UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    FORM 10-K

                                   (Mark One)
              [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       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 0-11771

                              SJNB FINANCIAL CORP.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

         CALIFORNIA                                     77-0058227
----------------------------------            ----------------------------------
  (State or other jurisdiction of             (I.R.S. Employer
   incorporation or organization)              Identification No.)

ONE NORTH MARKET STREET, SAN JOSE, CALIFORNIA 95113
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code    (408) 947-7562
                                                      --------------

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
--------------------------------------------------------------------------------
                                (Title of class)

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

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

The aggregate market value of the voting common equity held by non-affiliates of
the  registrant,  based on a market value of $38.56 per share (the closing price
of the Common Stock, as of February 28, 2001) was $120,605,000

Number of shares of common stock outstanding as of February 28, 2001: 3,791,951
shares
                      Documents incorporated by reference:

Portions of the  registrant's  definitive  proxy statement for the  registrant's
2001 Annual Meeting of Shareholders (to be filed pursuant to Regulation 14A) are
incorporated by reference into Part III of this Report.


<PAGE>


                                TABLE OF CONTENTS

PART I

                                                                            PAGE

     Item 1 - Business                                                         4

     Item 2 - Properties                                                      11

     Item 3 - Legal Proceedings                                               12

     Item 4 - Submission of Matters to a Vote of Security Holders             12

PART II

     Item 5 - Market for Registrant's Common Equity and Related Stockholder
              Matters                                                         12

     Item 6 - Selected Financial Data                                         14

     Item 7 - Management's Discussion and Analysis of Financial Condition and
              Results of Operation                                            14

     Item 7A- Quantitative and Qualitative Disclosures about Market Risk      34

     Item 8 - Financial Statements and Supplementary Data                     36

     Item 9 - Changes in and Disagreements with Accountants on Accounting
              and Financial Disclosure                                        61

PART III

     Item 10 -Directors and Executive Officers of the Registrant              61

     Item 11 -Executive Compensation                                          61

     Item 12 -Security Ownership of Certain Beneficial Owners and Management  61

     Item 13 -Certain Relationships and Related Transactions                  61

PART IV

     Item 14 -Exhibits, Financial Statement Schedules and Reports on          62
              Form 8-K

SIGNATURES                                                                    65


<PAGE>


                                     PART I

ITEM 1.  BUSINESS

Forward-Looking Information

This Annual Report on Form 10-K includes  forward-looking  information  which is
subject to the "safe  harbor"  created by Section 27A of the  Securities  Act of
1933,  as amended,  and Section 21E of the  Securities  Exchange Act of 1934, as
amended.  These  forward-looking  statements (which involve the Company's plans,
beliefs and goals,  refer to estimates  or use similar  terms)  involve  certain
risks and  uncertainties  that could cause actual  results to differ  materially
from  those in the  forward-looking  statements.  Such  risks and  uncertainties
include, but are not limited to, the following factors:  competitive pressure in
the banking industry;  changes in the interest rate  environment;  the declining
health of the economy,  either  nationally or regionally;  the  deterioration of
credit  quality,  which could cause an  increase in the  provision  for loan and
lease  losses;  changes  in the  regulatory  environment;  changes  in  business
conditions,  particularly  in Santa  Clara  County  real  estate  and  high-tech
industries;  the impact of the  California  energy crisis;  certain  operational
risks involving data processing  systems or fraud;  volatility of rate sensitive
deposits;  asset/liability  matching  risks;  and liquidity  risks.  The Company
undertakes  no  obligation  to revise or  publicly  release  the  results of any
revision to these  forward-looking  statements.  See also the  section  included
herein  entitled  "Certain  Additional  Business  Risks" and other risk  factors
discussed elsewhere in this Report.

GENERAL

SJNB Financial Corp. (the "Company") is a bank holding company  registered under
the Bank Holding  Company Act of 1956, as amended (the "BHCA").  The Company was
incorporated  under the laws of the State of California  on April 18, 1983.  Its
principal  office is located at One North Market  Street,  San Jose,  California
95113, and its telephone number is (408) 947-7562.

The Company owns 100% of the issued and  outstanding  common  shares of San Jose
National  Bank  (referred  to  herein as  "SJNB"  or "the  Bank").  The Bank was
incorporated  on  November  23,  1981  and  commenced   business  in  San  Jose,
California,  on June 10, 1982.  SJNB engages in the general  commercial  banking
business  with  special  emphasis  on the  banking  needs  of the  business  and
professional  communities in Santa Clara County and the surrounding  areas.  The
Bank has branches located in San Jose, Saratoga, Los Gatos and Danville.

On May 22,  1998,  SJNB  acquired  all of the stock of a private  company,  Epic
Funding Corporation ("Epic"), pursuant to a definitive agreement dated April 13,
1998. In connection  with the  acquisition,  which was  structured as a tax-free
reorganization,  the Company  issued  12,223 shares of its common stock and paid
$110,000 to Epic's sole  shareholder  in exchange for all of Epic's  outstanding
stock.  The total purchase price for Epic was $611,000,  while Epic's fair value
of net assets was  $28,000.  Goodwill  amounted to $759,000,  including  certain
expenses of the  transaction.  Epic provides direct and vendor lease programs to
manufacturers and equipment users throughout  California and across parts of the
United States. Epic is now a wholly-owned  subsidiary of the Bank. Epic's office
is located in Danville, California,  together with a small de novo branch of the
Bank at the same facility, which opened July 1, 1998.

On  January 5,  2000,  Saratoga  Bancorp  ("Saratoga"),  the  parent  company of
Saratoga  National  Bank,  was merged with and into the Company,  pursuant to an
exchange of the Company's common stock for all common stock of Saratoga Bancorp.
Saratoga National Bank,  headquartered in Saratoga,  California,  operated three
branches  and as of the  acquisition  date had  approximately  $142  million  in
assets,  $103  million in  deposits  and $15  million in  shareholders'  equity.
Saratoga  National  Bank was  merged  with and into  SJNB on  January  5,  2000.
Saratoga's San Jose office,  which was located near SJNB's San Jose office,  was
consolidated   into  SJNB's  San  Jose  office  as  of  January  28,  2000.  The
shareholders of Saratoga  received 0.70 shares of the Company's common stock for
each outstanding  share of Saratoga common stock.  Based on the closing price of
the Company's stock on January 5, 2000 of $29.125, the transaction was valued at
approximately $34.2 million, excluding the value of any unexercised options, and
each  Saratoga  shareholder  received the  equivalent  of 0.70 of the  Company's
common stock valued at $20.39 per share for each share of Saratoga common stock.
The merger has been accounted for as a pooling of interests.

SJNB accepts checking and savings deposits, offers money market deposit accounts
and  certificates of deposit,  makes secured and unsecured  commercial and other
installment and term loans and offers other  customary  banking  services.  SJNB
offers banking services generally, but it places primary emphasis on lending for
real estate  purposes and specialized  lending to businesses and  professionals.
Loans for real estate purposes include term financing for commercial  facilities
and real  estate  construction  loans  mainly  for  residential  and  commercial
properties.  Loans to businesses and professionals  include accounts  receivable
financing,  equipment  financing,  commercial  loans,  SBA loans and  letters of
credit. The Company provides commercial banking,  factoring and leasing services
principally  through the Bank, the Bank's Financial  Services Division and Epic.
Although the Bank has neither a trust nor an international  banking  department,
it has arranged to provide these services through its correspondent  banks. As a
bank holding  company,  the Company is  authorized  to engage in the  activities
permitted under the BHCA and regulations thereunder.

SERVICE AREA

The  principal  service area of SJNB  includes the County of Santa Clara and its
contiguous counties,  including San Mateo, Alameda, Contra Costa, Santa Cruz and
San Benito.

EMPLOYEES

At December 31, 2000,  SJNB had 127  full-time  officers  and  employees  and 24
part-time  employees for a total of 115.7  employees on a full-time  equivalent.
Certain of the Bank's  officers are also  officers of the  Company.  None of the
Bank's employees are represented by a union.  Management  believes that employee
relations are good.

SUPERVISION AND REGULATION

     THE EFFECT OF GOVERNMENT POLICY ON BANKING

The  earnings  and growth of the Company are  affected  not only by local market
area factors and general economic  conditions,  but also by government  monetary
and fiscal policies.  For example, the Board of Governors of the Federal Reserve
System  (the  "FRB")  influences  the supply of money  through  its open  market
operations in U.S.  Government  securities and adjustments to the discount rates
applicable to borrowings by  depository  institutions  and others.  Such actions
influence the growth of loans, investments and deposits and also affect interest
rates  charged  on loans and paid on  deposits.  The nature and impact of future
changes in such  policies on the business and earnings of the Company  cannot be
predicted.  Additionally,  state and federal  tax  policies  can impact  banking
organizations.

As a consequence of the extensive regulation of commercial banking activities in
the United States,  the business of the Company is  particularly  susceptible to
being affected by the enactment of federal and state  legislation which may have
the effect of  increasing or decreasing  the cost of doing  business,  modifying
permissible  activities or enhancing the competitive position of other financial
institutions.  Any change in applicable  laws or regulations may have a material
adverse effect on the business and prospects of the Company.

     REGULATION AND SUPERVISION OF BANK HOLDING COMPANIES

The Company is a bank holding  company  subject to the BHCA. The Company reports
to,  registers  with,  and may be  examined  by,  the FRB.  The FRB also has the
authority to examine the Company's subsidiaries. The costs of any examination by
the FRB are payable by the Company.

On March 11, 2000, the Gramm-Leach-Bliley  Act, or the Financial Services Act of
1999 (the "FSA"),  became  effective.   This Act amended certain portions of the
BHCA, subject to conditions.  See "Recently Enacted  Legislation" below for more
information.

The Company is a bank holding  company within the meaning of Section 3700 of the
California  Financial  Code.  As such,  the  Company and the Bank are subject to
examination  by,  and may be  required  to file  reports  with,  the  California
Commissioner of Financial Institutions (the "Commissioner").

The FRB has significant  supervisory  and regulatory  authority over the Company
and its affiliates.  The FRB requires the Company to maintain  certain levels of
capital.  See  "Capital  Standards."  The FRB  also  has the  authority  to take
enforcement  action against any bank holding  company that commits any unsafe or
unsound practice, or violates certain laws, regulations or conditions imposed in
writing  by the  FRB.  See  "Prompt  Corrective  Action  and  Other  Enforcement
Mechanisms."

Under the BHCA, a company  generally  must obtain the prior  approval of the FRB
before it exercises a controlling influence over a bank, or acquires directly or
indirectly, more than 5% of the voting shares or substantially all of the assets
of any bank or bank holding company. Thus, the Company is required to obtain the
prior approval of the FRB before it acquires,  merges or  consolidates  with any
bank or  bank  holding  company.  Any  company  seeking  to  acquire,  merge  or
consolidate with the Company also would be required to obtain the prior approval
of the FRB.

The Company is generally  prohibited under the BHCA from acquiring  ownership or
control of more than 5% of the voting  shares of any company  that is not a bank
or bank holding  company and from engaging  directly or indirectly in activities
other than banking,  managing banks, or providing  services to affiliates of the
holding company.  However, a bank holding company, with the approval of the FRB,
may engage,  or acquire the voting  shares of companies  engaged,  in activities
that the FRB has  determined to be so closely  related to banking or managing or
controlling  banks as to be a proper  incident  thereto.  A bank holding company
must demonstrate  that the benefits to the public of the proposed  activity will
outweigh the possible adverse effects associated with such activity.

A bank  holding  company may acquire  banks in states  other than its home state
without regard to the  permissibility of such acquisitions  under state law, but
subject to any state  requirement that the bank has been organized and operating
for a minimum period of time, not to exceed five years, and the requirement that
the bank  holding  company,  prior to or  following  the  proposed  acquisition,
controls no more than 10% of the total amount of deposits of insured  depository
institutions  in the United States and no more than 30% of such deposits in that
state (or such lesser or greater amount set by state law).  Banks may also merge
across states lines, thereby creating interstate branches.  Furthermore,  a bank
is now able to open new  branches in a state in which it does not  already  have
banking operations, if the laws of such state permit such de novo branching.

Under California law, (i) out-of-state banks that wish to establish a California
branch  office to conduct core banking  business  must first acquire an existing
five year old  California  bank or industrial  bank by merger or purchase,  (ii)
California  state-chartered  banks are empowered to conduct  various  authorized
branch-like  activities on an agency basis through  affiliated and  unaffiliated
insured  depository  institutions  in California  and other states and (iii) the
Commissioner is authorized to approve an interstate  acquisition or merger which
would result in a deposit concentration  exceeding 30% if the Commissioner finds
that the  transaction  is  consistent  with public  convenience  and  advantage.
However,  a state bank chartered in a state other than  California may not enter
California  by  purchasing a California  branch  office of a California  bank or
industrial  bank without  purchasing  the entire entity or by  establishing a de
novo California bank.

The FRB generally  prohibits a bank holding  company from  declaring or paying a
cash  dividend  which would impose undue  pressure on the capital of  subsidiary
banks or would be funded only through borrowing or other arrangements that might
adversely affect a bank holding company's financial  position.  The FRB's policy
is that a bank holding  company  should not  continue its existing  rate of cash
dividends on its common stock unless its net income is  sufficient to fully fund
each dividend and its prospective rate of earnings  retention appears consistent
with its capital needs, asset quality and overall financial  condition.  See the
section  entitled  "Restrictions  on  Dividends  and  Other  Distributions"  for
additional  restrictions  on the  ability  of the  Company  and the  Bank to pay
dividends.

Transactions  between  the Company and the Bank are subject to a number of other
restrictions. FRB policies forbid the payment by bank subsidiaries of management
fees,  which are  unreasonable  in amount or exceed the fair market value of the
services  rendered  (or, if no market  exists,  actual  costs plus a  reasonable
profit). Subject to certain limitations,  depository institution subsidiaries of
bank  holding  companies  may extend  credit to,  invest in the  securities  of,
purchase assets from, or issue a guarantee,  acceptance,  or letter of credit on
behalf of, an affiliate,  provided that the aggregate of such  transactions with
affiliates  may  not  exceed  10%  of  the  capital  stock  and  surplus  of the
institution,  and the aggregate of such transactions with all affiliates may not
exceed 20% of the capital stock and surplus of such institution. The Company may
only borrow from depository  institution  subsidiaries if the loan is secured by
marketable  obligations  with a value of a  designated  amount  in excess of the
loan.  Further,  the Company may not sell a  low-quality  asset to a  depository
institution subsidiary.

Comprehensive  amendments  to  Regulation Y became  effective  in 1997,  and are
intended to improve the  competitiveness  of bank  holding  companies  by, among
other things:  (i) expanding the list of  permissible  nonbanking  activities in
which  well-run bank holding  companies  may engage  without prior FRB approval,
(ii)  streamlining the procedures for well-run bank holding  companies to obtain
approval to engage in other nonbanking  activities and (iii) eliminating most of
the  anti-tying  restrictions  imposed  upon bank  holding  companies  and their
nonbank  subsidiaries.  Amended Regulation Y also provides for a streamlined and
expedited  review process for bank acquisition  proposals  submitted by well-run
bank holding companies and eliminates certain duplicative reporting requirements
when there has been a further  change in bank  control or in bank  directors  or
officers  after an earlier  approved  change.  These changes to Regulation Y are
subject to numerous qualifications, limitations and restrictions. In order for a
bank  holding  company  to  qualify  as  "well-run,"  both  it and  the  insured
depository  institutions that it controls must meet the  "well-capitalized"  and
"well-managed" criteria set forth in Regulation Y.

To  qualify  as  "well-capitalized,"   the  bank  holding  company  must,  on  a
consolidated  basis:  (i) maintain a total  risk-based  capital  ratio of 10% or
greater,  (ii) maintain a Tier 1 risk-based capital ratio of 6% or greater,  and
(iii) not be subject to any order by the FRB to meet a specified  capital level.
Its lead insured depository institution must be well-capitalized as that term is
defined in the capital  adequacy  regulations of the applicable  bank regulator,
80%  of  the  total   risk-weighted   assets  held  by  its  insured  depository
institutions must be held by institutions that are well-capitalized, and none of
its insured depository institutions may be undercapitalized.

To qualify as  "well-managed:"  (i) each of the bank holding  company,  its lead
depository institution and its depository  institutions holding 80% of the total
risk-weighted  assets of all its  depository  institutions  at their most recent
examination  or  review  must have  received  a  composite  rating,  rating  for
management and rating for compliance which were at least satisfactory, (ii) none
of the bank holding company's  depository  institutions may have received one of
the two lowest composite ratings, and (iii) neither the bank holding company nor
any of its depository  institutions  during the previous 12 months may have been
subject to a formal enforcement order or action.

     Bank Regulation and Supervision

As a national bank, the Bank is regulated,  supervised and regularly examined by
the Office of the Comptroller of the Currency (the "OCC").  Deposit  accounts at
the Bank are insured by the Bank Insurance Fund (the "BIF"),  as administered by
the Federal Deposit  Insurance  Corporation (the "FDIC"),  to the maximum amount
permitted  by  law.  The  Bank is  also  subject  to  applicable  provisions  of
California law, insofar as such provisions are not in conflict with or preempted
by federal banking law. The Bank is a member of the Federal Reserve System,  and
is also subject to certain  regulations of the FRB dealing  primarily with check
clearing  activities,   establishment  of  banking  reserves,   Truth-in-Lending
(Regulation Z),  Truth-in-Savings  (Regulation DD), and Equal Credit Opportunity
(Regulation B).

The OCC may  approve,  on a  case-by-case  basis,  the  entry of bank  operating
subsidiaries  into a business  incidental  to banking,  including  activities in
which the parent bank is not  permitted to engage.  A national bank is permitted
to engage in  activities  approved  for a bank  holding  company  through a bank
operating  subsidiary,  such as acting as an  investment  or financial  advisor,
leasing  personal  property and  providing  financial  advice to  customers.  In
general,  these activities are permitted only for well-capitalized or adequately
capitalized national banks.

     Capital Standards

The  federal  banking  agencies  have  risk-based  capital  adequacy  guidelines
intended to provide a measure of capital  adequacy  that  reflects the degree of
risk associated with a banking  organization's  operations for both transactions
reported on the  balance  sheet as assets and  transactions,  such as letters of
credit and recourse arrangements, which are recorded as off balance sheet items.
Under these  guidelines,  nominal dollar amounts of assets and credit equivalent
amounts  of off  balance  sheet  items are  multiplied  by one of  several  risk
adjustment  percentages,  which range from 0% for assets  with low credit  risk,
such as certain U.S. government  securities,  to 100% for assets with relatively
higher credit risk, such as certain loans.

In determining  the capital level the Bank is required to maintain,  the federal
banking agencies do not, in all respects,  follow generally accepted  accounting
principles ("GAAP") and have special rules which have the effect of reducing the
amount of capital they will  recognize for purposes of  determining  the capital
adequacy of the Bank.

A banking organization's  risk-based capital ratios are obtained by dividing its
qualifying  capital  by its total  risk-adjusted  assets and off  balance  sheet
items. The regulators measure  risk-adjusted  assets and off balance sheet items
against  both total  qualifying  capital  (the sum of Tier 1 capital and limited
amounts of Tier 2 capital) and Tier 1 capital. Tier 1 capital consists of common
stock, retained earnings,  noncumulative  perpetual preferred stock, other types
of qualifying  preferred stock and minority  interests in certain  subsidiaries,
less most other intangible assets and other  adjustments.  Net unrealized losses
on  available-for-sale  equity  securities with readily  determinable fair value
must be deducted in  determining  Tier 1 capital.  For Tier 1 capital  purposes,
deferred tax assets that can only be realized if an institution earns sufficient
taxable  income in the future are limited to the amount that the  institution is
expected to realize within one year, or ten percent of Tier 1 capital, whichever
is less.  Tier 2 capital may consist of a limited  amount of the  allowance  for
loan and lease losses,  term preferred  stock and other types of preferred stock
not  qualifying  as Tier 1 capital,  term  subordinated  debt and certain  other
instruments with some  characteristics  of equity.  The inclusion of elements of
Tier 2 capital are subject to certain other  requirements and limitations of the
federal banking  agencies.  The federal banking agencies require a minimum ratio
of qualifying total capital to risk-adjusted  assets and off balance sheet items
of 8%, and a minimum ratio of Tier 1 capital to adjusted  average  risk-adjusted
assets and off balance sheet items of 4%.

On October 1, 1998, the FDIC adopted two rules governing  minimum capital levels
that  FDIC-supervised  banks must  maintain  against the risks to which they are
exposed.  The first rule makes risk-based  capital standards  consistent for two
types of credit  enhancements  (i.e.,  recourse  arrangements  and direct credit
substitutes)  and  requires  different  amounts of capital  for  different  risk
positions in asset securitization transactions.  The second rule permits limited
amounts of unrealized  gains on debt and equity  securities to be recognized for
risk-based capital purposes as of September 1, 1998. The FDIC rules also provide
that a qualifying  institution  that sells small  business loans and leases with
recourse  must hold  capital only  against the amount of recourse  retained.  In
general,  a qualifying  institution  is one that is  well-capitalized  under the
FDIC's prompt  corrective  action rules. The amount of recourse that can receive
the preferential  capital treatment cannot exceed 15% of the institution's total
risk-based capital.

In addition to the risk-based  guidelines,  the federal banking agencies require
banking organizations to maintain a minimum amount of Tier 1 capital to adjusted
average total assets,  referred to as the leverage  capital ratio. For a banking
organization  rated in the highest of the five  categories  used to rate banking
organizations, the minimum leverage ratio of Tier 1 capital to total assets must
be 3%. It is improbable,  however,  that an institution with a 3% leverage ratio
would  receive  the  highest  rating  since  a  strong  capital  position  is  a
significant part of the regulators'  rating.  For all banking  organizations not
rated in the highest  category,  the minimum leverage ratio must be at least 100
to 200 basis points above the 3% minimum.  Thus, the effective  minimum leverage
ratio,  for all  practical  purposes,  must be at least 4% or 5%. In addition to
these  uniform  risk-based  capital  guidelines  and leverage  ratios that apply
across the  industry,  the  regulators  have the  discretion  to set  individual
minimum capital  requirements for specific  institutions at rates  significantly
above the minimum guidelines and ratios.

The following  tables  present the capital  ratios for the Company and the Bank,
compared to the standards for well-capitalized  depository  institutions,  as of
December 31, 2000.
<PAGE>

-------------------------------------------------------- -----------------------
(amounts in thousands, except percentages)            WELL             MINIMUM
                                   ACTUAL             CAPITALIZED      CAPITAL
                           ----------------------
THE COMPANY                CAPITAL      RATIO         RATIO          REQUIREMENT
------------------------------------------- ---------------------- ------------

Leverage                   $60,115       8.94%         5.0%            4.0%
Tier 1 Risk-based           60,115      11.04          6.0             4.0
Total Risk-based            66,928      12.29         10.0             8.0

THE BANK
--------------------------------------------------------------------------------
Leverage                   $58,217       8.66%         5.0%            4.0%
Tier 1 Risk-based           58,217      10.75          6.0             4.0
Total Risk-based            64,995      12.00         10.0             8.0


The federal  banking  agencies must take into  consideration  concentrations  of
credit  risk  and  risks  from  non-traditional   activities,   as  well  as  an
institution's ability to manage those risks, when determining the adequacy of an
institution's   capital.  This  evaluation  will  be  made  as  a  part  of  the
institution's  regular  safety and soundness  examination.  The federal  banking
agencies  must  also  consider  interest  rate  risk  (when  the  interest  rate
sensitivity  of an  institution's  assets does not match the  sensitivity of its
liabilities or its off balance sheet position) in evaluation of a bank's capital
adequacy.

     PROMPT CORRECTIVE ACTION AND OTHER ENFORCEMENT MECHANISMS

The Federal  Deposit  Insurance  Corporation  Improvement Act of 1991 ("FDICIA")
requires each federal banking agency to take prompt corrective action to resolve
the problems of insured  depository  institutions,  including but not limited to
those that fall below one or more prescribed  minimum  capital  ratios.  The law
required  each federal  banking  agency to promulgate  regulations  defining the
following five  categories in which an insured  depository  institution  will be
placed,  based on the level of its capital ratios: well capitalized,  adequately
capitalized,  undercapitalized,  significantly  undercapitalized  and critically
undercapitalized.

Under the prompt corrective  action provisions of FDICIA, an insured  depository
institution  generally will be classified in the following  categories  based on
the capital measures indicated below:

WELL CAPITALIZED                           ADEQUATELY CAPITALIZED
Total risk-based  capital of 10%;          Total  risk-based  capital of 8%;
Tier 1  risk-based  capital of 6%; and     Tier 1 risk-based capital of 4%; and
Leverage ratio of 5%.                      Leverage ratio of 4%.

UNDERCAPITALIZED                           SIGNIFICANTLY  UNDERCAPITALIZED
Total risk-based capital less              Total risk-based capital less than 6%
than 8%;                                   Tier 1 risk-based capital less
Tier 1 risk-based capital  less            than 3%; or
than 4%; or                                Leverage ratio less than 3%.
Leverage ratio less than 4%.

CRITICALLY UNDERCAPITALIZED
Tangible equity to total assets less than 2%.

An  institution  that,  based upon its capital  levels,  is  classified as "well
capitalized,"  "adequately  capitalized" or "undercapitalized" may be treated as
though it were in the next lower  capital  category if the  appropriate  federal
banking agency,  after notice and  opportunity  for hearing,  determines that an
unsafe or unsound  condition  or an unsafe or  unsound  practice  warrants  such
treatment.  At each successive  lower capital  category,  an insured  depository
institution is subject to more restrictions.

In addition to measures  taken under the prompt  corrective  action  provisions,
commercial banking organizations may be subject to potential enforcement actions
by the federal  banking  agencies for unsafe or unsound  practices in conducting
their businesses or for violations of any law, rule, regulation or any condition
imposed  in  writing by the agency or any  written  agreement  with the  agency.
Enforcement actions may include the imposition of a conservator or receiver, the
issuance  of a  cease-and-desist  order  that can be  judicially  enforced,  the
termination of insurance of deposits (in the case of a depository  institution),
the imposition of civil money penalties,  the issuance of directives to increase
capital, the issuance of formal and informal agreements, the issuance of removal
and   prohibition   orders  against   institution-affiliated   parties  and  the
enforcement of such actions through injunctions or restraining orders based upon
a  judicial  determination  that the  agency  would be harmed if such  equitable
relief was not granted.  Additionally, a holding company's inability to serve as
a source of strength to its subsidiary banking  organizations  could serve as an
additional basis for a regulatory action against the holding company.

     SAFETY AND SOUNDNESS STANDARDS

FDICIA also  implemented  certain  specific  restrictions  on  transactions  and
required  federal  banking  regulators  to adopt  overall  safety and  soundness
standards  for  depository   institutions  related  to  internal  control,  loan
underwriting  and  documentation  and asset growth.  Among other things,  FDICIA
limits the  interest  rates paid on deposits by  undercapitalized  institutions,
restricts  the use of brokered  deposits,  limits the  aggregate  extensions  of
credit by a depository institution to an executive officer, director,  principal
shareholder or related  interest,  and reduces  deposit  insurance  coverage for
deposits  offered  by  undercapitalized  institutions  for  deposits  by certain
employee  benefits  accounts.  The  federal  banking  agencies  may  require  an
institution  to  submit  to  an  acceptable  compliance  plan  as  well  as  the
flexibility  to pursue other more  appropriate  or  effective  courses of action
given the specific circumstances and severity of an institution's  noncompliance
with one or more standards.

     RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS

The power of the board of  directors  of an insured  depository  institution  to
declare a cash dividend or other distribution with respect to capital is subject
to statutory and regulatory  restrictions  which limit the amount  available for
such  distribution  depending  upon the earnings,  financial  condition and cash
needs  of the  institution,  as  well as  general  business  conditions.  FDICIA
prohibits  insured  depository  institutions  from paying management fees to any
controlling  persons  or,  with  certain  limited  exceptions,   making  capital
distributions,  including dividends, if, after such transaction, the institution
would be undercapitalized.

The federal  banking  agencies  also have the authority to prohibit a depository
institution  from  engaging in business  practices  which are  considered  to be
unsafe or unsound,  possibly  including  payment of dividends or other  payments
under certain  circumstances even if such payments are not expressly  prohibited
by statute.

The payment of dividends by a national bank is further  restricted by additional
provisions  of federal  law,  which  prohibit a national  bank from  declaring a
dividend  on its shares of common  stock  unless its  surplus  fund  exceeds the
amount of its common  capital  (total  outstanding  common  shares times the par
value per share). Additionally,  if losses have at any time been sustained equal
to or exceeding a bank's  undivided  profits then on hand, no dividend  shall be
paid.  Moreover,  even if a bank's  surplus  exceeded its common capital and its
undivided profits exceed its losses, the approval of the OCC is required for the
payment of dividends if the total of all  dividends  declared by a national bank
in any  calendar  year would  exceed  the total of its net  profits of that year
combined  with its retained  net profits of the two  preceding  years,  less any
required  transfers  to surplus or a fund for the  retirement  of any  preferred
stock. A national bank must consider other business  factors in determining  the
payment of  dividends.  The payment of  dividends by the Bank is governed by the
Bank's  ability to  maintain  minimum  required  capital  levels and an adequate
allowance for loan losses.

