U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC  20549

FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [FEE REQUIRED]

For the Fiscal Year ended December 31, 1995

OR

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934  [NO FEE REQUIRED]

 For the Transition period from _________________ to _____________________

Commission File Number     0-11771

                           SJNB Financial Corp.
--------------------------------------------------------------------------------
                (Name of small business issuer 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)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act of 1934 during the past 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 ___

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will 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-KSB or any
amendment to this Form 10-KSB. [ ]

State the issuer's revenues for its most recent fiscal year:  $21,944,000

The  aggregate  market value of the voting stock held by  non-affiliates  of the
registrant,  based on a market value of $13.375 per share (the closing price, as
of January 26, 1996) was $31,429,694.

Number of shares of common stock outstanding as of 1/26/96:     2,424,650 shares
Documents incorporated by reference:

Portions of Registrant's definitive proxy statement for Registrant's 1996 Annual
Meeting  of   Shareholders   (to  be  filed  pursuant  to  Regulation  14A)  are
incorporated by reference into Part III of this Report.

Transitional small business disclosure format:  Yes       No  X


<PAGE>


                                TABLE OF CONTENTS

Page
PART I

   Item 1  -    Business                                                       1

   Item 2  -    Properties                                                     8

   Item 3  -    Legal Proceedings                                              8

   Item 4  -    Submission of Matters to a Vote of Security Holders            9

PART II

   Item 5  -    Market for Registrant's Common Equity and Related
                           Stockholder Matters                                10

   Item 6  -    Management's Discussion and Analysis or Plan of Operation     11

   Item 7  -    Financial Statements                                          31

   Item 8  -    Changes in and Disagreements with Accountants on Accounting
                 and Financial Disclosure                                     50

PART III

    Item 9  -   Directors, Executive Officers, Promoters and Control Persons;
                 Compliance with Section 16(a) of the Exchange Act            50

    Item 10 -   Executive Compensation                                        50

    Item 11 -   Security Ownership of Certain Beneficial Owners & Management  50

    Item 12 -   Certain Relationships and Related Transactions                50

    Item 13 -   Exhibits and Reports on Form 8-K                              50

    Signatures                                                                53


<PAGE>


                                     PART I


ITEM 1.  BUSINESS


General

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 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. The Company acquired  Business Bancorp ("BB") and
its wholly-owned subsidiary California Business Bank ("CBB") on October 1, 1994.
Operations of the Company and BB were consolidated into a single location 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.

On January 2, 1996, the Bank acquired Astra  Financial  Corp. for  approximately
$760,000.  The  purchase  price is  subject  to  upward  adjustment  if  certain
contingencies  are met. Astra's principal  business was factoring.  Its business
was merged into the Bank's Financial Services Division,  by adding approximately
$1.9 million of factored  receivables.  Astra  Financial Corp. was liquidated on
January  5,  1996 and its  assets  were  transferred  to the  Bank.  The  Bank's
Financial  Services  Division is located at 95 South  Market  Street,  San Jose,
California 95113.

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.  In addition,  the Bank offers factoring  services through its Financial
Services  Division.  Although the Bank has neither a trust nor an  international
banking department,  it has arranged to provide these services,  when requested,
through its correspondent banks.

The  Company  provides  commercial  banking  services  principally  through  its
subsidiary Bank and the Bank's Financial  Services  Division.  As a bank holding
company,  the Company is authorized to engage in the activities  permitted under
the Bank Holding Company Act and regulations thereunder.


Service Area

The principal service area of SJNB includes San Jose and the surrounding  areas,
including most of Santa Clara County.


Competition

The banking  business in California,  generally and  specifically  in the market
areas served by the Bank, is highly  competitive  with respect to both loans and
deposits. It is dominated by a relatively small number of major banks which have
offices operating throughout  California.  Among the advantages such major banks
have  over  the Bank are  their  ability  to  finance  wide-ranging  advertising
campaigns and to allocate  their  investment  assets to regions of highest yield
and demand. In addition, many of the major banks operating in the Bank's service
area offer certain specialized services, such as trust and international banking
services,  which  SJNB does not  offer  directly.  By  virtue  of their  greater
capitalization,  the major banks also have  substantially  higher lending limits
than the Bank.  SJNB competes for loans and deposits with these major banks,  as
well as with savings and loan associations,  credit unions, brokerage companies,
mortgage companies,  insurance  companies,  and other lending sources which have
provided  significant  competition  for banks with  respect to  deposits.  Other
entities,  both  governmental and private,  seeking to raise capital through the
issuance and sale of debt or equity securities, also provide competition for the
Bank in the acquisition of deposits.

At present there are  approximately  139 banking  offices in the geographic area
served  by  SJNB,  including  offices  of  major  chain  banks  and  of  smaller
independent  banks. There are also approximately 219 offices of savings and loan
associations, credit unions and other financial institutions in the service area
of SJNB.

The Bank also directly competes with other independent banks in their respective
market areas.  Presently,  there are approximately eight other independent banks
in the City of San Jose,  and  seven in the  surrounding  areas  served by SJNB.
Three of the independent  banks--Heritage  Bank of Commerce,  Cupertino National
Bank,  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 Financial  Services  Division also competes with many of the major banks and
the  independent  banks within in its  marketing  area.  It also  competes  with
companies  solely in the factoring  business.  Such companies may offer products
and services which traditionally are not offered by banking institutions.

The  trend  of  federal  and  state  legislation  has  significantly   increased
competition  between banks and other financial  institutions  for both loans and
deposits and is expected to continue to do so in the future.


Employees

At December  31,  1995,  SJNB had 63 full-time  officers  and  employees  and 18
part-time  employees for a total of 72.33 full time equivalents.  Certain of the
Bank's officers are also officers of the Company.  None of the Bank's  employees
are represented by a union. Employee relations are believed to be good.


Supervision and Regulation

         The Company

The Company is a bank holding company  registered under the Bank Holding Company
Act of 1956 and is subject to the  supervision  of the Board of Governors of the
Federal Reserve System  ("Board").  As a bank holding company,  the Company must
obtain the approval of the Board before it may acquire all or substantially  all
of the assets of any bank,  or ownership or control of the voting  shares of any
bank if, after giving effect to such  acquisition  of shares,  the Company would
own or control  more than 5% of the voting  shares of such  bank.  With  certain
limited  exceptions,  the Company is  prohibited  from  engaging in or acquiring
direct or indirect  ownership or control of more than 5% of the voting shares of
any company engaged in non-banking activities,  unless the Federal Reserve Board
determines  that such  activities  are so closely  related to banking as to be a
proper incident thereof.

The  Company and any  subsidiary  which it may acquire or organize in the future
are deemed to be  affiliates  of the Bank  within the  meaning  set forth in the
Federal  Reserve Act. This means,  for example,  that there are  limitations  on
loans by the Bank to affiliates,  on investments by the Bank in any  affiliate's
stock and on the Bank's taking any affiliate's  stock as collateral for loans to
any borrower.  All affiliate  transactions must satisfy certain  limitations and
otherwise be on terms and  conditions  that are  consistent  with safe and sound
banking practices.  In this regard, the Bank generally may not purchase from any
affiliate a  low-quality  asset (as that term is defined in the Federal  Reserve
Act). Also,  transactions by the Bank with an affiliate must be on substantially
the same terms as would be available for non-affiliates.

The Company and its  subsidiary  are also subject to certain  restrictions  with
respect  to  engaging  in the  underwriting,  public  sale and  distribution  of
securities.

The  Company  and the  Bank are  prohibited  from  engaging  in  certain  tie-in
arrangements in connection with the extension of credit.  For example,  the Bank
generally may not extend credit on the condition  that the customer  obtain some
additional service from the Bank or the Company,  or refrain from obtaining such
service from a competitor.

          The Bank

As a national banking association,  the Bank is subject to the National Bank Act
and to supervision, regulation and regular examination by the Comptroller of the
Currency ("Comptroller"). It is also a member of the Federal Reserve System and,
as such,  is subject to  applicable  provisions  of the Federal  Reserve Act and
regulations issued pursuant thereto.  The deposits of the Bank are insured up to
the maximum  legal limits by the Bank  Insurance  Fund,  which is managed by the
Federal  Deposit  Insurance  Corporation  ("FDIC"),  and the  Bank is  therefore
subject to  applicable  provisions  of the  Federal  Deposit  Insurance  Act and
regulations  of the FDIC.  The statutes and  regulations  administered  by these
agencies govern most aspects of the Bank's business, including required reserves
against deposits,  loans,  investments,  dividends, and the establishment of new
branches and other banking facilities.

(a)  Supervision and Examinations.

Federal law mandates  frequent  examinations of all banks (usually  annually for
the Bank),  with the costs of examinations to be assessed against the bank being
examined. In the case of the Bank, its primary regulator is the Comptroller

The FDIC has "back up"  enforcement  power over the Bank under  Federal law. The
FDIC may recommend and, in the absence of response by an  institution's  primary
regulator,   undertake   enforcement   action  against  any  insured   financial
institution.  Such "back up" enforcement action is permissible if ordered by the
Board of  Directors  of the FDIC only upon a showing  that an insured  financial
institution's conduct poses a risk to its insurance fund.

The federal banking regulatory agencies have substantial enforcement powers over
the depository institutions that they regulate. Civil and criminal penalties may
be imposed on such institutions and persons  associated with those  institutions
for violations of any law or  regulation.  The penalties can be up to $5,000 per
day that a violation continues when the violation is unintentional,  or up to $1
million per day that a violation  continues  when the violation is willful.  The
amount of the penalty also depends on whether the violation is part of a pattern
or causes a loss to the financial institution.

(b)  Brokered Deposits.

The Federal  Deposit  Insurance  Corporation  Improvement Act of 1991 ("FDICIA")
places  limits on brokered  deposits  and extends the limits to any bank that is
not  "well  capitalized"  or is  notified  that it is in  "troubled  condition."
Previously,  the limitations  applied only to troubled banks. A well capitalized
institution  (which  generally  includes an institution  that is considered well
capitalized for purposes of the prompt corrective action  regulations  discussed
below) may still accept brokered  deposits  without  restriction,  unless it has
been  informed  by its  appropriate  federal  regulatory  agency  that  it is in
"troubled  condition." All other insured depository  institutions are prohibited
from accepting brokered deposits unless a waiver is obtained from the FDIC. If a
waiver is obtained,  the interest  paid on such deposits may not exceed the rate
paid for deposits in its normal  market area, or the national rate as determined
in the FDIC's regulation.

If a  depository  institution  solicits  deposits  by  offering  interest  rates
significantly  higher than rates being  offered in its market area, it is deemed
under  FDICIA  to be a  deposit  broker.  Therefore,  depending  on its  capital
category,  it may be prohibited from such practice,  or need a prior waiver from
the FDIC in order to offer such rates.  The FDIC's  regulations  specify that an
institution  that is not well  capitalized  may  offer  rates  that  exceed  the
prevailing  effective  rates  offered  in the  normal  market  area  only if the
institution  obtains a waiver, but the institution may not offer rates more than
75 basis points above such prevailing rates.

The Bank is at this time  considered  well  capitalized  and not in a  "troubled
condition,"  and  it  is  not,  therefore,   subject  to  the  brokered  deposit
limitations. If the Bank's status changes in the future, these regulations could
restrict the ability to attract such deposits.

(c)  Risk-Based Deposit Insurance Assessments.

In  addition,  FDICIA  required  the FDIC to develop  and  implement a system to
account for risks  attributable to different  categories and  concentrations  of
assets and liabilities in assessing deposit insurance premiums. The FDIC adopted
a  risk-assessment  system effective  January 1, 1994.  Under this system,  each
bank's deposit insurance premium  assessment is calculated based on the level of
risk that the Bank  Insurance  Fund will incur a loss if that bank fails and the
amount of the loss if such  failure  occurs.  This  requirement,  along with the
increased  emphasis on exceeding capital measures,  may cause banks such as SJNB
to adjust their asset mix in order to affect their deposit insurance premium and
their ability to engage in activities.

         Capital Regulations and Dividends

The Company and the Bank are subject to regulations and guidelines which provide
minimum capital adequacy requirements and leverage requirements for bank holding
companies and banks. The specific regulatory  requirements are described in Item
6, "Management's  Discussion and Analysis or Plan of  Operation-Capital."  Under
FDICIA,  there are five  categories  of capital  compliance,  ranging from "well
capitalized,"  which means the bank has total risk-based capital of 10% or more,
Tier 1 risk-based  capital of 6% or more, and a leverage ratio of 5% or more, to
"critically undercapitalized," which means that the bank has a leverage ratio of
less than 2%. The Bank is in the "well capitalized" category at this time.

FDICIA requires the banking  agencies to take corrective  action against certain
financial institutions,  based upon the financial institution's  compliance with
the capital  measurements.  A  financial  institution  is subject to  corrective
action if its total risk-based capital is less than 8%, or its Tier 1 risk-based
capital  ratio or leverage  ratio is less than 4%. In addition,  an  institution
having a total  risk-based  capital  to assets  ratio of less than 10%, a Tier 1
risk  based  ratio of less than 6%, or a  leverage  ratio of less than 5% may be
subject to corrective action if it receives a less-than-satisfactory  rating for
assets,  management,  earnings or liquidity in an  examination or if such ratios
fall  significantly  below  such  standards.  These  corrective  actions  become
increasingly more severe as institutions become more and more  undercapitalized.
Ultimately,  the federal regulator is required to seize an institution within 90
days of its becoming  "critically  undercapitalized,"  unless the  regulator can
document that another  course of action will better achieve the purposes of this
section.  The  Bank  has  capital  ratios  in  excess  in  all of  such  capital
measurements and it is not subject to any corrective actions.

As  required  by FDICIA,  the  federal  banking  agencies  now take  credit risk
concentrations   and  an  individual   institution's   ability  to  manage  such
concentrations  into  account  when  they  assess  a  bank's  capital  adequacy.
Non-traditional investments and activities, such as the use of derivatives,  are
also taken into  account in  assessing  capital  requirements.  The agencies can
adjust the standards for risk-based capital on a case by case basis to take such
risks  into  account,  but  there is no  formula  that a bank  can use  prior to
evaluation by the agency to determine how credit concentration or nontraditional
activities will affect its capital requirements.

The banking agencies adopted  amendments to the risk-based capital rules in 1995
to take  interest  rate risk into  account.  Now,  when the agencies  assess the
capital  adequacy  of a bank,  they must take into  account  the  effect on that
bank's  capital that would occur if interest rates moved up or down. The purpose
of the  amendment is to ensure that banks with high levels of interest rate risk
have enough capital to cover the loss exposure.

The  amendments to the capital rules do not specify how interest rate risks will
be measured.  The agencies  proposed a measurement  framework in 1995 to measure
the  interest  rate risk to a  particular  bank.  However,  the  agencies  later
announced  in  December  of 1995 that they  need more time to  analyze  the risk
measurement  proposal.  It is not known whether the final measurement  framework
will affect the Bank's capital requirements.

The  Company  and the Bank are also  subject to  regulatory  restrictions  and  
guidelines  with  respect to the payment ofdividends.  See Item 5, "Market for 
Registrant's Common Equity and Related Stockholder Matters."

         Impact of Monetary Policies

Banking is a business in which profitability  depends on rate differentials.  In
general,  the difference between the interest rate received by the Bank on loans
extended to its customers and securities held in the Bank's investment portfolio
and the interest rate paid by the Bank on its deposits and its other  borrowings
comprise the major portion of the Bank's  earnings.  To the extent that the Bank
is not able to  compensate  for  increases  in the cost of  deposits  and  other
borrowings with greater income from loans, securities and fees, the net earnings
of the Bank will be reduced.  The  interest  rates paid and received by the Bank
are highly  sensitive to many factors  which are beyond the control of the Bank,
including the influence of domestic and foreign economic conditions.

The earnings and growth of the Bank are also affected by the monetary and fiscal
policy of the United States government and its agencies, particularly the Board.
These agencies can and do implement  national monetary policy,  which is used in
part to curb inflation and combat  recession.  Among the instruments of monetary
policy used by these  agencies  are open market  transactions  in United  States
Government  securities,  changes in the discount rates of member bank borrowings
and  changes  in  reserve  requirements.  The  actions  of the Board  have had a
significant  effect on  lending by banks,  investments  and  deposits,  and such
actions are  expected to  continue to have a  substantial  effect in the future.
However,  the nature and timing of any further changes in such polices and their
impact on the Bank cannot be predicted.

         Environmental Regulation

Federal,  state and local regulations  regarding the discharge of materials into
the  environment  may have an impact on the Company and the Bank.  Under federal
law,  liability for environmental  damage and the cost of cleanup may be imposed
upon any person or entity who is an owner or operator of contaminated  property.
State law provisions, which were modeled after federal law, impose substantially
similar  requirements.  A  resulting  risk to the  Company  and the  Bank is the
possibility   that   property   securing   a  loan  made  by  the  Bank  may  be
environmentally  impaired and not provide  adequate  security  for the Bank.  In
addition,  these statutes subject the Bank to a risk that it might be considered
to be an owner or operator of such property and  therefore  liable for the costs
associated with cleaning up the environmental damage.

California law provides some protection  against the first risk, by establishing
certain additional, alternative remedies for a lender in the situation where the
property  securing  a  loan  is  later  found  to be  environmentally  impaired.
Primarily,  the law permits the lender in such a case to pursue remedies against
the  borrower  other  than  foreclosure  under  the  deed of  trust.  Additional
legislation is now pending in California to protect  lenders  against the second
risk, but there can be no assurance that such legislation will be adopted.

The  Environmental  Protection  Agency  had  adopted  a rule  that  limited  the
environmental  clean-up  liability  of a lender  with  limited  interest  in and
control over contaminated  property. In 1994, however, that rule was struck down
by the federal  courts,  on the ground that the rule was not  authorized  by the
statutory  law.  In spite of this,  the EPA has  continued  to follow the rule's
provisions  in its  enforcement  policy.  Although  legislation  to give lenders
similar  protection  is pending in Congress,  there can be no assurance  that it
will  pass or that  it will  provide  similar  protection  to  lenders  if it is
enacted.

         New and Pending Legislation

(a)      Interstate Banking and Branching.

The Caldera,  Weggeland and Killea California  Interstate  Banking and Branching
Act of 1995  ("Interstate  Banking Act") became  effective  October 2, 1995. The
Interstate  Banking Act  implements  in  California a limited form of interstate
branching.  A bank from  outside of  California  may now acquire a whole bank in
California and merge the California bank into the out-of-state  bank. The effect
of such merger is that the  out-of-state  bank will have full branch  offices in
California.  Federal law authorizing these mergers was passed in 1994 and became
effective September 30, 1995.

Out of state banks may not establish  branch  offices in California by opening a
new branch or  acquiring  one or more (but less than all) of the  branches  of a
California  bank.  They may only acquire a whole bank that has been in existence
for at least five years. As a result of the Interstate  Banking Act,  California
banks may now be  permitted  to branch into other  states that have also adopted
early opt-in legislation.

