SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K


[X]      Annual report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the fiscal year ended December 31, 2001, or

[ ]      Transition report pursuant to Section 13 or 15 (d) of Securities
         Exchange Act of 1934

                          Commission File No. 000-49693

                                   FNB BANCORP
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)

          California                                           92-2115369
-------------------------------                         ------------------------
(State or other jurisdiction of                         (IRS Employer ID Number)
incorporation or organization)

975 El Camino Real, South San Francisco, California                     94080
---------------------------------------------------                   ----------
      (Address of principal executive offices)                        (Zip code)

                                 (650) 588-6800
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

           Securities to be registered pursuant to
                         Section 12(b) of the Act:  None
                                                    ----------------------------


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

                                   Title of Class:  Common Stock, no par value
                                                    ----------------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                               Yes [X]     No [ ]

Indicate by check mark if disclosure of delinquent files 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 the 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.  [ ]

    Aggregate market value of the voting stock held by non-affiliates of the
      registrant, computed by reference to the closing price of the stock,
                        as of March 25, 2002: $69,565,470

       Number of shares outstanding of each of the registrant's classes of
                       common stock, as of March 25, 2002

            No par value Common Stock - 2,318,849 shares outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE
   The following documents are incorporated by reference into this Form 10-K:
   Part III, Items 10 through 13 from Registrant's definitive proxy statement
                  for the 2002 annual meeting of shareholders.

                                  Page 1 of 66

                 The Index to the Exhibits is located at Page 63
<PAGE>

                                     PART I


ITEM 1.  BUSINESS
-------  --------

         Forward-Looking Statements: Certain matters discussed or incorporated
by reference in this Annual Report on Form 10-K including, but not limited to,
matters described in "Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations," are forward-looking statements that are
subject to risks and uncertainties that could cause actual results to differ
materially from those projected. Forward-looking statements are certain written
and oral statements made or incorporated by reference from time to time by FNB
Bancorp or its representatives in this document or other documents filed with
the Securities and Exchange Commission, press releases, conferences, or
otherwise that are not historical facts, or are preceded by, followed by or that
include words such as "anticipate," "believe," "plan," "estimate," "seek," and
"intend," and words of similar import are intended to identify forward-looking
statements. Changes to such risks and uncertainties, which could impact future
financial performance, include, among others, (1) competitive pressures in the
banking industry; (2) changes in the interest rate environment; (3) general
economic conditions, nationally, regionally and in operating market areas; (4)
changes in the regulatory environment; (5) changes in business conditions and
inflation; (6) changes in securities markets; (7) data processing problems; (8)
the California power crisis; and (9) the U.S. "war on terrorism." Therefore, the
information set forth therein should be carefully considered when evaluating the
business prospects of FNB Bancorp and its subsidiary, First National Bank of
Northern California.

         All forward-looking statements of FNB Bancorp are qualified by and
should be read in conjunction with such risk disclosure. FNB Bancorp undertakes
no obligation to publicly update or revise any forward-looking statements
whether as a result of new information, future events or otherwise.


General
-------

         FNB Bancorp (sometimes referred to herein as the "Company") is a bank
holding company registered under the Bank Holding Company Act of 1956, as
amended. The Company was incorporated under the laws of the State of California
on February 28, 2001. As a bank holding company, the Company is authorized to
engage in the activities permitted under the Bank Holding Company Act of 1956,
as amended, and regulations thereunder. Its principal office is located at 975
El Camino Real, South San Francisco, California 94080, and its telephone number
is (650) 588-6800.

         The Company owns all of the issued and outstanding shares of common
stock of First National Bank of Northern California, a national banking
association ("First National Bank" or the "Bank"). The Company has no other
subsidiary. The Company was formed at the direction of the Board of Directors of
the Bank in order to reorganize the Bank into a holding company structure, with
the approval of the Office of the Comptroller of the Currency, pursuant to 12
U.S.C. 215a-2 and 12 CFR 7.2000. The Bank and the Company entered into an
Agreement and Plan of Reorganization dated November 1, 2001 (the "Plan of
Reorganization") for this purpose, and the shareholders of the Bank approved the
Plan of Reorganization at a Special Meeting of the Shareholders of the Bank held
on February 27, 2002. The Plan of Reorganization was consummated on March 15,
2002. Each outstanding share of the common stock, par value $1.25 per share, of
the Bank (other than any shares as to which dissenters' rights of appraisal have
been properly exercised) was converted into one share of the common stock of the
Company, and the former holders of Bank common stock became the holders of all
of the Company common stock. As a subsidiary of the Company, the Bank continues
its business and operations as a national banking association, with the same
Board of Directors, officers and employees as existed prior to the
reorganization. Prior to consummation of the Plan of Reorganization, FNB Bancorp
had no significant assets or liabilities and its activities were limited to the
process of becoming a holding company for First National Bank. Consequently,
upon consummation of the Plan of Reorganization, the consolidated financial
statements of FNB Bancorp and First National Bank did not differ in any
significant respect from the historical financial statements of First National
Bank. The reorganization was accounted for in a manner similar to a pooling of
interests, using the historical costs of First National Bank. Accordingly, the
historical financial position and results of operations of First National Bank
became those of FNB Bancorp. Prior to the reorganization, the common stock of
the Bank was quoted on the OTC Bulletin Board under the symbol "FNBD.OB."
Commencing on March 18, 2002, the common stock of the Company has been quoted on
the OTC Bulletin Board under the symbol "FNBG.OB".

                                       -2-
<PAGE>

         The Bank was organized in 1963 as "First National Bank of Daly City."
In 1995, the shareholders approved a change in the name to "First National Bank
of Northern California." The administrative headquarters of the Bank is located
at 975 El Camino Real, South San Francisco, California. The Bank is locally
owned and presently operates twelve full service banking offices within its
primary service area of San Mateo County, in the cities of Colma, Daly City,
South San Francisco, Milbrae, Pacifica, Half Moon Bay, San Mateo, Redwood City
and Pescadero. The Bank also serves the City and County of San Francisco through
its Flower Mart Branch in San Francisco. The Bank's primary business is
servicing the business or commercial banking needs of individuals and small to
mid-sized businesses within San Mateo and San Francisco Counties.

         The Bank is chartered under the laws of the United States and is
governed by the National Bank Act, and is a member of the Federal Reserve
System. The Federal Deposit Insurance Corporation insures the deposits of the
Bank up to the applicable legal limits. The Bank is subject to regulation,
supervision and regular examination by the Office of the Comptroller of the
Currency. The regulations of the Federal Deposit Insurance Corporation, the
Board of Governors of the Federal Reserve System, and the Office of the
Comptroller of the Currency govern many aspects of the Bank's business and
activities, including investments, loans, borrowings, branching, mergers and
acquisitions, reporting and numerous other areas. The Bank is also subject to
applicable provisions of California law to the extent those provisions are not
in conflict with or preempted by federal banking law. See "Supervision and
Regulation" below.

         First National Bank offers a broad range of services to individuals and
businesses in its primary service area with an emphasis upon efficiency and
personalized attention. First National Bank provides a full line of business
financial products with specialized services such as courier, appointment
banking, and business internet banking. First National Bank offers personal and
business checking and savings accounts, including individual interest-bearing
negotiable orders of withdrawal ("NOW"), money market accounts and/or accounts
combining checking and savings accounts with automatic transfer capabilities,
IRA accounts, time certificates of deposit and direct deposit of social
security, pension and payroll checks and computer cash management with access
through the internet. First National Bank also makes available commercial,
standby letters of credit, construction, accounts receivable, inventory,
automobile, home improvement, residential real estate, commercial real estate,
single family mortgage, Small Business Administration, office equipment,
leasehold improvement and installment loans as well as overdraft protection
lines of credit. In addition, First National Bank sells travelers checks and
cashiers checks, offers automated teller machine (ATM) services tied in with
major statewide and national networks and offers other customary commercial
banking services.

         Most of First National Bank's deposits are obtained from commercial
businesses, professionals and individuals. As of December 31, 2001, First
National Bank had a total of 24,645 accounts. On occasion, First National Bank
has obtained deposits through deposit brokers for which First National Bank pays
a broker fee. As of December 31, 2001, First National Bank had no such deposits.
There is no concentration of deposits or any customer with 5% or more of First
National Bank's deposits.

         At December 31, 2001, First National Bank had total assets of
$397,000,000, total net loans of $288,000,000, deposits of $344,000,000 and
shareholders' equity of $47,000,000. First National Bank competes with
approximately 28 other banking or savings institutions in its service areas.
First National Bank's market share of Federal Deposit Insurance Corporation
insured deposits in the service area of San Mateo County is approximately 2.7%
(based upon the most recent information made available by the Federal Deposit
Insurance Corporation through June 30, 2000). See "Competitive Data" below.


Employees

         At December 31, 2001, First National Bank employed 189 persons on a
full-time basis. First National Bank believes its employee relations are good.
First National Bank is not a party to any collective bargaining agreement.

                                       -3-
<PAGE>

                           SUPERVISION AND REGULATION


General

         FNB Bancorp. The common stock of FNB Bancorp is subject to the
registration requirements of the Securities Act of 1933, as amended, and the
qualification requirements of the California Corporate Securities Law of 1968,
as amended. FNB Bancorp has registered its common stock under Section 12(g) of
the Securities Exchange Act of 1934, as amended, and is subject to the periodic
reporting requirements of Section 13 of the Securities Exchange Act of 1934, as
amended, which include, but are not limited to, annual, quarterly and other
current reports with the Securities and Exchange Commission.

         FNB Bancorp is a bank holding company within the meaning of the Bank
Holding Company Act of 1956, as amended (the "Bank Holding Company Act"), and is
registered as such with, and subject to the supervision of, the Board of
Governors of the Federal Reserve System (the "Board of Governors"). FNB Bancorp
is required to obtain the approval of the Board of Governors before it may
acquire all or substantially all of the assets of any bank, or ownership or
control of the voting shares of any bank if, after giving effect to such
acquisition of shares, FNB Bancorp would own or control more than 5% of the
voting shares of such bank. The Bank Holding Company Act prohibits FNB Bancorp
from acquiring any voting shares of, or interest in, all or substantially all of
the assets of, a bank located outside the State of California unless such an
acquisition is specifically authorized by the laws of the state in which such
bank is located. Any such interstate acquisition is also subject to the
provisions of the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994.

         FNB Bancorp, and any subsidiaries, which it may acquire or organize,
are deemed to be "affiliates" of First National Bank within the meaning of that
term as defined in the Federal Reserve Act. This means, for example, that there
are limitations (a) on loans by First National Bank to affiliates, and (b) on
investments by First National Bank in affiliates' stock as collateral for loans
to any borrower. FNB Bancorp and First National Bank are also subject to certain
restrictions with respect to engaging in the underwriting, public sale and
distribution of securities.

         In addition, regulations of the Board of Governors under the Federal
Reserve Act require that reserves be maintained by First National Bank in
conjunction with any liability of FNB Bancorp under any obligation (promissory
note, acknowledgment of advance, banker's acceptance or similar obligation) with
a weighted average maturity of less than seven (7) years to the extent that the
proceeds of such obligations are used for the purpose of supplying funds to
First National Bank for use in its banking business, or to maintain the
availability of such funds.

         First National Bank As a national banking association licensed under
the national banking laws of the United States, First National Bank is regularly
examined by the Office of the Comptroller of the Currency and is subject to the
supervision of the Federal Deposit Insurance Corporation, The Board of
Governors, and the Office of the Comptroller of the Currency. The supervision
and regulation includes comprehensive reviews of all major aspects of First
National Bank's business and condition, including its capital ratios, allowance
for possible loan losses and other factors. However, no inference should be
drawn that such authorities have approved any such factors. First National Bank
is required to file reports with the Office of the Comptroller of the Currency
and the Federal Deposit Insurance Corporation. First National Bank's deposits
are insured by the Federal Deposit Insurance Corporation up to the applicable
legal limits.


Capital Standards

         The Board of Governors, the Federal Deposit Insurance Corporation, and
the Office of the Comptroller of the Currency have adopted risk-based capital
guidelines for evaluating the capital adequacy of bank holding companies and
banks. The guidelines are designed to make capital requirements sensitive to
differences in risk profiles among banking organizations, to take into account
off-balance sheet exposures and to aid in making the definition of bank capital
uniform internationally. Under the guidelines, First National Bank is required
to maintain (and FNB Bancorp and First National Bank will be required to
maintain) capital equal to at least 8.0% of its assets and commitments to extend

                                       -4-
<PAGE>

credit, weighted by risk, of which at least 4.0% must consist primarily of
common equity (including retained earnings) and the remainder may consist of
subordinated debt, cumulative preferred stock, or a limited amount of loan loss
reserves.

         Assets, commitments to extend credit, and off-balance sheet items are
categorized according to risk and certain assets considered to present less risk
than others permit maintenance of capital at less than the 8% ratio. For
example, most home mortgage loans are placed in a 50% risk category and
therefore require maintenance of capital equal to 4% of those loans, while
commercial loans are placed in a 100% risk category and therefore require
maintenance of capital equal to 8% of those loans.

         Under the risk-based capital guidelines, assets reported on an
institution's balance sheet and certain off-balance sheet items are assigned to
risk categories, each of which has an assigned risk weight. Capital ratios are
calculated by dividing the institution's qualifying capital by its period-end
risk-weighted assets. The guidelines establish two categories of qualifying
capital: Tier 1 capital (defined to include common shareholders' equity and
noncumulative perpetual preferred stock) and Tier 2 capital which includes,
among other items, limited life (and in case of banks, cumulative) preferred
stock, mandatory convertible securities, subordinated debt and a limited amount
of reserve for credit losses. Tier 2 capital may also include up to 45% of the
pretax net unrealized gains on certain available-for-sale equity securities
having readily determinable fair values (i.e. the excess, if any, of fair market
value over the book value or historical cost of the investment security). The
federal regulatory agencies reserve the right to exclude all or a portion of the
unrealized gains upon a determination that the equity securities are not
prudently valued. Unrealized gains and losses on other types of assets, such as
bank premises and available-for-sale debt securities, are not included in Tier 2
capital, but may be taken into account in the evaluation of overall capital
adequacy and net unrealized losses on available-for-sale equity securities will
continue to be deducted from Tier 1 capital as a cushion against risk. Each
institution is required to maintain a minimum risk-based capital ratio
(including Tier 1 and Tier 2 capital) of 8%, of which at least half must be Tier
1 capital.

         A leverage capital standard was adopted as a supplement to the
risk-weighted capital guidelines. Under the leverage capital standard, an
institution is required to maintain a minimum ratio of Tier 1 capital to the sum
of its quarterly average total assets and quarterly average reserve for loan
losses, less intangibles not included in Tier 1 capital. Period-end assets may
be used in place of quarterly average total assets on a case-by-case basis. The
Board of Governors and the Federal Deposit Insurance Corporation have also
adopted a minimum leverage ratio for bank holding companies as a supplement to
the risk-weighted capital guidelines. The leverage ratio establishes a minimum
Tier 1 ratio of 3% (Tier 1 capital to total assets) for the highest rated bank
holding companies or those that have implemented the risk-based capital market
risk measure. All other bank holding companies must maintain a minimum Tier 1
leverage ratio of 4% with higher leverage capital ratios required for bank
holding companies that have significant financial and/or operational weakness, a
high risk profile, or are undergoing or anticipating rapid growth.

         At December 31, 2001, First National Bank was in compliance with the
risk-weighted capital and leverage ratios. Upon consummation of the Plan of
Reorganization, FNB Bancorp and First National Bank were, and remain, in
compliance with the risk-weighted capital and leverage ratios. See "Capital"
under Item 7 below.


Prompt Corrective Action

         The Board of Governors, Federal Deposit Insurance Corporation, and
Office of the Comptroller of the Currency have adopted regulations implementing
a system of prompt corrective action pursuant to Section 38 of the Federal
Deposit Insurance Act and Section 131 of the Federal Deposit Insurance
Corporation Improvement Act of 1991 ("FDICIA"). The regulations establish five
capital categories with the following characteristics: (1) "Well capitalized" -
consisting of institutions with a total risk-based capital ratio of 10% or
greater, a Tier 1 risk-based capital ratio of 6% or greater and a leverage ratio
of 5% or greater, and the institution is not subject to an order, written
agreement, capital directive or prompt corrective action directive; (2)
"Adequately capitalized" - consisting of institutions with a total risk-based
capital ratio of 8% or greater, a Tier 1 risk-based capital ratio of 4% or
greater and a leverage ratio of 4% or greater, and the institution does not meet
the definition of a "well capitalized" institution; (3) "Undercapitalized" -
consisting of institutions with a total risk-based capital ratio less than 8%, a
Tier 1 risk-based capital ratio of less than 4%, or a leverage ratio of less
than 4%; (4) "Significantly undercapitalized" - consisting of institutions with
a total risk-based capital ratio of less than 6%, a Tier 1 risk-based capital
ratio of less than 3%, or a leverage ratio of less than 3%; (5) "Critically
undercapitalized" - consisting of an institution with a ratio of tangible equity
to total assets that is equal to or less than 2%.

