SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K
                 ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                  For the Fiscal Year Ended: December 31, 1999

                         Commission File Number: 0-27784

                                HUMBOLDT BANCORP
        (Exact name of small business issuer as specified in its charter)


          California                                  93-1175446
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
incorporation or organization)

                                701 Fifth Street
                               Eureka, California
                    (Address of principal executive offices)

                                      95501
                                   (Zip Code)

                                 (707) 445-3233
              (Registrant's telephone number, including area code)

Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act: Common Stock-
No Par Value

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  twelve  months (or for such shorter  period that the
registrant was required to file such  reports);  and 2) has been subject to such
filing requirements for the past 90 days.

                                    X Yes          ___ No

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation  5(b),  and no  disclosure  will  be  contained,  to the  best of the
registrant's   knowledge,   in  definitive   proxy  or  information   statements
incorporated by reference in Part III of the Form 10-K. [  ]

Issuer's revenues for the most recent fiscal year were:   $44,998,000

Aggregate  Market  Value  of the  voting  stock  held by  non-affiliates  of the
registrant as of December 31, 1999: $53,916,652

Number of shares of common stock outstanding at December 31, 1999, as adjusted:
5,203,972

Documents incorporated by reference:None

                    This report includes a total of 74 pages
                            Exhibit Index on page 72


<PAGE>2

                                     PART 1

ITEM 1 - DESCRIPTION OF BUSINESS

Introduction

        Humboldt  Bancorp  is  a  multi-bank   holding  company  with  two  bank
subsidiaries,  Humboldt  Bank and Capitol  Valley Bank.  In  addition,  Humboldt
Bancorp  owns  a  50%  interest  in  Bancorp  Financial   Services,   a  leasing
corporation. Reference to Humboldt Bancorp in this section constitutes reference
to Humboldt  Bank,  and Capitol  Valley Bank.  Reference  to Humboldt  Bank is a
reference  to just  Humboldt  Bank and  reference  to Capitol  Valley  Bank is a
reference to just Capitol Valley Bank.

        Humboldt  Bancorp  was  incorporated  under  the  laws of the  state  of
California on January 23, 1995. Humboldt Bancorp initially was organized for the
purpose of becoming the holding  company for Humboldt  Bank. On January 2, 1996,
the plan of  reorganization  was effected and shares of Humboldt  Bancorp common
stock were issued to the  shareholders  of Humboldt  Bank in exchange  for their
Humboldt  Bank common  stock.  Humboldt  Bank was  incorporated  as a California
state-licensed  bank  on  March  13,  1989,  and  began  its  operations  in the
Eureka/Humboldt  area of California on September 13, 1989.  Capitol  Valley Bank
was incorporated as a California  state-licensed  bank on December 17, 1998, and
began its operations in Roseville, California on March 3, 1999.

        In addition to its main branch located in Eureka,  California,  Humboldt
Bank has nine  branches  located in Humboldt,  Trinity and  Mendocino  counties.
Capitol Valley Bank has one main branch office located in Roseville, California,
20 miles from downtown  Sacramento.  Bancorp  Financial  Services,  a California
corporation,  is jointly owned by Humboldt  Bancorp and Tehama Bancorp and makes
automobile  loans to  consumers  and  commercial  equipment  leases of less than
$100,000 to small businesses.  Bancorp Financial Services markets its automobile
products principally in California but its equipment lease products nationally.

        As of December 31, 1999 and 1998,  Humboldt  Bancorp had total assets of
$423.6 million and $320.0  million,  total deposits of $378.6 million and $284.0
million, and shareholders'  equity of $34.1 million and $27.8 million.  Humboldt
Bancorp's net income for the years ended  December 31, 1999,  1998 and 1997, was
$4.6  million,  $4.0  million and $3.3 million  respectively.  1999 was Humboldt
Bancorp's  ninth  consecutive  year of increasingly  higher net income.  For the
years ended  December  31, 1999,  1998 and 1997,  Humboldt  Bancorp's  return on
average  assets was 1.27%,  1.32% and 1.30%  respectively  and return on average
equity was 15.10%, 16.02% and 14.50% respectively. Since the year ended December
31, 1995,  Humboldt Bancorp has increased annual earnings by an average of 20.3%
per year and increased  return on average  assets from 1.22% in 1995 to 1.27% in
1999. During the same period,  Humboldt Bancorp has achieved a return on average
equity greater than 14.5% in each year while maintaining high asset quality.

        From its origins as a one-branch  bank in Eureka,  California,  Humboldt
Bancorp has grown primarily  through acquiring  branches,  opening new branches,
creating Capitol Valley Bank, and expansion of new business lines. Humboldt Bank
opened  its first  office in 1989 in  Eureka,  California,  and  opened its next
branch in 1991 in Fortuna,  California.  Humboldt Bank then acquired five of its
branches  from  U.S.  Bank:  Arcata  and  McKinleyville  in  1993,  and  Loleta,
Weaverville  and Willow Creek in 1995. In 1997,  Humboldt  Bancorp  acquired its
Garberville branch from First Nationwide Bank. On August 27, 1999, Humboldt Bank
completed the acquisition of two branches of CalFed located in Eureka and Ukiah.

<PAGE>3


Management  believes the branch  acquisitions have strengthened  Humboldt Bank's
market position by increasing our presence in our primary region of Humboldt and
Trinity  counties.  Humboldt Bancorp plans to open a new branch in Eureka in the
second quarter of 2000.

        In order to  strengthen  its market  position in Capitol  Valley  Bank's
market area of  Roseville,  California,  in  September  1999,  Humboldt  Bancorp
acquired  the stock and  services  of the key  executives  of  Silverado  Merger
Corporation,  which was  Silverado  Bank, a bank in  organization  in Roseville,
California.  Silverado  was in the process of raising the  necessary  capital to
open as a  commercial  banking  institution.  In  addition,  on June  22,  1999,
Humboldt Bancorp entered into a merger agreement to acquire Global Bancorp,  and
its  wholly-owned  operating  subsidiary  Capitol  Thrift and Loan, a California
industrial  loan  corporation.  Capitol Thrift has 10 branches  located  through
California and focuses primarily on consumer mortgage and commercial real estate
lending.  The  acquisition of Global  Bancorp is subject to several  conditions,
including  approval  of  the  merger  by the  shareholders  of  Global  Bancorp,
regulatory approval,  and sale of common stock through a public offering. If the
acquisition  of Global  Bancorp  is  consummated,  Capitol  Thrift and Loan will
become a  subsidiary  of  Humboldt  Bancorp.  Reference  in this  document  will
primarily refer to Capitol Thrift because it is the operating entity.

        Management  of  Humboldt  Bancorp  has  historically  searched  for  and
developed  non-traditional business lines for the company. An example of this is
Humboldt's  Bancorp's 50% joint venture,  Bancorp Financial Services,  formed in
1996. In addition to making  automobile loans and commercial  equipment  leases,
Bancorp  Financial  Services  acquires  leases  and  contracts,  which  are then
packaged as  asset-backed  securities  for  placement  in the public  securities
market.  Another example is Humboldt Bank's merchant  bankcard services business
line.  These services  involve  collecting funds for, and crediting the accounts
of,  merchants for sales of merchandise  and services to credit card  customers.
This department,  including ATM activities,  has grown significantly since 1993,
and now is staffed by 93 employees  and had total  revenues of $14.5 million for
the year ended December 31, 1999.

Risk Factors

No assurance that we will acquire Global Bancorp

        We have entered into a merger agreement to acquire Capitol Thrift, which
is subject to a number of  conditions,  including  state and federal  regulatory
approval.  While we intend to complete the  acquisition  of Capitol  Thrift,  no
assurance can be given that it will be consummated.

We will need to integrate and operate the business of Capitol Thrift & Loan

        While we have experience in managing growth through branch acquisitions,
Capitol  Thrift  represents  our  first  major  banking  venture  into  areas of
California other than Humboldt,  Trinity, Mendocino and Placer Counties. Capitol
Thrift also represents our first venture into acquiring a California  industrial
thrift and loan  institution.  Unlike  Humboldt  Bank and Capitol  Valley  Bank,
Capitol  Thrift  almost  exclusively  relies on net income  generated  from loan
interest income. We may experience:

        o problems  integrating  Capitol  Thrift as our separate  subsidiary;
        o unexpected employee departures;
        o computer hardware or software problems and  coordination;  or
        o the  failure to maintain  and improve  customer service.

<PAGE>4


Capitol Thrift is under an agreement with the FDIC and California  Department of
Financial Institutions

        Capitol  Thrift is subject to an agreement  with the FDIC and California
Department  of  Financial  Institutions  dated August 23,  1998.  The  agreement
requires that Capitol Thrift:

        o develop a plan for the reduction of all classified  assets;
        o develop specific strategies for the reduction of other real estate
          owned;
        o develop a plan to increase its Tier 1 capital.

        Although  we believe  that we have the  business  experience  to address
these  issues,  no  assurance  can be given that  either the FDIC or  California
Department of Financial Institutions will not impose additional  restrictions on
Capitol Thrift's operations.

Adverse   performance  of  Capitol   Thrift's  loan  portfolio  and  our  future
performance

        Making loans is the principal business of Capitol Thrift. Its operations
and  performance  rely almost solely on generating  loan interest  income rather
than other income and fees.  Also,  Capitol  Thrift's  existing loan  portfolios
differ  to some  extent  in the  types  of  borrowers,  industries  and  credits
represented by Humboldt Bank's and Capitol Valley Bank's loan portfolios.

        Our performance and prospects after the merger will be largely dependent
on the  performance of our combined loan  portfolios  with Capitol  Thrift,  and
ultimately on the financial  condition of their  respective  borrowers and other
customers.  Our failure to effectively  manage the combined loan portfolio could
have a material adverse effect on our business,  financial condition and results
of operations  after the merger.  Any decrease in loan customers could adversely
effect  our  shareholders'  return  on  equity  and cause us to lose some of the
anticipated benefit of the Capitol Thrift acquisition. For information about our
loan portfolio,  see "Humboldt Bancorp  Management's  Discussion and Analysis of
Financial Condition and Results of Operation -- Loans."

Dependence on non-traditional banking income for growth

        Because of limited  growth in the  Humboldt-Eureka  area, a  substantial
portion of our revenue is derived from  non-traditional  banking focused on fees
on accounts,  for services,  leasing activity, and merchant bankcard processing.
Although we intend to diversify our growth in other  geographical  areas through
the  acquisition  of Capitol  Thrift and  operations  of  Capitol  Valley  Bank,
increased  competition within the banking industry could reduce fees on deposits
and for services. With respect to merchant bankcard processing,  we have focused
our marketing to first-time merchants and small to medium-sized merchants in the
retail,  telephone,  mail order and Internet commerce industries.  Because these
merchants are located outside our geographic location,  they require more effort
to monitor in the event the merchants experience a problem.
See "Description of Business - Merchant Bankcard."


<PAGE>5


Recent  changes  made  by VISA  will  adversely  affect  our  merchant  bankcard
operations

     During  November 1999,  VISA adopted several rules in order to reduce risks
in high-risk merchant bankcard programs. Although Humboldt Bank does not believe
that it operates a high-risk  merchant  bankcard  program,  these new rules will
adversely affect our operations. We are seeking a waiver from VISA. No assurance
can be given that the waiver will be granted.

Our Stock Option Plan contains an antidilution provision

     Our stock  option plan for  directors,  officers and  employees  contains a
provision which grants  additional  options to the option holder in the event we
issue additional shares, such as in the proposed stock offering.  The additional
options that may be granted will have an exercise price equal to the fair market
value at the time of grant. As a result of this  provision,  option holders will
have the right to maintain their ownership  interest in us. Further,  because of
these  options,  this may have the effect of  impairing  the price of our common
stock or our ability to raise  additional  capital at a higher  price due to the
potential dilutive effect to new investors.

Our acquisitions and growth may strain our personnel and systems

     We have grown substantially through branch acquisition  activity,  new bank
and branch  openings,  the  introduction  of new product  lines,  and  sustained
increases in loans and  deposits.  Rapid growth has at times put high demands on
our management and personnel,  and has required  increased  expenditures for new
employees, enhanced training, office space, and technology upgrades.

We face strong competition

     In recent years, competition for bank customers, the source of deposits and
loans, has greatly intensified. This competition includes

     o    large national and  super-regional  banks which have  well-established
          branches and  significant  market share in many of the  communities we
          serve;
     o    finance  companies,   investment  banking  and  brokerage  firms,  and
          insurance  companies that offer bank-like  products;
     o    credit unions,  which can offer highly  competitive rates on loans and
          deposits   because  they  receive  tax  advantages  not  available  to
          commercial  banks;
     o    government-assisted   farm  credit  programs  that  offer  competitive
          agricultural loans;
     o    other community  banks,  including  start-up banks,  which can compete
          with us for customers who desire a high degree of personal service;
     o    technology-based  financial  institutions including large national and
          super-regional  banks  offering  on-line  deposit,  bill payment,  and
          mortgage loan application services; and
     o    other financial  institutions  offering merchant  bankcard  processing
          services.

     Other existing  single or  multi-branch  community  banks, or new community
bank start-ups, have marketing strategies similar to ours. These other community
banks can open new branches in the communities we serve and compete directly for
customers  who want the high  level of  service  community  banks  offer.  Other
community  banks also  compete for the same  management  personnel  and the same
potential acquisition and merger candidates in Northern California.


<PAGE>6


        Historically,  insurance companies,  brokerage firms, credit unions, and
other  non-bank  competitors  have less  regulation  than  banks and can be more
flexible in the  products and services  they offer.  Under the recently  enacted
Financial Services Act of 1999, most separations between banks, brokerage firms,
and insurance companies are eliminated, which is likely to increase competition.

Deterioration of local economic conditions could hurt our profitability

        Our  operations  are primarily  located in Northern  California  and are
concentrated  in  Eureka  and  surrounding  areas,  and,  to  a  lesser  extent,
Roseville,  California.  As a  result  of  this  geographic  concentration,  our
financial  results  depend  largely  upon  economic  conditions  in these areas.
Adverse local  economic  conditions in Northern  California,  and in particular,
Eureka,  may have a  material  adverse  effect on our  financial  condition  and
results of operations.

Government regulation and legislation could hurt our business and prospects

        We  have  extensive  state  and  federal  regulation,   supervision  and
legislation  that  govern  almost  all  aspects  of  our  respective  operations
including:

        o the capital we must maintain;
        o the kinds of activities we can engage in;
        o the kinds and amounts of  investments  we can make;
        o the location of our offices.

        Bank  regulation  can hinder  our  ability  to  operate  with  financial
services companies that are not regulated or are less regulated. This regulation
is primarily intended for the protection of consumers,  depositors,  and deposit
insurance funds and not for the protection of Humboldt Bancorp shareholders.

Loss of key employees could hurt our performance

        The loss of the  services of a key  employee,  or the failure to attract
and retain other qualified persons,  could have a material adverse effect on our
business,  financial  condition  and  results  of  operations.  We  are  heavily
dependent  on the  services  of  Theodore  S.  Mason,  our  President  and Chief
Executive  Officer,  and on  several  other key  executives,  including  Messrs.
Barkley,  Smyth, Ziegler,  Dalby, and Musante, who have been instrumental in our
growth.  The operation and performance of Capitol Thrift is heavily dependent on
the services of Mr. Robert F. Kelly,  President and Chief Executive Officer, and
Mr. Leighton Monroe,  Jr., Chief Financial Officer, of Capitol Thrift. We intend
to enter into employment  arrangements with Mr. Robert F. Kelly and Mr. Leighton
Monroe,   Jr.  for  the  continuation  of  their  services  for  Capitol  Thrift
operations.

        Our rapid growth has placed significant demands on Mr. Mason's time, who
until July 15, 1999,  served as President  and Chief  Executive  Officer of both
Humboldt  Bancorp and Humboldt Bank and Chairman of the Board of Capitol  Valley
Bank. As of December 31, 1999, Mr. Mason serves as President and Chief Executive
Officer of Humboldt Bancorp, Mr. Ron Barkley serves as Senior Vice President and
Senior Loan  Officer of Humboldt  Bancorp,  Mr. Alan Smyth serves as Senior Vice
President  and Chief  Financial  Officer of Humboldt  Bancorp,  Mr. Paul Ziegler
serves as Executive Vice President of Humboldt Bancorp, Mr. John Dalby serves as
President and Chief  Executive  Officer of Humboldt Bank, and Mr. Musante serves
as Vice  President and Manager of the Merchant  Bankcard  Department of Humboldt
Bank.

<PAGE>7


        We may need to recruit  additional senior level executives as our growth
continues. However, the market for qualified persons is competitive and they may
be unwilling to relocate to Eureka, a non-metropolitan city.

Limited  trading market for Humboldt  Bancorp common stock and price  volatility
could make it difficult to sell shares in the future

        Our common stock has been  approved  for listing on the NASDAQ  National
Market.  We intend to begin trading on the NASDAQ National Market upon the close
of our public offering. Our common stock is currently quoted on the OTC Bulletin
Board. There is limited trading in our common stock. We do not know if an active
trading market for our common stock will develop once our shares of common stock
begin trading on the NASDAQ National Market.

        Given  the  limited  trading  history  of our  common  stock  on the OTC
Bulletin Board and our inability to predict at what price level our common stock
will trade in the future,  the price of our common stock may  fluctuate  widely,
depending on many factors that may have little to do with  operating  results or
intrinsic  worth,  and  delays may be  encountered  in  selling  our stock.  For
information  about the trading history of Humboldt  Bancorp's  common stock, see
"Market for Common Equity and Related Shareholder Matters."

Business Strategy

        Continue  to Seek  Strategic  Acquisitions.  We  intend to  explore  the
acquisition  of other  community  banks  and  branches  of  larger  banks in the
California  market,  to  develop  a banking  presence  in  high-growth  areas of
Northern California.  We believe that the consolidation in the banking industry,
along with  increased  regulatory  burdens,  and concerns  about  technology and
marketing,  could  likely  lead the owners of  community  banks to  explore  the
possibility of sale or combination with a broader-based  holding company such as
Humboldt Bancorp.  We intend to operate acquired banks as separate  subsidiaries
to retain  their boards of directors  and the goodwill of the  communities  they
serve.  In  addition,  we intend to form  community  banks in areas of  Northern
California  that  may  have  lost  their  independent  community  banks  through
consolidation, merger, or acquisition.

        Increase Efficiency of Operations.  Humboldt Bancorp intends to commence
an in-depth, company-wide study of methods to reduce costs and increase revenues
as soon as  feasible  after the merger  with  Global  Bancorp.  Given our recent
acquisitions,  and the  introduction  of several new products and  services,  we
believe  there is an  opportunity  to reduce  redundant  costs  within  Humboldt
Bancorp,  as well as introduce  existing products and services into our recently
acquired  operations.  We intend to  consolidate  the operations of our acquired
banks,  combining such functions as financial  administration,  data processing,
insurance,  employee  benefits and human  resources  support,  and contracts for
services. We are also in the process of renovating  approximately 70,000 sq. ft.
of office  space  for the  consolidation  of a  majority  of the  organization's
administrative offices and functions. Additional plans for this facility include
the  creation  of a call  center,  which will  provide  bookkeeping  and service
support to our customers and various subsidiaries.

        Increase  Earning  Assets.  With the CalFed branch  acquisitions,  which
primarily  included  deposits  with  only a nominal  amount  of loans,  Humboldt
Bancorp had a 60.3%  loan-to-deposit  ratio at December 31, 1999. Our goal is to
increase  earning  assets  in  order  to  raise  the  loan-to-deposit  ratio  to
approximately  80% by July 1, 2001. If this were to happen,  we would expect our

<PAGE>8


profitability to increase as higher yielding loans replace investment securities
on our balance sheet. No assurance, however, can be given that we will meet this
goal.  One of our strategies to increase  earning  assets is the  acquisition of
Capitol Thrift. Capitol Thrift's branch network extends from central to southern
California,  and its primary  focus is on loan  products,  rather  than  deposit
products.  We expect this  emphasis to  complement  Humboldt  Bancorp's  current
deposit  products  and  marketing  focus.  We will also  develop  and expand the
leasing  activities and  associated  business  lines through  Bancorp  Financial
Services.

        Aggressively   and   Prudently   Increase   Market   Share  in   Greater
Sacramento/Roseville. Humboldt Bancorp's subsidiary, Capitol Valley Bank, opened
in March 1999 in the Sacramento suburb of Roseville,  California.  Roseville was
selected  for our  expansion  into central  California  because it is one of the
fastest  growing  regions in California.  Employers such as Hewlett  Packard and
Oracle have created  numerous jobs in the Roseville area over the past 10 years.
Subsequently,  in September 1999 Humboldt Bancorp,  through Capitol Valley Bank,
acquired  Silverado Merger  Corporation,  which under the name of Silverado Bank
(In  organization)  had been  raising  capital  in  anticipation  of  opening  a
community  bank in Roseville.  The  acquisition  of Silverado not only removes a
potential competitor from the marketplace,  but more importantly,  we believe it
significantly    increases    our   market    presence    and   depth   in   the
Sacramento/Roseville market.

        Capitalize on Humboldt Bank's Market  Position.  Humboldt Bank currently
holds the largest share of FDIC-insured deposits in Humboldt County at 26.9%. It
also holds  22.5% of  FDIC-insured  deposits in Trinity  County.  Our goal is to
increase our market share  position by opening new branches and  increasing  our
current  operations  in the  region.  Current  plans  are  underway  to  open an
additional  branch  in  the  Henderson  Center  business  area  of  Eureka.  The
additional  branch  should  increase  market  share and  provide  an  additional
convenient  location to serve Humboldt  Bank's current  customer base.  Humboldt
Bank's new President,  John Dalby,  intends to continue  Humboldt  Bank's strong
sales culture in order to  aggressively  pursue new loan business and cross-sell
additional bank services while strictly  adhering to our prudent and proven loan
approval process.

        Expand  non-lending,  and  fee-based  activities.  We will  continue  to
develop  non-interest  sources such as Merchant Bankcard  activities,  which has
developed  into an area of financial and strategic  importance for us. We intend
to expand the proprietary  merchants  portfolio,  which produces greater profits
and allows us more control over merchant  accounts than portfolios  initiated by
independent servicing and marketing organizations.  We also intend to expand our
Internet  delivery system,  allowing us to aggressively  identify and market our
services to smaller  merchants.  We intend to continue our ATM funding programs,
which   constitute   another   important  source  of  fee-based  income  to  the
organization.  We will  develop our  insurance  and  investment  programs as yet
another  source of  non-interest  income,  and  expand  our  electronic  banking
services to complement  delivery of both traditional  banking services and newer
offerings,  such as online cash  management,  bill  payment and stock quotes and
trading.

Pending Acquisition of Global Bancorp

        Our most  recent  proposed  acquisition-based  expansion  is our pending
merger of Global Bancorp.  On June 22, 1999,  Global Bancorp and we entered into
an Agreement and Plan of Reorganization,  as subsequently  amended and restated.
We will acquire  Global for  approximately  $16.5  million  consisting  of $11.8
million in cash and the balance  consisting  of a $4.7 million  promissory  note
subject to  adjustment.  We intend to fund the $11.8 million cash portion of the
acquisition  of  Global  Bancorp  through  the funds  raised  by a public  stock
offering, with the balance from borrowings on other interest-bearing securities.

<PAGE>9


        Global  Bancorp is a California  corporation  organized on September 18,
1980, to act as a holding company for thrift and loan companies and to engage in
other financial activities.  Global Bancorp conducts business through its wholly
owned  thrift  and  loan  company  subsidiary,   Capitol  Thrift,  a  California
corporation  licensed under the California  Industrial Loan Law.  Capitol Thrift
conducts a general  consumer and  commercial  finance  business from 10 branches
located  throughout the State of California.  Capitol Thrift's primary source of
revenue is providing commercial and single-family, residential real estate loans
to  customers  who are  predominantly  small and  middle-market  businesses  and
individuals. Capitol Thrift does not provide general commercial banking services
such as demand checking accounts,  lines of credit,  safe deposit boxes and wire
transfer.  Capitol  Thrift  funds  its  lending  activities  by  issuing  thrift
certificates and investment certificates.

        Global  Bancorp and Capitol  Thrift have their head  offices  located at
1424 Second  Street,  Napa,  California  94559.  The Federal  Deposit  Insurance
Corporation  insures Capitol Thrift's  deposits up to $100,000.  At December 31,
1999,  Global  had 49  full-time  employees  and 3  part-time  employees.  As of
December 31, 1999,  Global  Bancorp had total  assets of $116.6  million,  total
deposits of $103.8 million and  shareholders'  equity of $12.0  million.  Global
Bancorp's net income for the years ended  December 31, 1999,  and 1998, was $1.3
million and $1.1 million  respectively.  Net income for the year ended  December
31,  1999,  included  $297,000  from the  proceeds  of a life  insurance  policy
insuring the life of a former officer. For the years ended December 31, 1999 and
1998,  Global Bancorp's return on average assets was 1.04% and .78% respectively
and return on average equity was 11.08% and 9.96% respectively.

        Capitol  Thrift  intends to close the San Jose branch prior to March 31,
2000.  Additional  plans call for the  consolidation  of several other branches,
leaving  Capitol  Thrift with seven  operating  branches prior to the end of the
second quarter of 2000.

        We expect to  complete  the  acquisition  of Global  Bancorp  during the
second  quarter of year 2000.  Closing is  conditioned  on, among other  things,
approval  from  state  and  federal  regulatory  authorities,  which  have  been
obtained.  The acquisition is also subject to the  satisfaction  and accuracy of
certain  representations  and  warranties  made by the  parties,  the absence of
litigation challenging the acquisition, the absence of any adverse change in the
operations  and  deposits  of  Capitol  Thrift,  and the  affirmative  vote of a
majority of all shares of Global  Bancorp  common  stock  entitled to be cast by
Global  Bancorp  shareholders.  The directors  and executive  officers of Global
Bancorp  have  agreed  not to  solicit  offers  for any  transaction  that would
interfere with the acquisition.  Under a termination fee provision,  we could be
liable  to Global  Bancorp,  and  Global  Bancorp  could be liable to us,  for a
termination  fee if either party fails to complete the  acquisition  for certain
specified  reasons,  including  an  intentional  breach of  various  pre-closing
obligations.  The  termination fee ranges from $250,000 to a maximum of $350,000
depending on the nature of the breach.

<PAGE>10

        In 1996 and 1997, Capitol Thrift experienced an increase in loss on real
property held for sale (RPHFS) and expenses related  thereto.  A majority of the
losses  related  to  loans  made  prior  to June  1992,  at  which  time  credit
underwriting  policies were  strengthened.  As a result of these  increases,  in
August 1998, Capitol Thrift entered into an agreement with the FDIC and the CDFI
pursuant to which management and the Capitol Thrift Board of Directors agreed to
reduce the level of classified assets as outlined in the agreement,  develop and
implement a plan with specific  strategies  for reducing  RPHFS,  classified and
non-performing  loans,  and revise the methodology for calculating the allowance
for losses on loans. In addition, Capitol Thrift is required to maintain certain
leverage  ratios.  Capitol  Thrift  management  believes that Capitol Thrift has
complied in most material  respects with the provisions of the agreement and are
actively working on completing the process of complying with all other aspects.

Banking Services

        To retain  existing  customers and attract new customers,  Humboldt Bank
offers a broad range of services,  including  automated teller machines,  credit
card and merchant bankcard services,  ACH services,  and daily courier services.
In addition,  Humboldt Bank maintains close  relationships with its customers by
providing  direct access to senior  management  during and after normal business
hours,  rapid  response  to  customer  requests,  and  specialized  market  area
knowledge of the communities in northern California.

Lending Activities

         Humboldt Bancorp  concentrates  its lending  activities in real estate,
commercial,  lease  financing,  credit  card and  consumer  loans,  made  almost
exclusively to  individuals  and  businesses  primarily in Northern  California.
Humboldt  Bancorp has no foreign loans.  The net loan and lease  portfolio as of
December 31, 1999  and1998,  totaled  $225.1  million and $186.0  million  which
represented  59.5%  and  65.5% of total  deposits  and  53.1% and 58.1% of total
assets. Humboldt Bancorp also generates fee income by servicing mortgage loans.
See "Loan Servicing" below.

Real Estate Loans and Real Estate Banking Operations

        Real Estate - Construction

        Humboldt  Bancorp makes loans to finance the construction of residential
and commercial  properties and to finance land acquisition and  development.  At
December 31, 1999 and 1998, Humboldt Bancorp had outstanding real estate-secured
construction loans totaling $22.1 and $20.7 million, representing 9.8% and 11.1%
of Humboldt Bancorp's net loan portfolio.  The concentration in the construction
loan portfolio has been on owner-occupied single family construction loans.

        Humboldt  Bancorp's  owner-occupied  single  family  construction  loans
typically have a maturity of up to nine months and are secured by deeds of trust
and usually do not exceed 80% of the appraised value of the home to be built.

         Loans to developers  for the purpose of acquiring  unimproved  land and
developing  such land into improved  1-to-4  residential  lots  typically have a
maturity  of 12 to 24  months;  have a  floating  rate tied to the  prime  rate;
usually do not exceed 75% of the appraised value; are secured by a first deed of
trust and  requires  the  borrower or its  principals  personally  to  guarantee
repayment  of the loan.  To also  reduce  the  risks  inherent  in  construction
lending,   Humboldt  Bancorp  limits  the  number  of  properties  that  can  be
constructed on a "speculative" or unsold basis by a builder at any one time to 2
to 4 houses.

<PAGE>11

        Commercial  construction  loans are  underwritten  using  the  actual or
estimated  cash flow the secured real  property  would provide to an investor in
the event of  default by the  borrower.  A debt  coverage  ratio of 1.25:1 and a
maximum loan to value of 70% is required in most cases.

        Real Estate - Owner-Occupied, Single-Family Residential

        Humboldt   Bancorp  also   originates   owner-occupied,   single-family,
residential real estate loans in its market area. At December 31, 1999 and 1998,
Humboldt Bancorp had outstanding owner-occupied, single-family, residential real
estate loans  totaling  $45.2 and $35.2  million.  Humboldt  Bancorp  originates
fixed-rate  mortgage  loans  and  adjustable-rate  residential  mortgage  loans.
Fixed-rate  mortgages  are  at  competitive  rates  and  adjustable-rate   loans
currently  offered by Humboldt  Bancorp have  interest  rates which adjust every
one, three or five years from the closing date of the loan or on an annual basis
commencing  after an initial  fixed-rate  period of one,  three or five years in
accordance with a designated index, plus a stipulated  margin.  Humboldt Bancorp
originates residential mortgage loans with loan-to-value ratios of up to 95%. On
any  mortgage  loan  exceeding  an  80%  loan-to-value  ratio  at  the  time  of
origination, however, Humboldt Bancorp requires private mortgage insurance in an
amount  intended to reduce Humboldt  Bancorp's  exposure to 80% of the appraised
value of the underlying collateral. Also, at December 31, 1999, Humboldt Bancorp
had   approximately   $15.7  million  in  home  equity  line  of  credit  loans,
representing approximately 6.9% of its gross loan portfolio.  Humboldt Bancorp's
home equity  lines of credit have  adjustable  interest  rates tied to the prime
interest rate plus a margin.

        Generally,  Humboldt  Bancorp sells its  owner-occupied,  single-family,
residential fixed-rate loans to institutional investors in the secondary market,
but retains the  servicing  of such loans.  There were $2.1  million real estate
loans pending sale at December 31, 1999.

        Real Estate - Commercial and Agricultural

        In order to  enhance  the  yield on and  decrease  the  average  term to
maturity of its assets,  Humboldt Bancorp originates  permanent loans secured by
commercial real estate. Humboldt Bancorp's commercial real estate loan portfolio
includes loans secured by small  apartment  buildings,  strip shopping  centers,
small office buildings,  farms and other business properties,  generally located
within  Humboldt  Bancorp's  primary  market area.  Real estate  commercial  and
agricultural loans are secured by both commercial and single-family property. At
December 31, 1999 and 1998, Humboldt Bancorp had outstanding real estate secured
commercial and agricultural loans totaling $99.1 million and $80.2 million.

        Business Loans

        Humboldt  Bancorp's  commercial  loans  consist of (i) loans  secured by
commercial  real  estate and (ii)  business  loans which are not secured by real
estate or if  secured by real  estate,  the  principal  source of  repayment  is
expected to be business  income.  For a discussion of Humboldt  Bancorp's  loans
secured by commercial  real estate lending see " -- Real Estate - Commercial and
Agricultural." Business loans include revolving lines of credit, working capital
loans,  equipment  financing,  letters of credit  and  inventory  financing.  At
December 31, 1999 and 1998,  Humboldt  Bancorp had business loans totaling $39.3
million and $34.0 million,  representing  17.5% and 18.3% of Humboldt  Bancorp's
net loan portfolio.

<PAGE>12

         Typically,  business loans are floating rate  obligations  and are made
for terms of five years or less,  depending  on the  purpose of the loan and the
collateral.  No single business  customer  accounted for more than 2.5% of total
net loans at December 31, 1999.

        Lease Financing Loans

        Humboldt  Bancorp  makes lease  financing  loans to finance  credit card
swipe  machines and other small ticket  leases.  The dollar amount of each lease
usually ranges from under $2,000 to $5,000 and the term is  approximately  three
to five years. At December 31, 1999 and 1998,  Humboldt  Bancorp had outstanding
lease  financing  loans totaling $17.2 and $9.9 million,  representing  7.6% and
5.3% of Humboldt Bancorp's net loan portfolio.

        Credit Card and Related Service

        Humboldt   Bank   offers  credit card accounts through its participation
as  a  principal member of Visa.  Management believes that providing credit card
services to its customers helps Humboldt Bank remain  competitive by offering an
additional  service.  Currently  Humboldt  Bank does not actively solicit credit
card  business  beyond  its  customer  base and  market  area.  At  December 31,
1999 and 1998, credit card loans totaled $3.5 and $5.7 million, or 1.6% and 3.1%
of Humboldt Bancorp's net loan portfolio.

        Consumer Loans

        The consumer loans  originated by Humboldt  Bancorp  include  automobile
loans  and  miscellaneous  other  consumer  loans,  including  unsecured  loans.
Consumer  lending affords Humboldt Bancorp the opportunity to earn yields higher
than those obtainable on single-family residential lending. At December 31, 1999
and 1998,  consumer  loans  totaled  $1.9 and $2.1  million,  or .8% and 1.1% of
Humboldt Bancorp's net loan portfolio.

        Other Loans

        At December 31, 1999 and 1998,  Humboldt  Bancorp had outstanding  other
loans  totaling  $1.2 million and $2.1 million.  These loans  consist  mainly of
overdrafts of less than 30 days' duration and state and political loans.

        Loan Servicing

        Humboldt  Bank sells the  majority of its  mortgage  and Small  Business
Administration loans that it originates to institutional investors.  However, it
retains the  servicing  on these loans in order to  generate  ongoing  revenues.
Humboldt Bank's  servicing  portfolio in which it has sold ownership but retains
the  servicing  was $163.7 and $144.5  million at  December  31,  1999 and 1998,
respectively.

Savings and Deposit Activities

        Humboldt Bancorp offers customary  banking services  including  personal
and business checking,  savings accounts, time certificates of deposit, IRA, and
Keogh accounts. Most of Humboldt Bancorp's deposits are obtained from commercial
businesses,  professionals,  and  individuals  with high income or net worth. In
addition,  Merchant Bankcard reserves are held primarily in non-interest bearing
accounts.

<PAGE>13

        The  following  table sets forth  certain  information  with  respect to
Humboldt  Bancorp's savings and deposit  activities as of December 31, 1998, and
1999.

<TABLE>
<CAPTION>



(Dollars in Thousands)                              December 31, 1998       December 31, 1999
                                                    -----------------       -----------------
                                                  Number of    Average     Number of   Average
                                                   Accounts    Balance      Accounts   Balance
                                                  ---------   --------     ---------  --------
<S>                                                 <C>       <C>            <C>      <C>
Demand deposit accounts                             11,973    $ 10,022       15,603   $  8,993
Savings and money market                            17,508       2,795       16,461      4,027
Time certificates in excess of $100,000                252     180,803          420    162,049
Time certificates less than $100,000                 3,566      19,483        5,422     19,175
                                                    ------    --------       ------   --------
        Totals                                      33,399    $  8,528       37,906   $  9,989
                                                    ======    ========       ======   ========

</TABLE>

        Humboldt  Bancorp has not obtained any deposits  through deposit brokers
and has no present intention of using brokered deposits as a source of funding.

Merchant Bankcard

        In 1993, Humboldt Bank established a merchant draft processing operation
("Merchant Bankcard").  Since that time the operation has grown steadily both in
volume and scope of activities.  In general,  Merchant Bankcard services involve
collecting  funds for, and  crediting  the accounts of,  merchants  for sales of
merchandise  and  services  to credit and debit  card  customers.  The  Merchant
Bankcard department specializes in providing processing for first time merchants
and small-to  medium-sized  merchants in the retail,  telephone,  mail order and
Internet  commerce  industries.  While these  merchants  vary in size, a typical
merchant customer generates  approximately  $40,000 in annual credit card charge
volume.  Humboldt Bank  believes  that there is a market for providing  Merchant
Bankcard  services to these merchants that are often overlooked by larger banks.
For the year ended December 31, 1999, no one merchant accounted for more than 2%
of Merchant  Bankcard's total gross processing volume. At December 31, 1999, the
Merchant  Bankcard  department  provided  processing  services to  approximately
68,000 merchants.