There may be a gradual  increase  in the number of  offices of foreign  banks in
California,  and a possible  decrease in banks  headquartered in California,  as
such banks are acquired by out-of-state entities. It is too early to predict the
specific  effect of the  Interstate  Banking Act on the Bank and its  particular
market.

The Interstate Banking Act also authorizes  California  state-chartered banks to
appoint  unaffiliated banks in other states to act as an agent of the California
state-chartered   bank.  The  agent  can  accept   deposits  and  evaluate  loan
applications  on behalf of the  principal  bank.  National  banks may  establish
agency  relationships  only with affiliated banks.  This expanded  authority for
state-chartered  banks may place  national banks in California at a disadvantage
if many state-chartered bank use agency relationships with unaffiliated entities
to increase their business.

(b)      New Community Reinvestment Act Regulations.

The federal banking agencies amended substantially their Community  Reinvestment
Act ("CRA")  regulations  in 1995.  CRA  requires  banks to help meet the credit
needs of their entire  communities,  including  minorities  and low and moderate
income  groups.  Prior  regulations  required banks to adopt a CRA statement and
prove to the regulators that the bank has engaged in activities to determine and
meet the credit  needs of minority  and low and moderate  income  groups.  Those
regulations had been  criticized on the ground that  regulatory  examinations to
determine  compliance  focused on the processes a bank goes through  rather than
the results of the effort or actual performance.

Under the revised CRA regulations,  the agencies determine a bank's rating under
the CRA by evaluating its performance on lending,  service and investment tests,
with the lending test as the most  important.  The tests are to be applied in an
"assessment  context"  that  is  developed  by the  agency  for  the  particular
institution.  The assessment  context takes into account  demographic data about
the community,  the community's  characteristics  and needs,  the  institution's
capacities and constraints,  the  institution's  product  offerings and business
strategy,  the institution's  prior performance,  and data on similarly situated
lenders.  Since the assessment context is developed by the regulatory  agencies,
there is  substantial  concern that a particular  bank will not know until it is
examined whether its CRA programs and efforts have been sufficient.

Larger  institutions  are required under the revised  regulations to compile and
report certain data on their lending activities in order to measure performance.
Some of this data is already required under other laws, such as the Equal Credit
Opportunity Act.

Small institutions (with less than $250 million in assets) will be examined on a
"streamlined  assessment  method".  The  streamlined  method  will  focus on the
institution's loan to deposit ratio, degree of local lending,  record of lending
to  borrowers  and  neighborhoods  of  differing  income  levels,  and record of
responding to complaints.

Large and small institutions have the option of being evaluated for CRA purposes
in relation to their own pre-approved strategic plan. Such a strategic plan must
be submitted to the  institution's  regulator  three months before its effective
date and be published for public comment.

The Bank will be considered a small  institution  until it has assets of greater
than $250 million at the ends of two years in a row. Therefore, the Bank expects
that it may become subject to the full reporting  requirements  for 1997, and be
subject to the service and  investment  tests starting in 1997.  Therefore,  the
initial  impact of this  amendment on the business of the Bank will be less than
the impact starting in 1997. At that time, the new regulations will increase the
amount of reports the Bank is required to prepare and submit, and it could cause
the Bank to change its asset mix,  in order to meet the  performance  standards.
The new regulations  will increase the uncertainty of the Bank's business as the
rating and examination procedures changes.

(c)      The Private Securities Litigation Reform Act of 1995

The Private Securities Litigation Reform Act of 1995 was enacted near the end of
1995 to implement  procedural  protections  to discourage  frivolous  securities
litigation. The Reform Act now requires certain specific pleadings to be made in
connection with litigation  involving  securities fraud, and limits  plaintiffs'
rights of recovery  against certain  defendants.  The Reform Act also provides a
legislative   safe  harbor   against   liability  for  the  release  of  certain
"forward-looking" statements, such as projections.

This  legislation  should have several  indirect  effects on all  publicly  held
companies, including the Company and the Bank. First, such companies should face
less risk of being sued by investors over issues relating to disclosures  and/or
stock  price.  Second,  companies  may find that it is now  easier to obtain the
services of highly qualified persons to serve as officers and directors, as this
legislation  should  reduce the risks such  individuals  face of being  named in
frivolous litigation. Finally, this should reduce, over time, insurance premiums
for director and liability insurance.

(d)      Safety and Soundness Guidelines.

The federal  banking  agencies  issued final safety and soundness  guidelines in
1995, as required by FDICIA. The guidelines  contain  operational and managerial
standards  and  prohibit  certain  compensation  practices.  The  effect  of the
guidelines  is to require on general  standards  of safe and sound  business and
banking  practices with respect to internal  controls and  information  systems,
internal audit systems, loan documentation,  credit underwriting,  interest rate
exposure  and  compensation.  The  banking  agencies  have  indicated  that  the
standards are the same as the agencies  previously applied in their examinations
of institutions,  so the adoption should not affect individual institutions that
comply with the regulations.  If an agency determines that an institution is not
in compliance  with the guidelines,  the institution  must submit a plan to come
into compliance to the regulator within 30 days of notification.

In addition, the agencies re-proposed guidelines for asset quality and earnings.
If adopted,  the proposal would set forth similar guidelines for institutions in
the areas of  monitoring  asset quality and the quality and quantity of earnings
that are similar to the operational and managerial standards.

The effect of these guidelines on the Bank, as adopted and re-proposed,  depends
on how they are implemented by the Bank's primary  regulator,  the  Comptroller.
The Bank  expects  that the  guidelines  may  increase  the Bank's cost of doing
business, since it now must document its compliance with all the requirements in
the guidelines.

(e)      Truth in Lending Act Amendments.

Amendments  to the Truth in Lending  Act were  enacted in 1995.  The  amendments
increase the tolerances for errors and reduce the potential liability of lenders
for errors in disclosure.  The legislation also places limitations on borrowers'
rights to rescind consumer credit transactions based on the disclosures provided
to the borrower by the lender.  The amendments provide relief to banks and other
consumer lenders generally from some of the uncertainty and potential  liability
that accompanies consumer lending.

(f)      Reduced Deposit Insurance Premiums.

During 1995 the FDIC reduced  substantially the deposit insurance  premiums paid
by most banks.  The Bank's premium was reduced,  effective June 1, 1995, from 23
cents per $100 to 4 cents per $100 of insured  deposits for most healthy  banks.
The premium  assessment  was further  reduced for the first half of 1996 to zero
cents per $100 of insured deposits for most healthy banks.  Banks must still pay
the legal minimum annual premium of $2,000. This has reduced and will reduce the
Bank's  cost of doing  business  by the  amount of the  reductions.  The  second
reduction to the legal  minimum  premium has been  criticized  substantially  by
other governmental  representatives and quasi-governmental  groups, however, and
there  can be no  assurance  that the  Bank  will  continue  to pay such a small
deposit insurance premium.

(g)      Proposed Legislation and Regulation.

Certain legislative and regulatory  proposals that could affect the Company, the
Bank and the  banking  business  in general  are  pending or may be  introduced,
before the United States Congress, the California State Legislature, and federal
and state  government  agencies.  The  United  States  Congress  is  considering
numerous bills that could reform the banking laws substantially.  Bills are also
pending that would reduce the banking  industry's  regulatory  burden,  in areas
such as  Truth  in  Lending,  Truth  in  Savings,  and  Real  Estate  Settlement
Procedures Act disclosure requirements, and in various reporting requirements.

In addition,  various  legislative  proposals to merge the Bank  Insurance  Fund
("BIF") with the Savings Association Insurance Fund ("SAIF"), and to address the
current  deposit  insurance  premium   discrepancy  between  banks  and  savings
associations,  are currently under consideration.  Banks insured by the BIF fund
now pay substantially lower deposit insurance premiums than institutions insured
by the SAIF fund. Should the funds be merged, the premiums paid by banks such as
the Bank may increase substantially, which would increase the Bank's expenses.

Other proposals to permit banks to engage in related financial services,  and to
permit other financial services companies to offer banking-related  services are
pending and, if adopted, would increase competition to the Bank.

It is not known to what extent, if any, these proposals will be enacted and what
effect such legislation would have on the structure,  regulation and competitive
relationship  of financial  institutions.  It is likely,  however,  that many of
these proposals would subject the Company and the Bank to increased  regulation,
disclosure and reporting requirements and would increase competition to the Bank
and its cost of doing business.

In addition to pending  legislative  changes,  the  various  banking  regulatory
agencies  frequently  propose  rules and  regulations  to implement  and enforce
already existing legislation. It cannot be predicted whether or in what form any
such  legislation  or  regulations  will be  enacted  or the  effect  that  such
legislation may have on the Bank's business.

Statistical Data

Certain  consolidated  statistical  information  concerning  the business of the
Company  appears  on  pages  11  through  30  under  the  caption  "Management's
Discussion and Analysis of Plan of Operation" and in the Company's  Consolidated
Financial  Statements on pages 31 through 49.  ratios  relating to the Company's
Return on Equity and Assets appear on page 11. The "Management's  Discussion and
Analysis  or  Plan  of  Operation"  should  be  read  in  conjunction  with  the
Consolidated Financial Statements.  Dollars are in thousands in the text, except
as otherwise noted


ITEM 2:  PROPERTIES

The Company  shares common  quarters with SJNB at One North Market  Street,  San
Jose,  California.  Purchased  by the Bank in 1985,  the  building  consists  of
approximately  24,000  square feet of  basement,  ground  floor and second floor
space.

In addition the Bank assumed  CBB's lease for  approximately  12,000 square feet
located at 95 South Market Street,  San Jose,  California.  Approximately  5,500
square feet is currently  being occupied by a third party under a sublease which
expires at the end of the term of the lease. Another sublease with a third party
has been signed for 3,500 square feet.  This sublease will commence as of May 1,
1996 and expire upon  termination of the original CBB lease. The remaining space
is being occupied by the Bank's Financial Services Division.

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

The Bank has invested in loans secured by real property  collateral.  The Bank's
policies   with  respect  to  such  loans  are   described   under  the  caption
"Management's  Discussion  and Analysis or Plan of Operation - Loan  Portfolio."
The Bank's  policies on real estate secured loans may be changed  without a vote
of security holders.


ITEM 3:  LEGAL PROCEEDINGS

Other than as set forth  below,  neither the Company nor the Bank are subject to
any pending material legal proceedings,  except legal proceedings arising in the
ordinary  course of the Bank's  business,  none of which are  expected to have a
material impact upon the financial position or results of operations.

The Bank has been named as a  defendant  in a lawsuit  filed in the Santa  Clara
County Superior Court by Giannotta  Properties,  Inc.  Giannotta  Properties had
borrowed  money  from the Bank and had given  the Bank a  security  interest  in
certain real property as security for the loan.  Giannotta  Properties defaulted
on the loan, the Bank declared a default and the foreclosure trustee conducted a
foreclosure  sale of the real  property on January 17,  1995.  The  property was
purchased at the foreclosure  sale by a third party. The Bank recovered the full
amount owed to it by the borrower.  On January 18, 1995, the borrower filed this
suit against the Bank, the foreclosure  trustee,  the third party that purchased
the property at the foreclosure sale, and various other parties,  by which it is
making  various  allegations  including  a claim that the  foreclosure  sale was
improperly  conducted.  Giannotta  Properties claims $20 million in damages as a
result  of  the  conduct   described  in  the   allegations,   which  amount  is
unsubstantiated  by the  pleadings.  The  litigation is in the initial  pleading
stages and virtually no discovery has been  conducted and no responses have been
filed to the pleadings.  It is too early to make any determination of the Bank's
exposure  for  damages,  if  any.  The  Bank  intends  to  defend  this  lawsuit
vigorously.

During the second  quarter of 1995,  the Bank was  served  with a  complaint  by
William Kaffer, Robert N. Greco and Gertrude E. Saynor, who allege that the Bank
participated with Charles A. Herpick,  Richard J. Bauer, James Herpick,  Century
Loan (Messrs. C. Herpick, Bauer, and J. Herpick and Century Loan are referred to
as the "Century Defendants"),  Santa Clara Land Title Company and other banks in
a scheme to defraud the  investors of Century  Loan.  The complaint was filed on
May 18, 1995, in the Superior Court of Santa Clara County. In the complaint, the
plaintiffs allege that the Century Defendants sold fictitious second trust deeds
to the plaintiffs and the plaintiff class, and that the proceeds from such sales
were  used  to make  interest  payments  on  fictitious  trust  deeds  that  had
previously been sold to other  investors.  The plaintiffs  alleged that the bank
defendants,  including the Bank,  knew or should have known that 1) Century Loan
was  overleveraged  and was commingling  investors'  funds and 2) that the banks
extended  credit to Century Loan in spite of such  knowledge,  enabling  Century
Loan to continue defrauding investors.  The complaint also alleges that the bank
defendants were  co-conspirators of the Century  Defendants,  were agents of and
joint ventures with the Century  Defendants and aided and abetted the fraudulent
scheme.

The Century Loan complaint asks for compensatory  damages,  punitive damages and
other damages,  interest,  costs and fees. The named plaintiffs allege losses on
the  investments  in trust deeds of  approximately  $1 million.  On December 26,
1995,  the Court issued a notice of decision  indicating its intent to certify a
class in the  lawsuit  on behalf  of all  investors  who  purchased  trust  deed
investments  from  Century  Defendants.  It is not  feasible to estimate  losses
suffered by the plaintiff class.

In the Company's  answer to the complaint,  it has denied all of the allegations
and has asserted numerous defenses to the various  allegations.  Given the early
stage of this action, it is not possible to make any determination of the Bank's
exposure  for  damages,  if  any.  The  Bank  intends  to  defend  this  lawsuit
vigorously.


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

No matter was submitted to a vote of security  holders during the fourth quarter
of the fiscal year covered by this Report.




<PAGE>


                                     PART II


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

As of January  26,  1996,  the  Company  had  2,424,650  shares of Common  Stock
outstanding,  held by  approximately  1,800  shareholders.  The Company's Common
Stock is listed on the NASDAQ  National  Market System under the symbol  "SJNB."
The market  makers of the common stock are:  Everon  Securities,  Inc.,  Sandler
O'Neill &  Partners,  Hoefer & Arnett,  Incorporated,  Sutro & Co.,  Dean Witter
Reynolds, Inc. and Van Kasper & Co., Inc.


Stock Price

The following sets forth the high and low 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.  Prices are without  retail  mark-up,
mark-down or commissions.

QUARTERLY COMMON STOCK PRICE
-----------------------------------------------------------------------------
                                                 Price
                                            of Common Stock         Cash
                                            High         Low      Dividends
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
                             1994
-----------------------------------------------------------------------------
First Quarter                               8.38        7.50        -----
Second Quarter                              9.00        7.00        $0.08
Third Quarter                               9.75        7.50        -----
Fourth Quarter                              8.88        6.88        $0.08
-----------------------------------------------------------------------------
                             1995
-----------------------------------------------------------------------------
First Quarter                               8.13        7.25        -----
Second Quarter                              9.38        7.75        $0.09
Third Quarter                              11.75        9.13        -----
Fourth Quarter                             14.50        11.00       $0.12
-----------------------------------------------------------------------------
                             1996
-----------------------------------------------------------------------------
First Quarter (through January 26, 1996)   13.50        13.00       -----

The Company's  Board of Directors will consider the  advisability  and amount of
proposed  dividends each year.  Future  dividends will be determined in light 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 banks is  subject  to  various  legal and  regulatory
restrictions.   See  "Supervision  and  Regulation  -  Capital  Regulations  and
Dividends."

During  1993,  the Company  commenced a policy to pay regular  dividends  to its
shareholders.  In the  future,  it is the  intention  of the Company to continue
dividend  payments  on a  semi-annual  basis  in May and  December,  based  upon
financial results.

ITEM 6:  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

<TABLE>
<CAPTION>

The following  presents  selected  financial  data and ratios for the five years
ended December 31, 1995:

(dollars in thousands, except per share amounts)
                                                                  
-------------------------------------------------------------------------------------------------------------------
                                                             As of and for the Years Ended December 31,
STATEMENT OF OPERATIONS DATA :                        1995         1994         1993         1992         1991
-------------------------------------------------------------------------------------------------------------------
<S>                                                    <C>          <C>          <C>         <C>          <C>   
Net interest income                                    $14,295       $9,749       $7,163       $5,866       $5,592
Provision for possible loan losses                     (1,045)        (600)        (625)        (698)      (1,575)
Other income                                               966          744          682          527          695
Other expenses                                         (8,797)      (6,676)      (5,276)      (4,645)      (5,056)
-------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes                        5,419        3,217        1,944        1,050        (344)
Income taxes (recovery)                                  2,395        1,354          758          345        (153)
-------------------------------------------------------------------------------------------------------------------
Net income (loss)                                       $3,024       $1,863       $1,186         $705       $(191)
===================================================================================================================
PER SHARE DATA:
-------------------------------------------------------------------------------------------------------------------
Net income (loss) per share                              $1.20        $1.00        $0.70        $0.43      $(0.12)
Dividends per share                                        .21          .16          .14         ----          .27
Shareholders' equity per share                           11.02         9.92         9.86         9.28         8.90
Tangible shareholders' equity per share                   9.06         7.84         9.86         9.28         8.90
===================================================================================================================
BALANCE SHEET DATA:
-------------------------------------------------------------------------------------------------------------------
Balance sheet totals-end of year:
  Assets                                              $252,195     $205,949     $127,967     $107,357      $94,525
  Loans                                                170,800      149,407       97,958       77,001       74,745
  Deposits                                             196,692      180,287      109,712       91,432       79,419
  Shareholders' equity                                  26,658       23,442       16,064       15,084       14,292
Average balance sheet amounts:
  Assets                                              $222,913     $153,717     $117,627     $100,382      $98,228
  Loans                                                152,820      112,818       84,457       72,009       73,512
  Earning assets                                       202,996      140,445      106,999       91,169       87,571
  Deposits                                             183,282      133,897      100,899       84,663       82,286
  Shareholders' equity                                  24,898       18,210       15,551       14,701       14,867
===================================================================================================================
SELECTED RATIOS:
-------------------------------------------------------------------------------------------------------------------
Return on average equity                                12.15%       10.23%        7.63%        4.80%      (1.29%)
Return on average assets                                  1.36         1.21         1.01          .70        (.19)
Dividend payout ratio                                    16.67        17.18        19.22         ----         ----
Average equity to average assets                         11.17        11.85        13.22        14.65        15.13
Leveraged capital ratio                                   9.00         9.33        12.02        14.94        15.33
Nonperforming loans to total loans                         .52         3.67         3.75         1.85         5.71
Net chargeoffs to average loans                            .33         1.11          .14         1.88         1.04
Allowance for loan losses to total loans                  2.25         2.22         2.10         2.02         2.95
Allowance for loan losses to
  nonperforming loans                                   430.24        60.45        55.93       108.82        51.70
===================================================================================================================
</TABLE>

The purpose of the following discussion is to address 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 31 through 49. Dollars are in thousands
in the text,  except as  otherwise  noted.  The  interest  earned  and yields on
nontaxable securities have been adjusted to a fully-taxable equivalent basis for
all financial  information  presented in "Item 6:  Management's  Discussion  and
Analysis or Plan of Operations."

