<TABLE>
<CAPTION>
                                          SELECTED FINANCIAL INFORMATION
                                              YEARS ENDED DECEMBER 31,
                                 1996         1995       1994        1993         1992
<S>                          <C>         <C>         <C>         <C>           <C>     
Interest income               $  13,188   $  11,973   $  10,551   $    8,768    $   7,808

Interest expense                  3,627       2,989       2,196        2,264        2,490

  Net interest income             9,561       8,984       8,355        6,504        5,318

Provision for loan losses           250         -           -            -            165

  Net interest income after 
    provision for loan losses     9,311       8,984       8,355       6,504         5,153

Other income                      1,370       1,380       1,512       1,632         1,292

Other expenses                    5,828       6,061       6,022       4,978         4,003

  Income before income taxes      4,853       4,303       3,845       3,158         2,442

Provision for income taxes        1,602       1,395       1,335       1,104           777

Net income                    $   3,251   $   2,908   $   2,510   $   2,054      $  1,665

Per share:*
  Net income                  $     .92   $     .82   $     .71   $     .58      $    .50
  Cash dividends              $     .27   $     .16   $     .14   $     .12      $    .11
  Year-end book value         $    5.75   $    5.03   $    4.32   $    3.88      $   3.40

Total assets                  $ 177,107   $ 151,485   $ 141,537   $ 141,970      $ 110,065

Total deposits                $ 155,568   $ 132,745   $ 124,472   $ 127,998      $  98,459

Net loans                     $  99,776   $  88,972   $  88,441   $  78,583      $  57,376

Shareholders' equity          $  20,188   $  17,470   $  15,000   $  12,973      $  11,312

Performance ratios:
  Return on average assets        1.97%       2.02%       1.74%       1.62%          1.61%
  Return on average equity       17.26%      17.75%      17.69%      16.97%         16.44%
  Equity to total assets         11.40%      11.53%      10.60%       9.14%         10.28%

Net loans to deposits            64.14%      67.02%      70.49%      61.39%         58.27%

(*All per share data has been retroactively restated to reflect stock 
  dividends and stock splits during 1991 through 1995.

</TABLE>

<PAGE>

The following discussion is intended to be read in conjunction with and is 
qualified in its entirety by reference to the consolidated financial 
statements and accompanying notes presented in Item 8 of this report.

Years Ended December 31, 1996, 1995 and 1994

Financial Highlights

Net income for 1996 of $3,251,270 was 11.80% higher than the $2,908,091 
reported in 1995, which was 15.87% greater than the $2,509,782 reported in 
1994. Return on average assets (ROA) declined slightly to 1.99% in 1996 
compared to 2.02% and 1.74% in 1995 and 1994, respectively. Return on 
average shareholders' equity (ROE) was 17.26% in 1996, compared to 17.75% and
17.69% in 1995 and 1994, respectively. The average equity to asset ratio was
10.63% at December 31, 1996, compared to 11.37% and 9.83% at year-end 1995 and 
1994, respectively.

Earnings Performance

For financial institutions, the primary component of earnings is net 
interest income. Net interest income is the difference between interest income, 
principally from loans and investment securities portfolios, and interest 
expense, principally on customer deposits. Changes in net interest income 
result from changes in "volume", "spread" and "margin." Volume refers to the 
dollar level of interest-earning assets and interest-bearing liabilities. 
Spread refers to the difference between the yield on interest-earning assets 
and the cost of interest-bearing liabilities. Margin refers to net interest 
income divided by interest-earning assets and is influenced by the level and 
relative mix of interest-earning assets and interest-bearing liabilities.

Net Interest Income. Net interest margin, which is tax-equivalent net 
interest income divided by average earning assets, decreased to 6.02% during
1996. This compares to 6.37% in 1995 and 6.02% in 1994. This statistical
measurement of the primary earnings source is an important indicator of VRB
Bancorp's ability to effectively manage earning assets and interest bearing
liabilities. 

The overall tax-equivalent earning asset yield was 9.52% in 1996 compared to 
9.68% and 8.37% for the same periods in 1995 and 1994, respectively, due to 
flat market interest rates and growth in the proportion of relatively lower-
yielding investments to earning assets. Loans, which generally carry a 
higher yield than investment securities and other earning assets, comprised
66.0% of average earning assets during 1996, versus 72.7% in 1995 and 64.5%
in 1994. During these same periods, average yields on loans also increased
from 10.00% in 1994 to 10.72% in 1995, but declined to 10.67% in 1996.
Investment securities comprised 28.8% of average earning assets in 1996 which
was up from 24.5% in 1995 and 28.0% in 1994. The reduced portfolio of
investment securities reflects the relatively stable yields realized from
these investments during 1994 to 1996 and the greater yield opportunity
recognized in growing the Bank's loan portfolio. Tax-equivalent interest
yields on investment securities have ranged from 7.67% in 1996 to 7.05% in
1995 and 5.71% in 1994.

Interest cost as a percentage of earning assets increased to 2.52% in 1996 
compared to 2.35% in 1995, and 1.69% in 1994. Local competitive pricing 
conditions and funding needs for the Bank's investments in loans was the 
primary cause for increases in rates paid for deposits during 1995 and 1996. 
As a result, tax-equivalent net interest income for the year ended December 
31, 1996, of $10,057,265 was $755,297 or 8.12% higher than the $9,301,968 in 
1995, which was $655,209 or 7.58% greater than the $8,646,759 reported in 
1994.

<PAGE>

AVERAGE BALANCES AND AVERAGE RATES EARNED AND PAID

The following table shows average balances and interest income or interest 
expense, with the resulting average yield or rates by category of average
earning asset or interest-bearing liability (in thousands):
<TABLE>
<CAPTION>
                               YEAR ENDED DECEMBER 31, 1996     YEAR ENDED DECEMBER 31, 1995    YEAR ENDED DECEMBER 31, 1994
                                          INTEREST   AVERAGE             INTEREST   AVERAGE              INTEREST   AVERAGE
                                AVERAGE  INCOME OR  YIELDS OR   AVERAGE INCOME OR  YIELDS OR   AVERAGE  INCOME OR  YIELDS OR
                                BALANCE   EXPENSE     RATES     BALANCE  EXPENSE     RATES     BALANCE   EXPENSE     RATES
<S>                           <C>        <C>       <C>     <C>        <C>          <C>     <C>        <C>          <C>
Interest-earning assets:
  Loans(1)                     $  94,907  $ 10,122   10.67%  $  92,268  $   9,893   10.72%  $  83,633  $   8,364    10.00%
  Investment securities:
    Taxable securities            22,328     1,711    7.66      18,275      1,256    6.87      24,372      1,213     4.98
    Nontaxable securities(2)      19,080     1,461    7.66      12,818        936    7.30      11,903        858     7.20
  Federal funds sold               7,419       390    5.26       3,614        206    5.71       9,636        408     4.24

    Total interest-earning
      assets                     143,734    13,684    9.52     126,975     12,291    9.68%    129,544     10,843     8.37%

Cash and due from banks           14,788                        12,213                         9,333
Fixed assets                       3,957                         3,900                         4,064
Loan loss allowance               (1,396)                       (1,423)                       (1,435)
Other assets                       2,444                         2,425                         2,873

  Total assets                $  163,527                     $ 144,090                     $ 144,379

Interest-bearing liabilities:
  Interest-bearing checking
    and savings accounts      $   79,256  $  2,367   2.99    $  70,167  $   1,983    2.83  $  75,841  $    1,565    2.06
  Time deposits                   24,436     1,261   5.16       19,043        938    4.93     17,447         631    3.60
  Borrowed funds                      -        -       -         1,091         69    6.29        -            -       -
  Total interest-bearing
    liabilities                  103,692     3,628   3.50%      90,301      2,990    3.31%    93,288       2,196    2.35%

Noninterest bearing
  deposits                        39,836                        36,310                        35,968
Other liabilities                  1,166                         1,092                           933

  Total liabilities              144,694                       127,703                       130,189

Shareholders' equity              18,833                        16,387                        14,190

  Total liabilities and
    shareholders' equity      $  163,527                     $ 144,090                     $ 144,379

Net interest income                       $ 10,056                      $  9,301                       $   8,647

Net interest margin                                 6.02%                           6.37%                          6.02%

Average yield on earning
  assets (1) (2)                                    9.52%                           9.68%                          8.37%

Interest expense to earning
  assets  (1) (2)                                   2.52%                           2.35%                          1.69%

Net interest income to
  earning assets (1) (2)                            7.00%                           7.33%                          6.67%

(1) Nonaccrual loans are included in the average balance.

(2) Tax-exempt income has been adjusted to a tax-equivalent basis at a 34 percent rate.

</TABLE>
<PAGE>

Analysis of Changes in Interest Differential. The following table shows the 
dollar amount of the increase (decrease) in Bancorp's net interest income 
and expense and attributes such dollar amounts to changes in volume as well as 
changes in rates. Rate/volume variances have been allocated proportionally 
between rate and volume changes (in thousands):
<TABLE>
<CAPTION>
                                  1996 OVER 1995               1995 OVER 1994
                             INCREASE (DECREASE) DUE TO   INCREASE (DECREASE) DUE TO
                                                 NET                          NET
                              VOLUME    RATE    CHANGE     VOLUME    RATE    CHANGE
<S>                       <C>       <C>       <C>       <C>       <C>      <C>    
Interest-earning assets:
  Loans                    $    283  $   (53)  $   230   $   863   $  669   $ 1,529
  Investment securities
    Taxable securities          279      153       432      (303)     347        44
    Nontaxable securities       457       45       502        66       13        79
  Federal funds sold            217      (16)      201      (255)      53      (202)

      Total*                  1,236      129     1,365       371    1,082     1,453

Interest-bearing liabilities:
  Interest-bearing checking
    and savings accounts       (257)    (112)     (369)      117    (535)      (418)
  Time deposits                (266)     (44)     (310)      (58)   (249)      (307)
  Borrowed funds                 69       -         69       (68)     (6)       (74)

      Total*                   (454)    (156)     (610)       (9)   (790)      (799)

Net increase (decrease)
  in net interest          $     782  $  (27)   $   755   $  362   $  292   $   654


* Tax-exempt income has been adjusted to a tax-equivalent basis at a 34 percent rate.
</TABLE>
 
Provision for Possible Loan Losses. Recoveries have been nearly equivalent 
to or have exceeded charge-offs over the past three year periods. Net charge-
offs for 1996 were approximately $25,000 which compares to net charge-offs of 
approximately $7,000 in 1995 and $39,000 in 1994. Loans on nonaccrual status 
have been insignificant. At December 31, 1996, nonaccrual loans totaled 
$58,166 compared to only $52,499 at December 31, 1995 and $7,475 at the end 
of 1994. These factors point out the strong underwriting and collection 
practices employed by the Bank. As a result over the past three years, only in
1996, when an expense of $250,000 was recognized, did the Bank record a
provision for loan losses. When a charge to the loan loss provision is recorded,
the amount is based on past charge-off experience, a careful analysis of our 
current portfolio, and evaluation of future economic trends in our market 
area. Management continues to closely monitor the loan quality of new and 
existing relationships. Net loan losses or recoveries in 1997 are expected 
to approximate the Bank's recent historical experience.

