<PAGE> 1
                SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549

                            FORM 10-Q



 X  Quarterly report pursuant to Section 13 or 15(d) of the       
    Securities Exchange Act of 1934

For the quarterly period ended June 30, 1998 or

    Transition report pursuant to Section 13 or 15(d) of the      
    Securities Exchange Act of 1934

For the transition period from _________ to __________

Commission file number            2-77519-LA                

                     SARATOGA BANCORP                       
      (Exact name of registrant as specified in its charter)

            California                      94-2817587     
(State or other jurisdiction of          (I.R.S. Employer
incorporation or organization)          Identification No.)

     12000 Saratoga-Sunnyvale Road
     Saratoga, California                       95070  
(Address of principal executive offices)     (Zip Code)

Registrant's telephone number including area code (408) 973-1111 

                             NONE                               
(Former name, former address and former fiscal year, if changed
since last report)

     Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days.    

                                 Yes  X     No     

     Indicate the number of shares outstanding of each of the
issuer's classes of common stock as of the latest practicable date.

       CLASS           SHARES OUTSTANDING AT JULY 27, 1998
   Common Stock                     1,644,567



                     Exhibit Index at Page 21
                                
                       Page 1 of 22 pages
<PAGE> 2
                    PART I - FINANCIAL INFORMATION

Item 1. Consolidated Condensed Financial Statements
<TABLE>
<CAPTION>
                   SARATOGA BANCORP AND SUBSIDIARY
                CONSOLIDATED CONDENSED BALANCE SHEETS

                                    June 30,        December 31,
                                      1998               1997*   
                                   (Unaudited)
<S>                              <C>              <C>
ASSETS
Cash and due from banks           $  6,540,000     $  4,760,000
Federal funds sold                  14,200,000       10,500,000
Total cash and equivalents          20,740,000       15,260,000
                                  ------------     ------------ 
Interest bearing deposits in
 other banks                         1,589,000        1,489,000
Securities available for sale       11,944,000       16,184,000
Securities held to maturity         28,780,000       31,152,000
Loans, net                          63,738,000       63,187,000
Premises and equipment               2,375,000        1,992,000
Other assets                         1,904,000        1,780,000
                                  ------------     ------------     
TOTAL ASSETS                      $131,070,000     $131,044,000
                                   ===========      ===========
LIABILITIES
Deposits:
  Non interest-bearing            $ 26,066,000     $ 25,456,000
  Interest-bearing                  66,353,000       65,590,000
Total deposits                      92,419,000       91,046,000
Federal funds purchased                 -             2,000,000
Other borrowings                    22,873,000       22,984,000
Accrued expenses and 
  other liabilities                  1,376,000        1,409,000
                                  ------------     ------------
TOTAL LIABILITIES                  116,668,000      117,439,000
                                  ------------     ------------
SHAREHOLDERS' EQUITY
Common stock, no par value;
 Authorized: 20,000,000 shares;    
 Issued and outstanding:
 1,644,567 shares at June 30, 
 1998 and 1,637,950 shares at
 December 31, 1997                   4,725,000        4,705,000
Retained earnings                    9,837,000        9,099,000
Net unrealized loss on 
 securities available for sale        (160,000)        (199,000)       
                                  ------------     ------------           
TOTAL SHAREHOLDERS' EQUITY          14,402,000       13,605,000
TOTAL LIABILITIES AND             ------------     ------------
  SHAREHOLDERS' EQUITY            $131,070,000     $131,044,000
                                   ===========      ===========
</TABLE>
*Derived from the December 31, 1997 audited balance sheet included in
the Company's 1997 Annual Report on Form 10-K.

See notes to consolidated condensed financial statements.



<PAGE> 3
<TABLE>
<CAPTION>
                      SARATOGA BANCORP AND SUBSIDIARY
            CONSOLIDATED CONDENSED INCOME STATEMENTS (Unaudited)

