S. Treasury and agency
   securities                $10,290,000   $ 29,000   $  (32,000)  $10,287,000
  Governmental mutual fund     3,128,000       -         (87,000)    3,041,000
  Federal Home Loan Bank Stock 1,958,000       -            -        1,958,000
                             -----------   --------   ----------   ----------- 
Total                        $15,376,000   $ 29,000   $ (119,000)  $15,286,000
                             ===========   ========   ==========   ===========
  SECURITIES HELD TO MATURITY
  U. S. Treasury and agency
   securities                $ 5,564,000   $ 75,000   $  (7,000)   $ 5,632,000
  Mortgage-backed securities  11,145,000     79,000     (72,000)    11,152,000
  Obligations of states and
   political subdivisions      3,549,000     45,000      (5,000)     3,589,000
  Federal Reserve Bank Stock      90,000       -           -            90,000
                             -----------   --------   ---------    -----------
  Total                      $20,348,000   $199,000   $ (84,000)   $20,463,000
                             ===========   ========   =========    ===========
</TABLE>
<PAGE> 47
<TABLE>
<CAPTION>
  The amortized cost and estimated market value of debt securities at
  December 31, 1996, by contractual maturity, are as follows:
                              Available for Sale         Held to Maturity
                                          Estimated                 Estimated
                            Amortized      Market       Amortized     Market
                              Cost         Value          Cost        Value
 <S>                     <C>          <C>            <C>          <C>
  Due in one year or less $   585,000  $    589,000   $ 1,634,000  $ 1,632,000
  Due after one year
   through five years       1,991,000     1,980,000     5,956,000    5,965,000
  Due after five years
   through ten years        3,496,000     3,500,000     7,234,000    7,261,000
  Mortgage-backed
   securities               5,632,000     5,602,000     9,197,000    9,067,000
  Governmental
   mutual fund              3,128,000     2,958,000          -            -
                          -----------   -----------   -----------   -----------
  Total                   $14,832,000   $14,629,000   $24,021,000   $23,925,000
                          ===========   ===========   ===========   ===========
</TABLE>
    Sale of investments resulted in gross realized gains of $1,000 for 1996,
  ($148,000 in 1995 and none in 1994) and gross realized losses of $5,000
  in 1996 ($76,000 in 1995 and $196,000 in 1994.)  During 1994, the Company
  transferred investments from available for sale to held to maturity.  The
  net unrealized loss at the date of transfer of $214,000 is being amortized
  over the remaining maturities of the investments. The unamortized portion
  of the loss is $161,000 at December 31, 1996.

  Mortgage-backed securities generally have stated maturities of four to
  fifteen years, but are subject to likely and substantial prepayments
  which effectively accelerate actual maturities. The Company's investment
  in governmental mutual funds has no fixed maturity.  At December 31, 1996
  investments with an amortized cost of $20,426,000 were pledged to secure
  public and certain other deposits as required by law or contract.

  Effective December 7, 1995, two securities totaling $ 3,000,000 in
  amortized cost and $3,105,000 market value and Federal Home Loan Bank
  stock totaling $1,958,000 were reclassified from held to maturity to
  available for sale in connection with initial adoption of the Financial
  Accounting Standards Board Special Report "A Guide to Implementation of
  Statement 115 on Accounting for Certain Investments in Debt and Equity
  Securities."

4.     LOANS  AND  ALLOWANCES  FOR  CREDIT  LOSSES
<TABLE>
<CAPTION>
  Loans at December 31, are comprised of the following:       
                                      1996           1995
 <S>                                <C>            <C>
  Real estate:   
    Construction                     $  9,249,000   $  7,837,000
    Other                              21,473,000     17,507,000 
  Commercial                           18,242,000     11,585,000             
  Installment                           1,861,000         77,000          
  Lease financing                       2,535,000        920,000      
  Unearned income on lease financing     (375,000)       (83,000)
                                       ----------     ----------     
  Total loans                          52,985,000     37,843,000
  Deferred loans fees                    (324,000)      (308,000)
                                      -----------     ----------
  Loans, net of deferred loan fees    $52,661,000    $37,535,000
                                      ===========    =========== 
</TABLE>
<PAGE> 48  