Noninterest Income and Noninterest Expense. Total noninterest income has 
declined from 1994 through year-end 1996. Over the three year period 
noninterest income has ranged from $1,511,706 in 1994 and $1,380,487 in 1995 
to $1,370,635 in 1996. While service charges on deposit accounts have 
remained stable from 1994 through 1996, other operating income, which includes 
earnings from the Bank's real estate mortgage processing activities, declined
after 1994. Closure of the Bank's manufactured housing lending division early
in 1995 significantly impacted other operating income levels such that revenues 
of approximately $480,000 in 1994 declined to nearly $370,000 in 1995 and 
approximately $390,000 in 1996. The Bank does not actively trade or sell 
investment securities and, consequently, has received no material income 
from such transactions during the period from 1994 to 1996.

<PAGE>

Other operating expenses are comprised principally of employees' salaries 
and benefits but also include occupancy costs, data processing and
communication expenses, FDIC insurance premiums, professional fees, and other
noninterest expenses. A measure of the Bank's ability to contain noninterest
expenses is the efficiency ratio. This statistic is derived by dividing total 
noninterest expenses by total interest and noninterest income. As of December
31, 1996, the ratio had improved to 40.03% compared to 45.38% and 49.92% at
the end of 1995 and 1994, respectively. This decrease reflects management's
emphasis and success in closely monitoring and controlling noninterest
expenses.

Salary and benefit expense of $3,692,594 in 1996 was 3.86% or $148,461 less 
than the $3,841,055 reported in 1995 which was $204,721 or 5.62% higher than 
the $3,636,334 reported in 1994. As of December 31, 1996, the Bank had 116 
full-time equivalent employees which compares to 107 and 111 as of December 
31, 1995 and 1994, respectively.

Net occupancy expenses consist of depreciation on premises and equipment, 
maintenance and repair expenses, utilities and related expenses. The Bank's 
net occupancy expense in 1996 of $629,642 was $21,903 or 3.60% higher than 
the $607,739 reported in 1995, which was $78,508 or 11.44% less than the 
$686,247 reported in 1994. At the close of 1995, the Bank embarked upon
upgrading its data processing systems. The result will increase operating
efficiencies, but may also cause increases to net occupancy expenses during
future years.

Communications expenses have increased consistently from 1994 through 1996 
as the Bank continues to promote and advertise its products and services to the 
communities it serves. In 1996, communication expenses of $226,390 were 10.80% 
higher than 1995 which were 7.30% greater than 1994. Expenditures relating 
to communications are important for the Bank to realize its market share and 
growth goals for the future.

FDIC insurance premiums are a function of outstanding deposit liabilities 
and through 1994 increased consistent with the Bank's growth in depository 
relationships. However, insurance expense decreased nearly $140,000 in 1995 
when the Bank received a premium refund after the Bank Insurance Fund was 
recapitalized. Because the Bank Insurance Fund is adequately capitalized, 
the Bank was required to make only nominal premium payments in 1996. For the 
three years ended December 31, 1996, the Bank has been rated to pay the lowest 
premiums available for its deposit insurance coverage.  

All other noninterest expenses, as a percentage of total revenues, declined 
in 1996 compared to both 1995 and 1994. In 1996, all other noninterest expenses 
were 8.8% of total revenues while in 1995 and 1994 these items were 9.5% and 
10.2%, respectively, of total revenues. Cost controls and careful management 
of expenses have contributed to reduction in other noninterest expenses.

Income Taxes. The provision for income taxes amounted to $1,602,000, 
$1,395,000, and $1,335,000 for 1996, 1995, and 1994, respectively. The 
provision resulted in effective combined federal and state tax rates of 33% 
in 1996 and 32% and 35% in 1995 and 1994, respectively. Effective tax rates 
differ from combined estimated statutory rates of 38% principally due to the 
effects of nontaxable interest income which is recognized for book but not 
for tax purposes. In addition, during 1995, Bancorp's state income tax rate was 
reduced 50% from 6.6% to 3.3% as a result of surplus revenues that had been 
received by the State of Oregon.

Balance Sheet Analysis

Total assets of VRB Bancorp and its wholly-owned subsidiary, Valley of the 
Rogue Bank, increased 16.91% when comparing balances at December 31, 1996 to 
1995. At year-end 1996, total assets of $177,106,667 were $25,621,216 more 
than total assets of $151,485,451 reported for December 31, 1995. Similarly, 
the Bank's daily average outstanding total assets of $163,526,452 grew over 
the 1995 daily average of $144,090,446. Growth in the level of daily average 
outstanding assets in 1996 over 1995 illustrates the competitiveness for 
strong customer loan and deposit relationships. It is management's opinion 
that the Bank's growth in assets during 1996 illustrates its strategy to 
aggressively pursue opportunities and grow within existing markets.

<PAGE>

Investment Securities and other investments. Investment securities held at 
December 31, 1996, totaled $40,284,694, representing a $3,203,895 or 8.64% 
increase when compared to December 31, 1995 investment security totals of 
$37,080,799. Total investment securities at December 31, 1994 were 8.57% 
higher than those reported in 1995. Increases or decreases in our investment 
portfolio are primarily a function of loan demand and changes in the Bank's 
deposit structure.

The Bank follows a financial accounting principle which requires the 
identification of investment securities as held-to-maturity or available-
for-sale. Securities designated as held-to-maturity are those that the Bank 
has the intent and ability to hold until they mature or are called rather than 
those that management may sell if liquidity requirements dictate or 
alternative investment opportunities arise. The mix of available-for-sale 
and held-to-maturity investment securities is considered in context with the 
Bank's overall asset-liability policy and illustrates management's assessment
of the relative liquidity of the Bank. At December 31, 1996, the investment 
portfolio was 53.74% comprised of available-for-sale securities and 46.26% 
comprised of held-to-maturity investments, compared to 57.27% comprised of 
available-for-sale securities and 42.73% comprised of held-to-maturity 
investments in 1995. This mix provides the Bank greater investment 
flexibility than the mix which was 15.81% comprised of available-for-sale
securities and 84.19% in held-to-maturity securities at December 31, 1994.

At December 31, 1996, the Bank's investment portfolio had total net 
unrealized gains of approximately $85,000. This compares to net unrealized
gains of approximately $44,000 at the end of 1995 and unrealized losses of 
$1,201,000 at December 31, 1994. Unrealized gains and losses reflect changes
in market conditions and do not represent the amount of actual profits or
losses the Bank may ultimately realize. Actual realized gains and losses
occur at the time investment securities are sold or redeemed.

Federal funds sold are short term investments which often mature on a daily 
basis. The Bank invests in these instruments to provide for additional 
earnings on excess available cash balances. Because of their short 
maturities, the balance of federal funds sold fluctuates dramatically on a
day-to-day basis. The balance on any one day is influenced by cash demands,
customer deposit levels, loan activity and other investment transactions. 
Investments in federal funds sold totaled $11,300,000 at December 31, 1996
compared to $4,500,000 and $6,800,000 at December 31, 1995 and 1994,
respectively.

In 1994, the Bank became a member and stockholder in the Federal Home Loan 
Bank. At December 31, 1996, the Bank held $1,119,500 in Federal Home Loan 
Bank stock. Our relationship and stock investment with the Federal Home Loan
Bank has and will afford us, in addition to dividend earnings, a borrowing 
source for meeting liquidity requirements.

<PAGE>

Investment securities at December 31 consisted of the following (in thousands):
<TABLE>
<CAPTION>
                                  December 31, 1996               December 31,1995            December 31, 1994
                                         APPROXI-                       APPROXI-                        APPROXI-
                                           MATE                           MATE                            MATE
                              AMORTIZED   MARKET     %       AMORTIZED   MARKET     %        AMORTIZED   MARKET     %
                                COST      VALUE    YIELD        COST     VALUE    YIELD         COST     VALUE    YIELD
<S>                          <C>        <C>       <C>      <C>        <C>        <C>       <C>        <C>        <C>
U.S. Treasuries and agencies:
  One year or less           $ 10,002   $  9,942   6.16%    $  7,847   $  7,749   5.70%     $  9,354   $  9,297   5.87%
  One to five years             9,993     10,150   7.12       12,008     12,075   6.14        10,397     10,078   5.86
  Five to ten years               -          -       -           -          -       -            -          -       -

Obligations of states
    and political subdivisions:
  One year or less                215        216   7.05        1,906     1,916    6.03           373        375   7.30
  One to five years             6,106      6,169   7.33        3,036     3,050    6.12         4,586      4,468   6.10
  Five to ten years            11,749     11,848   8.08        4,351     4,402    7.13         4,594      4,235   7.17
  Over ten years                  566        589   8.41        6,551     6,712    8.09         3,010      2,793   8.49

Corporate and other:
  One year or less              1,569     1,555    6.04          128       126    5.35           224        213   5.77
  One to five years               -         -        -         1,570     1,557    6.04         1,705      1,582   6.00
  Five to ten years               -         -        -           -         -        -            -          -       -
  Over ten years                  -         -        -           -         -        -            -          -       -

                             $ 40,200  $ 40,469    7.17%    $ 37,037  $ 37,317    6.50%     $ 34,243   $ 33,041   6.32%
 

* Weighted average yields are stated on a federal tax equivalent basis at a 34% rate.
</TABLE>
 

Loans. Outstanding loans totaled $99,775,802 at December 31, 1996, 
representing a $10,803,321, or 12.14% increase when compared to December 31, 
1995, loan totals of $88,972,481. Loan totals grew 0.6% in 1995 over 1994. 
Due to the closure of the Bank's manufactured housing department in 1995 and 
strong competitive pressure for loan relationships, loan portfolio growth in 
1995 was below management's expectations. However, the introduction of 
aggressive marketing and additional incentive programs resulted in 
significant loan growth for 1996.

The Bank's loan portfolio mix as of December 31, 1996 remained consistent 
with the mix reported at the end of 1995. Approximately 75% of the loan
portfolio continues to involve real estate secured transactions. At 
December 31, 1996, real estate mortgage loans totaled $66,209,000 and
construction or residential real estate loans totaled $9,112,000, or 65.28%
and 8.98%, respectively, of gross outstanding loans. At the same time, other
commercial loans were $13,181,000 (12.99%) and consumer loans were $12,808,000
(12.63%) of gross outstanding loans.

Although real estate loans constitute a significant portion of the total 
loan portfolio, this portfolio has performed well and, management believes, 
represents low risk of loss. The Bank's normal lending criteria requires a 
loan-to-value ratio on commercial real estate not to exceed 75%, and a loan-
to-value ratio on residential real estate not to exceed 80%. Consequently, 
the Bank's loans secured by real estate have a lower delinquency rate than the 
balance of its loan portfolio. As of December 31, 1996 and 1995, the Bank 
had no investment in other real estate owned.