                             Three Months Ended       Six Months Ended
                                  June 30,                June 30,
                              1998        1997        1998        1997 
INTEREST INCOME:
<S>                       <C>         <C>         <C>         <C>
  Loans                    $1,536,000  $1,331,000  $3,094,000  $2,634,000
  Investment securities       698,000     853,000   1,446,000   1,445,000
  Federal funds sold          189,000     107,000     293,000     331,000
                           ----------  ----------  ----------  ----------
Total interest income       2,423,000   2,291,000   4,833,000   4,410,000
                           ----------  ----------  ----------  ---------- 
INTEREST EXPENSE:    
  Deposits                    726,000     697,000   1,443,000   1,428,000
  Other                       353,000     358,000     705,000     638,000
                           ----------  ----------  ----------  ----------
Total interest expense      1,079,000   1,055,000   2,148,000   2,066,000
                           ----------  ----------  ----------  ----------
NET INTEREST INCOME 
 BEFORE PROVISION 
 FOR CREDIT LOSSES          1,344,000   1,236,000   2,685,000   2,344,000  
Provision for credit
 losses                        51,000         -       102,000        -    
                           ----------  ----------  ----------  ----------
Net interest income 
  after provision for 
  credit losses             1,293,000   1,236,000   2,583,000   2,344,000
Other income                  133,000     111,000     292,000     233,000
Other expenses                729,000     824,000   1,505,000   1,604,000
                           ----------  ----------  ----------  ---------- 
INCOME BEFORE INCOME TAXES    697,000     523,000   1,370,000     973,000
Provision for income taxes    264,000     199,000     520,000     370,000
                           ----------  ----------  ----------  ----------  
NET INCOME                 $  433,000  $  324,000  $  850,000  $  603,000
                           ==========  ==========  ==========  ==========

EARNINGS PER SHARE:  
  Basic                    $     0.26 $      0.21  $     0.52  $     0.39
                           ==========  ==========  ==========  ==========

  Diluted                  $     0.24 $      0.18  $     0.47  $     0.34
                            ==========  ==========  ==========  ==========  
</TABLE>
See notes to consolidated condensed financial statements.


<PAGE> 4
<TABLE>
<CAPTION>
                      SARATOGA BANCORP AND SUBSIDIARY
        CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)

                                                    Six Months Ended
                                                        June 30,
                                                   1998           1997   
<S>                                           <C>           <C>
OPERATIONS:
 Net income                                    $   850,000   $   603,000
 
 Adjustments to reconcile net income to
   net cash provided by operating
   activities:
   Provision for credit losses                     102,000          -    
   Depreciation and amortization                    90,000        89,000
   Other, net                                      158,000       253,000    
                                               -----------   ----------- 
Net cash provided by operating activities        1,200,000       945,000
                                               -----------   ----------- 
INVESTING ACTIVITIES:
   Net increase in interest bearing
    deposits in other banks                       (100,000)
   Proceeds from maturities or sale of 
    investments available for sale              13,309,000     9,517,000
   Proceeds from maturities of investments
    held to maturity                             3,012,000     1,571,000 
   Purchase of securities available for sale    (7,000,000)  (10,814,000)
   Purchase of securities held to maturity      (2,985,000)  (13,450,000)
   Net increase in loans                          (653,000)     (620,000)
   Purchases of premises and equipment            (473,000)      (24,000)
   Proceeds from sale of OREO                         -        1,311,000 
                                               -----------  ------------
Net cash provided by (used in) investing
 activities                                      5,110,000   (12,509,000)
                                               -----------  ------------
FINANCING ACTIVITIES:
  Net increase (decrease) in deposits            1,373,000    (3,063,000)
  Issuance of common stock                          20,000        48,000
  Payment of cash dividends                       (112,000)     (105,000)
  Net (decrease) increase in other borrowings     (111,000)    4,893,000
  Decrease in federal funds purchased           (2,000,000)   (1,500,000)
                                               -----------  ------------ 
Net cash (used in) provided by financing 
  activities                                      (830,000)      273,000
                                               -----------  ------------                                             
NET INCREASE (DECREASE)IN CASH 
  AND EQUIVALENTS                                5,480,000   (11,291,000) 
Cash and equivalents, beginning of period       15,260,000    22,843,000
                                               -----------  ------------
Cash and equivalents, end of period            $20,740,000   $11,552,000
                                               ===========   ===========
</TABLE>

See notes to consolidated condensed financial statements.
<PAGE> 5
              SARATOGA BANCORP AND SUBSIDIARY
   NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

           QUARTERS ENDED JUNE 30, 1998 AND 1997
                              
1.  The unaudited consolidated condensed financial statements reflect all 
adjustments (which include only normal recurring adjustments) which are, in 
the opinion of management, necessary to state fairly the results for the 
periods presented.  The results for the periods are not necessarily
indicative of the results to be expected for the full fiscal year.