  The activity in the allowance for credit losses is summarized as follows:
<TABLE>
 <S>                             <C>            <C>            <C>
                                        1996          1995            1994
  Balance, beginning of year      $    776,000   $    738,000   $ 1,339,000
  Provision credited to expense       (150,000)          -         (636,000)
  Write-offs                           (39,000)       (45,000)      (73,000)
  Recoveries                            41,000         83,000       108,000
                                  ------------   ------------   ----------- 
  Balance, end of year            $    628,000   $    776,000   $   738,000
                                  ============   ============   ===========
</TABLE>
  There were no nonaccrual loans at December 31, 1996 and 1995 and $707,000
  at December 31, 1994.  The reduction in interest income associated with
  these loans in 1994 was $59,000.   Interest income recognized on such
  loans in 1994 was $28,000.

5.     PREMISES  AND  EQUIPMENT

  Premises and equipment at December 31, are comprised of the following:

 
                                            1996           1995

  Land                                 $     948,000  $     948,000
  Building and leasehold improvements      1,194,000      1,194,000 
  Furniture and equipment                    945,000        860,000      
  Leased equipment                           365,000        390,000           
                                       -------------  -------------
  Total                                    3,452,000      3,392,000
  Accumulated depreciation and 
   amortization                           (1,317,000)    (1,404,000)
                                       -------------  -------------
  Premises and equipment, net          $   2,135,000  $   1,988,000
                                       =============  ============= 
  

  The Company's Los Gatos and San Jose branches are leased under noncancellable
  operating leases which expire in 1998 and 1999, respectively.  The Bank has
  renewal options with adjustments to the lease payments based on changes in
  the consumer price index.  Future minimum annual lease payments are as
  follows:

  
  1997      $    250,000
  1998           188,000
  1999           176,000
            ------------
  Total     $    614,000
            ============
  
  Rental expense under operating leases was $236,000 in 1996 and 1995 and
  $226,000 in 1994. 

6.     OTHER  REAL  ESTATE  OWNED

  Other real estate owned was $1,252,000 and $1,745,000 at December 31, 1996
  and 1995, respectively,
<PAGE> 49 
  (net of valuation allowance of $143,000 and $303,000, respectively).  The
  net cost of operation of other real estate owned is as follows:    
<TABLE>
                                             1996         1995           1994  
 <S>                                  <C>           <C>            <C>
  Decreases (increases) in valuation 
   allowance to reflect increases and
    decreases in estimated fair value $     50,000   $   (35,000)   $ (481,000)
  Net holding costs                        (55,000)      (80,000)      (33,000)
                                      ------------   -----------    ----------
  Total                               $     (5,000)  $  (115,000)   $ (514,000)
                                      ============   ===========    ==========
</TABLE>
  
7.     DEPOSITS


   The aggregate amount of short-term jumbo CDs, each with a minimum 
   denomination of $100,000, was approximately $13,264,000 and 10,782,000
   in 1996 and 1995, respectively.

  At December 31, 1996, the scheduled maturities of CDs over $100,000 are
  as follows:

                 1997           $10,335,000
                 1998             2,060,000
                 1999               154,000
                 2000               715,000
                                -----------
                                $13,264,000    
                                ===========

8.       OTHER BORROWINGS
  
  Other borrowings consist of borrowings from the Federal Home Loan Bank
  which are due as follows:
       
                 2000           $ 2,208,000
                 2001             4,150,000
                 2002               766,000
                 2003             2,700,000
                 2005             7,058,000
                 2010               353,000
                 2011               966,000
                                -----------
                                $18,201,000     
                                ===========
<PAGE> 50
9.        INCOME TAXES

  The provision for income taxes is comprised of the following:

                            Years Ended December 31,                  
                         1996       1995      1994   
  Current:
    Federa            $478,000   $ 68,000   $189,000
    State              167,000     79,000     57,000
                      --------   --------   --------
  Total current        645,000    147,000    246,000
                      --------   --------   --------
  Deferred:
    Federal            (75,000)   345,000     94,000
    State              (11,000)    47,000     37,000 
                      --------   --------   --------
  Total deferred       (86,000)   392,000    131,000 
                      --------   --------   --------
  Total               $559,000   $539,000   $377,000
                      ========   ========   ========

  
  The effective tax rate differs from the federal statutory rate as follows:
  