Merger with Business Bancorp (BB)

On October 1, 1994,  the Company  completed the purchase of BB and CBB.  Because
the acquisition was accounted for as a purchase,  BB's results of operations for
the period  prior to the  acquisition  have not been  included in the  Company's
results of  operations.  The impact of the changes in the Company are  discussed
below. See "Financial  Review,"  "Earning Assets,"  "Funding,"  "Asset/Liability
Management" and "Capital and Liquidity."


Financial Review

         Earnings Summary

For the year ended  December 31, 1995,  the Company  reported net income of $3.0
million or $1.20 per share as  compared  to net income of $1.9  million or $1.00
per  share  in  1994  (a 62%  increase).  Net  income  for  the  year  increased
substantially  over that of a year ago  primarily  due to the  increase  of $4.5
million in net  interest  income.  The  increase in net  interest  income is due
partially to the  acquisition  of CBB as of the beginning of the last quarter of
1994 and to  additional  volume  growth  of $46  million  throughout  1995.  The
increase in net interest  income was offset by an increase in the loss provision
and an increase in expenses which are primarily  related to the  acquisition and
the increase in volumes.

As of December 31, 1995,  consolidated assets were $252 million,  net loans $167
million, and deposits $197 million. Total consolidated assets have increased $46
million from $206 million a year ago, or a 22% increase. Loan and deposit growth
was  generated by increased  marketing and business  development  efforts of the
Bank  and the  Bank's  use of  on-balance-sheet  hedging  of  approximately  $24
million.

         Net Interest Income

Net interest income is the principal source of the Company's operating earnings.
It  represents  the  interest  earned on loans,  investments,  and money  market
investments  less the  interest  paid on  deposits  and other  sources of funds.
Significant factors affecting net interest income are rates,  volumes and mix of
the loan and deposit portfolios.

Consolidated  net interest income was $14.3 million in 1995, as compared to $9.8
million in 1994,  on average  earning  assets of $203 million and $140  million,
respectively.  The $4.5 million  increase in net interest income during 1995 was
due primarily to an increase in the volume of earning assets. The acquisition of
CBB added  approximately  $52 million in average earning assets for 1995,  while
the remainder of the growth of  approximately  $11 million was achieved  through
the success of the Bank's marketing efforts.  The Bank's net interest margin for
1995 was fairly consistent with that in 1994 (7.07% in 1995 as compared to 6.97%
in 1994). Two factors affected this result. First, the Bank received substantial
interest income on a cash basis in 1995 (approximately  $588) for loans that had
been put on nonaccrual  status in prior years.  This had a significant  positive
impact on 1995's net interest  margin,  which is not expected to be continued in
future periods.  Offsetting this increase was the  stable-to-declining  interest
rate environment in 1995, as well as the impact of the highly competitive market
and the resulting  pressure on loan interest rates. The Bank's average prime was
8.83%  in 1995 as  compared  to  7.14%  in 1994.  The  impact  of these  factors
primarily offset each other.

Consolidated  net interest  income was $9.8 million in 1994, as compared to $7.2
million in 1993, on average earning assets of $140.4 million and $107.0 million,
respectively.  The $2.6 million  increase in net interest income during 1994 was
due to an  increase  in the volume of earning  assets and an increase in the net
interest  margin.  On an  average  basis for the  year,  the  acquisition  added
approximately  $13  million  in  average  earning  assets  for  1994,  while the
remainder of the growth was achieved through the success of the Bank's marketing
efforts.  The  increase  in the net  interest  margin was due  primarily  to the
increase in interest rates  throughout  1994. The Bank's average prime was 7.14%
in 1994 as compared to 6% in 1993. The impact of the rate increases  resulted in
increasing the net interest margin from 6.74% to 6.97%

The Company  recognizes  loan  origination  and certain  commitment fees (net of
origination  costs)  over  the  contractual  lives  of the  related  loans as an
adjustment  to yield.  Loan fees  contributed  6.2% of loan  portfolio  interest
during 1995,  8.9% in 1994 and 11.6% in 1993.  This decline in the proportion of
loan  fees  to  total  loan  interest  is  due  mainly  to the  increase  in the
competitive  atmosphere relating to loan pricing,  the overall level of interest
rates and the higher proportion of SBA loans included in the loan portfolio (SBA
loans have lower origination fees).

Like interest income,  interest  expense  increased  significantly  during 1995.
Interest  expense in 1995 was $6.7  million as compared to $3.2 million in 1994.
This was mainly due to the  increase  in volumes  and the higher  interest  rate
environment.   Interest  expense  as  a  percent  of  interest-bearing  deposits
increased  from  3.31%  in 1994 to 4.45% in 1995.  The more  rapid  increase  in
interest  costs  also  represents  the impact of  nonbank  competition  for bank
deposits.

As an offset to the  increase in interest  income of $3.8  million in 1994,  the
Bank's  interest  expense  increased  by  $1.2  million.   Deposits  are  priced
competitively  based on local market  rates.  The average  interest rate paid on
interest  sensitive  deposit  accounts  increased to 3.31% in 1994 from 3.00% in
1993.

A substantial  portion of the Bank's deposits (an average of 24% in 1995, 29% in
1994 and 35% in 1993) are non interest-bearing and therefore do not reprice when
interest  rates  change.  See  "Funding."  This  is  somewhat  ameliorated  by a
significant  amount of  corporate  account  balances  which are tied to earnings
credits and utilized to offset bank service costs. The decline in the percentage
of the non interest-bearing  deposits is due to the acquisition of CBB, the more
competitive  market  for  deposits  and the  impact  of the high  interest  rate
environment.

Due to the nature of the Company's  markets in which loans are generally tied to
the prime  rate,  an increase in interest  rates  should  positively  affect the
Company's  future  earnings,  while a decline  in  interest  rates  would have a
negative  impact.   As  noted  above,  the   level-to-declining   interest  rate
environment during 1995 has had a negative impact on net interest income. Should
the trend of declining  interest rates  continue,  the Bank could  experience an
additional  increase in its cost of funds  relative  to the rates  earned on its
earning assets and a decrease in its net interest margin.  See  "Asset/Liability
Management."

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, the impact of the Bank's Factoring Division and its SBA lending.

Net interest income also reflects the impact of  nonperforming  loans.  Interest
income on the loans is  recorded  on the  accrual  basis.  However,  the Company
follows the practice of discontinuing  the accrual of interest and reversing any
accrued  and  unpaid  interest  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.  For these  loans,  interest is
recorded when payment is received. See "Asset Quality - Nonperforming Loans."

The  effect of  nonaccrual  of  interest  income  based on loans  classified  as
nonaccrual (such definition  provided by the SEC) at December 31, 1995, 1994 and
1993 is set forth in the following table:

NEGATIVE IMPACT OF NONACCRUAL LOANS
(dollars in thousands)                        For the Years
                                            Ended December 31,
---------------------------------------------------------------
                                           1995   1994    1993
---------------------------------------------------------------
Interest revenue which would have been
  recorded under original terms            $111   $359    $265
Interest revenue actually realized           11    121     126
===============================================================
Negative impact on interest revenue        $100   $238    $139
===============================================================

This  table  does not  reflect  the cash  basis  interest  received  on  several
significant loan collections, as such loans were not classified as nonaccrual as
of the end of the year.  See the above  discussion  regarding the  collection of
such  income.  The impact of such  loans,  which are not  included  in the above
table,  was  significant  in 1995.  Approximately  $588 of  interest  income was
recognized on collection of previously  nonaccrual loans, which resulted in a 29
basis point impact on the net interest margin.
<TABLE>
<CAPTION>

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, 1995.

AVERAGE BALANCES, RATES AND YIELDS
(dollars in thousands)
                                                      1995                          1994                          1993
---------------------------------------------------------------------------------------------------------------------------------
                                           Average              Average   Average              Average   Average           Average
Assets                                     Balance    Interest   Yield    Balance   Interest    Yield    Balance  Interest  Yield
---------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>       <C>        <C>      <C>        <C>        <C>      <C>      <C>      <C>   
Interest earning assets:
  Loans, net (1)                           $152,820  $18,016    11.79%   $112,818   $11,517    10.21%    $84,457  $8,002   9.47%
  Securities held to maturity:
    Taxable (2)                              12,122      757      6.25      7,846       406      5.18      7,874     379    4.81
    Nontaxable (3)                            2,601      168      6.47      1,894       119      6.28      1,816     113    6.22
  Securities available for sale (4)          30,619    1,847      6.03     10,866       520      4.79      6,059     253    4.18
  Money market investments (5)                4,834      280      5.79      7,021       303      4.31      6,793     192    2.83
Interest rate hedging instruments              ----    (43 )      ----       ----        77      ----       ----     240
                                                                                                                            ----
-------------------------------------------------------------          ---------------------          -------------------
      Total interest-earning assets         202,996   21,025     10.36    140,445    12,942      9.22    106,999   9,179    8.58
-------------------------------------------------------------          ---------------------          -------------------
Allowance for possible loan losses          (3,574)                       (2,677)                        (1,911)
Cash and due from banks                      11,668                         8,367                          7,362
Bank premises and equipment, net              3,356                         2,614                          2,517
Other real estate owned                       1,213                         1,216                          1,197
Accrued interest receivable and
  other assets                                2,466                         1,716                          1,463
Core deposit intangibles and goodwill         4,788                         2,036                           ----
----------------------------------------------------                   -----------                    -----------
      Total                                $222,913                      $153,717                       $117,627
====================================================                   ===========                    ===========
Liabilities and Shareholders' equity Interest-bearing liabilities:
  Deposits:
    Interest-bearing demand                 $30,915    1,158      3.74    $14,399       334      2.32     $6,623     108    1.63
    Money market and savings                 51,654    1,751      3.39     39,919     1,202      3.01     29,868     825    2.76
    Certificates of deposit:
      Less than $100                         15,519      826      5.32     13,245       516      3.89      9,403     331    3.52
      $100 or more                           40,305    2,232      5.54     27,668     1,091      3.94     19,612     700    3.57
-------------------------------------------------------------          ---------------------          -------------------
        Total certificates of deposit        55,824    3,058      5.48     40,913     1,607      3.93     29,015   1,031    3.55
-------------------------------------------------------------          ---------------------          -------------------
Other short-term borrowings                  11,663      716      5.88        272        16      5.88        171       6    3.45
-------------------------------------------------------------          ---------------------          -------------------
       Total interest-bearing liabilities   150,056    6,683      4.45     95,503     3,159      3.31     65,677   1,970    3.00
-------------------------------------------------------------          ---------------------          -------------------
Noninterest-bearing demand                   44,889                        38,666                         35,392
Accrued interest payable and
  other liabilities                           3,070                         1,338                          1,007
----------------------------------------------------                   -----------                    -----------
      Total liabilities                     198,015                       135,507                        102,076
----------------------------------------------------                   -----------                    -----------
Shareholders' equity                         24,898                        18,210                         15,551
---------------------------------------------------                    -----------                    -----------
       Total                               $222,913                      $153,717                       $117,627
====================================================---------          ===========----------          ===========--------
Net interest income and margin (6)                   $14,342     7.07%              $9,783       6.97%             $7,209   6.74%
=========================================           ===================           ====================           ================
<FN>

(1) Includes  amortized  loan fees of $1,123 for 1995,  $1,028 for 1994 and $931
    for 1993.  Nonperforming loans have been included in average loan balances.
(2) Includes  dividend  income of $30  received in 1995,  $18 in 1994 and $15 in
    1993.
(3) Adjusted to a fully  taxable  equivalent  basis using the federal  statutory
    rate ($47 in 1995, $34 in 1994 and $33 in 1993).
(4) Includes  dividend  income of $233, $195 and $225 received in 1995, 1994 and
    1993, respectively and includes $7 in 1993 for taxable equivalent adjustment.
(5) Includes $6 in 1993 for tax equivalent  adjustment.
(6) The net interest  margin  represents the net interest income as a percentage
    of average earning assets.
</FN>
</TABLE>


<TABLE>
<CAPTION>

Interest  margin is  affected  by  changes in  volume,  changes in rates,  and a
combination  of  changes  in volume  and  rates.  Volume  changes  are caused by
differences  in the level of earning  assets and  interest-bearing  deposits and
borrowings.  Rate changes  result in  differences of yields earned on assets and
rates paid on  liabilities.  Changes not solely  attributable to volume or rates
have been allocated to volume and rate in proportion to the  relationship of the
absolute dollar amounts of changes in each. The following table shows the effect
on the  interest  differential  of volume and rate  changes  for the years ended
December 31, 1995 and 1994.

VOLUME/RATE ANALYSIS
(dollars in thousands)
                                                        1995 vs. 1994                        1994 vs. 1993
-----------------------------------------------------------------------------------------------------------------
                                                   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 (1)                                 $4,524      $1,975       $6,499      $2,857        $658       $3,515
  Securities:
    Taxable                                    255          96          351         (2)          29           27
    Nontaxable                                  46           3           49           4           2            6
    Available for sale                       1,161         166        1,327         225          42          267
  Money market investments                     219       (242)         (23)           6         105          111
-----------------------------------------------------------------------------------------------------------------
     Total interest income                   6,205       1,998        8,203       3,090         836        3,926
-----------------------------------------------------------------------------------------------------------------
Interest expense:
  Interest checking                            536         288          824         166          60          226
  Money market and savings                     384         165          549         297          80          377
  Certificates of deposits:
    Less than $100                              99         211          310         146          38          184
    $100 or greater                            606         535        1,141         311          80          391
  Other short-term borrowings                  700        ----          700           5           6           11
-----------------------------------------------------------------------------------------------------------------
      Total interest expense                 2,325       1,199        3,524         925         264        1,189
-----------------------------------------------------------------------------------------------------------------
Interest rate hedging instruments             ----       (120)        (120)        ----       (163)        (163)
-----------------------------------------------------------------------------------------------------------------
Change in net interest income               $3,880        $679       $4,559      $2,165        $409       $2,574
=================================================================================================================
<FN>

(1) The effect of the change in loan fees is included as an  adjustment  to the
    average rate.
(2) Include in the average rate column for  interest  income on loans is $588 of
    interest income on a cash basis of which $420 pertains to prior periods.
</FN>
</TABLE>

              Provision for Possible Loan Losses

The level of the allowance  for possible loan losses (and  therefore the related
provision)  reflects the Company's  judgment as to the inherent risks associated
with the loan, factoring and lease portfolios.  Based on management's evaluation
of such risks, additions of $1.0 million and $600 were made to the allowance for
possible loan losses in 1995 and 1994, respectively. Management's determinations
of the  provision  in  1995  and  1994  were  based  on the  measurement  of the
possibility  of future loan losses  through  various  objective  and  subjective
criteria and the impact of net chargeoffs.

Please  refer to the  section  regarding  the "Loan  Portfolio"  for a  detailed
discussion of asset quality and the allowance for possible loan 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, 1995 and 1994.

OTHER INCOME
(dollars in thousands)
                                                  1995                1994
--------------------------------------------------------------------------------
                                            Amount    Percent    Amount  Percent
--------------------------------------------------------------------------------
                                           
Depositor service charges                   $553      57.25%     $403     54.16%
Other operating income                       456       47.20      281      37.77
Gain on sale of SBA loans                   ----      ----         75      10.08
Net loss on securities available for sale   (43)      (4.45)     (15)     (2.01)
--------------------------------------------------------------------------------
    Total                                   $966     100.00%     $744    100.00%
================================================================================

Other  income  totaled  $966 in 1995,  which is an increase of $222 over $744 in
1994. The 1995 increase is primarily  attributable  to the acquisition of CBB at
the beginning of the fourth quarter of 1994. In addition, other operating income
increased  mainly due to merchant  credit  card income and fees  relating to the
servicing of SBA loans.

Gains on sale of SBA loans  amounted to 11.4% of income  before  income taxes in
1993 and 2.3% in 1994. In 1995,  there were no gains on sale of SBA loans due to
the Bank's  decision to hold such loans and realize their inherent  spreads over
the Bank's cost of funds.  The Bank's policy is to originate  only variable rate
SBA loans.  As the yield  adjusts  for changes in  interest  rates,  the risk of
holding the SBA loans is mitigated.

Management believes that the government's SBA loan program will continue for the
foreseeable  future,  and that the Bank will  continue  its program to originate
such  loans.  Future  gains on the sale of SBA loans  will be  dependent  on the
Bank's  decision  whether to sell such loans or maintain  such loans for its own
account.

              Other Expense

The  components of other expense and the percentage of each component of average
assets are set forth in the  following  table for the years ended  December  31,
1995 and 1994.

OTHER EXPENSE AS A PERCENT OF AVERAGE ASSETS
(dollars in thousands)
--------------------------------------------------------------------------------
                                        1995                   1994
                                       Amount     Percent     Amount     Percent
--------------------------------------------------------------------------------
Salaries and benefits                  $4,339      1.95%      $3,341      2.17%
Occupancy                                 740        .33         594        .39
Amortization of core deposit
  intangiblesand goodwill                 569        .26         166        .11
Legal and professional fees               476        .21         282        .18
Data processing                           458        .20         351        .23
Business promotion                        314        .14         273        .18
Regulators' assessments                   283        .13         361        .23
Client services                           247        .11         176        .11
Directors' fees and costs                 239        .11         161        .10
Loan and collection                       215        .10         235        .15
Advertising                               186        .08          81        .05
Stationery and supplies                   180        .08         132        .09
Net cost of other real estate owned        45        .02         130        .09
Other                                     506        .23         393        .26
--------------------------------------------------------------------------------
     Total                             $8,797      3.95%      $6,676      4.34%
================================================================================

Other expenses  increased  approximately $2.1 million or 32% in 1995 as compared
to 1994. The increase is primarily  related to the  acquisition of CBB and other
growth in loans and  deposits  and  increases  in salaries  and  benefits  which
relates to several staff  additions for business  development  and the provision
for  incentive  payments for  exceeding  predefined  goals.  In addition,  other
expense includes approximately $569 of amortization of goodwill and core deposit
intangibles relating to the acquisition of CBB as compared to $166 in 1994.

During 1995, the FDIC reduced its premium on insurable  deposits  effective June
1995 from 23 cents per $100 of  deposits  to 4 cents.  The  impact of this was a
savings to the Bank of  approximately  $190  which  offset a portion of the 1995
increase in other expenses. The FDIC has announced that for the first six months
of 1996 such rate for insured deposits will be $2 annually.

Other expenses  increased  approximately $1.4 million or 27% in 1994 as compared
to 1993. The increase is primarily  related to the  acquisition and other growth
in loans and deposits. Other expense includes approximately $166 of amortization
relating to the acquisition of CBB.