<PAGE>

The composition of the consolidated loan portfolio as of the end of the 
preceding five fiscal years, was as follows (in thousands):
<TABLE>
<CAPTION>
                                              DECEMBER 31, 
                               1996      1995      1994      1993      1992
<S>                        <C>       <C>       <C>       <C>       <C> 
Commercial                  $ 13,181  $  9,440  $ 10,619  $ 10,719  $  9,632
Real estate - construction     9,112     8,225    16,930    11,659     8,153
Real estate - mortgage        66,209    59,804    49,882    46,511    30,019
Installment                   12,808    12,806    12,274    10,933    10,373
Other                             98       104       150       214       140

  Total loans                101,408    90,379    89,855    80,036    58,317

Allowance for loan losses      1,632     1,407     1,414     1,453       941

  Net loans                 $ 99,776  $ 88,972  $ 88,441  $ 78,583  $ 57,376

</TABLE>
 
As of December 31, 1995 and 1994, there was no concentration of loans 
exceeding 10% of the total loans to a multiple number of borrowers engaged 
in similar activities.

The maturity distribution of selected categories of VRB Bancorp's 
consolidated loan portfolio at December 31, 1996, and the interest sensitivity
are estimated in the following table (in thousands):
<TABLE>
<CAPTION>
                                    COMMERCIAL     LOANS SECURED
                                      LOANS        BY REAL ESTATE      TOTAL
<S>                               <S>             <S>             <S>
Due within one year                $     8,465      $    47,674    $    56,139 
Due after one through five
  years                                  4,488           19,469         23,957
Due after five years                       228            8,178          8,406

  Total                            $    13,181      $    75,321     $   88,502

Fixed-rate loans                   $     5,483      $    25,955     $   31,438
Variable-rate loans                      7,698           49,366         57,064

  Total                            $    13,181      $    75,321     $   88,502

</TABLE>
 
Summary of Loan Loss Experience. Although management recorded a $250,000 
provision for loan losses in 1996 to support loan portfolio growth, the 
quality of the Bank's loan portfolio remains strong. At December 31, 1996, 
the allowance for loan losses of $1,632,000 was considered sufficient to absorb 
possible losses on loans which may become uncollectible based on evaluations 
by management.

The amount of the allowance for loan losses is assessed by management on a 
regular basis to ensure that it is sufficient to cover potential future loan 
losses. Management does not specifically allocate the reserve for loan 
losses by loan category. The reserve balance and amount of provision charged to 
operations is based primarily on management's evaluation of the entire 
portfolio. This analysis includes review of the following factors: (a) the 

<PAGE>

volume and mix of the existing loan portfolio, including the volume and 
severity of nonperforming loans and adversely classified credits, as well as 
analysis of net charge-offs experienced on previously classified loans; (b) 
the extent to which loan renewals and extensions are used to maintain loans 
on a current basis and the degree of risk associated with such loans; (c) the 
trend in loan growth, including any rapid increase in loan volume within a 
relatively short period of time; (d) general and local economic conditions 
affecting the collectibility of the Bank's loans; (e) the relationship and 
trend over the past several years of recoveries as a percentage of previous 
years' charge-offs; and, (g) available outside information of a comparable 
nature regarding the loan portfolios of other banks, including peer group 
banks. 

The following table shows VRB Bancorp's loan loss performance for the years 
ended December 31 (in thousands):
<TABLE>
<CAPTION>
                                          1996       1995       1994       1993       1992
<S>                                   <C>        <C>        <C>       <C>         <C>
Loans outstanding at end of year,
  net of unearned interest income      $ 101,408  $  90,379  $  89,855  $  80,036  $  58,317
Average loans outstanding,
  net of unearned interest income         94,907     92,268     83,633     68,739     55,529
Reserve balance, beginning of year         1,407      1,414      1,453        941        754
Loans charged-off:
  Commercial                                  29         31         24         35         13
  Real estate                                -          -          -          -          -
  Consumer                                     9         14         66         23        151
    Total loans charged-off                   38         45         90         58        164

Recoveries:
  Commercial                                  10         20         31        156        162
  Real estate                                -          -          -          -          -
  Consumer                                     3         18         20         53         24
    Total recoveries                          13         38         51        209        186

Provision charged to operations              250        -          -          -          165

Changes incidental to merger                 -          -          -          361        -
Reserve balance, end of year           $   1,632  $   1,407  $   1,414  $   1,453        941

Ratio of net loans charged-off to
  average loans outstanding                 0.03%      0.01%      0.05%     (0.22)%    (0.04)%

Ratio of reserve for loan losses to
  loans at year-end                         1.61%      1.56%      1.57%      1.82%      1.61%

</TABLE>
 
As the table illustrates, during both 1996 and 1995, the Bank charged 
nominal amounts to losses and recovered on loans previously charged-off of
nearly the same amounts. At December 31, 1996, the Bank classified $96,655
in loans as either doubtful of collection or loss. The majority of these
classified loans are comprised of commercial loans with the balance
consisting of consumer transactions. Management believes it is reasonable
to expect a significant portion of this amount may be charged to losses in
the future. 

<PAGE>

Nonperforming loans. The table below shows information regarding 
consolidated loans as of December 31 of each year (in thousands):
<TABLE>
<CAPTION>
                                   1996       1995       1994       1993       1992
<S>                            <C>        <C>        <C>        <C>         <C>
Loans past due 90 days or more
    and still accruing:
  Commercial                    $    -      $   30     $   23     $   76     $   -
  Real estate                        -          -          -          -          -
  Consumer                           12         18         85         41         53

    Subtotal                         12         48        108        117         53

Nonaccrual loans:
  Commercial                         -           1          7        111         30
  Real estate                        -          -          -          -          -
  Consumer                           58         52         -          60         44

    Subtotal                         58         53          7        171         74

Restructured loans                   -          -          -          -          -
    Total nonperforming loans        70        101        115        288        127

Other nonperforming assets
  Other real estate                  -          -          -         146        120

    Total nonperforming assets  $    70      $ 101     $  115     $  434     $  247

Nonperforming loans as % of
  total loans                      0.06%      0.11%      0.13%      0.36%      0.22%

Nonperforming assets as % of
  total assets                     0.04%      0.07%      0.08%      0.31%      0.22%

Reserve coverage - Allowance for
  loan losses as a % of non-
  performing loans              2331.43%   1393.07%   1229.57%    504.51%    740.94%

</TABLE>

No interest income was accrued on the nonaccrual loans or included in the 
results of operations for the years ended December 31, 1996, 1995 and 1994. 
The Bank's policy is to place a loan on nonaccrual status when there is 
significant question as to the collectibility of the interest. Normally if 
the loan is past due 90 days or more, it is placed in nonaccrual status unless 
well secured and in the process of collection.

Deposits. From December 31, 1995 to 1996, total deposits increased by 
$22,823,910, or 17.19% from $132,744,547 to $155,568,457. This represents an 
increase from 1995, when total deposits increased by 5.80% over 1994. 

Nonvolatile, noninterest bearing demand deposits, also referred to as core 
deposits, continued to represent a significant percentage of the Bank's 
deposit base. To the extent that the Bank funds operations with noninterest 
bearing core deposits, net interest margin, the difference between interest 
income and interest expense, will improve. At December 31, 1996, these 
demand deposits accounted for 26.83% of total deposits which was down slightly
from 28.70% as of December 31, 1995. Nevertheless, average outstanding core 
deposit balances improved in 1996 over 1995 by approximately $3,500,000 to 
$39,836,439.

<PAGE>

Interest bearing deposits consist of NOW, money market, savings and time 
certificate accounts. By their nature, interest bearing account balances 
will tend to grow or decline as the Bank reacts to changes in competitor
pricing and interest paying strategies. In 1996, total interest bearing
deposit accounts of $113,822,282 increased $19,176,002 or 20.26% from 1995. 
Significant growth in interest-bearing demand deposits ($15,774,164 or 
29.59%) and time deposits ($5,462,095 or 22.92%) was more than sufficient
to offset a decline in savings deposits ($2,060,257 or 11.77%). Management's
analysis of the shifts in interest bearing deposit mix indicates that a
significant number of the Bank's savings account customers shifted into
higher earning time deposit accounts during the year.

In 1994 and early 1995, management of the Bank purposely held down interest 
paid on time deposits as it was unwilling to aggressively compete for such 
deposits when no need for additional liquidity existed. This allowed the 
Bank to improve its net interest margin by keeping down the interest paid on 
deposit accounts. As a result, however, increased competition from local 
financial institutions and other investment sources attracted depositors 
away from the Bank. As competition eased for time deposit accounts and interest 
rates paid for such accounts became more favorable in 1995 and 1996, the 
Bank became more aggressive in pricing its time deposit products. This resulted 
in the deposit growth in 1995 and 1996, and will help support management's 
growth expectations for the future.

The Bank, by policy, does not depend on brokered deposits nor high priced 
time deposits. At December 31, 1996, time certificates of deposits in excess of 
$100,000 totaled $7,051,302 or 24.07% of total outstanding time deposits. 
This compares to 12.09% and 13.06% as of December 31, 1995 and 1994, 
respectively. 

The following table sets forth by time remaining to maturity, time 
certificates of deposit accounts in amounts of $100,000 or more at December 
31, 1996 (in thousands):


        Less than three months                                     $  4,397
        Three to twelve months                                        3,234
        Over one year through five years                                520
        More than five years                                              -

                                                                   $  8,151
<PAGE>
 
Return on Equity and Assets. Return on daily average assets and equity and 
certain other ratios for the years ended December 31 are presented below (in 
thousands except per share data):
<TABLE>
<CAPTION>

                                  1996        1995         1994         1993         1992
<S>                          <C>          <C>          <C>          <C>          <C>  
Net income                    $   3,251    $   2,908    $   2,510    $   2,053    $   1,665
Average assets                  163,526      144,090      144,379      126,750      103,393 

RETURN ON AVERAGE ASSETS          1.99%        2.02%        1.74%        1.62%        1.61%

Net income                        3,251        2,908        2,509        2,053        1,665
Average equity                   18,833       16,382       14,190       12,095       10,129

RETURN ON AVERAGE EQUITY         17.26%       17.75%       17.69%       16.97%       16.44%

Cash dividends paid per share $     .27    $     .16    $     .14    $     .12    $     .11
Net income per share          $     .92    $     .82    $     .71    $     .58    $     .50

DIVIDEND PAYOUT RATIO            29.35%       19.51%       19.72%       20.68%       22.00%

Average equity                   18,833       16,382       14,190       12,095       10,129
Average assets                  163,526      144,090      144,379      126,750      103,393

AVERAGE EQUITY TO ASSET          11.52%       11.37%        9.83%        9.54%        9.80%
  RATIO

</TABLE>
 
Capital Adequacy. The primary capital-to-asset leverage ratio was 11.40% at 
December 31, 1996, versus 11.53% at year-end 1995. The 1996 ratio was a 
direct result of the continuing strong profitability of the Bank and an
increased cash dividend payout to existing shareholders. With a strong
equity to asset ratio, the Bank enjoys greater financial flexibility and
less dependence upon its deposit base to support loan and investment
activities. 

