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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

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

                   For the fiscal year ended December 31, 1995
                           Commission File No 0-17719

                                 AUBURN BANCORP
             (Exact Name of Registrant as Specified in its Charter)

                California                            94-2827787
  (State or Other Jurisdiction of         (I.R.S. Employer Identification No.)
   Incorporation or Reorganization)

                    540 Wall Street, Auburn, California 95603
               (Address of Principal Executive Offices) (Zip Code)

       Registrant's Telephone Number, Including Area Code: (916) 888-8405

           Securities registered pursuant to Section 12(b) of the Act:

                                                Name of Each Exchange on
            Title of Each Class                   Which Registered
                    None                                None

           Securities registered pursuant to Section 12(g) of the Act:

                           Common Stock, no par value
                                (Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  Registrant  was
required  to file  such  report(s),  and (2) has  been  subject  to such  filing
requirements for the past 90 days.
              
                              Yes x                No

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

As of March 15, 1996,  the  aggregate  market value of the voting shares held by
nonaffiliates of the Registrant was approximately $5,870,000.

1,004,955 Shares of Common Stock were outstanding at March 15, 1996.


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PART I

Item 1.  Business

The  Bancorp  was  organized  and  incorporated  under  the laws of the State of
California on December 31, 1981 and obtained  approval of the Board of Governors
of the  Federal  Reserve  System  to be a bank  holding  company.  Approval  was
subsequently received from the Comptroller of the Currency on August 10, 1982 to
organize Auburn Bank of Commerce,  N.A.,("Bank") as a wholly owned subsidiary of
Bancorp which opened for business on February 7, 1983.  The name of the Bank was
subsequently changed to The Bank of Commerce, N.A. on July 29, 1988.

The Bank currently  operates out of its main office at 540 Wall Street,  Auburn,
California  95603,  with branch offices at 10375 Brunswick  Road,  Grass Valley,
California 95945 and 2893 Sunrise Blvd.,  Suite 106, Rancho Cordova,  California
95741.  In addition,  a loan  production  office is  maintained at 1601 Response
Road,  Sacramento,  California 95815. The Bancorp has no industry segments other
than its banking operations conducted by the Bank.

Services

The Bank  offers a wide  range of general  commercial  banking  services.  These
include personal and business checking accounts and savings accounts,  including
money market  accounts,  "NOW" accounts and time  certificates  of deposit.  The
interest  paid on time and  savings  deposits  is  priced at  prevailing  market
conditions. The Bank also offers night depository and bank-by-mail services. The
Bank sells travelers' checks (issued by an independent entity), cashier's checks
and money orders.  In addition,  it provides note and collection  services.  The
Bank does not offer trust or international banking services, but it will arrange
for such services through a correspondent bank.

On  the  lending  side,  the  Bank  engages  in a  full  complement  of  lending
activities,  including commercial,  consumer/installment  and real estate loans,
with particular  emphasis on short and medium-term  loans.  The Bank's long-term
mortgage real estate loans are generally sold without  recourse to institutional
investors in the secondary market. In addition,  the Bank continues to be one of
the largest generators of Small Business  Administration (SBA) loans in northern
California and has been designated by SBA as a Preferred Lender.

The Bank's capital base, which includes  stockholders'  equity and the allowance
for loan losses less  intangibles  at December 31, 1995,  was  $7,581,000.  This
capital base provides the Bank with lending limits of  approximately  $1,137,000
for unsecured loans. Loan limits for properly  collateralized  loans approximate
$1,895,000.  This is based upon federal law, which  restricts a national bank to
lend not more than 15 percent of its  unimpaired  capital  and  surplus,  and an
additional 10 percent for loans fully secured by readily marketable  collateral,
to any single  customer.  Management  believes that this lending limit should be
sufficient  to meet the needs of most of the  Bank's  customers.  If a  customer
requires,  and  deserves,  more credit  than the Bank can extend,  the Bank will
attempt to arrange to sell all, or a portion,  of a prospective  loan to another
bank so as to accommodate the customer's credit needs while remaining within its
legal lending limits.

Source of Business

Management  obtains  sufficient market penetration from the services referred to
above and by the personal  solicitation  of the Bank's  officers,  directors and
shareholders. All officers are responsible for making regular calls on potential
customers  to solicit  business and on existing  customers to obtain  referrals.
Promotional  efforts are directed  toward  residents  and small to  medium-sized
businesses.  The Bank's customers deal with bankers who have commercial and real
estate  loan  experience,   lending  authority  and  the  time  to  quickly  and
competently  serve  customer  banking needs.  In order to expedite  decisions on
lending transactions,  the Bank's senior loan committee meets on a regular basis
and is  available  for  committee  meetings  where  immediate  authorization  is
important to the customer.

The risk of nonpayment (or deferred  payment) of loans is inherent to commercial
banking.  The Bank's  marketing  focus,  directed toward  residents and small to
medium-sized businesses, may, however, involve certain lending risk not inherent
in loans to larger  companies.  The smaller companies may have shorter operating
histories,

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less sophisticated  internal record keeping and financial planning capabilities,
and greater debt-to-equity ratios.

Management of the Bank carefully  evaluates all loan  applicants and attempts to
minimize  its credit  risk  exposure  by use of thorough  loan  application  and
approval procedures.

Asset Management

As of December 31, 1995,  approximately  22.3 percent of the Bank's deposits are
non-interest  bearing  demand  deposits  and 77.7  percent  are time and savings
demand   interest-bearing   deposits.   Of  its  time  and   savings   deposits,
approximately  71.4  percent are  interest-bearing  deposits  without  specified
maturities or contractual provisions requiring advance notice to withdraw funds.
The remaining 28.6 percent are  interest-bearing  with  specified  maturities or
such contractual provisions.

Consistent  with the  requirements  of prudent  banking  necessary  to  maintain
liquidity,  Management  of the Bank  invests the  largest  portion of the Bank's
assets in loans of the types  described  above,  with an emphasis on  short-term
real estate  secured loans and longer term loans which are 75% to 80% guaranteed
by the Small Business  Administration.  The Bank generally  sells the guaranteed
portion of these  loans.  As of December  31, 1995,  commercial  purpose  loans,
consumer loans and real estate loans constitute  approximately 17.2 percent, 6.7
percent and 76.1 percent,  respectively, of the Bank's loan portfolio. Loans are
generally limited to less than 85 percent of the Bank's deposits. The balance of
the Bank's  investable funds are invested  primarily in securities of the United
States  government  and  its  agencies,  obligations  of  states  and  political
subdivisions,  and the sale of Federal  funds to other  banks.  At December  31,
1995, the portfolio mix of such investments was 24.3 percent,  17.9 percent, and
57.8 percent, respectively.

Competition

The banking  business in California  generally,  and the Bank's primary  service
area in  particular,  is  highly  competitive  with  respect  to both  loans and
deposits and is dominated by a relatively small number of major banks which have
many offices operating over wide geographic areas.  Moreover, the entry of other
independent  commercial banks in the area surrounding  Auburn,  Grass Valley and
Rancho Cordova affects the Bank's competitive position.

The Bank competes for deposits and loans  principally  with these banks, as well
as  with  savings  and  loan  associations,   savings  banks,  thrift  and  loan
associations,  credit unions, mortgage companies,  insurance companies and other
lending  institutions.  Among the advantages  certain of these institutions have
over the Bank are their ability to finance extensive  advertising  campaigns and
to  allocate  their  investment  assets to regions of highest  yield and demand.
Further,  the  effect of recent  legislation  has  increased  competition  among
different types of financial institutions for both deposits and loans.

Many of the major  commercial banks operating in the Bank's primary service area
offer certain services (such as international  banking  services) which will not
be  offered  directly  by the  Bank  and,  by  virtue  of  their  greater  total
capitalization,  have  substantially  higher  lending  limits than the Bank.  In
addition,  other  entities  (both public and private)  seeking to raise  capital
through the  issuance  and sale of debt or equity  securities  will also compete
with the Bank in the acquisition of deposits. In order to compete with the other
financial  institutions in its primary service area, the Bank relies principally
upon local promotional activity,  personal contacts by its Officers,  Directors,
employees and shareholders, and extended hours.

The Bank's  promotional  activities  emphasize the  advantages of dealing with a
locally-owned and headquartered  institution  attuned to the particular needs of
the community. For customers whose loan demands exceed the Bank's lending limit,
the Bank  attempts  to arrange for such loans on a  participation  or sale basis
with its correspondent banks.

In addition to competing with other  financial  institutions,  commercial  banks
compete  with  other  financial  markets  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  available  funds with money  market  funds which are not  generally
subject to federal deposit insurance and

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banking laws and  regulations.  In periods of high  interest  rates,  such money
market funds have provided substantial  competition to banks for deposits and it
is  anticipated  that they may continue to do so in the future.  The  discussion
which follows, under the heading "Recent Legislation and Other Changes Affecting
Banking", discusses the changes which have significantly altered the competitive
banking environment.

Employees

As of December 31, 1995, the Bank had 50 full-time and 21 part-time employees.

Market Area

The Bank's primary  service area consists of the cities of Auburn,  Grass Valley
and  Rancho  Cordova,  California,  and  adjacent  areas in  Placer,  Nevada and
Sacramento Counties,  including Newcastle, Loomis, Colfax, Meadow Vista, Bowman,
Nevada City, Folsom and portions of Lincoln and Rocklin.  This area is primarily
rural;  however,  in recent years there has been increased  commercial and light
industrial development. This trend is expected to continue in the future.

The largest  employer in the primary  service area is Placer  County,  for which
Auburn is the  county  seat.  Major  businesses  and  employers  in the area are
Modular Homes, Inc.; American Forest Products;  Auburn Container;  Pacific Gas &
Electric; Pacific Telesis; the United States Government (Bureau of Reclamation);
Cable Data and Auburn Faith Hospital.

The Holding Company

The  capital  stock of  Bancorp  is subject  to the  registration  and  periodic
reporting requirements of the Securities Act of 1933. The Bank's common stock is
exempt from such requirements.

The Bancorp is a bank  holding  company  within the meaning of the Bank  Holding
Company Act of 1956, as amended, and is registered as such and is subject to the
supervision of the Federal Reserve Board.  The Bancorp is required to obtain the
approval of the Federal Reserve Board 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 shares,  the Bancorp
would own or control more than 5 percent of the voting shares of such bank.  The
Bank Holding Company Act prohibits the Bancorp from acquiring any voting shares,
interest in 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.  Under the Bank Holding Company
Act,  the  Bancorp  may not  engage  in any  business  other  than  managing  or
controlling banks or furnishing services to its subsidiaries, except that it may
engage in certain activities which, in the opinion of the Federal Reserve Board,
are so closely related to banking or to managing or controlling banks as to be a
proper  incident  thereto.   The  Bancorp  is  also  prohibited,   with  certain
exceptions,  from acquiring direct or indirect ownership or control of more than
5% of the voting  shares of any  company  unless the  company is engaged in such
activities.  The Federal  Reserve  Board's  approval must be obtained before the
shares of any such  company can be acquired  and, in certain  cases,  before any
approved company can open new offices. In making such determinations the Federal
Reserve Board  considers  whether the  performance of such  activities by a bank
holding  company  would  offer  advantages  to  the  public,   such  as  greater
convenience,   increased  competition,   or  gains  in  undue  concentration  of
resources,  decreased or unfair competition,  conflicts of interest,  or unsound
banking  practices.   Further,   the  Federal  Reserve  Board  is  empowered  to
differentiate  between activities  commenced de novo and activities commenced by
acquisition, in whole or in part, of a going concern. The Bancorp has no present
plans to directly or indirectly engage in any non-banking activity.

The Bancorp's primary source of income is the earnings of the Bank.

No national bank may,  pursuant to 12 U.S.C.  Section 56, pay dividends from its
capital.  All  dividends  must be paid out of net  profits  then on hand,  after
deducting  therefrom  losses and bad debts.  The payment of dividends out of net
profits of a national bank is further limited by 12 U.S.C.  Section 60(a), which
prohibits a bank from  declaring a dividend on its shares of common  stock until
the surplus fund equals the amount of capital stock or, if the surplus fund does
not equal the amount of capital stock, until one-tenth part of the

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Bank's net  profits of the  preceding  half year,  in the case of  quarterly  or
semiannual dividends, or the preceding two consecutive half years in the case of
an annual dividend, are transferred to the surplus fund.

Pursuant to 12 U.S.C.  Section 60(a),  the approval of the Comptroller  shall be
required if the total of all dividends declared by the Bank in any calendar year
shall exceed the total of its retained  net profits of that year  combined  with
its net profits of the two  preceding  years,  less any  required  transfers  to
surplus  or a fund for the  retirement  of any  preferred  stock.  Additionally,
pursuant to 12 U.S.C.  Section 1818(b), the Comptroller may prohibit the payment
of dividends which would constitute an unsafe and unsound banking practice.

As a bank  holding  company,  the Bancorp is required to file  reports  with the
Federal  Reserve Board and provide such  additional  information  as the Federal
Reserve  Board  may  require.  The  Federal  Reserve  Board  will  also have the
authority  to examine the Bancorp  and each of its  subsidiaries,  with the cost
thereof to be borne by the Bancorp.

The Bancorp,  and any  subsidiaries  which it may acquire or  organize,  will be
deemed to be affiliates of the Bank, within the meaning set forth in the Federal
Reserve  Act.  This  means,  for  example,  that  there will be  limitations  on
extensions of credit, including loans by the Bank to affiliates,  on investments
by the Bank in affiliates'  stock and on the Bank's taking  affiliates' stock as
collateral for loans to any borrower. The Bancorp and its subsidiaries will also
be subject to certain restrictions with respect to engaging in the underwriting,
public sales and distribution of securities.

The Bancorp and its  subsidiaries are prohibited from engaging in certain tie-in
arrangements  in  connection  with any  extension  of  credit,  sale or lease of
property or furnishing of services.  For example,  with certain exceptions,  the
Bank may not  condition an extension of credit on a customer's  obtaining  other
services provided by it, the Bancorp, or any other subsidiary or on a promise by
its customer not to obtain other services from a competitor.

Non-Banking Activities That May Be Engaged in by the Holding Company

Federal Reserve  Regulation "Y" sets out those  activities which are regarded as
closely  related to banking or  managing or  controlling  banks,  and thus,  are
permissible  activities that may be engaged in by bank holding companies subject
to approval in individual  cases by the Federal  Reserve  Board.  There has been
litigation  challenging  the validity of certain  activities  authorized  by the
Federal Reserve Board for bank holding companies,  and the Federal Reserve Board
has various regulations in this regard still under consideration.

The Bank - General

The Bank, as a national  banking  association  whose accounts are insured by the
FDIC up to the  maximum  legal  limits of the FDIC,  is subject  to  regulation,
supervision and regular examination by the Comptroller of the Currency. The Bank
is a member of the Federal  Reserve  System and, as such,  is subject to certain
provisions of the Federal Reserve Act and regulations  issued by the Board.  The
Bank is subject to applicable  provisions  of California  law insofar as they do
not conflict  with,  or are not preempted by,  federal law. The  regulations  of
these various  agencies  govern most aspects of the Bank's  business,  including
reserves  against   deposits,   interest  rates  payable  on  deposits,   loans,
investments,  mergers and acquisitions,  borrowings,  dividends and locations of
branch offices. California law exempts banks from usury laws.

Recent Legislation and Other Changes

From time to time, legislation is enacted which has the effect of increasing the
cost  of  doing  business,  limiting  or  expanding  permissible  activities  or
affecting  the   competitive   balance   between   banks  and  other   financial
institutions.  Proposals  to  change  the laws  and  regulations  governing  the
operations and taxation of banks and other financial institutions are frequently
made  in  Congress,  in the  California  legislature  and  before  various  bank
regulatory  agencies.  The  likelihood  of any major changes and the impact such
changes  might  have on the Bank  are  impossible  to  predict.  Certain  of the
potentially  significant changes which have been enacted recently by Congress or
various regulatory or professional agencies are discussed below.


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On September 28, 1995,  Governor Pete Wilson signed Assembly Bill 1482 (known as
the Caldera,  Weggeland,  and Killea California Interstate Banking and Branching
Act of 1995 and  referred  to  herein as the  "CIBBA")  which  allows  for early
interstate  branching in  California.  Under the federally  enacted  Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 ("IBBEA"),  discussed in
more detail  below,  individual  states could  "opt-out" of the federal law that
would allow banks on an interstate  basis to engage in  interstate  branching by
merging out-of-state banks with host state banks after June 1, 1997. In addition
under IBBEA,  individual states could also "opt-in" and allow out-of-state banks
to merge with host state banks prior to June 1, 1997.  The host state is allowed
under IBBEA to impose  certain  nondiscriminatory  conditions  on the  resulting
depository  institution  until  June  1,  1997.  California  in  enacting  CIBBA
authorizes  out-of-state  banks to enter  California  by the  acquisition  of or
merger  with a  California  bank that has been in  existence  for at least  five
years.

Section 3824 of the California Financial Code ("Section 3824") as added by CIBBA
provides  for the  election  of  California  to "opt-in"  under  IBBEA  allowing
interstate  bank merger  transactions  prior to July 1, 1997 of an  out-of-state
bank with a California  bank that has been in existence for at least five years.
The early "opt in" has the  reciprocal  effect of allowing  California  banks to
merge with out-of-state  banks where the states of such out-of-state  banks have
also "opted in" under IBBEA.  The five year age  limitation is not required when
the  California  bank is in danger of  failing  or in  certain  other  emergency
situations.

Under  IBBEA,  California  may  also  allow  interstate  branching  through  the
acquisition  of a branch in  California  without  the  acquisition  of an entire
California bank. Section 3824 provides an express prohibition against interstate
branching  through  the  acquisition  of a  branch  in  California  without  the
acquisition of the entire  California bank. IBBEA also has a provision  allowing
states to "opt-in" with respect to permitting  interstate  branching through the
establishment  of de novo or new branches by  out-of-state  banks.  Section 3824
provides that California  expressly prohibits  interstate  branching through the
establishment  of de novo branches of  out-of-state  banks in California,  or in
other words, California did not "opt-in" this aspect of IBBEA. CIBBA also amends
the California  Financial Code to include agency  provisions to allow California
banks to establish  affiliated  insured depository  institution  agencies out of
state as allowed under IBBEA.

Other provisions of CIBBA amend the intrastate branching laws, govern the use of
shared ATM's,  allow the  repurchase of stock with the prior written  consent of
the  Superintendent,  and amend  intrastate  branch  acquisition and bank merger
laws.  Another  banking bill enacted in  California  in 1995 was Senate Bill 855
(known as the State Bank Parity Act and is  referred  to herein as the  "SBPA").
SBPA  went  into  effect on  January  1,  1996,  and its  purpose  is to allow a
California state bank to be on a level playing field with a national bank by the
elimination of certain disparities and allowing the California Superintendent of
Banks  ("Superintendent")  authority to implement  certain changes in California
banking law which are parallel to changes in national banking law such as closer
conformance  of  California's  version of  Regulation O to the FRB's  version of
Regulation O.

