SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

                                  FORM 10-KSB
                ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
                 For the Fiscal Year Ended:  DECEMBER 31, 1997

                       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
Incorporation or organization)                         Identification No.)

                               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-KSB.

Issuer's revenues for the most recent fiscal year were:           $28,162,000

Aggregate Market Value of the voting stock held by
non-affiliates of the registrant as of December 31, 1997:         $41,543,000

Number of shares of common stock outstanding at
December 31, 1997 is:                                               1,576,542

Documents incorporated by reference:   NONE

                   This report includes a total of 44 pages
                           Exhibit Index on page 43



<PAGE>2
                                    PART 1


ITEM 1 - DESCRIPTION OF BUSINESS

GENERAL

On November 10, 1995, the shareholders of Humboldt Bank (the "Bank") approved a
Plan of Reorganization  by  and  between  the Bank, Humboldt Merger Company and
Humboldt  Bancorp  (the  "Company") whereby the  Bank  became  a  wholly  owned
subsidiary of the Company.   The  reorganization  became  effective  January 2,
1996.   The  sole  business  operation of the Company is conducted through  its
wholly owned subsidiary, Humboldt  Bank.   The following discussion, therefore,
although presented on a consolidated basis,  analyzes  primarily  the financial
condition  and  results  of operations of the Bank for the twelve month  period
ended December 31, 1997.  Previously, the Bank filed its periodic reports under
the Securities Exchange Act of 1934 with the Federal Reserve Board.

Humboldt Bank (the "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.  The Bank is a member of the Federal Reserve
System ("FRS")  and its deposits are insured to the maximum amount permitted by
law by the Federal Deposit Insurance Corporation ("FDIC").

On January 22, 1993,  the  Board  of  Directors of the Bank approved the Bank's
acquisition of the Arcata and McKinleyville,  California branches (the "HomeFed
Branches"), previously owned and operated by HomeFed  Bank,  F.A.,  San  Diego,
California ("HomeFed").  The two branches were acquired directly from U.S. Bank
of  California  ("U.S. Bank") pursuant to an agreement, dated January 22, 1993,
between Humboldt  Bank and U.S. Bank (the "Agreement") simultaneously with U.S.
Bank's acquisition of 18 HomeFed branches from the Resolution Trust Corporation
("RTC").  The Branches  had  total deposits of approximately $57 million at the
time of acquisition.

Under the terms of the Agreement,  Humboldt  Bank agreed to acquire the HomeFed
Branches  from  U.S.  Bank  for  a  purchase price of  $1.2  million  plus  any
additional amounts required to be paid under the Branch Purchase and Assumption
Agreement and a related indemnity agreement  entered into between U.S. Bank and
RTC.

In connection with its approval of the acquisition of the HomeFed Branches, the
Federal Reserve Bank of San Francisco relied on  the Bank's commitment to raise
at least $1 million of equity capital, $500,000 of  which was guaranteed by the
Directors of the Bank.

On  September  22,  1993,  the Bank completed the required  stock  offering  by
selling 186,155 shares of common stock at $13.00 per share totaling $2,420,000,
less expenses incurred in the  sale  of  $17,000, for a net capital infusion of
$2,403,000.

On June 15, 1994, the Board of Directors of  the  Bank authorized management to
enter into negotiations for the acquisition of the  Loleta,  Willow  Creek  and
Weaverville,  California  branches  (the "U.S. Bank Branches") previously owned
and operated by U.S. Bank of California  ("U.S. Bank").  The Board of Directors
voted final approval of the purchase on January 18, 1995 and the three branches
were acquired on February 9, 1995 directly  from  U.S.  Bank,  pursuant  to  an
agreement  dated August 17, 1994 between Humboldt Bank and U.S. Bank (the "U.S.
Bank Agreement").   The  U.S. Bank Branches had total deposits of approximately
$26 million and total loans  of  approximately  $1.8  million  at  the  time of
acquisition.


<PAGE>3

Under the terms of the U.S. Bank Agreement, the Bank agreed to acquire the U.S.
Bank  Branches  from  U.S.  Bank  for  a  negotiated deposit premium based upon
average deposits excluding all Public Fund  accounts,  all  Jumbo  accounts and
interbranch  accounts  for the three (3) calendar months preceding the  closing
date.

On December 5, 1994 the  Bank  completed  a  stock  offering by selling 185,715
shares of common stock at $14.00 per share totaling $2,600,000,  less  expenses
incurred in the sale of $50,000 for a net capital infusion of $2,550,000.   The
funds  were  used  to  increase the Bank's capital levels and to facilitate the
U.S. Bank Branch purchase at a cost of approximately $787,000.

On June 19, 1996, the Board  of  Directors  authorized management to enter into
negotiations  for the acquisition of the Garberville,  California  Branch  (the
"Garberville Branch")  previously  owned  and operated by First Nationwide Bank
("First  Nationwide").  The Board of Directors  voted  final  approval  of  the
purchase on  January  15,  1997  and  the  branch  was  acquired on May 9, 1997
directly from First Nationwide, pursuant to an agreement dated December 6, 1996
between  Humboldt  Bank and First Nationwide (the First Nationwide  Agreement).
The Garberville Branch had total deposits of approximately $22.9 million at the
time of acquisition.

Under the terms of the  First  Nationwide Agreement, the Bank agreed to acquire
the Garberville Branch from First  Nationwide  Bank  for  a  negotiated deposit
premium  based  upon the aggregate amount of the deposits assumed  by  Humboldt
Bank on the closing date.

HUMBOLDT BANK

The Bank is locally  owned  and  operated  and  its primary service area is the
communities of Northern California.  The Bank's business  is  primarily focused
on servicing the banking needs of these communities and its marketing  strategy
stresses  its  local  ownership  and  commitment  to serve the banking needs of
individuals living and working in the Bank's primary  service  areas  and local
businesses,  including retail, professional and real estate related enterprises
in  those  service   areas.   The  Bank  is  not  licensed  by  the  California
Superintendent  of  Banks  (the  "Superintendent")  as  a  trust  company  and,
therefore, it may not provide trust services.

The Bank offers a broad range of services to individuals and businesses with an
emphasis upon efficiency  and personalized attention.  The Bank 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.   The  Bank  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  and  merchants,
and travelers' checks (issued by an independent entity).

The principal  office  of  the  Bank  is  located  at 701 Fifth Street, Eureka,
California 95501, Phone (707) 445-3233.  The Bank has  branches  at:  1360 Main
Street, Fortuna, California 95540, Phone (707) 725-7474; 1063 G Street, Arcata,
California  95521,  Phone  (707)  822-5165; 2095 Central Avenue, McKinleyville,
California 95519, Phone (707) 839-3281;  358  Main  Street,  Loleta, California
95551, Phone (707) 733-5731; 39171 Highway 299, Willow Creek, California 95573,
Phone  (530)  629-2125; 409 Main Street, Weaverville, California  96093,  Phone
(530) 623-5576;  a  Supermarket  Office  at  West  Highway  299  & Martin Road,
Weaverville,  California  96093,  Phone  (530) 623-6733 and 915 Redwood  Drive,


<PAGE>4

Suite D, Garberville, California 95542, Phone  (707)  923-2745.  The Bank has a
Lease,  SBA,  Loan  Supervision and Real Estate Department  at  612  G  Street,
Eureka, California 95501,  Phone (707) 269-3134 and a Merchant BankCard, Credit
Card Issuing and Heritage Club  Department  at 605 K Street, Eureka, California
95501,  Phone (707) 269-3207.  The Bank has an  Administration  Department  and
Alternative  Investment  Department  at  701  Fifth  Street, 2nd Floor, Eureka,
California 95501, Phone (707) 445-3233 as well as a Central Services Department
and  Data  Processing Department in the basement at this  location.   The  Bank
leases  premises  at  the  following  locations:   1)  555  H  Street,  Eureka,
California  95501,  Phone  441-0223,  to house the Cashier's Department; 2) 710
Fifth Street, Eureka, California 95501,  to  house  the  Statement  Preparation
Department; 3) 605 K Street, Eureka, California 95501, Phone (707) 269-3207  to
house  the Merchant Bankcard Department, the Credit Card Issuing Department and
the Heritage Club; 4) 767 Redwood Drive, Garberville, California 95442 to house
the Garberville  Branch  until the new Branch Office was ready for occupancy on
December 15, 1997.  This premises  is  currently  available for sub-leasing; 5)
915  Redwood  Drive,  Suite  D,  Garberville, California  95440  to  house  the
Garberville  Branch;  6)  West  Highway   299  and  Martin  Road,  Weaverville,
California  96093 to house the Weaverville Supermarket  Branch;  7)  523  Fifth
Street, Eureka, California 95501 and has donated as a community service the use
of  this  office   to  the  Redwood  Coast  Dixieland  Jazz  Festival  for  the
headquarters office.

BANCORP SUBSIDIARY

In January 1997, an  application  was  filed  with  the  regulatory agencies to
establish a new subsidiary of the Bancorp, Humboldt Bank Nevada,  which  was to
be  formed  as  a  limited  purpose bank issuing secured credit cards.  In late
1997, a decision was made, based  upon  economic  factors,  not  to  pursue the
formation of this subsidiary at this time.

LEASE COMPANY SUBSIDIARY

In January 1997, the Bank contributed capital totaling $2,000,000.00 for  a 50%
interest  in  Bancorp  Financial Services which makes small ticket lease loans.
The dollar amount of each lease usually ranges from $10,000 to $100,000 and the
term is approximately three  to five years.  At December 31, 1997, the Bank had
recorded a gain on this investment of $22,448.

SAVINGS AND DEPOSIT ACTIVITIES

The  Bank offers customary banking  services  such  as  personal  and  business
checking,  savings  accounts,  time  certificates  of  deposit,  IRA  and Keogh
accounts.  Most of the Bank's deposits are obtained from commercial businesses,
professionals  and individuals with high income or net worth.  At December  31,
1997, the Bank had  a  total  of  39,572 accounts, consisting of demand deposit
accounts  with an average balance of  approximately  $8,015;  savings  with  an
average balance  of approximately $2,192; time certificates of $100,000 or more
with an average balance of approximately $165,890; and other time deposits with
an average balance  of  approximately  $18,168.   The Bank has not obtained any
deposits through deposit brokers and has no present intention of using brokered
deposits as a source of funding.  See "Management's  Discussion and Analysis of
Financial Condition and Results of Operations - Deposits".


<PAGE>5


LENDING ACTIVITIES

The  Bank  concentrates  its lending activities in consumer  loans,  commercial
loans, lease receivable loans,  real  estate construction loans and other forms
of real estate loans made primarily to  businesses  and  individuals; it has no
foreign loans.  The net loan portfolio as of December 31, 1997 totaled $157,464
million, which represented 61.7% of total deposits and 55.4%  of  total assets.
The table below shows the mix of the loan portfolio.

<TABLE>
<CAPTION>
                                 12/31/97                    12/31/96                   12/31/95
(DOLLARS IN THOUSANDS)            AMOUNT           %          AMOUNT           %         AMOUNT           %
<S>                           <C>            <C>           <C>           <C>          <C>           <C>
 Commercial, Industrial & Ag      28,766         17.9%        20,559         14.1%       16,284         14.1%
 Real Estate-Construction &
   Land Dev                       20,165         12.6%        21,205         14.5%       15,874         13.7%
 Real Estate-Residential 1-5      27,205         16.9%        31,456         21.6%       21,156         18.3%
 Real Estate-Commercial & Ag      65,772         41.0%        61,030         41.9%       54,879         47.4%
 Lease Financing                   8,732         5.4%          3,168         2.2%         3,974         3.4%
 Consumer Loans                    9,502         5.9%          4,529         3.1%         3,395         2.9%
 State And Political Loans           0            0%           2,875         2.0%           0             0
 Other                              502          0.3%           850          0.6%          159          0.2%
 Total Gross Loans                160,644        100%         145,672        100%        115,721        100%
 Less Deferred Loan Fees           <809>                       (765)                      <616>
 Less Allowance For Loan
   Losses                          <2,371>                     (2,146)                    <1,868>
 Total Net Loans                  157,464                     142,761                    113,237
 Loans Held For Sale                48                          63                        1,880
 Total Loans And Leases           157,512                     142,824                    115,117
</TABLE>

COMMERCIAL LOANS

As  of  December  31, 1997, the Bank had outstanding commercial, industrial and
agricultural loans  totaling  $28.8  million,  representing 17.9% of the Bank's
gross  loan  portfolio.   The  Bank  lends  primarily   to  businesses  and  to
professionals  and  other  individuals located in the communities  of  Northern
California.   The  Bank  offers  a  variety  of  commercial  lending  services,
including  revolving  lines   of   credit,  working  capital  loans,  equipment
financing, letters of credit and inventory  financing.   Typically,  commercial
loans  are  floating  rate  obligations  and  are  priced  based  on the Bank's
reference rate.

Commercial  loans  are  typically  secured  by  several  types  of  collateral,
including  qualifying  accounts  receivable,  equipment,  inventory,  and  real
estate.  No single commercial account customer accounted for more than 4.0%  of
total outstanding loans at December 31, 1997.

REAL ESTATE LOANS

As  of  December  31,  1997,  the  Bank  had  outstanding  real  estate secured
construction  and  land  development loans totaling $20.2 million, representing
12.6% of the Bank's gross  loan  portfolio.   The  Bank  makes loans to finance
construction  of  residential,  commercial  and  industrial properties  and  to
finance land development.  At December 31, 1997, the  Bank had outstanding real
estate secured non-farm non-residential loans totaling  $64.8 million and loans
secured  by  farmland  totaling $1.0 million.  The Bank makes  loans  to  owner
occupied businesses for  a  variety  of  purposes  including  working  capital,
refinance, purchase, etc.

<PAGE>6


REAL ESTATE BANKING OPERATIONS

The  Bank  is  engaged  in  originating  real  estate secured loans for sale to
institutional investors in the secondary market.   The  Bank also generated fee
income by servicing mortgage loans.