                                       -5-
<PAGE>

         The regulations established procedures for classification of financial
institutions within the capital categories, filing and reviewing capital
restoration plans required under the regulations and procedures for issuance of
directives by the appropriate regulatory agency, among other matters. The
regulations impose restrictions upon all institutions to refrain from certain
actions which would cause an institution to be classified within any one of the
three "undercapitalized" categories, such as declaration of dividends or other
capital distributions or payment of management fees, if following the
distribution or payment the institution would be classified within one of the
"undercapitalized" categories. In addition, institutions, which are classified
in one of the three "undercapitalized" categories are subject to certain
mandatory and discretionary supervisory actions. Mandatory supervisory actions
include (1) increased monitoring and review by the appropriate federal banking
agency; (2) implementation of a capital restoration plan; (3) total asset growth
restrictions; and (4) limitation upon acquisitions, branch expansion, and new
business activities without prior approval of the appropriate federal banking
agency. Discretionary supervisory actions may include (1) requirements to
augment capital; (2) restrictions upon affiliate transactions; (3) restrictions
upon deposit gathering activities and interest rates paid; (4) replacement of
senior executive officers and directors; (5) restrictions upon activities of the
institution and its affiliates; (6) requiring divestiture or sale of the
institution; and (7) any other supervisory action that the appropriate federal
banking agency determines is necessary to further the purposes of the
regulations. Further, the federal banking agencies may not accept a capital
restoration plan without determining, among other things, that the plan is based
on realistic assumptions and is likely to succeed in restoring the depository
institution's capital. In addition, for a capital restoration plan to be
acceptable, the depository institution's parent holding company must guarantee
that the institution will comply with such capital restoration plan. The
aggregate liability of the parent holding company under the guaranty is limited
to the lesser of (i) an amount equal to 5 percent of the depository
institution's total assets at the time it became undercapitalized, and (ii) the
amount that is necessary (or would have been necessary) to bring the institution
into compliance with all capital standards applicable with respect to such
institution as of the time it fails to comply with the plan. If a depository
institution fails to submit an acceptable plan, it is treated as if it were
"significantly undercapitalized." FDICIA also restricts the solicitation and
acceptance of and interest rates payable on brokered deposits by insured
depository institutions that are not "well capitalized." An "undercapitalized"
institution is not allowed to solicit deposits by offering rates of interest
that are significantly higher than the prevailing rates of interest on insured
deposits in the particular institution's normal market areas or in the market
areas in which such deposits would otherwise be accepted.

         Any financial institution which is classified as "critically
undercapitalized" must be placed in conservatorship or receivership within 90
days of such determination unless it is also determined that some other course
of action would better serve the purposes of the regulations. Critically
undercapitalized institutions are also prohibited from making (but not accruing)
any payment of principal or interest on subordinated debt without prior
regulatory approval and regulators must prohibit a critically undercapitalized
institution from taking certain other actions without prior approval, including
(1) entering into any material transaction other than in the usual course of
business, including investment expansion, acquisition, sale of assets or other
similar actions; (2) extending credit for any highly leveraged transaction; (3)
amending articles or bylaws unless required to do so to comply with any law,
regulation or order; (4) making any material change in accounting methods; (5)
engaging in certain affiliate transactions; (6) paying excessive compensation or
bonuses; and (7) paying interest on new or renewed liabilities at rates which
would increase the weighted average costs of funds beyond prevailing rates in
the institution's normal market areas.


Additional Regulations

         Under the FDICIA, the federal financial institution agencies have
adopted regulations which require institutions to establish and maintain
comprehensive written real estate policies which address certain lending
considerations, including loan-to-value limits, loan administrative policies,
portfolio diversification standards, and documentation, approval and reporting
requirements. The FDICIA further generally prohibits an insured bank from
engaging as a principal in any activity that is impermissible for a national
bank, absent Federal Deposit Insurance Corporation determination that the
activity would not pose a significant risk to the Bank Insurance Fund, and that
such bank is, and will continue to be, within applicable capital standards.

                                       -6-
<PAGE>

         The Federal Financial Institution Examination Counsel ("FFIEC") on
December 13, 1996, approved an updated Uniform Financial Institutions Rating
System ("UFIRS"). In addition to the five components traditionally included in
the so-called "CAMEL" rating system which has been used by bank examiners for a
number of years to classify and evaluate the soundness of financial institutions
(including capital adequacy, asset quality, management, earnings and liquidity),
UFIRS includes for all bank regulatory examinations conducted on or after
January 1, 1997, a new rating for a sixth category identified as sensitivity to
market risk. Ratings in this category are intended to reflect the degree to
which changes in interest rates, foreign exchange rates, commodity prices or
equity prices may adversely affect an institution's earnings and capital. The
revised rating system is identified as the "CAMELS" system.

         The federal financial institution agencies have established bases for
analysis and standards for assessing a financial institution's capital adequacy
in conjunction with the risk-based capital guidelines including analysis of
interest rate risk, concentrations of credit risk, risk posed by non-traditional
activities, and factors affecting overall safety and soundness. The safety and
soundness standards for insured financial institutions include analysis of (1)
internal controls, information systems and internal audit systems; (2) loan
documentation; (3) credit underwriting; (4) interest rate exposure; (5) asset
growth; (6) compensation, fees and benefits; and (7) excessive compensation for
executive officers, directors or principal shareholders which could lead to
material financial loss. If an agency determines that an institution fails to
meet any standard, 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. 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.

         Community Reinvestment Act ("CRA") regulations evaluate banks' lending
to low and moderate income individuals and businesses across a four-point scale
from "outstanding" to "substantial noncompliance," and are a factor in
regulatory review of applications to merge, establish new branches or form bank
holding companies. In addition, any bank rated in "substantial noncompliance"
with the CRA regulations may be subject to enforcement proceedings. First
National Bank has a current rating of "Satisfactory" for CRA compliance.


Limitations on Dividends

         The Company's ability to pay cash dividends is subject to restrictions
set forth in the California General Corporation Law. Funds for payment of any
cash dividends by the Company would be obtained from its investments as well as
dividends and/or management fees from First National Bank. First National Bank's
ability to pay cash dividends is subject to restrictions imposed under the
National Bank Act and regulations promulgated by the Office of the Comptroller
of the Currency. Prior to the reorganization, First National Bank has paid cash
dividends in each of the last 60 consecutive quarters. Also, First National Bank
has paid a stock dividend annually for the last 34 years (including the 5% stock
dividend paid on December 14, 2001).

         FNB Bancorp. FNB Bancorp has not paid dividends and any future
dividends will be determined after consideration of FNB Bancorp's earnings,
financial condition, future capital funds, regulatory requirements and other
factors as the board of directors may deem relevant. It is the intention of FNB
Bancorp to pay cash dividends, subject to legal restrictions on the payment of
cash dividends and depending upon the level of earnings, management's assessment
of future capital needs and other factors to be considered by the FNB Bancorp
board of directors.

         Holders of FNB Bancorp common stock will be entitled to receive
dividends following the reorganization as and when declared by the board of
directors of FNB Bancorp out of funds legally available therefor under the laws
of the State of California. The California General Corporation Law provides that
a corporation may make a distribution to its shareholders if the corporation's
retained earnings equal at least the amount of the proposed distribution. The
California General Corporation Law further provides that, in the event
sufficient retained earnings are not available for the proposed distribution, a
corporation may nevertheless make a distribution to its shareholders if, after
giving effect to the distribution, it meets two conditions, which generally
stated are as follows: (i) the corporation's assets must equal at least 125% of
its liabilities; and (ii) the corporation's current assets must equal at least
its current liabilities or, if the average of the corporation's earnings before
taxes on income and before interest expense for the two preceding fiscal years

                                       -7-
<PAGE>

was less than the average of the corporation's interest expense for those fiscal
years, then the corporation's current assets must equal at least 125% of its
current liabilities.

         The Board of Governors of the Federal Reserve System 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 Federal Reserve Board 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.

         First National Bank First National Bank's shareholder is entitled to
receive dividends when and as declared by its board of directors, out of funds
legally available therefor, subject to the restrictions set forth in the
National Bank Act.

         The payment of cash dividends by First National Bank may be subject to
the approval of the Office of the Comptroller of the Currency, as well as
restrictions established by federal banking law and the Federal Deposit
Insurance Corporation. Approval of the Office of the Comptroller of the Currency
is required if the total of all dividends declared by First National Bank's
board of directors in any calendar year will exceed First National Bank's net
profits for that year combined with its retained net profits for the preceding
two years, less any required transfers to surplus or to a fund for the
retirement of preferred stock. Additionally, the Federal Deposit Insurance
Corporation and/or the Office of the Comptroller of the Currency, might, under
some circumstances, place restrictions on the ability of a bank to pay dividends
based upon peer group averages and the performance and maturity of that bank.


                                   COMPETITION

Competitive Data

         Larger banks may have a competitive advantage because of higher lending
limits and major advertising and marketing campaigns. They also perform
services, such as trust services, international banking, discount brokerage and
insurance services, which First National Bank is not authorized nor prepared to
offer currently. First National Bank has made arrangements with its
correspondent banks and with others to provide some of these services for its
customers. For borrowers requiring loans in excess of First National Bank's
legal lending limits, First National Bank has offered, and intends to offer in
the future, such loans on a participating basis with its correspondent banks and
with other independent banks, retaining the portion of such loans which is
within its lending limits. As of December 31, 2001, First National Bank's
aggregate legal lending limits to a single borrower and such borrower's related
parties were $7,510,000 on an unsecured basis and $12,516,000 on a fully secured
basis, based on regulatory capital of $50,006,000.

         First National Bank's business is concentrated in its service area,
which primarily encompasses San Mateo and San Francisco Counties. The economy of
First National Bank's service area is dependent upon government, manufacturing,
tourism, retail sales, population growth and smaller service oriented
businesses.

         Based upon the December 2000 Deposit and Market Share Report prepared
by California Banksite Corporation, there were 156 commercial and savings
banking offices in San Mateo County with a total of $14,904,430,000 in deposits
at December 31, 2000. First National Bank had a total of 12 offices with total
deposits of $329,600,000 at the same date, or 2% of the San Mateo County totals.
At December 31, 1999, there were 155 commercial and savings banking offices in
San Mateo County with total deposits of $12,092,940,000, while First National
Bank had $276,220,000, or 2% of the San Mateo County totals.

         In 1996, pursuant to Congressional mandate, the Federal Deposit
Insurance Corporation reduced bank deposit insurance assessment rates to a range
from $0 to $0.27 per $100 of deposits, dependent upon a bank's risk. Based upon
the risk-based assessment rate schedule, First National Bank's current capital
ratios and levels of deposits, First National Bank anticipates no change in the
assessment rate applicable to it during 2002 from that in 2001.

                                       -8-
<PAGE>

General Competitive Factors

         In order to compete with the major financial institutions in their
primary service areas, community banks such as First National Bank use to the
fullest extent possible the flexibility, which is accorded by their independent
status. This includes an emphasis on specialized services, local promotional
activity, and personal contacts by their respective officers, directors and
employees. They also seek to provide special services and programs for
individuals in their primary service area who are employed in the agricultural,
professional and business fields, such as loans for equipment, furniture, tools
of the trade or expansion of practices or businesses. In the event there are
customers whose loan demands exceed their respective lending limits, they seek
to arrange for such loans on a participation basis with other financial
institutions. They also assist those customers requiring services not offered by
either bank to obtain such services from correspondent banks.

         Banking is a business that depends on interest rate differentials. In
general, the difference between the interest rate paid by a bank to obtain their
deposits and other borrowings and the interest rate received by a bank on loans
extended to customers and on securities held in a bank's portfolio comprise the
major portion of a bank's earnings.

         Commercial banks compete with savings and loan associations, credit
unions, other financial institutions and other entities for funds. For instance,
yields on corporate and government debt securities and other commercial paper
affect the ability of commercial banks to attract and hold deposits. Commercial
banks also compete for loans with savings and loan associations, credit unions,
consumer finance companies, mortgage companies and other lending institutions.

         The interest rate differentials of a bank, and therefore their
earnings, are affected not only by general economic conditions, both domestic
and foreign, but also by the monetary and fiscal policies of the United States
as set by statutes and as implemented by federal agencies, particularly the
Federal Reserve Board. The Federal Reserve Board can and does implement national
monetary policy, such as seeking to curb inflation and combat recession, by its
open market operations in United States government securities, adjustments in
the amount of interest free reserves that banks and other financial institutions
are required to maintain, and adjustments to the discount rates applicable to
borrowing by banks from the Federal Reserve Board. These activities influence
the growth of bank loans, investments and deposits and also affect interest
rates charged on loans and paid on deposits. The nature and timing of any future
changes in monetary policies and their impact on First National Bank are not
predictable.


Legislative and Regulatory Impact

         Since 1996, California law implementing certain provisions of prior
federal law has (1) permitted interstate merger transactions; (2) prohibited
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) prohibited interstate branching through de novo establishment of
California branch offices. Initial entry into California by an out-of-state
institution must be accomplished by acquisition of or merger with an existing
whole bank, which has been in existence for at least five years.

         The federal financial institution agencies, especially the Office of
the Comptroller of the Currency and the Board of Governors, have taken steps to
increase the types of activities in which national banks and bank holding
companies can engage, and to make it easier to engage in such activities. The
Office of the Comptroller of the Currency has issued regulations permitting
national banks to engage in a wider range of activities through subsidiaries.
"Eligible institutions" (those national banks that are well capitalized, have a
high overall rating and a satisfactory CRA rating, and are not subject to an
enforcement order) may engage in activities related to banking through operating
subsidiaries subject to an expedited application process. In addition, a
national bank may apply to the Office of the Comptroller of the Currency to
engage in an activity through a subsidiary in which First National Bank itself
may not engage.

         On November 12, 1999, President Clinton signed into law the
Gramm-Leach-Bliley Act (the "Act"), which is potentially the most significant
banking legislation in many years. The Act eliminates most of the remaining
depression-era "firewalls" between banks, securities firms and insurance
companies which was established by The Banking Act of 1933, also known as the
Glass-Steagall Act ("Glass-Steagall). Glass-Steagall sought to insulate banks as
depository institutions from the perceived risks of securities dealing and
underwriting, and related activities. The Act repeals Section 20 of

                                       -9-
<PAGE>

Glass-Steagall, which prohibited banks from affiliating with securities firms.
Bank holding companies that can qualify as "financial holding companies" can
now, among other matters, acquire securities firms or create them as
subsidiaries, and securities firms can now acquire banks or start banking
activities through a financial holding company. The Act includes provisions
which permit national banks to conduct financial activities through a subsidiary
that are permissible for a national bank to engage in directly, as well as
certain activities authorized by statute, or that are financial in nature or
incidental to financial activities to the same extent as permitted to a
"financial holding company" or its affiliates. This liberalization of United
States banking and financial services regulation applies both to domestic
institutions and foreign institutions conducting business in the United States.
Consequently, the common ownership of banks, securities firms and insurance
firms is now possible, as is the conduct of commercial banking, merchant
banking, investment management, securities underwriting and insurance within a
single financial institution using a "financial holding company" structure
authorized by the Act.

         Prior to the Act, significant restrictions existed on the affiliation
of banks with securities firms and on the direct conduct by banks of securities
dealing and underwriting and related securities activities. Banks were also
(with minor exceptions) prohibited from engaging in insurance activities or
affiliating with insurers. The Act removes these restrictions and substantially
eliminates the prohibitions under the Bank Holding Company Act on affiliations
between banks and insurance companies. Bank holding companies which qualify as
financial holding companies can now, among other matters, insure, guarantee, or
indemnify against loss, harm, damage, illness, disability, or death; issue
annuities; and act as a principal, agent, or broker regarding such insurance
services.

         In order for a commercial bank to affiliate with a securities firm or
an insurance company pursuant to the Act, its bank holding company must qualify
as a financial holding company. A bank holding company will qualify if (i) its
banking subsidiaries are "well capitalized" and "well managed" and (ii) it files
with the Board of Governors a certification to such effect and a declaration
that it elects to become a financial holding company. The amendment of the Bank
Holding Company Act now permits financial holding companies to engage in
activities, and acquire companies engaged in activities, that are financial in
nature or incidental to such financial activities. Financial holding companies
are also permitted to engage in activities that are complementary to financial
activities if the Board of Governors determines that the activity does not pose
a substantial risk to the safety or soundness of depository institutions or the
financial system in general. These standards expand upon the list of activities
"closely related to banking" which have to date defined the permissible
activities of bank holding companies under the Bank Holding Company Act.

         One further effect of the Act is to require that federal financial
institution and securities regulatory agencies prescribe regulations to
implement the policy that financial institutions must respect the privacy of
their customers and protect the security and confidentiality of customers'
non-public personal information. These regulations require, in general, that
financial institutions (1) may not disclose non-public personal information of
customers to non-affiliated third parties without notice to their customers, who
must have an opportunity to direct that such information not be disclosed; (2)
may not disclose customer account numbers except to consumer reporting agencies;
and (3) must give prior disclosure of their privacy policies before establishing
new customer relationships.

         Neither FNB Bancorp or First National Bank have determined whether or
when they may seek to acquire and exercise new powers or activities under the
Act, and the extent to which competition will change among financial
institutions affected by the Act has not yet become clear.