On  September  29,  1994,  IBBEA was enacted  which has  eliminated  many of the
current restrictions to interstate banking and branching. The IBBEA permits full
nationwide  interstate banking to adequately  capitalized and adequately managed
bank holding  companies  beginning  September 29, 1995 without regard to whether
such  transaction  is  expressly  prohibited  under the laws of any  state.  The
IBBEA's  branching  provisions  permit full  nationwide  interstate  bank merger
transactions to adequately  capitalized  and adequately  managed banks beginning
June 1,  1997.  However,  states  retain  the right to  completely  "opt out" of
interstate  bank  mergers  and to continue to require  that  out-of-state  banks
comply with the states' rules governing entry.

The states  that opt out must enact a law after  September  29,  1994 and before
June 1,  1997  that (i)  applies  equally  to all  out-of-state  banks  and (ii)
expressly  prohibits merger  transactions with out-of-state  banks. States which
opt out of  allowing  interstate  bank merger  transactions  will  preclude  the
mergers of banks in the opting out state with banks located in other states.  In
addition,  banks  located  in  states  that  opt out are not  permitted  to have
interstate  branches.  States  can also "opt in" which  means  states can permit
interstate branching earlier than June 1, 1997.

The laws governing  interstate  banking and interstate bank mergers provide that
transactions,  which result in the bank holding  company or bank  controlling or
holding in excess of ten  percent  of the total  deposits  nationwide  or thirty
percent of the total  deposits  statewide,  will not be  permitted  except under
certain

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specified conditions.  However, any state may waive the thirty percent provision
for such  state.  In  addition,  a state may  impose a cap of less  than  thirty
percent of the total amount of deposits  held by a bank holding  company or bank
provided such cap is not  discriminatory  to out-of-state bank holding companies
or banks.

On  September  23,  1994,  the  Riegle  Community   Development  and  Regulatory
Improvement  Act of 1994 (the "1994 Act") was enacted  which covers a wide range
of  topics   including   small   business  and   commercial   real  estate  loan
securitization,  money  laundering,  flood insurance,  consumer home equity loan
disclosure  and  protection  as well as the  funding  of  community  development
projects and regulatory relief.

The major  items of  regulatory  relief  contained  in the 1994 Act  include  an
examination  schedule  that has been  eased for the top rated  banks and will be
every 18 months  for CAMEL 1 banks with less than $250  million in total  assets
and CAMEL 2 banks with less than $100 million in total  assets  (after two years
the $100 million  amount may be increased to $175  million,  if the  appropriate
federal  banking  regulatory  agency so  permit).  The 1994 Act  amends  Federal
Deposit  Insurance  Corporation  Improvement  Act of 1991  with  respect  to the
Section  124,  the mandate to the federal  banking  agencies to issue safety and
soundness  regulations,  including regulations concerning executive compensation
allowing the federal banking regulatory  agencies to issue guidelines instead of
regulations.

Further  regulatory  relief is  provided in the 1994 Act, as each of the federal
regulatory banking agencies  including the National Credit Union  Administration
Board is  required  to  establish  an internal  regulatory  appeals  process for
insured depository  institutions within 6 months. In addition, the Department of
Justice 30 day waiting  period for mergers  and  acquisitions  is reduced by the
1994 Act to 15 days for certain acquisitions and mergers.

In the area of currency transaction reports, the 1994 Act requires the Secretary
of  the  Treasury  to  allow   financial   institutions  to  file  such  reports
electronically.  The 1994 Act also  requires  the  Secretary  of the Treasury to
publish written rulings concerning the Bank Secrecy Act, and staff commentary on
Bank Secrecy Act regulations must also be published on an annual basis.

The procedures for forming a bank holding company have also been simplified. The
formal  application  process  for  many  holding  company  formations  is  now a
simplified 30 day notice procedure.  In addition, the Securities Act of 1933 has
been  amended by the 1994 Act to further  simplify  the  securities  issuance in
connection with a bank holding company formation.

On December 17,  1993,  the  President  signed into law  legislation  to provide
additional funding for failed savings associations under the jurisdiction of the
Resolution  Trust  Corporation.  In  addition to  providing  such  funding,  the
legislation, among other things, makes it more difficult for the federal banking
agencies to obtain prejudgment injunctive relief against depository institutions
and  parties  affiliated  with such  institutions,  extends  the  moratorium  on
depository  institutions  converting  from Savings  Association  Insurance  Fund
insurance to Bank Insurance Fund insurance or vice versa, and prohibits the FDIC
from using any deposit  insurance funds to benefit the  shareholders of a failed
or failing depository institution.

The Omnibus  Budget  Reconciliation  Act of 1993 (the "Budget  Act"),  which was
signed into law on August 10, 1993,  contains  numerous tax and other provisions
which may affect  financial  institutions and their  businesses.  The Budget Act
contains a provision that establishes a priority for depositors,  or the FDIC as
subrogee  thereof,  in the  event of a  liquidation  or other  resolution  of an
insured  depository  institution  for which a receiver is appointed after August
10, 1993. In addition, under the existing cross-guarantee  provisions of federal
banking  law,  the FDIC has the power to estimate  the cost of the failure of an
insured  depository  institution  and  assess a  charge  against  any  financial
institution affiliated with the failed institution.

On December  19,  1991,  the FDIC  Improvement  Act of 1991 (the "1991 Act") was
signed into law. The 1991 Act provides for the  recapitalization  and funding of
the Bank  Insurance  Fund of the FDIC.  In addition the 1991 Act  includes  many
changes to banking law.  Supervisory reforms provided under the 1991 Act include
annual on-site full scope examinations of most insured institutions,  additional
audit and audit report requirements  imposed on most insured  institutions and a
new annual report requirement for most insured institutions. Accounting reforms,
including the  prescription  of accounting  principles  no less  stringent  than
generally accepted accounting principles,  and prescription of standards for the
disclosure of off-balance sheet items,

                                        7

<PAGE>



market value information and capital adequacy, are also provided for in the 1991
Act. In  addition,  the 1991 Act  provides  for a new rating  system for insured
institutions  based on capital  adequacy.  Institutions  will be  categorized as
critically undercapitalized,  significantly undercapitalized,  undercapitalized,
adequately capitalized and well capitalized.

The FDIC has adopted  definitions of how institutions  will be ranked for prompt
corrective  action  purposes.  These  definitions  are  as  follows:  (i) a well
capitalized  institution  is one  that  has a  leverage  ratio  of 5%,  a Tier 1
risk-based  capital ratio of 6%, a total risk-based  capital ratio of 10% and is
not  subject to any  written  order or final  directive  by the FDIC to meet and
maintain a specific capital level; (ii) an adequately capitalized institution is
one that meets the minimum  required  capital  adequacy levels but not that of a
well capitalized institution;  (iii) an undercapitalized institution is one that
fails to meet any one of the minimum required capital adequacy levels but not as
undercapitalized  as  a  significantly   undercapitalized  institution;  (iv)  a
significantly  undercapitalized  institution is one that has a total  risk-based
capital ratio of less than 6% and/or a leverage ratio of less than 3%; and (v) a
critically  undercapitalized  institution  is one with a leverage  ratio of less
than 2%.

The  banking  regulators  will have broad  powers to  regulate  undercapitalized
institutions.  Undercapitalized institutions must file capital restoration plans
and are automatically subject to restrictions on dividends,  management fees and
asset  growth.  In addition,  the  institution  is  prohibited  from opening new
branches,  making  acquisitions or engaging in new lines of business without the
approval of its appropriate banking regulator.

Holding  companies with  undercapitalized  institutions  will be prohibited from
capital  distributions without the prior approval of the FRB. Definite drop dead
dates  are  mandated  under  the 1991 Act for when  critically  undercapitalized
insured institutions must go under receivership or conservatorship.

The 1991 Act also requires the regulators to issue  regulations in many areas of
banking  including  prescribing  safety and  soundness  standards as to internal
controls,  asset quality,  earnings, stock valuation and executive compensation.
Least cost resolution is mandated by the 1991 Act which will require the FDIC to
use the least cost method case resolution. Beginning in 1995, the FDIC generally
will not be  permitted to cover  uninsured  depositors  or creditors  unless the
President,  Secretary of Treasury and the FDIC  jointly  determine  that such is
necessary to avoid systemic risk.

The  1991  Act  also  contains  miscellaneous  provisions  including  additional
regulation  of  foreign  banks,   notification  of  branch   closures,   reduced
assessments for lifeline  account  products,  FDIC affordable  housing  program,
Truth in  Savings  disclosure  provisions,  limitations  on  brokered  deposits,
restrictions on state bank  nonbanking  activities,  risk-based  assessments and
deposit  insurance  limitations  for certain  accounts.  The FDIC also adopted a
risk-based  assessment  system for purposes of determining the insurance premium
to be paid by a bank for FDIC deposit insurance.

The Comprehensive Thrift and Bank Fraud Prosecution and Taxpayer Recovery Act of
1990 (the "Crime Bill"), signed into law on November 29, 1990, also expanded the
enforcement powers of regulatory authorities. The Crime Bill increases fines and
prison  terms  for  various  financial  institution  related  crimes;   appoints
additional  prosecutors;  establishes  a system of rewards for people  providing
information leading to the prosecution of financial institution crimes; mandates
prison  terms of ten  years  to life for  "kingpins"  of  financial  institution
crimes; makes it a crime to obstruct the examination of a financial  institution
to conceal  assets from a conservator or to impede  conservatorship  operations;
provides for the forfeiture of assets  obtained  through bank crimes;  prohibits
persons  convicted  of bank crimes from  engaging in certain  transactions  with
financial  institutions or regulatory  agencies;  and provides that  liabilities
arising from a breach of fiduciary duty to a financial institution or the breach
of an agreement to maintain the  institution's  capital  cannot be discharged in
bankruptcy.  Further,  the Crime Bill  prohibits  a financial  institution  from
prepaying the salary,  liabilities or legal  expenses of an affiliated  party if
such prepayments are made in contemplation of an institution's  insolvency or if
such   prepayments   will  prevent  normal  payments  from  being  made  to  the
institution's creditors.  Golden parachute and indemnification payments can also
be  prohibited  by  regulatory  authorities  in  certain  circumstances  if  the
institution is insolvent, is in conservatorship or receivership,  is in troubled
condition,  or has received a regulatory  rating in one of the two lowest rating
categories (or in contemplation of such events).


                                        8

<PAGE>



On August 9, 1989, Financial Institutions Reform,  Recovery, and Enforcement Act
of 1989 ("FIRREA") was signed into law. FIRREA provided  funding in the range of
many billions of dollars for the  so-called  "bailout" of insolvent or seriously
undercapitalized savings and loans, reorganized the federal regulatory structure
of the financial institution industry, and expanded the enforcement authority of
banking supervisory  agencies.  Tighter regulatory  standards are required under
FIRREA for the  performance of real estate  appraisals,  and FIRREA provides for
greater  examination  and  disclosure  of an  insured  depository  institution's
compliance   with  the   Community   Reinvestment   Act  which  deals  with  the
institution's  record  of  meeting  the  credit  needs of its  entire  community
including low and moderate income neighborhoods.

It is likely that other bills  affecting the business of banks may be introduced
in the future by the United States Congress or California legislature.

Impact of Monetary Policies

Banking is a business which depends on interest rate differentials.  In general,
the  difference  between the  interest  paid by the Bank on its deposits and its
other borrowings, and the interest received by the Bank on loans extended to its
customers and on securities  held in its portfolio,  comprises the major portion
of the Bank's earnings.

The earnings  and growth of the Bank are  affected not only by general  economic
conditions,  both  domestic  and  foreign,  but also by the  monetary and fiscal
policies of the United  States and its agencies,  particularly  the FRB. The FRB
can and  does  implement  national  monetary  policy,  such as  seeking  to curb
inflation  and combat  recession by its open market  operations in United States
Government securities, by adjusting the required level of reserves for financial
institutions subject to reserve requirements,  and by varying the discount rates
applicable to borrowings by banks from the Federal Reserve  System.  The actions
of the FRB influence the growth of bank loans, investments and deposits and also
affect  interest  rates  charged on loans and paid on  deposits.  The nature and
impact that future changes in fiscal or monetary  policies or economic  controls
may have on the Bank's business and earnings cannot be predicted.

                                        9

<PAGE>



                            SELECTED STATISTICAL DATA


Distribution of Assets, Liabilities and Stockholders' Equity:

Interest Rates and Interest Differential


Set forth  below are the  consolidated  assets,  liabilities  and  stockholders'
equity and  applicable  percentages  computed on a daily average basis as of the
dates indicated:


(Dollars In Thousands)                           Year Ended December 31,

Assets                                       1995   Percent        1994  Percent
------                                     -------  -------      ------- -------

Cash and Due from Banks ................   $ 5,112    6.9        $ 5,196    8.0
Federal Funds Sold .....................     6,471    8.8          6,668   10.3
Investment Securities ..................     6,550    8.9          5,221    8.0
Loans Held for Sale ....................     4,931    6.7          5,331    8.2
Loans, Net .............................    44,215   60.0         36,690   56.6
Bank Premises and Equipment ............     3,572    4.9          3,407    5.3
Other Assets ...........................     2,780    3.8          2,366    3.6
                                           -------  -----        -------  -----

         Total Assets ..................   $73,631  100.0%       $64,879  100.0%
                                           =======  =====        =======  =====

Liabilities and Stockholders'
           Equity

Non-interest Bearing Deposits ..........   $13,778   18.7        $12,087   18.6
Interest-bearing Deposits ..............    51,338   69.7         44,821   69.1
Long-term Debt .........................       572     .8            602     .9
Other Liabilities ......................       482     .7            258     .4
Stockholders' Equity ...................     7,461   10.1          7,111   11.0
                                           -------  -----        -------  -----

         Total Liabilities and
           Stockholders' Equity ........   $73,631  100.0%      $64,879   100.0%
                                           =======  =====       =======   =====


                                       10

<PAGE>



Average Balances and Interest Rates

The  following  tables  indicate  the amounts and average  balances,  amounts of
return and average  yield of  interest-bearing  assets and  liabilities  for the
period indicated:
<TABLE>
<CAPTION>

                                                   Year Ended December 31,
                                    ------------------------------------------------------
(Dollars In Thousands)                         1995                          1994
                                    ------------------------      ------------------------
                                    Balance  Interest  Rate       Balance   Interest  Rate
<S>                                 <C>      <C>       <C>        <C>      <C>       <C>
                                    -------  --------  -----      -------  --------- -----
Earning Assets

Federal Funds Sold ...............  $ 6,471   $   364    5.6%     $ 6,668   $   278    4.2%
Loans Held for Sale ..............    4,931       527   10.7        5,331       474    8.9
Investment Securities:
  Obligations of U.S. ............
    Government Agencies ..........    3,500       206    5.9        1,855       111    6.0
  Other Securities ...............    3,050       217    7.1        3,366       234    7.0
                                    -------   -------             -------   -------

         Total Investment
           Securities ............    6,550       423    6.5        5,221       345    6.6

Loans (Net) ......................   44,215     4,812   10.9       36,690     3,633    9.9
                                    -------   -------             -------   -------
         Total Earning
           Assets ................  $62,167   $ 6,126    9.9%     $53,910   $ 4,730    8.8%
                                    =======   =======             =======   =======
</TABLE>
<TABLE>
<CAPTION>

                                                   Year Ended December 31,
                                    ------------------------------------------------------
(Dollars In Thousands)                         1995                          1994
                                    ------------------------      ------------------------
                                    Balance  Interest  Rate       Balance   Interest  Rate
                                    -------  --------  -----      -------  --------- -----
<S>                                 <C>      <C>       <C>        <C>      <C>       <C>

Interest-Bearing Liabilities

Demand Deposits - Interest
  Bearing ........................  $32,910   $   758    2.3%     $33,253   $   740    2.2%
Savings Deposits .................    3,198        70    2.2        3,391        74    2.2
Time Deposits ....................   15,230       802    5.3        8,177       275    3.4
Long-term Debt ...................      572        49    8.6          602        51    8.5
                                    -------   -------             -------   -------   

         Total Interest-
           Bearing Liabilities
                                    $51,910   $ 1,679    3.2%     $45,423   $ 1,140    2.5%
                                    =======   =======             =======   =======

Interest Income/Earning Assets ...                       9.9%                          8.8%
Interest Expense/Earning Assets ..                       2.7%                          2.1%
                                                        -----                        -----

         Net Interest Income and
           Net Yield on Interest-
           Earning Assets                     $ 4,447    7.2%               $ 3,590    6.7%
                                              =======   =====               =======  =====
</TABLE>

                                                     11

<PAGE>



Rate/Volume Analysis of Net Interest Revenue

The following table sets forth information  regarding changes in interest income
and interest expense for the Bank for the periods  indicated.  For each category
of  interest  earning  asset and  interest  bearing  liability,  information  is
provided on changes  attributable  to (1)  changes in volume  (changes in volume
multiplied by previous rate),  (2) change in rate (changes in rate multiplied by
previous  volume) and (3) changes in rate/volume  (change in rate  multiplied by
the change in volume).
<TABLE>
<CAPTION>

(Dollars In Thousands)                  1995 over 1994(1)             1994 over 1993(1)
                                    --------------------------    --------------------------
                                    Volume     Rate     Total     Volume     Rate     Total
<S>                                 <C>        <C>      <C>       <C>        <C>      <C>

Increase (Decrease) in:

     Interest Income

Loans Held for Sale ..............     (31)       83        52       437         0       437
Federal Funds Sold ...............      (8)       94        86         9        86        95
Investment Securities ............      86        (8)       78        29       (18)       11
Loans ............................     792       383     1,175        98        78       176
                                    ------    ------    ------    ------    ------    ------

  Total increase (decrease) ......     839       552     1,391       573       146       719
                                    ------    ------    ------    ------    ------    ------

    Interest Expense

Demand Deposits - Interest
  Bearing ........................      (8)       26        18       122       (12)      110
Savings Deposits .................      (4)        0        (4)       (1)       (2)       (3)
Time Deposits ....................     298       195       493        18         3        21
Long-term Debt ...................      (3)        1        (2)       (2)       (5)       (7)
                                    ------    ------    ------    ------    ------    ------

  Total increase (decrease) ......     283       222       505       137       (16)      121
                                    ------    ------    ------    ------    ------    ------

Total change in net interest
  income .........................  $  556    $  330    $  886    $  436    $  162    $  598
                                    ======    ======    ======    ======    ======    ======

</TABLE>

(1) The variance not solely due to rate or volume is  proportionately  allocated
between the rate and volume variances.

                                       12

<PAGE>



Investment Portfolio

The  following  table  summarizes  the  investments  at amortized  cost by term,
distributions and yields as of December 31, 1995:
<TABLE>
<CAPTION>

                                                   After Five
(Dollars In Thousands)            One Year          Years to          Over Ten
                                   or Less          Ten Years           Years             Total
Available-for-sale              Amount Yield      Amount Yield      Amount Yield      Amount Yield
<S>                             <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>

U.S. Government
  Agencies ..................   $3,500   5.9%                                         $3,500   5.9%

Obligations of States &
  Political Subdivisions ....    1,000   7.5%     $1,571   8.2%                        2,571   7.9%

Federal Reserve Bank
  Stock .....................                                          141   6.0%        141   6.0%
                                ------   ---      ------   ---      ------   ---      ------   ---
         Total ..............   $4,500   6.3%     $1,571   8.2%     $  141   6.0%     $6,212   6.7%
                                ======   ===      ======   ===      ======   ===      ======   ===

</TABLE>

The Company had no held-to-maturity investment securities at December 31, 1995.