     PREMIUMS FOR DEPOSIT INSURANCE AND ASSESSMENTS FOR EXAMINATIONS

FDICIA  established  several  mechanisms to increase  funds to protect  deposits
insured by the BIF administered by the FDIC. The FDIC is authorized to borrow up
to $30 billion  from the United  States  Treasury;  up to 90% of the fair market
value of  assets  of  institutions  acquired  by the FDIC as  receiver  from the
Federal Financing Bank; and from depository institutions that are members of the
BIF. Any borrowings not repaid by asset sales are to be repaid through insurance
premiums  assessed to member  institutions.  Such premiums must be sufficient to
repay any borrowed funds within 15 years and provide  insurance fund reserves of
$1.25 for each $100 of insured  deposits.  FDICIA also  provides  authority  for
special assessments against insured deposits.  No assurance can be given at this
time as to what the future level of insurance premiums will be.

     COMMUNITY REINVESTMENT ACT AND FAIR LENDING DEVELOPMENTS

The  Bank  is  subject  to  certain  fair  lending  requirements  and  reporting
obligations   involving   home  mortgage   lending   operations   and  Community
Reinvestment  Act ("CRA")  activities.  The CRA  generally  requires the federal
banking  agencies to evaluate the record of a financial  institution  in meeting
the credit needs of their local  communities,  including low and moderate income
neighborhoods. In addition to substantive penalties and corrective measures that
may be required  for a  violation  of certain  fair  lending  laws,  the federal
banking  agencies may take  compliance  with such laws and CRA into account when
regulating and supervising other activities.

     RECENTLY ENACTED LEGISLATION

On March  11,  2000,  the  Financial  Services  Act of 1999 (the  "FSA")  became
effective.  The FSA repealed  provisions of the  Glass-Steagall  Act,  which had
prohibited  commercial  banks and securities  firms from  affiliating  with each
other and  engaging  in each  other's  businesses.  Thus,  many of the  barriers
prohibiting affiliations between commercial banks and securities firms have been
eliminated.

The BHCA was also amended by the FSA to allow new "financial  holding companies"
("FHC") to offer banking, insurance,  securities and other financial products to
consumers.  Specifically,  the FSA  amended  section  4 of the  BHCA in order to
provide for a framework for the  engagement in new  financial  activities.  Bank
holding  companies  ("BHC")  may  elect to  become  a FHC if all its  subsidiary
depository   institutions  are  well-capitalized  and  well-managed.   If  these
requirements are met, a BHC may file a certification to that effect with the FRB
and  declare  that it  elects  to  become a FHC.  After  the  certification  and
declaration is filed, the FHC may engage either de novo or though an acquisition
in any activity that has been determined by the FRB to be financial in nature or
incidental to such financial activity.  BHCs may engage in financial  activities
without prior notice to the FRB if those  activities  qualify under the new list
of permissible  activities in section 4(k) of the BHCA. However,  notice must be
given to the FRB  within 30 days  after a FHC has  commenced  one or more of the
financial activities. The Company has not elected to become a FHC.

Under the FSA, national banks (as well as FDIC-insured  state banks,  subject to
various  requirements) are permitted to engage through "financial  subsidiaries"
in certain financial activities  permissible for affiliates of FHCs. However, to
be  able  to  engage  in  such   activities  the  national  bank  must  also  be
well-capitalized  and  well-managed  and have received at least a "satisfactory"
rating in its most recent CRA  examination.  The  aggregate  consolidated  total
assets of all  financial  subsidiaries  of a  national  bank may not  exceed the
lesser  of 45% of the  consolidated  total  assets  of the  parent  bank  or $50
billion.  In addition,  if the national  bank ranks as one of the top 50 largest
insured  banks in the  United  States,  it must  have an  issue  of  outstanding
long-term  debt  rated  in one of the  three  highest  rating  categories  by an
independent  rating agency.  If the national bank falls within the next group of
50, it must  either  meet the  debt-rating  test  described  above or  satisfy a
comparable  test jointly  agreed to by the FRB and the Treasury  Department.  No
debt rating is required for any national bank,  such as the Bank, not within the
top 100 largest insured banks in the United States. We do not have any such debt
outstanding.

The Company  cannot be certain of the effect of the foregoing  recently  enacted
legislation on its business,  although there is likely to be consolidation among
financial services institutions and increased competition for the Company.

     PENDING LEGISLATION AND REGULATIONS

Certain  pending  legislative  proposals  include  bills to permit  banks to pay
interest on business  checking  accounts,  to cap consumer  liability for stolen
debit  cards,  to enact  privacy  rules  designed  to  regulate  the  ability of
financial  institutions  to use or share  customer  information,  to end certain
predatory lending  practices,  to allow the payment of interest on reserves that
financial  institutions  must keep with FRB and to give judges the  authority to
force high-income borrowers to repay their debts rather than cancel them through
bankruptcy.  A proposal  to merge the FDIC's two funds,  the BIF and the Savings
Association  Insurance Fund, is also being  discussed.  The Company also expects
that during 2001, the Financial  Accounting  Standards Board will issue guidance
as to  whether  to retain  the  pooling-of-interests  method of  accounting  for
business  combinations  and  related  issues,  including  whether  to  adopt  an
impairment-only approach to amortization of goodwill.

     COMPETITION

In the past, an independent bank's principal  competitors for deposits and loans
have been other banks (particularly major banks),  savings and loan associations
and credit unions.  To a lesser extent,  competition was also provided by thrift
and  loans,   mortgage  brokerage  companies  and  insurance  companies.   Other
institutions,  such as  brokerage  houses,  mutual fund  companies,  credit card
companies, and even retail establishments,  have offered new investment vehicles
which also compete  with banks for deposit  business.  The  direction of federal
legislation in recent years seems to favor  competition  between different types
of financial institutions and to foster new entrants into the financial services
market, and it is anticipated that this trend will continue.

The  enactment  of the  Interstate  Banking  and  Branching  Act in 1994 and the
California   Interstate  Banking  and  Branching  Act  of  1995  have  increased
competition  within  California.  Recent legislation has also made it easier for
out-of-state  credit  unions  to  conduct  business  in  California  and  allows
industrial banks to offer consumers more lending products. Regulatory reform, as
well  as  other  changes  in  federal  and   California  law  will  also  affect
competition.   The  availability  of  banking  services  over  the  internet  or
"e-banking" has continued to expand.  While the impact of these changes,  and of
other proposed changes, cannot be predicted with certainty, it is clear that the
business of banking in California will remain highly competitive.

As of June 30,  2000,  there  were  approximately  388  banking  offices  in the
geographic area served by SJNB, including offices of major chain banks and other
independent banks. There were also approximately 144 offices of savings banks as
of such date.  Of these  there  were 230  offices  of  commercial  banks (and 88
offices of savings banks) in Santa Clara County,  which is the principal  market
area for the Bank's San Jose  office.  In  addition,  there were 158  offices of
commercial  banks (and 56 offices of  savings  banks) in the  Danville  office's
primary  market area.  Total  deposits of the combined  area were  approximately
$54.5  billion as of June 30,  2000,  of which the Bank has  approximately  a 1%
share.  In the San  Jose  office's  market  area,  the  Bank's  market  share is
approximately 1.5% of the deposits in that market.

Presently,  there are at least 9 other  independent banks in Santa Clara County.
Five of the independent  banks - Heritage Bank of Commerce and Bank of Los Altos
(subsidiaries of Heritage  Commerce Corp),  Cupertino  National Bank & Trust and
Mid-Peninsula Bank (subsidiaries of Greater Bay Bancorp) and Silicon Valley Bank
-  emphasize   commercial  banking  services  and,   therefore,   create  direct
competition  for the services that SJNB offers to the business and  professional
communities in its market area. The Bank's Financial  Services Division and Epic
also  compete  with  many  of the  major  and  independent  banks  within  their
respective marketing areas.

The Bank's  Financial  Services  Division and Epic also  compete with  companies
solely in the factoring or leasing  business.  Such companies may offer products
and services which traditionally are not offered by banking institutions.

CERTAIN ADDITIONAL BUSINESS RISKS

The Company's business, financial condition, operating results and prospects can
be  impacted by a number of factors,  including,  but not limited to,  those set
forth in the  paragraphs  below.  Any one of these  stated risks could cause the
Company's  actual  results in the future to vary from the Company's  anticipated
future results.

Shares of Company  Common  Stock  eligible for future sale could have a dilutive
effect on the market for Company  Common  Stock and could  adversely  affect the
market price of the Common Stock.  The Articles of  Incorporation of the Company
authorize  the issuance of 20,000,000  shares of Common and 5,000,000  shares of
Preferred Stock, of which approximately 3,791,951 common shares and no preferred
shares were  outstanding  at February  28,  2001.  Pursuant to its stock  option
plans,  the Company had outstanding  options to purchase an aggregate of 601,181
shares of  Company  Common  Stock at  February  28,  2001.  As of the same date,
178,645 shares of Company  Common Stock  remained  available  for option grants
under  the  Company's  stock  option  plans,  including  stock  option  plans of
Saratoga.

The Company has  previously  announced its intention to pursue  acquisitions  of
other financial  services companies from time to time when such acquisitions are
believed by the Company to enhance  shareholder value or satisfy other strategic
objectives of the Company. Other acquisitions,  if any, could be accomplished by
the issuance of additional  shares of Company  Common Stock or other  securities
convertible  into or  exercisable  for such Common Stock.  Sales of  substantial
amounts of Company Common Stock or  convertible  securities in the public market
or due to  acquisitions  could  adversely  affect the market price of the Common
Stock.

The loan and lease  portfolio of the Company is  dependent  on real  estate.  At
December 31, 2000, real estate served as the principal source of collateral with
respect  to  approximately  55% of the  Company's  loan and lease  portfolio.  A
worsening of current economic  conditions or rising interest rates could have an
adverse  effect on the demand for new loans,  the ability of  borrowers to repay
outstanding loans, the value of real estate and other collateral  securing loans
and the value of the available  for sale  investment  portfolio,  as well as the
Company's  financial  condition  and  results of  operations  in general and the
market  value  of  the  Company's  Common  Stock.  Acts  of  nature,   including
earthquakes and floods, which may cause uninsured damage and other loss of value
to real  estate  that  secures  these  loans,  may also  negatively  impact  the
Company's financial condition.

In late 2000 and continuing  into 2001, the State of California has been subject
to a  deterioration  in the ability of major utilities to provide energy for the
State's  needs.  In  Northern  California,  the crisis has  resulted in "rolling
blackouts" where certain areas are not provided with any electricity for periods
of up to two hours.  To date the most immediate  impact has been the significant
increase in power rates for most users,  including the Company.  In addition the
major utility providers are purchasing power on a "spot" basis. The cost of such
purchases has exceeded  their ability to fully collect the increases  from their
customers.  The  long-term  impact is unknown  but could  result in an  economic
slow-down as companies  located in  California  relocate or shift  production to
areas outside the State. This could have an adverse effect on the demand for new
loans,  the ability of borrowers to repay  outstanding  loans, the value of real
estate  and  other  collateral  securing  loans,  and  the  Company's  financial
condition and results of  operations in general and, as a result,  on the market
value of the Company's Common Stock.

The Bank is subject to certain operational risks including,  but not limited to,
data processing  system failures and errors and customer or employee fraud.  The
Bank  maintains a system of internal  controls,  which it believes will mitigate
such occurrences,  and maintains  insurance coverage for such risks. Should such
an event  occur  that was not  prevented  or  detected  by the  Bank's  internal
controls or that was uninsured or in excess of the applicable  insurance limits,
it could have a significant negative impact on the Company's financial condition
or results of operations.

STATISTICAL DATA

Certain  consolidated  statistical  information  concerning  the business of the
Company  appears on page 15,  under the caption  "Selected  Financial  Data;" on
pages 16 through 36, under the caption "Management's  Discussion and Analysis of
Financial  Condition  and Results of  Operation;"  on page 36, under the caption
"Quantitative  and Qualitative  Disclosures  about Market Risk;" and on pages 38
through 63, in the Company's Consolidated Financial Statements.  Ratios relating
to the  Company's  Return on Equity  and Assets  appear on page 15. The  section
entitled  "Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of Operation" should be read in conjunction with the information in Item
1 herein and the Company's Consolidated Financial Statements.

ITEM 2:  PROPERTIES

The Company  shares office space with the Bank's main branch at One North Market
Street, San Jose,  California,  95113. The building was purchased by the Bank in
1985 and consists of approximately 24,000 square feet of basement,  ground floor
and second  floor  space.  It is  constructed  and  equipped to meet  prescribed
security requirements.

SJNB's  Saratoga  Branch  office is  located at 12000  Saratoga-Sunnyvale  Road,
Saratoga,  California,  95070,  comprises  5,500 square feet and is owned by the
Bank.  The Bank's Los Gatos  Branch  office is located at 15405 Los Gatos Blvd.,
Suite 103, Los Gatos, California,  95032. The facility has 3,082 square feet and
is leased under a  noncancelable-operating  lease which expires in 2003. Current
lease payments are $6,387 per month.

In  addition,  the Bank leases  approximately  12,000  square feet located at 95
South Market Street, San Jose,  California,  95113.  Approximately  9,000 square
feet of space at this location is currently  being  occupied by two  third-party
tenants  under  subleases  which  expire  at the  termination  of the  lease  in
September  2004.  The  Bank's  Financial  Services  Division  is  occupying  the
remaining   space  at  this   location.   Gross  rental   expense  is  currently
approximately  $20,000 per month,  of which  $14,899 is received from the third-
party tenants.

The Bank and its subsidiary,  Epic, share 3,000 square feet of leased facilities
in  Danville,  California.  The  monthly  lease  expense is $6,300 and the lease
expires July 2001.  The Bank notified the landlord in January 2001 of its intent
to exercise  its  renewal  option for the period  ending July 2004,  on the same
terms and conditions as the original term.

In the opinion of management,  adequate  insurance is being  maintained on these
properties.

ITEM 3:  LEGAL PROCEEDINGS

Neither  the  Company  nor the Bank is a party  to any  material  pending  legal
proceeding,  nor is any of their  property the subject of any  material  pending
legal  proceeding,  except ordinary routine  litigation  arising in the ordinary
course of the Bank's business and incidental to its business,  none of which are
expected  to have a material  adverse  impact upon the  Company's  or the Bank's
business, financial condition or results of operations.

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

None

                                     PART II

ITEM 5:  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

As  of  February  28, 2001,  the  Company  had 3,791,951  shares of Common Stock
outstanding, held by approximately 2,700 beneficial shareholders.  The Company's
Common  Stock is listed on the NASDAQ  National  Market  System under the symbol
"SJNB."  Significant market participants of the Company's Common Stock and those
firms which provide research  relating to the Company include:  Hoefer & Arnett,
Inc.,  Wedbush Morgan  Securities,  Inc., Knight Securities L.P., Spear, Leeds &
Kellogg,  Sandler  O'Neill & Partners,  Keefe  Bruyette & Woods,  Inc., and Dain
Rauscher Wessels.


STOCK PRICE

The following sets forth the high and low sales prices for the Company's  Common
Stock  during the periods  indicated,  as reported by NASDAQ,  and the per share
cash dividends declared on the Common Stock during such periods.


QUARTERLY COMMON STOCK PRICE

--------------------------------------------------------------------------------
                                                  PRICE
                                              OF COMMON STOCK          CASH
                                             HIGH          LOW       DIVIDENDS
--------------------------------------------------------------------------------
                             1999
--------------------------------------------------------------------------------
First Quarter                                $28.50        $26.00        $.14
Second Quarter                                30.25         26.50         .14
Third Quarter                                 34.50         31.00         .14
Fourth Quarter                                37.00         30.00         .14
--------------------------------------------------------------------------------
      ANNUAL CASH DIVIDEND PER SHARE                                      .56
--------------------------------------------------------------------------------
                             2000
--------------------------------------------------------------------------------
First Quarter                                 30.63         26.50         .16
Second Quarter                                29.75         25.88         .16
Third Quarter                                 36.88         27.38         .16
Fourth Quarter                                37.25         33.75         .16
--------------------------------------------------------------------------------
      ANNUAL CASH DIVIDEND PER SHARE                                      .64
--------------------------------------------------------------------------------
                             2001
--------------------------------------------------------------------------------
FIRST QUARTER (THROUGH FEBRUARY 28,  2001)    39.75         36.50         .20*

[FN]
*Declared  by the Board of Directors on January 24, 2001 and to be paid on March
5, 2001 to shareholders of record on February 6, 2001.
</FN>

The  Company's  Board of  Directors  considers  the  advisability  and amount of
proposed  dividends  each  year.  Future  dividends  will  be  determined  after
consideration of the Company's  earnings,  financial  condition,  future capital
funds,  regulatory requirements and such other factors as the Board of Directors
may deem  relevant.  The  Company's  primary  source  of funds  for  payment  of
dividends to its  shareholders  will be receipt of dividends and management fees
from the Bank.  The payment of dividends  by a bank is subject to various  legal
and  regulatory  restrictions.  See  "Business -  Supervision  and  Regulation -
Restrictions on Dividends and Other  Distributions."  It is the intention of the
Company to continue  the payment of  quarterly  dividends,  subject to financial
results and other factors, which could limit or restrict dividends as more fully
discussed elsewhere herein.


<PAGE>



ITEM 6:  SELECTED FINANCIAL DATA

The following  presents  selected  financial  data and ratios for the five years
ended December 31, 2000:
<TABLE>
<CAPTION>

(dollars in thousands, except per share amounts)
----------------------------------------------------------------------------------------------------------------------------------
                                                                          As of and for the Years Ended December 31,
STATEMENT OF OPERATIONS DATA :                                2000          1999           1998            1997           1996
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>           <C>            <C>             <C>            <C>
Net interest income                                          $33,626       $27,565        $25,603         $23,562        $20,495
Provision for loan or lease losses                              (725)         (862)          (436)           (705)           (40)
Other income                                                   1,606         1,866          1,824           1,490          1,199
Merger related costs, nonrecurring                            (3,424)         (487)          ----            ----           ----
Other expenses                                               (16,932)      (16,064)       (14,462)        (12,888)       (12,505)
----------------------------------------------------------------------------------------------------------------------------------
Income before income taxes                                    14,151        12,018         12,529          11,459          9,149
Income taxes                                                  (5,527)       (4,901)        (5,040)         (4,749)        (3,757)
----------------------------------------------------------------------------------------------------------------------------------
Net income                                                    $8,624        $7,117         $7,489          $6,710         $5,392
==================================================================================================================================
PER SHARE DATA:
----------------------------------------------------------------------------------------------------------------------------------
Net income per share - basic                                    $2.35         $2.04          $2.06           $1.86          $1.51
Net income per share - diluted                                   2.24          1.91           1.92            1.74           1.41
EXCLUDING MERGER RELATED COSTS, NET OF TAX:
Net income per share - basic (1)                                 2.94          2.13          ----             ----          ----
Net income per share - diluted (1)                               2.80          2.00          ----             ----          ----

Cash dividends per share                                         0.64          0.56           0.56            0.45           0.33
Shareholders' equity per share                                  16.97         14.81          14.13           12.85          11.80
Tangible shareholders' equity per share                         16.18         13.81          13.01           11.82          10.58
==================================================================================================================================
BALANCE SHEET DATA:
----------------------------------------------------------------------------------------------------------------------------------
Balance sheet totals-end of year:
  Assets                                                      $687,777      $568,081       $494,736        $455,963       $431,187
  Loans and leases                                             463,314       403,318        335,943         292,737        251,288
  Deposits                                                     585,343       473,733        405,857         361,391        334,083
  Shareholders' equity                                          63,583        53,219         50,739          46,764         43,157
Average balance sheet amounts:
  Assets                                                      $634,042      $536,721       $469,317        $439,187       $379,529
  Loans and leases                                             420,943       366,175        301,910         267,332        224,680
  Earning assets                                               583,325       496,958        436,481         402,390        347,639
  Deposits                                                     536,844       444,547        385,887         354,604        296,834
  Shareholders' equity                                          56,255        51,956         48,511          43,661         39,619
==================================================================================================================================
SELECTED RATIOS:
----------------------------------------------------------------------------------------------------------------------------------
Return on average equity                                         15.33%        13.70%         15.44%          15.37%         13.61%
Return on average assets                                          1.36          1.33           1.60            1.53           1.42
Return on average equity (1)                                     19.15         14.29          15.44           15.37          13.61
Return on average assets (1)                                      1.70          1.38           1.60            1.53           1.42
Efficiency ratio (non-interest expense
 as a percentage of total revenues) (1)                          48.06         54.58          52.73           51.45          57.64
Efficiency ratio excluding the amortization of
  intangibles and goodwill (1)                                   46.81         53.03          51.06           49.56          55.34
Dividend payout ratio                                            27.20         27.47          27.18           24.19          21.85
Average equity to average assets                                  8.87          9.68          10.34            9.94          10.44
Leverage capital ratio                                            8.94          8.88           9.78            9.58          11.42
Nonperforming loans and leases to total loans and leases          0.10          0.54           0.07            0.27           0.22
Net (recoveries) chargeoffs to average loans and leases          (0.06)        (0.02)          0.00            0.10           0.04
Allowance for loan or lease losses to total loans and leases      1.60          1.59           1.64            1.74           1.84
Allowance for loan or lease losses to
  nonperforming loans and leases                              1,621           296          2,280             647            849
==================================================================================================================================
<FN>
(1) Excludes  $3.4 million of merger  related costs and $1.3 million of related
tax  benefits for the year ended  December  31, 2000 and $487 of merger  related
costs and $178 of related tax benefits for the year ended December 31, 1999.
</FN>
</TABLE>


<PAGE>




ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATION

This Annual Report on Form 10-K includes forward-looking  information within the
meaning of Section 27A of the  Securities  Act of 1933, as amended,  and Section
21E of the  Securities  Exchange Act of 1934, as amended,  and is subject to the
"safe harbor" created by those sections. These forward-looking statements (which
involve the  Company's  plans,  beliefs  and goals,  refer to  estimates  or use
similar terms) involve certain risks and  uncertainties  that could cause actual
results to differ materially from those in the forward-looking  statements. Such
risks and uncertainties  include, but are not limited to, the following factors:
competitive  pressure  in the banking  industry;  changes in the  interest  rate
environment;   the  declining  health  of  the  economy,  either  nationally  or
regionally;  the deterioration of credit quality,  which could cause an increase
in  the  provision  for  loan  and  lease  losses;  changes  in  the  regulatory
environment; changes in business conditions,  particularly in Santa Clara County
real  estate  and high tech  industries;  the  impact of the  California  energy
crisis;  certain  operational risks involving data processing  systems or fraud;
volatility of rate  sensitive  deposits;  asset/liability  matching  risks;  and
liquidity  risks.  The Company  undertakes  no  obligation to revise or publicly
release the results of any  revision to these  forward-looking  statements.  See
also the  section  included  herein  entitled  "Business  -  Certain  Additional
Business Risks" and other risk factors discussed elsewhere in this Report.

The purpose of the following discussion is to provide information  pertaining to
the financial condition and results of operations of the Company that may not be
apparent  from a review of the  consolidated  financial  statements  and related
notes. It also incorporates certain statistical  information that is required by
Industry  Guide 3 promulgated by the  Securities  and Exchange  Commission.  The
discussion  should be read in conjunction with the  aforementioned  consolidated
financial  statements,  as found on pages 38 through 63. The interest earned and
yields on nontaxable securities have been adjusted to a fully-taxable equivalent
basis for all financial information presented in this Item 7.

Dollars and share  amounts are in  thousands  in the text for Item 7, except per
share amounts or as otherwise noted.

FINANCIAL REVIEW

     Earnings Summary

For the year ended  December 31, 2000,  the Company  reported net income of $8.6
million or $2.24 per diluted share. After excluding merger related costs, net of
tax,  operating  net income  was $10.8  million  or $2.80 per  diluted  share as
compared to net income,  excluding  merger  related  costs,  net of tax, of $7.4
million or $2.00 per diluted  share for the year ended  December 31, 1999 (a 46%
increase).  Net income, excluding merger related costs, net of tax, for the year
increased  over that of the previous  year  primarily due to an increase of $6.1
million in net interest  income offset by a decrease in other income of $260 and
an  increase  in other  expense of $868.  See the  specific  sections  below for
details regarding these changes.

As of December 31, 2000,  consolidated assets were $688 million, gross loans and
leases were $463 million,  and deposits were $585  million.  Total  consolidated
assets increased $120 million,  a 21% increase from $568 million at December 31,
1999. Loans and leases  increased $60 million,  a 15% increase from $403 million
at December 31, 1999.  Deposits grew $111 million from $474 million the previous
year,  representing  a 23%  increase.  Loan and lease  and  deposit  growth  was
generated mainly by marketing and business  development  efforts of the Bank and
its subsidiary, Epic.

For the year ended  December 31, 1999,  the Company  reported net income of $7.1
million or $1.91 per diluted share. After excluding merger related costs, net of
tax,  operating  net  income  was $7.4  million  or $2.00 per  diluted  share as
compared to net income of $7.5  million or $1.92 per diluted  share for the year
ended December 31, 1998. Net income, excluding merger related costs, net of tax,
for the year  decreased  over  that of the  previous  year  primarily  due to an
increase in the  provision  for loan and lease losses of $426 and to an increase
in other  expense of $1.6  million  offset by an increase of $2.0 million in net
interest  income.  See the specific  sections below for details  regarding these
changes.

As of December 31, 1999,  consolidated assets were $568 million, gross loans and
leases were $403 million,  and deposits were $474  million.  Total  consolidated
assets  increased $73 million,  a 15% increase from $495 million at December 31,
1998. Loans and leases  increased $67 million,  a 20% increase from $336 million
at December 31, 1998.  Deposits  grew $68 million from $406 million the previous
year,  representing  a 17%  increase.  Loan and lease  and  deposit  growth  was
generated mainly by marketing and business  development  efforts of the Bank and
its subsidiary, Epic.

     Net Interest Income and Margin

Net interest income is the principal source of the Company's operating earnings.
Significant factors affecting net interest income are rates,  volumes and mix of
the loan, investment and deposit portfolios.

The following  table shows the composition of average earning assets and average
funding  sources,  average yields and rates and the net interest  margin for the
three years ended December 31, 2000.


<PAGE>



<TABLE>
<CAPTION>

AVERAGE BALANCES, RATES AND YIELDS

FULLY TAXABLE EQUIVALENT
(dollars in thousands)
                                                     2000                            1999                       1998
---------------------------------------------------------------------------------------------------------------------------------
                                           Average            Avg yield/  Average           Avg yield  Average         Avg yield/
ASSETS                                     Balance  Interest  Rate paid   Balance  Interest Rate paid  Balance Interest Rate paid
---------------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>       <C>       C>     <C>        <C>        <C>    <C>        <C>       <C>
Interest earning assets:
  Loans and leases, net (1)                 $420,943  $44,942   0.68%  $366,175   $35,826    9.78%  $301,910   $31,252   10.35%
  Securities available for sale:
    Taxable (2)                              103,392    6,791   6.57     76,057     4,638    6.10     79,262     4,753    6.00
    Nontaxable (3)                               531       48   9.10       ----      ----    ----       ----      ----   ---
  Securities held to maturity:
    Taxable (4)                                2,911      224   7.69      6,450       443    6.87      8,653       648    7.49
    Nontaxable (5)                            17,464    1,415   8.10     16,199     1,262    7.79     11,588       861    7.43
   Money market investments                   36,717    2,358   6.42     30,204     1,536    5.08     32,138     1,750    5.44
   Interest bearing due from banks             1,367       73   5.34      1,873       107    5.71      2,929       169    5.77
Interest rate hedging instruments               ----       10   ---        ----       (50)   ----       ----        (9)  ---
---------------------------------------------------------------       --------------------         ---------------------
      TOTAL INTEREST EARNING ASSETS          583,325   55,861   9.58    496,958    43,762    8.81    436,480    39,424    9.03
---------------------------------------------------------------       --------------------         ---------------------
Allowance for loan or lease losses            (6,733)                    (5,799)                      (5,289)
Cash and non-interest bearing due from banks  24,545                     22,717                       20,078
Other assets                                  29,536                     19,024                       14,073
Core deposit intangibles and goodwill, net     3,369                      3,820                        3,975
------------------------------------------------------                -----------                  -----------
      Total Assets                          $634,042                   $536,721                     $469,317
======================================================                ===========                  ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing liabilities:

  Deposits:
    Interest-bearing demand                  $79,747    2,244   2.81    $81,522     2,189    2.69    $75,152     2,158    2.87
    Money market and savings                 154,287    6,481   4.20    116,579     3,938    3.38    115,245     3,931    3.41
    Certificates of deposit:
      Less than $100                          55,738    3,237   5.81     49,154     2,627    5.34     29,563     1,604    5.42
      $100 or more                           130,838    7,490   5.72    100,669     4,992    4.96     75,005     4,073    5.43
---------------------------------------------------------------       --------------------         ---------------------
        Total certificates of deposit        186,576   10,727   5.75    149,823     7,619    5.09    104,568     5,677    5.43
---------------------------------------------------------------       --------------------         ---------------------
Other borrowings                              33,032    2,198   6.65     32,554     1,946    5.98     27,832     1,711    6.15
---------------------------------------------------------------       --------------------         ---------------------
       TOTAL INTEREST-BEARING LIABILITIES    453,642   21,650   4.77    380,478    15,692    4.12    322,798    13,477    4.18
---------------------------------------------------------------       --------------------         ---------------------
Noninterest-bearing demand deposits          116,234                     96,623                       90,921
Accrued interest payable and
  other liabilities                            7,911                      7,664                        7,087
------------------------------------------------------                -----------                  -----------
      Total liabilities                      577,787                    484,765                      420,806
------------------------------------------------------                -----------                  -----------
Shareholders' equity                          56,255                     51,956                       48,511
------------------------------------------------------                -----------                  -----------
       Total Liabilities and Shareholders'
equity                                      $634,042                   $536,721                     $469,317
======================================================--------        ==========---------          ==========----------
NET INTEREST INCOME AND MARGIN (6)                    $34,211   5.86%             $28,070    5.65%             $25,947    5.94%
============================================          ====================        ===================          ==================
<FN>
(1) Includes amortized loan fees of $2.1 million for 2000 and for 1999 and $1.6
million for 1998. Nonperforming loans and leases have been included in
average loan and lease balances.

