<PAGE>

                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549

                                      FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended               December 31, 1996
                        -------------------------------------------------------

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

For the transition period from                     to
                              ---------------------  ---------------------------


Commission file number                        0-26552
                       ---------------------------------------------------------


                            California Independent Bancorp
--------------------------------------------------------------------------------
                (Exact name of registrant as specified in its charter)

          California                                 68-0349947
-----------------------------------    ----------------------------------------
State or other jurisdiction of         (I.R.S. Employer Identification No.)
incorporation or organization
        1005 Stafford Way, Yuba City, California                   95991
--------------------------------------------------------------------------------
(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number, including area code       (916) 674-4444
                                                  ------------------------------

Securities registered pursuant to Section 12(b) of the Act:

        Title of each class

              None
-----------------------------------     ----------------------------------------

             Securities registered pursuant to Section 12(g) of the Act:

                              Common Stock, no par value
--------------------------------------------------------------------------------
                                   (Title of class)


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

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ X]

Aggregate market volume of Common Stock held by non-affiliates
of California Independent Bancorp at February 28, 1997:              $29,816,105

Number of shares of Common Stock outstanding at February 28, 1997:     1,546,032

Documents Incorporated by Reference

Proxy Statement for 1997 Annual Meeting of Shareholders to be filed pursuant
to Regulation 14A.

                                               Part III, Items 10, 11, 12 and 13
                                       THIS REPORT INCLUDES A TOTAL OF ___ PAGES
                                                     EXHIBIT INDEX IS ON PAGE 73

<PAGE>

                                      I N D E X
                                      ----------


         DESCRIPTION                                                   PAGE NO.


ITEM 1.  BUSINESS.............................................................1
ITEM 2.  PROPERTIES..........................................................23
ITEM 3.  LEGAL PROCEEDINGS...................................................25
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.................25
ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
         MATTERS.............................................................25
ITEM 6.  SELECTED FINANCIAL DATA.............................................26
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS......27
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.........................27
ITEM 10  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..................28
ITEM 11  EXECUTIVE COMPENSATION..............................................31
ITEM 12  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT..........................................................39
ITEM 13  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS......................42
ITEM 14  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
         ON FORM 8-K.........................................................43

                                          2
<PAGE>

                                        PART I

ITEM 1.  BUSINESS

GENERAL

    California Independent Bancorp ("Company") is a California corporation and
the bank holding company for Feather River State Bank ("Bank"), both located in
Yuba City, California.  The Bank was incorporated as a California state banking
corporation on December 1, 1976, and commenced operations on April 6, 1977.  The
Company was incorporated on October 28, 1994 and became the bank holding company
for Feather River State Bank (the "Bank") on May 2, 1995 pursuant to the Bank
Holding Company Act ("BHC Act").

    On October 1, 1996, the Company acquired E.P.I. Leasing Co., Inc., an
equipment lessor ("EPI").

GENERAL BANKING SERVICES

    The Bank engages in a broad range of financial services activities, and its
primary market is located in the northern portion of the Sacramento Valley, with
a total of seven branches in Yuba City, Marysville, Colusa, Arbuckle, Wheatland
and Woodland, California  serving Sutter, Yuba, Colusa and Yolo Counties.  The
total population base in these six counties is approximately 1.6 million people,
the majority of which is in Sacramento County which has 1.1 million people.  The
Bank's branch in Wheatland, California opened on March 6, 1997 in a temporary
facility.  Bank of America closed its branch in Wheatland on March 21, 1997,
which was the only other banking facility in Wheatland.  The Bank decided to
open a branch in Wheatland after requests by numerous residents and the City
Council.  Wheatland is primarily an agricultural area.  In addition, the Bank
operates two loan production offices ("LPOs"), in Roseville, California in
Sacramento County and in Chico, California in Butte County.  Both of these LPOs
emphasize residential mortgage and construction lending.  The Bank intends to
open an LPO in Madera, California, an agricultural area just north of Fresno, in
the second quarter of 1997.  The decision to open an LPO in Madera was based
upon residents contacting the Bank suggesting that the Bank open a facility and
the results of a focus group conducted in December, 1996, showing a need for
agricultural lending and other services in this area.  The Bank currently has
agricultural loans in this area.  The Bank intends to offer agricultural loans,
residential real estate and construction loans and equipment leasing through its
subsidiary, E.P.I.

    With the exception of Sacramento County, whose main economic force is
government, the Bank's operating territory is predominantly agricultural in
nature.

                                          1

<PAGE>

Food crops grown in the area are all grown on irrigated land and range from
tomatoes and rice to tree nuts, peaches and prunes.

    Due to the agricultural nature of the economy in the Bank's operating
territory and the diversification of crops produced, economic conditions in the
Bank's market areas have remained more stable than in other parts of California
during the recent recession.

    The Bank's branches in Yuba City and Marysville (Sutter and Yuba Counties)
are in areas which are at the periphery of housing for those individuals who
work in the growing Sacramento area.

    The Bank currently has no applications pending to open additional branch
offices or LPOs, other than for Madera, California, but the Bank may increase
the number of its banking facilities in the Bank's trade areas when such
expansion is appropriate.  The Bank's expansion program is, of course, dependent
on obtaining the necessary governmental approvals, a continued earnings pattern
and absence of adverse effects from economic conditions, governmental monetary
policies or competition.  No assurance can be given that all or any part of the
Bank's expansion program can be accomplished without the Bank being required to
raise additional capital in the future.

    The Bank conducts a commercial banking business including accepting demand,
savings and time deposits and making commercial, real estate, agricultural and
consumer loans and factoring of accounts receivable.  The Bank also offers
equipment leasing through its subsidiary, EPI.  It also offers installment note
collection, issues cashier's checks and money orders, sells traveler's checks,
and provides bank-by-mail, night depository, safe deposit boxes and other
customary banking services.  The Bank installed ATMs for the first time in 1996
at each of its branches.  In connection with the relocation of the Bank's
Agricultural and Real Estate Departments in March 1997 to a separate building on
Tharp Road in Yuba City, which formerly was a bank branch, it has installed two
ATMs at this building.  The Bank is a member of the Federal Deposit Insurance
Corporation and each depositor's account is insured up to $100,000.  The Bank
does not offer trust services or international banking services and does not
plan to do so in the near future.

DEPOSITS

    Most of the Bank's deposits are attracted from individuals, small and
medium-sized businesses and professionals.  A material portion of the Bank's
deposits has not been obtained from a single person or a few persons, the loss
of any one or more of which would not have a materially adverse effect on the
business of the Bank.

                                          2

<PAGE>


LENDING ACTIVITIES

    The Bank engages in a full complement of lending activities, including
commercial, agricultural, real estate and consumer/ installment loans and
factoring of accounts receivable.

    Agricultural loans are made to finance agricultural production generally as
nonrevolving lines of credit that are drawn on when crop expenses are incurred
and are repaid as crop sale proceeds are received.  These loans are secured by
the crops and the proceeds.  The Bank generally requires a repayment margin of
25% for permanent plantings (i.e., tree and vine crops) and 20% for row crops.
As of December 31, 1996, the Bank had agricultural production loans outstanding
of $46,786,000 which represented 31.0% of the Bank's loan portfolio.
Approximately 5% of these loans are guaranteed by the Farm Service Agency (FSA).

    The Bank makes real estate loans for farm land and residential loans.
Loans for farm land include loans for farm residences and other improvement
loans and are secured by a first lien on real estate.  The maximum loan-to-value
ratio for farm land is 65%.  Residential loans are made to purchase or refinance
1 to 4 family residences or multi-family residential properties and are secured
by a first deed of trust on the property except for loans to improve existing
properties which are secured by junior liens.  The maximum loan-to-value ratio
for these loans is 80%.  As of December 31, 1996, these types of real estate
secured loans equalled $13,765,000 or 9.11% of the Bank's loan portfolio.

    The Bank also makes real estate construction and development loans for
acquisition of raw land to be developed into subdivisions and for the
construction of one to four family and multi-family housing.  These loans are
secured by a first deed of trust and have maximum loan to value ratios ranging
from 65% to 80%.  As of December 31, 1996, the Bank had outstanding loans of
$29,521,000 for these purposes representing 19.54% of the Bank's loan portfolio
as compared to $18,048,000 or 13.96% as of December 31, 1995.  This increase in
real estate construction and development loans reflects the economy recovery in
Northern California following the last recession.

    The Bank makes commercial real estate loans for such purposes as offices,
warehouses, professional buildings, retail and storage facilities, and other
purposes.  These loans are secured by first deeds of trust and typically are
fully or partially owner-occupied, have a maximum loan-to-value ratio of 65% and
mature in five years or less.  As of December 31, 1996, the Bank had a total of
$15,194,000 in these loans representing 10.06% of the Bank's loan portfolio.

                                          3

<PAGE>


    The Bank makes commercial and industrial loans to small-to-medium-sized
businesses for working capital, loans secured by inventory and receivables, term
loans for equipment and for working capital.  Typically, the Bank obtains a
security interest in the collateral being financed or in other available assets
of the customer.  Loan to value ratios vary but generally do not exceed 75%.  As
of December 31, 1996, the Bank had outstanding loans for these purposes of
$26,891,000 representing 17.80% of the Bank's loan portfolio.

    Consumer and installment loans and leases are made for household, family
and other personal expenditures.  These loans are made on both a secured and
unsecured basis.  As of December 31, 1996 the Bank had a total of $18,943,000 in
consumer and installment loans and leases or 12.54% of its loan portfolio.

    The Bank originates mortgage loans on residential and farm properties which
it sells into the secondary market in order to divest itself of the interest
rate risk associated with these mostly fixed interest rate products.  The Bank
accounts for these loans in accordance with the Emerging Issues Task Force
Issues No. 88-11, "Allocation of Recorded Investment when a Loan is Sold", No.
86-38, "Implication of Mortgage Prepayments on Amortization of Servicing
Rights", and No. 84-21, "Sale of a Loan with a Partial Participation Retained".
These loans are sold without recourse.  As of December 31, 1996, 1995, and 1994,
total loans serviced by the Bank were $107,637,000, $107,141,759, and
$105,307,587.  For the years ended December 31, 1996, 1995 and 1994, total loans
sold by the Bank were $36,302,000, $8,935,100 and $17,617,681.

    Being in an agricultural area the Bank participates in the Farmer Mac I
loan program, pursuant to which it makes and then sells agricultural real estate
loans to the Travelers Realty Insurance Company and the Federal Agricultural
Mortgage Corporation.  In addition, the Bank participates in the Farmer Mac II
loan program pursuant to which it makes FmHA guaranteed farm real estate loans
and subsequently sells the 90% guaranteed portion of these loans directly to the
Federal Agricultural Mortgage Corporation ("Farmer Mac") and often retains the
servicing of these loans for which it receives a fee.  The Bank is one of the
largest lenders in the U.S. in the Farmer Mac program.

    The Bank's real estate department makes mortgage and construction loans.
Its mortgage loans are typically 15 year and 30 year loans with either
adjustable or fixed interest rates.  These mortgage loans are pre-sold to
minimize the Bank's interest rate risk.  The Bank sells mortgage loans to Fannie
Mae, Freddie Mac, and to other mortgage lenders.  The loans sold to Fannie Mae
and Freddie Mac are usually sold servicing retained, for which the Bank
continues to be paid a fee for collecting payments on the loan and performing
other services, and are also sold servicing released, where the Bank does not
perform these services but receives higher

                                          4

<PAGE>

compensation upon purchase of the loan.  With the opening of the Woodland branch
in 1993, the Bank makes mortgage loans in Yolo County and the Greater Sacramento
area.  In 1995 and 1996 the Bank generated approximately $20,000,000 and
$28,297,000 in residential mortgage loans.

    Pursuant to California law, the Bank's legal lending limit to any one
borrower is 15% of its shareholders' equity and allowance for loan losses for
unsecured loans and 25% for secured loans.

    In May of 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard 122, Accounting for Mortgage Servicing Rights.
This statement eliminates the accounting distinction between rights to service
mortgage loans for others that are acquired through loan origination activities
and those acquired through purchase transactions.  Under this statement, if the
Company sells or securitizes loans and retains the mortgage servicing rights,
the Company should allocate the total cost of the mortgage loan to the loan and
the mortgage servicing rights based on their relative fair values.  Any cost
allocated to the mortgage servicing rights should be recognized as a separate
asset and amortized over the period estimated net service income.

    The provisions of this statement apply to fiscal years beginning after
December 15, 1995.  Accordingly, the Company adopted this statement on January
1, 1996.  The adoption of this statement does not have a significant impact on
its financial position and results of operations.

    The risks associated with commercial banking consist primarily of interest
rate risk and credit risk.  The Bank attempts to manage its interest rate risk
by making variable rate loans and by interest rate gap analysis.

    Credit risk relates to the ability of a borrower to repay the principal and
interest on their loan and is managed by adherence to credit standards and the
taking of collateral to secure most of the Bank's loans.

    The majority of the Bank's loan portfolio consists of loans with variable
interest rates.  The following chart illustrates the composition of the Bank's
loan portfolio as of December 31, 1996, as it pertains to interest-rate
sensitivity:

                                      FIXED RATE
                             --------------------------------
TOTAL LOAN    VARIABLE-RATE
 PORTFOLIO        LOANS       UNDER 1 YR.         OVER 1 YR.
----------    -------------  ---------------     ------------
$151,100,000  $108,419,000     $20,219,000       $22,462,000

                                          5

<PAGE>

    This chart shows that a total of $128,638,000 of the Bank's loans are
repriceable within one year.

    On a monthly basis, the Bank calculates its interest-rate gap position
whereby interest-rate-sensitive assets are compared with interest-rate-sensitive
liabilities for specific periods to determine if the Bank is susceptible to
significant earnings changes as a result of changes in interest rates.  If the
gap percentage is positive, the Bank's interest earnings would increase during a
period of increasing interest rates and the Bank's interest earnings would
decrease during a period of declining interest rates.  The reverse would be true
if the Bank has a negative gap.  The Bank puts more emphasis on its gap position
for periods up to one year, as it is felt that a longer horizon gives the Bank
more time and flexibility to reposition its assets and liabilities to counteract
any potential earnings decrease.

    The following chart illustrates the gap position of the Bank as of December
31, 1996:

                             MATURE OR
                              REPRICE          1-90      91-183       184-365
                            IMMEDIATELY        DAYS       DAYS          DAYS
                            -----------     --------  ---------     ----------
                                               (IN THOUSANDS)
Rate-sensitive
  Assets                       $142,485     $ 21,340  $   5,568     $   8,563
Rate-sensitive
  Liabilities                    41,741       88,797     19,867        22,745
Interest Rate
  Sensitivity Gap              $100,744     $(67,457)  $(14,299)     $(14,182)
Cumulative Interest
  Rate Sensitivity Gap         $100,744      $33,287     18,988       $ 4,807
Cumulative Gap as a
  Percentage of
  Total Assets                    38.7%         12.8%      7.3%          1.8%

    It is the Bank's policy to maintain a one-year gap of between 0% and 6%.

    Most of the Bank's deposits are attracted by the Bank's established
reputation in the communities it serves and through advertising in the local
media.  A material

                                          6

<PAGE>

portion of the Bank's deposits has not been obtained from a single person or a
few persons, the loss of any or more of which would not have a materially
adverse effect on the business of the Bank.

    The underwriting criteria for agricultural and mortgage loans sold in the
secondary market are established by the purchasers of the loans.  In certain
instances the Bank will make mortgage loans for its own portfolio at variable
interest rates.

    The Bank has made Small Business Administration ("SBA") loans since its
inception.  The Bank offers both SBA 7(a) and SBA 504 real estate guaranteed
loans ranging from amounts of $50,000 to $2,000,000.  SBA 7(a) loans are for
such purposes as working capital, inventory and other purposes, and are
guaranteed up to 80%.  SBA 504 loans are made to finance commercial real estate.
The SBA loan program is continually subject to political and budgetary
uncertainty which, in recent years has resulted in a reduction of the guaranteed
portion of SBA loans and lower maximum loan amounts.

    The Bank also offers business and industrial guaranteed loans through the
Rural Development Administration ("RDA").  These loans are designated for
businesses that create jobs in rural areas.  RDA loans are in amounts up to $10
million and are 90% guaranteed by the RDA.  The Bank sells the guaranteed
portion of its SBA and RDA loans in the secondary market.

INVESTMENT POLICY

    The Bank's investment policy is to provide the Bank with the maximum return
on its investment securities consistent with safety and liquidity.

    In accordance with this policy and state laws regarding permissible
investments the Bank invests in U.S. Treasury and Agency securities with a
maturity of 10 years or less; tax-free municipal bonds rated "A" or better by
Moody's with a maturity not to exceed 13 years; corporate bonds rated "A" or
better by Standard and Poors or Moody's with a maturity not to exceed 7 years.
The Bank also invests in Federal funds.

    The Bank's investment securities may also be used as collateral for public
deposits and for other borrowings.

OTHER SERVICES

    The Bank also offers other financial products and services including
annuities, mutual funds, mutual fund advisory service, IRA's, brokerage and
custodial services,

                                          7

<PAGE>

401(k) plans, estate plans, asset management, asset consulting, charitable
remainder trusts, fiduciary services, pension plans, nonqualified deferred
compensation, retirement plans and trust services.  All of these investments
and/or financial services are offered by a registered investment representative
through the Bank's affiliation with Select Advisors, Inc., a registered
broker/dealer and a member of the National Association of Securities Dealers
("NASD") and the Securities Investor Protection Corporation ("SIPC").  Trust
services are provided by the Boston Safe Deposit and Trust Company of
California.

    The Bank's primary service area consists of Colusa, Sutter, Yolo and Yuba
Counties.  It is estimated that this service area contains 37 competitive
banking offices, of which nine offices are owned by other independent banks.  It
is estimated that the primary service area also contains 4 offices of savings
and loan associations, and 6 offices of credit unions.  Based upon total bank
deposits as of June 30, 1996 (the last period for which data is available), the
Bank is first in market share in Sutter County, fourth in Yuba and Colusa
counties and tenth in Yolo County which the Bank entered in 1993.

    The banking business in California generally, and in the Bank's primary
service area specifically is highly competitive with respect to both loans and
deposits, and is dominated by a relatively small number of major banks with many
offices operating over a wide geographic area.  Among the advantages such major
banks have over the Bank are their ability to finance wide ranging advertising
campaigns and to allocate their investment assets to regions of highest yield
and demand.  Such institutions offer certain services such as trust services and
international banking which are not offered directly by the Bank (but are
offered indirectly through correspondent institutions) and, by virtue of their
greater total capitalization (legal lending limits to an individual customer are
limited to a percentage of a bank's total capital accounts), they have
substantially higher lending limits than does the Bank.  Other entities, both
governmental and in private industry, seeking to raise capital through the
issuance and sale of debt or equity securities also provide competition for the
Bank in the acquisition of deposits.  The Bank also competes with money-market
funds for deposits.

    In order to compete with major financial institutions and other competitors
in its primary service areas, the Bank relies upon the experience of its
executive and senior officers in serving business individuals, and upon its
specialized service, local promotional activities and the personal contacts made
by its officers, directors and employees.  For customers whose loan demand
exceeds the Bank's legal lending limit, the Bank may arrange for such loans on a
participation basis with correspondent banks.  The Bank's lending limit is 15%
of its capital and allowance for loan losses for unsecured loans and 25% of its
capital and allowance for loan losses for unsecured and secured loans.

                                          8

<PAGE>

SUPERVISION AND REGULATION

     The Bank is chartered under the banking laws of the State of California and
is subject to the supervision of, and is regularly examined by, the
Superintendent and the FDIC.

     The Company is a bank holding company within the meaning of the BHC Act, is
registered as such with and is subject to the supervision of the Federal Reserve
Board ("FRB") and regularly files proxy statements, periodic and other reports
with the Securities and Exchange Commission as a registered company under
Section 12 of the Securities Exchange Act of 1934, as amended.

     Certain legislation and regulations affecting the businesses of the Company
and the Bank are discussed below.

GENERAL

    As a bank holding company, the Company is subject to the BHC Act.  The
Company reports to, registers with, and is examined by the FRB.  The FRB also
has the authority to examine the Company's subsidiaries which includes the Bank.

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

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

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

                                          9

<PAGE>

benefits to the public of the proposed activity will outweigh the possible
adverse effects associated with such activity.

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

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

CAPITAL STANDARDS

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

                                          10

<PAGE>


    A banking organization's risk based capital ratios are obtained by dividing
its qualifying capital by its total risk-adjusted assets and off balance sheet
items.  The regulators measure risk-adjusted assets and off balance sheet items
against both total qualifying capital (the sum of Tier 1 capital and limited
amounts of Tier 2 capital) and Tier 1 capital.  Tier 1 capital consists of
common stock, retained earnings, noncumulative perpetual preferred stock and
minority interests in certain subsidiaries, less most other intangible assets.
Tier 2 capital may consist of a limited amount of the allowance for possible
loan and lease losses and certain other instruments with some characteristics of
equity.  The inclusion of elements of Tier 2 capital are subject to certain
other requirements and limitations of the federal banking agencies.  Since
December 31, 1992, the federal banking agencies have required a minimum ratio of
qualifying total capital to risk-adjusted assets and off balance sheet items of
8%, and a minimum ratio of Tier 1 capital to risk-adjusted assets and off
balance sheet items of 4%.