In 1989, banking regulators adopted risk-based capital guidelines under 
which one of four risk weights is applied to balance sheet assets, each with 
different capital requirements based on the credit risk of the asset. At 
December 31, 1996, the Bank was required to have minimum Tier 1 and total 
capital ratios of 4.00% and 8.00%, respectively. The Bank's actual ratios on 
that date substantially exceeded regulatory guidelines at 16.08% and 17.34%, 
respectively.

Management seeks to attain a level of capital consistent with appropriate 
business risk and an ongoing need for financial flexibility. Adequacy of 
capital depends on the assessment of a number of factors such as stability 
of earnings, asset quality, liquidity, and economic conditions. Nevertheless, 
management and the Board of Directors are cognizant of the need to provide 
shareholders with a fair return on their investment in the Bank. With these 
factors in mind, the Bank's total cash dividend payout ratio to shareholders 
has been 29.35% and 19.51% in 1996 and 1995, respectively.

Liquidity Management. Liquidity represents the ability to meet cash flow 
requirements and financial commitments at a reasonable cost, while retaining 
the flexibility to take advantage of business opportunities. Management has 
always placed a high priority on maintaining a high liquidity through a 
moderate loan-to-deposit ratio and a conservative investment portfolio. Our 
loan-to-deposit ratio was 65.19% at December 31, 1996, versus 68.08% at 
year-end 1995. Approximately $3,311,000 or 8.22% of our securities portfolio 
matures within one year. In addition, the Bank participates in the Cash 
Management Advance Program with the Federal Home Loan Bank of Seattle and 
other borrowing arrangements with Bank of America and Wells Fargo Bank. 

<PAGE>

Under these programs, the Bank may borrow to a maximum of $11,900,000 although
no borrowings were outstanding at December 31, 1996. Management believes these 
factors are indicative of the emphasis placed upon maintaining sufficient 
liquidity for the Bank.

Asset-Liability Management. The principal purpose of asset-liability 
management is to manage the Bank's sources and uses of funds to maximize net 
interest income under different interest rate conditions with minimal risk. 
The Bank employs a financial model to project earnings performance under 
various rate scenarios and growth assumptions.

A part of this financial model calculates the "GAP," the difference between 
repricing assets and repricing liabilities in a specific time period. This 
analysis provides an indication of the Bank's earnings risk due to future 
interest rate changes. At December 31, 1996, the analysis indicated that
the earnings risk was within the Bank's policy guidelines.

Interest Rate Sensitivity. A key component of the asset-liability management 
is the measurement of interest-rate sensitivity. Interest-rate sensitivity 
refers to the volatility in earnings resulting from fluctuations in interest 
rates, variability in spread relationships, and the mismatch of repricing 
intervals between assets and liabilities. Interest-rate sensitivity 
management attempts to maximize earnings growth by minimizing the effects of
changing market rates, asset and liability mix, and prepayment trends. 

Management reviews the Bank's interest-rate sensitivity position on an 
ongoing basis, and prepares strategies to adjust that sensitivity, as
appropriate. Consideration is given and strategies are developed to minimize
the effect of any compression on net interest income which may arise from
earlier repricing of loans at lower rates or earlier repricing of deposits at
higher rates. As of December 31, 1996, management believes its strategies are
sufficient to offset any compression on net interest income that may arise from
asset and liability repricing in the near term.

The table below presents interest-rate sensitivity data as of December 31, 
1996. The interest rate gaps reported in the table arise when assets are 
funded with liabilities having different repricing intervals. Since these 
gaps are actively managed and change daily as adjustments are made in interest 
rate views and market outlook, positions at the end of any period may not be 
reflective of the Bank's interest rate view in subsequent periods. Active 
management dictates that longer-term economic views are balanced against the 
prospects of short-term interest rate changes in all repricing intervals.

<PAGE>

<TABLE>
<CAPTION>
                                           BY REPRICING INTERVAL
                                                                              NON
                                                                           INTEREST-
December 31, 1996         0 - 3      3 - 6   6 - 12    1 - 5     OVER 5     BEARING
  (in thousands)          MONTHS     MONTHS   MONTHS   YEARS     YEARS       FUNDS      TOTAL
<S>                    <C>         <C>       <C>       <C>      <C>        <C>         <C>
Assets                  
  Federal funds sold    $  11,300   $    -    $     -   $   -     $    -    $    -       $  11,300
  Securities available- 
    for-sale                  -        3,012        -     15,597     3,040       -          21,649
  Securities held-to-
    maturity                  150         15        50     2,809    15,612       -          18,636
  Loans                    50,196      2,431     4,485    30,759    11,904       -          99,775
  Noninterest earning
    assets and allowance
    for credit losses         -          -        -          -         -      25,747        25,747

        Total           $  61,646   $  5,458  $  4,535  $ 49,165  $ 30,556  $ 25,747     $ 177,107

Liabilities and stock-
    holders' equity
  Interest-bearing
    demand deposits     $  69,082   $    -    $    -    $   -     $   -     $    -       $  69,082
  Savings deposits         15,448        -         -        -         -          -          15,448
  Time deposits
    Over $100,000           4,397      1,496     1,738      520       -          -           8,151
    Under $100,000          7,439      6,204     3,486    3,997       15         -          21,141
  Noninterest bearing
    liabilities and
    common stock              -          -         -         -         -      63,285        63,285
        Total              96,366      7,700     5,224    4,517        15     63,285       177,107
  Interest rate
    sensitivity gap           -          -        -          -         -        -             -

Cumulative interest
  rate sensitivity gap  $  96,366   $  7,700  $  5,224  $  4,517  $    15   $ 63,285     $ 177,107

</TABLE>


 


                     VRB Bancorp Consolidated Balance Sheet
<TABLE>
<CAPTION>
                                    

                                                                DECEMBER 31,
                                                            1996            1995

                                        ASSETS
<S>                                                  <C>             <C>                      
Cash and due from banks                              $    17,916,909 $    13,599,620
Federal funds sold                                        11,300,000       4,500,000
        Total cash and cash equivalents                   29,216,909      18,099,620


Held-to-maturity securities:
  State and municipal subdivisions                        18,635,932      15,843,744
                                                          18,635,932      15,843,744



Available-for-sale securities:
  U.S. Treasuries and agencies                            20,092,813      19,554,343
  Corporate and other                                      1,555,949       1,682,712
                                                          21,648,762      21,237,055
Federal Home Loan Bank stock                               1,119,500       1,036,200



Loans, net of allowance for loan losses
        and unearned income                               99,775,802      88,972,481
Premises and equipment, net                                4,093,669       3,881,683
Accrued interest and other assets                          2,616,093       2,414,668

        Total assets                                  $  177,106,667 $   151,485,451


                        LIABILITIES AND SHAREHOLDERS' EQUITY

DEPOSITS
  Demand deposits                                    $    41,746,175 $    38,098,267
  Interest bearing demand deposits                        69,082,274      53,308,110
  Savings deposits                                        15,447,644      17,507,901
  Time deposits                                           29,292,364      23,830,269
        Total deposits                                   155,568,457     132,744,547

Accrued interest and other liabilities                     1,350,076       1,271,159
        Total liabilities                                156,918,533     134,015,706

SHAREHOLDERS' EQUITY
  Preferred stock, voting, $5 par value; 5,000,000 shares
    authorized and unissued
  Preferred stock, nonvoting, $5 par value; 5,000,000 shares
    authorized and unissued
  Common stock, no par value, 10,000,000 shares authorized
    with 3,574,682 and 2,333,019, issued and outstanding
    at December 31, 1996 and 1995, respectively              9,480,330       9,085,013
  Retained earnings                                         10,652,015       8,355,113
  Unrealized gain on available-for-sale securities,
    net of taxes                                                55,789          29,619
        Total shareholders' equity                          20,188,134      17,469,745

        Total liabilities and shareholders' equity      $  177,106,667   $  151,485,451

    The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

<PAGE>

                    VRB Bancorp Consolidated Statements of Income
<TABLE>
<CAPTION>
  
                                                                   YEARS ENDED DECEMBER 31,
                                                               1996        1995        1994
<S>                                                     <C>          <C>               <C>
INTEREST INCOME
  Interest and fees on loans                            $  10,122,237 $  9,892,695 $    8,363,776
  Interest on investment securities held-to-maturity:
    State and municipal subdivisions                          964,043      617,886        565,982
    U.S. Treasuries and agencies                            1,229,046      891,985      1,152,820
  Interest on investment securities available-for-sale:                       
    Corporate and other investments                           482,256     364,428          60,038
  Federal funds sold                                          390,450     206,215         408,219
      Total interest income                                13,188,032   11,973,209     10,550,835

INTEREST EXPENSE
  Interest-bearing demand deposits                          1,990,377    1,519,257      1,000,647
  Savings deposits                                            376,290      463,435        563,994
  Time deposits                                             1,260,728      938,197        631,001
  Other borrowings                                               -          68,658           -
      Total interest expense                                3,627,395    2,989,547      2,195,642
      Net interest income                                   9,560,637    8,983,662      8,355,193
  Provision for loan losses                                   250,000         -              -
      Net interest income after provision
        for loan losses                                     9,310,637    8,983,662      8,355,193

NONINTEREST INCOME
  Service charges on deposit accounts                         978,739    1,006,765      1,031,819
  Other operating income                                      391,896      373,722        479,887
      Total noninterest income                              1,370,635    1,380,487      1,511,706

NONINTEREST EXPENSES
  Salaries and benefits                                     3,692,594    3,841,055      3,636,634
  Net occupancy                                               629,642      607,739        686,247
  Communications                                              226,390      204,323        190,419
  Data processing                                             147,844       97,339         91,192
  FDIC insurance premium                                        2,000      142,633        281,720
  Supplies                                                    170,948      158,648        145,534
  Professional fees                                           143,817      179,686        152,844
  Other real estate expense                                      -            -             8,858
  Other expenses                                              814,767      829,635        828,969
      Total noninterest expenses                            5,828,002    6,061,058      6,022,117

INCOME BEFORE INCOME TAXES                                  4,853,270    4,303,091   3,844,782

PROVISION FOR INCOME TAXES                                  1,602,000   1,395,000    1,335,000

NET INCOME                                             $    3,251,270 $ 2,908,091 $  2,509,782

NET INCOME PER COMMON
  AND COMMON EQUIVALENT SHARE                          $         0.92 $      0.82 $       0.71

                 The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

<PAGE>

      VRB Bancorp Consolidated Statements of Changes in Shareholders' Equity
<TABLE>
<CAPTION>
                                                                                                (LOSS) GAIN ON       TOTAL
                                                  COMMON STOCK                   RETAINED       AVAILABLE-FOR-    SHAREHOLDERS'
                                            SHARES             AMOUNT            EARNINGS       SALE SECURITIES      EQUITY
<S>                                     <C>               <C>                <C>               <C>              <C>
BALANCE, December 31,
  1993                                   1,426,482         $ 6,873,549        $ 6,099,821       $     -          $12,973,370

Stock option exercised
  (April to September 1994)                  3,825              30,380               -                -               30,380

3 for 2 Stock split
  (September 15, 1994)                     715,217                -                  -                -                 -

Payments for fractional shares
  related to 3 for 2 stock
  split ($12 per share)                       -                   -                (1,398)            -               (1,398)