LOAN ORIGINATION

The Bank's real estate secured loan origination activities have been focused on
one-to-four  family,  owner-occupied  residences  in California.   Underwriting
criteria established by investors in adjustable and  fixed  rate  single-family
residential  loans  generally  include the following:  maturities of 15  to  30
years,  a  loan-to-value ratio no  greater  than  80%,  the  liquidity  of  the
borrower's other  assets, and the borrower's ability to service the debt out of
income.   Interest  rates  on  adjustable  rate  loans  are  adjusted  annually
primarily on the basis  of  the  One-Year  Treasury  Constant  Maturity  Index.
Except  for the amount of the loan, the underwriting standards of the investors
generally  conform  to certain requirements established by the Federal National
Mortgage  Corporation  ("FNMA").   Loans  sold  in  the  secondary  market  are
generally secured  by a first deed of trust.  Real estate loans pending sale at
December 31, 1997 totaled  $48 thousand.  The Bank may also elect, from time to
time, to portfolio loans secured  by  single-family  residences.   The total of
portfolio real estate loans was $4.5 million at December 31, 1997.

LOAN SERVICING

The  Bank  may  retain  the servicing on loans sold to institutional investors,
thereby generating ongoing  servicing  revenues.   The  Bank's mortgage and SBA
servicing  portfolio was $123.2 million at December 31, 1997.   Loan  servicing
includes collection  and  remitting loan payments, accounting for principal and
interest, holding escrow (impound)  funds  for  payment of taxes and insurance,
making  inspections  as required of the mortgage premises,  collecting  amounts
from delinquent mortgages,  supervising foreclosures in the event of unremedied
defaults, and generally administering the loans for investors to whom they have
been  sold.   Management believes  that  the  quality  of  its  loan  servicing
capability is a  factor  which  permits  it to retain the servicing on loans it
sells in the secondary market.

The Bank received fees for servicing mortgage  loans,  ranging  generally  from
 .250% to .375% per annum on the declining principal balances of the loans.  The
average service fee collected by the Bank was .250% for the year ended December
31, 1997.  Servicing fees are collected and retained by the Bank out of monthly
mortgage  payments.   The Bank's servicing portfolio is subject to reduction by
reason of normal amortization  and  prepayment  or  liquidation  of outstanding
loans.  Approximately 90.0% of the loans serviced by the Bank have  outstanding
balances of greater than $100,000, and approximately 10.0% are adjustable  rate
mortgages (ARMs).

The  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.  65  and  the Financial Accounting  Standards  Board
Emerging Issues Task Force Issue No. 88-11.  Gains and losses are recognized at
the  time of sale by comparing sales price  with  carrying  value.   A  premium
results  when the interest rate on the loan, adjusted for a normal service fee,
exceeds the pass-through yield to the buyer.

In general,  the  value of the Bank's loan servicing portfolio may be adversely
affected as mortgage  interest rates decline and loan prepayments increase.  It
is anticipated that income  generated  from the Bank's loan servicing portfolio
will also decline in such an environment.   This  negative effect on the Bank's
income  may be offset somewhat by a rise in origination  and  servicing  income
attributable  to  new  loan  originations, which historically have increased in
periods of low mortgage interest rates.

<PAGE>7

The following table sets forth  the  dollar  amount of the Bank's mortgage loan
servicing portfolio.  Although the Bank intends  to  continue  to  increase its
servicing  portfolio, such increases will depend on market conditions  and  the
availability of capital.

                                                            DECEMBER 31, 1997
                                                            (In thousands)
Loan Servicing Portfolio:
Loans originated by the Bank and sold:                      $ 120.6 Million
Loans originated by the Bank but awaiting funding:          $  48.0 Thousand

The Bank also services a portfolio of SBA loans which is anticipated to
increase during 1998.

SBA Loans originated and serviced by Bank:                  $   2.6 Million

For the most part, the SBA loans are tied to Prime and as a result they are not
as  subject to early payoff as a result of declining rates as are  real  estate
loans.

LEASE RECEIVABLE LOANS

As of  December  31,  1997,  the  Bank  had  outstanding Lease Receivable Loans
totaling $8.7 million representing 5.4% of the  Bank's  Gross  Loan  Portfolio.
The Bank makes Lease Receivable loans to finance credit card swipe machines and
other small ticket leases.  The dollar amount of each Lease usually range  from
under  $2,000.00 to $100,000 and the term is approximately three to five years.
The Bank  may  also  generate  leases  which  may  be  sold  to other financial
institutions on a non-recourse basis.

CONSUMER LOANS

As of December 31, 1997, consumer loans, including loans to individuals, dealer
auto  loans, business customers, credit cards and related plans,  totaled  $9.5
million,  or  5.9%,  of  the  Bank's  gross  loan portfolio.  Loans to purchase
automobiles were $1.3 million or 13.7%, dealer  auto loans were $0.1 million or
1.0% and credit cards and related plans were $7.3  million  or  76.9%  of total
consumer  loans  at December 31, 1997.  The remainder includes mobile home  and
other personal loans totaling $0.8 million or 8.4%.

STATE AND POLITICAL LOANS

As of December 31,  1997,  the  Bank  had  no  outstanding  State and Political
Subdivision Loans.  The Bank previously has made loans to State  and  Political
Subdivisions to finance equipment, water system improvements and purchase  land
for sewage treatment.

OTHER LOANS

As  of  December  31,  1997, the Bank had outstanding other loans totaling $0.5
million.  These loans consist  mainly  of  overdrafts  of  less  than  30  days
duration.

BANKING SERVICES

To retain existing customers and attract new customers, the 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,  the  Bank  maintains  close  relationships  with  its  customers  by

<PAGE>8

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.

HUMAN RESOURCES

At December  31,  1997,  the  Bank employed a total of 209 full time equivalent
employees, consisting of 74 salaried persons and 135 hourly persons.

COMPETITION

The Bank actively competes for all types of deposits and loans with other banks
and financial institutions located in its service area.  Increased deregulation
of  financial  institutions has increased  competition.   Many  of  the  Bank's
competitors have  greater  financial resources and facilities than the Bank and
may offer certain services,  such  as  trust  services,  that the Bank does not
presently offer.  In addition, California legislation that  became effective on
January 1, 1991 permitted nationwide interstate banking on a  reciprocal basis.
The  Bank  believes that this legislation will further increase competition  as
out-of-state financial institutions enter the California market.

The Bank'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 the Bank's larger
competitors.

REGULATION OF HUMBOLDT BANCORP

The Company and the Bank are extensively regulated under both federal and state
laws and regulations.  These laws  and  regulations  are  primarily intended to
protect  depositors,  not  shareholders.   To  the  extent  that the  following
information describes statutory or regulatory provisions, it  is  qualified  in
its entirety by reference to the particular statutory and regulatory provisions
at issue.

The Company is a registered bank holding company under the Bank Holding Company
Act  (BHC  Act)  and,  as  such,  is  subject  to  regulation, supervision, and
examination by the Board of Governors of the Federal  Reserve Bank (FRB).  Bank
holding companies must file with the FRB an annual report  and  such additional
reports as the FRB may require and are also subject to periodic examinations by
the  FRB.   The  Bank,  as  a  California  state-licensed  bank, is subject  to
regulation, supervision, and periodic examination by the California  Department
of  Financial Institutions (the "Department") and the Federal Deposit Insurance
Corporation (FDIC).  The Bank's deposits are insured by the FDIC to the maximum
amount  permitted  by  law,  which  is currently $100,000 per depositor in most
cases.  For this protection, the Bank  pays  a  semi-annual  assessment  and is
subject  to  the  rules  and  regulations  of  the  FDIC  pertaining to deposit
insurance and other matters.

The regulations of the FRB, the FDIC, and the Department govern most aspects of
the Bank's business and operations, including, but not limited to, the scope of
its business, investments, reserves against deposits, the nature  and amount of
any  collateral  for  loans,  the time of availability of deposited funds,  the
issuance of securities, the payment  of  dividends,  bank  expansion  and  bank
activities, including real estate development and insurance activities, and the
making  of  periodic reports.  The Bank is also subject to the requirements and
restrictions  of various consumer laws and regulations.  The FRB, the FDIC, and
the Department  have  broad  enforcement  powers  over depository institutions,
including  the  power to prohibit a bank from engaging  in  business  practices
which are considered  to  be unsafe or unsound, to impose substantial fines and
other civil and criminal penalties,  to  terminate  deposit  insurance,  and to


<PAGE>9


appoint  a  conservator  or  receiver  under  a  variety of circumstances.  For
instance,  if  the Bank were to experience either significant  loan  losses  or
rapid growth in loans or deposits, or some other event resulting in a depletion
or deterioration  of  the  Bank's  capital  account,  the shareholders might be
compelled by federal banking authorities to invest additional  capital  in  the
Bank as necessary to return the Bank's capital account to a satisfactory level.
The  FRB  also  has  broad  enforcement  powers  over  bank  holding companies,
including  the power to impose substantial fines and other civil  and  criminal
penalties.

From time to  time,  legislation  is enacted which has the effect of increasing
the cost of doing business, limiting  or  expanding  permissible activities, or
affecting   the   competitive   balance  between  banks  and  other   financial
institutions.  Proposals to change  the  laws  and  regulations  governing  the
operations   and  taxation  of  banks  and  other  financial  institutions  are
frequently made in Congress, in the California legislature, and by various bank
regulatory agencies.   No  prediction  can  be made as to the likelihood of any
major changes or the impact such changes might have on the Company or the Bank.

IMPACT OF ECONOMIC CONDITIONS AND MONETARY POLICIES

The  earnings  and  growth  of the Bank are and will  be  affected  by  general
economic conditions, both domestic  and  international, and by the monetary and
fiscal policies of the United States Government  and its agencies, particularly
the  FRB.   One function of the FRB is to regulate the  money  supply  and  the
national  supply   of  bank  credit  in  order  to  mitigate  recessionary  and
inflationary pressures.   Among  the  instruments  of  monetary  policy used to
implement   these  objects  are  open  market  transactions  in  United  States
Government securities,  changes in the discount rate on member bank borrowings,
and  changes in reserve requirements  held  by  depository  institutions.   The
monetary  policies  of  the  FRB have had a significant effect on the operating
results of commercial banks in  the  past and are expected to continue to do so
in the future.  However, the effect of such policies on the future business and
earnings of the Bank cannot be accurately predicted.

RISK MANAGEMENT

Beginning in 1996, FRB examiners were instructed to assign a formal supervisory
rating to the adequacy of an institution's risk management processes, including
its  internal  controls.   The  five ratios  are  strong,  satisfactory,  fair,
marginal, and unsatisfactory.  The  specific  rating  of  risk  management  and
internal  controls  will be given significant weight when evaluating management
under the Bank (CAMEL) and Company (BOPEC) rating systems.

CAPITAL ADEQUACY GUIDELINES

The FRB has adopted risk-based  capital  requirements  for  member  banks which
require  a minimum risk-based capital ratio of 8% (at least 4% in the  form  of
Tier 1 Capital).   "Tier  1"  capital  excludes goodwill and consists of common
equity, non-cumulative perpetual preferred stock, and minority interests in the
equity accounts of consolidated subsidiaries.   "Tier  2"  capital  consists of
cumulative  and limited-life preferred stock, mandatory convertible securities,
subordinated  debt  and,  subject  to  certain  limitations, allowance for loan
losses.  General loan loss reserves may make up no  more  than  1.25%  of risk-
weighted  assets  at year ended 1997.  At December 31, 1997, the Bank's general
loan loss reserves  were  98.7%  of  risk  weighted  assets  and thus 0% of the
general loan loss reserve was not eligible for inclusion in Tier 2 capital.

The  Bank's and the Company's Tier 1 risk based capital ratio at  December  31,
1997 was 10.79% and 11.1%, respectively.

The requirements  made  regulatory  capital  requirements more sensitive to the
differences in risk profiles among banking institutions, took off-balance sheet
items into account when assessing capital adequacy  and minimized disincentives


<PAGE>10


to holding liquid low-risk assets.  In addition, the requirements required some
banking  institutions  to  increase  the  level  of their common  shareholders'
equity.  The Bank's and the Company's risk-based capital  ratio at December 31,
1997 was 12.0% and 12.3%, respectively.

In 1990, the FRB instituted minimum leverage ratio guidelines  for state member
banks.   Effective January 1, 1991, capital leverage ratio guidelines  replaced
the FRB's  total  and  primary  capital  guidelines  for Banks which previously
required the maintenance of a minimum total capital to total assets ratio of 6%
and  a  minimum primary capital to assets ratio of 5.5%.   The  leverage  ratio
guidelines  required  maintenance  of  a  minimum ratio of 3% Tier 1 capital to
total assets for the most highly rated bank  organizations.   Institutions that
were  less  highly rated, anticipating significant growth or subject  to  other
significant risks  were  required to maintain capital levels ranging from 1% to
2% above the 3% minimum.   At  December 31, 1997, the Bank's leverage ratio was
7.4% and the Company's leverage  ratio  was  7.6%.   The  Company  has not been
advised by any regulatory agency that it is deficient with respect to  the Tier
1 leverage ratio.

The  Company  does  not presently expect compliance with the risk-based capital
requirements or leverage  guidelines  to  have a materially adverse effect upon
the  business  of the Company.  See "Management's  Discussion  and  Analysis  -
Capital Resources."

RECENT LEGISLATION AND LEGISLATIVE PROPOSALS

Federal and state  laws  applicable  to  financial  institutions have undergone
significant  changes  in  recent  years.  The most significant  recent  federal
legislative enactment's are the Riegle-Neal  Interstate  Banking  and Branching
Efficiency Act of 1994 and the Riegle-Neal Community Development and Regulatory
Improvement  Act of 1994.  Other legislation which has been or may be  proposed
to the Congress  or  the  California  Legislature  and regulations which may be
proposed  by  the  FRB,  the FDIC, and the Banking Department  may  affect  the
business of the Company and  the  Bank.   It  cannot  be  predicted whether any
pending or proposed legislation or regulations will be adopted  or  the  effect
such  legislation  or regulations may have upon the business of the Company  or
the Bank.