The net costs of other real estate  owned for the years ended  December 31, 1995
and 1994 are summarized below:

NET COST OF OTHER REAL ESTATE OWNED
(dollars in thousands)
--------------------------------------------------------------------
                                                   1995        1994
--------------------------------------------------------------------
Costs relating to foreclosed properties             $26        $179
Rental income on foreclosed properties             (15)       (128)
Loss on dispositions                                 34          79
--------------------------------------------------------------------
  Net cost of other real estate owned               $45        $130
====================================================================

              Income Taxes

The Company  accounts for income taxes using the asset and  liability  method in
accordance with Statement of Financial  Accounting Standards No. 109 "Accounting
for Income Taxes" (SFAS No. 109). Under the asset and liability method, deferred
tax assets  and  liabilities  are  recognized  for the  future tax  consequences
attributable to differences  between the financial statement carrying amounts of
existing  assets and liabilities  and their  respective tax basis.  Deferred tax
assets and  liabilities  are  measured  using  enacted tax rates  expected to be
recovered  or settled.  The effect on deferred tax assets and  liabilities  of a
change in tax rates is  recognized  as income in the period  that  includes  the
enactment date.

The effective  tax rate was 44% in 1995 and 42% in 1994.  The higher tax rate in
1995 was  primarily  due to the  amortization  of the  nondeductible  portion of
intangibles arising in connection with the purchase of CBB.

              Quarterly Income
<TABLE>
<CAPTION>

The following table shows the Company's  unaudited  quarterly  income  statement
data for the years 1995 and 1994.

UNAUDITED QUARTERLY INCOME STATEMENT DATA
 (dollars in thousands)
-------------------------------------------------------------------------------------------------------------
                                        First quarter    Second quarter    Third quarter    Fourth quarter
                                       1995     1994      1995     1994     1995    1994     1995     1994
-------------------------------------------------------------------------------------------------------------
<S>                                   <C>       <C>      <C>      <C>      <C>     <C>      <C>      <C>   
Net interest income                    $3,322    $1,995   $3,772   $2,196   $3,563  $2,252   $3,638   $3,306
Provision for possible loan losses      (210)     (150)    (500)    (150)    (180)   (100)    (155)    (200)
Other income                              256       205      186      141      278      65      246      333
Other expenses                        (2,186)   (1,427)  (2,196)  (1,511)  (2,225) (1,481)  (2,190)  (2,257)
-------------------------------------------------------------------------------------------------------------
Income before income taxes              1,182       623    1,262      676    1,436     736    1,539    1,182
Income taxes                            (531)     (249)    (561)    (270)    (629)   (295)    (674)    (540)
-------------------------------------------------------------------------------------------------------------
Net income                               $651      $374     $701     $406     $807    $441     $865     $642
=============================================================================================================

Net income per share                    $0.27     $0.22    $0.29    $0.24    $0.32   $0.26    $0.34    $0.26
=============================================================================================================
</TABLE>

The Company  reported net income of $865 for the quarter ended December 31, 1995
compared  with net income of $642 for the 1994 fourth  quarter.  The results for
the fourth quarter of 1995 as compared to the same quarter a year ago reflect an
increase  in volume of earning  assets  ($224  million in 1995  compared to $179
million in 1994)  offset by a decrease  in net  interest  margin  (6.51% in 1995
compared to 7.33% in 1994).

The results for the fourth quarter of 1994 and later reflect the  acquisition of
CBB.

Earning Assets

              Investment Securities

The following table shows the book value composition of the securities portfolio
at December 31, 1995, 1994 and 1993. At December 31, 1995, there were no issuers
of securities for which the book value of specific  securities  held by the Bank
exceeded 10% of the Company's shareholders' equity.

INVESTMENT SECURITIES COMPOSITION
 (dollars in thousands)                                    December 31,
--------------------------------------------------------------------------------
                                                  1995        1994         1993
--------------------------------------------------------------------------------
Investment securities held to maturity:
  U. S. Treasury                                 $4,265      $4,260      $4,343
  U. S. Government Agencies                       4,976       4,963       3,001
  State and municipal                             3,060       1,797       2,008
  Mortgage Backed                                 2,428       2,377      -----
  Other                                             519         462         245
--------------------------------------------------------------------------------
    Investment securities held to maturity       15,248      13,859       9,597
--------------------------------------------------------------------------------
Investment securities available for sale:
  U. S. Treasury                                  4,057       9,786       2,001
  U. S. Government Agencies                      34,578       4,955      -----
  Mortgage Backed                                     9          18      -----
  Mutual funds                                    3,898       3,947       5,154
--------------------------------------------------------------------------------
    Investment securities available for sale     42,542      18,706       7,155
--------------------------------------------------------------------------------
  Total                                         $57,790     $32,565      $16,752
================================================================================

Investment securities held to maturity include those securities which management
has the ability and intent to hold to maturity.  The Bank's policy is to acquire
generally  "A" rated or better  state and  municipal  securities.  The  specific
issues are  monitored  for changes in financial  condition.  Appropriate  action
would be taken if significant deterioration was noted. Management's policy is to
reduce  the market  valuation  risk of the  investment  portfolio  by  generally
limiting portfolio maturities to 60 months or less. It is management's intent to
maintain at least 50% of its investment  securities  portfolio in U. S. Treasury
and U. S. Government Agencies securities.

Investment  securities  available for sale,  which include all mutual funds, are
acquired without the intent to hold until maturity.  The Bank's weighted average
maturity of the available for sale investment portfolio is 1.7%. It is estimated
that for each 1% change in interest rates, the value of the Company's securities
held to maturity will change by approximately  1.6%. Any unrealized gain or loss
is reflected  in the  carrying  value of the security and reported net of income
taxes in the  equity  section  of the  condensed  consolidated  balance  sheets.
Realized gains and losses are reported in the condensed  consolidated  statement
of operations.  The net unrealized  gain on securities  available for sale as of
December 31, 1995 was $233.

Mortgage  backed  securities are considered to have increased  risks  associated
with them because of the timing of principal  repayments.  At December 31, 1995,
the  Bank  had the  following  securities  which  were  mortgage-backed  related
securities:

-------------------------------------------- -------------- -----------
                                              Historical      Market
(dollars in thousands)                           Cost         Value
Federal Home Loan Mortgage  Corp.
   (U.S.Agency)                                  $2,428      $2,544
Federal National Mortgage Association
   (U.S. Agency)                                      9           9
Federated ARMs Funds *                            1,686       1,638
Overland Variable Rate
   Government Fund*                               1,263       1,184
-------------------------------------------- -------------- -----------
* The assets of these mutual funds are invested  mainly in adjustable  rate U.S.
Treasury or Agency securities.

Gross unrealized gains on investment securities held to maturity were $244 as of
December 31, 1995 as compared to an  unrealized  loss of $467 as of December 31,
1994.  The  unrealized  gains result from the  significant  decrease in interest
rates in 1995. The decrease in interest rates has an inverse effect on the value
of securities for which the interest rate is fixed.  The Bank's weighted average
maturity of the held to maturity  investment  portfolio  was  approximately  1.9
years as of  December  31,  1995.  It is  estimated  that for each 1%  change in
interest  rates,  the value of the  Company's  securities  held to maturity will
change by approximately 1.6%. This volatility  decreases as the average maturity
shortens.  It is the  intention  of  management  to  hold  these  securities  to
maturity. Therefore this increase in value will be realized over the life of the
securities as greater than market interest income is recognized.

The average  balance of money market  investments,  which include  federal funds
sold and liquid  money  market cash mutual  funds,  was $4.8 million in 1995 and
$7.0 million in 1994.  These balances  represented 3% and 5% of average deposits
for  1995  and  1994,  respectively.  They  are  maintained  primarily  for  the
short-term liquidity needs of the Bank. See "Liquidity."

              Loan Portfolio

The following  table shows the Company's  consolidated  loans by type of loan or
borrower.

LOAN PORTFOLIO
(dollars in thousands)
                                               December 31,
--------------------------------------------------------------------------------
                            1995        1994       1993        1992       1991
--------------------------------------------------------------------------------
Commercial                 $48,121    $49,018     $27,361     $20,555    $21,244
Real estate construction    14,488     16,343      15,492      14,907     19,263
Real estate-other           66,949     63,104      38,519      26,964     26,829
Consumer                     8,800      9,461       6,857       8,696      3,401
Other                       21,302      7,362       8,416       4,802      4,418
Unearned fee income          (793)      (888)       (746)       (537)      (410)
--------------------------------------------------------------------------------
  Loan portfolio           158,867    144,399      95,899      75,387     74,745
Loans available for sale    11,933      5,008       2,059       1,614     -----
--------------------------------------------------------------------------------
  Total loans             $170,800   $149,407     $97,958     $77,001    $74,745
================================================================================

During  1995  certain  loans  were  reclassified,  the  impact  of which  was to
reclassify approximately $2.1 million from Commercial to Other.

              General

The Company's loan  portfolio  consists  primarily of short-term,  floating rate
loans for business and real estate purposes. At December 31, 1995, approximately
31% of the loan portfolio was commercial loans, 43% real estate-other,  and 8.5%
in real estate construction. SJNB's legal lending limit for any one borrower was
approximately $3.7 million at December 31, 1995.

The  commercial  loan  portfolio   primarily  consists  of  loans  to  small  to
medium-sized  businesses with gross revenues up to $25 million, as well as loans
to local professional businesspersons. SJNB's lending services include revolving
credit loans, SBA loans, term loans, accounts receivable  financing,  factoring,
equipment financing and letters of credit.

Included in  commercial  loans as of December  31,  1995 are  factored  accounts
receivable of approximately  $2.4 million or 1.4% of total loans. As of December
31, 1994, factored accounts receivable were $2.6 million or 1.7% of total loans.
The Bank purchases  accounts  receivable from clients and then receives  payment
directly from the party obligated for the receivable.  To date,  there have been
no significant losses relating to the Bank's factoring program.

The real  estate-other  loans include term loans (up to a ten year  maturity) on
income producing commercial properties.

The real estate construction  portfolio (8.5% of the loan portfolio) consists of
67%  residential,  33%  commercial.  They 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.  Each loan is monitored as to its incurred costs,  sales price and
sales cycle.

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.  Other loans include loans primarily to real estate  mortgage  brokers
(approximately  $1.2  million),  loans to real estate  developers for short-term
investment purposes (approximately $3.3 million) and leases.

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 portfolio, a substantial
portion  of its  customers'  ability  to honor  contracts  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
generally  made on the basis of a secure  repayment  source  and  collateral  is
generally a secondary source for loan qualification.

Approximately  59% of the loan  portfolio is directly  related to real estate or
real estate interests,  when real estate  construction  loans, real estate-other
loans,  prime equity  loans  (included  in consumer  loans of $4.6  million) and
certain other loans to real estate developers and other investors for short-term
investment  purposes  (approximately  4.6% of the loan  portfolio) are included.
Approximately 31% of the loan portfolio is made up of commercial loans; however,
no particular industry represents a significant portion of such loans.

Inherent in any loan portfolio are risks associated with certain types of loans.
The Company  attempts to limit these risks through  stringent  loan 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:


                                               Maximum LTV
 Category of Real Estate Collateral               Ratio
----------------------------------------------------------
Raw land                                           50%
Land Development                                   60%
Construction:
  1-4 Single family residence,
    Less than $500                                 75%
    Greater than $500                              70%
  Other                                            70%
Term loans  (construction take-out                 70%
and commercial)
Other improved property                            70%
Prime equity loans                                 75%
-----------------------------------------------------------

Any term loans on income  producing  properties must have a minimum debt service
coverage of at least 1.2 to 1 for non-owner  occupied  property and at least 1.1
to 1 for owner occupied.

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 mitigates 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 indicated by the questionnaire or
if for any other  reason  it is  determined  appropriate.  Other  reasons  would
include  the  industrial  use of  environmentally  sensitive  substances  or the
proximity to known other environmental  problems.  A Phase II report is required
in certain cases, depending on the outcome of the Phase I report.

              Activity

Total loans were $171 million at December 31, 1995 and averaged $153 million for
the year.  At December  31,  1994,  loans were $149  million and  averaged  $113
million  during the year.  The  increase  in loans of $22  million  during  1995
relates to the overall growth in the Bank's loan portfolio. The most significant
area of growth  was the  increase  in SBA loans  (included  in  commercial  loan
category) of $14 million.  During 1995  approximately $2.1 million of commercial
loans were reclassified to Other.  Real estate-other  increased $3.8 million due
to strength of the real estate  environment  in Santa Clara County.  Other loans
also increased due to the growth of loans for other investment purposes.

The economic  climate in Northern  California has been generally strong in 1995.
However,  the competitive  environment  within the Bank's marketplace has become
more  aggressive  with  competition  between  lenders for additional loan growth
causing more competitive  pricing.  To the extent that such competitive  pricing
continues during 1996 and the Bank finds it necessary to meet such  competition,
the Bank's net interest margins could decline.

              Asset Quality

              Allowance for Possible Loan Losses

A  consequence  of lending  activities is that losses will be  experienced.  The
amount  of such  losses  will vary  from  time to time  depending  upon the risk
characteristics of the loan portfolio as affected by economic conditions and the
financial  experiences  of  borrowers.  The  allowance for possible loan losses,
which provides for the risk of losses inherent in the credit extension  process,
is increased by the provision  for possible  loan losses  charged to expense and
decreased by the amount of  chargeoffs  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 portfolio. The conclusion that a loan may
become  uncollectable  (in whole or in part) and should be charged  against  the
allowance is a matter of judgment.  Similarly, the adequacy of the allowance for
possible  loan losses and the level of the related  provision  for possible loan
losses is  determined  (after  full  review)  on a  judgmental  basis  including
consideration of:

o Economic conditions,
o Borrowers' financial condition,
o Loan impairment,
o Evaluation of industry trends,
o Industry 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  identified  as having loss
    potential,
o Quarterly review by the Board of Directors, and o Off-balance sheet
    risks.

In addition to the  continuing  internal  assessment of the loan  portfolio (and
off-balance   sheet  credit  risk,  such  as  letters  of  credit,   etc.),  the
consolidated financial statements are examined by independent  accountants.  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
possible loan losses.  Examinations  of the loan  portfolio  are also  conducted
periodically by the federal banking regulators.

The Company  utilizes a method of assigning a minimum and maximum loss ratio for
each grade of loan within each category of loans (commercial, real estate-other,
real estate  construction,  etc.) Loans are graded on a ranking  system based on
management's assessment of the loan's credit quality. The assigned loss ratio is
based upon the Company's  prior  experience,  industry  experience,  delinquency
trends and the level of nonaccrual loans. In addition, the 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 losses.
Management  and the Board of Directors  evaluate the allowance and determine its
desired level considering  objective and subjective measures,  such as knowledge
of the  borrowers'  business,  valuation of  collateral,  the  determination  of
impaired loans and exposure to potential  losses.  Management  believes that the
allowance for possible  loan losses,  determined  as described  above,  to be an
adequate allowance against losses inherent in the loan portfolio.

The  allowance  for possible loan losses  includes the  allocation  for impaired
loans while the amount  remaining  is  considered  a general  reserve  available
against the total loan portfolio and off-balance  sheet credit  exposure.  While
management  uses  available  information  to recognize  losses on loans,  future
additions  to the  allowance  may be  necessary  based on  changes  in  economic
conditions or other new information.  In addition,  various regulatory agencies,
as an integral part of their examination process, periodically review the Bank's
allowance  for possible  losses on loans.  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.  The most recent examination
conducted in October 1995 did not result in any  recommended  adjustments to the
Bank's established reserves.

There is uncertainty concerning the future economic trends.  Accordingly,  it is
not possible to predict the effect such uncertainty may have on the level of the
provision for possible loan losses in future periods.
<TABLE>
<CAPTION>

The following  table  summarizes the activity in the allowance for possible loan
losses for the five years ended December 31, 1995:

ALLOWANCE FOR POSSIBLE LOAN LOSSES
 (dollars in thousands)                                            Years Ended December 31,
-------------------------------------------------------------------------------------------------------------
                                                       1995       1994        1993        1992        1991
-------------------------------------------------------------------------------------------------------------
<S>                                                   <C>         <C>         <C>         <C>         <C>   
Balance, beginning of the year                        $3,311      $2,057      $1,553      $2,207      $1,396
-------------------------------------------------------------------------------------------------------------
Chargeoffs by loan category:
  Commercial                                             233         148         389         137         533
  Real estate-other                                      220         637           5        -----          304
  Real estate construction                               154         -----       -----       687         183
  Consumer                                                89          73          90           4           9
  Other                                                -----         824          26         980       ----
-------------------------------------------------------------------------------------------------------------
    Total chargeoffs                                     696       1,682         510       1,808       1,029
-------------------------------------------------------------------------------------------------------------
Recoveries by loan category:
  Commercial                                              42         192          21         221         151
  Real estate-other                                       27          10           5         173          42
  Real estate construction                             -----      -----          200      -----       -----
  Consumer                                                16           7          16          29          72
  Other                                                  102         222         147          33      -----
-------------------------------------------------------------------------------------------------------------
    Total recoveries                                     187         431         389         456         265
-------------------------------------------------------------------------------------------------------------
Net chargeoffs                                           509       1,251         121       1,352         764
-------------------------------------------------------------------------------------------------------------
Provision charged to expense                           1,045         600         625         698       1,575
Allowance relating to California Business Bank         -----       1,905      -----       -----       -----
-------------------------------------------------------------------------------------------------------------
Balance, end of the year                              $3,847      $3,311      $2,057      $1,553      $2,207
=============================================================================================================

Ratios:
Net chargeoffs to average loans                        0.33%       1.11%       0.14%       1.88%       1.04%
Allowance to total loans at the end of the year        2.25        2.22        2.10        2.02         2.95
Allowance to nonperforming loans at end of the year    430.24      60.45       55.93      108.82       51.72
===============================================================================================================
</TABLE>

Net chargeoffs were $509 or .33% of average loans during 1995.  During 1994, the
Company experienced net chargeoffs of $1.2 million or 1.11%. The decrease in net
chargeoffs  in  1995 as  compared  to  1994  results  primarily  from  the  1994
charge-off  of two  unrelated  loans.  The first  involved a  chargeoff  of $750
relating to a real estate  mortgage broker who is believed to have defrauded the
Bank and numerous investors by creating fictitious mortgages and obtaining funds
from either the Bank or the investors to fund such fraudulent mortgages. Also in
1994, the Bank  charged-off a fully reserved loan in the amount of $469 which it
had  acquired  from CBB.  Real  estate-other  loss  includes  the loan which was
acquired from CBB, and Other includes the real estate mortgage broker loan.

Commercial  loan losses in 1995 and 1994  involved  loans to several  borrowers,
none of which were individually significant.

The  allowance  for  possible  loan  losses as a  percent  of loans was 2.25% at
December 31, 1995,  and 2.22% at December 31, 1994.  The  allowance for possible
loan  losses as a percent  of  nonperforming  loans  was  approximately  430% at
December 31, 1995 as compared to 60% at December 31, 1994.  Nonperforming  loans
at December  31, 1995 were $894  compared to $5.5  million at December 31, 1994.
See "Nonperforming Loans" below.