2.  On March 27, 1998 the Board of Directors declared a 3-for-2 stock split, 
which was distributed on May 1, 1998, to shareholders of record as of April 
15, 1998.  All share and per share data have been retroactively adjusted to 
reflect the
stock split.

3.  The Company adopted SFAS No. 128 "Earnings per Share"
during the fourth quarter of 1997.  SFAS 128 requires
presentation of basic and diluted earnings per share (EPS) and
restatement of all prior period EPS presented.  Basic EPS is
computed by dividing net income by the weighted average common
shares outstanding during the period.  Diluted EPS reflects
the potential dilution if securities or other contracts to
issue common stock are exercised or converted into common
stock.  The weighted average shares used in computing earnings
per share are as follows:

                                   Quarters ended June 30,
                                        1998        1997
Weighted average shares used 
  in computing:

Basic earnings per share             1,644,000     1,573,000 
 
Diluted potential common shares
  from exercise of stock options,
  using the treasury stock method      185,000       188,000 
                                     ---------     --------- 
Diluted earnings per share           1,829,000     1,761,000 
                                     ---------     ---------
<PAGE> 6     
                                   Six Months ended June 30,
                                        1998        1997
Weighted average shares used 
  in computing:

Basic earnings per share             1,642,000     1,564,000 
 
Diluted potential common shares
  from exercise of stock options,
  using the treasury stock method      178,000       198,000 
                                     ---------     --------- 
Diluted earnings per share           1,820,000     1,762,000 
                                     ---------     --------- 

4.  Effective January 1, 1998, the Company adopted Statement
of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income."  This Statement requires that all items
recognized under accounting standards as components of
comprehensive earnings be reported in an annual financial
statement that is displayed with the same prominence as other
annual financial statements. This Statement also requires that
an entity classify items of other comprehensive earnings by
their nature in an annual financial statement.  For example,
other comprehensive earnings may include foreign currency
translation adjustments, minimum pension liability
adjustments, and unrealized gains and losses on marketable
securities classified as available-for-sale.  Annual financial
statements for prior periods will be reclassified, as
required. The Company's total comprehensive earnings are as
follows:

                                    Six months ended June 30,
                                         1998        1997

Net income                            $850,000     $603,000

Other comprehensive earnings-
  Net unrealized gains on
 securities available for sale          39,000       73,000 
                                      --------     --------
Total comprehensive earnings          $889,000     $676,000
                                      --------     --------
<PAGE> 7 
                                     Quarters ended June 30,
                                         1998        1997

Net income                            $433,000     $324,000

Other comprehensive earnings-
  Net unrealized gains on
 securities available for sale          15,000       97,000 
                                      --------     --------
Total comprehensive earnings          $448,000     $421,000


5.  In June, 1998, the Financial Accounting Standards Board
issued SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities", which establishes accounting and
reporting standards for derivative instruments and hedging
activities.  This statement becomes effective in the third
quarter of 1999, with earlier application permitted.  Adoption
of this statement will not impact the Company's consolidated
financial position, results of operations of cash flows.

6.  During the six months ended June 30, 1998 and 1997, cash
paid for taxes was $627,000 and $155,000, respectively. 
During the six months ended June 30, 1998 and 1997, cash paid
for interest was $2,083,000 and $2,056,000, respectively.
<PAGE> 8
               SARATOGA BANCORP AND SUBSIDIARY


Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.

Certain matters discussed or incorporated by reference in
this Quarterly Report on Form 10-Q are forward-looking
statements that are subject to risks and uncertainties that
could cause actual results to differ materially from those
projected.  Such risks and uncertainties include, but are
not limited to, matters described in Item 2 - "Management's
Discussion and Analysis of Financial Condition and Results
of Operations."  Therefore, the information set forth
therein should be carefully considered when evaluating the
business prospects of the Company and the Bank.

Summary of financial results
----------------------------
At June 30, 1998, total assets were $131,070,000, a slight
increase from $131,044,000 at December 31, 1997.  Net loans
increased $551,000 (0.9%) from $63,187,000 at December 31,
1997 to $63,738,000 at June 30, 1998.  Total deposits
increased $1,373,000 (1.5%) from $91,046,000 at December 31,
1997 to $92,419,000 at June 30, 1998.  

