U. S. SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                 FORM 10-KSB-A
                                   (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, 1996

                                       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)

                    Issuer's telephone number (408) 947-7562

      Securities registered under Section 12(b) of the Exchange Act: NONE

         Securities registered under Section 12(g) of the Exchange 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 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. [ ]

Issuer's revenues for its most recent fiscal year:   $25,374,000

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Registrant,  based on a market value of $20.375 per share (the closing  price of
the Common Stock), as of February 5, 1997) was $45,265,294.

Number of shares of common stock outstanding as of February 5, 1997:
  2,580,182 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>

ITEM 7:  FINANCIAL STATEMENTS

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

            Independent Auditors' Report

            Consolidated Balance Sheets - December 31, 1996
                  and 1995

            Consolidated Statements of Income for the Years
                  Ended December 31, 1996 and 1995

            Consolidated Statements of Shareholders' Equity
                  for the Years Ended December 31, 1996 and 1995

            Consolidated Statements of Cash Flows for the
                  Years Ended December 31, 1996 and 1995

            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, 1996 and 1995,  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,  1996 and 1995,  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 14, 1997


<PAGE>

<TABLE>
<CAPTION>


-----------------------------------------------------------------------------------------------
SJNB Financial Corp. and subsidiary
Consolidated Balance Sheets
December 31, 1996 and 1995
(in thousands)
-----------------------------------------------------------------------------------------------
Assets                                                                1996            1995
-----------------------------------------------------------------------------------------------
<S>                                                                  <C>             <C>
Cash and due from banks                                              $20,208         $12,574
Money market investments                                              19,800           3,200
Investment securities:
  Available for sale                                                  48,044          42,542
  Held to maturity (Fair value: $15,231 at December 31, 1996
    and $15,492 at December 31, 1995)                                 15,072          15,248
-----------------------------------------------------------------------------------------------
    Total investment securities                                       63,116          57,790
-----------------------------------------------------------------------------------------------
Loans                                                                198,627         170,800
Allowance for possible loan losses                                    (4,005)         (3,847)
-----------------------------------------------------------------------------------------------
  Loans, net                                                         194,622         166,953
-----------------------------------------------------------------------------------------------
Premises and equipment, net                                            4,001           3,494
Other real estate owned                                                  454             664
Accrued interest receivable and other assets                           2,737           2,764
Intangibles, net of accumulated amortization of $1,234
  at December 31, 1996 and $735 at December 31, 1995                   4,465           4,756
----------------------------------------------------------------------------------------------
     Total                                                          $309,403        $252,195
===============================================================================================

Liabilities and Shareholders' Equity
-----------------------------------------------------------------------------------------------
Deposits:
  Non-interest-bearing                                               $80,774         $52,775
  Interest-bearing                                                   163,865         143,917
-----------------------------------------------------------------------------------------------
     Total deposits                                                  244,639         196,692
-----------------------------------------------------------------------------------------------
Other short-term borrowings                                           29,688          24,000
Accrued interest payable and other liabilities                         3,871           4,845
-----------------------------------------------------------------------------------------------
     Total liabilities                                               278,198         225,537
-----------------------------------------------------------------------------------------------
Shareholders' equity:
  Common stock, no par value; authorized, 20,000 shares;
     issued and outstanding, 2,571 shares
     in 1996 and 2,418 shares in 1995                                 20,880          19,627
  Retained earnings                                                   10,263           6,798
  Net unrealized gain on securities available for sale                    62             233
-----------------------------------------------------------------------------------------------
     Total shareholders' equity                                       31,205          26,658
-----------------------------------------------------------------------------------------------
Commitments and contingencies                                           ----            ----
-----------------------------------------------------------------------------------------------
     Total                                                          $309,403        $252,195
===============================================================================================

<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, 1996 and 1995
---------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)                                  1996            1995
---------------------------------------------------------------------------------------------------
Interest income:
<S>                                                                      <C>             <C>
  Interest and fees on loans                                             $20,422         $18,016
  Interest on money market investments                                       258             280
  Interest and dividends on investment securities available for sale       2,907           1,847
  Interest on investment securities held to maturity                         949             878
  Other interest and investment income                                        (9)            (43)
---------------------------------------------------------------------------------------------------
    Total interest income                                                 24,527          20,978
---------------------------------------------------------------------------------------------------
Interest expense:
  Interest expense on interest-bearing deposits:
    Certificates of deposit of $100 or more                                2,608           2,232
    Other                                                                  5,451           4,451
---------------------------------------------------------------------------------------------------
    Total interest expense                                                 8,059           6,683
---------------------------------------------------------------------------------------------------
    Net interest income                                                   16,468          14,295
---------------------------------------------------------------------------------------------------
Provision for possible loan losses                                           190           1,045
---------------------------------------------------------------------------------------------------
     Net interest income after provision for
       possible loan losses                                               16,278          13,250
---------------------------------------------------------------------------------------------------
Other income:
  Service charges on deposits                                                551             553
  Other operating income                                                     437             456
  Net loss on sale of securities available for sale                         (142)            (43)
---------------------------------------------------------------------------------------------------
     Total other income                                                      846             966
---------------------------------------------------------------------------------------------------
Other expenses:
  Salaries and benefits                                                    5,517           4,339
  Occupancy                                                                  702             740
  Other                                                                    3,416           3,718
---------------------------------------------------------------------------------------------------
     Total other expenses                                                  9,635           8,797
---------------------------------------------------------------------------------------------------
     Income before income taxes                                            7,489           5,419
Income taxes                                                               3,198           2,395
---------------------------------------------------------------------------------------------------
     Net income                                                           $4,291          $3,024
===================================================================================================