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

ALLOCATION OF THE ALLOWANCE FOR POSSIBLE LOAN LOSSES
(dollars in thousands)
                                Amount of Allowance Allocation at December 31,
--------------------------------------------------------------------------------
                                1995       1994       1993      1992       1991
--------------------------------------------------------------------------------

  Commercial                   $1,193     $1,192      $459       $499      $711
  Real estate construction        176        310       181        374       358
  Real estate-other             1,134      1,051       567        359     1,069
  Consumer                        169        219        99         38        31
  Other                           337         94       101         22        38
  Unallocated                     838        445       650        261      -----
--------------------------------------------------------------------------------
    Total                      $3,847     $3,311    $2,057     $1,553    $2,207
================================================================================


                                      Percent of Loans in Each Category
                                       to Total Loans at December 31,
--------------------------------------------------------------------------------
                                1995        1994     1993       1992       1991
--------------------------------------------------------------------------------
  
  Commercial                    30.86%     33.96%    27.85%     26.51%    28.38%
  Real estate construction       8.45      10.87     15.69      19.23     25.74
  Real estate-other             43.15      43.97     40.98      36.86     35.84
  Consumer                       5.13       6.29      6.95      11.22      4.54
  Other                         12.41       4.90      8.53       6.18      5.50
--------------------------------------------------------------------------------
    Total                      100.00%    100.00%   100.00%    100.00%   100.00%
================================================================================


The  allowance  for  possible  loan losses is  maintained  without any  internal
allocation to the segments of the loan  portfolio.  The above  schedule is being
presented  in  accordance   with  the  Securities   and  Exchange   Commission's
requirements to provide an allocation of the allowance.  The allocation 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 under
the section "Asset Quality - Allowance for Possible Loan Losses".

              Nonperforming Loans
<TABLE>
<CAPTION>

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

NONPERFORMING LOANS
 (dollars in thousands)
                                                                                       December 31,
---------------------------------------------------------------------------------------------------------------------------
                                                                   1995        1994       1993       1992         1991
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>       <C>       <C>         <C>          <C>   
Loans accounted for on a non-accrual basis                          $866      $5,395    $3,678      $1,427       $3,698
Other loans with principal or interest contractually past
  due 90 days or more                                                 28          83      ----        ----          571
---------------------------------------------------------------------------------------------------------------------------
    Total                                                           $894      $5,478    $3,678      $1,427       $4,269
===========================================================================================================================
</TABLE>

Nonperforming loans declined  significantly  during 1995. The primary reason for
the decline  was the  collection  of a $2.5  million  loan placed on  nonaccrual
status  in 1993.  In  addition,  the Bank has  placed  significant  emphasis  on
reducing the nonaccrual loans acquired from CBB. Nonperforming loans at December
31, 1995 include loans to four borrowers,  of which two loans totaling $783, are
secured by real estate.

During  both  1994  and  1993  the  amount  of  nonperforming   loans  increased
significantly. The increase in 1994 was due to the acquisition of the CBB loans.
The  increase  in 1993 was due to placing a single  loan,  a $2.5  million  real
estate-other  loan, on  nonaccrual in July 1994.  The loan was collected in June
1995.

Potential  nonperforming  loans  are  identified  by  management  as part of its
ongoing evaluation and review of the loan portfolio. Based on such reviews as of
December 31, 1995, management has identified no loans which management has known
information about that causes doubts regarding the borrowers'  ability to comply
with  present  repayment  terms,  such that the loan(s)  might  subsequently  be
classified as nonperforming.

              Other Real Estate Owned

At December 31, 1995,  the Bank had three  properties  totaling  $664 which were
acquired through the foreclosure process. Prior to recording a foreclosure,  the
Bank provides for any expected loss in its allowance for possible loan losses. A
summary of the properties at December 31, 1995 and 1994 are as follows:

----------------------------------------------------------------------------
(dollars in thousands)                                 Carrying Value
----------------------------------------------------------------------------
             Description of Property                  1995        1994
----------------------------------------------------------------------------
Two vacant parcels, currently subject to a
 one-year sewer moratorium                            $304         $304
Single family residence ("SFR"), Piedmont              225      -----
Raw land, 11.7 acres in San Jose, CA                   135      -----
Other properties, which were liquidated             -----         1,191
----------------------------------------------------------------------------
     Total                                            $664       $1,495
============================================================================

At the time of foreclosure,  any difference between the loan balance and the net
realizable value of the collateral is charged to the allowance for possible loan
losses.  Foreclosed  property is  recorded at the lower of its revised  basis or
fair value,  less estimated  selling costs.  Any subsequent  decline in value is
charged directly to the income statement. See "Financial Review - Other Expense"
for the analysis of the net cost of other real estate owned for 1995 and 1994.

              Commitments and Lines of Credit

It is the  Bank's  policy  not to issue  formal  commitments  or lines of credit
except to a limited number of well-established and financially responsible local
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 controls
credit risk through its credit  approval  process.  The same credit policies are
used when entering into such commitments.

As of December 31, 1995, the Company had undisbursed  loan commitments to extend
credit under normal lending arrangements as follows:

------------------------------------------------------------
UNDISBURSED LOAN COMMITMENTS
(dollars in thousands)
------------------------------------------------------------
Loan Category                                       Amount
------------------------------------------------------------
Commercial                                          $27,270
Real estate-other                                     2,991
Real estate construction                             13,267
Consumer                                              5,633
Other                                                16,302
------------------------------------------------------------
    Total                                           $65,463
============================================================

In addition,  there was approximately  $3.3 million for commitments under unused
letters of credit.

Funding
<TABLE>
<CAPTION>

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, 1995, 1994 and 1993.

DEPOSIT CATEGORIES
 (dollars in thousands)
                                           December 31, 1995          December 31, 1994        December 31, 1993
-------------------------------------------------------------------------------------------------------------------
                                                   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            $52,775        26.83%      $54,002        29.95%      $36,677      33.43%
Interest-bearing demand                34,641         17.61       29,041         16.11        8,208        7.48
Money market and savings               51,201         26.03       47,170         26.16       32,400       29.53
Certificates of deposit:
  Less than $100                       14,730          7.49       16,038          8.90       10,157        9.26
  $100 or more                         43,345         22.04       34,036         18.88       22,270       20.30
-------------------------------------------------------------------------------------------------------------------
    Total                            $196,692       100.00%     $180,287       100.00%     $109,712     100.00%
===================================================================================================================
</TABLE>

Deposits  increased 9% from $180 million at December 31, 1994 to $197 million at
December  31,  1995.  The  increase is  primarily  centered in  interest-bearing
accounts  and  is  related  to  the   servicing   of  accounts  for   homeowners
associations.  In addition,  other  interest-bearing  accounts showed  increases
mainly due to a combination  of factors  including the  development of customers
with significant cash balances,  aggressive pricing of rates and the purchase of
certain wholesale deposits.

The Bank has been able to attract a high  proportion of its deposits in the form
of non  interest-bearing  deposits.  The Bank's primary business is commercially
oriented and therefore significant non interest-bearing  deposits are maintained
by its commercial customers.

The Bank also  raises a  substantial  amount of funds  through  certificates  of
deposit of greater  than $100.  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 significantly
less than its peer group.  However, as these certificates of deposit are usually
more interest rate  sensitive,  their  repricing in an increasing  interest rate
environment  could  negatively  impact the Bank's net interest  margin without a
corresponding increase in rates earned on its earning assets. See "Liquidity."


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  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 natural balance sheet position is asset-sensitive,  based upon the
significant  amount of variable rate loans and the repricing  characteristics of
its deposit  accounts.  This natural  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 "Net Interest Income."
<TABLE>
<CAPTION>

The following table quantifies the Company's  interest rate exposure at December
31, 1995 based upon the known  repricing dates of certain assets and liabilities
and the assumed  repricing  dates of others.  At December 31, 1995,  the Company
was, as noted above,  asset  sensitive in the near term.  This table  displays a
static view of the  Company's  interest rate  sensitivity  position and does not
consider the dynamics of the balance sheet and interest rate movements.

DISTRIBUTION OF REPRICING OPPORTUNITIES
At December 31, 1995
(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>   
Money market investments           $3,200                                             $3,200
Investment securities-taxable       -----      $2,798       $1,509         $7,881      -----    12,188
Investment securities-non-taxable   -----       -----        1,048          1,105       $907     3,060
Securites available for sale        5,397       2,983        6,047         28,106          9    42,542
Loans                             148,528         846          826         10,193     10,407   170,800
-----------------------------------------------------------------------------------------------------
 Total earning assets             157,125       6,627        9,430         47,285     11,323   231,790
-----------------------------------------------------------------------------------------------------
Interest checking, money market
  and savings                      85,842       -----        -----          -----      -----    85,842
Certificates of deposit:
 Less than $100                     6,569       3,305        2,708          1,751        397    14,730
  $100 or more                     21,778      15,195        3,529          2,643        200    43,345
Repurchase agreements              22,000       -----        -----          -----      -----    22,000
Other borrowings                    2,000       -----        -----          -----        634     2,634
-----------------------------------------------------------------------------------------------------
 Total interest-bearing           138,189      18,500        6,237          4,394      1,231   168,551
liabilities
------------------------------------------------------------------------------------------------------
Interest rate gap                 $18,936    ($11,873)      $3,193        $42,891    $10,092   $63,239
======================================================================================================
Cumulative interest rate gap      $18,936      $7,063      $10,256        $53,147    $63,239
===========================================================================================
Interest rate gap ratio              1.14        0.36         1.51          10.76       9.20
===========================================================================================
Cumulative interest rate gap ratio   1.14        1.05         1.06           1.32       1.38
===========================================================================================
</TABLE>

To counter its natural interest rate position, the Bank entered into an interest
rate "floor" in the amount of $10 million  which  expires in May 1999.  The Bank
has paid a fixed premium of $47 for which it will receive the amount of interest
on $10 million  based on the  difference of 7% and prime when prime is less than
7%. This  protects the Bank  against  decreases in its net income when the prime
decreases.  Settlement is done quarterly and the Bank records the impact of this
hedge on an accrual basis.

During  the  second  and  third  quarters  of 1995,  the Bank  executed  several
transactions which are intended to mitigate its exposure to a decline in general
market  interest  rates.  The  transactions  involved the purchase of three U.S.
Agency  securities  for an  aggregate  cost of $24 million  which were  financed
through the use of 90 day repurchase  agreements.  The repurchase agreements are
shown as short-term  borrowings on the Company's  balance sheet.  The securities
are fixed rate with  maturities of $7 million in November  1997,  $10 million in
May 1998 and $7 million in July 1998. The repurchase  agreements' interest rates
range from 5.70% to 5.90% and mature  through  March 1996.  As these  repurchase
agreements expire they will be renewed at the prevailing rates.

A large  proportion  of the  Bank's  deposits  are non  interest-bearing  demand
deposits and are not  included in the above table as they are not interest  rate
sensitive.  The average balance of these deposits was $45 million in 1995. There
is no benefit to the Bank with respect to these  deposits  when market  interest
rates decline. This reduces the Bank's net interest margin when rates decline.
<TABLE>
<CAPTION>

The maturities  and yields of the investment  portfolio at December 31, 1995 are
shown below:

MATURITY AND YIELDS OF  INVESTMENT  SECURITIES
At December 31, 1995 (dollars in thousands)
------------------------------------------------------------------------------------------------------
                                                                   Maturity
------------------------------------------------------------------------------------------------------
                                                              After one year
                               Carrying    Within one year      within five         After ten years
                                 Value    Amount     Yield    Amount     Yield     Amount     Yield
------------------------------------------------------------------------------------------------------
<S>                               <C>      <C>         <C>     <C>         <C>         <C>      <C>
Securities held to maturity:
  U. S. Treasury                  $4,265    $3,307     4.43%      $958     7.05%       ----      ----
  U. S. Government Agencies        4,976     1,000      4.12     3,976      6.65       ----      ----
  State and municipal              3,060     1,298      6.84     1,762      7.92       ----      ----
  Mortgage Backed                  2,428      ----      ----     2,428      7.90       ----      ----
  Other                              519      ----      ----      ----      ----       $519     6.00%
---------------------------------------------------          ----------          -----------
    Total                         15,248     5,605               9,124                  519
---------------------------------------------------          ----------          -----------
Securities available for sale:
  U. S. Treasury                   4,057     3,041      6.93     1,016      6.69       ----      ----
  U. S. Government Agencies       34,578     7,038      5.97    27,540      6.13       ----      ----
  Mortgage Backed                      9      ----      ----      ----      ----          9      0.00
  Mutual funds                     3,898     3,898      5.43      ----      ----       ----      ----
---------------------------------------------------          ----------          -----------
    Total                         42,542    13,977              28,556                    9
---------------------------------------------------          ----------          -----------
  Total                          $57,790   $19,582     5.71%   $37,680     6.42%       $528     5.90%
======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
 
The  following  table  shows the  maturity  and  interest  rate  sensitivity  of
commercial, real estate-other and real estate construction loans at December 31,
1995.  Approximately  86% of the  commercial  and real estate loan  portfolio is
priced with floating  interest  rates which limits the exposure to interest rate
risk on long-term loans.

COMMERCIAL AND REAL ESTATE LOAN MATURITY AND INTEREST RATE SENSITIVITY
(dollars in thousands)
                                                            Balances maturing    Interest Rate Sensitivity
------------------------------------------------------------------------------------------------------------
                                                                                  Predeter-
                                Balances at                   One                    mined       Floating
                                 December     One year     year to      Over       interest     interest
                                 31, 1995      or less   five years  five years     rates         rates
------------------------------------------------------------------------------------------------------------
<S>                               <C>         <C>         <C>          <C>         <C>           <C>    
Commercial                        $52,958     $34,748     $14,058      $4,152       $1,917       $51,041
============================================================================================================
Real estate-other                 $74,045      $6,024     $31,657     $36,364      $18,019       $56,026
============================================================================================================
Real estate construction          $14,488     $12,928      $1,560       -----         $552       $13,936
============================================================================================================
<FN>

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.
</FN>
</TABLE>


Capital and Liquidity

         Capital

The Company's  book value per share was $11.02 and $9.92 as of December 31, 1995
and 1994,  respectively.  Tangible  book  value per share was $9.06 and $7.84 at
December 31, 1995 and 1994,  respectively,  due to the goodwill and core deposit
intangibles  generated by the acquisition of CBB.  Shareholders'  equity was $27
million  and $23 million as of December  31,  1995 and 1994,  respectively.  The
Federal Reserve Board's risk-based capital guidelines require that total capital
be in  excess  of  8% of  total  assets  on a  risk-weighted  basis.  Under  the
guidelines for a bank holding company,  capital  requirements are based upon the
composition  of the  consolidated  asset base and the risk  factors  assigned to
those assets.  The guidelines  characterize  an  institution's  capital as being
"Tier 1" capital  (defined to be principally  shareholders'  equity less certain
intangibles such as goodwill and core deposit  intangibles) and "Tier 2" capital
(defined to be  principally  the  allowance  for possible  loan losses and other
supplemental  capital).  The  guidelines  require  the  Company  to  maintain  a
risk-based  capital  target ratio of 8%,  one-half or more of which should be in
the form of Tier 1 capital.

The Comptroller of the Currency also requires SJNB to maintain adequate capital.
The Comptroller's  current regulations require national banks to maintain Tier 1
capital  (the  leveraged  ratio)  equal to at  least  3% to 5% of total  assets,
depending on the Comptroller's evaluation of the bank.

The Comptroller also adopted risk-based capital  requirements.  Like the Federal
Reserve's guidelines,  the amount of capital the Comptroller will require a bank
to  maintain  will be based  upon the  composition  of its  asset  base and risk
factors assigned to those assets.  The guidelines require the Bank to maintain a
risk-based  capital  target ratio of 8%,  one-half or more of which should be in
the form of Tier 1 capital.

The  table  below  summarizes  the  various  capital  ratios of the Bank and the
Company for the years ended December 31, 1995 and 1994.

Risk-based and Leverage Capital Ratios
(dollars in thousands)
Company                                December 31,               December 31, 
-------                                    1995                       1994   
                                       -----------------------------------------
Risk-based                                Amount      Ratio     Amount     Ratio
---------                              -----------------------------------------
Tier 1 capital                            $21,589    11.34%    $18,530    10.93%
Tier 1 capital minimum requirement          7,617      4.00      6,781      4.00
                                       -----------------------------------------
  Excess                                  $13,972     7.34%    $11,749     6.93%
                                       =========================================
Total capital                             $24,046    12.63%    $20,724    12.23%
Total capital minimum requirement          15,233      8.00     13,561      8.00
                                       -----------------------------------------
  Excess                                   $8,813     4.63%     $7,163     4.23%
                                       =========================================
Risk-adjusted assets                     $190,417             $169,514
                                       ============          ===========

Leverage
--------
Tier 1 capital                            $21,589     9.00%    $18,530     9.33%
Minimum leverage ratio requirement (1)      9,596      4.00      7,942      4.00
                                       -----------------------------------------
  Excess                                  $11,993     5.00%    $10,588     5.33%
                                       =========================================
Average total assets                     $239,899             $198,542
                                       ============          ===========

Bank
----
Risk-based
Tier 1 capital                             20,819    10.94%    $17,477    10.34%
Tier 1 capital minimum requirement          7,614      4.00      6,759      4.00
                                       -----------------------------------------
  Excess                                  $13,205     6.94%    $10,718     6.34%
                                       -----------------------------------------
Total capital                             $23,275    12.23%    $19,664    11.64%
Total capital minimum requirement          15,228      8.00     13,518      8.00
                                       -----------------------------------------
  Excess                                   $8,047     4.23%     $6,146     3.64%
                                       =========================================
                                       
Risk-adjusted assets                     $190,345             $168,976
                                       ============          ===========

Leverage
--------
Tier 1 capital                            $20,819     8.67%     $17,477    8.81%
Minimum leverage ratio requirement (1)      9,607      4.00       7,934     4.00
                                         ---------------------------------------
  Excess                                  $11,212     4.67%      $9,543    4.81%
                                         =======================================
Average total assets                     $240,163              $198,341
                                         ==============       ============


(1) The required ratio is determined on an individual  bank basis as a result of
factors considered by the Company's and Bank's regulators. To date, however, the
regulators  have not established  this amount.  The Company and the Bank believe
that they may be required to maintain a leverage  capital ratio at levels higher
than the minimum required ratio of 4% based on management's analysis.

         Liquidity

Management strives to maintain a level of liquidity  sufficient to meet customer
requirements for loan funding and deposit  withdrawals.  Liquidity  requirements
are   evaluated   by  taking  into   consideration   factors   such  as  deposit
concentrations,  seasonality and maturities,  loan 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  source of  liquidity  consists  of its  deposits  with other  banks,
overnight  funds  sold  to  correspondent   banks  and  short-term,   marketable
investments.  On December  31,  1995,  consolidated  liquid  assets  totaled $35
million or 14% of consolidated total assets as compared to $31 million or 15% of
consolidated  total assets on December 31, 1994. In addition to the liquid asset
portfolio,  SJNB also has  available  $9 million  in lines of credit  with three
major  commercial  banks,  approximately  $4 million of credit  available at the
Federal Reserve  Discount  Window and $12 million in SBA guaranteed  loans which
are  available  for sale  and  could 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  amounted to 22% of total deposits on December 31, 1995,
as compared to 19% for 1994.