The Patriot Act

         On October 26, 2001, President Bush signed the USA Patriot Act (the
"Patriot Act"), which includes provisions pertaining to domestic security,
surveillance procedures, border protection, and terrorism laws to be
administered by the Secretary of the Treasury. Title III of the Patriot Act
entitled, "International Money Laundering Abatement and Anti-Terrorist Financing
Act of 2001" includes amendments to the Bank Secrecy Act which expand the
responsibilities of financial institutions in regard to anti-money laundering
activities with particular emphasis upon international money laundering and
terrorism financing activities through designated correspondent and private
banking accounts.

         Effective December 25, 2001, Section 313(a) of the Patriot Act
prohibits any insured financial institution such as the Bank, from providing
correspondent accounts to foreign banks which do not have a physical presence in
any country (designated as "shell banks"), subject to certain exceptions for
regulated affiliates of foreign banks. Section 313(a) also requires financial

                                      -10-
<PAGE>

institutions to take reasonable steps to ensure that foreign bank correspondent
accounts are not being used to indirectly provide banking services to foreign
shell banks, and Section 319(b) requires financial institutions to maintain
records of the owners and agent for service of process of any such foreign banks
with whom correspondent accounts have been established.

         Effective July 23, 2002, Section 312 of the Patriot Act creates a
requirement for special due diligence for correspondent accounts and private
banking accounts. Under Section 312, each financial institution that
establishes, maintains, administers, or manages a private banking account or a
correspondent account in the United States for a non-United States person,
including a foreign individual visiting the United States, or a representative
of a non-United States person shall establish appropriate, specific, and, where
necessary, enhanced, due diligence policies, procedures, and controls that are
reasonably designed to detect and record instances of money laundering through
those accounts.

         The Company and the Bank are not currently aware of any account
relationships between the Bank and any foreign bank or other person or entity as
described above under Sections 313(a) or 312 of the Patriot Act. The terrorist
attacks on September 11, 2001 have realigned national security priorities of the
United States and it is reasonable to anticipate that the United States Congress
may enact additional legislation in the future to combat terrorism including
modifications to existing laws such as the Patriot Act to expand powers as
deemed necessary. The effects which the Patriot Act and any additional
legislation enacted by Congress may have upon financial institutions is
uncertain; however, such legislation would likely increase compliance costs and
thereby potentially have an adverse effect upon the Company's results of
operations.


Future Legislation and Regulations

         Certain legislative and regulatory proposals that could affect FNB
Bancorp, First National Bank, and the banking business in general are
periodically introduced before the United States Congress, the California State
Legislature and Federal and state government agencies. It is not known to what
extent, if any, legislative proposals will be enacted and what effect such
legislation would have on the structure, regulation and competitive
relationships of financial institutions. It is likely, however, that such
legislation could subject FNB Bancorp and First National Bank to increased
regulation, disclosure and reporting requirements, competition, and costs of
doing business.

         In addition to legislative changes, the various Federal and state
financial institution regulatory agencies frequently propose rules and
regulations to implement and enforce already existing legislation. It cannot be
predicted whether or in what form any such rules or regulations will be enacted
or the effect that such regulations may have on FNB Bancorp and First National
Bank

ITEM 2.  PROPERTIES
-------  ----------

         FNB Bancorp does not own any real property. FNB Bancorp has conducted
its operations since consummation of the Plan of Reorganization at the
administrative offices of First National Bank, located at 975 El Camino Real,
South San Francisco, California 94080.

         First National Bank owns the land and building at 975 El Camino Real,
South San Francisco, California 94080. The premises consist of a modern,
three-story building of approximately 20,000 square feet and off-street parking
for employees and customers of approximately 45 vehicles. The Buri Buri Branch
Office of First National Bank is located on the ground floor of this three-story
building and administrative offices, including the offices of senior management,
occupy the second and third floors.

         First National Bank owns the land and two-story building occupied by
the Daly City Branch Office (6600 Mission Street, Daly City, CA 94014); the land
and two-story building occupied by the Colma Branch Office (1300 El Camino Real,
Colma, CA 94014); the land and two-story building occupied by the South San
Francisco Branch Office (211 Airport Boulevard, South San Francisco, CA 94080);
the land and two-story building occupied by the Redwood City Branch Office (700
El Camino Real, Redwood City, CA 94063); the land and two-story building

                                      -11-
<PAGE>

occupied by the Millbrae Branch Office (1551 El Camino Real, Millbrae, CA
94030); the land and single-story building occupied by the Half Moon Bay Branch
Office (756 Main Street, Half Moon Bay, CA 94019); and the land and two-story
building occupied by the Pescadero Branch Office (239 Stage Road, Pescadero, CA
94060). All properties include adequate vehicle parking for customers and
employees.

         All of the foregoing properties are owned by First National Bank, free
and clear of any mortgage lien or similar encumbrance, with the exception of
1300 El Camino Real, Colma, California, on which there is recorded a deed of
trust securing a note with a principal balance of approximately $153,000 as of
December 31, 2001.

         First National Bank leases premises at 1450 Linda Mar Shopping Center,
Pacifica, California 94044, for its Linda Mar Branch Office. This ground floor
space of approximately 4,100 square feet is leased from Fifty Associates and
Demartini/Linda Mar, LLC. The lease term is 10 years and expires on September 1,
2009.

         First National Bank leases premises at 210 Eureka Square, Pacifica,
California 94044, for its Eureka Square Branch Office. This ground floor space
of approximately 3,000 square feet is leased from Joseph A. Sorci and Eldiva
Sorci. The lease term is for 5 years, commencing January 1, 1995, with two
5-year options to extend the lease term, the first of which has been exercised
and expires on December 31, 2004.

         First National Bank leases premises at 640 Brannan Street, Suite 102,
San Francisco, California 94107, for its Flower Mart Branch Office. This ground
floor space of approximately 300 square feet is leased from California Flower
Market, Inc. The lease term is for 5 years, commencing September 1, 1996, with
two 5-year options to extend the lease term, the first of which has been
exercised and expires on September 1, 2006.

         First National Bank leases premises at 491 El Camino Real, Suite B, San
Mateo, California 94402, for its San Mateo Branch Office. Suite B is ground
floor space of approximately 3,349 square feet, and is subleased from Union Bank
of California N.A. under its master lease with Nikko Capital Corp. for the
entire building (Suites A and B) at that address, consisting of approximately
5,753 total square feet. The sublease is for 7 years and expires on January 31,
2004.

         First National Bank leases approximately 2,242 square feet of office
space in an office building located at 520 South El Camino Real, San Mateo,
California. The Business Banking Division of First National Bank occupies Suite
430 at that address. The landlord is Westlake Development Company, Inc. The
lease is for 3 years, expiring June 15, 2003.

         The foregoing summary descriptions of leased premises are qualified in
their entirety by reference to the full text of the lease agreements listed as
exhibits to this report.


ITEM 3.  LEGAL PROCEEDINGS
-------  -----------------

         There are no material legal proceedings adverse to the Company or First
National Bank to which any director, officer, affiliate of the Company, or 5%
shareholder of the Company, or any associate of any such director, officer,
affiliate or 5% shareholder of the Company are a party, and none of the
foregoing persons has a material interest adverse to the Company or First
National Bank.

         From time to time, the Company and/or First National Bank is a party to
claims and legal proceedings arising in the ordinary course of business. The
Company's management is not aware of any material pending legal proceedings to
which either it or First National Bank may be a party or has recently been a
party, which will have a material adverse effect on the financial condition or
results of operations of the Company and First National Bank, taken as a whole.

                                      -12-
<PAGE>

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

         The Company was incorporated under the laws of the State of California
on February 28, 2001, at the direction of the Board of Directors of First
National Bank, for the purpose of becoming the holding company of the Bank.
Prior to consummation of the Plan of Reorganization, there were 100 shares of
FNB Bancorp common stock issued and outstanding, all of which were paid for, and
held by, Michael R. Wyman, Chairman of the Board of Directors of First National
Bank. As the sole shareholder of FNB Bancorp, Mr. Wyman approved the Agreement
and Plan of Reorganization dated November 1, 2001, between the Company and the
Bank. To date, there have been no other meetings of the shareholders of FNB
Bancorp. On February 27, 2002, at a Special Meeting of Shareholders of the Bank,
the shareholders of First National Bank approved the Agreement and Plan of
Reorganization. A total of 1,734,916 shares were voted "For" the Plan of
Reorganization; 24,007 shares were voted "Against" the Plan of Reorganization;
and 10,842 shares abstained from voting. Approval of the Plan of Reorganization
required the affirmative vote of at least two-thirds (2/3) of all shares of Bank
common stock outstanding on the record date, January 15, 2002. Effective as of
March 15, 2002, each share of Bank common stock was exchanged for one share of
FNB Bancorp common stock (subject to any dissenting shareholder rights, yet to
be asserted). Upon consummation of the Plan of Reorganization, FNB Bancorp
repurchased the 100 shares of Company common stock held by Michael R. Wyman at
the same price paid by Mr. Wyman for those shares. The 2002 annual meeting (the
first annual meeting) of the shareholders of FNB Bancorp is currently scheduled
to be held on May 15, 2002.

                                      -13-
<PAGE>

                                     PART II

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

         There has been limited trading in the shares of common stock of First
National Bank. The Bank's common stock was not listed on any exchange, but was
quoted on the OTC Bulletin Board under the symbol "FNBD.OB." Management of First
National Bank of Northern California is aware of the following securities
dealers that have executed transactions in the common stock: Sutro & Co.;
Wedbush Morgan Securities; and Hoefer & Arnett, Inc.

         The Plan of Reorganization between FNB Bancorp and the Bank was
consummated on March 15, 2002. At the close of business on March 15, 2002, all
shares of the common stock of the Bank became owned by FNB Bancorp and ceased to
be quoted on the OTC Bulletin Board. Commencing at the opening of business on
March 18, 2002, and to the present, the common stock of FNB Bancorp has been
quoted on the OTC Bulletin Board under the trading symbol, "FNBG.OB." On March
18, 2002, FNB Bancorp had approximately 465 holders of common stock of record.

         The following table summarizes sales of the common stock of First
National Bank during the periods indicated of which management of the Bank has
knowledge, including the approximate high and low bid prices during such periods
and the per share cash dividends declared for the periods indicated. All
information has been adjusted to reflect stock dividends effected on December
15, 2000, and on December 14, 2001. The prices indicated below reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
necessarily represent actual transactions.

                      Bid Price of First National Bank
                              Common Stock (1)           Cash
                                                       Dividends
                             High         Low        Declared (2)
             2000          --------     --------     ------------
        --------------
        First Quarter      $26.1875     $22.1406         0.12
        Second Quarter      25.2344      22.8594         0.12
        Third Quarter       26.1875      23.8125         0.12
        Fourth Quarter      26.7500      25.7188         0.12
                                                         0.75         Spec.
             2001                                                      Div.
        --------------
        First Quarter      $26.7500     $25.5000         0.12
        Second Quarter      26.6250      25.0000         0.12
        Third Quarter       26.5000      25.0000         0.12
        Fourth Quarter      26.1000      25.0000         0.12
                                                         0.52         Spec.
                                                                       Div.
         -------------------------
         (1)      As estimated by First National Bank of Northern California,
                  based upon trades of which First National Bank of Northern
                  California was aware.

         (2)      See Item 1, "Limitations on Dividends, " for a discussion of
                  the limitations applicable to the payment of dividends by
                  First National Bank and FNB Bancorp.

                                      -14-
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA
-------  -----------------------

         The following table presents a summary of selected financial
information that should be read in conjunction with the Company's financial
statements and notes thereto included under Item 8 - "FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA."

<TABLE>
<CAPTION>
Dollars in thousands, except per                          AT AND FOR YEAR ENDED DECEMBER 31,
share amounts and ratios                  ------------------------------------------------------------------
                                             2001        2000 (1)        1999          1998          1997
                                          ----------    ----------    ----------    ----------    ----------
                                                      (as adjusted)
<S>                                       <C>           <C>           <C>           <C>           <C>
STATEMENT OF INCOME DATA
Total interest income                     $   30,844    $   30,862    $   27,586    $   24,739    $   21,171
Total interest expense                         7,935         8,192         6,998         6,877         6,000
                                          ----------    ----------    ----------    ----------    ----------
Net interest income                           22,909        22,670        20,588        17,862        15,171
Provision for loan losses                        300           425           750           750           340
                                          ----------    ----------    ----------    ----------    ----------
Net interest income after provision for
  loan losses                                 22,609        22,245        19,838        17,112        14,831
Total non interest income                      3,007         3,781         2,785         2,654         2,452
Total non interest expenses                   17,911        15,977        14,519        14,215        12,496
                                          ----------    ----------    ----------    ----------    ----------
Earnings before taxes                          7,705        10,049         8,104         5,551         4,787
Income tax expense                             2,468         2,921         2,887         1,508         1,771
                                          ----------    ----------    ----------    ----------    ----------
Net earnings                              $    5,237    $    7,128    $    5,217    $    4,043    $    3,016
                                          ==========    ==========    ==========    ==========    ==========

PER SHARE DATA
Net earnings per share:
  Basic                                   $     2.37    $     3.07    $     2.25    $     1.74    $     1.50
  Diluted                                 $     2.36    $     3.07    $     2.25    $     1.74    $     1.50
Cash dividends per share                  $     1.00    $     1.23    $     1.00    $     0.36    $     0.15
Weighted average shares outstanding:
  Basic                                    2,214,092     2,319,077     2,319,068     2,319,068     2,004,219
  Diluted                                  2,219,606     2,320,770     2,319,068     2,319,068     2,004,219
Shares outstanding at period end           2,318,849     2,208,658     2,103,694     2,003,759     1,908,541
Book value per share                      $    20.06    $    19.52    $    17.83    $    17.85    $    16.82

BALANCE SHEET DATA
Investment securities                         65,311        87,241        70,658        78,865        67,021
Net loans                                    288,067       229,669       237,062       203,884       180,798
Allowance for loan losses                      3,543         3,332         2,920         2,224         1,666
Total assets                                 397,388       379,102       348,054       321,031       290,733
Total deposits                               344,079       330,457       305,361       280,589       256,490
Shareholders' equity                          46,523        43,128        37,507        35,761        32,098

SELECTED PERFORMANCE DATA
Return on average assets                        1.30%         1.97%         1.53%         1.33%         1.13%
Return on average equity                       11.43%        17.42%        13.96%        11.31%         9.84%
Net interest margin                             6.34%         6.97%         6.73%         6.61%         6.73%
Average loans as a percentage of
  average deposits                             77.67%        75.42%        75.02%        74.47%        69.87%
Average total stockholders' equity as
  a percentage of average total assets         11.41%        11.31%        10.96%        11.72%        11.53%
Dividend payout ratio                          43.38%        37.50%        38.55%        17.15%         9.32%
SELECTED ASSET QUALITY RATIOS
Net loan charge-offs to average loans           0.03%         0.01%         0.02%         0.10%         0.02%
Allowance for loan losses/Total Loans           1.21%         1.43%         1.22%         1.08%         0.91%
CAPITAL RATIOS
Tier 1 risk-based                              12.98%        14.54%        13.18%        17.02%        15.13%
Total risk-based                               13.98%        15.67%        14.18%        18.10%        15.92%
Leverage                                       11.41%        11.28%        11.00%        10.88%        11.21%
</TABLE>

--------------------
(1)  The net earnings for the year ended December 31, 2000, have been adjusted
     to record an income tax refund receivable of $341,770.

                                      -15-
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-------  -----------------------------------------------------------------------
         OF OPERATIONS OF FIRST NATIONAL BANK OF NORTHERN CALIFORNIA
         -----------------------------------------------------------

         Note: Certain matters discussed or incorporated by reference in this
Annual Report on Form 10-K including, but not limited to matters described in
this section are forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected.


Critical Accounting Policies And Estimates

         Management's discussion and analysis of its financial condition and
results of operations are based upon the Company's financial statements, which
have been prepared in accordance with accounting principles general accepted in
the United States of America. The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, the Company evaluates
its estimates, including those related to its loans and allowance for loan
losses. The Company bases its estimates on current market conditions, historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. The Company believes the
following critical accounting policy requires significant judgments and
estimates used in the preparation of its consolidated financial statements.


Allowance for Credit Losses. The allowance for credit losses is periodically
evaluated for adequacy by management. Factors considered include the Company's
loan loss experience, known and inherent risks in the portfolio, current
economic conditions, known adverse situations that may affect the borrower's
ability to repay, regulatory policies, and the estimated value of underlying
collateral. The evaluation of the adequacy of the allowance is based on the
above factors along with prevailing and anticipated economic conditions that may
impact borrowers' ability to repay loans. Determination of the allowance is in
part objective and in part a subjective judgment by management given the
information it currently has in its possession. Adverse changes in any of these
factors or the discovery of new adverse information could result in higher
charge-offs and loan loss provisions.