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

    The following tables present the capital ratios for the Company and the
Bank as of December 31, 1996.

                                             THE COMPANY          THE BANK
                                         ------------------  -----------------
                                          AMOUNT      RATIO   AMOUNT     RATIO
                                         --------     -----  --------    -----
                                          (000's)             (000's)
RISK-BASED CAPITAL RATIOS:
 Tier 1 Capital . . . . . . . . . . .    $ 21,813    11.31%   $21,804   11.32%
 Minimum Requirement                        7,713     4.00%     7,708    4.00%
                                         --------    ------  --------   ------

                                          11

<PAGE>


                                            THE COMPANY          THE BANK
                                         ------------------  -----------------
                                          AMOUNT      RATIO   AMOUNT     RATIO
                                         --------     -----  --------    -----
                                          (000's)             (000's)
    Excess. . . . . . . . . . . . . .    $ 14,100     7.31%  $ 14,096    7.32%
                                         --------    ------  --------   ------
                                         --------    ------  --------   ------
 Total Capital. . . . . . . . . . . .    $ 22,918    11.89%  $ 24,225   12.57%
 Minimum Requirement. . . . . . . . .      15,426     8.00%    15,415    8.00%
                                         --------    ------  --------   ------
    Excess. . . . . . . . . . . . . .    $  7,492     3.89%  $  8,810    4.57%
                                         --------    ------  --------   ------
                                         --------    ------  --------   ------
Risk-Adjusted Assets. . . . . . . . .    $192,825            $192,693

LEVERAGE RATIO:
 Tier 1 Capital . . . . . . . . . . .    $ 21,813     8.82%  $ 21,804    8.82%
  Minimum Requirement . . . . . . . .       9,891     4.00%     9,890    4.00%
                                         --------    ------  --------   ------
  Excess. . . . . . . . . . . . . . .    $ 11,922     4.82%  $ 11,914    4.82%
                                         --------    ------  --------   ------
                                         --------    ------  --------   ------
Total Adjusted Assets . . . . . . . .    $247,274            $247,255


    SAFETY AND SOUNDNESS STANDARDS

    The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") implemented certain specific restrictions on transactions and
required the regulators to adopt overall safety and soundness standards for
depository institutions related to internal control, loan underwriting and
documentation, and asset growth.  Among other things, FDICIA limits the interest
rates paid on deposits by undercapitalized institutions, the use of brokered
deposits and the aggregate extension of credit by a depository institution to an
executive officer, director, principal stockholder or related interest, and
reduces deposit insurance coverage for deposits offered by undercapitalized
institutions for deposits by certain employee benefits accounts.

    The federal financial institution agencies published a final rule effective
on August 9, 1995, implementing safety and soundness standards.  The FDICIA
added a new Section 39 to the Federal Deposit Insurance Act which required the
agencies to establish safety and soundness standards for insured financial
institutions covering (1) internal controls, information systems and internal
audit systems; (2) loan

                                          12

<PAGE>

documentation; (3) credit underwriting; (4) interest rate exposure; (5) asset
growth; (6) compensation, fees and benefits; (7) asset quality, earnings and
stock valuation; and (8) excessive compensation for executive officers,
directors or principal shareholders which could lead to material financial loss.
The agencies issued the final rule in the form of guidelines only for
operational, managerial and compensation standards and reissued for comment
proposed standards related to asset quality and earnings which are less
restrictive than the earlier proposal in November 1993.  Unlike the earlier
proposal, the guidelines under the final rule do not apply to depository
institution holding companies and the stock valuation standard was eliminated.
If an agency determines that an institution fails to meet any standard
established by the guidelines, the agency may require the financial institution
to submit to the agency an acceptable plan to achieve compliance with the
standard.  If the agency requires submission of a compliance plan and the
institution fails to timely submit an acceptable plan or to implement an
accepted plan, the agency must require the institution to correct the
deficiency.  Under the final rule, an institution must file a compliance plan
within 30 days of a request to do so from the institution's primary federal
regulatory agency.  The agencies may elect to initiate enforcement action in
certain cases rather than rely on an existing plan particularly where failure to
meet one or more of the standards could threaten the safe and sound operation of
the institution.

RESTRICTIONS ON DIVIDENDS AND OTHER DISTRIBUTIONS

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

    The FRB has issued a policy statement that a bank holding company should
not declare or pay a cash dividend to its stockholders if the dividend would
place undue pressure on the capital of its subsidiary banks or if the dividend
could be funded only through additional borrowings or other arrangements that
might adversely affect the financial position of the bank holding company.
Specifically, a bank holding company should not continue its existing rate of
cash dividends on its common stock unless its net income is sufficient to fully
fund each consistent with its capital needs, asset quality, and overall
financial condition.  Further, the Company is expected to act as a source of
financial strength for each of its subsidiary banks and to commit resources to
support each subsidiary bank in circumstances when it might not do so absent
such policy.

                                          13

<PAGE>

    The Company's ability to pay dividends depends in large part on the ability
of the Bank to pay management fees and dividends to the Company.  The ability of
its subsidiary banks to pay dividends will be subject to restrictions set forth
in the California Banking Law and regulations of the FDIC.

    The payment of dividends by a state bank is further restricted by
additional provisions of state law.  Under Section 642 of the California
Financial Code, funds available for cash dividend payments by a bank are
restricted to the lesser of: (i) retained earnings; or (ii) the bank's net
income for its three fiscal years (less any distributions to stockholders made
during such period).  However, under Section 643 of the California Financial
Code, with the prior approval of the Superintendent, a bank may pay cash
dividends in an amount not to exceed the greater of the: (1) retained earnings
of the bank; (2) net income of the bank for its last fiscal year; or (3) net
income of the bank for its current fiscal year.  However, if the Superintendent
finds that the stockholders' equity of the bank is not adequate or that the
payment of a dividend would be unsafe or unsound, the Superintendent may order
such bank not to pay a dividend to stockholders.  Currently, it is permissible
for the Bank to pay cash dividends without the Superintendent's prior approval.

    Additionally, under FDICIA, a bank may not make any capital distribution,
including the payment of dividends, if after making such distribution the bank
would be in any of the "under-capitalized" categories under the FDIC's Prompt
Corrective Action regulations.

    Also, under the Financial Institution's Supervisory Act, the FDIC also has
the authority to prohibit a bank from engaging in business practices which the
FDIC considers to be unsafe or unsound.  It is possible, depending upon the
financial condition of a bank and other factors, that the FDIC could assert that
the payment of dividends or other payments in some circumstances might be such
an unsafe or unsound practice and thereby prohibit such payment.

INTERSTATE BANKING AND BRANCHING

    On September 29, 1994, the Reigle/Neal Interstate Banking and Branching
Efficiency Act of 1994 (the "Interstate Act") was signed into law.  This
Interstate Act effectively permits nationwide banking.  The Interstate Act
provides that one year after enactment, adequately capitalized and adequately
managed bank holding companies may acquire banks in any state, even in those
jurisdictions that currently bar acquisition by out-of-state institutions,
subject to deposit concentration limits.  The deposit concentration limits
provide that regulatory approval by the Federal Reserve Board may not be granted
for a proposed interstate acquisition if after the acquisition, the acquiror on
a consolidated basis would control more than 10% of the total deposits
nationwide or would control more than 30% of deposits in the state where

                                          14

<PAGE>

the acquiring institution is located.  The deposit concentration state limit
does not apply for initial acquisitions in a state and in every case, may be
waived by the state regulatory authority.  Interstate acquisitions are subject
to compliance with the Community Reinvestment Act ("CRA").  States are permitted
to impose age requirements not to exceed five years on target banks for
interstate acquisitions.

    Branching between states may be accomplished either by merging separate
banks located in different states into one legal entity, or by establishing de
novo branches in another state.  Consolidation of banks is not permitted until
June 1, 1997 provided that the state has not passed legislation "opting-out" of
interstate branching.  If a state opts-out prior to June 1, 1997, then banks
located in that state may not participate in interstate branching.  A state may
opt-in to interstate branching by bank consolidation or by de novo branching by
passing appropriate legislation earlier than June 1, 1997.  California has
passed legislation to opt-in to this legislation.  Interstate branching is also
subject to a 30% statewide deposit concentration limit on a consolidated basis,
and a 10% nationwide deposit concentration limit.  The laws of the host state
regarding community reinvestment, fair lending, consumer protection (including
usury limits) and establishment of branches shall apply to the interstate
branches.

    De novo branching by an out-of-state bank is not permitted unless the host
state expressly permits de novo branching by banks from out-of-state.  The
establishment of an initial de novo branch in a state is subject to the same
conditions as apply to initial acquisition of a bank in the host state other
than the deposit concentration limits.

    Effective one year after enactment, the Interstate Act permits bank
subsidiaries of a bank holding company to act as agents for affiliated
depository institutions in receiving deposits, renewing time deposits, closing
loans, servicing loans and receiving payments on loans and other obligations.  A
bank acting as agent for an affiliate shall not be considered a branch of the
affiliate.  Any agency relationship between affiliates must be on terms that are
consistent with safe and sound banking practices.  The authority for an agency
relationship for receiving deposits includes the taking of deposits for an
existing account but is not meant to include the opening or origination of new
deposit accounts.  Subject to certain conditions, insured saving associations
which were affiliated with banks as of June 1, 1994, may act as agents for such
banks.  An affiliate bank or saving association may not conduct any activity as
an agent which such institution if prohibited from conducting as principal.

    If an interstate bank decides to close a branch located in a low-or
moderate-income area, it must comply with additional branch closing notice
requirements.  The appropriate regulatory agency is authorized to consult with
community organizations

                                          15
<PAGE>

to explore options to maintain banking services in the affected community where
the branch is to be closed.

    To ensure that interstate branching does not result in taking deposits
without regard to a community's credit needs, the regulatory agencies are
directed to implement regulations prohibiting interstate branches from being
used as "deposit production offices."  The regulations to implement this
provision are due by June 1, 1997.  The regulations must include a provision to
the effect that if loans made by an interstate branch are less than fifty
percent of the average of all depository institutions in the state, then the
regulator must review the loan portfolio of the branch.  If the regulator
determines that the branch is not meeting the credit needs of the community, it
has the authority to close the branch and to prohibit the bank from opening new
branches in the state.

    The Caldera, Weggeland and Killea California Interstate Banking and
Branching Act of 1995, effective October 2, 1995, (the "Caldera Act") amends the
California Financial Code to, among other matters, regulate the operations of
state banks to eliminate conflicts with and to implement the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 discussed above.  The
Caldera Act includes (1) an election to permit early interstate merger
transactions; (2) a prohibition against interstate branching through the
acquisition of a branch business unit located in California without acquisition
of the whole business unit of the California bank; and (3) a prohibition against
interstate branching through de novo establishment of California branch offices.
The Caldera Act mandates that initial entry into California by an out-of-state
institution be accomplished by acquisition of or merger with an existing whole
bank which has been in existence for at least five years.

COMMUNITY REINVESTMENT ACT

    In October 1994, the federal financial institution regulatory agencies
proposed a comprehensive revision of their regulations implementing the
Community Reinvestment Act ("CRA"), enacted in 1977 to promote lending by
financial institutions to individuals and businesses located in low and moderate
income areas.  In May 1995, the proposed CRA regulations were published in final
form effective as of July 1, 1995.  The revised regulations included
transitional phase-in provisions which generally require mandatory compliance
not later than July 1, 1997, although earlier voluntary compliance is
permissible.  Under the former CRA regulations, compliance was evaluated by an
assessment of the institution's methods for determining, and efforts to meet,
the credit needs of such borrowers.  This system was highly criticized by
depository institutions and their trade groups as subjective, inconsistent and
burdensome, and by consumer representatives for its alleged failure to
aggressively penalize poor CRA performance by financial institutions.  The
revised CRA regulations emphasize an assessment of actual performance rather
than of the procedures

                                          16

<PAGE>

followed by a bank, to evaluate compliance with the CRA.  Overall CRA compliance
continues to be rated across a four-point scale from "outstanding" to
"substantial noncompliance," and continues to be a factor in review of
applications to merge, establish new branches or form bank holding companies.
In addition, any bank rated in "substantial noncompliance" with the revised CRA
regulations may be subject to enforcement proceedings.

    The regulations provide that "small banks", which are defined to include
any independent bank with total assets of less than $50 million, are to be
evaluated by means of a so-called "streamlined assessment method" unless such a
bank elects to be evaluated by one of the other methods provided in the
regulations.  The differences between the evaluation methods may be summarized
as follows:

    (1)  The "streamlined assessment method" presumptively applicable to small
banks requires that a bank's CRA compliance be evaluated pursuant to five
"assessment criteria," including its (i) loan-to-deposit ratio (as adjusted for
seasonal variations and other lending-related activities, such as sales to the
secondary market or community development lending); (ii) percentage of loans and
other lending-related activities in the bank's service area(s); (iii)
distribution of loans and other lending-related activities among borrowers of
different income levels, given the demographic characteristics of its service
area(s); (iv) geographic distribution of loans and other lending-related
activities within its service area(s); and (v) record of response to written
complaints, if any, about its CRA performance.

    (2)  The "lending, investments and service tests method" is applicable to
all banks larger than $250 million which are not wholesale or limited purpose
banks and do not elect to be evaluated by the "strategic plan assessment
method."  Central to this method is the requirement that such banks collect and
report to their primary federal banking regulators detailed information
regarding home mortgage, small business and farm and community development loans
which is then used to evaluate CRA compliance.  At the bank's option, data
regarding consumer loans and any other loan distribution it may choose to
provide also may be collected and reported.

    Using such data, a bank will be evaluated regarding its (i) lending
performance according to the geographic distribution of its loans, the
characteristics of its borrowers, the number and complexity of its community
development loans, the innovativeness or flexibility of its lending practices to
meet low and moderate income credit needs and, at the bank's election, lending
by affiliates or through consortia or third-parties in which the bank has an
investment interest; (ii) investment performance by measure of the bank's
"qualified investments," that is, the extent to which the bank's investments,
deposits, membership shares in a credit union, or grants primarily to benefit
low or moderate income individuals and small businesses and farms, address
affordable housing or other needs not met by the private market, or

                                          17

<PAGE>

assist any minority or women-owned depository institution by donating, selling
on favorable terms or provisioning on a rent-free basis any branch of the bank
located in a predominately minority neighborhood; and (iii) service performance
by evaluating the demographic distribution of the bank's branches and ATMs, its
record of opening and closing them, the availability of alternative retail
delivery systems (such as telephone banking, banking by mail or at work, and
mobile facilities) in low and moderate income geographies and to low and
moderate income individuals, and (given the characteristics of the bank's
service area(s) and its capacity and constraints) the extent to which the bank
provides "community development services" (services which primarily benefit low
and moderate income individuals or small farms and businesses or address
affordable housing needs not met by the private market) and their innovativeness
and responsiveness.

    (3)  Wholesale or limited purpose banks which do not make home mortgage,
small farm or business or consumer loans to retail customers may elect, subject
to agency approval of their status, to be evaluated by the "community
development test method," which assesses the number and amount of the bank's
community development loans, qualified investments and community development
services and their innovativeness and complexity.

    (4)  Any bank may request to be evaluated by the "strategic plan assessment
method" by submitting a strategic plan for review and approval.  Such a plan
must involve public participation in its preparation, and contain measurable
goals for meeting low and moderate income credit needs through lending,
investments and provision of services.  Such plans generally will be evaluated
by measuring strategic plan goals against standards similar to those which will
be applied in evaluating a bank according to the "lending, investments and
service test method."

    The federal institution regulatory agencies issued a final rule effective
as of January 1, 1996 to make certain technical corrections to the revised CRA
regulations.  Among other matters, the rule clarifies the transition from the
former CRA regulations to the revised CRA regulations by confirming that when an
institution either voluntarily or mandatorily becomes subject to the performance
tests and standards of the revised regulations, the institution must comply with
all of the requirements of the revised regulations and is no longer subject to
the provisions of the former CRA regulations.

DEPOSIT INSURANCE

    On December 11, 1996 the FDIC finalized a rule lowering the rates on
assessments paid to the Savings Association Insurance Fund ("SAIF"), effective
October 1, 1996.  As a result of the special assessment required by the Deposit
Insurance Funds Act of 1996 ("Funds Act"), the SAIF must be capitalized at the
target

                                          18

<PAGE>

designated reserve ratio ("DRR") of 1.25 percent of estimated insured deposits
on October 1, 1996.  Section 7 of the Federal Deposit Insurance Act, as amended
by the Funds Act, requires the FDIC to set assessments in order to maintain the
target DRR.  Therefore, the FDIC has lowered the rates on assessments paid to
the SAIF, while simultaneously widening the spread between the lowest and
highest rates to improve the effectiveness of the FDIC's risk-based premium
system.  The FDIC also established a process, similar to that which has applied
to the Bank Insurance Fund ("BIF"), for adjusting the rate schedules for both
the SAIF and BIF within a limited range without notice and comment to maintain
each of the fund balances at the targeted DRR.  The Funds Act also separates,
effective January 1, 1997, the Financing Corporation ("FICO") assessment to
service the interest on its bond obligations from the SAIF assessment.  The
amount assessed on individual institutions by the FICO will be in addition to
the amount paid for deposit insurance according to the FDIC's risk-related
assessment rate schedules.

    The final rule establishes a SAIF assessment rate schedule of 0 to 27 basis
points effective for all institutions beginning January 1, 1997, in addition to
a special interim rate schedule for the fourth quarter of 1996.  The Funds Act
also provides that the assessment rates for SAIF members may not be less than
the assessment rates for BIF members which pose a comparable risk to the Deposit
Insurance Fund.  The Funds Act provides that assessments are authorized only if
necessary to maintain the DRR of a Deposit Insurance Fund.  In the event the
balance in a Deposit Insurance Fund is in excess of the DRR of such fund, such
excess amount shall be refunded to insured depository institutions by the FDIC
on such basis as the FDIC determines to be appropriate, taking into account the
factors considered under the risk-based assessment system.  In the case of any
payment of an assessment by an insured depository institution in excess of the
amount due to the FDIC, the FDIC may refund the amount of the excess payment to
the insured depository institution or credit such excess amount toward the
payment of subsequent semi-annual assessments until such credit is exhausted.
The Funds Act also provides that the BIF and the SAIF shall be merged into one
Deposit Insurance Fund effective January 1, 1999, if no insured depository
institution is a savings association on that date.

ECONOMIC GROWTH AND REGULATORY PAPERWORK REDUCTION ACT OF 1996

    The Economic Growth and Regulatory Paperwork Reduction Act of 1996 (the
"Regulatory Reduction Act"), was enacted in September 1996.  The Regulatory
Reduction Act streamlines many banking laws and Federal bank regulatory agencies
are in the process of promulgating regulations to implement the law.  The
Regulatory Reduction Act changes:  (i)  the procedures for merging, acquiring,
or assuming all or a part of another depositary institution have been simplified
for banks with the two highest regulatory ratings.  The regulators have
streamlined their internal approval procedures and expedited the review process
for proposals.  Top rated banks and

                                          19

<PAGE>

well run bank holding companies, qualify for the expedited treatment; (ii)  the
new rules eliminate the requirement for well capitalized and well managed banks
to obtain prior approval for investment in bank premises or the stock of a
corporation holding bank premises; (iii)  per branch capital requirements are
eliminated for well performing banks as are the requirement that a bank file a
branch application for ATMs;  (iv) the approval requirement for divestitures by
well run banks have been eliminated.  The process for acquisition of an interest
in certain nonbank activities has been simplified by eliminating notice
requirements for well capitalized and well managed banks.  Acquisitions are
still limited to permitted nonbank activities.  Permitted nonbank activities
have been greatly expanded.  The acquisition is limited in size to ten percent
of the consolidated total risk-weighted assets of the acquiring bank; (v) a
qualified bank holding company may engage in permissible activities listed in 12
USC 1843(c)(8) without prior notification to its federal regulator, but must
still give notification within 10 days of commencing the activity; (vi) banks
meeting minimum capital requirements may appoint directors without giving prior
notice to their regulator.  A bank that does not meet its minimum capital
requirements must give notice to its regulator 30 days prior to an appointment.
Once the notice is received, the federal regulator has 90 days to file an
objection to the appointment; (vii) the prohibitions against dual service of
management officials for large banks have been amended to increase the size of
the bank.  The effect of this change is to exempt some of the smaller banks from
this particular part of the management interlock prohibitions.  Those persons
who were grandfathered under the old regulations have had five years added to
the grandfathering statute; (viii) the requirements for notice to the regulators
and to customers for the closure of an ATM site is eliminated.  Relocation or
consolidation of branches no longer require notice if the relocation or
consolidation occurs within the immediate neighborhood or it does not
substantially affect the nature of the business or customers served; (ix) the
Regulatory Reduction Act expanded the eligibility of some banks to qualify for
an 18 month examination schedule by increasing the total asset size for those
banks rated outstanding or good from $175,000,000 to $250,000,000; (x) all
federal regulatory agencies are required to review regulations for outdated or
otherwise unnecessary regulatory requirements not less frequently than once
every 10 years; (xi) in order to encourage self testing and correction of
regulatory errors, the Regulatory Reduction Act establishes a privilege for
information accumulated during self testing of regulatory compliance.
Information obtained by a bank during self testing may not be used in any civil
action, examination or investigation, and generally may not be obtained by any
agency or department for use in such a proceeding.  If the bank elects to
disclose this information in connection with a particular action, it may not be
used in any other actions; and (xii) as a result of the passage of the
Regulatory Reduction Act the federal bank regulators have begun a process of
regulatory simplification.