(2) Includes dividend income of $152, $305 and $451 received in 2000, 1999 and
1998, respectively.

(3) Adjusted to a fully taxable equivalent basis using the federal statutory
rate ($19 in 2000).

(4) Includes dividend income of $164, $160 and $31 received in 2000, 1999 and
1998, respectively.

(5) Adjusted to a fully taxable equivalent basis using the federal statutory
rate ($566 in 2000, $505 in 1999 and $344 in 1998).

(6) The net interest margin represents the net interest income as a
percentage of average earning assets.
</FN>
</TABLE>


<PAGE>



The following table shows the effect on the interest  differential of volume and
rate changes for the years ended December 31, 2000 and 1999:
<TABLE>
<CAPTION>

VOLUME/RATE ANALYSIS
(dollars in thousands)
                                                         2000 vs. 1999                                    1999 vs. 1998
------------------------------------------------------------------------------------------------------------------------------------
                                                       Increase (decrease)                             Increase (decrease)
                                                         due to change in                                due to change in
------------------------------------------------------------------------------------------------------------------------------------
                                               Average       Average        Total          Average         Average         Total
                                                Volume         Rate         Change          Volume          Rate           Change
------------------------------------------------------------------------------------------------------------------------------------
<S>                                            <C>           <C>           <C>             <C>           <C>              <C>
Interest income:
  Loans and leases (1)                         $5,572        $3,544        $9,116          $5,921        $(1,347)         $4,574
  Securities:
    Taxable available for sale                  1,795           358         2,153            (195)           (34)           (229)
    Nontaxable available for sale                  48          ----            48            ----           ----            ----
    Taxable held to maturity                     (272)           53          (219)           (151)            60             (91)
    Nontaxable held to maturity                   103            50           153             359             42             401
   Money market investments                       418           404           822             (99)          (115)           (214)
   Interest bearing due from banks                (27)           (7)          (34)            (60)            (2)            (62)
------------------------------------------------------------------------------------------------------------------------------------
     Total interest income                      7,637         4,402        12,039           5,775         (1,396)          4,379
------------------------------------------------------------------------------------------------------------------------------------
Interest expense:
  Interest-bearing demand                         (50)          105            55             171           (140)             31
  Money market and savings                      1,584           959         2,543              45            (39)              7
  Certificates of deposits:
    Less than $100                                382           228           610           1,047            (24)          1,023
    $100 or greater                             1,727           771         2,498           1,273           (354)            919
  Other borrowings                                 32           220           252             282            (47)            235
------------------------------------------------------------------------------------------------------------------------------------
      Total interest expense                    3,675         2,283         5,958           2,818           (603)          2,215
------------------------------------------------------------------------------------------------------------------------------------
Interest rate hedging instruments                ----            60            60            ----            (41)            (41)
------------------------------------------------------------------------------------------------------------------------------------
Change in net interest income                  $3,962        $2,179        $6,141          $2,957          $(894)         $2,123
====================================================================================================================================
<FN>
(1) The effect of the change in loan fees is included as an  adjustment  to the
average rate.
</FN>
</TABLE>

Consolidated net interest income (on a fully taxable equivalent basis) was $34.2
million in 2000,  as compared  to $28.1  million in 1999.  The  increase of $6.1
million in net interest income during 2000 was primarily a result of an increase
in the average  volume of $86.4  million in earning  assets,  which  amounted to
approximately  $4.0 million of net interest income.  In addition to the increase
in the average volume of earning assets, the net interest margin (the difference
in the yields on earning  assets  less the cost of the  deposits  divided by the
amount of earning assets)  increased to 5.86% in 2000 from 5.65% in 1999,  which
amounted to approximately $2.1 million of net interest income.

The  Bank's   asset/liability   position   is  slightly   asset-sensitive   (See
"Asset/Liability  Management").  Therefore,  in times of an increasing  interest
rate environment,  the Bank's net interest margin should be positively impacted,
as was the case in 2000. The Bank's average prime was 9.24% in 2000, as compared
to 8.00% in 1999. The increase in the cost of  interest-bearing  liabilities was
due the  increase  in  interest  rates and to a change in the mix to higher cost
funds.  Interest expense in 2000 was $21.7 million, as compared to $15.7 million
in 1999. The difference  attributable  to volume  increases was $3.7 million and
the difference  attributable to rate increases was $2.3 million. Actual interest
expense rates increased from 4.12% to 4.77%.

Consolidated net interest income (on a fully taxable equivalent basis) was $28.1
million in 1999,  as compared  to $26.0  million in 1998.  The  increase of $2.1
million in net interest income during 1999 was primarily a result of an increase
in volume of $60.5  million in earning  assets which  amounted to  approximately
$3.0 million of net interest income. The increase in net interest income in 1999
relating to the increase in volume and fees was offset by an overall decrease in
the net interest  margin (the difference in the yields on earning assets and the
cost of funds).

A  substantial  portion of the Bank's  deposits (an average of 22.2% in 2000 and
20.0% in 1999)  are non  interest-bearing  and  therefore  do not  reprice  when
interest  rates  change.  See  "Funding."  This  is  somewhat  ameliorated  by a
significant  amount of customer  corporate  account  balances  which are tied to
earnings credits and utilized to offset bank service costs.

Due to the nature of the Company's lending markets, in which loans are generally
tied to the Prime Rate,  it is believed  an  increase in interest  rates  should
positively  affect the Company's  future  earnings,  while a decline in interest
rates would have a negative impact. Should interest rates decline in the future,
management believes that net interest income could be negatively impacted and it
is not feasible to provide an accurate  measure of such a change  because of the
many factors (many of which are uncontrollable) influencing the result.

The Company's net interest margin for the periods  presented is high relative to
its peer  group,  mainly  due to its  high  proportion  of non  interest-bearing
deposits and the impact of its generally  higher  yielding  loans,  specifically
leasing, factoring and asset-based lending.

Net interest income also reflects the impact of nonperforming  loans and leases.
The effect on interest income for the years ended December 31, 2000 through 1996
for the loans and leases that were on nonaccrual as of December 31, 2000 through
1996 was as follows:
<TABLE>
<CAPTION>

NEGATIVE IMPACT OF NONACCRUAL LOANS AND LEASES
(dollars in thousands)
------------------------------------------------------------------------------------------------------------------
                                              2000           1999          1998           1997          1996
------------------------------------------------------------------------------------------------------------------
<S>                                            <C>           <C>            <C>            <C>           <C>
Interest revenue which would have been
  recorded under original terms                $62           $132           $22            $61           $35
Interest revenue actually realized              16            112            21             32            29
----------------------------------------------------------------------------------------------------------------
NEGATIVE IMPACT ON INTEREST REVENUE            $46            $20            $1            $29            $6
==================================================================================================================
</TABLE>

                Provision for Loan and Lease Losses

The level of the allowance for loan and lease losses (and  therefore the related
provision)  reflects the Company's  judgment as to the inherent risks associated
with the loan, lease and factoring  portfolios.  Since estimates of the adequacy
of the Company's  allowance  for loan and lease losses are based on  foreseeable
risks,  such  judgments  are subject to change based on changing  circumstances.
Based on management's  current evaluation of such risks, as well as judgments of
the Company's  regulators,  additions of $725,  $862,  and $436 were made to the
allowance  for loan and  lease  losses  in 2000,  1999 and  1998,  respectively.
Management's  determinations  of the provision in 2000, 1999 and 1998 were based
on the  measurement of the  possibility of future loan and lease losses inherent
in the  portfolio  through  various  objective and  subjective  criteria and the
impact  of net  chargeoffs.  See  "Loan  and  Lease  Portfolio"  for a  detailed
discussion of asset quality and the allowance for loan and lease losses.

                Other Income

The following table sets forth the components of other income and the percentage
distribution  of such income for the years ended  December  31,  2000,  1999 and
1998.
<TABLE>
<CAPTION>

OTHER INCOME
(dollars in thousands)
                                                                     2000                      1999                     1998
------------------------------------------------------------------------------------------------------------------------------------
                                                             Amount       Percent      Amount       Percent      Amount      Percent
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>          <C>          <C>          <C>            <C>         <C>
Depositor service charges                                    $1,067       66.4%        $1,044       55.9%          $950        52.1%
Other operating income                                          599       37.3            737       39.5            724        39.7
Increase in cash surrender value of life insurance              542       33.8            218       11.7            ---         ---
Net (loss) gain on sale of securities available for sale       (602)     (37.5)          (133)      (7.1)           150         8.2
------------------------------------------------------------------------------------------------------------------------------------
    TOTAL                                                    $1,606      100.0%        $1,866      100.0%        $1,824       100.0%
====================================================================================================================================
</TABLE>

Other income totaled $1.6 million in 2000, $1.9 million in 1999 and $1.8 million
in 1998.  The decrease in other income during 2000 resulted  primarily  from the
realization of securities losses of $602 in 2000.

     Other Expense

The  components of other  expense are set forth in the  following  table for the
years ended December 31, 2000, 1999 and 1998.
<PAGE>

<TABLE>
<CAPTION>

OTHER EXPENSE AS A PERCENT OF AVERAGE ASSETS
(dollars in thousands)
------------------------------------------------------------------------------------------------------------------------------------
                                         2000                           1999                         1998
                                 Amount         Percent        Amount        Percent         Amount       Percent
----------------------------------------------------------------------------------------------------------------------
<S>                               <C>             <C>           <C>           <C>             <C>           <C>
Salaries and benefits             $9,642          1.52%         $9,180        1.71%           $8,048        1.71%
Occupancy                            810          0.13             818        0.15               764        0.16
Data processing                      747          0.12             676        0.12               741        0.16
Furniture and equipment              694          0.11             636        0.12               546        0.11
Directors' & shareholders'           660          0.10             673        0.13               469        0.10
Legal and professional fees          641          0.10             701        0.13               520        0.11
Client services paid by Bank         613          0.10             585        0.11               495        0.11
Amortization of core deposit
  intangibles and goodwill           439          0.07             455        0.08               457        0.10
Merger costs                       3,424          0.54             487        0.09              ----       ----
Other                              2,686          0.42           2,340        0.44             2,422        0.52
---------------------------------------------------------------------------------------------------------------------
     TOTAL                       $20,356          3.21%        $16,551        3.08%          $14,462        3.08%
======================================================================================================================
</TABLE>

Total other expenses increased approximately $3.8 million in 2000 as compared to
1999.  This is mainly  attributable  to the  inclusion  of the  one-time  merger
related  costs,  incurred  in  connection  with the  acquisition  of Saratoga on
January 5, 2000. After deducting these costs in each year,  continuing operating
expenses were $16.9 million in 2000,  $16.1 million in 1999 and $14.5 million in
1998.  The most  significant  increase in 2000  related to  increased  incentive
accruals and salary  increases  necessitated by the competitive  environment for
personnel and the supplemental retirement programs for outside directors and key
executives instituted by Saratoga National Bank in 1999 and by SJNB in 2000.

Total other expenses increased  approximately $1.6 million (excluding the impact
of the merger  related  costs) in 1999 as  compared  to 1998.  This  increase is
partially  related to the operations of Epic (which accounted for  approximately
$400 of the  increase)  and the opening of the East Bay Regional  Office  (which
accounted for approximately $300 of the increase),  both occurring in July 1998.
In  addition,  salaries  and  benefits  increased  as a result of the  increased
incentive  accruals,  additions  to staff and the  competitive  environment  for
personnel. Increases in occupancy also related to Epic and the East Bay Regional
Office.

     Income Taxes

The effective tax rate was 39% in 2000,  41% in 1999 and 40% in 1998.  The lower
effective tax rate in 2000 was primarily due to the greater amount of nontaxable
income  generated  by  the  investment  in  California   nontaxable   securities
(municipals and other political subdivisions).

     Quarterly Income

The unaudited consolidated income statement data of the Company and the Bank, in
the  opinion  of  management,  includes  all normal  and  recurring  adjustments
necessary  to state fairly the  information  set forth  therein.  The results of
operations are not necessarily  indicative of results for any future period. The
following table shows the Company's  unaudited  quarterly  income statement data
for the years 2000 and 1999:
<PAGE>

<TABLE>
<CAPTION>

UNAUDITED QUARTERLY INCOME STATEMENT DATA
 (dollars in thousands, except per share amounts)
------------------------------------------------------------------------------------------------------------------------------------
                                              First quarter           Second quarter          Third quarter       Fourth quarter
                                             2000       1999         2000         1999       2000      1999       2000      1999
------------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>         <C>        <C>           <C>         <C>       <C>        <C>       <C>
Net interest income                          $7,796      $6,402     $8,543        $6,644      $8,519    $7,162     $8,768    $7,357
Provision for loan or lease losses             (250)       (140)      (125)          (27)       (150)     (150)      (200)     (545)
Other income                                    507         651        (90)          438         583       468        606       308
Other expenses                               (7,450)     (3,847)    (4,116)       (3,964)     (4,423)   (4,196)    (4,367)   (4,543)
------------------------------------------------------------------------------------------------------------------------------------
Income before income taxes                      603       3,066      4,212         3,091       4,529     3,284      4,807     2,577
Income taxes                                   (288)     (1,268)    (1,635)       (1,235)     (1,760)   (1,300)    (1,844)   (1,098)
------------------------------------------------------------------------------------------------------------------------------------
Net income                                     $315      $1,798     $2,577        $1,856      $2,769    $1,984     $2,963    $1,479
====================================================================================================================================

Net income per share - basic                  $0.09      $0.51       $0.70         $0.54       $0.75     $0.57      $0.80     $0.42
Net income per share - diluted                $0.08      $0.48       $0.67         $0.50       $0.72     $0.53      $0.75     $0.40
EXCLUDING MERGER RELATED COSTS, NET OF TAX:
Net income per share - basic (1)              $0.69      $0.51       $0.70         $0.54       $0.75     $0.57      $0.80     $0.42
Net income per share - diluted (1)            $0.64      $0.48       $0.67         $0.50       $0.72     $0.53      $0.75     $0.40
====================================================================================================================================
<FN>
(1) Excludes  $3.4 million of merger  related  costs and $1.3 million of related
tax  benefits  for the quarter  ended March 31, 2000 and $487 of merger  related
costs and $178 of related tax benefits for the quarter ended December 31, 1999.
</FN>
</TABLE>

The Company  reported net income of $3.0 million for the quarter ended  December
31, 2000,  compared  with net income of $1.5  million for the fourth  quarter of
1999. The results for the fourth quarter of 2000 as compared to the same quarter
a year ago reflect an increase in volume of earning assets ($612 million in 2000
compared to $527 million in 1999).  The loan and lease loss provision  decreased
from $545 in 1999 to $200 in 2000, mainly due to a provision in 1999 by Saratoga
for a specific  non-performing  loan.  Other  expenses  decreased  $176 in 2000,
primarily  as a  result  of  merger  related  costs  of  $487  relating  to  the
acquisition  of  Saratoga  incurred  in the fourth  quarter of 1999 as offset by
increased salary and benefit costs in 2000.

FINANCIAL CONDITION AND EARNING ASSETS

     Federal Funds Sold and Money Market Investments

Federal funds sold and money market  investments  were $45.7 million at December
31, 2000 as compared to $12.7  million at December  31, 1999.  This  increase is
mainly  due to an  increase  in  short-term  deposits,  which were  invested  in
short-term money market securities.

The average  balance of money market  investments,  which include  federal funds
sold and liquid money market  investments,  was $36.7  million in 2000 and $30.2
million in 1999.  These balances  represented  6.8% of average deposits for 2000
and 1999.  They are maintained  primarily for the short-term  liquidity needs of
the Bank. See "Capital and Liquidity."

     Securities

The following table shows the book value composition of the securities portfolio
at December 31, 2000, 1999 and 1998. At December 31, 2000, there were no issuers
of securities  for which the  aggregate  book value of securities of such issuer
held by the Bank exceeded 10% of the Company's  shareholders' equity, except for
investment  securities  with the fair value of $21.4 million ($21.2 million cost
basis) issued by the Federal Home Loan Bank and $8.5 million  ($8.5 million cost
basis) issued by the Federal National Mortgage Association.


<PAGE>


<TABLE>
<CAPTION>

INVESTMENT SECURITIES COMPOSITION
 (dollars in thousands)
                                                    2000            1999            1998
-----------------------------------------------------------------------------------------------
<S>                                                <C>             <C>            <C>
Investment securities available for sale:
  U. S. Treasury                                   $1,527          $2,499          $3,077
  U. S. Government Agencies                        33,649          36,613          25,687
  Mortgage Backed                                  57,567          37,996           3,965
  State and municipal                               5,313           -----           -----
  Trust Preferred                                   8,475           6,583           -----
  Asset Backed                                      3,629           1,978           -----
  Mutual funds                                      -----           5,209           2,487
-----------------------------------------------------------------------------------------------
    INVESTMENT SECURITIES AVAILABLE FOR SALE      110,160          90,878          35,216
-----------------------------------------------------------------------------------------------
Investment securities held to maturity:
  U. S. Treasury                                    -----           -----           1,000
  U. S. Government Agencies                           500             499           3,496
  State and municipal                              16,395          17,828           4,213
  Mortgage Backed                                   -----             657           1,927
  Other                                             1,732           3,212             537
-----------------------------------------------------------------------------------------------
    INVESTMENT SECURITIES HELD TO MATURITY         18,627          22,196          11,173
-----------------------------------------------------------------------------------------------
  TOTAL                                          $128,787        $113,074         $46,389
===============================================================================================
</TABLE>

Investment  securities classified as available for sale are acquired without the
intent to hold until maturity. At December 31, 2000, the Bank's weighted average
maturity of the available for sale  investment  portfolio was 3.98 years.  It is
estimated  that for  each  1.0%  change  in  interest  rates,  the  value of the
Company's securities available for sale will change by approximately 2.9%.

Any  unrealized  gain or loss on  investment  securities  available  for sale is
reflected in the carrying value of the security and reported net of income taxes
in the equity section of the  consolidated  balance  sheets.  Realized gains and
losses  are  reported  in the  consolidated  statement  of income.  The  pre-tax
unrealized  gain on  securities  available  for sale as of December 31, 2000 was
$1.2 million.  This compares to a pre-tax  unrealized loss of $2.2 million as of
December 31, 1999. The change in the pre-tax unrealized gain or loss is directly
attributable  to the  decrease in interest  rates  during late 2000.  Changes in
interest  rates have an inverse  effect on the value of securities for which the
interest rate is fixed.

Investment  securities  classified as held to maturity  include those securities
which the Company has the ability and intent to hold to maturity.  The Company's
policy is to  generally  acquire "A" rated or better U.S.,  state and  municipal
securities.   The  specific  issues  are  monitored  for  changes  in  financial
condition.  Appropriate  action would be taken if significant  deterioration was
noted.

The pre-tax unrealized gain on investment securities held to maturity was $19 as
of December 31, 2000 as compared to a $1.5 million pre-tax unrealized loss as of
December 31, 1999.  The change in the pre-tax  unrealized  gain or loss resulted
from the decrease in interest  rates in late 2000. The Bank's  weighted  average
maturity of the held to maturity  investment  portfolio  as of December 31, 2000
was  approximately  11.6  years.  It is  estimated  that for each 1.0% change in
interest  rates,  the value of the  Company's  securities  held to maturity will
change by approximately 5.9%. This volatility  decreases as the average maturity
shortens.  Since it is the intention of  management to hold these  securities to
maturity, the unrealized losses will be realized over the life of the securities
as above-market interest income is recognized.

Mortgage-backed  securities  ("MBS")  are  considered  to have  increased  risks
associated with them because of the timing of principal repayments.  As interest
rates  decrease,  the  average  maturity  of  mortgages  underlying  MBS tend to
decline; as rates increase,  maturities tend to lengthen.  At December 31, 2000,
the Company had the following  securities which were  mortgage-backed or related
securities:
<PAGE>

MORTGAGE BACKED AND RELATED SECURITIES
December 31, 2000


PAGE>
                                                                         FAIR
(dollars in thousands)                                    COST           VALUE
-------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.    (U.S. Agency)         $2,975         $3,624
Federal National Mortgage Association    (U.S. Agency)    18,915         19,004
Government National Mortgage Association (U.S. Agency)       705            710
Collateralized mortgage obligations                       33,525         34,229
                                                         ----------------------
                                                         ----------------------
  Total                                                  $56,120        $57,567
                                                         ======================

LOAN AND LEASE PORTFOLIO

The following table shows the Company's consolidated loans and leases by type of
loan or  borrower  and their  percentage  distribution  for the five years ended
December 31:
<TABLE>
<CAPTION>

LOAN AND LEASE PORTFOLIO
(dollars in thousands)
                                     2000               1999               1998               1997               1996
-----------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>                <C>                <C>                <C>                 <C>
Commercial and other                  $140,108           $123,873           $110,604           $115,311            $96,533
SBA                                     53,371             49,949             37,019             39,409             32,968
Leasing                                 37,450             20,837              5,618              3,215              2,160
Factoring and asset-based               13,476              9,901              7,393              4,915              4,397
Real estate construction                54,667             48,410             51,963             26,763             24,700
Real estate term                       147,110            139,103            113,461             93,503             81,040
Consumer                                18,262             12,448             10,839             10,590             10,483
Unearned fee income                     (1,130)            (1,203)              (954)              (969)              (992)
-----------------------------------------------------------------------------------------------------------------------------
  TOTAL LOAN AND LEASE PORTFOLIO      $463,314           $403,318           $335,943           $292,737           $251,289
=============================================================================================================================

Commercial and other                    30.2%              30.7%              32.9%               39.4%             38.4%
SBA                                     11.5               12.4               11.0                13.5              13.1
Leasing                                  8.1                5.2                1.7                 1.1               0.9
Factoring and asset-based                2.9                2.4                2.2                 1.8               1.8
Real estate construction                11.8               12.0               15.5                 9.1               9.8
Real estate term                        31.8               34.5               33.8                31.9              32.2
Consumer                                 3.9                3.1                3.2                 3.6               4.2
Unearned fee income                     (0.2)              (0.3)              (0.3)               (0.3)             (0.4)
-----------------------------------------------------------------------------------------------------------------------------
  Total loan and lease portfolio       100.0%             100.0%             100.0%              100.0%            100.0%
=============================================================================================================================
</TABLE>

     GENERAL

The  Company's  loan and  lease  portfolio  consists  primarily  of  short-term,
floating  rate loans for  business  and real  estate  purposes.  SJNB's  lending
services  include  revolving  credit  loans,  SBA loans,  term  loans,  accounts
receivable financing, factoring, equipment financing and letters of credit.

The  commercial  loan  portfolio  (approximately  30%  of  the  loan  portfolio)
primarily  consists  of loans to small- to  medium-sized  businesses  with gross
revenues  up  to  $50   million,   as  well  as  loans  to  local   professional
businesspersons.  Commercial  and  other  loans  include  loans  to real  estate
developers for short-term  investment  purposes  (totaling  approximately  $16.6
million),  loans for real  estate  investment  purposes  made to  non-developers
(totaling  approximately  $2.7 million) and mortgage  warehouse  loans (totaling
approximately  $1.8 million).  No particular  industry  represents a significant
portion of such loans, other then the above noted real estate related loans.

The Bank as a Preferred Lender  originates SBA loans and participates in the SBA
7A and 504 SBA  lending  programs.  Under  the 7A  program,  a loan is made  for
commercial  or real  estate  purposes.  The SBA  guarantees  these loans and the
guarantee  may range from 70% to 90% of the total loan.  In  addition,  the loan
could be collateralized by a deed of trust on real estate. Because of the nature
of the loan and the SBA  guarantee,  the Bank does not consider this exposure as
real estate.  It is the Bank's policy to retain ownership of both the guaranteed
and unguaranteed portions of these loans in its outstanding loans rather then to
sell the guaranteed portion.

Under the 504 program, the Bank lends directly to the borrower and takes a first
deed of trust to the subject  property.  In addition the SBA through a Community
Development  Corporation  makes an  additional  loan to the borrower and takes a
deed of trust subject to the Bank's position. The Bank's position in relation to
the real estate "piggy back" loans can range from 50% to 70% loan to value.

SBA loans can be summarized as follows as of December 31, 2000:

           SBA 7A program (with SBA guarantee):
                      Commercial purposes (no real estate)  $22,065
                      Real estate related                    24,652
           SBA 504 program, real estate piggyback loans       6,654
                                                           --------
                      Total SBA loans                       $53,371
                                                           ========


The  leasing  portfolio  consists  of  financing  type leases made to small- and
medium-sized businesses.  The average lease is approximately $237. Approximately
56% of the  leasing  portfolio  is  located in the State of  California,  10% is
located in Nevada and 7% is located in Texas; no other state has greater than 7%
of the leasing  portfolio.  Computer  equipment  (including  computer  hardware,
software,  network, servers and storage systems) represents approximately 32% of
the leasing portfolio,  office furniture and equipment (including phone systems)
account for  approximately  13%, printing and graphic arts equipment account for
11%,  and  industrial  equipment  represents  approximately  9%. No other sector
represents more than 5% of the leasing portfolio.

Factoring and  asset-based  lending  represents  purchased  accounts  receivable
(factoring) and a structured  accounts receivable lending program where the Bank
receives specific payment for client invoices.  Under the factoring program, the
Bank  purchases  accounts  receivable  invoices  from clients and then  receives
payment directly from the party obligated for the receivable. In most cases, the
Bank's Financial Services Division purchases the receivables subject to recourse
from the Bank's  factoring  client.  The asset-based  lending program requires a
security   interest  in  all  of  a  client's  accounts   receivable.   Specific
verifications  are performed on some or all of the  receivables  and the account
debtor.  Normally  payments made by mail are directed to a Bank  controlled lock
box. This business and related purchasing of accounts receivable is subject to a
greater degree of risk than normal  lending due to the  involvement of the third
party obligee,  the lack of control over the direct receipt of payment,  and the
potential  purchase of fraudulent or inflated  receivables.  To date, there have
been no  significant  losses  relating to the Bank's  factoring  or  asset-based
lending programs.

The real  estate  construction  portfolio  consists of 30%  residential  and 70%
commercial loans. The most significant types of commercial construction include:
industrial and warehouse space, hotels/motels,  and golf courses.  Approximately
86% of the  commercial  construction  will be either  occupied or managed by the
owner.  Such  loans  are made on the  basis of the  economic  viability  for the
specific  project,  the cash flow  resources of the developer,  the  developer's
equity in the project and the underlying financial strength of the borrower. The
Company's  policy is to monitor each loan with respect to incurred costs,  sales
price and sales  cycle.  The  weighted  average loan to value of all real estate
construction  loans is  estimated to be 57% based on the latest  appraisal  data
available to the Bank.

The real  estate  term  loans  include  term  loans  (up to a  twenty-five  year
maturity) on income-producing  or owner occupied commercial  properties totaling
$139.7 million and land development  loans totaling $7.4 million.  Approximately
41% of these  properties  are  owner  occupied.  The most  significant  types of
commercial properties include: industrial and warehouse space, office buildings,
retail and retail strip centers, and hotels/motels. The average loan to value of
all real estate term loans and land  development  loans is  estimated  to be 60%
based on the latest appraisal data available to the Bank.

Consumer loans consist primarily of loans to individuals for personal uses, such
as home equity loans,  installment purchases,  premier lines (unsecured lines of
credit) and overdraft protection loans and a variety of other consumer purposes.

Concentrations  of credit risk arise when a number of  customers  are engaged in
similar business  activities,  or activities in the same geographic  region,  or
have  similar  economic   features  that  would  cause  their  ability  to  meet
contractual  obligations  to  be  similarly  affected  by  changes  in  economic
conditions.  Although the Company has a diversified loan and lease portfolio,  a
substantial  portion of its customers'  ability to honor loan and lease terms is
reliant upon the economic stability of Santa Clara County,  which in some degree
relies on the stability of high  technology  companies in its "Silicon  Valley."
Loans are made on the basis of a secure  repayment source as the first priority.
Collateral is generally a secondary source for loan qualification.

Approximately  55% of the loan and lease  portfolio is directly  related to real
estate or real estate interests.  This amount includes real estate  construction
loans,  real estate  term  loans,  real  estate  related  loans  included in the
commercial loan portfolio,  SBA real estate  piggyback  loans,  and prime equity
loans (included in consumer loans in the amount of $8.1 million).

Inherent in any loan and lease portfolio are risks associated with certain types
of loans  and  leases.  The  Company  attempts  to  limit  these  risks  through
conservative  loan and lease policies and review  procedures that are applied at
the  time of  origination.  Included  in these  policies  are  specific  maximum
loan-to-value  ("LTV")  limitations  as to  various  categories  of real  estate
related loans. These ratios are as follows:
<PAGE>

MAXIMUM LOAN TO VALUE RATIOS

----------------------------------------------------------------------
                                                        MAXIMUM LTV

     CATEGORY OF REAL ESTATE COLLATERAL                    RATIO

----------------------------------------------------- ----------------
Raw land                                                     50%
Land Development                                             60
Construction:
  1-4 Single family residence,
    Owner occupied                                           80
    Speculative development                                  80
  Other                                                      80
Term  loans  (construction   take-out    and
commercial)                                                  75
Other improved property                                      75
Prime equity loans                                           80

The  Company's   loan  and  lease  policy   provides  that  any  term  loans  on
income-producing  properties  must have a minimum  debt  service  coverage of at
least 1.25 to 1 for non-owner occupied property and at least 1.15 to 1 for owner
occupied.