                                   Years Ended December 31,
                                     1996      1995      1994     

  Federal statutory rate             35.0%     35.0%     35.0%
  State income tax, net
   of federal effect                  6.2       6.0       5.9          
  Tax exempt income                  (3.1)     (3.6)     (4.2)
  Officer's life insurance             -        1.3       0.3                 
  Other, net                         (4.4)     (0.7)     (0.6)
                                     -----     -----     -----
  Total                              33.7%     38.0%     36.4%
                                     =====     =====     =====
<PAGE> 51
  The Company's net deferred tax asset at December  31 is as follows:

                                              1996      1995                  
  Deferred tax assets:
    Provision for credit losses           $ 197,000 $ 198,000   
    Unrealized loss on investments
       available for sale                   138,000   111,000                
    Deferred compensation                    93,000    30,000                  
    Provision for other real estate owned    59,000   126,000            
    Deferred rent                            36,000    52,000               
                                          --------- ---------
Total deferred assets                       523,000   517,000             
                                          --------- ---------
Deferred tax liabilities:
    Depreciation and amortization          (183,000) (242,000)
    Other                                   (28,000)  (76,000)
                                          --------- ---------  
  Total deferred liabilities                211,000  (318,000)        
                                          --------- ---------  
  Net deferred tax asset                  $ 312,000 $ 199,000     
                                          ========= =========  
  
  There was no valuation allowance at December 31, 1996 and 1995.


10.    STOCK  OPTION  PLANS

  
  The Company's stock option plans authorize the issuance to employees, 
  officers and directors of incentive and  nonstatutory options to purchase
  common stock.

  The Company's 1982 Amended Stock Option Plan (the "1982 Plan") expired by 
  its terms on October 26, 1992. Therefore, no options were granted by the
  Corporation during 1994, 1995 or 1996 under the 1982 Plan.  Prior to
  expiration of the 1982 Plan, options were granted to key officers and 
  employees of the Company and its subsidiary.  Options granted under the 
  1982 Plan were either incentive options or nonstatutory options and
  become exercisable in accordance with a vesting schedule established at 
  the time of grant.  Vesting may not extend beyond ten years from the date 
  of grant.  Upon a change in control of the Company, all outstanding options 
  under the 1982 Plan will become fully vested and exercisable.  Options 
  granted under the 1982 Plan are adjusted to protect against dilution in the 
  event of certain changes in the Company's capitalization, including stock 
  splits and stock dividends. 

  The Company's 1994 Stock Option Plan ("the 1994 Plan") is substantially 
  similar to the 1982 Plan regarding provisions related to option grants, 
  vesting and dilution.  Upon a change in control, options do not become 
  fully vested and exercisable, but may be assumed or equivalent options 
  may be substituted by a successor corporation.  All options granted 
  in 1996 under the 1994 Plan were incentive stock options and have an   
  exercise price equal to the fair market value of the Company's common 
  stock on the date of grant. 
  <PAGE> 52
  Option activity is summarized as follows:
                                         Outstanding Options                
                                      Number of      Weighted Average
                                       Shares         Exercise Price

  Balances,  January 1, 1994           176,377            $5.93

    Granted                             97,300             6.31 
    Canceled                            (7,000)            6.22
                                       -------            -----
  Balances,  December 31, 1994         266,677             6.06

  At December 31, 1996, options for 36,494 shares are available for
  future grant.
  
  The Company continues to account for its stock-based awards using the
  intrinsic value method in accordance with Accounting Principles Board
  Opinion No. 25, "Accounting for Stock Issued to Employees" and its related
  interpertations.  Accordingly, no compensation expense has been recognized
  in the financial statements for employee stock arrangements.