On September 23, 1994,  the  President  signed  into  law  the Riegle Community
Development and Regulatory Improvement Act of 1994 which covers a wide range of
topics,   including   small   business   and   commercial   real  estate   loan
securitization,  money laundering, flood insurance, consumer home  equity  loan
disclosure and protection,  as  well  as  the  funding of community development
projects and regulatory relief.  On September 29,  1994,  the  President signed
into  law  the Riegle-Neal Interstate Banking and Branching Efficiency  Act  of
1994 (the "Interstate  Banking  Act"),  which eliminated many of the previously
existing  restrictions to interstate banking  and  branching.   The  Interstate
Banking  Act   permits   full   nationwide  interstate  banking  to  adequately
capitalized and adequately managed  bank  holding  companies  without regard to
whether such transaction is expressly prohibited under the laws  of  the state.
The  Interstate  Banking  Act's  branching  provisions  permit  full nationwide
interstate  bank  merger transactions to adequately capitalized and  adequately
managed banks.

On September 28, 1995,  Governor  Pete  Wilson  signed  into  law  the Caldera,
Weggeland, and Killea California Interstate Banking and Branching Act  of  1995
(the  "Caldera  Weggeland  Act").   The  Caldera  Weggeland  Act,  which became
effective  on  October  2,  1995, opted into the Interstate Banking Act's  bank
branching  provision,  and  adopted   other   provisions  consistent  with  the
Interstate Banking Act.


<PAGE>11


PENDING MATTERS

The Board of Directors, after due deliberation, made the decision that becoming
a State non-member bank would provide the institution  with  greater  strategic
opportunities  for  expansion and customer services in the future.  On December
3, 1997, the Bank made a formal application to the FDIC to convert from a state
member bank to a state non-member bank.  At that time, the FRB in San Francisco
was notified of the Bank's  intent.  The Bank expects a favorable decision from
the FDIC in early 1998.  The  Bank  does  not  anticipate that this matter will
have any impact upon the results of operations of the Bank.

On June 23, 1997, the FRB of San Francisco conducted  a Consumer Compliance and
Community  Reinvestment Act Examination.  The revised report  of  the  FRB  was
issued on November 21, 1997 indicating that the Bank was rated "unsatisfactory"
relative to  consumer  compliance,  and  "Needs  to  Improve"  relative  to the
Community  Reinvestment Act.  The Bank has filed an appeal with the FRB of  San
Francisco contesting  the  Community  Reinvestment  Act  rating  of  "Needs  to
Improve."  The appeal is based mainly upon the misinterpretation of data by the
examiners  which resulted in a "Less than Satisfactory" rating.  The hearing of
the appeal will  be  completed  during  the  first  quarter  of 1998.  The Bank
expects  a favorable decision from the FRB in early 1998.  The  Bank  does  not
anticipate that this matter will have any impact upon the results of operations
of the Bank.

YEAR 2000 ISSUE

In late 1997,  the  Company  formed  a committee of senior company personnel to
evaluate and make recommendations on the  Year  2000  Issue.  It is anticipated
that  the  Assessment  Phase,  the  Vendor, Customer and Employee  Notification
Phase, and the Vendor and Customer Application  Review  Phase will be completed
during  1998.   The  testing  of  all  systems which may affect  the  Company's
operation will commence in late 1998 or early 1999.

RECENT ACCOUNTING PRONOUNCEMENTS

SFAS NO. 125

In June 1996, the Financial Accounting Standards Board ("FASB") issued SFAS No.
125,  "Accounting  for  Transfers  and  Servicing   of   Financial  Assets  and
Extinguishment of Liabilities."  SFAS No. 125 requires that,  after  a transfer
of financial assets, an entity recognize the financial and servicing assets  it
controls and the liabilities it has incurred, derecognize financial assets when
control  has  been  surrendered, and derecognize liabilities when extinguished.
SFAS No. 125 is intended to provide consistent standards by which a company may
distinguish transfers  of  financial  assets that are sales from transfers that
are secured borrowings.  SFAS No. 125 applies  to  transfers  and  servicing of
financial assets and extinguishment of liabilities occurring after December 31,
1996, and is to be applied prospectively--earlier or retroactive application is
not permitted.  Implementation of SFAS No. 125, beginning on January  1,  1997,
did  not  have  a  significant  effect on the financial condition or results of
operations of the Company.

SFAS NO. 128

In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share," which (i)
replaces  the  presentation  of primary  earnings  per  share  ("EPS")  with  a
presentation of basic EPS; (ii) requires dual presentation of basic and diluted
EPS on the face of the consolidated  statements of income regardless of whether
basic and diluted EPS are the same; and  (iii) requires a reconciliation of the
numerator and denominator used in computing  basic  and diluted EPS.  Basic EPS
excludes  dilution  of  common stock equivalents and is  computed  by  dividing
income available to common  stockholders  by  the  weighted-average  number  of

<PAGE>12


common  shares  outstanding for the period.  Diluted EPS reflects the potential
dilution that could  occur  if  securities  or  other contracts to issue common
stock were exercised or converted into common stock or resulted in the issuance
of common stock that then shared in the earnings of the entity.  Diluted EPS is
computed similarly to fully diluted EPS pursuant to Accounting Principles Board
Opinion No. 15.  SFAS No. 128 is effective for financial  statements issued for
periods  ending  after  December 15, 1997, including interim periods.   Earlier
application is not permitted.   SFAS  No. 128 requires restatement of all prior
period EPS data presented.

SFAS NO. 129

In February 1997, the FASB also issued SFAS No. 129, "Disclosure of Information
about Capital Structure."  This pronouncement  established  standards  for  the
disclosure  of information about an entity's capital structure and is effective
for financial  statements  issued  for  periods ending after December 15, 1997.
The  adoption  of this pronouncement is expected  to  have  no  impact  on  the
financial statements of the Company.

SFAS NO. 130

In June 1997, the  FASB  issued SFAS No. 130, "Reporting Comprehensive Income".
SFAS No. 130 established standards  for  reporting and display of comprehensive
income which is defined as the change in equity of a business enterprise during
a period from nonowner sources.  SFAS No.  130 is effective for years beginning
after December 15, 1997 and requires reclassification  of  financial statements
for  all prior years presented.  The adoption of SFAS No. 130  is  expected  to
impact the presentation of financial information only.

SFAS NO. 131

In June 1997, the FASB also issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information."  SFAS No. 131 requires public companies
to report  financial  and  descriptive  information about operating segments in
annual financial statements and requires  selected  information about operating
segments to be reported in interim financial reports  issued  to  shareholders.
Operating segment financial information is required to be reported on the basis
that it is used internally for evaluating segment performance and allocation of
resources.   SFAS  No.  131  is effective for financial statements for  periods
beginning after December 15, 1997  and  requires  presentation  of  comparative
information  for  prior  periods  presented.   The adoption of SFAS No. 131  is
expected  to  impact  the  way  the  Company  reports  information   about  its
operations.


ITEM 2-DESCRIPTION OF PROPERTIES

The  Bank  originally  leased  its  office space at 701 Fifth Street in Eureka,
California from certain organizers, directors  and  persons  of  the  Bank  and
entities  associated  with such persons including Francis Dutra, Dorothy Dutra,
Gary Evans, John Winzler,  Flora Winzler, Donald Grace, David McMurray, Barbara
McMurray, Francis Carrington,  Robert  Dias,  Lenore  Dias,  Mary  Schmidbauer,
Ronald  Angell,  Margaret  Angell and Ward De Witt, M.D., A Medical Corporation
Pension and Profit Sharing Plan.   The rental payment was $5,000 per month.  On
December 29, 1989, the Bank exercised  its  option under the terms of the lease
to  purchase the land and building for approximately  $710,000.   The  purchase
price  was  determined  by  the  sum of the lessor's original purchase price of
$500,000 plus out-of-pocket repair  costs  and  other  expenses incurred by the
landlord.   The  Bank believes that the $500,000 represented  the  fair  market
value of the premises on the date the lessors purchased the premises and before
the improvements were made.

<PAGE>13

On March 1, 1990,  the  Bank acquired a one-year option to lease a 2,440 square
foot, one story office building for the proposed new site of the Fortuna Branch
located  at 1201 Main Street  in  Fortuna,  California.   The  Bank  originally
acquired the  option  for an option price of $3,000 which was initially paid by
the directors of the Bank  who  were  subsequently  reimbursed  in  full.   The
original  lease,  which was dated May 1, 1991, was for a period of three years,
with an option to renew  for  an  additional  three  years,  with monthly lease
payments of $900 for the first year, $1,000 for the second year, $1,100 for the
third year.  The building was previously used as a savings and loan.  Under the
terms  of  the  lease,  the  lessor agreed to provide $10,000 toward  leasehold
improvements and would pay the  taxes  and  insurance  on  the property.  After
deciding not to use the lease, on November 2, 1992, the Bank  executed  a  sub-
lease  with  Joseph  and  Lisa Barrote doing business as Bartow's Jewelry.  The
sub-lease originated on November  2, 1992 with lease payments of $900 per month
from November 2, 1992 through April  30,  1993  and  $1,000  per  month for the
period May 1, 1993 through April 30, 1994.  On May 1, 1994, the Bank executed a
modification  agreement  to  extend the sub-lease with Joseph and Lisa  Barrote
doing business as Bartow's Jewelry.  The modification to the agreement included
that "the sub-lease shall commence  on  November  2,  1992 and shall end on the
date on which the Master Lease terminates or on April 30,  1997,  whichever  is
earlier"  and "pursuant to Paragraph XXI of the Master Lease and Paragraph 3 of
the sub-lease,  the  San Francisco Consumer Price Index for January 1, 1994 was
$147.4, being an increase in the amount of 1.7% from January 1, 1993.  Rent for
the period May 1, 1994  through  and including April 30, 1997 shall be $1,119".
On April 30, 1997 the lease was terminated by mutual consent with the landlord,
with the bank making a one time negotiated  payment  of  $3,000  to  cover  the
leasehold improvement mentioned above.

Only  July  1, 1992, the Bank purchased from the RTC a bank building located at
1360  Main  Street,   Fortuna,   California  for  the  sum  of  $310,000.   The
approximately 3,600 square foot building was previously occupied as a branch of
the now defunct Imperial Savings and Loan ("ISL").  The RTC claimed the Fortuna
facility as part of its ISL regulatory  settlement and then put the property up
for sale.  The Bank reviewed the advantages of the "available" Fortuna facility
and placed a bid to purchase the property that was accepted by the RTC in March
1992.  The Bank moved from its leased facility  at  1201  Main Street, Fortuna,
California  to  the  newly  acquired  property  at  1360 Main Street,  Fortuna,
California on September 28, 1992.

On August 2, 1993, the Bank purchased from the RTC a  bank  building located at
1063  G Street, Arcata, California for the sum of $397,380.  The  building  was
previously  occupied  as  a  branch  of  the now defunct HomeFed Bank.  The RTC
claimed the Arcata facility as part of its  HomeFed  regulatory  settlement and
then  put  the property up for sale.  The Bank reviewed the advantages  of  the
"available"  Arcata facility and placed a bid to purchase the property that was
accepted by the  RTC.   The purchase price of $397,380 was the negotiated sales
price with the RTC.

Also on August 2, 1993, the Bank purchased from the RTC a bank building located
at 2095 Central Avenue, McKinleyville, California for the sum of $181,845.  The
building was previously occupied  as  a branch of the now defunct HomeFed Bank.
The  RTC  claimed  the McKinleyville facility  as  part  of  its  HomeFed  Bank
regulatory settlement and then put the property up for sale.  The Bank reviewed
the advantages of the  "available"  McKinleyville  facility and placed a bid to
purchase  the property that was accepted by the RTC.   The  purchase  price  of
$181,845 was  the negotiated sales price with the RTC.  In addition, as part of
the agreement with  the  RTC, the Bank purchased certain furniture and fixtures
for the sum of $46,495 at  Arcata and $46,105 at McKinleyville.  These purchase
prices of $46,495 and $46,105  respectively  were  the  negotiated sales prices
with the RTC.

On  October 25, 1993, the Bank exercised a two year option  to  lease  a  1,239
square  foot,  two  story  office building located at 528 Fifth Street, Eureka,
California  to house the Bank's  Lease  Department.   The  Lease  commenced  on
November 1, 1993  and was for a period of two years with monthly lease payments
of $900.  The Lease  also  contained  an  option  to  renew  the  Lease  for an
additional  five  year  term.   The  building  was previously used as a jewelry

<PAGE>14

store.  The Bank elected not to exercise the option  to  renew  and  the  lease
terminated on November 1, 1995.

On  November  2,  1993,  the Bank purchased from Jack Retzloff, an unaffiliated
party, property located at  404  H  Street,  Eureka,  California for the sum of
$400,000.  The property was previously used for office space.  The building was
removed by the previous owner and the Bank obtained the  necessary  permits  to
turn  the vacant lot into an additional parking lot with a Drive-up ATM for the
Bank building  located  at  701  Fifth  Street,  Eureka,  California.  The Bank
reviewed the advantages of the "available" property and negotiated a price with
the previous owner.

On  June 21, 1994, the Bank purchased from the RTC a bank building  located  at
612 G  Street,  Eureka,  California  for  the  sum  of $532,000 to serve as the
location of the SBA, Lease and Loan Supervision Departments.   The building was
previously  occupied  as  a  branch of the now defunct HomeFed Bank.   The  RTC
claimed the Eureka facility as  part  of  its HomeFed regulatory settlement and
then put the property up for sale.  The Bank  reviewed  the  advantages  of the
"available"  Eureka  facility  and  placed a bid to purchase the property at an
auction held by the RTC and the RTC accepted the bid.

Upon  the  completion  of the acquisition  of  the  Loleta,  Willow  Creek  and
Weaverville offices of U.S.  Bank in early 1995, pursuant to an agreement dated
August 17, 1994, the Bank purchased the following properties from U.S. Bank:

     a)  358 Main Street, Loleta, California for $183,333
     b)  39171 Highway 299, Willow Creek, California for $400,000
     c)  409 Main Street, Weaverville, California for $230,000

All of these properties were occupied  as  branches  of U.S. Bank of California
which offered them for sale pursuant to the Agreement  dated  August  17, 1994.
The  Bank  reviewed  the advantages of the "offered" branches and negotiated  a
sale price on each office  which  was  accepted by U.S. Bank of California.  In
addition, certain fixtures and equipment  were purchased upon completion of the
acquisition of the three branches from U.S.  Bank of California.  The following
table outlines the purchase price:

     a)  Loleta         $   2,940
     b)  Willow Creek   $  49,217
     c)  Weaverville    $  58,832
                        ---------
                        $ 110,989

On May 15, 1996, the Bank exercised a ten year  option to lease 773 square feet
in  a  Tops  Sentry  Market  located  at  West  Highway 299  and  Martin  Road,
Weaverville,  California,  to house the Weaverville  Supermarket  Branch.   The
lease commenced on May 15, 1996  and  was  for  a  period  of ten years with an
initial monthly lease payment of $1,725, to increase to $2,030  per  month when
store  customer count reaches 15,000.  The rent at December 1, 1997 was  $2,030
per month.   The  lease  also  contained  an  option to renew the lease for two
additional five-year terms.