                                          20

<PAGE>


    The Real Estate Settlement Procedures Act ("RESPA") regulations and the
Truth-in-Lending Act ("TILA") regulations have been changed to adopt matching
definitions for common terms.  Federal regulators recently asked for additional
comments from banks for consolidation and simplification of the consumer
protection regulations.  Those comments are to be published sometime in the
Spring of 1997.

ASSET CONSERVATION, LENDER LIABILITY AND DEPOSIT INSURANCE PROTECTION ACT OF
1996

    Environmental Protection Agency regulations excluding financial
institutions from liability for the clean up of toxic materials on property held
as collateral for loans were over turned by the federal courts.  Due to concerns
expressed by interested parties (owners, realtors and lenders) Congress passed
amendments to the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA") to reinstate certain safeguards for fiduciaries
and lenders.  A bank or other party acting as a fiduciary may hold property in
such capacity and shall have no liability for the release or threatened release
of a hazardous substance in excess of the value of the property held in a
fiduciary capacity.  For example, a bank acting as trustee under the terms of a
written trust agreement, will not have any liability in excess of the actual
value of the assets in that particular trust.   The assets of the Bank will not
be at risk for a release occurring on property belonging to the trust.  This
amendment does not limit the liability of the fiduciary to private parties that
may have a cause of action outside of the scope of CERCLA.   Fiduciary as used
in CERCLA includes, trustees, executors, administrators, custodians, guardians,
receivers, conservators, and personal representatives.

    The amendments to CERCLA include changes in the definitions contained in 42
USC 9601(20) entitled definitions.  A major change in the definition of "owner"
or "Operator" has the effect of limiting the liability of a financial
institution that does not participate in management of an environmentally
impaired property.  Section 9607 of CERCLA states that owners and operators of a
vessel or facility are liable for damages arising out of discharge of a
hazardous substance on property.  The amendment specifically states that a
financial institution holding a deed of trust on real property that does not
participate in the management of the operations carried out on the property is
not an owner or an operator under the statute.  The amendments further state
that a financial institution that forecloses on such property does not incur
liability simply by the act of foreclosing on the property or through the
subsequent sale of the property to a third party.

INTER-COMPANY BORROWINGS

    Bank holding companies are also restricted as to the extent to which they
and their subsidiaries can borrow or otherwise obtain credit from one another,
or engage

                                          21

<PAGE>

in certain other transactions.  The "covered transactions" that an insured
depository institution and its subsidiaries are permitted to engage in with
their nondepository affiliates are limited to the following amounts: (1) in the
case of any one such affiliate, the aggregate amount of covered transactions of
the insured depository institution and its subsidiaries cannot exceed 10% of the
capital stock and the surplus of the insured depository institution; and (ii) in
the case of all affiliates, the aggregate amount of covered transactions of the
insured depository institution and its subsidiaries cannot exceed 20% of the
capital stock and surplus of the insured depository institution.  In addition,
extensions of credit that constitute covered transactions must be collateralized
in prescribed amounts.

    "Covered transactions" are defined by statute to include a loan or
extension of credit to the affiliate, a purchase of securities issued by an
affiliate, a purchase of assets from the affiliate (unless otherwise exempted by
the Federal Reserve Board), the acceptance of securities issued by the affiliate
as collateral for a loan and the issuance of a guarantee, acceptance, or letter
of credit for the benefit of an affiliate.  Further, a bank holding company and
its subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit, lease or sale of property or furnishing
of services.

IMPACT OF MONETARY POLICIES

    Banking is a business which depends on interest rate differentials. In
general, the difference between the interest paid by a bank on its deposits and
other borrowings, and the interest rate earned by banks on loans, securities and
other interest-earning assets comprises the major source of banks' earnings.
Thus, the earnings and growth of banks are subject to the influence of economic
conditions generally, both domestic and foreign, and also to the monetary and
fiscal policies of the United States and its agencies, particularly the FRB.
The FRB implements national monetary policy, such an seeking to curb inflation
and combat recession, by its open-market dealings in United States government
securities, by adjusting the required level of reserves for financial
institutions subject to reserve requirements and through adjustments to the
discount rate applicable to borrowings by banks which are members of the FRB.
The actions of the FRB in these areas influence the growth of bank loans,
investments and deposits and also affect interest rates.  The nature and timing
of any future changes in such policies and their impact on Central Coast and
Cypress cannot be predicted. In addition, adverse economic conditions could make
a higher provision for loan losses a prudent course and could cause higher loan
loss charge-offs, thus adversely affecting a bank's net earnings.

ACCOUNTING PRONOUNCEMENTS

    The Financial Accounting Standards Board has recently issued SFAS No.
125, "Accounting for the Transfer and Servicing of Financial Assets and
Extinguishments of Liabilities" effective for transactions occurring after
December 31, 1996. SFAS NO. 125 requires that an asset seller must meet
defined conditions to demonstrate that it has surrendered control over the
assets. The failure to meet these conditions usually results in
on-balance-sheet treatment for the assets and a libility for the sale
proceeds received. SFAS No. 125 also requires that contracts to service are
recorded as an asset or a liability based on fair value or on an allocation
of the carrying amount of the financial asset. SFAS 125 covers subsequent
accounting, including impairments, and eliminates the distinction between
excess and normal servicing. In December 1996, the FASB issued SFAS No. 127,
"Deferral of the Effective Date of Certain Provisions of FASB Statement No.
125" to defer for one year the effective date of implementation for
transactions related to repurchase agreements, dollar-roll repurchase
agreements, securities lending and other similar transactions. The Company
does not believe that adoption of these standards will have a significant
impact on its financial position or results of operations.

                                          22


<PAGE>

GENERAL

    On June 25, 1984, the Bank formed Yuba-Sutter Financial Services
Corporation ("Yuba-Sutter") as a wholly-owned subsidiary.  This subsidiary is
inactive.

    There has been no material effect upon the Bank's capital expenditures,
earnings, or competitive position as a result of federal, state or local
provisions regarding the discharge of materials into the environment.

    At December 31, 1996, the Company employed one hundred seventy-nine (179)
persons including six (6) part-time employees, four (4) executive officers and
forty-seven (47) other officers.  None of the Company's employees is presently
represented by a union or covered under a collective bargaining agreement.
Management of the Company believes that its employee relations are excellent.

ITEM 2.  PROPERTIES

    The Bank currently conducts its banking operations from an administrative
office, seven (7) branch offices and two loan production offices and another
loan production office is scheduled to open in the second quarter of 1997.

    The Bank's principal office in Yuba City, California, is located at 777
Colusa Avenue in a modern, single story, shopping center end building which has
drive-up windows and off-street parking for its customers.  This office was
opened in 1982.

    In 1991, the Bank purchased a building located at 1005 Stafford Way, Yuba
City, California, located directly behind its main branch.  This building serves
as the headquarters for the Company.  The Bank's note department will move from
the Bank's Colusa Avenue office to this location in the second quarter of 1997,
after the Company's headquarters have moved to another location.

    The Bank purchased land for the Bank's office at 1221 Bridge Street, Yuba
City, in 1978.  In 1991, the Bank purchased a combined retail and office
building with parking located at 1227 Bridge Street, adjacent to the Bank's
Bridge Street branch.  Presently, the Bank's Data Center, Administrative
services and financial consulting services are located in this building.  In the
second quarter of 1997, the Company's and the Bank's headquarters will be moved
to this location.

    The Bank's Marysville branch office was located at 231 D Street in a leased
portion of an office building called "Library Square" until March 31, 1996.  The
Bank's lease obligations also terminated on March 31, 1996.

                                          23

<PAGE>


    The new location of the Bank's Marysville office is 700 "E" Street in
Marysville.  The Bank purchased this building, which was a branch of another
bank, in September 1995 for a purchase price of $405,000 including all of the
improvements, furniture, fixtures and equipment which were located there.

    The Bank's Colusa branch office is located at 655 Fremont Street in an
office building which was converted to banking quarters.  The Bank owns the land
and premises for the branch.

    In 1985, the Bank purchased premises for its Arbuckle office located at the
corner of Amanda and Sixth Streets.  The Bank moved its Arbuckle office to this
location in June, 1986.  The Bank leases 1,800 square feet plus a common area of
these premises to an unaffiliated party.

    In 1993, the Bank purchased the building which is now the location of its
new Woodland branch office located at 203 Main Street.  This was formerly the
site of the Security Pacific Bank branch.  The purchase price for this building
of approximately 4,000 square feet was $430,100 and the Bank spent $154,381
remodeling the building.

    The Bank's former Citrus Heights loan production office was located at 6545
Sunrise Boulevard, Citrus Heights, California.  The premises contained
approximately 1,556 square feet of office space, and was leased for a three year
term beginning on September 15, 1994.  The lease was terminated on March 31,
1996.  The rent during the first year was $1,400 per month and increases each
year with a rent of $1,556 per month during the third year.

    On October 1, 1996, the Bank entered into a month to month lease for an
office located at 2140 Professional Drive, in Roseville, California where it has
a real estate LPO.  The rent is $405 per month plus an additional $235 per month
for office services.

    On April 30, 1996, the Bank entered into a lease for premises located at
194 East Sixth Street, Chico California, the site of one of its LPOs.  The lease
is for two (2) years commencing on June 1, 1996 at a rent of $900 per month.
The lease provides for three options to renew for a period of two (2) years
each.

    On December 2, 1996, the Bank purchased a former bank branch located at 995
Tharp Road in Yuba City, California for a purchase price of $650,000.  After
remodeling, the Bank relocated its Agricultural Real Estate and Residential Real
Estate Departments at this location.


                                          24

<PAGE>

    In connection with the purchase of E.P.I., the Bank entered into a lease
for premises where E.P.I. is located at 6929 Sunrise Boulevard in Citrus
Heights.  The lease commenced on August 1, 1996 at a monthly rent of $3,322
which increased to $3,449 on November 1, 1996 and until the lease terminates on
December 31, 1997.


ITEM 3.  LEGAL PROCEEDINGS

    The Company is a party to ordinary routine litigation incidental to its
business and is not a party to any material pending legal proceedings.


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

    Not applicable.


                                       PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

    The Company's Common Stock is trading on the NASDAQ National Market under
the trading symbol "CIBN". The Company's Common Stock began trading on the
NASDAQ National Market on July 31, 1996. Prior to that time, the Company's
Common Stock was listed on the NASDAQ Bulletin Board and was the subject of
limited trading.

    Set forth below is information regarding trading in the Company's Common
Stock for the last two years.

    The prices indicated below may not necessarily represent actual
transactions.

                       SALE PRICE OF COMMON STOCK
                       --------------------------
PERIOD ENDED 1996          BID            ASK
                       -----------    -----------
March 31                 $19.52          $20.48
June 30                   18.10           21.90
September 30              22.75           23.00
December 31               24.00           25.00

                                          25

<PAGE>

PERIOD ENDED 1995         BID              ASK
                       -----------    -----------
March 31                 $18.10          $18.57
June 30                   18.10           18.70
September 30              19.76           20.40
December 31               18.10           18.46

    Cash dividends paid on the Company's Common Stock were $.42 per share for
the year ending December 31, 1996, and $.41 per share for the year ending
December 31, 1995, both adjusted to reflect the 5 percent stock dividends paid
on July 14, 1995 and September 20, 1996, and a 5-for-4 stock split paid on May
26, 1994.

    It is currently the intention of the Board of Directors of the Company to
pay cash dividends on a quarterly basis.  However, there is no assurance that
cash dividends will be paid in the future as they are dependent upon the
earnings, financial condition and capital requirements of the Company and its
subsidiary, Feather River State Bank, as well as legal and regulatory
requirements.  As of December 31, 1996, the Company had $6,792,619 available for
payment of dividends to its shareholders without any restrictions.

    As of February 28, 1997, there were 1,160 holders of record of the
Company's Common Stock.

ITEM 6.  SELECTED FINANCIAL DATA



<TABLE>
<CAPTION>

                                        1996           1995           1994           1993           1992
                                   --------------  -------------  -------------  -------------  -------------
<S>                                <C>             <C>            <C>            <C>            <C>
FOR THE YEAR
Interest Income                      $20,574,833    $19,002,834    $15,120,346    $12,805,981    $12,419,781
Interest expense                       7,448,898      6,316,594      4,502,067      4,388,018      4,915,960
                                   --------------  -------------  -------------  -------------  -------------
Net Interest income                   13,125,935     12,686,240     10,618,279      8,417,963      7,503,821
Provision for loan losses                385,000        875,000        347,000        155,000        180,000
                                   --------------  -------------  -------------  -------------  -------------
Net interest income after
  provision for loan losses           12,740,935     11,811,240     10,271,279      8,262,963      7,323,821
Noninterest income                     3,136,423      2,226,967      1,878,349      2,353,021      1,922,883
Noninterest expense                  (10,269,529)    (8,936,485)    (8,189,991)    (7,118,212)    (5,999,167)
                                   --------------  -------------  -------------  -------------  -------------

                                        26

<PAGE>

<CAPTION>

                                        1996           1995           1994           1993           1992
                                   --------------  -------------  -------------  -------------  -------------
<S>                                <C>             <C>            <C>            <C>            <C>
Income before provision for
  income taxes                         5,607,829      5,101,722      3,959,637      3,497,772      3,247,537
Provision for income taxes             2,206,778      2,036,000      1,540,000      1,309,000      1,200,000
                                   --------------  -------------  -------------  -------------  -------------
Net income                           $ 3,401,051    $ 3,065,722    $ 2,419,637    $ 2,188,772   $  2,047,537
                                   --------------  -------------  -------------  -------------  -------------
                                   --------------  -------------  -------------  -------------  -------------

PER COMMON SHARE DATA
Net income                          $       2.18    $      1.88    $      1.52    $      1.37   $       1.28
Cash dividends                      $       0.42    $      0.41    $      0.36    $      0.29   $       0.29
Book value                          $      14.16    $     12.26    $     10.83    $      9.67   $       8.46
Dividend payout ratio                      19.05%         21.70%         23.80%         21.50%         23.10%

AVERAGE COMMON SHARES OUTSTANDING       1,560,949      1,629,474      1,588,874      1,600,926      1,605,070

FINANCIAL RATIOS
Return on average assets                    1.51%          1.56%          1.33%          1.34%          1.33%
Return on average common
  shareholders' equity                     16.71%         17.54%         15.92%         17.88%         19.46%
Net interest margin                         5.64%          5.45%          4.96%          4.25%          3.95%
Net charge-offs to average
  loans, net                                0.16%          0.19%          0.12%          0.34%         (0.01%)
Allowance for loan loss as a
  percent of net loans                      2.68%          3.05%          2.57%          2.87%          3.13%
Efficiency ratio                           63.05%         59.92%         65.54%         66.09%         63.64%


</TABLE>


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS
         OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE YEARS
         ENDED DECEMBER 31, 1995 AND 1996

THE COMPANY
California Independent Bancorp (the "Company") through its wholly-owned
subsidiary, Feather River State Bank (the "Bank"), engages in a broad range of
financial service activities. The Bank commenced operations in 1977. The Company
was formed in 1995 and, after receiving regulatory and shareholder approval,
became the bank holding company for the Bank in May 1995. In October 1996, the
Bank acquired E.P.I. Leasing Co., Inc., ("EPI") and operates it as a subsidiary.
The Bank's other subsidiary, Yuba-Sutter Financial Services, Inc., is currently
inactive.

SUMMARY OF FINANCIAL RESULTS
In 1996, the Company's earnings increased to $3,401,000 or 10.9%, representing
the fourteenth consecutive year of increases in net income. In 1995, earnings
were $3,066,000, an increase of 26.7% from 1994. Earnings per share in 1996 were
$2.18 an increase of 16.0% as compared to earnings of $1.88 per share in 1995,
which was an increase of 23.7% from 1994.

The Company paid cash dividends of $.36 per share in 1994, $.41 per share in
1995 and $.42 in 1996, 5% stock dividends in 1995 and 1996, and a 5-for-4 stock
split of its Common Stock in 1994. Earnings per share have been adjusted
retroactively to reflect the stock dividends and stock split.

The increase in the Company's earnings from 1994 to 1996 generally reflects an
increase in the volume of interest-earning assets and the economic recovery in
Northern California.

Certain information concerning the Company's average balances, yields and rates
on average interest-earning assets and interest-bearing liabilities is set forth
in the table below.

The Company's average interest-earning assets increased from $155,309,000 in
1994, to $175,020,000 in 1995, and to $201,233,000 in 1996, while the average
yield on these assets increased in 1995 to 10.86% from 9.74% in 1994, and then
declined in 1996 to 10.22%. The increase in average yield in 1995 reflected a
rising interest rate environment from the previous year, while the decrease in
average yield in 1996 of .64% reflects both a decrease in prevailing interest
rates nationally and amongst the Company's local competitors. Average interest-
bearing liabilities, consisting of interest paid on interest-bearing deposits,
increased from $129,454,000 in 1994, to $141,339,000 in 1995, and $162,582,000
in 1996, while the average rate paid on these deposits was 3.48%, 4.47%, and
4.58% respectively. The increase in interest rates on deposits is reflective of
the increase in market rates.

Noninterest-bearing demand accounts, consisting primarily of business checking
accounts, has increased from $36,912,000 in 1994, to $35,864,000 in 1995, and to
$40,128,000 in 1996. The increase in both interest-bearing and noninterest-
bearing deposits from 1995 to 1996, reflects normal growth and also reflects the
closing of branches by large statewide banks in Marysville, where the branch
accounted for a significant part of the overall increase in deposits.

Management believes that the Company has adequate liquidity to meet its needs
such as funding the undisbursed portion of borrower's lines of credit,
withdrawals by depositors, managing interest and market rate risk in the event
of significant changes in interest rates, and meeting its cash needs. Federal
Funds Sold is the means by which the Company invests its excess cash overnight
with other banks.

--------------------------------------------------------------------------------


AVERAGE BALANCE SHEETS

<TABLE>
<CAPTION>


                                           1996                              1995                                1994
                           -------------------------------   ---------------------------------   --------------------------------

                             Average     Yield/   Interest     Average     Yield/    Interest      Average     Yield/    Interest
                             Balance      Rate     Amount      Balance      Rate      Amount       Balance      Rate      Amount
                           -----------   ------ ----------   -----------   ------  ----------    ----------    ------  ----------
                                                                     (Dollars in thousands)

<S>                        <C>          <C>     <C>          <C>          <C>      <C>           <C>          <C>      <C>
Assets
Earning-assets
  Short-term investments:
    Federal funds sold     $27,962,872    5.30% $1,482,801   $12,305,263    5.73%    $705,422    $8,872,954     4.44%    $393,770
                           -----------   ------ ----------   -----------   ------  ----------    ----------    ------  ----------
     Total                 $27,962,872    5.30% $1,482,801   $12,305,263    5.73%    $705,422    $8,872,954     4.44%    $393,770
                           -----------   ------ ----------   -----------   ------  ----------    ----------    ------  ----------
Investment securities:
  Taxable                   20,654,011    7.70%  1,591,086    26,081,024    6.99%   1,823,710    22,202,577     5.16%   1,146,082
  Nontaxable                 4,322,277    6.36%    274,808     4,741,005    6.61%     313,293     5,276,970     6.84%     360,830
                           -----------   ------ ----------   -----------   ------  ----------    ----------    ------  ----------
Total                       24,976,288    7.47%  1,865,894    30,822,029    6.93%   2,137,003    27,479,547     5.48%   1,506,912
                           -----------   ------ ----------   -----------   ------  ----------    ----------    ------  ----------

<PAGE>

AVERAGE BALANCE SHEETS (CONTINUED)
<CAPTION>

                                           1996                              1995                                1994
                           --------------------------------   ----------------------------------   ---------------------------------

                             Average     Yield/    Interest     Average     Yield/     Interest      Average     Yield/     Interest
                             Balance      Rate      Amount      Balance      Rate       Amount       Balance      Rate       Amount
                           -----------   ------  ----------   -----------   ------   ----------    ----------    ------   ----------
                                                                        (Dollars in thousands)
<S>                       <C>           <C>     <C>          <C>           <C>      <C>          <C>            <C>      <C>

Loans: (1)                 148,293,868   11.62%  17,226,138   131,892,742   12.25%   16,160,409   118,956,336    11.11%   13,219,664
                          ------------   ------- ----------  ------------   ------  -----------  ------------    ------  -----------
Total earning assets      $201,233,028   10.22% $20,574,833  $175,020,034   10.86%  $19,002,834  $155,308,837     9.74%  $15,120,346
                          ------------   ------ -----------  ------------   ------  -----------  ------------    ------  -----------
  Allowance for
    possible loan losses   (3,952,228)                        (3,592,222)                         (3,157,839)
Nonearning assets
  Cash and due from banks $ 13,751,241                       $ 11,579,838                        $ 17,887,422
  Premises and equipment     6,769,581                          6,214,843                           6,237,337
  Other                      7,140,684                          7,225,503                           5,906,097
                          ------------                       ------------                        ------------
Total nonearning assets     27,661,506                         25,020,184                          30,030,856
Total assets              $224,942,306                       $196,447,996                        $182,181,854
                          ------------                       ------------                        ------------
                          ------------                       ------------                        ------------

LIABILITIES AND
SHAREHOLDERS' EQUITY
Interest-bearing deposits:
  Demand, savings and
    money market          $ 92,765,254    3.80% $ 3,524,331  $ 87,893,048    3.65% $  3,211,937 $  96,101,626     3.01% $  2,894,702
                          ------------   ------ -----------  ------------   ------  -----------  ------------    ------  -----------
   Time certificates        68,959,042    5.64%   3,891,406    52,245,879    5.82%    3,041,354    32,452,971     4.82%    1,564,253
   Other                       858,176    3.86%      33,161     1,200,548    5.27%       63,303       899,241     4.79%       43,112
                          ------------   ------ -----------  ------------   ------  -----------  ------------    ------  -----------
Total                     $162,582,472    4.58% $ 7,448,898  $141,339,475    4.47% $  6,316,594  $129,453,838     3.48% $  4,502,067
                          ------------   ------ -----------  ------------   ------  -----------  ------------    ------  -----------
Noninterest-bearing
  deposits and other
  liabilities:
  Demand,
    noninterest-bearing   $ 40,127,679                       $ 35,863,668                        $ 36,912,054
  Other liabilities          1,881,981                          1,768,835                             620,713
  Shareholders' equity      20,350,174                         17,476,018                          15,195,249
                         -------------                       ------------                        ------------
Total                     $ 62,359,834                        $55,108,521                        $ 52,728,016
                         -------------                       ------------                        ------------
Total liabilities and
  shareholders' equity    $224,942,306                       $196,447,996                        $182,181,854
                         -------------                       ------------                        ------------
                         -------------                       ------------                        ------------
Net interest income                             $11,283,053                         $12,686,240                          $10,618,279
Net interest margin                       5.64%                              6.39%                                6.26%
                                        -------                            -------                              -------


</TABLE>



(1)  Includes loan origination fees of $808,336 for 1996; $1,854,024 for 1995;
$2,020,074 for 1994.