  SFAS No. 123, "Accounting for Stock- Based Compensation" requires the
  disclosure of proforma net income and earnings per share had the Company
  adopted the fairvalue method as of the beginning of fiscal 1995.  Under
  SFAS 123, the fair value of stock-based awards to employees is calculated
  through the use of option pricing models, even though such models were
  developed to estimate the fair value of freely tradable, fully 
  transferrable options without vesting restriction, which significantly 
  differ from the Company's stock option awards.  These models also require
  subjective assumptions, including future stock price volatility and
  expected time to exercice, which greatly affect the calculated values.  The
  Company's calculations were made using the Black-Scholes option pricing
  model with the following weighted average assumptions: expected life, 114
  months;  stock volatility, 19.0%; risk free interest rates, 6.54% and 
  6.68% in 1996 and 5.85%, 6.15% and 7.66% in 1995; and a dividend yield of
  5.50% as they occur.  If the computed values of the 1996 and 1995 awards
  had been amortized to expense over the vesting period of the awards, pro
  forma net income would have been $1,090,000 ($0.95 per share) in 1996 and
  $868,000 ($0.81 per share) in 1995.  However, the impact of outstanding
  non-vested stock options granted prior to 1995 have been excluded from the
  pro forma calculation; accordingly the 1995 and 1996 pro forma adjustments
  are not indicative of future period pro forma adjustments, when the 
  calculation will apply to all applicable stock options.
  
11.   COMMITMENTS AND CONTINGENT LIABILITIES
  
  The Bank is party to financial instruments with off-balance-sheet risk in the
  normal course of business to meet the financing needs of its customers.  
  These financial instruments include loan commitments of $20,826,000 and 
  standby letters of credit of $25,000 at December 31, 1996.  The Bank's
  exposure to
<PAGE> 53
  credit loss is limited to amounts funded or drawn; however, at December 31,
  1996, no losses are anticipated as a result of these commitments.

  Loan commitments are typically contingent upon the borrower's meeting
  certain financial and other covenants and such commitments typically have
  fixed expiration dates and require payment of a fee.  As many of these
  commitments do not necessarily represent future cash requirements.  The
  Bank evaluates each potential borrower and the necessary collateral on an
  individual basis.  Collateral varies, and may include real property, bank
  deposits, or business or personal assets.

  Standby letters of credit are conditional commitments written by the Bank to
  guarantee the performance of a customer to a third party.  These guarantees
  are issued primarily relating to inventory purchases by the Bank's 
  commercial customers and such guarantees are typically short-term.  Credit
  risk is similar to that involved in extending loan commitments to customers
  and the Bank, accordingly, uses evaluation and collateral requirements
  similar to those for loan commitments.  Virtually all of such commitments 
  are collateralized.

  Officers of the Company have severance agreements which provide, in the 
  event of a change in control  meeting certain criteria, severance payments
  based on a multiple of their current compensation.  At  December 31, 1996,
  these payments would have aggregated up to $351,000.

12.    LOAN  CONCENTRATIONS

  The Bank's customers are primarily located in Santa Clara County, which is
  located in the southern portion of the San Francisco Bay Area.  Many of
  the Bank's customers are employed by or are otherwise dependent on the high
  technology and real estate development industries and, accordingly, the
  ability of the Bank's borrowers to repay loans may be affected by the
  performance of these sectors of the economy.  Virtually all loans are
  collateralized.  Generally, real estate loans are secured by real property
  and commercial and other loans are secured by business or personal assets.
  Repayment is generally  expected from refinancing or sale of the related
  property for real estate construction loans and from cash flows of the
  borrower for all other loans.  

  The composition of the loan portfolio at December 31, 1996 and 1995 is
  summarized in the following table.

                           
                                      1996 1995
       Real estate:               
           Construction:               17   21 
           Other                       41   46
       Commerical                      34   31
       Installment                      4    -
       Lease financing                  4    2  
                                      100%  100%
                                      ===   ===

13.    DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS 

  The following estimated fair value amounts have been determined by using
  available market information and appropriate valuation methodologies.
  However, considerable judgment is required to interpret market data to
  develop the estimates of fair value.  Accordingly, the estimates presented
  are not necessarily indicative of the amounts that could be realized in a
  current market exchange.  The use of different market assumptions and/or 
  estimation techniques may have a material effect on the estimated fair 
  value amounts.
<PAGE> 54
  
  The following table presents the carrying mount and estimated fair value 
  of certain assets and liabilities of the Company at December 31, 1996.  
  The carrying amounts reported in the  consolidated balance sheets 
  approximate fair value for the following financial instruments: cash and 
  due from banks, federal funds sold, interest bearing  deposits in other 
  banks, demand and savings deposits, federal funds purchased and other 
  borrowings  (See Note 3 for information regarding securities).