        The transaction  processing  industry provides merchants with credit and
debit card processing  services.  The industry has grown rapidly in recent years
as a result of wider merchant acceptance and rapid technological advances within
the bankcard industry.

        Humboldt Bank markets its Merchant Bankcard services through independent
service and marketing  organizations  ("ISO"s).  In most cases,  the ISO solicit
merchant  accounts  and  perform  the service  and  collections  function  while
Humboldt Bank provides the accounting and credit function.  For these functions,
Humboldt Bank receives an average  processing fee of approximately  0.15%. As of
December  31,  1999,  five ISOs  engaged by  Humboldt  Bank  represented  62,646
merchant accounts. Further, these five ISOs represented $2.8 billion or 93.0% of
total  Merchant  Bankcard  debit and credit sales  processed  for the year ended
December 31, 1999.  These five contracts expire over the years 2000, 2001, 2002,
and 2004.

        In 1997,  Humboldt  Bank began an  additional  unit within the  Merchant
Bankcard  department where all servicing  aspects of the  relationship  with the
merchant are performed by Humboldt Bank,  although Humboldt Bank still relies on
ISOs for  solicitation of merchants.  Humboldt Bank  categorizes  these types of

<PAGE>14

accounts  as  proprietary  accounts   ("Proprietary").   For  these  proprietary
accounts,  Humboldt  Bank is able to retain  more  income  from the  service and
processing  fees paid than when an ISO is involved.  For example,  Humboldt Bank
receives a service fee of approximately  4% of the gross  processing  volume for
proprietary accounts. For the year ended December 31, 1999, Proprietary accounts
represented  $215.8  million of total  Merchant  Bankcard gross volume and 5,641
merchant  accounts at period end. The Proprietary  accounts  segment of Humboldt
Bank's merchant  processing  portfolio is growing much more rapidly than the ISO
segment.  For example, for the year ended December 31, 1999 net revenues for the
Proprietary  account  segment have grown 204.6% relative to the same time period
in 1998, while net revenues for the ISO segment have grown 12.6% relative to the
same time period in 1998.

        Humboldt  Bank  intends to  continue to expand the  Proprietary  account
segment of its  business.  The rapid  acceptance  of the Internet as a method to
transact commerce has led to an increase in the number of smaller Internet-based
merchants.  Humboldt  Bank believes its  processing  services are well suited to
these  lower  volume  merchants.   In  order  to  attract  these  Internet-based
merchants, as well as other merchants, who have access to the Internet, Humboldt
Bank  has  hired  an  individual  with  extensive   Internet-related   marketing
experience  to lead its efforts in this arena.  In addition,  Humboldt  Bank has
entered  into  several key  relationships  with web site  providers  and gateway
services  that cater to  business  services  for  merchants  for the  purpose of
advertising  Humboldt Bank's merchant bankcard services.  In addition,  Humboldt
Bank  accepts  applications  for  merchant  processing  services at its Merchant
Bankcard web site, www.merchant.humboldtbank.com.

        Many  of  the  merchants   processing   through  the  Merchant  Bankcard
department accept  consumers' credit card numbers over the telephone.  There are
no signed  drafts  and the  entire  process  is  handled  electronically.  Since
consumers find these transactions easier to dispute than transactions  involving
signed drafts,  the charge-back  rates for services  provided over the telephone
and through the  Internet are  generally  higher.  Further,  because most of the
merchants are located outside the Humboldt-Eureka, California area, they require
more Humboldt Bank personnel to follow and monitor their accounts. Humboldt Bank
views its risk  management  and fraud  avoidance  practices  as  integral to its
operations and overall success because of Humboldt  Bank's  potential  liability
for  merchant  fraud,  charge backs and other  losses.  While the first time and
small to medium sized  merchants may be potentially  lucrative to Humboldt Bank,
these  accounts  are  perceived  as high risk  because  of the lack of  business
experience and higher monitoring  costs. For ISO accounts,  risk is mitigated by
requiring  merchant  reserves  and by  ISO  reserves  and  guarantees.  For  the
Proprietary  account segment,  risk management and fraud control occur initially
at the application stage when merchant applications are reviewed against certain
criteria to determine acceptance or denial. Furthermore, Humboldt Bank addresses
these risks by actively monitoring all merchants on a daily basis,  employing an
aggressive  fraud control team,  requiring  personal  guarantees  for nearly all
merchants and holding reserve deposits for certain merchants. These deposits are
primarily non-interest bearing and totaled $54.1 million at December 31, 1999.

        In the event a consumer is dissatisfied with the merchandise or service,
in general,  a merchant must accept a charge-back  for a period of 120 days. The
merchant's  checking account is debited with the charge-back if sufficient funds
exist;  otherwise,  the  merchant's  reserve funds are debited.  If a merchant's
reserves  are  insufficient  to fund  the  charge-back  and an ISO is  involved,
Humboldt Bank looks to the  applicable and available  guarantee,  if any, of the
ISO. If the  merchant's  reserve is exhausted  and either (i) an ISO is involved
but no  guarantee  is  applicable  or  available,  or (ii)  no ISO is  involved,
Humboldt Bank uses its internal reserves to fund the charge-back.

<PAGE>15

        A  summary  of the  Merchant  Bankcard  Department's  merchant  bankcard
activities  for the years  ended  December  31,  1997 1998 and 1999 is set forth
below:

                                          Year Ended December 31,
                               -------------------------------------------
                                  1997             1998            1999
                               ----------       ----------      ----------
                            (Dollars in thousands except for Number of Accounts)

Number of Accounts:
  ISO                              32,694           59,595          62,646
  Proprietary                         412            2,754           5,641
                               ----------       ----------      ----------
    Total                          33,106           62,349          68,287
                               ==========       ==========      ==========
Gross Processing Volume:
  ISO                          $1,419,355       $2,100,500      $2,695,037
  Proprietary                       8,645           71,500         215,780
                               ----------       ----------      ----------
    Total                      $1,428,000       $2,172,000      $2,910,817
                               ==========       ==========      ==========

Net Processing Revenue:
  ISO                          $    3,229       $    3,026      $    3,768
  Proprietary                           9              178           2,739
                               ----------       ----------      ----------
    Total                      $    3,238       $    3,204      $    6,507
                               ==========       ==========      ==========

        A summary of the Merchant Bankcard  Department's  reserves for the years
ended December 31, 1997, 1998 and 1999, is set forth below:

                                          Year Ended December 31,
                               -------------------------------------------
                                  1997             1998            1999
                               ----------       ----------      ----------
                                           (Dollars in thousands)

Merchant's Reserves:
  ISO                          $   32,957       $   45,088      $   47,587
  Proprietary                          82            1,881           6,566
                               ----------       ----------      ----------
    Total                      $   33,039       $   46,969      $   54,153
                               ==========       ==========      ==========
Internal Reserves:
  ISO                          $      680       $      920      $    1,030
  Proprietary                           3               34             514
                               ----------       ----------      ----------
    Total                      $      683       $      954      $    1,544
                               ==========       ==========      ==========
<PAGE>16

        A summary of the  Merchant  Bankcard  Department's  losses for the years
ended  December 31, 1997,  1998 and 1999, in connection  with merchant  bankcard
services  involving an ISO, and for losses in  connection  with its own merchant
bankcard services when an ISO was not involved, is set forth below:

                                       For Years Ended December 31,
                               -------------------------------------------
                                  1997             1998            1999
                               ----------       ----------      ----------

ISO Servicing Loss             $   14,682       $        -      $        -
Proprietary Loss               $        -       $   17,829      $  127,049

        Merchant  bankcard  processing  services are highly  regulated by credit
card  associations  such as VISA.  In order to  participate  in the credit  card
programs, Humboldt Bank must comply with the credit card association's rules and
regulations  that may  change  from time to time.  During  November  1999,  VISA
adopted  several rule changes to reduce  risks in  high-risk  merchant  bankcard
programs  and these  rule  changes  affect  Humboldt  Bank's  Merchant  Bankcard
business.  These changes include a requirement,  enacted in December 1999, which
requires a processor's  reported fraud ratios be no greater than three times the
national  average.  At October 31, 1999 (the most recent period  available  from
VISA) Humboldt Bank's overall fraud ratio was below the VISA  requirement.  Only
one of Humboldt  Bank's ISO portfolios is above this  requirement,  and Humboldt
Bank expects the entire portfolio to maintain compliance with this requirement.

        Other  VISA  changes   announced  in  November  of  1999   included  the
requirement that total  processing  volume in certain  high-risk  categories (as
defined by VISA) be less than 20% of total processing  volume.  At June 30, 1999
(the most recent  information  available from VISA)  Humboldt  Bank's total VISA
transactions within these certain high-risk  categories were 15.7% of VISA total
processing  volume.  Although  these  merchants  are  categorized  as high-risk,
Humboldt Bank has taken  precautions such as requiring  higher  deposits,  daily
monitoring and aggressive fraud control,  and to date has not seen extraordinary
losses in these categories.

        Other changes VISA announced in November 1999 include a requirement that
weekly  VISA  volumes  be less  than  20% of an  institution's  tangible  equity
capital,  and a requirement  that  aggregate  charge-backs  for the previous six
months be less than 5% of the institution's tangible equity capital. At June 30,
1999, (the most recent  information  available from VISA) Humboldt Bank's weekly
VISA volume was 162% of tangible equity capital, and aggregate  charge-backs for
the previous six months were 54% of tangible equity capital.

        Merchant Bankcard participants,  such as Humboldt Bank, must comply with
these new VISA rules by filing a compliance plan with VISA by February 12, 2000.
At this time,  Humboldt  Bank does not believe  that it will be able to submit a
plan  that is in full  compliance  with the  VISA  requirements.  Humboldt  Bank
intends to seek a waiver of these requirements from VISA.  However,  should VISA
not grant  Humboldt  Bank a waiver,  Humboldt  Bank would need to  significantly
restructure  the Merchant  Bankcard  Department,  which would  adversely  affect
Merchant Bankcard revenues.  Initially,  Humboldt Bank would focus on the higher
margin processing of its Proprietary portfolio. In addition, Humboldt Bank could
form a consortium  of  financial  institutions  in order to meet Visa's  capital
requirement and continue to process for the higher volume ISOs.

<PAGE>17

ATM Funding

        In 1996,  Humboldt  Bank  began its  automated  teller  machine  ("ATM")
funding  activities  by sponsoring  several  non-bank  companies  that place and
service  ATMs in various  public  places such as  restaurants,  stores,  and gas
stations. ATM networks such as Star, Plus and Cirrus require a placement company
to be sponsored by a chartered  financial  institution.  Humboldt  Bank sponsors
these companies,  and provides cash for their ATMs. Humboldt Bank contracts with
bonded money carriers and correspondent  vault centers  throughout the nation to
provide a ready amount of cash when these placement companies require.  Humboldt
Bank earns a fee for each sponsored transaction and a fee for the cash advanced.

        For the years ended  December 31, 1999,  1998 and 1997,  ATM funding was
$11.5  million,  $13.9  million  and $10.2  million,  respectively.  Losses that
related to the ATM funding  activities  for the years ended  December  31, 1999,
1998 and 1997 were $0, $3,340 and $0, respectively.

Capitol Valley Bank

        In March  1999,  Humboldt  Bancorp  contributed  capital  totaling  $4.5
million  to  form  Capitol  Valley  Bank.  Capitol  Valley  Bank is  located  in
Roseville,  California,  and opened for business March 3, 1999. Humboldt Bancorp
believes  that  the   Sacramento-Roseville,   California  market  represents  an
attractive    location   to   do   business   for   a   community    bank.   The
Sacramento-Roseville   region's   infrastructure   contains  a  major   airport,
deep-water port,  transcontinental  railroad,  and an interstate freeway system.
Roseville is located  approximately  20 miles northeast of downtown  Sacramento.
The city of  Roseville  is an important  link along the  Interstate  80 corridor
linking Sacramento and Auburn, California, and Reno, Nevada. Capitol Valley Bank
will focus primarily on products and services for individuals, professionals and
small and middle-size businesses.

        In September 1999, Humboldt Bancorp entered into an agreement to acquire
all the outstanding  shares of Silverado Merger  Corporation which was Silverado
Bank, a bank in  organization,  which had yet to raise the necessary  capital to
open as a commercial banking institution,  for 49,502 shares of Humboldt Bancorp
common  stock and warrants to purchase up to 99,000  shares of Humboldt  Bancorp
common  stock at $10.91 per share.  In the event  Capitol  Valley  Bank fails to
achieve certain  business  objectives such as developing new business  accounts,
(i) Humboldt  Bancorp has the right to  repurchase  the 49,502  shares of common
stock for $0.91 each,  and (ii) the warrants to purchase up to 99,000  shares of
common  stock  for  $10.91  per  share  cannot  be  exercised.  As  part  of the
acquisition, Capitol Valley Bank hired Silverado Merger Corporation's president,
and entered into  non-competition  agreements with the shareholders of Silverado
Merger  Corporation   prohibiting  them  from  participating  in  any  financial
institution  within 30 miles of Capitol  Valley Bank until December 31, 2002. In
addition,  Capitol Valley Bank's board was expanded to include three to five new
directors  consisting  of  some  of the  prior  directors  of  Silverado  Merger
Corporation.  Finally, as part of the acquisition  agreement,  some shareholders
and  supporters  of  Silverado  Merger  Corporation  purchased  $1.6  million of
Humboldt  Bancorp's  restricted  common stock at $10.91 per share  pursuant to a
private placement.

        Silverado  Merger  Corporation  has  no  operations,   and  all  of  its
obligations  and  liabilities  were  extinguished  prior to  consummation of the
merger.  Therefore,  Silverado  Merger  Corporation's  financial  statements are
immaterial.  Humboldt  Bancorp acquired  Silverado Merger  Corporation to expand
Capitol  Valley Bank's  presence in the  Sacramento-Roseville,  California  area
through business  associates and contacts of the former directors and organizers
of Silverado Merger Corporation.

<PAGE>18

        As of December  31, 1999  Capitol  Valley Bank had total assets of $26.0
million, total loans of $15.5 million, and total deposits of $22.3 million.

Bancorp Financial Services

        During 1996,  Humboldt  Bank  entered  into a joint  venture with Tehama
Bank,  Red Bluff,  California,  to organize  and share  equally in a  subsidiary
leasing company,  Bancorp Financial  Services.  Bancorp  Financial  Services was
organized as a California  corporation  on November 25, 1996,  and Humboldt Bank
and Tehama Bank each contributed $2.0 million towards its  capitalization  as of
January 2, 1997.  Subsequently  during 1998,  Humboldt Bank and Tehama Bank each
contributed  their interests in Bancorp  Financial  Services to their respective
holding  companies,  Humboldt  Bancorp  and Tehama  Bancorp.  Bancorp  Financial
Services makes consumer  automobile loans and commercial  equipment  leases,  of
less than $100,000, to small businesses.

        In addition to making leases and loans,  Bancorp Financial Services buys
and services commercial  equipment lease contracts  throughout the United States
directly from lessors, brokers, finance companies, banks and thrifts nationwide.
Bancorp Financial Services also buys and services consumer automobile  contracts
primarily  in Northern  California.  While it  maintains  its own  portfolio  of
contracts,  the  majority  of  acquired  leases  are  sold  to its  wholly-owned
subsidiary,  BFS Funding Corporation,  which packages the leases as asset-backed
securities for placement in the public market on a non-recourse  basis.  Bancorp
Financial  Services  retains  the  servicing  and  management  of all  leases it
acquires  regardless  of their  subsequent  sale.  Likewise,  Bancorp  Financial
Services acquires consumer automobile contracts from dealers throughout Northern
California  and  similarly   repackages   and  sells  the  payment   streams  to
institutional  investors  in  the  financial  marketplace  while  retaining  the
servicing.  In addition to service fees,  Bancorp Financial  Services  generates
income through spreads on its lease portfolio,  loan portfolio,  gains on sales,
and ongoing fees and charges.

        Previously,  Humboldt  Bank  purchased  leases  from  Bancorp  Financial
Services.  It is not  anticipated  that Humboldt  Bank will acquire  leases from
Bancorp  Financial  Services  in the  future.  In  addition,  Humboldt  Bank has
extended credit to Bancorp Financial  Services.  See "Certain  Relationships and
Related Transactions."

        The Bancorp  Financial  Services  board of  directors  consists of seven
members including Bancorp Financial Services' Chief Executive Officer,  Kevin D.
Cochrane,  and three members  representing  each of Humboldt  Bancorp and Tehama
Bancorp.  Humboldt Bancorp has elected Theodore S. Mason,  Lawrence Francesconi,
and Gary L. Evans to the board of directors of Bancorp Financial Services.

        Humboldt  Bancorp  accounts  for its  investment  in  Bancorp  Financial
Services  using the equity method.  For the years ended December 31, 1999,  1998
and 1997,  Humboldt  Bancorp  recognized  revenue  of  $450,000,  $259,000,  and
$22,000, respectively.

Acquisition of California Federal Branches

        On August 27, 1999,  Humboldt  Bank  completed  the  acquisition  of two
branches  located at 959 Myrtle Avenue,  Eureka,  CA 95501,  and 607 South State
Street, Ukiah, CA 95482, from CalFed. Under the terms of the purchase agreement,
Humboldt Bank acquired all of the fixed assets  relating to CalFed's  Eureka and
Ukiah branch offices.  Humboldt Bank primarily  acquired the two CalFed branches
for access to their deposits.  The purchase price for the two branches was equal

<PAGE>19

to  approximately  3.25% of the aggregate  deposits  acquired by Humboldt  Bank.
Total deposits  acquired by Humboldt Bank were  approximately  $72.2 million and
loans acquired were approximately $0.1 million.

Human Resources

        At December 31, 1999, Humboldt Bancorp employed a total of 318 full-time
equivalent employees, consisting of 120 salaried persons and 198 hourly persons,
respectively.   A  collective  bargaining  group  represents  none  of  Humboldt
Bancorp's employees. Management considers its relations with its employees to be
excellent.

Competition

        Humboldt  Bancorp's primary market area consists of Humboldt and Trinity
counties  and nearby  communities  of adjacent  counties.  Humboldt  Bancorp has
recently  entered  into the Placer  county  market  with the  opening of Capitol
Valley Bank in Roseville, California.

        Humboldt Bancorp  actively  competes for all types of deposits and loans
with  other  banks and  financial  institutions  located  in its  service  area,
including  credit unions which are able to offset more  favorable  savings rates
and  loan  rates  due  primarily  to  favorable  tax  treatment.  In  California
generally,  major banks and local regional banks dominate the commercial banking
industry.  By virtue of their  larger  capital  bases,  such  institutions  have
substantially  greater lending limits than those of Humboldt Bancorp, as well as
more  locations,  more  products and  services,  greater  economies of scale and
greater ability to make  investments in technology for the delivery of financial
services.

        An independent  bank's principal  competitors for deposits and loans are
other banks,  particularly major banks,  savings and loan  associations,  credit
unions,  thrift and loans, mortgage brokerage companies and insurance companies.
Increased  deregulation  of financial  institutions  has increased  competition.
Other  institutions,  such  as  mutual  funds,  brokerage  houses,  credit  card
companies and even retail  establishments have offered new investment  vehicles,
such as  money-market  funds,  that also  compete with banks.  The  direction of
federal  legislation in recent years favors competition  between different types
of  financial  institutions  and  encourages  new  entrants  into the  financial
services market, and it is anticipated that this trend will continue.

        Humboldt Bancorp's strategy for meeting competition has been to maintain
a sound capital base and liquidity position, employ experienced management,  and
concentrate on particular  segments of the market,  particularly  businesses and
professionals, by offering customers a degree of personal attention that, in the
opinion of management,  is not generally  available  through Humboldt  Bancorp's
larger   competitors.   Humboldt  Bancorp  relies  upon  specialized   services,
responsive handling of customer needs, local promotional activity,  and personal
contacts by its officers,  directors and staff, compared with large multi-branch
banks that  compete  primarily on interest  rates and location of branches.  The
acquisition  of Capitol Thrift will increase  Humboldt  Bancorp's loan portfolio
and the  continuation of Capitol  Thrift's  industrial loan charter will provide
favorable  lending  terms so as to  assist  Humboldt  Bancorp  to  compete  with
institutions  for more loans.  No assurance can be given that  Humboldt  Bancorp
will be able to compete  successfully for more loans.  Also, no assurance can be
given that,  because of customer  loyalty,  available  products  and services or
other reasons,  customers in Humboldt Bancorp's branches will not withdraw their
business and establish a banking relationship with other competitors.

<PAGE>20

        Historically,  insurance  companies,  brokerage firms, credit unions and
other  non-bank  competitors  have less  regulation  than  banks and can be more
flexible in the  products  and  services  they  offer.  The  Financial  Services
Modernization  Act of 1999  eliminates  most of the  separations  between banks,
brokerage  firms and  insurance  companies by  permitting  securities  firms and
insurers  to buy banks and for banks to  underwrite  securities  and  insurance.
Generally  speaking,  the Act is likely to increase  competition  for  community
banks such as Humboldt  Bank,  Capitol Valley Bank and Capitol  Thrift,  but may
also cause consolidations and mergers with larger competitors and resources. The
Act may also increase cross-border consolidations and mergers.

ITEM 2 - DESCRIPTION OF PROPERTIES

        The following  table sets forth  information  about  Humboldt  Bancorp's
subsidiaries offices as of December 31, 1999.

<TABLE>
<CAPTION>


                                                                                   Occupied
Location                           Type of Office       Owned/Lease      Size        Since
------------------------------ ----------------------- --------------- --------- --------------

<S>                           <C>                     <C>              <C>        <C>
Humboldt Bank

701 Fifth Street, Eureka       Administrative/Main     Owned             19,800      1989
                               Branch

1063 G Street, Arcata          Branch                  Owned              4,660      1993

1360 Main Street, Fortuna      Branch                  Owned              5,770      1991

2095 Central Avenue,           Branch                  Owned              2,500      1993
McKinleyville

612 G Street, Eureka           Administrative          Owned             15,000      1994

358 Main Street, Loleta        Branch                  Owned              2,400      1995

39171 Highway 299,             Branch                  Owned              5,715      1995
Willow Creek

409 Main Street, Weaverville   Branch                  Owned              2,112      1995

605 K Street, Eureka           Administrative          Lease             10,000      1996

915 Redwood Drive,             Branch                  Lease              3,100      1997
Garberville

555 H Street, Eureka           Administrative          Lease              1,945      1997

710 Fifth Street, Eureka       Administrative          Lease              1,100      1997

539 G Street, Eureka           Administrative          Lease              1,000      1998

2830 G Street, Eureka          Administrative          Lease              1,000      1998

2851/2861 E Street, Eureka     Branch                  Purchase           2,500   1999 Owned
(Henderson Center)                                                                  (Under
                                                                                 Construction)

<PAGE>21

                                                                                   Occupied
Location                           Type of Office       Owned/Lease      Size        Since
------------------------------ ----------------------- --------------- --------- --------------

2440 Fifth Street, Eureka      Land for Humboldt       Owned             70,000      1999
                               Bancorp Plaza

607 South State Street, Ukiah  Branch                  Owned              4,500      1999

959 Myrtle Avenue, Eureka      Branch                  Lease              3,500      1999

1001 Searles Street, Eureka    Administrative          Lease              3,450      1999


Capitol Valley Bank

1601 Douglas Boulevard,        Main Branch             Lease              3,955      1998
Roseville

</TABLE>

        Rental  expense for all leases of premises for the years ended  December
31, 1999, 1998, and 1997, was $401,000,  $269,000,  and $128,000,  respectively.
Rental income from all properties  owned and leased for the years ended December
31, 1999, 1998, and 1997, was $302,000, $177,000, and $65,000, respectively.

ITEM 3 - LEGAL PROCEEDINGS

        On December  7, 1998,  the case of Freeman,  et al. v.  Citibank  (South
Dakota),  N.A.,  et al.,  Civil  Action No.  CV-98-RRA-3029-S,  was filed in the
United States District Court,  Northern District of Alabama,  Northern Division.
This case is a  purported  class  action  brought on behalf of Mr.  Freeman  and
others  similarly  situated (VISA credit  cardholders  issued by Citibank (South
Dakota),  hereinafter  "Citibank"),  against  Citibank  and  VISA  International
(hereinafter  "VISA") to (i) enjoin the  collection of debts charged to Citibank
VISA cards for gambling at Internet casino  websites;  (ii) have Internet casino
gambling declared unlawful;  and (iii) recover all payments including principal,
interest and penalties  received by Citibank and VISA related to such debts. Mr.
Freeman is alleging that Citibank and VISA were  facilitating,  participating in
and  profiting  from  gambling by allowing Mr.  Freeman to use his Citibank VISA
card to purchase  "e-cash" at a website owned and operated by a provider of such
"virtual"  commodity  (hereinafter the "Merchant  Provider"),  which he accessed
from an on-line  casino  operation.  Mr.  Freeman  proceeded to play the game of
blackjack  with his e-cash and lost $30.  The action  alleges  violation  of the
federal  Wire  Act  and  the  federal   Racketeering   Influenced   and  Corrupt
Organizations  Act ("RICO").  Mr. Freeman is seeking treble damages  pursuant to
RICO, punitive damages and attorney's fees, in addition to compensatory  damages
and declaratory  relief.  Citibank has pending a motion to compel arbitration in
the case; the plaintiff has moved to consolidate this action with others,  which
have been filed  against  VISA across the  country.  The court to date has heard
neither motion.

        Humboldt Bank is not a defendant in the Freeman case. However,  Humboldt
Bank provides merchant processing for the Merchant Provider used by Mr. Freeman,
and on April 21, 1999, Citibank sent a letter to Humboldt Bank seeking indemnity
for the Freeman action pursuant to VISA regulations.  Humboldt Bank and Citibank
have had  preliminary  discussions  regarding this matter,  but Humboldt Bank at
this time has neither  acknowledged  nor disputed the  applicability of the VISA

<PAGE>22

regulation  cited by Citibank.  The Freeman action is in its preliminary  stages
and the outcome at this time cannot be determined. A similar lawsuit in a United
States  District Court in Wisconsin  (not involving  Humboldt Bank insofar as is
known) was  recently  dismissed;  however,  that  decision is not binding on the
Freeman Court. Until the Freeman action is ultimately determined,  any potential
action against Humboldt Bank by Citibank would be premature.  In the event it is
ultimately  determined  that Humboldt  Bank is obligated to indemnify  Citibank,
Humboldt Bank intends to seek indemnity  against both the Merchant  Provider and
the company  which  through its  independent  marketing  efforts  presented  the
Merchant Provider's application for merchant services to Humboldt Bank.

     On January  20,  1998,  Shinergy  Diversified,  Inc.  filed suit  (Shinergy
Diversified,  Inc. et al. v. Electronic Card Systems,  Inc., Humboldt Bank, Inc.
et al., Los Angeles  Superior  Court Case No. BC 184 522) against  Humboldt Bank
and  creditcards.com,  formerly  known as  Electronic  Card  Systems,  Inc.  The
complaint  alleges  fraud,  conversion  and  intentional  infliction  of  mental
distress.  Shinergy  alleged that its credit card  processing by Electronic Card
Systems, Inc. and Humboldt Bank was not carried out as represented. In addition,
Shinergy  alleged  that a  document  that  would have  allowed  Electronic  Card
Systems,  Inc. and Humboldt  Bank to do certain  things in  connection  with the
credit card processing for Shinergy was forged. The complaint seeks lost profits
of approximately $200,000 plus other damages, damages for emotional distress and
punitive damages.

     We are also involved in other litigation;  the outcome of which, we believe
will not have a material effect on our operations or financial condition.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None applicable.

                                     PART II

ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our common  stock has been  approved  for  listing  on the NASDAQ  National
Market under the symbol HBEK and Humboldt  Bancorp  intends to begin trading its
common  stock on the  NASDAQ  National  Market  upon  completion  of its  public
offering.  Currently,  Humboldt  Bancorp's  common  stock is  quoted  on the OTC
Bulletin Board as disclosed below.

     We have been  informed  by market  makers of the high and low bid price for
our common  stock  during the last two fiscal years as shown in the table below.
No  assurances  can be  given;  however,  that  these  high  and low bid  prices
reflected  the actual  market value of our common  stock.  The high and low bids
have been  adjusted  to give  effect  to all  stock  dividends  and  splits.  In
addition,  the prices  indicated  reflect  inter-dealer  prices,  without retail
mark-up, mark down or commission and may not represent actual transactions.

                             NUMBER OF
YEAR        QUARTER           TRADES      HIGH BID            LOW BID

1998     First Quarter          15         $11.45              $10.20
         Second Quarter         18         $11.80              $ 9.10
         Third Quarter           7         $11.35              $ 9.80
         Fourth Quarter         16         $11.25              $ 8.75

<PAGE>23


1999     First Quarter          16         $10.80              $ 8.75
         Second Quarter         19         $11.60              $ 8.75
         Third Quarter          29         $14.65              $10.90
         Fourth Quarter         31         $14.90              $11.35

        As of  December  31,  1999,  our  shares  of common  stock  were held by
approximately  680  shareholders,  not  including  those held in street  name by
several brokerage firms. As of December 31, 1999, a total of 1,053,790 shares of
our common  stock  underlie  outstanding  options  and  warrants  as adjusted to
reflect a 10% stock dividend payable on February 7, 2000.

                                 DIVIDEND POLICY

        We have never  declared or paid any cash  dividends  on our common stock
and we do not  intend to pay cash  dividends  in the near  future.  We intend to
retain all earnings to support our planned growth.  In addition,  California and
federal  banking  laws and  regulations  place  restrictions  on the  payment of
dividends by a bank to its  shareholders.  Any future  dividends  will be at the
discretion of our board of directors,  subject to a number of factors, including
our results of operations,  general business conditions,  capital  requirements,
general financial  condition,  and other factors deemed relevant by our board of
directors. Traditionally, we have declared stock dividends. We distributed a 10%
stock dividend on the common stock on May 30, 1997,  1998, and an additional 10%
stock dividend will be  distributed on February 7, 2000. In addition,  effective
June 30, 1999, we completed a 5-for-2 stock split.

ITEM 6 - SELECTED FINANCIAL DATA

        The  following  table sets forth  selected  financial  data of  Humboldt
Bancorp (on a  consolidated  basis) as of and for the years ended  December  31,
1995,  1996,  1997  1998,  and  1999,  and  should be read in  conjunction  with
Management's Discussion and Analysis and with the financial statements presented
elsewhere.

<TABLE>
<CAPTION>


(Dollars In Thousands except per share data)

                                                                   As Of And For The
                                                               Years Ended December 31,
                                       -----------------------------------------------------------------------------

                                          1995 (1)        1996           1997             1998               1999
                                       ----------      ----------     ----------       ----------         ----------
<S>                                   <C>            <C>            <C>              <C>                 <C>
Income Statement Data
  Interest income                      $   15,241      $   16,562     $   20,053       $   23,504         $   25,240
  Interest expense                          5,244           5,549          7,024            7,742              8,345
                                       ----------      ----------     ----------       ----------         ----------
    Net interest income                     9,997          11,013         13,029           15,762             16,895
  Provision for loan and
    lease losses                              792             533            773            2,124              1,046
                                       ----------      ----------     ----------       ----------         ----------
  Net interest income after
    provision for loan and
    losses                                  9,205          10,480         12,256           13,638             15,849
  Non-interest income                       3,509           5,747          8,109           12,473             19,523
  Non-interest expense                      9,149          11,325         15,496           19,578             28,494
    Income before provision for
      income taxes                          3,565           4,902          4,869            6,533              6,878
  Provision for income taxes                1,363           1,926          1,611            2,517              2,271
                                       ----------      ----------     ----------       ----------         ----------
    Net income                         $    2,202      $    2,976     $    3,258       $    4,016         $    4,607
                                       ==========      ==========     ==========       ==========         ==========

<PAGE>24

(Dollars In Thousands except per share data)

                                                                   As Of And For The
                                                               Years Ended December 31,
                                       -----------------------------------------------------------------------------

                                          1995 (1)        1996           1997             1998               1999
                                       ----------      ----------     ----------       ----------         ----------
Balance Sheet Data
  Investment securities                $   53,875      $   39,933     $   80,180       $   77,802         $  115,360
  Total net loans and leases           $  115,117      $  142,824     $  157,512       $  186,038         $  225,122
  Total assets                         $  193,912      $  214,738     $  284,087       $  319,975         $  423,649
  Total deposits                       $  174,526      $  192,576     $  255,186       $  283,967         $  378,630
  Total shareholders' equity           $   16,934      $   19,600     $   23,554       $   27,848         $   34,139

Per Share Data (2)
  Net income
    Basic                              $     0.48      $     0.64     $     0.69       $     0.82         $     0.91
    Diluted                            $     0.45      $     0.58     $     0.61       $     0.75         $     0.83
  Book value                           $     3.65      $     4.18     $     5.94       $     5.66         $     6.56
  Weighted average shares outstanding
    Basic                               4,624,000       4,637,000      4,756,000        4,876,000          5,049,000
    Diluted                             4,913,000       5,135,000      5,325,000        5,379,000          5,557,000
    Actual                              4,636,000       4,694,000      4,769,000        4,917,000          5,204,000

Selected Ratios (3)
  Return on average assets                   1.22%           1.48%          1.30%            1.32%              1.27%

  Return on average equity                  14.57%          16.96%         14.50%           16.02%             15.10%

  Total loans to deposits                   65.96%          74.17%         61.72%           65.51%             59.46%

  Net interest margin                        6.07%           5.98%          5.85%            5.94%              5.39%

  Efficiency ratio (3)                      67.74%          67.57%         73.31%           69.34%             78.24%

Asset Quality Ratios
  Reserve for loan and lease losses to:
    Ending total loans and leases            1.60%           1.48%          1.48%            1.62%              1.47%

    Non-performing assets                  195.60%         351.80%        128.02%          420.22%            286.91%

  Non-performing assets to
    ending total assets                      0.49%           0.28%          0.65%            0.23%              0.28%

  Net loan and lease charge-offs
    (recoveries) to average
    loans and leases                         0.25%           0.19%          0.36%            0.82%              0.35%

  Reserve/non-performing loans             195.60%         569.23%        139.14%          553.44%            319.73%

Capital Ratios
  Average stockholders' equity
    to average assets                        8.40%           8.85%          8.48%            8.35%              8.42%

  Tier 1 capital ratio (4)                  11.37%          11.35%         10.79%           10.41%             10.90%

  Total risk-based capital ratio (5)        12.62%          12.60%         12.02%           11.66%             12.07%

  Leverage ratio (6)                         7.64%           8.53%          7.38%            7.23%              7.50%

Other
  Average assets                       $  180,584      $  201,780     $  251,095       $  304,515         $  362,427
  Average earning assets               $  164,844      $  183,930     $  222,555       $  265,355         $  314,038
  Number of branch offices (7)                  7               8              9                8                 11
  Number of full-time equiv. employees        130             175            209              250                318

</TABLE>

<PAGE>25

(1)  Represents financial data for Humboldt Bank. Humboldt Bancorp completed its
     reorganization as a holding company on January 2, 1996.

(2)  Per share data reflects retroactive  restatement for 10% stock dividends in
     1994, 1995,  1996, 1997, 1998, and 2000, and a five-for-two  stock split in
     1999.  The per share data does not  reflect  the 49,502  shares of Humboldt
     Bancorp restricted common stock because of the contingencies on the stock.

(3)  Efficiency ratio is non-interest expense divided by the sum of net interest
     income plus non-interest income.

(4)  Tier I capital divided by risk-weighted assets.

(5)  Total capital divided by risk-weighted assets.

(6)  Tier I capital divided by average assets.

(7)  Including head office.


ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS


                          HUMBOLDT BANCORP MANAGEMENT'S
                 DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATION

        The  following   management's   discussion  and  analysis  of  financial
condition and results of operations  contains  forward-looking  statements  that
involve risks and uncertainties. Our actual results could differ materially from
those anticipated in these forward-looking statements as a result of the factors
described in the section entitled "Risk Factors" and elsewhere in this document.

General

        Humboldt  Bancorp's  results of operations are primarily  dependent upon
the results of  operations  of Humboldt  Bank and Capitol  Valley Bank and, to a
lesser extent, Bancorp Financial Services. Humboldt Bank and Capitol Valley Bank
conduct general commercial banking business, such as gathering deposits from the
general  public  and  applying  those  funds to the  origination  of  loans  for
commercial,  consumer and residential purposes. Bancorp Financial Services makes
consumer automobile loans and commercial  equipment leases of less than $100,000
to small businesses.  Reference to Humboldt Bancorp in this section  constitutes
reference to Humboldt Bank and Capitol  Valley Bank.  Reference to Humboldt Bank
is a reference to just Humboldt  Bank and reference to Capitol  Valley Bank is a
reference to just Capitol Valley Bank.