--------------------------------------------------------------------------------

NET INTEREST INCOME
Net interest income, the difference between interest earned on loans and
investments and the interest paid on deposits and other sources of funds, is the
principal component of the Company's earnings. The preceding table shows the
composition of average earning assets and average interest-bearing liabilities,
average yields and rates, and the Company's net interest margin.

Interest income increased from $15,120,000 in 1994, to $19,003,000 in 1995, and
$20,575,000 in 1996, or by 25.7% in 1995 and 8.27% in 1996. The average interest
rate earned on loans was 11.62% in 1996 versus 12.25% in 1995 and 11.11% in
1994. The Company's loan portfolio consists mainly of loans that reprice
immediately with changes in the prime rate and, therefore, closely follow
interest rate trends. The increase in 1995 is a result of an increase in the
volume of interest-earning assets and a larger net interest margin due to the
average yield on interest-earning assets increasing more steeply than the
average rate paid on interest-bearing liabilities. The increase in interest
income in 1996 is due to the increase in the volume of interest-earning assets
as both average yield and the net interest margin decreased.

Average Federal Funds Sold were $8,873,000 in 1994, $12,305,000 in 1995, and
$27,963,000 in 1996, representing increases of 38.7% in 1995 and 127% in 1996.
The increase in Federal Funds Sold in 1996 is due to the increase in both
interest and noninterest-bearing deposits of $25,507,000 and a lower average
balance of investment securities.

<PAGE>

Total interest expense increased from $4,502,000 in 1994, to $6,317,000 in 1995,
and to $7,449,000 in 1996, or an increase of 40.3% in 1995, and 17.9% in 1996.
The volume of average interest-bearing liabilities increased by 15.0% in 1996,
9.0% in 1995, and 12.8% in 1994. The increase in the Company's cost of funds is
due to increases in both volume and rate.

The Company's net yield on interest-earning assets is affected by changes in the
rates earned and paid and the volume of interest-earning assets and interest-
bearing liabilities. The impact of changes in volume and rate on net interest
income in 1996 and 1995 is shown in the following table. Changes attributable to
both volume and rate have been allocated to rate.

--------------------------------------------------------------------------------



CHANGES IN VOLUME/RATE

<TABLE>
<CAPTION>


                                                      1996 Compared to 1995          1995 Compared to 1994
                                                   ----------------------------   ---------------------------
                                                    Volume     Rate      Total    Volume     Rate      Total
                                                   --------  --------   -------   -------   -------   -------
                                                                         (Dollars in thousands)
<S>                                               <C>        <C>        <C>      <C>       <C>       <C>
Federal funds sold                                  $   897  $   (119)   $  778   $   152   $   159    $  311
Investment securities:
  Taxable                                              (379)      146      (233)      200       478       678
  Nontaxable                                            (28)      (10)      (38)      (36)       84       (48)
Loans                                                 2,009    (2,786)     (777)    1,437     1,504     2,941
                                                   --------  --------   -------   -------   -------   -------
     Total                                           $2,499   $(2,769)    $(270)   $1,753    $2,129    $3,882
                                                   --------  --------   -------   -------   -------   -------
                                                   --------  --------   -------   -------   -------   -------

Demand, savings and
  money market                                          178       134       312      (247)      564       317
Time certificates                                       973      (123)      850       954       523     1,477
                                                   --------  --------   -------   -------   -------   -------
    Total                                            $1,151   $(1,181)   $  (30)  $   707    $1,087    $1,794
                                                   --------  --------   -------   -------   -------   -------
Increase in net interest income                      $1,349   $(1,589)    $(240)   $1,046    $1,042    $2,088
                                                   --------  --------   -------   -------   -------   -------
                                                   --------  --------   -------   -------   -------   -------

</TABLE>



--------------------------------------------------------------------------------

LOANS
Outstanding total loans averaged $148,294,000 in 1996 as compared to
$131,893,000 in 1995, and $118,956,000 in 1994. This represents increases of
$16,401,000 or 12.4% in 1996, $12,937,000 or 10.9% in 1995, and $3,562,000 or
3.1% in 1994. While the Company continues to emphasize its agricultural lending
and lending under programs such as the Federal Agricultural Mortgage Corporation
(Farmer Mac) and Farmers Service Agency (FSA), the increase in average total
loans in 1995 and 1996 primarily reflects increases in loans for real estate
construction and land development due to the economic recovery in the Company's
market area and a significant increase in lease financing. In 1996, the Company
purchased equipment leases from three sources including EPI, which it acquired
in October 1996. The Company purchases leases with its excess liquidity as the
average yield on leases is in excess of 10%.

The following table summarizes the composition of the loan portfolio as of
December 31 for the years indicated:

--------------------------------------------------------------------------------

COMPOSITION OF LOAN PORTFOLIO

<TABLE>
<CAPTION>

                                                                               December 31,
                                             --------------------------------------------------------------------------
                                                   1996           1995           1994           1993           1992
<S>                                          <C>             <C>            <C>            <C>            <C>
Commercial and agricultural                   $  71,527,482  $  74,355,093  $  69,143,245  $  51,166,003  $  41,646,415
Real estate-construction                         29,916,204     18,048,005     12,647,669     15,619,506     11,159,497
Real estate-mortgage                             28,564,640     28,288,337     33,450,751     37,435,688     46,508,307
Consumer                                          2,983,939      2,814,717      3,111,243      2,923,728      3,513,747
Lease financing                                  15,892,783      3,216,140      6,501,110         23,844        137,476
Other                                             2,214,574      1,522,174      3,109,201        464,524      3,152,019
                                             --------------  -------------  -------------  ------------- --------------
     Total                                     $151,099,622   $128,244,466   $127,963,219   $107,633,293   $106,117,461
                                             --------------  -------------  -------------  ------------- --------------
                                             --------------  -------------  -------------  ------------- --------------

</TABLE>



<PAGE>

The Company lends to consumers, small to medium-sized businesses and farmers.

A significant portion of the Company's loan portfolio consists of loans secured
by residential, commercial and agricultural real estate.

Real estate mortgage and construction loans and agricultural real estate
equalled $58,481,000 or 38.7% and $46,336,000 or 36.13% of the total loan
portfolio at December 31, 1996 and 1995, respectively. These loans are secured
by real estate, and advances are limited to 65% to 80% of appraised value
depending on the type of loan.

The Company makes agricultural production loans and other agricultural loans
which are secured by the crops and the proceeds. These loans generally are at
their peak in the third quarter of each year. The Company had $46,786,000 or
31.0% and $49,966,000 or 39.0% of its loan portfolio in agricultural production
loans outstanding at December 31, 1996 and 1995, respectively. Approximately 15%
of these loans are guaranteed by the Farm Service Agency (FSA).

In October 1995, the Company established a Commercial Finance Division. The
Commercial Finance Division makes commercial and industrial loans to small and
medium-sized businesses for working capital, inventory and equipment. These
loans are secured by the assets being financed or by the customer's receivables,
with loan-to-value ratios which generally do not exceed 75%. The Company also
does factoring (the purchase of accounts receivable) at discounts from 50% to
80% of the amount of the accounts receivable which are purchased. At December
31, 1996, the Commercial Finance Division had outstanding extensions of credit
of approximately $4,500,000.

The Company originates mortgage loans on residential and agricultural properties
which it sells into the secondary market in order to divest itself of the
interest rate risk associated with these mostly fixed-interest rate products.
The Company accounts for these loans in accordance with the Emerging Issues Task
Force Issues No. 88-11, "Allocation of Recorded Investment when a Loan is Sold",
No. 86-38, "Implication of Mortgage Prepayments on Amortization of Servicing
Rights", and No. 84-21, "Sale of a Loan with a Partial Participation Retained".
These loans are sold without recourse.

As of December 31, 1996, 1995, and 1994, total loans serviced by the Company
were $107,637,000, $107,141,759 and $105,307,587. Total loans sold by the
Company were $28,297,103 in 1996, an increase of 217% from 1995; $8,935,100 in
1995, a decrease of 49.28% from 1994; and $17,617,681 in 1994. The decrease in
loans sold in 1995 reflects a change in the market for residential mortgage
loans and the Company's decreased activity in that area. The significant
increase in loans sold in 1996 reflects both Farmer Mac and FSA changing their
procedures for the sale of loans into the secondary market whereby they purchase
the loans directly from the Company rather than have "poolers" purchase these
loans to assemble a pool of loans to be sold in the secondary market. This has
made it easier and less time consuming for the Company to sell these loans. The
Company in 1996 sold many of these loans as servicing released, as the Company
receives more income per loan if it is sold in this manner.

INTEREST RATE SENSITIVITY
Interest rate sensitivity is the relationship between market interest rates and
net interest income due to the repricing characteristics of assets and
liabilities. If more liabilities than assets reprice in a given period (a
liability sensitive position), market interest rate changes will be reflected
more quickly in liability rates. If interest rates decline, a liability
sensitive position will benefit net income. Alternatively, where assets reprice
more quickly than liabilities in a given period (an asset sensitive position), a
decline in market rates will have an adverse effect on net interest income.

Management's objective is to maintain the stability of the net interest margin
in times of fluctuating interest rates by maintaining an appropriate mix of
interest rate sensitive assets and liabilities.

The following table presents the interest rate sensitivity of the Company as of
December 31, 1996.

<PAGE>

INTEREST RATE SENSITIVITY AS OF DECEMBER 31, 1996


<TABLE>
<CAPTION>

                                                                          Repricing Opportunity
                                                    0-90          91-180        181-365          Over
                                                    Days           Days          Days          One Year         Total
                                                 ----------     ----------   ------------     ----------      ---------
                                                                         (Dollars in thousands)
<S>                                              <C>           <C>          <C>               <C>            <C>
Federal funds sold                                $  41,300     $        0   $          0     $        0      $  41,300
Loans                                               121,598          5,862          3,121         20,519        151,100
Taxable investments                                       6          4,830          1,990         24,298         31,124
Nontaxable investments                                  115            150          1,575          1,700          3,540
                                                 ----------     ----------   ------------     ----------      ---------
     Total earning assets                          $163,019        $10,842      $   6,686        $46,517       $227,064
                                                 ----------     ----------   ------------     ----------      ---------
                                                 ----------     ----------   ------------     ----------      ---------

Interest-bearing demand                              33,659              0              0              0         33,659
Savings and money market deposits                    67,756              0              0              0         67,756
Time certificates                                    29,028         19,695         22,574         10,063         81,360
                                                 ----------     ----------   ------------     ----------      ---------
     Total interest-bearing liabilities             130,443         19,695         22,574         10,063        182,775
                                                 ----------     ----------   ------------     ----------      ---------
Gap                                               $  32,576       $(8,853)      $(15,888)        $36,454      $  44,289
                                                 ----------     ----------   ------------     ----------      ---------
Cumulative gap                                       32,576         23,723          7,835         44,289
                                                 ----------     ----------   ------------     ----------
                                                 ----------     ----------   ------------     ----------


</TABLE>




--------------------------------------------------------------------------------

Management does not manage its interest rate sensitivity to maximize income
based on its prediction of interest rates, but to minimize interest rate risk to
the Company by stabilizing the Company's net interest margin in all interest
rate environments.

Additionally, the Company is subject to considerable competitive pressure in
generating deposits and loans at rates and terms prevailing in the Company's
market areas.

Management has developed a matrix that calculates pre-tax impact on earnings as
determined by its gap position, that takes into consideration delays in the
timing of repricing based on actual experience. The matrix is of a static nature
and assumes that Management and market forces effect no changes and leave the
rate-sensitive balance sheet virtually unchanged.

QUALITY OF LOANS
Inherent in the lending function is the fact that loan losses will be
experienced and that the risk of loss will vary with the type of loan extended
and the creditworthiness of the borrower. To reflect the estimated risks of loss
associated with its loan portfolio, provisions are made to the Company's
allowance for loan losses. As an integral part of this process, the allowance
for loan losses is subject to review and possible adjustment as a result of
regulatory examinations conducted by governmental agencies and through
Management's assessment of risk.

The Company uses the allowance method in providing for loan losses. Loan losses
are charged to the allowance for loan losses and recoveries are credited to it.

Management believes that the total allowance for loan losses is adequate and
continues to be maintained at a level above the Company's peer group,
particularly when considering the Company's historically lower level of loan
losses. While Management uses available information to provide for loan losses,
future additions to the allowance may be necessary based on changes in economic
conditions.

The allowance for loan losses at December 31, 1996, was $4,053,000 or 2.68% of
total loans outstanding as compared to $3,911,000 or 3.05% of total loans
outstanding at December 31, 1995. Management believes that the allowance for
loan losses at December 31, 1996, was adequate to provide for losses that can be
reasonably anticipated.

Additions to the allowance for loan losses are made by provisions for possible
loan losses. The provision for possible loan losses is charged to operating
expense and is based upon past loan loss experience and estimates of potential
losses which, in Management's judgment, deserve current recognition. Management
determines the appropriate size of the allowance for loan losses based upon
specific allocations for classified loans and a general allocation for other
loans based upon the loss experience

<PAGE>

during the past twelve rolling months for each particular type of loan. Other
factors considered by Management include growth, composition and overall quality
of the loan portfolio, and current economic conditions that may affect the
borrower's ability to pay. Actual losses may vary from current estimates. The
estimates are reviewed periodically, and adjustments, as necessary, are charged
to operations in the period in which they became known.

--------------------------------------------------------------------------------

ALLOWANCE FOR LOAN LOSSESS


<TABLE>
<CAPTION>

                                                    1996           1995           1994           1993           1992
                                                 ----------     ----------     ----------     ----------    -----------
                                                                         (Dollars in thousands)
<S>                                              <C>            <C>            <C>            <C>           <C>
Total loans outstanding                            $151,100       $128,244       $127,963       $107,633      $106,117
Average net loans                                   148,294        131,893        118,956        115,394       126,869

BALANCE, JANUARY 1                                    3,911          3,288          3,087          3,320         3,128
Charge-offs by loan category
  Commercial                                            323            413             29            133           376
  Consumer                                                0             46             43              8             2
  Real Estate                                             4             96            125            300             0
                                                 ----------     ----------     ----------     ----------    -----------
     Total                                       $      327     $      555     $      197     $      441    $      378
                                                 ----------     ----------     ----------     ----------    -----------
Recoveries by loan category
  Commercial                                            $53     $      249            $48    $        18    $      380
  Consumer                                               31             44              3              5             9
  Real Estate                                             0             10              0             30             1
                                                 ----------     ----------     ----------     ----------    -----------
     Total                                      $        84     $      303    $        51    $        53    $      390
                                                 ----------     ----------     ----------     ----------    -----------
Net charge-offs (recoveries)                            243            252            146            388           (12)
Provision charged to expense                            385            875            347            155           180
                                                 ----------     ----------     ----------     ----------    -----------
BALANCE, DECEMBER 31                             $    4,053     $    3,911      $   3,288      $   3,087     $   3,320
                                                 ----------     ----------     ----------     ----------    -----------
                                                 ----------     ----------     ----------     ----------    -----------
Ratios:
  Net charge-offs (recoveries)
    to average loans                                  0.16%          0.19%          0.12%          0.34%       (0.01)%
Allowance to loans at end of year                     2.68%          3.05%          2.57%           .87%         3.13%


</TABLE>



--------------------------------------------------------------------------------

The Company had loan charge-offs of $327,000 in 1996, $555,000 in 1995, and
$197,000 in 1994, and net loan charge-offs (which include recoveries) of
$243,000, $252,000 and $146,000 in 1996, 1995 and 1994, respectively. These net
charge-offs are equal to .16%, .19% and .12% of average loans for 1996, 1995 and
1994. The charged-off loans in 1996 included two row crop loans consisting of a
charge-off of $203,000 of a loan with an original balance of $1,500,000, and a
charge-off of $42,000 from an original balance of $450,000, and a letter of
credit of $35,000, which the Company was obligated to pay when its customer
defaulted on an obligation. The Company has recovered approximately $6,000 from
its customer regarding the letter of credit and recoveries are expected to
continue, but there can be no assurance that the Company will recover the full
amount. In 1995, the Company charged-off $194,000 consisting of three unsecured
loans to one borrower and recovered this same amount during the year. The
Company also charged-off a real estate loan to another borrower in 1995 with a
remaining balance of $55,000, which was also recovered during the year. The
remainder of the loan charge-offs in 1995 consisted of 11 loans of various
dollar amounts and a $55,000 writedown of property subsequently transfered to
OREO.

<PAGE>

ALLOCATION OF ALLOWANCE



<TABLE>
<CAPTION>

                                       1996                1995                1994                1993                1992
                                   Category to          Category to        Category to          Category to        Category to
                                -----------------    ----------------    ----------------   -----------------    ----------------
                                   $         %         $         %         $         %         $         %         $         %
                                -------   -------    ------   -------    ------   -------   -------   -------    ------   -------
                                                                      (Dollars in thousands)
<S>                             <C>       <C>        <C>      <C>        <C>      <C>       <C>       <C>        <C>      <C>
Loans in Each Category
to Toal Loans
Balance applicable to:
Commercial and
  agricultural                   $1,918    47.34%    $2,267    57.98%    $1,776    54.03%    $1,467    47.54%    $1,302    39.25%
Real Estate-
  construction                      802    19.80%       550    14.07%       325     9.88%       448    14.51%       349    10.52%
Real Estate-
  mortgage                          766    18.90%       863    22.06%       860    26.14%     1,074    34.78%     1,455    43.83%
Consumer                             80     1.97%        86     2.19%        80     2.43%        84     2.72%       110     3.31%
Other                               487    11.99%       145     3.70%       247     7.52%        14      .45%       104     3.09%
                                -------   -------    ------   -------    ------   -------   -------   -------    ------   -------
Total                            $4,053   100.00%    $3,911   100.00%    $3,288   100.00%    $3,087   100.00%    $3,320   100.00%
                                -------   -------    ------   -------    ------   -------   -------   -------    ------   -------
                                -------   -------    ------   -------    ------   -------   -------   -------    ------   -------
Nonperforming Loans
Loans Accounted for on
  a Nonaccrual Basis            $   846             $   293              $1,110              $1,355              $1,042
Other Loans Contractually
  Past Due 90 Days or More        2,202                  60                  50                 317                  20
                                -------              ------              ------             -------              ------
Total                            $3,048             $   353              $1,160              $1,672              $1,062
                                -------              ------              ------             -------              ------
                                -------              ------              ------             -------              ------


</TABLE>


--------------------------------------------------------------------------------

Any allocation or breakdown in the allowance for loan losses lends an appearance
of exactness that does not exist. Thus, the allocation above should not be
interpreted as an indication of expected amounts or categories where charge-offs
will occur. The allocation of the allowance for loan losses as of the end of the
last five fiscal years is summarized in the table above.