On  March  1,  1996,  the  Bank  exercised  a  ten  year  option  to  lease  an
approximately 10,000 square foot, single story office building located at 605 K
Street, Eureka, California, to house the Bank's Heritage  Club  Department, the
Merchant BankCard Department and the Credit Card Issuing Department.  The lease
commenced  on  March 1, 1996 and was for a period of ten years with  a  monthly
lease payment of $4,500.  The lease also contained an option to renew the lease
for two additional five year terms.

<PAGE>15

On  July 28, 1995,  the  Bank  exercised  a  three  year  option  to  lease  an
approximately  1,600  square foot building located at 525 Fifth Street, Eureka,
California.  The lease commenced November 1, 1995 and was for a period of three
years with a monthly lease  payment  of  $600.   The  Bank  has  donated,  as a
community service, the use of this property to the Redwood Coast Dixieland Jazz
Festival for their headquarters office.

On May 9, 1997, the Bank, as part of the "First Nationwide" Agreement assumed a
lease  on  an  approximately  1800  square foot building located at 767 Redwood
Drive, Garberville, California to house  the Garberville Branch.  This property
is at present vacant and the Bank is actively  trying  to sub-let the premises.
This  lease  expires on July 1, 1999, and the Bank does not  plan  to  exercise
additional options.

On September 1, 1997, the Bank executed a ten year lease with Sentry III for an
approximately  3,100  square  foot  building  located  at  915  Redwood  Drive,
Garberville,  California  to house the Garberville Branch.  The lease commenced
on September 1, 1997 and was  for a period of ten years with an initial monthly
lease payment of $2,550.  The lease  also  contains  two  five  year options to
extend the lease.

On  October  10,  1997,  the  Bank  executed  a  one  year  lease  with  ReProp
Investments,  Inc.  for office space of approximately 1945 square feet, located
at 555 H Street, Suite  B  and  C,  Eureka,  California  to  house the Cashiers
Department.  The lease commenced on October 13, 1997 and terminates  on October
31, 1998 with a monthly lease payment of $1,945.

On  November  28, 1997, the Bank executed a month to month lease with 1991  Rev
Trust c/o Bob Gardner  for  office  space  of  approximately  1100 square feet,
located at 710 Fifth Street, Eureka, California.  The building  at December 31,
1997 was vacant.  The lease commenced December 3, 1997 and is a month  to month
lease  with  a  sixty  day notice to terminate, and a monthly lease payment  of
$475.00.

Rental expense for all leases of premises was $128,000, $94,000 and $24,000 for
the year ended December  31,  1997,  1996 and 1995 respectively.  Rental income
for all leases of premises was $65,000,  $69,000,  and  $64,000  for  the years
ended December 31, 1997, 1996 and 1995, respectively.


ITEM 3-LEGAL PROCEEDINGS

The  Company 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  Company  as to the current status of various claims and
proceedings to which the Company 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 Company.


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

None applicable.

<PAGE>16

                                    PART II

ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Trades in the Company's common stock are made through Everen Securities,  Inc.,
Sutro  and  Company (since July 1, 1997) and Paine Webber (since July 1, 1997),
as intermediary.   However,  no  established  trading  market  exists  for  the
Company's  common  stock.   The  Company's  common  stock  is not listed on any
exchange  nor the NASDAQ system, and the Company does not currently  intend  to
seek such listing.  In addition, the Company does not anticipate that an active
market in the  Company's  common  stock will develop in the foreseeable future.
Prior to the effective date of the reorganization, Humboldt Bank's common stock
was traded as outlined above.

For the year ended December 31, 1997,  the  Company was aware of only 51 trades
of the Company's common stock totaling 104,932  shares  of  common stock.  This
compared with 5 trades totaling 2,342 shares of the Company's stock in the year
ending  December  31, 1996.  Since all of those transactions were  individually
negotiated between  the buyer and seller through Everen Securities, Inc., Sutro
and Company, or Paine  Webber  as intermediary, the Company was not informed of
the  exact  purchase  price  for  the  common  stock  sold  in  each  of  these
transactions.  The Company, however,  was  informed by Everen Securities, Inc.,
Sutro and Company, or Paine Webber of the high and low bid price for the common
stock during the last two fiscal years as follows,  but  no  assurances  can be
given  that these high and low bid prices reflected the actual market value  of
the Company's  common  stock.  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

-1996-      First Quarter                2           $17.00            $17.00
            Second Quarter (1)           0           $18.50            $15.38
            Third Quarter                0           $20.50            $19.50
            Fourth Quarter               3           $20.75            $20.50
-1997-      First Quarter                5           $23.00            $21.13
            Second Quarter (2)           8           $29.00            $23.00
            Third Quarter               23           $31.00            $27.50
            Fourth Quarter              15           $31.25            $29.00

(1) During the second quarter of 1996 the Company declared a 10% stock dividend.
(2) During the second quarter of 1997 the Company declared a 10% stock dividend.


As of December 31, 1997, the shares of the Company  were  held by approximately
582  shareholders  compared to 586 shareholders as of December  31,  1996,  not
including those held  in  street  name  by  several  brokerage  houses.   As of
December 31, 1997, 362,201 shares of the Company's common stock are subject  to
outstanding  options.   The Company is the sole shareholder of the one share of
Bank stock.

The Bank distributed a 10% stock dividend on the common stock on April 5, 1995.
The Company distributed a  10%  stock  dividend  on the common stock on May 30,
1996  and  1997.   Because  there  is  no established trading  market  for  the
Company's common stock, the Company cannot  determine  the  effect of the stock

<PAGE>17

dividends on the market value of the stock.  Neither the Bank  nor  the Company
has  ever  declared  a  cash  dividend on the common stock.  Payments of future
dividends will be subject to the  discretion of the Board of Directors and will
depend upon the Company's earnings,  financial condition, capital requirements,
regulatory requirements and such other  factors as the Board of Directors deems
appropriate.


ITEM 6-MANAGEMENT'S DISCUSSION AND ANALYSIS

SELECTED FINANCIAL DATA

The following table sets forth certain selected  financial data of the Bank and
the Company for the years ended December 31, 1997, 1996 and 1995, respectively,
and should be read in conjunction with Management's  Discussion and Analysis of
Financial  Condition  and  Results  of  Operations,  and  with   the  financial
statements presented herein.

YEAR ENDED DECEMBER 31:                    - 1997 -      - 1996       - 1995 -
(DOLLARS IN THOUSANDS EXCEPT               COMPANY       COMPANY     BANK ONLY
 PER SHARE DATA)
Results of Operations:
  Interest Income                           20,053        16,562        15,241
  Interest Expense                           7,024         5,549         5,244
Net Interest Income:                        13,029        11,013         9,997
  Provision for Loan Losses                    773           533           792
  Other Income                               8,109         5,747         3,509
  Other Expense                             15,496        11,325         9,149
  Income Before Income Taxes                 4,869         4,902         3,565
  Provision for Income Taxes                 1,611         1,926         1,363
NET INCOME:                                  3,258         2,976         2,202
Per Share Data (1):
  Net Income                                 $2.08         $1.94         $1.44
  Net Income Assuming Dilution               $1.78         $1.70         $1.33
  Cash Dividend Declared                       n/a           n/a           n/a
  Book Value Per Share                      $14.94        $13.89        $11.33
  Weighted Average Shares Outstanding    1,569,498     1,533,071     1,528,913
  Weighted Average Shares Outstanding-
     Diluted                             1,829,947     1,746,268     1,650,041
Balance Sheet at December 31:
  Assets                                   284,087       214,738       193,912
  Loans                                    157,512       142,824       115,118
  Deposits                                 255,186       192,576       174,526
  Shareholders' Equity                      23,554        19,600        16,934
Financial Ratios:
  Return on Average Assets                    1.15          1.48          1.22
  Return on Average Shareholders'
     Equity                                  14.50         16.96          9.80
   Average Shareholders' Equity
     to Average Assets                        7.93          8.80          8.37

(1) All share and share data have been retroactively adjusted to reflect
    stock dividends

The following discussion,  although presented on a consolidated basis, analyzes
primarily the financial condition and results of operations of the Bank for the
twelve month period ended December  31, 1997.  The 1995 financial condition and

<PAGE>18

results  of  operations pertain only to  the  Bank.   All  should  be  read  in
conjunction with  the  Company's  and the Bank's financial statements and notes
presented herein.

SUMMARY OF OPERATIONS

The Company reported net income of  $3,258,000  for the year ended December 31,
1997 compared to $2,976,000 for the year ended December 31, 1996.  The increase
in  net income is attributable to an increase of $2,016,000  or  18.3%  in  net
interest  income,  an  increase  in  other non interest income of $2,362,000 or
41.1% and an increase in provision for  loan  losses  of $240,000 or 45.0% from
1996.  These increases were offset by an increase in other non interest expense
of $4,171,000 or 36.8% and a decrease in provision for income taxes of $315,000
or  16.4%.   The  increase  in  net  interest  income  is attributable  to  the
substantial increase in earning assets and by a slight increase  in the rate of
interest earned on these assets.  The increase in other non interest  income is
attributable  to  increases  in  service charges on deposit accounts, fees  for
customer services plus substantial  increases  in  Lease  Department,  Merchant
BankCard Department and Credit Card Issuing Department income which was  offset
in  part by a decrease in gains on sale of loans and investments.  The increase
in other  non  interest  expense  is  attributable to increases in salaries and
employee  benefits,  net  occupancy  and  equipment  expenses,  stationery  and
supplies, telephone expense, travel expense,  postage  expense,  other  outside
service  expense  Credit Card Issuing Department and Merchant BankCard expenses
which was offset in  part  by  a  decrease  in FDIC expense and Data Processing
expense.   The increase in provision for loan  losses  is  attributable  to  an
increase in  loans  and  to  an  increase  in the provision for the Credit Card
Issuing Department.  The decrease in provision for income taxes is attributable
to the increase in pre-tax income which was  offset  by  the effect of deferred
taxes.  While pre-tax income increased the provision for income taxes decreased
as a result of the Company taking advantage of some deferred tax benefits.

The Company reported net income of $2,976,000 for the year  ended  December 31,
1996 compared to $2,202,000 for the year ended December 31, 1995.  The increase
in  net  income  is attributable to an increase of $1,016,000 or 10.2%  in  net
interest income, an  increase  in  other  income  of  $2,238,000 or 63.8% and a
decrease in provision for loan losses of $259,000 or 32.7%  from  1995.   These
increases  were  offset  by an increase in other expense of $2,176,000 or 23.8%
and an increase in provision  for  income  taxes  of  $563,000  or  41.3%.  The
increase in net interest income is attributable to the substantial increase  in
earning  assets somewhat offset by a decrease in the rate of interest earned on
these assets.   The  increase  in  other  interest  income  is  attributable to
increases  in  service  charges,  fees  for  customer services plus substantial
increases in Lease Department, Merchant BankCard  Department  and  Credit  Card
Issuing  Department  income and in gains on sale of securities which was offset
in part by a decrease in gains on sale of loans.  The increase in other expense
is attributable to increases  in  salaries and employee benefits, net occupancy
and equipment expenses, stationery  and supplies, FDIC expense, travel expense,
Credit  Card  Issuing Department and Merchant  BankCard  expenses.   The  small
decrease in provision  for  loan  losses  is  attributable to a decrease in the
provision for lease department loans based upon  three  years  of experience of
losses  in  this  area  and  the  increase  in  provision  for income taxes  is
attributable to an increase in pre-tax income.

NET INTEREST INCOME

Net  interest  income represents the excess of interest income  and  loan  fees
earned by the Company  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 earning  assets  is  referred  to  as  net  interest
margin.   The  level  of  net interest income is affected by the levels of both
interest-earning assets and  interest-bearing liabilities as well as changes in
interest  rates.   During periods  of  rapidly  changing  interest  rates,  the
Company's earnings can  be  significantly  affected,  as  interest rates on the
majority of its earning assets reflect changes in interest  rates  immediately,
while interest rates paid on liabilities, such as time certificates of deposit,
change only at the maturity of the deposit certificate.

<PAGE>19

Net  interest income for 1997 totaled $13,029,000 compared with $11,013,000  in
1996.   The  increase  in  interest  income  was  attributable to a significant
increase  in earning assets somewhat offset by a slight  decrease  in  interest
rates.  The yield on loans increased by 0.25% over the same period in 1996, and
the yield on  deposits increased 0.04%.  The reference rate used by the Company
to price a significant  portion  of  its loan products was 8.5% at December 31,
1997, and at December 31, 1996.  Total loans comprised 68.2% of average earning
assets in 1997 compared with 73.1% in 1996.

Net interest income for 1996 totaled $11,013,000  compared  with  $9,997,000 in
1995.   The  increase  in  interest  income  was  attributable to a significant
increase  in earning assets somewhat offset by a decrease  in  interest  rates.
The yield on  loans  decreased  by  0.79% over the same period in 1995, and the
yield on deposits decreased 0.14%.  The  reference  rate used by the Company to
price a significant portion of its loan products was  8.5% at December 31, 1996
and  at  December  31,  1995.  The loan portfolio comprised  73.1%  of  average
earning assets in 1996 compared with 62.5% in 1995.

Loan fees included in net  interest  income were $729,000 at December 31, 1997,
$802,000 at December 31, 1996 and $755,000 at December 31, 1995.

The Company had no loans outstanding,  the  interest on which is considered tax
exempt, at December 31, 1997, December 31, 1996  or  December 31, 1995.  During
1997 the Company had average outstanding loans in this  category of $386,000 on
which $21,000 was earned in interest.