Earnings Analysis

         Net earnings in 2001 were $5,237,000, a 26.5% decrease from 2000
earnings of $7,128,000. Earnings for the year 2000 increased $1,911,000 or 36.6%
over earnings of $5,217,000 in 1999. A tax refund related primarily to the
recapture of certain tax credits earned in prior years, but received in 2001,
was reclassified to 2000 as a tax receivable. The year 2000 also included a
non-recurring pre-tax gain on sale of bank premises of $701,000. Excluding these
two non-recurring items, and related tax effect, the Bank's earnings for the
year ended December 31, 2000 were $6,289,000. In this case, 2001 net earnings
declined 16.7% from 2000, which was caused by a reduction in interest rate
spreads, in which interest earned on average loans dropped by 125 basis points,
while interest on all interest-bearing liabilities dropped by only 50 basis
points.

         Basic earnings per share were $2.37 in 2001; $3.07 ($2.71 excluding
non-recurring) in 2000, and $2.25 in 1999. Diluted earnings per share were $2.36
in 2001; $3.07 ($2.71 excluding non-recurring) in 2000; and $2.25 in 1999.

         Operating results in 2001 reflected net interest income of $22,909,000,
an increase of $239,000 or 1.1% over 2000. Interest income was $30,844,000 in
2001, down $18,000 from 2000. Average interest earning assets in 2001 were
$361,617,000, an increase of $36,378,000 or 11.2% over 2000, but their yield
declined 1.0% for the same period. The principal earning assets were loans,
which grew by $33,282,000 or 14.0% in 2001 versus 2000, but the yield declined
125 basis points, primarily due to a succession of prime rate cuts caused by the
Federal Reserve. Net interest income for 2000 was $22,670,000, up $2,082,000 or
10.1% over 1999. Interest income in 2000 was $30,862,000, an increase of
$3,276,000 or 11.9% over 1999. Average interest earning assets were $325,239,000
in 2000, an increase of $19,330,000 or 6.3% over 1999. Average loans were
$238,167,000 in 2000, an increase of $13,712,000 or 6.1% over 1999. Their yield
was 10.8% in 2000, 35 basis points higher than in 1999.

                                      -16-
<PAGE>

         Interest expense for 2001 was $7,935,000, a slight decline of $257,000
or 3.1% compared to 2000, as rates on average interest-bearing liabilities
dropped on a lagged basis behind the prime rate on loans. Interest-bearing
liabilities averaged $262,019,000 in 2001, $30,071,000 or 13.0% higher than
2000. However, the cost of average interest-bearing liabilities declined by 50
basis points in 2001 compared to 2000. The principal interest-bearing
liabilities are time deposits. Average time deposits increased to $105,224,000
in 2001, a change of $3,010,000 or 2.9% above 2000, but with a drop of 44 basis
points.

         Interest expense for 2000 was $8,192,000, an increase of $1,193,000 or
17.1% over 1999. Interest-bearing liabilities averaged $231,948,000 in 2000, an
increase of $9,648,000 or 4.3% over 1999. The cost of interest-bearing
liabilities was 38 basis points higher in 2000 than in 1999. Although average
time deposits declined from $106,279,000 in 1999 to $102,214,000 in 2000, their
cost increased by 61 basis points from 1999 to 2000.

         The provision for loan losses was $300,000 in 2001, a decrease of
$125,000 or 29.4% from 2000. The provision for 2000 was $425,000, a decrease of
$325,000 or 43.3% from 1999. At the end of 2001, the allowance for loan losses
was 1.21% of loans outstanding, compared to 1.43% in 2000 and 1.22% in 1999.


Net Interest Income

         Net interest income is the difference between interest yield generated
by earning assets and the interest expense associated with the funding of those
assets. Net interest income is affected by the interest rate earned or paid and
by volume changes in loans, investment securities, deposits and borrowed funds.


<TABLE>
<CAPTION>
TABLE 1                                                         Net Interest Income and Average Balances
                                      ---------------------------------------------------------------------------------------------
                                                                              (In thousands)
                                                                          Year ended December 31
                                                   2001                            2000                            1999
                                      -----------------------------   -----------------------------   -----------------------------
                                                 Interest   Average              Interest   Average              Interest   Average
                                      Average     Income     Yield    Average     Income     Yield    Average     Income     Yield
                                      Balance    (Expense)  (Cost)    Balance    (Expense)  (Cost)    Balance    (Expense)  (Cost)
                                      --------   --------  --------   --------   --------  --------   --------   --------  --------
<S>                                   <C>        <C>          <C>     <C>        <C>         <C>      <C>        <C>         <C>
INTEREST EARNING ASSETS
Loans, gross                          $271,449   $ 26,024     9.59%   $238,167   $ 25,811    10.84%   $224,455   $ 23,542    10.49%
Taxable Securities                      45,650      2,630     5.76%     44,584      2,860     6.41%     37,231      2,047     5.50%
Nontaxable Securities                   31,129      1,579     5.07%     32,120      1,524     4.74%     34,445      1,517     4.40%
Federal funds sold                      13,389        611     4.56      10,368        667     6.43       9,778        480     4.91
                                      --------   --------             --------   --------             --------   --------
   Total interest earning assets      $361,617   $ 30,844     8.53    $325,239   $ 30,862     9.49    $305,909   $ 27,586     9.02
                                      --------   --------             --------   --------             --------   --------

NONINTEREST EARNING ASSETS:
Cash and due from banks               $ 22,654                        $ 20,782                        $ 19,176
Premises and equipment                  11,728                          10,730                          11,380
Other assets                             5,413                           5,092                           4,472
                                      --------                        --------                        --------
   Total noninterest earning assets   $ 39,795                        $ 36,604                        $ 35,028
                                      --------                        --------                        --------
TOTAL ASSETS                          $401,412                        $361,843                        $340,937
                                      ========                        ========                        ========
</TABLE>

                                      -17-
<PAGE>

<TABLE>
<CAPTION>
<S>                                   <C>        <C>          <C>     <C>        <C>         <C>      <C>        <C>         <C>
INTEREST BEARING LIABILITIES:
Deposits:
Demand, interest bearing              $ 54,539  ($   653)    (1.20)   $ 42,157  ($   527)   (1.25)    $ 36,703  ($   364)   (0.99)
Money market                            55,670    (1,490)    (2.68)     43,599    (1,438)   (3.30)      22,933      (869)   (3.79)
Savings                                 46,312      (727)    (1.57)     43,689      (851)   (1.95)      55,856      (813)   (1.46)
Time deposits                          105,224    (5,054)    (4.80)    102,214    (5,353)   (5.24)     106,279    (4,925)   (4.63)
Fed funds purchased and other
   borrowings                              274       (11)    (4.01)        289       (23)   (7.96)         529       (27)   (5.10)
      Total interest bearing
         liabilities                  $262,019  ($ 7,935)    (3.03)   $231,948  ($ 8,192)   (3.53)    $222,300  ($ 6,998)   (3.15)


NONINTEREST BEARING LIABILITIES:
Demand deposits                         87,726                          84,127                          77,415
Other liabilities                        5,859                           4,848                           3,857
                                      --------                        --------                        --------
Total noninterest bearing

       liabilities                    $ 93,585                        $ 88,975                        $ 81,272
                                      --------                        --------                        --------
   Total liabilities                  $355,604                        $320,923                        $303,572
Stockholders' equity                  $ 45,808                        $ 40,920                        $ 37,365

TOTAL LIABILITIES AND

                                      --------                        --------                        --------
   STOCKHOLDERS' EQUITY               $401,412                        $361,843                        $340,937
                                      ========                        ========                        ========

                                                 --------                        --------                        --------
NET INTEREST INCOME AND
MARGIN ON TOTAL EARNING
ASSETS                                           $ 22,909     6.34%              $ 22,670    6.97%               $ 20,588    6.73%
                                                 ========                        ========                        ========
</TABLE>

Interest income is reflected on an actual basis, not on a fully taxable
equivalent basis.

Yield on gross loans was not adjusted for nonaccrual loans, as these were
considered not material for this calculation.

                                      -18-
<PAGE>

         The following table analyzes the dollar amount of change in interest
income and expense and the changes in dollar amounts attributable to: (a)
changes in volume (changes in volume at the current year rate), (b) changes in
rate (changes in rate times the prior year's volume) and (c) changes in
rate/volume (changes in rate times change in volume). In this table, the dollar
change in rate/volume is prorated to volume and rate proportionately.


<TABLE>
<CAPTION>
TABLE 2                                              Rate/Volume Variance Analysis
                                    --------------------------------------------------------------
                                                            (in thousands)

                                                        Year Ended December 31
                                        2001 Compared To 2000            2000 Compared To 1999
                                    -----------------------------    -----------------------------
                                         Increase (decrease)              Increase (decrease)
                                    Interest                         Interest
                                    Income/         Variance         Income/         Variance
                                    Expense      Attributable To     Expense      Attributable To
                                    Variance     Rate      Volume    Variance     Rate      Volume
                                    -------    -------    -------    -------    -------    -------
<S>                                 <C>        <C>        <C>        <C>        <C>        <C>
INTEREST EARNING ASSETS:

Loans                               $   213    ($2,438)   $ 2,677    $ 2,269    $   783    $ 1,486

Investments                            (175)      (179)         4        820        533        287

Federal Funds sold                      (56)      (194)       138        187        149         38
                                    -------    -------    -------    -------    -------    -------
    Total                           ($   18)   ($3,351)   $ 3,333    $ 3,276    $ 1,465    $ 1,811
                                    =======    =======    =======    =======    =======    =======

INTEREST BEARING LIABILITIES:

Demand deposits                     $   126    ($   22)   $   148    $   163    $    95    $    68

Money market                             52       (271)       323        569       (113)       682

Savings deposits                       (124)      (165)        41         38        275       (237)

Time deposits                          (299)      (444)       145        428        641       (213)

Federal funds purchased and other       (12)       (11)        (1)        (4)        15        (19)
borrowings
                                    -------    -------    -------    -------    -------    -------
    Total                           ($  257)   ($  913)   $   656    $ 1,194    $   913    $   281

                                    -------    -------    -------    -------    -------    -------
NET INTEREST INCOME                 $   239    ($2,438)   $ 2,677    $ 2,082    $   552    $ 1,530
                                    =======    =======    =======    =======    =======    =======
</TABLE>


         In 2001, net interest income represented 88.40% of net revenue (net
interest income plus non-interest income), compared to 85.71% in 2000 and 88.08%
in 1999. The net yield on average earning assets was 6.34% in 2001 compared to
6.97% in 2000 and 6.73% in 1999. The average rate earned on interest earning
assets was 8.53% in 2001, down from 9.49% in 2000 and 9.02% in 1999. The average
cost for interest-bearing liabilities was 3.03% in 2001, compared to 3.53% in
2000 and 3.15% in 1999.

         The decrease in net interest income in 2001 was due to a combination of
a 96 basis point decline in the rate on interest earning assets that was greater
than the 50 basis point decline in the rate on interest-bearing liabilities due
to a succession of prime rate cuts caused by the Federal Reserve Board. In 2000
compared to 1999, the opposite was the case, as the rate on interest earning
assets increased by 47 basis points, and the rate on interest-bearing
liabilities increased by 38 basis points. Generally speaking, rates increased
from 1999 to 2000, but declined from 2000 to 2001, with the exception of money
market costs, which declined consistently, as follows. For 1999, 2000 and 2001,

                                      -19-
<PAGE>

rates were as follows: loans were at 10.49%, increased to 10.84%, and ended at
9.59%; investment securities started at 4.97%, increased to 5.72%, ended at
5.48%; federal funds sold, 4.91%, 6.43%, 4.56%. On the expense side,
interest-bearing demand deposits cost .99% in 1999, 1.25% in 2000, 1.20% in
2001; money market dropped steadily from 3.79% to 3.30% then to 2.68%; savings
started at 1.46%, then 1.95% and finally at 1.57%; time deposits in 1999 cost
4.63%, 5.24% in 2000 and 4.80% in 2001. Finally, fed funds purchased and other
borrowings increased sharply from 5.10% in 1999 to 7.96% in 2000, but dropped
back to 4.01% in 2001. If the large number of interest rate cuts seen in 2001
stops in 2002 and the economy improves, rates may eventually rise, which would
contribute to an improved net interest income, as interest rates on loans tied
to prime tend to rise faster than interest rates on deposits.


Provision And Allowance For Loan Losses

         The Bank has the responsibility of assessing the overall risks in its
loan portfolio, assessing the specific loss expectancy, and determining the
adequacy of the loan loss reserve. The level of reserves is determined by
internally generating credit quality ratings, reviewing economic conditions in
the Bank's market area, and considering the Bank's historical loan loss
experience. The Bank is committed to maintaining adequate reserves, identifying
credit weaknesses by consistent review of loans, and maintaining the ratings and
changing those ratings in a timely manner as circumstances change.

         Based on a review of the five years ended December 31, 2001, the Bank
has had a very low loan loss experience, with no real estate loan losses.
However, in consideration of: a) the significant increase in real estate loans
outstanding in 2001, which ended with $180,964,000, or 61.6% of loan portfolio,
compared to $115,775,000 in 2000; b) the present state of the economy; c) the
increase in vacancy factors in the current commercial real estate market, the
proportion of the Allowance for Loan Losses attributable to real estate loans
was increased from $955,000 or 28.7% in 2000 to $1,912,000 or 54.0% in 2001.

         The allowance for loan losses totaled $3,543,000, $3,332,000 and
$2,920,000 at December 31, 2001, 2000, and 1999, respectively. This represented
1.21%, 1.43% and 1.22% of outstanding loans on those respective dates. The
balances reflect an amount that, in management's judgment, is adequate to
provide for potential loan losses based on the considerations listed above.
During 2001, the provision for loan losses was $300,000, while write-offs
totaled $94,000, compared to a provision for loan losses of $425,000 and total
write-offs of $23,000 in 2000 and a provision of $750,000 and total write-offs
of $70,000 in 1999. There was no significant single loan written off in the
periods mentioned.


<TABLE>
<CAPTION>
TABLE 3                               Allocation of the Allowance for Loan Losses
                ---------------------------------------------------------------------------------------
                                                    (in thousands)

                         2001              2000              1999              1998              1997
                         ----              ----              ----              ----              ----
                        Percent           Percent           Percent           Percent           Percent
                        in each           in each           in each           in each           in each
                       category          category          category          category          category
                       to total          to total          to total          to total          to total
                Amount   Loans    Amount   Loans    Amount   Loans    Amount   Loans    Amount   Loans
                ------   -----    ------   -----    ------   -----    ------   -----    ------   -----

<S>             <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>      <C>
Real Estate     $1,912    61.6%   $  955    49.4%   $1,024    50.2%   $  795    52.2%   $  581    59.5%
Construction       504     9.8     1,196    17.1       566    17.0       393     7.2       285     4.8
Commercial         387    20.1       264    22.4       415    21.8       416    30.2       624    23.2
Consumer           226    8.54       352    11.1       526    11.0       294    10.4       176    12.5
Unfunded
  commitments      514      --       565      --       389      --       326      --        --      --

                ------   -----    ------   -----    ------   -----    ------   -----    ------   -----
Total           $3,543   100.0%   $3,332   100.0%   $2,920   100.0%   $2,224   100.0%   $1,666   100.0%
                ======   =====    ======   =====    ======   =====    ======   =====    ======   =====
</TABLE>

                                      -20-
<PAGE>

         Table 4 summarizes transactions in the allowance for loan losses and
details the charge-offs, recoveries and net loan losses by loan category for the
last five fiscal years ended December 31, 2001. The amount added to the
provision and charged to operating expense for each period is based on the risk
profile of the loan portfolio.

         Starting in 1997 and continuing through 1999, there was a change in
portfolio mix, which saw an increase in loan size, and lending in Enterprise
Zones, which implies a slightly higher risk. A favorable payment history for
these loans indicated that not as much need be added to the reserve, so the
provision declined in 2000 and 2001.


<TABLE>
<CAPTION>
               TABLE 4                                             Allowance for Loan Losses
                                                                      Historical Analysis
                                                    -------------------------------------------------------
                                                                        (in thousands)

                                                                For the year ended December 31,
                                                    -------------------------------------------------------
                                                      2001        2000        1999        1998        1997
                                                    -------     -------     -------     -------     -------

<S>                                                 <C>         <C>         <C>         <C>         <C>
            Balance at Beginning of Period          $ 3,332     $ 2,920     $ 2,224     $ 1,666     $ 1,355
            Provision for Loan Losses                   300         425         750         750         340

            Charge-offs:
            Commercial                                  (22)         --         (51)       (169)        (58)
            Consumer                                    (72)        (23)        (19)        (38)         (8)
                                                    -------     -------     -------     -------     -------
               Total                                    (94)        (23)        (70)       (207)        (66)

            Recoveries:
            Commercial                                   --           1          10           7           4
            Consumer                                      5           9           6           8          33
                                                    -------     -------     -------     -------     -------
               Total                                      5          10          16          15          37
            Net Charge-offs                             (89)        (13)        (54)       (192)        (29)
            Balance at End of Period                $ 3,543     $ 3,332     $ 2,920     $ 2,224     $ 1,666

            Percentages
            Allowance for Loan Losses/Total Loans      1.21%       1.43%       1.22%       1.08%       0.91%
            Net charge-offs/Commercial Loans           0.04%       0.00%       0.08%       0.26%       0.13%
            Net charge-offs/Consumer Loans             0.03%       0.05%       0.05%       0.14%      -0.13%
            Net charge-offs/Total Loans                0.03%       0.01%       0.02%       0.09%       0.02%
</TABLE>


Nonperforming Assets

         Non-performing assets consist of nonaccrual loans, foreclosed assets,
and loans that are 90 days or more past due but are still accruing interest. The
accrual of interest on impaired loans is discontinued when, in management's
opinion, the borrower may be unable to meet payments as they became due. For the
year ended December 31, 2001, had nonaccrual loans performed as agreed,
approximately $133,000 in interest would have been accrued.