During 2000 the Bank  increased the maximum loan to value ratio for  speculative
construction  loans from 75% to 80%.  This was done to allow the Bank to be more
competitive in its marketplace.  In addition,  the Bank generally  requires that
the  developer  have 10% to 25% of the total project costs paid by them in cash.
Over 90% of all  construction  loans to date have  required  at least 20% of the
total project costs paid in cash. Since this change of policy,  no loan has been
made with a loan to value in excess of 75%.

One of the  significant  risks  associated  with real estate lending is the risk
associated with the possible  existence of environmental  risks or hazards on or
in property  affiliated  with the loan.  The Bank attempts to mitigate such risk
through the use of an Environmental  Risk Questionnaire for all loans secured by
real  estate.  A Phase I  environmental  report is required if so  indicated  by
response to the  questionnaire  or if (for any other reason) it is determined to
be   appropriate.   Other   reasons  would   include  the   industrial   use  of
environmentally   sensitive   substances   or  the   proximity  to  other  known
environmental  problems.  A Phase  II  report  is  required  in  certain  cases,
depending on the outcome of the Phase I report.

     ACTIVITY

Total loans and leases were $463 million and averaged $421 million as of and for
the year ended  December 31, 2000.  Total loans and leases were $403 million and
averaged  $366  million  as of and for the year ended  December  31,  1999.  The
increase in total loans and leases of $60 million during 2000 represented growth
from all sectors of the Bank's portfolio. The largest growth was centered in the
Commercial and other category, which grew $16 million or 13%. The growth was not
centered in any  specific  industry or sector and the Bank  continues to enjoy a
diversified  commercial loan portfolio.  The leasing  portfolio has continued to
expand  since the  acquisition  of Epic in 1998,  growing $17 million in 2000 as
marketing efforts and diversification  expanded.  Real estate construction loans
grew $6.3 million or  approximately  13% in 2000. The major source of the growth
relating to construction was in the commercial area. The demand for construction
in the Bank's market area continued to be strong in 2000.  Demand in the housing
and commercial  markets was fueled by the growth in the high  technology  sector
throughout  much of 2000. Real estate term loans increased by $8 million in 2000
mainly  as a result  of the Bank  providing  term  funding  for  several  of its
completed  construction  projects,  as well as the continued  development of new
business.

In  addition,  the  Bank  experienced  growth  in SBA  loans  ($4  million)  and
factoring/asset-based  lending ($3  million) in 2000.  Growth in these areas was
also mainly due to business development efforts.

Late in 2000,  the  expansion of the Bank's  market area,  specifically  Silicon
Valley and the high technology  sector, was impacted by the negative reaction of
the  financial  markets to the Internet  industry and the  slow-down of earnings
growth of the large  technology  companies.  There has also been a slow-down  in
venture capital  fundings;  the future of such fundings is unclear at this time.
If venture capital  fundings are  significantly  curtailed  during 2001, the Bay
Area and the Silicon Valley could be negatively impacted. In addition, the State
of  California  is in the midst of an energy  crisis,  where the  ability of the
major  utilities  to provide and deliver  adequate  resources to their users has
been threatened. These changes could result in layoffs and restructurings. It is
not clear at this time what  impact  this will have on the  overall  economy and
specifically the growth and quality of the Bank's loan portfolio in the future.

Total loans and leases were $336 million and averaged $302 million as of and for
the year ended  December 31, 1998. The increase in total loans and leases of $67
million during 1999 represented growth from all sectors of the Bank's portfolio,
except real estate construction. Real estate term loans increased by $26 million
as a result of the lower interest rate  environment  during the first and second
quarters of 1999, which fueled the demand for refinancing. The Bank continued to
provide term funding for several of its completed construction projects, as well
as the continued  development of new business.  In addition the Bank experienced
growth in commercial  ($13 million),  SBA ($13 million),  leasing ($15 million),
and  factoring/asset-based  lending ($3  million)  in 1999.  Growth in all these
areas was mainly due to the generally  positive  economic  conditions of Silicon
Valley  and  rapid  expansion  of the  technology  sector in 1999.  Real  estate
construction loans declined by $3.6 million in 1999. The decrease in real estate
construction  was due to a  change  in the  mix of  business  done  by  Saratoga
National  Bank prior to the merger  with SJNB on  January 5, 2000.  During  1999
Saratoga  National Bank began to focus on larger real estate projects where they
sold off  (participated)  a  majority  of the loan  balance.  Although  activity
increased,  the  amount  outstanding  actually  declined  by  approximately  $12
million. The net remaining increase of $8 million related to SJNB's focus on its
market area's expanding real estate environment during 1999.

Asset Quality

     ALLOWANCE FOR LOAN AND LEASE LOSSES

A consequence  of lending  activities  is the potential for loss.  The amount of
such losses will vary from time to time depending upon the risk  characteristics
of the loan and lease  portfolio  as  affected by  economic  conditions,  rising
interest rates and the financial experience of borrowers. The allowance for loan
and lease losses,  which provides for the risk of losses  inherent in the credit
extension  process,  is  increased  by the  provision  for loan and lease losses
charged to expense and decreased by the amount of charge-offs net of recoveries.
There is no  precise  method  of  predicting  specific  losses or  amounts  that
ultimately  may be  charged  off on  particular  segments  of the loan and lease
portfolio.  Similarly,  the adequacy of the  allowance for loan and lease losses
and the level of the related  provision  for loan and lease losses is determined
on a judgmental basis by management based on consideration of:

o  Economic conditions,
o  Borrowers' financial condition,
o  Loan and lease impairment,
o  Evaluation of industry trends,
o  Historic losses, migrations and delinquency trends,
o  Industry and other concentrations,
o  Loans which are contractually current as to payment terms but  demonstrate a
   higher degree of risk as identified by management,
o  Continuing evaluation of the performing loan portfolio,
o  Monthly  review  and evaluation  of  problem  loans and leases identified as
   having loss potential,
o  Quarterly review by the Board of Directors,
o  Off balance sheet risks, and
o  Assessments by regulators and other third parties.

In addition to the internal  assessment of the loan and lease portfolio (and off
balance sheet credit risk,  such as letters of credit,  etc.),  the Company also
retains a consultant who performs  credit reviews on a quarterly  basis and then
provides  an  assessment  of the  adequacy of the  allowance  for loan and lease
losses. The federal banking regulators also conduct examinations of the loan and
lease portfolio periodically.

The Company  utilizes a method of assigning a minimum and maximum loss ratio for
each grade of loan or lease  within  each  category of loans  (commercial,  real
estate term, real estate  construction,  etc.). Loans and leases are graded on a
ranking system based on management's  assessment of the loan's or lease's credit
quality.  The  assigned  loss  ratio  is  based  upon  many  factors,  including
prevailing  economic  conditions,  historical  loss  experience as well as other
factors. In addition,  the Company's  methodology  considers (and assigns a risk
factor  for)  current   economic   conditions,   off  balance   sheet  risk  and
concentrations of credit. The methodology provides a systematic approach for the
measurement  of  the  possible  existence  of  future  loan  and  lease  losses.
Management  and the Board of Directors  evaluate the allowance and determine its
appropriate  level  considering  objective  and  subjective  measures,  such  as
knowledge of the borrowers' business, valuation of collateral, the determination
of impaired  loans and leases and exposure to potential  losses.  Based on known
information available to it at the date of this Report, management believes that
the  Company's  allowance  for loan and lease  losses,  determined  as described
above, was adequate at December 31, 2000 for foreseeable losses.

The allowance for loan and lease losses is a general reserve  available  against
the total loan and lease portfolio and off balance sheet credit exposure.  While
management  uses available  information to recognize  losses on loans or leases,
future  additions to the allowance may be necessary based on changes in economic
conditions.  In addition,  various regulatory  agencies,  as an integral part of
their examination process, periodically review the Bank's allowance for loan and
lease  losses.  Such  agencies may require the Bank to provide  additions to the
allowance  based on their judgment of information  available to them at the time
of their examination.

Finally,  there is  uncertainty  concerning  future  economic  trends.  As noted
elsewhere  in this  Report,  the  events  occurring  at the end of 2000  and the
beginning of 2001, such as the national equity market correction,  disappointing
earnings  announcements,  negative economic fundamentals,  the California energy
crisis,  and the corrective  action taken by the FOMC by reducing interest rates
by 100 basis points,  has caused  greater  uncertainty.  Accordingly,  it is not
possible to predict the effect future  economic  trends may have on the level of
the  provision  for loan and  lease  losses  in  future  periods.  See "Item 7A:
Quantitative  and  Qualitative   Disclosures  About  Market  Risk"  herein,  for
additional information regarding changes in interest rates.

The following table  summarizes the activity in the allowance for loan and lease
losses for the five years ended December 31, 2000:



<TABLE>
<CAPTION>

ALLOWANCE FOR LOAN AND LEASE LOSSES
(dollars in thousands)
                                                                         2000         1999         1998        1997       1996
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>           <C>          <C>          <C>        <C>
Balance, beginning of the year                                          $6,412        $5,494       $5,071       $4,633     $4,623
----------------------------------------------------------------------------------------------------------------------------------
Chargeoffs by category:
  Commercial and other                                                   -----           108          234          271        243
  SBA                                                                       18            18        -----           37         22
  Factoring and asset-based                                              -----         -----        -----            1         83
  Real estate construction                                                 376         -----        -----        -----      -----
  Real estate term                                                       -----             4        -----           32         69
  Consumer                                                                  17            35           65           62         60
----------------------------------------------------------------------------------------------------------------------------------
    TOTAL CHARGEOFFS                                                       411           165          299          403        477
----------------------------------------------------------------------------------------------------------------------------------
Recoveries by category:
  Commercial and other                                                     135           150          159          123        216
  SBA                                                                       13             5           58            5         39
  Factoring and asset-based                                              -----         -----        -----            6         35
  Real estate construction                                                 379             4        -----        -----      -----
  Real estate term                                                       -----             4        -----        -----          1
  Consumer                                                                 140            59           69            2        106
----------------------------------------------------------------------------------------------------------------------------------
    TOTAL RECOVERIES                                                       667           222          286          136        397
----------------------------------------------------------------------------------------------------------------------------------
NET (RECOVERIES) CHARGEOFFS                                               (256)          (57)          13          267         80
----------------------------------------------------------------------------------------------------------------------------------
PROVISION CHARGED TO EXPENSE                                               725           861          436          705         40
Allowance relating to acquired businesses                                -----         -----        -----        -----         50
----------------------------------------------------------------------------------------------------------------------------------
BALANCE, END OF THE YEAR                                                $7,393        $6,412       $5,494       $5,071     $4,633
==================================================================================================================================

RATIOS:
Net (recoveries) chargeoffs to average loans and leases                  (.06%)        (.02%)        .00%         .10%       .04%
Allowance to total loans and leases at the end of the year               1.60          1.59         1.64         1.74       1.84
Allowance to nonperforming loans and leases at end of the year       1,621           296        2,280          647        849
====================================================================================================================================
</TABLE>

During 2000,  the Bank wrote off $411 in loans and had  recoveries of $667 for a
total of $256 in net  recoveries.  Net  recoveries  were $57 during 1999 and net
chargeoffs were $13 in 1998.

The  allowance  for loan and lease  losses as a  percentage  of total  loans and
leases  was  1.60%,  1.59%,  and  1.64% at  December  31,  2000,  1999 and 1998,
respectively.  The  allowance  for loan and  lease  losses  as a  percentage  of
nonperforming  loans was approximately  1,621%,  296% and 2,280% at December 31,
2000,  1999 and 1998,  respectively.  Nonperforming  loans and leases were $456,
$2.2  million and $241 at December 31, 2000,  1999 and 1998,  respectively.  See
"Nonperforming Loans and Leases" below.

Based on an evaluation of individual credits, historical credit loss experienced
by loan or lease type and economic  conditions,  management  has  allocated  the
allowance  for loan and lease  losses as follows  for the past five years  ended
December 31:


<PAGE>



<TABLE>
<CAPTION>

ALLOCATION OF THE ALLOWANCE FOR LOAN OR LEASE LOSSES
(dollars in thousands)
                                                           Amount of allowance allocation
--------------------------------------------------------------------------------------------------------------------
                                    2000               1999            1998             1997             1996
--------------------------------------------------------------------------------------------------------------------
<S>                                <C>                 <C>             <C>              <C>              <C>
  Commercial and other             $2,549              $2,209          $2,066           $1,519           $1,401
  SBA                               1,258               1,051           1,064            1,079              840
  Leasing                             820                 455              90             ----             ----
  Factoring and asset-based           457                 320             197              206              159
  Real estate construction            556                 970             570              297              293
  Real estate term                  1,433               1,044             933            1,042            1,050
  Consumer                            320                 245             239              167              139
  Unallocated                        ----                 118             335              761              751
--------------------------------------------------------------------------------------------------------------------
    TOTAL                          $7,393              $6,412          $5,494           $5,071           $4,633
====================================================================================================================

                                                 Percent of loans and leases in each category
                                                          to total loans and leases
--------------------------------------------------------------------------------------------------------------------
                                    2000               1999            1998             1997             1996
--------------------------------------------------------------------------------------------------------------------
  Commercial and other               30.0%                 30.4%           32.6%            39.1%            38.0%
  SBA                                11.5                  12.4            11.0             13.5             13.1
  Leasing                             8.1                   5.2             1.7              1.1              0.9
  Factoring and asset-based           2.9                   2.4             2.2              1.7              1.8
  Real estate construction           11.8                  12.0            15.5              9.1              9.8
  Real estate term                   31.8                  34.5            33.8             31.9             32.2
  Consumer                            3.9                   3.1             3.2              3.6              4.2
--------------------------------------------------------------------------------------------------------------------
    Total                           100.0%                100.0%          100.0%           100.0%           100.0%
====================================================================================================================
</TABLE>

The  allowance  for loan and lease  losses is  maintained  without any  internal
allocation  to the  segments  of the loan and  lease  portfolio  and the  entire
allowance is available to cover any loan and lease losses.  The allocation above
is  based on  subjective  estimates  that  take  into  account  historical  loss
experience   and   management's   current   assessment   of  the  relative  risk
characteristics  of the  portfolio as of the  reporting  date noted above and as
described more fully herein.

     NONPERFORMING LOANS AND LEASES

Loans for which the accrual of interest has been suspended,  restructured  loans
and other loans with  principal  or interest  contractually  past due 90 days or
more are set forth in the following table as of December 31 of each year:

<TABLE>
<CAPTION>

NONPERFORMING LOANS AND LEASES
 (dollars in thousands)
                                                                          2000        1999        1998       1997       1996
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>        <C>          <C>        <C>        <C>
Loans and leases accounted for on a non-accrual basis                       $421       $1,395       $197       $720       $457
Loans and leases restructured and in compliance with modified terms         ----         ----         44         63         89
Other loans and leases with principal or interest contractually past
  due 90 days or more                                                         35          769       ----          1       ----
--------------------------------------------------------------------------------------------------------------------------------
    TOTAL                                                                   $456       $2,164       $241       $784       $546
====================================================================================================================================
</TABLE>

Total  nonperforming  loans of $456 in 2000 consisted of four individual  loans,
none of which were considered  significant.  Total  nonperforming  loans of $2.2
million in 1999  included a single  customer with  aggregate  borrowings of $1.1
million with the remaining loans not considered significant.

Management  identifies  potential  nonperforming loans and leases as part of its
ongoing  evaluation and review of the loan and lease portfolio.  On February 16,
2001,  a  commercial  loan and related  leases in the  aggregate  amount of $1.7
million  secured by accounts  receivable,  operating  equipment and other assets
were classified as nonperforming  and were put on non-accrual  status.  Based on
such reviews and  information  known to  management  at the date of this Report,
management has not identified any further SJNB loans or leases (other than those
in the above  table and  mentioned  above)  about  which it has  serious  doubts
regarding the borrowers'  ability to comply with present loan  repayment  terms,
such that the loans or leases might subsequently be classified as nonperforming.
The  accrual of  interest  on loans is  discontinued  and any accrued and unpaid
interest is reversed  when, in the opinion of  management,  there is significant
doubt as to the  collectibility  of interest or principal or when the payment of
principal or interest is ninety days past due, unless the amount is well-secured
and in the process of collection.

     OTHER REAL ESTATE OWNED

At  December  31,  2000  and 1999  there  were no  properties  owned by the Bank
acquired through the foreclosure process.

COMMITMENTS AND LINES OF CREDIT

It is the  Bank's  policy  not to issue  formal  commitments  or lines of credit
except to well-established and financially  responsible commercial  enterprises.
Such  commitments  can be either  secured or unsecured  and are typically in the
form of revolving lines of credit for seasonal working capital needs.

Occasionally,  such  commitments  are in the  form  of a  letter  of  credit  to
facilitate the customer's particular business transaction. Commitments and lines
of credit  typically  mature  within one year.  These  commitments  involve  (to
varying  degrees)  credit risk in excess of the amount  recognized  as either an
asset or liability in the statement of financial position.  The Company attempts
to control this credit risk through its credit approval process. The same credit
policies are used when entering into such commitments.

As of December 31, 2000, the Company had undisbursed  loan commitments to extend
credit as follows:

UNDISBURSED LOAN COMMITMENTS
(dollars in thousands)
Loan Category                                                       Amount
--------------------------------------------------------------------------------
Commercial and other                                                $138,196
SBA                                                                    1,462
Real estate construction                                              47,133
Real estate term                                                       1,111
Consumer                                                              13,348
--------------------------------------------------------------------------------
    Total                                                           $201,250
================================================================================

In addition, there was approximately $13 million available for commitments under
unused letters of credit as of December 31, 2000.

FUNDING

Deposits represent SJNB's principal source of funds. Most of the Bank's deposits
are  obtained  from  professionals,   small-  to  medium-sized   businesses  and
individuals  within the Bank's market area.  SJNB's deposit base consists of non
interest and interest-bearing demand deposits, savings and money market accounts
and  certificates of deposit.  The following table summarizes the composition of
deposits as of December 31, 2000, 1999 and 1998:


<PAGE>


<TABLE>
<CAPTION>

DEPOSIT CATEGORIES
 (dollars in thousands)
                                        2000                             1999                              1998
------------------------------------------------------------------------------------------------------------------------------
                                             Percentage                       Percentage                       Percentage
                               Total          of Total          Total          of Total          Total          of Total
                               Amount         Deposits          Amount         Deposits          Amount         Deposits
------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>              <C>              <C>              <C>             <C>              <C>
Noninterest-bearing demand      $130,130         22.23%           $94,687          19.99%          $98,422          24.25%
Interest-bearing demand           78,539         13.42             78,523          16.58            73,834          18.19
Money market and savings         187,794         32.08            140,871          29.73           105,009          25.87
Certificates of deposit:
  Less than $100                  54,175          9.26             54,172          11.43            45,272          11.16
  $100 or more                   134,705         23.01            105,480          22.27            83,320          20.53
------------------------------------------------------------------------------------------------------------------------------
    Total                       $585,343        100.00%          $473,733         100.00%         $405,857         100.00%
==============================================================================================================================
</TABLE>

Deposits increased 24% to $585 million at December 31, 2000 from $474 million at
December 31, 1999. Deposits increased 17% at December 31, 1999 from $406 million
at December 31, 1998.  Several  specific  customers'  unusually large short-term
deposits  amounting  to  approximately  $37  million  impacted  the  increase in
deposits from 1999 to 2000.  Excluding this unusual flow of funds, the growth in
deposits  from 1999 to 2000 would have been 16%.  These  increases  are due to a
combination of factors,  including the development of customers with significant
cash  balances,   utilization  of  sophisticated  cash  management  systems  and
aggressive pricing of interest rates.

The Bank has been able to attract a  significant  proportion  of its deposits in
the  form of  noninterest-bearing  deposits.  The  Bank's  primary  business  is
commercially oriented with significant  noninterest-bearing  deposits maintained
by commercial customers. In the current economic environment,  these funds could
be subject to  disintermediation  (moved for higher interest rate products).  To
counter such  possibilities,  the Bank  maintains an array of products  which it
believes would be competitive  if such were to occur.  In addition,  in illiquid
economic  times  (possibly  recessions)  these  deposits  could  be  subject  to
withdrawal  pressures.  See "Capital and Liquidity - Liquidity" for a discussion
of the Bank's liquidity sources.

The Bank also  raises a  substantial  amount of funds  through  certificates  of
deposit of $100 or greater,  which were  approximately  23% of total deposits at
December 31, 2000.  These  deposits are usually at interest  rates  greater than
other  types of  deposits  and are more  sensitive  to  interest  rate  changes.
Historically,  the Bank's  overall  cost of funds has been less than that of its
peer group.  However, as these certificates of deposit are usually more interest
rate sensitive, their repricing in an increasing interest rate environment could
increase the Bank's cost of funds and negatively  impact the Bank's net interest
margin. See "Capital and Liquidity."

On December 4, 1998 the Bank  obtained  $10 million  through the  placement of a
ten-year synthetic floating rate certificate of deposit. The instrument consists
of two linked  transactions,  a callable  interest rate swap and callable  fixed
rate certificate of deposit. Under the swap agreement,  the Bank pays LIBOR plus
five  basis  points  and  receives  6% for a period  of ten  years.  The swap is
currently  callable  by a major U.S.  domestic  bank.  Simultaneously,  the Bank
issued a callable 6% fixed rate  certificate  of  deposit.  The  certificate  of
deposit does not have any early redemption  clauses,  other than by death of the
holder. Effectively,  the Bank's rate of interest on the combined transaction is
LIBOR plus five basis points.

The Bank utilizes  short-term  borrowings in its balance sheet  management.  The
short-term borrowings  (securities sold under agreements to repurchase) are used
for short-term  liquidity needs. During 2000, the average cost of the borrowings
was 6.65%,  the average amount  outstanding  was $7.4 million and the maximum at
any month end was $15.6 million.

ASSET/LIABILITY MANAGEMENT

The Company defines interest rate sensitivity as the measurement of the mismatch
in  repricing  characteristics  of assets,  liabilities  and off  balance  sheet
instruments at a specified  point in time. This mismatch (known as interest rate
sensitivity gap) represents the potential  mismatch in the change in the rate of
interest revenue accrual and interest expense that would result from a change in
interest  rates.   Mismatches  in  interest  rate  repricing  among  assets  and
liabilities arise primarily from the interaction of various customer  businesses
(i.e.,  types of loans and leases versus the types of deposits  maintained)  and
from management's  discretionary investment and funds gathering activities.  The
Company attempts to manage its exposure to interest rate  sensitivity.  However,
due to its size and direct  competition  from the major banks,  the Company must
offer  products  which are  competitive  in the market place,  even if less than
optimum with respect to its interest rate exposure.

The  Company's  balance  sheet  position  at  December  31,  2000  was  slightly
asset-sensitive,  based upon the  significant  amount of variable rate loans and
the repricing  characteristics of its deposit accounts (although the table below
reflects liability sensitivity, see commentary beneath the table). This position
provides a hedge against rising  interest  rates,  but has a detrimental  effect
during times of interest rate  decreases.  Net interest  revenues are negatively
impacted by a decline in interest rates and  positively  impacted by an increase
in interest rates.  The interest rate gap is a measure of interest rate exposure
and is based upon the known  repricing  dates of certain assets and  liabilities
and assumed  repricing  dates of others.  See  "Financial  Review - Net Interest
Income and Margin."

The following table quantifies the Company's  interest rate exposure at December
31, 2000 based upon the known  repricing dates of certain assets and liabilities
and the assumed repricing dates of others.
<TABLE>
<CAPTION>

DISTRIBUTION OF REPRICING OPPORTUNITIES
(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 and money market investments         $45,715          ----          ----         ----          ----       $45,715
Investment securities-held to maturity-taxable             ----          $500          ----         ----        $1,732         2,232
Investment securities-held to maturity-non-taxable         ----          ----          $415       $1,542        14,438        16,395
Securities available for sale-taxable                     4,609         2,670         7,759       71,174        23,276       109,488
Securities available for sale-non-taxable                  ----          ----         -----        -----           672           672
Loans                                                   324,167        15,573        30,445       71,411        21,718       463,314
------------------------------------------------------------------------------------------------------------------------------------
 TOTAL EARNING ASSETS                                   374,491        18,743        38,619      144,127        61,836       637,816
------------------------------------------------------------------------------------------------------------------------------------
Interest checking, money market
  and savings                                           266,334          ----          ----         ----          ----       266,334
Certificates of deposit:
 Less than $100                                          18,870         8,751         9,568       16,566           419        54,174
  $100 or more                                           80,704        28,871        16,338        8,247           545       134,705
Repurchase agreements                                      ----          ----         9,645         ----          ----         9,645
Other borrowings                                          4,116            26         7,667        4,863         5,722        22,394
------------------------------------------------------------------------------------------------------------------------------------
 TOTAL INTEREST-BEARING LIABILITIES                     370,024        37,648        43,218       29,676         6,686       487,252
------------------------------------------------------------------------------------------------------------------------------------
INTEREST RATE GAP                                        $4,467      $(18,905)      $(4,599)    $114,451       $55,150      $150,564
====================================================================================================================================
CUMULATIVE INTEREST RATE GAP                             $4,467      $(14,438)     $(19,037)     $95,414      $150,564
=========================================================================================================================
Interest rate gap ratio                                    1.01          0.50          0.89         4.86          9.25
=========================================================================================================================
CUMULATIVE INTEREST RATE GAP RATIO                         1.01          0.96          0.96         1.20          1.31
=========================================================================================================================
</TABLE>

In evaluating the Company's exposure to interest rate risk, certain shortcomings
inherent  in the method of analysis  presented  in the  foregoing  table must be
considered.  For  example,  although  certain  assets and  liabilities  may have
similar maturities or periods to reprice, they may react in different degrees to
changes in market  interest rates.  Additionally,  the interest rates on certain
types of assets and  liabilities  may  fluctuate in advance of changes in market
interest  rates,  while  interest rates on other types may lag behind changes in
market  interest  rates.  Further,  certain  earning  assets have features which
restrict  changes in interest  rates on a short-term  basis and over the life of
the asset.  In considering  such  shortcomings,  the above table would reflect a
slightly asset-sensitive position. The Company considers the anticipated effects
of these various  factors when  implementing  its interest rate risk  management
activities, including the utilization of certain interest rate hedges.

A large  proportion  of the  Bank's  deposits  are non  interest-bearing  demand
deposits and are not included in the above table as they tend not to be interest
rate sensitive.  The average balance of these deposits was $116 million in 2000.
In addition,  the Bank's total tangible capital of approximately  $61 million in
2000 is not included as a funding source in the above table.  Lastly,  the table
includes the  repricing of the Bank's  non-maturity  deposits  (interest-bearing
demand,  money  market and savings  accounts) as  repricing  immediately.  These
accounts are not subject to any specific  interest rate adjustment  formulas and
are adjusted by management based upon the competitive environment and the Bank's
liquidity and asset/liability positions. Taking these factors into consideration
could alter the above ratios significantly.

The maturities  and yields of the investment  portfolio at December 31, 2000 are
shown below:
<PAGE>

<TABLE>
<CAPTION>

MATURITY AND YIELDS OF INVESTMENT SECURITIES
(dollars in thousands)
------------------------------------------------------------------------------------------------------------------------------------
                                                                                           Maturity
                                           -----------------------------------------------------------------------------------------
                                                                       After one year         After five years
                                             Within one year       within five years        within ten years      After ten years
                                  Carrying   ---------------------------------------------------------------------------------------
                                  Value      Amount      Yield       Amount       Yield      Amount       Yield     Amount     Yield
------------------------------------------------------------------------------------------------------------------------------------
<S>                              <C>         <C>          <C>         <C>          <C>        <C>         <C>        <C>       <C>
Securities available for sale:
  U. S. Treasury                   $1,527       ----      ----         $1,527      6.25%         ----     ----          ----   ----
  U. S. Government Agencies        33,649       ----      ----         30,687      6.36        $2,962      6.13%        ----   ----
  Mortgage backed (1)              57,567     $7,877       6.71%       29,214      6.35         9,502      6.56      $10,974   6.85%
  State and municipal (2)           5,313       ----      ----          4,116      6.99          ----     ----         1,197   7.34
  Trust preferred                   8,475      2,029       7.00          ----     ----           ----     ----         6,446   7.91
  Asset-backed                      3,629      2,377       6.38         1,252      7.43          ----     ----          ----   ----
-------------------------------------------------------           -------------            -------------          ------------
    TOTAL                         110,160     12,283                   66,796                  12,464                 18,617
-------------------------------------------------------           -------------            -------------          ------------
Securities held to maturity:
  U. S. Government Agencies           500        500       6.78          ----     ----           ----     ----          ----   ----
  State and municipal (2)          16,395        415       7.96         2,067      7.52         1,483      7.70       12,430   7.92
  Other                             1,732       ----      ----           ----     ----           ----     ----         1,732   6.00
-------------------------------------------------------           -------------            -------------          ------------
    TOTAL                          18,627        915                    2,067                   1,483                 14,162
-------------------------------------------------------           -------------            -------------          ------------
  TOTAL                          $128,787    $13,198       6.73%      $68,863      6.45%      $13,947      6.59%     $32,779   7.44%
====================================================================================================================================
<FN>
(1) Maturities of mortgage  backed  securities are based upon dealer  prepayment
projections.

(2) State and municipal  securities  are adjusted to a fully taxable  equivalent
basis using the federal statutory rate.
</FN>
</TABLE>

The  following  table  shows the  maturity  and  interest  rate  sensitivity  of
commercial, SBA, real estate construction and real estate term loans at December
31, 2000.  Approximately 77% of the commercial and real estate loan portfolio is
priced with floating  interest rates,  which limit the exposure to interest rate
risk on long-term loans.