NONPERFORMING LOANS
Loans are generally placed on nonaccrual status when they are 90 days past due
as to either interest or principal. At that time, any accrued but uncollected
interest is reversed, and additional income is recorded on a cash basis as
payments are received. However, loans that are in the process of renewal in the
normal course of business, or are well-secured and in the process of collection,
may not be placed on nonaccrual status, at the discretion of Management. A
nonaccrual loan may be restored to an accrual basis when interest and principal
payments are current and the prospects for future payments are no longer in
doubt.

At December 31, 1996, nonaccrual loans amounted to $846,000 or .56% of total
loans as compared to $293,000 or .23% of total loans, at December 31, 1995, and
$1,110,000 or .87% of total loans at December 31, 1994. The decrease in
nonaccrual loans from 1994 to 1995 primarily reflects the recovering economy at
that time. At December 31, 1996, the increase in nonaccrual loans included three
loans totalling approximately $542,000 for development of residential property
where it was necessary for the developer to change the type of housing to be
built. Additionally, land values in this area decreased because of over-
building. The Company is in negotiation with the borrower to restructure the
loan which would include additional collateral in order to reduce the loan-to-
value ratio to a more appropriate level. Other nonaccrual loans include two
business loans with government guarantees, a business loan on which the Company
now expects to be provided with collateral and a crop loan which is 90%
guaranteed by FSA.

Nonaccrual loans at December 31, 1995, consisted of three loans, two of which
were real estate loans on which the Company anticipated full recovery as the
remaining loan balance was below the market value of the real estate, and
another loan which was a FSA guaranteed as to 90% of the loan.

Loans past due 90 days or more as to principal or interest increased in 1996 to
$2,202,000 as compared to $60,000 in 1995 and $50,000 in 1994. The significant
increase of 357% in loans past due 90 days or more consists primarily of three
loans totalling approximately $1,875,000. The Company is negotiating with the
borrower regarding the largest of these loans, a $1,000,000 loan for livestock
operations, to restructure the loan into a three-year term loan. The second
largest loan is a $700,000 business loan, which is now accruing.

<PAGE>

The Company is negotiating with the borrower to restructure the loan into
separate loans, with one loan to be secured by commercial real estate. The third
loan, which is for approximately $175,000, is on nonaccrual as it is past due as
to $1,700 in interest payments. In addition, there are equipment leases which
are past due in the total amount of approximately $239,000 which were purchased
from the two nonaffiliated leasing companies from which the Company purchases
leases. These represent 1.4% of the leases purchased by the Company from these
leasing companies, whereas the standard in the leasing industry is past dues
equal to about 2% of leases outstanding.

INVESTMENTS
In 1996, the Company's investment portfolio was $34,664,000 or 13.2% of total
assets, an increase from $27,428,000 or 12.78% of total assets in 1995, and from
$32,809,000 or 17.0% of total assets in 1994. At December 31, 1996, 1995 and
1994, Federal Funds Sold were $41,300,000, $30,000,000 and $9,000,000
respectively. Federal Funds Sold are overnight deposits with other banks. In
1996, the increase in investment securities and Federal Funds Sold represent the
investment of additional cash as growth in deposits exceeded the growth in
loans. In 1995, the increase in Federal Funds Sold was due to the additional
purchase of Federal Funds which were yielding a higher interest rate than 5-year
U.S. Treasury securities.

Under Statement of Financial Accounting Standard No. 115 (SFAS 115), investments
of a bank in debt and equity securities must be classified in three different
categories: "Trading", "Available-for-Sale", and "Held-to-Maturity", and there
are different accounting methods for each category. The Company has classified
all of its investment securities as either "Available-for-Sale" or "Held-to-
Maturity". SFAS 115 requires that any unrealized gain or loss of the "Available-
for-Sale" category be reported as an adjustment to the Company's equity capital,
even though this gain or loss would only be realized if the investment were
actually sold.

If the investment is in the "Held-to-Maturity" category, no unrealized gains or
losses need be reported.

The following table summarizes the distribution of the Company's investment
securities as of December 31, 1996 and 1995.

--------------------------------------------------------------------------------


INVESTMENTS


<TABLE>
<CAPTION>

                                                                                  Gross          Gross
                                                                Amortized      Unrealized     Unrealized       Fair
                                                                  Cost            Gains          Losses       Value
                                                              ------------     ----------     ----------   ------------
<S>                                                           <C>             <C>            <C>           <C>
December 31, 1996
Available-for-sale:
  U.S. Treasury securities and obligations of U.S.
    government agencies                                        $11,405,179     $    5,915       $(36,631)   $11,374,463
                                                              ------------     ----------     ----------   ------------
                                                              ------------     ----------     ----------   ------------

 Held-to-maturity:
  U.S. Treasury securities and obligations of U.S.
    government agencies                                        $15,720,573       $140,302      $  (1,158)   $15,859,717
  Obligations of states and political subdivisions               3,576,412         92,434        (22,159)     3,646,687
  Corporate obligations and other securities                     3,992,185         27,109              0      4,019,294
                                                              ------------     ----------     ----------   ------------
                                                               $23,289,170       $259,845       $(23,317)   $23,525,698
                                                              ------------     ----------     ----------   ------------
                                                              ------------     ----------     ----------   ------------

December 31, 1995
Available-for-sale:
  U.S. Treasury securities and obligations of U.S.
    government agencies                                       $  5,847,100      $  47,652      $  (4,566)  $  5,890,186
                                                              ------------     ----------     ----------   ------------
                                                              ------------     ----------     ----------   ------------
Held-to-maturity:
  U.S. Treasury securities  and obligations of U.S.
    government agencies                                       $  9,722,535       $352,824      $       0    $10,075,359
  Obligations of states and political subdivisions               4,905,291        154,675         (3,152)     5,056,814
    Corporate obligations and other securities                   6,909,942        116,710        (26,875)     6,999,777
                                                              ------------     ----------     ----------   ------------
                                                               $21,537,768       $624,209       $(30,027)   $22,131,950
                                                              ------------     ----------     ----------   ------------
                                                              ------------     ----------     ----------   ------------

</TABLE>


<PAGE>

As of December 31, 1996, the Company's "Available-for-Sale" category adjustment
reflected a net unrealized loss of $18,000 net of taxes, and the approximate
market value of the Company's total investment portfolio was $34,900,000,
reflecting an unrealized gain of $206,000.

As of December 31, 1995, the Company's "Available-for-Sale" category adjustment
of capital reflected an unrealized gain of $24,900 net of taxes, and the
approximate market value of the Company's total investment portfolio was
$28,022,000, reflecting an unrealized gain of $637,000.

The Company had investment securities pledged as collateral for certain
deposits, typically deposits of government entities of $10,375,000, $10,410,000
and $9,904,000 at December 31, 1996, 1995 and 1994, respectively.

FUNDING
Total deposits at December 31, 1996, 1995 and 1994 were $237,892,000,
$193,296,000 and $175,112,000, an increase of $44,596,000 or 23.1% during 1996
and $18,184,000 or 10.38% during 1995. Average total deposits were $202,710,000
in 1996, $177,203,000 in 1995 and $166,366,000 in 1994. The increase in deposits
in 1996 reflects both normal growth and the acquisition of deposits resulting
from branch consolidations and closings in the Company's market area by large
statewide banks. The increase in deposits during 1995 is partially a result of
depositors shifting funds to bank deposits from other investments as interest
rates on bank deposits increased significantly from the beginning of 1994
through 1995. Average deposits in time certificates increased from $32,453,000
in 1994 to $52,246,000 or 61% in 1995, and to $68,959,000 or 31.99% in 1996. The
increase in 1995 reflects in part the aforementioned movement from other
investments, and depositors shifting funds from other interest-bearing accounts
at the Company to higher yielding time certificates, and in 1996 primarily
reflects the acquisition of new deposits. The Company has been able to attract
deposits by providing interest rates on deposits competitive with other
financial institutions in its market area.

The table below sets forth information for the last three fiscal years regarding
the Company's average deposits and the average rate paid on each of the deposit
categories.

--------------------------------------------------------------------------------

AVERAGE DEPOSITS

<TABLE>
<CAPTION>

                                                            1996               1995                 1994
                                                   ------------------   -----------------   ------------------
                                                    Average             Average             Average
                                                    Balance      Rate   Balance      Rate   Balance      Rate
                                                   --------    ------   -------     -----  --------     -----
                                                                     (Dollars in thousands)

<S>                                               <C>         <C>      <C>         <C>     <C>         <C>
Demand, noninterest-bearing                         $40,128         -   $35,864         -   $36,912         -
Demand, savings, and
  money market, interest-bearing                     92,765     3.80%    87,893     3.65%    96,102     3.01%
Time certificates                                    68,959     5.64%    52,246     5.82%    32,453     4.82%


</TABLE>



--------------------------------------------------------------------------------

The remaining maturities of the Company's certificates of deposit in amounts of
$100,000 or more, including public time deposits, as of December 31, 1996, are
indicated in the table below. Interest expense on these certificates of deposit
totaled $1,481,000 in 1996.

MATURITY OF CERTIFICATE OF DEPOSITS $100,000 OR MORE

                                  December 31, 1996
                                  -----------------
                                    (In thousands)
Three months or less                   $12,928
Over three through six months            9,077
Over six through twelve months           8,514
Over twelve months                       3,333
                                       -------
Total                                  $33,852
                                       -------
                                       -------
<PAGE>


NONINTEREST INCOME
Noninterest income for 1996 was $3,136,000 or an increase of 40.8%, and for 1995
was $2,227,000 or an increase of 18.6%.

The table below sets forth the components of noninterest income for the years
indicated:

NONINTEREST INCOME

                         1996           1995           1994
                        ------         ------         ------
                             (Dollars in thousands)
Service charges
  and fees              $1,010         $  943         $  855
Loan servicing fees        487            482            306
Brokered loan fees         923            360            418
Gain on sale
  of OREO                  240             31             29
Other                      476            411            270
                        ------         ------         ------
Total                   $3,136         $2,227         $1,878
                        ------         ------         ------
                        ------         ------         ------

Service charges and fees on deposit accounts, the primary component in
noninterest income, increased in 1996 to $1,010,000 or 7.1%, and in 1995 to
$943,000 or 10.3%, due to increased activity in both years. Loan servicing fees
in 1996 were $487,000, and in 1995 were $482,000, an increase of 57.6% over 1994
due to an increase in the number of loans it services. Brokered loan fees in
1996 were $923,000 an increase of 156% as a result of a higher volume of
residential and agricultural mortgage loans sold into the secondary market, the
sale of a significant portion of these loans on a servicing released basis, and
EPI Leasing Brokered Commission Income. In 1996, the Company's gain on sale of
OREO was $240,000 versus $31,000 in 1995. In both years, the gain on sale of
OREO reflects the market value of the real estate property sold in that year.

--------------------------------------------------------------------------------

OTHER EXPENSES


<TABLE>
<CAPTION>

                                                        1996                            1995                        1994
                                             ---------------------------    --------------------------  ------------------------
                                                            Percentage                    Percentage                 Percentage
                                                            of Average                    of Average                 of Average
                                               Amount     Earning Assets       Amount   Earning Assets    Amount   Earning Assets
                                             ----------   --------------    ----------  --------------  ---------  --------------
                                                                               (Dollars in thousands)
<S>                                         <C>          <C>               <C>          <C>            <C>         <C>
Salaries and benefits                        $    5,513            2.74%     $   4,673           2.67%  $   4,216           2.71%
Occupancy                                           572             .28%           598            .34%        546            .35%
Equipment                                           998             .50%           791            .45%        696            .45%
Advertising and promotion                           342             .17%           286            .16%        267            .17%
Stationery and supplies                             253             .13%           212            .12%        196            .13%
Assessments                                          25             .01%           220            .13%        376            .24%
Directors' fees                                     391             .19%           300            .17%        260            .17%
Other                                             2,175            1.08%         1,857           1.06%      1,632           1.05%
                                             ----------          -------    ----------          ------  ---------         -------

Total                                         $  10,269            5.10%     $   8,937           5.10%  $   8,189           5.27%
                                             ----------          -------    ----------          ------  ---------         -------
                                             ----------          -------    ----------          ------  ---------         -------

Average Earning Assets                         $201,233                       $175,020                   $155,309
                                             ----------                     ----------                  ---------
                                             ----------                     ----------                  ---------


</TABLE>



--------------------------------------------------------------------------------

NONINTEREST EXPENSE
Noninterest expense for 1996 of $10,269,000 increased by 14.9% as compared to
$8,937,000 in 1995 or an increase of 9.1%. Salaries and employee benefits of
$5,513,000 in 1996, $4,673,000 in 1995, and $4,216,000 in 1994 represent
increases of 17.98% and 10.8% in 1996 and 1995, respectively. The increase in
1996 reflects an increase in employment to accommodate the growth in the
Company's asset size and the addition of 17 employees upon the acquisition of
EPI. The increase in 1995 reflects salary increases and personnel added in
connection with the Company's SBA Department at that time. The Company has
closed its SBA Department due to competitive reasons, but continues to make SBA
loans.

Assessments in 1996 were $25,000 or a decrease of 88.64%, and were $220,000 in
1995 or a decrease of 41.5%, reflecting reductions in FDIC insurance assessments
which were reduced significantly in 1995 and again in 1996.

<PAGE>

INCOME TAXES
The provision for income taxes was $2,207,000 in 1996, $2,036,000 in 1995, and
$1,540,000 in 1994. The Company's effective tax rate was 39.4% for 1996, 39.9%
for 1995, and 38.9% for 1994.

CAPITAL

The Company has sustained its growth in capital through retained earnings, net
of cash dividends paid out to shareholders. Shareholders' equity increased by
$3,011,000 or 15.95% to $21,886,000 in 1996, and by $2,622,000 or 16.1% to
$18,875,000 in 1995, after paying cash dividends of $.42 and $.41 per share in
1996 and 1995, respectively.

The Company and the Bank are subject to requirements of the Federal Reserve
Board and FDIC, respectively, governing capital adequacy. These guidelines are
intended to reflect the degree of risk associated with both on and off-balance
sheet items. Financial institutions are expected to comply with a minimum ratio
of qualifying total capital to risk-weighted assets of 8% at least half of which
must be in Tier 1 Capital.

Federal regulatory agencies have also adopted a minimum leverage ratio of 4%,
which is intended to supplement the risk-based capital requirements and to
ensure that all financial institutions continue to maintain a minimum level of
core capital.

The risk-based and leverage capital ratios for the Company and the Bank at
December 31, 1996, are set forth below. Both the Company and the Bank exceed the
minimum capital requirements.

--------------------------------------------------------------------------------

CAPITAL RATIO
AS OF DECEMBER 31, 1996


<TABLE>
<CAPTION>

                                                         Company                        Bank
                                                 --------------------          --------------------
                                                     Amount     Ratio              Amount     Ratio
                                                 ----------   -------          ----------   -------
                                                               (Dollars in thousands)
<S>                                              <C>         <C>               <C>         <C>
RISK BASED CAPITAL RATIOS
Tier 1 Capital                                    $  21,813    11.31%          $   21,804    11.32%
Tier 1 Capital minimum requirement                   -7,713    -4.00%              -7,708    -4.00%
                                                 ----------   -------          ----------   -------
     Excess                                       $  14,100     7.31%          $   14,096     7.32%
                                                 ----------   -------          ----------   -------
                                                 ----------   -------          ----------   -------
Total Capital                                     $  22,918    11.89%           $  24,225    12.57%
Total Capital minimum requirement                   -15,426    -8.00%             -15,415    -8.00%
                                                 ----------   -------          ----------   -------
     Excess                                          $7,492     3.89%              $8,810     4.57%
                                                 ----------   -------          ----------   -------
                                                 ----------   -------          ----------   -------
Risk-adjusted assets                               $192,825                     $ 192,693
                                                 ----------                    ----------
                                                 ----------                    ----------
LEVERAGE CAPITAL RATIO
Tier 1 Capital to quarterly average total assets  $  21,813     8.82%           $  21,804     8.82%
Minimum leverage requirement                         -9,891    -4.00%              -9,890    -4.00%
                                                 ----------   -------          ----------   -------
     Excess                                       $  11,922     4.82%           $  11,914     4.82%
                                                 ----------   -------          ----------   -------
                                                 ----------   -------          ----------   -------
Total Quarterly average assets                     $247,274                      $247,255
                                                 ----------                    ----------
                                                 ----------                    ----------


</TABLE>


--------------------------------------------------------------------------------

INFLATION
It is Management's opinion that the effects of inflation on the Company's
financial statements for the years ended December 31, 1996, 1995 and 1994 are
not material.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    Audited consolidated financial statements of the Company as of December 31,
1996 and 1995 and for each of the three years in the period ended December
31, 1996 appear on pages 40 thru 67.

<PAGE>

PAGE 22

Consolidated Financial Statements

Report Of Independent Public Accountants

To the Shareholders and Board of Directors of California Independent Bancorp:

We have audited the accompanying consolidated balance sheets of CALIFORNIA
INDEPENDENT BANCORP (a California corporation) AND SUBSIDIARIES as of December
31, 1996 and 1995, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements are the responsibility of
the Company'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 financial statements referred to above present fairly, in
all material respects, the financial position of California Independent Bancorp
and Subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.

As explained in Note 1 to the financial statements, effective January 1, 1994,
the Company changed its method of accounting for certain investments in debt and
equity securities as required by Statement of Financial Accounting Standards
No.115.


Arthur Andersen LLP
Sacramento, California
February 28, 1997

<PAGE>

PAGE 23

California Independent Bancorp And Subsidiaries
Consolidated Balance Sheets - December 31, 1996 And 1995



                                                        1996               1995
                                                   ------            --------
ASSETS
Cash and due from banks                        $  22,927,881     $   17,962,704
Federal funds sold                                41,300,000         30,000,000
                                               -------------     --------------

     Cash and cash equivalents                    64,227,881         47,962,704

Investment securities held-to-maturity            23,289,170         21,537,768
Investment securities available-for-sale          11,374,463          5,890,186
                                               -------------     --------------

     Total investments                            34,663,633         27,427,954

Loans                                            134,574,987        123,707,855
Loans held-for-sale                               16,524,635          4,536,611
  Less - allowance for loan losses                (4,052,783)        (3,910,970)
                                               -------------     --------------

     Net loans                                   147,046,839        124,333,496

Premises and equipment, net                        7,420,387          6,393,687
Interest receivable                                2,213,083          1,270,868
Other real estate owned                            1,081,620            965,135
Other assets                                       5,948,888          6,222,244
                                               -------------     --------------

                                                $262,602,331       $214,576,088
                                               -------------     --------------
                                               -------------     --------------

LIABILITY AND SHAREHOLDERS' EQUITY
Deposits:
  Noninterest-bearing                          $  55,117,230     $   43,826,833
  Interest-bearing                               182,775,038        149,469,624
                                               -------------     --------------

  Total deposits                                 237,892,268        193,296,457

Interest payable                                   1,406,031          1,330,077
Other liabilities                                  1,417,852          1,074,185
                                               -------------     --------------
<PAGE>


     TOTAL LIABILITIES                           240,716,151        195,700,719
                                               -------------     --------------

Commitments
Shareholders' equity:
Common stock, no par value-
  Authorized -- 20,000,000 shares

  Issued and outstanding -- 1,546,032 shares
    in 1996 and 1,518,938 shares in 1995          11,088,190          9,303,841
  Retained earnings                               10,935,806          9,706,538
  Debt guarantee of ESOP                            (120,000)          (160,000)

Net unrealized gain (loss) on securities
  available-for-sale                                 (17,816)            24,990
                                               -------------     --------------

Total shareholders' equity                        21,886,180         18,875,369
                                               -------------     --------------

                                                $262,602,331       $214,576,088
                                               -------------     --------------
                                               -------------     --------------

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.