Net income per share                                                       $1.63           $1.20
===================================================================================================
Average common share equivalents outstanding                               2,640           2,522
===================================================================================================
<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, 1996 and 1995
----------------------------------------------------------------------------------------------------------------------------
                                                                                             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>
Balances, December 31, 1994                                  2,363     $19,421     $4,278          $(257)        $23,442
Stock options exercised                                         71         351       ----           ----             351
Common stock repurchase                                        (16)       (145)      ----           ----            (145)
Cash dividends ($.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
----------------------------------------------------------------------------------------------------------------------------
Stock options exercised                                        153         810       ----           ----             810
Tax benefit from stock options exercised                      ----         443       ----           ----             443
Cash dividends ($.33 per share)                               ----        ----       (826)          ----            (826)
Net income for the year ended
  December 31, 1996                                           ----        ----      4,291           ----           4,291
Net unrealized loss on securities available for sale          ----        ----        ----          (171)           (171)
----------------------------------------------------------------------------------------------------------------------------
Balances, December 31, 1996                                  2,571     $20,880    $10,263            $62         $31,205
============================================================================================================================
<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, 1996 and 1995
----------------------------------------------------------------------------------------------------------------------------
(dollars in thousands)                                                                         1996              1995
----------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
<S>                                                                                            <C>               <C>
  Net income                                                                                   $4,291            $3,024
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Provision for possible loan losses                                                          190             1,045
      Depreciation and amortization                                                               483               424
      Amortization of intangibles                                                                 499               569
      Deferred tax (benefit)                                                                    -----               (86)
      Loss on sale of securities available for sale                                               142                43
      Write down of other real estate owned                                                     -----             -----
      Net (gain) loss on sale of other real estate owned                                          (46)               19
      Amortization of  premium on investment securities, net                                       36              (129)
      Decrease in intangible assets                                                               200              (412)
     Decrease in accrued interest receivable and other assets                                     120               418
      Increase (decrease) in accrued interest payable and other liabilities                    (1,388)            2,470
----------------------------------------------------------------------------------------------------------------------------
          Net cash provided by operating activities                                             4,527             7,385
----------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
  Proceeds from sale or maturities of securities available for sale                            22,751            14,162
  Maturities of securities held to maturity                                                     5,345               425
  Purchase of securities available for sale                                                   (28,784)          (37,148)
  Purchase of securities to be held until maturity                                             (5,101)           (1,762)
  Proceeds from the sale of other real estate owned                                               406             1,761
  Loans, net                                                                                  (27,333)          (22,851)
  Capital expenditures                                                                           (989)             (896)
  Cash used to acquire Astra Financial Corp.                                                     (650)            -----
----------------------------------------------------------------------------------------------------------------------------
          Net cash used in investing activities                                               (34,355)          (46,309)
----------------------------------------------------------------------------------------------------------------------------
Cash flow from financing activities:
  Deposits, net                                                                                47,947            16,405
  Other short-term borrowings                                                                   5,688            24,000
  Cash dividends                                                                                 (826)             (504)
  Tax benefit from stock options exercised                                                        443             -----
  Common stock repurchased                                                                      -----              (145)
  Proceeds from stock options exercised                                                           810               351
----------------------------------------------------------------------------------------------------------------------------
          Net cash provided by financing activities                                            54,062            40,107
----------------------------------------------------------------------------------------------------------------------------
          Net increase in cash and equivalents                                                 24,234             1,183
Cash and equivalents at beginning of year                                                      15,774            14,591
----------------------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of year                                                           $40,008           $15,774
============================================================================================================================

</TABLE>

<PAGE>



--------------------------------------------------------------------------------
SJNB Financial Corp. and subsidiary
Consolidated Statements of Cash Flows
  For the years ended December 31, 1996 and 1995
--------------------------------------------------------------------------------
(dollars in thousands)                                      1996         1995
--------------------------------------------------------------------------------
Other cash flow information:
  Interest paid                                            $8,012       $6,388
  Income taxes paid                                        $4,111       $1,185
================================================================================
Noncash transactions:
  Transfer of loans to other real estate owned               $150         $950
================================================================================
  Purchase of Astra Financial's assets at fair value:
    Loans                                                    $676        -----
    Intangible assets                                         408        -----
    Other assets                                               93        -----
--------------------------------------------------------------------------------
      Fair value of assets acquired                         1,177        -----
  Liabilities assumed:
    Other liabilities                                         527        -----
--------------------------------------------------------------------------------
      Total liabilities assumed                               527        -----
--------------------------------------------------------------------------------
Cash used to acquire Astra Financial Corp.                   $650        -----
================================================================================

See accompanying Notes to Consolidated Financial Statements.