<TABLE>
<CAPTION>

COMMERCIAL AND REAL ESTATE LOAN MATURITIES AND INTEREST RATE SENSITIVITY

                                                           Balances maturing            Interest Rate Sensitivity
-----------------------------------------------------------------------------------------------------------------------
                                                                                        Predeter-
                             Balances at                     One                          mined         Floating
                            December 31,     One year      year to          Over        interest        interest
                                2000          or less    five years      five years       rates           rates
-----------------------------------------------------------------------------------------------------------------------
<S>                           <C>             <C>          <C>              <C>          <C>            <C>
Commercial and other          $140,108        $94,865      $36,425          $8,818       $27,210        $112,899
SBA                             53,371          2,786       10,343          40,242         2,090          51,281
Real estate construction        54,667         49,467          227           4,972         8,093          46,574
Real estate-other              147,110         14,907       44,951          87,252        55,401          91,709
</TABLE>

The above table does not take into  account the  possibility  that a loan may be
renewed at the time of maturity.  In most  circumstances,  the Company  treats a
renewal  request in  substantially  the same  manner in which it  considers  the
request for an initial  extension of credit.  The Company does not have a policy
to automatically renew loans.

<PAGE>


CAPITAL AND LIQUIDITY

     Capital

The Company's book value per share was $16.97,  $14.81 and $14.13 as of December
31, 2000, 1999 and 1998,  respectively.  Tangible book value per share, adjusted
for  goodwill  and core  deposit  intangibles  was $16.18,  $13.81 and $13.01 at
December 31, 2000,  1999 and 1998,  respectively.  Shareholders'  equity was $64
million,  $53 million and $51 million as of December  31,  2000,  1999 and 1998,
respectively. Tangible shareholders' equity was $61 million, $50 million and $47
million as of December 31, 2000,  1999 and 1998,  respectively.  During 2000 the
Company did not repurchase any shares of its Common Stock.  During 1999 and 1998
the Company  repurchased 151 shares of its Common Stock for $3.9 million and 103
shares  of its  Common  Stock  for  $3.7  million,  respectively.  See  Notes to
Consolidated  Financial  Statements and "Business - Supervision  and Regulation"
for a discussion of the Company's capital requirements.

     Liquidity

Management strives to maintain a level of liquidity  sufficient to meet customer
requirements  for loan and lease  funding  and  deposit  withdrawals.  Liquidity
requirements are evaluated by taking into consideration  factors such as deposit
concentrations,  seasonality  and  maturities,  loan and lease  demand,  capital
expenditures and prevailing and anticipated economic conditions. SJNB's business
is  generated   primarily  through  customer  referrals  and  employee  business
development  efforts.  The Bank utilizes brokered deposits on a limited basis to
satisfy temporary liquidity needs.

The  Bank's  sources of  liquidity  consist of its  deposits  with other  banks,
overnight  funds  sold  to  correspondent   banks  and  short-term,   marketable
investments  net of short-term  borrowings.  On December 31, 2000,  consolidated
liquid  assets  totaled $110 million or 16% of  consolidated  total  assets,  as
compared  to $86 million or 15% of  consolidated  total  assets on December  31,
1999.  In addition to the liquid asset  portfolio,  as of December 31, 2000 SJNB
also had $22  million in  informal  lines of credit  available  with three major
commercial banks,  approximately $7.0 million of credit available at the Federal
Reserve  Discount  Window,  a  repurchase  agreement  for up to $24  million  in
additional  borrowings  and  $26  million  in SBA  guaranteed  loans  which  are
available for sale and could likely be sold within a 30-day period.

SJNB is primarily a business  and  professional  bank and, as such,  its deposit
base is more  susceptible  to  economic  fluctuations.  Accordingly,  management
strives  to  maintain a  balanced  position  of liquid  assets to  volatile  and
cyclical  deposits.  In their  normal  course of  business,  commercial  clients
maintain  balances in large  certificates  of deposit.  The  stability  of these
balances hinges upon, among other factors,  market conditions and each business'
seasonality.  Large  certificates  of deposit ($100 or more)  amounted to 23% of
total deposits on December 31, 2000 and 22% on December 31, 1999.

Liquidity  is  also  affected  by  investment  securities  and  loan  and  lease
maturities and the effect of interest rate  fluctuations on the marketability of
both assets and liabilities.  The loan and lease portfolio consists primarily of
floating rate,  short-term  loans.  On December 31, 2000,  approximately  26% of
total  consolidated  assets had  maturities  less than one year and 70% of total
consolidated  loans and  leases  had  floating  rates  tied to the prime rate or
similar indexes. The short-term nature of the loan and lease portfolio, and loan
agreements  which  generally  require  monthly  interest  payments,  provide the
Company with an additional secondary source of liquidity.

The Company's  liquidity is maintained by cash flows stemming from dividends and
management  fees from the Bank and the exercise of stock  options  issued to the
Bank's employees and directors. The amount of dividends from the Bank is subject
to certain  regulatory  restrictions as discussed in Note 17 of the Notes to the
Consolidated  Financial Statements and elsewhere within this Report.  Subject to
said restrictions,  at December 31, 2000, up to $16 million could have been paid
to  the  Company  by  the  Bank  without  regulatory  approval.   The  Company's
parent-only  financial  statements  are  presented  in Note 16 of the  Notes  to
Consolidated Financial Statements.  Dividends of $500 and $5.0 million were paid
to the Company by the Bank during 2000 and 1999, respectively.

There are no material commitments for capital expenditures in 2001 or beyond.


<PAGE>


EFFECTS OF INFLATION

The most direct  effect of  inflation on the Company is higher  interest  rates.
Because  a  significant  portion  of the  Bank's  deposits  are  represented  by
noninterest-bearing  demand  accounts,  changes in interest  rates have a direct
impact on the financial results of the Bank. See  "Asset/Liability  Management."
Another  effect of inflation is the upward  pressure on the Company's  operating
expenses.  Inflation did not have a material effect on the Bank's  operations in
2000, 1999 or 1998.

ITEM 7A:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company defines interest rate sensitivity as the measurement of the mismatch
in  repricing  characteristics  of assets,  liabilities  and off  balance  sheet
instruments at a specified  point in time. This mismatch (known as interest rate
sensitivity gap) represents the potential  mismatch in the change in the rate of
interest revenue accrual and interest expense that would result from a change in
interest  rates.   Mismatches  in  interest  rate  repricing  among  assets  and
liabilities arise primarily from the interaction of various customer  businesses
(i.e.,  types of loans and leases versus the types of deposits  maintained)  and
from management's  discretionary investment and funds gathering activities.  The
Company attempts to manage its exposure to interest rate  sensitivity.  However,
due to its size and direct  competition  from the major banks,  the Company must
offer  products  which are  competitive  in the market place,  even if less than
optimum with respect to its interest rate exposure.

The  Company's  balance  sheet  position  at  December  31,  2000  was  slightly
asset-sensitive,  based upon the  significant  amount of variable rate loans and
the repricing  characteristics of its deposit accounts. This position provides a
hedge against rising interest rates,  but has a detrimental  effect during times
of interest rate decreases.  Net interest revenues are negatively  impacted by a
decline in interest  rates.  The interest rate gap is a measure of interest rate
exposure  and is based  upon the known  repricing  dates of  certain  assets and
liabilities and assumed  repricing dates of others.  See "Financial Review - Net
Interest Income and Margin."

Commencing  in the third  quarter of 1999,  the Federal  Open  Market  Committee
("FOMC")  began a process of  increasing  interest  rates to offset the possible
increase in inflation and to slow down consumer spending. Through July 2000, the
FOMC had increased  interest rates 175 basis points. For the year ended December
31, 2000,  1999 and 1998,  net interest  margins on a fully  taxable  equivalent
basis were 5.86%, 5.65% and 5.94%, respectively. The effect of possible interest
rate changes is not precisely  determinable due to the many factors  influencing
the Bank's net interest margin, including repricing of deposits, a change in mix
of the loan,  lease and  deposit  portfolios  and other  borrowings,  changes in
relative  volumes,  the speed in which fixed rate loans and leases are repriced,
discretionary investment activities and other factors.

On January 3, 2001 and on January 31, 2001,  the Federal  Open Market  Committee
lowered its target for the interbank  borrowing  rate (the rate banks borrow and
lend to each other) by 50 basis points on each date to 5.5%.  This action caused
a  decrease  in  SJNB's  prime  rate  from 9.5% to 8.5%.  SJNB's  balance  sheet
position at December 31, 2000, as discussed above, was slightly  asset-sensitive
on a short-term basis, based on the significant amount of variable rate loans at
that date, most of which will have immediate reductions in their interest rates.
Rates paid on deposits  generally  will not be  readjusted  downward as quickly.
This position has a short-term  detrimental effect during times of interest rate
decreases  as net  interest  revenues  are  negatively  impacted by a decline in
interest rates. Future rate reductions will likely have a similar impact.

The Federal  Reserve's rate  reductions were made based on a slowing economy and
an attempt to forestall an economic  recession.  Management  believes,  however,
that the Bank should be able to achieve loan and deposit  growth in 2001 similar
to its historical  rates of growth.  As a result of the recent rate  reductions,
management anticipates the Company's net interest margin in the first quarter of
2001  will be in a range of 5.55%  to 5.65%  and for the year  within a range of
approximately  5.59% to 5.69%.  Based  upon the  Company's  currently  projected
growth rates and the anticipated range of the net interest margins for the year,
management  currently expects the Company's  full-year 2001 diluted earnings per
share to be  between  $2.95 and  $3.00.  As of the date of the  Report,  current
analyst  expectations have the Company's diluted earnings per share in the range
of $3.04 to $3.05 for the full year.

In evaluating the Company's exposure to interest rate risk, certain shortcomings
inherent  in the method of analysis  presented  in the  following  table must be
considered.  For  example,  although  certain  assets and  liabilities  may have
similar maturities or periods to reprice, they may react in different degrees to
changes in market  interest rates.  Additionally,  the interest rates on certain
types of assets and  liabilities  may  fluctuate in advance of changes in market
interest  rates,  while  interest rates on other types may lag behind changes in
market interest  rates.  Further,  certain  earning assets have features,  which
restrict  changes in interest  rates on a short-term  basis and over the life of
the asset.  The  Company  considers  the  anticipated  effects of these  various
factors  when  implementing  its  interest  rate  risk  management   activities,
including the utilization of certain interest rate hedges.

See Note 15 to the Consolidated  Financial  Statements on page 58 of this Report
for a discussion of the methodology and assumptions used in the following table.

<TABLE>
<CAPTION>

INTEREST RATE RISK ANALYSIS
(dollars in thousands)

------------------------------------------------------------------------------------------------------------------------December 31,
                                     Average         Expected Maturity/Principal Repayment December 31,                      1999
                                    Interest                                                               Total     Fair    Fair
                                      Rate      2001      2002      2003      2004     2005   Thereafter  Balance   Value    Value
------------------------------------------------------------------------------------------------------------------------------------
Interest-Sensitive Assets:

<S>                                     <C>     <C>       <C>       <C>       <C>       <C>     <C>       <C>      <C>      <C>
Fed funds sold and money market
  investments                           6.36%   $45,715      ----      ----     ----     ----      ----   $45,715  $45,730  $12,655
Investments:
   Fixed maturity                       6.24      1,998   $15,395   $18,289   $6,977     $931   $26,110    69,700   69,507   69,708
   Mortgage Backed                      6.90     12,722    14,284    11,318    6,752    4,380     6,664    56,120   57,567   38,666
   Federal Reserve Bank and
       Federal Home Loan Bank stock     6.00       ----      ----      ----     ----     ----     1,732     1,732    1,732    3,212
Loans and leases:
  Fixed rate                            8.38     26,693     5,612     6,091    6,517    2,811    48,201    95,926   95,724   93,985
  Variable rate                        11.11    151,095    21,317    13,258   13,165   23,440    94,186   316,461  325,231  273,151
  Leasing                               9.77     13,120     7,841     9,270    5,977    1,242      ----    37,451   36,799   20,379
  Factoring accounts receivable and
      asset based lending              16.94     13,476      ----      ----     ----     ----      ----    13,476   13,522    9,961
Interest-Sensitive Liabilities:
Deposits:
   Interest-bearing demand              3.11     39,270    11,781    11,781   15,707     ----      ----    78,539   76,597   75,247
   Money market                         4.55    107,211    35,737    35,739     ----     ----      ----   178,687  177,790  130,885
   Savings                              3.00         10     2,729     2,729    1,819    1,820      ----     9,107    8,628    7,905
   Certificates of deposit              5.89    163,102     7,287     5,890   11,637      864       100   188,880  189,519  159,761
Fed funds purchased and
  repurchase agreements                 7.01      9,645      ----      ----     ----     ----      ----     9,645    8,753   10,516
Federal Home Loan Bank advances         6.50     11,723     1,494     1,773    1,596       48     3,692    20,326   21,310   23,592
Other borrowings                        9.74       ----      ----      ----     ----     ----     2,068     2,068    2,156      525
Interest-Sensitive Off balance
sheet
  items:
Unused lines of credit and
  undisbursed loan commitments         11.09       ----      ----      ----     ----     ----      ----   201,250     ----     ----
</TABLE>

<PAGE>


TEM 8:  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The following section includes the Company's Consolidated Financial Statements:

     Independent Auditors' Report

     Consolidated Balance Sheets - December 31, 2000 and 1999

     Consolidated  Statements  of Income for the Years Ended  December 31, 2000,
        1999 and 1998

     Consolidated  Statements of Shareholders'  Equity and Comprehensive  Income
        for the Years Ended December 31, 2000, 1999 and 1998

     Consolidated  Statements  of Cash Flows for the Years  Ended  December  31,
        2000, 1999 and 1998

     Notes to Consolidated Financial Statements


<PAGE>

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors
SJNB Financial Corp.:

We have audited the accompanying  consolidated  balance sheets of SJNB Financial
Corp.  and  subsidiary  (the Company) as of December 31, 2000 and 1999,  and the
related   consolidated   statements   of   income,   shareholders'   equity  and
comprehensive  income,  and cash  flows for each of the years in the  three-year
period ended December 31, 2000. These consolidated  financial statements are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of SJNB Financial Corp.
and  subsidiary  as of  December  31,  2000 and 1999,  and the  results of their
operations and their cash flows for each of the years in the  three-year  period
ended  December 31, 2000, in conformity  with  accounting  principles  generally
accepted in the United States of America.

KPMG LLP

San Francisco, California
January 17, 2001


<PAGE>


<TABLE>
<CAPTION>

---------------------------------------------------------------------------------------------------------------------
SJNB FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2000 AND 1999

(in thousands)
---------------------------------------------------------------------------------------------------------------------
ASSETS                                                                              2000                1999
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>                 <C>
Cash and due from banks                                                              $20,831             $18,938
Interest-bearing deposits in other banks                                                 599               2,042
Federal funds sold                                                                     7,240               7,000
Money market investments                                                              38,475               5,651
Investment securities:
  Available for sale (includes securities subject to repurchase agreements
     Fair value: $10,024 at December 31, 2000 and $13,147 at December 31, 1999)      110,160              90,878

  Held to maturity (Fair value: $18,646 at December 31, 2000
    and $20,708 at December 31,1999)                                                  18,627              22,196
---------------------------------------------------------------------------------------------------------------------
    Total investment securities                                                      128,787             113,074
---------------------------------------------------------------------------------------------------------------------
Loans and leases                                                                     463,314             403,318
Allowance for loan and lease losses                                                   (7,393)             (6,412)
---------------------------------------------------------------------------------------------------------------------
  Loans and leases, net                                                              455,921             396,906
---------------------------------------------------------------------------------------------------------------------
Premises and equipment, net                                                            5,444               5,564
Accrued interest receivable                                                            3,968               3,202
Intangibles, net of accumulated amortization of  $3,059 at December 31, 2000
 and $2,620 at December 31, 1999.                                                      2,952               3,617
Other assets                                                                          23,560              12,087
---------------------------------------------------------------------------------------------------------------------
     Total                                                                          $687,777            $568,081
=====================================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
---------------------------------------------------------------------------------------------------------------------
Deposits:
  Non interest-bearing                                                              $130,130             $94,687
  Interest-bearing                                                                   455,213             379,046
---------------------------------------------------------------------------------------------------------------------
     Total deposits                                                                  585,343             473,733
---------------------------------------------------------------------------------------------------------------------
Federal Home Loan Bank advances                                                       20,326              22,503
Other borrowings                                                                      11,713              11,022
Accrued interest payable                                                               2,412               1,720
Other liabilities                                                                      4,400               5,884
---------------------------------------------------------------------------------------------------------------------
     Total liabilities                                                               624,194             514,862
---------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
  Preferred stock, no par value, 5,000 shares authorized;
     none issued or outstanding in 2000 or 1999.                                        ----                ----
  Common stock, no par value; 20,000 shares authorized ;
     3,747 and 3,593 shares issued and outstanding
    in 2000 and 1999 respectively.                                                    22,845              20,769
  Retained earnings                                                                   40,221              33,942
  Accumulated other comprehensive income (losses)                                        517              (1,492)
---------------------------------------------------------------------------------------------------------------------
     TOTAL SHAREHOLDERS' EQUITY                                                       63,583              53,219
---------------------------------------------------------------------------------------------------------------------
Commitments and contingencies                                                           ----                ----
---------------------------------------------------------------------------------------------------------------------
     Total                                                                          $687,777            $568,081
=====================================================================================================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>


<PAGE>


<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------
SJNB FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)                                          2000             1999            1998
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>              <C>              <C>
 INTEREST INCOME:
  Interest and fees on loans and leases                                           $44,942          $35,826          $31,252
  Interest on money market investments                                              2,358            1,536            1,750
  Interest on time deposits                                                            73              107              169
  Interest and dividends on investment securities available for sale                6,820            4,638            4,753
  Interest and dividends on investment securities held to maturity                  1,073            1,200            1,165
  Other interest and investment income (expense)                                       10              (50)              (9)
------------------------------------------------------------------------------------------------------------------------------
    TOTAL INTEREST INCOME                                                          55,276           43,257           39,080
------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE:
  Deposits:
    Interest-bearing demand                                                         2,244            2,189            2,158
    Money market and savings                                                        6,481            3,938            3,931
    Certificates of deposit of $100 or more                                         7,490            4,992            4,073
    Certificates of deposit of less than $100                                       3,237            2,627            1,604
Federal Home Loan Bank advances                                                     1,331            1,361            1,398
Other borrowings                                                                      867              585              313
------------------------------------------------------------------------------------------------------------------------------
    TOTAL INTEREST EXPENSE                                                         21,650           15,692           13,477
------------------------------------------------------------------------------------------------------------------------------
    NET INTEREST INCOME                                                            33,626           27,565           25,603
------------------------------------------------------------------------------------------------------------------------------
Provision for loan and lease losses                                                   725              862              436
------------------------------------------------------------------------------------------------------------------------------
     NET INTEREST INCOME AFTER PROVISION FOR
       LOAN AND LEASE LOSSES                                                       32,901           26,703           25,167
------------------------------------------------------------------------------------------------------------------------------
OTHER INCOME:
  Service charges on deposits                                                       1,067            1,044              950
  Other operating income                                                              599              737              724
  Increase in cash surrender value of life insurance                                  542              218             ----
  Net (loss) gain on sale of securities available for sale                           (602)            (133)             150
------------------------------------------------------------------------------------------------------------------------------
     TOTAL OTHER INCOME                                                             1,606            1,866            1,824
------------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES:
  Salaries and benefits                                                             9,642            9,180            8,048
  Occupancy                                                                         1,504            1,454            1,310
  Merger related costs, nonrecurring                                                3,424              487             ----
  Other                                                                             5,786            5,430            5,104
------------------------------------------------------------------------------------------------------------------------------
     TOTAL OTHER EXPENSES                                                          20,356           16,551           14,462
------------------------------------------------------------------------------------------------------------------------------
     INCOME BEFORE INCOME TAXES                                                    14,151           12,018           12,529
Income taxes                                                                        5,527            4,901            5,040
------------------------------------------------------------------------------------------------------------------------------
     NET INCOME                                                                    $8,624           $7,117           $7,489
==============================================================================================================================

BASIC EARNINGS PER SHARE                                                           $2.35            $2.04            $2.06
==============================================================================================================================
DILUTED EARNINGS PER SHARE                                                         $2.24            $1.91            $1.92
==============================================================================================================================
Average common shares outstanding                                                   3,665            3,491            3,635
==============================================================================================================================
Average common share equivalents outstanding                                        3,854            3,722            3,902
==============================================================================================================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>


<PAGE>


<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------------
SJNB FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
------------------------------------------------------------------------------------------------------------------------------------
                                                                                                       Accumulated         Total
                                                                                                          Other            Share-
                                                                          Common       Retained       Comprehensive        holders'
(in thousands, except per share amounts)                       Shares      Stock       Earnings      Income (Losses)       Equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>         <C>         <C>               <C>            <C>
BALANCES, DECEMBER 31, 1997                                      3,640       $23,505     $23,353           $(94)          $46,764
------------------------------------------------------------------------------------------------------------------------------------
Net income for the year                                           ----          ----       7,489           ----             7,489
Change in net unrealized gain/loss on securities:
   Unrealized gains arising during the year, net of taxes         ----          ----        ----            329               329
   Reclassification adjustment for losses included in
        income, net of taxes                                      ----          ----        ----             47                47
                                                                                                                    ---------------
Comprehensive income                                                                                                        7,865
                                                                                                                    ---------------
Stock options exercised                                             41           572        ----           ----               572
Common stock repurchase                                           (103)       (3,562)       (180)          ----            (3,742)
Issuance of common stock for Epic Funding Corp.                     12           501        ----           ----               501
Tax benefit from stock options exercised                          ----           445        ----           ----               445
Cash dividends ($0.56 per share)                                  ----          ----      (1,666)          ----            (1,666)
------------------------------------------------------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1998                                      3,590        21,461      28,996            282            50,739
------------------------------------------------------------------------------------------------------------------------------------
Net income for the year                                           ----          ----       7,117           ----             7,117
Other comprehensive income-Unrealized loss
  on securities held for sale, net                                ----          ----        ----         (1,774)           (1,774)
                                                                                                                     ---------------
Comprehensive income                                                                                                        5,343
                                                                                                                    ---------------
Common stock issued                                                 60         1,800        ----           ----             1,800
Stock options exercised                                             93           849        ----           ----               849
Common stock repurchase                                           (150)       (3,389)       (522)          ----            (3,911)
Tax benefit from stock options exercised                          ----            48        ----           ----                48
Cash dividends ($0.56 per share)                                  ----          ----      (1,649)          ----            (1,649)
------------------------------------------------------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1999                                      3,593        20,769      33,942         (1,492)           53,219
------------------------------------------------------------------------------------------------------------------------------------
Net income for the year                                           ----          ----       8,624           ----             8,624
Other comprehensive income-Unrealized gain
  on securities held for sale, net                                ----          ----        ----          2,009             2,009
                                                                                                                     ---------------
Comprehensive income                                                                                                       10,633
                                                                                                                     ---------------
Stock options exercised                                            154         1,557        ----           ----             1,557
Tax benefit from stock options exercised                          ----           519        ----           ----               519
Cash dividends ($0.64 per share)                                  ----          ----      (2,345)          ----            (2,345)
------------------------------------------------------------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 2000                                      3,747       $22,845     $40,221           $517           $63,583
====================================================================================================================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>


<PAGE>


<TABLE>
<CAPTION>

----------------------------------------------------------------------------------------------------------------------------------
SJNB FINANCIAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000,  1999 AND 1998
----------------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)                                                           2000            1999               1998
----------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:

<S>                                                                              <C>             <C>              <C>
  Net income                                                                     $8,624          $7,117           $7,489
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Provision for loan and lease losses                                           725             862              436
      Depreciation and amortization                                                 844           1,279              790
      Amortization of intangibles                                                   439             456              457
      Deferred tax benefit                                                        1,199             361               57
      Loss (gain) on sale of securities available for sale                          602             133             (150)
      Net gain (loss) on sale of leased assets                                    -----              35              (12)
      Amortization of (discount) premium on investment securities, net             (185)             10              (49)
      Decrease (increase) in intangible assets                                      226             (45)             (50)
      Increase in accrued interest receivable and other assets                   (5,304)         (3,561)            (393)
      (Decrease) increase in accrued interest payable and other liabilities        (618)            (24)           1,702
----------------------------------------------------------------------------------------------------------------------------------
          Net cash provided by operating activities                               6,552           6,623           10,277
----------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
  Proceeds from sale or maturities of securities available for sale              38,636          23,423           58,974
  Maturities of securities held to maturity                                       3,757           6,725           11,355
  Purchase of securities available for sale                                     (54,926)        (53,991)         (40,071)
  Purchase of securities to be held to maturity                                    (150)         (5,868)          (6,703)
  Net increase in loans and leases                                              (59,898)        (64,996)         (43,070)
  Capital expenditures                                                             (723)         (3,381)            (908)
  Purchase of life insurance policies                                            (9,070)          -----           (3,953)
  Cash used to acquire Epic Funding Corp.                                         -----           -----             (206)
----------------------------------------------------------------------------------------------------------------------------------
          Net cash used in investing activities                                 (82,374)        (98,088)         (24,582)
----------------------------------------------------------------------------------------------------------------------------------
Cash flow from financing activities:
  Net increase in deposits                                                      111,610          67,867           44,466
  Decrease in Federal Home Loan Bank borrowings                                  (2,177)           (169)            (287)
  Increase (decrease) in other borrowings                                           691           3,997          (11,000)
  Cash dividends                                                                 (2,345)         (1,649)          (1,666)
  Common stock repurchased                                                        -----          (3,911)          (3,742)
  Common stock issued                                                             -----           1,800            -----
  Proceeds from stock options exercised                                           1,557             849              572
----------------------------------------------------------------------------------------------------------------------------------
          Net cash provided by financing activities                             109,336          68,784           28,343
----------------------------------------------------------------------------------------------------------------------------------
          Net increase (decrease) in cash and equivalents                        33,514         (22,681)          14,038
Cash and equivalents at beginning of year                                        33,631          56,312           42,274
----------------------------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of year                                             $67,145         $33,631          $56,312
==================================================================================================================================
Other cash flow information:
  Interest paid                                                                 $20,958         $15,268          $13,450
  Income taxes paid                                                               5,832           5,544            4,016
==================================================================================================================================
Noncash transactions:
   Purchase of Epic Funding Corp.:
    Leases                                                                         -----           -----            $149
    Other assets                                                                   -----           -----             789
----------------------------------------------------------------------------------------------------------------------------------
      Total assets acquired                                                        -----           -----             938
  Cash paid and expenses incurred                                                  -----           -----            (206)
  Liabilities assumed:
    Other liabilities                                                              -----           -----             231
----------------------------------------------------------------------------------------------------------------------------------
      Total liabilities assumed                                                    -----           -----             231
----------------------------------------------------------------------------------------------------------------------------------
Common stock issued, net of registration costs                                     -----           -----            $501
==================================================================================================================================
<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>


<PAGE>


Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SJNB Financial Corp.  ("Company") is a bank holding company registered under the
Bank Holding Company Act of 1956, as amended. The Company was incorporated under
the laws of the State of California on April 18, 1983.  Its principal  office is
located at One North Market Street, San Jose, California, 95113.

The Company owns 100% of the issued and  outstanding  common  shares of San Jose
National  Bank  (referred  to  herein as  "SJNB"  or "the  Bank").  The Bank was
incorporated on November 23, 1981 and commenced business in San Jose, California
on June 10,  1982.  Its main office is located at One North Market  Street,  San
Jose, California, 95113. SJNB engages in the general commercial banking business
with special  emphasis on the banking  needs of the  business  and  professional
communities  in San Jose  and the  surrounding  areas.  The  Financial  Services
Division is located at 95 South Market,  San Jose,  California,  95113, where it
engages  in the  factoring  of  accounts  receivable.  The  Bank's  wholly-owned
subsidiary,  Epic  Funding  Corp.  is located in Danville,  California  where it
shares  an office  with the  Bank's  Danville  branch.  Epic  Funding  Corp.  is
primarily in the business of originating  equipment lease  financing  throughout
the United States, but primarily in the State of California.

Dollars and share amounts are in thousands in these footnotes,  except per share
amounts or as otherwise noted.

The  accounting  policies of SJNB  Financial  Corp.  and San Jose  National Bank
(collectively,   the  "Company")  are  in  accordance  with  generally  accepted
accounting  principles  and  conform to  general  practices  within the  banking
industry.

a.  Consolidation

The consolidated financial statements include the accounts of SJNB. All material
intercompany  accounts and transactions have been eliminated in the consolidated
financial statements.

b.  Investment Securities

The Company accounts for its investment securities as follows:

AVAILABLE FOR SALE-Investment securities that are acquired without the intent to
hold until  maturity are classified as available for sale.  Such  securities are
carried at market  value.  Market value  adjustments  are reported as a separate
component of other comprehensive  income included in shareholders'  equity until
realized.

HELD TO MATURITY-Investment  securities purchased with the intent and ability to
hold them until maturity are classified as held to maturity. Such securities are
carried at cost,  adjusted  for  accretion  of  discounts  and  amortization  of
premiums.

Investment  securities  purchased are recorded as of their trade date. Accretion
of discounts and amortization of premiums arising at acquisition are included in
income using methods approximating the interest method. Gains or losses on sales
of  securities,  if any, are  determined  based on the  specific  identification
method. The carrying values of individual  investment securities are reduced, if
necessary,  through  write-downs to reflect other than temporary  impairments in
value.