Year End Balances

The following table  summarizes the year-end  balances and  distributions of the
Bank's  investment  securities held on the dates  indicated.  The Company had no
held-to-maturity investment securities at December 31, 1995. Available-for- sale
investment securities are shown at estimated market value:

(Dollars In Thousands)

                                                           Available-for-sale
                                                             1995      1994
                                                           -------   -------

U.S. Government Agencies ....................              $ 3,510   $ 3,410
State and Political Subdivisions ............                2,666     2,979
Federal Reserve Bank Stock ..................                  141       141
                                                           -------   -------
                                                           $ 6,317   $ 6,530
                                                           =======   =======
Loan Portfolio

The following table sets forth the amounts of gross loans outstanding at the end
of the period indicated, according to the type of loan:

(Dollars In Thousands)                                        December 31,
                                                             1995      1994
                                                           -------   -------

Commercial, Financial, and Agricultural .....              $ 7,901   $ 6,858
Real estate - Construction ..................                2,791     2,871
Real estate - Mortgage ......................               32,283    31,796
Installment Loans to Individuals ............                3,093     2,192
                                                           -------   -------

         Total Loans ........................              $46,068   $43,717
                                                           =======   =======



                                       13

<PAGE>



Maturity of Loans and Sensitivity of Loans to Changes in Interest
  Rates
                                                                Fixed   Variable
                                              One               Rate     Rate
                                      Less    Year     More      Due      Due
                                      than     to      than     After    After
                                      One     Five     Five      One      One
(Dollars In Thousands)                Year    Years    Years     Year     Year
                                     ------   ------   ------   ------   ------
December 31, 1995

Commercial, Financial
  Agricultural ...................   $6,039   $1,395   $  467   $1,862   $3,843
Real Estate Construction .........    2,791


Impaired, Nonaccrual, Past Due and Restructured Loans

(Dollars In Thousands)                         Year Ended         Year Ended
                                            December 31, 1995  December 31, 1994
                                               Loan Amount        Loan Amount

Loans meeting the definition of
  impairment under SFAS 114 .................    $604,717            $      0

Loans accounted for on a non-
  accrual basis .............................    $604,717            $451,908

Accruing loans which are 90
  days or more past due as to
  interest or principal .....................    $ 62,801            $ 89,300

Troubled debt restructuring .................    $      0            $      0


Interest  income  on these  loans  included  in net  income  for the year  ended
December 31, 1995 and 1994 totaled $54,949 and $28,384,  respectively.  Interest
foregone on  nonaccrual  loans totaled  $12,526 for the year ended  December 31,
1995.

Impaired  loans are defined as loans for which it is  probable  that all amounts
due (including  both principal and interest) will not be collected in accordance
with the contractual  term of the loan  agreement.  An impaired loan is measured
based on the present  value of  expected  future  cash flows  discounted  at the
loan's  effective  interest  rate  or,  as a  practical  matter,  at the  loan's
observable  market  price  or the  fair  value  of  collateral  if the  loan  is
collateral  dependent.  Loans are generally  placed on  non-accrual  status when
principal or interest  payments are past due 90 days or more.  Certain loans are
placed  on  non-accrual  earlier  if  there  is a  reasonable  doubt  as to  the
collectibility  of  interest.  Loans  which are in the process of renewal in the
normal  course of business or are well secured and in the process of  collection
continue  to accrue  interest  if  Management  considers  the risk of loss to be
minimal.  Troubled debt  restructurings are those loans for which the terms have
been  renegotiated  to provide a reduction  or deferral of interest or principal
because of a  deterioration  in the financial  position of the borrower or which
would be classified as a restructured debt in a troubled loan situation.

Potential Problem Loans

Management  knows of no  potential  problem  loans  that have not been  reported
above.



                                       14

<PAGE>



Foreign Loans

There are no foreign loans.

Loan Concentrations and Other Interest-Bearing Assets

As of December  31, 1995,  there were no  concentrations  of loans  exceeding 10
percent of total loans which were not  otherwise  disclosed as a category in the
loan  portfolio   table.   As  of  December  31,  1995,   there  were  no  other
interest-bearing assets that would be required to be in the Impaired, Nonaccrual
and Potential  Problem Loans  sections  above if such assets were  classified as
loans, except as noted above.

Analysis of the Allowance for Loan Losses

                                                         Year Ended December 31,
(Dollars In Thousands)                                       1995      1994
                                                           -------   -------

Balance at beginning of period ..............              $   741   $   793
Charge-offs:
  Commercial, financial and agricultural ....                  (59)
  Real estate-mortgage ......................                  (64)      (72)
  Installment loans to individuals ..........                   (7)       (7)

Recoveries:
  Commercial, financial and agricultural ....                   49         3
  Real estate-mortgage ......................                    2        24
                                                           -------   -------

Net charge-offs .............................                  (79)      (52)
Additions charged to operations .............                   70
                                                           -------   -------

Balance at end of period ....................              $   732   $   741
                                                           =======   =======

Ratio of net charge-offs during the
  period to average loans outstanding
  during period .............................                  .18%      .14%
                                                           =======   =======

The allowance for loan losses is established  through charges to earnings in the
form of a provision for loan losses.  Loan losses are charged and recoveries are
credited to the  allowance  for loan losses.  The  provision  for loan losses is
determined after  considering  various factors such as impaired loans, loan loss
experience,  the existing  allowance for loan losses,  current  charges-offs and
recoveries  to the  allowance  for loan losses,  and the overall  quality of the
portfolio, as determined by management, regulatory agencies and current economic
conditions.  The adequacy of the allowance  for loan losses is determined  after
considering  the results of the Bank's ongoing  internal review of the portfolio
which is undertaken to ascertain  whether there are probable losses that must be
charged  off  and  to  assess  the  risk  characteristics  of the  portfolio  in
aggregate.  In addition,  consideration  is given to the results of examinations
and  third-party  loan file  reviews  performed  annually.  The Bank's loan loss
experience,  current charge-offs and recoveries,  delinquency trends and current
national and local economic  conditions  are also evaluated by management.  1996
losses for all loan  categories as a percentage of average loans are expected to
approximate  the average for the previous  three years.  As over 95% of the loan
portfolio  is made up of  commercial  and real estate  loans,  the Bank does not
specifically  allocate the allowance for loan losses to particular categories of
loans.



                                       15

<PAGE>



Deposit Structure

The following is a  distribution  of average daily  deposits for the years ended
December 31, 1995 and 1994.

                                                  Years Ended December 31,
(Dollars In Thousands)                           1995                  1994
                                                 ----                  ----
                                             Amount  Rate         Amount  Rate
Demand deposits
  Non-interest bearing .................    $13,778              $12,087
Demand deposits
  Interest bearing .....................     32,910   2.3%        33,253   2.2%
Saving deposits ........................      3,198   2.2          3,391   2.2
Time deposits ..........................     15,230   5.3          8,177   3.4
                                             -------             -------      

         Total .........................    $65,116   3.2%       $56,908   2.4%
                                            =======              =======      

Time  deposits  of  $100,000  or more at  December  31,  1995 had the  following
schedule of maturities:
(Dollars In Thousands)                                         December 31,
                                                                  1995

Three months or less .............................               $   875
Over three months to six months ..................                 1,514
Over six months to twelve months .................                 1,173
                                                                 -------

         Total ...................................               $ 3,562
                                                                 =======

Financial Ratios

The  following  table  indicates  the key  financial  ratios of Bancorp  for the
periods indicated:


                                                     Years Ended December 31,
                                                     1995       1994       1993
                                                   ------     ------     ------
Profitability ratios:
  Rate of return on average total assets ......      1.20%      1.26%      1.30%
  Rate of return on average stockholders'
    equity ....................................     11.79%     11.52%      9.96%
Liquidity and capital ratios:
  Dividend payout ratio .......................     35.50%     35.61%     30.86%
  Average stockholders' equity to average
    total assets ..............................     10.13%     10.96%     13.06%




                                       16

<PAGE>



Item 2.  Properties

Bancorp and Bank  conduct  operations  at their main office at 540 Wall  Street,
Auburn,  California,  with branch banking offices at 10375 Brunswick Road, Grass
Valley,   California,   and  2893  Sunrise  Blvd,  Suite  106,  Rancho  Cordova,
California.  The Bank also maintains a loan  production  office at 1601 Response
Road, Suite 150, Sacramento, California.

The Auburn main office consists of a one-story  building of approximately  4,000
square feet of office space with parking  facilities on the  property,  which is
owned by Bancorp in fee. The property is subject to a first trust deed  securing
a note with an original amount of $308,000.

The Bancorp also owns  property in fee at 500 Wall Street,  Auburn,  California.
The property includes a one-story building with approximately  5,200 square feet
of office space.  This space is used by the Bank and Bancorp for  administrative
offices.  The property is also subject to a first trust deed  securing a note in
the original amount of $390,000.

The branch office located at 10375 Brunswick Road, Grass Valley,  California, is
a two-story building owned by the Bank with approximately  12,990 square feet of
office space.  The Bank occupies the lower floor of  approximately  6,890 square
feet. The upper floor is being leased to third parties.

The Bank leases its Rancho  Cordova  facility under a  noncancellable  operating
lease which  expires  November  1999.  The monthly  rental is $5,133.90  and the
office consists of approximately  3,843 square feet. The loan production  office
in Sacramento is approximately 2,085 square feet and is leased for $3,736.28 per
month.

The Bank acquired property at the corner of Bell Road and Professional  Drive in
Auburn,  California during December 1989. It was determined not to use this site
for future Bank offices and the property is currently for sale.

Management of Bancorp and Bank believe that the facilities are  appropriate  and
adequate for the operation of the business of Bancorp and Bank.

Item 3.  Legal Proceedings

There are no legal proceedings other than ordinary routine litigation incidental
to the business pending against Bancorp or Bank to which the Bancorp or the Bank
is a party or of which any of their property is subject.

Item 4.  Submission of Matters to a Vote of Security Holders

Not applicable.


                                       17

<PAGE>



PART  II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

               a.  Market Information

               There is no established  public trading market for Auburn Bancorp
               common   stock.    The   Bancorp's   common   stock   is   traded
               over-the-counter, is not listed on any exchange and is not quoted
               on NASDAQ.  The following table summarizes the trades about which
               management of Bancorp has information:

               Quarter Ended                              High(Ask) Low(Bid)
               --------------                             --------  --------
               December 31, 1995 ......................   $   7.63  $   7.63
               September 30, 1995 .....................       7.63      7.50
               June 30, 1995 ..........................       7.75      7.50
               March 31, 1995 .........................       7.50      7.50
               December 31, 1994 ......................       7.50      7.00
               September 30, 1994 .....................       8.00      7.00
               June 30, 1994 ..........................       8.13      7.50
               March 31, 1994 .........................       7.50      7.50

               b. Holders

               In addition, there were approximately 460 shareholders of Bancorp
               stock as of March 1, 1996.

               c. Dividends

               On  February  14,  1996,  the Board of  Directors  of the Bancorp
               declared a $.32 per share  cash  dividend  distributed  March 29,
               1996 to shareholders of record on March 15, 1996.

               On  January  18,  1995,  the Board of  Directors  of the  Bancorp
               declared a $.30 per share cash dividend  distributed February 28,
               1995 to shareholders of record on February 10, 1995.

               On  January  19,  1994,  the Board of  Directors  of the  Bancorp
               declared a $.28 per share cash dividend  distributed February 28,
               1994 to shareholders of record on February 11, 1994.

               Under  California  law,  the  Bancorp is  prohibited  from paying
               dividends unless: (1) its retained earnings  immediately prior to
               dividend payment equals or exceeds the amount of the dividend; or
               (2)  immediately  after giving effect to the dividend (i) the sum
               of the Bancorp's assets would be at least 125% of its liabilities
               and (ii) the  current  assets  of the  Bancorp  would be at least
               equal  to its  current  liabilities  or,  if the  average  of its
               earnings before taxes on income and before  interest  expense for
               the two  preceding  fiscal years was less than the average of its
               interest  expense for the two preceding  fiscal  years,  at least
               125% of its current liabilities.

               The  Bancorp's   principal  source  of  funds,   including  funds
               available for payment of cash dividends to shareholders, consists
               of dividends  paid and other funds advanced to the Bancorp by the
               subsidiary  Bank.  Statutory and regulatory  requirements  impose
               limitations on the amount of dividends payable by the Bank to the
               Bancorp and on  extensions  of credit by the Bank to the Bancorp.
               Extensions of credit by the Bank to the Bancorp are limited by 12
               U.S.C.  371c to an amount not to exceed 10 percent of the capital
               stock and surplus of the Bank and must be on terms and conditions
               that are  consistent  with safe and sound banking  practices.  In
               addition,  any  such  extension  of  credit  must be  secured  by
               collateral having market values equal to specified percentages of
               the loan.  Although  there  were no  extensions  of credit to the
               Bancorp by the Bank at December 31, 1995, the Bank was limited in
               the amount it could lend to the Bancorp to $730,000.


                                       18

<PAGE>



               Pursuant to 12 U.S.C. Sections 56 and 60, the Bank's shareholders
               are entitled to cash  dividends  when,  as and if declared by the
               Board of  Directors of the Bank out of funds  properly  available
               therefore.  A dividend  cannot be declared if it would exceed the
               Bank's  net  profits or if it would  impair  the Bank's  capital.
               Furthermore,  unless  the  Bank's  surplus  fund is  equal to its
               common stock, no dividends can be paid until a required amount of
               the Bank's undivided  profits has been transferred to its surplus
               fund. The approval of the Comptroller of the Currency is required
               if the  total of all  cash  dividends  declared  by the Bank in a
               calendar year exceeds the total of the Bank's net profit for that
               year  combined  with its retained  profits for the  preceding two
               years. At December 31, 1995, $708,270 in retained earnings of the
               Bank were available for dividend payments.


                                       19

<PAGE>



Item 6.  Selected Financial Information

The  following  table  summarizes  certain  consolidated  financial  information
relating to Bancorp and Bank:

(Dollars in thousands except                  Years Ended December 31,
per share data)                       1995     1994     1993     1992     1991
                                    -------  -------  -------  -------  -------

CONSOLIDATED STATEMENTS
  OF OPERATIONS

  Total interest income ..........  $ 6,126  $ 4,731  $ 4,011  $ 4,112  $ 4,944
  Net interest income ............    4,447    3,590    2,992    2,822    2,950
  Provision for loan losses ......       70        0       90       50       82
  Net income .....................      880      819      738      572      469
  Per common share(1) ............  $   .85  $   .79  $   .65  $   .49  $   .40

CONSOLIDATED BALANCE SHEETS

  Total assets ...................  $76,128  $69,428  $57,119  $56,635  $54,134
  Net loans ......................   45,237   42,847   34,167   35,310   31,823
  Total deposits .................   67,246   61,070   49,242   48,503   46,287
  Allowance for loan losses ......      732      741      793      772      736
  Total stockholders'
    equity .......................  $ 7,800  $ 7,475  $ 7,063  $ 7,270  $ 6,925

STOCK DATA

  Cash dividends paid ............  $   .30  $   .28  $   .20  $   .20  $  --
  Book value per share(2) ........  $  7.91  $  7.18  $  6.78  $  6.39  $  6.08

SELECTED RATIOS (3)

  Return on average assets
      (net income divided
      by average total assets) ...     1.20%    1.26%    1.30%    1.05%     .87%
  Return on average equity
      (net income divided
      by average equity) .........    11.79%   11.52%    9.96%    8.03%    6.97%
  Equity to assets
      (average equity divided
      by average total assets) ...    10.13%   10.96%   13.06%   13.11%   12.54%
  Net yield on average
      interest-earning assets ....     9.85%    8.77%    8.52%    9.12%   10.80%
  Average net loans
      to average deposits ........    67.90%   64.47%   73.77%   72.86%   79.20%

(1)   Per share  net  income  is based on  weighted-average  number of shares of
      common stock and common stock equivalents outstanding during each period.
(2)   The book value per share is based on total stockholders' equity divided by
      the  number  of  shares  outstanding  as  of  the  date  indicated.  Total
      stockholders'  equity includes the unrealized  loss on  available-for-sale
      investment securities, net of taxes, at December 31, 1995 and 1994.
(3)   Average balances are based on daily average balances for each month.

                                       20

<PAGE>



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

Introduction

Management's   discussion   and   analysis  is  intended  to  provide  a  better
understanding  of the  financial  condition  and results of operations of Auburn
Bancorp (the "Company") and its wholly-owned  subsidiary,  The Bank of Commerce,
N.A. (the "Bank").  This  discussion and analysis  should be read in conjunction
with the consolidated  financial statements and notes thereto,  along with other
financial information included in this report.

Financial Overview

Auburn  Bancorp  and  subsidiary   produced   earnings  of  $880,000  for  1995,
representing  earnings per share of $.85.  This  represents a 7.4% increase over
1994  earnings of $819,000 and a 19.2%  increase from 1993 earnings of $738,000.
Total  assets   increased  to  $76,128,000,   as  compared  to  1994  assets  of
$69,428,000.  The improved  earnings for 1995 were primarily the result of a 24%
increase  in net  interest  income and only a  marginal  increase  in  operating
expenses.  Interest on loans held for sale  increased  to $527,000 for 1995 from
$474,000  for 1994 and  $37,000 for 1993 and was the result of  retaining  Small
Business  Administration  loans held for sale for longer  periods  before  being
sold.

Net Interest Income

The primary  source of earnings  for the Bank is its net  interest  income,  the
amount by which interest and fees on loans and investments  exceed interest paid
on deposits and long-term  debt.  Net interest  income for 1995 was  $4,447,000,
which  represents a 23.9%  increase from 1994,  and a 48.6%  increase from 1993.
Average  loans   outstanding   increased  20.5%  to  $44,215,000  in  1995  from
$36,690,000 in 1994. The increase in average loans  outstanding  was the primary
reason for the increase in net interest income. However, average yields on loans
also  increased  to  10.9%  in 1995,  from  9.9% in 1994  and  9.7% in 1993.  In
addition, average yields on investments decreased to 6.5% from 6.6% in 1994, and
7.2% in 1993.

Although average yields on interest-bearing  deposits increased in 1995 to 3.2%,
from 2.4% in 1994 and 2.5% in 1993,  the Bank's earning  assets,  such as loans,
reflect  changes in interest  rates more  readily  than do its  interest-bearing
liabilities,  such as certificates  of deposit.  Non-interest  bearing  deposits
increased  8.8%,  to  $15,025,000  in 1995 from  $13,816,000  in 1994.  Interest
bearing  deposits  increased  10.5% to $52,221,000  in 1995 from  $47,253,000 in
1994.  Total interest  income  increased  $1,395,000 for 1995 and total interest
expense increased  $538,000 for 1995, leaving an increase in net interest income
of approximately $857,000.