Notes to Consolidated Financial Statements
December 31, 1996 and 1995

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 investment securities as follows:

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

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

Impaired loans are those in which based on current information and events, it is
probable that the Company will be unable to collect all amounts due according to
the  contractual  terms  of the loan  agreement,  including  scheduled  interest
payments.  The Company  measures such 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.  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.  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.

e.  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

f.  Other Real Estate Owned

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

g. Intangibles

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

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

h.  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.
<PAGE>
i.  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.

j.  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.

The Company applies APB Opinion No. 25 and related interpretations in accounting
for  its  stock  option  plans.  Accordingly,  no  compensation  cost has  been
recognized for its stock option plans.
k.  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.

l.  Use of Estimates

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

m.  Impairment of Long-Lived Assets

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

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

Statement of Financial  Accounting  Standards No. 125,  Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities, was issued
in 1996 and is effective for years ending after December 31, 1996. The Statement
provides  accounting  and  reporting  standards  for  transfers and servicing of
financial  assets  and   extinguishments  of  liabilities  based  on  consistent
application  of a  financial-components  approach  that  focuses on control.  It
distinguishes  transfers of financial  assets that are sales from transfers that
are secured  borrowings.  Under this  approach,  after a transfer  of  financial
assets,  an entity recognizes all financial and servicing assets it controls and
liabilities  it has  incurred  and  derecognizes  financial  assets it no longer
controls  and  liabilities  that have been  extinguished.  The Company  does not
believe this  Statement  will have any  significant  impact on its  consolidated
financial statements.

NOTE 2 - Acquisition

On January 2, 1996 the Company  acquired Astra Financial Inc.  (Astra) which was
accounted for as a purchase transaction. 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 purchase price of Astra
was approximately $760.

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 $4.1 million
and $2.0 million as of December 31, 1996 and 1995, respectively.



<PAGE>

<TABLE>
<CAPTION>

NOTE 4 - Investment Securities

Investment  securities  as of  December  31,  1996 and 1995  are  summarized  as follows:

(dollars in thousands)                                                          December 31, 1996
----------------------------------------------------------------------------------------------------------------------------
                                                                                    Unrealized                   Fair
                                                                        -----------------------------------
                                                            Cost             Gains            Losses            Value
----------------------------------------------------------------------------------------------------------------------------
Available for sale:
<S>                                                         <C>                  <C>              <C>            <C>
  U.S. Treasury                                             $3,989               $19              ($3)           $4,005
  U. S. Government Agencies                                 34,099               188               (2)           34,285
  Mortgage Backed                                            5,835                55              (22)            5,868
  Mutual funds                                               4,018             -----             (132)            3,886
----------------------------------------------------------------------------------------------------------------------------
    Total available for sale                                47,941               262             (159)           48,044
----------------------------------------------------------------------------------------------------------------------------
Held to Maturity:
  U.S. Treasury                                              1,975                28            -----             2,003
  U.S. Government agencies                                   7,463                78              (18)            7,523
  State and municipal (nontaxable)                           2,635                20               (2)            2,653
  Mortgage Backed                                            2,481                53            -----             2,534
----------------------------------------------------------------------------------------------------------------------------
    Total held to maturity                                  14,554               179              (20)           14,713
Federal Reserve Bank Stock                                     518             -----            -----               518
----------------------------------------------------------------------------------------------------------------------------
    Total                                                   15,072               179              (20)           15,231
============================================================================================================================
      Total investment securities portfolio                $63,013              $441            $(179)          $63,275
============================================================================================================================

                                                                                December 31, 1995
----------------------------------------------------------------------------------------------------------------------------
Available for sale:
  U.S. Treasury                                             $3,998               $59            -----            $4,057
  U. S. Government Agencies                                 34,129               450               (1)           34,578
  Mortgage Backed                                                9             -----            -----                 9
  Mutual funds                                               4,018             -----             (120)            3,898
----------------------------------------------------------------------------------------------------------------------------
    Total available for sale                                42,154               509             (121)           42,542
----------------------------------------------------------------------------------------------------------------------------
Held to Maturity:
  U.S. Treasury                                              4,265                39              (11)            4,293
  U.S. Government agencies                                   4,976               101              (25)            5,052
  State and municipal (nontaxable)                           3,060                26               (2)            3,084
  Mortgage Backed                                            2,428               116            -----             2,544
----------------------------------------------------------------------------------------------------------------------------
    Total held to maturity                                  14,729               282              (38)           14,973
Federal Reserve Bank Stock                                     519             -----            -----               519
----------------------------------------------------------------------------------------------------------------------------
    Total                                                   15,248               282              (38)           15,492
============================================================================================================================
      Total investment securities portfolio                $57,402              $791            $(159)          $58,034
============================================================================================================================

</TABLE>



As of December 31, 1996 and 1995  investment  securities with carrying values of
approximately  $38  million  and $49  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.