In  connection  with the  Company's  adoption  of SFAS No. 133,  "Accounting for
Derivative Instruments and Hedging  Activities"  as described in note 1(f) below
the Company  elected to reclassify all of its "Held to maturity"  investments to
"available  for  sale" as of  January  1,  2001.  The  impact of this will be to
account for the unrealized gain or loss in the held to maturity securities as an
additional  component of other  comprehensive  income included in  shareholders'
equity  until  realized.  The amount of the net  unrealized  gain in the held to
maturity classification was $19 as of December 31, 2000.

c.  Loans and Leases and Allowance for Loan and Lease Losses

Loans and leases  generally  are  stated at the  principal  amount  outstanding.
Interest  on loans is credited to income on a simple  interest  basis.  Unearned
revenue on direct  financing  leases is accreted over the lives of the leases in
decreasing amounts to provide a constant rate of return on the net investment in
the  leases.  Loan  origination  fees and direct  origination  costs,  including
initial direct cost of lease origination are deferred and amortized to income by
a method  approximating  the level yield method over the estimated  lives of the
underlying  loans.  The accrual of interest on loans and leases is  discontinued
and any  accrued  and  unpaid  interest  is  reversed  when,  in the  opinion of
management,  there is significant doubt as to the  collectibility of interest or
principal  or when the payment of principal or interest is ninety days past due,
unless the loan is well-secured and in the process of collection.

The allowance for loan and lease losses is a valuation  allowance  maintained to
provide for future loan losses through charges to current operating expense. The
allowance  is based upon a continuing  review of loans and leases by  management
which includes  consideration  of changes in the character of the loan and lease
portfolio,  current and anticipated economic conditions, past lending experience
and such other factors which, in management's  judgment,  deserve recognition in
estimating potential loan losses. In addition,  regulatory examiners may require
the Company to recognize  additions to the  allowance  based on their  judgments
about information available to them at the time of their examinations.

Impaired loans are those in which,  based on current  information and events, it
is probable that the Company will be unable to collect all amounts due according
to the contractual  terms of the loan or lease  agreement,  including  scheduled
interest  payments.  The  Company  measures  such loans and leases  based on the
present value of future cash flows discounted at the loan's or lease's effective
interest rate, or at the loan's or lease's market value or the fair value of the
collateral if the loan is secured.  If the  measurement  of the impaired loan or
lease is less than the recorded investment, impairment is recognized by creating
or adjusting an existing allocation of the allowance for loan and lease losses.

d.  Premises and Equipment

Premises and equipment are stated at cost,  less  accumulated  depreciation  and
amortization.  Depreciation  and  amortization  are charged to expense  over the
estimated useful lives of the assets on a straight-line basis as follows:

      Buildings                              30 years
      Furniture and equipment              3-10 years
      Improvements                         7-15 years

e.  Intangibles

Goodwill is amortized using the straight-line method over 15 years. Core deposit
intangibles are amortized using an accelerated method over ten years.

On a periodic  basis,  the Company  reviews its intangible  assets for events or
changes in  circumstances  that may  indicate  that the  carrying  amount of the
assets may not be  recoverable.  Should such a change indicate that the value of
such intangibles may be impaired,  an evaluation of the recoverability  would be
performed, using undiscounted cash flows, prior to any writedown of the assets.

f. Derivative Instruments and Hedging Activities

Interest  rate  instruments  are  entered  into in  conjunction  with the Bank's
asset/liability  management.  As these  contracts  are  entered  into only after
meeting the  accounting  criteria for a hedge,  and as long as they  continue to
meet such criteria, changes in market value are deferred and the net settlements
are  accrued  as  adjustments  to  interest  income.   The  Bank  currently  has
outstanding   a  callable   interest   rate  swap  for  $10  million  it  issued
simultaneously  with a $10 million  ten-year  callable  synthetic  floating rate
certificate  of deposit and a three-year $20 million  prime/fixed  interest rate
swap, which are accounted for as hedges.

In June  1998,  the  FASB  issued  SFAS  No.  133,  "Accounting  for  Derivative
Instruments  and Hedging  Activities".  This  Statement  requires that an entity
recognize all  derivatives  as either assets or  liabilities in the statement of
financial  position and measure those  instruments at fair value.  In June 1999,
the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities-Deferral  of Effective  Date". In June 2000, the FASB issued SFAS No.
138,  "Accounting  for  Certain  Derivative   Instruments  and  Certain  Hedging
Activities",  an  amendment  of SFAS No. 133.  SFAS No. 138  addresses a limited
number of issues  causing  implementation  difficulties  for entities  which are
required to apply SFAS No. 133. SFAS No. 137 deferred the effective  date to the
fiscal  quarters of fiscal  years  beginning  after June 15,  2000.  The Company
adopted SFAS No. 133, as amended on January 1, 2001 and there was no effect.  As
noted  above the Bank  currently  has  outstanding  $30  million  in  derivative
instruments  as defined  by SFAS No.  133.  These  derivative  instruments  will
qualify as cash flow or fair market hedges in accordance with the Statement.
g.  Income Taxes

The Company  accounts  for income  taxes using the asset and  liability  method.
Under this method,  deferred tax assets and  liabilities  are recognized for the
future tax consequences of differences  between the financial statement carrying
amounts of  existing  assets and  liabilities  and their  respective  tax bases.
Deferred  tax  assets and  liabilities  are  measured  using  enacted  tax rates
expected  to apply to  taxable  income  in the  years in which  those  temporary
differences are expected to be recovered or settled.  The effect on deferred tax
assets and  liabilities  of a change in tax rates is recognized in income in the
period that includes the enactment date.

Under the asset and liability  method,  deferred tax assets are  recognized  for
deductible   temporary   differences   and   operating   loss  and  tax   credit
carryforwards,  and then a valuation  allowance  is  established  to reduce that
deferred tax asset if it is "more likely than not" that the related tax benefits
will not be realized.

h.  Stock-based Compensation

The  Company  continues  to  account  for  stock-based  compensation  using  the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting  for Stock  Issued to  Employees."  The Company  only  grants  stock
options  at  fair  market  value.  SFAS  No.  123, "Accounting  for  Stock-Based
Compensation,"  established  accounting  and  disclosure  requirements  using  a
fair-value-based  method of accounting  for  stock-based  employee  compensation
plans.  The Company has elected to remain on its current method of accounting as
described above, and has adopted the disclosure requirements of SFAS No. 123.

i.  Net Income Per Share

Basic net income per share is computed by  dividing  net income by the  weighted
average number of shares of common stock  outstanding  during the year.  Diluted
net income per share is computed by dividing net income by the weighted  average
number of  shares  of  common  stock  outstanding  during  the year plus  shares
issuable  assuming  exercise  of  all  employee  stock  options,   except  where
anti-dilutive.

j.  Comprehensive Income

Effective  January  1,  1998,  the  Company  adopted  SFAS No.  130,  "Reporting
Comprehensive Income", which establishes new rules for the reporting and display
of comprehensive income and its components. Comprehensive income is a part of an
enterprises  financial  performance and, as described in SFAS No. 130,  includes
net income and other comprehensive income such as revenues,  expenses, gains and
losses not included in net income.  The adoption of this statement had no impact
on net income or shareholders'  equity.  SFAS No. 130 requires the Company's net
unrealized  gains or losses on  available-for-sale  securities to be included in
other comprehensive income. Comprehensive income is included in the statement of
shareholders' equity for the periods presented.

k.  Statement of Cash Flows

For purposes of reporting cash flows, cash and cash equivalents  include cash on
hand, amounts due from banks, fed funds sold and money market investments.

l.  Use of Estimates

Management  of the  Company  has  made a number  of  estimates  and  assumptions
relating  to the  reporting  of assets and  liabilities  and the  disclosure  of
contingent  asset and  liabilities  to prepare  these  financial  statements  in
conformity with generally accepted accounting  principles.  Actual results could
differ from those estimates.

m.  Impairment of Long-lived Assets

Long-lived  assets  and  certain  identifiable  intangibles  held and used by an
entity are reviewed for impairment  whenever events or changes indicate that the
carrying  amount  of an  asset  may  not be  recoverable.  The  Company  has not
identified  any  long-lived  assets  or  identifiable   intangibles  which  were
impaired.

n.  Accounting  for  Transfers   and   Servicing   of   Financial   Assets  and
    Extinguishments of Liabilities

SFAS No. 125,  "Accounting  for Transfers and Servicing of Financial  Assets and
Extinguishments of Liabilities", provides accounting and reporting standards for
transfers and servicing of financial assets and  extinguishments  of liabilities
based on consistent application of a financial-components  approach that focuses
on control.  It distinguishes  transfers of financial assets that are sales from
transfers that are secured borrowings.  Under this approach, after a transfer of
financial  assets,  an entity  recognizes all financial and servicing  assets it
controls and liabilities it has incurred and derecognizes financial assets it no
longer  controls  and  liabilities  that have been  extinguished.  SFAS No. 140,
"Accounting for Transfers and Servicing of Financial Assets and  Extinguishments
of  Liabilities",  was issued in September  2000 and replaces the  standards for
accounting  for  securitizations  and other  transfers of  financial  assets and
collateral  and  requires  certain  disclosures.  The  Company  did not have any
significant  transactions  in  which  these  Statements  had any  impact  on its
consolidated financial statements.
o.  Segments of an Enterprise and Related Information

SFAS  No.  131,  "Disclosures  About  Segments  of  an  Enterprise  and  Related
Information",  requires certain  information about the operating segments of the
Company. The objective of requiring  disclosures about segments of an enterprise
and related  information is to provide  information about the different types of
business  activities in which an enterprise  engages and the different  economic
environments in which it operates to help users of financial  statements  better
understand  its  performance,  better assess its prospects for future cash flows
and make more informed  judgments  about the enterprise as a whole.  The Company
has determined it has three segments:  general commercial  banking,  leases, and
factoring/asset  based  financing.  Neither  leasing nor  factoring/asset  based
financing  meet the required  thresholds  for  disagregation  and  therefore the
disclosures and related information about such segments has not been included in
the consolidated financial statements. At such time that these segments meet the
required thresholds, such disclosures and other information will be included.

p.  Reclassification

Certain  1999 and 1998  amounts  have been  reclassified  to conform to the 2000
presentation.

NOTE 2 - ACQUISITIONS

On January 5, 2000, the Company acquired all of the outstanding shares of common
stock of  Saratoga  Bancorp,  the parent  company  of  Saratoga  National  Bank,
pursuant to an exchange of the  Company's  common  stock for all common stock of
Saratoga Bancorp. Saratoga National Bank, headquartered in Saratoga, California,
operated  three  branches  and as of  the  acquisition  date  had  $142  million
(unaudited) in assets and $103 million  (unaudited) in deposits.  Saratoga's San
Jose office,  which was located near SJNB's San Jose  office,  was  consolidated
into  SJNB's San Jose  office in January  2000.  The  shareholders  of  Saratoga
received 0.70 shares of the Company's common stock for each outstanding share of
Saratoga  common stock.  Based on the closing  price of the  Company's  stock on
January 5, 2000 of $29.125,  the transaction was valued at  approximately  $34.2
million,  excluding  the value of any  unexercised  options,  and each  Saratoga
shareholder received SJNB common stock valued at $20.39 per share for each share
of Saratoga  common  stock.  The merger has been  accounted  for as a pooling of
interests.

On May 22,  1998,  SJNB  acquired  all of the stock of a private  company,  Epic
Funding Corporation (Epic),  pursuant to a definitive  agreement dated April 13,
1998. In connection  with the  acquisition,  which was  structured as a tax-free
reorganization  and  accounted  for as a  purchase  transaction  for  accounting
purposes,  SJNB issued  12.2 shares of its common  stock and paid $110 to Epic's
sole  shareholder  in exchange for all of Epic's  outstanding  stock.  The total
purchase price was $611, while Epic's fair value of net assets was $28; goodwill
amounted to $759 including  certain expenses of the  transaction.  Epic provides
direct and vendor lease programs to manufacturers and equipment users throughout
California  and  across  parts of the  United  States.  Epic is a  wholly  owned
subsidiary  of the Bank.  Epic's  office is  located  in  Danville,  California,
together  with a small de novo  branch  of the Bank at the same  facility  which
opened July 1, 1998.

NOTE 3 - CASH AND DUE FROM BANKS

The Federal Reserve  requires the Bank to maintain  average reserve balances for
certain deposit  balances.  Required reserves at December 31, 2000 were $746 and
there were no required reserves in 1999.

NOTE 4 - INVESTMENT SECURITIES

Investment  securities  as of  December  31,  2000 and 1999  are  summarized  as
follows:
<PAGE>

<TABLE>
<CAPTION>

(DOLLARS IN THOUSANDS)                                              DECEMBER 31, 2000
----------------------------------------------------------------------------------------------------
                                                                      UNREALIZED             FAIR
                                                               --------------------------
                                                      COST         GAINS         LOSSES      VALUE
----------------------------------------------------------------------------------------------------
<S>                                                   <C>            <C>          <C>        <C>
AVAILABLE FOR SALE:
  U.S. Treasury                                       $1,496          $31        -----       $1,527
  U. S. Government Agencies                           33,444          295         $(90)      33,649
  Mortgage Backed                                     56,120        1,567         (120)      57,567
  State and municipal                                  5,208          109           (4)       5,313
 Trust preferred                                       9,050           32         (607)       8,475
 Asset-backed                                          3,607           29           (7)       3,629
----------------------------------------------------------------------------------------------------
    TOTAL AVAILABLE FOR SALE                         108,925        2,063         (828)     110,160
----------------------------------------------------------------------------------------------------
HELD TO MATURITY:
  U.S. Government agencies                               500            1        -----          501
  State and municipal (nontaxable)                    16,395          159         (141)      16,413
----------------------------------------------------------------------------------------------------
    TOTAL HELD TO MATURITY                            16,895          160         (141)      16,914
----------------------------------------------------------------------------------------------------
Federal Reserve Bank/Federal Home Loan Bank Stock      1,732        -----        -----        1,732
----------------------------------------------------------------------------------------------------
    TOTAL                                             18,627          160         (141)      18,646
----------------------------------------------------------------------------------------------------
      TOTAL INVESTMENT SECURITIES PORTFOLIO         $127,552       $2,223        $(969)    $128,806
====================================================================================================

                                                                 DECEMBER 31, 1999
------------------------------------------------------------------------------------------------------
                                                                      UNREALIZED             FAIR
                                                               --------------------------
                                                      COST         GAINS         LOSSES      VALUE
----------------------------------------------------------------------------------------------------
AVAILABLE FOR SALE:
  U.S. Treasury                                       $2,496           $3        -----       $2,499
  U. S. Government Agencies                           37,337            8        $(732)      36,613
  Mortgage Backed                                     38,560        -----         (564)      37,996
  Asset-backed                                         2,000        -----          (22)       1,978
  Trust Preferred                                      7,062        -----         (479)       6,583
  Mutual funds                                         5,646        -----         (437)       5,209
----------------------------------------------------------------------------------------------------
    TOTAL AVAILABLE FOR SALE                          93,101           11       (2,234)      90,878
----------------------------------------------------------------------------------------------------
HELD TO MATURITY:
  U.S. Government agencies                               499            3        -----          502
  State and municipal (nontaxable)                    17,828            8       (1,512)      16,324
  Mortgage Backed                                        657           13        -----          670
----------------------------------------------------------------------------------------------------
    TOTAL HELD TO MATURITY                            18,984           24       (1,512)      17,496
----------------------------------------------------------------------------------------------------
Federal Reserve Bank/Federal Home Loan Bank Stock      3,212        -----        -----        3,212
----------------------------------------------------------------------------------------------------
    TOTAL                                             22,196           24       (1,512)      20,708
----------------------------------------------------------------------------------------------------
      TOTAL INVESTMENT SECURITIES PORTFOLIO         $115,297          $35      $(3,746)    $111,586
====================================================================================================
</TABLE>

As of December 31, 2000 and 1999  investment  securities with carrying values of
approximately  $54.9 million and $36.9  million,  respectively,  were pledged as
collateral for deposits of public funds and other  purposes.  Investments in the
Federal Reserve Bank and Federal Home Loan Bank stock is carried at cost,  which
is approximately equal to their market value.

Mutual   funds   consist   of   several  funds   invested  in U.  S.  Government
securities and government issued adjustable rate mortgages (ARMS).

The  following  tables  provide  the  scheduled   maturities  of  the  Company's
investment securities portfolio as of December 31, 2000:
<PAGE>

MATURITY OF INVESTMENT SECURITIES PORTFOLIO
(dollars in thousands)
                                                      AMORTIZED          FAIR
           SECURITIES AVAILABLE FOR SALE                COST            VALUE

                                                   -----------------------------
Due in one year or less                                   $1,998         $2,029
Due after one year through five years                     42,050         42,928
Due after five years through ten years                    18,090         18,204
Due after ten years                                       46,787         46,999
                                                   -----------------------------
  TOTAL                                                  108,925        110,160
                                                   -----------------------------
            SECURITIES HELD TO MATURITY

Due in one year or less                                      915            918
Due after one year through five years                      2,067          2,092
Due after five years through ten years                     1,483          1,498
Due after ten years                                       12,430         12,406
                                                   -----------------------------
  TOTAL                                                   16,895         16,914
                                                   -----------------------------
             NON-MATURITY INVESTMENTS

Held to maturity - FRB/FHLB Stock                          1,732          1,732
                                                   -----------------------------
  TOTAL                                                    1,732          1,732
                                                   -----------------------------
    TOTAL INVESTMENT SECURITIES                         $127,553       $128,806
                                                   =============================


Interest and dividend income earned on investment securities for the years ended
December 31, 2000, 1999 and 1998 are as follows:

INTEREST AND DIVIDEND INCOME
<TABLE>
<CAPTION>

                                                                                   INTEREST AND DIVIDEND INCOME

(dollars in thousands)                                                     2000             1999                   1998
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>              <C>                    <C>
Securities available for sale:
  U.S. Treasury                                                              $99             $146                   $378
  U.S. Government agencies                                                 2,147            2,964                  3,736
  State and municipal (nontaxable)                                            29             ----                   ----
  State and municipal (taxable)                                              115             ----                   ----
  Mortgage Backed                                                          3,257              851                    301
  Asset-backed                                                               376               72                   ----
  Trust preferred                                                            645              300                   ----
  Mutual funds                                                               152              305                    338
Securities held to maturity:
  U.S. Treasury                                                             ----               78                     97
  U.S. Government agencies                                                    34              116                    260
  State and municipal (nontaxable)                                           849              757                    518
  Mortgage Backed                                                             26               89                    146
Federal Reserve Bank/Federal Home Loan Bank Stock                            164              160                    144
---------------------------------------------------------------------------------------------------------------------------------
     INTEREST AND DIVIDEND INCOME                                         $7,893           $5,838                 $5,918
=================================================================================================================================
</TABLE>

NOTE 5 - LOANS

A summary of loans as of December 31, 2000, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>

(dollars in thousands)                                                       2000             1999                  1998
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>              <C>                   <C>
Commercial and other                                                     $140,108         $123,873              $110,604
SBA                                                                        53,371           49,949                37,019
Leasing                                                                    37,450           20,837                 5,618
Factoring and asset-based                                                  13,476            9,901                 7,393
Real estate construction                                                   54,667           48,410                51,963
Real estate term                                                          147,110          139,103               113,461
Consumer                                                                   18,262           12,448                10,839
Unearned fee income                                                        (1,130)          (1,203)                 (954)
--------------------------------------------------------------------------------------------------------------------------------
  Total loan and lease portfolio                                          463,314          403,318               335,943
Less allowance for loan or lease losses                                    (7,393)          (6,412)               (5,494)
--------------------------------------------------------------------------------------------------------------------------------
     LOANS AND LEASES, NET                                               $455,921         $396,906              $330,449
====================================================================================================================================
</TABLE>

Concentrations  of credit risk arise when a number of  customers  are engaged in
similar business  activities,  or activities in the same geographic  region,  or
have  similar  features  that would  cause  their  ability  to meet  contractual
obligations to be similarly affected by changes in economic conditions. Although
the Company has a diversified loan and lease portfolio, a substantial portion of
its customers' ability to honor contracts is reliant upon the economic stability
of the Santa Clara Valley,  which in some degree relies on the stability of high
technology  companies in its "Silicon  Valley."  Loans and leases are  generally
made on the basis of a secure  repayment  source,  which is based on a  detailed
cash flow analysis; however, collateral is generally a secondary source for loan
qualification.

Approximately  32% of the Company's loan and lease  portfolio is made up of real
estate  term  loans.  This  category  of real  estate  loans  includes  loans on
income-bearing  or  owner-occupied  commercial  properties  and land  loans.  In
addition,  approximately  12% of the loan and lease portfolio is made up of real
estate  construction loans. These loans consist of approximately 30% residential
and 70%  commercial.  Included in consumer  loans are prime equity loans of $8.1
million or representing approximately 1.7% of the total loan portfolio. Included
in the commercial  category are mortgage  warehouse loans,  loans to real estate
developers for short-term  investment  purposes and loans to  nondevelopers  for
real estate  investment  purposes that amount to  approximately  9% of the total
loan  portfolio.  Included in the SBA  category are real estate piggy back loans
that amount to approximately  2% of the total loan portfolio.  In the aggregate,
approximately  55% of the loan  portfolio is directly  related to real estate or
real  estate  interests.  Approximately  30%  of the  total  loan  portfolio  is
commercial  loans;  however,  no  particular  industry  represents a significant
portion of such loans.

The  following is an analysis of the allowance for loan and lease losses for the
years ended December 31, 2000, 1999 and 1998:
<TABLE>
<CAPTION>

(dollars in thousands)                               2000                         1999                         1998
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>                          <C>                          <C>
Balance, beginning of year                            $6,412                       $5,494                       $5,071
Provision for loan or lease losses                       725                          861                          436
Charge-offs                                             (411)                        (165)                        (299)
Recoveries                                               667                          222                          286
--------------------------------------------------------------------------------------------------------------------------------
BALANCE, END OF YEAR                                  $7,393                       $6,412                       $5,494
================================================================================================================================
</TABLE>

At December 31, 2000 and 1999, impaired loans totaled $421 and $1.4 million with
a  corresponding  valuation  allowance of $284 and $224,  respectively.  For the
years ended  December  31, 2000 and 1999,  the average  recorded  investment  in
impaired  loans was  approximately  $828 and  $475,  respectively.  The  Company
recognized $72, $41 and $60 of interest on impaired loans (during the portion of
the year they were impaired), of which $72, $40 and $8 related to impaired loans
for which interest  income is recognized on the cash basis,  for the years ended
December 31, 2000, 1999 and 1998, respectively.

The  balance  of  nonaccrual  loans  as  of  December  31,  2000  and  1999  was
approximately $421 and $1.4 million, respectively. The effect on interest income
had these loans been performing in accordance with contractual  terms was $62 in
2000, $132 in 1999, and $22 in 1998.  Income actually  recognized on these loans
was $16 in 2000, $112 in 1999 and $21 in 1998.

The Company has made loans to executive officers, directors and their affiliates
in the ordinary course of business. An analysis of activity with respect to such
loans during the years ended December 31, 2000, 1999 and 1998 is as follows:

<TABLE>
<CAPTION>

(dollars in thousands)                                 2000                    1999                    1998
----------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>                     <C>                     <C>
Balance, beginning of year                             $2,741                  $1,749                  $1,223
New loans disbursed                                        21                   2,717                   1,340
Repayments of loans                                    (2,189)                 (1,725)                   (814)
----------------------------------------------------------------------------------------------------------------------
BALANCE, END OF YEAR                                     $573                  $2,741                  $1,749
======================================================================================================================
</TABLE>

As of December  31,  2000,  loans of  approximately  $12 million were pledged as
collateral for the Federal Reserve Discount Window.
<PAGE>

NOTE 6 - PREMISES AND EQUIPMENT

A summary of  premises  and  equipment  as of  December  31, 2000 and 1999 is as
follows:

(dollars in thousands)                             2000               1999
--------------------------------------------------------------------------------
Land                                                $1,777             $1,777
Buildings and improvements                           4,138              4,351
Furniture and equipment                              2,623              3,447
--------------------------------------------------------------------------------
     Premises and equipment                          8,538              9,575
Less accumulated depreciation and amortization      (3,094)            (4,011)
--------------------------------------------------------------------------------
     PREMISES AND EQUIPMENT, NET                    $5,444             $5,564
================================================================================

NOTE 7 - TIME DEPOSITS

As of December 31, 2000 and 1999,  the Bank had $135  million and $105  million,
respectively,  in time  deposits  in  denominations  of $100 or  more.  Interest
expense for these  deposits  was $7.5 million and $5.0 million in 2000 and 1999,
respectively.  Time  deposits in  denominations  of $100 or more which mature in
greater than one year were $8.8 million as of December 31, 2000.

On  December 4, 1998 the Bank raised $10  million  through  the  placement  of a
ten-year synthetic floating rate certificate of deposit. The instrument consists
of two linked  transactions,  a callable  interest rate swap and callable  fixed
rate  certificate of deposit.  Under the swap agreement the Bank pays LIBOR plus
five  basis  points  and  receives  6% for a period  of ten  years.  The swap is
callable  after  one  year by the  issuer.  Simultaneously,  the  Bank  issued a
callable 6% fixed rate  10-year  certificate  of  deposit.  The  certificate  of
deposit does not have any early redemption  clauses,  other then by death of the
holder. Effectively,  the Bank's rate of interest on the combined transaction is
LIBOR plus five basis points.


<PAGE>


NOTE 8 - BORROWINGS

Federal funds purchased and securities  sold under  agreements to repurchase and
information  relating to these borrowings are summarized below as of and for the
years ended December 31:
<TABLE>
<CAPTION>

(dollars in thousands)                                                        2000                 1999                 1998
------------------------------------------------------------------------------------------------------------------------------------
FEDERAL FUNDS PURCHASED

<S>                                                                         <C>                  <C>                   <C>
   Balance at December 31,                                                    -----                 $500               $5,000
   Weighted average interest rate at year end                                 -----                 5.50%                5.50%
   Maximum amount outstanding at any month end                               $9,000              $22,000               $5,000
   Average outstanding balance                                                 $577               $1,801                 $380
   Weighted average interest rate paid                                       7.00%                5.54%                6.40%
SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE

   Balance at December 31,                                                   $9,645              $10,497                -----
   Weighted average interest rate at year end                                  7.01%                5.80%               -----
   Maximum amount outstanding at any month end                              $10,497              $15,559              $12,000
   Average outstanding balance                                              $10,017               $7,421               $3,762
   Weighted average interest rate paid                                        6.65%                5.61%                5.59%
</TABLE>

Any securities  used under  securities  sold under  agreements to repurchase are
under the control of the Bank. Securities subject to the agreement to repurchase
represent  securities  held by the  Bank in its  securities  available  for sale
portfolio  with a total  amortized  cost of $9.9  million and a market  value of
$10.0 million as of December 31, 2000.

The  Company's   bank   subsidiary  has  informal   arrangements   with  various
correspondents  providing  short-term  credit for liquidity  requirements;  such
informal lines aggregated $22 million at December 31, 2000.

The Company had  borrowings  from the Federal  Home Loan Bank  bearing  interest
ranging  from 5.67% to 7.59% as of  December  31,  2000 and 5.82% to 6.74% as of
December  31,  1999.  The  borrowings  are  secured by U. S.  Government  Agency
securities and are due as follows as of December 31, 2000 and 1999:

Year                       2000                  1999
------------------ --------------------- ---------------------
------------------ --------------------- ---------------------
2001                       $9,076                $9,096
2002                          723                   735
2003                        2,616                 2,639
2005                        6,892                 6,933
2010                          246                   274
2011                          773                   826
------------------ --------------------- ---------------------
------------------ --------------------- ---------------------
Total                     $20,326               $20,503
================== ===================== =====================

NOTE 9 - ACCUMULATED OTHER COMPREHENSIVE INCOME
<TABLE>
<CAPTION>

Accumulated  other  comprehensive  income  is as  follows  for the  years  ended
December 31, 2000, 1999, and 1998:

                                                                      2000              1999              1998
--------------------------------------------------------------------------------- ----------------- -----------------
<S>                                                                   <C>               <C>                <C>
Realized (losses) gains on securities available for sale, net         $(602)            $(133)             $150
Unrealized appreciation (loss) of securities held for sale, net       2,611            (1,641)              226
--------------------------------------------------------------------------------- ----------------- -----------------
OTHER COMPREHENSIVE INCOME (LOSS)                                    $2,009           $(1,774)             $376
================================================================================= ================= =================
</TABLE>



<PAGE>


NOTE 10 - EARNINGS PER SHARE

The  reconciliation  of the numerators and denominators of the basic and diluted
earnings per share (EPS) computations are as follows:
<TABLE>
<CAPTION>

(in thousands,                                                    Net                                            PER SHARE
except per share amounts)                                        Income                    Shares                 AMOUNTS
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>                        <C>                   <C>
For the year ended December 31, 2000
Net income and basic EPS                                           $8,624                     3,665                 $2.35
                                                                                                           =======================
Effect of stock option dilutive shares                                                          189
------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE                                         $8,624                     3,854                 $2.24
==================================================================================================================================
For the year ended December 31, 1999
Net income and basic EPS                                           $7,117                     3,491                 $2.04
                                                                                                           =======================
Effect of stock option dilutive shares                                                          231
------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE                                         $7,117                     3,722                 $1.91
==================================================================================================================================
For the year ended December 31, 1998
Net income and basic EPS                                           $7,489                     3,635                 $2.06
                                                                                                           =======================
Effect of stock option dilutive shares                                                          267
------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE                                         $7,489                     3,902                 $1.92
==================================================================================================================================
</TABLE>


NOTE 11 - INCOME TAXES
<TABLE>
<CAPTION>

Income tax expense for the years ended December 31, 2000, 1999 and 1998 consists
of the following:

(dollars in thousands)                                   2000                   1999                   1998
--------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                    <C>                    <C>
Current:
  Federal                                                  $5,065                 $3,980                 $3,899
  State                                                     1,661                  1,282                  1,198
--------------------------------------------------------------------------------------------------------------------
     Total current                                          6,726                  5,262                  5,097
--------------------------------------------------------------------------------------------------------------------
Deferred:
  Federal                                                    (910)                  (266)                   (48)
  State                                                      (289)                   (95)                    (9)
--------------------------------------------------------------------------------------------------------------------
    Total deferred                                         (1,199)                  (361)                   (57)
--------------------------------------------------------------------------------------------------------------------
       Income taxes                                        $5,527                 $4,901                 $5,040
====================================================================================================================
</TABLE>

Total income tax expense differed from the amount computed by applying the U.S.
federal income tax rate of 34% in the years ended  December 31, 2000, 1999 and
1998 to income before income taxes as a result of the following:
<TABLE>
<CAPTION>

(dollars in thousands)                                    2000                  1999                   1998
---------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                   <C>                    <C>
Computed "expected " tax expense                           $4,811                $4,085                 $4,259
California franchise tax, net of federal income tax           905                   783                    785
Amortization of intangible assets                             130                   136                    136
Federal tax-exempt investment income                         (266)                 (239)                  (151)
Other                                                         (53)                  136                     11
---------------------------------------------------------------------------------------------------------------------
     Income taxes                                          $5,527                $4,901                 $5,040
=====================================================================================================================
</TABLE>



<PAGE>


The tax effects of temporary  differences that gave rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 2000 and
1999, are presented below:

(dollars in thousands)                       2000                    1999
--------------------------------------------------------------------------------
Deferred tax assets:
  Provision for loan or lease losses          $2,414                  $2,193
  Purchase accounting adjustments                 65                      95
  Foreclosure income                              43                      43
  State taxes                                    527                     426
  Deferred compensation                        1,275                     353
  Securities available for sale                 ----                     936
--------------------------------------------------------------------------------
    Total gross deferred tax assets            4,324                   4,046
--------------------------------------------------------------------------------
Deferred tax liabilities:
  Depreciation and amortization                   32                      43
  Leases                                           2                       2
  Securities available for sale                  345                    ----
  Other                                          152                     126
--------------------------------------------------------------------------------
    TOTAL GROSS DEFERRED TAX LIABILITIES         531                     171
--------------------------------------------------------------------------------
      NET DEFERRED TAX ASSETS                 $3,793                  $3,875
================================================================================

Amounts for the current year are based upon estimates and  assumptions as of the
date of this report and could vary  significantly  from amounts shown on the tax
returns  as  filed.  Accordingly,  the  variances  from the  amounts  previously
reported  for 1999 are  primarily as a result of  adjustments  to conform to tax
returns as filed.