Liquidity is also  affected by portfolio  maturities  and the effect of interest
rate fluctuations on the marketability of both assets and liabilities.  The loan
portfolio consists primarily of floating rate, short-term loans. On December 31,
1995,  approximately 34% of total  consolidated  assets had maturities under one
year and 86% of total  consolidated  loans had floating  rates tied to the prime
rate or similar indexes.  The short-term nature of the loan portfolio,  and loan
agreements  which  generally  require  monthly  interest  payments,  provide the
Company with an additional secondary source of liquidity.

There are no material commitments for capital expenditures in 1996.


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 non
interest-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 1995 or
1994.


ITEM 7:  FINANCIAL STATEMENTS

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

            Independent Auditors' Report

            Consolidated Balance Sheets - December 31, 1995 
                  and 1994

            Consolidated Statements of Income for the Years
                  Ended December 31, 1995 and 1994

            Consolidated Statements of Shareholders' Equity
                  for the Years Ended December 31, 1995 and 1994

            Consolidated Statements of Cash Flows for the
                  Years Ended December 31, 1995 and 1994

            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, 1995 and 1994,  and the
related consolidated  statements of income,  shareholders' equity and cash flows
for the years  then  ended.  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  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the 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,  1995 and 1994,  and the  results of their
operations  and their cash flows for the years  then  ended in  conformity  with
generally accepted accounting principles.


KPMG Peat Marwick LLP

San Jose, California
January 10, 1996


<PAGE>

<TABLE>
<CAPTION>


----------------------------------------------------------------------------------------------------
SJNB Financial Corp. and subsidiary
Consolidated Balance Sheets
December 31, 1995 and 1994
(in thousands)
----------------------------------------------------------------------------------------------------
Assets                                                                         1995          1994
----------------------------------------------------------------------------------------------------
<S>                                                                           <C>          <C>    
Cash and due from banks                                                        $12,574      $14,591
Money market investments                                                         3,200      -----
Investment securities:
  Held to maturity (Market value: $15,492 at December 31, 1995
    and $13,392 at December 31, 1994)                                           15,248       13,859
  Available for sale                                                            42,542       18,706
----------------------------------------------------------------------------------------------------
    Total investment securities                                                 57,790       32,565
----------------------------------------------------------------------------------------------------
Loans                                                                          158,867      144,399
Loans available for sale                                                        11,933        5,008
Allowance for possible loan losses                                             (3,847)      (3,311)
----------------------------------------------------------------------------------------------------
  Loans, net                                                                   166,953      146,096
----------------------------------------------------------------------------------------------------
Premises and equipment, net                                                      3,494        3,022
Other real estate owned                                                            664        1,495
Accrued interest receivable and other assets                                     2,764        3,267
Intangibles, net of accumulated amortization of $735
  at December 31, 1995 and $166 at December 31, 1994                             4,756        4,913
---------------------------------------------------------------------------------------------------
     Total                                                                    $252,195      $205,949
====================================================================================================

Liabilities and Shareholders' Equity
----------------------------------------------------------------------------------------------------
Deposits:
  Non-interest-bearing                                                         $52,775      $54,002
  Interest-bearing                                                             143,917      126,285
----------------------------------------------------------------------------------------------------
     Total deposits                                                            196,692      180,287
----------------------------------------------------------------------------------------------------
Other short-term borrowings                                                     24,000      -----
Accrued interest payable and other liabilities                                   4,845        2,220
----------------------------------------------------------------------------------------------------
     Total liabilities                                                         225,537      182,507
----------------------------------------------------------------------------------------------------
Shareholders' equity:
  Common stock, no par value; authorized, 20,000 shares;
     issued and outstanding, 2,418 shares
     in 1995 and 2,363 shares in 1994                                           19,627       19,421
  Retained earnings                                                              6,798        4,278
  Net unrealized gain (loss) on securities available for sale                      233        (257)
----------------------------------------------------------------------------------------------------
     Total shareholders' equity                                                 26,658       23,442
----------------------------------------------------------------------------------------------------
Commitments and contingencies                                                    ----          ----
----------------------------------------------------------------------------------------------------
     Total                                                                    $252,195     $205,949
====================================================================================================
<FN>

See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>
>


<PAGE>


<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------
SJNB Financial Corp. and subsidiary
Consolidated Statements of Income
For the years ended December 31, 1995 and 1994
-----------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)                                         1995         1994
-----------------------------------------------------------------------------------------------------
Interest income:
<S>                                                                             <C>          <C>    
  Interest and fees on loans                                                    $18,016      $11,517
  Interest on money market investments                                              280          300
  Interest on investment securities held to maturity                                878          491
  Interest and dividends on investment securities available for sale              1,847          521
  Other interest and investment income                                             (43)           79
-----------------------------------------------------------------------------------------------------
    Total interest income                                                        20,978       12,908
-----------------------------------------------------------------------------------------------------
Interest expense:
  Interest expense on interest-bearing deposits:
    Certificates of deposit of $100 or more                                       2,232        1,091
    Other                                                                         4,451        2,068
-----------------------------------------------------------------------------------------------------
    Total interest expense                                                        6,683        3,159
-----------------------------------------------------------------------------------------------------
    Net interest income                                                          14,295        9,749
-----------------------------------------------------------------------------------------------------
Provision for possible loan losses                                                1,045          600
-----------------------------------------------------------------------------------------------------
     Net interest income after provision for
       possible loan losses                                                      13,250        9,149
-----------------------------------------------------------------------------------------------------
Other income:
  Service charges on deposits                                                       553          403
  Other operating income                                                            456          356
  Net loss on sale of securities available for sale                                (43)         (15)
-----------------------------------------------------------------------------------------------------
     Total other income                                                             966          744
-----------------------------------------------------------------------------------------------------
Other expenses:
  Salaries and benefits                                                           4,339        3,341
  Occupancy                                                                         740          594
  Other                                                                           3,718        2,741
-----------------------------------------------------------------------------------------------------
     Total other expenses                                                         8,797        6,676
-----------------------------------------------------------------------------------------------------
     Income before income taxes                                                   5,419        3,217
Income taxes                                                                      2,395        1,354
-----------------------------------------------------------------------------------------------------
     Net income                                                                  $3,024       $1,863
=====================================================================================================
Net income per share                                                              $1.20        $1.00
=====================================================================================================
Average common share equivalents outstanding                                      2,522        1,854
=====================================================================================================
<FN>

See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>


<PAGE>


<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------------------------------------------
SJNB Financial Corp. and subsidiary
Consolidated Statements of Shareholders' Equity
For the years ended December 31, 1995 and 1994
                                                                                                Net Unrealized
                                                                                                 Gain (Loss)      Total
                                                                                                on Securities    Share-
                                                                        Common     Retained        Available     holders'
(in thousands, except per share amounts)                     Shares      Stock     Earnings         for Sale      Equity
-------------------------------------------------------------------------------------------------------------------------
<S>                <C> <C>                                    <C>       <C>          <C>             <C>          <C>   
Balances, December 31, 1993                                   1,629     $13,329      $2,735                       $16,064
Issuance of common stock for Business Bancorp,
  net of $165 registration costs                                733       6,090        ----            ----         6,090
Stock options exercised                                           1           2        ----            ----             2
Cash dividends ($.16 per share)                                ----        ----       (320)            ----         (320)
Net income for the year ended
  December 31, 1994                                            ----        ----       1,863            ----         1,863
Net unrealized loss on securities available for sale           ----        ----        ----           $(257)        (257)
-------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1994                                   2,363      19,421       4,278            (257)       23,442
-------------------------------------------------------------------------------------------------------------------------
Stock options exercised                                          71         351        ----            ----           351
Stock buyback                                                  (16)       (145)        ----            ----         (145)
Cash dividends ($.21 per share)                                ----        ----       (504)            ----         (504)
Net income for the year ended
  December 31, 1995                                            ----        ----       3,024            ----         3,024
Net unrealized gain on securities available for sale           ----        ----                         490           490
-------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1995                                   2,418     $19,627      $6,798            $233       $26,658
=========================================================================================================================
<FN>

See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>


<PAGE>

<TABLE>
<CAPTION>


---------------------------------------------------------------------------------------------------------
SJNB Financial Corp. and subsidiary
Consolidated Statements of Cash Flows
For the years ended December 31, 1995 and 1994
---------------------------------------------------------------------------------------------------------
(dollars in thousands)                                                              1995        1994
---------------------------------------------------------------------------------------------------------
<S>                                                                               <C>        <C>    
Cash flows from operating activities:
  Net income                                                                       $3,024      $1,863
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Provision for possible loan losses                                            1,045         600
      Depreciation and amortization                                                   424         321
      Amortization of intangibles                                                     569         166
      Deferred tax (benefit)                                                         (86)         268
      Loss on sale of securities available for sale                                    43          15
      Write down of other real estate owned                                         -----          40
      Net gain on sale of other real estate owned                                      19      -----
      Increase in loans available for sale, net                                   (6,925)     (1,283)
      Amortization of  premium on investment securities, net                        (129)        (18)
      Decrease in accrued interest receivable and other assets                          6         303
      Increase (decrease) in accrued interest payable and other liabilities         2,470       (477)
---------------------------------------------------------------------------------------------------------
          Net cash provided by operating activities                                   460       1,798
---------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
  Proceeds from sale or maturities of securities available for sale                14,162       6,016
  Maturities of securities held to maturity                                           425       2,520
  Purchase of securities available for sale                                      (37,148)    (14,310)
  Purchase of securities to be held until maturity                                (1,762)     (2,319)
  Proceeds from the sale of other real estate owned                                 1,761      -----
  Loans, net                                                                     (15,926)     (4,957)
  Capital expenditures                                                              (896)       (580)
  Cash and equivalents acquired in acquisition of BB, net
    of purchase payments                                                            -----       5,660
---------------------------------------------------------------------------------------------------------
          Net cash used in investing activities                                  (39,384)     (7,970)
---------------------------------------------------------------------------------------------------------
Cash flow from financing activities:
  Deposits, net                                                                    16,405      11,429
  Other short-term borrowings                                                      24,000     (1,400)
  Cash dividends                                                                    (504)       (320)
  Common stock repurchased                                                          (145)      -----
  Proceeds from stock options exercised                                               351           2
---------------------------------------------------------------------------------------------------------
          Net cash provided by financing activities                                40,107       9,711
---------------------------------------------------------------------------------------------------------
          Net increase in cash and equivalents                                      1,183       3,539
Cash and equivalents at beginning of year                                          14,591      11,052
---------------------------------------------------------------------------------------------------------
Cash and equivalents at end of year                                                $15,774     $14,591
=========================================================================================================
Other cash flow information:
  Interest paid                                                                     $6,388      $2,998
  Income taxes paid                                                                 $1,185        $795
=========================================================================================================
Noncash transactions:
  Transfer of loans to other real estate owned                                        $950      $1,211
=========================================================================================================
<FN>

See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>


<PAGE>


Notes to Consolidated Financial Statements
December 31, 1995 and 1994

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.

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.  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, where it engages in
the factoring of accounts receivable.

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 Financial
Corp. and its wholly-owned subsidiary,  San Jose National Bank (the "Bank"). All
material  intercompany  accounts and  transactions  have been  eliminated in the
consolidated financial statements.

b.  Investment Securities

The  Company  accounts  for its  securities  in  accordance  with  Statement  of
Financial  Accounting  Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (SFAS No. 115) as follows:

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.

Available for sale-Investment securities that are acquired without the intent to
hold until  maturity are classified as available for sale.  Such  securities are
valued at market  value.  Market  value  adjustments  are reported as a separate
component of shareholders' equity until realized.

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.

c.  Loans and Allowance for Possible Loan Losses

Loans  generally are stated at the  principal  amount  outstanding.  Interest on
loans is credited to income on a simple interest basis.  Loan  origination  fees
and direct  origination  costs 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 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.

The allowance for possible  loan 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  by  management  which
includes  consideration  of  changes  in the  character  of the loan  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.

The  Company  adopted  Statement  of  Financial  Accounting  Standards  No. 114,
"Accounting  by Creditors  for  Impairment of a Loan" as amended by SFAS No. 118
(collectively  referred  to as SFAS No.  114) on January  1, 1995.  SFAS No. 114
requires  entities to measure certain  impaired loans based on the present value
of future cash flows discounted at the loan's effective interest rate, or at the
loan's market value or the fair value of  collateral  if the loan is secured.  A
loan is considered impaired when, 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  agreement,  including  scheduled  interest
payments.  If the  measurement  of the  impaired  loan is less than the recorded
investment  in the loan,  impairment  is  recognized by creating or adjusting an
existing allocation of the allowance for loan losses.

d.  Loans Available for Sale

The  unsold  guaranteed  portion  of SBA  loans  has  been  designated  as being
available for sale, and  accordingly,  these loans are being  accounted for on a
lower of  aggregate  cost or market  basis.  Any market  value  adjustments  are
recorded as an adjustment to the Company's income.

e.  Sales of Loans

When loans or participating interests in loans are sold without recourse,  gains
and losses are  recognized at the time of sale.  Gains or losses  recognized are
equal to the premium less  estimated  future  servicing  costs and profits.  Any
premiums  or  discounts  related  to loan  sales are  amortized  on a basis that
approximates the effective yield over the estimated remaining life of the loan.

f.  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

g.  Other Real Estate Owned

Other  real  estate  owned  is  comprised  of  real  estate   acquired   through
foreclosure.  Such  foreclosures are recorded at the lower of cost or fair value
less estimated selling costs.  Subsequent valuation adjustments are made if fair
value less  estimated  selling  costs falls below the carrying  amount.  Holding
costs are expensed as incurred.

h. Intangibles

Goodwill,  representing  the excess of the purchase price over the fair value of
net assets acquired,  results from the Company's acquisition of Business Bancorp
and its  subsidiary  California  Business  Bank on October 1, 1994.  Goodwill is
being amortized using the straight-line method over 15 years.

Core deposit intangibles  resulting from the acquisition of Business Bancorp and
California  Business Bank on October 1, 1994 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 prior to any writedown of the assets.

i.  Interest Rate Instruments

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  an  interest  rate  floor  arrangement  which  does  not  meet  the
accounting  criteria for a hedge and which  therefore is accounted for on a mark
to market basis.

j.  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.

k.  Net Income Per Share

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.

In October 1995, the Financial Accounting Standard Board (FASB) issued Statement
of  Financial  Accounting  Standards  No. 123 (SFAS No.  123),  "Accounting  for
Stock-Based Compensation." SFAS No. 123 permits a company to choose either a new
fair value based method of accounting for its  stock-based  compensation  (stock
options)  or the  current  Accounting  Principles  Board  Opinion  25  (APB  25)
intrinsic  value based method of accounting  for its  stock-based  compensation.
SFAS No. 123 requires pro forma disclosures of net income and earnings per share
computed  as if the fair  value  based  method  had been  applied  in  financial
statements of companies that continue to follow  current  practice in accounting
for such  arrangement  under APB 25. The  Company has elected to continue to use
current  practice  under APB 25,  but is unable to  determine  the impact of the
required disclosures as it is still reviewing the requirements of SFAS No. 123.

l.  Statement of Cash Flows

For purposes of reporting cash flows, cash and cash equivalents  include cash on
hand, amounts due from banks and money market investments. Cash flow amounts for
the year ended  December 31, 1994 are net of the effects of the  acquisition  of
Business Bancorp.

m.  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  statement  in
conformity with generally accepted accounting  principles.  Actual results could
differ from those estimates.

n.  Impairment of Long-Lived Assets

In 1995, the Company  adopted  Statement of Financial  Accounting  Standards No.
121,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to Be Disposed of" (SFAS No. 121).  SFAS No. 121 requires that long-lived
assets and certain identifiable  intangibles to be held and used by an entity be
reviewed for impairment  whenever  events or changes  indicate that the carrying
amount of an asset may not be recoverable. Upon adoption, the Company identified
no long-lived assets or identifiable intangibles which were impaired.

NOTE 2 - Acquisitions

The Company  completed  the  purchase of Business  Bancorp  ("BB"),  the holding
company for California  Business Bank, N.A. ("CBB"),  effective as of October 1,
1994. The purchase price was approximately  $11.4 million, of which $6.3 million
(55%) was paid in common stock of SJNB Financial Corp. (733,000 shares) and $5.1
million (45%) was paid in cash.

The Company accounted for this acquisition as a purchase and,  accordingly,  the
results of operations  for BB have been included in the  Consolidated  Financial
Statements from October 1, 1994, the acquisition  date. The following  unaudited
pro  forma  combined  consolidated  financial  information  gives  effect to the
acquisition as if it had been consummated on January 1, 1993.

------------------------------------------------------------
                                     Years Ended December 31
(dollars in thousands,                        
  except per share data)                 1994         1993
Net interest income                    $12,690      $10,690
Income before income taxes               2,095        2,399
Net income                               1,010        1,229
Net income per share                       .41          .51
------------------------------------------------------------

This unaudited pro forma  information  may not be indicative of the results that
would actually have occurred in the combination had been in effect on January 1,
1993 or which may be obtained in the future. The unaudited pro forma information
does not include any potential  benefit from possible  efficiencies  obtained by
combining the two bank operations.

In November  1995,  the  Company  entered  into an  agreement  to acquire  Astra
Financial  Inc.  (Astra).  Astra is an asset based lending  company based in San
Jose, California.  Its outstanding factoring receivables were approximately $2.2
million as of  December  31,  1995.  The  estimated  purchase  price of Astra is
approximately  $760 including a covenant not to compete and  compensation to the
sole owner of Astra. The purchase price is contingent and may be increased based
upon the first year's  performance  not to exceed a total of $1.2  million.  The
acquisition  will be  accounted  for as a  purchase  transaction  and  closed on
January 2, 1996.

NOTE 3 - Cash and Due from Banks

The Federal Reserve  requires the Bank to maintain  average reserve balances for
certain deposit balances. Such required reserves were approximately $2.0 million
and $1.2 million as of December 31, 1995 and 1994, respectively.