                                      December 31, 1996                   
                                  Carrying        Estimated Fair
                                   Amount              Value       
  Loans, net                    $52,033,000         $52,202,000
  Time deposits                 $29,515,000         $29,590,000
  

                                       December 31, 1995                   
                                  Carrying         Estimated Fair
                                   Amount               Value       
  Loans, net                    $36,759,000          $36,752,000
  Time deposits                 $27,208,000          $27,375,000


  Loans
  The fair value of loans with fixed rates is estimated by discounting 
  the future cash flows using current rates at which similar loans would
  be made to borrowers with similar credit ratings.  For loans with 
  variable rates which adjust with changes in  market rates of interest, 
  the carrying amount is a reasonable estimate of fair value.  

  Time deposits 
  The fair value of fixed maturity certificates of deposit is estimated 
  using rates currently offered for deposits of similar remaining maturities.
  
  Commitments to extend credit and standby letters of credit
  Commitments to extend credit and standby letters of credit are issued in 
  the normal course of business by the Bank.  Commitments to extend credit 
  are issued with variable interest rates tied to market interest rates at 
  the time the commitment is funded and the amount of the commitment equals 
  their fair value.  Standby letters of credit are supported by commitments 
  to extend credit with variable interest rates tied to market interest 
  rates at the time the commitments are funded and the amount of standby    
  letters of credit equals their fair value.


14.    REGULATORY  MATTERS

  The Company and the Bank are subject to various regulatory capital 
  requirements administered by federal banking agencies.  Failure to meet 
  minimum capital requirements can initiate certain mandatory, and possibly 
  additional discretionary, actions by regulators that, if undertaken, could 
  have a direct material effect on the Company's financial statements.  Under 
  capital adequacy guidelines and the regulatory framework for prompt   
  prompt corrective action, the Company and the Bank must meet specific 
  capital guidelines that involve quantitative measures of the Company's 
  and the Bank's assets, liabilities, and certain off-balance-sheet items as 
  calculated under regulatory accounting practices.  The Company's and the 
  Bank's capital amounts and classification are also subject to qualitative 
  judgments by the regulators about components, risk weightings, and other 
  factors.
  <PAGE> 55
  Quantitative measures established by regulation to ensure capital adequacy
  require the Company and the Bank to maintain minimum amounts and ratios
  (set forth in the table below) of total and Tier 1 capital (as defined in
  the regulations) to risk-weighted assets (as defined), and of Tier I capital
  (as defined) to average assets (as defined).  Management believes, as of 
  December 31, 1996, that the Company and the Bank meet all capital adequacy
  requirements to which they are subject.


  As of December 3 1, 1996, the most recent notification from the Office of 
  the Comptroller of the Currency categorized the Company and the Bank as well
  capitalized under the regulatory framework for prompt corrective action.  
  To be categorized as well capitalized the Company and the Bank must 
  maintain minimum total risk-based , Tier I risk-based, and Tier I leverage
  ratios as set forth in the table.  There are no conditions or events since
  that notification that management believes have changed the institution's 
  category.

  The following table shows the Company's and the Bank's capital ratios at
  December 31, 1996 and 1995 as well as the minimum capital ratios required
  to be deemed "well capitalized" under the regulatory framework.
<TABLE>
<CAPTION>
                                                                 To Be Well
                                                             Capitalized Under
               Bancorp         Bank Only         For Capital Prompt Corrective
               Actual           Actual      Adequacy PurposesAction Provisions 
          Amount    Ratio  Amount     Ratio   Amount     Ratio  Amount   Ratio  
As of December 31, 1996  
<S>    <C>         <C>   <C>         <C>   <C>         <C>    <C>        <C>
Total 
Capital
(to Risk
Weighed
Assets) $12,580,000 18.0% $11,826,000 17.1% >$5,602,000 >8.00%>$7,003,000>10.0%
Tier I 
Capital
to Risk
Weighed 
Assets) $11,952,000 17.1% $11,198,000 16.2% >$2,802,000 >4.00%>$4,202,000> 6.0% 
Tier I
Capital                     
(to 
Average 
Assets) $11,952,000 10.5% $11,198,000  9.8% >$4,614,000 >4.00%>$5,767,000> 5.0% 