Net income for the second quarter of 1998 was $433,000
($0.26 basic earnings per share, $0.24 diluted earnings per
share) compared to $324,000 ($0.21 basic earnings per share,
$0.18 diluted earnings per share) for the comparable period
in 1997.  Net income for the first six months of 1998 was
$850,000 ($0.52 basic earnings per share, $0.47 diluted
earnings per share) compared to $603,000 ($0.39 basic
earnings per share, $0.34 diluted earnings per share) for
the comparable period in 1997.

The increase in income resulted primarily from an increase
in the volume of earning assets, offset in part by an
increase in interest expense due to the increased volume of
interest-bearing liabilities.

RESULTS OF OPERATIONS
---------------------


SECOND QUARTER OF 1998 AND 1997
-------------------------------


An analysis of the results of operations of the Company for
the second quarter of 1998 compared to the second quarter of
1997 is presented below:
<PAGE> 9
Net interest income

Net interest income, the difference between interest earned
on loans and investments and interest paid on deposits, is
the principal component of the Bank's earnings.  The
components of net interest income are as follows:
<TABLE>
<CAPTION>
                                 Three months ended June 30,

                               1998                        1997           
                      -------------------------  -------------------------
                      Average           Average  Average           Average
                      Balance  Interest Yield(1) Balance  Interest Yield(1)
                      -------  -------- -------- -------  -------- -------- 
                                (In thousands, except percentages)
<S>                 <C>         <C>     <C>    <C>        <C>     <C>
Assets:
Earning assets:
  Loans (2)          $ 62,494    $1,536  9.8%   $ 53,224   $1,331  10.0%
  Investment 
    securities         45,837       698  6.1      54,419      853   6.3 
  Federal funds sold   13,805       189  5.5       7,340      107   5.8 
  Total interest     --------    ------         --------   ------
    earning assets    122,136     2,423  7.9     114,983    2,291   8.0 
Cash and due from                ------                    ------
  banks                 5,053                      4,697
Other assets (3)        2,754                      3,993
                     --------                   --------                     
                     $129,943                   $123,673
                     ========                   ========
Liabilities and 
  Shareholders'
  Equity:
Interest-bearing 
  liabilities: 
  Demand deposits    $ 39,130       351  3.6    $ 37,173       315  3.4  
  Time deposits        28,025       375  5.4      28,981       382  5.3 
  Other borrowings     22,910       353  6.2      22,694       358  6.3  
  Total interest-    --------    ------         --------    ------
    bearing
    liabilities        90,065     1,079  4.8      88,848     1,055  4.7 
Demand deposits        24,632    ------           21,448    ------
Other liabilities       1,240                      1,054
                     --------                   --------
Total liabilities     115,937                    111,350
Shareholders' equity   14,006                     12,323
                     --------                   --------
                     $129,943                   $123,673
                      =======                    =======

Net interest income and margin(4)$1,344  4.4%               $1,236  4.3%
                                 ======                     ======
</TABLE>
(1)  Annualized.
(2)  Loan interest income includes loan fee income of       
     $98,000 and $83,000 for the quarters ended June 30,
     1998 and 1997,respectively.
(3)  Net of the average allowance for loan losses of 
     $668,000 and $625,000 and deferred loan fees of 
     $317,000 and $330,000 for the quarters ended June 30,
     1998 and 1997, respectively. 

(4)  Net interest margin is computed by dividing net 
     interest income by total average interest earning
     assets.
<PAGE> 10
Provision for credit losses
---------------------------
The Bank maintains an allowance for possible credit losses
which is based, in part, on the Bank's historical loss
experience, the impact of forecasted economic conditions
within the Bank's market area, and, as applicable, the State
of California, the value of the underlying collateral, loan
performance and inherent risks in the loan portfolio.  The
allowance is reduced by charge-offs and increased by
provisions for credit losses charged to operating expense
and recoveries of previously charged-off loans.  During the
second quarter of 1998 the Bank provided $51,000 for the
allowance for credit losses.  During the second quarter of
1997 the Bank did not record a provision for credit losses.
There were $14,000 in loans charged-off and $20,000 in
recoveries in the second quarter of 1998, as compared to
$5,000 in loans charged-off and $10,000 in recoveries in the
second quarter of 1997.  
  
At June 30, 1998, the allowance for credit losses was
$698,000 or 1.1% of total loans, compared to $598,000 or
0.9% at December 31, 1997.  There were no nonaccrual loans
at June 30, 1998 compared to $360,000 at December 31, 1997.