        Humboldt Bancorp's  profitability  depends on net interest income, which
is the  difference  between (i) interest  income  generated by  interest-earning
assets  (i.e.,  loans and  investments)  and (ii) interest  expense  incurred on
interest-bearing  liabilities (i.e.,  customer deposits and borrowed funds). Net
interest income is affected by the difference  ("interest rate spread")  between
rates of interest earned on  interest-earning  assets and rates of interest paid
on   interest-bearing   liabilities,   as  well  as  the  relative   amounts  of
interest-earning  assets  and  interest-bearing  liabilities.  If the  total  of
interest-earning  assets  approximates or exceeds the total of  interest-bearing
liabilities,  any  positive  interest  rate spread will  generate  net  interest
income.  Financial institutions have traditionally used interest rate spreads as
a measure of net interest income.  Another  indication of an  institution's  net

<PAGE>26


interest income is its "net yield on  interest-earning  assets" or "net interest
margin,"  which is net  interest  income  divided  by  average  interest-earning
assets.

        Because of the limited loan growth in the  Humboldt-Trinity,  California
area, a  substantial  part of our  revenues  are also derived from  non-interest
income. Non-interest income consists primarily of fees generated by the Merchant
Bankcard and Issuing Bankcard (Credit Card)  Departments and lease residuals and
rentals  generated  by the  Lease  Finance  Department.  During  the year  ended
December 31, 1994,  Humboldt Bank began to emphasize the growth in such fees and
other income.  For the years ended December 31, 1999,  1998, and 1997,  fees and
other income were $16.7 million,  $9.7 million, and $6.9 million,  respectively.
Of this growth,  most can be attributed  to Humboldt  Bank's  Merchant  Bankcard
processing  fees.  During 1999,  Humboldt  Bank  continued to reduce its Issuing
Bankcard  (Credit  Card)  activities.  This  planned  reduction  in credit  card
receivables  was  initiated  in early 1997 due to increased  competition  in all
credit card issuing markets and a noticeable  trend of increased  charge-offs in
connection  with credit  card  receivables.  The focus of the  Issuing  Bankcard
(Credit  Card)  Department  is now  issuance of credit  cards to  Humboldt  Bank
customers.

        Although Humboldt Bancorp intends to diversify its growth of traditional
banking  through the  establishment  of Capitol  Valley Bank and  acquisition of
Capitol  Thrift,  Humboldt  Bancorp  will  continue to emphasize  revenues  from
non-interest income sources.  For example,  during 1997 Humboldt Bancorp,  along
with Tehama  Bancorp,  formed  Bancorp  Financial  Services.  Bancorp  Financial
Services makes consumer  automobile loans and commercial  equipment  leases,  of
less  than  $100,000,  to  small  businesses.   Humboldt  Bank's  Lease  Finance
Department operations,  on the other hand, consist principally of the leasing of
point-of-sale   terminals,   printers  for  credit  card  vouchers  and  related
equipment.  Humboldt  Bancorp  accounts for its investment in Bancorp  Financial
Services using the equity method in which only Humboldt Bancorp's net investment
in Bancorp Financial Services is accounted for on Humboldt  Bancorp's  financial
statements rather than Bancorp Financial  Services'  financial  statements being
consolidated  with  Humboldt  Bancorp's  financial  statements.  Therefore,  the
following  discussion  does  not  include  a  detailed  description  of  Bancorp
Financial Services' operations.

        Humboldt Bancorp's profitability is also affected by such factors as the
level of non-interest expenses, the provision for loan losses, and the effective
tax rate.  Non-interest expenses consist of salaries and benefits,  fixed assets
(occupancy related expenses), and Merchant Bankcard expenses.

        Management's  discussion and analysis of earnings and related  financial
data are presented herein to assist investors in understanding  the consolidated
financial  condition and results of operations of Humboldt  Bancorp and Humboldt
Bank for the  fiscal  years  ended  December  31,  1999,  1998 and 1997,  and of
Humboldt  Bancorp,  Humboldt  Bank and  Capitol  Valley  Bank for the year ended
December  31,  1999.  This  discussion  should be read in  conjunction  with the
consolidated  financial  statements and related  footnotes  presented  elsewhere
herein.

Summary of Operations

        For the year ended  December 31, 1999,  net income was $4.6 million,  an
increase of 15.0% over net income of $4.0 million  earned during the same period
in 1998.  Diluted  earnings  per share were $0.83 and $0.75 for the years  ended
December 31, 1999, and 1998, respectively.  The return on average assets for the
years ended  December 31, 1999 and 1998, was 1.27% and 1.32%  respectively.  The
return on average  equity for the years ended  December  31, 1999 and 1998,  was
15.10% and 16.02%  respectively.  The  increase in  earnings  for the year ended
December 31, 1999,  versus the prior period in 1998 can be  attributed to growth
in earning assets,  fee income growth,  and increased  customer  activity in our
Merchant Bankcard product.

<PAGE>27

        Humboldt  Bancorp reported net income of $4.0 million for the year ended
December  31,  1998,  compared to $3.3  million for the year ended  December 31,
1997. The increase in net income is  attributable to an increase of $2.8 million
or 21.5% in net interest income and an increase in other non-interest  income of
$4.4 million or 54.3%.  These  increases were offset by an increase in provision
for loan losses of $1.3  million or 162.5%,  an  increase in other non  interest
expense of $4.1 million or 26.5% and an increase in  provision  for income taxes
of $.9 million or 56.2%.  The increase in net interest income is attributable to
the  substantial  increase  in earning  assets and a slight  increase in the net
interest yield. The increase in non-interest income is primarily attributable to
substantial  increases  in the Lease  Finance,  Merchant  Bankcard,  and Issuing
Bankcard (Credit Card)  Departments'  income and to increases in service charges
on  deposit  accounts.   The  increase  in  non-interest  expense  is  primarily
attributable  to  increases  in salaries  and  employee  benefits  and  Merchant
Bankcard expenses.  These increases can be attributed to the continued growth of
Humboldt Bank and Humboldt  Bancorp.  These  increases  were offset in part by a
decrease in Issuing Bankcard (Credit Card) Department expenses.  The increase in
provision for loan losses is attributable to an increase in loans  originated by
Humboldt Bank, and an increase in  charge-offs in the Issuing  Bankcard  (Credit
Card) Department and Lease Finance Department.

Results of Operations

        Net Interest Income

        Net interest  income  represents the excess of interest  income and loan
fees earned by Humboldt  Bancorp on its earning assets over the interest expense
paid on its interest bearing  liabilities and other borrowed money. Net interest
income as a percentage of average  interest-earning assets is referred to as net
interest  margin.  The levels of  interest-earning  assets and  interest-bearing
liabilities  as well as  changes  in  interest  rates  affect  the  level of net
interest  income.  During periods of rapidly changing  interest rates,  Humboldt
Bancorp's  earnings can be  significantly  affected  because interest rates on a
substantial amount of the earning assets are tied to prime and therefore tend to
change  immediately,  whereas  interest rates on liabilities  have a tendency to
change more slowly, and normally only upon the maturity of the liability.

<PAGE>28

Average Balances and Average Rates Earned and Paid

        The following table shows unaudited average balances and interest income
or interest  expense,  with the resulting  average yield or rates by category of
earning assets or interest-bearing liabilities.

<TABLE>
<CAPTION>

(Dollars in Thousands)
                                      Year Ended December 31, 1997    Year Ended December 31, 1998    Year Ended December 31, 1999
                                      ----------------------------- -------------------------------  ------------------------------
                                                            Average                       Average                          Average
                                                  Interest  Yields              Interest   Yields                Interest   Yields
(Unaudited)                            Average     Income     or     Average     Income      or      Average      Income      or
                                       Balance   or Expense  Rate    Balance   or Expense   Rate     Balance    or Expense   Rate
                                      ---------  ---------- ------  ---------  ----------  ------  ----------   ----------  ------
<S>                                <C>          <C>        <C>    <C>        <C>          <C>      <C>         <C>          <C>
Interest-earning assets:
  Loans and Leases                    $ 151,695  $   15,961  10.52% $ 175,173  $   18,762  10.71%  $  200,986   $  19,186    9.55%
  Investment securities:
    Taxable securities                   46,989       2,783   5.92     63,494       3,317   5.22       67,950       3,773    5.55
    Nontaxable securities (1)            10,396         569   5.47     13,682         739   5.40       16,292         875    5.37
    Interest-earning balances due
      From banks                          2,164         128   5.91      3,502         174   4.97        2,089          90    4.31
  Federal funds sold                     11,311         612   5.41      9,504         512   5.39       26,202       1,316    5.02
                                      ---------  ---------- ------  ---------  ----------  ------  ----------   ----------  ------
    Total interest-earning
      assets(2)                         222,555      20,053   9.01    265,355      23,504   8.86      313,519      25,240    8.05
Cash and due from banks                  12,679                        20,157                          26,168
Premises and equipment, net               5,860                         7,120                           8,745
Loan and lease loss allowance            (2,312)                       (2,626)                         (3,191)
Other assets                             12,313                        14,509                          17,186
                                      ---------                     ---------                      ----------
    Total assets                      $ 251,095                     $ 304,515                      $  362,427
                                      =========                     =========                      ==========
Interest-bearing liabilities:
  Interest-bearing checking and
    Savings accounts                  $  66,153       1,516   2.29% $  72,594       1,439   1.98%  $   79,955       1,423    1.78%
  Time deposit and IRA accounts         100,072       5,457   5.45    114,633       6,126   5.34      134,608       6,601    4.90
  Borrowed funds                            828          51   6.16      3,003         177   5.89        4,487         321    7.15
                                      ---------  ---------- ------  ---------  ----------  ------  ----------   ----------  ------
  Total interest-bearing liabilities    167,053       7,024   4.20    190,230       7,742   4.07      219,050       8,345    3.81
Non-interest-bearing deposits            59,050                        83,965                         106,829
Other liabilities                         3,694                         4,883                           6,030
                                      ---------                     ---------                      ----------
    Total liabilities                   229,797                       279,078                         331,909
Stockholders' equity                     21,298                        25,437                          30,518
                                      ---------                     ---------                      ----------
  Total liabilities and
    stockholders' equity              $ 251,095                     $ 304,515                      $  362,427
                                      =========                     =========                      ==========
Net interest income                              $   13,029                    $   15,762                       $  16,895
                                                 ==========                    ==========                       =========
Net interest spread                                           4.81%                         4.79%                            4.24%
                                                            ======                         ======                            =====
Average yield on average
  earning assets (1)                                          9.01%                         8.86%                            8.05%
                                                            ======                         ======                            =====
Interest expense to average
  earning assets                                              3.16%                         2.92%                            2.66%
                                                            ======                         ======                            =====
Net interest margin (3)                                       5.85%                         5.94%                            5.39%
                                                            ======                         ======                            =====

</TABLE>


(1)  Tax-exempt income has not been adjusted to its tax-equivalent basis.

(2)  Non-accrual loans are included in the average balance.

(3)  Net interest  margin is computed by dividing  net interest  income by total
     average earning assets.

<PAGE>29

Analysis of Changes in Interest Differential

        The following  table shows the  Unaudited  dollar amount of the increase
(decrease) in Humboldt  Bancorp's net interest income and expense and attributes
such dollar  amounts to changes in volume as well as changes in rates.  Rate and
volume  variances  have been  allocated  proportionally  between rate and volume
changes.

<TABLE>
<CAPTION>

                                        Year Ended                   Year Ended                    Year Ended
(Dollars in Thousands)             December 31, 1997              December 31, 1998            December 31, 1999
                                        over 1996                     over 1997                    over 1998
                               --------------------------    --------------------------    --------------------------
                               Increase (Decrease) Due To    Increase (Decrease) Due To   Increase (Decrease) Due To
                               --------------------------    --------------------------   ---------------------------
                                Volume    Rate     Total     Volume     Rate     Total    Volume     Rate      Total
                               -------   ------   -------   -------   -------   -------   -------  --------   -------
<S>                           <C>       <C>      <C>        <C>      <C>       <C>        <C>      <C>       <C>
Interest Income
Attributable To:
  Loans and Leases             $ 1,842   $ 346    $ 2,188   $ 2,451   $  350    $ 2,801   $ 2,465  $ (2,041)  $   424
  Securities                       976      10        986     1,220     (516)       704       387       205       592
  Balance due from banks            63      16         79        13       33         46       (61)      (23)      (84)
  Federal funds sold               213      25        238       (98)      (2)      (100)      838       (34)      804
                               -------   ------   -------   -------   ------    -------   -------  --------   -------
    Total increase (decrease)    3,094     397      3,491     3,586     (135)     3,451     3,629    (1,893)    1,736
                               -------   ------   -------   -------   ------    -------   -------  --------   -------
Interest Expense
Attributable To:
  Now and Super Now                 29      (2)        27        28      (11)        17        26       (42)      (16)
  Savings                           73     (29)        44        19        -         19        76        44       120
  Money Market                     114      87        201        88     (201)      (113)       19      (138)     (119)
  Time Deposits                  1,106      95      1,201       795     (126)       669     1,004      (530)      474
  Borrowed funds                     2       -          2       174      (48)       126       106        38       144
                               -------   ------   -------   -------   ------    -------   -------  --------   -------
    Total increase (decrease)    1,324     151      1,475     1,104     (386)       718     1,231      (628)      603
                               -------   ------   -------   -------   ------    -------   -------  --------   -------
Total Change in Net Interest     1,770     246      2,016     2,482      251      2,733     2,398    (1,265)    1,133
                               =======   =====    =======   =======   ======    =======   =======  ========  ========

</TABLE>

        Net interest  income for the year ended  December  31,  1999,  was $16.9
million,  an increase of $1.1  million  compared to $15.8  million in 1998.  The
increase in net interest  income is  attributable to an increase of $1.7 million
in income  earned  from  interest-earning  assets  offset by an increase of $0.6
million in expense from interest-bearing liabilities. Interest expense increased
7.8% to $8.3 million for the  year-ended  December  31,  1999,  compared to $7.7
million for the year-ended  December 31, 1998. The increase in interest  expense
was primarily a result of increased volume, partially offset by falling interest
rates.

        Total  interest-earning  assets  averaged  $313.5  million  at  year-end
December 31,  1999,  compared to $265.4  million at year-end  December 31, 1998.
Most of the increase was due to an increase in loans and federal funds sold with
a smaller increase in investment  securities being offset by a small decrease in
due from banks time. The average yield on  interest-earning  assets decreased to
8.1% at year-end  December  31, 1999  compared to 8.9% at year-end  December 31,
1998.

<PAGE>30

        Interest-bearing   liabilities   averaged  $219.1  million  at  year-end
December 31, 1999, compared to $190.2 million at year-end December 31, 1998. The
average cost of these  liabilities  decreased at year-end  December 31, 1999, to
3.8%  from  4.1%  at  year-end   December   31,   1998.   The  average  cost  of
interest-bearing  liabilities  decreased  primarily  as a  result  of  declining
interest rates in 1999.  Although  further  competitive  pressure is expected in
expanding deposit  relationships,  management,  as a matter of policy,  does not
seek to attract  high-priced,  brokered deposits.  In the near-term,  management
does  not   anticipate   Humboldt   Bancorp's  net  interest   margins  will  be
significantly  impacted by competitive  pressure for deposit accounts,  although
there can be no assurance that this will not occur.

        Net  interest  income for the  year-ended  1998  totaled  $15.8  million
compared  with  $13.0  million  for the year ended  1997.  The  increase  in net
interest income was attributable to a significant increase in earning assets and
a slight increase in net interest  yield.  The yield on loans increased by 0.2%,
over the same period in 1997 and the cost of funds decreased 0.1%. The reference
rate used to price a significant  portion of the loan  portfolio at December 31,
1999,  1998 and 1997 was 8.50%,  7.75% and 8.50%  respectively.  At December 31,
1999,  1998 and 1997 net loans and leases  comprised  71.7%,  70.1% and 70.8% of
average earning assets.

        At December 31, 1999,  1998 and 1997 loan fees  included in net interest
income were $983,000, $1.4 million and $729,000 respectively.

Provision for Loan and Lease Losses

        A  reserve  for loan and  lease  losses is  maintained  at a level  that
management  of  Humboldt  Bancorp  considers  adequate  for  losses  that can be
reasonably  anticipated.  The  reserve  is  increased  by a charge to  operating
expenses referred to as a provision for loan and lease losses, and is reduced by
the net loan  that is  charged-off.  See  "Loan  Losses  and  Recoveries"  for a
discussion of reserves and net loans  charged-off  and a table  summarizing  the
changes in the reserve for loan and lease  losses.  The  provision  for loan and
lease losses does not contain  charges related to the activities of the Merchant
Bankcard Department since merchant bankcard accounts are not reflected as loans,
and Merchant Bankcard Department's reserves do not constitute loan reserves.

        For the year-ended December 31, 1999, management charged $1.0 million to
Humboldt Bancorp's  provision for loan and lease losses compared to $2.1 million
for the year-ended  December 31, 1998.  This was a 52.4% decrease from the prior
year.  The  decrease in the  provision  for loan and lease  losses was  directly
related to a decline in anticipated credit cards  charged-off.  Net credit cards
charged-off  for the  year-ended  December 31, 1999,  were $405,000  compared to
$851,000 for the same period ended December 31, 1998.

        For the years ended December 31, 1999, 1998 and 1997, management charged
$1.0 million,  $2.1 million,  and $773,000,  respectively to Humboldt  Bancorp's
provision for loan and lease losses. The ratio of the reserve for loan and lease
losses to total loans and leases at December 31, 1999,  1998, and 1997,  equaled
1.5%, 1.6%, and 1.5%,  respectively.  The decrease in the provision from 1998 to
1999 was due to a  decrease  in  leases  and  credit  cards  charged-off  and an
increase in  recoveries  from  charged-  off credit  cards.  The increase in the
provision from 1997 to 1998 is attributable to an increase in loans  originated,
an increase in credit cards charged-off, and an increase in charged-off leases.

<PAGE>31

Non-Interest Income

        The  following  table  sets  forth  components  of  Humboldt   Bancorp's
non-interest income:

<TABLE>
<CAPTION>


                                                              Year Ended December 31,
                                                     ---------------------------------------
                                                       1997          1998             1999
                                                     --------      --------         --------
                                                                (Dollars in Thousands)
<S>                                               <C>             <C>              <C>
Fees and Other Income:
  Merchant credit card processing fees               $  3,906      $  6,177         $ 13,178
  Lease residuals and rentals                           1,306         1,575            1,250
  Credit Card program fees                                778         1,019              519
  Equity income of Bancorp Financial Services              22           259              450
  Fees for customer services                              291           346              415
  Earnings on life insurance                              195           106              161
  Loan and lease servicing fees                           346            87              293
  Other                                                    67           162              386
                                                     --------      --------         --------
    Total Fees and Other Income                         6,911         9,731           16,652
Service charges on Deposit Accounts                     1,300         2,097            2,411
Net Gain (Loss) on Sale of Loans                         (204)          645              695
Net Investment Securities Gains (Losses)                  102             -             (235)
                                                     --------      --------         --------
  Total Non-Interest Income                          $  8,109      $ 12,473         $ 19,523
                                                     ========      ========         ========

</TABLE>

        Non-interest  income is primarily  derived from Merchant  Bankcard fees,
services charges on deposit accounts,  Lease Finance  Department lease residuals
and rentals, and Issuing Bankcard (Credit Card) fees.

        During the past four fiscal years,  Humboldt  Bank's  Merchant  Bankcard
Department  has increased in importance to Humboldt  Bank's  revenues.  Humboldt
Bank  offers  merchant  bankcard  services  to a variety  of  merchants  located
throughout  the  United  States,  including  first time  merchants  and small to
medium-sized  merchants  in the  retail,  telephone,  mail  order  and  Internet
commerce industries.  In general,  merchant bankcard services involve collecting
funds for, and crediting the accounts of, merchants for sales of merchandise and
services to credit card  customers.  For its services,  Humboldt Bank receives a
service fee and other  processing fees. Also, as of December 31, 1999, 1998, and
1997,  Humboldt Bank held merchant  reserves  primarily in non-interest  bearing
accounts of $54.2 million, $47.0 million, and $33.0 million, respectively.

        During 1996,  Humboldt Bank actively  pursued credit card income through
nationwide  secured and  unsecured  credit card  programs.  In early 1997,  this
strategy was  abandoned  due to a perceived  increase in credit risk and extreme
competition from major credit card issuers. Currently, management estimates that
at  present  levels of credit  card  receivables,  Humboldt  Bank makes a modest
monthly profit net of service expenses and write-offs. Therefore, while Humboldt
Bank intends to continue credit card lending to its customer base,  there are no
further plans to solicit credit card business beyond its market areas.

        Non-interest  income increased $7.0 million, or 56.0% for the year-ended
December 31, 1999,  compared to the year-ended  December 31, 1998. The principal
reason for this increase was income generated by Merchant  Bankcard  operations.
During 1999,  Merchant  Bankcard  operations  generated  $13.2 million in income
compared to $6.2 million in 1998.

<PAGE>32

        Non-interest  income for 1998 totaled $12.5 million, an increase of $4.4
million or 54.3% from $8.1 million  earned in 1997.  The  increases for the year
ended 1998,  compared to the year ended 1997, are attributable  primarily to the
activities of the Merchant  Bankcard,  and to a lesser extent, the activities of
the Lease  Finance and  Issuing  Bankcard  (Credit  Card)  Departments,  plus an
increase in service charges on deposit accounts. The increase in gain on sale of
loans is  attributable  in part to selling some  portfolio  loans at a gain. The
decrease  in gain  on  sale  of  investments  is  attributable  to fact  that no
investments were sold in 1998. Service charges on deposit accounts increased $.8
or 61.5%,  fees and other income  increased $2.8 million or 40.6%, and all other
non-interest income increased $.8 or 900.0%.

Non-Interest Expense

        Non-interest  expenses  consist  principally of employees'  salaries and
benefits,  Merchant Bankcard expenses, and fixed asset (occupancy and equipment)
expenses.  Non-interest  expense  increased  $8.9  million,  or 45.4%,  to $28.5
million for the year-ended  December 31, 1999,  compared to $19.6 million in the
corresponding  period of 1998.  This was due to increases  in Merchant  Bankcard
operation  expense of $4.7 million,  as well as increases in salary and employee
benefits  of $2.7  million,  primarily  relating to the  increase in  personnel.
Salaries and  employee  benefits  represented  the single  largest  component of
non-interest  expense:  $12.0  million  or  42.2% in  1999.  Humboldt  Bancorp's
investments  in new and expanded  technology to support  internal  services,  to
ensure Year 2000 compliance, and to provide additional technology-based products
for Humboldt Bancorp's customers, also resulted in expense increases.

        Non-interest  expense for the year ended 1998 totaled $19.6 million,  an
increase  of $4.1  million  or 26.5%  from the year  ended  1997.  Salaries  and
employee  benefits  represented  the single  largest  component of  non-interest
expense:  $9.2 million or 46.7% in 1998 and $6.8 million or 43.9% in 1997.  Full
-time  equivalent  employees  numbered  318,  250, and 209 on December 31, 1999,
1998, and 1997, respectively.

        Fixed assets expense increased $312,000 or 11.5% to $3.0 million for the
year ended 1999.  This increase can be attributed to increased  maintenance  and
repairs on older equipment,  and increased  rental expense,  partially offset by
increased rental income. Fixed assets expense increased $245,000 or 9.9% to $2.7
million for the year ended 1998.  This  increase can be  attributed to increased
maintenance  and  repairs on older  equipment,  and  increased  rental  expense,
partially  offset by increased  rental income.  Humboldt  Bancorp's fixed assets
expense is anticipated  to increase in 2000 due to the planned  opening of a new
headquarters; a new branch; the commencement of operations at the Capitol Thrift
branches; and the acquisition of the two former CalFed branches located in Ukiah
and Eureka.

        Other  expenses  (excluding  salaries  and  employee  benefits and fixed
assets),  increased  $5.9 million or 76.6% in 1999 from 1998, and increased $1.5
million  or 24.2% in 1998  from  1997  primarily  due to the  Merchant  Bankcard
program in 1999 and1998.

        The  following   table   summarizes  the   significant   components  and
percentages of non-interest  expense for the years ended December 31, 1997, 1998
and 1999:

<TABLE>
<CAPTION>

(Dollars in Thousands)
                                                 1997                  1998                  1999
                                         ------------------    ------------------    ------------------

<S>                                      <C>         <C>       <C>         <C>       <C>         <C>
Salaries and employee benefits           $  6,806    43.92%    $  9,151    46.74%    $ 11,866    41.64%
Net occupancy and Equipment expense         2,466    15.91        2,711    13.85        3,023    10.61
Merchant credit card program (1)              822     5.30        2,665    13.61        7,460    26.18
Professional and other outside services     1,342     8.66        1,122     5.74        1,446     5.07
Credit card program                         1,021     6.59          346     1.77          240     0.84
Stationery, supplies & postage                887     5.72          884     4.52          955     3.35
Amortization of core deposit Intangible       426     2.75          372     1.90          459     1.61
FDIC and other insurance                      164     1.06          186     0.95          217     0.76
Advertising                                   265     1.71          247     1.26          412     1.45
Development                                   242     1.56          249     1.27          414     1.45
Telephone and travel                          478     3.08          598     3.05          870     3.05
Data processing and ATM fees                  170     1.10          324     1.65          299     1.05
Other                                         407     2.64          723     3.69          833     2.91
                                         ------------------    ------------------    ------------------
Total expenses                           $ 15,496   100.00%    $ 19,578   100.00%    $ 28,494   100.00%
                                         ==================    ==================    ==================
</TABLE>


(1)     Merchant Bankcard  expenses  includes  merchant and proprietary  related
        expenses only. Salaries and employee benefits are included in salary and
        employee benefits above.

Provision for Income Taxes

        The provision for income taxes for the year-ended  December 31, 1999 was
$2.3  million  representing  an  effective  tax rate of 33.0%,  compared to $2.5
million, or 38.5% for the year-ended December 31, 1998.

        The  provision  for income taxes totaled $2.5 million for the year ended
1998, an increase of $906,000 or 56.2% from the year ended 1997. The increase in
1998 was the result of increased  pre-tax  income  partially  offset by Humboldt
Bancorp taking  advantage of some deferred tax benefits.  The 1998 effective tax
rate of 38.5% and the 1997  effective  tax rate of 33.1% on reported  income was
below the expected  statutory  federal rate of 34.0% and the state franchise tax
rate of 7.1% (net of the federal benefit)  principally because of exemptions for
Enterprise  Zone  loans  for  state  tax  purposes,   exemptions  for  municipal
obligations  for federal  purposes,  key-person  insurance,  low income  housing
credits and other permanent differences.

Investments

        Humboldt  Bancorp  invests  excess funds in a variety of  instruments in
order to meet liquidity and profitability goals. A portion of available funds is
invested in liquid investments including overnight federal funds. The balance is
invested in investment  securities including U.S. Treasury and Agency securities
such as CMOs, tax-exempt municipal bonds, corporate bonds, and Federal Home Loan
Bank and Federal National Mortgage Corporation stock.

        At  December  31,  1999,  Humboldt  Bancorp's  portfolio  of  investment
securities  market value totaled  $115.4  million,  an increase of $37.6 million
compared to its  December  31,  1998,  securities  portfolio  of $77.8  million,
representing an increase of 48.3% from the prior year-end.

<PAGE>34

     The  following  table  provides the  amortized  cost of Humboldt  Bancorp's
portfolio of investment securities as of December 31, 1997, 1998, and 1999:

                                                  As of December 31,
(Dollars in Thousands)                  -----------------------------------

                                           1997         1998        1999
                                        --------     --------    ---------
Investments available-for-sale:
U.S. Treasury and agencies              $  2,996     $  3,000    $   3,551
CMOs issued by U.S. agencies              62,433       56,682       87,316
Obligations of political subdivisions     12,190       16,227       19,614
Corporate debt and other securities        1,286        1,062        5,480
                                        --------     --------    ---------
  Total investment securities           $ 78,905     $ 76,971    $ 115,961
                                        ========     ========    =========

     Investment securities at the dates indicated consisted of the following:

<TABLE>
<CAPTION>


                                              As of                          As of                                 As of
(Dollars in Thousands)                  December 31, 1997              December 31, 1998                    December 31, 1999
                               -------------------------------  -------------------------------    ---------------------------------
                                              Approx.                         Approx.                              Approx.
                                Amortized     Market      %      Amortized    Market       %         Amortized     Market       %
                                  Cost        Value     Yield*     Cost       Value      Yield*        Cost        Value      Yield*
                               ----------   ---------   ------   ---------   --------    ------    -----------   ---------    ------

<S>                           <C>          <C>         <C>       <C>        <C>         <C>       <C>           <C>          <C>
U.S. Treasury and agencies:
  Three months or less         $      -     $      -        -%   $    999    $  1,000     6.04%    $   1,000     $  1,000     4.82%
  Three to twelve months              -            -        -       2,001       2,013     6.20             -            -        -
  One to three years              2,996        3,007     6.15           -           -        -         2,551        2,537     5.70
CMO issued by U.S. agencies:
  Three months or less              769          771     9.00       1,398       1,348     9.08           697          697     7.85
  Three to twelve months          8,960        9,048     8.08      11,384      11,384     4.16        11,374       11,396     7.36
  One to three years             19,020       19,200     6.58      35,821      35,780     4.80        56,381       56,079     6.09
  Three to five years            32,545       32,935     6.09       6,019       6,019     4.21        12,130       12,070     5.22
  Five to fifteen years           1,140        1,160     6.14       2,060       2,083     4.60         6,733        6,655     7.25
Obligations of political
  subdivisions:
  Three months or less                -            -        -         280         286     7.50             -            -        -
  Three to twelve months            102          104     7.99           -           -        -             -            -        -
  One to three years                283          292     7.45         235         243     7.75           485          496     9.11
  Three to five years             1,179        1,226     8.07       1,238       1,281     8.20         1,328        1,341     9.01
  Five to fifteen years           6,016        6,381     7.82       8,324       8,920     7.75        11,982       11,950     7.47
  Over fifteen years              4,610        4,768     7.67       6,150       6,380     7.06         5,820        5,714     7.29

Corporate debt and other
  securities:
  Three months or less              664          664     8.35       1,062       1,065     6.22         1,000        1,000     4.82
  Three to twelve months            175          178     8.35           -           -        -           625          625     5.96
  Five to fifteen years             446          446     6.00           -           -        -         3,855        3,800     7.41
                               --------     --------     ----    --------    --------     ----     ---------     --------     ----
    Total securities           $ 78,905     $ 80,180     6.28%   $ 76,971    $ 77,802     5.38%    $ 115,961     $115,360     6.47%
                               ========     ========     ====    ========    ========     ====     =========     ========     ====
</TABLE>

<PAGE>35

        At December 31,  1999,  the  amortized  cost of the  following  issuers'
securities exceeded ten percent of Humboldt Bancorp's capital.

(Dollars            Issuer         Amortized cost        Market Value
in Thousands)       ------         --------------        ------------

                  FRMAC CMOs        $33,217,096           $32,987,013
                  FNMA CMOs         $27,631,168           $27,499,179
                  GNMA CMOs         $10,165,933           $10,071,828
                  FHLMC CMOs        $ 4,546,539           $ 4,613,594
                  SLMA CMOs         $10,595,252           $10,575,725

        Humboldt  Bancorp  does  not own  securities  of a single  issuer  whose
aggregate book value is in excess of its total equity.

Loans

        Humboldt  Bancorp  concentrates  its lending  activities in real estate,
commercial,  lease financed,  credit card and consumer loans,  made primarily to
individuals and businesses located in Northern California.

        At December 31, 1999,  Humboldt Bancorp had total net loans  outstanding
of $225.1 million.  This represented  59.5% of total  consolidated  deposits and
53.1% of total  consolidated  assets of Humboldt Bancorp.  At December 31, 1998,
Humboldt  Bancorp  had total  net loans  outstanding  of  $186.0  million.  This
represented 65.5% of total consolidated deposits and 58.1% of total consolidated
assets of Humboldt Bancorp. At December 31, 1997, Humboldt Bancorp had total net
loans   outstanding  of  $157.5  million.   This  represented   61.7%  of  total
consolidated deposits and 55.4% of total consolidated assets.

        Types  of  Loans.   The  table  below  shows  the  composition  of  loan
or type of borrower at the dates indicated:

(Dollars in Thousands)                     As of                  As of
                                     December 31, 1995      December 31, 1996
                                 -----------------------  ---------------------
Type of Loan                       Amount     Percentage    Amount   Percentage
------------                     ---------    ----------  ---------  ----------
Real estate-secured loans:
   Construction                  $  15,874      13.79%    $  21,205     14.85%
   Residential                      23,036      20.01        31,519     22.07
   Commercial & agricultural        54,879      47.67        61,030     42.73
                                 ---------     ------     ---------    ------
     Total real estate loans        93,789      81.47       113,754     79.65
Commercial                          16,284      14.15        20,559     14.39
Lease financing                      3,974       3.45         3,168      2.22
Credit card and related accounts     1,203       1.05         2,021      1.42
Consumer                             2,192       1.90         2,508      1.76
Other                                  159       0.14         3,725      2.60
                                 ---------     ------     ---------    ------
   Total loans and leases          117,601     102.16       145,735    102.04

Less:
   Deferred loan fees                 (616)     (0.54)         (765)    (0.54)

<PAGE>36


(Dollars in Thousands)                     As of                  As of
                                     December 31, 1995      December 31, 1996
                                 -----------------------  ---------------------
Type of Loan                       Amount     Percentage    Amount   Percentage
------------                     ---------    ----------  ---------  ----------

Allowance for loan losses           (1,868)     (1.62)       (2,146)    (1.50)
Loans and lease receivable, net  $ 115,117     100.00%    $ 142,824    100.00%

<TABLE>
<CAPTION>



                                                   As of                     As of                       As of
(Dollars in Thousands)                       December 31, 1997         December 31, 1998           December 31, 1999
                                         ----------------------    -----------------------     -----------------------
Type of Loan                               Amount    Percentage      Amount     Percentage       Amount     Percentage
                                           ------    ----------      ------     ----------       ------     ----------
<S>                                     <C>          <C>           <C>          <C>           <C>           <C>
Real estate-secured loans:
   Construction                          $  20,165      12.80%     $  20,667       11.11%      $  22,118        9.82%
   Residential                              27,253      17.30         35,226       18.93          45,185       20.07
   Commercial & agricultural                65,772      41.76         80,197       43.11          99,053       44.00
                                         ---------     ------      ---------      ------       ---------      ------
     Total real estate loans               113,190      71.86        136,090       73.15         166,356       73.90
Commercial                                  28,091      17.83         33,981       18.27          39,295       17.45
Lease financing                              8,732       5.55          9,867        5.30          17,202        7.64
Credit card and related accounts             7,062       4.48          5,672        3.05           3,456        1.54
Consumer                                     2,440       1.55          2,110        1.13           1,938        0.86
Other                                        1,177       0.75          2,097        1.13           1,216        0.54
                                         ---------     ------      ---------      ------       ---------      ------
   Total loans and leases                  160,692     102.02%       189,817      102.03%        229,463      101.93%
Less:
   Deferred  loan fees                        (809)     (0.51)%         (724)      (0.39)%          (987)      (0.44)%
   Allowance for loan losses                (2,371)     (1.51)%       (3,055)      (1.64)%        (3,354)      (1.49)%
                                         ---------     ------      ---------      ------       ---------      ------
     Loans and lease receivable, net     $ 157,512     100.00%     $ 186,038      100.00%      $ 225,122      100.00%
                                         =========     ======      =========      ======       =========      ======
</TABLE>


        At  December  31,  1999,  1998,  and  1997,   Humboldt  Bancorp  had  no
concentration of loans that exceeded 10% of total loans not otherwise identified
by the categories set forth above.

        Real Estate - Construction

        Humboldt  Bancorp makes loans to finance the construction of residential
and  commercial  properties  and to finance land  acquisition  and  development.
Construction   and   development   loans  are   obtained   principally   through
solicitations by Humboldt Bancorp and through  continued  business from builders
and  developers who have  previously  borrowed from Humboldt  Bancorp.  When the
total amount of a loan would otherwise  exceed Humboldt  Bancorp's legal lending
limit,  Humboldt  Bancorp  sells  participation  interests  to  other  financial
institutions to facilitate the extension of credit.

<PAGE>37

        As of December 31, 1999,  the  breakdown  of  construction  loans was as
follows:

        Owner-Occupied Single Family Construction            $ 5,554,645
        Owner-Occupied Commercial Construction               $10,500,000
        Speculation Construction                             $ 3,965,422
        Acquisition/Development                              $ 2,098,413

        Humboldt  Bancorp's  owner-occupied  single  family  construction  loans
typically have a maturity of up to nine months and are secured by deeds of trust
and  usually do not exceed 80% of the  appraised  value of the home to be built.
All owner-occupied single family construction  borrowers have been pre-qualified
for long-term loans using Fannie Mae underwriting guidelines.

        Humboldt  Bancorp  also  makes  loans to  developers,  primarily  in its
service area, for the purpose of acquiring  unimproved  land and developing such
land. These loans typically have a maturity of 12 to 24 months;  have a floating
rate tied to prime rate;  usually do not exceed 75% of the appraised  value; are
secured  by a  first  deed of  trust  and,  in the  case  of  corporations,  are
personally  guaranteed.  Loan  commitment and  origination  fees of 1% to 2% are
usually charged.