As of December 31, 1995  
Total 
Capital
(to Risk 
Weighed 
Assets) $11,833,000 22.0% $11,669,000 21.7% >$4,304,000 >8.00%>$5,380,000>10.0%
Tier I
Capital
(to Risk 
Weighed 
Assets) $11,057,000 20.8% $10,669,000 20.5% >$2,152,000 >4.00%>$3,228,000> 6.0%
Tier I 
Capital                     
(to 
Average 
Assets) $11,057,000 11.7% $10,669,000 11.5% >$3,826,000 >4.00%>$4,782,000> 5.0%
</TABLE>
 
<PAGE> 56
15.    CONDENSED FINANCIAL INFORMATION OF SARATOGA BANCORP (PARENT ONLY)
  
  The condensed financial statements of Saratoga Bancorp are as follows:

  CONDENSED BALANCE SHEETS
                                                    December 31,           
                                                     1996            1995
  ASSETS:             
    Cash-interest bearing account with Bank    $   102,000       $   149,000
    Real estate loans                              764,000              - 
    Investment in Bank                          11,078,000        10,882,000
    Other assets                                     8,000            27,000 
                                               -----------       -----------
  Total                                        $11,952,000       $11,058,000
                                               ===========       ===========

  LIABILITIES AND SHAREHOLDERS' EQUITY
    Other liabilities                          $      -          $     1,000
    Common stock                                 4,461,000         4,427,000
    Retained earnings                            7,717,000         6,797,000
    Net unrealized loss on investments 
      available for sale                          (226,000)         (167,000)
                                               -----------       -----------
  Total                                        $11,952,000       $11,058,000
                                               ===========       ===========

CONDENSED INCOME STATEMENTS
                           
                                    Years Ended December 31,
                                1996            1995        1994

  Interest income           $  26,000    $    8,000       $  43,000  
  Credit for credit losses       -             -             10,000  
  Dividend from subsidiary    861,000          -               -    
  Other expenses              (50,000)      (50,000)        (57 000)
                            ---------    ----------       ---------
  Loss before income taxes
   and equity in 
   undistributed net income 
   of Bank                    837,000       (42,000)          (4,000)
  Income tax benefit            9,000        16,000            1,000      
  Equity in undistributed 
   net income of Bank         255,000       907,000          661,000
                          -----------    ----------      -----------
  Net income              $ 1,101,000    $  881,000      $   658,000
                          ===========    ==========      ===========
<PAGE> 57
CONDENSED STATEMENTS OF CASH FLOWS

                                             Years ended December 31,     
                                       1996             1995           1994
  Cash flows from operations:
    Net income                      $1,101,000     $     881,000  $   658,000
    Adjustments to reconcile 
      net income to net
      cash provided by (used in) 
      operating activities:     
      Equity in undistributed 
       net income of Bank            (255,000)          (907,000)    (661,000)
      Credit for credit losses           -                  -         (10,000)
      Change in other assets           19,000            (16,000)        -   
      Change in other liabilities      (1,000)              -           1,000
                                   ----------      -------------  -----------
  Net cash provided by (used in) 
  operating activities                864,000            (42,000)     (12,000)
  Cash flows from investing 
  activities - 
    Net change in loans              (764,000)            36,000      354,000
                                   ----------      -------------  -----------
  Cash flows from financing 
  activities:        
    Cash dividend                    (181,000)          (103,000)        -     
    Issuance of common stock           34,000               -            -
    Repurchase of common stock           -                  -        (944,000)
                                   ----------      -------------  -----------
  Net cash used in financing 
  activities                         (147,000)          (103,000)    (944,000)
                                   ----------      -------------  -----------
  Net decrease in cash                (47,000)          (109,000)    (602,000)

 Cash, beginning of year              149,000            258,000      860,000 
                                   ----------      -------------  -----------
  Cash, end of year                $  102,000      $     149,000  $   258,000 
                                   ==========      =============  ===========

  The ability of the Company to pay future dividends will largely depend 
  upon the dividends paid to it by the Bank. Under federal law regulating
  national banks, dividends declared by the Bank in any calendar year may
  not exceed the lesser of its undistributed net income for the most recent
  three fiscal years or its retained earnings.  As of December 31, 1996, the
  amount available for distribution from the Bank to the Company was 
  approximately $2,356,000, subject to approval by the Office of the 
  Comptroller of the Currency.  The Bank is also restricted as to the amount
  and form of loans,  advances or other transfers of funds or other assets 
  to the Company.
                           