<PAGE>

PAGE 24

California Independent Bancorp And Subsidiaries
Consolidated Statements Of Income
For The Years Ended December 31, 1996, 1995, 1994


<TABLE>
<CAPTION>

                                                     1996           1995         1994
                                                   --------       --------     --------
<S>                                              <C>            <C>           <C>
INTEREST INCOME
Interest and fees on loans and leases            $17,226,138    $16,160,409    $13,219,664
Interest on investments-
   Taxable interest income                         1,591,086      1,823,710      1,146,082
   Nontaxable interest income                        274,808        313,293        360,830
Interest on federal funds sold                     1,482,801        705,422        393,770
                                                  ----------     ----------     ----------
      Total interest income                       20,574,833     19,002,834     15,120,346
                                                  ----------     ----------     ----------

INTEREST EXPENSE
Interest on deposits                               7,415,738      6,253,291      4,458,955
Interest on other borrowings                          33,160         63,303         43,112
                                                  ----------     ----------     ----------
      Total interest expense                       7,448,898      6,316,594      4,502,067
                                                  ----------     ----------    -----------
      Net interest income                         13,125,935     12,686,240     10,618,279

PROVISION FOR LOAN LOSSES                            385,000        875,000        347,000
                                                  ----------     ----------     ----------

      Net interest income after provision
         for loan losses                          12,740,935     11,811,240     10,271,279
                                                  ----------     ----------     ----------

NONINTEREST INCOME
   Service charges on deposit accounts               917,466        859,329        768,279
   Other                                           2,218,957      1,367,638      1,110,070
                                                  ----------     ----------     ----------
      Total noninterest income                     3,136,423      2,226,967      1,878,349
                                                  ----------     ----------     ----------

NONINTEREST EXPENSE
   Salaries and employee benefits                  5,512,769      4,672,500      4,216,146
   Occupancy expense                                 572,532        598,127        546,721
   Furniture and equipment expense                   998,145        791,141        695,920
   Other                                           3,186,083      2,874,717      2,731,204
                                                  ----------     ----------     ----------
      Total noninterest expense                   10,269,529      8,936,485      8,189,991
                                                  ----------     ----------     ----------

      Income before provision for income taxes     5,607,829      5,101,722      3,959,637

<PAGE>


PROVISION FOR INCOME TAXES                         2,206,778      2,036,000      1,540,000
                                                 -----------    -----------    -----------

NET INCOME                                       $ 3,401,051    $ 3,065,722    $ 2,419,637
                                                 -----------    -----------    -----------
                                                 -----------    -----------    -----------

PER SHARE AMOUNTS
   Net income per common share and
      common share equivalent                          $2.18          $1.88          $1.52
                                                 -----------    -----------    -----------
                                                 -----------    -----------    -----------

Cash dividends per common share and
   common share equivalent                              $.42           $.41           $.36
                                                 -----------    -----------    -----------
                                                 -----------    -----------    -----------


WEIGHTED AVERAGE COMMON SHARES OUTSTANDING         1,560,949      1,629,474     1,588,874
                                                 -----------    -----------    -----------
                                                 -----------    -----------    -----------

</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.

<PAGE>

PAGE 25

California Independent Bancorp and Subsidiaries
Consolidated Statements Of Changes In Shareholders' Equity
For The Years Ended December 31, 1996, 1995 And 1994

<TABLE>
<CAPTION>

                                                                               Net
                                                                            Unrealized      Debt           Net
                                                                            Gain/(Loss)  Guarantee of   Unrealized
                                                                           on Marketable  Employee     Gain(Loss)on
                                             Common Stock                     Equity        Stock        Securities
                                           ------------------   Retained                  Ownership      Available
                                           Shares      Amount   Earnings     Securities      Plan        For-Sale      Total
                                           ------      ------   --------     ----------   -----------  -----------  -----------
<S>                                      <C>        <C>         <C>         <C>           <C>          <C>         <C>

Balance December 31, 1993                1,073,848  $7,694,375  $6,656,642    $(19,317)    $(16,585)        $  -   $14,315,115

Net unrealized gain on transfer of
  securities to available-for-sale               -           -           -           -            -       83,201        83,201
5-for-4 stock split with cash paid in
 lieu of fractional shares                 268,618           -      (8,228)          -            -            -        (8,228)
Reduction of ESOP debt                           -           -           -           -       16,585            -        16,585
Options exercised                           18,650      70,171           -           -            -            -        70,171
Tax benefit arising from exercise of
  nonqualified stock options and
  disqualifying dispositions                     -     114,701           -           -            -            -       114,701
Cash dividends                                   -           -    (534,686)          -            -            -      (534,686)
Change in net unrealized loss on
 securities held as available-for-sale           -           -           -           -            -     (242,620)     (242,620)
Realized loss on sale of marketable
  equity securities                              -           -           -      19,317            -            -        19,317
Net income                                       -           -   2,419,637           -            -            -     2,419,637
                                       -----------  ----------  ----------   ---------     --------   ----------    ----------

Balance December 31, 1994                1,361,116   7,879,247   8,533,365           -            -     (159,419)   16,253,193

5% stock dividend with cash paid in
  lieu of fractional shares                 67,610   1,267,687  (1,276,762)          -            -            -        (9,075)
ESOP loan                                        -           -           -           -     (200,000)           -      (200,000)
Reduction of ESOP debt                           -           -           -           -       40,000            -        40,000
Options exercised                           18,162      14,587           -           -            -            -        14,587
Tax benefit arising from exercise of
  nonqualified stock options and
  disqualifying dispositions                     -     142,320           -           -            -            -       142,320
Cash dividends                                   -           -    (615,787)          -            -            -      (615,787)
Change in net unrealized gain on
 securities held as available-for-sale           -           -           -           -            -      184,409       184,409
Net income                                       -           -   3,065,722           -            -            -     3,065,722
                                       -----------  ----------  ----------   ---------     --------   ----------    ----------

Balance December 31, 1995                1,446,888   9,303,841   9,706,538           -     (160,000)      24,990    18,875,369
5% stock dividend with cash paid in
  lieu of fractional shares                 72,050   1,513,050  (1,523,842)                                            (10,792)
Reduction of ESOP debt                                                                       40,000                     40,000
Options exercised                           27,094      35,010                                                          35,010
Tax benefit arising from exercise of
  nonqualified stock options and
  disqualifying dispositions                           236,289                                                         236,289
Cash dividends                                                    (647,941)                                           (647,941)

<PAGE>

Change in net unrealized loss on
  marketable equity securities                                                                          (42,806)      (42,806)
Net income                                                       3,401,051                                           3,401,051
                                       -----------  ----------  ----------   ---------     --------   ----------    ----------

Balance December 31, 1996                1,546,032 $11,088,190 $10,935,806           -    ($120,000)    ($17,816)  $21,886,180
                                       -----------  ----------  ----------   ---------     --------   ----------    ----------
                                       -----------  ----------  ----------   ---------     --------   ----------    ----------

</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.

<PAGE>

PAGE 26

California Independent Bancorp And Subsidiaries
Consolidated Statements Of Cash Flows
For The Years Ended December 31, 1996, 1995, And 1994

<TABLE>
<CAPTION>


                                                                        1996             1995             1994
                                                                     ---------        ---------         --------
<S>                                                                 <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                                        $  3,401,051     $  3,065,722     $  2,419,637
  Adjustments to reconcile net income to net cash provided
    by operating activities-
    Depreciation and amortization                                        776,561          687,353          642,186
    Provision for losses of other real estate owned                       97,823          178,506           79,000
    Provision for loan losses                                            385,000          875,000          347,000
    Provision for deferred taxes                                        (103,192)        (204,521)         (80,816)
    Investment security losses, net                                       (3,470)          12,316           17,970
    Gain on sale of loans                                                (80,952)        (142,270)               -
    (Gain) loss on sale of real estate properties, net                  (240,358)           4,218          (15,556)
    Origination of loans held-for-sale                               (10,854,337)     (19,818,618)     (23,415,728)
    Proceeds from loan sales                                          28,297,103       20,858,358       26,629,068
  (Increase) decrease in assets-
    Interest receivable                                                 (942,215)         751,854         (103,286)
    Other assets                                                         376,548       (4,329,745)        (430,302)
  Increase (decrease) in liabilities-
    Interest payable                                                      75,954          789,561          280,973
    Other liabilities                                                    383,667          101,212         (247,082)
                                                                     -----------       ----------       ----------
       Net cash provided by operating activities                      21,569,183        2,828,946        6,123,064

CASH FLOWS FROM INVESTING ACTIVITIES
  Net increase in loans                                               (6,956,353)      (1,130,175)     (24,473,319)
  Purchase of securities held-to-maturity                            (11,841,055)     (14,561,000)      (4,917,462)
  Purchase of securities available-for-sale                           (7,760,490)      (3,315,591)      (7,166,041)
  Purchase of loans held-for-sale                                    (33,967,000)               0                0
Proceeds from maturity of securities held-to-maturity                 10,326,530        6,658,000        3,777,215
Proceeds from sales and maturities of securities
   available-for-sale                                                  2,000,000       16,771,301        5,647,852
Proceeds from sales of other real estate owned                           489,246        1,370,253           53,044
Purchases of premises and equipment                                   (1,803,261)        (954,625)        (582,593)
                                                                     -----------       ----------       ----------
  Net cash provide by (used for) investing activities                (49,512,383)       4,838,163      (27,661,304)
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

CASH FLOWS FROM FINANCING ACTIVITIES
<S>                                                                <C>               <C>             <C>
  Net increase (decrease) in noninterest-bearing deposits          $  11,290,397     $  1,334,920      $  (881,497)
  Net increase in interest-bearing deposits                           33,305,414       16,849,335       15,902,119
  Cash dividends                                                        (647,941)        (615,787)        (534,686)
  Stock options exercised                                                271,299          156,907          184,872
  Cash paid in lieu of fractional shares                                 (10,792)          (9,075)          (8,228)
                                                                   -------------    -------------    -------------
    Net cash provided by financing activities                         44,208,377       17,716,300       14,662,580
                                                                   -------------    -------------    -------------
    Net increase (decrease) in cash and cash equivalents              16,265,177       25,383,409       (6,875,660)

CASH AND CASH EQUIVALENTS,  BEGINNING OF YEAR                         47,962,704       22,579,295       29,454,955
                                                                   -------------    -------------    -------------

CASH AND CASH EQUIVALENTS,  END OF YEAR                            $  64,227,881    $  47,962,704    $  22,579,295
                                                                   -------------    -------------    -------------
                                                                   -------------    -------------    -------------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
  Cash paid during the year for-
    Interest expense                                                $  7,352,690     $  5,463,729     $  4,177,982
    Income taxes                                                       1,889,000        2,010,000        1,632,690

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
  FINANCING ACTIVITIES
  Debt guarantee of ESOP                                              $  (40,000)      $  160,000       $  (16,585)
  Unrealized gain on transfer of securities to
    available-for-sale (net of taxes of $49,707)                          -                -                83,201
  Net unrealized gain on securities held as
    available-for-sale (net of taxes)                                     42,806          184,409         (242,620)
  Tax benefit arising from exercise of nonqualified
    stock options and disqualifying dispositions                         236,289          142,320          114,701
  Stock dividends                                                      1,513,050        1,267,687                -
  Increase in other real estate owned as a result of
    foreclosure                                                          463,196          939,482          723,325
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.

<PAGE>

PAGE 27-38


California Independent Bancorp And Subsidiaries
(Formerly Known As Feather River State Bank)
Notes To Financial Statements
December 31, 1996

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The accounting and reporting policies of California Independent Bancorp and
Subsidiaries (the Company) conform with generally accepted accounting principles
and general practice within the banking industry. The more significant of these
policies applied in the preparation of the accompanying financial statements are
discussed below.

PRINCIPLES OF CONSOLIDATION-The accompanying financial statements include the
accounts of California Independent Bancorp (CIB) and two wholly owned
Subsidiaries, Feather River State Bank (the Bank) and its wholly owned
subsidiaries, EPI Leasing Company, Inc. and Yuba-Sutter Financial Services
Corporation. Significant intercompany transactions and balances have been
eliminated in consolidation.

NATURE OF OPERATIONS-
A new bank holding company, California Independent Bancorp (CIB), was
established in October 1994. CIB acquired all of the outstanding stock of
Feather River State Bank (FRSB) through a phantom merger with FRSB Merger
Company, a wholly-owned subsidiary of CIB. The shareholders exchanged their FRSB
stock on a one-for-one share basis, for stock in CIB. In May 1995, FRSB became a
wholly-owned subsidiary of CIB. Former shareholders of FRSB are now shareholders
of CIB. There have been no changes to management or services of FRSB.

CIB is a California corporation and the bank holding company for Feather
River State Bank (FRSB), located in Yuba City, California. The Bank was
incorporated as a California state banking corporation on December 1, 1976,
and commenced operations on April 6, 1977. The Company was incorporated on
October 28, 1994, and became the holding company for FRSB on May 2, 1995. The
Bank engages in a broad range of financial services activities, and its
primary market is located in the northern Sacramento Valley, with a total of
six branches. In addition, the Bank operates two loan production offices,
emphasizing Residential Mortgage lending, and one lease production office
through EPI Leasing Company, Inc. The primary source of income for the Bank
is from lending activities, including commercial, agricultural, real estate
and consumer/installment loans.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS-
The preparation of financial statements in conformity with generally accepted
accounting principles may require management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of income and expenses during the reporting period. Actual
results could differ from those estimates.

CASH AND CASH EQUIVALENTS-
For purposes of reporting cash flows, cash and cash equivalents include cash on
hand, amounts due from banks, and federal funds sold. Generally, federal funds
are purchased and sold for one-day periods.

<PAGE>

INVESTMENT SECURITIES-
As of January 1, 1994, the Bank adopted Statement of Financial Accounting
Standards No. 115 (SFAS 115), Accounting for Certain Investments in Debt and
Equity Securities. This change in accounting principle requires the Bank to
classify its investments as either held-to-maturity, trading or
available-for-sale. The Bank does not maintain a trading account and classifies
securities as either "Held-to-Maturity" or "Available-for-Sale."

Securities that the Bank has the positive intent and ability to hold to maturity
are classified as held-to-maturity and accounted for at amortized cost in the
Consolidated Balance Sheets.

Other securities for which the Bank does not have the positive intent or ability
to hold to maturity are classified under the balance sheet caption
Available-for-Sale and are reported at their fair values, with unrealized gains
and losses reported on a net-of-tax basis as a separate component of
shareholders' equity. Fair values are based on quoted market prices or broker or
dealer price quotations on a specific identification basis. Certain economic
factors could cause the Bank to sell some of these securities prior to maturity.
Such factors include significant movements in interest rates and significant
changes in liquidity demands. Gains or losses on sale of investment securities
are computed using the specific identification method.


LOANS-
Loans are stated at the principal amount outstanding less applicable unearned
interest income.

As of January 1, 1995, the Bank adopted Statement of Financial Accounting
Standards No. 114, Accounting by Creditors for Impairment of a Loan, as amended
by Statement of Financial Accounting Standards No. 118. A loan is impaired when,
based on current information and events, it is probable that the Bank will be
unable to collect all amounts due according to the contractual terms of the loan
agreement. When a loan is impaired, the recorded amount of the loan in the
balance sheets is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or on the observable or
estimated market price of the loan or the fair value of the collateral if the
loan is collateral dependent. Income on impaired loans is recognized in
accordance with the Bank's accounting for loans placed on a non-accrual status.
Cash payments are first applied as a reduction of the principal balance until
collectibility of the remaining principal and interest can be reasonably
assured. Thereafter, interest income is recognized as it is collected in cash.
The affect of adopting this standard did not have a material impact on the
balances of the Bank's loans or allowance for loan losses.

LOANS HELD-FOR-SALE-
The Bank originates mortgage loans on residential and farm properties which it
sells into the secondary market in order to divest itself of the interest rate
risk associated with these primarily fixed interest rate products. The Bank
accounts for these loans at the lower cost or net realizable value.

As of January 1, 1996, the Bank adopted Statement of Financial Accounting
Standards No. 122, Accounting for Mortgage Servicing Rights. This statement
requires, under certain circumstances, entities to recognize as a separate asset
an amount related to the right to service mortgage loans. The adoption of this
statement had an immaterial impact on the Bank's results of operations.

SALES AND SERVICING OF SBA LOANS-
The Bank originates loans to customers under the Small Business Administration
(SBA) program that generally provides for SBA guarantees of 70% to 90% of each
loan. The Bank generally sells the guaranteed portion of each loan to a third
party and retains the unguaranteed portion in its own portfolio. The Bank may be
required to refund a portion of the sales premium received, if the borrower
defaults or the loan prepays within 90 days of the settlement date. At December
31, 1996, the Bank had no premiums subject to such recourse. A gain is
recognized on the sale of SBA loans through collection on sale of a premium over
the adjusted carrying value, through retention of an ongoing rate differential
less a normal service fee (excess servicing fee) between the rate paid by the
borrower to the Buyer and the rate paid by the Bank to the purchaser, or both.

<PAGE>

To calculate the gain (or loss) on sale, the Bank's investment in an SBA loan is
allocated among the retained portion of the loan, the excess servicing retained
and the sold portion of the loan, based on the relative fair market value of
each portion. The gain (or loss) on the sold portion of the loan is recognized
at the time of sale based on the difference between the sale proceeds and the
allocated investment. As a result of the relative fair value allocation, the
carrying value of the retained portion is discounted, with the discount accreted
to interest income over the life of the loan. The excess servicing fees are
reflected as an asset which is amortized over an estimated life using a method
approximating the level yield method; in the event future prepayments exceed
Management's estimates and future expected cash flows are inadequate to cover
the unamortized excess servicing asset, additional amortization would be
recognized. In its calculation of excess servicing fees, the Bank is required to
estimate a "normal" servicing fee. The Bank uses the contractual rate of 100
basis points as its estimate of a normal servicing fee.

ALLOWANCE FOR LOAN LOSSES-
The allowance for loan losses is maintained at a level considered adequate by
Management to provide for losses that can be reasonably anticipated.
Accordingly, loan losses are charged to the allowance for loan losses and
recoveries are credited to it. The provision for loan losses charged to
operating expense is based upon past loan loss experience and estimates of
potential losses which, in Management's judgment, deserve current recognition.
Other factors considered by Management include growth, composition and overall
quality of the loan portfolio, reviews of specific problem loans, and current
economic conditions that may affect the borrowers' ability to pay. This
evaluation process requires the use of current estimates which may vary from the
ultimate losses experienced in the future. The estimates are reviewed
periodically, and adjustments, as they become necessary, are charged to
operations in the period in which they become known.

OTHER REAL ESTATE OWNED-
Other real estate owned consists of properties acquired by the Bank through
foreclosure and is carried at the lower of cost or fair value, less estimated
costs to sell. At the time the property is acquired, if the estimated fair value
is less than the amount outstanding on the loan, the difference is charged
against the allowance for loan losses. Subsequent declines, if any, in estimated
fair value are charged to expense.

INTEREST AND FEES ON LOANS AND LEASES-
Origination fees and commitment fees, offset by certain direct loan origination
costs, are deferred and recognized over the contractual life of the loan as
yield adjustment. Interest income on loans and direct lease financing is accrued
monthly as earned on all credits not classified as nonaccrual. Unearned income
on loans, where applicable, is recognized as income using the effective interest
method over the term of the loan.

Loans are generally placed on nonaccrual status when they are 90 days past due
as to either interest or principal or are otherwise determined to be impaired.
At that time, any accrued but uncollected interest is reversed, and additional
income is recorded on a cash basis as payments are received. However, loans that
are well secured and in the process of collection may not be placed on
nonaccrual status, at the discretion of Management. A nonaccrual loan may be
restored to an accrual basis when interest and principal payments are current
and prospects for future payments are no longer in doubt.

<PAGE>

DEPRECIATION AND AMORTIZATION-
Premises and equipment are stated at cost, less accumulated depreciation.
Depreciation on premises, furniture, fixtures and equipment is calculated using
the straight-line method over the estimated useful lives of the assets, which
range from 3 to 31.5 years. Leasehold improvements are amortized using the
straight-line method over the asset's useful life or the term of the lease,
whichever is shorter.

Expenditures for major renewals and improvements of bank premises and equipment
are capitalized, and those for maintenance and repairs are charged to expense as
incurred.

INCOME TAXES-
Income taxes reported in the financial statements are computed at current tax
rates, including deferred taxes resulting from temporary differences in the
recognition of items for tax and financial reporting purposes.

The Bank records income taxes for financial statement purposes using the
liability or balance sheet method under which the net deferred tax asset or
liability is determined based on the tax effects of the differences between book
and tax bases of the various balance sheet assets and liabilities. Under this
method, the computation of the net deferred tax asset or liability gives the
current recognition to changes in tax laws and rates.

RECLASSIFICATIONS-
Certain reclassifications have been made to amounts previously reported to
conform with current presentation methods. Such reclassifications have no effect
on net income or shareholders' equity previously reported.

(2) INVESTMENT SECURITIES:
As of January 1, 1994, securities with an amortized cost of $7,467,595 and a
fair value of $7,980,184 were classified as held-to-maturity. Securities with
an amortized cost of $22,840,612 and a fair value of $22,973,521 were
classified as available-for-sale. The effect of adopting SFAS 115 was to
recognize an unrealized gain, net of applicable taxes, of $83,201 as a direct
addition to shareholders' equity. As of December 31, 1996, 1995, and 1994, the
Bank's equity capital reflected a net unrealized gain (loss), net of applicable
taxes, of $ (17,816), $24,990, and $(159,419), respectively.