At June 30, 1998 and December 31, 1997, there were no loans
past due 90 days or more as to principal or interest and
still accruing interest.  There were no loans at June 30,
1998 which were  troubled debt restructurings as defined in
Statement of Financial Accounting Standards No. 15,
"Accounting by Debtors and Creditors for Troubled Debt
Restructuring."  At June 30, 1998, there were five potential
problem loans having a combined principal balance of
$310,000 ($305,000 at December 31, 1997).  Potential problem
loans are loans which are generally current as to principal
and interest but have been identified by the Company as
potential problem loans due either to a decrease in the
underlying value of the property securing the credit or some
other deterioration in the creditworthiness of the borrower. 
All of the five loans identified as potential problem loans
are secured by real estate and personal property.

There was no Other Real Estate owned ("OREO")at June 30,
1998 or December 31, 1997.
<PAGE> 11
Nonperforming loans and other real estate owned are
summarized below:
                           June 30, 1998   December 31, 1997
                           -------------   -----------------
Nonperforming loans:
  Past due 90 days or more $     -          $          -   
  Nonaccrual                     -                  360,000    
                           -------------    ---------------
    Total                         -                 360,000
Other real estate owned           -                    -   
                           -------------    ---------------
Total nonperforming loans 
  and other real estate 
  owned                    $     -          $       360,000
                           =============    ===============

Management is of the opinion that the allowance for credit
losses is maintained at an adequate level for known and
currently anticipated future risks inherent in the loan
portfolio.  However, the Bank's loan portfolio, which
includes approximately $38,000,000 in real estate loans
representing approximately 59% of the portfolio, could be
adversely affected if California economic conditions and the
real estate market in the Bank's market area weaken.  The
effect of such events could  result in an increase in the
level of nonperforming loans and OREO and the level of the
allowance for loan losses which could adversely affect the
Company's and the Bank's future growth and profitability.

Noninterest income
------------------
Other income consists of service charges on deposit
accounts, income from assets acquired for lease and fees for
other miscellaneous services.  Total other income increased
from $111,000 in the second quarter of 1997 to $133,000 in
the second quarter of 1998.  This increase is primarily
attributable to a gain on sale of leases of $12,000 and an
increase of $6,000 in service charges assessed on deposit
accounts.

Noninterest expenses
--------------------
Other expenses decreased from $824,000 in the second quarter
of 1997 to $729,000 in the second quarter of 1998.  The
decrease is primarily attributable to a loss on sale of
securities of $35,000 which was realized in the second
quarter of 1997 and a decrease in OREO expense of $33,000. 
As a percentage of average earning assets, other expenses
for the second quarter, on an annualized basis, decreased
from 2.9% in 1997 to 2.4% in 1998.
<PAGE> 12
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
---------------------------------------
An analysis of the results of operations of the Company for
the six month period ended June 30, 1998 compared to the
comparable period in 1997 is as follows:

Net interest income
-------------------
Net interest income, the difference between interest earned
on loans and investments and interest paid on deposits, is
the principal component of the Bank's earnings.  The
components of net interest income are as follows:
<TABLE>
<CAPTION>
                                 Six months ended June 30,

                               1998                        1997           
                      Average           Average  Average           Average
                      Balance  Interest Yield(1) Balance  Interest Yield(1)
                                (In thousands, except percentages)          
      Assets:                                   (Unaudited)
<S>                 <C>         <C>     <C>     <C>        <C>     <C>
Earning assets:
  Loans (2)          $ 62,976    $3,094  9.8%    $53,138    $2,634  9.9%
  Investment 
    securities         46,945     1,446  6.2      48,024     1,445  6.0 
  Federal funds sold   10,745       293  5.5      12,529       331  5.3 
  Total interest     --------    ------         --------    ------
    earning assets    120,666     4,833  8.0     113,691     4,410  7.8 
Cash and due from                ------         --------    ------
  banks                 4,963                      4,573
Other assets (3)        2,786                      3,999
                     --------                   --------
                     $128,415                   $122,263
                     ========                   ========
Liabilities and 
  Shareholders'
  Equity:
Interest-bearing 
  liabilities:
  Demand deposits    $ 38,577       633  3.3     $37,095       626  3.4 
  Time deposits        28,429       810  5.7      30,340       802  5.3 
  Other borrowings     22,948       705  6.1      20,459       638  6.2 
  Total interest-    --------    ------         --------    ------
    bearing
    liabilities        89,954     2,148  4.8      87,894     2,066  4.7 
Demand deposits        23,192    ------           21,249    ------ 
Other liabilities       1,338                        927
                     --------                   --------
Total liabilities     114,484                    110,070 
Shareholders' equity   13,931                     12,193
                     --------                   --------
                     $128,415                   $122,263
                     ========                    =======