                                      -21-
<PAGE>

         Table 5 provides a summary of contractually past due loans for the most
recent five years. Nonperforming loans were 0.7% of total loans at the end of
2001. Nonperforming loans were 0.5% of total loans at the end of 2000. They were
0.1% of outstanding loans at the end of 1999. Management believes the current
list of past due loans are collectible and does not anticipate any losses. There
were no foreclosed assets as of the periods indicated.


<TABLE>
<CAPTION>
            TABLE 5                                        Analysis of Nonperforming Assets
                                                      ------------------------------------------
                                                                    (in thousands)

                                                                Year Ended December 31
                                                      ------------------------------------------
                                                       2001     2000     1999     1998     1997
                                                      ------   ------   ------   ------   ------

<S>                                                   <C>      <C>      <C>      <C>      <C>
            Accruing loans past due 90 days or more   $   --   $   --   $   --   $   --   $   --
            Nonaccrualloans                            1,964    1,218    1,999    3,232    3,072
                                                      ======   ------   ------   ------   ------
            Total                                     $1,964   $1,218   $1,999   $3,232   $3,072
                                                      ======   ======   ======   ======   ======
</TABLE>


         There was no commitment to lend additional funds to any customer whose
loan was classified nonperforming at December 31, 2001, 2000 and 1999.


Noninterest Income

         The following table sets forth the principal components of noninterest
income:


<TABLE>
<CAPTION>
            TABLE 6                                         Noninterest Income
                                                       ----------------------------
                                                          (Dollars in thousands)

                                                         Years Ended December 31,
                                                       ----------------------------
                                                         2001      2000       1999
                                                       -------   -------    -------

<S>                                                    <C>       <C>        <C>
            Service charges                            $ 1,657   $ 1,662    $ 1,772
            Credit card fees                               913       975        761
            Gain on sale of bank premises, equipment
               and leasehold improvements                   --       701         12
            Gain (loss) on sales of securities              58        (1)      (117)
            Other income                                   379       445        357
                                                       -------   -------    -------
               Total noninterest income                $ 3,007   $ 3,782    $ 2,785
                                                       =======   =======    =======
</TABLE>


         Noninterest income for the year ended December 31, 2001 was $3,007,000
compared to $3,782,000 for 2000 and $2,785,000 for 1999. The decrease in 2001
from 2000 was primarily due to a gain on sale of bank premises of $701,000 that
took place in 2000. This same gain accounted for most of the $997,000 increase
in 2000 over 1999, with increased credit card activity in 2000 over 1999
producing $214,000 in additional fee income.

                                      -22-
<PAGE>

Noninterest Expenses

         The following table sets forth the various components of noninterest
expense:


            TABLE 7                                  Noninterest Expenses
                                               -------------------------------
                                                    (Dollars in thousands)

                                                   Years Ended December 31,
                                               -------------------------------
                                                 2001        2000        1999
                                               -------     -------     -------

            Salaries and employee benefits     $10,532     $ 9,453     $ 8,588
            Occupancy expense                    1,290       1,122       1,093
            Equipment expense                    1,736       1,453       1,419
            Advertising expense                    384         428         413
            Data processing expense                330         360         310
            Professional fees                      731         468         423
            Director expense                       150         132         120
            Surety insurance                       303         309         244
            Telephone, postage, supplies         1,014         973         789
            Other                                1,441       1,279       1,120
                                               -------     -------     -------
               Total noninterest expense       $17,911     $15,977     $14,519
                                               =======     =======     =======


         Noninterest expenses for the year ended December 31, 2001 were
$17,911,000, an increase of $1,934,000 or12.1% over 2000. For 2000, they were
$15,977,000, an increase of $1,458,000 or 10.0% over 1999. During 2001, the Bank
purchased computer hardware and software equipment to convert its accounting
system and related application systems. During 2001, salaries included increased
costs arising from overtime and additional staff working on the conversion of
software systems. Because of difficulties encountered upon conversion and lack
of functionality of the new software equipment the Bank evaluated these assets
for impairment. No impairment loss was recognized; however, the Bank revised the
estimate of useful life of the software. Depreciation expense on the software
with an original purchase price of approximately $675,000 was approximately
$336,000 for the year ended December 31, 2001. The Bank plans to convert back to
its previous accounting and related application systems by March 2002. An
important part of the increase in 2001 professional fees was related to
consultants hired to help with the data conversion process.


Balance Sheet Analysis

         Total assets were $397,388,000 at December 31, 2001, which represented
a 4.8% increase over 2000. Total assets were $379,102,000 in 2000, an 8.9%
increase over 1999. Assets averaged $401.4 million in 2001 compared to $361.8
million in 2000 and $340.9 million in 1999. Average earning assets increased
from $305.9 million in 1999 to $325.2 million in 2000 and $361.6 million in
2001. They represented 89.7% of total average assets in 1999, 89.9% in 2000 and
90.1% in 2001. Interest-bearing liabilities averaged $262.0 million in 2001,
$231.9 million in 2000 and $222.3 million in 1999. This was an increase of 13.0%
in 2001 over 2000, and 4.3% in 2000 over 1999.


Loans

         The loan portfolio is the principal earning asset of the Bank. Loans
outstanding at December 31, 2001 increased by $58.6 million or 25.2% over 2000,
while loans outstanding at December 31, 2000 had decreased by $7 million or 3.0%
from 1999.

                                      -23-
<PAGE>

         Real Estate loans had declined by $5.7 million or 4.7% from 1999 to
2000, but rose sharply by $65.2 million or 56.3% from 2000 to 2001. A
combination of an emphasis in developing new Commercial Real Estate business,
coupled with the series of drops in the prime lending rate were major factors in
the upsurge. Construction loans declined only 2.5% from 1999 to 2000, but then
dropped $11.3 million or 28% from 2000 to 2001, as existing projects were
completed and paid off, while less activity in new construction did not fill the
void. Commercial loans were flat between 1999 and 2000, but increased $6.4
million or 12.3% in 2001. There was less activity in Consumer loans, which
declined 2.4% from 1999 to 2000, and a further 4.4% in 2001.

         Table 8 presents a detailed analysis of loans outstanding at December
31, 1997 through December 31, 2001.


<TABLE>
<CAPTION>
            TABLE 8                                          Loan Portfolio
                                     -------------------------------------------------------------
                                                             (in thousands)

                                                              December 31
                                     -------------------------------------------------------------
                                        2001         2000         1999         1998         1997
                                     ---------    ---------    ---------    ---------    ---------
<S>                                  <C>          <C>          <C>          <C>          <C>
            Real Estate loans        $ 180,964    $ 115,775    $ 121,434    $ 108,527    $ 109,393
            Construction loans          28,761       40,021       41,061       14,890        8,829
            Commercial loans            58,895       52,454       52,607       62,740       42,752
            Consumer loans              24,841       25,987       26,632       21,701       22,974
                                     ---------    ---------    ---------    ---------    ---------
               Sub total               293,461      234,237      241,734      207,858      183,948
            Net deferred loan fees      (1,851)      (1,236)      (1,752)      (1,750)      (1,486)
                                     ---------    ---------    ---------    ---------    ---------
               Total                 $ 291,610    $ 233,001    $ 239,982    $ 206,108    $ 182,462
                                     =========    =========    =========    =========    =========
</TABLE>


         The following table shows the Bank's loan maturities and sensitivities
to changes in interest rates as of December 31, 2001.

<TABLE>
<CAPTION>
                                                              Maturing
                                                 Maturing    After One     Maturing
                                                Within One   But Within   After Five
                                                   Year      Five Years     Years        Total
                                                ---------    ---------    ---------    ---------

<S>                                             <C>          <C>          <C>          <C>
            Real Estate loans                   $ 140,129    $  32,181    $   8,654    $ 180,964
            Construction loans                     22,271        5,115        1,375       28,761
            Commercial loans                       45,605       10,473        2,816       58,894
            Consumer loans                         19,236        4,418        1,188       24,842
                                                ---------    ---------    ---------    ---------
               Sub total                          227,241       52,187       14,033      293,461
            Net deferred loan fees                 (1,433)        (329)         (89)      (1,851)
                                                ---------    ---------    ---------    ---------
               Total                            $ 225,808    $  51,858    $  13,944    $ 291,610
                                                =========    =========    =========    =========
            With predetermined interest rates   $ 205,814    $  47,266    $  12,710    $ 265,790
            With floating interest rates        $  19,994    $   4,592    $   1,234    $  25,820
                                                ---------    ---------    ---------    ---------
               Total                            $ 225,808    $  51,858    $  13,944    $ 291,610
                                                =========    =========    =========    =========
</TABLE>


         Average loans earned 9.59% in 2001, 125 basis points less than in 2000,
as a result of numerous prime rate changes during the year. In 2000, average
loans earned 10.84%, 35 basis points above 1999. Interest income on loans for
2001 was only $213,000 or 0.8% higher than in 2000, because the interest rate
decrease almost erased the effect of an increase in average loans, which
increased $33,282,000 or 14.0% in 2001 over 2000. Interest income on loans for

                                      -24-
<PAGE>

2000 was $25,811,000, $2,269,000 or 9.6% higher than in 1999. In this case,
average loans had risen by $13,712,000 or 6.1% in 2000 compared to 1999, and was
also affected by a higher yield of 35 basis points.


Investment Portfolio

         Investments at December 31, 2001 were $65,311, a decline of $21,930,000
or 25.1% compared to 2000. However, investments at December 31, 2000 were
$87,241,000, an increase of $16,583,000 or 23.4% over 1999.

         Available funds are first used for Loans, then Investments, and the
remainder sold as Federal Funds. The primary source of funds is the deposit
base. If more funds are needed, the Investment Portfolio maturities may be used,
as well as sales and calls, which accounts for the volume variances in
Investments. The Bank's investment portfolio is concentrated in U. S. Government
Agencies and in obligations of States and their political subdivisions. The Bank
believes this provides for an appropriate liquidity level.

         The following table sets forth the maturity distribution and interest
rate sensitivity of investment securities at December 31, 2001:


<TABLE>
<CAPTION>
                                         After            After
                                          One              Five
                        Due              Year             Years              Due
                      In One            Through          Through            After                    Maturity
                       Year              Five              Ten               Ten              Fair      In    Average
                     Or Less   Yield     Years   Yield    Years   Yield     Years    Yield    Value    Years   Yield
                     ------------------------------------------------------------------------------------------------
                                                          (Dollars in thousands)
<S>                  <C>       <C>     <C>       <C>     <C>       <C>     <C>       <C>     <C>       <C>     <C>
U. S. Treasury       $ 1,029   6.23%   $    --     --%   $    --     --%   $    --     --%   $ 1,029    0.68   6.23%
U. S. Government
   Agencies           12,122   6.58%    14,252   5.29%     1,007   5.81%        --     --     27,381    1.45   5.88%
States & Political
  Subdivisions         1,738   5.76%    14,820   4.79%    11,591   4.62%     1,312   4.96%    29,461    5.79   4.80%
Corporate debt            --     --      5,144   5.51%        --     --%        --     --%     5,144    1.98   5.51%
Other
   Securities             --     --         --     --%        --     --%     2,296   6.36%     2,296   14.69   6.36%
                     -------           -------           -------           -------           -------
     Total           $14,889   6.45%   $34,216   5.14%   $12,598   4.71%   $ 3,608   5.45%   $65,311    3.91   5.38%
                     =======           =======           =======           =======           =======
</TABLE>


         The following table shows the securities portfolio mix at December 31,
2001, 2000 and 1999:

<TABLE>
<CAPTION>
                                                                 Years Ended December 31,
                                                  2001                2000                1999
                                                ---------------------------------------------------------
                                               Amortized    Fair   Amortized    Fair   Amortized    Fair
                                                  Cost     Value      Cost     Value      Cost     Value
                                                -------   -------   -------   -------   -------   -------
                                                                 (Dollars in thousands)

<S>                                             <C>       <C>       <C>       <C>       <C>       <C>
            U. S. Treasury                      $ 1,000   $ 1,029   $ 3,996   $ 4,017   $ 3,985   $ 3,971
            U. S. Government agencies            26,994    27,381    44,690    45,040    34,685    34,129
            States and political subdivisions    29,119    29,461    36,651    36,537    32,893    31,738
            Corporate debt                        5,049     5,144        --        --        --        --
            Other securities                    $ 2,296   $ 2,296   $ 1,647   $ 1,647   $   820   $   820
                                                -------   -------   -------   -------   -------   -------
               Total                            $64,458   $65,311   $86,984   $87,241   $72,383   $70,658
                                                =======   =======   =======   =======   =======   =======
</TABLE>

                                      -25-
<PAGE>

Deposits

         The increase in the earning assets in 2001 was funded with the
increases in the deposit base. During 2001, average deposits were $349.5
million, an increase of $33.7 million or10.7% over 2000. In 2000, average
deposits increased $16.6 million or 5.5% over 1999. In 2001, average
interest-bearing deposits were $261.7 million, which represented an increase of
$30.1 million or 13.0% over 2000. For 2000, average interest-bearing deposits
were $231.7 million, an increase of $9.9 million or 4.5% over 1999.

         The Bank's cost of average interest-bearing deposits in 2001 was 3.03%,
a decrease of 50 basis points from 2000. The cost of average interest- bearing
deposits in 2000 was 3.53%, 39 basis points higher than 1999. The decline in
costs from 2000 compared to 2001 followed the drops in the prime lending rate,
but at a slower rate, as rates on time certificates of deposits only had an
immediate effect on new deposits, but lagged on existing certificates until they
matured and were rolled over. This was most noticeable in the case of rates for
time deposits of $100,000 or more, which had risen from 4.6% in 1999 to 5.7% in
2000, but dropped back to 4.8% in 2001. These deposits, as a group, tend to have
shorter maturities, which cause them to reprice faster.

         The following table summarizes the distribution of average deposits and
the average rates paid for them during the periods indicated:

<TABLE>
<CAPTION>
                                        Average Deposits and Average Rates paid for the period ending December 31,
                                             2001                          2000                          1999
                                  ---------------------------   ---------------------------   --------------------------
                                                       % of                          % of                          % of
                                   Average  Average   Total      Average  Average   Total      Average  Average   Total
(in thousands)                     Balance    Rate   Deposits    Balance    Rate   Deposits    Balance    Rate  Deposits
                                  --------  -------  --------   --------  -------  --------   --------  ------- --------

<S>                               <C>         <C>      <C>      <C>         <C>      <C>      <C>         <C>      <C>
Deposits:
Interest-bearing demand           $ 54,539    1.2%     15.6%    $ 42,157    1.3%     13.3%    $ 36,703    1.0%     12.3%
Money market                        55,670    2.7%     15.9       43,599    3.3%     13.8       22,933    3.8       7.7
Savings                             46,312    1.6%     13.3       43,689    2.0%     13.8       55,856    1.5      18.7
Time deposits $100,000 or more      47,261    4.8%     13.5       51,444    5.7%     16.3       52,362    4.6      17.5
Time deposits under $100,000        57,963    4.8%     16.6       50,770    4.8%     16.1       53,918    4.7      18.0
                                  --------    ---     -----     --------    ---     -----     --------    ---     -----

Total interest bearing deposits   $261,745    3.0%     74.9     $231,659    3.5%     73.3     $221,772    3.2      74.2
Demand deposits                     87,726    0.0%     25.1       84,127    0.0%     26.7       77,415    0.0      25.8

                                  --------    ---     -----     --------    ---     -----     --------    ---     -----
Total Deposits                    $349,471    2.3%    100.0%    $315,786    2.6%    100.0%    $299,187    2.3%    100.0%
                                  ========    ===     =====     ========    ===     =====     ========    ===     =====
</TABLE>


         The following table indicates the maturity schedule of time deposits of
$100,000 or more:

       Analysis of Time Deposits of $100,000 or more at December 31, 2001

<TABLE>
<CAPTION>
                                                Over Three          Over Six             Over
        Total Deposits      Three Months          to Six           To Twelve            Twelve
       $100,000 or More        or Less            Months             Months             Months
       ----------------   ----------------   ----------------   ----------------   ----------------

<S>                            <C>                <C>                <C>                <C>
            $45,899            $26,388            $ 6,159            $12,320            $ 1,032
</TABLE>

                                      -26-
<PAGE>

Capital

         At December 31, 2001 shareholders' equity was $46,523,000, an increase
of $3,395,000 or 7.9% over 2000. Shareholders' equity was $43,128,000 in 2000,
an increase of $5,621,000 or 15.0% over shareholders' equity of $37,507,000 in
1999. The increases were primarily attributable to the retention of net income
after payment of cash dividends of $2,272,000 in 2001, $2,673,000 in 2000 and
$2,011,000 in 1999. The year 2000 increase in equity included total
non-recurring net income of $839,000, due to a reclassification of a tax refund
received in 2001, primarily for the recapture of certain tax credits earned in
prior years, to a tax receivable in 2000, plus a gain on sale of bank premises.