The amortized cost and approximate fair value of investments in debt securities
and other investments at December 31, 1996 and 1995, are as follows:


<TABLE>
<CAPTION>


                                                                   Gross          Gross
                                                   Amortized    Unrealized      Unrealized      Fair
                                                      Cost         Gains          Losses        Value
                                                   ----------    ---------      -----------   ----------
<S>                                                <C>            <C>            <C>            <C>
December 31, 1996
Available-for-sale:
 U.S. Treasury securities and obligations of
  U.S. government agencies                         $11,405,179     $  5,915     $  (36,631)   $11,374,463
                                                   -----------    ---------     ----------    -----------
                                                   -----------    ---------     ----------    -----------

Held-to-maturity:
 U.S. Treasury securities and obligations of
  U.S. government agencies                          15,720,573      140,302         (1,158)    15,859,717
 Obligations of states and political
  subdivisions                                       3,576,412       92,434        (22,159)     3,646,687

<PAGE>

Corporate obligations and other securities
                                                     3,992,185       27,109              -      4,019,294
                                                   -----------    ---------     ----------    -----------
   Total                                           $23,289,170   $  259,845     $  (23,317)   $23,525,698
                                                   -----------    ---------     ----------    -----------
                                                   -----------    ---------     ----------    -----------

December 31, 1995
Available-for-sale:
 U.S. Treasury securities and obligations of
  U.S. government agencies                      $  5,847,100    $  47,652          (4,566)  $  5,890,186
                                                   -----------    ---------     ----------    -----------
                                                   -----------    ---------     ----------    -----------

Held-to-maturity:
 U.S. Treasury securities and obligations of
  U.S. government agencies                       $  9,722,535     $352,824      $        -    $10,075,359
 Obligations of states and political
  subdivisions                                      4,905,291      154,675          (3,152)     5,056,814
Corporate obligations and other securities          6,909,942      116,710         (26,875)     6,999,777
                                                   -----------    ---------     ----------    -----------

   Total                                           $21,537,768     $624,209     $  (30,027)   $22,131,950
                                                   -----------    ---------     ----------    -----------
                                                   -----------    ---------     ----------    -----------

The following table shows the amortized cost and estimated fair value of
investment securities by contractual maturity at December 31, 1996 and 1995.
Expected maturities may differ from contractual maturities because borrowers
may have the right to call or prepay obligations with or without call or
prepayment penalties.


                                             Held-to-Maturity           Available-for-Sale
                                             ----------------           -------------------
                                        Amortized        Fair         Amortized        Fair
                                          Cost           Gains          Losses         Value
                                        ---------      ----------     ---------     ----------

December 31, 1996
Within one year                         $6,833,079     $6,880,248     $1,833,086     $1,833,123
After one but within five years         16,060,091     16,214,010      6,119,299      6,111,175
After five but within ten years            396,000        431,440      3,452,794      3,430,165
                                       -----------      ---------     ----------    -----------

        Total                          $23,289,170    $23,525,698    $11,405,179    $11,374,463
                                       -----------    -----------     ----------    -----------
                                       -----------    -----------     ----------    -----------

December 31, 1995
Within one year                       $  4,102,714   $  4,136,151   $  1,999,876   $  1,995,310
After one but within five years         15,992,053     16,487,664        401,240        406,049
After five but within ten years          1,397,001      1,457,178      3,445,984      3,488,827
After ten years                             46,000         50,957              -              -
                                       -----------      ---------     ----------    -----------
        Total                          $21,537,768    $22,131,950   $  5,847,100   $  5,890,186
                                       -----------      ---------     ----------    -----------
                                       -----------      ---------     ----------    -----------
</TABLE>


Net gains (losses) from sales of available-for-sale investment securities during
1996, 1995, and 1994 were $3,470, $(12,316), and $(17,970), respectively. Gross
gains of $3,470, $3,000, and $1,750 and gross losses of $0, $15,316, and
$19,720, were realized on those sales in 1996, 1995, and 1994, respectively.

<PAGE>

Investment securities pledged as collateral for certain deposits amounted to
$10,374,814 and $10,410,068 at December 31, 1996 and 1995, respectively.

<PAGE>

(3) LOANS:
Loans outstanding are summarized as follows:

                                                       December 31,
                                                       ------------
                                                1996                1995
                                              ---------            -------

Real estate mortgage                      $  28,564,640       $  28,288,337
Commercial and agricultural                  71,527,482          74,355,093
Real estate construction                     29,916,204          18,048,005
Consumer and installment                      2,983,939           2,814,717
Lease financing                              15,892,783           3,216,140
Other                                         2,214,574           1,522,174
                                          -------------        ------------
     Totals                                $151,099,622        $128,244,466
                                          -------------        ------------
                                          -------------        ------------


Loans on which the accrual of interest has been discontinued or reduced amounted
to approximately $845,832 and $292,725 at December 31, 1996 and 1995,
respectively.

As of December 31, 1996, the total recorded investment in impaired loans was
$845,832 and $292,725 as of December 31, 1996 and 1995, respectively, and the
related reserve for loan losses was $200,601 and $292,725 as of December 31,
1996 and 1995, respectively. For income reporting purposes, impaired loans are
placed on a nonaccrual status. This is more fully discussed in Note 1. The
average balance of impaired loans during 1996 was $569,279. Interest income
recorded on those loans during 1996 was $82,344. Foregone interest on loans
placed on nonaccrual status was $42,783 and $39,812 as of December 31, 1996 and
1995, respectively.

Changes in the allowance for loan losses are summarized as follows:

<TABLE>
<CAPTION>

                                                          Year Ended December 31,
                                                   ------------------------------------
                                                     1996           1995           1994
                                                    ------         ------         ------
<S>                                               <C>            <C>            <C>
Balance, beginning of year                        $3,910,970     $3,287,663     $3,086,736
Provision                                            385,000        875,000        347,000
Loans charged off                                   (327,357)      (554,514)      (196,712)
Recoveries on loans previously charged off            84,170        302,821         50,639
                                                  -----------    ----------     ----------
Balance, end of year                              $4,052,783     $3,910,970     $3,287,663
                                                  -----------    ----------     ----------
                                                  -----------    ----------     ----------
</TABLE>


<PAGE>

(4) PREMISES AND EQUIPMENT:
A summary of premises and equipment follows:

                                                     December 31,
                                               -------------------------
                                               1996                1995
                                              ------               -----
Land                                         $1,432,957          $1,087,889
Bank premises and improvements                5,415,175           4,911,217
Furniture, fixtures and equipment             4,555,933           3,909,030
                                             ----------          ----------
                                             11,404,065           9,908,136
Less accumulated depreciation
  and amortization                            3,983,678           3,514,449
                                             ----------          ----------
                                             $7,420,387          $6,393,687
                                             ----------          ----------
                                             ----------          ----------


Depreciation and amortization charged to expense was $776,561, $687,353, and
$642,186 in 1996, 1995 and 1994, respectively.

Rent under operating leases was approximately $52,487, $110,070, and $93,000 in
1996, 1995 and 1994, respectively.

(5) DEPOSITS:
A summary of deposit balances follows:

                                                      December 31,
                                               -------------------------
                                                1996                1995
                                               ------               -----

Demand                                      $55,117,230       $  43,826,833
Interest-bearing
  transaction accounts                       33,659,296          27,315,360
Savings deposits                             67,755,798          61,291,154
Time deposits                                81,359,944          60,863,110
                                           ------------       -------------
Total deposits                             $237,892,268        $193,296,457
                                           ------------       -------------
                                           ------------       -------------


Certificates of deposit of $100,000 or more, including public time deposits,
amounted to approximately $33,851,000 and $23,937,000 at December 31, 1996 and
1995, respectively.

Interest expense on certificates of deposit of $100,000 or more, including
public time deposits, amounted to approximately $1,481,000, $911,000, and
$354,000 in 1996, 1995 and 1994, respectively.

<PAGE>


At December 31, 1996, the scheduled maturities of all Certificates of
Deposits are as follows:

                                         December 31, 1996
                                       --------------------
                                      (Dollars in thousands)

Three months or less                         $29,028
Over three through six months                 19,695
Over six through twelve months                22,574
Over twelve months                            10,063
                                              ------
Total                                        $81,360

<PAGE>

(6) OTHER NONINTEREST INCOME AND EXPENSE:
The components of other operating income and expense were as follows:


                                                 Year Ended December 31,
                                               ---------------------------
                                             1996          1995         1994
                                            ------        ------       ------
                                                  (Dollars in thousands)

Loan servicing fees                         $  487        $  482        $  306

Brokered loan fees                             923           360           418
Gain on Sale of OREO                           240            31            29
Other                                          569           495           357
                                            ------        ------         -----

Total other noninterest income              $2,219        $1,368        $1,110
                                            ------        ------         -----
                                            ------        ------         -----

Advertising and promotion                   $  342        $  286        $  267
FDIC assessments                                25           220           376
Stationery and supplies                        253           212           196
Directors' fees                                391           300           260
Other                                        2,175         1,857         1,632
                                            ------        ------         -----
Total other noninterest expense             $3,186        $2,875        $2,731
                                            ------        ------         -----
                                            ------        ------         -----

(7) INCOME TAXES:
The provision for income taxes consists of the following:


                                                 Year Ended December 31,
                                               ---------------------------
                                             1996          1995         1994
                                            ------        ------       ------
Current-
  Federal                               $1,697,811    $1,626,412    $1,171,774
  State                                    612,159       614,109       449,042
                                        ----------    ----------    ----------
                                         2,309,970     2,240,521     1,620,816
                                        ----------    ----------    ----------
Deferred-
  Federal                                  (85,574)     (147,274)      (89,774)
  State                                    (17,618)      (57,247)        8,958
                                        ----------    ----------    ----------
                                          (103,192)     (204,521)      (80,816)
                                        ----------    ----------    ----------
                                        $2,206,778    $2,036,000    $1,540,000
                                        ----------    ----------    ----------
                                        ----------    ----------    ----------

<PAGE>
The effective tax rate and statutory federal income tax rate are reconciled as
follows:

                                                  Year Ended December 31,
                                               ---------------------------
                                              1996          1995         1994
                                             ------        ------       ------

Federal
  statutory
  income tax
  rate                                        34.0%         34.0%         34.0%
State franchise
  taxes, net of
  federal income
  tax benefit                                  7.4           7.2           7.6
Tax-exempt
  interest                                    (2.1)         (1.9)         (3.3)
Other                                         (0.1)         (0.6)          0.6
                                              -----         -----         -----
                                              39.4%         39.9%         38.9%
                                              -----         -----         -----
                                              -----         -----         -----

The components of the net deferred tax asset, recorded in other assets, of the
Bank as of December 31, 1996 and 1995, were as follows:

                                                         1996           1995
                                                        ------         ------
Deferred tax assets-
   Loan losses                                       $1,555,127      $1,492,325
   California franchise tax                             205,355         151,785
   Other real estate owned                              116,441          62,262
   Unrealized loss on available-for-sale
     securities                                          12,901               -
                                                      ---------      ----------

          Total deferred tax assets                   1,889,824       1,706,372
                                                      ---------      ----------
Deferred tax liabilities-
   Depreciation                                         256,938         264,527
   Accretion                                             85,236          67,575
   Unrealized gain on available-for-sale
     securities                                               -          18,096
   Other                                                182,824         125,537
                                                      ---------      ----------

          Total deferred tax liabilities                524,998         475,735
                                                      ---------      ----------

          Net deferred tax asset                     $1,364,826      $1,230,637
                                                      ---------      ----------
                                                      ---------      ----------

The components of the deferred income tax provisions are summarized as follows:

                                               YEAR ENDED DECEMBER 31,
                                               -----------------------
                                          1996           1995          1994
                                       ----------    ----------    ----------
Provisions for possible loan losses    $  (62,802)   $ (242,184)   $   15,163
Tax depreciation methods                   (7,589)       52,304       (27,569)
California franchise tax                  (53,570)      (24,447)     (125,002)
Other real estate owned                   (54,179)      (37,663)       10,581
Accretion                                  17,661        52,959         6,892
Other                                      67,287        (5,490)       39,119
                                       ----------    ----------    ----------
                                       $ (103,192)   $ (204,521)   $  (80,816)


<PAGE>

(8) SHAREHOLDERS' EQUITY:
At December 31, 1996, CIB was authorized to issue 20,000,000 shares of no par
common stock. Of this amount, 1,546,032 and 1,518,938 shares of common stock
were issued and outstanding at December 31, 1996 and 1995, respectively.

One of the principal sources of cash for the Company will be dividends from
its subsidiary bank. Banking regulations limit the amount of dividends that
may be paid without prior approval of the Company's regulatory agencies to
the lesser of retained earnings or the net income of the Company for its last
three fiscal years, less any distributions during such period, subject to
capital adequacy requirements. At December 31, 1996, the Company had
approximately $6,792,619 available for payments of dividends which would not
require the prior approval of the banking regulators under this limitation.

Earnings per share are computed on the basis of the weighted average number of
shares outstanding during each year, including the dilutive effect of stock
options granted, adjusted retroactively to reflect stock splits and stock
dividends declared.

In August 1996, the Board of Directors authorized a five percent stock dividend
which was distributed on September 20, 1996. The dividend was declared on August
13, 1996, to holders of record on August 30, 1996. The dividend resulted in the
issuance of an additional 72,050 shares of common stock.

In June 1995, the Board of Directors authorized a five percent stock dividend
which was distributed on July 14, 1995. The dividend was declared on June 23,
1995, to holders of record on June 30, 1995. The dividend resulted in the
issuance of an additional 67,610 shares of common stock.

In April 1994, the Board of Directors authorized a five-for-four stock split
which was distributed on May 26, 1994. The split was declared on April 22, 1994,
to holders of record on April 29, 1994. The split resulted in the issuance of an
additional 268,618 shares of common stock.


(9) DISCLOSURE OF FAIR VALUE OF FINANCIAL INSTRUMENTS:

CASH AND CASH EQUIVALENTS-
For these short-term instruments, the carrying value is a reasonable estimate of
fair value.

INVESTMENTS-
For securities held-for-investment purposes, fair values are based on quoted
market prices or dealer quotes. See Note 2 for further discussion.

LOANS-
The fair value of loans is estimated by discounting the future cash flows using
current rates at which similar loans would be made to borrowers with similar
credit ratings for similar remaining maturities. The fair value of nonperforming
loans is estimated based on allocating specific and general reserves to the
various nonperforming loan classifications.

DEPOSIT LIABILITIES-
The fair value of demand deposits, savings accounts, and certain money market
deposits is the amount payable on demand at the reporting date. The fair value
of fixed maturity certificates of deposit is estimated using the rates currently
offered for deposits of similar remaining maturities.

Other liabilities represent short-term instruments. The carrying amount is a
reasonable estimate of fair value.

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS-
The carrying amounts for fees arising from commitments to extend credit, standby
letters of credit and financial guarantees written and their related fair values
are not material.

<PAGE>

The estimated fair values of the Bank's financial instruments at December 31,
1996 and 1995, are as follows:

<TABLE>
<CAPTION>

                                               December 31, 1996                      December 31, 1995
                                          ---------------------------        --------------------------------
                                         Carrying            Fair               Carrying              Fair
                                          Amount            Value                Amount               Value
                                         --------          --------             --------             -------
<S>                                  <C>                 <C>                 <C>                 <C>
Financial assets:
  Cash and cash equivalents          $  64,227,881       $  64,227,881       $  47,962,704       $  47,962,704
  Investments                           34,663,633          34,900,161          27,427,954          28,022,136
  Loans                                147,046,839         149,780,903         124,333,496         124,520,236

Financial liabilities:
  Deposits                            $237,892,268        $238,285,181        $193,296,457        $193,789,361
  Interest Payable and other
  liabilities                            2,823,883           2,823,883           2,404,262           2,404,262

</TABLE>


(10) STOCK OPTIONS:
During 1989, the Bank adopted the Feather River State Bank 1989 Amended and
Restated Stock Option Plan. The plan is nonqualified and provides that
nonemployee directors and key employees may be granted options to purchase the
Company's stock at the fair market value of the shares as determined by the
Board of Directors. As of May 1995, all previously granted options to purchase
the Bank's stock had been retired, and exchanged for options to purchase the
Company's stock, on a one-for-one option basis. All granted options must be
exercised within the earlier of ten years of the date of grant or within 30 days
of termination of employment or status as a director. Vesting is determined at
the time of grant by the Board of Directors. Current participants vest over five
years from date of employment. Federal income tax benefits relating to options
exercised have been credited to shareholders' equity.

During 1996, the Company adopted the California Independent Bancorp 1996
Stock Option Plan ("1996 Plan") which sets aside 149,052 shares of no par
value Common Stock of the Company for which options may be granted to key,
full-time salaried employees and officers of the Company, as well as
non-employee directors of the Company. The exercise price of all options to
be granted under the 1996 Plan must be at least 100% of the fair market value
of the Company's Common Stock on the granting date and be paid in full at the
time the option is exercised in cash, shares of the Company's Common Stock
with a fair value equal to the purchase price or a combination thereof. Under
the 1996 Plan, all options expire no more than ten years after the date of
grant.

Federal income tax benefits relating to options exercised under both plans
have been credited to shareholders' equity.

Statement of Financial Accounting Standards No. 123 (SFAS 123), "Accounting for
Stock-Based Compensation," is effective for transactions entered into for fiscal
years beginning after December 15, 1995. This statement defines a
fair-value-based method of accounting for stock-based compensation. As permitted
by SFAS 123, the Bank accounts for stock options under APB Opinion No. 25, under
which no compensation cost is being recognized. Pro forma amounts are not shown
as the difference between SFAS 123 and APB Opinion No. 25 is immaterial.

The following is a summary of stock option transactions with 1995 figures
adjusted to reflect the five percent stock dividend:


                                                  December 31,
                                             1996          1995
                                           -------        -------
Stock options authorized                   427,608        427,608
                                         ---------      ---------
                                         ---------      ---------

Stock options granted                      333,899        305,448
Stock options exercised                   (107,138)       (72,251)
Stock options expired                         (948)          (948)
                                         ---------      ---------
Stock options outstanding
  December 31                              225,813        232,249
                                         ---------      ---------
                                         ---------      ---------

<PAGE>


Stock options vested
  December 31                              225,318        231,312
                                         ---------      ---------
                                         ---------      ---------
Price per share -
  Options outstanding                   $  5.43 to     $  5.47 to
                                            $24.75         $20.03
                                         ---------      ---------
                                         ---------      ---------

Price of options exercised              $  5.43 to     $  5.43 to
                                            $13.79         $18.62
                                         ---------      ---------
                                         ---------      ---------

(11) PROFIT SHARING PLAN AND EMPLOYEE STOCK OWNERSHIP PLAN:
The Bank formed a 401(k) Qualified Savings Plan (the Plan) effective August 1,
1993. All full-time employees who have reached the age of 21 are eligible to
participate beginning on January 1st or July 1st following 12 months of
employment. All eligible employees are 100% vested in their own contributions
which may be any whole percentage of pay between 2% and 12% inclusive. Beginning
January 1, 1995, the Bank began making matching contributions which were equal
to 20% of each employee's elective contributions not exceeding 6% of pay.
Contributions are invested with Lincoln National Life Insurance Company under
employee directed investment options.

The Bank formed an Employee Stock Ownership Plan (the ESOP) effective January 1,
1988. Effective January 1, 1995, the ESOP was amended to recognize CIB and all
of its employees as participants. All employees who have completed one year of
service and have reached the age of 21 are eligible to participate in the ESOP.
The ESOP provides for annual contributions at the discretion of the Board of
Directors. The contributions are allocated based on the participants'
compensation for the year. Employees vest ratably in the ESOP over six years.
The ESOP borrowed $200,000 from a nonprofit corporation to acquire 9,762 shares
of CIB common stock in August 1995. The borrowing is payable in five equal
annual installments with interest at prime minus 1/2 percent, which rate was
7.75% at December 31, 1996. The Bank made contributions to the ESOP of
approximately $40,000, $40,000 and $17,000 in 1996, 1995 and 1994, respectively.

(12) FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK:
The Bank makes commitments to extend credit in the normal course of business to
meet the financing needs of its customers. 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 amount does not necessarily represent future cash
requirements.

The Bank is exposed to credit loss, in the event of nonperformance by the
borrower, in the contract amount of the commitment. The Bank uses the same
credit policies in making commitments as it does for on-balance-sheet
instruments and evaluates each customer's creditworthiness on a case-by-case
basis. The amount of collateral obtained, if deemed necessary by the Bank, is
based on Management's credit evaluation of the borrower. Collateral held varies
but may include certificates of deposit, accounts receivable, inventory,
property and equipment, and real property.

The Bank also issues standby letters of credit which are unconditional
commitments to guarantee the performance of a customer to a third party. These
guarantees are primarily issued to support construction bonds, private borrowing
arrangements, and similar transactions. Most of these guarantees are short-term
commitments expiring in 1997 and are not expected to be drawn upon. 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 collateral as
deemed necessary, as described above.

<PAGE>

The contract amount of commitments not reflected on the balance sheet at
December 31, 1996, were as follows:


 Loan commitments                         $  72,208,282
 Standby letters of credit                    1,276,607

(13) RELATED PARTY TRANSACTIONS:
The Bank has had loan and deposit transactions and has contracted for services
with certain officers and directors and the companies with which they are
associated. In the opinion of Management and the Board of Directors, all such
loans, commitments to lend, and contracts for services were made under terms
which are consistent with the Bank's normal policies. Loan transactions with
these officers and directors for the years ended December 31, 1996 and 1995,
respectively, are as follows:


                                      1996           1995
                                   ----------     ----------
Loan balances -
  beginning of year               $ 6,433,373    $ 4,343,878
    Additions                       4,277,689      4,446,748
    Collections                    (3,813,593)    (2,357,253)
                                 ------------    -----------
  end of year                     $ 6,897,469    $ 6,433,373
                                 ------------    -----------
                                 ------------


The Bank had loans outstanding to two directors of the Bank and their
associates, each in excess of 5 percent of shareholders' equity. The total
principal balance of the loans to one of these two directors was approximately
$3,781,536 and $3,118,000 at December 31, 1996 and 1995, respectively. The total
principal balance of the loans to the other director was approximately
$1,057,000 and $1,524,000 at December 31, 1996 and 1995, respectively.