Stock option exercised
  (September 30, 1994)                       4,047               25,947               -               -               25,947

Cash dividend ($ .22 per share
  paid December 1, 1994)                      -                    -             (472,985)            -             (472,985)

4% stock dividend (85,755
  shares issued, dated
  December 1, 1994)                         85,755              986,183          (986,183)            -                 -

Payments for fractional shares
  related to stock dividend
  ($11.50 per share)                          -                    -               (2,785)            -               (2,785)

Changes in unrealized loss
  on available-for-sale
  securities, net of taxes                    -                    -                 -             (61,706)          (61,706)

Net income                                    -                    -            2,509,782             -            2,509,782


BALANCE,
  December 31, 1994                      2,235,686           7,916,059          7,146,252          (61,706)       15,000,605

Stock options exercised
  (August 11, 1995)                            143                 581               -                -                  581

Cash dividend ($ .25 per
  share, paid November
  10, 1995)                                   -                   -              (558,957)            -             (558,957)

4% stock dividend (89,190
  shares issued, dated
  November 10, 1995)                        89,190           1,137,173         (1,137,173)            -                 -

                The accompanying notes are an integral part of these consolicated financial statements.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>
                                                                                                 UNREALIZED
                                                 COMMON STOCK                   RETAINED       AVAILABLE-FOR-    SHAREHOLDERS'
                                           SHARES             AMOUNT            EARNINGS       SALE SECURITIES      EQUITY

<S>                                    <C>              <C>                   <C>              <C>              <C>             
Payments for fractional
  shares related to stock
  dividend ($12.75 per
  share)                                     -             $     -             $  (3,100)       $     -          $    (3,100)

Stock options exercised
  (December 28, 1995)                       8,000              31,200               -                 -               31,200

Net income                                   -                   -              2,908,091             -            2,908,091

Changes in net unrealized
  gain on available-for-sale
  securities, net of taxes                   -                   -                   -              91,325            91,325

BALANCE, December 31,
  1995                                  2,333,019           9,085,013          8,355,113            29,619        17,469,745

Stock options exercised
  (January to October 1995)                50,180             304,054               -                 -              304,054

Income tax benefit from exercised
  of stock option                            -                 91,263               -                 -               91,263

Cash dividend ($ .40 per share,
  paid November 20, 1996)                    -                   -              (953,280)             -             (953,280)

2 for 1 stock split
  (November 20, 1996)                   1,191,483                -                  -                 -                 -

Payments for fractional shares
  related to stock split
  ($9.33 per share)                          -                   -                (1,088)             -                (1,088)

Net income                                   -                   -             3,251,270              -             3,251,270

Changes in net unrealized gain
  on available-for-sale
  securities, net of taxes                   -                   -                  -               26,170             26,170

BALANCE,
  December 31, 1996                     3,574,682         $ 9,480,330        $10,652,015       $    55,789        $20,188,134

</TABLE>

<PAGE>

                         VRB Bancorp Consolidated Statements of Cash Flows
<TABLE>
                                                                     YEARS ENDED DECEMBER 31,
                                                                  1996         1995         1994
<S>                                                       <C>             <C>          <C>         
CASH FLOWS RELATING TO OPERATING ACTIVITIES
  Net income                                               $     3,251,270 $ 2,908,091  $ 2,509,782
  Adjustments to reconcile net income to net cash
      provided by operating activities:
    Depreciation and amortization                                  432,815     430,123      505,259
    Loss (gain) on sales of assets                                   1,493        -          (9,998)
    Provision for loan losses                                      250,000        -            -
    Write-down on other real estate owned                             -           -          (8,858)
    FHLB dividend                                                  (83,800)    (55,128)      (9,900)
    Deferred taxes                                                   6,451      13,118       104,120
  Change in cash due to changes in certain assets
      and liabilities:
    Increase in accrued interest and other assets                 (226,911)     (90,327)       (5,290)
    Decrease in accrued interest and other liabilities             125,871       192,234       64,689
        Net cash provided by operating activities                3,757,689     3,398,111    3,167,520

CASH FLOWS RELATING TO INVESTING ACTIVITIES
  Proceeds from the maturity of held-to-maturity securities     5,390,000     7,895,537   16,937,000
  Purchases of held-to-maturity securities                     (8,204,586)   (3,686,000) (14,355,971)
  Proceeds from maturity of available-for-sale securities       6,118,455     2,000,000    2,000,000
  Purchases of available-for-sale securities                   (6,490,627)   (9,034,989)        -
  Purchases of Federal Home Loan Bank stock                          -         (544,472)    (426,700)
  Net increase in loans                                       (11,053,321)     (530,996)  (9,858,207)
  Purchase of premises and equipment                             (513,479)     (249,433)     (96,401)
  Sale of premises and equipment                                     -            4,010        4,405
  Proceeds from sale of other real estate owned                      -             -         146,833
        Net cash used in investing activities                 (14,753,558)   (4,146,343)  (5,649,041)

CASH FLOWS RELATING TO FINANCING ACTIVITIES
  Net increase (decrease) in deposits                          22,823,910     7,272,231   (2,525,281)
  Cash dividends and fractional share payments                   (954,368)     (562,057)    (477,168)
  Cash received from exercise of common stock options             243,616        31,781       56,327
        Net cash provided by (used in) financing activities    22,113,158     6,741,955   (2,946,122)

NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS                                                  11,117,289     5,993,723   (5,427,643)

CASH AND CASH EQUIVALENTS, beginning of year                   18,099,620    12,105,897   17,533,540

CASH AND CASH EQUIVALENTS, end of year                     $   29,216,909 $  18,099,620 $ 12,105,897

      The accompanying notes are an integral part of these consolidated financial statements.
<PAGE>


SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
  Cash paid for interest                                   $    3,363,185 $   2,919,329 $  2,205,676
  Cash paid for taxes                                      $    1,607,300 $   1,456,256 $  1,441,586

SCHEDULE OF NONCASH ACTIVITIES
  Stock dividends declared                                 $         -    $   1,137,173 $    986,183

  Unrealized loss (gain) on available-for-sale
    securities, net of tax                                 $       26,170 $      91,325 $     61,706
  Income tax benefit of stock options exercised            $       91,263 $        -    $       -

</TABLE>

<PAGE>
                               VRB BANCORP
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    DECEMBER 31, 1996, 1995, AND 1994


NOTE 1 -	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

	Organization - VRB Bancorp is the parent holding company for Valley of the
Rogue Bank. Substantially all activity of VRB Bancorp is conducted through its
subsidiary bank and all significant intercompany accounts and transactions have
been eliminated in the preparation of the consolidated financial statements.

	Nature of operations - The Bank is a state-chartered institution authorized
to provide banking services by the State of Oregon. With its headquarters in
Rogue River, Oregon, the Bank also has branch operations in Josephine and
Jackson County, Oregon. Both VRB Bancorp and Valley of the Rogue Bank are
subject to the regulations of certain Federal and State agencies and undergo
periodic examinations by those regulatory authorities.

	Management's estimates and assumptions - In preparing the consolidated
financial statements, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities as of the date of
the balance sheet and revenues and expenses for the period. Actual results
could differ significantly from those estimates.

	Investment securities - The Bank  is required to specifically identify under
generally accepted accounting principles its investment securities as
"held-to-maturity," "available-for-sale," or "trading accounts." Accordingly,
management has determined that all investment securities held at December 31,
1996 and 1995, are either "available-for-sale" or "held-to-maturity" and
conform to the following accounting policies:

  Securities held-to-maturity - Bonds, notes, and debentures for which the Bank
has the intent and ability to hold to maturity are reported at cost, adjusted
for premiums and discounts that are recognized in interest income using the
interest method over the period to maturity.

		Securities available-for-sale - Available-for-sale securities 
consist of bonds, notes, debentures, and certain equity securities not 
classified as held-to-maturity securities. Securities are generally classified 
as available-for-sale if the instrument may be sold in response to such 
factors as: (1) changes in market interest rates and related changes in the 
security's prepayment risk, (2) needs for liquidity, (3) changes in the 
availability of and the yield on alternative instruments, and (4) changes in 
funding sources and terms. Unrealized holding gains and losses, net of tax, on 
available-for-sale securities are reported as a net amount in a separate 
component of equity until realized. Fair values for investment securities are 
based on quoted market prices. Gains and losses on the sale of available-for-
sale securities are determined using the specific-identification method.

            Declines in the fair value of individual held-to-maturity and 
available-for-sale securities below their cost that are other than temporary, 
result in write-downs of the individual securities to their fair value. The 
related write-downs would be included in earnings as realized losses. Premiums 
and discounts are recognized in interest income using the interest method over 
the period to maturity.

<PAGE>

NOTE 1 -	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - (Continued)

		Loans, net of allowance for loan losses and unearned income - 
Loans are stated at the amount of unpaid principal, reduced by an allowance 
for loan losses and unearned income. Interest on loans is calculated by using 
the simple-interest method on daily balances of the principal amount 
outstanding. The allowance for loan losses is established through a provision 
for loan losses charged to expenses. Loans are charged against the allowance 
for loan losses when management believes that the collectibility of the 
principal is unlikely. The allowance is an amount that management believes 
will be adequate to absorb possible losses on existing loans that may become 
uncollectible, based on evaluations of the collectibility of loans and prior 
loan loss experience. The evaluations take into consideration such factors as 
changes in the nature and volume of the loan portfolio, overall portfolio 
quality, review of specific problem loans, and current economic conditions 
that may affect the borrower's ability to pay. Accrual of interest is 
discontinued on a loan when management believes, after considering economic 
and business conditions, collection efforts, and collateral position, that the 
borrower's financial condition is such that collection of interest is 
doubtful. Loan origination fees and certain direct origination costs are 
capitalized and recognized as an adjustment of the yield of the related loan.

		The Bank adopted the Financial Accounting Standards Board's 
Statements No. 114 "Accounting by Creditors for Impairment of a Loan" and No. 
118 "Accounting by Creditors for Impairment of a Loan - Income Recognition and 
Disclosures" as of January 1, 1995. These pronouncements require that the Bank 
assess loans that are considered impaired and measure this impairment based on 
the present value of expected future cash flows discounted at the loan's 
effective interest rate. There were no loans of material value considered 
impaired for the years ended December 31, 1996 and 1995.

	Premises and equipment - Premises and equipment are stated at 
cost, less accumulated depreciation. Depreciation is computed principally by 
the straight-line method over the estimated useful lives of the assets. 
Depreciation is based on useful lives of 3 to 25 years on furniture and 
equipment; 15 to 40 years for buildings and components; and, 15 to 20 years on 
leasehold improvements.

	Intangible assets - Intangible assets consist of purchased 
goodwill arising from the previous acquisition of financial institutions. 
These assets are being amortized over periods which do not exceed 15 years.

	Income taxes - Deferred tax assets and liabilities are reflected 
at currently enacted income tax rates applicable to the period in which the 
deferred tax assets or liabilities are expected to be realized or settled. As 
changes in tax laws or rates are enacted, deferred tax assets and liabilities 
are adjusted through the provision for income taxes.