Net interest income and margin(4)$2,685  4.5%               $2,344  4.1%
                                 ======                     ======
</TABLE>
(1)  Annualized.
(2)  Loan interest income includes loan fee income of  
     $180,000  and $166,000 for the six months ended June 30,
     1998 and 1997, respectively.
(3)  Net of the average allowance for loan losses of   
     $637,000 and $624,000, and deferred loan fees of
     $318,000 and $325,000 for the six months ended June 30,
     1998 and 1997, respectively. 
(4)  Net interest margin is computed by dividing net
     interest income by total average interest earning
     assets.
<PAGE> 13
Provision for credit losses
---------------------------
During the first six months of 1998, the Bank provided
$102,000 to the provision for credit losses.  During the first
six months of 1997, the Bank did not provide any additional
funds to the provision for credit losses.  There were $14,000
in loans charged off and $32,000 in recoveries for the six
months ended June 30, 1998, compared to $23,000 in loans
charged off and $20,000 in recoveries for the first six months
of 1997.

Noninterest income
------------------
Other income consists of service charges on deposit accounts,
income on assets acquired for lease and fees for other
miscellaneous services.  Total other income increased from
$233,000 in 1997 to $292,000 in 1998. The increase is
primarily attributable to a gain on sale of securities of
$59,000 and a gain on sale of leases of $12,000.

Noninterest expenses
--------------------
Other expenses have decreased from $1,604,000 in 1997 to
$1,505,000 in 1998 due primarily to a loss on sale of
securities of $35,000 which was realized in the first six
months of 1997 and a decrease in salary expense of $73,000. 
As a percentage of average earning assets, other expenses, on
an annualized basis, decreased from 2.8% in 1997 to 2.5% in
1998.
<PAGE> 14

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The Bank manages its liquidity to provide adequate funds at an
acceptable cost to support borrowing requirements and deposit
flows of its customers.  At June 30, 1998 liquid assets as a
percentage of deposits were 35% (36% at December 31, 1997). 
In addition to cash and due from banks, liquid assets include
short-term time deposits with other banks, Federal funds sold
and investment securities available for sale.  The Bank has
$11.0 million in Federal funds lines of credit available with
correspondent banks to meet liquidity needs.

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


The following table sets forth the distribution of repricing
opportunities, based on contractual terms, of the Company's
earning assets and interest-bearing liabilities at June 30,
1998, the interest rate sensitivity gap (i.e. interest rate
sensitive assets less interest rate sensitive liabilities),
the cumulative interest rate sensitivity gap, the interest
rate sensitivity gap ratio (i.e. interest rate sensitive
assets divided by interest rate sensitive liabilities) and the
cumulative interest rate sensitivity gap ratio.

<PAGE> 15
<TABLE>
<CAPTION>
DISTRIBUTION OF REPRICING OPPORTUNITIES
At June 30, 1998
(Dollars in thousands)

                       After Three  After Six   After One
               Within  Months But   Months But  Year But    After 
               Three   Within Six   Within One    Within    Five 
               Months    Months        Year     Five Years  Years      Total  
<S>         <C>        <C>         <C>         <C>         <C>     <C>
Federal 
funds sold   $14,200       -           -            -          -    $14,200
Interest 
 bearing
 deposits in 
 other banks    -          -         1,589          -          -      1,589
Municipal 
 securities      660       -      $    200      $ 1,837    $ 5,227    7,924  
U.S. Treasury
 and agency
 securities    3,451       -           420       12,289     14,451   30,611 
FRB stock       -          -          -            -         2,189    2,189
Loans         31,947     2,667       3,637       13,788     12,719   64,758  
             -------   -------     -------      -------    -------  -------
Total 
 earning 
 assets      $50,258   $ 2,667    $  5,846      $27,914    $34,586 $121,271  
             -------   -------    --------      -------    ------- --------
Interest 
 bearing
 demand 
 accounts    $32,302      -           -            -          -      32,302  
Savings 
 accounts      5,821      -           -            -          -       5,821  
Time cert-
 ificates of
 deposit of 
 $100,000
 or more       4,507   $ 3,224    $ 1,946       $ 3,046        100   12,823 
Other time 
 deposits      4,042     4,071      3,816         3,478        -     15,407
Other 
 borrowings     -         -          -           11,995    $10,878   22,873
             -------   -------    -------       -------    -------  ------- 
Total 
 interest-
 bearing
 liabilities $46,672   $ 7,295    $ 5,762       $18,519    $10,978   89,226  