         In 1989, the Federal Deposit Insurance Corporation (FDIC) established
risk-based capital guidelines requiring banks to maintain certain ratios of
"qualifying capital" to "risk-weighted assets". Under the guidelines, qualifying
capital is classified into two tiers, referred to as Tier 1 (core) and Tier 2
(supplementary) capital. Currently, the Bank's Tier 1 capital consists of common
shareholders' equity, though other instruments such as certain types of
preferred stock can also be included in Tier 1 capital. Tier 2 capital consists
of eligible reserves for possible loan losses and qualifying subordinated notes
and debentures. Total capital is the sum of Tier 1 plus Tier 2 capital.
Risk-weighted assets are calculated by applying risk percentages specific by the
FDIC to categories of both balance sheet assets and off-balance sheet
obligations.

         At year-end 1990, the FDIC also adopted a leverage ratio requirement.
This ratio supplements the risk-based capital ratios and is defined as Tier 1
capital divided by quarterly average assets during the reporting period. The
requirement established a minimum leverage ratio of 3.0% for the highest rated
banks and ratios of 100 to 200 basis points higher for most banks. Furthermore,
in 1993, the FDIC began assessing risk-based deposit insurance assessments based
on financial institutions' capital resources and "management strength", as
mandated by the FDIC Improvement Act of 1991. To qualify for the lowest
insurance premiums as indicated in the following table, "well-capitalized
financial institutions must maintain risk-based Tier 1 and total capital ratios
of at least 6.0% and 10.0% respectively. "Well-capitalized" financial
institutions must also maintain a leverage ratio equal to or exceeding 5.0%.

         The following table shows the risk-based capital ratios and the
leverage ratios at December 31, 2001, 2000 and 1999.

<TABLE>
<CAPTION>
                                                                              Minimum "Well
                                               December 31,                   Capitalized"
         Risk-Based Capital Ratios      2001       2000       1999            Requirements
         -------------------------     ------     ------     ------           -------------

<S>                                    <C>        <C>        <C>        <C>      <C>
         Tier 1 Capital                12.98%     14.54%     13.18%     >         6.00%
                                                                        -

         Total Capital                 13.98%     15.67%     14.18%     >        10.00%
                                                                        -

         Leverage Ratios               11.41%     11.28%     11.00%     >         5.00%
                                                                        -
</TABLE>


Liquidity

         Liquidity is a measure of the Bank's ability to convert assets into
cash with minimum loss. Liquidity consists of cash and due from other banks
accounts, including time deposits, Federal Funds sold, Securities
Available-for-Sale and Securities Held-to-Maturity. Securities Held-to-Maturity
are only included if they are within three months of maturity or most likely
call date. The Bank's policy is to maintain a liquidity ratio of 20% or greater
of total assets. As of December 31, 2001, the Bank's primary liquidity was
21.85%, compared to 33.95% in 2000. The ratio declined as federal funds sold and
most of the maturity runoff in Available-for-Sale securities was reinvested in
higher-yielding quality loans. The objective of liquidity management is to
ensure that the Bank has funds available to meet all present and future
financial obligations and to take advantage of business opportunities as they
occur. Financial obligations arise from withdrawals of deposits, repayment on
maturity of purchased funds, extension of loans or other forms of credit,
payment of operating expenses and payment of dividends.

                                      -27-
<PAGE>

         Core deposits, which consist of all deposits other than time deposits,
have provided the Bank with a sizable source of relatively stable low-cost
funds. The Bank's average core deposits funded 61% of average total assets of
$401,412,000 for the year ended December 31, 2001, compared to 59% of total
average assets of $361,843,000 for the year ended December 31, 2000.

         As of December 31, 2001, the Bank had contractual obligations and other
commercial commitments totaling approximately $69,443,677. The following table
sets forth the Bank's contractual obligations and other commercial commitments
as of December 31, 2001.

<TABLE>
<CAPTION>
                                         Payments Due by Period
                                         ----------------------


                                                  Less than 1
Contractual Obligations                 Total        Year       1 - 3 years   4 - 5 years   After 5 years
-----------------------              ----------   -----------   -----------   -----------   -------------

<S>                                  <C>          <C>           <C>           <C>            <C>
Operating Leases                     $1,307,277   $  358,613    $  653,726    $  294,938     $       --

Other Long-Term Obligations             152,985       74,627        78,358            --             --
                                     ----------   ----------    ----------    ----------     ----------

Total Contractual Cash Obligations   $1,460,262   $  433,240    $  732,084    $  294,938     $       --
----------------------------------   ==========   ==========    ==========    ==========     ==========
</TABLE>


<TABLE>
<CAPTION>
                             Amount of Commitment Expiration Per Period
                             ------------------------------------------

                              Total Amounts  Less than 1
Other Commercial Commitments    Committed        year      1 - 3 years   4 - 5 years   After 5 years
----------------------------   -----------   -----------   -----------   -----------   -------------

<S>                            <C>           <C>           <C>           <C>            <C>
Lines of Credit                 30,375,727   $ 2,626,807   $ 5,643,920   $ 6,925,000    $15,180,000

Standby Letters Of Credit        2,736,088     2,576,988       159,100            --             --

Guarantees                              --            --            --            --             --

Other Commercial Commitments    34,871,600    34,871,600            --            --             --
                               -----------   -----------   -----------   -----------    -----------

Total Commercial Commitments   $67,983,415   $40,075,395   $ 5,803,020   $ 6,925,000    $15,180,000
----------------------------   ===========   ===========   ===========   ===========    ===========
</TABLE>

Asset And Liability Management

         The largest component of the Bank's earnings is net interest income,
which can fluctuate widely when significant interest rates movements occur, as
was the case in 2001, with its succession of prime lending rate cuts. The Bank's
management is responsible for minimizing the Bank's exposure to interest rate
risk and assuring an adequate level of liquidity. This is accomplished by
developing objectives, goals and strategies designed to enhance profitability
and performance.

                                      -28-
<PAGE>

         Ongoing management of the Bank's interest rate sensitivity limits
interest rate risk by controlling the mix and maturity of assets and
liabilities. Management regularly reviews the Bank's position and evaluates
alternative sources and uses of funds as well as changes in external factors.
Various methods are used to achieve and maintain the desired rate sensitivity
position including the sale or purchase of assets and product pricing.

         In order to ensure that sufficient funds are available for loan growth
and deposit withdrawals, as well as to provide for general needs, the Bank must
maintain an adequate level of liquidity. Asset liquidity comes from the Bank's
ability to convert short-term investments into cash and from the maturity and
repayment of loans and investment securities. Liability liquidity is provided by
the Bank's ability to attract deposits. The primary source of liability
liquidity is the Bank's customer base, which provides core deposit growth. The
overall liquidity position of the Bank is closely monitored and evaluated
regularly. Management believes the Bank's liquidity sources at December 31, 2001
were adequate to meet its operating needs in 2002 and going forward into the
foreseeable future.

         The following table sets forth the maturity distribution and interest
rate sensitivity of selected interest sensitive as well as noninterest sensitive
assets and liabilities, including the interest rate sensitivity gap and
cumulative interest rate sensitivity gap as of December 31, 2001. The following
table sets forth the amounts of interest-earning assets and interest-bearing
liabilities outstanding at December 31, 2001, which are anticipated by the Bank,
based upon certain assumptions, to reprice or mature in each of the future time
periods shown. Except as stated below, the amounts of assets and liabilities
shown which reprice or mature during a particular period were determined in
accordance with the earlier of term to repricing or the contractual terms of the
asset or liability. Since all interest rates and yields do not adjust at the
same velocity or magnitude, and since volatility is subject to change, the gap
is only a general indicator of interest rate sensitivity. The Bank's
asset/liability gap is the difference between the cash flow amounts of
interest-sensitive assets and liabilities that will be refinanced (or repriced)
during a given period. For example, if the asset amount to be repriced exceeds
the corresponding liability amount for a certain day, month, year, or longer
period, the institution is in an asset-sensitive gap position. In this
situation, net interest income would increase if market interest rates rose or
decrease if market interest rates fell. If, alternatively, more liabilities than
assets will reprice, the institution is in a liability-sensitive position.
Accordingly, net interest income would decline when rates rose and increase when
rates fell.

                                      -29-
<PAGE>

<TABLE>
<CAPTION>
                                                               Rate Sensitivity Assets/Liabilities
                                                                     As of December 31, 2001

                                              Three     Over Three     Over One      Over         Not
                                              Months     to Twelve   Year Through    Five         Rate-
(Dollars in thousands)                       or Less       Months     Five Years     Years      Sensitive      Total
                                            ---------    ---------    ---------    ---------    ---------    ---------
<S>                                         <C>          <C>          <C>          <C>          <C>          <C>
Interest earnings assets:
  Securities                                $   8,277    $   6,613    $  31,028    $  19,393    $      --    $  65,311
  Loans                                       140,447       85,309       51,846       10,465           --      288,067
                                            ---------    ---------    ---------    ---------    ---------    ---------
    Total interest earning assets             148,724       91,922       82,874       29,858           --      353,378
                                            ---------    ---------    ---------    ---------    ---------    ---------
Cash and due from banks                            --           --           --           --       22,493       22,493
Other assets                                       --           --           --           --       21,517       21,517
                                            ---------    ---------    ---------    ---------    ---------    ---------
    Total assets                            $ 148,724    $  91,922    $  82,874    $  30,476    $  44,010    $ 397,388
                                            =========    =========    =========    =========    =========    =========

Interest bearing liabilities:
  Demand, interest bearing                  $  55,357    $      --    $      --    $      --    $      --    $  55,357
  Savings and money market                     98,891           --           --           --           --       98,891
  Time deposits                                49,961       38,158       13,729           --           --      101,848
  Fed funds purchased and
    other borrowed money                        2,100           --          153           --           --        2,253
                                            ---------    ---------    ---------    ---------    ---------    ---------
    Total interest bearing liabilities        206,309       38,158       13,882           --           --      258,349
                                            ---------    ---------    ---------    ---------    ---------    ---------

Noninterest demand deposits                        --           --           --           --       87,983       87,983
Other liabilities                                  --           --           --           --        4,533        4,533
Shareholders' equity                               --           --           --           --       46,523       46,523
                                            ---------    ---------    ---------    ---------    ---------    ---------
    Total liabilities and                          --           --           --           --
       shareholders' equity                 $ 206,309    $  38,158    $  13,882    $      --    $ 139,039    $ 397,388
                                            =========    =========    =========    =========    =========    =========
Interest rate sensitivity GAP               ($ 57,585)   $  53,764    $  68,992    $  29,858    ($ 95,029)   $       0
                                            =========    =========    =========    =========    =========    =========
Cumulative int rate sensitivity GAP         ($ 57,585)   ($  3,821)   $  65,171    $  95,029    $      --    $      --
Cumulative int rate sensitivity GAP ratio      -38.72%       -1.59%       20.14%       26.89%          --           --
</TABLE>


Effect Of Changing Prices

         The results of operations and financial conditions presented in this
report are based on historical cost information and are not adjusted for the
effects of inflation.

         Since the assets and liabilities of banks are primarily monetary in
nature(payable in fixed, determinable amounts), the performance of the Bank is
affected more by changes in interest rates than by inflation. Interest rates
generally increase as the rate of inflation increases, but the magnitude of the
change in rates may not be the same.

         The effect of inflation on banks is normally not as significant as its
influence on those businesses that have large investments in plant and
inventories. During periods of high inflation, there are normally corresponding
increases in the money supply, and banks will normally experience above average
growth in assets, loans and deposits. Also, increases in the price of goods and
services will result in increased operating expenses.

                                      -30-
<PAGE>

         The following table includes key ratios, including returns on average
assets and equity, which show the effect of the significant series of interest
rate adjustments throughout 2001 and the effects of noninterest income and
expenses.

<TABLE>
<CAPTION>
                                                    Return on Equity and Assets
                                   Key Financial Ratios(ratios are computed on average balances)

                                                      Year Ended December 31,
                                                   2001        2000        1999
                                                  ------      ------      ------

<S>                                               <C>         <C>         <C>
            Return on average assets               1.34%       1.88%       1.53%

            Return on average equity              11.77%      16.58%      13.99%

            Dividend payout ratio                 43.38%      37.50%      38.55%

            Average equity to assets ratio        11.41%      11.31%      10.96%
</TABLE>

                                      -31-
<PAGE>

ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
-------- ----------------------------------------------------------


Interest Rate Risk

         Closely related to the concept of liquidity is the concept of interest
rate sensitivity (i.e., the extent to which assets and liabilities are sensitive
to changes in interest rates). Interest rate sensitivity is often measured by
the extent to which mismatches or "gaps" occur in the repricing of assets and
liabilities within a given time period. Gap analysis is utilized to quantify
such mismatches. A "positive" gap results when the amount of earning assets
repricing within a given time period exceeds the amount of interest-bearing
liabilities repricing within that time period. A "negative" gap results when the
amount of interest-bearing liabilities repricing within a given time period
exceeds the amount of earning assets repricing within such time period.

         In general, a financial institution with a positive gap in relevant
time periods will benefit from an increase in market interest rates and will
experience erosion in net interest income if such rates fall. Likewise, a
financial institution with a negative gap in relevant time periods will normally
benefit from a decrease in market interest rates and will be adversely affected
by an increase in rates. By maintaining a balanced interest rate sensitivity
position, where interest rate sensitive assets roughly equal interest sensitive
liabilities in relevant time periods, interest rate risk can be limited.

         As a financial institution, the Company's potential interest rate
volatility is a primary component of its market risk. Fluctuations in interest
rates will ultimately impact the level of income and expense recorded on a large
portion of the Company's assets and liabilities, and the market value of all
interest-earning assets, other than those that possess a short term to maturity.
Based upon the nature of the Company's operations, the Company is not subject to
foreign currency exchange or commodity price risk. The Company does not own any
trading assets and does not have any hedging transactions in place, such as
interest rate swaps and caps.

         The Company's Board of Directors has adopted an Asset/Liability Policy
designed to stabilize net interest income and preserve capital over a broad
range of interest rate movements. This policy outlines guidelines and ratios
dealing with, among others, liquidity, volatile liability dependence, investment
portfolio composition, loan portfolio composition, loan-to-deposit ratio and gap
analysis ratio. The Company's performance as compared to Asset/Liability Policy
is monitored by its Board of Directors. In addition, to effectively administer
the Asset/Liability Policy and to monitor exposure to fluctuations in interest
rates, the Company maintains an Asset/Liability Committee, consisting of the
Chief Executive Officer, Chief Financial Officer, Chief Lending Officer, Branch
Administrator, and Comptroller. This committee meets monthly to review the
Company's lending and deposit-gathering activities, to review competitive
interest rates, to develop strategies to implement the Asset/Liability Policy
and to respond to market conditions.

         The Company monitors and controls interest rate risk through a variety
of techniques, including use of traditional interest rate sensitivity analysis
(also known as "gap analysis") and an interest rate risk management model. With
the interest rate risk management model, the Company projects future net
interest income, and then estimates the effect of various changes in interest
rates and balance sheet growth rates on that projected net interest income. The
Company also uses the interest rate risk management model to calculate the
change in net portfolio value over a range of interest rate change scenarios.
Traditional gap analysis involves arranging the Company's interest-earning
assets and interest-bearing liabilities by repricing periods and then computing
the difference (or "interest rate sensitivity gap") between the assets and
liabilities that are estimated to reprice during each time period and
cumulatively through the end of each time period.

         Both interest rate sensitivity modeling and gap analysis are done at a
specific point in time and involve a variety of significant estimates and
assumptions. Interest rate sensitivity modeling requires, among other things,
estimates of how much and when yields and costs on individual categories of
interest-earning assets and interest-bearing liabilities will respond to general
changes in market rates, future cash flows and discount rates.

         Gap analysis requires estimates as to when individual categories of
interest-sensitive assets and liabilities will reprice, and assumes that assets
and liabilities assigned to the same repricing period will reprice at the same

                                      -32-
<PAGE>

time and in the same amount. Gap analysis does not account for the fact that
repricing of assets and liabilities is discretionary and subject to competitive
and other pressures.

         The following table sets forth the estimated maturity/repricing
structure of the Company's interest-bearing assets and interest-bearing
liabilities at December 31, 2001. Except as stated below, the amounts of assets
or liabilities shown which reprice or mature during a particular period were
determined in accordance with the contractual terms of each asset or liability.
The majority of interest-bearing demands deposits and savings deposits are
assumed to be "core" deposits, or deposits that will remain at the Company
regardless of market interest rates. The table does not assume any prepayment of
fixed-rate loans.