NOTE 4 - Investment Securities

Investment  securities  as of  December  31,  1995 and 1994  are  summarized  as
follows:

(dollars in thousands)                     1995                1994
--------------------------------------------------------------------------------
                                                   Market                 Market
                                           Cost     Value       Cost       Value
--------------------------------------------------------------------------------
Held to Maturity:
  U.S. Treasury                           $4,265    $4,293     $4,260     $4,101
  U.S. Government agencies                 4,976     5,052      4,963      4,752
  State and municipal (nontaxable)         3,060     3,084      1,797      1,762
  Mortgage Backed                          2,428     2,544      2,377      2,315
--------------------------------------------------------------------------------
   Total held to maturity                 14,729    14,973     13,397     12,930
Federal Reserve Bank Stock                   519       519        462        462
--------------------------------------------------------------------------------
   Total                                  15,248    15,492     13,859     13,392
--------------------------------------------------------------------------------
Available for sale:
  U.S. Treasury                            3,998     4,057      9,989      9,786
  U. S. Government Agencies               34,129    34,578      4,960      4,955
  Mortgage Backed                              9         9         19         18
  Mutual funds                             4,018     3,898      4,180      3,947
--------------------------------------------------------------------------------
   Total available for sale               42,154    42,542     19,148     18,706
--------------------------------------------------------------------------------
    Total invest. securities portfolio   $57,402   $58,034    $33,007    $32,098
================================================================================

As of December 31, 1995 and 1994  investment  securities with carrying values of
approximately  $34  million  and  $5  million,  respectively,  were  pledged  as
collateral  for  deposits  of public  funds and other  purposes.  Investment  in
Federal Reserve Bank stock is carried at cost, which is  approximately  equal to
its market value.
<TABLE>
<CAPTION>

The following tables provide the scheduled  maturity and weighted average yields
of the  Company's  investment  securities  portfolio as of December 31, 1995 and
1994:

                                                                                                                   Weighted
 December 31, 1995                              Amortized       Unrealized      Unrealized        Market            Average
(dollars in thousands)                            Cost            Gain           (Loss)           Value             Yield
---------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>             <C>              <C>            <C>                <C>    
Securities held to maturity:
  U.S. Treasury Securities:
    Maturing within 1 year                        $3,307           -----           ($11)          $3,296             4.43%
    Maturing after 1 year but within 5 years         958             $39           -----             997              7.05
  U.S. Government Agencies:
    Maturing within 1 year                         1,000           -----             (9)             991              4.12
    Maturing after 1 year but within 5 years       3,976             101            (16)           4,061              6.65
  State and municipal:
    Maturing within 1 year                         1,298               4             (2)           1,300              4.89
    Maturing after 1 year but within 5 years       1,762              22           -----           1,784              5.60
 Mortgaged Backed
    Maturing after 1 year but within 5 years       2,428             116           -----           2,544              7.90
  Other securities:
    Maturing after ten years                         519           -----           -----             519              6.00
---------------------------------------------------------------------------------------------------------------------------
    Securities held to maturity                   15,248             282            (38)          15,492              5.93
---------------------------------------------------------------------------------------------------------------------------
Securities available for sale:
  U.S. Treasury Securities:
    Maturing within 1 year                         2,999              42           -----           3,041              6.93
    Maturing after 1 year but within 5 years         999              17           -----           1,016              6.69
  U.S. Government Agencies:
    Maturing within 1 year                         7,022              17             (1)           7,038              5.97
    Maturing after 1 year but within 5 years      27,107             433           -----          27,540              6.13
  Mortgaged Backed-Maturing in more than 10 years      9           -----           -----               9
  Mutual funds-Overnight availability              4,018           -----           (120)           3,898              5.43
---------------------------------------------------------------------------------------------------------------------------
    Securities available for sale                 42,154             509           (121)          42,542              6.11
---------------------------------------------------------------------------------------------------------------------------
  Total investment securities                    $57,402            $791          $(159)         $58,034             6.06%
===========================================================================================================================

 December 31, 1994
---------------------------------------------------------------------------------------------------------------------------
Securities held to maturity:
  U.S. Treasury Securities:
    Maturing after 1 year but within 5 years      $4,260           -----          $(159)          $4,101             5.01%
  U.S. Government Agencies:
    Maturing after 1 year but within 5 years       4,963              $1           (212)           4,752              6.14
  State and municipal:
    Maturing within 1 year                           427           -----             (2)             425              4.63
    Maturing after 1 year but within 5 years       1,370           -----            (32)           1,338              4.74
 Mortgaged Backed
    Maturing after 1 year but within 5 years       2,377           -----            (63)           2,314              7.90
  Other securities:
    Maturing after ten years                         462           -----           -----             462              6.00
---------------------------------------------------------------------------------------------------------------------------
    Securities held to maturity                   13,859               1           (468)          13,392              5.91
---------------------------------------------------------------------------------------------------------------------------
Securities available for sale:
  U.S. Treasury Securities:
    Maturing within 1 year                         3,992           -----            (57)           3,935              4.96
    Maturing after 1 year but within 5 years       5,997           -----           (146)           5,851              5.45
  U.S. Government Agencies:
    Maturing within 1 year                         3,960           -----             (4)           3,956              5.66
    Maturing after 1 year but within 5 years       1,000           -----             (1)             999              7.63
  Mortgaged Backed-Maturing in more                   19           -----             (1)              18
than 10 years
  Mutual funds-Overnight availability              4,180           -----           (233)           3,947              5.55
---------------------------------------------------------------------------------------------------------------------------
    Securities available for sale                 19,148           -----           (442)          18,706              5.52
---------------------------------------------------------------------------------------------------------------------------
     Total investment securities                 $33,007              $1          $(910)         $32,098             5.68%
===========================================================================================================================
<FN>

The  weighted  average  yields  above have not been  adjusted  for tax  benefits
available on tax-exempt state and municipal investments. Mutual funds consist of
several funds invested in U. S.  Government  securities  and  government  issued
adjustable rate mortgages (ARMS).
</FN>
</TABLE>

Interest income earned on U. S. Treasury,  U. S.  Government  agencies and state
and municipal  securities  for the years ended December 31, 1995 and 1994 are as
follows:
-----------------------------------------------------
                                     Interest Income
(dollars in thousands)                1995     1994
-----------------------------------------------------
Securities held to maturity:                
 U.S. Treasury                         $214     $193
 U.S. Government Agencies               306      148
 State and municipal (nontaxable)       120       85
 Mortgage Backed                        208       47
 Federal Reserve Bank                    30       18
Securities available for sale:
 U.S. Treasury                          417      294
 U.S. Government agencies             1,200       31
 Mortgage Backed                        (3)        1
 Mutual funds                           233      195
-----------------------------------------------------
  Interest income                    $2,725   $1,012
=====================================================


NOTE 5 - Loans

A summary of loans as of December 31, 1995 and 1994 is as follows:

(dollars in thousands)                    1995       1994
------------------------------------------------------------
Commercial                              $48,121     $49,018
Real estate construction                 14,488      16,343
Real estate other                        66,949      63,104
Consumer                                  8,800       9,461
Other                                    21,302       7,362
Unearned fee income                       (793)       (889)
------------------------------------------------------------
 Loan portfolio                         158,867     144,399
Loans available for sale                 11,933       5,008
------------------------------------------------------------
  Total                                 170,800     149,407
Less allowance for possible loan losses (3,847)      (3,311)
-----------------------------------------------------------
  Loans, net                           $166,953    $146,096
===========================================================


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  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 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  43% of the  Company's  loan  portfolio  is made up of real estate
other than  construction.  This category of real estate loans  includes loans on
income-bearing commercial properties. In addition, 8.5% of the loan portfolio is
made up of real estate  construction loans. These loans consist of approximately
67% residential and 33% commercial.  Included in Consumer loans are prime equity
loans  of $4.6  million  or  approximately  2.7% of the  total  loan  portfolio.
Included  in the  category  "Other"  are  loans to real  estate  developers  for
short-term  investment  purposes  and  loans to  nondevelopers  for real  estate
investment  purposes  that  amount  to  approximately  4.6%  of the  total  loan
portfolio.  This amounts to  approximately  59% of the loan  portfolio  which is
directly related to real estate or real estate  interests.  Approximately 31% of
the total loan portfolio is commercial loans;  however,  no particular  industry
represents a significant portion of such loans.

Loans available for sale consist of the guaranteed portion of the SBA loans. The
Bank  provides  servicing  of loans sold to permanent  investors.  The amount of
loans being serviced at December 31, 1995 and 1994 was approximately $12 million
and $27 million, respectively.

The  following is an analysis of the  allowance for possible loan losses for the
years ended December 31, 1995 and 1994:  


(dollars in thousands)                   1995             1994
--------------------------------------------------------------
Balance, beginning of year              $3,311         $2,057
Provisions for possible loan losses      1,045            600
Charge-offs                              (696)         (1,682)
Recoveries                                 187            431
Allowance relating to the acquisition
 of California Business Bank             -----          1,905
--------------------------------------------------------------
Balance, end of year                    $3,847         $3,311
==============================================================


At December 31, 1995, the recorded  investment in loans for which  impairment in
accordance  with  SFAS  Nos.  114  and 118  totaled  $936  with a  corresponding
valuation  allowance of $302.  For the year ended December 31, 1995, the average
recorded  investment  in impaired  loans was  approximately  $2.8  million.  The
Company recognized $549 of interest on impaired loans (during the portion of the
year they were  impaired),  of which $543  related to  impaired  loans for which
interest income is recognized on the cash basis.

The  balance  of  nonaccrual  loans  as  of  December  31,  1995  and  1994  was
approximately  $894  and  $5.5  million,  respectively.  Nonaccrual  loans as of
December  31, 1994  includes a single loan in the amount of  approximately  $2.5
million,  which was  collected in June 1995.  The effect on interest  income had
these loans been  performing in accordance  with  contractual  terms was $111 in
1995 and $359 in 1994. Income actually recognized on these loans was $11 in 1995
and $121 in 1994.

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, 1995 and 1994 is as follows:

(dollars in thousands)                    1995     1994
----------------------------------------------------------
Balance, beginning of year               $4,206    $2,673
New loans disbursed                         471     3,225
Repayments of loans                      (2,859)  (1,692)
----------------------------------------------------------
Balance, end of year                     $1,818    $4,206
==========================================================


As of December 31,  1995,  loans of  approximately  $8.5 million were pledged as
collateral for the Federal Reserve Discount Window. The Bank did not utilize the
Discount Window for any borrowings during 1995.

NOTE 6 - Premises and Equipment

A summary of  premises  and  equipment  as of  December  31, 1995 and 1994 is as
follows:

(dollars in thousands)                            1995        1994
-------------------------------------------------------------------
Land                                              $829        $829
Buildings and improvements                       3,312       2,704
Furniture and equipment                          2,258       2,147
-------------------------------------------------------------------
  Premises and equipment                         6,399       5,680
Less accumulated depreciation and amortization (2,905)     (2,658)
-------------------------------------------------------------------
  Premises and equipment, net                  $3,494      $3,022
===================================================================


NOTE 7 - Time Deposits

As  of  December  31,  1995  and  1994,  the  Bank  had  $43  and  $34  million,
respectively,  in time  deposits  in  denominations  of $100 or  more.  Interest
expense for these  deposits  was $2.2 million and $1.1 million in 1995 and 1994,
respectively.

NOTE 8 - Other Short-term Borrowings

Other short-term  borrowings include federal funds purchased and securities sold
under agreements to repurchase and information  relating to these borrowings are
summarized below:

(dollars in thousands)
-----------------------------------------------------------------------
Federal funds purchased
  Balance at December 31                               $2,000    -----
  Weighted average interest rate at year end            5.25%    -----
  Maximum amount outstanding at any month end           9,000   $1,200
  Average outstanding balance                             355      182
  Weighted average interest rate paid                   6.17%    2.72%
Securities sold under agreements to
  repurchase                                 
  Balance at December 31,                             $22,000    -----
  Weighted average interest rate at year end            5.77%    -----
  Maximum amount outstanding at any month end          23,553    -----
  Average outstanding balance                          10,827    -----
  Weighted average interest rate paid                   5.95%    -----


The  Company's   bank   subsidiary  has  informal   arrangements   with  various
correspondents  providing  short-term  credit for liquidity  requirements;  such
informal lines aggregated $9 million at December 31, 1995.

NOTE 9 - Income Taxes

Income tax expense for the years ended  December  31, 1995 and 1994  consists of
the following:

(dollars in thousands)                      1995         1994
--------------------------------------------------------------
Current:
  Federal                                 $2,108         $520
  State                                      373          156
--------------------------------------------------------------
     Total current                         2,481          676
--------------------------------------------------------------
Deferred:
  Federal                                   (81)          631
  State                                      (5)           47
--------------------------------------------------------------
    Total deferred                          (86)          678
--------------------------------------------------------------
       Income taxes                       $2,395       $1,354
==============================================================

Total income tax expense differed from the amount computed by applying the U. S.
federal  income tax rates in years  ended  December  31, 1995 and 1994 of 34% to
income before income taxes as a result of the following:

(dollars in thousands)                                 1995          1994
---------------------------------------------------------------------------
Computed "expected " tax expense                      $1,842       $1,094
California franchise tax, net of federal income tax      368          203
Amortization of intangible assets                        230           56
Federal tax-exempt investment income                    (42)         (33)
Change in valuation account                                7           11
Other                                                   (10)           23
---------------------------------------------------------------------------
     Income taxes                                     $2,395       $1,354
===========================================================================

The tax effects of temporary  differences that gave rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1995 and
1994, are presented below:
4
(dollars in thousands)                      1995              1994
-------------------------------------------------------------------
Deferred tax assets:
  Provision for possible loan losses        $1,353            $236
  Deferred loan fees                         -----             194              
  Securities available for sale              -----             171
  Purchase accounting adjustments            -----             146
  Foreclosure income                            48              85
  State taxes                                -----              53
  Deferred compensation                         65              50
  Other                                      -----              27
-------------------------------------------------------------------
    Total gross deferred tax assets          1,466             962
-------------------------------------------------------------------
    Less valuation allowance                 (280)            (273)
-------------------------------------------------------------------
    Net deferred tax assets                  1,186             689
-------------------------------------------------------------------
Deferred tax liabilities:
  Purchase accounting adjustments             503            -----
  Securities available for sale               155            -----
  State taxes                                 143            -----
  Depreciation and amortization               195              136
  Excess servicing                             29              152
-------------------------------------------------------------------
    Total gross deferred tax liabilities    1,025              288
-------------------------------------------------------------------
      Net deferred tax assets                $161             $401
===================================================================

Deferred tax assets related to purchase  accounting  adjustments include the tax
effect of fair market value  adjustments of the assets and liabilities  acquired
from BB and CBB.  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 10 - Detail of Other Expense

Other  expense for the years ended  December  31, 1995 and 1994  consists of the
following: 

(dollars in thousands)                            1995      1995
-------------------------------------------------------------------
Amortization of core deposit intangibles
  and goodwill                                    $569      $166
Legal and professional fees                        476       282
Data processing                                    458       351
Business promotion                                 314       273
Regulator's assessments                            283       361
Client services                                    247       176
Directors' fees and costs                          239       161
Loan and collection                                215       235
Advertising                                        186        81
Stationery and supplies                            180       132
Net cost of other real estate owned                 45       130
Other                                              506       394
-------------------------------------------------------------------
Total                                           $3,718    $2,741
===================================================================


NOTE 11 - Stock Option Plan

The Company has two stock option plans under which  incentive  stock  options or
nonqualified  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.  All stock options  become  exercisable at least 40% one year
after the date of grant and at least 20% in each of the  following  three years.
They expire no later than ten years  after the date of the grant.  The number of
shares  granted to the  directors  is set by a predefined  formula  based on the
profitability  of the Company.  A prior plan expired  during 1992 and the unused
shares  authorized  under the prior plan may not be the subject of stock options
granted under the current plans.  The prior plan provided that all stock options
expire no later  than five years  after the date of grant.  The number of shares
subject to  outstanding  options under the prior plan was 144,384 as of December
31, 1995.

Activity under the stock plans is as follows:

                                                    Per
Options                               Number       Share
-----------------------------------------------------------
Balances, December 31,  1993         245,371    $4.25-7.87
  Granted                             17,100     7.25-8.38
  Cancelled                          (1,640)     4.25-8.13
  Exercised                            (360)     4.25-4.37
-----------------------------------------------------------
Balances, December 31, 1994          260,471    $4.25-8.38
-----------------------------------------------------------
  Granted                            140,125    7.50-14.07
  Cancelled                          (8,300)     4.25-9.31
  Exercised                         (70,987)     4.25-7.38
-----------------------------------------------------------
Balances, December 31, 1995          321,309   $4.25-13.75
===========================================================

Options  available  for grant at  December  31,  1995 and 1994 were  309,355 and
141,180,  respectively.  Options  to  purchase  163,432  shares  of  stock  were
exercisable as of December 31, 1995.

NOTE 12 - 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.
As of December 31, 1995, amounts committed to extend credit under normal lending
agreements aggregated approximately $65 million for undisbursed loan commitments
and  approximately  $3.0 million for commitments under unused standby letters of
credit and other guarantees.

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  failed 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.

Also at December 31, 1995,  the Bank had  outstanding  an interest rate floor in
the amount of $10 million for a period of five years.  The Bank has paid a fixed
premium for which it will receive,  through May 10, 1999, the amount of interest
on $10 million  based on the  difference of 7% and prime when prime is less than
7%. This will  protect the Bank  against  decreases in its net income when prime
decreases  to less  than 7%.  The  current  fair  market  value of the  floor is
approximately $64.

The Company is obligated  under its lease  agreement for 95 South Market under a
noncancelable  operating  lease through  September 2004. The lease is subject to
periodic  adjustment  based on changes in the CPI.  The  following  table  shows
future minimum payments under the lease as of December 31, 1995:

-------------------------------------- ---------------------
                                           Year Ending
(in thousands)                             December 31,
-------------------------------------- ---------------------
1996                                            $228
1997                                             228
1998                                             228
1999                                             228
2000                                             228
Thereafter                                       855
                                       ---------------------
Total minimum lease payments                  $1,995
------------------------------------------------------------

Total  minimum  lease  payments to be  received  under  noncancelable  operating
subleases at December 31, 1995 are  approximately  $1.5 million;  these payments
are not reflected in the above table.

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 13 - Fair Value of Financial Instruments

In 1995, the Company implemented Statement of Financial Accounting Standards No.
107 (SFAS No. 107),  "Disclosures  about Fair Value of  Financial  Instruments,"
which requires that the Company disclose estimated fair values for its 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
financial statements and notes 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 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, 1995:

(dollars in thousands)
-------------------------------------------------------------------------------
                                                           Carrying      Fair
Financial assets                                            Value       Value
-------------------------------------------------------------------------------
Cash and due from banks                                    $12,574     $12,574
Money market investments                                     3,200       3,200
Investment securities                                       57,790      58,034
Loans, net                                                 166,953     167,207
Accrued interest receivable                                  1,698       1,698

Financial liabilities
-------------------------------------------------------------------------------
Deposits                                                   197,189     197,102
Federal funds purchased, securities sold under
  repurchase agreements and other borrowings                24,714      24,672

Off-balance sheet
Financial Instruments
-------------------------------------------------------------------------------
Interest rate floor contract purchased                          31          64

Cash and due from banks and money market investments - These are valued at their
carrying amounts included in the consolidated  statement of financial condition,
which are reasonable  estimates of fair value due to the relatively short period
to maturity of the instruments.

Investment securities - For securities held to maturity and carried at amortized
cost,  as well as  available  for sale  securities,  current  market  prices  or
quotations were used to determine fair value.  Stock held in the Federal Reserve
Bank of San  Francisco  has no trading  market,  is  required as part of being a
member of the Federal Reserve system, and is redeemable at par;  therefore,  its
fair value is presented at cost.

Loans - The  carrying  amount of loans is net of  unearned  fee  income  and the
reserve  for  possible  loan  losses.  The fair  valuation  calculation  process
differentiates loans based on their financial  characteristics,  such as product
classification,   loan  category,   pricing  features  and  remaining  maturity.
Prepayment  estimates  are  evaluated by product and loan 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 is  calculated  by  discounting  contractual  cash flows
using discount rates that reflect the Company's  current  pricing for loans with
similar  characteristics  and  remaining  maturity.  Most of the discount  rates
applied to these loans are between 10.6% and 11.2% at December 31, 1995.