<PAGE>

<TABLE>
<CAPTION>

The  following  tables  provide  the  scheduled   maturities  of  the  Company's
investment securities portfolio as of December 31, 1996 and 1995:

(dollars in thousands)                                        December 31, 1996                  December 31, 1995
                                                      ----------------------------------------------------------------------
                                                          Amortized           Fair           Amortized           Fair
            Securities available for sale                   Cost             Value             Cost             Value
                                                      ----------------------------------------------------------------------
<S>                                                         <C>               <C>              <C>               <C>
Due in one year or less                                     $12,125           $12,147          $10,021           $10,079
Due after one year through five years                        31,798            32,005           28,106            28,556
Due after ten years                                               0                 6                9                 9
                                                      ----------------------------------------------------------------------
  Total                                                      43,923            44,158           38,136            38,644
                                                      ----------------------------------------------------------------------
             Securities held to maturity
Due in one year or less                                       2,250             2,277            5,605             5,587
Due after one year through five years                         9,822            10,420            6,696             6,842
Due after ten years                                           2,481             2,534            2,428             2,544
                                                      ----------------------------------------------------------------------
  Total                                                      14,553            15,231           14,729            14,973
                                                      ----------------------------------------------------------------------
              Non-maturity investments
Available for sale - Mutual Funds                             4,018             3,886            4,018             3,898
Held to maturity - FRB Stock                                    519               519              519               519
                                                      ----------------------------------------------------------------------
  Total                                                       4,537             4,405            4,537             4,417
                                                      ----------------------------------------------------------------------
    Total Investment securities                             $63,013           $63,794          $57,402           $58,034
                                                      ======================================================================

</TABLE>

<PAGE>



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

Interest income earned on U. S. Treasury,  U. S.  Government  agencies and state
and municipal  securities  for the years ended December 31, 1996 and 1995 are as
follows:

---------------------------------------------------------
                                     Interest income
(dollars in thousands)               1996        1995
---------------------------------------------------------
Securities available for sale:
  U.S. Treasury                       $291        $417
  U.S. Government agencies           2,088       1,200
  Mortgage Backed                      311          (3)
  Mutual funds                         217         233
Securities held to maturity:
  U.S. Treasury                        168         214
  U.S. Government agencies             408         306
  State and municipal                  136         120
(nontaxable)
  Mortgage Backed                      206         208
  Federal Reserve Bank                  31          30
---------------------------------------------------------
     Interest income                $3,856      $2,725
=========================================================



NOTE 5 - Loans

A summary of loans as of December 31, 1996 and 1995 is as follows:

(dollars in thousands)               1996        1995
---------------------------------------------------------
Commercial                          $77,335     $52,958
Real estate construction             15,451      14,488
Real estate-other                    74,713      74,045
Consumer                              8,622       8,800
Other                                23,174      21,302
Unearned fee income                    (668)       (793)
---------------------------------------------------------
  Total loan portfolio              198,627     170,800
Less allowance for possible          (4,005)     (3,847)
loan losses
---------------------------------------------------------
     Loans, net                    $194,622    $166,953
=========================================================

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  40% 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, 9.0% of the loan portfolio is
made up of real estate  construction loans. These loans consist of approximately
61% residential and 39% commercial.  Included in Consumer loans are prime equity
loans  of $4.5  million  or  approximately  2.3% 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  6.3%  of the  total  loan
portfolio.  This amounts to  approximately  54% of the loan  portfolio  which is
directly related to real estate or real estate  interests.  Approximately 38% of
the total loan portfolio is commercial loans;  however,  no particular  industry
represents a significant portion of such loans.
<PAGE>
The  following is an analysis of the  allowance for possible loan losses for the
years ended December 31, 1996 and 1995:

(dollars in thousands)                   1996        1995
-----------------------------------------------------------
Balance, beginning of year               $3,847     $3,311
Provision for possible loan losses          190      1,045
Charge-offs                                (418)      (696)
Recoveries                                  336        187
Allowance relating to the
acquisition of Astra Financial Corp.         50       ----
-----------------------------------------------------------
 Balance, end of year                    $4,005     $3,847
===========================================================

At December 31, 1996, impaired loans totaled $540 with a corresponding valuation
allowance of $37. For the year ended  December  31, 1996,  the average  recorded
investment in impaired loans was approximately  $600. The Company recognized $46
of  interest  on  impaired  loans  (during  the  portion  of the year  they were
impaired),  of which $39 related to impaired loans for which interest  income is
recognized on the cash basis.