Management  believes net interest  margins will decrease  slightly under current
economic  conditions.  The Bank's net interest  margin  averaged 7.2% in 1995 as
compared to 6.7% in 1994 and 6.3% in 1993.



                                       21

<PAGE>



Allowance for Loan Losses

The  allowance  for loan losses is  maintained to provide for losses in the loan
portfolio which can be expected to occur in the normal course of operations. The
level of the  allowance for loan losses is based on  management's  evaluation of
potential  losses in the loan  portfolio,  as well as prevailing and anticipated
economic conditions. At December 31, 1995, the allowance for loan losses totaled
$732,000,  or 1.6% of gross  loans.  This  compares to $741,000 or 1.7% of total
gross loans at December 31, 1994. Impaired loan totaled $605,000 at December 31,
1995.  The  allowance  for loan losses  included an  allocation  for these loans
totaling $76,000. Nonaccrual loans totaled $605,000 and $452,000 at December 31,
1995 and 1994,  respectively.  Nonperforming  loans (loans  greater than 90 days
past due and still accruing  interest)  totaled $62,800 and $481,900 at December
31, 1995 and 1994,  respectively.  The Bank's net charge-offs  remain minimal at
$79,000,  $51,000 and $69,000 for the years ended  December 31,  1995,  1994 and
1993,  respectively.  The  provision  for loan  losses was  $70,000 in 1995,  as
compared to no  provision  in 1994 and  $90,000 in 1993.  The  provision  to the
allowance  for loan losses in 1995  reflects the  continued  high level of asset
quality as evidenced by the minimal  charge-offs and  delinquencies  experienced
during  the  year.  In  addition,  management  does not  believe  that any loans
classified for regulatory  purposes  represent a significant risk of loss to the
Bank or that there are any negative trends or  uncertainties  reflected in their
quarterly  analysis of the adequacy of the allowance for loan losses which would
materially impact future operating results.

Other Real Estate

Other real estate  acquired  through  foreclosure  during  1995 was  $599,000 as
compared to none in 1994.  Other real estate sold during 1995  resulted in a net
loss of $7,000.

Non-interest Income

Non-interest  income is  comprised  primarily  of  service  charges  on  deposit
accounts and gains on sales of investments and loans. Service charges on deposit
accounts  were  $367,600 in 1995 as compared to $252,700 in 1994 and $232,400 in
1993.

There were no sales of investments in 1995. A gain of $173,000 was recognized on
the sale of  investments in 1994 and there were no sales of investments in 1993.
At December 31, 1995,  an  unrealized  gain on  available-  for-sale  investment
securities totaling $104,355 existed in the portfolio.  At December 31, 1994 and
1993,  an  unrealized  loss of $195,365  and a gain of  $406,000,  respectively,
existed in the investment portfolio .

In addition, the Bank's mortgage and Small Business Administration (SBA) lending
departments  generated  gains from the sale of loans totaling  $535,000 in 1995,
$1,101,000 in 1994 and  $1,234,000 in 1993. The decrease in income from the sale
of loans  during  1995  occurred  as a result  of a  decrease  in the SBA  loans
originated  and sold.  Sales of the  guaranteed  portion  of SBA  loans  totaled
$7,952,000 in 1995, $18,419,000 in 1994 and $12,275,000 in 1993. The decrease in
SBA  activity was the result of a funding  shortfall  in the SBA program  during
1995,  which  restricted  SBA  lending  activity  for several  months.  The Bank
continues to focus  significant  attention  toward  increasing SBA loan volumes.
However,  the present yield curve and risk based  pricing are  presently  making
alternative  financing more attractive than the SBA 7a program. As a result, SBA
lending for real estate  purposes has been  impacted and 1996 volumes  should be
approximately at the 1995 level.  Our marketing  program has been expanded in an
effort to  increase  volumes  to  offset  these  effects.  After the sale of the
quaranteed  portion,  the Bank  continues to service  these loans,  resulting in
servicing income of $335,000 in 1995, $288,000 in 1994 and $197,000 in 1993. The
volume of servicing income will continue to grow with the continued sales of SBA
loans.



                                       22

<PAGE>



Loans Held for Sale

In  May  1995,  the  Financial  Accounting  Standards  Board  issued  SFAS  122,
Accounting  for Mortgage  Servicing  Rights.  This  Statement  requires that the
rights to service mortgage loans for others,  whether those servicing rights are
acquired through the purchase or origination of the related loans, be recognized
as separate assets. In addition,  capitalized  mortgage servicing rights must be
evaluated for impairment  based on the fair value of the rights.  This Statement
is  effective  for fiscal years  beginning  after  December  15,  1995.  Earlier
application   is   encouraged,   but  was   determined  by  the  Company  to  be
impracticable.  The Company  does not believe that the adoption of SFAS 122 will
have a significant  impact on its  financial  position and results of operations
when implemented.

Non-interest Expense

Non-interest  expense  increased 3.7% to $4,250,000 in 1995,  from $4,097,000 in
1994 and 26.7% from  $3,355,000  in 1993  primarily due to an increase in salary
and employee benefit expense.

Salary and employee  benefit expense,  before deferred loan  origination  costs,
increased  3.8%, to  $2,554,000  in 1995 from  $2,461,000 in 1994 and 32.2% from
$1,932,000 in 1993.  Other  expenses  decreased  4.3% to $1,216,000 in 1995 from
$1,271,000 in 1994 and increased 15.3% from $1,055,000 in 1993.

Cumulative Effect of Change in Accounting Principle

On January 1, 1993,  the  Company  changed its method of  accounting  for income
taxes from the deferred  method to an asset and liability  approach.  Under this
approach,  deferred  tax  assets  and  liabilities  are  recognized  for the tax
consequences of temporary  differences  between the financial  statement and tax
basis of existing assets and liabilities.  The cumulative  effect on prior years
of this change in accounting  principle increased 1993 net income by $19,000, or
$.02 per share.

Liquidity Management

Both the  Company  and the Bank must  maintain  adequate  liquidity  to  service
long-term debt, accommodate customer withdrawals of deposits and fund new loans.
The main sources of liquidity  are cash and due from banks,  Federal funds sold,
marketable  investment  securities,  loan  repayments  and  the  sale of SBA and
mortgage loans.  Investment  securities are a secondary  source of liquidity and
are categorized as  available-for-sale.  The ratio of cash,  Federal funds sold,
marketable investment  available-for-sale  securities and loans held for sale to
total  liabilities  was 35.6% at  December,  31,  1995,  as compared to 32.8% at
December 31, 1994.

The Bank's  liquidity  is also  enhanced by its strong  core  deposit  base.  At
December 31, 1995, demand deposits and interest-bearing  savings deposits (e.g.,
savings, money market accounts and CODs) of the Bank increased from the previous
year's ending balances by $1,209,000 and $1,677,000,  respectively. In addition,
the Bank has a $2,000,000 unsecured Federal funds purchase agreement with one of
its correspondent  banks.  Although management believes current liquidity levels
are adequate, cash flow requirements of the Company and the Bank are continually
monitored.



                                       23

<PAGE>



Interest Rate Sensitivity

Because the majority of the Company's  assets and  liabilities are interest rate
sensitive,  fluctuations  in  interest  rates  expose the  Company to  potential
increases and decreases in its net interest income. The following table reflects
repricing  options that are included in the December 31, 1995 balance sheet that
are sensitive to changes in interest rates.
<TABLE>

<CAPTION>

(Dollars In Thousands)
                                   1-90 days 91-365 days   1-5 years  5-10 years   10+ years
<S>                                <C>       <C>           <C>        <C>          <C>    

Earning assets ...................   $44,394     $ 5,206     $10,656     $ 3,870     $ 1,033
Net sources ......................    58,014       8,782         450           0         557
Incremental gap ..................   (13,620)     (3,576)     10,206       3,870         476
Cumulative gap ...................   (13,620)    (17,196)     (6,990)     (3,120)     (2,644)
% of earning assets ..............     (20.9)      (26.4)      (10.7)       (4.8)       (4.1)
</TABLE>


At December 31, 1995, the cumulative  one-year gap was a negative $17.2 million,
representing  26.4% of earning  assets.  As a result,  $17.2  million of earning
assets  will  reprice  after the sources of funds are  eligible to be  repriced.
Interest rates increased during the first half of 1995, but began to decrease in
the latter part of the year. During a period of rising interest rates the Bank's
negative gap position  should  result in a decrease in its net interest  margin.
However,  because the Bank's deposits do not respond to interest rate changes as
readily as its loans, the Bank's net interest margin increased in 1995.

Capital Acquisitions

Additions to premises and equipment during 1995 totaled $53,000.



                                       24

<PAGE>



Regulatory Capital

The Office of the Comptroller of the Currency  specifies  minimum capital ratios
for national banks using both risk-weighted  assets  (risk-based  capital ratio)
and average assets (leverage ratio).  Regulatory  accounting  principles,  which
differ  from  generally  accepted  accounting  principles,  are  applied  in the
calculation of these ratios.

Total risk-based capital consists of the following two elements:

     Tier I  - Common  stock,  additional  paid-in  capital,  retained earnings,
               less certain intangible assets such as goodwill and  core deposit
               premiums.

     Tier II - Allowance  for loan  losses,  limited to 1.25%  of  risk-weighted
               assets.

In addition,  certain  additional  capital  guidelines  were  defined  under the
Federal Deposit Insurance Corporation  Improvement Act. These guidelines include
minimum capital ratios for banks considered to be well capitalized.

The Bank's capital ratios and the respective minimum regulatory  requirements at
December 31, 1995, 1994 and 1993 were as follows:

                                                     1995       1994      1993
                                                    ------     ------    ------
Leverage Ratio

The Bank of Commerce, N.A .....................       9.1%       9.0%       9.5%
Minimum requirement for "Well-
  Capitalized" institution ....................       5.0%       5.0%       5.0%
Minimum regulatory requirement ................       4.0%       4.0%       4.0%

Tier I Risk-Based Capital Ratio

The Bank of Commerce, N.A .....................      11.8%      12.2%      12.7%
Minimum requirement for "Well-
  Capitalized" institution ....................       6.0%       6.0%       6.0%
Minimum regulatory requirement ................       4.0%       4.0%       4.0%

Total Risk-Based Capital Ratio

The Bank of Commerce, N.A .....................      13.1%      13.4%      13.9%
Minimum requirement for "Well-
  Capitalized" institution ....................      10.0%      10.0%      10.0%
Minimum regulatory requirement ................       8.0%       8.0%       8.0%



                                       25

<PAGE>



Dividends

The following  dividends  were declared by the Board of Directors of the Company
during 1996 and the four years ended December 31, 1995:


                   Amount Per Share                  Distribution Date

                         $.32                        March 29, 1996
                          .30                        February 28, 1995
                          .28                        February 28, 1994
                          .20                        February 26, 1993
                          .20                        February 14, 1992


Stock Redemption

During 1993, the Company  offered to purchase up to 140,000  shares,  12% of its
common stock  outstanding as of October 31, 1993, at a price of $7.00 per share.
Upon  expiration  of the tender  offer on  December  17,  1993,  the Company had
redeemed  97,402  shares  at a total  cost of  $716,782,  which  included  stock
redemption  expense  of  $34,968.  Of the total  shares  redeemed,  30,982  were
tendered by members of the Company's Board of Directors.

During  1995,  the Company  repurchased,  at market  price,  6,028 shares of its
outstanding  common stock from a retiring  director and 50,000 shares from other
stockholders.  In addition, the Company repurchased, at market price, 250 shares
of  outstanding  common stock from the  Company's  401(k)  Profit  Sharing Stock
Ownership Plan.  The cost of the redemptions totaled $422,147.

The Future

Management  believes 1996 will be a year of continued growth.  Although interest
rates are expected to decline and the  competition  for deposits among financial
institutions,  non-financial  institutions and non-regulated  industries remains
challenging,  the  directors,  officers and  employees  are committed to meeting
these challenges.

The business  plan for 1996 calls for  developing  the Bank's  current  existing
markets  in Auburn,  Grass  Valley and Rancho  Cordova.  In  addition,  our loan
production  office in Sacramento  should continue to provide a broader marketing
area for SBA loans.

Although its business plan is more  aggressive in 1996, the Bank is committed to
remaining focused on the business and professional  sectors of the community and
continuing the  conservative  loan  underwriting  practices that have served the
Bank well in the past.



                                       26

<PAGE>



Item 8.  Financial Statements and Supplementary Data

         Index to Financial Statements
                                                                Page(s)

         Independent Auditor's Report .....................     F-1

         Consolidated Balance Sheet .......................     F-2

         Consolidated Statement of Income .................     F-3 and F-4

         Consolidated Statement of Stockholders'
           Equity .........................................     F-5

         Consolidated Statement of Cash Flows .............     F-6 and F-8

         Notes to Consolidated Financial Statements .......     F-9 to F-35

Item 9.  Disagreements on Accounting and Financial Disclosure

         Not applicable.


                                       27

<PAGE>



PART III

Item 10.  Directors and Executive Officers of the Registrant

<TABLE>
<CAPTION>

                                                Year First                      Principal
         Name and Title                          Appointed               Occupation During the             
      Other Than Director            Age          Director                    Past Five Years
------------------------------       ---       --------------    --------------------------------------
<S>                                  <C>            <C>          <C>                                      
John G. Briner                       56             1981         President and Chief Executive  Officer 
Director, President and                                          of the Company and the Bank.
Chief Executive Officer

Paul Brocker                         71             1986         General Contractor  and  Owner of Paul 
                                                                 Brocker Construction and Brocker, 
                                                                 Brocker & Brocker, Auburn.

Pamela J. Briner                     45             ___          Executive  Officer and  Cashier of the
Executive Officer                                                Company  and  Bank  since  March 1996.
and Casher                                                       Executive  Officer of the Company  and 
                                                                 Bank since 1988.

Mark Lund                            46             ___          Executive  Vice  President  and  Chief 
Executive Vice President                                         Credit  Officer  of  the Company since 
and Chief Credit Officer                                         September, 1994 and of the Bank  since 
                                                                 January, 1992. Mr. Lund was previously 
                                                                 the Bank's Credit  Administrator  from 
                                                                 1988 to 1992.

D. Dwight Odom, M.D.                 58             1981         Former  Gynecologist and  President of
Chairman of the Board                                            D. Dwight  Odom,  M.D., Inc.,  Auburn.  
                                                                 Dr. Odom  retired  from practice as of
                                                                 December 31, 1993.

Thomas E. Propp                      47             1995         Managing Partner.  CFO & CPA of  Tate,
Director                                                         Propp, Beggs & Sugimoto,an accountancy
                                                                 corporation.

Donald L. Robinson                   65             1981         Owner and President  of  Don  Robinson 
Director                                                         Sand  & Gravel, Inc., Auburn, and  Don 
                                                                 Robinson Construction Inc., Auburn.

Harry E. Sands                       69             1981         Retired.  Former business executive.
Secretary

Virgil R. Traynor, D.V.M.            58             1981         Veterinarian  and  Owner  of  Edgewood
Director                                                         Veterinary Clinic, Auburn.

Gary N. Weeks                        54             1988         Owner and President of Marina Imports,
Director                                                         Grass Valley.

H. Ray Yamasaki                      63             1981         Landscape Architect, Owner and  Presi-
Vice Chairman                                                    dent of YamasakiNursery, Inc., Auburn.
</TABLE>

                                       28

<PAGE>

All  directors  have been  elected  to serve for a one year term  until the 1996
Annual Meeting of Shareholders  and until their  successors are elected and have
qualified.  The  executive  officers are appointed for a one year term until the
1996 Annual Meeting of  Shareholders  and are subject to at-will  termination by
the Company,  except as may be provided by  employment  agreements.  None of the
directors or executive  officers  wereselected  pursuant to any  arrangement  or
understanding  other  than with the  directors  and  executive  officers  of the
Company   acting  within  their   capacities  as  such.   There  are  no  family
relationships  among any of the directors and executive officers of the Company,
except Ms.  Pamela J.  Briner is the spouse of John G.  Briner.  No  director or
executive officer of the Company serves as a director of any company which has a
class of  securities  registered  under,  or which is  subject  to the  periodic
reporting  requirements  of,  the  Securities  Exchange  Act of 1934,  or of any
company  registered as an investment company under the Investment Company Act of
1940.

Compliance with Section 16(a) of the Exchange Act

Section  16(a) of the  Securities  Exchange Act of 1934  requires the  Company's
officers  and  directors,  and  persons  who own  more  than  ten  percent  of a
registered  class  of the  Company's  equity  securities,  to  file  reports  of
ownership and changes in ownership with the Securities and Exchange  Commission.
Officers,  directors  and more than  ten-percent  shareholders  are  required by
Securities Exchange Commission  regulation to furnish the Company with copies of
all Section 16(a) forms they file.

Based  solely on its  review  of the  copies of such  forms  received  by it, or
written  representations  from  certain  reporting  persons that no Forms 5 were
required for those persons, the Company believes that, during 1995 its officers,
directors  and more  than  ten-percent  shareholders  complied  with all  filing
requirements applicable to them.

                                       29
<PAGE>



Item 11.  Executive Compensation


<TABLE>
<CAPTION>

                                             Summary Compensation Table



                                                                                   Long Term Compensation
                         Annual Compensation                                         Awards            Payouts
          (a)                 (b)          (c)          (d)         (e)          (f)         (g)         (h)          (i)
                                                                   Other
                                                                   Annual     Restricted                            All Other
       Name and                                                    Compen-       Stock                   LTIP        Compen-
       Principal                          Salary       Bonus       sation       Award(s)   Options/    Payouts       sation(1)
       Position              Year           ($)         ($)          ($)          ($)        SARs        ($)            ($)

     <S>                     <C>         <C>           <C>         <C>         <C>          <C>        <C>            <C>         
     John G. Briner          1995        $128,400      $18,000                              10,000                    $8,657
     President and
     Chief Executive Officer
     of the Company
     and the Bank
                             1994        $124,163      $30,947                               3,000                   $11,483
                             1993        $118,400       $7,500                                   0                    $7,266

     Mark A. Lund            1995         $84,625      $10,388                               6,500                    $6,735
     Executive Vice President
     of the Company and
     the Bank

                             1994         $81,626      $14,244                               2,000                    $7,384
                             1993         $77,739      $10,325                                   0                    $5,597

</TABLE>

(1) These  amounts  represent  the Bank's  contribution  under the Bank's Profit
    Sharing/401(k) Plan and the cost of premiums for excess group insurance.