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

Fair value for nonperforming loans 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.

Loans  available for sale - Loans  available for sale are valued based on quoted
prices for SBA guaranteed loans.

Accrued  interest   receivable  -  The  carrying  amounts  of  accrued  interest
receivable approximate their fair values.

Deposits - SFAS No. 107 states  that the fair value of  deposits  with no stated
maturity, such as noninterest-bearing demand deposits, interest-bearing checking
and money market and savings deposit accounts, is equal to the amount payable on
demand at the measurement date. Although FASB's requirement for these categories
is not consistent  with market  practice of using  prevailing  interest rates to
value these  amounts,  the amount  included  for these  deposits in the previous
table is their carrying value.

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.

Accrued  interest  payable - The carrying  amounts of accrued  interest  payable
approximate their fair values.

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.  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 interest  rate floor
generally  reflects the  estimated  amounts the Company would receive based upon
dealer quotes, to terminate such agreements at the reporting date.

Limitations  - These fair value  disclosures  are made solely to comply with the
requirements  of SFAS No. 107.  The  calculations  represent  management's  best
estimates;  however,  due to the lack of broad markets and the significant items
excluded from this disclosure,  the calculations do not represent the underlying
value of the Company.  The  information  presented in this  footnote is based on
market quotes and fair value calculations as of December 31, 1995. These amounts
have not been updated since year end; therefore, the valuations may have changed
significantly since that point in time.

NOTE 14 - SJNB Financial Corp.
(Parent Company Only)


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

--------------------------------------------------------------------------------
Balance Sheets
December 31, 1995 and 1994
(dollars in thousands)                                        1995        1994
--------------------------------------------------------------------------------
Assets
Cash and equivalents                                           $710        $529
Loans, net of allowance for possible loan losses
  of $57 in 1994                                               -----        455
Investment in the Bank                                       25,889      22,389
Other assets                                                     74          74
--------------------------------------------------------------------------------
      Total assets                                          $26,673     $23,447
================================================================================
Liabilities and Shareholders' Equity
Total liabilities-Accounts payable                              $15          $5
--------------------------------------------------------------------------------
Common stock, no par value; authorized, 20,000 shares
   issued and and outstanding, 2,418 shares
   in 1995 and 2,363 shares in 1994                          19,627      19,421
Retained earnings                                             6,798       4,278
Net unrealized gain (loss) on securities available for sale     233       (257)
--------------------------------------------------------------------------------
     Total shareholders' equity                              26,658      23,442
--------------------------------------------------------------------------------
     Total liabilities and shareholders' equity             $26,673     $23,447
================================================================================


--------------------------------------------------------------------------------
Statements of Income
For the Years Ended December 31, 1995 and 1994
(dollars in thousands)                                        1995        1994
--------------------------------------------------------------------------------
Equity in undistributed income of the Bank                   $3,010        $900
Cash dividend received from Bank                              -----         900
Interest income and fees on loans                               123         105
Reduction of provision for possible loan losses                  57         100
Other income (expense)                                        (156)        (98)
--------------------------------------------------------------------------------
Income  before taxes                                          3,034       1,907
Income tax                                                     (10)        (44)
--------------------------------------------------------------------------------
Net income                                                   $3,024      $1,863
================================================================================

<TABLE>
<CAPTION>

-------------------------------------------------------------------------------------
Statements of Cash Flows
For the Years Ended December 31, 1995 and 1994
(dollars in thousands)                                          1995         1994
-------------------------------------------------------------------------------------
<S>                                                               <C>          <C>   
Cash flows from operating activities:
  Net income                                                      $3,024       $1,863
    Adjustments to reconcile net income to net cash
      provided by (used in) operating activities:
        Recovery of provision for possible loan losses              (57)        (100)
        Decrease (increase) in other assets                        ----            76
        Increase (decrease) in liabilities                            10         (70)
        Equity in undistributed income of the Bank               (3,010)        (901)
--------------------------------------------------------------------------------------
          Net cash provided by (used in) operating activities       (33)          868
--------------------------------------------------------------------------------------
  Cash flows from investing activities:
    Decrease in loans, net                                           512          678
    Capital contribution to the Bank                                ----      (1,000)
    Cash dividend                                                  (504)        (320)
    Common stock repurchased                                       (145)
    Stock options exercised                                          351            2
    Net cash used in the acquisition of BB                          ----      (2,089)
--------------------------------------------------------------------------------------
          Net cash provided by (used in) investing activities        214      (2,729)
--------------------------------------------------------------------------------------
  Net increase in cash and equivalents                               181      (1,861)
  Cash and equivalents at beginning of year                          529        2,390
--------------------------------------------------------------------------------------
  Cash and equivalents at end of year                               $710         $529
======================================================================================

Noncash transactions:                                     
  Acquisition of BB's assets at fair market value:
    Fair value of assets acquired                                    ----      $11,374
   Payment for purchase of BB                                        ----      (5,136)
                                                                -----------------------
      Common stock issued                                            ----       $6,238
=======================================================================================
</TABLE>

NOTE 15- Regulatory Matters

The Company and the Bank are subject to their  respective  regulator's  policies
governing capital adequacy.  Such regulators adopted regulations for determining
capital adequacy that involve assigning assets to four broad risk categories and
that  establish  minimum  capital  ratios  based  on  these   assignments.   The
regulations  require a ratio of capital to  risk-weighted  assets of 8.00% and a
minimum Tier 1 ratio (as defined by the  regulations)  of 4.00%.  As of December
31, 1995,  the Company and the Bank  qualified  for the top capital  category of
"well capitalized" under the regulations.

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, the Bank may not declare  dividends in any calendar
year that exceed certain legal limitations without the approval of the Office of
the  Comptroller  of the  Currency.  The  restricted  equity  of the  Bank as of
December 31, 1995 was approximately $20 million.




<PAGE>


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

Not applicable.


                                    PART III


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

ITEM 10:EXECUTIVE COMPENSATION


ITEM 11:SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


ITEM 12:CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to General Instruction E(3), the information in Items 9, 10, 11, and 12
of Part  III is  furnished  by way of  incorporation  by  reference  from  those
sections of the  Registrant's  1996 proxy  statement  containing the information
required by Items 401, 402, 403, 404 and 405 of Regulation  S-B. The  Registrant
intends to file a definitive copy of its 1996 proxy statement by April 29, 1996.


ITEM 13:  EXHIBITS AND REPORTS ON FORM 8-K

(a)    Exhibits

         The following exhibits are filed as part of this report:

(2)a.The Plan of Acquisition  and Merger by and between SJNB Financial Corp. and
     Business Bancorp (as amended) is hereby  incorporated by reference to Annex
     A filed with Registration Statement on Form S-4, Amendment No. 2 Commission
     File No.  33-79874,  filed with the Securities  and Exchange  Commission on
     August 3, 1994.

(2)b.The Stock Acquisition  Agreement by and among San Jose National Bank, Astra
     Financial Inc. and Thomas D. Griffin,  dated November 17, 1995, and related
     side letters dated December 14, 1995, and January 5, 1996 and the Estension
     Agreement dated January 5, 1996 are filed with this Report.

(3)a.The  Certificate of Amendment to Articles of  Incorporation  filed June 17,
     1988 and restated  Articles of  Incorporation  are hereby  incorporated  by
     reference to Exhibit (3) b. of the Registrant's  Annual Report on Form 10-K
     for the fiscal year ended December 31, 1988.

(3)b.Amendments to the Registrant's  bylaws dated January 25, 1995, February 22,
     1995, and March 22, 1995 and the  Registrant's  restated  bylaws are hereby
     incorporated by reference to Exhibit (3)(ii) of the Registrant's  Quarterly
     Report on Form 10-QSB for the quarterly period ended March 31, 1995.

*(10)a. The Registrant's  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 October 4, 1989 and amended January 24,1992 under Registration No.
     33-31392.

*(10)b. The form of Incentive  Stock Option  Agreement  being utilized under the
     Stock Option Plan is hereby  incorporated  by reference from Exhibit 4.2 of
     Amendment No. 1 to the Registrant's  Registration Statement on Form S-8, as
     filed on January 24, 1992, under Registration No. 33-31392.

*(10)c. The form of Stock Option Agreement being utilized under the Stock Option
     Plan is hereby  incorporated by reference from Exhibit 4.3 of Amendment No.
     1 to the  Registrant's  Registration  Statement  on Form  S-8,  as filed on
     January 24, 1992, under Registration No. 33-31392.

*(10)d.  Amendment  No. 3 to the Stock  Option  Plan is hereby  incorporated  by
     reference  from  Exhibit  4.4  of  Amendment  No.  1  to  the  Registrant's
     Registration  Statement  on Form S-8, as filed on January 24,  1992,  under
     Registration No. 33-31392.

*(10)e.  Amendment  No. 4 to the Stock  Option  Plan is hereby  incorporated  by
     reference  from  Exhibit  4.5  of  Amendment  No.  2  to  the  Registrant's
     Registration  Statement  on Form  S-8,  as filed on June  22,  1992,  under
     Registration No. 33-31392.

*(10)f. 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)g.  Amendment  No. 1 to the  1992  Employee  Stock  Option  Plan is  hereby
     incorporated by reference to Exhibit (10) f. of the Registrant's  Quarterly
     Report on Form 10-QSB for the quarterly period ended June 30, 1995.

*(10)h. 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)i.  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)j. The Registrant's 1992 Director Stock Option Plan is hereby  incorporated
     by reference from Exhibit (10) i. of the Registrant's Annual Report on Form
     10-KSB for the fiscal year ended December 31, 1992.

*(10)k.  Amendment  No. 1 to the  1992  Director  Stock  Option  Plan is  hereby
     incorporated by reference to Exhibit (10) i. of the Registrant's  Quarterly
     Report on Form 10-QSB for the quarterly period ended June 30, 1995.

*(10)l.  The  form of Stock  Option  Agreement  being  utilized  under  the 1992
     Director Stock Option Plan is hereby incorporated by reference from Exhibit
     (10) j. of the  Registrant's  Annual  Report on Form  10-KSB for the fiscal
     year ended December 31, 1992.

*(10)m. Agreement between James R. Kenny and SJNB Financial Corp. dated June 18,
     1991  and  amendment  dated  January  9,  1992 is  hereby  incorporated  by
     reference  from Exhibit (10) f. of the  Registrant's  Annual Report on Form
     10-K for the fiscal year ended December 31, 1991.

(10)n. Systems Management  Services Agreement by and between  Systematics,  Inc.
     and San Jose National Bank dated March 1, 1990, and amendments  dated April
     5, 1990,  July 10, 1990 and January  27,  1992 are hereby  incorporated  by
     reference  from Exhibit (10) g. of the  Registrant's  Annual Report on Form
     10-K for the fiscal year ended December 31, 1991.

(10)o.  Agreement  for  Item  Processing  Services  by  and  between  Datatronix
     Financial  Services  and San Jose  National  Bank dated  April 13,  1992 is
     hereby  incorporated by reference from Exhibit (10) m. of the  Registrant's
     Annual Report on Form 10-KSB for the fiscal year ended December 31, 1992.

(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 Form 10-QSB for the quarterly period ended September 30, 1995.

(22) Subsidiary of Registrant.

(23) Consent of KPMG Peat Marwick, LLP.

(27) Financial Data Schedule.

*  Indicates management contract or compensation plan or arrangement.


(b)  Reports on Form 8-K

         None



<PAGE>


In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act of  1934,  the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

Date: January 24, 1996                               SJNB Financial Corp.

By:  S/James R. Kenny                           By:  S/Eugene E. Blakeslee
     James R. Kenny                                  Eugene E. Blakeslee
     President and Chief                             Executive Vice President &
     Executive Officer                               Chief Financial Officer

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


<PAGE>



S/James R. Kenny                                  S/F. Jack Gorry
----------------------------                      ------------------------------
James R. Kenny                                    F. Jack Gorry, Director
President, Chief Executive Officer                January 24, 1996
and Director
January 24, 1996                                  S/Arthur K. Lund
                                                  ------------------------------
S/Eugene E. Blakeslee                             Arthur K. Lund, Director
----------------------------                      January 24, 1996
Eugene E. Blakeslee
Executive Vice President and                      S/Louis Oneal
Chief Financial Officer and                       ------------------------------
Chief Accounting Officer                          Louis Oneal, Director       
January 24, 1996                                  January 24, 1996

S/Ray S. Akamine                                  S/Diane Rubino
----------------------------                       -----------------------------
Ray S. Akamine, Director                          Diane Rubino, Director
January 24, 1996                                  January 24, 1996

S/Robert A. Archer                                S/Douglas L. Shen
----------------------------                      ------------------------------
Robert A. Archer                                  Douglas L. Shen, Director
Chairman and Director                             January 24, 1996
January 24, 1996
                                                  S/John W. Weinhardt
S/Albert V. Bruno                                 ------------------------------
----------------------------                      John W. Weinhardt
Albert V. Bruno, Director                         Vice Chairman and Director
January 24, 1996                                  January 24, 1996

S/William H. Curtis                               S/Gary S. Vandeweghe
------------------------------             ------------------------------
William H. Curtis, Director                       Gary S. Vandeweghe, Director
January 24, 1996                                  January 24, 1996

S/Rod Diridon
-----------------------------
Rod Diridon, Director
January 24, 1996

S/Dominic A. Fanelli
-----------------------------
Dominic A. Fanelli, Director
January 24, 1996

S/Jack G. Fischer
-----------------------------
Jack G. Fischer, Director
January 24, 1996


<PAGE>




                              SJNB Financial Corp.

                                   Form 10-KSB

                                    Exhibits

                                December 31, 1995

<TABLE>

The following exhibits are filed as part of this report:
<S>                                                                                <C> 
(2)a.The Plan of Acquisition  and Merger by and between SJNB Financial Corp. and
     Business  Bancorp (as Page amended) is hereby  incorporated by reference to
     Annex A filed with  Registration  Statement  on Form S-4,  Amendment  No. 2
     Commission  File No.  33-79874,  filed  with the  Securities  and  Exchange
     Commission on August 3, 1994.                                                  N/A

 
(2)b.The Stock Acquisition  Agreement by and among San Jose National Bank, Astra
     Financial Inc. and Thomas D. Griffin,  dated November 17, 1995, and related
     side letters dated December 14, 1995, and January 5, 1996 and the Extension
     Agreement dated January 5, 1996 are filed with this Report.                     57

(3)a.The  Certificate of Amendment to Articles of  Incorporation  filed June 17,
     1988 and restated  Articles of  Incorporation  are hereby  incorporated  by
     reference to Exhibit (3) b. of the Registrant's  Annual Report on Form 10-K
     for the fiscal year ended December 31, 1988.                                   N/A

(3)b.Amendments to the Registrant's  bylaws dated January 25, 1995, February 22,
     1995, and March 22, 1995 and the  Registrant's  restated  bylaws are hereby
     incorporated by reference to Exhibit (3)(ii) of the Registrant's  Quarterly
     Report on Form 10-QSB for the quarterly period ended March 31, 1995.           N/A

*(10)a. The Registrant's  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 October 4, 1989 and amended  January  24, 1992 under  Registration
     No. 33-31392.                                                                  N/A

*(10)b. The form of Incentive  Stock Option  Agreement  being utilized under the
     Stock Option Plan is hereby  incorporated  by reference from Exhibit 4.2 of
     Amendment No. 1 to the Registrant's  Registration Statement on Form S-8, as
     filed on January 24, 1992, under Registration No. 33-31392.                    N/A

*(10)c. The form of Stock Option Agreement being utilized under the Stock Option
     Plan is hereby  incorporated by reference from Exhibit 4.3 of Amendment No.
     1 to the  Registrant's  Registration  Statement  on Form  S-8,  as filed on
     January 24, 1992, under Registration No. 33-31392.                             N/A

*(10)d.  Amendment  No. 3 to the Stock  Option  Plan is hereby  incorporated  by
     reference  from  Exhibit  4.4  of  Amendment  No.  1  to  the  Registrant's
     Registration  Statement  on Form S-8, as filed on January 24,  1992,  under
     Registration No. 33-31392.                                                     N/A

*(10)e.  Amendment  No. 4 to the Stock  Option  Plan is hereby  incorporated  by
     reference  from  Exhibit  4.5  of  Amendment  No.  2  to  the  Registrant's
     Registration  Statement  on Form  S-8,  as filed on June  22,  1992,  under
     Registration No. 33-31392.                                                     N/A

*(10)f. 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.    N/A

*(10)g.  Amendment  No. 1 to the  1992  Employee  Stock  Option  Plan is  hereby
     incorporated by reference to Exhibit (10) f. of the Registrant's  Quarterly
     Report on Form 10-QSB for the quarterly period ended June 30, 1995.            N/A

*(10)h.  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.                 N/A

*(10)i.  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.                 N/A

*(10)j. The Registrant's 1992 Director Stock Option Plan is hereby  incorporated
     by reference from Exhibit (10) i. of the Registrant's Annual Report on Form
     10-KSB for the fiscal year ended December 31, 1992.                            N/A

*(10)k.  Amendment  No. 1 to the  1992  Director  Stock  Option  Plan is  hereby
     incorporated by reference to Exhibit (10) i. of the Registrant's  Quarterly
     Report on Form 10-QSB for the quarterly period ended June 30, 1995.            N/A

*(10)l.  The  form of Stock  Option  Agreement  being  utilized  under  the 1992
     Director Stock Option Plan is hereby incorporated by reference from Exhibit
     (10) j. of the  Registrant's  Annual  Report on Form  10-KSB for the fiscal
     year ended December 31, 1992.                                                  N/A

*(10)m. Agreement between James R. Kenny and SJNB Financial Corp. dated June 18,
     1991  and  amendment  dated  January  9,  1992 is  hereby  incorporated  by
     reference  from Exhibit (10) f. of the  Registrant's  Annual Report on Form
     10-K for the fiscal year ended December 31, 1991.                              N/A
 
(10)n.   Systems Management Services Agreement by and between Systematics, Inc.
       and San Jose  National  Bank dated March 1, 1990,  and  amendments  dated
       April 5, 1990, July 10, 1990 and January 27, 1992 are hereby incorporated
       by reference  from Exhibit (10) g. of the  Registrant's  Annual Report on
       Form 10-K for the fiscal year ended December 31, 1991.                       N/A

(10)o.    Agreement  for Item  Processing  Services by and  between  Datatronix
       Financial  Services  and San Jose  National  Bank dated April 13, 1992 is
       hereby incorporated by reference from Exhibit (10) m. of the Registrant's
       Annual Report on Form 10-KSB for the fiscal year ended December 31, 1992.    N/A

(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 thefiscal year ended December
     31, 1994.                                                                      N/A

(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 Form 10-QSB for the quarterly period ended September
       30, 1995.                                                                    N/A

(22)   Subsidiary of Registrant.                                                    99

(23)   Consent of KPMG Peat Marwick, LLP.                                           100

(27)   Financial Data Schedule.                                                     2

*  Indicates management contract or compensation plan or arrangement.


Item 13.  Exhibits and Reports on Form 8-K

(a)    Exhibits
<PAGE>
</TABLE>