	Statement of cash flows - Cash equivalents are generally all 
short-term investments with a maturity of three months or less. Cash and cash 
equivalents normally include cash on hand, amounts due from banks, and federal 
funds sold.

	Off-balance-sheet financial instruments - In the ordinary course 
of business, the Bank has entered into off-balance-sheet financial instruments 
consisting of commitments to extend credit as well as commercial letters of 
credit and standby letters of credit. Such financial instruments are recorded 
in the financial statements when they are funded or related fees are incurred 
or received.

		The Financial Accounting Standards Board issued Statement No. 119, 
"Disclosures about Derivative Financial Instruments and Fair Value of 
Financial Instruments" which became effective for the Bank for the year ending 
December 31, 1995. This pronouncement requires that banks holding derivative 

<PAGE>

NOTE 1 -	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
         POLICIES - (Continued)

financial instruments, disclose quantitative and qualitative information about 
the instruments. As of December 31, 1996 and 1995, and for the years then
ended, the Bank held no derivative financial instruments.

		Fair value of financial instruments - The following methods and 
assumptions were used by the Bank in estimating fair values of financial 
instruments as disclosed herein:

		Cash and cash equivalents - The carrying amounts of cash and 
short-term instruments approximate their fair value.

		Held-to-maturity and available-for-sale securities - Fair values 
for investment securities, excluding restricted equity securities, are based 
on quoted market prices. The carrying values of restricted equity securities 
approximate fair values.

		Loans receivable - For variable-rate loans that reprice frequently 
and have no significant change in credit risk, fair values are based on 
carrying values. Fair values for certain mortgage loans (for example, one-to-
four family residential), credit card loans, and other consumer loans are 
based on quoted market prices of similar loans sold in conjunction with 
securitization transactions, adjusted for differences in loan characteristics. 
Fair values for commercial real estate and commercial loans are estimated 
using discounted cash flow analyses, using interest rates currently being 
offered for loans with similar terms to borrowers of similar credit quality. 
Fair values for impaired loans are estimated using discounted cash flow 
analyses or underlying collateral values, where applicable.

		Deposit liabilities - The fair values disclosed for demand 
deposits are, by definition, equal to the amount payable on demand at the 
reporting date (that is, their carrying amounts). The carrying amounts of 
variable-rate, fixed-term money market accounts and certificates of deposit 
(CDs) approximate their fair values at the reporting date. Fair values for 
fixed-rate CDs are estimated using a discounted cash flow calculation that 
applies interest rates currently being offered on certificates to a schedule 
of aggregated expected monthly maturities on time deposits.

		Short-term borrowings - The carrying amounts of federal funds 
purchased, borrowings under repurchase agreements, and other short-term 
borrowings maturing within 90 days approximate their fair values. Fair values 
of other short-term borrowings are estimated using discounted cash flow 
analyses based on the Bank's current incremental borrowing rates for similar 
types of borrowing arrangements.

		Long-term debt - The fair values of the Bank's long-term debt are 
estimated using discounted cash flow analyses based on the Bank's current 
incremental borrowing rates for similar types of borrowing arrangements.

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

		Off-balance-sheet instruments - The Bank's off-balance-sheet 
instruments include unfunded commitments to extend credit and standby letters 
of credit. The fair value of these instruments is not considered practicable 
to estimate because of the lack of quoted market prices and the inability to 
estimate fair value without incurring excessive costs.

	Reclassifications - Certain reclassifications have been made to 
the 1995 and 1994 consolidated financial statements to conform with current 
year presentations.

<PAGE>

NOTE 1 -	ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
         POLICIES - (Continued)

		Stock options - In October 1995 the Financial Accounting Standards 
Board issued Statement of Financial Accounting Standards (SFAS) No. 123, 
"Accounting for Stock-Based Compensation." This new standard defines a fair 
value based method of accounting for an employee stock option or similar 
equity  instrument. This statement gives entities a choice of recognizing
related compensation expense by adopting the new fair value method or to
continue to measure compensation using the intrinsic value approach under
Accounting Principles Board (APB) Opinion No. 25, the former standard. If
the former standard for measurement were elected, SFAS No. 123 requires
supplemental disclosure to show the effects of using the new measurement
criteria. The Bank has elected to continue using the measurement prescribed
by APB Opinion No. 25, and accordingly, this pronouncement has had no affect
on the Bank's financial position or results of operations.


NOTE 2 -	INVESTMENT SECURITIES

  The amortized cost and estimated market values of investment 
securities at December 31, 1996 and 1995, are as follows (in thousands):

<TABLE>
<CAPTION>
                                                      GROSS        GROSS      ESTIMATED
                                        AMORTIZED   UNREALIZED   UNREALIZED     MARKET
                                          COST        GAINS       LOSSES        VALUE
<S>                                   <C>         <C>         <C>            <C>      
    December 31, 1996

    Held-to-maturity securities:
      State and political subdivisions  $ 18,636   $    227     $    (43)     $ 18,820

    Available-for-sale securities:
      U.S. Treasuries and agencies      $ 19,995   $    167     $    (69)     $ 20,093
      Corporate and other                  1,569          -          (13)        1,556

                                        $ 21,564   $    167     $    (82)     $ 21,649

    December 31, 1995

      Held-to-maturity securities:
        State and municipal subdivision $ 15,844   $    262     $    (26)     $ 16,080

      Available-for-sale securities:
        U.S. Treasuries and agencies    $ 19,496   $     87     $    (28)     $ 19,555
        Corporate and other                1,697          -          (15)        1,682

                                        $ 21,193   $     87     $    (43)     $ 21,237
</TABLE>
<PAGE>

NOTE 2 -	INVESTMENT SECURITIES - (Continued)

The amortized cost and estimated market value of investment 
securities at December 31, 1996, by contractual maturity, are shown below (in 
thousands). Expected maturities will differ from contractual maturities 
because borrowers may have the right to call or prepay obligations with or 
without call or prepayment penalties.

<TABLE>
<CAPTION>
    
                                          HELD-TO-MATURITY         AVAILABLE-FOR-SALE
                                            SECURITIES               SECURIITES
                                                     ESTIMATED                 ESTIMATED
                                        AMORTIZED     MARKET      AMORTIZED     MARKET
                                           COST        VALUE        COST         VALUE
<S>                                   <C>          <C>          <C>          <C>       
     Due in one year or less           $    215     $    215     $  3,087     $  3,096
     Due after one year through
       five years                         2,809        2,827       16,477       16,521
     Due after five years through
       ten years                          5,453        5,533        2,000        2,032
     Due after ten years                 10,159       10,245            -            -

                                       $ 18,636     $ 18,820     $ 21,564     $ 21,649

</TABLE>

 Proceeds from maturities of held-to-maturity investment securities 
during 1996 and 1995, were $5,390,000 and $7,895,537, respectively. Proceeds 
from the maturity of available-for-sale securities was $6,118,455 and 
$2,000,000 in 1996 and 1995, respectively.

	During 1995, pursuant to implementation guidance on accounting for 
certain investments in debt and equity securities issued in a Special Report 
by the Financial Accounting Standards Board, the Bank reassessed the 
appropriateness of its classifications for investment securities. Accordingly, 
securities with an amortized cost of $16,237,960 were transferred from the 
held-to-maturity category to the available-for-sale category. This resulted in 
the recognition of an unrealized loss on available-for-sale securities, net of 
tax, of $132,610 at the time of transfer.

 At December 31, 1996 and 1995, investment securities with an 
amortized cost of $5,188,961 and $4,174,355, respectively, were pledged to 
secure public deposits and for other purposes required or permitted by law.

	The Bank, as a member of the Federal Home Loan Bank (FHLB) system, 
is required to maintain an investment in capital stock of the FHLB. The FHLB 
stock is not actively traded but is redeemable by FHLB at its current book 
value.

<PAGE>

NOTE 3 -	LOANS AND RESERVE FOR LOAN LOSSES

The loan portfolio consisted of the following (in thousands):
<TABLE>
<CAPTION>
                                                            DECEMBER 31,
                                                       1996             1995
<S>                                              <C>               <C>       
            Real estate - construction            $    9,112        $    8,225
            Real estate - mortgage                    66,209            59,804
            Commercial                                13,181             9,440
            Installment                               12,808            12,806
            Other loans                                   98               104
                                                     101,408            90,379
                                                      (1,632)           (1,407)

                                                  $   99,776        $   88,972
</TABLE>


The following is an analysis of the changes in the reserve for 
possible loan losses (in thousands):
<TABLE>
<CAPTION>

                                                 YEARS ENDED DECEMBER 31,
                                              1996         1995         1994
<S>                                       <C>          <C>          <C>      
     Beginning balance                     $  1,470     $  1,414     $  1,453
     Provision for possible loan losses         250            -            -
     Losses                                     (38)         (45)         (90)
     Recoveries                                  13           38           51

     Ending balance                        $  1,632     $  1,407     $  1,414

</TABLE>

		Impairment of loans having recorded investments of $58,166 and 
$52,499 at December 31, 1996 and 1995, respectively, has been recognized in 
conformity with FASB Statement No. 114, as amended by FASB Statement No. 118. 
The average recorded investment and total allowance for loan losses related to 
impaired loans was equal to their recorded investment at December 31, 1996 and 
1995. No interest income was accrued on the impaired loans or included in the 
results of operations for the years ended December 31, 1996, 1995, and 1994. 
Management estimates that in 1996, approximately $3,788 of interest income was 
not recognized on impaired loans on nonaccrual status, compared with 
approximately $2,868 in 1995 and $543 in 1994.

<PAGE>

NOTE 4 -	BANK PREMISES AND EQUIPMENT

Bank premises, furniture, and equipment consisted of the following 
(in thousands):
<TABLE>
<CAPTION>
                                                           DECEMBER 31,
                                                      1996             1995
<S>                                              <C>                <C>      
            Land                                  $   1,323          $   1,323
            Buildings                                 3,147              2,942
            Furniture and equipment                   2,545              2,300
                                                      7,015              6,565
            Less: accumulated depreciation           (2,921)            (2,683)

                                                  $   4,094          $   3,882
</TABLE>

NOTE 5 -	OTHER ASSETS

Other assets consisted of the following (in thousands):
<TABLE>
<CAPTION>
                                                           DECEMBER 31,
                                                      1996             1995
<S>                                             <C>                <C>
            Accrued interest receivable          $    1,162         $      937
            Prepaid expenses                            136                162
            Deferred taxes                              126                132
            Intangible and other assets               1,192              1,184

                                                 $    2,616         $    2,415

</TABLE>

NOTE 6 -	TIME DEPOSITS

Time certificates of deposit of $100,000 and over, aggregated 
$8,151,302 and $2,881,559 at December 31, 1996 and 1995, respectively.