The  balance  of  nonaccrual  loans  as  of  December  31,  1996  and  1995  was
approximately  $457 and $894,  respectively.  The effect on interest  income had
these loans been performing in accordance with contractual terms was $35 in 1996
and $111 in 1995. Income actually  recognized on these loans was $29 in 1996 and
$11 in 1995.

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, 1996 and 1995 is as follows:

(dollars in thousands)                    1996      1995
-----------------------------------------------------------
Balance, beginning of year               $1,466     $3,854
New loans disbursed                         634        471
Repayments of loans                        (448)    (2,859)
-----------------------------------------------------------
Balance, end of year                     $1,652     $1,466
===========================================================

As of December  31,  1996,  loans of  approximately  $12 million were pledged as
collateral for the Federal Reserve Discount Window. The Bank did not utilize the
Discount Window for any borrowings during 1996.

NOTE 6 - Premises and Equipment

A summary of  premises  and  equipment  as of  December  31, 1996 and 1995 is as
follows:

(dollars in thousands)                     1996      1995
-----------------------------------------------------------
Land                                       $829      $829
Buildings and improvements                3,880     3,312
Furniture and equipment                   2,639     2,258
-----------------------------------------------------------
     Premises and equipment               7,348     6,399
Less accumulated depreciation and        (3,347)   (2,905)
 amortization
-----------------------------------------------------------
     Premises and equipment, net         $4,001    $3,494
===========================================================

NOTE 7 - Time Deposits

As  of  December  31,  1996  and  1995,  the  Bank  had  $48  and  $43  million,
respectively,  in time  deposits  in  denominations  of $100 or  more.  Interest
expense for these  deposits  was $2.6 million and $2.2 million in 1996 and 1995,
respectively.



<PAGE>


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)                              1996         1995
------------------------------------------------------------------------
Federal funds purchased:
   Balance at December 31,                          -----       $2,000
   Weighted average interest rate at year end       -----         5.25%
   Maximum amount outstanding at any month         $5,000        9,000
     end
   Average outstanding balance                        813          355
   Weighted average interest rate paid               5.70%        6.17%
Securities sold under agreements to
repurchase:
   Balance at December 31,                         $29,688     $22,000
   Weighted average interest rate at year end         5.56%       5.77%
   Maximum amount outstanding at any month          30,067      23,553
     end
   Average outstanding balance                      23,161      10,827
   Weighted average interest rate paid                5.58%      5.95%

The  Company's   bank   subsidiary  has  informal   arrangements   with  various
correspondents  providing  short-term  credit for liquidity  requirements;  such
informal lines aggregated $12 million at December 31, 1996.

NOTE 9 - Income Taxes

Income tax expense for the years ended  December  31, 1996 and 1995  consists of
the following:

(dollars in thousands)                1996         1995
-----------------------------------------------------------
Current:
  Federal                            $2,271       $2,108
  State                                 806          373
-----------------------------------------------------------
     Total current                    3,077        2,481
-----------------------------------------------------------
Deferred:
  Federal                               145          (81)
  State                                 (24)          (5)
-----------------------------------------------------------
    Total deferred                      121          (86)
-----------------------------------------------------------
       Income taxes                  $3,198       $2,395
===========================================================
<PAGE>
Total income tax expense differed from the amount computed by applying the U. S.
federal  income tax rates in years  ended  December  31, 1996 and 1995 of 34% to
income before income taxes as a result of the following:

(dollars in thousands)                      1996     1995
-----------------------------------------------------------
Computed "expected " tax expense           $2,546  $1,842
California franchise tax, net of
 federal income tax                           516     368
Amortization of intangible assets             167     230
Federal tax-exempt investment income          (46)    (42)
Other                                          15      (3)
-----------------------------------------------------------
     Income taxes                          $3,198  $2,395
===========================================================

The tax effects of temporary  differences that gave rise to significant portions
of the deferred tax assets and deferred tax liabilities at December 31, 1996 and
1995, are presented below:

(dollars in thousands)                      1996     1995
-----------------------------------------------------------
Deferred tax assets:
  Provision for possible loan losses       $1,157   $1,175
  Purchase accounting adjustments             231      263
  Foreclosure income                           44       44
  State taxes                                 224      181
  Deferred compensation                        95       59
  General business credit                     130      182
  Net operating loss                        -----      175
  Other                                        95    -----
-----------------------------------------------------------
    Total gross deferred tax assets         1,976    2,079
-----------------------------------------------------------
Deferred tax liabilities:
  Securities available for sale                41      155
  Depreciation and amortization               125       69
  Other                                     -----       38
-----------------------------------------------------------
    Total gross deferred tax liabilities      166      262
-----------------------------------------------------------
      Net deferred tax assets              $1,810   $1,817
===========================================================

Amounts for the current year are based upon estimates and  assumptions as of the
date of this report and could vary  significantly  from amounts shown on the tax
returns  as  filed.  Accordingly,  the  variances  from the  amounts  previously
reported  for 1995 are  primarily as a result of  adjustments  to conform to tax
returns as filed.