        All commercial  construction  loans are underwritten using the estimated
cash flow the secured real property would provide in the event of default by the
borrower.  A debt coverage ratio of 1.25:1 is required.  In all cases,  Humboldt
Bancorp pre-approves a long-term loan to pay off the construction loan.

        Risks  associated  with real  estate  construction  loans are  generally
considered higher than risks associated with other forms of lending.  Loan funds
are advanced upon the security of the project under construction,  which is more
difficult to value prior to the  completion  of  construction.  Should a default
occur which results in foreclosure, Humboldt Bancorp could be adversely affected
in that it would have to control the  project and attempt  either to arrange for
completion of construction or to dispose of the unfinished project.

        Humboldt  Bancorp's  underwriting  criteria is designed to evaluate  and
minimize  the risk of each  construction  loan.  A wide  variety of factors  are
carefully  considered  before  originating a  construction  loan,  including the
availability  of permanent  financing to the borrower  (which may be provided by
Humboldt  Bancorp at market  rates);  the  reputation  of the  borrower  and the
contractor;    independent   valuations   and   reviews   of   cost   estimates;
pre-construction  sale information and cash flow projections of the borrower. At
the time of Humboldt Bancorp's  origination of a construction loan to a builder,
the builder  often has a signed  contract  with a purchaser  for the sale of the
to-be-constructed  house,  which, by assuring the builder of a repayment source,
lessens  Humboldt  Bancorp's  underwriting  risks on the  construction  loan. To
reduce the risks inherent in construction  lending,  Humboldt Bancorp limits the
number of properties which can be constructed on a "speculative" or unsold basis
by a builder at any one time to 2 to 4 houses and  requires  the borrower or its
principals  personally to guarantee  repayment of the loan.  Moreover,  Humboldt
Bancorp controls certain of the risks  associated with  construction  lending by
requiring  builders  to submit  itemized  bills to Humboldt  Bancorp,  whereupon
Humboldt  Bancorp  disburses the builder's loan funds directly to the contractor
and  subcontractors,  rather  than  to the  builder.  For a  contractor  meeting
specific criteria, loan funds may be disbursed directly to the contractor.

<PAGE>38


        Real Estate - Owner-Occupied, Single-Family Residential

        Humboldt Bancorp historically has been and continues to be an originator
of  owner-occupied,  single-family,  residential real estate loans in its market
area.  These  residential  loans as a percentage of total net loans  outstanding
were at December 31, 1999, 1998, and 1997, 20.1%, 18.9%, and 17.3% respectively.
The decrease in  residential  real estate loans in 1998 is  attributable  to the
sale of portfolio  loans.  The higher volume of residential real estate loans in
1999 is attributable to lower rates at the beginning of 1999.  Humboldt  Bancorp
also offers FHA and VA mortgage loans in its market area, which are underwritten
and closed by a correspondent lender.

        Humboldt Bancorp originates owner-occupied,  single-family,  residential
fixed-rate mortgage loans at competitive  interest rates within its market area.
Generally,  Humboldt  Bancorp sells these loans in the secondary  market.  Loans
held for sale were at December 31, 1999,  1998,  and 1997,  $2.1  million,  $7.7
million, and $48,000 respectively.  These balances are included in Real Estate -
Residential totals in the table above.

        Humboldt Bancorp also offers adjustable-rate residential mortgage loans.
The  adjustable-rate  loans currently  offered by Humboldt Bancorp have interest
rates which adjust  every one,  three or five years from the closing date of the
loan or on an annual basis commencing after an initial fixed-rate period of one,
three or five years in accordance with a designated index.

        The retention of adjustable-rate  loans in Humboldt Bancorp's  portfolio
helps reduce Humboldt Bancorp's exposure to increases or decreases in prevailing
market interest rates. However,  there are unquantifiable credit risks resulting
from potential  increases in costs to borrowers in the event of upward repricing
of  adjustable-rate  loans.  However,  there can be no assurance  that yields on
Humboldt  Bancorp's  adjustable-rate  loans will fully adjust to compensate  for
increases in Humboldt Bancorp's cost of funds.

        Humboldt Bancorp evaluates both the borrower's ability to make principal
and interest  payments and the value of the property  that will secure the loan.
Humboldt Bancorp originates residential mortgage loans with loan-to-value ratios
of up to 95%. On any mortgage loan exceeding an 80%  loan-to-value  ratio at the
time  of  origination,  however,  Humboldt  Bancorp  requires  private  mortgage
insurance in an amount intended to reduce Humboldt  Bancorp's exposure to 80% of
the appraised value of the underlying collateral.

        Residential  mortgage  loan  origination  come from a number of sources,
including  solicitations  by Humboldt  Bancorp,  referrals  by builders and real
estate brokers,  existing borrowers and depositors,  and walk-in customers. Loan
applications are accepted at all of Humboldt Bancorp's offices.

        At December 31, 1999,  Humboldt Bancorp had approximately  $15.7 million
in owner-occupied home equity line of credit loans,  representing  approximately
6.97% of its net loan portfolio.  Humboldt Bancorp's home equity lines of credit
have  adjustable  interest  rates tied to the prime interest rate plus a margin.
Home  equity  lines of  credit  are  secured  by liens  against  owner-occupied,
residential real property.  Home equity loans are generally  limited so that the
amount of such loans, along with any senior indebtedness, does not exceed 80% of
the value of the real estate security.

<PAGE>39

        Real Estate - Commercial and Agricultural

        Humboldt Bancorp's  commercial real estate loan portfolio includes loans
secured by small  apartment  buildings,  strip  shopping  centers,  small office
buildings,  farms  and  other  business  properties,  generally  located  within
Humboldt Bancorp's primary market areas.  Commercial and agricultural loans as a
percentage of total net loans  outstanding  were at December 31, 1999, 1998, and
1997, 44.0%, 43.1%, and 41.8%,  respectively.  Commercial and agricultural loans
are secured by both commercial and non-owner occupied property.

        The breakdown by type of property securing these loans is as follows:

                4%     Multi-family property
                2%     Single-family residential non-owner occupied property
               12%     Equity line of credit

        Permanent  commercial real estate loans have a maximum term of 10 years,
with 25-year amortization  schedules being the norm. Interest rates on permanent
loans generally  either adjust  (subject,  in some cases, to specified  interest
rate caps) at 1- to 5-year  intervals  to  specified  spreads  over the  related
index.  Commercial real estate loans are generally  written in amounts up to 70%
of the appraised value of the property or sale price.

        Commercial  real estate loans  generally  present a higher level of risk
than loans secured by  owner-occupied,  single family  residences.  This greater
risk is due to several  factors,  including the  concentration of principal in a
limited  number  of  loans  and  borrowers,  the  effects  of  general  economic
conditions  on  income-producing  properties  and the  increased  difficulty  of
evaluating and monitoring  these types of loans.  Furthermore,  the repayment of
loans  secured  by  commercial  real  estate  is  typically  dependent  upon the
successful operation of the related real estate project.

        Humboldt  Bancorp entered into a number of SBA guaranteed  loans and has
loans where SBA has a subordinate  lien  position.  These loans are eligible for
sale on the secondary  market.  Humboldt  Bancorp  chose to sell SBA  guaranteed
loans in 1999 and1998 but did not choose to sell these types of loans in 1997.

        Business Loans

        Humboldt  Bancorp's  commercial  loans  consist of (i) loans  secured by
commercial  real  estate and (ii)  business  loans which are not secured by real
estate or if  secured by real  estate,  the  principal  source of  repayment  is
expected to be business  income.  Business  loans as a  percentage  of total net
loans outstanding were at December 31, 1999, 1998, and 1997,  17.5%,  18.3%, and
17.8%,  respectively.  Business loans include revolving lines of credit, working
capital loans, equipment financing, letters of credit and inventory financing.

        In recent  years,  Humboldt  Bancorp has  emphasized  business  lending.
Humboldt Bancorp originates  business loans to small and medium sized businesses
in its market area.  Humboldt  Bancorp's  business borrowers are generally small
businesses engaged in manufacturing, distribution or retailing, or professionals
in healthcare,  accounting and law. Business loans are generally made to finance
the purchase of inventory,  new or used equipment or commercial vehicles and for
short-term working capital. Equipment and inventory generally secure such loans,
but unsecured loans may be granted.  Business loans generally are made for terms

<PAGE>40


of 5 years or less.  Generally,  business  loans  are  made in  amounts  ranging
between $50,000 and $300,000.

        Humboldt  Bancorp  underwrites  its  business  loans on the basis of the
borrower's  cash flow and ability to service the debt from earnings  rather than
on the basis of  underlying  collateral  value,  and Humboldt  Bancorp  seeks to
structure  such loans to have more than one source of repayment.  For loans with
maturities  exceeding one year,  Humboldt  Bancorp  requires that  borrowers and
guarantors  provide updated financial  information at least annually  throughout
the term of the loan.

        Humboldt Bancorp's business loans may be structured as short-term loans,
term loans or as lines of credit.  Short-term  business loans are for periods of
12 months  or less and are  generally  self-liquidating  from  asset  conversion
cycles. Business term loans are generally made to finance the purchase of assets
and have  maturities  of five  years  or less.  Business  lines  of  credit  are
typically made for the purpose of providing  short-term  working capital and are
usually  approved  with a term of 12 months and are reviewed at that time to see
if extension is  warranted.  Humboldt  Bancorp  also offers  standby  letters of
credit for its business borrowers.

        Business loans are often larger and may involve  greater risk than other
types of  lending.  Because  payments  on such  loans  are  often  dependent  on
successful  operation of the business  involved,  repayment of such loans may be
subject  to a greater  extent to adverse  conditions  in the  economy.  Humboldt
Bancorp seeks to minimize these risks through its underwriting guidelines, which
require  that the loan be  supported  by  adequate  cash  flow of the  borrower,
profitability  of  the  business,  collateral  and  personal  guarantees  of the
individuals in the business.  In addition,  Humboldt Bancorp limits this type of
lending to its market area and to borrowers  with which it has prior  experience
or who are otherwise well known to Humboldt Bancorp.

        Lease Financing Loans

        Humboldt  Bancorp  makes lease  financing  loans to finance small ticket
leases,  such as leases of credit card  processing  software,  terminals,  swipe
machines and related  webpages.  The dollar amount of each lease is under $2,500
and the term is  approximately  three to five years.  Lease  financing  loans at
December 31, 1999,  1998,  and 1997 were $17.2 million,  $9.9 million,  and $8.7
million  respectively.  Lease financing loans as a percentage of total net loans
outstanding  at December 31, 1999,  1998,  and 1997 were 7.6%,  5.3%,  and 5.5%,
respectively.  The increase in Humboldt  Bancorp's lease financing loans in 1998
was mostly  attributable  to an  increase in credit  card  equipment  and leases
acquired from Humboldt  Bancorp's joint venture  subsidiary,  Bancorp  Financial
Services.  The decrease in Humboldt  Bancorp's lease financing loans in 1999 was
caused by a  planned  reduction  in  leases  purchased  from  Bancorp  Financial
Services.

        Credit Card and Related Accounts

        Humboldt Bank offers credit card loans  through its  participation  as a
Principal  Member  of Visa.  Management  believes  that  providing  credit  card
services  helps  Humboldt  Bank  remain  competitive  by offering  customers  an
additional service.

        During 1996,  Humboldt Bank began to actively  pursue credit card income
through  nationwide  secured and unsecured credit card programs.  In early 1997,
this  strategy  was  abandoned  due to a  perceived  increase in credit risk and
extreme  competition  from major  credit  card  issuers.  Currently,  management

<PAGE>41

estimates that at present levels of credit card receivables, Humboldt Bank makes
a modest monthly profit net of service expenses and write-offs. Therefore, while
Humboldt  Bank intends to continue  credit card  lending to its  customer  base,
there are no further  plans to solicit  credit card  business  beyond its market
areas. Credit card loans at December 31, 1999, 1998, and 1997 were $3.5 million,
$5.7 million, and $7.1 million  respectively.  Credit card loans as a percentage
of total net loans  outstanding at December 31, 1999,  1998, and 1997 were 1.5%,
3.1%, and 4.5%, respectively. The rate currently charged by Humboldt Bank on its
credit card loans ranges from 13.9% to 19.8%,  and Humboldt Bank is permitted to
change the interest rate on 30 days notice.  Processing of bills and payments is
contracted  to an outside  service.  At December 31, 1999,  Humboldt  Bank had a
commitment  to fund an  aggregate  of $9.3  million of credit card loans,  which
represented the aggregate credit limit on credit cards.

        Consumer Loans

        The consumer loans  originated by Humboldt  Bancorp  include  automobile
loans  and  miscellaneous  other  consumer  loans,  including  unsecured  loans.
Consumer  loans as a percentage of total net loans  outstanding  at December 31,
1999, 1998, and 1997 were 0.9%, 1.1%, and 1.6%,  respectively.  Humboldt Bancorp
has recently  centralized  its consumer loan  process,  and plans to continue to
expand this type of loan within its market area.

        Loan Servicing

        Humboldt  Bank sells the majority of the mortgages and some of the Small
Business Administration loans it originates to institutional investors. However,
it retains the servicing on these loans in order to generate  ongoing  revenues.
Humboldt Bank's  servicing  portfolio in which it has sold ownership but retains
the servicing was $163.7  million and $144.5  million at December 31, 1999,  and
1998, respectively.

        Loan servicing includes (i) collecting and remitting loan payments, (ii)
accounting  for principal and interest,  (iii) holding  escrow and impound funds
for payment of taxes and insurance,  (iv) making  inspections as required of the
mortgage  premises,  (v)  collecting  amounts from  delinquent  mortgages,  (vi)
supervising  foreclosures  in  the  event  of  unremedied  defaults,  and  (vii)
generally administering the loans for investors to whom they have been sold.

        Humboldt  Bank's fees for servicing  mortgage loans range generally from
 .250% to .375% per annum on the declining  principal  balances of the loans. The
average  service fee  collected  by Humboldt  Bank was .250% for the  year-ended
December  31,1999  and  1998  respectively.  Servicing  fees are  collected  and
retained by Humboldt Bank out of monthly mortgage payments.  Normal amortization
and prepayment or liquidation of outstanding  loans can reduce  Humboldt  Bank's
servicing  portfolio.  Approximately  90% of the loans serviced by Humboldt Bank
have outstanding  balances of greater than $100,000,  and  approximately 10% are
adjustable rate mortgages.

        Humboldt  Bank  accounts  for  revenue  from  the  sale of  loans  where
servicing is retained in  conformity  with the  requirements  of  Statements  of
Financial  Accounting  Standards No.125.  Gains and losses are recognized at the
time of sale by comparing  sales price with carrying  value.  A servicing  asset
results when the  servicing  fees  received are  considered  more than  adequate
compensation.

        In general, the value of Humboldt Bank's loan servicing portfolio may be
adversely  affected  as mortgage  interest  rates  decline and loan  prepayments
increase.  This would also decrease  income  generated from Humboldt Bank's loan

<PAGE>42

servicing portfolio. This negative effect on Humboldt Bank's income attributable
to  existing  servicing  may be offset  somewhat  by a rise in  origination  and
servicing income  attributable to new loan origination,  which historically have
increased in periods of low mortgage interest rates.

        The  following  table sets forth the dollar  amount of  Humboldt  Bank's
mortgage loan servicing portfolio. Although Humboldt Bank intends to continue to
increase its servicing portfolio, increases will depend on market conditions and
the  availability of capital.
                                               December 31,       December 31,
                                                  1998                1999
                                             --------------      --------------
Mortgage Loan Servicing Portfolio:
Loans originated by Humboldt Bank and sold:  $142.2 Million      $159.6 Million
Loans originated by Humboldt Bank but
     awaiting funding:                       $  7.7 Million      $  2.1 Million

        Humboldt  Bank also  services  a  portfolio  of sold SBA loans  which is
anticipated  to increase  during the year 2000 as a result of increased  selling
and marketing efforts.  SBA has designated Humboldt Bank as a "Preferred Lender"
which  should  also  assist in  increasing  loan  volumes in the  future.  As of
December 31, 1999 and 1998 SBA Loans  originated,  sold and serviced by Humboldt
Bank were $4.1 million, and $2.4 million respectively.

        For the most part, the Small Business  Administration  loans are tied to
the  prime  rate  and as a result  there  are no early  payoffs  as a result  of
declining rates such as with real estate loans.

Maturities  of  Loans  and  Leases.  The  following  table  shows  the  maturity
distribution  of Humboldt  Bancorp's loan  portfolio with principal  balances of
loans indicated by both fixed and floating rate categories.

<TABLE>
<CAPTION>



                                          As of                                                      As of
                                    December 31, 1998                                          December 31, 1999
                    --------------------------------------------------      ------------------------------------------------------
                                 Due after                                                 Due after
                     Due in      one year                                     Due in       one year
                    one year      through      Due after       Total         one year       through       Due after        Total
(In thousands of    or less     five years    five years       loans         or less      five years     five years        loans
dollars)            --------     --------      --------      ---------      ---------      ---------      --------       ---------


<S>                 <C>          <C>           <C>           <C>            <C>            <C>            <C>            <C>
Fixed rate          $ 14,114     $ 34,153      $ 31,795      $  80,062      $  14,556      $  43,826      $ 37,940       $  96,322
Variable rate         81,327       26,388         2,040        109,755         90,574         40,543         2,024         133,141
                    --------     --------      --------      ---------      ---------      ---------      --------       ---------
   Total loans      $ 95,441     $ 60,541      $ 33,835      $ 189,817      $ 105,130      $  84,369      $ 39,964       $ 229,463
                    ========     ========      ========      =========      =========      =========      ========       =========
</TABLE>


        Humboldt  Bancorp's  renewal  policy  is that  all  maturing  loans  are
reviewed on a case-by-case  basis,  new financial  statements are requested from
the borrower and an in-depth  credit  analysis is performed after which the loan
may be  extended,  renewed,  restructured  or demand  made for  payment  in full
depending upon the circumstances.

Loan Losses and Recoveries

        Humboldt  Bancorp  maintains  a reserve  for loan and lease  losses at a
level that management of Humboldt Bancorp considers adequate for losses that can

<PAGE>43


be reasonably anticipated.  Humboldt Bancorp's reserve for loan and lease losses
was $3.4  million,  $3.1  million,  $ 2.4 million,  and $2.1  million,  and $1.9
million at December 31, 1999, 1998, 1997, 1996, and 1995, respectively.

        The Issuing Bankcard (Credit Card) Department's reserve also constitutes
a portion of Humboldt  Bancorp's  reserves.  The Issuing  Bankcard (Credit Card)
Department  was  established  in  1996.  The  Issuing   Bankcard  (Credit  Card)
Department's  reserve at December 31, 1999,  1998,  and 1997,  was  respectively
$186,000 or 5.8%,  $330,000 or 10.80%, and $278,000 or 11.7%, of total reserves.
The increase in Issuing Bankcard (Credit Card)  Department's  reserves from 1997
to 1998 both as to amount and as a percentage of total reserves is  attributable
to the Issuing  Bankcard  (Credit Card)  Department's  increase in the number of
credit  card  accounts.  Since  early  1997,  Humboldt  Bank has  focused on its
customer  base for issuing  Humboldt  Bank  credit  cards  instead of  customers
outside its market area. Accordingly,  reserves for the Issuing Bankcard (Credit
Card)  Department at December 31, 1999 have  decreased from reserves at December
31, 1998.

        The Merchant Bankcard's  Department's  reserves are separately accounted
for as a liability of Humboldt Bank on its financial  statement  since there are
no loans associated with such reserves.

        The  adequacy  of the reserve for loan losses is measured in the context
of several key ratios and factors discussed below. The reserve is increased by a
charge to operating  expenses and is reduced by net  charge-offs  that are loans
actually  removed  from  the  consolidated   balance  sheet  after  netting  out
recoveries on previously  charged-off  assets.  Humboldt  Bancorp's policy is to
charge-off loans when, in management's opinion, the loan or a portion thereof is
deemed uncollectible,  although concerted efforts are made to maximize recovery.
Humboldt  Bancorp's  historical net loan losses or recoveries stem from Humboldt
Bancorp's  underwriting  and collection  practices,  and the quality of the loan
portfolio.

         During the year-ended  1999,  loan  charge-offs  net of recoveries were
$747,000,  compared to  $1,440,000  during the  year-ended  December 31, 1998, a
48.1% decrease in loan charge-offs net of recoveries.  This decrease is directly
related to the planned reduction in credit card receivables  through the sale of
certain  credit card  portfolios  and the  cessation  of new credit card issuing
programs.  Charge-offs  recorded  during the year-ended  December 31, 1999, were
consistent with Humboldt Bancorp's  historical  experience in view of the growth
in its  loan  portfolio.  Management  expects  its  current  loan  underwriting,
oversight and  collection  policies to promote high quality loans and limit loan
losses.  These  policies  include  aggressive  action to limit credit  losses by
lowering  lending  authorities,  when  and if  appropriate.  As  part  of  these
policies,  Humboldt  Bancorp  has  hired  additional  staff  to  support  credit
administration functions. Therefore, management believes that its charge-off and
recovery experience for the year 2000 will be comparable to that of prior years.

        For the years ending December 31, 1999, 1998, 1997, 1996, and 1995, loan
charge-offs net of recoveries were $747,000, $1.4 million,  $548,000,  $255,000,
and $255,000,  respectively.  These amounts  represented 0.4%, 0.8%, 0.4%, 0.2%,
and 0.3%,  respectively,  of average loans outstanding.  The decrease in 1999 is
attributable to reduced lease and credit card  charge-offs and increased  credit
card recoveries. The increase from 1997 to 1998 is attributable to credit cards,
lease and real estate.  The increase from 1996 to 1997 is attributable to credit
cards.

<PAGE>44

        The following  table  summarizes the changes in the reserve for loan and
lease losses for the periods shown:

<TABLE>
<CAPTION>


                                                                      Year Ended December 31,

                                                  1995          1996          1997          1998          1999
                                               ---------     ---------     ---------     ---------     ---------

<S>                                          <C>            <C>           <C>           <C>           <C>
Reserve for loan and lease
  losses balance, beginning of period          $   1,331     $   1,868     $   2,146     $   2,371     $   3,055
                                               ---------     ---------     ---------     ---------     ---------
Loans and leases charged off:
  Real estate                                          -           (46)            -          (141)          (67)
  Commercial                                         (11)         (122)         (193)         (191)         (218)
  Consumer                                           (23)          (29)          (11)          (25)          (29)
  Lease financing                                   (254)         (132)         (124)         (316)         (148)
  Credit card and related accounts                     -             -          (475)         (956)         (614)
  Other                                              (30)          (45)           (7)           (5)            -
                                               ---------     ---------     ---------     ---------     ---------
    Total loans and leases charged off              (318)         (374)         (810)       (1,634)       (1,076)

Recoveries:
  Real estate                                          -             -             -             -            98
  Commercial                                           9            78           129            54             7
  Consumer                                             4             5             9             8             6
  Lease financing                                     49            34            34            24             9
  Credit card and related accounts                     -             -            87           105           209
  Other                                                1             2             3             3             -
                                               ---------     ---------     ---------     ---------     ---------
    Total recoveries                                  63           119           262           194           329
                                               ---------     ---------     ---------     ---------     ---------
Net (charge-offs) recoveries                        (255)         (255)         (548)       (1,440)         (747)
Provision charged to operations                      792           533           773         2,124         1,046
                                               ---------     ---------     ---------     ---------     ---------
Reserve for loan and lease
  losses balance, end of period                $   1,868     $   2,146     $   2,371     $   3,055     $   3,354
                                               =========     =========     =========     =========     =========
Loans and leases outstanding
  at end of period, net of
  unearned interest income                     $ 116,985     $ 144,970     $ 159,883     $ 189,093     $ 228,476
                                               =========     =========     =========     =========     =========
Average loans and leases
  outstanding for the period                   $ 102,931     $ 134,617     $ 151,695     $ 175,173     $ 200,986
                                               =========     =========     =========     =========     =========
Ratio of net loans and leases
  charged off (recovered) to average
  loans and leases outstanding                      0.25%         0.19%         0.36%         0.82%         0.37%
Ratio of reserve for loan and
  lease losses to loans and
  leases at end of period                           1.60%         1.48%         1.48%         1.62%         1.47%
</TABLE>


        The  adequacy  of the reserve for loan losses is measured in the context
of several  key ratios and  factors  including:  (1) the ratio of the reserve to
total outstanding  loans; (2) the ratio of total  non-performing  loans to total
loans;  and,  (3) the ratio of net  charge-offs  (recoveries)  to average  loans
outstanding.  Additional  factors  considered  in  establishing  an  appropriate
reserve include a careful assessment of the financial condition of the borrower;
a realistic  determination  of the value and adequacy of underlying  collateral;
the condition of the local economy and the condition of the specific industry of
the  borrower;   comprehensive  analysis  of  the  levels  and  trends  of  loan
categories;  and a review  of  delinquent  and  classified  loans.  Management's
evaluation  is based on a system  whereby  each loan is  "graded" at the time of
origination,  extension or renewal.  Each grade is assessed a risk factor, which
is calculated to assess the adequacy of the allowance for loan losses.  Further,
management considers other factors including changes in the nature and volume of
the loan portfolio,  overall portfolio quality,  loan concentrations,  trends in

<PAGE>45

the  level of  delinquent  and  classified  loans,  specific  problem  loans and
commitments, and current and anticipated economic conditions.

     Since  1995,  Humboldt  Bancorp's  ratio of the  reserve for loan losses to
total loans has ranged from 1.4% to 1.6%.  The amounts  provided by these ratios
have been sufficient to fund Humboldt Bancorp's charge-offs, which have not been
historically  significant,  and to  provide  for  potential  losses  as the loan
portfolio has grown. From 1995 through December 31, 1999,  non-performing  loans
to total loans have  ranged  from a low of 0.3% to a high of 1.1%.  For the five
years ended December 31, 1999, net charge-offs ranged from .2% to .8% of average
loans.

     On a  monthly  basis,  management  considers  the  factors  that  follow in
establishing  Humboldt Bancorp's Allowance for Loan and Lease Losses (ALLL). The
results are reported to the board of directors on a quarterly basis.

     o    Management  considers whether there have been any significant  changes
          in Humboldt Bancorp's policies and procedures,  including underwriting
          standards and collections, charge-offs, and recovery practices.

     o    Management keeps abreast of the local economic and business conditions
          through the board of directors and various organizations.

     o    Management  considers any major changes regarding the lending officers
          and staff.

     o    Humboldt  Bancorp  obtains  quarterly  outside credit reviews for loan
          write-ups and grade changes.

     o    The Loan Review/Compliance  Department reviews a sampling of loans not
          covered  by the  quarterly  outside  review  and  reports to the Chief
          Credit Officer on a monthly basis.

     o    Management   prepares   concentration   reports  in  which  loans  are
          segregated to better manage the portfolios.

     o    On a limited  basis,  Humboldt  Bancorp  will extend the maturity of a
          loan if it is awaiting  current customer  financial  statements or for
          valid  reasons.  Renewals and  extensions are not granted for the sole
          purpose of keeping a loan current.

     o    On  a  regular  basis,   management  compares  Humboldt  Bancorp  loan
          portfolios to its peer group in various categories.

Non-Performing Assets

        Humboldt  Bancorp's policy is to recognize interest income on an accrual
basis unless the full  collectibility  of principal  and interest is  uncertain.
Loans  that are  delinquent  90 days or more,  unless  well  secured  and in the
process  of  collection,  are placed on  non-accrual  status on a cash basis and
previously  accrued  but  uncollected   interest  is  reversed  against  income.
Thereafter, income is recognized only as it is collected in cash. Collectibility
is determined by considering  the  borrower's  financial  condition,  cash flow,
quality of  management,  the existence of collateral or guarantees and the state
of the local economy.

<PAGE>46


        The  following   table   provides   information   with  respect  to  all
non-performing assets.

<TABLE>
<CAPTION>


                                                                         As of December 31,
                                               -----------------------------------------------------------------
                                                  1995          1996          1997          1998          1999
                                               ---------     ---------     ---------     ---------     ---------

<S>                                            <C>           <C>           <C>           <C>           <C>
Loans on non-accrual status                    $     619     $     218     $     838     $     311     $     767

Loans - leases past due -
  greater than 90 days                               261           159           843           241           282

Restructured loans                                    75             -            23             -             -
                                               ---------     ---------     ---------     ---------     ---------
Total non-performing loans                           955           377         1,704           552         1,049

Other real estate owned                                -           233           148           175           120
                                               ---------     ---------     ---------     ---------     ---------
Total non-performing assets                    $     955     $     610     $   1,852     $     727     $   1,169
                                               =========     =========     =========     =========     =========
Allowance for loan losses                      $   1,868     $   2,146     $   2,371     $   3,055     $   3,354

Ratio of total non-performing
  assets to total assets                            0.49%         0.28%         0.65%         0.23%         0.28%

Ratio of total non-performing
  loans to total loans                              0.81%         0.26%         1.06%         0.29%         0.46%

Ratio of allowance for loan
  losses to total non-performing assets           195.60%       351.80%       128.02%       420.22%       286.91%

</TABLE>

        The increase in non-performing  assets at December 31, 1999, compared to
December  31,  1998,  is  primarily  due to an increase in loans on  non-accrual
status.

        The decrease in non-performing  assets at December 31, 1998, compared to
December 31, 1997, is primarily due to decreases in loans on non-accrual status,
restructured  loans and in loans and leases past due 90 days or more offset by a
small increase in other real estate owned.

        The increase in non-performing  assets at December 31, 1997, compared to
December 31, 1996, is primarily due to increases in loans on non-accrual status,
restructured loans and in loans and leases past due 90 days or more offset by an
increase in other real estate owned.

        The table  below  shows the gross  interest  income that would have been
recorded at December  31, 1999,  and December 31, 1998,  if these loans had been
current  in  accordance  with  their  original  terms  and had been  outstanding
throughout the period or since  origination  if new for part of the period;  and
the amount of interest  that was  included  in net income for the period.  There
were no restructured loans 90 days past due at December 31, 1998, or 1999.

<PAGE>47


                                   Year Ended                 Year Ended
                                December 31, 1998          December 31, 1999
                             ----------------------      --------------------
                              Gross        Interest       Gross      Interest
                              Income        Earned        Income      Earned
                             --------      --------      --------    --------
Non-accrual loans            $ 56,269      $ 19,789      $ 64,588    $ 13,376
Other real estate owned      $ 15,300      $      -      $  9,591    $      -


Potential Problem Loans

        At  December  31, 1999 and 1998,  there were no loans or other  interest
bearing assets classified for regulatory purposes as loss, doubtful, substandard
or special  mention that (i) represent or resulted from trends or  uncertainties
which  management  anticipates  could have a material impact on future operating
results, liquidity or capital resources, or (ii) represented material credits or
assets about which  management had information that would cause serious doubt as
to the ability of the borrower to comply with the repayment terms.

Deposits

        The  following  table  sets  forth  the  average  balances  of  Humboldt
Bancorp's  interest-bearing  deposits,  interest expense, and average rates paid
for the periods indicated:

<TABLE>
<CAPTION>

                                                   Year Ended December 31, 1997                    Year Ended December 31, 1998
                                        ---------------------------------------------   -------------------------------------------
                                                      Average     Interest    Average                 Average    Interest   Average
                                          Actual      Balance     Expense      Rate      Actual       Balance    Expense     Rate
                                        ---------    ---------    --------    ------    ---------    ---------   --------   ------
                                                                  (Dollars in thousands)

<S>                                    <C>          <C>           <C>                  <C>          <C>          <C>          <C>
Non-interest-bearing deposits          $  70,767    $  59,050     $     -         -%   $  96,884    $  83,965    $     -      0.00%

Interest-bearing accounts:
  Interest-bearing checking               52,003       46,177       1,158      2.51       49,615       51,609      1,061      2.06
  Savings                                 21,952       19,976         359      1.80       21,635       20,985        378      1.80
  Time deposits                          110,464      100,072       5,456      5.45      115,833      114,633      6,126      5.34
                                       ---------    ---------     -------    ------    ---------    ---------    -------    ------
    Total interest-bearing accounts      184,419      166,225       6,973      4.19      187,083      187,227      7,565      4.04
                                       ---------    ---------     -------    ------    ---------    ---------    -------    ------
Total Deposits                         $ 255,186    $ 225,275     $ 6,973      3.10%   $ 283,967    $ 271,192    $ 7,565      2.79%
                                       =========    =========     =======    ======    =========    =========    =======    ======

</TABLE>


<PAGE>48

<TABLE>
<CAPTION>
                                                                Year Ended
                                                             December 31, 1999
                                         --------------------------------------------------
                                                          Average        Interest   Average
                                           Actual         Balance        Expense     Rate
                                         ---------       ---------       -------     -----
                                                      (Dollars in thousands)

<S>                                      <C>             <C>             <C>        <C>
Non-interest-bearing deposits            $ 110,523       $ 106,829       $     -         -%
Interest-bearing accounts:
  Interest-bearing checking                 63,547          56,312           925      1.64
  Savings                                   32,533          24,781           498      2.01
  Time deposits                            172,027         134,608         6,601      4.90
                                         ---------       ---------       -------     -----
    Total interest-bearing accounts        268,107         215,701         8,024      3.72
                                         ---------       ---------       -------     -----
Total Deposits                           $ 378,630       $ 322,530       $ 8,024      2.49%
                                         =========       =========       =======     =====
</TABLE>

        Total  deposits  increased from the year ended December 31, 1998, to the
year ended December 31, 1999, by $94.7 million, or 33.4%. The primary reason for
this increase is the purchase of two CalFed  branches,  with  deposits  totaling
$72.2  million.   Management  attributes  the  remaining  increase  to  Humboldt
Bancorp's  ongoing  marketing  efforts.  Changes  occurred  in the four  deposit
categories:  non-interest-bearing  deposits increased by 14.1%, interest-bearing
demand deposits  increased by 28.1%,  savings  accounts  increased by 50.4%, and
time deposits increased by 48.5%.

        At December 31, 1998, total deposits were $284.0 million, an increase of
$28.8  million or 11.3% from total  deposits of $255.2  million at December  31,
1997.  Deposit growth in 1998 was due primarily to internal  growth and not as a
result of acquisitions.

        Non-interest-bearing  demand  deposits  continued  to  be a  significant
portion of Humboldt  Bancorp's  deposit base. To the extent Humboldt Bancorp can
fund  operations  with  these  deposits,  net  interest  spread,  which  is  the
difference  between  interest  income and interest  expense,  will  improve.  At
December 31, 1999,  non-interest  bearing demand deposits accounted for 29.2% of
total  deposits,  down  slightly from 34.1% as of December 31, 1998. In general,
the growths in  non-interest-bearing  demand  accounts have been  primarily from
acquisitions  and our  Merchant  Bankcard  operations.  Merchant  reserves are a
source  of funds and are held in the event  the  merchant's  customer  returns a
purchased item and is charged-back with the return.

        Interest-bearing  deposits  consist of money market,  savings,  and time
certificate accounts.  Interest-bearing account balances tend to grow or decline
as Humboldt  Bancorp adjusts its pricing and product  strategies based on market
conditions,  including  competing deposit products.  At December 31, 1999, total
interest-bearing  deposit  accounts  were $268.1  million,  an increase of $81.0
million,  or 43.3%,  from December 31, 1998.  Interest-bearing  demand  accounts
increased  $13.9  million,  or 28.1%,  and  decreased  $2.4 million or 4.6% from
December 31, 1998 to 1999 and 1997 to 1998 respectively.

        At  December  31,  1999,  time  certificates  of  deposits  in excess of
$100,000 totaled $68.1 million, or 18.0% of total outstanding deposits, compared
to $46.5 million, or 16.4%, of total outstanding  deposits at December 31, 1998,
and $40.6 million, or 15.9%, of total outstanding deposits at December 31, 1997.
Humboldt  Bancorp has never had  brokered  deposits  and does not intend to seek
these deposits.  All  public-entity  time certificates of deposit are from local
government agencies located in Humboldt and Trinity Counties.

<PAGE>48


        The majority of certificates of deposit in  denominations of $100,000 or
more in the  past  have  tended  to  mature  in less  than  one  year;  however,
management can give no assurance that this trend will continue in the future.

        The following table sets forth, by time remaining to maturity,  all time
certificates of deposit accounts outstanding at December 31, 1999.

                                                   As of
                                                 December 31,
(Dollars in Thousands)                              1999
                                                 -----------
        Three months or less                     $  64,138
        Over three through twelve months            82,481
        Over one year to three years                23,461
        Over three years                             1,947
                                                 ---------
          Total                                  $ 172,027
                                                 =========
Short-Term Borrowings

        The  following  table sets forth  certain  information  with  respect to
Humboldt  Bancorp's  short-term  borrowings as of December 31, 1997,  1998,  and
1999.

<TABLE>
<CAPTION>


                                                                      As of December 31,

                                                            1997            1998          1999
                                                          --------        -------        -------
(Dollars in thousands)

<S>                                                       <C>             <C>            <C>
Amount outstanding at end of period                       $  1,761        $ 3,402        $ 5,316

Weighted average interest rate at end of period               6.18%          6.13%          7.21%

Maximum amount outstanding at any month-end
  and during the year                                     $  1,774        $ 3,461        $ 5,395

Average amount outstanding during the period              $    767        $ 3,011        $ 4,658

Average Weighted average interest rate
  during the period                                           6.19%          6.16%          6.84%

</TABLE>


Shareholders' Equity

        Shareholders'  equity increased $6.3 million during 1999.  Shareholders'
equity at December  31,  1999 was $34.1  million  compared  to $27.8  million at
December 31, 1998.  This is an increase of $4.2 million or 17.8%  compared  with
$23.6 million at December 31, 1997.