At December 31, 1996, the scheduled maturities for time deposits 
is as follows (in thousands):
<TABLE>
<CAPTION>
<S>                                                       <C>
            1997                                           $          25,498
            1998                                                       2,135
            1999                                                       1,064
            2000                                                         469
            2001 and thereafter                                          126

                                                           $          29,292
</TABLE>
<PAGE>

NOTE 7 -	INCOME TAXES

The income tax provision consisted of the following (in 
thousands):
<TABLE>
<CAPTION>

                                                  YEARS ENDED DECEMBER 31,
                                              1996         1995         1994
<S>                                       <C>          <C>          <C>   
         Currently payable                 $  1,596     $  1,382     $  1,231
         Deferred                                 6           13          104

         Provision for income taxes        $  1,602     $  1,395     $  1,335

</TABLE>

Deferred income taxes represent the tax effect of differences in 
timing between financial income and taxable income. Deferred income taxes, 
according to the timing differences which caused them, were as follows (in 
thousands):
<TABLE>
<CAPTION>

                                                  YEARS ENDED DECEMBER 31,
                                              1996         1995         1994
<S>                                      <C>          <C>          <C>   
     Accounting loan loss provision
       in excess of tax provision          $   (100)    $     -      $     43
     Accounting depreciation less than
       (in excess of) tax depreciation           19          (6)           (4)
     Deferred compensation                       (8)        (14)          (16)
     Accounting loan fees in excess
       of tax loan fees                          56          17            86
     Federal Home Loan Bank stock dividends      24          19             -
     Other differences                           15          (3)           (5)

                                           $      6      $   13      $    104

</TABLE>
<PAGE>

NOTE 7 -	INCOME TAXES - (Continued)

The net deferred tax benefits included in other assets in the 
accompanying consolidated balance sheets include the following components (in 
thousands):
<TABLE>
<CAPTION>
                                                           DECEMBER 31,
                                                       1996             1995
<S>                                                <C>             <C> 
            Deferred tax assets:
              Loan loss reserve                      $    334        $     234
              Deferred compensation                        82               74
              Other                                        14               29

                                                          430              337

            Deferred tax liabilities:
              Accumulated depreciation                    (97)             (78)
              Deferred loan fees                         (159)            (103)
              Other                                       (48)             (24)

                                                         (304)            (205)

            Net deferred tax asset                  $     126        $     132

</TABLE>

	The exercise of stock options which have been granted under VRB 
Bancorp's stock option plan for directors give rise to compensation which is 
includable in the taxable income of the applicable employees and deductible by 
the Bank for federal and state income tax purposes. Such compensation results 
from increases in the fair market value of VRB Bancorp's common stock 
subsequent to the date of grant of the applicable exercised stock options and, 
accordingly, in accordance with Accounting Principles Board Opinion No. 25, 
such compensation is not recognized as an expense for financial accounting 
purposes and the related tax benefits are taken directly to common stock. In 
the year ended December 31, 1996, such deductions resulted in federal and 
state tax deductions increasing common stock. The compensation deductions 
arising from the exercise of stock options were not material in 1995 and 1994.

	Management believes, based upon the Bank's historical performance, 
net deferred tax assets will be realized in the normal course of operations 
and, accordingly, management has not reduced net deferred tax assets by a 
valuation allowance.

The tax provision differs from the federal statutory rate of 34% 
due principally to the effect of tax exemptions for interest received on 
municipal investments. The 1995 provision for income taxes reflects a 
reduction in the state income tax rate from 6.6% to 3.3%.

<PAGE>

NOTE 7 -	INCOME TAXES - (Continued)

 A reconciliation between the statutory federal income tax rate and 
the effective tax rate is as follows (in thousands):
<TABLE>
<CAPTION>

                                                      YEARS ENDED DECEMBER 31,
                                                   1996         1995         1994
<S>                                           <C>          <C>           <C> 
     Federal income taxes at statutory rate    $  1,650     $  1,463      $ 1,307
     State income tax expense, net of
       federal income tax benefit                   211           94          167
     Effect of nontaxable interest income          (298)        (191)        (179)
     Other                                           39           29           40

                                               $  1,602        1,395        1,335

     Effect tax rate                                 33%          32%          35%

</TABLE>


NOTE 8 -	FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

		The Bank is a party to financial instruments with off-balance-
sheet risk in the normal course of business to meet the financing needs of its 
customers. These financial instruments include commitments to extend credit 
and standby letters of credit and financial guarantees. Those instruments 
involve elements of credit and interest-rate risk similar to the amounts 
recognized in the consolidated balance sheets. The contract or notional 
amounts of those instruments reflect the extent of the Bank's involvement in 
particular classes of financial instruments.

		The Bank's exposure to credit loss in the event of nonperformance 
by the other party to the financial instrument for commitments to extend 
credit and standby letters of credit, and financial guarantees written, is 
represented by the contractual notional amount of those instruments. The Bank 
uses the same credit policies in making commitments and conditional 
obligations as it does for on-balance-sheet instruments.

		Commitments to extend credit are agreements to lend to a customer 
as long as there is no violation of any condition established in the contract. 
Commitments generally have fixed expiration dates or other termination clauses 
and may require payment of a fee. Since many of the commitments are expected 
to expire without being drawn upon, the total commitment amounts do not 
necessarily represent future cash requirements. The Bank's experience has been 
that nearly all loan commitments are drawn upon by customers. While most 
commercial letters of credit are not utilized, a significant portion of such 
utilization is on an immediate payment basis. The Bank evaluates each 
customer's creditworthiness on a case-by-case basis. The amount of collateral 
obtained, if it is deemed necessary by the Bank upon extension of credit, is 
based on management's credit evaluation of the counterparty. Collateral held 
varies but may include cash, accounts receivable, inventory, premises and 
equipment, and income-producing commercial properties.

		Standby letters of credit and financial guarantees written are 
conditional commitments issued by the Bank to guarantee the performance of a 
customer to a third-party. These guarantees are primarily issued to support 
public and private borrowing arrangements, including commercial paper, bond 
financing, and similar transactions. The credit risk involved in issuing 
letters of credit is essentially the same as that involved in extending loan 
facilities to customers. The Bank holds cash, marketable securities, or real 
estate as collateral supporting those commitments for which collateral is 
deemed necessary.

<PAGE>

NOTE 8 -	FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK - 
       		(Continued)

		The Bank has not been required to perform on any financial 
guarantees during the past two years. The Bank has not incurred any losses on 
its commitments in either 1996, 1995, or 1994.

		A summary of the notional amounts of the Bank's financial 
instruments with off-balance-sheet risk at December 31, 1996, follows:


            Commitments to extend credit                         $   16,013,904
            Commercial and standby letters of credit             $      479,328



NOTE 9 -	FAIR VALUES OF FINANCIAL INSTRUMENTS

	The following table estimates fair value and the related carrying 
values of the Bank's financial instruments (in thousands):
<TABLE>
<CAPTION>
  
                                     DECEMBER 31, 1996        DECEMBER 31, 1995
                                    CARRYING      FAIR       CARRYING      FAIR
                                     AMOUNT       VALUE       AMOUNT      VALUE
<S>                               <S>         <S>         <S>         <S>  
Financial assets:
  Cash and due from bank           $  17,917    $  17,917   $  13,599   $  13,559
  Federal funds sold               $  11,300    $  11,300   $   4,500   $   4,500
  Securities available-for-sale    $  21,649    $  21,649   $  21,237   $  21,237
  Securities held-to-maturity      $  18,636    $  18,820   $  15,843   $  16,080
  Federal Home Loan Bank stock     $   1,120    $   1,120   $   1,036   $   1,036
  Loans, net of allowance for
     loan losses                   $  99,776    $  99,544   $  88,972   $  87,444

Financial liabilities:
  Demand and savings deposits      $ 126,276    $ 126,276   $ 108,914   $ 108,914
  Time deposits                    $  29,292    $  29,373   $  23,830   $  23,090

</TABLE>

	While estimates of fair value are based on management's judgment 
of the most appropriate factors, there is no assurance that were the Bank to 
have disposed of such items at December 31, 1996 and 1995, the estimated fair 
values would necessarily have been achieved at that date, since market values 
may differ depending on various circumstances. The estimated fair values at 
December 31, 1996 and 1995, should not necessarily be considered to apply at 
subsequent dates.

	In addition, other assets and liabilities of the Bank that are not 
defined as financial instruments are not included in the above disclosures, 
such as premises and equipment. Also, nonfinancial instruments typically not 
recognized in the financial statements nevertheless may have value but are not 
included in the above disclosures. These include, among other items, the 
estimated earnings power of core deposit accounts, the earnings potential of 
loan servicing rights, the trained work force, customer goodwill, and similar 
items.

<PAGE>

NOTE 10 -	CONCENTRATIONS OF CREDIT

		All of the Bank's loans, commitments, and commercial and standby 
letters of credit have been granted to customers in the Bank's market area. 
Investments in state and municipal securities involve government entities also 
within the Bank's geographical region. The concentrations of credit by type of 
loan are set forth in Note 3. The distribution of commitments to extend credit 
approximates the distribution of loans outstanding. Commercial and standby 
letters of credit were granted primarily to commercial borrowers as of 
December 31, 1996. The Bank's loan policy does not allow the extension of 
credit to any single borrower or group of related borrowers in excess of a 
total of $200,000 without approval from the Board of Directors.


NOTE 11 -	COMMITMENTS AND CONTINGENCIES

In the ordinary course of business, the Bank becomes involved in 
various litigation arising from normal banking activities. In the opinion of 
management, the ultimate disposition of these actions will not have a material 
adverse effect on the consolidated financial position or results of 
operations.

The Bank leases certain branch premises and equipment. The 
following is a schedule of future minimum lease payments under operating 
leases in effect as of December 31, 1996:


         YEARS ENDING DECEMBER 31,
            1997                                             $          90,260
            1998                                                        90,260
            1999                                                        78,260
            2000                                                        13,940

         Total minimum payments required                      $        272,720


	Total rental expense was $94,413, $92,059, and $79,308 in 
1996, 1995, and 1994, respectively.


NOTE 12 -	BORROWING AGREEMENTS

	The Bank has borrowing agreements with the Bank of America and 
Wells Fargo Bank for $2,000,000 and $3,000,000, respectively. There is no 
stated rate of interest on these borrowings. As of December 31, 1996, there 
were no borrowings outstanding under these agreements.

	The Bank also participates in the Cash Management Advance Program 
with the Federal Home Loan Bank of Seattle (FHLB). Under the program, the Bank 
may borrow to a maximum of $6,900,000 with interest at the FHLB's cash 
management rate. There were no borrowings outstanding at December 31, 1996.


NOTE 13 -	STOCK OPTION PLANS

The Bank has two stock option plans which were approved by the 
shareholders during 1991 and amended in 1994. The Plans provide for an 
aggregate of 362,746 shares of the Bank's unissued common stock to be granted 
to key employees and nonemployee directors. The 1994 amendment removed the 
requirement for a five-year vesting schedule for any future grants from the 

<PAGE>

NOTE 13 -	STOCK OPTION PLANS - (Continued)

Employees' Plan, thus leaving the setting of any vesting schedule to the 
discretion of the Board of Directors. The Directors' Plan was amended to 
extend the time in which options may be exercised following resignation or 
retirement.