<PAGE>20

Interest income may be analyzed by segregating the volume  and  rate components
of  interest  income and interest expense.  The following table sets  forth  an
analysis of the increases and decreases in interest income and interest expense
in terms of changes  in  average  volume and average rates for the years ending
December 31, 1997 and 1996.

              ANALYSIS OF CHANGES IN INTEREST INCOME AND EXPENSES
                      INCREASE (DECREASE) DUE TO CHANGE IN
                                VOLUME AND RATE

                               1997 OVER 1996              1996 OVER 1995
INCREASE/DECREASE
IN INTEREST INCOME:
(DOLLARS IN THOUSANDS)    VOLUME   RATE    TOTAL       VOLUME   RATE    TOTAL

LOANS                      1,842    346    2,188        2,628   <246>   2,382
SECURITIES                   976     10      986         <919>    54     <865>
FED FUNDS SOLD               213     25      238         <201>    16     <185>
FED RESERVE STOCK            -0-    -0-      -0-            1      0        1
DUE FROM BANKS TIME           63     16       79          <13>     1      <12>
OTHER INTEREST               -0-    -0-      -0-            0      0        0
                           -----  -----    -----        -----   ----    -----
TOTAL INCREASE/DECREASE    3,094    397    3,491        1,496   <175>   1,321

INCREASE/DECREASE
   IN INTEREST EXPENSE:
NOW & SUPER NOW               29     <2>      27           <9>     0       <9>
SAVINGS                       73    <29>      44           13     <1>      12
MONEY MARKET                 114     87      201           74      2       76
CERTIFICATES OF DEPOSIT    1,106     95    1,201          225      1      226
BORROWED FUNDS                 3    -0-        3            0      0        0
OTHER                        <1>    -0-       <1>           0      0        0
                           -----  -----    -----        -----   ----    -----
TOTAL INCREASE/DECREASE    1,324    151    1,475          303      2      305

TOTAL CHANGE IN NET
   INTEREST INCOME         1,770    246    2,016        1,193   <177>   1,016


PROVISION FOR LOAN AND LEASE LOSSES

The provision for loan and lease losses which is charged to operations is based
on  the  quality  of the loan portfolio, the amount of net loan losses incurred
and management's estimate  of  potential  future  losses  based  on  an ongoing
evaluation of the portfolio risk and economic conditions.

The  provisions  for  loan and lease losses in 1997 was $773,000 compared  with
$533,000 in 1996 and $792,000 in 1995.  The ratio of the allowance for loan and
lease losses to total gross  loans and leases equaled 1.48%, 1.48% and 1.61% at
December 31, 1997, 1996 and 1995  respectively.   The increase in the provision
from 1996 to 1997 is attributable to an increase in  loans  and  an increase in
the  provision  for  the Credit Card Issuing Department.  The decrease  in  the
provision from 1995 to  1996  was  due  to  a  decrease  in provision for Lease
Department  loans  based  upon a three year analysis of lease  losses  in  this
department.

Net charge-offs were $548,000,  $255,000  and  $255,000  in 1997, 1996 and 1995
respectively.   These  amounts  represented  <0.36%>, <0.19%>  and  <0.25%>  of
average loans outstanding.

<PAGE>21


NON-INTEREST INCOME

Non-interest income for 1997 totaled $8,109,000,  an  increase of $2,362,000 or
41.1%  from  $5,747,000 earned in 1996.  Service charges  on  deposit  accounts
increased $591,000 or 83.4%, fees for customer services increased $2,626,000 or
61.3%, net investment  securities  gain/loss decreased by $576,000 or 85.0% and
gain on sale of loans decreased by $279,000 or 372.0% from the prior year.  The
increases are attributable to the activities  of  the Lease, Merchant Bankcard,
Credit Card Issuing and Alternative Investment Departments,  plus  increases in
service  charges  on  deposit  accounts  and  fees  for customer service.   The
decrease  in  gain on sale of loans is attributable in  part  to  selling  some
portfolio loans  at  a  loss.   The  decrease in gain on sale of investments is
attributable to the selling of more investments  in  1996  than  1997  to  fund
loans.

NON-INTEREST EXPENSE

Non-interest expense for 1997 totaled $15,496,000 an increase of $4,171,000  or
36.8%  from  1996.   Non-interest  expense  totaled $11,325,000, an increase of
$2,176,000 or 23.8% from 1995.  Salaries and  employee benefits represented the
single largest component of non-interest expense:   $6,806,000 or 43.9% in 1997
and $5,592,000 or 49.4% in 1996.  Full time equivalent  employees numbered 209,
175 and 130 at December 31, 1997, 1996 and 1995 respectively.

Net occupancy and equipment expense increased $674,000 or  37.6%  to $2,466,000
in 1997.  This increase can be in part attributable to the purchase  of  an in-
house computer system, a local area network and a wide area network as well  as
the  purchase  of  furniture  &  fixtures  and  leasehold  improvements  at the
Garberville  Branch, the Merchant BankCard, Credit Card Issuing departments  at
605 K Street,  Eureka,  California,  the  Cashiers  Department at 555 H Street,
Eureka, California and increased maintenance and repairs on older equipment.


<PAGE>22


Other expenses, excluding salaries and related benefits  and  net occupancy and
equipment  expenses,  increased  $2,283,000  or  57.9%  in 1997 from  1996  and
$702,000 or 21.7% in 1996 from 1995, primarily due to the  increased  growth of
the  Bank,  the  establishment  of the Garberville Branch. and the purchase  of
three branches of U.S. Bank in Loleta,  Willow  Creek  and Weaverville in early
1995.   The  following  table  summarizes  the significant components  of  non-
interest expense for 1997, 1996 and 1995.

                             NON-INTEREST EXPENSE

                                                DOLLAR       % DOLLAR        %
(DOLLARS IN                                     CHANGE  CHANGE CHANGE   CHANGE
THOUSANDS)          12/31/97 12/31/96 12/31/95    1997 VS 1996   1996  VS 1995

Salaries & Related
  Benefits             6,806    5,592    4,612   1,214    21.7    980    21.2%
Fixed Assets           2,466    1,792    1,298     674    37.6    494    38.1%
Prof. Services         1,342      693      503     649    93.7    190    37.8%
Credit Card Program    1,021      170      -0-     851   500.6    170   100.0%
Stationery, Supplies
  & Postage              887      542      492     345    63.7     50    10.2%
Intangible Expense       426      372      403      54    14.5    <31>   <7.7%>
Merchant Credit
  Card Program           822      434      384     388    89.4     50    13.0%
FDIC & Other Ins.        164      480      348    <316>  <65.8>   132    37.9%
Advertising & Dev.       507      364      314     143    39.3     50    15.9%
Telephone & Travel       478      424      267      54    12.7    157    58.8%
Data Processing/
  ATM Expense            170      199      174     <29>  <14.6>    25    14.4%
Other Expense            407      263      354     144    54.8    <91>  <25.7%>
                      ------   ------    -----   -----   -----  -----   -----
TOTAL:                15,496   11,325    9,149   4,171    36.8  2,176    23.8%

PROVISION FOR INCOME TAXES

The  provision  for  income  taxes  totaled  $1,611,000  in 1997, a decrease of
$315,000 or 16.4% from 1996.  The provision for income taxes  in  1996  totaled
$1,926,000  an  increase  of $563,000 or 41.3% from 1995.  While pre-tax income
increased, the provision for  income  tax  decreased as a result of the Company
taking advantage of some deferred tax benefits.  The 1997 effective tax rate of
33.1% on reported income was below the expected statutory federal and state tax
rate  of  41.1%  due to exemptions for Enterprise  Zone  loans  for  State  Tax
purposes, exemptions  for  Municipal  Obligations  for Federal purposes, Keyman
Insurance and other temporary differences.  The 1997  and  1996  effective  tax
rate  on  reported  income  varied  from the expected statutory federal rate of
34.0% and the state franchise tax rate  of  10.8%  (net of the federal benefit)
principally  because  of exemptions for Enterprise Zone  loans  for  state  tax
purposes, exemptions for  Municipal  obligations for federal purposes and other
temporary differences.

LOANS

The  Company concentrates its lending activities  in  commercial,  real  estate
construction, real estate related and consumer loans made almost exclusively to
individuals and businesses within Northern California and lease receivables and
credit  cards  throughout  the  nation.   At December 31, 1997, the Company had
total gross loans outstanding of $160.6 million  and loans held for sale of $48
thousand.  This represented 62.8% of total deposits  and  56.5% of total assets
of  the  Bank.   At  December  31,  1996,  the  Company  had total gross  loans
outstanding  of $145.7 million and loans held for sale of $63  thousand.   This

<PAGE>23

represented 75.7% of total deposits and 67.9% of total assets.  At December 31,
1995, the Bank  had  total  gross loans outstanding of $115.7 million and loans
held for sale of $1.9 million.   This  represented  67.4% of total deposits and
60.6% of total assets.

The  Company  offers  a  variety  of  commercial  lending  services,  including
revolving lines of credit, working capital loans, equipment  financing, letters
of  credit and inventory financing.  Typically, commercial loans  are  floating
rate  obligations  and  are  priced based on the Company's reference rate.  The
Company makes loans to finance  the construction of residential, commercial and
industrial properties and to finance  land  acquisition  and  development.  The
Company's   single  family  real  estate  construction  loans  typically   have
maturities 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.  Land
development  loans  typically have maturities of twelve to twenty-four  months;
have a floating rate  tied  to  the  Company's  reference  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.  When the  total amount of
a  loan would otherwise exceed the Company's legal lending limit,  the  Company
seeks other financial institutions to facilitate the extension of credit.  Real
estate  construction and development loans as a percentage of total gross loans
outstanding  were  12.6% at December 31, 1997 compared to 14.5% at December 31,
1996 and 13.7% at December 31, 1995.

Risks associated with  real  estate construction and land development loans are
generally considered to be higher  than  risks  associated  with other forms of
lending in which commercial banks traditionally engage.  The  concentration  in
the  real  estate  construction and land development loan portfolio has been on
residential real estate  construction  loans.   The California economy began to
exhibit  signs  of  recovery  in  1996  and  1997  and sales  of  single-family
residences exhibited a small upturn.  While the Company  is  continuing to fund
real   estate  construction  and  land  development  commitments,  underwriting
requirements continue to be conservative.

Real estate  residential loans as a percentage of total gross loans outstanding
were 16.9% at  December  31,  1997,  compared to 21.6% at December 31, 1996 and
18.3% at December 31, 1995.  The decrease  in  residential real estate loans is
attributable  to  the sale of portfolio loans during  1997.   The  increase  in
residential real estate  loans  in  1996  is  attributable  to  a single-family
residential loan promotion commenced in the last quarter of 1995.

Real  estate commercial and agricultural loans as a percentage of  total  gross
loans outstanding were 41.0% at December 31, 1997 compared to 41.9% at December
31, 1996 and 47.4% at December 31, 1995.  The Company has entered into a number
of SBA  guaranteed  loans  and  has loans where SBA has a second lien position.
These loans are eligible for sale on the secondary market but the Company chose
not to sell any of these loans in  1997, but could sell additional SBA loans in
1998 if economically justified.

Consumer loans include loans to individuals,  business  customers,  dealer auto
loans  and  credit  card  related  plans.  Automobile loans extended were  $1.3
million or 13.7%, dealer auto loans  were  $0.1 million or 1.0%, other consumer
loans were $0.8 million or 8.4%, and credit  cards  and related plans were $7.3
million  or  76.9% of total consumer loans at December  31,  1997  compared  to
automobile loans of $1.5 million or 33.3%, dealer auto loans of $0.3 million or
6.7%, other consumer  loans  of  $0.5  million  or  11.1%  and credit cards and
related  plans were $2.2 million or 48.9% at December 31, 1996  and  automobile
loans of $1.4  million  or  41.2%,  dealer auto loans of $0.6 million or 17.6%,
other consumer loans of $0.2 million  or  5.9%,  and  credit  cards and related
plans of $1.2 million or 35.3% at December 31, 1995.  The other  consumer loans
include mobile home and other personal loans.

Lease  financing  loans  as a percentage of total gross loans outstanding  were
5.4% at December 31, 1997  compared  to  2.2%  at December 31, 1996 and 3.4% at
December 31, 1995.  The increase in Lease Receivable  loans  from 1997 compared

<PAGE>24


to 1996 is mostly attributable to small ticket leases purchased in 1997 and the
decrease in 1996 compared to 1995 is attributable to the fact  that credit card
swipe  machine  leases  continue  to be booked at a slower pace and  the  older
portfolio is running off.

Loans held for sale totaled $48,000  at  December 31, 1997, $63,000 at December
31,  1996  and  $1,880,000  at December 31, 1995  and  represent  single-family
residential mortgage loans originated  by the Company.  Loans are classified as
held for sale when the Company is waiting  to  sell  the  loan in the secondary
market to FNMA or PERS.

The  following  table  sets forth certain trends in loans outstanding  and  the
composition of the loan portfolio for 1997, 1996 and 1995.

<TABLE>
<CAPTION>
                                    12/31/97                    12/31/96                   12/31/95
(DOLLARS IN THOUSANDS)                AMOUNT             %        AMOUNT            %        AMOUNT            %
<S>                                  <C>            <C>          <C>           <C>          <C>           <C>
Commercial, Industrial & Ag           28,766         17.9%        20,559        14.1%        16,284        14.1%
Real Estate-Const & Land Dev          20,165         12.6%        21,205        14.5%        15,874        13.7%
Real Estate-Residential 1-5           27,205         16.9%        31,456        21.6%        21,156        18.3%
Real Estate-Commercial & Ag           65,772         41.0%        61,030        41.9%        54,879        47.4%
Lease Financing                        8,732          5.4%         3,168         2.2%         3,974         3.4%
Consumer Loans                         9,502          5.9%         4,529         3.1%         3,396         2.9%
State & Political Loans                    0             0         2,875         2.0%             0            0
Other                                    502          0.3%           850         0.6%           159         0.2%
Total Gross Loans                    160,644          100%       145,672         100%       115,722         100%
Less Deferred Loan Fees                <809>                       <765>                      <616>
Less   Allowance   For   Loan        <2,371>                     <2,146>                    <1,868>
Losses
Total Net Loans                      157,464                     142,761                    113,238
Loans Held For Sale                       48                          63                      1,880
TOTAL LOANS AND LEASES               157,512                     142,824                    115,118
</TABLE>


The  table  below summarizes the maturities and/or next repricing opportunities
of the Company's loan portfolio as of December 31, 1997.