Deferred tax assets related to purchase  accounting  adjustments include the tax
effect of fair  market  value  adjustments  of the  assets  and  liabilities  of
businesses  acquired.  The Company  believes  that the net deferred tax asset is
realizable  through  sufficient  taxable income within the carryback periods and
the current year's taxable income.

NOTE 12 - DETAIL OF OTHER EXPENSE

Other expense for the years ended  December 31, 2000,  1999 and 1998 consists of
the following:
<TABLE>
<CAPTION>

(dollars in thousands)                                          2000           1999            1998
----------------------------------------------------------------------------------------------------------
<S>                                                               <C>             <C>            <C>
Data processing                                                   $747            $676           $741
Directors and shareholders                                         660             673            469
Legal and professional fees                                        641             701            520
Client services                                                    613             585            495
Amortization of core deposit intangibles and goodwill              439             455            457
Net cost of other real estate owned                               ----             (47)             7
Other                                                            2,686           2,387          2,415
----------------------------------------------------------------------------------------------------------
  TOTAL                                                         $5,786          $5,430         $5,104
==========================================================================================================
</TABLE>

NOTE 13 - STOCK OPTION PLAN

During 1996, the shareholders of the Company approved the 1996 Stock Option Plan
(the  "Plan"),  which  replaced two then existing  stock option plans.  The 1996
Stock Option Plan is described below. In accordance with APB 15, no compensation
cost has been recognized for the Plan. Had  compensation  cost for the Plan been
determined  consistent  with SFAS No. 123, the Company's net income and earnings
per share would have been adjusted to the pro forma amounts for options  granted
for the years 2000, 1999 and 1998 indicated below:


<PAGE>


<TABLE>
<CAPTION>


(dollars in thousands, except per share amounts)          2000                       1999                       1998
--------------------------------------------------------------------------------------------------------------------------------
NET INCOME:

<S>                                                        <C>                        <C>                        <C>
  As reported                                              $8,624                     $7,117                     $7,489
  Pro forma                                                 7,841                      6,261                      6,432
--------------------------------------------------------------------------------------------------------------------------------
NET INCOME PER SHARE:

  Basic, as reported                                        $2.35                      $2.04                      $2.06
  Basic, pro forma                                           2.14                       1.79                       1.77
--------------------------------------------------------------------------------------------------------------------------------
  Diluted, as reported                                      $2.24                      $1.91                      $1.92
  Diluted, pro forma                                         2.03                       1.68                       1.65
</TABLE>

The above amounts  include the impact on net income and net income per share for
options granted during the years 1995 through 2000; such amounts would have been
substantially  different if options  granted  prior to 1995 had been included in
the computation.

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions used for grants in the following years:
<TABLE>
<CAPTION>

ASSUMPTIONS:                                                  2000                   1999                   1998
---------------------------------------------------------------------------- ---------------------- ----------------------
<S>                                                         <C>                     <C>                    <C>
   Dividend yield                                            2.2%                    2.0%                   1.8%
   Volatility                                               31.2%                   46.7%                  50.0%
   Risk free interest rate                                   6.2%                    5.4%                   5.0%
   Expected lives (years)                                    4.9                     7.2                    6.4
</TABLE>

The 1996 Stock  Option Plan  provides  that either  incentive  stock  options or
nonstatutory  stock options may be granted to certain key employees or directors
to purchase authorized, but unissued, Common Stock of the Company. Shares may be
purchased  at a price not less than the fair  market  value of such stock on the
date of the grant.  Generally,  stock options  become  exercisable  40% one year
after  the date of grant  and 20% in each of the  following  three  years.  They
expire no later than ten years  after the date of the grant.  The Plan  provides
that outside directors will automatically receive a nonstatutory option covering
five thousand  shares  annually at an exercise price equal to 100% of the market
price of the  Common  Stock on the date of grant.  The 1996  Stock  Option  Plan
replaced the previous two plans which had similar provisions. If options granted
under the prior plans expire without being exercised,  the corresponding  common
shares shall become available for awards under the Plan.  During 2000, no shares
became available under this provision. The number of shares available for future
grants of options  under the 1996 Stock  Option Plan was 169 as of December  31,
2000.


<PAGE>


Activity under the stock plans is as follows:

                                                                WEIGHTED
                                     NUMBER                      AVERAGE
                                       OF                       EXERCISE
OPTIONS                              SHARES                       PRICE

--------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1997           527,157                      $12.03
  Granted                             428,950                       30.09
  Cancelled                          (198,230)                      35.25
  Exercised                           (41,233)                      13.87
--------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1998           716,644                       16.31
  Granted                             158,170                       27.93
  Cancelled                           (32,632)                      25.51
  Exercised                           (90,965)                       9.34
--------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 1999           751,217                       19.21
--------------------------------------------------------------------------------
  Granted                              93,186                       30.17
  Cancelled                           (26,258)                      26.25
  Exercised                          (155,978)                      10.12
--------------------------------------------------------------------------------
BALANCES, DECEMBER 31, 2000           662,167                      $22.62
================================================================================

The  weighted-average  fair value of options  granted during 2000, 1999 and 1998
was $9.05, $12.34 and $12.30, respectively.

The following table summarizes  options  outstanding and exercisable at December
31, 2000:
<TABLE>
<CAPTION>

                                                OPTIONS OUTSTANDING                                          OPTIONS EXERCISABLE

                       -------------------------------------------------------------------------------------------------------------
                                     NUMBER                        WEIGHTED                            NUMBER            WEIGHTED

       RANGE OF                   OUTSTANDING                      AVERAGE                          EXERCISABLE           AVERAGE
       EXERCISE                      AS OF                REMAINING         EXERCISE                   AS OF             EXERCISE
        PRICES                 DECEMBER 31, 2000            LIFE              PRICE              DECEMBER 31, 2000         PRICE
------------------------------------------------------------------------------------------------------------------------------------
<S>  <C>          <C>                  <C>                  <C>               <C>                        <C>                <C>
     $5.38-$6.43                     66,650               3.14              $5.94                      66,650             $5.94
      6.90- 9.31                      8,810               3.86               7.68                       8,810              7.68
     11.50-14.31                     49,010               4.63               9.56                      49,010              9.56
     16.38-19.94                     59,920               5.51              16.98                      59,120             16.94
     22.69-24.88                     36,542               7.28              22.95                      34,408             22.91
     25.00-26.56                     66,250               6.64              25.38                      46,500             25.22
     26.69-26.69                    156,360               7.81              26.69                      91,648             26.69
     27.19-27.50                     49,452               8.26              27.33                      19,420             27.33
     27.63-27.63                     55,400               8.19              27.63                      22,160             27.63
     27.79-36.06                    113,773               9.36              30.32                       9,668             30.56
------------------------------------------------------------------------------------------------------------------------------------
     $5.38-$36.06                    662,167               7.03             $22.62                     407,394            $19.10
====================================================================================================================================
</TABLE>

Options  exercisable  as of December  31,  1999 were  354,851 and had a weighted
average  exercise price of $11.70.  Options  exercisable as of December 31, 1998
were 370,025 and had a weighted average exercise price of $9.38.

NOTE 14 - COMMITMENTS AND CONTINGENT LIABILITIES

In the normal course of business,  there are  outstanding  commitments,  such as
commitments  to extend  credit,  which  are not  reflected  in the  consolidated
financial statements. These commitments involve, to varying degrees, credit risk
in excess of the  amount  recognized  as  either  an asset or  liability  in the
consolidated  balance  sheet.  The Company  controls the credit risk through its
credit  approval  process.  The same credit policies are used when entering into
such commitments. Management does not anticipate any loss from such commitments.
Amounts  committed to extend credit under normal lending  agreements  aggregated
approximately  $201  million and $164  million  for  undisbursed  variable  loan
commitments and approximately $13 million and $5.6 million for commitments under
unused standby  letters of credit and other  guarantees at December 31, 2000 and
1999, respectively.

The Bank utilizes various  financial  instruments with off balance sheet risk to
reduce  its  exposure  to  fluctuations  in  interest  rates.   These  financial
instruments involve, to varying degrees, credit and interest rate risk in excess
of the amount  recognized  as either an asset or liability  in the  statement of
financial position.

The credit risk is the  possibility  that a loss may occur  because a party to a
transaction  fails to perform  according to the terms of the contract.  Interest
rate risk is the  possibility  that future changes in market prices will cause a
financial  instrument to be less valuable or more onerous.  The Bank attempts to
control  the credit  risk  arising  from these  instruments  through  its credit
approval  process  and  through the use of risk  control  limits and  monitoring
procedures. Interest rate risk is managed by various asset and liability methods
including the utilization of interest rate hedging vehicles.

During 2000 the Company executed supplemental  compensation agreements providing
nonqualified  defined  benefit  retirement  income for the directors and certain
executive  officers  of the  Company.  In  connection  with  establishing  these
agreements,  the Company also purchased  single premium life insurance  policies
for each  participant.  Generally,  the defined  benefit for  retirement was 50%
vested at the date of the agreements and 10% for each year thereafter. For those
directors for which mandatory retirement (age 70) was within five years, vesting
was in equal periods until retirement. The agreements provide that each director
will  receive  $22.5  annually  (adjusted  annually  by 2%) over their  lifetime
commencing on the third anniversary subsequent to their retirement. The range of
defined  lifetime  benefit  for the  participating  executives  is $72.5 to $182
(adjusted  annually  by 2%);  retirement  is at age 65.  If an  executive  shall
voluntarily  resign prior to being 100% vested,  the executive shall forfeit all
rights and benefits under the agreement.  At the participant's death, 80% of the
difference between the insurance life benefit and the then cash surrender value,
will be paid to the  participant's  heirs.  The total  amount  accrued for these
agreements was $215 during 2000.

The Company also assumed a nonqualified defined contribution retirement plan for
the benefit of the  directors  and certain  executive  officers of Saratoga.  In
connection  with this plan,  Saratoga  purchased  single  premium life insurance
policies for each  participant.  At the time of the  acquisition of Saratoga the
estimated  net present  value of the lifetime  benefit of each  participant  was
accrued by the Company in the amount of $1.4  million.  During  1999,  the total
amount expensed for this plan was $231.

The cash surrender  value of life insurance  purchased under these plans totaled
approximately $15 million as of December 31, 2000. Of this amount,  $9.3 million
related to the Company's plan and $5.7 million related to the Saratoga plan.

The Company is obligated under its lease  agreements for 95 South Market Street,
San Jose, 50 Oak Court, Danville and 15405 Los Gatos Boulevard,  Los Gatos under
noncancelable  operating  leases through  September  2004,  June 2004, and March
2003,  respectively.  The leases are  subject to periodic  adjustments  based on
changes in the CPI. The following table shows future minimum  payments under the
leases as of December 31, 2000:

YEARS ENDING DECEMBER 31,
------------------------------------------------- ---------------------
(in thousands)
2001                                                       $405
2002                                                        409
2003                                                        342
2004                                                        220
------------------------------------------------- ---------------------
TOTAL MINIMUM LEASE PAYMENTS                             $1,376
================================================= =====================

Total  minimum  lease  payments to be  received  under  noncancelable  operating
subleases at December 31, 2001 were  approximately  $712; these payments are not
reflected in the above table.  Total rent expense was $434,  $583,  and $520 for
the years ended December 31, 2000, 1999 and 1998, respectively.

There is ordinary routine litigation  incidental to the business pending against
the Company but, in the opinion of management, liabilities (if any) arising from
such claims  will not have a material  effect  upon the  consolidated  financial
statements of the Company.

NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS

SFAS No. 107, "Disclosures About Fair Value of Financial Instruments,"  requires
disclosure  of estimated  fair values for the Company's  financial  instruments.
Fair value estimates, methods and assumptions, set forth below for the Company's
financial  instruments,  are made solely to comply with the requirements of SFAS
No.  107 and  should  be read in  conjunction  with the  consolidated  financial
statements and notes thereto in this Annual Report.

Fair values are based on  estimates or  calculations  at the  transaction  level
using present value  techniques in instances  where quoted market prices are not
available. Because broadly traded markets do not exist for most of the Company's
financial  instruments,  the fair value calculations  attempt to incorporate the
effect of current  market  conditions at a specific  time.  Fair  valuations are
management's  estimates of the values,  and they are often  calculated  based on
current  pricing  policy,   the  economic  and  competitive   environment,   the
characteristics  of the financial  instruments,  and other such  factors.  These
calculations  are  subjective in nature,  involve  uncertainties  and matters of
significant  judgment  and do not  include  tax  ramifications;  therefore,  the
results  cannot be determined  with  precision,  substantiated  by comparison to
independent  markets  and may not be  realized  in an actual  sale or  immediate
settlement of the  instruments.  The fair valuations have not been updated since
year end;  therefore,  the valuations may have changed  significantly since that
point in time.

The Company has not included certain  material items in its disclosure,  such as
the value of the long-term  relationships  with the Company's deposit customers,
since these  intangibles  are not financial  instruments.  There may be inherent
weaknesses  in  any  calculation  technique,   and  changes  in  the  underlying
assumptions used,  including  discount rates and estimates of future cash flows,
could significantly  affect the results.  For all these reasons, the aggregation
of the fair value calculations presented herein do not represent, and should not
be construed to represent, the underlying value of the Company.

The following table presents a summary of the Company's  financial  instruments,
as defined by SFAS No. 107 as of December 31, 2000 and 1999:
<TABLE>
<CAPTION>

FAIR VALUE OF FINANCIAL INSTRUMENTS

(dollars in thousands)                                                     2000                                1999
------------------------------------------------------------------------------------------------------------------------------------
                                                                 Carrying           Fair            Carrying            Fair
FINANCIAL ASSETS                                                  Value             Value            Value             Value
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>               <C>              <C>               <C>
Cash and due from banks (including federal funds sold)             $28,670           $28,674          $27,980           $27,980
Money market investments                                            38,475            38,486            5,651             5,655
Investment securities                                              128,787           128,806          113,074           111,586
Loans and leases, net                                              455,921           463,883          396,906           397,476
Accrued interest receivable                                          3,968             3,968            3,202             3,202

FINANCIAL LIABILITIES
------------------------------------------------------------------------------------------------------------------------------------
Deposits                                                           585,343           585,982          473,733           474,250
Federal funds purchased, securities sold under
  repurchase agreements, FHLB advances and other borrowings         32,039            33,219           33,525            34,633

OFF BALANCE SHEET FINANCIAL INSTRUMENTS
------------------------------------------------------------------------------------------------------------------------------------
Interest rate swap contract purchased                                                ----               501             ----
</TABLE>

The  methodology  and  assumptions  utilized to  estimate  the fair value of the
Company's financial  instruments,  not previously discussed above, are described
below:

Financial  instruments  with fair  value  approximate  to  carrying  value - The
carrying  value of cash and due from banks,  money market  investments,  accrued
interest  receivable,  non-interest-bearing  demand  accounts,  interest-bearing
demand,  money market and savings deposit accounts,  accrued interest receivable
and  expense  approximates  fair  value  due to the  short-term  nature of these
financial instruments.

Investment  securities - The  estimated  fair values of  securities  by type are
based on quoted market prices when available.

Loans and leases - The  carrying  amount of loans and leases is net of  unearned
fee  income  and the  reserve  for loan and  lease  losses.  The fair  valuation
calculation  process  differentiates  loans and leases based on their  financial
characteristics, such as product classification, loan category, pricing features
and  remaining  maturity.  Prepayment  estimates  are  evaluated  by product and
respective  interest rate. Discount rates presented in the paragraphs below have
a wide range due to the Company's mix of fixed and variable rate products.

The fair value of loans and leases is calculated by discounting contractual cash
flows using discount rates that reflect the Company's  current pricing for loans
and leases with similar  characteristics  and  remaining  maturity.  Most of the
discount  rates  applied to these loans were  between 8.2% and 10.6% at December
31, 2000.

Additionally,  the allowance  for loan and lease losses was applied  against the
estimated  fair  value of loans  and  leases to  recognize  future  defaults  of
contractual cash flows.

Fair value for nonperforming loans and leases is based on discounting  estimated
cash flows using a rate commensurate with the risk associated with the estimated
cash flows, or underlying collateral values, where appropriate.

Deposits - The fair value of  certificates of deposit and other time deposits is
calculated based on the discounted value of contractual cash flows. The discount
rate is  estimated  using the rates  currently  offered for like  deposits  with
similar remaining maturities.

Other short-term borrowings - A reasonable estimate of the fair value of federal
funds sold is the carrying amount because of the relatively short period of time
between the origination of the instrument and its expected maturity.

The fair value of the Company's  securities sold under repurchase  agreements is
calculated based on the discounted value of contractual cash flows. The discount
rate is estimated using the rates currently  offered for such  instruments  with
similar remaining maturities.

Commitment  to extend  credit - The  majority of the  Company's  commitments  to
extend credit carry variable and current  market  interest rates if converted to
loans or leases.  Because these commitments are generally unassignable by either
the  Company  or the  borrower,  they only  have  value to the  Company  and the
borrower.  The  estimated  fair value  approximates  the  recorded  deferred fee
amounts and is excluded from the table.

Derivative  financial  instruments - The fair value of the derivative  financial
instruments  generally  reflects the estimated amounts the Company would receive
based upon dealer quotes, to terminate such agreements at the reporting date.


NOTE 16 - SJNB FINANCIAL CORP.
(PARENT COMPANY ONLY)

The following are the financial statements of SJNB Financial Corp. (parent
company only):
<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------
BALANCE SHEETS
December 31, 2000 and 1999

(dollars in thousands)                                                           2000             1999
--------------------------------------------------------------------------------------------------------------
ASSETS

<S>                                                                                <C>              <C>
Cash and equivalents                                                               $1,085           $1,847
Real estate loans                                                                    ----              123
Investment in the Bank                                                             61,686           50,898
Other assets                                                                          812              351
--------------------------------------------------------------------------------------------------------------
     Total assets                                                                 $63,583          $53,219
==============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY

Total liabilities-Accounts payable                                                   ----             ----
--------------------------------------------------------------------------------------------------------------
Common stock                                                                      $22,845          $20,769
Retained earnings                                                                  40,221           33,942
Accumulated other comprehensive income (losses)                                       517           (1,492)
--------------------------------------------------------------------------------------------------------------
     Total shareholders' equity                                                    63,583           53,219
--------------------------------------------------------------------------------------------------------------
     TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                   $63,583          $53,219
==============================================================================================================
</TABLE>
<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------
STATEMENTS OF INCOME
<S>                                                             <C>              <C>              <C>
Years Ended December 31, 2000, 1999 and 1998
(dollars in thousands)                                          2000             1999             1998
--------------------------------------------------------------------------------------------------------------
Cash dividend received from Bank                                  $500           $4,979           $4,470
Interest income and fees on loans                                   60               30               79
Other expense                                                     (314)            (280)            (222)
--------------------------------------------------------------------------------------------------------------
Income before taxes                                                246            4,729            4,327
Income tax benefit                                                 101               97               58
--------------------------------------------------------------------------------------------------------------
Income before undistributed income of the Bank                     347            4,826            4,385
Equity in undistributed income of the Bank                       8,277            2,291            3,104
--------------------------------------------------------------------------------------------------------------
Net income                                                      $8,624           $7,117           $7,489
==============================================================================================================
</TABLE>


<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
Years Ended December 31, 2000, 1999 and 1998
(dollars in thousands)                                                 2000               1999               1998
-------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
<S>                                                                     <C>                <C>                <C>
  NET INCOME                                                            $8,624             $7,117             $7,489
    Adjustments to reconcile net income to net cash
      (used in) provided by operating activities:
        Increase in other assets                                          (444)              (439)              (609)
        (Decrease) increase in other liabilities                          ----               ( 98)               631
        Equity in undistributed income of the Bank                      (8,277)            (2,291)            (3,104)
-------------------------------------------------------------------------------------------------------------------------
          NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES             ( 97)             4,289              4,407
-------------------------------------------------------------------------------------------------------------------------
  Cash flows from investing activities:
    Decrease in loans, net                                                 123                413                124
    Cash dividend                                                       (2,345)            (1,649)            (1,666)
    Common stock repurchased                                              ----             (3,911)            (3,742)
    Stock options exercised                                              1,557              2,649                572
-------------------------------------------------------------------------------------------------------------------------
          NET CASH USED IN INVESTING ACTIVITIES                           (665)            (2,498)            (4,712)
-------------------------------------------------------------------------------------------------------------------------
  Net (decrease) increase in cash and equivalents                         (762)             1,791               (305)
  Cash and equivalents at beginning of year                              1,847                 56                361
-------------------------------------------------------------------------------------------------------------------------
  CASH AND EQUIVALENTS AT END OF YEAR                                   $1,085             $1,847                $56
=========================================================================================================================
Noncash transaction:
  Contribution of stock used in the acquisition of
    Epic Funding Corp.                                                    ----               ----               $501
                                                                    =====================================================
</TABLE>

NOTE 17 - REGULATORY MATTERS

The Federal  Reserve  Board,  the  Comptroller of the Currency and the FDIC have
issued   substantially   similar  risk-based  and  leverage  capital  guidelines
applicable to United States banking organizations. In addition, those regulatory
agencies  may from time to time  require  that a banking  organization  maintain
capital above the minimum levels,  whether because of its financial condition or
actual or anticipated growth.

The  Federal  Reserve  Board  risk-based  guidelines  define a two-tier  capital
framework.   Tier  1  capital  consists  of  common  and  qualifying   preferred
shareholders'  equity,  less certain  intangibles and other adjustments.  Tier 2
capital  consists of subordinated  and other  qualifying debt, and the allowance
for loan and lease losses up to 1.25% of risk weighted assets. The total of Tier
1  and  Tier  2  capital,  less  investments  in  unconsolidated   subsidiaries,
represents  qualifying total capital, at least 50% of which must consist of Tier
1 capital. Risk-based capital ratios are calculated by dividing Tier 1 and total
capital by  risk-weighted  assets.  Assets and off balance  sheet  exposures are
assigned to one of four categories of risk-weights,  based primarily on relative
credit risk.  The minimum Tier 1 risk-based  capital ratio is 4% and the minimum
total  risk-based  capital ratio is 8%. The leverage capital ratio is determined
by dividing Tier 1 capital by adjusted average total assets. Although the stated
minimum leverage capital ratio is 3%, most banking organizations are required to
maintain  leverage  capital ratios of at least 100 to 200 basis points above the
3%.


<PAGE>


The table below  summarizes the Tier 1 and total  risk-based  capital ratios and
leverage capital ratios of the Company and the Bank as of December 31:
<TABLE>
<CAPTION>

RISK-BASED AND LEVERAGE CAPITAL RATIOS

(DOLLARS IN THOUSANDS)
                                                                  2000                                  1999
                                                 ----------------------------------------------------------------------------
COMPANY-RISK-BASED                                      Amount              Ratio             Amount            Ratio
------------------
                                                 ----------------------------------------------------------------------------
<S>                                                       <C>             <C>                  <C>             <C>
TIER 1 CAPITAL                                            $60,115         11.04%               $50,371         11.08%
Tier 1 capital minimum requirement                         21,779          4.00                 18,177          4.00
                                                 ----------------------------------------------------------------------------
  EXCESS                                                  $38,336          7.04%               $32,194          7.08%
                                                 ============================================================================
TOTAL CAPITAL                                             $66,928         12.29%               $56,060         12.34%
Total capital minimum requirement                          43,559          8.00                 36,354          8.00
                                                 ----------------------------------------------------------------------------
  EXCESS                                                  $23,369          4.29%               $19,706          4.34%
                                                 ============================================================================
Risk-adjusted assets                                     $544,485                             $454,429
                                                 ======================                 ===================

COMPANY-LEVERAGE

TIER 1 CAPITAL                                            $60,115          8.94%               $50,371          8.88%
Minimum leverage ratio requirement                         26,902          4.00                 22,685          4.00
                                                 ----------------------------------------------------------------------------
  EXCESS                                                  $33,213          4.94%               $27,686          4.88%
                                                 ============================================================================
Average total assets                                     $672,555                             $567,130
                                                 ======================                 ===================

BANK-RISK-BASED

TIER 1 CAPITAL                                            $58,217         10.75%               $48,050         10.57%
Tier 1 capital minimum requirement                         21,667          4.00                 18,180          4.00
                                                 ----------------------------------------------------------------------------
  EXCESS                                                  $36,550          6.75%               $29,870          6.57%
                                                 ============================================================================
TOTAL CAPITAL                                             $64,995         12.00%               $53,740         11.82%
Total capital minimum requirement                          43,334          8.00                 36,360          8.00
                                                 ----------------------------------------------------------------------------
  EXCESS                                                  $21,661          4.00%               $17,380          3.82%
                                                 ============================================================================
Risk-adjusted assets                                     $541,671                             $454,503
                                                 ======================                 ===================

BANK-LEVERAGE

TIER 1 CAPITAL                                            $58,217          8.66%               $48,050          8.47%
Minimum leverage ratio requirement                         26,879          4.00                 22,679          4.00
                                                 ----------------------------------------------------------------------------
  EXCESS                                                  $31,338          4.66%               $25,371          4.47%
                                                 ============================================================================
Average total assets                                     $671,976                             $566,978
                                                 ======================                 ===================
</TABLE>

The Federal Deposit  Insurance  Corporation  Improvement Act of 1991 ("FDICIA"),
among other things,  identifies five capital  categories for insured  depository
institutions  (well  capitalized,   adequately  capitalized,   undercapitalized,
significantly undercapitalized and critically undercapitalized) and requires the
respective  Federal  regulatory   agencies  to  implement  systems  for  "prompt
corrective action" for insured depository  institutions that do not meet minimum
capital requirements within such categories.  FDICIA imposes  progressively more
restrictive  constraints  on operations,  management and capital  distributions,
depending on the category in which an institution is classified. Failure to meet
the  capital  guidelines  could also  subject a banking  institution  to capital
raising  requirements.   An  "undercapitalized"  bank  must  develop  a  capital
restoration  plan and its  parent  holding  company  must  guarantee  the bank's
compliance  with the plan. The liability of the parent holding company under any
such  guarantee is limited to the lesser of 5% of the bank's  assets at the time
it became  "undercapitalized"  or the  amount  needed  to comply  with the plan.
Furthermore,  in the event of the bankruptcy of the parent holding company, such
guarantee would take priority over the parent's general unsecured creditors.

The various regulatory agencies have adopted  substantially  similar regulations
that define the five capital  categories  identified by FDICIA,  using the total
risk-based capital, Tier 1 risk-based capital and leverage capital ratios as the
relevant  capital  measures.  Such  regulations  establish  various  degrees  of
corrective   action   to  be   taken   when   an   institution   is   considered
undercapitalized.  Under the regulations,  a "well capitalized" institution must
have a Tier 1 capital  ratio of at least 6%, a total  capital  ratio of at least
10% and a  leverage  ratio  of at  least  5% and  not be  subject  to a  capital
directive  order.  An "adequately  capitalized"  institution  must have a Tier 1
capital ratio of at least 4%, or 3% in some cases.  Under these guidelines,  the
Company and the Bank were considered  well  capitalized at December 31, 2000 and
1999.