        The increase in the year ended December 31, 1999 reflects net income and
comprehensive income of $3.8 million,  $400,000 in exercised stock options, $1.8
million in common stock purchases, and $300,000 in year end tax adjustments.

<PAGE>50

Asset-Liability Management and Interest Rate Sensitivity

        The  operating  income and net income of  Humboldt  Bancorp  depend to a
substantial  extent on "rate  differentials,"  i.e., the difference  between the
income  Humboldt  Bancorp  receives  from loans,  securities  and other  earning
assets,  and the  interest  expense it pays on deposits  and other  liabilities.
Interest income and interest expense is affected by general economic  conditions
and by competition in the marketplace.  Humboldt  Bancorp's interest and pricing
strategies are driven by its  asset-liability  management  analysis and by local
market conditions.

        Humboldt  Bancorp seeks to manage its assets and liabilities to generate
a stable level of earnings in response to changing  interest rates and to manage
its  interest  rate  risk.   Humboldt  Bancorp  further  strives  to  serve  its
communities   and   customers   through   deployment   of  its  resources  on  a
corporate-wide  basis so that  qualified  loan  demands  may be funded  wherever
necessary in its branch  banking  system.  Asset/liability  management  involves
managing the  relationship  between  interest rate sensitive assets and interest
rate sensitive liabilities.

        The interest rate  sensitivity of Humboldt Bancorp is measured over time
and  is  based  on  Humboldt   Bancorp's  ability  to  reprice  its  assets  and
liabilities. The opportunity to reprice assets in the same dollar amounts and at
the same time as liabilities  would minimize  interest rate risk in any interest
rate  environment.  The difference  between the amount of assets and liabilities
repriced at the same time is referred to as the "gap." This gap  represents  the
risk, or opportunity,  in repricing. In general, if more assets than liabilities
are repriced at a given time in a rising rate  environment,  net interest income
would improve,  and in a declining rate  environment,  net interest income would
deteriorate.  If more  liabilities  than  assets  were  repriced  under the same
conditions,  the  opposite  results  would  prevail.  Humboldt  Bancorp is asset
sensitive  and its near term  performance  could be enhanced by rising rates and
negatively  affected by falling  rates due mainly to the  significant  amount of
earning assets tied to prime.

        Interest Rate Risk.  The table below shows the  potential  change in NIM
(before taxes) if rates change as of December 31, 1999. NIM is the "net interest
margin" which is the spread or difference  between  interest-earning  assets and
interest-paying  liabilities.  Humboldt Bancorp's NIM tends to increase if rates
rise, and tends to decline if rates fall. The causes of this exposure are due to
Humboldt  Bancorp's  concentration  of short-term and rate sensitive loans as of
December 31, 1999.

        Economic Risk.  Humboldt  Bancorp also measures the potential  change in
the net present value of Humboldt  Bancorp's net existing assets and liabilities
if rates change (the "economic value of equity" or "EVE").  The table below also
shows the EVE.  Valuing  Humboldt  Bancorp assets and liabilities as of December
31, 1999  determine the EVE,  using a present value cash flow  calculation as if
Humboldt  Bancorp is liquidated.  The EVE declines when rates  increase  because
there are more fixed rate assets than liabilities.  However,  Humboldt Bancorp's
NIM earnings  would also  increase as rates  increased  (from the interest  rate
risk) and this benefit would offset the decline in EVE.

<PAGE>51

                                       % Change in NIM
                    Change in NIM       to Shareholder
  Change in         (In thousands           Equity
Interest Rates         pre-tax)            (pre-tax)         % of EVE
--------------      -------------      ---------------       --------
    +2%                 $  604               1.8%             (12.0)%
    +1%                 $  318               1.0%              (6.0)%
    -1%                 $ (349)             (1.1)%              5.9%
    -2%                 $ (733)             (2.3)%             11.8%

        The  following  table sets  forth the  repricing  opportunities  for the
assets and  liabilities  of Humboldt  Bancorp at December 31,  1999.  Assets and
liabilities are classified by the earliest possible  repricing date or maturity,
whichever comes first.

<TABLE>
<CAPTION>


                                                             Repricing In
                                  -----------------------------------------------------------------

                                     Less       Three        One       Three      Five
                                     Than      Through     Through    Through    Through     Over          Non-
                                    Three      Twelve       Three      Five      Fifteen    Fifteen      Interest
                                    Months     Months       Years      Years      Years      Years       Bearing       Total
                                  ---------   ---------   --------    --------  --------   --------     ---------    ---------

<S>                              <C>         <C>        <C>         <C>        <C>        <C>         <C>           <C>
Assets:                                                             (Dollars in thousands)

  Net Loans                       $  88,295   $  15,585   $ 37,796    $ 46,573  $ 23,797   $ 16,430    $        -    $ 228,476
  Investment Securities               1,697      12,021     59,112      13,411    22,405      5,714             -      114,360
  Federal Funds Sold                 21,375           -          -           -         -          -             -       21,375
  FHLB Stock                              -           -          -           -         -          -         1,000        1,000
  Interest-bearing deposits
    with banks                           20           -          -           -         -          -             -           20
  Non-interest earning assets             -           -          -           -         -          -        58,418       58,418
                                  ---------   ---------   --------    --------  --------   --------     ---------    ---------
Total Assets                      $ 111,387   $  27,606   $ 96,908    $ 59,984  $ 46,202   $ 22,144     $  59,418    $ 423,649
                                  =========   =========   ========    ========  ========   ========     =========    =========
Liabilities:
  Non-interest-bearing deposits   $       -   $       -   $      -    $      -  $      -   $      -     $ 110,523    $ 110,523
  Interest-bearing deposits         160,216      82,484     23,460       1,947         -          -             -      268,107
  Borrowings                             23          70      2,206       3,017         -          -             -        5,316
  Other liabilities                       -           -          -           -         -          -         5,564        5,564
Stockholders' equity                      -           -          -           -         -          -        34,139       34,139
                                  ---------   ---------   --------    --------  --------   --------     ---------    ---------
Total liabilities and
  stockholders' equity            $ 160,239   $  82,554   $ 25,666    $  4,964  $      -   $      -     $ 150,226    $ 423,649
                                  =========   =========   ========    ========  ========   ========     =========    =========
Interest rate sensitivity gap     $ (48,829)  $ (54,948)  $ 71,242    $ 55,019  $ 46,202   $ 22,144
Cumulative interest rate
  sensitivity gap                 $ (48,829)  $(103,777)  $(32,535)   $ 22,484  $ 68,686   $ 90,830

</TABLE>

        The net cumulative  Gap position is slightly  negative in three years or
less since more  liabilities  than  assets  appear to reprice  during  that time
frame.  However, this exposure to increasing rates is mitigated by deposit rates
which are not expected to reprice rapidly in an increasing rate  environment and
a higher than normal level of short-term  cash (not  included in rate  sensitive
assets).  Historically,  Humboldt Bancorp's asset rates change more quickly than
deposit rates, and management feels Humboldt  Bancorp's asset yields will change
more than cost of funds when rates change.

<PAGE>52


        Although the  cumulative  Gap  position  appears  slightly  negative for
assets and  liabilities  repricing  in the next  three  through  twelve  months,
management  believes that Humboldt  Bancorp is somewhat asset  sensitive and has
relatively  low interest  rate risk.  The net interest  margin  should  increase
slightly when rates increase, and shrink somewhat when rates fall. This interest
rate  risk is  driven  by  concentration  of rate  sensitive  variable  rate and
short-term  commercial  loans,  one of Humboldt  Bancorp's major business lines.
Humboldt  Bancorp does have a  significant  amount of fixed rate loans to offset
the  impact  from  repricing  of  short-term  loans.  However,  there  can be no
assurance that  fluctuations in interest rates will not have a material  adverse
impact on Humboldt Bancorp.

Liquidity

        Humboldt  Bancorp's  liquidity  is  primarily a  reflection  of Humboldt
Bancorp's  ability to acquire funds to meet loan demand and deposit  withdrawals
and to service other  liabilities as they come due. Humboldt Bancorp has adopted
policies to  maintain a  relatively  liquid  position to enable it to respond to
changes in the financial  environment and ensure  sufficient funds are available
to meet those needs.  Generally,  Humboldt  Bancorp's major sources of liquidity
are customer deposits, sales and maturities of investment securities, the use of
federal funds markets, and net cash provided by operating activities.  Scheduled
loan repayments are a relatively  stable source of funds,  while deposit inflows
and unscheduled loan prepayments,  which are influenced by general interest rate
levels,  interest rates available on other  investments,  competition,  economic
conditions,  and other factors,  are not.  Liquid asset  balances  include cash,
amounts   due  from  other   banks,   federal   funds   sold,   and   securities
available-for-sale.  To augment liquidity,  Humboldt Bancorp has a Federal Funds
borrowing arrangement with two correspondent banks totaling $10.5 million.

        Additionally, Humboldt Bancorp is a member of the Federal Home Loan Bank
and through membership has the ability to pledge qualifying collateral for short
term (up to six months) and long-term (up to five years) borrowings.  Management
may  use  this  facility  to  fund  loan  advances  by  pledging   single-family
residential   mortgages  and/or  commercial  real  estate  loans  as  qualifying
collateral.

        The  following  table sets forth  certain  information  with  respect to
Humboldt Bancorp's liquidity as of December 31, 1997, 1998, and 1999.

                                              Year Ended December 31,
                                     --------------------------------------
                                         1997           1998         1999
                                     ---------       --------     ---------
                                              (Dollars in thousands)

Cash and due from banks              $  21,442       $ 28,626     $  31,339
Federal funds sold                       3,520          2,250        21,375
Interest earning deposits                3,020          3,020            20
Unpledged securities                    80,180         57,994        87,742
                                     ---------       --------     ---------
  Total liquid assets                $ 108,162       $ 91,890     $ 140,476
                                     =========       ========     =========
Liquid ratios (1)
  Liquid assets to:
    Ending  assets                        38.1%          28.7%         33.2%
    Ending  deposits (2)                  42.4%          32.4%         37.2%

<PAGE>53

(1)     Liquid  assets  include  cash and due from  banks,  federal  funds sold,
        interest-bearing   deposits  and  market  value  of   available-for-sale
        securities less book value of pledged securities.

(2) Less pledged public deposits.

        The  liquidity  ratios  reflect  merchant  reserves  held  primarily  in
non-interest  bearing accounts to fund  charge-backs to Humboldt Bank's Merchant
Bankcard  Department's  merchants and the pledging of  investments  for selected
deposits and current VISA and MasterCard pledging requirements.

        The increase in liquidity at December 31, 1999, compared to December 31,
1998,  is mainly  attributable  to  deposits  acquired  from the  CalFed  branch
purchase acquisitions.  The decrease in liquidity at December 31, 1998, compared
to December 31, 1997, is mainly  attributable to the pledging of investments for
Visa and MasterCard pledging requirements.

        The  analysis of  liquidity  also  includes a review of the changes that
appear in the consolidated  statements of cash flows for the year ended December
31,  1999.  The  statement  of cash flows  includes  operating,  investing,  and
financing  categories.  Operating activities include net income of $4.6 million,
which is adjusted  for noncash  items and  increases or decreases in cash due to
changes  in  certain  assets  and  liabilities.   Investing  activities  consist
primarily of both proceeds from and purchases of  securities,  and the impact of
the net growth in loans.  Financing activities present the cash flows associated
with deposit accounts.

        Part of Humboldt  Bancorp's  normal  lending  activity  involves  making
commitments to extend credit.  One risk associated with the loan  commitments is
the demand on Humboldt  Bancorp's  liquidity  that would result if a significant
portion  of the  commitments  were  unexpectedly  funded at one  time.  Humboldt
Bancorp assesses the likelihood of projected  funding  requirements by reviewing
historical  patterns,  current and forecasted economic conditions and individual
client funding needs. At December 31, 1999, 1998, and 1997 respectively Humboldt
Bancorp had undisbursed  commitments of $75.5 million,  $59.7 million, and $47.2
million. Further, management maintains Unpledged U.S. Government securities that
are available to secure additional  borrowings in the form of reverse repurchase
agreements.  At December 31, 1999, no U.S. Government  Treasuries or Agencies at
market value were available for reverse repurchase agreements. However, Humboldt
Bancorp had U.S.  Government Agency CMOs at market value of approximately  $60.7
million which were Unpledged.  Management  believes that this provides  Humboldt
Bancorp with the necessary liquid assets to satisfy funding  requirements in the
unlikely  event  of  substantially   higher  than  projected   customer  funding
requirements.

Humboldt Bank Plaza

        On June 30, 1998,  Humboldt Bank  purchased from an  unaffiliated  party
approximately  29 acres of property  located at 2500 Fifth  Street,  Eureka,  CA
95501.  The property was purchased as a site for the future  Humboldt Bank Plaza
at a cost of  approximately  $2.9  million.  At December 31, 1999,  the property
contained a building  and a trailer  park.  The trailer park holds a lease which
expires  December  31,  2000,  and which  obligates  it to pay  monthly  rent of
$166.66,  plus  12.5% of its  gross  rental  income  and 0.5% of its  additional
revenues.

        Humboldt Bank is working with an architect and a construction company on
plans to  renovate  the  building  and the  parking  lot so that all of Humboldt
Bancorp's and Humboldt Bank's  administrative  offices and  departments  will be
located at the facility. Further, 20,090 square feet of the Plaza will be leased
to the District  Attorney's Family Support  Division,  a Humboldt County agency.
During the initial year of the lease to the agency, monthly lease income will be
$27,121.

<PAGE>54

        Humboldt Bancorp is internally financing the cost of the acquisition and
the  renovation.  Although the final budget has not been  completed or approved,
the estimated cost to renovate the building to house the administrative  offices
and  departments  is between $3.3  million and $3.9  million.  Humboldt  Bancorp
believes it will save  approximately  $135,000  per year in lease  expenses  and
become more efficient by housing all administrative  offices in one building. In
addition,  Humboldt  Bancorp  expects to sell its  current  property  at 6th & G
Streets, Eureka, California.

Financial Condition

<TABLE>
<CAPTION>


(Dollars in Thousands)           Year Ended December 31,          Increase (Decrease)
                          ---------------------------------    -----------------------
                                                                1998 over    1999 over
                             1997        1998        1999         1997         1998
                          ---------   ---------   ---------    ----------   ----------
<S>                       <C>         <C>         <C>          <C>          <C>
Assets                    $ 284,087   $ 319,975   $ 423,649    $  35,888    $ 103,674
Liabilities               $ 260,533   $ 292,127   $ 389,510    $  31,594    $  97,383
Shareholders' Equity      $  23,554   $  27,848   $  34,139    $   4,294    $  6,291

</TABLE>

Capital Resources

        The Federal Reserve Board and the Federal Deposit Insurance  Corporation
have  established  minimum  requirements  for capital  adequacy for bank holding
companies and member banks. The requirements address both risk-based capital and
leveraged  capital.   The  regulatory  agencies  may  establish  higher  minimum
requirements  if, for example,  a corporation  has previously  received  special
attention or has a high susceptibility to interest rate risk.

        The following  reflects  Humboldt  Bancorp's  various  capital ratios at
December 31, 1999, and 1998, as compared to regulatory minimums:

                                                        Minimum    Minimum Well
                          December 31,  December 31,    Capital    Capitalized
                             1998           1999      Requirement  Requirement
                          ------------  ------------  -----------  -----------
Tier I capital              10.41%         10.90%         4.0%         6.0%
Total risk-based capital    11.66%         12.07%         8.0%        10.0%
Leverage ratio               7.23%          7.50%         4.0%         5.0%

        No regulatory  agency has advised  Humboldt Bancorp that it is deficient
with respect to the Tier 1 leverage-ratio.  Management is unaware of any current
recommendations by regulatory  authorities,  which if implemented,  would have a
material  adverse  impact on future  operating  results,  liquidity  or  capital
resources.

Effects of Inflation

        Assets  and  liabilities  of  financial   institutions  are  principally
monetary in nature.  Accordingly,  interest rates, which generally move with the
rate of inflation,  have a potentially  significant effect on Humboldt Bancorp's
net interest income.  Humboldt Bancorp attempts to limit  inflation's  impact of
rates and net income  margins  through a continuing  asset/liability  management
program.

<PAGE>55

        Year 2000 Issue

        The Year 2000 problem arose when computer  programs were written  having
two  digits  rather  than  four to  define  the  applicable  year.  As a result,
date-sensitive  software and/or hardware might recognize a date having 00 as the
year 1900  rather  than the year  2000.  This could  have  resulted  in a system
failure  or  other   disruption  of  operations  and  impeded  normal   business
activities.

        The total cost  associated  with required  modifications  to become Year
2000 compliant was not material to Humboldt Bancorp's  financial  position.  The
estimated  total  cost of the Year  2000  project  was  approximately  $500,000.
Humboldt  Bancorp has also  expensed  and reserved  $220,000  for possible  loan
losses caused by Year 2000 problems at December 31, 1999.

        Humboldt  Bancorp has completed  all phases of our Year  2000-compliance
project on time and as of February 29, 2000,  has not  encountered  any material
Year 2000 problems.

Impact of Recent Accounting Pronouncements

        In June 1998, the FASB issued SFAS No. 133,  "Accounting  for Derivative
Instruments and Hedging Activities." This statement  establishes  accounting and
reporting standards for derivative instruments and for hedging activities.  This
new standard was amended by SFAS No. 137,  which  defers the  effective  date to
January 1,  2001.  The  adoption  of this  standard  is not  expected  to have a
material impact on the financial statements of Humboldt Bancorp.

        In  October  1998,  the  FASB  issued  SFAS  No.  134,  "Accounting  for
Mortgage-Backed  Securities  Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage  Banking  Enterprise."  SFAS No. 134 amends SFAS No.
65,  "Accounting for Certain Mortgage  Banking  Activities,"  which  establishes
accounting and reporting  standards for selected  activities of mortgage banking
enterprises and other enterprises that conduct operations that are substantially
similar.  SFAS No. 134 requires that after the  Securitization of mortgage loans
held for sale,  the  resulting  mortgage-backed  securities  and other  retained
interests should be classified in accordance with SFAS No. 115,  "Accounting for
Certain  Investments  in Debt and Equity  Securities,"  based on its ability and
intent to sell or hold these  investments.  This new standard is  effective  for
1999 and did not have a material impact on the financial  statements of Humboldt
Bancorp.

        In April 1998,  statement of position 98-5 (SOP 98-5)  "Reporting on the
Costs of Start-up  Activities"  was issued and was effective  beginning in 1999.
The statement requires costs of start-up activities and organization costs to be
expensed as incurred,  and resulted in $192,000 of costs related to the start-up
of Capitol Valley Bank to be expensed.

ITEM 7A. - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See Item 7

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        Financial  statements  meeting the  requirements  of Regulation  S-X are
attached to this report.

<PAGE>56

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE

        During the two most  recent  fiscal  years,  the Company has not changed
accountants  nor  had a  disagreement  with  its  accountants  with  respect  to
accounting principles or practices of financial statement disclosure.

                                    PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS

        The board of directors of Humboldt Bancorp consists of 13 directors. All
of the  directors of Humboldt  Bancorp then in office  immediately  prior to the
completion of the proposed Capitol Thrift and Loan merger will continue to serve
as directors of Humboldt Bancorp.

Board of Directors

        Each of the directors has been elected to serve for the ensuing year and
until his or her  successor is elected and  qualified at the annual  stockholder
meeting of Humboldt  Bancorp for the year 2000.  As of December  31,  1999,  the
directors,  their ages,  and their  principal  occupations  during the past five
years are:

<TABLE>
<CAPTION>

<S>                   <C>    <C>
Ronald F. Angell      57     Attorney and Partner with the firm of Roberts, Hill, Bragg, Angell & Perlman.
                             Board member since 1989.

Marguerite Dalianes   56     Retired President, Dalianes Travel Service.  Board member since 1992.

Gary L. Evans         57     Certified Public Accountant associated with the firm of Aalfs, Evans & Company
                             since 1976.  Board member since 1989.

Lawrence Francesconi  68     Retired.  From 1952 to 1992, owner of Redwood Bootery, retail shoe store.  Board
                             member since 1991.  Chairman of the Board since March 1999.

Clayton R. Janssen    74     Attorney and Partner with the firm of Janssen,  Malloy,  Needham,  Morrison &
                             Reinholtsen LLP. Board member since 1993.

James O. Johnson      71     General Contractor and Owner of Jim Johnson Construction.  Board member since
                             1997.

Theodore S. Mason     57     President and Chief  Executive  Officer of Humboldt Bancorp since 1996 and of
                             Humboldt Bank from 1989 until July 15,  1999.  Board member since 1989.

John C. McBeth        53     President, O & M Industries, since 1964.  Board member since 1991.

Michael L. Renner     46     President, Renner Petroleum.  Board member since 1996.

Jerry L. Thomas       54     Director of Eureka Fisheries, Inc.  Board member since 1998.

Edythe E. Vaissade    61     Retired.  From 1989 to 1997, Vice President, Humboldt Bank.  Board  member since 1998.

Thomas W. Weborg      57     President and Chief Executive Officer of Java City.  Board member November 1999.

John R. Winzler       69     Chairman of the Board of Directors of Winzler & Kelly Consulting Engineers.
                             Board member since 1989.
</TABLE>

<PAGE>57

Executive Officers

        As of December 31, 1999,  the  following  are the names of the executive
officers and significant employees of Humboldt Bancorp and its subsidiaries, and
information concerning each of them:

<TABLE>
<CAPTION>


                                                                   Biographical
   Officer Name       Age         Position                            Sketch

<S>                 <C>     <C>                 <C>
Theodore S. Mason     57    President & Chief    Mr. Mason has been President and Chief
                            Executive Officer    Executive Officer of the Bank/Bancorp since its
                            of Humboldt Bancorp  inception in 1989.  From 1984 to 1989, he was
                                                 an area manager for the Bank of America in the
                                                 North Coast area, headquartered in Eureka.  He
                                                 also served as manager for Bank of America's
                                                 Eureka Main office for approx. five years and
                                                 has been in banking for over 30 years.  Mr.
                                                 Mason is a graduate of the University of San Francisco.

Paul A. Ziegler       41    Executive Vice       Mr. Ziegler joined Bank/Bancorp as the Vice
                            President of         President & Chief Administrative Officer in
                            Humboldt Bancorp     January 1994.  Prior to joining Humboldt Bank
                                                 Mr. Ziegler worked at U.S. Bank of California
                                                 in Eureka, California from 1988 to 1993 as
                                                 their Senior Vice President and Area Manager.
                                                 Mr. Ziegler started his banking career locally
                                                 with Bank of Loleta, last serving in 1988 as
                                                 their Senior Vice President/Chief Financial
                                                 Officer.  Mr. Ziegler is a graduate of the
                                                 University of Southern California.

Alan J. Smyth         66    Senior Vice          Mr. Smyth has been the Senior Vice President
                            President, and       and Chief Financial Officer for the
                            Chief Financial      Bank/Bancorp since September 1989.  From 1981
                            Officer of           to 1985, Mr. Smyth was the Vice President and
                            Humboldt Bancorp     Chief Financial Officer for Great Valley Bank
                                                 and from 1985 to 1989 was the Senior Vice
                                                 President and Chief Financial Officer for
                                                 Redding Bank of Commerce.  Mr. Smyth graduated
                                                 from California Lutheran University in 1974 and
                                                 is a graduate of Pacific Coast School of
                                                 Banking.

Ronald V. Barkley     63    Senior Vice          Mr. Barkley has been the Senior Vice President
                            President and Loan   and Loan Administrator of the Bank/Bancorp
                            Administrator of     since June 1989.  From 1984 to 1989 he served
                            Humboldt Bancorp     as Vice President/Manager of the Real
                                                 Estate/SBA Departments of North Valley Bank in
                                                 Redding, California.  From 1982 to 1984 Mr.
                                                 Barkley served as the President/CEO of Redding
                                                 Savings and Loan Association in Redding,
                                                 California.  Mr. Barkley spent 15 years in
                                                 various management positions with Crocker
                                                 National Bank.  Mr. Barkley graduated from
                                                 Pacific Coast School of Banking in 1980.

<PAGE>58

                                                                   Biographical
   Officer Name       Age         Position                            Sketch


John E. Dalby         41    President and        Mr. Dalby joined Humboldt Bank in October 1991
                            Chief Executive      as Vice President and Manager of the Bank's
                            Officer of           Fortuna Branch and served in that capacity
                            Humboldt Bank        until March of 1993 when he accepted the
                                                 position of Vice President and Manager of the
                                                 Eureka Main Office.  Mr. Dalby was promoted to
                                                 his current position as the President and
                                                 C.E.O. of Humboldt Bank in July of 1999.  Prior
                                                 to his employment with Humboldt Bank Mr. Dalby
                                                 worked for Bank of America from November 1983
                                                 to January 1987 and again from July 1990 to
                                                 October 1991; he was also employed by
                                                 Centennial Bank in Springfield, Oregon from
                                                 January 1987 to February 1989.  Mr. Dalby
                                                 attended the University of Oregon and Northwest
                                                 Christian College, both in Eugene, Oregon and
                                                 holds a B.S. Degree in Business
                                                 Administration-Finance (1982).

Richard L. Whitsell   54    President and        Prior to his appointment as the President &
                            Chief Executive      C.E.O. of Capitol Valley Bank, Mr. Whitsell
                            Officer of Capitol   served as the Vice President and Branch
                            Valley Bank,         Administrator for Humboldt Bank since 1997.
                            Roseville,           From 1994 through May 1997 he was Vice
                            California           President & Branch Manager for the Bank's
                                                 Arcata Office.  From January 1992 through May
                                                 1996 he was Senior Vice President and Branch
                                                 Administrator for U.S. Bank in Reno, Nevada.
                                                 Prior to that he was Senior Vice President and
                                                 Branch Administrator for Bank of America in
                                                 Reno, Nevada for approximately two years and
                                                 has been in banking for over 27 years.  Mr.
                                                 Whitsell holds a Bachelor of Science degree
                                                 from Sacramento State and a Masters
                                                 (equivalent) from University of Virginia.

Kenneth J. Musante    34    Vice President and   Vice President and Manager of Humboldt Bank's
                            Manager of the       Merchant Bankcard Department since 1993. Mr.
                            Merchant Bankcard    Musante was previously employed by Wells Fargo
                            Department of        Bank holding several management positions with
                            Humboldt Bank        the Credit Card division in California. Mr.
                                                 Musante  holds  a  Bachelor  of Science degree from
                                                 the University of California, Davis and  a  Masters
                                                 degree in Business Administration from Golden Gate
                                                 University.
</TABLE>

<PAGE>59

Compensation of Directors

        Directors of Humboldt Bancorp who are also employees of Humboldt Bancorp
or its  subsidiaries do not receive  compensation  for their service on Humboldt
Bancorp's  Board of Directors.  During 1998, for the period January through May,
non-employee  directors  of  Humboldt  Bancorp  received a fee of $400 per board
meeting attended and $200 per board meeting not attended; Loan Committee members
received $150 per meeting  attended;  and all other committee  members  received
$100 per meeting attended.  Since June 1998,  non-employee directors of Humboldt
Bancorp  received  a fee of $700 per  board  meeting  attended,  $200 per  board
meeting not  attended,  $450 per special board  meeting  attended,  and $200 per
meeting for all committee meetings attended.

Limitation of Liability and Indemnification

     The Articles of  Incorporation  and Bylaws of Humboldt  Bancorp provide for
indemnification of agents including  directors,  officers and employees,  to the
maximum  extent  allowed by  California  law  including  the use of an indemnity
agreement.  Humboldt  Bancorp  Articles  further  provide for the elimination of
director  liability  for  monetary  damages  to the  maximum  extent  allowed by
California  law. The  indemnification  law of the state of California  generally
allows indemnification in matters not involving the right of the corporation, to
an agent of the  corporation  if that person acted in good faith and in a manner
that person reasonably  believed to be in the best interests of the corporation,
and in the case of a criminal  matter,  had no  reasonable  cause to believe the
conduct of that person was  unlawful.  California  law,  with respect to matters
involving the right of a corporation,  allows indemnification of an agent of the
corporation,  if the agent acted in good faith, in a manner that person believed
to be in the best interests of the  corporation and its  shareholders;  provided
that there will be no indemnification for:

     o    amounts  paid in settling or otherwise  disposing of a pending  action
          without court approval;

     o    expenses  incurred in defending a pending action,  which is settled or
          otherwise disposed of without court approval;

     o    matters  in which the  agent  will be  determined  to be liable to the
          corporation  unless and only to the extent that the court in which the
          proceeding is or was pending will determine that the agent is entitled
          to be indemnified; or

     o    other matters specified in the California General Corporation Law.

     Humboldt  Bancorp's  Articles and Bylaws provide that Humboldt Bancorp will
to the  maximum  extent  permitted  by law  have  the  power  to  indemnify  its
directors,  officers and employees.  Humboldt Bancorp's Bylaws also provide that
Humboldt Bancorp will have the power to purchase and maintain insurance covering
its directors, officers and employees against any liability asserted against any
of them and incurred by any of them,  whether or not Humboldt Bancorp would have
the power to  indemnify  them for those  liabilities  under  the  provisions  of
applicable law or the provisions of Humboldt Bancorp's Bylaws.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors,  officers or persons controlling Humboldt
Bancorp,  Humboldt  Bancorp  has been  informed  that in the opinion of the SEC,
indemnification  is against public policy as expressed in the Securities Act and
is therefore unenforceable.

<PAGE>60

                                HUMBOLDT BANCORP
                             EXECUTIVE COMPENSATION

        As  to  Humboldt  Bancorp's  Chief  Executive  Officer  and  each  other
executive  officer of Humboldt  Bancorp and  Humboldt  Bank who  received  total
compensation in excess of $100,000 in 1999 (the "named executive officers"), the
following  table  sets  forth  all cash  and  non-cash  compensation  (including
bonuses, other annual compensation,  deferred compensation, and options granted)
received from Humboldt  Bancorp and Humboldt Bank for services  performed in all
capacities during the last three years.

Summary Compensation

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>


                                                  Annual Compensation               Long Term Compensation
                                         --------------------------------------   -------------------------
                                                                    Other
                                                                    Annual           Deferred       Options
Name and Principal Position   Year         Salary   Bonus(1)    Compensation(2)   Compensation(3)   Granted
-------------------------------------------------------------------------------   -------------------------
<S>                           <C>        <C>       <C>              <C>              <C>             <C>
Theodore S. Mason             1999       $125,000  $157,310         $1,987           $150,000        12,095
President and Chief           1998       $125,000  $ 58,809         $2,434           $150,000         6,050
Executive Officer             1997       $125,000  $ 45,990         $1,782           $125,000         6,655

Alan J. Smyth                 1999       $ 85,000  $ 27,285         $3,018           $ 90,475         5,971
Senior Vice President and     1998       $ 85,000  $ 12,932         $3,704           $ 90,000             0
Chief Financial Officer       1997       $ 85,000  $  1,865         $2,107           $ 75,000         6,352

Ronald V. Barkley             1999       $ 85,000  $ 46,782         $1,863           $ 44,880         5,978
Senior Vice President and     1998       $ 85,000  $ 35,550         $2,279           $ 45,000             0
Loan Administrator            1997       $ 85,000  $ 34,991         $1,882           $ 60,000         6,352

Paul A. Ziegler               1999       $ 96,865  $ 63,677         $  714           $      -         4,308
Executive Vice President      1998       $ 77,000  $ 51,340         $  738           $      -             0
                              1997       $ 77,000  $ 25,825         $  554           $      -        15,427

</TABLE>


(1)     Includes amounts paid to Messrs.  Mason, Smyth,  Barkley, and Ziegler as
        provided by Humboldt Bank's Incentive Bonus Plan.

(2)     Includes amounts imputed to Messrs.  Mason, Smyth,  Barkley, and Ziegler
        as income for tax  purposes as provided  by Humboldt  Bank's  automobile
        program and Humboldt Bank's life insurance program.

(3)     Includes  amounts of salary or bonus deferred by Messrs.  Mason,  Smyth,
        and Barkley as provided by Humboldt Bank's Deferred  Compensation  Plan.
        The  amounts  in this  column are not  included  in the Salary and Bonus
        columns.

        Employment Contracts

        Humboldt Bank entered into an employment agreement with Mr. Mason on May
1, 1989,  whereby Mr. Mason  agreed to serve as Humboldt  Bank's  President  and
Chief Executive Officer. The term of this agreement was extended on December 10,
1996,  to January 1, 2001.  The  agreement has been revised to refer to Humboldt
Bancorp  effective July 15, 1999 and has been extended to January 1, 2002. Under
the terms of the  agreement,  Mr.  Mason is entitled to receive a base salary of
$125,000 per year and an incentive  bonus based on a percentage  ranging from 4%
to 2.5% of Humboldt  Bancorp's  pre-tax net profits as provided by an  Incentive

<PAGE>61

Bonus Plan.  During his term of  employment,  Mr.  Mason may be  reimbursed  for
travel, meals, entertainment expenses, service to charitable organizations,  and
membership in selected committees and other  organizations.  In addition,  he is
eligible for typical  employee  benefits  including paid  vacation,  sick leave,
medical insurance, and the use of an automobile owned by Humboldt Bank.

     Humboldt Bank entered into an employment agreement with Mr. Smyth on August
19,  1989,  whereby Mr.  Smyth  agreed to serve as Humboldt  Bank's  Senior Vice
President and Chief Financial Officer.  Mr. Smyth's employment agreement was for
an initial  three  years to be  automatically  renewed for  successive  one-year
terms. Mr. Smyth's current annual salary is $85,000 per annum. In addition,  Mr.
Smyth is entitled to a percentage of Humboldt  Bank's  pre-tax  profits  ranging
from 2% to .5%.

     Humboldt Bank entered into an employment agreement with Mr. Barkley on June
1, 1989,  whereby Mr.  Barkley  agreed to serve as Humboldt  Bank's  Senior Vice
President and Loan Administrator.  Mr. Barkley's employment agreement was for an
initial two years to be automatically renewed for successive one-year terms. Mr.
Barkley's  current annual salary is $85,000 per annum. In addition,  Mr. Barkley
is entitled to a percentage of Humboldt  Bancorp's  pre-tax profits ranging from
2% to .5%.

Benefit Plans

     Retirement  Plan:  Currently,  Humboldt  Bank  has a  defined  contribution
retirement  plan  covering  substantially  all  of  Humboldt  Bank's  employees.
Management is in the process of adopting the plan as a Humboldt Bancorp Plan for
which  Humboldt  Bank and  Capitol  Valley Bank will sign on as  sponsors.  Bank
contributions  to the plan are made at the  discretion of the Board of Directors
in an amount  not to exceed  the  maximum  amount  deductible  under the  profit
sharing plan rules of the Internal Revenue Service.  Employees may elect to have
a portion of their  compensation  contributed to the plan in conformity with the
requirements  of Section  401(k) of the  Internal  Revenue  Code.  Salaries  and
employee  benefits expense includes Bank  contributions to the plan of $223,000,
$189,000, and $134,000, during 1999, 1998, and 1997, respectively.

     Director Fee Plan: Humboldt has adopted the Humboldt Bank Director Fee Plan
(the "Fee Plan").  The Fee Plan  permits  each  director of Humboldt to elect to
receive his/her  director's fees in the form of Bancorp common stock, cash, or a
combination  of Bancorp common stock and cash, and to elect to defer the receipt
of any of the foregoing until the end of his/her term as a Bancorp director.  If
deferral is elected,  the amount of the  director's  fees will be credited to an
account on behalf of the director.  However,  such crediting shall  constitute a
mere promise on the part of Humboldt Bank and Bancorp to  pay/distribute on this
account.  The account is otherwise  unsecured and  unfunded,  and subject to the
general claims of creditors of Humboldt Bank and Bancorp.  The Fee Plan provides
for the issuance of up to 40,000 shares of Bancorp  common stock.  The amount of
director fees deferred was $86,000,  $58,000,  and $43,000,  in 1999,  1998, and
1997,  respectively.  At December 31, 1999,  the liability for amounts due under
this plan totaled $196,000 or approximately 20,083 shares of stock.

     Employee Stock Bonus Plan:  Currently,  Humboldt Bank has an Employee Stock
Bonus  Plan,  which is funded  annually at the sole  discretion  of the Board of
Directors.  Management  is in the  process  of  adopting  the plan as a Humboldt
Bancorp Plan for which  Humboldt  Bank would be a sponsor.  Capitol  Valley Bank
would not  initially  become a sponsor.  Funds are  invested  in Bancorp  common
stock, when available,  which is purchased at the current market price on behalf
of all employees except the executive officers of Bancorp. The compensation cost
recognized for 1999, 1998, and 1997 was $20,000 each year. In addition, $100,000
was transferred from the profit-sharing plan into this plan.