                         * * * * *
<PAGE> 58
Item 9.  Changes in and Disagreements with Accountants
         on Accounting and Financial Disclosure.
                      Not applicable.

                            PART III

Item 10. Directors and Executive Officers of the Registrant.
     The information required hereunder is incorporated by reference from 
  the Company's definitive proxy statement for the Company's 1997 Annual
  Meeting of Shareholders (to be filed pursuant to Regulation 14A).

Item 11. Executive Compensation.
     The information required hereunder is incorporated by reference from 
the Company's definitive proxy statement for the Company's 1997 Annual 
Meeting of Shareholders (to be filed pursuant to Regulation 14A).

Item 12. Security Ownership of Certain Beneficial Owners and      
         Management.
  The information required hereunder is incorporated by reference from 
the Company's definitive proxy statement for the Company's 1997 Annual 
Meeting of Shareholders (to be filed pursuant to Regulation 14A).

Item 13. Certain Relationships and Related Transactions.
     The information required hereunder is incorporated by reference from 
the Company's definitive proxy statement for the Company's 1997 Annual 
Meeting of Shareholders (to be filed pursuant to Regulation 14A).

                             PART IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on
               Form 8-K

     (a)  (1)  Financial Statements. This information is listed   
            and included in Part II, Item 8.

     (a)  (2)  Financial Statement Schedules.  All schedules have 
               been omitted since the required information is not 
               present or is not present in amounts sufficient to 
               require submission of the schedule or because the  
               information required is included in Consolidated
               Financial Statements or notes thereto.
<PAGE> 59
     (a)  (3)  Exhibits.  The exhibits listed on the accompanying   
               Exhibit Index are filed as part of this report.
         
        (3.1)  Articles of Incorporation, as amended, are
               incorporated by reference herein to Exhibit 3.1
               of Registrant's Annual Report on Form 10-K for
               the fiscal year ended December 31, 1988, as filed 
               with the Securities and Exchange Commission on
               March 27, 1989.

        (3.2)  By-laws, as amended, are incorporated by reference   
               herein to Exhibit 3.2 of Registrant's Annual     
               Report on Form 10-K for the fiscal year ended 
               December 31, 1993 as filed with the Securities 
               and Exchange Commission on March 29, 1994.

       (4.1)   Specimen stock certificate is incorporated by         
               reference to Exhibit 4.1 of Registrant's Annual       
               Report on Form 10-K for the fiscal year ended         
               December 31, 1994 as filed with the Securities and    
               Exchange Commission on March 30, 1995.                
          
      (10.1)   Lease agreement dated 10/19/87 for 15405 Los Gatos    
               Blvd., Suite 103, Los Gatos, CA is incorporated       
               by reference herein to Exhibit 10.1 of                
               Registrant's Annual Report on Form 10-K for the       
               fiscal year ended December 31, 1987 as filed with     
               the Securities and Exchange Commission on March       
               31, 1988.

     (10.2)    Agreement of Purchase and Sale dated July 27, 1988    
               for 12000 Saratoga-Sunnyvale Road, Saratoga, CA is    
               incorporated by reference herein to Exhibit 10.1      
               of Registrant's Annual Report on Form 10-K for the    
               fiscal year ended December 31, 1988, as filed with    
               the Securities and Exchange Commission on March       
               27, 1989.

    *(10.3)    Indemnification Agreements with directors and         
               Executive Officers of the Registrant are              
               incorporated by reference herein to Exhibit 10.2      
               of Registrant's Annual Report on Form 10-K for the    
               fiscal year ended December 31, 1988, as filed with    
               the Securities and Exchange Commission on March       
               27, 1989.

     (10.4)    Lease agreement dated 1/17/89 for 160 West Santa      
               Clara Street, San Jose, California is incorporated    
               by reference herein to Exhibit 10.4 of                
               Registrant's Annual Report on Form 10-K for the       
               fiscal year ended December 31, 1989, as filed with    
               the Securities and Exchange Commission on March       
               27, 1990.             
<PAGE> 60
     (10.5)    Bank of the West Master Profit Sharing and Savings    
               Plan and Amendment, amended as of March, 1990 is      
               incorporated by reference herein to Exhibit 10.5      
               of Registrant's Annual Report on Form 10-K for the    
               fiscal year ended December 31, 1990, as filed with    
               the Securities and Exchange Commission on March       
               20, 1991. 