The Bank's former data processing service bureau was partially owned by a
director of the Bank. The Bank paid approximately $0, $0, and $196,000 for this
service in 1996, 1995 and 1994, respectively.

Remodeling work on branches and offices of the Bank was done by directors of
the Bank. The Bank paid approximately $320,701, $60,000 and $31,000 for this
work in 1996, 1995 and 1994, respectively.

The Bank contracts its property management with a company that is partially
owned by a director of the Bank. The Bank paid approximately $28,772,
$244,000, and $18,000 for property management services in 1996, 1995 and
1994, respectively.

The Bank leased a vehicle and purchased another from an automobile dealership of
which a director of the Bank is the General Manager and President. The vehicle
was purchased in 1995 for $21,000. The lease expires in May 1997 and requires
monthly payments of $434.

<PAGE>

(14) CALIFORNIA INDEPENDENT BANCORP FINANCIAL STATEMENTS (PARENT ONLY):

                                                         (In thousands)
                                                    December 31,  December 31,
                                                        1996          1995
                                                    ------------  ------------

BALANCE SHEET-
Assets:
  Cash and due from banks                                $  63        $  29
  Investment in subsidiaries                            21,662       18,753
  Other assets                                             161           93
                                                     ---------    ---------
     Total assets                                    $  21,886    $  18,875
                                                     ---------    ---------
                                                     ---------    ---------

  Liabilities and shareholders' equity:
     Shareholders' equity
       Total shareholders' equity                    $  21,886    $  18,875
                                                     ---------    ---------
       Total liabilities and shareholders' equity    $  21,886    $  18,875
                                                     ---------    ---------
                                                     ---------    ---------

                                                            (In thousands)
                                                     December 31,  December 31,
                                                          1996         1995
                                                     ------------  -----------
STATEMENT OF INCOME-
Administrative expense                                  $  222        $  76
Other expense                                              104           53
                                                         ------       -----
Loss before equity in net income of subsidiaries           326          129
Equity in net income of subsidiaries:
  Distributed                                              958          516
  Undistributed                                          2,637        2,628
Income tax benefit                                         132           51
                                                         ------       -----
       Net income                                       $3,401       $3,066
                                                         ------       -----
                                                         ------       -----


                                                            (In thousands)
                                                     December 31,  December 31,
                                                          1996         1995
                                                     ------------  -----------

STATEMENT OF CASH FLOWS-
Operating activities:
  Net income                                            $3,401       $3,066
  Adjustments to reconcile net income to
    net cash provided by operating activities-
      Undistributed equity in subsidiaries              (2,637)      (2,628)

<PAGE>

      Deferred income taxes                               (132)         (51)
      Increase in other operating assets                   (68)         (42)
                                                          -----       -----
       Net cash provided by operating activities           564          345
                                                          -----       -----
Investing activities:                                        -            -

       Net cash provided by investing activities             -            -
                                                          -----       -----
Financing activities:
  Dividends paid                                          (530)        (316)
                                                          -----       -----
       Net cash used in financing activities              (530)        (316)
                                                          -----       -----
       Increase in cash and cash equivalents                34           29

Cash and cash equivalents, beginning of year                29            -
                                                          -----       -----

Cash and cash equivalents, end of year                   $  63        $  29
                                                          -----       -----
                                                          -----       -----


(15) QUARTERLY STATEMENTS OF OPERATIONS:
The following information is unaudited. However, in the opinion of Management,
all adjustments, which include only normal recurring adjustments necessary to
present fairly the results of operations for such periods, are reflected.
Reference is made to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for further explanation of quarterly
results of operations.

<TABLE>
<CAPTION>

                                                                 1996 Quarter Ended (unaudited)
                                                    ------------------------------------------------------
                                                    March 31        June 30     September 30   December 31
                                                    --------       --------     ------------    -----------
                                                       (Dollar amounts in thousands, except per share data)
<S>                                                 <C>            <C>          <C>             <C>
Interest income                                       $4,823         $4,867         $5,311         $5,574
Interest expense                                       1,746          1,743          1,884          2,076
                                                      ------         ------         ------         ------
        Net interest income                            3,077          3,124          3,427          3,498
Provision for loan losses                                 60             40             80            205
                                                      ------         ------         ------         ------
        Net interest income (loss) after
         provision for loan losses                     3,017          3,084          3,347          3,293
Noninterest income                                       638            590            677          1,232
Noninterest expense                                    2,346          2,360          2,583          2,980
                                                      ------         ------         ------         ------
Income (loss) before income taxes                      1,309          1,313          1,441          1,545
Provision for income taxes                               522            526            537            622
                                                      ------         ------         ------         ------
        Net income (loss)                                787            787            904            923
                                                      ------         ------         ------         ------
                                                      ------         ------         ------         ------
        Net income (loss) per share                    $0.50          $0.51          $0.58          $0.59
                                                      ------         ------         ------         ------
                                                      ------         ------         ------         ------
        Weighted average shares outstanding        1,535,447      1,535,450      1,538,713      1,560,950
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                                                1995 Quarter Ended (unaudited)
                                                     ------------------------------------------------------
                                                    March 31        June 30     September 30   December 31
                                                    --------       --------     ------------    -----------
                                                       (Dollar amounts in thousands, except per share data)
<S>                                                 <C>            <C>          <C>             <C>

Interest income                                       $4,379         $4,774         $4,939         $4,911
Interest expense                                       1,395          1,555          1,653          1,714
                                                      ------         ------         ------         ------
        Net interest income                            2,984          3,219          3,286          3,197
Provision for loan losses                                245            255            275            100
                                                      ------         ------         ------         ------
        Net interest income (loss) after
          provision for loan losses                    2,739          2,964          3,011          3,097
Noninterest income                                       372            422            671            762
Noninterest expense                                    2,100          2,218          2,246          2,372
                                                      ------         ------         ------         ------
Income (loss) before income taxes                      1,011          1,168          1,436          1,487
Provision for income taxes                               396            462            569            609
                                                      ------         ------         ------         ------
        Net income (loss)                               $615           $706           $867           $878
                                                      ------         ------         ------         ------
                                                      ------         ------         ------         ------
        Net income (loss) per share                    $0.38          $0.43          $0.53          $0.54
                                                      ------         ------         ------         ------
                                                      ------         ------         ------         ------
        Weighted average shares outstanding        1,621,384      1,659,075      1,628,262      1,637,397


                                                                 1994 Quarter Ended (unaudited)
                                                    ------------------------------------------------------
                                                    March 31        June 30     September 30   December 31
                                                    --------       --------     ------------    -----------
                                                       (Dollar amounts in thousands, except per share data)
<S>                                                 <C>            <C>          <C>             <C>

Interest income                                       $3,220         $3,634         $4,017         $4,249
Interest expense                                       1,040          1,053          1,155          1,254
                                                      ------         ------         ------         ------
        Net interest income                            2,180          2,581          2,862          2,995
Provision for loan losses                                 10            115            122            100
                                                      ------         ------         ------         ------
        Net interest income (loss) after
          provision for loan losses                    2,170          2,466          2,740          2,895
Noninterest income                                       456            451            475            496
Noninterest expense                                    1,932          1,995          2,059          2,203
                                                      ------         ------         ------         ------
Income (loss) before income taxes                        694            922          1,156          1,188
Provision for income taxes                               246            367            454            473
                                                      ------         ------         ------         ------
        Net income (loss)                               $448           $555           $702           $715
                                                      ------         ------         ------         ------
                                                      ------         ------         ------         ------
        Net income (loss) per share                    $0.28          $0.35          $0.44          $0.45
                                                      ------         ------         ------         ------
                                                      ------         ------         ------         ------
        Weighted average shares outstanding        1,584,394      1,584,394      1,590,565      1,599,465

</TABLE>

(16) REGULATORY MATTERS:

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

<PAGE>

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

As of December 31, 1996, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action.  To be categorized as well capitalized the Bank
must maintain minimum Total Risk-Based, Tier I Risk-Based, 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.

The Company's and Bank's actual capital amounts and ratios are also presented
in the following table:

<TABLE>
<CAPTION>

                                                       Actual
                                                 ----------------
                                                 Amount     Ratio
                                                 ------     -----
                                  (Dollar amounts in thousands, except ratio data)
<S>                                             <C>         <C>
As of December 31, 1996:
TOTAL RISK BASED CAPITAL:
      California Independent Bancorp            $22,918     11.89%
      Feather River State Bank                  $24,225     12.57%
   TIER I RISK BASED CAPITAL:
      California Independent Bancorp            $21,813     11.31%
Feather River State Bank                        $21,804     11.32%
TIER I LEVERAGE RATIO:
      California Independent Bancorp            $21,813      8.82%
      Feather River State Bank                  $21,804      8.82%

As of December 31, 1995:
   TOTAL RISK-BASED CAPITAL:
      California Independent Bancorp            $22,087     13.07%
      Feather River State Bank                  $22,085     13.08%
   TIER I RISK-BASED CAPITAL:
      California Independent Bancorp            $18,875     11.17%
      Feather River State Bank                  $18,753     11.10%
TIER I LEVERAGE RATIO:
      California Independent Bancorp            $18,875      9.00%
      Feather River State Bank                  $18,753      8.95%

</TABLE>

<TABLE>
<CAPTION>



                                                                              For Capital Adequacy
                                                                                    Purpose
                                                                              --------------------

                                                                  Amount                              Ratio
                                                                  ------                              -----
                                                              (Dollar amounts in thousands, except ratio data)

<S>                                              <C>                                 <C>
As of December 31, 1996:
TOTAL RISK-BASED CAPITAL:
     California Independent Bancorp              Greater than or equal to $15,426    Greater than or equal to 8.0%
     Feather River State Bank                    Greater than or equal to $15,415    Greater than or equal to 8.0%
   TIER I RISK-BASED CAPITAL:
      California Independent Bancorp              Greater than or equal to $7,713    Greater than or equal to 4.0%
Feather River State Bank                          Greater than or equal to $7,708    Greater than or equal to 4.0%
TIER I LEVERAGE RATIO:
      California Independent Bancorp              Greater than or equal to $9,891    Greater than or equal to 4.0%
      Feather River State Bank                    Greater than or equal to $9,890    Greater than or equal to 4.0%

As of December 31, 1995:
   TOTAL RISK-BASED CAPITAL:
      California Independent Bancorp             Greater than or equal to $13,488    Greater than or equal to 8.0%
      Feather River State Bank                   Greater than or equal to $13,487    Greater than or equal to 8.0%
   TIER I RISK-BASED CAPITAL:
      California Independent Bancorp             Greater than or equal to $6,741    Greater than or equal to 4.0%
      Feather River State Bank                   Greater than or equal to $6,758    Greater than or equal to 4.0%
TIER I LEVERAGE RATIO:
      California Independent Bancorp              Greater than or equal to $8,779    Greater than or equal to 4.0%
      Feather River State Bank                    Greater than or equal to $8,722    Greater than or equal to 4.0%


</TABLE>

<TABLE>
<CAPTION>

                                                                             To Be Well
                                                                          Capitalized Under
                                                                          Prompt Corrective
                                                                          Action Provisions
                                                                          -----------------
                                                              Amount                             Ratio
                                                              ------                             -----
                                                         (Dollar amounts in thousands, except ratio data)
<S>                                              <C>                                <C>
As of December 31, 1996:
TOTAL RISK-BASED CAPITAL:
     California Independent Bancorp              Greater than or equal to $19,282   Greater than or equal to 10.0%
     Feather River State Bank                    Greater than or equal to $19,269   Greater than or equal to 10.0%
   TIER I RISK-BASED CAPITAL:
      California Independent Bancorp             Greater than or equal to $11,569    Greater than or equal to 6.0%
Feather River State Bank                         Greater than or equal to $11,562    Greater than or equal to 6.0%
TIER I LEVERAGE RATIO:
      California Independent Bancorp             Greater than or equal to $12,364    Greater than or equal to 5.0%
      Feather River State Bank                   Greater than or equal to $12,363    Greater than or equal to 5.0%

As of December 31, 1995:
   TOTAL RISK-BASED CAPITAL:
      California Independent Bancorp             Greater than or equal to $16,260   Greater than or equal to 10.0%
      Feather River State Bank                   Greater than or equal to $16,859   Greater than or equal to 10.0%
   TIER I RISK-BASED CAPITAL:
      California Independent Bancorp             Greater than or equal to $10,112    Greater than or equal to 6.0%
      Feather River State Bank                   Greater than or equal to $10,137    Greater than or equal to 6.0%
TIER I LEVERAGE RATIO:
      California Independent Bancorp             Greater than or equal to $10,974    Greater than or equal to 5.0%
      Feather River State Bank                   Greater than or equal to $10,903    Greater than or equal to 5.0%

</TABLE>


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

    Not applicable.

                                          27

<PAGE>


                                       PART III

ITEM 10  -  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS

     For information concerning directors and executive officers of the Company,
see "ELECTION OF DIRECTORS" and "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" in the definitive Proxy Statement for the
Company's 1997 Annual Meeting of Shareholders to be filed pursuant to
Regulation 14A (the "Proxy Statement"), which is incorporated herein by
reference.

ITEM 11  -  EXECUTIVE COMPENSATION

     For information concerning executive compensation, see "EXECUTIVE
COMPENSATION" in the Proxy Statement, which is incorporated herein by reference.

ITEM 12  -  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     For information concerning security ownership of certain beneficial owners
and management, see "Security Ownership of Certain Beneficial Owners and
Management" and "Election of Directors" in the Proxy Statement, which is
incorporated herein by reference.

ITEM 13  -  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     For information concerning certain relationships and related transactions,
see "Indebtedness of Management and Other Transactions" in the Proxy Statement,
which is incorporated herein by reference.


                                       PART IV

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

(a) 1.   FINANCIAL STATEMENTS.

    The consolidated financial statements of California Independent
Bancorp and Subsidiaries, other financial information and the Independent
Auditors' Report on Consolidated Financial Statements are contained herein
under Item 8.

    2.   FINANCIAL STATEMENT SCHEDULES.

    In accordance with Regulation S-X, the financial statement schedules have
been omitted because (a) they are not applicable to or required of the Company;
or (b) the information required is included in the consolidated financial
statements or notes thereto.

    3.   EXHIBITS.

    See Index to Exhibits of this Form 10-K.

(b) REPORTS ON FORM 8-K.

    For the purposes of complying with the amendments to the rules governing
Form S-8 under the Securities Act of 1933, the undersigned registrant hereby
undertakes as follows, which undertaking shall be incorporated by reference into
the registrant's Registration Statements on Form S-8 No. 333-09823 and No.333-
09813.

    Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.  In the event that a claim for
indemnification against such liabilities other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding as asserted by such director, officer or controlling person in

                                          43

<PAGE>

connection with the securities being registered the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

                                          44

<PAGE>

                                      SIGNATURES

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

CALIFORNIA INDEPENDENT BANCORP

Date:  March 27, 1997


By: /s/ Robert J. Mulder
    --------------------------------
    Robert J. Mulder, President
    and Chief Executive Officer

                                          45

<PAGE>


                                  POWER OF ATTORNEY

    Each person whose signature appears below hereby constitutes and appoints
Robert J. Mulder and Annette Dier Bertolini and each of them, his or her true
and lawful attorney-in-fact and agent, with full powers of substitution, for him
or her and in his or her name, place and stead, in any and all capacities, to
sign and to file any and all amendments, including pre- and/or post-effective
amendments to this Registration Statement, with the Securities and Exchange
Commission, granting to said attorney-in-fact full power and authority to
perform any other act on behalf of the undersigned required to be done in
connection therewith.

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

Signature                         Title                    Date
---------                         -----                    ----

/s/ Annette Dier Bertolini        Senior Vice              March 27, 1997
--------------------------        President and Chief
ANNETTE DIER BERTOLINI            Financial Officer
                                  (Principal Financial
                                  and Accounting Officer)

/s/ Harold M. Eastridge
--------------------------        Director                 March 27, 1997
HAROLD M. EASTRIDGE


                                  Chairman of
                                  the Board
--------------------------        of Directors             March ___, 1997
WILLIAM H. GILBERT


--------------------------        Director                 March ___, 1997
DALE L. GREEN

/s/ Lawrence G. Harris
--------------------------        Director                 March 27, 1997
LAWRENCE G. HARRIS

                                          46

<PAGE>

/s/ Robert J. Mulder
--------------------------        President, Chief         March 27, 1997
ROBERT J. MULDER                  Executive Officer and
                                  Director

/s/ David A. Offutt
--------------------------        Director                 March 26, 1997
DAVID A. OFFUTT


--------------------------        Director                 March ___, 1997
WILLIAM K. RETZER


--------------------------        Director                 March ___, 1997
ROSS D. SCOTT


/s/ Louis F. Tarke
--------------------------        Director                 March 27, 1997
LOUIS F. TARKE

/s/ Michael C. Wheeler
--------------------------        Director                 March 27, 1997
MICHAEL C. WHEELER


                                          47

<PAGE>

                                  INDEX TO EXHIBITS




Exhibit No.
-----------

 2.1          Plan of Reorganization and Merger Agreement dated
              January 30, 1995 by and between Feather River State
              Bank, FRSB Merger Company and California Independent
              Bancorp. 23/                                                *

 3.1          Articles of Incorporation of California Independent
              Bancorp. 23/                                                *

 3.2          Bylaws of California Independent
              Bancorp. 23/                                                *

10.1          Salary Continuation Agreements dated April 28, 1993
              with Robert J. Mulder, Ronald W. Kelly and Annette
              Dier Bertolini. 23/                                         *

10.2          Agreement for the purchase of 203 Main Street,
              Woodland, California by and between Feather River
              State Bank and Bank of America, NT & SA successor to
              Security Pacific National Bank. 23/                         *

10.3          Consolidated Agreement dated April 30, 1993 with
              Unisys Corporation. 23/                                     *

10.4          Agreements with Information Technologies, Inc. 23/          *

10.5          Lease for 6545 Sunrise Boulevard, Suite 201, Citrus
              Heights, California. 23/                                    *

10.6          Deferred Compensation Agreement dated July 19, 1994
              with William H. Gilbert. 23/                                *

---------------
23/ Filed as an exhibit to the Company's General Form for Registration of
    Securities on Form 10 (File No. 0-26552).

*   Document incorporated herein by reference.

                                          48

<PAGE>



10.7          Feather River State Bank Employee Ownership
              Plan. 23/                                                   *

10.8          Bank Affiliate Agreement between Feather River State
              Bank and Lexington Capital Management, Inc. 24/             *

10.9          California Independent Bancorp 1989 Amended and
              Restated Stock Option Plan including related Incentive
              and Non Statutory Stock Option Agreements. 25/

10.10         California Independent Bancorp 1996 Stock Option Plan
              and related Incentive Stock Option and Nonstatutory
              Stock Option Agreements.  26/                               *

10.11         Purchase and Sale Agreement and Joint Escrow
              Instructions by and between First Interstate Bank of
              California and Feather River State Bank for 700 "E"
              Street, Marysville.  24/                                    *

10.12         Stock Purchase Agreement dated September 16, 1996
              between Feather River State Bank and Carolyn E. Roth
              and related Employment Agreement and Noncompetition
              Agreement. 27/                                              *

10.13         Lease by and between Metta M. Boyd and Feather River
              State Bank for 194 East Sixth Street, Chico, California.

10.14         Lease by and between Wells Fargo Bank, N.A. and
              Feather River State Bank for 995 Tharp Road, Yuba City,
              California.

10.15         Lease by and between Professional Executive Center,
              Inc. and Feather River State Bank for 2140 Professional
              Drive, Roseville, California.


---------------
24/ Filed as an Exhbit to the Company's Form 10-K for December 31, 1995.

25/ Filed as an Exhibit to Amendment No. 1 to the Company's Registration
    Statement on Form S-8/SEC Registration No. 333-09813.

26/ Filed as an exhibit to Amendment No. 1 to the Company's Form S-8/SEC
    Registration No. 333-09823.

27/ Filed as an Exhibit to the Company's Form 8-K for the month of October,
    1996.

                                          49

<PAGE>

10.16         Executive Salary Continuation Agreement dated Februry
              4, 1997 by and between Feather River State Bank and
              Robert J. Mulder.

10.17         Lease by and between Anderson and Associates and
              E.P.I. Leasing Co., Inc. for the premises at 6929
              Sunrise Boulevard, Citrus Heights, California.

10.18         Lease by and between Vault Security Systems, Inc.
              and Feather River State Bank dated March 1, 1997 for
              modular bank branch located in Wheatland, California.

23            Consent of Arthur Andersen LLP for audited
              financial statements for the year ended December 31,
              1996.

24            Power of Attorney (Incorporated herein by reference)

27            Financial Data Schedule

                                          50