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


NOTE 10 - Detail of Other Expense

Other  expense for the years ended  December  31, 1996 and 1995  consists of the
following:

(dollars in thousands)                1996          1995
-----------------------------------------------------------
Data processing                       $554          $458
Amortization of core deposit
 intangibles  and goodwill             499           569
Business promotion                     370           314
Legal and professional fees            369           476
Client services                        247           247
Advertising                            242           186
Directors' fees and costs              219           239
Stationery and supplies                183           180
Loan and collection                    151           215
Regulators' assessments                 72           283
Net cost of other real estate owned    (48)           45
Other                                  559           506
-----------------------------------------------------------
  Total                             $3,417        $3,718
===========================================================
<PAGE>
NOTE 11 - Stock Option Plan

During 1996 the  shareholders of the Company approved the 1996 Stock Option Plan
(the "Plan"), which replaced the existing two stock option plans. The 1996 Stock
Option  Plan is  described  below.  The  Company  applies APB Opinion No. 25 and
related Interpretations in accounting for the Plan. Accordingly, no compensation
cost has been recognized for its Plan. Had  compensation  cost for the Plan been
determined  consistent with FASB Statement No. 123, the Company's net income and
earnings per share would have been reduced to the pro forma  amounts for options
granted for the years 1995 and 1996 indicated below:

(dollars in thousands)           1996            1995
---------------------------------------------------------
Net income:
    As reported                  $4,291         $3,024
    Pro forma                     3,845          2,842
---------------------------------------------------------
Net income per share:
    As reported                   $1.63          $1.20
    Pro forma                      1.46           1.13
---------------------------------------------------------

The above amounts  include the impact on net income and net income per share for
options granted during 1995 and 1996; such amounts would have been substantially
different if options granted prior to 1995 had been included in the computation.

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions  used for grants in 1996 and 1995,  respectively:  dividend yield of
1.9% and 1.6%;  expected  volatility of 50% and 55%; average risk-free  interest
rates of 6.3% and 6.5%; and expected lives of 8.2 years.

The 1996 Stock  Option Plan  provides  that either  incentive  stock  options or
nonstatutory  stock options may be granted to certain key employees or directors
to purchase authorized, but unissued, common stock of the Company. Shares may be
purchased  at a price not less than the fair  market  value of such stock on the
date of the grant.  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 Plan
provides that outside directors will automatically receive a nonstatutory option
covering 5,000 shares  annually at an exercise price equal to 100% of the market
price of the  Common  Stock on the date of grant.  The 1996  Stock  Option  Plan
replaced  the  previous  two plans  which had  similar  provisions.  Any options
granted   under  these  plans  which  expire   without  being   exercised,   the
corresponding  common  shares shall become  available for awards under the Plan.
The number of shares  subject  to  outstanding  options  under  these  plans was
244,815 as of December 31, 1996. A prior plan expired during 1992 and the number
of shares  subject to  outstanding  options under the prior plan was 7,703 as of
December 31, 1996.

Activity under the stock plans is as follows:

                                                 Weighted
                                       Number    Average
                                         of      Exercise
Options                                Shares     Price
-----------------------------------------------------------
Balances, December 31,  1994           260,471      $5.34
  Granted                              140,125       9.28
  Cancelled                             (8,300)      8.08
  Exercised                            (70,987)      5.14
-----------------------------------------------------------
Balances, December 31, 1995            321,309       7.03
-----------------------------------------------------------
  Granted                               93,560      16.48
  Cancelled                             (9,640)     11.58
  Exercised                           (152,711)      5.29
-----------------------------------------------------------
Balances, December 31, 1996            252,518     $11.41
===========================================================

The  weighted-average  fair value of options  granted  during  1996 and 1995 was
$6.22 and $4.32, respectively.
<PAGE>
The following table summarizes  options  outstanding and exercisable at December
31, 1996:

--------------------------------------------------------------------------------
                                   Weighted Average                    Weighted
  Range of                     -----------------------                  Average
  Exercise          Shares     Contractual    Exercise       Shares     Exercise
    Price        Outstanding       Life        Price      Exercisable    Price
--------------------------------------------------------------------------------
 $4.25-8.37         43,293          5.63        $6.48        33,433        $6.13
  9.12-9.31        117,940          8.56         9.31        43,000         9.31
 11.50-14.31        12,825          9.09        13.39           770        11.87
 16.37-19.94        78,460          9.49        16.96          ----         ----
                ----------------------------------------------------------------
 $4.25-19.94       252,518          8.37       $11.41        77,203        $7.96
               ==============                           ==============


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, 1996, amounts committed to extend credit under normal lending
agreements aggregated approximately $77 million for undisbursed loan commitments
and  approximately  $3.9 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, 1996,  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 $8.