    *(10.6)    Employment Agreement and Management Continuity        
               Agreement and Chief Executive Officer                 
               Compensation Plan/Richard L. Mount is incorporated    
               by reference herein to Exhibit 10.6 of                
               Registrant's Annual Report on Form 10-K for the       
               fiscal year ended December 31, 1990, as filed with    
               the Securities and Exchange Commission on March       
               20, 1991.

     (10.7)    Saratoga Bancorp 1982 Stock Option Plan is
               incorporated by reference herein to the exhibits
               to Registration Statement No. 33-34674 on Form S-8
               as filed with the Securities and Exchange Commission
               on May 7, 1990.       

     (10.8)    Saratoga National Bank Savings Plan dated June 19,    
               1995 is incorporated by reference herein to           
               Exhibit 10.8 of Registrant's Annual Report on Form    
               10-K for the fiscal year ended December 31, 1995,     
               as filed with the Securities and Exchange             
               Commission on March 27, 1996.

     (10.9)    Saratoga Bancorp 1994 Stock Option Plan dated March
               18, 1994 is incorporated by referencce herein to
               Appendix A of Proxy Statement dated April 19, 1994
               filed as with the Securities and Exchange Commission
               on April 27, 1994.       


     (10.10)   Forms of Incentive Stock Option Agreement, Non-
               Statutory Stock Option Agreement and Non-Statutory
               Agreement for Outside Diectors, as amended is 
               incorporated by reference herein to Exhibit 10.8 of
               Registrant's Quarterly Report on Form 10-Q for the 
               Quarter ended June 30, 1994 as filed with the
               Securities and Exchange Commission on August 15,
               1994.

             
       (21)    Subsidiaries of the registrant:  Registrant's only    
               subsidiary is Saratoga National Bank, a national      
               banking association, which operates a commercial      
               and retail banking operation in California.
<PAGE> 61
       (23)    Independent Auditors' consent

       (27)    Financial Data Schedule


* Denotes management contracts, compensatory plans or    
arrangements.


    (b)        Reports on Form 8-K
               
               Registrant filed no reports on Form 8-K for the 
               three month period ended December 31, 1996.

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT
TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED
SECURITIES PURSUANT TO SECTION 12 OF THE ACT.

No annual report or proxy material has been sent to security
holders.  The Company shall furnish copies of such material to the
Commission when it is sent to security holders.

                             SIGNATURES

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

                          SARATOGA BANCORP



                            By_______________________________
                               Richard L. Mount, President           
                              (Principal Executive Officer)

                            Date_____________________________

                            
                            
                            By_______________________________
                               Mary Page-Rourke, Treasurer           
                              (Principal Financial and               
                               Accounting Officer)     

                            Date_____________________________


Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.
<PAGE> 62
    Name                      Title               Date


__________________         Director            _______________
Victor Aboukhater


__________________     Director and Secretary  _______________
Neal A. Cabrinha


__________________         Director            _______________
Robert G. Egan


__________________         Director            _______________
William D. Kron


__________________         Director            _______________
John F. Lynch III


__________________         Director            _______________
V. Ronald Mancuso


                     Chairman of the Board
__________________   President and Director    _______________
Richard L. Mount     (Principal Executive                      
                      Officer)


__________________          Treasurer          _______________
Mary Page-Rourke     (Principal Financial and                 
                      Accounting Officer)





<PAGE> 63
                          INDEX TO EXHIBITS
                                                                     
                                                    Sequentially     
                                                     Numbered
Number                     Exhibits                    Page    


23       Independent Auditors' Consent                  65  
27       Financial Data Schedule                        66  

<PAGE> 65

                                                         EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in Registration Statement No.
33-34674 of Saratoga Bancorp on Form S-8 of our report dated January 24,
1997, appearing in this Annual Report on Form 10-K of Saratoga Bancorp 
for the year ended December 31, 1996.

//Deloitte & Touche LLP// 

DELOITTE & TOUCHE LLP

San Jose, California
March 26, 1997