<TABLE>
<CAPTION>
                                                       Rate Sensitive Gap
                                                            Analysis
                                                    As of December 31, 2001

                                                     Maturing or repricing
                                ---------------------------------------------------------------
(Dollars in thousands)            Three       Over Three     Over One      Over          Rate
                                  Months      To Twelve      Through       Five       Sensitive
                                 Or Less        Months      Five Years     Years        Total
                                ---------     ---------     ---------    ---------    ---------
<S>                             <C>           <C>           <C>          <C>          <C>
Interest earning assets
Securities                      $   8,277     $   6,613     $  31,028    $  19,393    $  65,311
Loans                             140,447        85,309        51,846       10,465      288,067
                                ---------     ---------     ---------    ---------    ---------
Total int earning assets          148,724        91,922        82,874       29,858      353,378
                                ---------     ---------     ---------    ---------    ---------

Interest bearing liabilities:
Demand, interest bearing        $  55,357     $      --     $      --    $      --    $  55,357
Savings & money market             98,891            --            --           --       98,891
Time deposits                      49,961        38,158        13,729           --      101,848
Fed funds purchased and
  other borrowed money              2,100            --           153           --        2,253
                                ---------     ---------     ---------                 ---------
Total int bearing liabilities     206,309        38,158        13,882           --      258,349
                                ---------     ---------     ---------                 ---------

Int rate sensitivity GAP        $ (57,585)    $  53,764     $  68,992    $  29,858    $  95,029
                                =========     =========     =========    =========    =========
Cumulative interest rate
  sensitivity GAP               $ (57,585)    $ ( 3,821)    $  65,171    $  95,029
Cumulative interest rate
  Sensitivity GAP ratio            (38.72%)       (1.59%)       20.14%       26.89%
</TABLE>

                                      -33-
<PAGE>

         Changes in estimates and assumptions made for interest rate sensitivity
modeling and gap analysis could have a significant impact on projected results
and conclusions. Therefore, these techniques may not accurately reflect the
impact of general interest rate movements on the Company's net interest income
or net portfolio value.

         Because of the limitations in the gap analysis discussed above, members
of the Company's Asset/Liability Management Committee believe that the interest
sensitivity modeling more accurately reflects the effects and exposure to
changes in interest rates. Net interest income simulation considers the relative
sensitivities of the balance sheet, including the effects of interest rate caps
on adjustable rate mortgages and the relatively stable aspects of core deposits.
As such, net interest income simulation is designed to address the probability
of interest rate changes and behavioral response of the balance sheet to those
changes. Market Value of Portfolio Equity represents the fair value of the net
present value of assets, liabilities and off-balance sheet items. The starting
point (or "base case") for the following table is an estimate of the Company's
net portfolio value at December 31, 2001 (using current discount rates, and an
estimate of net interest income for 2002 assuming that both interest rates and
the Company's interest-sensitive assets and liabilities remain at December 31,
2001 levels. The "rate shock" information in the table shows estimates of net
portfolio value at December 31, 2001 and net interest income for 2001 assuming
fluctuations or "rate shocks" of minus 100 and 200 basis points and plus 100 and
200 basis points. Rate shocks assume that current interest rates change
immediately. The information set forth in the following table is based on
significant estimates and assumptions, and constitutes a forward-looking
statement within the meaning of that term set forth in Rule 173 of the
Securities Act of 1933 and Rule 3-6 of the Securities Exchange Act of 1934.


<TABLE>
<CAPTION>
                                            Market Risk in Securities
(Amounts in thousands)                         Interest Rate Shock
                                               At December 31, 2001
Available for Sale securities

                                   Rates Decline                     Rates Increase
                                   -------------                     --------------
Rate change                       (2%)        (1%)      Current     + 1%       + 2%

<S>                             <C>         <C>         <C>       <C>        <C>
Unrealized gain (loss)          $ 3,741     $ 2,297     $   853   ($  779)   ($2,766)

Change from current             $ 2,888     $ 1,444               ($1,632)   ($3,619)
</TABLE>



<TABLE>
<CAPTION>
                                        Market Risk on Net Interest Income
(Amounts in thousands)                         At December 31, 2001

                                   Rates Decline                     Rates Increase
                                   -------------                     --------------
Rate change                       (2%)        (1%)      Current     + 1%       + 2%

<S>                             <C>         <C>         <C>       <C>        <C>
Change in net interest income   ($  654)    ($  327)    $22,909   $   261    $   456
</TABLE>

                                      -34-
<PAGE>

ITEM 8.  Financial Statements and Supplementary Data
-------  -------------------------------------------


INDEX TO FINANCIAL STATEMENTS                                               Page
                                                                            ----

Report of Independent Certified Public Accountants........................   36

Balance Sheets, December 31, 2001 and 2000................................   37

Statements of Earnings for the years ended December 31, 2001, 2000 and
1999......................................................................   38

Statement of Stockholders' Equity and Comprehensive Income for the
years ended December 31, 2001,9 2000 and 1999.............................   39

Statements of Cash Flows for the years ended December 31, 2001, 2000
and 1999..................................................................   40

Notes to Financial Statements.............................................   41



         All schedules have been omitted since the required information is not
present in amounts sufficient to require submission of the schedule or because
the information required is included in the Financial Statements or notes
thereto.

                                      -35-
<PAGE>

               Report Of Independent Certified Public Accountants



Board of Directors
First National Bank of Northern California


We have audited the accompanying balance sheets of First National Bank of
Northern California (a National Banking Association) as of December 31, 2001 and
2000, and the related statements of earnings, stockholders' equity and
comprehensive income and cash flows for each of the three years in the period
ended December 31, 2001. These financial statements are the responsibility of
the Bank's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First National Bank of Northern
California as of December 31, 2001 and 2000, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2001, in conformity with accounting principles generally accepted in the United
States of America.


/s/  GRANT THORNTON LLP

San Francisco, California
January 31, 2002

                                      -36-
<PAGE>

<TABLE>
<CAPTION>
                      First National Bank of Northern California

                                    BALANCE SHEETS

                                     December 31,

                                        ASSETS

                                                               2001           2000
                                                           ------------   ------------
                                                                          (as adjusted)
<S>                                                        <C>            <C>
Cash and due from banks                                    $ 22,493,099   $ 22,712,702
Federal funds sold                                                   --     19,040,000
                                                           ------------   ------------

        Cash and cash equivalents                            22,493,099     41,752,702

Securities available-for-sale                                65,310,919     87,241,009

Loans, net                                                  288,067,144    229,668,543

Bank premises, equipment and leasehold improvements          11,654,532     11,040,132

Accrued interest receivable and other assets                  9,862,084      9,399,416
                                                           ------------   ------------

                                                           $397,387,778   $379,101,802
                                                           ============   ============

                   LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits
   Demand, noninterest bearing                             $ 87,982,573   $ 89,493,429
   Demand, interest bearing                                  55,357,111     48,840,453
   Savings                                                   98,890,771     88,681,533
   Time                                                     101,848,871    103,441,559
                                                           ------------   ------------

        Total deposits                                      344,079,326    330,456,974

Federal funds purchased                                       2,100,000             --
Accrued expenses and other liabilities                        4,685,862      5,516,824
                                                           ------------   ------------

        Total liabilities                                   350,865,188    335,973,798

Commitments and contingencies                                        --             --

Stockholders' equity
   Common stock, $1.25 par value, authorized 10,000,000
      shares; issued and outstanding 2,318,849 shares in
      2001 and 2,208,658 shares in 2000                       2,898,561      2,760,823
   Additional paid-in capital                                20,496,723     17,810,267
   Retained earnings                                         22,546,095     22,405,755
   Accumulated other comprehensive income                       581,211        151,159
                                                           ------------   ------------

        Total stockholders' equity                           46,522,590     43,128,004
                                                           ------------   ------------

                                                           $397,387,778   $379,101,802
                                                           ============   ============
</TABLE>


See accompanying notes to financial statements.

                                      -37-
<PAGE>

<TABLE>
<CAPTION>
                                First National Bank of Northern California

                                          STATEMENTS OF EARNINGS

                                          Year ended December 31,


                                                                   2001           2000            1999
                                                               ------------   ------------    ------------

                                                                              (as adjusted)
<S>                                                            <C>            <C>             <C>
Interest income
   Interest and fees on loans                                  $ 26,024,139   $ 25,811,471    $ 23,542,577
   Interest and dividends on securities                           2,759,851      2,957,290       2,046,493
   Interest on tax-exempt securities                              1,448,895      1,426,724       1,517,210
   Federal funds sold                                               610,701        666,648         480,137
                                                               ------------   ------------    ------------
      Total interest income                                      30,843,586     30,862,133      27,586,417

Interest expense
   Interest on deposits and other                                 7,934,658      8,191,525       6,998,861
                                                               ------------   ------------    ------------

         Net interest income                                     22,908,928     22,670,608      20,587,556

Provision for loan losses                                           300,000        425,000         750,000
                                                               ------------   ------------    ------------

         Net interest income after provision for loan losses     22,608,928     22,245,608      19,837,556

Noninterest income
   Service charges                                                1,656,668      1,661,721       1,771,878
   Credit card fees                                                 912,708        974,645         761,460
   Gain on sale of bank premises, equipment and
      leasehold improvements                                            336        700,802          11,756
   Gain (loss) on sales of securities                                58,281         (1,425)       (116,651)
   Other                                                            379,366        444,817         356,740
                                                               ------------   ------------    ------------
         Total noninterest income                                 3,007,359      3,780,560       2,785,183

Noninterest expense
   Salaries and employee benefits                                10,531,645      9,453,202       8,588,182
   Occupancy expense                                              1,289,689      1,122,541       1,092,511
   Equipment expense                                              1,736,155      1,452,979       1,419,335
   Advertising expense                                              384,060        427,868         412,891
   Data processing expense                                          329,970        360,038         310,194
   Professional fees                                                731,099        467,723         422,866
   Director expense                                                 150,000        132,000         120,000
   Surety insurance                                                 303,309        308,873         243,813
   Telephone, postage, supplies                                   1,014,153        972,700         788,904
   Bankcard expenses                                                734,768        692,869         592,637
   Other                                                            706,507        585,894         527,330
                                                               ------------   ------------    ------------
         Total noninterest expense                               17,911,355     15,976,687      14,518,663
                                                               ------------   ------------    ------------

         Earnings before income tax expense                       7,704,932     10,049,481       8,104,076

Income tax expense                                                2,468,240      2,921,621       2,886,912
                                                               ------------   ------------    ------------

         NET EARNINGS                                          $  5,236,692   $  7,127,860    $  5,217,164
                                                               ============   ============    ============

Earnings per share data:
   Basic                                                       $       2.37   $       3.07    $       2.25
                                                               ============   ============    ============
   Diluted                                                     $       2.36   $       3.07    $       2.25
                                                               ============   ============    ============

Weighted average shares outstanding:
   Basic weighted average shares outstanding                      2,214,092      2,319,077       2,319,068
                                                               ============   ============    ============
      Diluted weighted average shares outstanding                 2,219,606      2,320,770       2,319,068
                                                               ============   ============    ============
</TABLE>


See accompanying notes to financial statements.

                                      -38-
<PAGE>

<TABLE>
<CAPTION>
                                            First National Bank of Northern California

                                    STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME

                                                Three years ended December 31, 2001


                                                                                                         Accumulated
                                                   Common Stock            Additional                       Other
                             Comprehensive  ---------------------------      Paid-in       Retained     Comprehensive
                                Income         Shares         Amount         Capital       Earnings        Income          Total
                             ------------   ------------   ------------   ------------   ------------   ------------   ------------

<S>                          <C>               <C>         <C>            <C>            <C>            <C>            <C>
Balance at January 1,
1999                                           2,003,759   $  2,504,699   $ 12,289,893   $ 20,520,524   $    445,624   $ 35,760,740

Comprehensive income:
   Net earnings              $  5,217,164             --             --             --      5,217,164             --      5,217,164
   Other comprehensive
      income:
      Unrealized loss
         on securities,
         net of tax of
         $1,006,783 and
         net of
         reclassification
         adjustments           (1,460,589)            --             --             --             --     (1,460,589)    (1,460,589)
                             ------------
   Comprehensive income      $ 11,654,532
                             ============

Cash dividends of $.10
   per share quarterly                                --             --             --       (801,504)            --       (801,504)
Cash dividends of $.60
   per share                                          --             --             --     (1,202,255)            --     (1,202,255)
Stock dividend of 5%                              99,935        124,919      2,673,261     (2,798,180)            --             --
Cash on fractional
   shares related to
   stock dividend                                     --             --             --         (6,919)            --         (6,919)
                             ------------   ------------   ------------   ------------   ------------   ------------   ------------

Balance at December 31,
1999                                           2,103,694      2,629,618     14,963,154     20,928,830     (1,014,965)    37,506,637

Comprehensive income:
   Net earnings (as
      adjusted)              $  7,127,860             --             --             --      7,127,860             --      7,127,860
   Other comprehensive
      income:
      Unrealized gain
         on securities,
         net of tax of
         $815,483 and
         net of
         reclassification
         adjustments            1,166,124             --             --             --             --      1,166,124      1,166,124
                             ------------
      Comprehensive income   $  8,293,984
                             ============

Cash dividends of $.12
   per share quarterly                                --             --             --     (1,009,773)            --     (1,009,773)
Cash dividends of $.75
   per share                                          --             --             --     (1,656,494)            --     (1,656,494)
Stock dividend of 5%                             104,943        131,179      2,846,579     (2,977,758)            --             --
Cash on fractional
   shares related to
   stock dividend                                     --             --             --         (6,910)            --         (6,910)
Stock options exercised                               21             26            534             --             --            560
                             ------------   ------------   ------------   ------------   ------------   ------------   ------------

Balance at December 31,
2000                                           2,208,658      2,760,823     17,810,267     22,405,755        151,159     43,128,004

Comprehensive income:
   Net earnings              $  5,236,692             --             --             --      5,236,692             --      5,236,692
   Other comprehensive
      income:
      Unrealized gain
         on securities,
         net of tax of
         $166,414 and
         net of
         reclassification
         adjustments              430,052             --             --             --             --        430,052        430,052
                             ------------
      Comprehensive income   $  5,666,744
                             ============

Cash dividends of $.12
   per share quarterly                                --             --             --     (1,060,156)            --     (1,060,156)
Cash dividends of $.52
   per share                                          --             --             --     (1,205,801)            --     (1,205,801)
Stock dividend of 5%                             110,191        137,738      2,686,456     (2,824,194)            --             --
Cash on fractional
   shares related to
   stock dividend                                     --             --             --         (6,201)            --         (6,201)
                             ------------   ------------   ------------   ------------   ------------   ------------   ------------

Balance at December 31,
2001                                           2,318,849   $  2,898,561   $ 20,496,723   $ 22,546,095   $    581,211   $ 46,522,590
                             ============   ============   ============   ============   ============   ============   ============
</TABLE>


See accompanying ntes to financial statements.

                                      -39-
<PAGE>

<TABLE>
<CAPTION>
                                    First National Bank of Northern California

                                             STATEMENTS OF CASH FLOWS

                                              Year ended December 31,

                                                                          2001            2000            1999
                                                                      ------------    ------------    ------------

                                                                                      (as adjusted)
<S>                                                                   <C>             <C>             <C>
Cash flows from operating activities
   Net earnings                                                       $  5,236,692    $  7,127,860    $  5,217,164
   Adjustments to reconcile net earnings to net cash provided by
      operating activities
         Depreciation and amortization                                   1,558,565       1,169,113       1,104,814
         (Gain) loss on sale of securities                                 (58,281)          1,425         116,651
         Gain on sale of bank premises, equipment and
            leasehold improvements                                            (336)       (700,802)        (11,756)
         Provision for loan losses                                         300,000         425,000         750,000
         Deferred taxes                                                   (432,023)       (365,010)       (467,367)
         Changes in assets and liabilities
            Accrued interest receivable and other assets                  (280,415)     (2,005,482)       (763,885)
            Accrued expenses and other liabilities                        (683,372)      1,623,434       1,019,462
                                                                      ------------    ------------    ------------

            Total adjustments                                              404,138         147,678       1,747,919
                                                                      ------------    ------------    ------------

            Net cash provided by operating activities                    5,640,830       7,275,538       6,965,083

Cash flows from investing activities
   Proceeds from matured securities available-for-sale                  22,140,000      16,290,135      34,438,373
   Purchases of securities available-for-sale                          (23,784,135)    (30,892,695)    (26,920,000)
   Proceeds from sale of securities available for sale                  24,235,810              --              --
   Proceeds from matured securities held-to-maturity                            --              --         142,777
   Net (increase) decrease in loans                                    (58,698,601)      6,968,462     (33,927,549)
   Proceeds from sales of bank premises, equipment
      and leasehold improvements                                             8,356       1,005,604          35,730
   Purchases of bank premises, equipment and leasehold improvements     (2,180,985)     (1,415,368)       (595,465)
                                                                      ------------    ------------    ------------

            Net cash used in investing activities                      (38,279,555)     (8,043,862)    (26,826,134)
                                                                      ------------    ------------    ------------

Cash flows from financing activities
   Net increase  in demand and savings deposits                         15,215,040      35,392,894       8,460,522
   Net (decrease) increase in time deposits                             (1,592,688)    (10,297,199)     16,311,649
   Net increase (decrease) in federal funds purchased                    2,100,000              --      (1,000,000)
   Proceeds from exercise of stock options                                      --             560              --
   Dividends paid                                                       (2,272,158)     (2,673,177)     (2,010,678)
   Payments on capital note payable                                        (71,072)        (75,943)        (65,888)
                                                                      ------------    ------------    ------------

            Net cash provided by financing activities                   13,379,122      22,347,135      21,695,605
                                                                      ------------    ------------    ------------

            NET (DECREASE) INCREASE IN CASH AND
               CASH EQUIVALENTS                                        (19,259,603)     21,578,811       1,834,554

Cash and cash equivalents at beginning of year                          41,752,702      20,173,891      18,339,337
                                                                      ------------    ------------    ------------

Cash and cash equivalents at end of year                              $ 22,493,099    $ 41,752,702    $ 20,173,891
                                                                      ============    ============    ============

Additional cash flow information
   Interest paid                                                      $  8,098,924    $  7,831,528    $  7,004,664
   Income taxes paid                                                  $  2,931,844    $  3,926,812    $  2,638,000
</TABLE>


See accompanying notes to financial statements.