LOANS MATURING AND/OR             Closed End
REPRICING OPPORTUNITY              Loans 1-4           All Other
(DOLLARS IN THOUSANDS)         Single Family    Loans and Leases        Total
3 Months Or Less                           0              77,025       77,025
Over 3 Through 12 Months                 267              10,902       11,169
Over 1 Year Through 3 Years              307              23,962       24,269
Over 3 Years Through 5 Years           1,914              14,669       16,583
Over 5 Through 15 Years                  506              21,789       22,295
Over 15 Years                          8,109               1,194        9,303
TOTAL GROSS LOANS                     11,103             149,541      160,144

Commercial  loan  totals  in  the  above table include numerous loans which are
secured by deed of trust which, for regulatory purposes, are considered as Real
Estate Loans and shown as such in the  table  on  page  24  dealing with "loans
outstanding and the composition of the loan portfolio" for 1997.

<PAGE>25

The  Company's  rollover 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 CONCENTRATIONS

At December 31, 1997, 1996 and 1995,  the Company had no concentration of loans
which exceeded 10% of total loans.

ALLOWANCE FOR LOAN AND LEASE LOSSES

The  allowance  for  loan  and lease losses  is  maintained  at  a  level  that
management of the Company considers  to  be  adequate  for  losses  that can be
reasonably  anticipated.   The  allowance  is increased by charges to operating
expenses and reduced by net charge-offs.  The  level  of the allowance for loan
losses  is based on management's evaluation of potential  losses  in  the  loan
portfolio, as well as prevailing and anticipated economic conditions.

Management  employs  a systematic methodology on a quarterly basis to determine
the amount of loan losses  to be reported and the adequacy of the allowance for
current and future losses.   Each  loan is "graded" at the time of origination,
extension or renewal by the senior credit administrator.  Gradings are assigned
a risk factor which is calculated to  assess  the adequacy of the allowance for
loan losses.  Further, management considers other  factors  such  as changes in
the  nature  and volume of the loan portfolio, overall portfolio quality,  loan
concentrations,  trends  in  the  level  of  delinquent  and  classified loans,
specific  problem  loans and commitments, and current and anticipated  economic
conditions.


<PAGE>26

ANALYSIS OF THE ALLOWANCE FOR LOAN AND LEASE LOSSES

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

YEAR ENDED DECEMBER 31:
(Dollars in Thousands)                      - 1997 -      - 1996 -    - 1995 -
Balance At Beginning Of Period:              2,146         1,868       1,331
Charge-Offs:
Commercial, Industrial & Ag                   <193>         <122>        <11>
Real Estate-Commercial & Ag                      0             0           0
Real Estate-Residential 1-5                      0           <23>          0
Real Estate-Const & Land Dev                     0             0           0
Real Estate-Non-Farm/Non-Residential             0           <23>          0
Lease Financing                               <124>         <132>       <254>
Credit Cards                                  <475>            0           0
Consumer                                       <11>          <29>        <23>
Other                                           <7>          <45>        <30>
                                           -------       -------     -------
TOTAL:                                        <810>         <374>       <318>
Recoveries:
Commercial, Industrial & Ag                    129            78           9
Real Estate-Commercial & Ag                      0             0           0
Real Estate-Residential 1-5                      0             0           0
Real Estate-Const & Land Dev                     0             0           0
Real Estate-Non-Farm/Non-Residential             0             0           0
Lease Financing                                 34            34          49
Credit Cards                                    87             0           0
Consumer                                         9             5           4
Other                                            3             2           1
                                           -------       -------     -------
TOTAL:                                         262           119          63
Net Charge-Offs:                              <548>         <255>       <255>
Provision Charged To Operations                773           533         792
Balance At End Of Period                     2,371         2,146       1,868
Ratio Of Net Charge-Offs To Avg Loans        -0.36%        -0.19%      -0.25%
Average Loans                              151,814       134,289     103,103

Charge-offs  for  the  three  years  ended December 31, 1997 were $1,502,000 of
which $444,000 has been recovered.

NON-PERFORMING ASSETS

The Company's policy is to recognize interest income on an accrual basis unless
the full collectability 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 a  cash  basis and previously accrued but uncollected
interest is reversed against income.   Thereafter, income is recognized only as
it  is collected in cash.  Collectability  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>27

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

NON-PERFORMING ASSETS AT DECEMBER 31:
 (DOLLARS IN THOUSANDS)                - 1997 -         - 1996 -     - 1995 -

Loans 90 days or more past due
  and still accruing                      787              122          193
Non-accrual loans                         838              218          619
Restructured Loans
  30 days or more past due                 23                0           75
Lease Financing
  90 days or more past due                 56               37           68
Other Real Estate Owned                   148              233            0
Total Non-Performing Assets             1,852              610          955
Non-Performing Assets to Total
  Gross Loans Plus O.R.E.O.              1.15%            0.42%        0.83%


The increase in non-performing assets at December 31, 1997 compared to December
31,  1996  is  attributable to an increase in non-accrual loans, an increase in
lease financing  loans which were awaiting charge-off at the January 1998 Board
of Directors meeting,  and  loans  90 days or more past due and still accruing,
partially  offset by a decrease in O.R.E.O.   The  decrease  in  non-performing
assets at December  31, 1996 compared to December 31, 1995 is due to a decrease
in non-accrual loans  offset  in  part  by  reductions in lease financing loans
which were awaiting charge-off at the January 1997 Board of Directors meeting.

The table below shows the gross interest income  that  would have been recorded
at December 31, 1997 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.


                               1997               1996              1995
                           GROSS  INTEREST    GROSS  INTEREST   GROSS  INTEREST
(In Dollars)              INCOME    EARNED   INCOME    EARNED  INCOME    EARNED

Non-Accrual Loans        $68,100   $38,900  $22,400        0  $66,600         0
90 Days Past Due
  Restructured Loans           0         0        0        0        0         0
Other Real Estate Owned  $15,300         0  $27,400        0        0         0

The lease financing  and  other  loans which were past due 90 days or more were
all still accruing interest at their stated contract rate.

POTENTIAL PROBLEM LOANS

In management's opinion, other than  the lease financing loans awaiting charge-
off in January 1998, there are no loans past due and still accruing on December
31, 1997 that present significant exposure  to the Company because they are all
well  secured and in process of collection.  Of  the  $838,000  in  non-accrual
loans and  $148,000  in O.R.E.O., management feels confident that $775,000 will
eventually be collected.

<PAGE>28

At December 31, 1997 there  are  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.

INVESTMENT PORTFOLIO

The Company invests excess funds in a variety of instruments  in  order to meet
liquidity  and profitability goals.  A portion of available funds are  invested
in liquid investments such as overnight federal funds.  The balance is invested
in investment securities such as U.S. Treasury and Agency securities (including
CMO's), tax-exempt  municipal  bonds, corporate bonds and Federal Reserve Bank,
FHLB and FNMA stock, etc.  See "Liquidity".

The composition of the investment portfolio is shown in the table below at book
and market value.  On November 16,  1995,  a  one-time  change  to  the  Bank's
category  allocation  was  permitted  and  the  Bank  elected to categorize all
investments as "Available For Sale".

<TABLE>
<CAPTION>
                          12/31/97          12/31/96         12/31/95
                              BOOK   MARKET     BOOK  MARKET     BOOK  MARKET
(DOLLARS IN THOUSANDS)       VALUE    VALUE    VALUE   VALUE    VALUE   VALUE
<S>                           <C>          <C>          <C>          <C>          <C>          <C>
Us Treasury Securities-Afs   2,996    3,007    3,056   3,105   10,169  10,377
Us Treasury Securities-Htm       0        0        0       0        0       0
Us Govt Agencies-Afs             0        0    1,002   1,011    7,951   8,159
Us Govt Agencies-Htm             0        0        0       0        0       0
Coll Mort Obligations-Afs   62,433   63,114   23,331  23,562   21,955  22,481
Coll Mort Obligations-Htm        0        0        0       0        0       0
Municipal Securities-Afs    12,190   12,771   10,172  10,499   10,775  11,214
Municipal Securities-Htm         0        0        0       0        0       0
Federal Reserve Bank Stock     446      446      446     446      445     445
Corporate Bonds                  0        0        0       0        0       0
Other Securities-Afs           840      842    1,309   1,310    1,187   1,199
                            ------   ------   ------  ------   ------  ------
TOTAL:                      78,905   80,180   39,316  39,933   52,482  53,875
Mark To Market Analysis
Available For Sale (Afs     78,905   80,180   39,316  39,933   52,482  53,875
Held To Maturity (Htm)           0        0        0       0        0       0
                            ------   ------   ------  ------   ------  ------
TOTAL PORTFOLIO:            78,905   80,180   39,316  39,933   52,482  53,875
Unrealized Gain/Loss On
   Securities:
Available For Sale (Afs)     1,275               617            1,393
Held To Maturity (Htm)           0                 0                0
                            ------            ------           ------
TOTAL UNREALIZED
   GAIN/LOSS                 1,275               617            1,393


<PAGE>29


The   table  below  summarizes  the  maturities  of  the  Company's  investment
securities as of December 31, 1997:

Available For Sale           U.S.                              Equity
Investments Maturing       Treas-      U.S.              Muni-  Secur-
(Dollars In Thousands)      uries  Agencies  C.M.O.'S   cipals  ities   Total

3 Months Or Less                0         0       771        0    664   1,435
Over 3 Through 12 Months        0         0     9,048      104    178   9,330
Over 1 Year Through 3
   Years                    3,007         0    19,200      292      0  22,499
Over 3 Through 5 Years          0         0    32,935    1,226      0  34,161
Over 5 Through 15 Years         0         0     1,160    6,381      0   7,541
Over 15 Years                   0         0         0    4,768    446   5,214
Total                       3,007         0    63,114   12,771  1,288  80,180
Unrealized Gain/Loss On
Available For Sale
  Investments
(Included in Figures Above     11         0       681      581      2   1,275


The  table  below  summarizes  the  Company's investment securities by weighted
average yield as of December 31, 1997.

                            U.S.       U.S.                          Equity
Weighted Average Yield   Treasuries  Agencies  C.M.O.'S Municipals Securities

3 Months Or Less              0.00%     0.00%     9.00%      0.00%      6.43%
Over 3 Through 12 Months      0.00%     0.00%     8.08%      7.99%      8.35%
Over 1 Year Through 3
  Years                       6.15%     0.00%     6.58%      7.45%      0.00%
Over 3 Through 5 Years        0.00%     0.00%     6.09%      8.07%      0.00%
Over 5 Through 15 Years       0.00%     0.00%     6.14%      7.82%      0.00%
Over 15 Years                 0.00%     0.00%     0.00%      7.67%      6.00%
Total Portfolio               6.15%     0.00%     6.56%      7.81%      6.54%

The  yields shown for municipal securities and equity securities are calculated
on a taxable equivalent basis.

The Company has followed an investment strategy since late 1994 of investing in
well structured,  relatively short term collateralized mortgage obligations and
longer term municipal  securities,  the later of which have a tendency to lower
the Company's income tax obligations.   At  December 31, 1997 the book value of
collateralized mortgage obligations totaled $62.4,  an  increase  of  $39.1  or
167.8%  from  December  31,  1996.   At  December  31,  1997  the book value of
municipal  investments  totaled $12.2 million, an increase of $2.0  million  or
19.6%  from  December  31, 1996.   These  increases  are  attributable  to  the
substantial increase in deposits.

At December 31, 1996 the book value of U.S. Treasuries totaled $3.1 million , a
decrease of $7.1 million or 69.6% from December 31, 1995.  At December 31, 1996
the book value of U.S. Agencies  totaled  $1.0  million,  a  decrease  of  $7.0
million  or  87.5% from December 31, 1995.  At December 31, 1996 the book value
of Collateralized  Mortgage  Obligations  totaled $23.3 million, an increase of
$1.3 million or 5.9% from December 31, 1995.   At  December  31,  1996 the book
value  of  Municipal  Investments  totaled  $10.2  million, a decrease of  $0.6
million or 5.6% from December 31, 1995.

These decreases are attributable to the large increase in loans which were only
partially  funded by the small increase in deposits.   The  small  increase  in
Collateralized  Mortgage  Obligations is attributable to the change in strategy
mentioned above.

<PAGE>30

At  December 31, 1997 the book  value  of  the  following  issuer's  securities
exceeded ten percent of the Company's capital.

ISSUER                            BOOK VALUE                    MARKET VALUE
(Dollars in Thousands)
U.S. Treasury                          2,996                           3,007
FHLMC CMO's                           22,085                          22,206
GNMA CMO's                            12,086                          12,264
FNMA CMO's                            22,207                          22,478
FGFLMC CMO's                           4,090                           4,175

DEPOSITS

Deposits,  including  non-interest  bearing  demand  deposits,  increased $62.6
million  or 32.5% in 1997 to $255.2 million from $192.6 million in  1996.   The
table below  sets  forth  certain information regarding trends in the Company's
deposits for 1997, and the Bank's deposits for 1996 and 1995.

DEPOSITS:              12/31/97            12/31/96           12/31/95
(Dollars in Thousands)   AMOUNT        %     AMOUNT        %    AMOUNT       %

Demand                   70,767    27.7%     50,412    26.2%    39,878   22.9%
NOW                      21,575     8.5%     16,476     8.6%    17,292    9.9%
Time-$100,000 and over   40,643    15.9%     26,432    13.7%    23,230   13.3%
Other Time               69,821    27.4%     57,951    30.1%    54,099   31.0%
Savings & Money Market   52,380    20.5%     41,305    21.4%    40,027   22.9%
TOTAL DEPOSITS:         255,186     100%    192,576     100%   174,526    100%


The  table  below  indicates the average rates of interest paid on each deposit
category.