<PAGE>62

        Post-Employment  Benefit  Plans and Life  Insurance  Policies:  Humboldt
Bancorp  and  Humboldt  Bank  have  entered  into  Officer  Salary  Continuation
Agreements and Deferred Compensation Agreements with key executive officers. The
Officer  Salary  Continuation  Agreements  provide for  payments in the event of
retirement,  death,  disability or change in control. The Deferred  Compensation
Agreements  allow the  employees to defer a portion of current  compensation  in
exchange for Humboldt  Bancorp and Humboldt Bank's  commitment to pay a deferred
benefit  at  retirement.  Deferred  compensation  is  vested  as to the  amounts
deferred.  If death occurs prior to or during  retirement,  Bancorp will pay the
employee's  beneficiary or estate the benefits set forth in the agreement.  Both
the  Officer  Salary  Continuation  Agreements  and  the  Deferred  Compensation
Agreements are unfunded although, as discussed below, Bancorp has purchased life
insurance policies in connection with the implementation.

        The Officer Salary Continuation Agreements provide that upon retirement,
or death prior to retirement,  the following executive officers will be entitled
to the  following  benefits:  Theodore S. Mason - $50,000 per year for 15 years;
Alan J. Smyth - $40,000 per year for 10 years;  Ronald V.  Barkley - $40,000 per
year for 10 years; Paul A. Ziegler - $75,481 for 15 years;  Kenneth J. Musante -
$78,542 per year for 15 years. In the event of disability,  these employees will
be  entitled  to the  following  amounts  payable  over the same  period  unless
otherwise noted: Theodore S. Mason - $387,739, Alan J. Smyth - $252,237,  Ronald
V.  Barkley - $252,237,  Paul A. Ziegler - $17,638 in a lump sum or as otherwise
agreed to,  and  Kenneth J.  Musante -  $112,653  in a lump sum or as  otherwise
agreed to.  Salary  continuation  benefits  may also be paid if  termination  is
without cause or due to a change in control of Bancorp.  Otherwise,  no benefits
are paid upon termination.

        The Officer Salary  Continuation  Agreements  define a change in control
as:

        as that event that would be  required to be reported in response to Item
        6(e) of Schedule 14A under the 1934 Act or in response to any other form
        or report to the regulatory agencies or governmental  authorities having
        jurisdiction  over Humboldt Bank or any stock  exchange on which Bancorp
        shares are listed which requires the reporting of a change in control;

        any merger, consolidation  or reorganization of Humboldt Bank or Bancorp
        in which Humboldt Bank or Bancorp does not survive;

        any  sale,  lease  exchange,   mortgage,   pledge,   transfer  or  other
        disposition  of any  assets  of  Humboldt  Bank  or  Bancorp  having  an
        aggregate  fair market  value of 50% of the total value of the assets of
        Humboldt Bank or Bancorp,  reflected in the most recent balance sheet of
        Humboldt Bank or Bancorp;

        any  person as  defined  in the 1934 Act is or  becomes  the  beneficial
        owner, directly or indirectly, of Bancorp securities representing 25% or
        more  of  the  combined  voting  power  of  Bancorp's  then  outstanding
        securities;

        in any one-year period,  individuals who at the beginning of such period
        constitute  the Board of Directors of Humboldt Bank or Bancorp cease for
        any  reason  to  constitute  at least a  majority  thereof,  unless  the
        election, or the nomination for election by Bancorp's  shareholders,  of
        each new director is approved by a vote of at least 3/4 of the directors
        then still in office who were  directors at the beginning of the period;
        or

<PAGE>63

        a majority of the members of the Board of Directors of Humboldt  Bank or
        Bancorp in office  prior to the  happening  of any event  determines  in
        their sole  discretion  that as a result of such event  there has been a
        change in control.

In the event of a change of control the executive  officers  named below will be
entitled to full vesting of their benefits under the Officer Salary Continuation
Agreements, and if an executive officer in connection with the change of control
is terminated  without cause, he shall be entitled to the fully vested payments.
The fully vested payments are as follows:  Theodore S. Mason - $387,739, Alan J.
Smyth - $252,237,  Ronald V. Barkley - $252,237,  Paul A. Ziegler - $17,638, and
Kenneth J. Musante - $112,653.

        Bancorp  has  purchased  single  premium  life  insurance   policies  in
connection with the  implementation  of these salary  continuation  and deferred
compensation   plans.  The  policies  provide  protection  against  the  adverse
financial  effects  from  their  death and  provide  income  to offset  expenses
associated  with the  plans.  The  specified  employees  are  insured  under the
policies, but Bancorp is the owner and beneficiary.  At December 31, 1999, 1998,
and 1997,  the cash  surrender  value of these  policies  totaled  approximately
$5,156,700, $4,943,000, and $4,810,000, respectively.

        At December  31,  1999,  1998,  and 1997,  liabilities  recorded for the
estimated present value of future salary continuation and deferred  compensation
benefits  totaled   approximately   $2,716,000,   $2,038,000,   and  $1,451,000,
respectively.  In the  event of death or  under  other  selected  circumstances,
Bancorp is contingently  liable to make future payments greater than the amounts
recorded  as  liabilities.  Based on  present  circumstances,  Bancorp  does not
consider it probable that this contingent  liability will be incurred or that in
the event of death, a liability  would be material after  consideration  of life
insurance benefits.

        Stock Option Plan: Bancorp has a stock option plan under which incentive
and non-statutory stock options, as defined under the Internal Revenue Code, may
be  granted.  Options  representing  456,255  shares  of  Bancorp's  issued  and
outstanding  no par value  common stock may be granted  under the Bancorp  stock
option plan by the Board of Directors or a committee of the board, to directors,
officers,  and key,  full-time  employees at an exercise price not less than the
fair market  value of the shares on the date of grant.  As of December  31, 1999
and 1998  respectively,  283,173 and 202,249 options were outstanding  under the
Bancorp  Stock  Option Plan.  Options may have an exercise  period of not longer
than ten years.  Incentive stock options have vesting schedules of 33% per year,
and non-statutory  stock options vest immediately.  In addition,  as of December
31, 1999, 671,762 options are outstanding as a result of Bancorp's assumption of
Humboldt Bank options granted prior to the reorganization.

        The Stock Option Plan contains an antidilution provision in the event of
a private  or  public  offering  of  Bancorp  common  stock.  Under the  current
antidilution  provision,  certain holders of outstanding options will be granted
additional  options to  purchase  shares of Bancorp  common  stock  based on the
number of shares  issued in the  proposed  merger with Global  Bancorp,  and the
Bancorp  public  offering.  Additional  options  will be  granted  to a  current
employee,  officer or director who holds options so as to maintain an optionee's
proportionate  interest in Bancorp by reason of his or her unexercised  portions
of options as before the issuance. However, the total number may not exceed that
available for grant under the Bancorp Stock Option Plan and the former  Humboldt
Bank Stock Option Plan.

        The exercise for such additional  options shall be the fair market value
of the Bancorp common stock on the date of the additional grant,  except that in
the event of an incentive stock option,  the exercise price shall be 110% if the
optionee is an employee  owning more than 10% of the total combined voting power
of all classes of stock of Bancorp.

<PAGE>64

        The  following  tables  set  forth  the  number of  options  granted  to
Bancorp's executive officers during 1999 and the number and value of unexercised
options held by these executive officers as of the end of 1999.

                         OPTION GRANTS AND EXERCISES BY
                            EXECUTIVE OFFICER IN 1999

<TABLE>
<CAPTION>


                                % of Total                                   Potential Realizable
                                  Options                                      Value at Assumed
                                Granted to     Exercise                     Annual Rates of Stock
                     Options   Employees in   Price per     Expiration         Price Appreciation
       Name          Granted       1999         Share           Date       for Option Term 5% / 10%

<S>                    <C>        <C>           <C>        <C>              <C>        <C>
Theodore S. Mason      5,500      13.33%        $ 9.27     Jan 21, 2009      $ 83,049 / $132,242

Theodore S. Mason      6,595      30.32%       $ 14.32     Sep 23, 2009      $153,833 / $244,954

Alan J. Smyth          2,750       6.67%        $ 9.27     Jan 21, 2009      $ 41,525 / $ 66,121

Alan J. Smyth          3,221      14.81%       $ 14.32     Sep 23, 2009      $ 75,132 / $119,636

Ronald V. Barkley      2,750       6.67%        $ 9.27     Jan 21, 2009      $ 41,525 / $ 66,121

Ronald V. Barkley      3,228      14.84%       $ 14.32     Sep 23, 2009      $ 75,296 / $119,896

Paul A. Ziegler        2,750        6.67%       $ 9.27     Jan 21, 2009      $ 41,525 / $ 66,121

Paul A. Ziegler        1,558        7.16%      $ 14.32     Sep 23, 2009      $ 36,342 / $ 57,868

</TABLE>


                       AGGREGATED OPTION EXERCISES IN 1999

<TABLE>
<CAPTION>

                                                       Number of Unexercised  Value of Unexercised
                          Shares                       Options at Year-end       In-the-money
                       Acquired on      Value             (Exercisable/          (Exercisable/
        Name             Exercise      Realized            Unexercisable)        Unexercisable)

<S>                    <C>            <C>               <C>       <C>        <C>          <C>
Theodore S. Mason             -               -          153,237 / 12,237     $1,246,644 / $31,381

Alan J. Smyth            12,468        $118,320           75,937 / 5,068      $  613,785 / $13,583

Ronald V. Barkley        12,375        $138,451           76,102 / 5,068      $  615,308 / $13,583

Paul A. Ziegler               -               -           30,970 / 8,218      $  182,693 / $18,392

</TABLE>


The value of  unexercised  in-the-money  options is based on a per share  market
value of $11.59 as of December 31, 1999 as quoted on the OTC bulletin board.

<PAGE>65

Compensation Committee Interlocks and Insider Participation

     The Personnel Committee is composed of Ronald F. Angell (Chairman), Mike L.
Renner,  Marguerite  Dalianes,  Larry Francesconi,  John R. Winzler and Theodore
Mason.  Mr. Mason is president of Humboldt Bancorp and was president of Humboldt
Bank. Ms. Dalianes is a former owner of Dalianes Worldwide Travel Service, which
during  1999  provided  travel  services  in the amount of  $77,000 to  Humboldt
Bancorp and its subsidiaries.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Principal Shareholders and Share Ownership of Management and Directors

     The  following  table sets forth,  as of December 31, 1999,  the number and
percentage of shares of Bancorp's  outstanding common stock before and after the
proposed stock offering,  which are beneficially owned,  directly or indirectly,
by:

     o    each shareholder  that owns more than 5% of the outstanding  shares;
     o    each of Bancorp's directors;
     o    Bancorp's named executive officers; and
     o    all of Bancorp's directors and executive officers 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 the
indicated  person has sole or shared voting or investment power and shares which
he/she has the right to acquire  within 60 days of  December  31,  1999.  Unless
otherwise  indicated,  the persons listed have sole voting and investment  power
over the shares beneficially owned. Management is not aware of any arrangements,
which may, at a subsequent date, result in a change of control of Bancorp.

                                    Shares
                                 Beneficially
Name                              Owned(1)(2)   Options (3)     Percentage
                                 ------------   ----------      ----------

Francis and Dorothy Dutra           273,725        1,453            5.26%
1964 South Maru Road
Arcata, California  95521

Ronald F. Angell                    106,409       37,009            2.04%

Marguerite Dalianes                  58,421       36,854            1.12%

Gary L. Evans                       112,574       67,401            2.16%

Lawrence Francesconi                 84,748       31,380            1.63%

Clayton R. Janssen                   68,026       14,389            1.31%

James O. Johnson                     23,081        7,113                *

John C. McBeth                      124,594        7,113            2.39%

<PAGE>66

                                    Shares
                                 Beneficially
Name                              Owned(1)(2)   Options (3)     Percentage
                                 ------------   ----------      ----------

Michael L. Renner                    54,963       10,578            1.06%

John R. Winzler                     134,044       52,181            2.58%

Jerry L. Thomas                      14,476        4,250                *

Edythe E. Vaissade                   97,126       73,375            1.87%

Thomas W. Weborg                     10,266        1,100                *

Theodore S. Mason                   200,266      165,474            3.85%

Alan J. Smyth                       101,786       81,005            1.96%

Ronald V. Barkley                    81,670       81,170            1.57%

Paul A. Ziegler                      39,188       39,188                *

All Directors and Executive       1,311,638      709,580           25.20%
Officers (16 Persons)

*       Less than 1%.

(1)     We have determined  beneficial ownership in accordance with the rules of
        the  Securities  and Exchange  Commission.  In  computing  the number of
        shares  beneficially  owned by a person and the percentage  ownership of
        that person,  shares of common stock subject to options or warrants held
        by that person that are currently exercisable within 60 days of December
        31, 1999, are deemed outstanding.  Such shares,  however, are not deemed
        outstanding  for the purpose of computing  the  percentage  ownership of
        each other person. Except as indicated in the footnote to this table and
        pursuant to applicable  community  property laws, each shareholder named
        in the table has sole voting power and investment  power with respect to
        the shares set forth opposite such shareholder's name.

(2)     Reflects an increase in the number of shares of common stock as a result
        of  the  10%  stock  dividend  declared  on January 11, 2000, payable on
        February 7, 2000.

(3)     Represents  options that may be exercised  within sixty days. The number
        of shares of common  stock  subject to options is included in the Shares
        Beneficially Owned column.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        Bancorp  has entered  into a $3.8  million  line of credit with  Bancorp
Financial  Services,  in which Bancorp owns a 50%  interest.  The line of credit
expires May 2, 2000,  and bears interest at the prime rate published in the Wall
Street Journal plus 0.50%  (currently  9.00%) per annum.  During the years ended
December 31, 1999, 1998 and 1997, the maximum amount  outstanding under the line
of credit was $3.0, $3.0 million and $2.0 million respectively.  Further, during
the years ended December 31, 1999, 1998 and 1997,  Humboldt Bank purchased $2.0,
$2.0 million and $6.8 million in leases generated by Bancorp Financial Services.

        Some  of the  Bancorp's  directors  and  executive  officers  and  their
immediate families, as well as the companies,  with which they may have interest
in,  have had loans  with  Humboldt  Bank in the  ordinary  course of the Bank's
business. In addition, Humboldt Bank expects to have loans with these persons in

<PAGE>67


the future.  In  management's  opinion,  all these loans and commitments to lend
were made in the  ordinary  course of  business,  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.
The outstanding balance under extensions of credit by Humboldt Bank to directors
and executive  officers of Bancorp and Humboldt  Bank and to the companies  that
these  directors  and  executive  officers may have an interest was  $4,865,000,
$6,451,000,   and   $6,218,000  as  of  December  31,  1999,   1998,  and  1997,
respectively.

        Bancorp has, and in the future will,  enter into  transactions  with our
directors or companies in which they may have an interest. During the year ended
December  31, 1999,  1998,  and 1997 no  transaction  exceeded  $60,000,  except
Bancorp engaged the services of Dalianes  Worldwide  Travel  Service,  which was
formerly owned by Marguerite Dalianes, one of Bancorp's directors.  Fees paid to
Dalianes  Worldwide Travel Service for the year-ended  December 31, 1999 and1998
amounted to $77,000.and $73,000 respectively.

ITEM 14 - EXHIBITS AND REPORTS ON FORM 8-K

(a)     Exhibits

2.1     Second Restatement of Agreement and Plan of Reorganization and Merger by
        and among Bancorp,  Humboldt  Bank,  Global Bancorp and Capitol Thrift &
        Loan Association, as amended, dated as of November 5, 1999.
        (2)

3.1     Amended and Restated Articles of Incorporation of Bancorp. (3)

3.2     Bylaws of Bancorp. (3)

10.1    Amended Employment Agreement with Theodore S. Mason. (4)

10.2    Director Fee Plan. (5)

10.3    Amended Bancorp Stock Option Plan. (5)

10.4    Salary Continuation Agreement with Theodore S. Mason. (5)

10.5    Salary Continuation Agreement with Alan J. Smyth. (5)

10.6    Salary Continuation Agreement with Ronald V. Barkley. (4)

10.7    Salary Continuation Agreement with Paul A. Ziegler. (4)

10.8    Director-Shareholder's Agreement in the Global Bancorp and Bancorp
        merger. (1)

10.9    Affiliate's Agreement. (1)

10.10   Trust Indenture. (1)

10.11   Deferred Compensation Agreement with Theodore S. Mason. (1)

<PAGE>68

10.12   Deferred Compensation Agreement with Alan J. Smyth. (1)

10.13   Deferred Compensation Agreement with Ronald V. Barkley. (1)

10.14   Plan of Reorganization with Silverado Merger Co. (1)

10.15   Loan Purchase Agreement. (2)

10.16   Impound Agreement. (2)

11.1    Statement re computation of per share earnings is included in note N to
        the financial statements.

21.1    Subsidiaries of  Bancorp are Humboldt Bank, a California state chartered
        bank,  Capitol  Valley  Bank, a California  state  chartered  bank,  and
        Bancorp Financial Services, a California corporation.

23.1    Consent of Richardson & Company, independent accountants for Bancorp.

(1)  Incorporated by reference to Bancorp's  Registration  Statement on Form S-1
     filed on November 12, 1999.

(2)  Incorporated  by reference to Bancorp's  Pre-Effective  Amendment  No. 1 on
     Form S-4 filed on February 11, 2000

(3)  Incorporated  by reference to the Company's Form 10-KSB for the fiscal year
     ended December 31, 1996 and previously filed with the Commission.

(4)  Incorporated by reference to the Company's  Definitive  Proxy Statement for
     the Company's  1996 Annual  Meeting  previously  filed with the  Commission
     (and,  with respect to the Stock Option  Plan,  as amended  pursuant to the
     terms set forth in the  Definitive  Proxy  Statement for the Company's 1998
     Annual Meeting).

(5)  Incorporated  by reference to the  Company's  Form 10-K for the fiscal year
     ended December 31, 1998, and previously filed with the Commission.

(b)     Reports on Form 8-K

        No reports on Form 8-K were filed for the three  months  ended  December
31, 1999.


<PAGE>69

                                   SIGNATURES

        In  accordance  with  Section  13 or  15(d)  of the  Exchange  Act,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                              HUMBOLDT BANCORP



Date: March 30, 2000                  By:  THEODORE S. MASON
                                          -----------------------------------
                                          Theodore S. Mason
                                          President & Chief Executive Officer

        In  accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated.


THEODORE S. MASON                           ALAN J. SMYTH
-----------------------------------         -----------------------------------
Theodore S. Mason, President, Chief         Alan J. Smyth, Senior Vice President
Executive Officer & Director                & Board Secretary
(Principal Executive Officer)               (Principal Financial Officer)

RONALD F. ANGELL                            MARGUERITE DALIANES
-----------------------------------         -----------------------------------
Ronald F. Angell, Chairman of the Board     Marguerite Dalianes, Director

GARY L. EVANS                               LAWRENCE FRANCESCONI
-----------------------------------         -----------------------------------
Gary L. Evans, Director                     Lawrence Francesconi, Director

CLAYTON R. JANSSEN                          JAMES O. JOHNSON
-----------------------------------         -----------------------------------
Clayton R. Janssen, Director                James O. Johnson, Director

JOHN C. MCBETH                              MICHAEL L. RENNER
-----------------------------------         -----------------------------------
John C. McBeth, Director                    Michael L. Renner, Director

JERRY L. THOMAS                             EDYTHE E. VAISSADE
-----------------------------------         -----------------------------------
Jerry L. Thomas, Director                   Edythe E. Vaissade, Director

JOHN R. WINZLER                             THOMAS W. WEBORG
-----------------------------------         -----------------------------------
John R. Winzler, Director                   Thomas W. Weborg, Director


<PAGE>F-1

                          INDEPENDENT AUDITOR'S REPORT



Board of Directors
Humboldt Bancorp and Subsidiaries
Eureka, California


We have audited the accompanying consolidated balance sheets of Humboldt Bancorp
(Bancorp)  and  Subsidiaries  as of December 31, 1999 and 1998,  and the related
consolidated statements of operations,  changes in stockholders' equity and cash
flows for each of the three years in the period ended  December 31, 1999.  These
financial  statements are the  responsibility of the Bancorp'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 consolidated  financial position of Humboldt Bancorp
and Subsidiaries at December 31, 1999 and 1998, and the consolidated  results of
their operations and their  consolidated  cash flows for each of the three years
in the period ended  December 31, 1999, in conformity  with  generally  accepted
accounting principles.


Richardson & Company
Sacramento, California

January 14, 2000

<PAGE>F-2


                        HUMBOLDT BANCORP AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                           December 31, 1999 and 1998
                             (dollars in thousands)


<TABLE>
<CAPTION>


                                                                                1999        1998
                                                                             ---------   ---------

<S>                                                                        <C>           <C>
ASSETS
   Cash and due from banks                                                   $  31,339   $  28,626
   Interest-bearing deposits in other banks                                         20       3,020
   Federal funds sold                                                           21,375       2,250
   Investment securities, at fair value                                        115,360      77,802
   Loans held for sale                                                           2,147       7,677
   Loans and lease financing receivables, net of
      allowance for loan and lease losses and
      deferred loan fees                                                       222,975     178,361
   Premises and equipment, net                                                   9,750       7,950
   Accrued interest receivable and other assets                                 20,683      14,289
                                                                             ---------   ---------
                                                              TOTAL ASSETS   $ 423,649   $ 319,975
                                                                             =========   =========

LIABILITIES
   Deposits
      Noninterest-bearing                                                    $ 110,523   $  96,884
      Interest-bearing                                                         268,107     187,083
                                                                             ---------   ---------
                                                            Total Deposits     378,630     283,967
   Accrued interest payable and other liabilities                                5,564       4,758
   Long-term debt                                                                5,316       3,402
                                                                             ---------   ---------
                                                         TOTAL LIABILITIES     389,510     292,127

   Commitments and contingencies (see accompanying notes)


STOCKHOLDERS' EQUITY
   Common stock, no par value; 50,000,000 shares
      authorized, 4,731,093 shares in 1999 and
      1,787,954 shares in 1998 issued and outstanding                           28,405      25,877
   Retained earnings                                                             6,088       1,485
   Accumulated other comprehensive income                                         (354)        486
                                                                             ---------   ---------
                                                TOTAL STOCKHOLDERS' EQUITY      34,139      27,848
                                                                             ---------   ---------
                                                     TOTAL LIABILITIES AND
                                                      STOCKHOLDERS' EQUITY   $ 423,649   $ 319,975
                                                                             =========   =========
</TABLE>


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

<PAGE>F-3

                        HUMBOLDT BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

              For the years ended December 31, 1999, 1998 and 1997
                             (dollars in thousands)

<TABLE>
<CAPTION>


                                                                    1999         1998         1997
                                                                  --------     --------     --------
<S>                                                              <C>          <C>          <C>
INTEREST INCOME
   Interest and fees on loans and leases                          $ 19,186     $ 18,762     $ 15,961
   Interest and dividends on investment securities
      Taxable                                                        3,667        3,239        2,700
      Exempt from Federal income tax                                   875          739          569
      Dividends                                                        106           78           83
   Interest on federal funds sold                                    1,316          512          612
   Interest on deposits in other banks                                  90          174          128
                                                                  --------     --------     --------
                                         Total Interest Income      25,240       23,504       20,053
INTEREST EXPENSE
   Interest on deposits                                              8,024        7,565        6,973
   Interest on long-term debt and other borrowings                     321          177           51
                                                                  --------     --------     --------
                                        Total Interest Expense       8,345        7,742        7,024
                                                                  --------     --------     --------
                                           NET INTEREST INCOME      16,895       15,762       13,029
   Provision for loan and lease losses                               1,046        2,124          773
                                                                  --------     --------     --------
                                     NET INTEREST INCOME AFTER
                                        PROVISION FOR LOAN AND
                                                  LEASE LOSSES      15,849       13,638       12,256
OTHER INCOME
   Fees and other income                                            16,652        9,731        6,911
   Service charges on deposit accounts                               2,411        2,097        1,300
   Net gain (loss) on sale of loans                                    695          645         (204)
   Net investment securities (loss) gains                             (235)                      102
                                                                  --------     --------     --------
                                            Total Other Income      19,523       12,473        8,109
OTHER EXPENSES
   Salaries and employee benefits                                   11,866        9,151        6,806
   Net occupancy and equipment expense                               3,023        2,711        2,466
   Other expenses                                                   13,605        7,716        6,224
                                                                  --------     --------     --------
                                          Total Other Expenses      28,494       19,578       15,496
                                                                  --------     --------     --------
                                    Income Before Income Taxes       6,878        6,533        4,869
   Provision for income taxes                                        2,271        2,517        1,611
                                                                  --------     --------     --------
                                                    NET INCOME    $  4,607     $  4,016     $  3,258
                                                                  ========     ========     ========
                                          NET INCOME PER SHARE    $    .91     $    .82     $    .69
                                                                  ========     ========     ========
                      NET INCOME PER SHARE---ASSUMING DILUTION    $    .83     $    .75     $    .61
                                                                  ========     ========     ========
</TABLE>


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

<PAGE>F-4

                        HUMBOLDT BANCORP AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

              For the years ended December 31, 1999, 1998 and 1997
                             (dollars in thousands)


<TABLE>
<CAPTION>
                                                                                           Accumulated
                                                                                              Other
                                  Comprehensive        Common Stock        Retained       Comprehensive
                                      Income        Shares     Amount      Earnings           Income        Total
                                   ------------   ---------   --------     --------       -------------    --------

<S>                              <C>            <C>         <C>          <C>               <C>           <C>
Balance at January 1, 1997                        1,410,767   $ 17,179     $  2,060          $  361        $ 19,600

10% stock dividend                                  143,110      3,113       (3,113)
Fractional shares purchased                             (5)                     (5)
Stock options exercised and
  related tax benefit                               22,665         317                                          317
Comprehensive income:
  Net income                       $    3,258                                 3,258                           3,258
  Other comprehensive
    income, net of tax:
    Unrealized holding
      gains on securities
      available-for-sale
      arising during the
      year, net of taxes
      of $274                             384                                                   384             384
                                   ----------     ---------   --------     --------          ------        --------
Total comprehensive income         $    3,642
                                   ==========
               BALANCE AT
        DECEMBER 31, 1997                         1,576,542     20,609        2,200             745          23,554

10% stock dividend                                  160,110      4,723       (4,723)
Fractional shares purchased                                                      (8)                             (8)
Stock options exercised
  and related tax benefit                            51,302        545                                          545
Comprehensive income:
  Net income                       $    4,016                                 4,016                           4,016
  Other comprehensive
    loss, net of tax:
    Unrealized holding
      losses on securities
      available-for-sale
      arising during the
      year, net of taxes
      of $185                            (259)                                                 (259)           (259)
                                   ----------     ---------   --------     --------          ------        --------
Total comprehensive income         $    3,757
                                   ==========
               BALANCE AT
        DECEMBER 31, 1998                         1,787,954     25,877        1,485             486          27,848

                                   (Continued)


<PAGE>F-5


                        HUMBOLDT BANCORP AND SUBSIDIARIES

     CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (Continued)

              For the years ended December 31, 1999, 1998 and 1997
                             (dollars in thousands)

                                                                                           Accumulated
                                                                                              Other
                                  Comprehensive        Common Stock        Retained       Comprehensive
                                      Income        Shares     Amount      Earnings           Income        Total
                                   ------------   ---------   --------     --------       -------------    --------

5 for 2 stock split                               2,719,653
Fractional shares purchased                                                $     (4)                       $     (4)
Sale of stock                                       153,652   $  1,833                                        1,833
Stock options exercised
   and related tax benefit                           69,834        695                                          695
Comprehensive income:
   Net income                      $    4,607                                 4,607                           4,607
   Other comprehensive
      loss, net of tax:
      Unrealized holding
        losses on securities
        available-for-sale
        arising during the
        year, net of taxes
        of $619                          (877)
   Less:  reclassification
        adjustment, net of
        taxes of $26                       37
                                   ----------
   Other comprehensive
        income, net of
        taxes                            (840)                                               $ (840)           (840)
                                   ----------     ---------   --------     --------          ------        --------
Total comprehensive income         $    3,767
                                   ==========
               BALANCE AT
        DECEMBER 31, 1999                         4,731,093   $ 28,405     $  6,088          $ (354)       $ 34,139
                                                  =========   ========     ========          ======        ========

</TABLE>

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

<PAGE>F-6

                        HUMBOLDT BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

              For the years ended December 31, 1999, 1998 and 1997
                             (dollars in thousands)

<TABLE>
<CAPTION>

                                                                 1999            1998            1997
                                                              ----------       ---------      ---------
<S>                                                         <C>               <C>            <C>
OPERATING ACTIVITIES
   Net income                                                 $    4,607       $   4,016      $   3,258
   Adjustments to reconcile net income to net
      cash provided by operating activities:
        Provision for loan and lease losses                        1,046           2,124            773
        Depreciation                                               1,543           1,586          1,565
        Loss(gain) on sale of investments                            235                           (102)
        Loss on sale of OREO                                          52
        Amortization and other                                     1,717           1,517          1,390
        Equity in income of subsidiary                              (450)           (259)           (22)
        Decrease (increase) in loans held for sale                 5,530          (7,629)            15
        Increase in interest receivable and
           other assets                                           (2,218)           (734)        (1,422)
        Increase in interest payable and other
           liabilities                                               806           1,355          1,913
                                                              ----------       ---------      ---------
                                    NET CASH PROVIDED BY
                                    OPERATING ACTIVITIES          12,868           1,976          7,368
INVESTING ACTIVITIES
   Net decrease (increase) in interest-
        bearing deposits with banks                                3,000                         (3,000)
   Net (increase) decrease in federal funds sold                 (19,125)          1,270          3,050
   Proceeds from maturities and sales
        of investment securities available-for-sale               36,441          28,169         22,261
   Purchases of investment securities available-for-sale         (76,656)        (27,967)       (62,711)
   Net increase in loans and leases                              (45,654)        (23,370)       (15,491)
   Purchases of premises and equipment                            (2,638)         (3,901)        (1,100)
   Investment in partnership/subsidiary                           (1,242)            (91)        (2,000)
   Proceeds from the sale of OREO                                    123             322            139
   Premium paid on deposits purchased                             (2,355)                        (1,040)
                                                              ----------       ---------      ---------
                                        NET CASH USED BY
                                    INVESTING ACTIVITIES        (108,106)        (25,568)       (59,892)
FINANCING ACTIVITIES
   Net increase in deposit accounts                               93,832          28,781         62,535
   Net proceeds from long-term debt and notes payable              2,000           1,700          1,000
   Payments on long-term debt and notes payable                      (86)            (59)           (14)
   Proceeds from issuance of common stock                          2,209             362            203
   Fractional shares purchased                                        (4)             (8)            (5)
                                                              ----------       ---------      ---------
                                    NET CASH PROVIDED BY
                                    FINANCING ACTIVITIES          97,951          30,776         63,719
                                                              ----------       ---------      ---------
                                    NET INCREASE IN CASH
                                      AND DUE FROM BANKS           2,713           7,184         11,195
   Cash and due from banks at beginning of year                   28,626          21,442         10,247
                                                              ----------       ---------      ---------
                                       CASH AND DUE FROM
                                    BANKS AT END OF YEAR      $   31,339       $  28,626      $  21,442
                                                              ==========       =========      =========

                                   (Continued)


<PAGE>F-7

                        HUMBOLDT BANCORP AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

              For the years ended December 31, 1999, 1998 and 1997
                             (dollars in thousands)

                                                                 1999            1998            1997
                                                              ----------       ---------      ---------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

   Cash paid during the year for:
      Interest expense                                        $    7,972       $   7,755      $   6,940
      Income taxes                                            $    2,921       $   2,830      $   1,809

SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:

   Stock dividend                                             $                $   4,723      $   3,113
   Net change in unrealized gains on securities
      available-for-sale                                      $   (1,432)      $    (444)     $     658
   Net change in deferred income taxes on
      unrealized gains on securities available-
      for-sale                                                $      592       $     185      $    (274)
   Deposit liabilities assumed in exchange
      for assets acquired in connection
      with purchase of branches                               $      831                      $      75
   Loans transferred to OREO                                  $      120       $     349      $      54

</TABLE>


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

<PAGE>F-8

                        HUMBOLDT BANCORP AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                        December 31, 1999, 1998 and 1997


NOTE A--SIGNIFICANT ACCOUNTING POLICIES

Business:  Humboldt Bancorp (Bancorp), formed in 1995, is a bank holding company
whose  principal  activity is the ownership and  management of its  wholly-owned
subsidiaries,   Humboldt  Bank  and  Capitol  Valley  Bank.  Humboldt  Bank  was
incorporated  on March 13, 1989 and opened for  business on  September  13, 1989
Capitol  Valley  Bank was  incorporated  on  December  17,  1998 and  opened for
business on March 3, 1999.  Bancorp and the Banks operate under California state
charters and are subject to regulation,  supervision and regular  examination by
the Federal Reserve Bank,  Department of Financial  Institutions and the Federal
Deposit  Insurance  Corporation.  The  regulations of these agencies govern most
aspects of the  Banks'  business.  The  accounting  and  reporting  policies  of
Humboldt Bancorp and  Subsidiaries  conform with generally  accepted  accounting
principles and general practices within the banking industry.

Principles of Consolidation:  The consolidated  financial statements include the
accounts of the Bancorp and its  wholly-owned  subsidiaries,  Humboldt  Bank and
Capitol Valley Bank. All material  intercompany  accounts and transactions  have
been eliminated.

Nature of  Operations:  Bancorp is locally  owned and  operated  and its primary
service  area  is  the   communities   of  Northern   California.   Through  its
subsidiaries,  Bancorp's  business is primarily focused on servicing the banking
needs of individuals living and working in the Bancorp primary service areas and
local  businesses,  including  retail,  professional  and  real  estate  related
enterprises in those service areas.  Bancorp offers a broad range of services to
individuals  and businesses  with an emphasis upon  efficiency and  personalized
attention.  Bancorp provides a full line of consumer  services,  and also offers
specialized  services  to  small  businesses,   middle  market  companies,   and
professional  firms, such as courier services and appointment  banking.  Bancorp
offers personal and business checking and savings accounts (including individual
interest-bearing   negotiable  orders  of  withdrawal  ("NOW")  accounts  and/or
accounts combining checking and savings accounts with automatic transfers),  IRA
and Keogh  accounts,  time  certificates of deposit and direct deposit of social
security,  pension  and  payroll  checks.  It also makes  available  commercial,
construction, accounts receivable, inventory, automobile, home improvement, real
estate, office equipment,  leasehold improvement, lease receivable financing and
other consumer loans (including  overdraft  protection lines of credit),  drafts
and  standby  letters of credit,  credit  card  activities  to both  individuals
(including both secured and unsecured credit cards) and merchants and travelers'
checks (issued by an independent entity).

Use of Estimates:  The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Investment Securities:  Securities are classified as held-to-maturity if Bancorp
has both the intent  and  ability to hold  those  debt  securities  to  maturity
regardless  of  changes  in market  conditions,  liquidity  needs or  changes in
general economic  conditions.  These securities are carried at cost adjusted for
amortization  of premium and  accretion  of  discount,  computed by the interest
method over their contractual lives.

Securities are classified as available-for-sale if Bancorp intends to hold those
debt  securities  for an  indefinite  period  of time,  but not  necessarily  to
maturity. Any decision to sell a security classified as available-for-sale would
be based on various factors,  including significant movements in interest rates,
changes in the maturity mix of Bancorp assets and liabilities,  liquidity needs,
regulatory  capital   considerations  and  other  similar  factors.   Securities
available-for-sale are carried at fair value. Unrealized holding gains or losses

<PAGE>F-9


                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)

are  reported as increases or  decreases  in  stockholders'  equity,  net of the
related deferred tax effect.  Realized gains or losses,  determined on the basis
of the cost of specific securities sold, are included in earnings.

The Bancorp's investments in mortgage-backed  securities represent participating
interests in pools of long-term first mortgage loans  originated and serviced by
issuers of the  securities.  Mortgage-backed  securities  are  carried at unpaid
principal  balances,  adjusted for unamortized  premiums and unearned discounts.
Premiums and discounts are amortized  using methods  approximating  the interest
method  over  the  remaining  period  to  contractual  maturity,   adjusted  for
anticipated prepayments.

Loans and Leases Held for Sale:  Bancorp sells  mortgage  loans,  the guaranteed
portion  of  Small  Business  Administration  (SBA)-guaranteed  loans  and  loan
participations  (with  servicing  retained)  for  cash  proceeds  equal  to  the
principal  amount of loans,  participation  or leases  with  yield  rates to the
investor  based upon the current  market rate. In accordance  with  Statement of
Financial  Standards  (SFAS) No. 125,  Accounting for Transfers and Servicing of
Financial  Assets and  Extinguishment  of Liabilities,  Bancorp records an asset
representing  the right to  service  loans for  others  when it sells a loan and
retains the servicing  rights.  The total cost of  originating or purchasing the
loans is allocated  between the loan and the  servicing  rights,  based on their
relative fair values.  Fair value is estimated by discounting  estimated  future
cash flows from the  servicing  assets  using  discount  rates that  approximate
current market rates and using current  expected future  prepayment  rates.  The
servicing  rights  are  amortized  in  proportion  to,  and over the  period of,
estimated net servicing income, assuming prepayments.