Banking  agencies  consider   concentrations  of  credit  risk  and  risks  from
non-traditional  activities, as well as an institution's ability to manage those
risks,  when  determining  the  adequacy  of  an  institution's   capital.  This
evaluation  is made as part of the  institution's  regular  safety and soundness
examination.  Banking  agencies  also  consider  interest  rate  risk  (when the
interest  rate  sensitivity  of an  institution's  assets  does  not  match  the
sensitivity of its  liabilities or its off balance sheet position) in evaluating
a bank's  capital  adequacy.  Banking  agencies have adopted a  methodology  for
evaluating  interest rate risk.  After gaining  experience with this measurement
process,  such banking agencies may propose further  regulations to establish an
explicit risk-based capital charge for interest rate risk.

The ability of the Company to pay dividends  largely  depends upon the dividends
paid to it by the Bank.  There are legal  limitations on the ability of the Bank
to provide  funds to the Company in the form of loans,  advances  or  dividends.
Under national banking law, without the prior approval of the Comptroller of the
Currency,  the Bank may not declare  dividends in any calendar  year that exceed
the Bank's net profits for that year,  as defined by statute,  combined with its
net retained  profits,  as defined,  for the preceding two years. As of December
31, 2000,  the Bank may initiate  dividend  payments  without  prior  regulatory
approval of up to $16 million.


<PAGE>

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

Not applicable.


                                    PART III

ITEM 10:  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information  concerning  directors,  executive  officers,  promoters and control
persons and compliance with Section 16(a) of the Exchange Act is incorporated by
reference to the text under the captions  "Election  of  Directors,"  "Executive
Compensation  and  Transactions  with Directors and Officers" and "Section 16(a)
Beneficial  Ownership Reporting  Compliance" in the Registrant's Proxy Statement
for its 2001 Annual Meeting of Shareholders.

ITEM 11:  EXECUTIVE COMPENSATION

Information  concerning  executive  compensation is incorporated by reference to
the text  under  the  caption  "Executive  Compensation  and  Transactions  with
Directors and Officers" in the Registrant's  Proxy Statement for its 2001 Annual
Meeting of Shareholders.

ITEM 12:  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information  concerning  security  ownership  of certain  beneficial  owners and
management is incorporated by reference to the text under the captions "Security
Ownership  of  Directors  and  Management"  and  "Security  Ownership of Certain
Beneficial  Owners" in the  Registrant's  Proxy  Statement  for its 2001  Annual
Meeting of Shareholders.

ITEM 13:  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information   concerning  certain  relationships  and  related  transactions  is
incorporated by reference to the text under the caption "Executive  Compensation
and  Transactions  with  Directors  and  Officers"  in  the  Registrant's  Proxy
Statement for its 2001 Annual Meeting of Shareholders.


<PAGE>


                                     PART IV

ITEM 14:  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) 1. All Financial Statements

See Index to Financial Statements on page 38 hereof.

(a) 2. Financial statement schedules required. None. (Information included
in Financial Statements).

(a) 3. Exhibits

The following exhibits are filed as part of this report:

EXHIBIT NUMBER

(2)a.      Agreement and  Plan  of Merger by and among the Registrant, Saratoga
           Bancorp and Saratoga  National Bank, dated as of August 27, 1999, is
           hereby incorporated  by reference to Exhibit 2.1 of the  Registrant's
           Registration Statement on  Form  S-4  as  filed on October 14, 1999,
           under Registration No. 333-89013.

(3)(i).   The  Registrant's  restated  Articles of  Incorporation  are hereby
          incorporated  by  reference  from Exhibit  (3)(i) of the  Registrant's
          Quarterly  Report on Form 10-Q for the  quarterly  period  ended  June
          30,1999.  (3)(ii). The Registrant's Restated Bylaws as of February 23,
          2000 are hereby  incorporated  by  reference  to Exhibit  3(ii)of  the
          Registrant's  Annual  Report on Form 10-K for the  fiscal  year  ended
          December 31,1999.

*(10)a.    The   Registrant's  1992  Employee  Stock  Option  Plan  is   hereby
           incorporated  by reference   from   Exhibit  4.1  of the Registrant's
           Registration  Statement on Form S-8, as  filed  on September 4, 1992,
           under Registration No. 33-51740.

*(10)b.   Amendment No. 1  to  the  1992  Employee  Stock Option  Plan is hereby
          incorporated by reference to Exhibit(10)b of the  Registrant's  Annual
          Report on Form 10-K for the fiscal year ended December 31, 1998.

*(10)c.   The form of Incentive  Stock  Option  Agreement  being utilized  under
          the  1992  Employee  Stock  Option  Plan  is  hereby  incorporated  by
          reference from Exhibit 4.2 of the Registrant's  Registration Statement
          on Form S-8, as filed on September  4, 1992,  under  Registration  No.
          33-51740.

*(10)d.   The form of  Stock Option  Agreement  being  utilized under  the  1992
          Employee  Stock Option Plan is hereby  incorporated  by reference from
          Exhibit 4.3 of the Registrant's Registration Statement on Form S-8, as
          filed on September 4, 1992, under Registration No. 33-51740.

*(10)e.   The    Registrant's   Amended  1996  Stock  Option  Plan  is    hereby
          incorporated by reference to Exhibit 99.1 of the Registrant's Form S-8
          filed June 15, 1999, under Registration No.333-80683.

*(10)f.   The  form   of  Nonstatutory  Stock   Option  Agreement   for  outside
          Directors  being  utilized under the Amended 1996 Stock Option Plan is
          hereby   incorporated   by   reference  to  Exhibit  (10)  f.  of  the
          Registrant's  Annual  Report on Form 10-K for the  fiscal  year  ended
          December 31, 1998.

*(10)g.   The  form of   Nonstatutory Stock Option Agreement for Employees being
          utilized   under  the  Amended   1996  Stock  Option  Plan  is  hereby
          incorporated  by  reference  to  Exhibit  (10) g. of the  Registrant's
          Annual  Report on Form 10-K for the  fiscal  year ended  December  31,
          1998.

*(10)h.   The   form  of Incentive  Stock Option  Agreement being utilized under
          the Amended 1996 Stock Option Plan is hereby incorporated by reference
          to Exhibit (10) h. of the Registrant's  Annual Report on Form 10-K for
          the fiscal year ended December 31, 1998.

*(10)i.   The Saratoga Bancorp  1982   Stock Option Plan is hereby  incorporated
          by reference to Exhibit  (10)i.of the  Registrant's  Annual  Report on
          Form 10-K for the fiscal year ended December 31, 1999.

*(10)j.   The Saratoga  Bancorp  1994   Stock  Option Plan  (Amended) is  hereby
          incorporated by reference to Exhibit (10)i. of the Registrant's Annual
          Report on Form 10-K for the fiscal year ended December 31, 1999.

*(10)k.   Forms of   Incentive  Stock  Option  Agreement,  Non-Statutory   Stock
          Option Agreement and Non-Statutory  Stock Option Agreement for Outside
          Directors  is hereby  incorporated  by reference to Exhibit (10) i. of
          the Registrant's  Annual Report on Form 10-K for the fiscal year ended
          December 31, 1999.

*(10)l.   Agreement  between   James R. Kenny  and SJNB Financial  Corp. and San
          Jose  National  Bank dated  March  27,1996 is hereby  incorporated  by
          reference  to Exhibit  (10) m. of the  Registrant's  Quarterly  Report
          on Form 10-QSB for the quarterly period ended March 31, 1996.

*(10)m.   Amendment   No. 1 to Employment  Agreement  between James R. Kenny and
          SJNB Financial  Corp. and San Jose National Bank dated October 6, 2000
          is  hereby   incorporated  by  reference  to   Exhibit(10)n.   of  the
          Registrant's  Quarterly Report on Form 10-QSB for the quarterly period
          ended September 30, 2000.

*(10)n.   Agreement  between   Eugene E. Blakeslee  and SJNB Financial Corp. and
          San Jose National Bank dated March 27, 1996 is hereby  incorporated by
          reference to Exhibit (10) n. of the  Registrant's  Quarterly Report on
          Form 10-QSB for the quarterly period ended March 31, 1996.

*(10)o.   Amendment   No. 1 To Employment Agreement  between Eugene E. Blakeslee
          and SJNB  Financial  Corp. and San Jose National Bank dated October 6,
          2000 is hereby  incorporated  by  reference  to Exhibit (10) n. of the
          Registrant's  Quarterly Report on Form 10-QSB for the quarterly period
          ended September 30, 2000.

(10)p.    Sublease  dated  April 5, 1982,  for  premises  at   95  South  Market
          Street,  San Jose, CA is hereby  incorporated  by reference to Exhibit
          (10)n. of the Registrant's Annual Report on Form 10-KSB for the fiscal
          year ended December 31, 1994.

(10)q.    Sublease   by and between McWhorter's Stationary and San Jose National
          Bank,  dated  July 6,  1995,  and as  amended  August  11,  1995,  and
          September 21, 1995, for premises at 95 South Market Street,  San Jose,
          CA is hereby  incorporated  by  reference  to  Exhibit  (10) o. of the
          Registrant's  Quarterly  Report on Form10-QSB for the quarterly period
          ended September 30, 1995.

(10)r.    Agreement  of   Purchase  and Sale  dated  July 27,  1988   for  12000
          Saratoga-  Sunnyvale  Road,  Saratoga,  CA is hereby  incorporated  by
          reference to Exhibit (10) i. of the Registrant's Annual Report on Form
          10-K for the fiscal year ended December 31, 1999.

*(10)s.   Form   of   Director   Supplemental   Compensation   Agreement   dated
          September 24, 1998 between Saratoga  National Bank and Robert G. Egan,
          John F.  Lynch  III and V.  Ronald  Mancuso,  respectively,  is hereby
          incorporated  by  reference  to  Exhibit  (10) i. of the  Registrant's
          Annual  Report on Form 10-K for the  fiscal  year ended  December  31,
          1999.

*(10)t.   Form  of  Director   Life  Insurance  Endorsement  Method Split Dollar
          Plan Agreement dated September 24, 1998 between Saratoga National Bank
          and  Robert  G.  Egan,  John  F.  Lynch  III  and V.  Ronald  Mancuso,
          respectively,  is hereby  incorporated by reference to Exhibit (10) i.
          of the  Registrant's  Annual  Report on Form 10-K for the fiscal  year
          ended December 31, 1999.

*(10)u.   Form  of   Director   Surrogate  Supplemental  Compensation  Agreement
          dated September 24, 1998 between Saratoga  National Bank and Victor E.
          Aboukhater and William D. Kron,  respectively,  is hereby incorporated
          by reference to Exhibit (10) i. of the  Registrant's  Annual Report on
          Form 10-K for the fiscal year ended December 31,1999.


*(10)v.   Form  of  Director  Surrogate Life Insurance  Endorsement Method Split
          Dollar  Plan  Agreement  dated  September  24, 1998  between  Saratoga
          National  Bank  and  Victor  E.   Aboukhater   and  William  D.  Kron,
          respectively, is hereby incorporated by reference to Exhibit (10)i. of
          the Registrant's  Annual Report on Form 10-K for the fiscal year ended
          December 31, 1999.

*(10)w.   Form  of Officer Supplemental  Compensation Agreement  dated September
          24, 1998 between Saratoga  National Bank and Earl Lanna,  Mary Rourke,
          Sandra  Swenson,  Barbara Resop and Cathe Franklin,  respectively,  is
          hereby incorporated by reference to Exhibit (10)i. of the Registrant's
          Annual  Report on Form 10-K for the  fiscal  year ended  December  31,
          1999.

*(10)x.   Form of Officer  Life  Insurance  Endorsement Method Split Dollar Plan
          Agreement dated September 24, 1998 between Saratoga  National Bank and
          Earl Lanna,  Mary  Rourke,  Sandra  Swenson,  Barbara  Resop and Cathe
          Franklin, respectively, is hereby incorporated by reference to Exhibit
          (10)i. of the  Registrant's  Annual Report on Form 10-K for the fiscal
          year ended December 31, 1999.

*(10)y.   Richard  L.  Mount  Executive  Supplemental   Compensation   Agreement
          dated  September  24,  1998 is hereby  incorporated  by  reference  to
          Exhibit (10) i. of the Registrant's Annual Report on Form 10-K for the
          fiscal year ended December 31, 1999.

*(10)z.   Richard  L.  Mount  Life  Insurance  Endorsement  Method  Split Dollar
          Plan  Agreement  dated  September 24, 1998 is hereby  incorporated  by
          reference to Exhibit (10) i. of the Registrant's Annual Report on Form
          10-K for the fiscal year ended December 31, 1999.

*(10)aa.  Richard  L. Mount  Executive  Benefits  Agreement  dated June 18, 1999
          is  hereby   incorporated   by  reference  to  Exhibit   (10)i.of  the
          Registrant's  Annual  Report on Form 10-K for the  fiscal  year  ended
          December 31, 1999.

*(10)ab.  Form  of  Executive  Supplemental  Compensation  Agreement dated  June
          1, 2000 between San Jose National  Bank and James R. Kenny,  Eugene E.
          Blakeslee,  Frederic A.  Charpiot,  Margo  Culcasi and Judith  Doering
          Nielsen,  respectively, is hereby incorporated by reference to Exhibit
          (10) z. of the  Registrant's  Quarterly  Report  on Form  10-Q for the
          quarter ended June 30, 2000.

*(10)ac.  Form  of  Endorsement   Method   Split   Dollar Plan  Agreement  dated
          August 1, 2000  between  San Jose  National  Bank and James R.  Kenny,
          Eugene E.  Blakeslee,  Frederic A. Charpiot,  Margo Culcasi and Judith
          Doering Nielsen,  respectively, is hereby incorporated by reference to
          Exhibit (10) aa. of the Registrant's Quarterly Report on Form 10-Q for
          the quarter ended June 30, 2000.

*(10)ad.  Form  of   Endorsement  Method  Split  Dollar  Plan  Agreement  dated
          August  1,  2000  between  San Jose  National  Bank and each of Ray S.
          Akamine,  Robert A. Archer, Albert V. Bruno, Rod Diridon, Sr., F. Jack
          Gorry,  Arthur K. Lund,  Richard L. Mount,  Louis Oneal, Diane Rubino,
          Douglas  L.  Shen,  D.D.S .  and   Gary   S.  Vandeweghe   is   hereby
          incorporated  by  reference  to Exhibit  (10) ab. of the  Registrant's
          Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.

*(10)ae.  Form  of  Director  Supplemental  Compensation Agreement dated June 1,
          2000  between San Jose  National  Bank and Ray S.  Akamine,  Robert A.
          Archer,  Albert V. Bruno,  Rod Diridon,  Sr.,  Robert G. Egan, F. Jack
          Gorry,  Arthur K. Lund, V. Ronald Mancuso,  D.D.S.,  Richard L. Mount,
          Louis  Oneal,  Diane  Rubino,  Douglas  L.  Shen, D.D.S. and  Gary  S.
          Vandeweghe  respectively,  is  hereby  incorporated  by  reference  to
          Exhibit(10) ae.  of the  Registrant's  Quarterly  Report on  Form 10-Q
          for the quarter ended September 30, 2000.

22        Subsidiary of the Registrant

23        Consent of KPMG LLP

* Indicates management contract or compensation plan or arrangement.


(b)  Reports on Form 8-K

           None.



<PAGE>



                                   SIGNATURES

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

Date:  February 28, 2001                     SJNB Financial Corp.

     By:  S/J.R. KENNY                         By: S/E.E. BLAKESLEE
   -----------------------------            ------------------------------
     James R. Kenny                           Eugene E. Blakeslee
     President and                            Executive Vice President and
     Chief Executive Officer                  Chief Financial Officer

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


<PAGE>



   S/J.R. KENNY
------------------------------------------
James R. Kenny
President, Chief Executive Officer
and Director
(Principal Executive Officer)

February 28, 2001

   S/E.E. BLAKESLEE
------------------------------------------
Eugene E. Blakeslee
Executive Vice President and
Chief Financial Officer and
Chief Accounting Officer
(Principal Financial Officer and
Principal Accounting Officer
February 28, 2001

   S/V. E. ABOUKHATER
------------------------------------------
Victor E. Aboukhater, Director
February 28, 2001

   S/R.S. AKAMINE
------------------------------------------
Ray S. Akamine, Director
February 28, 2001

   S/R.A. ARCHER
------------------------------------------
Robert A. Archer
Chairman and Director
February 28, 2001

   S/A.V. BRUNO
------------------------------------------
Albert V. Bruno, Director
February 28, 2001

   S/R. DIRIDON, SR.
------------------------------------------
Rod Diridon, Sr., Director
February 28, 2001

   S/R. G. EGAN
------------------------------------------
Robert G. Egan, Director
February 28, 2001

   S/F.J. GORRY
------------------------------------------
F. Jack Gorry, Director
February 28, 2001

   S/W. D. KRON
------------------------------------------
William D. Kron, Director
February 28, 2001

   S/A.K. LUND
------------------------------------------
Arthur K. Lund, Director
February 28, 2001

   S/V. R. MANCUSO, D.D.S.
------------------------------------------
V. Ronald Mancuso, D.D.S., Director
February 28, 2001

    S/R. L. MOUNT
------------------------------------------
Richard L. Mount, Director
February 28, 2001

   S/L. ONEAL
------------------------------------------
Louis Oneal, Director
February 28, 2001

   S/D. RUBINO
------------------------------------------
Diane Rubino, Director
February 28, 2001

   S/D.L. SHEN
------------------------------------------
Douglas L. Shen, Director
February 28, 2001

   S/G.S. VANDEWEGHE
------------------------------------------
Gary S. Vandeweghe, Director
February 28, 2001


<PAGE>


SJNB Financial Corp.

                                                                Form 10-K

                                                                Exhibits

                                                            December 31, 2000



The following exhibits are filed as part of this report:


EXHIBIT NUMBER

(2)a.      Agreement and  Plan  of Merger by and among the Registrant, Saratoga
           Bancorp and Saratoga  National Bank, dated as of August 27, 1999, is
           hereby incorporated  by reference to Exhibit 2.1 of the  Registrant's
           Registration Statement on  Form  S-4  as  filed on October 14, 1999,
           under Registration No. 333-89013.

(3)(i).   The  Registrant's  restated  Articles of  Incorporation  are hereby
          incorporated  by  reference  from Exhibit  (3)(i) of the  Registrant's
          Quarterly  Report on Form 10-Q for the  quarterly  period  ended  June
          30,1999.  (3)(ii). The Registrant's Restated Bylaws as of February 23,
          2000 are hereby  incorporated  by  reference  to Exhibit  3(ii)of  the
          Registrant's  Annual  Report on Form 10-K for the  fiscal  year  ended
          December 31,1999.

*(10)a.    The   Registrant's  1992  Employee  Stock  Option  Plan  is   hereby
           incorporated  by reference   from   Exhibit  4.1  of the Registrant's
           Registration  Statement on Form S-8, as  filed  on September 4, 1992,
           under Registration No. 33-51740.

*(10)b.   Amendment No. 1  to  the  1992  Employee  Stock Option  Plan is hereby
          incorporated by reference to Exhibit(10)b of the  Registrant's  Annual
          Report on Form 10-K for the fiscal year ended December 31, 1998.

*(10)c.   The form of Incentive  Stock  Option  Agreement  being utilized  under
          the  1992  Employee  Stock  Option  Plan  is  hereby  incorporated  by
          reference from Exhibit 4.2 of the Registrant's  Registration Statement
          on Form S-8, as filed on September  4, 1992,  under  Registration  No.
          33-51740.

*(10)d.   The form of  Stock Option  Agreement  being  utilized under  the  1992
          Employee  Stock Option Plan is hereby  incorporated  by reference from
          Exhibit 4.3 of the Registrant's Registration Statement on Form S-8, as
          filed on September 4, 1992, under Registration No. 33-51740.

*(10)e.   The    Registrant's   Amended  1996  Stock  Option  Plan  is    hereby
          incorporated by reference to Exhibit 99.1 of the Registrant's Form S-8
          filed June 15, 1999, under Registration No.333-80683.

*(10)f.   The  form   of  Nonstatutory  Stock   Option  Agreement   for  outside
          Directors  being  utilized under the Amended 1996 Stock Option Plan is
          hereby   incorporated   by   reference  to  Exhibit  (10)  f.  of  the
          Registrant's  Annual  Report on Form 10-K for the  fiscal  year  ended
          December 31, 1998.

*(10)g.   The  form of   Nonstatutory Stock Option Agreement for Employees being
          utilized   under  the  Amended   1996  Stock  Option  Plan  is  hereby
          incorporated  by  reference  to  Exhibit  (10) g. of the  Registrant's
          Annual  Report on Form 10-K for the  fiscal  year ended  December  31,
          1998.

*(10)h.   The   form  of Incentive  Stock Option  Agreement being utilized under
          the Amended 1996 Stock Option Plan is hereby incorporated by reference
          to Exhibit (10) h. of the Registrant's  Annual Report on Form 10-K for
          the fiscal year ended December 31, 1998.

*(10)i.   The Saratoga Bancorp  1982   Stock Option Plan is hereby  incorporated
          by reference to Exhibit  (10)i.of the  Registrant's  Annual  Report on
          Form 10-K for the fiscal year ended December 31, 1999.

*(10)j.   The Saratoga  Bancorp  1994   Stock  Option Plan  (Amended) is  hereby
          incorporated by reference to Exhibit (10)i. of the Registrant's Annual
          Report on Form 10-K for the fiscal year ended December 31, 1999.

*(10)k.   Forms of   Incentive  Stock  Option  Agreement,  Non-Statutory   Stock
          Option Agreement and Non-Statutory  Stock Option Agreement for Outside
          Directors  is hereby  incorporated  by reference to Exhibit (10) i. of
          the Registrant's  Annual Report on Form 10-K for the fiscal year ended
          December 31, 1999.

*(10)l.   Agreement  between   James R. Kenny  and SJNB Financial  Corp. and San
          Jose  National  Bank dated  March  27,1996 is hereby  incorporated  by
          reference  to Exhibit  (10) m. of the  Registrant's  Quarterly  Report
          on Form 10-QSB for the quarterly period ended March 31, 1996.

*(10)m.   Amendment   No. 1 to Employment  Agreement  between James R. Kenny and
          SJNB Financial  Corp. and San Jose National Bank dated October 6, 2000
          is  hereby   incorporated  by  reference  to   Exhibit(10)n.   of  the
          Registrant's  Quarterly Report on Form 10-QSB for the quarterly period
          ended September 30, 2000.

*(10)n.   Agreement  between   Eugene E. Blakeslee  and SJNB Financial Corp. and
          San Jose National Bank dated March 27, 1996 is hereby  incorporated by
          reference to Exhibit (10) n. of the  Registrant's  Quarterly Report on
          Form 10-QSB for the quarterly period ended March 31, 1996.

*(10)o.   Amendment   No. 1 To Employment Agreement  between Eugene E. Blakeslee
          and SJNB  Financial  Corp. and San Jose National Bank dated October 6,
          2000 is hereby  incorporated  by  reference  to Exhibit (10) n. of the
          Registrant's  Quarterly Report on Form 10-QSB for the quarterly period
          ended September 30, 2000.

(10)p.    Sublease  dated  April 5, 1982,  for  premises  at   95  South  Market
          Street,  San Jose, CA is hereby  incorporated  by reference to Exhibit
          (10)n. of the Registrant's Annual Report on Form 10-KSB for the fiscal
          year ended December 31, 1994.

(10)q.    Sublease   by and between McWhorter's Stationary and San Jose National
          Bank,  dated  July 6,  1995,  and as  amended  August  11,  1995,  and
          September 21, 1995, for premises at 95 South Market Street,  San Jose,
          CA is hereby  incorporated  by  reference  to  Exhibit  (10) o. of the
          Registrant's  Quarterly  Report on Form10-QSB for the quarterly period
          ended September 30, 1995.

(10)r.    Agreement  of   Purchase  and Sale  dated  July 27,  1988   for  12000
          Saratoga-  Sunnyvale  Road,  Saratoga,  CA is hereby  incorporated  by
          reference to Exhibit (10) i. of the Registrant's Annual Report on Form
          10-K for the fiscal year ended December 31, 1999.

*(10)s.   Form   of   Director   Supplemental   Compensation   Agreement   dated
          September 24, 1998 between Saratoga  National Bank and Robert G. Egan,
          John F.  Lynch  III and V.  Ronald  Mancuso,  respectively,  is hereby
          incorporated  by  reference  to  Exhibit  (10) i. of the  Registrant's
          Annual  Report on Form 10-K for the  fiscal  year ended  December  31,
          1999.

*(10)t.   Form  of  Director   Life  Insurance  Endorsement  Method Split Dollar
          Plan Agreement dated September 24, 1998 between Saratoga National Bank
          and  Robert  G.  Egan,  John  F.  Lynch  III  and V.  Ronald  Mancuso,
          respectively,  is hereby  incorporated by reference to Exhibit (10) i.
          of the  Registrant's  Annual  Report on Form 10-K for the fiscal  year
          ended December 31, 1999.

*(10)u.   Form  of   Director   Surrogate  Supplemental  Compensation  Agreement
          dated September 24, 1998 between Saratoga  National Bank and Victor E.
          Aboukhater and William D. Kron,  respectively,  is hereby incorporated
          by reference to Exhibit (10) i. of the  Registrant's  Annual Report on
          Form 10-K for the fiscal year ended December 31, 1999.


*(10)v.   Form  of  Director  Surrogate Life Insurance  Endorsement Method Split
          Dollar  Plan  Agreement  dated  September  24, 1998  between  Saratoga
          National  Bank  and  Victor  E.   Aboukhater   and  William  D.  Kron,
          respectively, is hereby incorporated by reference to Exhibit (10)i. of
          the Registrant's  Annual Report on Form 10-K for the fiscal year ended
          December 31, 1999.

*(10)w.   Form  of Officer Supplemental  Compensation Agreement  dated September
          24, 1998 between Saratoga  National Bank and Earl Lanna,  Mary Rourke,
          Sandra  Swenson,  Barbara Resop and Cathe Franklin,  respectively,  is
          hereby incorporated by reference to Exhibit (10)i. of the Registrant's
          Annual  Report on Form 10-K for the  fiscal  year ended  December  31,
          1999.

*(10)x.   Form of Officer  Life  Insurance  Endorsement Method Split Dollar Plan
          Agreement dated September 24, 1998 between Saratoga  National Bank and
          Earl Lanna,  Mary  Rourke,  Sandra  Swenson,  Barbara  Resop and Cathe
          Franklin, respectively, is hereby incorporated by reference to Exhibit
          (10)i. of the  Registrant's  Annual Report on Form 10-K for the fiscal
          year ended December 31, 1999.

*(10)y.   Richard  L.  Mount  Executive  Supplemental   Compensation   Agreement
          dated  September  24,  1998 is hereby  incorporated  by  reference  to
          Exhibit (10) i. of the Registrant's Annual Report on Form 10-K for the
          fiscal year ended December 31, 1999.

*(10)z.   Richard  L.  Mount  Life  Insurance  Endorsement  Method  Split Dollar
          Plan  Agreement  dated  September 24, 1998 is hereby  incorporated  by
          reference to Exhibit (10) i. of the Registrant's Annual Report on Form
          10-K for the fiscal year ended December 31, 1999.

*(10)aa.  Richard  L. Mount  Executive  Benefits  Agreement  dated June 18, 1999
          is  hereby   incorporated   by  reference  to  Exhibit   (10)i.of  the
          Registrant's  Annual  Report on Form 10-K for the  fiscal  year  ended
          December 31, 1999.

*(10)ab.  Form  of  Executive  Supplemental  Compensation  Agreement dated  June
          1, 2000 between San Jose National  Bank and James R. Kenny,  Eugene E.
          Blakeslee,  Frederic A.  Charpiot,  Margo  Culcasi and Judith  Doering
          Nielsen,  respectively, is hereby incorporated by reference to Exhibit
          (10) z. of the  Registrant's  Quarterly  Report  on Form  10-Q for the
          quarter ended June 30, 2000.

*(10)ac.  Form  of  Endorsement   Method   Split   Dollar Plan  Agreement  dated
          August 1, 2000  between  San Jose  National  Bank and James R.  Kenny,
          Eugene E.  Blakeslee,  Frederic A. Charpiot,  Margo Culcasi and Judith
          Doering Nielsen,  respectively, is hereby incorporated by reference to
          Exhibit (10) aa. of the Registrant's Quarterly Report on Form 10-Q for
          the quarter ended June 30, 2000.

*(10)ad.  Form  of   Endorsement  Method  Split  Dollar  Plan  Agreement  dated
          August  1,  2000  between  San Jose  National  Bank and each of Ray S
          Akamine,  Robert A. Archer, Albert V. Bruno, Rod Diridon, Sr., F. Jac
          Gorry,  Arthur K. Lund,  Richard L. Mount,  Louis Oneal, Diane Rubino
          Douglas   L.  Shen,   D.D.S. and  Gary  S.  Vandeweghe      is  hereb
          incorporated  by  reference  to Exhibit  (10) ab. of the  Registrant'
          Quarterly Report on Form 10-Q for the quarter ended June 30, 2000.

*(10)ae.  Form  of  Director  Supplemental  Compensation Agreement dated June 1
          2000  between San Jose  National  Bank and Ray S.  Akamine,  Robert A
          Archer,  Albert V. Bruno,  Rod Diridon,  Sr.,  Robert G. Egan, F. Jac
          Gorry,  Arthur K. Lund, V. Ronald Mancuso,  D.D.S.,  Richard L. Mount
          Louis   Oneal,   Diane   Rubino,   Douglas  L. Shen D.D.S. and Gary S
          Vandeweghe   respectively,   is  hereby   incorporated by reference t
          Exhibit (10) ae. of the  Registrant's  Quarterly  Report on Form 10-Q
          for the quarter ended September 30, 2000.

22        Subsidiary of the Registrant

23        Consent of KPMG LLP

* Indicates management contract or compensation plan or arrangement.