                                       30
<PAGE>

<TABLE>
<CAPTION>


                                             Option/SAR Grants Table

                                        Option/SAR Grants in Last Fiscal Year



                                                 Individual Grants

         (a)                         (b)                        (c)                         (d)                         (e)
                                                             % of Total
                              Number of Securities           Options/SARs
                                  Underlying                  Granted to                 Exercise or
                                 Options/SARs                Employees in                Base Price                  Expiration
         Name                     Granted (#)                 Fiscal Year                ($/Share)                      Date

     <S>                            <C>                          <C>                       <C>                         <C>
     Jack G. Briner                 10,000                       21.7%                     $7.75                       7/2005
     Mark A. Lund                    6,500                       14.1%                     $7.75                       7/2005

</TABLE>
<TABLE>
<CAPTION>



                                      Option/SAR Exercises and Year-End Value Table

                          Aggregated Option/SAR Exercises in Last Fiscal Year and Year-End Option/SAR Value


         (a)                         (b)                        (c)                         (d)                         (e)
                                                                                                                     Value of
                                                                                        Number of                Unexercised In-
                                                                                       Unexercised                   the-Money
                                                                                     Options/SARs at             Options/SARs at
                                                                                       Year-End (#)                Year-End ($)
                               Shares Acquired on          Value Realized               Exercisable/               Exercisable/
         Name                     Exercise (#)                  ($)                    Unexercisable               Unexercisable

    
     <S>                              <C>                       <C>                  <C>                           <C>
     John G. Briner                   0                         N/A                  33,388/12,400(1)              $79,318/$300(1)
     Mark L. Lund                     0                         N/A                  22,785/6,900(1)               $53,329/$200(1)


     N/A - means not applicable.

     (1)      Options only.
</TABLE>

                                       31
<PAGE>



Employment Agreements

The Company and Bank have employment  agreements  with Messrs.  Briner and Lund.
Both  agreements  provide for four weeks vacation,  health,  disability and life
insurance  benefits,  use of an appropriate  company car for business use, stock
options  in  amounts  to  be  determined   by  the  board  of   directors,   and
indemnification  for matters  incurred in connection with any action against the
executive  which  arose  out of and was  within  the  scope  of his  employment,
provided  that the  executive  acted in good faith and in a manner the executive
reasonably  believed to be in the best interests of the Company and the Bank and
with respect to a criminal matter if the executive also had no reasonable  cause
to believe his conduct was unlawful.

Pursuant to Mr.  Briner's  agreement,  Mr. Briner is to serve for a term of five
years commencing January 1, 1995 as the President and Chief Executive Officer of
the Company and the Bank.  The base annual salary for Mr. Briner is $120,000 per
year,  with  increases  to be  determined  at the  discretion  of the  Boards of
Directors of the Bank and the Company. If the Company and the Bank terminate Mr.
Briner without cause, Mr. Briner shall be entitled to (i) two years base salary,
and (ii) continuation of insurance  benefits for six months.  Upon any merger or
consolidation  where the Company and the Bank are not the surviving or resulting
corporations,  or upon any transfer of all or substantially all of the assets of
the Company and the Bank,  and Mr. Briner not be retained for the remaining term
of the  agreement  in a position  comparable  to that of the highest  level vice
president of the resulting  corporation  or another  position  acceptable to Mr.
Briner,  the  resulting  corporation  shall pay to Mr. Briner three years of his
base salary plus such amount to cover the federal and state  income taxes on the
three years of base salary and the "golden  parachute" taxes required by Section
280G  of the  Internal  Revenue  Code  in a lump  sum  within  ten  days of such
termination.

Pursuant to Mr. Lund's agreement, Mr. Lund is to serve for a term of three years
commencing  January 1, 1995 as the  Executive  Vice  President  and Chief Credit
Officer of the  Company  and the Bank.  The base  annual  salary for Mr. Lund is
$84,625 per year,  with  increases to be  determined  at the  discretion  of the
Boards of  Directors  of the Bank and the  Company.  If the Company and the Bank
terminate Mr. Lund without  cause,  Mr. Lund shall be entitled to (i) six months
base salary or the remaining compensation to be paid to him under his agreement,
whichever is less, and (ii) continuation of insurance benefits for three months.
Upon any  merger or  consolidation  where the  Company  and the Bank are not the
surviving   or  resulting   corporations,   or  upon  any  transfer  of  all  or
substantially all of the assets of the Company and the Bank, and Mr. Lund not be
retained in a position satisfactory to Mr. Lund with the resulting  corporation,
the resulting  corporation shall pay to Mr. Lund a maximum of nine months of his
then base pay.

In addition Mr. Briner has a salary  continuation  agreement with the Bank which
provides that the Bank will pay him $75,000 per year for 15 years  following his
retirement  from  the  Bank  at age 65  ("Retirement  Age").  In  the  event  of
disability  while Mr. Briner is actively  employed  prior to Retirement  Age, he
will have the  option to take a benefit  amount  based on the  vesting  schedule
below for 15 years  beginning  at the earlier of the time when he reaches age 65
or the date on which he is no longer entitled to disability benefits provided by
the Bank. In the event Mr. Briner dies while actively employed by the Bank prior
to Retirement Age, his  beneficiary  will receive from the Bank a benefit amount
based on the vesting  schedule below for 15 years  beginning one month after his
death. In the event of termination without cause, early retirement, or voluntary
termination,  Mr.  Briner  shall  receive a benefit  amount based on the vesting
schedule  below for 15 years  beginning  with the month  following  the month in
which Executive  terminates  employment and attains age 65. The vesting schedule
is 12% per year of service for the first five years  beginning May 18, 1994, and
decreases to 8% additional  per year of service for the last five years.  In the
event Mr. Briner is  terminated  for cause he will forfeit any benefits from the
salary continuation agreement.



                                       32


<PAGE>



Compensation of Directors

The  directors  of the Company do not  receive  compensation  from the  Company,
however,  the  directors do receive a fee of $500 for  attendance  at the Bank's
board of directors  meetings and $200 for each of the Bank's committee  meetings
attended,  up to a  maximum  of $700 per  month per  director  for all  meetings
attended.

Item 12.  Shareholdings of Certain Beneficial Owners and Management

Management of the Company knows of no person who owns, beneficially or of record
either  individually  or  together  with  associates,  5 percent  or more of the
outstanding shares of the Company's common stock except as set forth herein. The
following  table sets forth,  as of March 15, 1996, the number and percentage of
shares of the Company's outstanding common stock beneficially owned, directly or
indirectly,  by each of the Company's  directors  named  executive  officers and
principal  shareholders  and by the  directors  and  executive  officers  of the
Company  as a group.  The  shares  "beneficially  owned"  are  determined  under
Securities  and  Exchange  Commission  rules,  and do not  necessarily  indicate
ownership  for any other  purpose.  In general,  beneficial  ownership  includes
shares  over which a  director,  principal  shareholder  or officer  has sole or
shared voting or investment  power and shares which such person has the right to
acquire  within 60 days of March  15,  1996.  Unless  otherwise  indicated,  the
persons listed below have sole voting and investment  powers.  Management is not
aware of any arrangements which may, at a subsequent date, result in a change of
control of the Company.
<TABLE>
<CAPTION>

                                                          Amount and Nature of           Percent
Beneficial Owner                                          Beneficial Ownership          of Class(1)

Directors and Named Executive Officers:

<S>                                                           <C>                          <C> 
John G. Briner                                                67,287(2)                    5.8%
Pamela J. Briner                                              27,864(2)                    2.6%
Paul Brocker                                                   6,046(3)                      *
Mark A. Lund                                                  23,765(4)                    2.2%
D. Dwight Odom, M.D.                                          46,927(5)                    4.2%
Thomas E. Propp                                                6,933(6)                      *
Donald L. Robinson                                            14,033(7)                    1.3%
Harry E. Sands                                                37,192(8)                    3.5%
Virgil R. Traynor, D.V.M.                                     15,009(9)                    1.4%
Gary N. Weeks                                                 30,405(10)                   2.8%
H. Ray Yamasaki                                               27,343(11)                   2.6%

All Directors and Executive Officers
as a Group (numbering 11)                                    235,178(1)                   27.9%

Principal Shareholders:

Cede & Co.                                                   104,347(12)                   9.8%


*        Less than 1%.
</TABLE>


                       (Footnotes on the following page.)

                                       33
<PAGE>


(1)  In  calculating  the  percentage  ownership of each  director and executive
     officer and the  directors  and  executive  officers as a group,  the total
     number of shares outstanding includes 64,711 shares subject to options held
     by directors and executive officers that were exercisable within 60 days of
     March 15, 1996.

(2)  Mr. Briner has shared voting and investment  powers as to 22,352 shares and
     has 33,338 shares  acquirable by exercise of stock  options.  Mr.  Briner's
     address is c/o Auburn Bancorp, 540 Wall Street,  Auburn,  California 95604.
     Ms. Briner spouse of Mr.  Briner has shared  voting and  investment  powers
     over the  same  22,352  shares  that  Mr.  Briner  has  shared  voting  and
     investment  powers.  Ms.  Briner has 746 shares  acquirable  by exercise of
     stock options.

(3)  Mr.  Brocker  has shared  voting and  investment  powers as to all of these
     shares. Mr. Brocker has 723 shares acquirable by exercise of stock options.

(4)  Mr. Lund has shared voting and investment powers as to 399 shares. Mr. Lund
     has 22,785 shares acquirable by exercise of stock options.

(5)  Dr. Odom has shared voting and  investment  powers as to 6,957 shares,  and
     has 723 shares acquirable by exercise of stock options.

(6)  Mr. Propp has shared voting and investment powers as to 266 shares.

(7)  Mr. Robinson has 723 shares acquirable by exercise of stock options.

(8)  Mr. Sands has shared voting and investment powers as to 29,814 shares,  and
     has 723 shares acquirable by exercise of stock options.

(9)  Dr.  Traynor has shared voting and  investment  powers as to 14,286 shares,
     and has 723 shares acquirable by exercise of stock options.

(10) Mr. Weeks has shared voting and investment powers as to 28,682 shares.

(11) Mr.  Yamasaki has shared voting and investment  powers as to 23,958 shares,
     and has 723 shares acquirable by exercise of stock options.

(12) The address of Cede & Co. is P.O. Box 20, Bowling Green Station,  New York,
     New York, 10004.

Item 13.  Certain Relationships and Related Transactions

Some of the  Company's  directors  and  executive  officers and their  immediate
families as well as the companies  with which they are  associated are customers
of, or have had banking  transactions  with, the Bank in the ordinary  course of
the Bank's business, and the Bank expects to have banking transactions with such
persons in the future.  In  management's  opinion,  all loans and commitments to
lend included in such  transactions were made in compliance with applicable laws
on substantially  the same terms,  including  interest rates and collateral,  as
those  prevailing  for  comparable  transactions  with other  persons of similar
creditworthiness and, in the opinion of management,  did not involve more than a
normal risk of collectibility or present other unfavorable features.

                                       34

<PAGE>



PART IV

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

             (a) 1. Financial Statements                            Page

                    See Part II, Item 8                             27

                 2. Financial Statement Schedules

                    All schedules are omitted  either  because
                    they are not required, are not applicable,
                    or the information  is otherwise  shown in
                    Items 7 or 8.

                 3. Exhibits Filed

                    (i)  Articles of Incorporation                  AI-1 to AI-3
                    (ii) Bylaws                                     B-1 to  B-13

                    Articles of Incorporation and Bylaws  were
                    filed with Securities and Exchange Commis-
                    sion in connection with the 1988 S-4, reg-
                    istration  No.33-20889  in favor of Auburn
                    Bancorp. Exhibits filed in connection with
                    this  filing reflect all subsequent amend-
                    ments.

                    (10)  Employment Agreement of John G. Briner    E-1
                    (10a) Employment Agreement of Mark A. Lund      E-10
                    (10b) Employment Agreement of Thomas L. Walker  E-19

                    (12)  The computation of earnings per share is
                          discussed in Footnote 1 to the Financial
                          Statements included in Part II, Item 8.

                    (22)  Subsidiaries of Bancorp

                          The Bank of Commerce, N.A. is the
                          sole wholly-owned subsidiary of Auburn 
                          Bancorp.

                    (23)  Consent of Accountants                    C-1

             (b)    Reports on Form 8-K

                    No reports on Form 8-K were filed during the
                    last quarter of 1995.

             (c)    Exhibits



                                       35

<PAGE>



                                POWER OF ATTORNEY


Auburn Bancorp,  and each of the undersigned,  do hereby  constitute and appoint
John  G.  Briner  and  Thomas  L.  Walker  and  each of  them  individually,  as
attorney-in-fact, to act as its or their true and lawful attorneys to execute on
behalf of Auburn  Bancorp and the  undersigned  any and all  amendments  to this
Annual  Report on Form 10-K and to file the same with all  exhibits  thereto and
other  documents  in  connection  therewith,  with the  Securities  and Exchange
Commission.

                                   SIGNATURES

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

Date    March 1, 1996                               

                                        AUBURN BANCORP (Registrant)



                                        By  /s/ JOHN G. BRINER
                                           ------------------------------
                                           John G. Briner
                                           President and
                                           Chief Executive Officer



                                        By  /s/  THOMAS L. WALKER
                                           ------------------------------
                                           Thomas L. Walker
                                           Executive Vice President and
                                           Controller and
                                           Chief Financial Officer

                                       36

<PAGE>



Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons and in the capacities and on the
dates indicated:

Signature and Title                                Date


/s/  JOHN G. BRINER                               8 MAR 96
-----------------------------                     --------
John G. Briner
Director/President and
Chief Executive Officer


/s/  PAUL BROCKER                                 8 MAR 96
-----------------------------                     --------               
Paul Brocker, Director


/s/  D. DWIGHT ODOM, M.D.                         8 MAR 96
-----------------------------                     --------
D. Dwight Odom, M.D., Chairman


/s/  DONALD L. ROBINSON                           3/8/96
-----------------------------                     --------
Donald L. Robinson, Director


/s/  THOMAS E. PROPP                              3/8/96
-----------------------------                     --------
Thomas E. H. Propp, Director


/s/  HARRY E. SANDS                               3/8/96
-----------------------------                     --------
Harry E. Sands, Director


/s/  VIRGIL R. TRAYNOR, D.V.M.                    3/8/96
-----------------------------                     --------
Virgil R. Traynor, D.V.M.
Director

/s/  GARY N. WEEKS                                3/8/96
-----------------------------                     --------
Gary N. Weeks, Director


/s/  HIDEO RAY YAMASAKI                           8 MAR 96
-----------------------------                     --------
H. Ray Yamasaki, Director


                                       37

<PAGE>



                          AUBURN BANCORP AND SUBSIDIARY


                              FINANCIAL STATEMENTS

                               FOR THE YEARS ENDED

                        DECEMBER 31, 1995, 1994 AND 1993

                                       and

                          INDEPENDENT AUDITOR'S REPORT

<PAGE>
       










                          INDEPENDENT AUDITOR'S REPORT



The Board of Directors
     and Stockholders
Auburn Bancorp

        We have audited the  accompanying  consolidated  balance sheet of Auburn
Bancorp  and  subsidiary  as of  December  31,  1995 and  1994  and the  related
consolidated statements of income,  stockholders' equity and cash flows for each
of the three  years in the period  ended  December  31,  1995.  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,  the  financial  statements  referred to above  present
fairly, in all material  respects,  the financial position of Auburn Bancorp and
subsidiary as of December 31, 1995 and 1994,  and the results of its  operations
and its cash flows for each of the three years in the period ended  December 31,
1995, in conformity with generally accepted accounting principles.

        As discussed in Notes 1 and 2 to the financial  statements,  the Company
changed its methods of  accounting  for certain  investments  in debt and equity
securities in 1994.







                                                 Certified Public Accountants

Sacramento, California
January 19, 1996

                                       F-1

<PAGE>



                          AUBURN BANCORP AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEET

                           December 31, 1995 and 1994

<TABLE>
<CAPTION>


                                                               1995          1994
                                                           ------------   ------------

                          ASSETS

<S>                                                        <C>            <C>         
Cash and due from banks ...............................    $  5,263,475   $  5,404,454
Federal funds sold ....................................       8,300,000      6,200,000
Loans held for sale ...................................       4,473,733      2,173,423
Investment securities (market value of $6,316,500
   in 1995 and $6,529,500 in 1994) (Note 2) ...........       6,316,500      6,529,500
Loans, less allowance for loan losses of $732,483
   in 1995 and $741,323 in 1994 (Note 3) ..............      45,237,229     42,846,549
Bank premises and equipment, net (Note 4) .............       3,092,082      3,409,874
Goodwill and other intangibles (Note 5) ...............         454,477        524,479
Accrued interest receivable and other assets (Note 9) .       2,990,713      2,339,272
                                                           ------------   ------------

                                                           $ 76,128,209   $ 69,427,551
                                                           ============   ============

                      LIABILITIES AND
                   STOCKHOLDERS' EQUITY

Deposits:
   Non-interest bearing ...............................    $ 15,025,492   $ 13,816,423
   Interest bearing (Note 6) ..........................      52,221,000     47,253,089
                                                           ------------   ------------

         Total deposits ...............................      67,246,492     61,069,512

Long-term debt (Note 8) ...............................         556,529        586,893
Accrued interest payable and other liabilities ........         525,512        296,000
                                                           ------------   ------------

         Total liabilities ............................      68,328,533     61,952,405
                                                           ------------   ------------

Commitments and contingencies (Note 10)

Stockholders' equity (Note 11):
   Preferred stock - no par value; 10,000,000 shares
      authorized; none issued .........................            --             --
   Common stock - no par value; 10,000,000 shares
      authorized; issued and outstanding - 985,498
      shares in 1995 and 1,041,053 shares in 1994 .....       5,107,501      5,525,420
   Retained earnings ..................................       2,631,879      2,064,511
   Unrealized gain (loss) on available-for-sale
      investment securities, net of taxes (Note 2) ....          60,296       (114,785)
                                                           ------------   ------------

         Total stockholders' equity ...................       7,799,676      7,475,146
                                                           ------------   ------------

                                                           $ 76,128,209   $ 69,427,551
                                                           ============   ============
</TABLE>

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


                                       F-2

<PAGE>




                                 AUBURN BANCORP AND SUBSIDIARY

                               CONSOLIDATED STATEMENT OF INCOME

                     For the Years Ended December 31, 1995, 1994 and 1993

<TABLE>
<CAPTION>



                                                   1995           1994           1993
                                               ------------   ------------   ------------

<S>                                            <C>            <C>            <C> 
Interest income:
   Interest and fees on loans ................ $  4,812,185   $  3,633,191   $  3,457,365
   Interest on taxable investment
      securities .............................      422,568        347,840        334,057
   Interest on Federal funds sold ............      363,689        275,490        182,445
   Interest on loans held for sale ...........      527,143        474,062         36,934
                                               ------------   ------------   ------------

         Total interest income ...............    6,125,585      4,730,583      4,010,801
                                               ------------   ------------   ------------

Interest expense:
   Interest on deposits ......................    1,629,994      1,089,056        960,648
   Interest on long-term debt (Note 8) .......       48,721         51,187         58,498
                                               ------------   ------------   ------------

         Total interest expense ..............    1,678,715      1,140,243      1,019,146
                                               ------------   ------------   ------------

         Net interest income .................    4,446,870      3,590,340      2,991,655

Provision for loan losses (Note 3) ...........       70,000                        90,000
                                               ------------   ------------   ------------

         Net interest income after
           provision for loan losses .........    4,376,870      3,590,340      2,901,655
                                               ------------   ------------   ------------

Non-interest income:
   Service charges ...........................      367,550        252,734        232,360
   Loan servicing income .....................      334,580        288,204        196,873
   Gain on sale of loans .....................      535,085      1,100,891      1,233,581
   Gain on sale of investment
      securities .............................                     173,444
   Other .....................................      192,873        128,880         60,504
                                               ------------   ------------   ------------