SFAS No. 125 also required the assessment of all  capitalized  servicing  rights
for  impairment  based on current  fair value of those  rights.  For purposes of
evaluating and measuring  impairment,  Bancorp stratifies servicing rights based
on the type and interest rates of the underlying  loans.  Impairment is measured
as the  amount by which the  servicing  rights for a stratum  exceed  their fair
value.

A premium  over the  adjusted  carrying  value is received  upon the sale of the
guaranteed  portion  of an SBA  loan.  Bancorp's  investment  in an SBA  loan is
allocated among the sold and retained portions of the loan based on the relative
fair  value  of each  portion  at the  time of loan  origination,  adjusted  for
payments and other  activities.  Because the portion  retained does not carry an
SBA guarantee,  part of the gain  recognized on the sold portion of the loan may
be deferred and  amortized  as a yield  enhancement  on the retained  portion in
order to obtain a market equivalent yield.

Loans  and  leases  held for sale are  recorded  at the  lower of cost or market
determined on an aggregate basis.

Loans and Lease Financing Receivables: Loans and leases are stated at the amount
of unpaid principal,  less the allowance for losses,  net deferred loan fees and
costs and unearned  income.  Interest on loans is accrued and credited to income
based on the principal amount outstanding.  Unearned income on installment loans
is  recognized  as  income  over  the  term of the  loans  using a  method  that
approximates the interest method.

Bancorp's leasing operations consist principally of the leasing of point-of-sale
terminals, printers for credit card vouchers and related equipment. Bancorp also
has  purchased  small  equipment  leases  from  Bancorp  Financial  Services,  a
subsidiary of the Bancorp.  All of Bancorp's leases are classified and accounted
for as direct financing leases.  Under the direct financing method of accounting
for leases, the total net rentals  receivable under the lease contracts,  net of
unearned income,  are recorded as a net investment in direct  financing  leases,
and the  unearned  income  is  recognized  each  month as it is  earned so as to
produce a constant periodic rate of return on the unrecovered investment.

<PAGE>F-10


                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loan origination fees and certain direct  origination and acquisition  costs are
capitalized  and recognized as an adjustment of the yield on the related loan or
lease.  Amortization  is  discontinued  when  the loan or  lease  is  placed  on
nonaccrual status.

Beginning  in 1997,  credit  card  origination  costs were  deferred  and netted
against the related credit card fee, if any, and the net amount was amortized on
a  straight-line  basis over the initial  privilege  period.  Fees  received and
marketing  costs  incurred in  connection  with  unsuccessful  efforts to create
credit  card  relationships  were  recorded  as  revenue  and  expense  when the
refundable  period  expired.   Amounts  paid  to  third-party  direct  marketing
specialists  related to successful  efforts to create credit card  relationships
were deferred and netted against related fees and all other amounts are recorded
as expenses in the period the services were  performed.  Annual service fees are
deferred and amortized over the credit card privilege period.

Allowance  for Loan and Lease  Losses:  The  allowance is  maintained at a level
which,  in the opinion of  management,  is adequate  to absorb  probable  losses
inherent in the loan,  including credit card receivables,  and lease portfolios.
Credit  losses  related to  off-balance-sheet  instruments  are  included in the
allowance  for loan and lease  losses  except if the loss meets the criteria for
accrual under  Statement of Financial  Accounting  Standard No. 5, in which case
the  amount is  accrued  and  reported  separately  as a  liability.  Management
determines the adequacy of the allowance based upon reviews of individual loans,
recent loss experience, current economic conditions, the risk characteristics of
the various  categories  of loans and leases and other  pertinent  factors.  The
allowance is based on estimates,  and ultimate  losses may vary from the current
estimates.  These  estimates are reviewed  quarterly and, as adjustments  become
necessary,  they are  reported  in  earnings in the periods in which they become
known.  Loans and leases  deemed  uncollectible  are  charged to the  allowance.
Credit card  receivables  are charged to the allowance when they become 120 days
past due.  Provisions for losses and  recoveries on loans and leases  previously
charged off are added to the allowance.

Commercial  loans are  considered  impaired,  based on current  information  and
events,  if it is probable  that Bancorp will be unable to collect the scheduled
payments of principal or interest when due according to the contractual terms of
the loan agreement.  Allowances on impaired loans are  established  based on the
present value of expected  future cash flows  discounted at the loans  effective
interest  rate or for  collateral-dependent  loans,  on the  fair  value  of the
collateral. Cash receipts on impaired loans are used to reduce principal.

Income  Recognition  on Impaired  and  Nonaccrual  Loans and  Leases:  Loans and
leases,  including  impaired  loans and  leases,  are  generally  classified  as
nonaccrual  if they are past due as to  maturity  or  payment  of  principal  or
interest  for a period of more than 90 days,  unless  such  loans and leases are
well-secured  and in the process of collection.  If a loan or lease or a portion
of a loan or lease is  classified  as doubtful or is partially  charged off, the
loan or lease is classified as nonaccrual.  Loans that are on a current  payment
status or past due less than 90 days may also be  classified  as  nonaccrual  if
repayment in full of principal and/or interest is in doubt.

Loans and leases  may be  returned  to accrual  status  when all  principal  and
interest amounts contractually due (including arrearages) are reasonably assured
of  repayment  within an  acceptable  period of time,  and there is a  sustained
period  of  repayment  performance  by the  borrower,  in  accordance  with  the
contractual terms of interest and principal.

<PAGE>F-11

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)

While a loan or lease is classified as nonaccrual and the future  collectibility
of the recorded  balance is doubtful,  collections of interest and principal are
generally  applied as a  reduction  to  principal  outstanding.  When the future
collectibility  of the  recorded  balance is  expected,  interest  income may be
recognized on a cash basis.

In the case where a  nonaccrual  loan or lease had been  partially  charged off,
recognition of interest on a cash basis is limited to that which would have been
recognized  on the  recorded  balance at the  contractual  interest  rate.  Cash
interest  receipts in excess of that amount are  recorded as  recoveries  to the
allowance  for loan and lease  losses  until prior  charge-offs  have been fully
recovered.

Premises  and  Equipment:  Premises  and  equipment  are  stated  at cost,  less
accumulated  depreciation.  The  provision for  depreciation  is computed by the
straight-line method over the estimated useful lives of the related assets.

Foreclosed Real Estate: Foreclosed real estate includes both formally foreclosed
property  and  in-substance   foreclosed   property.   In-substance   foreclosed
properties are those properties for which Bancorp has taken physical possession,
regardless of whether formal  foreclosure  proceedings  have taken place. At the
time of  foreclosure,  foreclosed  real  estate is  recorded at the lower of the
carrying  amount or fair value less cost to sell,  which becomes the  property's
new  basis.  Any  write-downs  based  on the  asset's  fair  value  at  date  of
acquisition  are charged to the  allowance for loan losses.  After  foreclosure,
valuations  are  periodically  performed  by  management  and the real estate is
carried at the lower of their new cost basis or fair value minus estimated costs
to sell. Revenue and expenses from operations and subsequent  adjustments to the
carrying amount of the property are included in income (loss) on foreclosed real
estate.

Intangible   Assets:   The  premiums   paid  to  acquire  the  deposits  of  the
McKinleyville, Arcata, Weaverville, Willow Creek, Loleta, Garberville, Ukiah and
Eureka (Burre Center) branches were allocated to core deposit  intangibles based
on the results of valuation studies performed to determine the fair value of the
deposit base acquired.  Core deposit  intangibles  are being  amortized over the
estimated remaining life of the related deposits of 8 to 10 years.

Investment in Unconsolidated Subsidiary: Humboldt Bank, along with another bank,
formed a  California  corporation,  Bancorp  Financial  Services,  Inc.  for the
purpose of operating an equipment  leasing  company.  In January 1997,  Humboldt
Bank  contributed  capital  totaling  $2,000,000  for a  50%  interest  in  this
corporation.  The  investment is accounted for using the equity  method.  During
1998, this investment was transferred to the Bancorp.

Investments in Limited Partnerships: Bancorp owns approximately 99% interests in
two limited  partnerships  that own and  operate  affordable  housing  projects.
Investment in these projects  serves as an element of Bancorp's  compliance with
the Community  Reinvestment Act and Bancorp receives tax benefits in the form of
deductions for operating losses and tax credits.  The tax credits may be used to
reduce taxes currently payable or may be carried back one year or forward twenty
years to recapture or reduce taxes. Bancorp uses the equity method of accounting
for the  partnerships'  operating  results and tax  credits are  recorded in the
years they became available to reduce income taxes.

Income Taxes:  Provisions for income taxes are based on amounts  reported in the
statements of operations (after exclusion of non-taxable income such as interest
on state and  municipal  loans and  securities)  and include  deferred  taxes on
temporary  differences  in  the  recognition  of  income and expense for tax and

<PAGE>F-12


                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)

financial  statement  purposes.  Deferred taxes are computed using the asset and
liability  method.  Deferred tax assets and  liabilities  are recognized for the
future tax  consequences  attributable  to  differences  between  the  financial
statement  carrying  amounts of assets and liabilities and their  respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
expected  to apply to  taxable  income  in the  years in which  those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and  liabilities  of a change in tax rates is recognized in income in the
period that includes the enactment date.  Deferred tax assets are recognized for
deductible  temporary  differences  and tax  credit  carryforwards,  and  then a
valuation  allowance is  established  to reduce that deferred tax asset if it is
"more likely than not" that the related tax benefits will not be realized.

Advertising:  Advertising costs are charged to operations in the year incurred.

Net Income Per Share: Net income per share is computed by dividing net income by
the weighted  average  number of common  shares  outstanding  during the period,
after giving  retroactive  effect to stock dividends and splits.  Net income per
share---assuming  dilution  is computed  similar to net income per share  except
that the  denominator  is increased to include the number of  additional  common
shares that would have been outstanding if the dilutive  potential common shares
had been issued.  Included in the  denominator  is the dilutive  effect of stock
options computed under the treasury method.

Off-Balance-Sheet  Financial  Instruments:  In the  ordinary  course of business
Bancorp has entered into off- balance-sheet  financial instruments consisting of
commitments to extend credit,  commitments  under credit card  arrangements  and
standby  letters of credit.  Such  financial  instruments  are  recorded  in the
financial statements when they become payable.

Cash and Cash  Equivalents:  For the purpose of presentation in the Statement of
Cash Flows,  cash and cash  equivalents are defined as those amounts included in
the balance sheet caption "Cash and due from banks."

Recently  Issued  Accounting  Standards:  In June 1998,  Statement  of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities"  (Statement  No. 133),  was issued.  Statement  No. 133  establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts,  by requiring that an entity
recognize  those items as assets or  liabilities  in the  statement of financial
position and measure them at fair value.  Statement  No. 137,  issued June 1999,
defers the effective  date of Statement No. 133 to January 1, 2001.  The Bancorp
will adopt this  Statement as of January 1, 2001 and has made no  assessment  of
the potential impact of adopting the Statement at this time.

In October 1998, Statement No. 134,  "Accounting for Mortgage-Backed  Securities
Retained after the  Securitization of Mortgage Loans Held for Sale by a Mortgage
Banking  Enterprise"  was issued.  Statement  No. 134 amends  Statement  No. 65,
"Accounting  for  Certain  Mortgage  Banking   Activities,"   which  establishes
accounting and reporting  standards for selected  activities of mortgage banking
enterprises and other enterprises that conduct operations that are substantially
similar.  Statement No. 134 requires that after the  securitization  of mortgage
loans held for sale, the resulting mortgage-backed securities and other retained
interests should be classified in accordance with Statement No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," based on its ability and
intent to sell or hold these  investments.  This new standard is  effective  for
1999 and did not have a material impact on the financial statements of Bancorp.

<PAGE>F-13

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE A--SIGNIFICANT ACCOUNTING POLICIES (Continued)

In April 1998, Statement of Position 98-5 ("SOP 98-5"),  "Reporting on the Costs
of Start-Up  Activities" was issued. The Statement is effective for fiscal years
beginning  after  December 15, 1998.  The Statement  requires  costs of start-up
activities  and  organization  costs to be  expensed  as  incurred.  The Bancorp
adopted SOP 98-5 effective  January 1, 1999, which resulted in $192,000 in costs
related to the start-up activities and organization costs of Capitol Valley Bank
being expensed.


NOTE B--RESTRICTIONS ON CASH AND DUE FROM BANKS AND INTEREST-BEARING DEPOSITS IN
OTHER BANKS

Cash and due from banks include  amounts Bancorp is required to maintain to meet
certain average  reserve and  compensating  balance  requirements of the Federal
Reserve.  The total  requirements at December 31, 1999 and 1998 were $14,064,000
and $10,936,000, respectively.

Interest-bearing  deposits in other banks  totaling  $3,000,000  were pledged to
MasterCard  International as of December 31, 1998 to secure the full performance
of all of  Bancorp's  payment  obligations  to  MasterCard  in  connection  with
Bancorp's MasterCard membership.


NOTE C--INVESTMENT SECURITIES

The amortized cost of investment securities and their approximate fair values at
December 31 were as follows (dollars in thousands):

<TABLE>
<CAPTION>


                                                       Amortized     Unrealized    Unrealized        Fair
                                                          Cost         Gains         Losses          Value
                                                       ---------      -------       -------        ---------

<S>                                                  <C>             <C>           <C>           <C>
December 31, 1999:

Available-for-Sale
   U.S. Government and agency securities               $   3,551                    $    14        $   3,537
   Municipal securities                                   19,614      $   211           324           19,501
   Collateralized mortgage obligations issued
      by U.S. government agencies                         87,316          233           652           86,897
   Corporate bonds                                           625                                         625
   Mortgage-backed securities                              3,855                         55            3,800
   Equity securities                                       1,000                                       1,000
                                                       ---------      -------       -------        ---------
                    Total available-for-sale           $ 115,961      $   444       $ 1,045        $ 115,360
                                                       =========      =======       =======        =========
</TABLE>

<PAGE>F-14

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE C--INVESTMENT SECURITIES (Continued)


<TABLE>
<CAPTION>


                                                       Amortized     Unrealized    Unrealized        Fair
                                                          Cost         Gains         Losses          Value
                                                       ---------      -------       -------        ---------

<S>                                                  <C>             <C>           <C>            <C>
December 31, 1998:

Available-for-Sale
   U.S. Government and agency securities               $   3,000      $    13                      $   3,013
   Municipal securities                                   16,227          890       $     7           17,110
   Collateralized mortgage obligations issued
      by U.S. government agencies                         56,682          286           353           56,615
   Equity securities                                       1,062            2                          1,064
                                                       ---------      -------       -------        ---------
                    Total available-for-sale           $  76,971      $ 1,191       $   360        $  77,802
                                                       =========      =======       =======        =========

</TABLE>


The  maturities  of  investment  securities at December 31, 1999 were as follows
(dollars in thousands):

                                                     Amortized        Fair
                                                       Cost           Value
                                                    ---------       ---------
Amounts maturing in:
      Three months or less                          $   1,697       $   1,697
      Over three months through twelve months          11,999          12,021
      After one year through three years               59,417          59,112
      After three years through five years             13,458          13,411
      After five years through fifteen years           18,715          18,605
      After fifteen years                               9,675           9,514
      Equity securities                                 1,000           1,000
                                                    ---------       ---------
                                                    $ 115,961       $ 115,360
                                                    =========       =========

The amortized cost and fair value of  collateralized  mortgage  obligations  are
presented by average life in the preceding  table.  Expected  maturities  differ
from  contractual  maturities  because  borrowers  may have the right to call or
prepay obligations without call or prepayment penalties.

Proceeds from sales of  investment  securities  available-for-sale  during 1999,
1998 and 1997 were $6,986,000,  $445,550, and $12,418,000,  respectively.  Gross
gains and losses on those sales were  $32,000 and  $267,000 in 1999 and $108,000
and  $6,000  in  1997,  respectively.  There  were no  gains  or  losses  on the
investment securities sold in 1998.

Investment  securities  with an amortized cost of  approximately  $3,551,000 and
$3,000,000  and an  approximate  market value of  $3,537,000  and  $3,013,000 at
December 31, 1999 and 1998, respectively,  were pledged to meet the requirements
of the  Federal  Reserve  and the U. S.  Department  of  Justice.  In  addition,
investment  securities  with an amortized cost of  approximately  $2,593,000 and
$4,878,000  and an  approximate  market value of  $2,609,000  and  $4,804,000 at
December  31,  1999 and 1998,  respectively,  were  pledged  to  secure  certain
deposits.   Furthermore,   investment  securities  with  an  amortized  cost  of
approximately  $3,698,000  and  $5,289,000  and an  approximate  market value of
$3,703,000  and  $5,224,000  at  December  31,  1999 and 1998,  were  pledged as
collateral  for an  advance  from the  Federal  Home  Loan  Bank.  In  addition,
investment  securities with an amortized cost of  approximately  $24,186,000 and

<PAGE>F-15

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE C--INVESTMENT SECURITIES (Continued)

$10,188,000  and an approximate  market value of $23,975,000  and $10,229,000 at
December 31, 1999 and 1998, respectively, were pledged to Visa and Mastercard to
secure the full performance of all of Bancorp's payment  obligations to Visa and
Mastercard in connection with Bancorp's Visa and Mastercard membership.


NOTE D--LOANS AND LEASE FINANCING RECEIVABLES, NET

The  components of loans and lease  financing  receivables in the balance sheets
were as follows at December 31 (dollars in thousands):

                                                         1999        1998
                                                      ---------    --------

  Real estate--construction and land development      $  22,118    $  20,667
  Real estate--commercial and agricultural               99,053       80,197
  Real estate--family and multifamily residential        43,038       27,549
  Commercial, industrial and agricultural                39,295       33,981
  Lease financing receivables, net of unearned
    income of $1,203,000 and $1,896,000 in
    1999 and 1998, respectively                          17,202        9,867
  Credit card receivables                                 3,456        5,672
  Consumer loans, net of unearned income of
    $1,000 in 1998                                        1,938        2,110
  State and political subdivisions                          707        1,512
  Other                                                     509          585
                                                      ---------    ---------
                                                        227,316      182,140
  Deferred loan fees                                       (987)        (724)
  Allowance for loan and lease losses                    (3,354)      (3,055)
                                                      ---------    ---------
                                                      $ 222,975    $ 178,361
                                                      =========    =========

The  maturity  and  repricing  distribution  of the loan and lease  portfolio at
December 31, 1999 and 1998, follows (dollars in thousands):

                                                         1999         1998
                                                      ---------    ---------

  Three months or less                                $  86,369    $  71,990
  Over three months to twelve months                     15,585       15,463
  Over one year to three years                           37,796       28,428
  Over three years to five years                         46,573       32,113
  Over five years to fifteen years                       23,797       21,979
  Over fifteen years                                     16,429       11,856
                                                      ---------    ---------
                                                        226,549      181,829
  Nonaccrual loans                                          767          311
                                                      ---------    ---------
                                                      $ 227,316    $ 182,140
                                                      =========    =========
<PAGE>F-16

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE D--LOANS AND LEASE FINANCING RECEIVABLES, NET (Continued)

At  December   31,  1999  and  1998   approximately   $45,000  and   $1,348,000,
respectively,  of  Bancorp's  credit card  receivables  were  secured by savings
accounts.

At December 31, 1999, the recorded  investment in loans for which impairment has
been  recognized in accordance with Statement No. 114 totaled  $849,000,  with a
corresponding  valuation  allowance  of  $114,000.  At December  31,  1998,  the
recorded  investment in loans for which  impairment has been recognized  totaled
$338,000,  with a corresponding  valuation allowance of $126,000.  For the years
ended  December 31, 1999,  1998 and 1997,  the average  recorded  investment  in
impaired loans was approximately $892,000, $515,000 and $156,000,  respectively.
In 1998 Bancorp  recognized  $41,000 of interest on impaired  loans  (during the
portion of the year that they were  impaired),  of which  $21,000 was related to
impaired loans for which interest was recognized on the cash basis.  In 1999 and
1997,  Bancorp  recognized  $3,000 and  $5,000,  respectively,  of  interest  on
impaired loans (during the portion of the year that they were impaired),  all of
which was recognized on the cash basis.

In addition,  at December 31, 1998 and 1997,  Bancorp had other nonaccrual loans
of  approximately  $246,000  and  $97,000  for  which  impairment  had not  been
recognized.  If  interest  on these loans had been  recognized  at the  original
interest  rates,  interest income would have increased  approximately  $1,000 in
1999,  $16,000 in 1998 and $5,000 in 1997.  Bancorp has no  commitments  to loan
additional funds to the borrowers of impaired or nonaccrual loans.

Bancorp receives fees for servicing retained on loans and leases sold. Loans and
leases  being  serviced  by Bancorp  for others  were as follows at  December 31
(dollars in thousands):

                                     1999          1998          1997
                                  ---------     ---------     ---------

  Loans                           $ 163,672     $ 144,531     $ 123,232
  Lease financing receivables                           2           701
  Credit                                                            904
                                  ---------     ---------     ---------
                                  $ 163,672     $ 144,533     $ 124,837
                                  =========     =========     =========

An  analysis  of the changes in the  allowance  for loan and lease  losses is as
follows for the years ended December 31 (dollars in thousands):

                                            1999        1998        1997
                                          -------     -------     -------
  Beginning balance                       $ 3,055     $ 2,371     $ 2,146
    Provision for loan and lease losses     1,046       2,124         773
    Credit cards charged off                 (614)       (956)       (475)
    Leases charged off                       (148)       (316)       (124)
    Loans charged off                        (314)       (362)       (211)
    Credit card recoveries                    209         105          87
    Lease recoveries                            9          24          34
    Loan recoveries                           111          65         141
                                          -------     -------     -------
  Ending balance                          $ 3,354     $ 3,055     $ 2,371
                                          =======     =======     =======

<PAGE>F-17

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE E--PREMISES AND EQUIPMENT

Components  of premises  and  equipment  included  the  following at December 31
(dollars in thousands):
                                                  1999         1998
                                                --------     --------

   Land                                         $  2,265     $  1,962
   Buildings and improvements                      5,505        5,168
   Furniture, fixtures and equipment               4,526        3,007
   Leasehold improvements                            310          203
                                                --------     --------
                                                  12,606       10,340
   Accumulated depreciation                       (3,941)      (2,390)
                                                --------     --------
                                                   8,665        7,950
   Construction in progress                        1,085
                                                --------     --------
                                                $  9,750     $  7,950
                                                ========     ========

NOTE F--INVESTMENT IN UNCONSOLIDATED EQUIPMENT LEASING SUBSIDIARIES

The  following  information   summarizes  the  activity  of  the  unconsolidated
equipment  leasing  subsidiary  for the twelve  months  ended  November  30, (in
thousands):

                                                  1999         1998
                                                --------     --------
   Balance sheet
      Assets                                    $ 27,759     $ 21,323
                                                ========     ========
      Liabilities                               $ 22,298     $ 16,761
      Equity                                       5,461        4,562
                                                --------     --------
                                                $ 27,759     $ 21,323
                                                ========     ========
   Income statement
      Revenues                                  $  5,090     $  3,055
      Expenses                                     4,191        2,537
                                                --------     --------
         Net income                                  899          518
                                                x     50%    x     50%
                                                --------     --------
      Bancorp's share of net income             $    450     $    259
                                                ========     ========


NOTE G--TRANSFERS OF FINANCIAL ASSETS

During the year ended December 31, 1999 and 1998,  Bancorp recorded $871,000 and
$739,000,  respectively,  of servicing  rights  related to loans  originated and
sold.  Amortization  of the  servicing  rights was $268,000 and $141,000 for the
years ended December 31, 1999 and 1998,  respectively.  The estimated fair value

<PAGE>F-18

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE G--TRANSFERS OF FINANCIAL ASSETS (Continued)

of the servicing assets aggregated  $1,751,000 and $640,000 at December 31, 1999
and 1998,  respectively.  A valuation allowance is recorded where the fair value
is below the carrying amount of the servicing assets. No valuation allowance was
needed at December 31, 1999 or 1998.


NOTE H--INTEREST-BEARING DEPOSITS

Interest-bearing  deposits consisted of the following at December 31 (dollars in
thousands):

                                                  1999         1998
                                               ---------    ---------

   Negotiable order of withdrawal (NOW)        $  29,789    $  22,314
   Savings and money market                       66,291       48,936
   Time, $100,000 and over                        68,061       46,355
   Other time                                    103,966       69,478
                                               ---------    ---------
                                               $ 268,107    $ 187,083
                                               =========    =========

Interest expense on these deposits for the years ended December 31 is as follows
(dollars in thousands):

                                  1999         1998          1997
                                -------      -------       -------

   NOW                          $   193      $   207       $   190
   Savings and money market       1,218        1,232         1,327
   Time, $100,000 and over        2,627        2,412         1,803
   Other time                     3,986        3,714         3,653
                                -------      -------       -------
                                $ 8,024      $ 7,565       $ 6,973
                                =======      =======       =======

The maturities of time deposits at December 31, 1999 are as follows  (dollars in
thousands):

   Three months or less                               $  64,138
   Over three months through twelve months               82,481
   Over one year through three years                     23,461
   Over three years                                       1,947
                                                      ---------
                                                      $ 172,027
                                                      =========

NOTE I--LINE OF CREDIT

Humboldt Bank and Capitol  Valley Bank have  uncommitted  federal funds lines of
credit  agreements  with two  financial  institutions.  The  maximum  borrowings
available under the lines totaled $10,500,000 and $500,000 for Humboldt Bank and
Capitol  Valley  Bank,  respectively.  Availability  of the lines are subject to
federal funds balances  available for loan and continued  borrower  eligibility.

<PAGE>F-19

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE I--LINE OF CREDIT (Continued)

These lines are intended to support short-term liquidity, and cannot be used for
more than ten consecutive business days or more than twelve times during a given
thirty day  period.  At  December  31,  1999 and 1998  there were no  borrowings
outstanding under the agreements.


NOTE J--LONG-TERM DEBT

Humboldt Bank has three advances totaling  $3,316,000 from the Federal Home Loan
Bank (FHLB) at December 31, 1999. The first advance totaling  $732,000 is due in
monthly  installments  of principal and  interest,  at 6.19%,  of  approximately
$5,000  through  February 15, 2004.  The second  advance of $1,000,000 is due at
maturity on December 31, 2007. Interest is due semi-annually at 6.18%. The third
advance  totaling  $1,584,000  is due in monthly  installments  of principal and
interest,  at 6.08%, of approximately  $14,000 through April 8, 2013. Investment
securities  with an amortized cost of $3,698,000 and  approximate  fair value of
$3,703,000  at  December  31,  1999,  were held as  collateral  for these  three
advances.  Humboldt Bank also had loans with an approximate principal balance of
$2,214,000 at December 31, 1999 pledged as collateral for these advances.

Bancorp has a $2,000,000 unsecured note payable to another Bank. Interest is due
monthly at prime plus .5%,  which was 9% at December 31, 1999,  and principal is
due at maturity on March 1, 2001.

Scheduled  principal  repayments of long-term debt, assuming no changes in their
terms,  for the five years ending  December 31, 2004 are as follows  (dollars in
thousands):

                                              Humboldt
                              Bancorp           Bank          Total
                             --------        ---------      --------
           2000                              $    93        $     93
           2001              $ 2,000              99           2,099
           2002                                  107             107
           2003                                  114             114
           2004                                  755             755


<PAGE>F-20

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE K--FEES AND OTHER INCOME

Fees and other income consisted of the following for the years ended December 31
(dollars in thousands):

                                                  1999        1998       1997
                                                --------    -------    -------
  Merchant credit card processing fees          $ 13,178    $ 6,177    $ 3,906
  Lease residuals and rentals                      1,250      1,575      1,306
  Credit card program fees                           519      1,019        778
  Equity income of Bancorp Financial Services        450        259         22
  Fees for customer services                         415        346        291
  Earnings on life insurance                         161        106        195
  Loan and lease servicing fees                      293         87        346
  Other (none exceeding 1% of revenues)              386        162         67
                                                --------    -------    -------
                                                $ 16,652    $ 9,731    $ 6,911
                                                ========    =======    =======


NOTE L--OTHER EXPENSES

Other  expenses  consisted  of the  following  for the years  ended  December 31
(dollars in thousands):

                                                  1999        1998       1997
                                                --------    -------    -------

  Merchant credit card program                  $  7,460    $ 2,665    $   822
  Professional and other outside services          1,446      1,122      1,342
  Stationery, supplies and postage                   955        884        887
  Telephone and travel                               870        598        478
  Amortization of core deposit intangible            459        372        426
  Credit card program                                240        346      1,021
  Data processing and ATM fees                       299        324        170
  Development                                        414        249        242
  Advertising                                        412        247        265
  FDIC and other insurance                           217        186        164
  Other (none exceeding 1% of revenues)              833        723        407
                                                --------    -------    -------
                                                $ 13,605    $ 7,716    $ 6,224
                                                ========    =======    =======
<PAGE>F-21

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE M--INCOME TAXES

The  components of income tax expense  included in the  statements of operations
were as follows for the years ended December 31 (dollars in thousands):

                                                  1999        1998       1997
                                                --------    -------    -------
   Currently payable
      Federal                                   $  1,728    $ 2,063    $ 1,707
      State                                          654        709        602
                                                --------    -------    -------
                                                   2,382      2,772      2,309
   Deferred tax benefit
      Federal                                       (310)      (353)      (606)
      State                                         (119)       (85)      (206)
                                                --------    -------    -------
                                                    (429)      (438)      (812)
   Tax benefit of exercised stock options
      recorded as common stock                       318        183        114
                                                --------    -------    -------
   Net provision for income taxes               $  2,271    $ 2,517    $ 1,611
                                                ========    =======    =======

A reconciliation  of income taxes computed at the federal  statutory rate of 34%
and the  provision  for  income  taxes for the years  ended  December  31 are as
follows (dollars in thousands):

                                                  1999        1998       1997
                                                --------    -------    -------

   Income tax at Federal statutory rate         $  2,338    $ 2,221    $ 1,655
      State franchise tax, less federal
         income tax benefit                          492        467        348
      Interest on municipal obligations exempt
         from Federal tax                           (284)      (227)      (176)
      Interest on enterprise zone loans exempt
         from State tax                              (77)       (38)       (52)
      Life insurance earnings and expenses           (79)       (55)       (93)
      Low income housing credits                    (165)
      Deferred tax asset valuation allowance
         change                                                 122        (99)
      Other differences                               46         27         28
                                                --------    -------    -------
   Provision for income taxes                   $  2,271    $ 2,517    $ 1,611
                                                ========    =======    =======

<PAGE>F-22

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE M--INCOME TAXES (Continued)

The tax effects of temporary differences that give rise to the components of the
net  deferred  tax asset  recorded  as an other  asset as of December 31 were as
follows (dollars in thousands):

                                                  1999         1998
                                               ---------    ---------
  Deferred tax assets:
    Allowance for loan and lease losses        $     934    $     929
    Nonqualified benefit plans                     1,188          935
    Deferred loan fees                               359          298
    State franchise taxes                            222          241
    Depreciation                                     675          593
    Unrealized securities holding losses             247
    Merchant Bankcard program                        629          393
    Core deposit intangible amortization             202          110
    Organization costs                               149
    Other                                            139          201
                                               ---------    ---------
               Total deferred tax assets           4,744        3,700
    Valuation allowance for deferred tax assets     (435)        (435)
                                               ---------    ---------
          Deferred tax assets recognized           4,309        3,265

  Deferred tax liabilities:
    Unrealized securities holding gains                           346
    Equity in income of subsidiaries                 248          116
    FHLB stock dividends                              61           49
    Other                                            301           78
                                               ---------    ---------
          Total deferred tax liabilities             610          589
                                               ---------    ---------
                  Net deferred tax asset       $   3,699    $   2,676
                                               =========    =========

Amounts  presented for the tax effects of temporary  differences  are based upon
estimates and  assumptions and could vary from amounts  ultimately  reflected on
Bancorp's  tax returns.  Accordingly,  the variances  from amounts  reported for
prior  years are  primarily  the  result of  adjustments  to  conform to the tax
returns as filed. A valuation  allowance has been established to reduce deferred
tax assets to the amount that is more likely than not to be realized.

Income taxes  receivable  (payable) were $398,000 and $(141,000) at December 31,
1999 and 1998,  respectively.  The income tax (benefit)  expense  related to net
investment  securities  gains was  $(97,000)  and $42,000  during 1999 and 1997,
respectively. There were no net investment gains during 1998.

<PAGE>F-23

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE N--EARNINGS PER SHARE

The following is a computation  of basic and diluted  earnings per share for the
years  ended  December  31,  which  has been  retroactively  adjusted  for stock
dividends and splits (dollars in thousands except per share amounts):

                                                1999        1998        1997
                                            ----------- ----------- -----------
Basic:

Net income                                  $     4,607 $     4,016 $     3,258
                                            =========== =========== ===========
Weighted-average common shares outstanding    5,048,547   4,876,404   4,755,846
                                            =========== =========== ===========
Earnings per share                          $       .91 $       .82 $       .69
                                            =========== =========== ===========
Diluted:
Net income                                  $     4,607 $     4,016 $     3,258
                                            =========== =========== ===========
Weighted-average common shares outstanding    5,048,547   4,876,404   4,755,846

Net effect of dilutive  stock options -
  based on the treasury stock method using
  average market price                          508,274     502,037     568,786
                                            ----------- ----------- -----------
Weighted-average common shares outstanding
  and common stock equivalents                5,556,821   5,378,441   5,324,632
                                            =========== =========== ===========
Earnings per share - assuming dilution      $       .83 $       .75 $       .61
                                            =========== =========== ===========


Options to purchase  1,100 and 35,203 shares of common stock at $13.52 per share
and $14.32 per share,  respectively,  were  outstanding at December 31, 1999 and
options  to  purchase  30,250  shares of common  stock at $10.25  per share were
outstanding  at December  31, 1997 but were not included in the  computation  of
diluted EPS because the  options'  exercise  price was greater  than the average
market price of the common shares. All options  outstanding at December 31, 1998
were included in the computation of diluted EPS.


NOTE O--BENEFIT PLANS

Retirement  Plan:  Humboldt  Bank has a  defined  contribution  retirement  plan
covering  substantially  all  of  the  Bank's  and  Bancorp's  employees.   Bank
contributions  to the plan are made at the  discretion of the Board of Directors
in an amount  not to exceed  the  maximum  amount  deductible  under the  profit
sharing plan rules of the Internal Revenue Service.  Employees may elect to have
a portion of their  compensation  contributed to the plan in conformity with the
requirements  of Section  401(k) of the  Internal  Revenue  Code.  Salaries  and
employee  benefits expense  includes Bank  contributions to the plan of $223,000
during 1999, $189,000 during 1998 and $134,000 during 1997.

<PAGE>F-24

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE O--BENEFIT PLANS (Continued)

Director Fee Plan:  The Bancorp has adopted the Humboldt  Bank Director Fee Plan
(the "Fee Plan"). The Fee Plan permits each Bancorp director to elect to receive
his/her  director's  fees in the  form  of  Bancorp  common  stock,  cash,  or a
combination  of Bancorp common stock and cash, and to elect to defer the receipt
of any of the foregoing until the end of his/her term as a Bancorp director.  If
deferral is elected,  the amount of the director's  fees shall be credited to an
account on behalf of the director,  however,  such crediting shall  constitute a
mere promise on the part of the Bancorp to pay/distribute  on this account.  The
account is otherwise  unsecured,  unfunded and subject to the general  claims of
creditors of Humboldt  Bank and Bancorp.  The Fee Plan provides for the issuance
of up to 40,000 shares of Bancorp common stock. The amount of such fees deferred
in 1999, 1998 and 1997 totaled $86,000,  $58,000 and $43,000,  respectively.  At
December  31,  1999 and 1998,  the  liability  for  amounts  due under this plan
totaled $196,000 and $110,000,  respectively, or approximately 20,083 and 13,079
shares of stock.

Employee Stock Bonus Plan:  Humboldt Bank has an Employee Stock Bonus Plan which
is funded annually at the sole  discretion of the Board of Directors.  Funds are
invested in Bancorp  stock,  when  available,  and is  purchased  at the current
market price on behalf of all  employees  except the  executive  officers of the
Bancorp.  The compensation  cost recognized for 1999, 1998 and 1997 was $20,000,
$20,000 and $20,000,  respectively.  In addition,  $100,000 was transferred from
the profit sharing plan into this Plan.