Interest 
 rate sens-
 itivity gap $ 3,586   $(4,628)   $    84       $ 9,395    $23,608   $32,045    
             =======   =======    ========       =======   =======   =======  
Cumulative 
 interest
 rate sens-
 itivity gap  $ 3,586  $ (1,042)  $  (958)      $ 8,437    $32,045
              =======  ========   =======       =======    =======
Interest rate
  sensitivity 
  gap ratio      1.08%     0.37%    1.01%         1.51%      3.15%

Cumulative 
  interest
  rate sens-
  itivity 
  gap ratio       1.08%    0.98%     0.98%        1.11%      1.36%
</TABLE>
<PAGE> 16
The Company and the Bank are subject to capital adequacy
guidelines issued by the Board of Governors of the Federal
Reserve System (the "BGFRS") and the Office of the Comptroller of
the Currency ("OCC"). The Company and the Bank are required to
maintain total capital equal to at least 8% of assets and
commitments to extend credit, weighted by risk, of which at least
4% must consist primarily of common equity including retained
earnings (Tier 1 capital) and the remainder may consist of
subordinated debt, cumulative preferred stock or a limited amount
of loan loss reserves.  Certain assets and commitments to extend
credit present less risk than others and will be assigned to
lower risk-weighted categories requiring less capital allocation
than the 8% total ratio.  For example, cash and government
securities are assigned to a 0% risk-weighted category, most home
mortgage loans are assigned to a 50% risk-weighted category
requiring a 4% capital allocation and commercial loans are
assigned to a 100% risk-weighted category requiring an 8% capital
allocation.  As of June 30, 1998, the Company's total risk-based
capital ratio was approximately 18.7% (approximately 18.7% for
the Bank) compared to approximately 18.1% (approximately 17.0%
for the Bank) at December 31, 1997.

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

The following table reflects the Company's leverage, Tier 1 and
total risk-based capital ratios as of June 30, 1998 and December
31, 1997.

                                 June 30, 1998  December 31, 1997
                                 -------------  -----------------
Leverage ratio                        11.2%             10.9%
Tier 1 capital ratio                  17.9%             17.4% 
Total risk-based capital ratio        18.7%             18.1%

On December 19, 1991, the President signed the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA").  The
FDICIA, among other matters, substantially revised banking
regulations and established a framework for determination of
capital adequacy of financial institutions.  Under the FDICIA,
financial institutions are placed into one of five capital
adequacy catagories as follows: (1) "Well capitalized" -
consisting of institutions with a total risk-based capital ratio
of 10% or greater, a Tier 1 risk-based capital ratio of 6% or
<PAGE> 17
greater and a leverage ratio of 5% or greater, and the
institution is not subject to an order, written agreement,
capital directive or prompt corrective action directive; (2)
"Adequately capitalized" - consisting of institutions with a
total risk-based capital ratio of 8% or greater, a Tier 1 risk-
based capital ratio of 4% or greater and a leverage ratio of 4%
or greater, and the institution does not meet the definition of a
"well capitalized" institution; (3) "Undercapitalized" -
consisting of institutions with a total risk-based capital ratio
less than 8%, a Tier 1 risk-based capital ratio of less than 4%,
or a leverage ratio of less than 4%; (4) "Significantly
undercapitalized" - consisting of institutions with a total risk-
based capital ratio of less than 6%, a Tier 1 risk-based capital
ratio of less than 3%, or a leverage ratio of less than 3%; (5)
"Critically undercapitalized" - consisting of an institution with
a ratio of tangible equity to total assets that is equal to or
less than 2%.