         Total non-interest income ...........    1,430,088      1,944,153      1,723,318
                                               ------------   ------------   ------------

</TABLE>














                                          (Continued)

                                             F-3

<PAGE>



                                 AUBURN BANCORP AND SUBSIDIARY

                               CONSOLIDATED STATEMENT OF INCOME
                                          (Continued)

                     For the Years Ended December 31, 1995, 1994 and 1993

<TABLE>
<CAPTION>

                                                   1995           1994           1993
                                               ------------   ------------   ------------

<S>                                            <C>            <C>            <C>
Other expenses:
   Salaries and employee benefits
      (Notes 3 and 13) ...................     $  2,293,813   $  2,114,245   $  1,701,573
   Occupancy .............................          335,541        349,830        287,925
   Equipment .............................          404,480        362,083        310,047
   Other (Note 12) .......................        1,216,439      1,271,074      1,055,260
                                               ------------   ------------   ------------

         Total other expenses ............        4,250,273      4,097,232      3,354,805
                                               ------------   ------------   ------------

         Income before income taxes
           and cumulative effect of
           change in accounting
           principle .....................        1,556,685      1,437,261      1,270,168

Income taxes (Note 9) ....................          677,000        618,600        551,500
                                               ------------   ------------   ------------

         Income before cumulative
           effect of change in
           accounting principle ..........          879,685        818,661        718,668

Cumulative effect on prior years of
   change in accounting principle
   (Note 9) ..............................                                         19,000
                                               ------------   ------------   ------------

         Net income ......................     $    879,685   $    818,661   $    737,668
                                               ============   ============   ============


Earnings per share:
   Income before cumulative effect
      of change in accounting principle ..     $        .85   $        .79   $        .63

   Cumulative effect of change in
      accounting principle ...............                                            .02
                                               ------------   ------------   ------------

         Net earnings per share ..........     $        .85   $        .79   $        .65
                                               ============   ============   ============

Weighted average number of
   shares outstanding ....................        1,029,033      1,041,053      1,134,396
                                               ============   ============   ============



</TABLE>






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

                                       F-4

<PAGE>



                          AUBURN BANCORP AND SUBSIDIARY

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

              For the Years Ended December 31, 1995, 1994 and 1993

<TABLE>
<CAPTION>

                                                                             Unrealized
                                                                             Gain (Loss)
                                                                            on Available-
                                         Common Stock                          For-Sale
                                                                Retained      Investment
                                     Shares        Amount       Earnings      Securities         Total

<S>                             <C>            <C>            <C>            <C>            <C>
Balance,
   January 1, 1993 ...........      1,138,45   $   6,242,20   $  1,027,368                  $  7,269,570

Cash dividend $.20
   per share .................                                    (227,691)                     (227,691)

Redemption of
   common stock
   (Note 11) .................       (97,402)      (716,782)                                    (716,782)

Net income ...................                                     737,668                       737,668
                                ------------   ------------   ------------   ------------   ------------

Balance,
   December 31, 1993 .........     1,041,053      5,525,420      1,537,345                     7,062,765

Cash dividend $.28
   per share .................                                    (291,495)                     (291,495)

Net income ...................                                     818,661                       818,661

Unrealized loss on avail-
   able-for-sale invest-
   ment securities, net
   of taxes (Note 2) .........                                                   (114,785)      (114,785)
                                ------------   ------------   ------------   ------------   ------------

Balance,
   December 31, 1994 .........     1,041,053      5,525,420      2,064,511       (114,785)     7,475,146

Cash dividend $.30 per
   share .....................                                    (312,317)                     (312,317)

Stock options exercised
   and related tax bene-
   fits (Note 11) ............           723          4,228                                        4,228

Redemption of common
   stock (Note 11) ...........       (56,278)      (422,147)                                    (422,147)

Net income ...................                                     879,685                       879,685

Net change in unrealized
   (loss) gain on avail-
   able-for-sale invest-
   ment securities, net
   of taxes (Note 2) .........                                                    175,081        175,081
                                ------------   ------------   ------------   ------------   ------------

Balance,
   December 31, 1995 .........       985,498   $   5,107,50   $   2,631,87   $     60,296   $  7,799,676
                                ============   ============   ============   ============   ============

</TABLE>

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



                                       F-5

<PAGE>



                                 AUBURN BANCORP AND SUBSIDIARY

                             CONSOLIDATED STATEMENT OF CASH FLOWS

                     For the Years Ended December 31, 1995, 1994 and 1993

<TABLE>
<CAPTION>


                                                        1995           1994           1993
                                                    ------------   ------------   ------------
<S>                                                 <C>            <C>            <C>

Cash flows from operating activities:
   Net income ....................................  $    879,685   $    818,661   $    737,668
   Adjustments to reconcile net income
      to net cash (used in) provided by
      operating activities:
      Depreciation and amortization ..............       449,381        410,876        358,733
      Cumulative effect of change in
         accounting principle ....................                                     (19,000)
      Provision for loan losses ..................        70,000                        90,000
      Decrease in deferred loan origin-
         ation fees and costs, net ...............       (30,375)        (9,869)       (55,393)
      Gain on sale of available-for-sale
         investment securities ...................                     (173,444)
      Gain on sale of assets, net ................                      (12,331)        (1,977)
      Net increase in unamortized
         discount on retained portion
         of sold loans ...........................        18,908        220,121        388,904
      Net decrease (increase) in the present
         value of future servicing income ........         2,132       (238,507)      (250,381)
      Net (increase) decrease in loans
         held for sale ...........................    (2,300,310)       137,637     (2,158,347)
      Increase in accrued interest
         receivable and other assets .............      (151,064)      (203,666)       (89,736)
      Increase (decrease) in accrued
         interest payable and other
         liabilities .............................       229,512         96,275        (30,174)
      Deferred tax benefits ......................       (58,000)       (10,700)       (28,700)
                                                    ------------   ------------   ------------

         Net cash (used in) provided by
           operating activities ..................      (890,131)     1,035,053     (1,058,403)
                                                    ------------   ------------   ------------
</TABLE>

















                                   (Continued)

                                       F-6

<PAGE>



                          AUBURN BANCORP AND SUBSIDIARY

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Continued)

              For the Years Ended December 31, 1995, 1994 and 1993


<TABLE>
<CAPTION>

                                                        1995           1994           1993
                                                    ------------   ------------   ------------
<S>                                                 <C>            <C>            <C>

Cash flows from investing activities:
   Proceeds from matured investment
      securities .................................                                $    300,000
   Proceeds from matured available-
      for-sale investment securities .............  $    500,000   $    500,000
   Proceeds from sale of available-
      for-sale investment securities .............                    2,204,400
   Purchases of investment securities ............                                    (501,563)
   Purchases of available-for-sale
      investment securities ......................                   (4,591,942)
   Net (increase) decrease in loans ..............    (2,992,286)    (8,890,056)       767,049
   Purchase of life insurance policies ...........                     (700,000)
   Proceeds from sale of assets ..................         3,794         18,516        115,834
   Additions to bank premises and
      equipment ..................................       (52,660)      (368,338)      (234,780)
   Acquisition of other real estate ..............       (26,076)
                                                    ------------   ------------   ------------

         Net cash (used in) provided
           by investing activities ...............    (2,567,228)   (11,827,420)       446,540
                                                    ------------   ------------   ------------

Cash flows from financing activities:
   Net increase in demand, interest
      bearing and savings deposits ...............     2,886,197      7,647,925      2,050,348
   Net increase (decrease) in time
      deposits ...................................     3,290,783      4,179,692     (1,311,591)
   Principal payments on long-term
      debt .......................................       (30,364)       (27,898)       (17,512)
   Payments to redeem common stock ...............      (422,147)      (716,782)
   Cash dividends paid ...........................      (312,317)      (291,495)      (227,691)
   Proceeds from exercised options ...............         4,228
                                                    ------------   ------------   ------------
         Net cash provided by (used
           in) financing activities ..............     5,416,380     11,508,224       (223,228)
                                                    ------------   ------------   ------------

         Increase (decrease) in cash
           and cash equivalents ..................     1,959,021        715,857       (835,091)

Cash and cash equivalents at
   beginning of year .............................    11,604,454     10,888,597     11,723,688
                                                    ------------   ------------   ------------

Cash and cash equivalents at
   end of year ...................................  $ 13,563,475   $ 11,604,454   $ 10,888,597
                                                    ============   ============   ============
</TABLE>





                                   (Continued)

                                       F-7

<PAGE>



                          AUBURN BANCORP AND SUBSIDIARY

                      CONSOLIDATED STATEMENT OF CASH FLOWS


              For the Years Ended December 31, 1995, 1994 and 1993


<TABLE>
<CAPTION>

                                                        1995           1994           1993
                                                    ------------   ------------   ------------
<S>                                                 <C>            <C>            <C>

Supplemental disclosure of cash
  flow information:

  Cash paid during the year for:
      Interest expense ...........................  $  1,446,859   $  1,103,192   $    989,829
      Income taxes ...............................  $    719,045   $    527,500   $    602,500

Non-cash investing activities:

   Real estate acquired through
      foreclosure ................................  $    598,841                  $     51,532
   Net change in unrealized gain (loss)
      on available-for-sale investment
      securities .................................  $    299,720   $   (195,365)


</TABLE>






























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



                                       F-8

<PAGE>



                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     General

     Auburn  Bancorp  (the  Company) was  incorporated  on December 31, 1981 and
     obtained  approval of the Board of Governors of the Federal  Reserve System
     to be a bank  holding  company.  The  Company  received  approval  from the
     Comptroller  of the Currency on August 10, 1982 to organize  Auburn Bank of
     Commerce,  N.A., which opened for business on February 7, 1983. The name of
     the subsidiary was changed to The Bank of Commerce,  N.A. (the Bank) during
     1988.

     The  accounting  and reporting  policies of the Company and its  subsidiary
     conform  with  generally  accepted  accounting  principles  and  prevailing
     practices within the banking industry.

     Certain  reclassifications  have  been  made to prior  years'  balances  to
     conform to classifications used in 1995.

     Principles of Consolidation

     The consolidated  financial  statements include the accounts of the Company
     and subsidiary,  which is wholly-owned.  All material intercompany balances
     and transactions have been eliminated in consolidation.

     Loans Held for Sale

     Loans  held  for  sale  consist  of  Small  Business  Administration  (SBA)
     guaranteed  loans and are  carried  at the  lower of cost or market  value.
     Loans held for sale  subsequently  transferred  to the loan  portfolio  are
     transferred  at the lower of cost or market  value at the date of transfer.
     Any difference  between the carrying amount of the loan and its outstanding
     principal  balance is  recognized as an adjustment to yield by the interest
     method.  Unrealized  losses on loans  held for sale are  included  in other
     expenses.   Realized  gains  or  losses  are  determined  on  the  specific
     identification method and are reflected in non-interest income or expense.



                                       F-9

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Loans Held for Sale(Continued)

     In May 1995,  the  Financial  Accounting  Standards  Board issued SFAS 122,
     Accounting for Mortgage Servicing Rights.  This Statement requires that the
     rights to service mortgage loans for others, whether those servicing rights
     are acquired  through the purchase or origination of the related loans,  be
     recognized as separate assets. In addition,  capitalized mortgage servicing
     rights  must be  evaluated  for  impairment  based on the fair value of the
     rights.  This  Statement is  effective  for fiscal  years  beginning  after
     December 15, 1995. Earlier application is encouraged, but was determined by
     the  Company to be  impracticable.  The Company  does not believe  that the
     adoption  of SFAS 122  will  have a  significant  impact  on its  financial
     position and results of operations when implemented.

     Investment Securities

     The Company adopted Statement of Financial  Accounting Standards (SFAS) 115
     Accounting for Certain Investments in Debt and Equity Securities on January
     1, 1994.  SFAS 115 requires that  investments be classified into one of the
     three following categories:

          o    Trading  securities  which  are  reported  at  fair  value,  with
               unrealized  gains  and  losses  included  in  earnings.   Trading
               securities  are bought and held  principally  for the  purpose of
               selling within a short period of time.

          o    Available-for-sale  securities  which are reported at fair value,
               with  unrealized  gains and losses  excluded  from  earnings  and
               reported,  net of taxes, as a separate component of stockholders'
               equity.

          o    Held-to-maturity securities which are reported at amortized cost,
               adjusted  for the  accretion  of discounts  and  amortization  of
               premiums.

     Management determines the appropriate  classification of its investments at
     the time of  purchase  and may only  change the  classification  in certain
     limited circum-stances.

     Gains or losses on the sale of  securities  are  computed  on the  specific
     identification method. Interest earned on investment securities is reported
     in  interest  income,  net  of  applicable  adjustments  for  accretion  of
     discounts and amortization of premiums. In addition, unrealized losses that
     are other than temporary are recognized in earnings for all investments.


                                      F-10

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Loans

     On January 1, 1995, the Company  adopted SFAS 114,  Accounting by Creditors
     for  Impairment  of a Loan  and  SFAS  118,  Accounting  by  Creditors  for
     Impairment of a Loan - Income  Recognition and Disclosures.  As a result of
     these statements, impaired loans are measured based on the present value of
     expected future cash flows discounted at the loan's effective interest rate
     or, as a practical  matter,  at the loan's  observable  market price or the
     fair value of collateral if the loan is collateral dependent.

     A loan is  considered  impaired  when,  based on  current  information  and
     events,  it is probable that the Bank will be unable to collect all amounts
     due  (including  both  principal  and  interest)  in  accordance  with  the
     contractual terms of the loan agreement.  The amount of initial  impairment
     and any  subsequent  change in  expected  cash flows is  recognized  in the
     allowance  for loan  losses  through  a charge  to the  provision  for loan
     losses.  The adoption of SFAS 114 and 118 did not have a material impact on
     the Bank as losses in the  allowance  for loan  losses had been  previously
     provided for using methods which approximated the requirements of SFAS 114.

     Loans are  stated  at  principal  balances  outstanding,  except  for loans
     transferred  from the loans held for sale account  which are carried at the
     lower of  principal  balance  or  market  value  at the  date of  transfer,
     adjusted for accretion of  discounts.  Interest is accrued daily based upon
     outstanding  loan  balances.  However,  when, in the opinion of management,
     loans are  considered  to be  impaired  and the  future  collectibility  of
     interest and principal is in serious doubt,  loans are placed on nonaccrual
     status and the  accrual  of  interest  income is  suspended.  Any  interest
     accrued but unpaid is charged against income. Payments received are applied
     to  reduce  principal  to  the  extent  necessary  to  ensure   collection.
     Subsequent  payments on these  loans,  or payments  received on  nonaccrual
     loans for which the ultimate  collectibility  of principal is not in doubt,
     are applied first to earned but unpaid interest and then to principal.

     Substantially  all loan  origination  fees,  commitment  fees,  direct loan
     origination costs and purchase premiums and discounts on loans are deferred
     and  recognized  as an  adjustment  of yield,  to be  amortized to interest
     income over the contractual  term of the loan. The  unamortized  balance of
     deferred fees and costs is reported as a component of net loans.


                                      F-11

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Sales and Servicing of SBA Loans

     Included in loans held for sale are loans  which are 70% to 90%  guaranteed
     by the Small Business Administration (SBA). The guaranteed portion of these
     loans are sold to a third party,  with the Bank retaining the  unguaranteed
     portion.  The Bank  generally  receives a premium in excess of the adjusted
     carrying value of the loan at the time of sale. The Bank may be required to
     refund a portion of the sales premium if the borrower  defaults or the loan
     prepays  within ninety days of the  settlement  date. At December 31, 1995,
     the Bank had  received  premiums  of $208,634  which were  subject to these
     recourse  provisions.  In addition,  the Bank receives a fee to service the
     loan represented by the difference between the rate paid by the borrower to
     the Bank and the rate paid by the Bank to the purchaser. Any excess of this
     fee over the normal cost of  servicing  the loan is recorded as  additional
     gain (excess servicing fees).

     The Bank's  investment  in an SBA loan is  allocated  between the  retained
     portion of the loan, the excess  servicing fee, and the sold portion of the
     loan based on their  relative fair values on the date the loan is sold. The
     gain on the sold portion of the loan is recognized as income at the time of
     the  sale.  The  carrying  value  of the  retained  portion  of the loan is
     discounted  based on the  estimated  value of a  comparable  non-guaranteed
     loan. The excess servicing fee is included in accrued  interest  receivable
     and other assets in the  financial  statements  and is  amortized  over the
     estimated life of the related loan. Significant future prepayments of these
     loans will result in the recognition of additional  amortization of related
     excess servicing fees.

     Allowance for Loan Losses

     The allowance  for loan losses is maintained to provide for losses  related
     to  impaired  loans and other  losses  that can be expected to occur in the
     normal  course of business.  The allowance is based on the character of the
     loan portfolio,  management's  analysis of the portfolio,  and business and
     economic   conditions  in  the  Bank's   service  area.  The  allowance  is
     established  through  a  provision  for loan  losses  which is  charged  to
     expense.



                                      F-12

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Other Real Estate

     Other  real  estate  includes  real  estate  acquired  in full  or  partial
     settlement of loan  obligations.  When property is acquired,  any excess of
     the Bank's  recorded  investment  in the loan balance and accrued  interest
     income  over the  estimated  fair market  value of the  property is charged
     against the allowance for loan losses.  Subsequent gains or losses on sales
     or writedowns are recorded in other income or expenses as incurred.  In the
     financial  statements,  other real estate is  included in accrued  interest
     receivable and other assets.

     Bank Premises and Equipment

     Bank premises and equipment are carried at cost,  including  interest costs
     for the construction of Bank premises. Depreciation is determined using the
     straight-line  method  over the useful  lives of the  related  assets.  The
     useful lives of Bank  premises  are  estimated to be twenty to forty years.
     The  useful  lives of the  improvements  to Bank  premises,  furniture  and
     equipment  are  estimated  to be two to ten years.  When assets are sold or
     otherwise  disposed of, the cost and related  accumulated  depreciation are
     removed from the accounts,  and any resulting gain or loss is recognized in
     income for the period.  The cost of  maintenance  and repairs is charged to
     expense as incurred.

     Income Taxes

     Effective  January 1, 1993,  the Company  adopted SFAS 109,  Accounting for
     Income  Taxes.  The  adoption of SFAS 109 changed the  Company's  method of
     accounting  for  income  taxes  from the  deferred  method to an assets and
     liability   approach.   Under  this  approach,   deferred  tax  assets  and
     liabilities   are  recognized  for  the  tax   consequences   of  temporary
     differences  between  the  financial  statement  and tax basis of  existing
     assets and  liabilities.  On the balance sheet, net deferred tax assets are
     included in accrued interest receivable and other assets.

     The  adjustments to the January 1, 1993 balance sheet to adopt SFAS 109 are
     reflected  in 1993 net  income  as the  cumulative  effect  of a change  in
     accounting principle.

     Cash Equivalents

     For the purpose of the statement of cash flows, the Company  considers cash
     and  due  from  banks  and  Federal  funds  sold  to be  cash  equivalents.
     Generally, Federal funds are sold for one day periods.