                                   1997               1996              1995
Now Accounts                       0.99%              1.01%             1.07%
MMDA Accounts                      3.57%              3.20%             2.99%
Savings Accounts                   1.80%              1.98%             2.05%
Time Certificates of Deposit       5.45%              5.33%             5.31%


Time  certificates  of deposit over $100,000 constituted 15.9%, 13.7% and 13.3%
of total deposits for 1997, 1996 and 1995 respectively.  The Bank has never had
brokered deposits and  does  not intend to seek such deposits.  All public time
certificates of deposit are from  local government agencies located in Humboldt
and Trinity Counties.

<PAGE>31


Time certificates of deposit at December 31, 1997 had the following schedule of
maturities:

(DOLLARS IN THOUSANDS)                       $100,000+                 OTHERS
Three months or less                           17,831                  22,924
Over three months through twelve months        19,290                  36,615
Over one year through three years               3,410                   9,760
Over three years                                  112                     522
TOTAL:                                         40,643                  69,821


At  December  31,  1997,  certificates  of deposit over $100,000 totaling $37.1
million or 14.5% of total deposits were scheduled  to  mature  within one year.
At  December  31,  1996,  certificates of deposit over $100,000 totaling  $24.1
million or 12.5% of total deposits  were  scheduled  to mature within one year.
At  December  31,  1995, certificates of deposit over $100,000  totaling  $19.9
million or 11.4% of  total  deposits  were scheduled to mature within one year.
Although the Company has not experienced  seasonal  or  unusual fluctuations in
this component of the deposit portfolio, management recognizes that these types
of deposits may represent a greater risk of interest rate and volume volatility
than small retail deposits.  Management believes that the  presumed  volatility
of   such   deposits  presents  an  acceptable  risk  and  withdrawal  of  such
certificates  of  deposit  would  not  have  a material impact on the liquidity
position of the Company.

INTEREST RATE SENSITIVITY

The  operating income and net income of the Company  depend  to  a  substantial
extent  on  "rate  differentials",  i.e., the difference between the income the
Company receives from loans, securities  and  other  earning  assets,  and  the
interest expense it pays on deposits and other liabilities.

The interest rate sensitivity of the Company is measured over time and is based
on   the  Company'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.   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  are  repriced  under the same
conditions, the opposite results would prevail.  The Company is asset sensitive
and its near term performance could be enhanced by rising rates and  negatively
affected by falling rates in the next twelve months.


<PAGE>32


The table below sets forth the distribution of repricing of the earning  assets
and  interest-bearing  liabilities  for  the respective periods at December 31,
1997.

ASSETS OR LIABILITIES       Due From
WHICH MATURE OR REPRICE        Banks         Fed Investments
(DOLLARS IN THOUSANDS)          Time       Funds   Ex Equity    Loans    Total

3 Months Or Less                  20       3,520         771   76,264   80,575
Over 3 Through 12 Months       3,000           0       9,152   11,169   23,321
Over 1 Year Through 3 Years        0           0      22,499   24,269   46,768
Over 3 Years Through 5 Years       0           0      34,161   16,583   50,744
Over 5 Through 15 Years            0           0       7,541   22,295   29,836
Over 15 Years                      0           0       4,768    9,303   14,071
                             =======     =======     =======  =======  =======
TOTAL ASSETS                   3,020       3,520      78,892  159,883  245,315

                                                        Time
                            Interest       MMDA,    Certifi-    Other
                             Bearing     Savings  cates Over Borrowed
                              Demand     & Other    $100,000    Funds    Total
Liabilities                                 Time
3 Months Or Less              21,575      75,304      17,831        0  114,710
Over 3 Through 12 Months           0      36,615      19,290        0   55,905
Over 1 Year Through 3 Years        0       9,760       3,410        0   13,170
Over 3 Years Through 5 Years       0         522         112    1,761    2,395
Over 5 Through 15 Years            0           0           0        0        0
Over 15 Years                      0           0           0        0        0
                             =======     =======     =======  =======  =======
TOTAL LIABILITIES             21,575     122,201      40,643    1,761  186,180
                             =======     =======     =======  =======  =======

Interest Rate Sensitivity Gap         Cumulative
3 Months Or Less             (34,135)   (34,135)
Over 3 Through 12 Months     (32,584)   (66,719)
Over 1 Year Through 3 Years   33,598    (33,121)
Over 3 Years Through 5 Years  48,349     15,228
Over 5 Through 15 Years       29,836     45,064
Over 15 Years                 14,071     59,135
                             =======    =======
TOTAL                         59,135
                             =======

LIQUIDITY

The  Company's  liquidity  is  primarily a reflection of its ability to acquire
funds  to  meet  loan  demand and deposit  withdrawals  and  to  service  older
liabilities as they come  due.  To augment liquidity, the Company has a Federal
Funds borrowing arrangement  with  two correspondent banks totaling $10 million
and  maintains  a credit arrangement with  the  Federal  Reserve  Bank  of  San
Francisco for open window borrowings.

Additionally, the Company 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  and  pledge  single-family  residential
mortgages as qualifying collateral.

The liquidity position  of  the  Company may be expressed as a ratio defined as
cash, due from banks, Federal Funds  sold, interest bearing deposits and market
value of available for sale securities,  divided by total deposits, less public
deposits.   Using  this  definition, at December  31,  1997,  the  Bank  had  a
liquidity ratio of 38.1% compared  to  26.4%  at December 31, 1996 and 35.0% at
December 31, 1995.  The increase in liquidity at  December 31, 1997 compared to

<PAGE>33


December  31,  1996 is attributed to a substantial increase  in  deposits;  the
increase at December  31,  1996 compared to December 31, 1995 was attributed to
the increase in deposits being  invested in Available for Sale securities which
appreciated significantly, rather than loans.

Part of the Company's normal lending  activity  involves  making commitments to
extend credit.  One risk associated with the loan commitments  is the demand on
the  Company's  liquidity  that  would result if a significant portion  of  the
commitments were unexpectedly funded  at  one  time.   The Company assesses the
likelihood of projected funding requirements by reviewing  historical patterns,
current and forecasted economic conditions and individual client funding needs.
At December 31, 1997 the Company had $47.2 million in undisbursed  commitments.
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, 1997, no U.S. Government Treasuries  or  Agencies
(at market value)  were  available  for reverse repurchase agreements, however,
the Company had U.S. Government Agency CMO's (at market value) of approximately
$56.7 million which were unpledged.  Management believes that this provides the
Company with the necessary liquid assets to satisfy funding requirements in the
unlikely  event  of  substantially  higher   than  projected  customer  funding
requirements.

CAPITAL RESOURCES

Shareholders'  equity  increased to $23.6 million  at  December  31,  1997,  an
increase of $4.0 million  or  20.4% compared with $19.6 million at December 31,
1996 which was an increase of $2.7  million  or  16.0%  compared with the $16.9
million at December 31, 1995.  At December 31, 1996 and 1995,  the Bank's risk-
based  capital  ratio was 12.02% and 12.60% respectively.  The following  table
sets forth the Company's  actual regulatory capital position as of December 31,
1997.


RISK-BASED CAPITAL RATIOS
(DOLLARS IN THOUSANDS)                    AMOUNT                        RATIO
Tier 1 Capital                            21,264                       11.06%
Tier 1 Minimum Requirement                11,536                         6.0%
Excess (Shortfall)                         9,728                        5.06%
Total Capital                             23,635                       12.29%
Total Capital Minimum Requirement         19,227                       10.00%
Excess (Shortfall)                         4,408                        2.29%
Risk-Adjusted Assets                     192,273


At  December  31,  1997  the  Bank's leverage ratio was 7.38% and the Company's
leverage ratio was 7.57%.  At December  31,  1996  and 1995 the Bank's leverage
ratio was 8.53% and 7.64% respectively.  The Company  has  not  been advised by
any regulatory agency 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 of 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 the Company's net interest
income.  The Company attempts to limit inflation's  impact  of  rates  and  net
income margins through a continuing asset/liability management program.

<PAGE>34

YEAR 2000 ISSUE

The  Company  formed  a committee of senior company personnel in late 1997, who
meet on a regular basis  to  evaluate and make recommendations on the Year 2000
Issue.  It is anticipated that  the  Assessment Phase, the Vendor, Customer and
Employee Notification Phase, and the Vendor  and  Customer  Application  Review
Phase  will  be  completed  during  1998.  The testing of all systems which may
affect the Company's operations will commence in late 1998 or early 1999.

The balance sheet of the Parent Company  at  December  31,  1997  contained the
following items:

ASSETS:  (Dollars in Thousands)
  Cash On Deposit With Subsidiary                                        504
  Investment In Subsidiary Including Unrealized
  Holding Gains                                                       23,037
  Organizational Costs                                                    13
  Total Assets:                                                       23,554
CAPITAL:
  Common Stock                                                        20,495
  Capital Surplus                                                        114
  Retained Earnings                                                    2,200
  Net Unrealized Holding Gains (Losses)                                  745
  Total Capital:                                                      23,554
The Statement Of Income And Expense Of The Company
At December 31, 1997 Contained The Following Items:
INCOME:
  Stock Transfer Fees                                                      2
  Dividends From Subsidiary                                                0
  Total Income:                                                            2
EXPENSES:
  Miscellaneous                                                            7
  Stationery & Supplies                                                    4
  Legal Expense                                                           13
  Taxes Paid                                                            <106>
Income Before Undistributed Income Of Subsidiary:                         84
Equity In Undisbursed Income Of Subsidiary:                            3,174
Net Income:                                                            3,258

The  Federal  Reserve  Bank regulations for bank holding companies require that
net unrealized holding gains/(losses)  be included in the balance sheet for the
parent company under "Investment in Subsidiary"  whereas  the audited financial
statements prepared by our Certified Public Accountants do  not.  The amount of
unrealized gains in 1997 was $745,000.

The $2,000 in stock transfer fees was for fees charged relative to the transfer
of  ownership  of  Bancorp Stock Certificates.  The miscellaneous  expenses  of
$7,000 relate to the  filing  fees  and  expenses  incurred with the 1997 proxy
solicitation.  The stationery & supplies expense of  $4,000 relate to the write
down of the stationery and supply organizational expense.   The  legal expenses
of $13,000 relate to legal expenses incurred relative to the 1996  10K  and the
1997  Annual  Meeting.   The  tax  income of $106,000 relate a reimbursement of
taxes paid.  For additional information,  please  refer  to  the  1997  audited
financial statements.

<PAGE>35

ITEM 7 -FINANCIAL STATEMENTS

Financial statements meeting the requirements of Item 310(a) of Regulation  S-B
are attached to this report.


ITEM  8  -CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON ACCOUNTING AND
FINANCIAL DISCLOSURE

During the three most recent fiscal years, neither the Company nor the Bank has
changed accountants and neither the Company nor the Bank has had a disagreement
with  its  accountants  with  respect to accounting principles or practices  of
financial statement disclosure.

<PAGE>36

                                   PART III


ITEM  9  -DIRECTORS,  EXECUTIVE  OFFICERS,   PROMOTERS   AND  CONTROL  PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

BOARD  OF  DIRECTORS - Each of the Directors has served as a  director  of  the
Company and/or the Bank since the initial appointment of directors in September
1989 except  Messrs.  Francesconi and McBeth who were appointed in May 1991 and
1992 respectively, Marguerite Dalianes who was appointed in March 1992, Clayton
Janssen who was  appointed  in  December 1993, Mike Renner who was appointed in
November 1996 and James O. Johnson who was appointed in May 1997.

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 Bank and Humboldt Bancorp on  May  21,  1998.  The Directors, their
ages and their principal occupations during the past five years are:

MYRON  T.  ABRAHAMSEN,  77, Retired Insurance Agent and  Broker  formerly  with
George Petersen & Associates.
RONALD F. ANGELL, 55, Attorney  and  Partner  with  the  firm of Roberts, Hill,
Calligan, Bragg, Feeney & Angell.
MARGUERITE DALIANES, 54, President of Dalianes Travel Service.
FRANCIS A. DUTRA, 67, Retired President of Dutra Trucking Company.
GARY  L. EVANS, 55, Certified Public Accountant associated  with  the  firm  of
Aalfs, Evans & Company.
LAWRENCE FRANCESCONI, 67, Retired Owner of Redwood Bootery.
CLAYTON  R. JANSSEN, 72, Attorney and Partner with the firm of Janssen, Malloy,
Needham, Morrison & Koshkin.
JAMES O. JOHNSON, 69, Owner, Jim Johnson Construction
THEODORE S.  MASON,  55,  President  and Chief Executive Officer of the Company
and/or Bank since March 1989.  Prior to  1989  Mr.  Mason  was  Manager  of the
Eureka Main Office of Bank of America for approximately five years.
JOHN MCBETH, 51, President of O & M Industries.
MIKE RENNER, 45, President of Renner Petroleum.
JOHN R. WINZLER, 67, Consulting Engineer and President of Winzler & Kelly.
(Note:   Directors Abrahamsen and Dutra decided not to seek re-election to  the
Board of Directors  and  the  Board  appointed Directors Vaissade and Thomas in
early February, 1998.)

EXECUTIVE OFFICERS - The following are  the  names of the executive officers of
the Company and/or the Bank and certain information concerning each of them:

THEODORE S. MASON, 55, President and Chief Executive  Officer  of  the  Company
and/or the Bank since its inception in 1989.
ALAN J. SMYTH, 64, Senior Vice President, Chief Financial Officer and Secretary
of the Company and/or the Bank since its inception in 1989.
RONALD  V.  BARKLEY,  61,  Senior  Vice President and Loan Administrator of the
Company and/or the Bank since its inception in 1989.
PAUL A. ZIEGLER, 39, Vice President  and  Chief  Administrative  Officer of the
Company and/or the Bank since January 1994.
(Note:  Richard Whitsell, 52, Vice President and Branch Administration  Officer
of  the  Company  and/or the Bank was appointed an Executive Officer in January
1998)

<PAGE>37

Pursuant to Section 16(a) of the Securities Exchange Act of 1934, all directors
and officers have filed  Forms  3,  4  and  5  in  a  timely manner, except for
Director Johnson who inadvertently filed his initial Form 3 late.