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, 1996:

----------------------------------------------------------
                                             Year Ending
(in thousands)                              December 31,
1997-2001 ($228 each year)                     $1,140
Thereafter                                        630
Total minimum lease payments                   $1,770
===========================================================

Total  minimum  lease  payments to be  received  under  noncancelable  operating
subleases at December 31, 1996 are  approximately  $1.4 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

Statement of Financial Accounting Standards No. 107 (SFAS No. 107), "Disclosures
about Fair Value of Financial  Instruments,"  requires the Company disclosure of
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 fair valuations have not been updated since
year end;  therefore,  the valuations may have changed  significantly since that
point in time.

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

The following table presents a summary of the Company's  financial  instruments,
as defined by SFAS No. 107 as of December 31, 1996:


 (dollars in thousands)                                       1996                               1995
-----------------------------------------------------------------------------------------------------------------
                                                     Carrying        Fair           Carrying            Fair
Financial assets:                                     Value         Value             Value            Value
-----------------------------------------------------------------------------------------------------------------
<S>                                                  <C>            <C>             <C>                <C>
Cash and due from banks                              $20,208        20,208          $12,574            12,574
Money market investments                              19,800        19,807            3,200             3,200
Investment securities                                 63,116        63,275           57,790            58,034
Loans, net                                           194,622       193,438          166,953           167,207
Accrued interest receivable                            1,735         1,735            1,698             1,698
-----------------------------------------------------------------------------------------------------------------
Financial liabilities:
-----------------------------------------------------------------------------------------------------------------
Deposits                                             245,213       245,348          197,189           197,102
Federal funds purchased, securities sold under
  repurchase agreements and other borrowings          30,286        30,318           24,714            24,672
-----------------------------------------------------------------------------------------------------------------
Off-balance sheet Financial Instruments
-----------------------------------------------------------------------------------------------------------------
Interest rate floor contract purchased                    22             8               31                64
-----------------------------------------------------------------------------------------------------------------


</TABLE>

<PAGE>


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

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

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

Loans - 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, 1996.

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.

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

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

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

Commitment  to extend  credit - The  majority of the  Company's  commitments  to
extend credit carry variable and current  market  interest rates if converted to
loans.  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.
<PAGE>
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, 1996 and 1995
(dollars in thousands)                                      1996         1995
--------------------------------------------------------------------------------
Assets
Cash and equivalents                                        $1,050         $710
Investment in the Bank                                      30,061       25,889
Other assets                                                    94           74
--------------------------------------------------------------------------------
     Total assets                                          $31,205      $26,673
================================================================================
Liabilities and Shareholders' Equity
Total liabilities-Accounts payable                           -----          $15
--------------------------------------------------------------------------------
Common stock, no par value; authorized, 20,000 shares
   issued and outstanding, 2,571 shares
   in 1996 and 2,418 shares in 1995                        $20,880       19,627
Retained earnings                                           10,263        6,798
Net unrealized gain on securities available for sale            62          233
--------------------------------------------------------------------------------
     Total shareholders' equity                             31,205       26,658
--------------------------------------------------------------------------------
     Total liabilities and shareholders' equity            $31,205      $26,673
================================================================================

--------------------------------------------------------------------------------
Statements of Income
For the Years Ended December 31, 1996 and 1995
(dollars in thousands)                                       1996         1995
--------------------------------------------------------------------------------
Equity in undistributed income of the Bank                  $4,343       $3,010
Interest income and fees on loans                               23          123
Reduction of provision for possible loan losses              -----           57
Other expense                                                 (110)        (156)
--------------------------------------------------------------------------------
Income  before taxes                                         4,256        3,034
Income (tax) benefit                                            35          (10)
--------------------------------------------------------------------------------
Net income                                                  $4,291       $3,024
================================================================================

--------------------------------------------------------------------------------
Statements of Cash Flows
For the Years Ended December 31, 1996 and 1995
(dollars in thousands)                                       1996           1995
--------------------------------------------------------------------------------
Cash flows from operating activities:
  Net income                                              $4,291         $3,024
    Adjustments to reconcile net income to net cash
      provided by (used in) operating activities:
        Recovery of provision for possible loan losses      ----            (57)
        Increase in other assets                             (20)          ----
        Increase (decrease) in liabilities                   (15)            10
        Equity in undistributed income of the Bank        (4,343)        (3,010)
--------------------------------------------------------------------------------
          Net cash used in operating activities              (87)           (33)
--------------------------------------------------------------------------------
  Cash flows from investing activities:
    Decrease in loans, net                                  ----            512
    Cash dividend                                           (826)          (504)
    Common stock repurchased                                ----           (145)
    Stock options exercised                                  810            351
    Tax benefit from stock options exercised                 443           ----
--------------------------------------------------------------------------------
          Net cash provided by investing activities          427            214
--------------------------------------------------------------------------------
  Net increase in cash and equivalents                       340            181
  Cash and equivalents at beginning of year                  710            529
--------------------------------------------------------------------------------
  Cash and equivalents at end of year                     $1,050           $710
================================================================================
<PAGE>