NOTE P--STOCK OPTION PLAN

At December 31, 1999, the Bancorp has a stock-based compensation plan consisting
of a fixed  stock  option plan which is  described  below.  The Bancorp  applies
Accounting  Principles  Board  Opinion  No. 25 and  related  Interpretations  in
accounting for its plan.  Accordingly,  no compensation cost has been recognized
for its stock option plan. Had compensation  cost for the Bancorp's stock option
plan been determined based on the fair value at the grant dates for awards under
this plan  consistent  with the method of SFAS No. 123, the Bancorp's net income
and net  income  per share  would have been  adjusted  to the pro forma  amounts
indicated below (dollars in thousands):

                                               1999      1998        1997
                                             -------    -------    -------
   Net income
       As reported                           $ 4,607    $ 4,016    $ 3,258
       Pro forma                               4,407      3,716      3,194

   Net income per share
       As reported                               .91        .82        .69
       Pro forma                                 .87        .76        .67

   Net income per share--assuming dilution
       As reported                               .83        .75        .61
       Pro forma                                 .80        .69        .60

The Bancorp has a stock option plan under which incentive and nonstatutory stock
options,  as defined under the Internal  Revenue Code,  may be granted.  Options
representing  456,255  shares of the  Bancorp's no par value common stock may be
granted under the plan by the Board of Directors to directors, officers and key,

<PAGE>F-25

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE P--STOCK OPTION PLAN (Continued)

full-time  employees at an exercise price not less than the fair market value of
the shares on the date of grant.  In addition,  671,762  options are outstanding
that were  granted by  Humboldt  Bank  prior to the  formation  of the  Bancorp.
Options may have an exercise  period of not longer than 10 years and the options
are subject to a graded  vesting  schedule of 33% per year for  incentive  stock
options. Nonstatutory stock options vest immediately.

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option   pricing  model  with  the  following   weighted-average
assumptions:

                                               1999      1998        1997
                                             -------    -------    -------

     Dividend yield                             0%         0%         0%
     Expected life:
       Incentive                             10 years   10 years   10 years
       Nonstatutory                          10 years   10 years   10 years
     Expected volatility                      15.00%     10.69%     10.69%
     Risk-free interest rate:
       Incentive                               6.50%      5.95%      6.24%
       Nonstatutory                            6.50%      5.20%      6.78%

A summary of stock option  activity,  adjusted to give effect to stock dividends
and splits follows:

<TABLE>
<CAPTION>


                                                                   Incentive Stock Options


                                        1999                      1998                          1997
                             -----------------------   ------------------------     --------------------------
                               Weighted-                  Weighted-                    Weighted-
                                Average                    Average                      Average
                            Exercise Price    Shares   Exercise Price    Shares     Exercise Price     Shares
                            --------------   -------   --------------   -------     --------------     -------
<S>                         <C>            <C>            <C>         <C>           <C>                <C>
Shares under option at
  beginning of year           $   4.08       531,352       $ 3.78       601,692         $  2.81        508,682
Options granted                  10.87        62,944         9.75         6,050            8.68        100,259
Options exercised                 2.26       (46,868)        2.02       (75,031)           3.40         (4,274)
Options expired                   9.27          (307)        8.32        (1,359)           4.09         (2,975)
                                             -------                    -------                        -------
Shares under option at
  end of year                     5.03       547,121         4.08       531,352            3.78        601,692
                                             =======                    =======                        =======
Options exercisable at
  end of year                                466,113                    446,815                        444,433
Weighted-average
  fair value of options
  granted during the year         5.36                       4.37                          4.04

<PAGE>F-26

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE P--STOCK OPTION PLAN (Continued)

                                                                 Nonstatutory Stock Options

                                        1999                      1998                          1997
                             -----------------------   ------------------------     --------------------------
                               Weighted-                  Weighted-                    Weighted-
                                Average                    Average                      Average
                            Exercise Price    Shares   Exercise Price    Shares     Exercise Price     Shares
                            --------------   -------   --------------   -------     --------------     -------


Shares under option at
   beginning of year          $  4.33        452,562       $  3.79      493,866         $  3.27        531,714

Options granted                 13.04         26,699          9.29       30,800           10.14         33,275

Options exercised                3.77        (71,592)         2.76      (72,104)           2.66        (71,123)
                                             -------                    -------                        -------
Shares under option at
   end of year                   5.56        407,669          4.33      452,562            3.79        493,866
                                             =======                    =======                        =======
Options exercisable at
   end of year                               407,669                    452,562                        493,866

Weighted-average fair value
   of options granted
   during the year               6.39                         3.80                         4.54

</TABLE>


The following table summarizes information about fixed stock options outstanding
at December 31, 1999:

                               Options Outstanding

                                          Weighted-Average
   Range of                Number            Remaining         Weighted-Average
Exercise Prices         Outstanding      Contractual Life       Exercise Price
---------------         -----------      ----------------      ----------------
$1.95 to $3.57            609,224            4.0 years              $ 2.94
$4.37 to $6.54            126,509            6.6 years                4.76
$9.09 to $11.59           182,754            8.5 years                6.43
$13.52 to $14.32           36,303            9.8 years               13.04
                          -------
$1.95 to $14.32           954,790            6.7 years                4.23
                          =======

                               Options Exercisable

   Range of                        Number          Weighted-Average
Exercise Prices                 Exercisable         Exercise Price
---------------                 -----------        ----------------

$1.95 to $3.57                    609,223               $ 2.94
$4.37 to $6.54                    114,055                 5.28
$9.09 to $11.59                   117,375                10.01
$13.52 to $14.32                   33,129                14.29
                                  -------               ------
$1.95 to $14.32                   873,782                 4.63

<PAGE>F-27

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE Q--RELATED PARTY TRANSACTIONS

Bancorp has entered into transactions with its directors, executive officers and
their  affiliates  and  subsidiaries  of  the  Bancorp  (related  parties).  The
following  is a  summary  of the  aggregate  activity  involving  related  party
borrowers at December 31, 1999 and 1998 (dollars in thousands):

                                                  1999            1998
                                                --------        --------

     Loans outstanding at beginning of year     $  6,451        $  6,218
     Loan disbursements                            2,862           2,095
     Loan repayments                              (4,448)         (1,862)
                                                --------        --------
          Loans outstanding at end of year      $  4,865        $  6,451
                                                ========        ========

At December 31, 1999 and 1998,  commitments to related parties of  approximately
$4,892,000 and $605,000 were  undisbursed.  Bancorp has issued letters of credit
on behalf of related parties totaling $2,270,000 at December 31, 1999.

Deposits received from directors and officers totaled $634,000 and $1,531,000 at
December 31, 1999 and 1998, respectively.

Bancorp made payments  totaling $77,000 in 1999,  $73,000 in 1998 and $50,000 in
1997 to a travel  business owned by a director.  Payments  under  contracts with
directors'  companies for premises  remodeling,  repair and engineering services
totaled $33,000 in 1999,  $32,000 in 1998 and $14,800 in 1997. Bancorp purchased
computer  equipment and office  furniture  from  businesses  owned by members of
executive  officers'  immediate families totaling $20,000 in 1998 and $17,000 in
1997.  Bancorp paid fees for payroll services and other  miscellaneous  expenses
totaling  $4,000 in 1998 and $11,000 in 1997 to a business with which a director
is  associated.  In 1997,  Bancorp  entered  into a long term lease for a branch
office with a company  owned by a director.  Payments on this lease during 1999,
1998 and 1997 totaled $37,000, $31,000 and $13,000. In 1999, Bancorp purchased a
branch that leases its facility from a company owned by a director.  Payments on
this lease during 1999 totaled $24,000.

Humboldt  Bank  and  Capitol   Valley  Bank   routinely   participate   in  loan
transactions. At December 31, 1999, the outstanding loan balances purchased from
Humboldt Bank by Capitol  Valley Bank was $2,649,000  and the  outstanding  loan
balances purchased from Capitol Valley Bank by Humboldt Bank was $2,760,000.

Humboldt  Bank  provides  loan support and performs  loan  servicing for Capitol
Valley Bank.  The amount of loans serviced by Humboldt Bank at December 31, 1999
totaled $13,358,000.

Bancorp  purchases  leases  that  are  originated  by  its  subsidiary,  Bancorp
Financial Services. These outstanding lease receivable balances, net of unearned
interest,  totaled  $12,534,000  and  $5,403,000  at December 31, 1999 and 1998,
respectively. In addition, Humboldt Bank has entered into a $3.8 million line of
credit with  Bancorp  Financial  Services,  which  expires May 2, 2000 and bears
interest at the prime rate plus .50% (currently 9%) per annum.

<PAGE>F-28

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE R--COMMITMENTS AND CONTINGENT LIABILITIES

Postemployment Benefit Plans and Life Insurance Policies:  Bancorp has purchased
single premium life insurance  policies in connection with the implementation of
salary  continuation and deferred  compensation plans for certain key employees.
The policies provide  protection  against the adverse financial effects from the
death of a key employee and provide income to offset  expenses  associated  with
the plans.  The specified  employees  are insured  under the  policies,  but the
Bancorp is the owner and  beneficiary.  At December 31, 1999 and 1998,  the cash
surrender  value  of  these  policies  totaled   approximately   $5,157,000  and
$4,943,000, respectively.

The plans are  unfunded and provide for Bancorp to pay the  employees  specified
amounts for specified  periods after retirement and allow the employees to defer
a portion of current  compensation  in exchange for the Bancorp's  commitment to
pay a  deferred  benefit  at  retirement.  If death  occurs  prior to or  during
retirement,  Bancorp will pay the employee's  beneficiary or estate the benefits
set forth in the plans.

At December 31, 1999 and 1998,  liabilities  recorded for the estimated  present
value of future salary continuation and deferred  compensation  benefits totaled
approximately  $2,716,000  and  $2,038,000,  respectively.  Salary  continuation
benefits  may be paid if  termination  is  without  cause or due to a change  in
control of Bancorp.  Otherwise no benefits are paid upon  termination.  Deferred
compensation  is vested  as to the  amounts  deferred.  In the event of death or
under certain other circumstances, Bancorp is contingently liable to make future
payments  greater  than the amounts  recorded as  liabilities.  Based on present
circumstances,  Bancorp  does not  consider it probable  that such a  contingent
liability will be incurred or that in the event of death, such a liability would
be material after consideration of life insurance benefits.

Lease  Commitments:  Bancorp  leases eight sites under  noncancelable  operating
leases  expiring in May 2000,  September  2000,  October  2000,  November  2000,
February 2006,  September  2007,  October 2008 and June 2009. The lease expiring
May 2000 includes an option to renew for two additional  five-year  terms,  with
the monthly  rental being  adjusted to the fair market rental  value.  The lease
expiring  November 2000 includes an option to extend the lease for an additional
term of one year.  The lease  expiring in February 2006 requires  adjustments to
the base rent after two years for changing  price indices with a maximum  annual
increase  of five  percent and  includes an option to renew for two  consecutive
five-year  terms.  The  lease  expiring  September  2007  is  renewable  for two
consecutive five-year periods and requires adjustment every September 1 based on
changing  price  indices  but not less  than 2% nor more  than  10%.  The  lease
expiring  October  2008  requires  annual  adjustments  to the base  rent  every
November 3 of the greater of 2% or the percentage increase in the Consumer Price
Index  and  includes  an  option  to  extend  the term of the  lease  for  three
consecutive  five-year  terms.  The lease expiring June 2009 requires  scheduled
adjustments to the base rent every two years and includes an option to renew for
two consecutive five-year terms.

<PAGE>F-29

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE R--COMMITMENTS AND CONTINGENT LIABILITIES (Continued)

As of December 31, 1999,  future  minimum  lease  payments  under  noncancelable
operating leases are as follows (dollars in thousands):

                                              Lease
                                            Commitment
                                            ----------
    Year ended December 31:
        1999                                 $   414
        2000                                     356
        2001                                     361
        2002                                     367
        2003                                     372
        Thereafter                             1,401
                                             -------
          Total minimum lease commitments    $ 3,271
                                             =======

Rent  expense for the years  ended  December  31,  1999,  1998 and 1997  totaled
$401,000, $269,000 and $128,000, respectively. Sublease rental income was $4,000
in 1997.

Financial   Instruments  with   Off-Balance-Sheet   Risk:   Bancorp's  financial
statements do not reflect various  commitments and contingent  liabilities which
arise in the normal  course of  business  and which  involve  elements of credit
risk,  interest rate risk and liquidity risk.  These  commitments and contingent
liabilities  are  commitments to extend  credit,  credit card  arrangements  and
standby  letters of credit.  A summary of Bancorp's  commitments  and contingent
liabilities at December 31, is as follows (dollar in thousands):

                                            Contractual Amounts
                                          1999              1998
                                        --------         --------
      Commitments to extend credit      $ 62,256         $ 42,200
      Credit card arrangements             9,256           12,299
      Standby letters of credit            3,951            5,240

Commitments to extend credit,  credit card  arrangements  and standby letters of
credit all include  exposure to some credit loss in the event of  nonperformance
of the customer. Bancorp's credit policies and procedures for credit commitments
and financial  guarantees are the same as those for extension of credit that are
recorded on the balance  sheet.  Because these  instruments  have fixed maturity
dates,  and because many of them expire  without  being drawn upon,  they do not
generally present any significant liquidity risk to Bancorp.

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. Bancorp evaluates each customer's credit worthiness on
a case-by-case basis. The amount of collateral obtained,  if deemed necessary by
Bancorp upon extension of credit, is based on management's  credit evaluation of
the  customer.  Collateral  held  varies but may  include  accounts  receivable,
inventory,  property,  plant,  and  equipment,   certificates  of  deposits  and
income-producing   commercial  properties.   At  December  31,  1999  and  1998,
approximately  $157,000 and $1,300,000,  respectively,  of Bancorp's undisbursed
credit card commitments were secured by deposit accounts.

<PAGE>F-30

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE R--COMMITMENTS AND CONTINGENT LIABILITIES (Continued)

Standby  letters  of credit  are  conditional  commitments  issued by Bancorp to
guarantee the performance of a customer to a third party.  Those  guarantees are
primarily  issued to support  public and  private  borrowing  arrangements.  All
letters of credit are short-term  guarantees  with no guarantees  extending more
than two  years.  The  credit  risk  involved  in  issuing  letters of credit is
essentially  the same as that  involved in extending  facilities  to  customers.
Bancorp  holds  assigned  deposit   accounts  as  collateral   supporting  those
commitments for which collateral is deemed  necessary.  The extent of collateral
held for those  commitments  at  December  31, 1999 and 1998 varies from zero to
100%; the average amount  collateralized is approximately 83% in 1999 and 92% in
1998. None of these letters of credit were utilized during 1999 or 1998.

Bancorp has not incurred any losses on its commitments in 1999, 1998 or 1997.

Merchant  Credit  and  Debit  Card  Sales  Processing:   Bancorp  processes  the
settlement of credit and debit card sales for merchants  located  throughout the
continental United States,  Alaska, Hawaii and Puerto Rico. The process involves
collecting funds from the card issuing bank and crediting the merchant  accounts
in  exchange  for a  merchant  discount  and  other  processing  fees.  The more
significant  areas of risk associated  with this process  includes the risk that
funds due from the card issuing  bank will be  uncollectible,  that  significant
fines may be assessed for  violations  of VISA or  MasterCard  rules or that the
merchant  will  be  unable  to  absorb  chargebacks,  deliver  products  due  to
insolvency  or may  commit  fraud.  To protect  Bancorp  from  losses,  merchant
deposits of  $54,153,000  at December 31, 1999 and  $46,969,000  at December 31,
1998 have been  established by  withholding a percentage of merchant  processing
volume. In addition, Bancorp has accrued a liability to cover losses, if any, in
excess of the merchant  reserves of $1,544,000 and $954,000 at December 31, 1999
and 1998, respectively.  Bancorp has incurred approximately $127,000 and $18,000
in losses during 1999 and 1998,  respectively.  No losses were incurred in 1997.
Bancorp  processed  approximately  $2.9  billion and $2.2  billion of credit and
debit card  sales for  merchants  during  1999 and 1998,  respectively.  Bancorp
markets its merchant  bankcard  services  through five  independent  service and
marketing  organizations  (ISO's).  Those five ISO's  represent  $2.8 billion of
Bancorp's  credit and debit card sales  during 1999.  In addition,  the merchant
bankcard  services are  regulated by VISA. At this time Bancorp does not believe
it is in complete compliance with the VISA requirements and is seeking a waiver.
If the waiver is not obtained,  Bancorp would need to  restructure  its merchant
bankcard  operations,  which would adversely affect Bancorp's revenues for these
services.

Legal Proceedings: Bancorp is a party to claims and legal proceedings arising in
the ordinary  course of business.  After taking into  consideration  information
furnished  by legal  counsel to the Bancorp as to the current  status of various
claims and proceedings to which Bancorp is a party, management is of the opinion
that the ultimate aggregate liability represented thereby, if any, will not have
a material adverse effect on the financial  position or results of operations of
the Bancorp.


NOTE S--CONCENTRATIONS OF CREDIT RISK

Most of Bancorp's  business  activity is with customers located within the State
of California,  primarily in Northern  California except for the merchant credit
card debit card sales processing as discussed in Note R. The economy of Humboldt
Bank's primary service area is heavily  dependent on the area's major industries
which are timber, commercial fishing,  agriculture and tourism. General economic
conditions or natural disasters  affecting the primary service area or its major
industries could affect the ability of customers to repay loans and the value of
real property used as collateral.

<PAGE>F-31

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE S--CONCENTRATIONS OF CREDIT RISK (Continued)

In  addition  to the  types  of  loans  as set  forth  in  Note D,  Bancorp  has
concentrations in out-of-area  participation loans, motel loans, commercial real
estate and construction  loans. The distribution of commitments to extend credit
approximates  the distribution of loans  outstanding.  Standby letters of credit
were granted primarily to commercial borrowers.  Bancorp, as a matter of policy,
does not extend credit to any single borrower or group of related borrowers on a
secured basis in excess of 25% of its unimpaired capital  (shareholders'  equity
plus the  allowance  for loan and lease  losses)  and on an  unsecured  basis in
excess of 15% of its unimpaired capital.

Bancorp places its cash investments primarily in financial instruments backed by
the U.S.  Government and its agencies or by high quality financial  institutions
or  corporations.  At  December  31,  1999 and 1998,  approximately  63% and 9%,
respectively, of Bancorp's net worth was invested in federal funds sold to a New
York bank. In addition,  at December 31, 1999, Bancorp had deposits in federally
insured banks in excess of federally insured limits by $4,196,000.


NOTE T--REGULATORY MATTERS

The primary source of dividends paid by Bancorp to its stockholders is dividends
received from its  subsidiaries.  Banking  regulations  limit the amount of cash
dividends  that may be paid without prior  approval of Humboldt Bank and Capitol
Valley Bank's  regulatory  agency.  Cash  dividends are limited to the lesser of
retained  earnings,  if any, or net income for the last three years,  net of the
amount of any other  distributions made to shareholders  during such periods. As
of December 31, 1999,  $6,217,000 was available for cash dividend  distributions
for Humboldt Bank without prior approval.  Capitol Valley Bank could not declare
dividends  at December  31, 1999  without  prior  approval  from the  regulatory
agency.

Bancorp is subject to various  regulatory capital  requirements  administered by
the federal banking  agencies.  Failure to meet minium capital  requirements can
initiate certain mandatory---and possible additional  discretionary---actions by
regulators  that,  if  undertaken,  could have a direct  material  effect on the
Bancorp's  financial  statements.  Under  capital  adequacy  guidelines  and the
regulatory   framework  for  prompt  corrective  action,  the  Bancorp  and  its
subsidiaries  must meet specific  capital  guidelines that involve  quantitative
measures of their assets,  liabilities,  and certain  off-balance-sheet items as
calculated  under  regulatory  accounting  practices.  These capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require  Bancorp to maintain  minimum amounts and ratios (set forth in the table
below)  of  total  and  Tier  I  capital  (as  defined  in the  regulations)  to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined).  Management believes, as of December 31, 1999, that Bancorp
meets all capital adequacy requirements to which it is subject.

As of December 31, 1999, the most recent  notification  from the Federal Deposit
Insurance  Corporation  (FDIC)  categorized the Bancorp and its  subsidiaries as
well capitalized under the regulatory framework for prompt corrective action. To
be  categorized  as  well  capitalized   Bancorp  must  maintain  minimum  total
risk-based, Tier I risk-based, Tier I leverage ratios as set forth in the table.
There are no  conditions  or events  since  that  notification  that  management
believes  have  changed  the  institution's   category.   The  Bancorp  and  its
subsidiaries' actual capital amounts and ratios are also presented in the table.

<PAGE>F-32

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE T--REGULATORY MATTERS (Continued)


<TABLE>
<CAPTION>

                                                                                    Capitalized Under
                                                                 For Capital        Prompt Corrective
                                            Actual            Adequacy  Purposes   Action   Provisions
                                     Amount       Ratio        Amount     Ratio     Amount     Ratio
                                   ---------      -----      ---------  --------   -------     -----
                                                           (in thousands)
<S>                              <C>            <C>        <C>          <C>       <C>         <C>
As of December 31, 1999:
  Total Capital
    (to Risk Weighted Assets)
    Consolidated                   $ 34,666       12.07%     $ 22,984     >8.0%
    Humboldt Bank                  $ 29,454       11.05%     $ 21,354     >8.0%    $ 26,692    >10.0%
     Capitol Valley Bank           $  3,683       20.29%     $  1,452     >8.0%    $  1,816    >10.0%
  Tier I Capital
     (to Risk Weighted Assets)
     Consolidated                  $ 31,312       10.90%     $ 11,492     >4.0%
     Humboldt Bank                 $ 26,181        9.82%     $ 10,677     >4.0%    $ 16,015     >6.0%
     Capitol Valley Bank           $  3,602       19.84%     $    726     >4.0%    $  1,089     >6.0%
  Tier I Capital
     (to Average Assets)
     Consolidated                  $ 31,312        7.50%     $ 16,689     >4.0%
     Humboldt Bank                 $ 26,181        6.61%     $ 15,844     >4.0%    $ 19,805     >5.0%
     Capitol Valley Bank           $  3,602       19.82%     $    727     >4.0%    $    909     >5.0%
As of December 31, 1998:
  Total Capital
    (to Risk Weighted Assets)      $ 25,683       11.66%    >$17,617      >8.0%   >$ 22,022    >10.0%
  Tier I Capital
     (to Risk Weighted Assets)     $ 22,931       10.41%    >$8,809       >4.0%   >$ 13,213     >6.0%
  Tier I Capital
     (to Average Assets)           $ 22,931        7.23%    >$12,690      >4.0%   >$ 15,863     >5.0%

</TABLE>


NOTE U--CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

Condensed  balance  sheets  as of  December  31,  1999 and 1998 and the  related
condensed  statements  of  operations  and cash flows for the three years in the
period ended December 31, 1999 for Humboldt  Bancorp  (parent  company only) are
presented as follows (dollars in thousands):

                            Condensed Balance Sheets

                                          December 31
                                  ------------------------------
                                     1999                 1998
                                  --------              --------
Assets
  Cash                            $    757              $    805
  Other assets                         453                   197
  Investment in subsidiaries        35,653                26,443
                                  $ 36,863              $ 27,445
                                  ========              ========
<PAGE>F-33

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE U--CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Continued)


                                                                 December 31
                                                            -------------------
                                                              1999       1998
                                                            --------   --------
Liabilities
  Other liabilities                                         $    370   $     83
  Borrowed funds                                               2,000
Stockholders' equity
  Common stock                                                28,405     25,877
  Retained earnings                                            6,088      1,485
                                                            --------   --------
                                                            $ 36,863   $ 27,445
                                                            ========   ========

                       Condensed Statements of Operations

                                                      Year Ended December 31
                                                 ------------------------------
                                                   1999       1998       1997
                                                 -------    --------   --------

Dividends from subsidiaries                      $ 2,500    $  2,085
Reimbursements from subsidiaries                   2,210
Other income                                           7           3   $      2
Expenses allocated to subsidiaries                (2,069)
Other expenses                                    (1,158)        (87)       (24)
Income (loss) before taxes                         1,490       2,001        (22)
Tax benefit (expense)                                307         (51)       106
Income before equity in income of subsidiaries     1,797       1,950         84
Equity in undistributed income of subsidiaries     2,810       2,066      3,174
                                                 -------    --------   --------
Net income                                       $ 4,607    $  4,016   $  3,258
                                                 =======    ========   ========

                       Condensed Statements of Cash Flows


<TABLE>
<CAPTION>

                                                                    Year ended December 31
                                                           -------------------------------------
                                                              1999          1998          1997
                                                           ---------      --------      --------
<S>                                                       <C>           <C>           <C>
Operating activities:
  Net income                                               $   4,607      $  4,016      $  3,258
  Adjustments to reconcile net income to net cash
    provided (used) by operating activities:
    Dividends from subsidiaries                                             (2,085)
    Equity in undistributed income of subsidiaries            (2,810)       (2,066)       (3,174)
    Amortization                                                   9             4             4
    Increase in other assets                                    (265)         (188)
    Increase in other liabilities                                287            83
                                                           ---------      --------      --------
     Net cash provided (used) by operating activities          1,828          (236)           88

</TABLE>

<PAGE>F-34

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE U--CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (Continued)

<TABLE>
<CAPTION>


                                                                    Year ended December 31
                                                              1999        1998        1997
                                                           ---------    --------    --------
<S>                                                      <C>          <C>          <C>
Investing activities:
  Investment in Capitol Valley Bank                        $  (4,500)
  Investment in Humboldt Bank                                 (1,900)
  Reimbursement from subsidiary                                  319    $    183    $    114
                                                           ---------    --------    --------
         Net cash (used) provided by investing activities     (6,081)        183         114

Financing activities:
  Proceeds from note payable                                   2,000
  Cash paid for fractional shares                                 (4)         (8)         (5)
  Proceeds from issuance of common stock                       2,209         362         203
                                                           ---------    --------    --------
                Net cash provided by financing activities      4,205         354         198
                                                           ---------    --------    --------
                          Net (decrease) increase in cash        (48)        301         400
                                Cash at beginning of year        805         504         104
                                                           ---------    --------    --------
                                      Cash at end of year  $     757    $    805    $    504
                                                           =========    ========    ========
</TABLE>

NOTE V--BANCORP ACQUISITION OF SILVERADO MERGER CORPORATION

In September 1999,  Bancorp acquired all of the outstanding  shares of Silverado
Merger  Corporation  for 49,502  shares of Bancorp  restricted  common stock and
warrants to purchase up to 99,000  shares of Bancorp stock for $10.91 per share.
Bancorp has the right to  repurchase  the 49,502 shares of common stock for $.91
each,  and the  warrants  to purchase  up to 99,000  shares of common  stock for
$10.91 per share cannot become  exercisable,  in the event  Capitol  Valley Bank
fails to achieve  certain  business  objectives by December 31, 2001.  Until the
contingencies  related to the issuance of the restricted  stock and warrants are
resolved,  the amount  recorded  for this  transaction  will be a  liability  of
$45,002  and the stock and  warrants  issued  will not be  included in per share
information.  The fair  value as of the  merger  date of the stock and  warrants
issued to the Silverado Merger  Corporation  stockholders will be recorded as an
additional  cost of the  acquisition if all the  requirements of the acquisition
agreement are achieved. Otherwise, the 49,502 shares of restricted stock will be
repurchased  for $.91 per share and the  warrants  will  expire.  As part of the
acquisition  agreement,  some  shareholders  and  supports of  Silverado  Merger
Corporation  purchased $1.6 million of Bancorp restricted common stock at $12.00
per share pursuant to a private placement.  Silverado has no operations, and all
of its obligations and liabilities  were  extinguished  prior to consummation of
the  merger.  Therefore,  Silverado's  financial  statements  at the time of the
merger were immaterial.


NOTE W--FAIR VALUES OF FINANCIAL INSTRUMENTS

Statement of Financial  Accounting  Standards  No. 107,  Disclosures  about Fair
Value of Financial  Instruments,  requires  disclosure of fair value information
about financial instruments,  whether or not recognized in the balance sheet. In
cases where quoted  market  prices are not  available,  fair values are based on
estimates using present value or other valuation  techniques.  Those  techniques
are significantly  affected by the assumptions used, including the discount rate
and  estimates  of  future  cash  flows.  In that regard, the derived fair value

<PAGE>F-35

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE W--FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

estimates cannot be  substantiated by comparison to independent  markets and, in
many cases,  could not be realized in immediate  settlement of the  instruments.
Statement No. 107 excludes  certain  financial  instruments and all nonfinancial
instruments from its disclosure  requirements.  Accordingly,  the aggregate fair
value amounts presented do not represent the underling value of the Bancorp as a
whole.

The estimated fair values of the Bancorp's financial  instruments are as follows
at December 31 (dollars in thousands):

<TABLE>
<CAPTION>

                                                                 1999                      1998
                                                      ------------------------    -----------------------
                                                                     Estimated                 Estimated
                                                       Carrying         Fair      Carrying        Fair
                                                        Amount         Value       Amount        Value
                                                      ---------     ----------   ----------    ----------
<S>                                                 <C>            <C>          <C>           <C>
Financial assets:
   Cash and due from banks                            $  31,339     $  31,339    $  28,626     $  28,626
   Interest-bearing deposits in other banks                  20            20        3,020         3,020
   Federal funds sold                                    21,375        21,375        2,250         2,250
   Investment securities                                115,360       115,360       77,802        77,802
   Loans and leases held for sale                         2,147         2,149        7,677         7,731
   Loans and lease financing receivables, net           222,975       222,114      178,361       178,386
   Accrued interest receivable                            2,147         2,147        1,779         1,779
   Cash surrender value of life insurance                 5,157         5,157        4,943         4,943

Financial liabilities:
   Deposits                                             378,630      378,655       283,967       283,997
   Accrued interest payable                                 678          678           306           306
   Long-term debt                                         5,316        5,316         3,402         3,402

</TABLE>


The carrying  amounts in the  preceding  table are included in the balance sheet
under the applicable captions.

The following methods and assumptions were used by the Bancorp in estimating its
fair value disclosures for financial instruments:

     Cash and due from  banks,  interest-bearing  deposits  in other  banks  and
     federal funds sold:  The carrying  amount is a reasonable  estimate of fair
     value.

     Investment  securities:  Fair values for investment securities are based on
     quoted  market  prices,  where  available.  If quoted market prices are not
     available,  fair  values are based on quoted  market  prices of  comparable
     instruments.   The   carrying   amount  of  accrued   interest   receivable
     approximates its fair value.

     Loans and leases  held for sale:  Fair values for loans and leases held for
     sale are based on quoted market prices or dealer quotes.  If a quoted price
     is not  available,  fair value is estimated  using quoted market prices for
     similar loans or leases.

     Loans and lease financing  receivables,  net: For variable-rate  loans that
     reprice  frequently  and fixed rate loans that  mature in the near  future,
     with no  significant  change  in  credit  risk,  fair  values  are based on
     carrying amounts.  The fair values for other fixed rate loans are estimated


<PAGE>F-36

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE W--FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)

     using  discounted  cash flow analysis,  based on interest  rates  currently
     being offered for loans with similar  terms to borrowers of similar  credit
     quality.  Bancorp's  lease  portfolio has relatively  high fixed rates that
     usually do not fluctuate with market changes and,  therefore,  the carrying
     amount is a  reasonable  estimate  of the fair  value.  Loan and lease fair
     value estimates include judgments regarding future expected loss experience
     and risk  characteristics  and are adjusted for the  allowance for loan and
     lease  losses.   The  carrying  amount  of  accrued   interest   receivable
     approximates its fair value.

    Cash surrender value of life insurance: The carrying amount approximates its
fair value.

    Deposits:  The fair  values  disclosed  for demand  deposits  (for  example,
    interest-bearing   checking   accounts  and  passbook   accounts)   are,  by
    definition,  equal to the  amount  payable on demand at the  reporting  date
    (that is,  their  carrying  amounts).  The fair values for  certificates  of
    deposit are estimated using a discounted cash flow  calculation that applies
    interest  rates  currently  being offered on  certificates  to a schedule of
    aggregated contractual maturities on such time deposits. The carrying amount
    of accrued interest payable approximates fair value.

    Long-term  debt:  The fair  value of  long-term  debt is  estimated  using a
    discounted cash flow calculation that applies interest rates currently being
    offered on similar debt instruments.

    Off-balance sheet  instruments:  Off-balance  sheet  commitments  consist of
    commitments to extend credit,  credit card  arrangements and standby letters
    of  credit.  The  contract  or  notional  amounts  of  Bancorp's   financial
    instruments with  off-balance-sheet risk are disclosed in Note R. Estimating
    the fair value of these financial instruments is not considered  practicable
    due to the immateriality of the amounts of fees collected, which are used as
    a basis for calculating the fair value, on such instruments.


NOTE X--SUBSEQUENT EVENTS

Bancorp has entered into a merger  agreement with Global  Bancorp,  a California
bank holding company that owns Capitol Thrift and Loan Association, a California
industrial loan company with 10 branches located  throughout  California.  Under
the merger  agreement,  Capitol Thrift will become a wholly-owned  subsidiary of
Bancorp.  The  acquisition  is subject to conditions  including  approval by the
shareholders of Global  Bancorp,  regulatory  approval,  and the completion of a
stock  offering.  The estimated  purchase  price of Global Bancorp will be $16.5
million,  $11.8  million of which will be in cash and $4.7 million of which will
be a contingent payment in the form of a promissory note due on January 30, 2002
bearing  interest at 8%, that is contingent on future events and can be adjusted
upward or downward  based on  criteria  set forth in the merger  agreement.  The
merger will be accounted for as a purchase and, due to the  contingent  payment,
will cause negative  goodwill  which will be accounted for as a deferred  credit
and amortized using the  straight-line  method over 15 years.  Bancorp  incurred
$238,000 of costs related to the pending  acquisition  of Global Bancorp and the
related stock  offering as of December 31, 1999.  These costs are recorded as an
other asset and will be expensed  when the  acquisition  takes place.  If either
party  fails to  complete  the  acquisition  for certain  specified  reasons,  a
termination fee of $250,000 to $350,000 could be imposed.

<PAGE>F-37

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE X--SUBSEQUENT EVENTS (Continued)

In February  2000,  Bancorp  filed a  registration  statement  for the sale of a
minimum of 320,000 shares of common stock at $12.50 per share.  Bancorp  intends
to use the  proceeds to assist in the purchase of Global  Bancorp.  In addition,
Bancorp intends to acquire  additional  capital of $5 million by the issuance of
subordinated debentures at an estimated rate of 10.875% per annum.

In 1998,  Bancorp purchased a building and land for approximately  $2.9 million.
Bancorp intends to renovate the property so that all of Bancorp's administrative
offices and  departments  will be centrally  located.  The estimated cost of the
renovation is $3.3 to $3.9  million.  At December 31, 1999,  approximately  $1.1
million  in costs  have been  incurred  for design  work.  Upon its  completion,
Bancorp has an agreement to lease a portion of the facility to a local agency in
exchange for approximately $27,000 per month.

On January 11, 2000,  Bancorp's Board of Directors declared a 10% stock dividend
on outstanding common stock to be distributed on February 7, 2000, to holders of
record on January  28,  2000.  As a result of the  dividend,  472,879  shares of
common  stock will be  distributed  and  fractional  shares will be purchased at
$12.727  per share.  All data with  respect  to net income per common  share and
weighted average number of shares outstanding have been  retroactively  adjusted
to reflect the stock dividend.


NOTE Y--OPERATING SEGMENTS

Reportable  operating  segments  are  generally  defined  as  components  of  an
enterprise  for  which  discrete  financial  information  is  available,   whose
operating results are regularly reviewed by the  organization's  decision makers
and  whose  revenue  from  external  customers  is 10  percent  or more of total
revenue.  The Bancorp has two reportable segments under this definition,  retail
banking  and  credit  card  operations.  The  retail  banking  segment  provides
traditional banking services such as checking,  savings, IRA and Keogh accounts,
time  certificates  of deposit,  loans,  and lease  financings.  The credit card
segment  processes  the  settlement of credit and debit card sales for merchants
and issues and maintains credit card accounts for its customers.  The accounting
policies  of the  segments  are the same as those  described  in the  summary of
significant  accounting  policies.   Each  segment  receives  an  allocation  of
administrative  expenses.  The Bancorp evaluates  performance based on profit or
loss from operations before income taxes. The Bancorp's  reportable segments are
strategic business units that provide different services that are carried out by
separate  departments.  Included  in the retail  banking  segment  are all other
operations of the Bancorp,  which include an investment in an equipment  leasing
company.

The following table includes  segment  profit,  including  certain  revenues and
expenses, and segment assets (in thousands) of and for the year ended:

                                             Retail    Credit Card
                                            Banking    Operations     Total
                                           ---------   -----------  --------
December 31, 1999:
Revenue from external customers            $  4,071     $ 14,992   $  19,063
Interest revenue                             24,612          628      25,240
Interest expense                              8,163          182       8,345
Depreciation and amortization                 2,987          273       3,260
Segment profit, before taxes                  2,691        4,187       6,878

<PAGE>F-38

                        HUMBOLDT BANCORP AND SUBSIDIARIES

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

                        December 31, 1999, 1998 and 1997


NOTE Y--OPERATING SEGMENTS (Continued)

                                                 Retail    Credit Card
                                                 Banking   Operations   Total
                                                ---------  ---------- ---------
Other significant non-cash items:
  Additions to reserves for potential losses   $     686    $    832  $   1,636
Segment assets                                   361,543      62,106    423,649
Investment in equity method investees              4,063                  4,063

December 31, 1998:
Revenue from external customers                    3,524       8,304     11,828
Interest revenue                                  22,339       1,165     23,504
Interest expense                                   7,593         149      7,742
Depreciation and amortization                      2,886         217      3,103
Segment profit, before taxes                       4,444       2,089      6,533
Other significant non-cash items:
  Additions to reserves for potential losses       1,240       1,183      2,423
Segment assets                                   262,301      57,674    319,975
Investment in equity method investees              2,281                  2,281