ITEM 10 -EXECUTIVE COMPENSATION

The following tables set forth the cash and non-cash compensation  paid for all
services of the Chief Executive Officer, Theodore S. Mason, the Chief Financial
Officer,  Alan  J. Smyth, the Senior Loan Officer, Ronald V. Barkley,  and  the
Chief Administrative Officer, Paul A. Ziegler.

                                                     OTHER
                                                    ANNUAL   DEFERRED  OPTIONS
NAME                   YEAR     SALARY   BONUS(2)  COMP(3)    COMP(4)  GRANTED
Theodore S. Mason (1)  1997   $125,000   $170,990   $1,782   $125,000    2,000
Theodore S. Mason      1996   $105,000   $ 70,906   $1,658   $100,000    2,000
Theodore S. Mason      1995   $105,000   $ 52,001   $1,464   $ 60,000    3,000
Alan J. Smyth          1997   $ 85,000   $ 76,865   $2,107   $ 75,000    2,000
Alan J. Smyth          1996   $ 70,000   $ 68,017   $2,331   $ 50,000    1,000
Alan J. Smyth          1995   $ 70,000   $ 55,410   $2,506   $ 31,668      500
Ronald V. Barkley      1997   $ 85,000   $ 94,990   $1,882   $ 60,000    2,000
Ronald V. Barkley      1996   $ 70,000   $ 12,926   $2,250   $ 45,000    1,000
Ronald V. Barkley      1995   $ 70,000   $ 48,884   $1,750   $ 31,703      500
Paul A. Ziegler        1997   $ 77,000   $ 25,825   $  554       0.00    5,000
Paul A. Ziegler        1996   $ 70,000   $ 24,600   $  631       0.00    1,000
Paul A. Ziegler        1995   $ 55,070   $ 14,015   $  553       0.00      500


(1) Humboldt  Bank  entered into an employment agreement with Mr. Mason on May
1, 1989 whereby Mr. Mason  agreed  to  serve  as the Bank's President and Chief
Executive Officer, which Agreement was on December  10,  1996  extended  for  a
third  time to January 1, 2001.  Under the terms of the Agreement, Mr. Mason is
entitled  to  receive  a  base  salary of $125,000.00 per year and an incentive
bonus based on a percentage ranging  from  4%  to  2.5%  of  the Bank's pre-tax
profits  pursuant to an incentive bonus plan.  During his term  of  employment,
Mr. Mason  may be reimbursed for travel, meals, entertainment expenses, service
to charitable  organizations,  and  membership  in certain committees and other
organizations.  In addition, he is eligible for typical  employee benefits such
as paid vacation, sick leave, medical insurance and the use  of  an  automobile
owned by the Bank.

(2) Includes  amounts  paid  to  Mr.  Mason,  Mr.  Smyth, Mr. Barkley, and Mr.
Ziegler pursuant to the Bank's Incentive Bonus Plan.

(3) Includes amounts imputed to Mr. Mason, Mr. Smyth,  Mr.  Barkley,  and  Mr.
Ziegler  as  income  for tax purposes pursuant to the Bank's automobile program
and the Bank's life insurance program.

(4) Includes amounts  of  salary or bonus deferred by Mr. Mason, Mr. Smyth and
Mr. Barkley pursuant to the  Bank's Deferred Compensation Plan.  The amounts in
this column are not included in the Salary and Bonus columns.

<PAGE>38

BENEFIT PLANS

RETIREMENT PLAN:  The Bank has  a defined contribution retirement plan covering
substantially all of the Bank'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 $134,000 during 1997 and $98,000 during 1996.

DIRECTOR FEE PLAN:  The Bancorp has adopted the Humboldt Bank Director Fee Plan
(the "Fee Plan").   The Fee Plan permits each Bank director to elect to receive
his/her directors' fees  in  the  form  of  Company  common  stock,  cash, or a
combination of Company 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 Bank 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 Company to pay/distribute on this account.  The
account is otherwise  unsecured,  unfunded and subject to the general claims of
creditors of the Bank and Company.   The  Fee Plan provides for the issuance of
up to 40,000 shares of Company common stock.   The amount of such fees deferred
in 1997 totaled $43,000.  At December 31, 1997,  the  liability for amounts due
under this plan totaled $63,000, or approximately 2,671 shares of stock.

EMPLOYEE STOCK BONUS PLAN:  The Company has an Employee  Stock Bonus Plan which
is funded annually at the sole discretion of the Board of Directors.  Funds are
invested  in  Company stock, when available, and is purchased  at  the  current
market price on  behalf  of  all employees except the executive officers of the
Bank.  The compensation cost recognized  for  1997  and  1996  was $20,000 each
year.

POSTEMPLOYMENT  BENEFIT  PLANS  AND  LIFE  INSURANCE  POLICIES:   The Bank  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 Bank is the owner and beneficiary.  At December 31, 1997
and 1996,  the  cash  surrender  value  of these policies totaled approximately
$4,810,000 and $4,583,000 respectively.

The plans are unfunded and provide for the  Bank 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 Bank's commitment to pay
a  deferred  benefit  at  retirement.   If  death occurs  prior  to  or  during
retirement, the Bank will pay the employee's beneficiary or estate the benefits
set forth in the plans.

At December 31, 1997 and 1996, liabilities recorded  for  the estimated present
value of future salary continuation and deferred compensation  benefits totaled
approximately  $1,451,000  and  $932,000,  respectively.   Salary  continuation
benefits  may  be  paid  if termination is without cause or due to a change  in
control  of  the  Bank.  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,  the Bank is contingently liable to
make future payments greater than the amounts  recorded  as liabilities.  Based
on present circumstances, the Bank 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.

STOCK OPTION PLAN:  The Company has  a  stock option plan under which incentive
and nonstatutory stock options, as defined under the Internal Revenue Code, may
be granted.  Options representing 87,484  shares  of  the  Company's issued and
outstanding  no  par value common stock may be granted under the  plan  by  the
Board of Directors  to  directors,  officers and key, full-time employees at an

<PAGE>39

exercise price not less than the fair market value of the shares on the date of
grant.  Options representing shares of  the  Company's  issued  and outstanding
common stock may be granted under the Humboldt Bank Stock Option Plan.  Options
may have an exercise period of not longer than 10 (ten) years and  the  options
are  subject  to  a graded vesting schedule of 33% per year for incentive stock
options and 20% per year for nonstatutory stock options.

The following tables  set  forth the number of options granted to the Company's
executive officers during 1997  and the number and value of unexercised options
held by such executive officers as of the end of 1997.


                             OPTION GRANTS IN 1997
                                                                POTENTIAL
                              %                                 REALIZABLE
                           OF TOTAL                           VALUE AT ASSUMED
                            OPTIONS                            ANNUAL RATES
                            GRANTED  EXERCISE                 OF STOCK PRICE
                              TO      PRICE                    APPRECIATION
                   OPTIONS EMPLOYEES   PER     EXPIRATION       FOR OPTION
  NAME             GRANTED  IN 1997   SHARE      DATE           TERM 5%/10%

Theodore S. Mason   2000     6.3%     $19.77  Feb. 18, 2007  $24,860 / $63,020
Alan J. Smyth       1000     3.1%     $19.77  Feb. 18, 2007  $12,430 / $31,150
Alan J. Smyth       1000     3.1%     $30.25  Dec. 18, 2007  $19,020 / $48,210
Ronald V. Barkley   1000     3.1%     $19.77  Feb. 18, 2007  $12,430 / $31,150
Ronald V. Barkley   1000     3.1%     $30.25  Dec. 18, 2007  $19,020 / $48,210
Paul A. Ziegler     1000     3.1%     $19.77  Feb. 18, 2007  $12,430 / $31,150
Paul A. Ziegler     4000    12.5%     $30.25  Dec. 18, 2007  $76,080 / $192,840

                      AGGREGATED OPTION EXERCISES IN 1997

                                             NUMBER OF
                                           UNEXERCISED           VALUE OF
                     SHARES              OPTIONS AT YEAR-      UNEXERCISED
                    ACQUIRED                   END            IN-THE-MONEY
                       ON       VALUE     (EXERCISABLE/       (EXERCISABLE/
NAME                EXERCISE   REALIZED   UNEXERCISABLE)      UNEXERCISABLE)

Theodore S. Mason     -0-         -0-     60,473 / 5,144    $474,008 / $59,193
Alan J. Smyth         -0-         -0-     28,548 / 3,129    $224,149 / $65,063
Ronald V. Barkley     -0-         -0-     28,548 / 3,129    $224,149./ $65,063
Paul A. Ziegler       -0-         -0-      5,402 / 6,129    $53,737 / $155,813


<PAGE>40


ITEM 11 -SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

Management  of  the  Company  knows  of  no person who owns, beneficially or of
record, either individually or together with associates, more than FIVE percent
of the outstanding shares of Humboldt's Common  Stock,  except  as set forth in
the  table  below.   Unless otherwise indicated, the persons listed  have  sole
voting and investment power over the shares beneficially owned.




The rest of this page is intentionally left blank.


<PAGE>41

SECURITIES OWNERSHIP OF MANAGEMENT

The following table compares,  as  of  December  31,  1997, the total number of
shares issued (1,576,542) and options exercisable by March  1,  1998  (232,237)
and  percentage  of  shares  of Humboldt's outstanding Common Stock, which  are
beneficially owned, directly or indirectly, by (a) each of Humboldt's directors
and nominees for director; (b) the Chief Executive Officer of Humboldt and each
of the Company's four executive officers other than the Chief Executive Officer
(the "named executive officers");  and  (c)  Humboldt's directors and the named
executive  officers  as  a  group.   The Company identifies  as  its  executive
officers the Chief Executive Officer,  the  Chief Financial Officer, the Senior
Loan Officer, and the Chief Administrative Officer  of Humboldt Bank who have a
significant  impact  on  the overall direction of financial  reporting  of  the
Company.  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, 1997.  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
the Company.

                                            OPTIONS
                             SHARES     EXERCISABLE
                               HELD       BY 3/1/98         TOTAL           %

Myron T. Abrahamsen          13,143          13,506        26,649        1.47
Ronald F. Angell             17,217          13,365        30,582        1.69
Marguerite Dalianes           7,131          10,003        17,134        0.95
Francis A. Dutra             82,072           6,241        88,313        4.88
Gary L. Evans                14,352          18,196        32,548        1.80
Lawrence Francesconi         17,448           8,436        25,884        1.43
Clayton R. Janssen           10,663           8,194        18,857        1.04
James O. Johnson              5,280             200         5,480        0.30
John McBeth                  29,460           8,436        37,896        2.10
Michael Renner               11,039             640        11,679        0.65
John R. Winzler              22,233          18,196        40,429        2.24
Theodore S. Mason             6,252          62,013        68,265        3.77
Alan J. Smyth                     0          29,319        29,319        1.62
Ronald V. Barkley               166          29,319        29,485        1.63
Paul A. Ziegler                   0           6,173         6,173        0.34
TOTAL:                      236,456         232,237       468,693       25.91
 a) Directors Nominees      236,290         167,426       403,716       22.32
 b) Executive Officers          166          64,811        64,977        3.60
 c) Directors & Executive  
    Officers                236,456         232,237       468,693       25.91


ITEM 12 -CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  Company  has  and expects to have in the future, in the ordinary course of
business,  banking  transactions  with  certain  of  its  directors,  officers,
shareholders, and their associates, including transactions with corporations of
which such persons are directors, officers or controlling shareholders.  In the
opinion of management,  such transactions involving loans have been and will be
entered into with such persons  in  accordance  with applicable laws and (1) in
the ordinary course of business, (2) on substantially the same terms, including
interest rates and collateral, as those prevailing  at  the time for comparable

<PAGE>42


transactions with other persons, and (3) on terms not involving  more  than the
normal  risk  of collectability or presenting other unfavorable features.   For
additional  reference   see   Note  "P"  of  the  Company's  Annual  Report  to
Shareholders prepared by Richardson & Company.

<PAGE>43


ITEM 13 -EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

The exhibits below are filed or  incorporated  by  reference  as  part  of this
report pursuant to Item 601 of Regulation S-B.

Exhibit                                                           Sequentially
Number     Exhibits                                              Numbered Page

 2.1       Plan of Reorganization and Merger Agreement*
 3.1       Articles of Incorporation*
 3.2       Bylaws*
 4.1       Copy of the Share Certificate for Common Shares*
10.1       Amended Employment Agreement with Theodore S. Mason*
10.2       Employment Agreement with Ronald V. Barkley*
10.3       Employment Agreement with Alan J. Smyth*
10.4       Employment Agreement with Paul A. Ziegler*
10.5       Humboldt Bancorp Stock Option Plan**
10.6       Stock Option Agreements with Theodore S. Mason***
10.7       Stock Option Agreements with Ronald V. Barkley***
10.8       Stock Option Agreements with Alan J. Smyth***
10.9       Stock Option Agreements with Paul A. Ziegler***
10.10      Stock Option Agreements with Richard Whitsell****
10.1       Humboldt Bank Director Fee Plan**



(b) Reports on Form 8-K

    No reports on Form 8-K were filed for the three months ended December 31,
    1997.

(c) Independent Auditors Report dated January 17, 1998


*Incorporated by reference  to  the  Bank's  Form 10 Registration Statement and
amendments thereto which was previously filed with the Federal Reserve Board on
May 1, 1992.

**Incorporated  by  reference to the Bank's definitive  Proxy  Statement  filed
pursuant to Regulation  14(a)  within  120  days  of the end of the last fiscal
year.

***Incorporated by reference to the Bank's 1992 Form 10-K previously filed with
the Federal Reserve Board.


<PAGE>44

                                  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

                                             THEODORE S. MASON

Date:  March 11, 1998               By:___________________________________
                                       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 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 & Accounting Officer)


        MYRON T. ABRAHAMSEN                      RONALD F. ANGELL
__________________________________    _______________________________________
Myron T. Abrahamsen, Director         Ronald F. Angell, Chairman of the Board


        MARGUERITE DALIANES                      FRANCIS A. DUTRA
__________________________________    _______________________________________
Marguerite Dalianes, Director         Francis A. Dutra, 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 M. MCBETH                           MICHAEL RENNER
__________________________________    _______________________________________
John M. McBeth, Director              Michael Renner, Director


        JOHN R. WINZLER
__________________________________
John R. Winzler, Director


</TABLE>