Financial institutions classified as undercapitalized or below
are subject to various limitations including, among other
matters, certain supervisory actions by bank regulatory
authorities and restrictions related to (I) growth of assets,
(ii) payment of interest on subordinated indebtedness, (iii)
payment of dividends or other capital distributions, and (iv)
payment of management fees to a parent holding company.  The
FDICIA requires bank regulatory authorities to initiate
corrective action regarding financial institutions which fail to
meet minimum capital requirements.  Such action may result in
orders to, among other matters, augment capital and reduce total
assets.  Critically undercapitalized financial institutions may
also be subject to appointment of a receiver or implementation of
a capitalization plan.

OTHER MATTERS

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

<PAGE> 18

Year 2000
---------
        As the year 2000 approaches, a critical issue has emerged
regarding how existing application software programs and
operating systems can accommodate this date value.  In brief,
many existing application software products were designed to only
accommodate a two digit date position which represents the year
(e.g. "97" is stored on the system and represents the year 1997). 
As a result, the year 1999 (i.e. "99",  could be the maximum date
value these systems will be able to accurately process.  This is
not just a banking problem, as corporations around the world and
in all industries are similarly impacted.  Management is in the
process of working with its software vendors to assure that the
Company is prepared for the year 2000. Also, the company has put
procedures in place to inquire whether the systems of key
borrowers are year 2000 compliant.  However there can be no
assurance that problems will not arise which could have such an
adverse impact due, among other matters, to the
complexitiesinvolved in computer programming related to
resolution of Year 2000 problems and the fact that the systems of
other companies on which  the Company may rely must also be
corrected on a timely basis.  Delays, mistakes or failures in
correcting Year 2000 system problems by such other companies
could have a significant adverse impact upon the Company and its
ability to mitigate the risk of adverse impact of Year 2000
problems for its customers.  At present, the Company does not
have an estimate of the total cost of evaluating and fixing any
potential year 2000 problems. 

Quantitative and Qualitative Disclosures about Market Risk
-----------------------------------------------------------
Disclosures under this item are not required for the current
fiscal year as the Company qualifies as a "Small Business" filer.


                   PART II - OTHER INFORMATION

Item 1. Legal Proceedings

         Not applicable

Item 2. Changes in Securities
          
         Not applicable

Item 3. Defaults upon Senior Securities

        Not applicable

<PAGE> 19

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

         The shareholders of Saratoga Bancorp took the following  
         action at the Annual Meeting of Shareholders held on May 
         21, 1998 at the Company's main office located at
         12000 Saratoga-Sunnyvale Road, Saratoga, California:

     
     1.  Approved the election of management's slate of nominees  
         for directors, each of whom were incumbent directors, as 
         follows:
                                            Votes
                                            -----
                                    For             Withheld
                                 -------            --------
         Victor Aboukhater       857,563              6,977
         Robert G. Egan          857,563              6,977
         William D. Kron         857,563              6,977
         John F. Lynch, III      857,563              6,977
         V. Ronald Mancuso       857,563              6,977
         Richard L. Mount        858,756              5,874 

     2.  Approved amendments of the 1994 Stock Option Plan to
         increase the maximum number of shares available for
         options. 

         Votes in favor of this proposal          718,499

         Votes against this proposal               33,609

         Votes abstaining                           5,675        
   
     3.  Ratified appointment of Deloitte & Touche LLP as            
         independent auditors of the Company for the fiscal
         year ending December 31, 1998.

                                    VOTES 
                                   ------
         FOR                       859,290
          
         AGAINST                     2,700

         ABSTAIN                     2,640

<PAGE> 20

          Item 5.  Other Information

           Not applicable

Item 6.  Exhibits and Reports on Form 8-K

        (a)  (3)  Exhibits
                  --------
                 (27.1) Financial Data Schedule
         
        (b)       Reports on Form 8-K
                  -------------------
                  On June 10, 1998, Registrant filed a Current
                  Report on Form 8-K, dated June 10, 1998   
                  reporting under Item 5 (Other Events)
                  detailing actions taken at the Annual Meeting 
                  of Shareholders of Registrant held on May 21,  
                  1998.  See Item 4 herein for additional
                  information.

                            SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF
1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.


                               SARATOGA BANCORP


                                MARY PAGE ROURKE
Date: August 11, 1998           -------------------------
                               Mary Page Rourke, Treasurer
                              (Principal Accounting Officer)

<PAGE> 21
                       INDEX TO EXHIBITS

                                             Sequentially
                                               Numbered
Number                   Exhibits                Page
------                   --------            ------------
 27.1          Financial Data Schedule             22