                                      F-13

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

     Earnings Per Share

     Earnings  per share are  calculated  using the weighted  average  number of
     shares of common stock and common stock equivalents  outstanding during the
     year. The dilutive effect of stock options outstanding from the application
     of the treasury  stock method has been  considered  in the  computation  of
     common stock equivalents.

     Loans Serviced for Others

     Loans with  unpaid  balances  of  $50,329,000  and  $47,644,000  were being
     serviced for others at December 31, 1995 and 1994, respectively.

2.   INVESTMENT SECURITIES

     As  discussed  in Note 1, the Bank  adopted SFAS 115 as of January 1, 1994.
     There was no cumulative  effect on prior years of this change in accounting
     principle.  However,  adoption  resulted in an  increase  in  stockholders'
     equity of $238,000.

     The amortized cost and estimated  market value of investment  securities at
     December 31, 1995 and 1994 consisted of the following:
<TABLE>
<CAPTION>

     Available-for-Sale:

                                                           1995
                                                    Gross          Gross       Estimated
                                 Amortized       Unrealized     Unrealized       Market
                                   Cost             Gains         Losses         Value
     <S>                        <C>            <C>            <C>            <C>

     U.S. Government
        agencies .............  $  3,499,856   $     10,546   $       (402)  $  3,510,000
     Obligations of states
        and political sub-
        divisions ............     2,571,789         94,211                     2,666,000
     Federal Reserve
        Bank stock ...........       140,500                                      140,500
                                ------------   ------------   ------------   ------------
  
                                $  6,212,145   $    104,757   $       (402)  $  6,316,500
                                ============   ============   ============   ============
</TABLE>

     Net unrealized gains on  available-for-sale  investment securities totaling
     $104,355  were  recorded  net of $44,059 in tax  liabilities  as a separate
     component  of  stockholders'  equity.  There were no sales or  transfers of
     investment securities during 1995.

                                      F-14

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


2.   INVESTMENT SECURITIES (Continued)

     Available-for-Sale: (Continued)
<TABLE>
<CAPTION>

                                                           1994
                                                    Gross          Gross       Estimated
                                 Amortized       Unrealized     Unrealized       Market
                                   Cost             Gains         Losses         Value

     <S>                        <C>            <C>            <C>            <C>
     U.S. Government
        agencies .............  $  3,499,922                  $    (89,922)  $  3,410,000
     Obligations of states
        and political sub-
        divisions ............     3,084,443   $        460       (105,903)     2,979,000
     Federal Reserve
        Bank stock ...........       140,500                                      140,500
                                ------------   ------------   ------------   ------------

                                $  6,724,865   $        460   $   (195,825)  $  6,529,500
                                ============   ============   ============   ============
</TABLE>

     Net unrealized losses on available-for-sale  investment securities totaling
     $195,365  were  recorded  net of  $80,580  in tax  benefits  as a  separate
     component of stockholders'  equity.  Proceeds and gross realized gains from
     the sale of available-  for-sale  investment  securities for the year ended
     December 31, 1994 totaled $2,204,400 and $173,444, respectively. There were
     no sales of investment securities during 1993.

     The  amortized  cost  and  estimated  market  value of debt  securities  at
     December  31,  1995 by  contractual  maturity  are  shown  below.  Expected
     maturities will differ from contractual  maturities  because the issuers of
     the  securities  may have the right to call or prepay  obligations  with or
     without call or prepayment penalties.

                                                           Available-for-Sale
                                                                      Estimated
                                                      Amortized         Market
                                                        Cost            Value

     Within one year ...........................   $  4,499,856    $  4,521,000
     After five years through ten years ........      1,571,789       1,654,000
     Federal Reserve Bank stock ................        140,500         140,500
                                                   ------------    ------------

                                                   $  6,212,145    $  6,315,500
                                                   ============    ============

     Investment   securities  with  amortized  costs  totaling   $3,071,878  and
     $3,585,068  and market  values  totaling  $3,165,000  and  $3,460,000  were
     pledged to secure deposits at December 31, 1995 and 1994, respectively.


                                      F-15

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


3.   LOANS

     Outstanding loans are summarized below:

                                                           December 31,

                                                       1995            1994
                                                   ------------    ------------

     Commercial ................................   $  7,901,397    $  6,857,703
     Real estate-mortgage ......................     32,282,575      31,795,561
     Real estate-construction ..................      2,791,456       2,871,406
     Installment ...............................      3,092,672       2,191,965
                                                   ------------    ------------

                                                     46,068,100      43,716,635

     Deferred loan fees ........................        (98,388)       (128,763)
     Allowance for loan losses .................       (732,483)       (741,323)
                                                   ------------    ------------
                                                   $ 45,237,229    $ 42,846,549
                                                   ============    ============

     Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>

                                                        1995           1994           1993
                                                    ------------   ------------   ------------

     <S>                                            <C>            <C>            <C>         
     Balance, beginning of year .................   $    741,323   $    792,514   $    771,512
     Provision charged to operations ............         70,000         90,000
     Losses charged to allowance ................       (130,465)       (79,143)       (73,051)
     Recoveries .................................         51,625         27,952          4,053
                                                    ------------   ------------   ------------

            Balance, end of year ................   $    732,483   $    741,323   $    792,514
                                                    ============   ============   ============
</TABLE>


        The recorded  investment  in loans that were  considered  to be impaired
        under SFAS 114, as discussed in Note 1, totaled $604,717 at December 31,
        1995.  The related  allowance for loan losses on these loans at December
        31, 1995 was $75,590.  The average recorded investment in impaired loans
        for the  year  ended  December  31,  1995  was  $424,000,  and the  Bank
        recognized no interest income on these loans during that same period.

        At December 31, 1995 and 1994,  nonaccrual  loans  totaled  $604,717 and
        $451,908, respectively. Interest foregone on these loans totaled $12,526
        and  $47,120  for  the  years   ended   December   31,  1995  and  1994,
        respectively. There was no interest foregone for the year ended December
        31, 1993.

        Salaries and employee benefits totaling $260,305,  $346,571 and $230,508
        have  been  deferred  as loan  origination  costs  for the  years  ended
        December 31, 1995, 1994 and 1993, respectively.

                                      F-16

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


3.   LOANS (Continued)

     Sales and Servicing of SBA Loans

     A summary of the  activity  in SBA loans for the years ended  December  31,
     1995, 1994 and 1993 is as follows:

<TABLE>
<CAPTION>
                                                                    December 31,
                                                        1995           1994           1993
                                                    ------------   ------------   ------------
     <S>                                            <C>            <C>            <C>         
     SBA loans originated .......................   $ 14,854,365   $ 23,918,021   $ 20,694,127
     SBA loans sold .............................      7,951,725     18,419,284     12,275,161
     Premium received at sale ...................        696,430      1,447,586      1,453,823
     Excess servicing retained ..................        133,782        309,207        282,443
     Amortization charged against
        earnings ................................        135,914         70,700         32,060
     Balance of excess servicing retain-
        ed at period end ........................        669,538        671,670        433,163
</TABLE>

     Excess servicing was calculated based on an allocation of the investment in
     the loan between the sold portion of the loan, the retained  portion of the
     loan and the excess servicing  retained based on the relative fair value of
     each component.

4.   BANK PREMISES AND EQUIPMENT

     Bank premises and equipment consisted of the following:

                                                           December 31,

                                                       1995            1994
                                                   ------------    ------------

     Land ......................................   $  1,024,480    $  1,024,480
     Bank premises .............................      1,889,710       1,889,710
     Furniture, fixtures and equipment .........      2,001,596       1,995,005
                                                                   ------------

                                                      4,915,786       4,909,195

            Less accumulated depreciation ......     (1,823,704)     (1,499,321)
                                                   ------------    ------------

                                                   $  3,092,082    $  3,409,874
                                                   ============    ============

     Depreciation  included in occupancy and equipment expense totaled $366,658,
     $331,793 and $288,647 for the years ended December 31, 1995, 1994 and 1993,
     respectively.


                                      F-17

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


5.   GOODWILL AND OTHER INTANGIBLES

     Goodwill,  recognized in business combinations  accounted for as purchases,
     represents  the excess of cost over the fair value of the  acquired  assets
     and is being amortized using the  straight-line  method over fifteen years.
     Other intangibles include premiums paid for acquired deposits and are being
     amortized  using the  straight-line  method  over ten  years.  Amortization
     expense  totaled  $70,004 for each of the three years  ended  December  31,
     1995, 1994 and 1993.

6.   INTEREST-BEARING DEPOSITS

     Interest-bearing deposits consisted of the following:

                                                           December 31,

                                                       1995            1994
                                                   ------------    ------------

     Savings ...................................   $  3,204,097    $  3,241,026
     Money market ..............................     16,020,870      16,582,965
     NOW accounts ..............................     18,086,693      15,810,541
     Time, $100,000 or more ....................      3,824,778       3,665,948
     Other time ................................     11,084,562       7,952,609
                                                                   ------------

                                                   $ 52,221,000    $ 47,253,089
                                                   ============    ============

     Interest  expense  recognized  on time deposits of $100,000 or more totaled
     $156,675,  $99,487 and $90,779 for the years ended December 31, 1995,  1994
     and 1993, respectively.

7.   SHORT-TERM BORROWING ARRANGEMENTS

     The Bank has a $2,000,000  unsecured Federal funds purchase  agreement with
     one of its correspondent banks. There were no borrowings  outstanding under
     this agreement at December 31, 1995 or 1994.



                                      F-18

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


8.   LONG-TERM DEBT

     Long-term  debt consists of mortgage  notes bearing fixed interest rates of
     8.5% due June 28, 2010.  Both notes are secured by land and buildings which
     have a  carrying  value  of  approximately  $399,000.  Both  notes  contain
     acceleration  clauses and provide for adjustments to interest rates. Future
     principal payments are as follows:

                               1996                          $     33,048
                               1997                                35,969
                               1998                                39,149
                               1999                                42,608
                               2000                                46,375
                            Thereafter                            359,380
                                                             ------------
                                                             $    556,529
                                                             ============
     The Company paid $48,721, $51,187 and $58,498 in interest on long-term debt
     during the years ended December 31, 1995, 1994 and 1993, respectively.

9.   INCOME TAXES

     The provision for income taxes for the years ended December 31, 1995,  1994
     and 1993 consisted of the following:
<TABLE>
<CAPTION>

                                              Federal        State           Total
     

     <S>                                   <C>            <C>            <C>         
     1995
     
     Current                               $    526,000   $    209,000   $    735,000
     Deferred                                   (37,000)       (21,000)       (58,000)
                                           ------------   ------------   ------------

            Income tax expense             $    489,000   $    188,000   $    677,000
                                           ============   ============   ============

     1994

     Current                               $    458,100   $    171,200   $    629,300
     Deferred                                    (5,700)        (5,000)       (10,700)
                                           ------------   ------------   ------------

            Income tax expense             $    452,400   $    166,200   $    618,600
                                           ============   ============   ============

     1993

     Current                               $    423,900   $    156,300   $    580,200
     Deferred                                   (19,400)        (9,300)       (28,700)
                                           ------------   ------------   ------------

            Income tax expense             $    404,500   $    147,000   $    551,500
                                           ============   ============   ============
</TABLE>


                                      F-19

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


9.   INCOME TAXES (Continued)

     As discussed in Note 1, the Company adopted SFAS 109 as of January 1, 1993.
     The cumulative effect on prior years of this change in accounting principle
     increased  1993 net income by $19,000  or $.02 per share,  and is  reported
     separately  in the  Consolidated  Statement  of Income  for the year  ended
     December 31, 1993.

     Deferred  tax  assets  (liabilities)  are  comprised  of the  following  at
     December 31, 1995 and 1994:

                                                        1995            1994
                                                   ------------    ------------

     Deferred tax assets:
        Allowance for loan losses ..............   $    295,000    $    296,000
        Future benefit of state tax deduction ..         67,000          60,000
        Excess servicing fees ..................         14,000          17,000
        Deferred compensation ..................         31,000          19,000
        Unrealized loss on available-for-sale
            investment securities ..............                         81,000
        Other ..................................                          2,000

            Total deferred tax assets ..........        407,000         475,000
                                                   ------------    ------------

     Deferred tax liabilities:
        Bank premises and equipment ............       (173,000)       (207,000)
        Deposit premiums .......................        (25,000)        (33,000)
        Unrealized gain on available-for-sale
            investment securities ..............        (44,000)
        Other ..................................        (19,000)        (11,000)
                                                   ------------    ------------

            Total deferred tax liabilities .....       (261,000)       (251,000)
                                                   ------------    ------------

               Net deferred tax assets .........   $    146,000    $    224,000
                                                   ============    ============


                                      F-20

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


9.   INCOME TAXES (Continued)

     The provision  for income taxes  differs from amounts  computed by applying
     the statutory  Federal  income tax rates to operating  income before income
     taxes. The significant  items  comprising  these  differences for the years
     ended December 31, 1995, 1994 and 1993 consisted of the following:
<TABLE>
<CAPTION>

                                       1995               1994               1993
                                 ----------------   ----------------   ----------------

                                   Amount  Rate %     Amount  Rate %     Amount  Rate %
<S>                              <C>         <C>    <C>         <C>    <C>         <C>

     Federal income tax
       expense, at
       statutory rate ........   $ 529,273   34.0   $ 488,669   34.0   $ 431,857   34.0
     State franchise tax,
       net of Federal tax
       effect ................     119,871    7.7     109,232    7.6      97,020    7.6
     Amortization of good-
       will ..................      17,851    1.1      17,851    1.2      17,851    1.4
     Increase in cash sur-
       render value of life
       insurance policies ....     (12,607)   (.8)
     Other ...................      22,612    1.4       2,848    0.2       4,772     .4
                                 ---------   ----   ---------   ----   ---------   ----

          Total income
             tax expense .....   $ 677,000   43.4   $ 618,600   43.0   $ 551,500   43.4

                                 =========   ====   =========   ====   =========   ====
</TABLE>

10.  COMMITMENTS AND CONTINGENCIES

     Leases

     The Bank leases certain of its branch offices under noncancelable operating
     leases. Future minimum lease payments are as follows:

                          Year Ending
                         December 31,

                             1996                                  $     103,979
                             1997                                        106,279
                             1998                                        108,580
                             1999                                         66,539
                                                                   -------------

                                                                   $     385,377
                                                                   ============

     Rental expense included in occupancy expense totaled $109,649, $110,901 and
     $51,110 for the years ended December 31, 1995, 1994 and 1993, respectively.


                                      F-21

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


10.  COMMITMENTS AND CONTINGENCIES (Continued)

     Financial Instruments With Off-Balance-Sheet Risk

     The Bank is a party to financial instruments with off-balance-sheet risk in
     the normal course of business in order to meet the  financing  needs of its
     customers and to reduce its own exposure to fluctuations in interest rates.
     These  financial  instruments  consist of  commitments to extend credit and
     letters of credit. These instruments involve, to varying degrees,  elements
     of credit and interest rate risk in excess of the amount  recognized in the
     balance sheet.

     The Bank's  exposure to credit loss in the event of  nonperformance  by the
     other  party for  commitments  to extend  credit  and  letters of credit is
     represented by the contractual amount of those  instruments.  The Bank uses
     the same credit policies in making  commitments and letters of credit as it
     does for loans included on the balance sheet.

     The following  financial  instruments  represent  off-balance-sheet  credit
     risk:

                                                           December 31,

                                                       1995           1994
                                                   ------------   ------------

         Commitments to extend credit              $ 11,166,866   $  5,766,180
         Letters of credit                         $    311,498   $    126,104

     Commitments  to extend credit are  agreements to lend to a customer as long
     as there is no  violation of any  condition  established  in the  contract.
     Commitments  generally  have fixed  expiration  dates or other  termination
     clauses and may require payment of a fee. Since some of the commitments are
     expected to expire without being drawn upon, the total  commitment  amounts
     do not necessarily  represent future cash requirements.  The Bank evaluates
     each customer's  credit-worthiness  on a case-by-case  basis. The amount of
     collateral  obtained,  if deemed  necessary  by the Bank upon  extension of
     credit,  is  based  on  management's  credit  evaluation  of the  borrower.
     Collateral held varies, but may include accounts receivable,  inventory and
     equipment   and   deeds  of   trust  on   residential   real   estate   and
     income-producing commercial properties.

     Letters  of  credit  are  conditional  commitments  issued  by the  Bank to
     guarantee the  performance of a customer to a third party.  The credit risk
     involved  in  issuing  letters  of credit is  essentially  the same as that
     involved in extending loans to customers.


                                      F-22

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


10.  COMMITMENTS AND CONTINGENCIES (Continued)

     Financial Instruments With Off-Balance-Sheet Risk (Continued)

     At December 31, 1995, commercial loan commitments  represent  approximately
     36% of total  commitments  and are  generally  unsecured.  Real estate loan
     commitments represent 51% of total commitments and are generally secured by
     property  with a  loan-to-value  ratio not to  exceed  80%.  Consumer  loan
     commitments  represent  the  remaining  13% of  total  commitments  and are
     generally secured by automobiles and real estate.

     Significant Concentrations of Credit Risk

     The Bank grants real estate mortgage, real estate construction,  commercial
     and consumer loans to customers  throughout  Placer,  Nevada and Sacramento
     Counties.

     Although the Bank has a diversified loan portfolio,  a substantial  portion
     of its  portfolio is secured by  commercial  and  residential  real estate.
     However,  personal  and business  income  represent  the primary  source of
     repayment for a majority of these loans.

     Federal Reserve Requirements

     Banks are required to maintain reserves with the Federal Reserve Bank equal
     to a percentage of their reservable deposits.  The reserve balances held on
     behalf of the Federal Reserve Bank totaled  $1,217,000 and $1,124,000 as of
     December 31, 1995 and 1994, respectively.

     Contingencies

     The Company is subject to legal  proceedings  and claims which arise in the
     ordinary  course of business.  In the opinion of management,  the amount of
     ultimate liability with respect to these actions will not materially affect
     the financial position or results of operations of the Company.



                                      F-23

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


11.  STOCKHOLDERS' EQUITY

     Dividends

     Upon declaration by the Board of Directors of the Company, all stockholders
     of record will be  entitled to receive  dividends.  The  Company's  primary
     source of funds for  payment  for such  dividends  is the net income of its
     subsidiary  bank.  Under  applicable  Federal laws, the  Comptroller of the
     Currency  restricts  the total  dividend  payment of any  national  banking
     association in any calendar year to the net income of the year, as defined,
     combined   with  the  net  income  for  the  two  preceding   years,   less
     distributions  made to stockholders  during the same three-year  period. At
     December 31, 1995, the Bank had $708,270 in retained earnings available for
     dividend payments to the Company.

     Regulatory Capital

     The Office of the Comptroller of Currency  specifies minimum capital ratios
     for national  banks using both  risk-weighted  assets  (risk-based  capital
     ratio)  and  average  assets  (leverage   ratio).   Regulatory   accounting
     principles, which differ from generally accepted accounting principles, are
     applied in the calculation of these ratios.  Regulatory  capital is defined
     as follows:

               Tier I -   Common  stock,  additional  paid-in  capital, retained
                          earnings,  less  certain  intangible  assets  such  as
                          goodwill and core deposit premiums.