NOTE 15- Regulatory Matters

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

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



<PAGE>


<TABLE>
<CAPTION>


The table below  summarizes the Tier 1 and total  risk-based  capital ratios and
leverage capital ratios of the Company and the Bank as of the dates indicated:

----------------------------------------------------------------------------------------------------------------------------
Risk-based and Leverage Capital Ratios
(dollars in thousands)
Company                                                             December 31, 1996              December 31, 1995
----------------------------------------------------------------------------------------------------------------------------
Risk-based                                                        Amount         Ratio          Amount           Ratio
                                                              --------------------------------------------------------------
<S>                                                               <C>             <C>           <C>              <C>
Tier 1 capital                                                     $26,533         11.91%        $21,589          11.34%
Tier 1 capital minimum requirement                                   8,910          4.00           7,617           4.00
----------------------------------------------------------------------------------------------------------------------------
  Excess                                                           $17,623          7.91%        $13,972           7.34%
============================================================================================================================
Total capital                                                      $29,333         13.17%        $24,046          12.63%
Total capital minimum requirement                                   17,820          8.00          15,233           8.00
----------------------------------------------------------------------------------------------------------------------------
  Excess                                                           $11,513          5.17%         $8,813           4.63%
============================================================================================================================
Risk-adjusted assets                                              $222,744                      $190,417
--------------------------------------------------------------================             =================

Leverage
Tier 1 capital                                                     $26,533          9.28%        $21,589           9.00%
Minimum leverage ratio requirement                                  11,438          4.00           9,596           4.00
----------------------------------------------------------------------------------------------------------------------------
  Excess                                                           $15,095          5.28%        $11,993           5.00%
============================================================================================================================
Average total assets                                              $285,952                      $239,899
--------------------------------------------------------------================             =================

Bank
----------------------------------------------------------------------------------------------------------------------------
Risk-based
Tier 1 capital                                                     $25,389         11.40%        $20,819          10.94%
Tier 1 capital minimum requirement                                   8,907          4.00           7,614           4.00
----------------------------------------------------------------------------------------------------------------------------
  Excess                                                           $16,482          7.40%        $13,205           6.94%
----------------------------------------------------------------------------------------------------------------------------
Total capital                                                      $28,187         12.66%        $23,275          12.23%
Total capital minimum requirement                                   17,813          8.00          15,228           8.00
----------------------------------------------------------------------------------------------------------------------------
  Excess                                                           $10,374          4.66%         $8,047           4.23%
============================================================================================================================
Risk-adjusted assets                                              $222,669                      $190,345
--------------------------------------------------------------================             =================

Leverage
Tier 1 capital                                                     $25,389          8.87%        $20,819           8.67%
Minimum leverage ratio requirement                                  11,447          4.00           9,607           4.00
----------------------------------------------------------------------------------------------------------------------------
  Excess                                                           $13,942          4.87%        $11,212           4.67%
============================================================================================================================
Average total assets                                              $286,164                      $240,163
--------------------------------------------------------------================             =================

</TABLE>

<PAGE>





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

The various regulatory agencies have adopted  substantially  similar regulations
that define the five capital  categories  identified by FDICIA,  using the total
risk-based capital, Tier 1 risk-based capital and leverage capital ratios as the
relevant  capital  measures.  Such  regulations  establish  various  degrees  of
corrective   action   to  be   taken   when   an   institution   is   considered
undercapitalized.  Under the regulations,  a "well capitalized" institution must
have a Tier 1 capital  ratio of at least 6%, a total  capital  ratio of at least
10% and a  leverage  ratio  of at  least  5% and  not be  subject  to a  capital
directive  order.  An "adequately  capitalized"  institution  must have a Tier 1
capital ratio of at least 4%, or 3% in some cases.  Under these guidelines,  the
Company and the Bank were considered  well  capitalized at December 31, 1996 and
1995.

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

The ability of the Company to pay dividends  largely  depends upon the dividends
paid to it by the Bank.  There are legal  limitations on the ability of the Bank
to provide  funds to the Company in the form of loans,  advances  or  dividends.
Under national banking law, without the prior approval of the Comptroller of the
Currency,  the Bank may not declare  dividends in any calendar  year that exceed
the Bank's net profits for that year,  as defined by statute,  combined with its
net retained  profits,  as defined,  for the preceding two years. As of December
31, 1996,  the Bank may initiate  dividend  payments  without  prior  regulatory
approval of up to $8.4 million.