 With the exception of certain options granted to nonemployee 
directors, all options granted and outstanding under both the Directors' and 
Employees' Plans are noncompensatory and exercisable at purchase prices which 
approximate fair value on the date of grant. Because certain options granted 
to the Bank's directors were based on purchase prices below the fair value of 
the stock as of the grant date, they are considered compensatory transactions 
and give rise to the recognition of compensation expense. Accordingly, the 
Bank has recognized $44,564, $39,151, and $20,368 as compensation expense 
relating to 7,087, 6,702, and 5,382 shares of common stock optioned to its 
directors during 1996, 1995, and 1994 respectively.

 The following summarizes options available and outstanding under 
both the Directors' and Employees' Plans as of December 31, 1996, after the 
effect of the current year's stock split:
<TABLE>
<CAPTION>
                                                                            COMBINED
                                    DIRECTOR'S PLAN      EMPLOYEE'S PLAN      PLANS
                                             AVERAGE               AVERAGE
                                              OPTION                OPTION
                                   SHARES      PRICE    SHARES       PRICE     SHARES
<S>                               <C>        <C>       <C>        <C>       <C>
Options reserved,
  December 31, 1995                 90,233               94,765                184,998
Options granted in 1996            (10,631)                   -                (10,631)

Options reserved,
  December 31, 1996                 79,602               94,765                174,367


Options under grant,
  December 31, 1995                 27,963   $  3.59    119,099   $  4.15      147,062
Options granted in 1996             10,631   $  4.99          -   $     -       10,631
Options exercised in 1996          (20,920)  $ (4.39)   (54,347)  $ (3.41)     (75,267)
Options forfeited                        -   $    -      (5,648)  $  6.77        5,648

Options under grant,
  December 31, 1996                 17,674   $  3.64     59,104   $  5.79       76,778

Options vested at
  December 31, 1996                 17,674   $  3.64     17,005   $  3.37       34,679

</TABLE>

NOTE 14 -	EMPLOYEE BENEFIT PLANS

The Bank has a defined contribution profit sharing plan. All 
permanent employees are eligible to participate once they meet the age and 
length of employment requirements. Contributions are determined annually by 
the Board of Directors and were $162,210, $172,401, and $168,635 in 1996, 
1995, and 1994, respectively, excluding additional amounts set aside for 
funding through the Bank's bonus program. Voluntary employee contributions are 
required to share in Bank contributions. Employee contributions were $185,861, 
$170,582, and $153,673 in 1996, 1995, and 1994, respectively.

<PAGE>

NOTE 14 -	EMPLOYEE BENEFIT PLANS - (Continued)

		The Bank has established a bonus program as part of the 
compensation package it provides to employees. At December 31, 1996, the Bank 
employed approximately 120 individuals eligible to participate in this 
program. Under the program, a bonus pool for non-executives is established and 
funded based on net profits of the current and immediately proceeding year. An 
executives bonus program is similarly funded and based on current year profits 
with payments measured on the basis of return on assets on after-tax income. 
For the years ending December 31, 1996, 1995, and 1994, $510,000, $600,000, 
and $452,500, respectively, was expensed to fund these programs with their 
related payroll and benefit costs.

  The Bank has also established supplemental retirement agreements 
with certain of its executive officers. The agreements provide for established 
post-retirement payments to covered executives for up to ten years after their 
retirement. The supplemental programs are self-funded by the Bank through the 
setting aside of funds into a bank-controlled deposit account. As of December 
31, 1996, a liability for the supplemental retirement plans was recognized and 
funded in the amount of $255,943. During 1996, 1995, and 1994, the Bank 
recorded Plan expenses of $28,000, $42,000, and $42,000, respectively.


NOTE 15 -	EARNINGS PER COMMON AND COMMON EQUIVALENT SHARES

  Earnings per share were computed by dividing net income by the 
weighted average number of shares of common stock and common stock equivalents 
outstanding for the years ending December 31, 1996, 1995, and 1994. Common 
stock equivalents include the number of shares issuable on exercise of the 
outstanding options less the numbers of shares that would have been purchased 
with the proceeds from the exercise of the options based on the average price 
of common stock during the year.


NOTE 16 -	TRANSACTIONS WITH RELATED PARTIES

		Certain directors, executive officers, and principal stockholders 
are customers of and have had banking transactions with the Bank in the 
ordinary course of business, and the Bank expects to have such transactions in 
the future. All loans and commitments to loan included in such transactions 
were made in compliance with applicable laws on substantially the same terms 
(including interest rates and collateral) as those prevailing at the time for 
comparable transactions with other persons and, in the opinion of the 
management of the Bank, do not involve more than the normal risk of 
collectibility or present any other unfavorable features. The amount of loans 
outstanding to directors, executive officers, principal stockholders, and 
companies with which they are associated was as follows:


                                                          DECEMBER 31,
                                                      1996             1995

            Beginning balance                   $ 1,621,867      $ 2,214,833
            Loans made                               74,000          299,164
            Loans paid                             (248,658)        (892,130)

            Ending balance                      $ 1,447,209      $ 1,621,867

<PAGE>

NOTE 17 -	REGULATORY MATTERS

	The Bank is subject to various regulatory capital requirements 
administered by federal banking agencies. Failure to meet minimum capital 
requirements can initiate certain mandatory - and possibly additional 
discretionary - actions by regulators that, if undertaken, could have a direct 
material effect on the Bank's financial statements. Under capital adequacy 
guidelines and the regulatory framework for prompt corrective action, the Bank 
must meet specific capital guidelines that involve quantitative measures of 
the Bank's assets, liabilities, and certain off-balance-sheet items as 
calculated under regulatory accounting practices. The Bank's capital amounts 
and classification are also subject to qualitative judgments by the regulators 
about components, risk weightings, and other factors.

	Quantitative measures established by regulation to ensure capital 
adequacy require the Bank to maintain minimum amounts and ratios (set forth in 
the table below) of total and Tier I capital (as defined in the regulations) 
to risk-weighted assets (as defined), and of Tier I capital to average assets 
(as defined). Management believes, as of December 31, 1996, that the Bank 
meets all capital adequacy requirements to which it is subject.

	As of December 31, 1996, the most recent notification from the 
Office of the Comptroller of the Currency categorized the Bank as adequately 
capitalized under the regulatory framework for prompt corrective action. To be 
categorized as adequately capitalized the Bank must maintain minimum total 
risk-based, Tier I risk-based, and Tier I leverage ratios as set forth in the 
table. There are no conditions or events since that notification that 
management believes have changed the institution's category.

<TABLE>
<CAPTION>
                                                           FOR CAPITAL           PROMPT CORRECTIVE
                                    ACTUAL              ADEQUACY PURPOSES        ACTION PROVISIONS
                                AMOUNT    RATIO          AMOUNT    RATIO          AMOUNT    RATIO

As of December 31, 1996
  (in thousands)
<S>                           <C>       <C>            <C>       <C>           <C>        <C>
Total capital to risk-weighted
  assets                       $ 20,628   17.3%         $  9,539   >8.0%        $ 11,924   >10.0%
                                                                   -                       -
Tier I capital to risk-weighted
  assets                       $ 19,139   16.1%         $  4,755   >4.0%        $  7,133   > 6.0%
                                                                   -                       _
Tier I capital to average
  assets                       $ 19,139   11.1%         $  6,897   >4.0%        $  8,622   >5.0%
                                                                   -                       -
As of December 31, 1995
  (in thousands)

Total capital to risk-weighted
  assets                       $ 17,680   17.6%         $  8,036  >8.0%         $ 10,045   >10.0%
                                                                  -                        -
Tier I capital to risk-weighted
  assets                       $ 16,420   16.3%         $  4,029  >4.0%         $  6,043   >6.0%
                                                                                           -
Tier I capital to average
  assets                       $ 16,420   10.8%         $  6,081  >4.0%         $  7,601   >5.0%
                                                                  -                        -
</TABLE>

<PAGE>

NOTE 18 -	PARENT COMPANY FINANCIAL INFORMATION

Condensed financial information for VRB Bancorp (unconsolidated 
parent company only) is as follows:


                                                          DECEMBER 31,
                                                      1996             1995

            ASSETS
              Cash                              $      122,128    $       30,912
              Investment in subsidiary              19,993,191        17,358,972
              Goodwill                                  72,815            79,861

                                                $   20,188,134    $   17,469,745

            SHAREHOLDERS' EQUITY
              Common stock                      $    9,480,330    $    9,085,013
              Retained earnings                      10,652,015        8,355,113
              Market value adjustment, available-
                for-sale securities, net of taxes        55,789           29,619

                                                $    20,188,134   $   17,469,745


<TABLE>
<CAPTION>
                                                            YEARS ENDED DECEMBER 31,
                                                         1996         1995         1994
<S>                                              <C>          <C>           <C>
     REVENUES
       Equity in undistributed
         earnings of subsidiary bank               $ 2,456,348  $ 2,390,137  $ 2,091,828
       Dividends                                       845,000      525,000      425,000

     EXPENSES
       Goodwill and other administrative expenses      (50,078)      (7,046)      (7,046)

     Net income                                    $ 3,251,270  $ 2,908,091  $ 2,509,782

</TABLE>

<PAGE>

NOTE 19 -	PARENT COMPANY FINANCIAL INFORMATION - (Continued)
<TABLE>
<CAPTION>
                                                            YEARS ENDED DECEMBER 31,
                                                         1996         1995         1994
<S>                                              <C>          <C>           <C>
     CASH FLOWS RELATED TO OPERATING
         ACTIVITIES
       Net income                                  $ 3,251,270  $ 2,908,091  $ 2,509,782
       Adjustments to reconcile net income to net
           cash provided by operating activities:
         Equity in undistributed earnings
           of subsidiary bank                       (2,456,348)  (2,390,137)  (2,091,828)
         Amortization                                    7,046        7,046        7,046
                 Net cash provided by operating
                    activities                         801,968      525,000      425,000

     CASH FLOWS RELATED TO FINANCING
         ACTIVITIES
       Cash dividends and fractional share payments  (954,368)     (562,057)    (477,168)
       Cash received from exercise of
         common stock options                         243,616        31,781       56,327
                 Net cash used in
                   financing activities              (710,752)     (530,276)    (420,842)

     NET INCREASE (DECREASE) IN CASH
         AND CASH EQUIVALENTS                          91,216        (5,276)       4,159

     CASH AND CASH EQUIVALENTS,
        beginning of year                              30,912        36,188       32,029

     CASH AND CASH EQUIVALENTS,
       end of year                               $    122,128    $   30,912  $    36,188

</TABLE>

<PAGE>

INDEPENDENT AUDITOR'S REPORT



To the Board of Directors
	and Shareholders of VRB Bancorp

We have audited the accompanying consolidated balance sheets of VRB Bancorp as 
of December 31, 1996 and 1995, and the related statements of income, changes 
in shareholders' equity, and cash flows for the years ended December 31, 1996, 
1995, and 1994. These financial statements are the responsibility of VRB 
Bancorp's management. Our responsibility is to express an opinion on these 
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 VRB 
Bancorp as of December 31, 1996 and 1995, and the results of its operations 
and cash flows for the years ended December 31, 1996, 1995, and 1994, in 
conformity with generally accepted accounting principles.



Moss Adams LLP

Portland, Oregon
January 7, 1997

<PAGE>