               Tier II -  Allowance for  loan  losses, limited to 1.25% of risk-
                          weighted assets.

     In addition,  certain  additional capital guidelines were defined under the
     Federal Deposit  Insurance  Corporation  Improvement  Act. These guidelines
     include minimum capital ratios for banks considered to be well capitalized.


                                      F-24

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


11.  STOCKHOLDERS' EQUITY (Continued)

     Regulatory Capital (Continued)

     The  Bank's   capital  ratios  and  the   respective   minimum   regulatory
     requirements at December 31, 1995, 1994 and 1993, are as follows:
<TABLE>
<CAPTION>

                                                            1995      1994      1993
                                                          --------  --------  --------
     <S>                                                  <C>       <C>       <C>
     Leverage Ratio

     The Bank of Commerce, N.A ........................      9.1%      9.0%      9.5%
     Minimum requirement for "Well-
        Capitalized" institution ......................      5.0%      5.0%      5.0%
     Minimum regulatory requirement ...................      4.0%      4.0%      4.0%

     Tier I Risk-Based Capital Ratio

     The Bank of Commerce, N.A ........................     11.8%     12.2%     12.7%
     Minimum requirement for "Well-
        Capitalized" institution ......................      6.0%      6.0%      6.0%
     Minimum regulatory requirement ...................      4.0%      4.0%      4.0%

     Total Risk-Based Capital Ratio

     The Bank of Commerce, N.A ........................     13.1%     13.4%     13.9%
     Minimum requirement for "Well-
        Capitalized" institution ......................     10.0%     10.0%     10.0%
     Minimum regulatory requirement ...................      8.0%      8.0%      8.0%
</TABLE>

     Stock Options

     In 1994 and  1982,  the  Board of  Directors  adopted  Stock  Option  Plans
     pursuant to which  389,497  shares of common  stock have been  reserved for
     issuance to employees and directors.

     The Plans  require  that the price of all  options may not be less than the
     fair market value of the stock at the date the option is granted,  and that
     the stock must be paid for in full at the time the option is exercised. All
     options  expire on a date  determined  by the Board of  Directors,  but not
     later  than ten years  from the date of grant.  Shares  granted  under both
     plans are  considered  to be  common  stock  equivalents  for  purposes  of
     calculating earnings per share.


                                      F-25

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


11.  STOCKHOLDERS' EQUITY (Continued)

     Stock Options (Continued)

     A summary of the activity within each plan follows:

                                                Stock Option Plans
                                                       1982
                                         1982          Non-            1994
                                       Incentive     Qualified         Plan

     Common stock reserved ........        79,860         79,137        230,500
                                     ============   ============   ============

     Balance, January 1, and
       December 31, 1993 ..........        76,007          5,784

          Options granted
            ($7.50 per share) .....                                      22,500
                                     ------------   ------------   ------------

     Balance, December 31, 1994 ...        76,007          5,784         22,500

          Options canceled ........                                      (4,500)

          Options granted
             ($7.75 per share) ....                                      52,500

          Options exercised
             ($4.70 per share) ....                         (723)
                                     ------------   ------------   ------------

     Balance, December 31, 1995 ...        76,007          5,061         70,500
                                     ============   ============   ============

     At December 31, 1995, stock options for 75,507 shares in the 1982 Incentive
     Plan were  exercisable at prices ranging from $4.88 to $5.78 per share.  In
     the 1982 Non- Qualified Plan,  options for 5,061 shares were exercisable at
     $4.70  per  share.  In  the  1994  plan,  options  for  3,600  shares  were
     exercisable at $7.50 per share.

     Stock Redemption

     During 1993, the Company offered to purchase up to 140,000  shares,  12% of
     its common stock  outstanding  as of October 31, 1993,  at a price of $7.00
     per share.  Upon  expiration of the tender offer on December 17, 1993,  the
     Company  had  redeemed  97,402  shares at a total cost of  $716,782,  which
     included  stock  redemption  expenses  of  $34,968.  Of  the  total  shares
     redeemed,  30,982  were  tendered  by  members  of the  Company's  Board of
     Directors.


                                      F-26

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


11.  STOCKHOLDERS' EQUITY (Continued)

     Stock Redemption (Continued)

     During 1995, the Company repurchased,  at market price, 6,028 shares of its
     outstanding  common stock from a retiring  director and 50,000  shares from
     other stockholders.  In addition, the Company repurchased, at market price,
     250 shares of  outstanding  common stock from the  Company's  401(k) Profit
     Sharing Stock Ownership Plan. The cost of the redemptions totaled $422,147.

12.  OTHER EXPENSES

     Other expenses consisted of the following:

                                          1995           1994           1993
                                      ------------   ------------   ------------

     Professional services ........   $    136,194   $    176,100   $    152,837
     Regulatory assessments .......        101,565        146,369        133,718
     Stationery and supplies ......         96,535        122,745        118,818
     Telephone ....................         73,846        103,656         64,720
     Postage ......................         78,015         84,094         63,532
     Directors fees ...............         75,700         73,900         80,900
     Amortization of goodwill and
       deposit premium ............         70,004         70,004         70,004
     Data processing ..............         57,585         69,666         77,247
     Advertising ..................         82,619         62,732         51,706
     Other ........................        444,376        361,808        241,778
                                      ------------   ------------   ------------

                                      $  1,216,439   $  1,271,074   $  1,055,260
                                      ============   ============   ============

13.  EMPLOYEE BENEFIT PLANS

     The Bank maintains a profit sharing plan and a salary continuation plan for
     certain  officers  and  employees.  Contributions  under  these  plans  are
     determined by the Board of Directors.


                                      F-27

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


13.  EMPLOYEE BENEFIT PLANS (Continued)

     Profit Sharing Plan

     The Bank adopted The Bank of Commerce,  N.A. 401(k) Profit Sharing Plan and
     Trust  effective  January 1, 1987.  The Plan was revised to a 401(k) Profit
     Sharing Stock  Ownership  Plan on January 1, 1995. The Plan is available to
     employees meeting certain service requirements.  The Bank's contribution to
     the  Plan is  discretionary  and is  allocated  in the  same  ratio as each
     participant's compensation bears to total compensation of all participants.
     Such  contributions  may be  made  in cash or  invested  in  shares  of the
     Company's  common  stock  and  vest  over  a  six-year  period.   Aggregate
     contributions  to the profit  sharing  plan  totaled  $80,000,  $73,000 and
     $78,000 for the years ended December 31, 1995, 1994 and 1993, respectively.

     Salary Continuation Plan

     The Bank also provides a salary continuation plan for a key executive which
     was  restructured  during 1994.  Under this plan,  the Bank is obligated to
     provide the executive, or designated beneficiary,  with annual benefits for
     fifteen years after retirement or death.  These benefits are  substantially
     equivalent to those  available under  insurance  policies  purchased by the
     Bank on the life of the executive. In addition, the estimated present value
     of  these  future  benefits  is being  accrued  over  the  period  from the
     effective date of the plan until the executive's  expected retirement date.
     As a result of the restructuring, no additional expense was accrued for the
     year ended  December  31,  1994.  The  expense  accrued for the years ended
     December 31, 1995 and 1993 totaled $27,818 and $15,144, respectively.

     In connection  with the Plan,  the Bank  purchased two single  premium life
     insurance  policies  with  cash  surrender  values  totaling  $732,207  and
     $707,630 at December 31, 1995 and 1994, respectively.



                                      F-28

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


14.  RELATED PARTY TRANSACTIONS

     During the normal  course of  business,  the Bank enters into  transactions
     with  related   parties,   including   directors  and   affiliates.   These
     transactions  include  borrowings from the Bank with substantially the same
     terms,  including rates and collateral,  as loans to unrelated parties. The
     following is a summary of the aggregate  activity  involving  related party
     borrowers during 1995:

     Balance, January 1, 1995                                      $  1,218,857

        Disbursements                                                   324,550
        Amounts repaid                                                 (243,330)

     Balance, December 31, 1995                                    $  1,300,077
                                                                   ============

     Undisbursed commitments to related
        parties, December 31, 1995                                 $     66,323
                                                                   ============

15.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

     The Company's  adopted SFAS 107,  Disclosures About Fair Value of Financial
     Instruments,  on  January  1,  1995.  SFAS 107  requires  that the  Company
     disclose  estimated fair values for financial  instruments  for which it is
     practicable to estimate fair value.  These estimates are made at a specific
     point in time  based on  relevant  market  data and  information  about the
     financial  instruments.  These  estimates  do not  reflect  any  premium or
     discount that could result from offering the Company's entire holdings of a
     particular  financial  instrument for sale at one time, nor do they attempt
     to  estimate  the  value of  anticipated  future  business  related  to the
     instruments.  In addition, the tax ramifications related to the realization
     of unrealized gains and losses can have a significant  effect on fair value
     estimates and have not been considered in any of these estimates.

     Because  no  market  exists  for a  significant  portion  of the  Company's
     financial  instruments,   fair  value  estimates  are  based  on  judgments
     regarding  current economic  conditions,  risk  characteristics  of various
     financial instruments and other factors.  These estimates are subjective in
     nature and involve  uncertainties  and matters of significant  judgment and
     therefore cannot be determined with precision. Changes in assumptions could
     significantly affect the fair values presented.

     The following  methods and assumptions were used by the Company to estimate
     the fair value of its financial instruments at December 31, 1995:


                                      F-29

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


15.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
     (Continued)

     Cash and cash  equivalents:  For cash and cash  equivalents,  the  carrying
     amount is estimated to be fair value.

     Investment securities: For investment securities,  fair values are based on
     quoted  market  prices,  where  available.  If quoted market prices are not
     available, fair values are estimated using quoted market prices for similar
     securities and indications of value provided by brokers.

     Loans receivable:  For variable-rate  loans that reprice frequently with no
     significant  change in  credit  risk,  fair  values  are based on  carrying
     values.  Fair  values of loans  held for sale are  estimated  using  quoted
     market  prices  for  similar  loans.  SBA loans  held for  sale,  which are
     scheduled for sale after final  disbursements are made, are valued at their
     cost plus  estimated  gain on only the funded portion of the loan. The fair
     values  for  other  loans  (e.g.,  real  estate  mortgage,  commercial  and
     installment loans) are estimated using discounted cash flow analyses, using
     interest  rates  currently  being  offered for loans with similar  terms to
     borrowers of comparable  creditworthiness.  The carrying  amount of accrued
     interest receivable approximates its fair value.

     Excess  servicing:  The unsold  interest  revenue related to sold SBA loans
     which  represents  the excess of  servicing  fees over  servicing  costs is
     valued at the current market rate for SBA interest strips.

     Life insurance  policies:  The fair values of life  insurance  policies are
     based on current cash surrender values provided by the insurers.

     Deposits:   The  fair  values  for  demand  deposits  (e.g.,  interest  and
     non-interest  checking,  savings,  NOW and money market  accounts)  are, by
     definition,  equal to the amount  payable on demand at the  reporting  date
     represented   by  their  carrying   amount.   Fair  values  for  fixed-rate
     certificates of deposit are estimated using a discounted cash flow analyses
     using interest rates currently  being offered by the Bank for  certificates
     with similar remaining maturities.  The carrying amount of accrued interest
     payable approximates its fair value.

     Long-term  debt:  Fair value is estimated  utilizing a discounted cash flow
     analysis using market  interest rates currently being offered for debt with
     similar remaining maturities and collateralized by similar property.



                                      F-30

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


15.  DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
     (Continued)

     Commitments  to extend  credit:  The fair values of  commitments  to extend
     credit are estimated using the fees currently charged to enter into similar
     agreements,  taking into account the remaining  terms of the agreements and
     the present  creditworthiness  of the borrowers.  For adjustable  rate loan
     commitments,  the carrying amount is considered to be fair value. For fixed
     rate loan  commitments,  fair value also considers the  difference  between
     current levels of interest rates and the committed rates.

     The  estimated  fair  values of the  Bank's  financial  instruments  are as
     follows:

                                                         December 31, 1995
                                                      Carrying         Fair
                                                       Amount          Value
                                                   ------------    ------------
     Financial assets:
        Cash and due from banks ................   $  5,263,475    $  5,263,475
        Federal funds sold .....................      8,300,000       8,300,000
        Investment securities ..................      6,316,500       6,316,500
        Loans held for sale ....................      4,473,733       4,631,000
        Loans ..................................     45,237,229      45,061,000
        Excess servicing .......................        669,538         837,000
        Accrued interest receivable ............        515,083         515,083
        Cash surrender value of life
            insurance policies .................        732,207         732,207
                                                   ------------    ------------

                                                   $ 71,507,765    $ 71,656,265
                                                   ============    ============

     Financial liabilities:
        Deposits ...............................   $ 67,246,492    $ 67,290,000
        Long-term debt .........................        556,529         482,000
        Accrued interest payable ...............        333,315         333,315
                                                   ------------    ------------

                                                   $ 68,136,336    $ 68,105,315
                                                   ============    ============

     Off-balance-sheet financial instruments:
        Commitments to extend credit ...........   $ 11,166,866    $ 11,166,866
        Standby letters of credit ..............        311,498         311,498
                                                   ------------    ------------

                                                   $ 11,478,364    $ 11,478,364
                                                   ============    ============

                                      F-31

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


16.  PARENT ONLY CONDENSED FINANCIAL STATEMENTS

                                  BALANCE SHEET
                           December 31, 1995 and 1994

                                                       1995            1994
                                                   ------------    ------------

                       ASSETS

     Cash and due from banks ...................   $     85,229    $    185,287
     Premises and equipment, net ...............        900,305         943,222
     Investment in wholly-owned subsidiary .....      7,363,471       6,919,468
     Other assets ..............................         11,945          16,062
                                                   ------------    ------------

                                                   $  8,360,950    $  8,064,039
                                                   ============    ============

                       LIABILITIES AND
                       STOCKHOLDERS' EQUITY

     Long-term debt ............................   $    556,529    $    586,893
     Other liabilities .........................          4,745           2,000
                                                   ------------    ------------

            Total liabilities ..................        561,247         588,893
                                                   ------------    ------------

     Common stock ..............................      5,107,501       5,525,420
     Retained earnings .........................      2,631,879       2,064,511
     Unrealized loss on available-for-sale
         investment securities, net of taxes ...         60,296        (114,785)
                                                   ------------    ------------

            Total stockholders' equity .........      7,799,676       7,475,146
                                                   ------------    ------------

                                                   $  8,360,950    $  8,064,039
                                                   ============    ============



                                      F-32

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


16.  PARENT ONLY CONDENSED FINANCIAL STATEMENTS (Continued)

                               STATEMENT OF INCOME
              For the Years Ended December 31, 1995, 1994 and 1993

<TABLE>
<CAPTION>

                                                        1995           1994           1993
                                                    ------------   ------------   ------------

<S>                                                 <C>            <C>            <C>
Income paid by subsidiary
   eliminated in consolidation:
   Rent ..........................................  $    138,840   $    138,840   $    138,840
   Interest ......................................                                       3,075
   Dividends .....................................       600,000                     1,100,000
                                                    ------------   ------------   ------------

          Total income ...........................       738,840        138,840      1,241,915
                                                    ------------   ------------   ------------

Expenses:
   Interest ......................................        48,721         51,187         61,573
   Depreciation ..................................        42,917         47,219         46,760
   Professional fees .............................        10,909         11,357         10,066
   Other .........................................        22,030         21,106         17,207
                                                    ------------   ------------   ------------

          Total expenses .........................       124,577        130,869        135,606
                                                    ------------   ------------   ------------

          Income before income
              taxes and equity in
              undistributed income
              (loss) of subsidiary ...............       614,263          7,971      1,106,309

Income taxes .....................................         3,500          2,000            800
                                                    ------------   ------------   ------------

          Income before equity
              in undistributed
              income (loss) of
              subsidiary .........................       610,763          5,971      1,105,509

Equity in undistributed income
   (loss) of subsidiary ..........................       268,922        812,690       (367,841)
                                                    ------------   ------------   ------------

          Net income .............................  $    879,685   $    818,661   $    737,668
                                                    ============   ============   ============

</TABLE>

                                      F-33

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


16.  PARENT ONLY CONDENSED FINANCIAL STATEMENTS (Continued)

                             STATEMENT OF CASH FLOWS
              For the Years Ended December 31, 1995, 1994 and 1993

<TABLE>
<CAPTION>

                                                        1995           1994           1993
                                                    ------------   ------------   ------------

<S>                                                 <C>            <C>            <C> 
Cash flows from operating activities:
   Net income ....................................  $    879,685   $    818,661   $    737,668
   Adjustments to reconcile
       net income to net cash
       provided by operating
       activities:
       Depreciation ..............................        42,917         47,219         46,760
       (Increase) decrease in
          undistributed earnings
          of subsidiary ..........................      (268,922)      (812,690)       367,841
       Decrease (increase) in other
          assets .................................         4,117         (2,941)        (5,218)
       Increase (decrease) in
          other liabilities ......................         2,745          1,200            (10)
                                                    ------------   ------------   ------------

          Net cash provided by
              operating activities ...............       660,542         51,449      1,147,042
                                                    ------------   ------------   ------------

Cash flows from investing
   activities:
   Additions to premises and
       equipment .................................                                     (35,368)
                                                    ------------   ------------   ------------
          Net cash used in
              investing activities ...............                                     (35,368)
                                                    ------------   ------------   ------------
</TABLE>


                                      F-34

<PAGE>


                          AUBURN BANCORP AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


16.  PARENT ONLY CONDENSED FINANCIAL STATEMENTS (Continued)

                             STATEMENT OF CASH FLOWS
                                   (Continued)
                     For the Years Ended December 31, 1995, 1994 and 1993

<TABLE>
<CAPTION>

                                                        1995           1994           1993
                                                    ------------   ------------   ------------

<S>                                                 <C>            <C>            <C>
Cash flows from financing
   activities:
   Principal payments on long-
       term debt .................................  $    (30,364)  $    (27,898)  $    (17,512)
   Payments to redeem common
       stock .....................................      (422,147)                     (716,782)
   Cash dividends paid ...........................      (312,317)      (291,495)      (227,691)
   Proceeds from exercised stock
       options ...................................         4,228
                                                    ------------   ------------   ------------
          Net cash used in
              financing activities ...............      (760,600)      (319,393)      (961,985)
                                                    ------------   ------------   ------------

          (Decrease) increase
              in cash ............................      (100,058)      (267,944)       149,689

Cash balance at beginning
   of year .......................................       185,287        453,231        303,542
                                                    ------------   ------------   ------------

Cash balance at end of year ......................  $     85,229   $    185,287   $    453,231
                                                    ============   ============   ============


Supplemental disclosures of cash flow information:

   Cash paid during the year for:
       Interest expense ..........................  $     48,721   $     51,187   $     61,573
       Income taxes ..............................                 $        800

Non-cash investing activities:
   Unrealized gain (loss) on
       available-for-sale
       investment securities .....................  $    299,720   $   (195,365)
</TABLE>

                                      F-35