                                      -40-
<PAGE>

                   First National Bank of Northern California

                          NOTES TO FINANCIAL STATEMENTS

                        December 31, 2001, 2000 and 1999


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         First National Bank of Northern California (the Bank) provides
         traditional banking services in San Mateo and San Francisco counties.
         The accounting and reporting policies of the Bank conform with
         accounting principles generally accepted in the United States of
         America and with prevailing practices within the banking industry. The
         following is a summary of the significant accounting policies.

         Cash and Cash Equivalents
         -------------------------

         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. Included in cash and cash equivalents are amounts
         restricted for the Federal Reserve requirement of approximately
         $10,573,000 and $9,663,000 in 2001 and 2000, respectively. (See Note
         C).

         Securities Available-for-Sale
         -----------------------------

         Available-for-sale securities consist of bonds, notes, debentures, and
         certain equity securities not classified as held-to-maturity
         securities. Available-for-sale securities are recorded at fair value.
         Unrealized holding gains and losses, net of tax, on available-for-sale
         securities are reported as a net amount in accumulated other
         comprehensive income until realized. Gains and losses on sales of
         available-for-sale securities are determined using the specific
         identification method.

         Loans
         -----

         Loans that management has the intent and ability to hold for the
         foreseeable future or until maturity or pay-off are reported at their
         outstanding principal adjusted for the allowance for loan losses and
         any deferred fees or costs on originated loans and unamortized premiums
         or discounts on purchased loans.

         A loan is identified as impaired when it is probable that interest and
         principal will not be collected according to the contractual terms of
         the loan agreement. The accrual of interest on impaired loans is
         discontinued when, in management's opinion, the borrower may be unable
         to meet payments as they become due. When interest accrual is
         discontinued, all unpaid accrued interest is reversed. Interest income
         is subsequently recognized only to the extent cash payments are
         received.

         The allowance for loan losses is increased by charges to earnings and
         decreased by charge-offs (net of recoveries). Management evaluates the
         adequacy of the Bank's allowance periodically, but at least quarterly,
         based on the Bank's past loan loss experience, known and inherent risks
         in the portfolio, adverse situations that may affect the borrower's
         ability to repay, the estimated value of any underlying collateral, and
         current economic conditions.

         Depreciation and Amortization
         -----------------------------

         Depreciation is provided by the straight-line and double declining
         balance methods in amounts sufficient to relate the cost of depreciable
         assets to operations over their estimated service lives ranging from 3
         to 31 years. Leasehold improvements are amortized over the lives of the
         respective leases or the service lives of the improvements, whichever
         is shorter.

         Interest and Fees on Loans
         --------------------------

         Interest is accrued monthly, as earned, on all loans. Management does
         not recognize interest income on loans if collection of the interest is
         deemed doubtful. Interest income is recognized using a method that
         provides a level yield on principal amounts outstanding.

         Loan origination fees and direct loan origination costs are deferred
         and amortized as a yield adjustment over the contractual life of the
         related loan.

                                      -41-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         Transfers and Servicing of Financial Assets
         -------------------------------------------

         A transfer of financial assets is accounted for as a sale when control
         is surrendered over the assets transferred.

         Servicing rights and other retained interests in the assets sold are
         recorded by allocating the previous recorded investment between the
         asset sold and the interest retained based on their relative fair
         values, at the date of transfer.

         Cash Dividends
         --------------

         Payment of dividends is subject to certain restrictions under the
         National Banking Laws. The payment of cash dividends in any calendar
         year is generally limited to the Bank's net earnings for the current
         and two preceding years.

         Income Taxes
         ------------

         Deferred income taxes are recognized for tax consequences of temporary
         differences by applying current tax rates to differences between income
         taxes are accounted for under the assets and liabilities method the
         financial reporting and the tax basis of existing assets and
         liabilities. Deferred tax assets and liabilities are reflected at
         currently enacted income tax rates applicable to the period in which
         the deferred tax assets or liabilities are expected to be realized or
         settled. As changes in tax laws or rates are enacted, deferred tax
         assets and liabilities are adjusted through the provision for income
         taxes.

         Stock Option Plan
         -----------------

         Statement of Financial Standards (SFAS) No. 123, Accounting for Stock
         Based Compensation, encourages all entities to adopt a fair value based
         method of accounting for employee stock compensation plans, where by
         compensation cost is measured at the grant date based on the fair value
         of the award and is recognized over the service period, which is
         usually the vesting period. However, the Standard also allows an entity
         to continue to measure compensation cost for those plans using the
         intrinsic value based method of accounting prescribed by Accounting
         Principles Board Opinion No. 25, Accounting for Stock Issued to
         Employees, whereby compensation cost is the excess, if any, of the
         quoted market price of the stock at the grant date (or other
         measurement date) over the amount an employee must pay to acquire the
         stock. Stock options issued under the Bank's stock option plan have no
         intrinsic value at the grant date, and under Opinion No. 25 no
         compensation cost is recognized for them. The Bank has elected to
         continue with the accounting methodology in Opinion No. 25 and, as a
         result, has provided pro forma disclosures of net income and earnings
         per share and other disclosures, as if the fair value based method of
         accounting had been applied.

                                      -42-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         Earnings Per Share
         ------------------

         Earnings per common share (EPS) is computed based on the weighted
         average number of common shares outstanding during the period. Basic
         EPS excludes dilution and is computed by dividing net earnings by the
         weighted average of common shares outstanding. Diluted EPS reflects the
         potential dilution that could occur if securities or other contracts to
         issue common stock were exercised or converted into common stock.
         Retroactive recognition has been given for all periods presented for
         the issuance of stock dividends.

         Earnings per share have been computed based on the following:

<TABLE>
<CAPTION>
                                                               Year Ended December 31,
                                                                   (in thousands)
                                                              ------------------------
                                                               2001     2000     1999
                                                              ------   ------   ------
                                                                   (as adjusted)
<S>                                                           <C>      <C>      <C>
            Net earnings                                      $5,237   $7,128   $5,217
                                                              ======   ======   ======

            Average number of shares outstanding               2,214    2,319    2,319
            Effect of dilutive options                             6        2       --
                                                              ------   ------   ------
            Average number of shares outstanding
               Used to calculate diluted earnings per share    2,220    2,321    2,319
                                                              ======   ======   ======
</TABLE>

         Options to purchase 18,811 shares of common stock were not included in
         the computation of diluted EPS because the options' exercise price was
         greater than the average market price of the common shares. The
         options, which expire on May 13, 2008, were still outstanding at
         December 31, 2001.

         Use of Estimates
         ----------------

         In preparing financial statements in conformity with generally accepted
         accounting principles, management is required to make estimates and
         assumptions that affect the reported amounts of assets and liabilities
         and the disclosure of contingent assets and liabilities at the date of
         the financial statements and revenue and expenses during the reporting
         period. Actual results could differ from those estimates.

         Fair Values of Financial Instruments
         ------------------------------------

         The notes to financial statements include various estimated fair value
         information as of December 31, 2001 and 2000. Such information, which
         pertains to the Bank's financial instruments, does not purport to
         represent the aggregate net fair value of the Bank. Further, the fair
         value estimates are based on various assumptions, methodologies and
         subjective considerations, which vary widely among different financial
         institutions and which are subject to change. The following methods and
         assumptions were used by the Bank.

         Cash and cash equivalents: The carrying amounts reported in the balance
         sheet for cash and short-term instruments approximate those assets'
         fair values.

         Securities: Fair values for securities are based on quoted market
         prices, where available. If quoted market prices are not available,
         fair values are based on quoted market prices of comparable
         instruments.

                                      -43-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         Loans: Fair values for variable-rate loans that reprice frequently and
         have no significant change in credit risk are based on carrying values.
         The fair values for other loans are estimated using discounted cash
         flow analyses, using interest rates currently being offered for loans
         with similar terms to borrowers of similar credit quality.

         Off-balance-sheet instruments: Fair values for the Bank's
         off-balance-sheet lending commitments are based on fees currently
         charged to enter into similar agreements, taking into account the
         remaining terms of the agreements and the credit standing of the
         counterparties.

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

         Federal Funds Purchased. The carrying amount of federal funds purchased
         approximates their fair values.

         Reclassifications
         -----------------

         Certain prior year information has been reclassified to conform to
         current year presentation.


NOTE B - PRIOR PERIOD ADJUSTMENT

         The net earnings for the year ended December 31, 2000 have been
         adjusted to record an income tax refund receivable of $341,770. The
         impact of the adjustment for the year ended December 31, 2000 is as
         follows:

                             As Previously
                                Reported    Adjustment    As Adjusted
                               ----------   ----------    ----------

         Income tax expense    $3,263,391   $ (341,770)   $2,921,621
         Net earnings           6,786,090      341,770     7,127,860
         Earnings per share:
            Basic                   $2.93   $    $0.14         $3.07
            Diluted                 $2.92        $0.15         $3.07


NOTE C - RESTRICTED CASH BALANCE

         Cash and due from banks include balances with the Federal Reserve Bank
         (the "FRB"). The Bank is required to maintain specified minimum average
         balances with the FRB, based primarily upon the Bank's deposit
         balances. As of December 31, 2001 and 2000, the Bank maintained
         deposits in excess of the FRB reserve requirement.

                                      -44-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE D - SECURITIES

         The amortized cost and fair value of securities available-for-sale are
         as follows:

<TABLE>
<CAPTION>
                                                           Gross          Gross
                                         Amortized      Unrealized      Unrealized         Fair
                                            Cost           Gains          Losses           Value
                                        ------------   ------------    ------------    ------------
<S>                                     <C>            <C>             <C>             <C>
         December 31, 2001
            U.S. Treasury Bonds         $  1,000,000   $     28,700    $         --    $  1,028,700
            Obligations of other U.S
               Government Agencies        26,993,571        387,829              --      27,381,400
            Obligations of states and
               political subdivisions     29,118,869        395,532         (53,059)     29,461,342
            Corporate debt                 5,049,080         96,860          (2,541)      5,143,399
            Other securities               2,296,078             --              --       2,296,078
                                        ------------   ------------    ------------    ------------

                                        $ 64,457,598   $    908,921    $    (55,600)   $ 65,310,919
                                        ============   ============    ============    ============
</TABLE>

<TABLE>
<CAPTION>
                                                           Gross          Gross
                                         Amortized      Unrealized      Unrealized         Fair
                                            Cost           Gains          Losses           Value
                                        ------------   ------------    ------------    ------------
<S>                                     <C>            <C>             <C>             <C>
         December 31, 2000
            U.S. Treasury Bonds         $  3,996,411   $     21,083    $       (145)   $  4,017,349
            Obligations of other U.S.
               Government Agencies        44,690,245        420,152         (70,057)     45,040,340
            Obligations of states and
               political subdivisions     36,650,628        199,522        (313,700)     36,536,450
            Other securities               1,646,870             --              --       1,646,870
                                        ------------   ------------    ------------    ------------

                                        $ 86,984,154   $    640,757    $   (383,902)   $ 87,241,009
                                        ============   ============    ============    ============
</TABLE>

         The amortized cost and fair value of debt securities at December 31,
         2001, by contractual maturity, are shown below. 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.

                                                      Amortized
                                                         Cost      Fair Value
                                                     -----------   -----------
         Available-for-sale
            Due in one year or less                  $14,691,531   $14,889,563
            Due after one year through five years     33,650,419    34,215,710
            Due after five years through ten years    12,506,579    12,597,634
            Due after ten years                        3,609,069     3,608,012
                                                     -----------   -----------

                                                     $64,457,598   $65,310,919
                                                     ===========   ===========

         For the years ended December 31, 2001, 2000, and 1999, gross realized
         gains amounted to $284,383, $19,897 and $11,691, respectively. For the
         years ended December 31, 2001, 2000, and 1999, gross realized losses
         amounted to $226,102, $21,322 and $128,342, respectively. The tax
         benefit (provision) applicable to these net realized gains and losses
         amounted to ($16,319), $470 and $41,994, respectively in 2001, 2000,
         and 1999.

                                      -45-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE D - SECURITIES (continued)

         At December 31, 2001 and 2000, securities with an amortized cost and
         fair value of $42,840,191 and $42,960,774 and $39,454,662 and
         $39,614,400, respectively, were pledged as collateral for public
         deposits and for other purposes as required by law.

         As of December 31, 2001 and 2000, the Bank had investments in Federal
         Reserve Bank stock classified as other assets in the accompanying
         balance sheets of $617,150. These investments in Federal Reserve Bank
         stock are carried at cost, and evaluated periodically for impairment.


NOTE E - LOANS

         Loans are summarized as follows at December 31:

                                             2001             2000
                                        -------------    -------------

            Commercial                  $  58,894,997    $  52,453,783
            Real estate                   180,963,944      115,774,816
            Construction                   28,761,207       40,020,718
            Installment                    24,840,817       25,987,516
                                        -------------    -------------
                                          293,460,965      234,236,833
            Allowance for loan losses      (3,543,025)      (3,331,918)
            Net deferred loan fees         (1,850,796)      (1,236,372)
                                        -------------    -------------

                                        $ 288,067,144    $ 229,668,543
                                        =============    =============

         The Bank had total impaired loans of $1,958,593 and $1,209,914 at
         December 31, 2001 and 2000, respectively. The allowance for loan
         losses, which relate to all impaired loans, was $224,698 and $57,712 as
         of December 31, 2001 and 2000 respectively. There were no impaired
         loans without a valuation allowance as of December 31, 2001 and 2000.
         The average recorded investment in impaired loans during 2001, 2000 and
         1999 was $1,963,484, $1,197,177 and $1,259,820, respectively. Interest
         income on impaired loans of $31,622, $0 and $696,984 was recognized for
         cash payments received in 2001, 2000 and 1999, respectively.


NOTE F - ALLOWANCE FOR LOAN LOSSES

         Changes in the allowance for loan losses are summarized as follows at
         December 31:

<TABLE>
<CAPTION>
                                                 2001           2000           1999
                                             -----------    -----------    -----------

<S>                                          <C>            <C>            <C>
            Balance, beginning of year       $ 3,331,918    $ 2,920,294    $ 2,223,756
            Loans charged off                    (94,010)       (22,727)       (65,996)
            Recoveries                             5,117          9,351         12,534
                                             -----------    -----------    -----------
               Net loans charged off             (88,893)       (13,376)       (53,462)
            Provision for loan losses            300,000        425,000        750,000
                                             -----------    -----------    -----------

                      Balance, end of year   $ 3,543,025    $ 3,331,918    $ 2,920,294
                                             ===========    ===========    ===========
            </TABLE>

                                      -46-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE G - RELATED PARTY TRANSACTIONS

         In the ordinary course of business, the Bank made loans and advances
         under lines of credit to directors, officers, and their related
         interests. The Bank's policies require that all such loans be made at
         substantially the same terms as those prevailing at the time for
         comparable transactions with unrelated parties and do not involve more
         than normal risk or unfavorable features. The following is the
         activities of loans to such parties in 2001:

            Balance, beginning of year                  $ 3,758,044
            Additions                                     2,021,435
            Repayments                                     (242,233)
                                                        -----------

            Balance, end of year                        $ 5,537,246
                                                        ===========


NOTE H - BANK PREMISES, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

         Bank premises, equipment and leasehold improvements are stated at cost,
         less accumulated depreciation and amortization, and are summarized as
         follows at December 31:

<TABLE>
<CAPTION>
                                                            2001            2000
                                                        ------------    ------------

<S>                                                     <C>             <C>
            Buildings                                   $  6,704,954    $  6,703,431
            Equipment                                      5,992,319       7,244,108
            Leasehold improvements                           545,980         202,326
                                                        ------------    ------------
                                                          13,243,253      14,149,865
            Accumulated depreciation and amortization     (5,576,424)     (7,097,436)
                                                        ------------    ------------
                                                           7,666,829       7,052,429
            Land                                           3,987,703       3,987,703
                                                        ------------    ------------

                                                        $ 11,654,532    $ 11,040,132
                                                        ============    ============
</TABLE>


         During 2001, the Bank purchased computer hardware and software
         equipment to convert its accounting system and related application
         systems. Because of difficulties encountered upon conversion and lack
         of functionality of the new software equipment the Bank evaluated these
         assets for impairment. No impairment loss was recognized. The Bank
         however revised its estimate of useful life on the software.
         Depreciation expense on the software with an original purchase price of
         approximately $675,000 was approximately $336,000 for the year ended
         December 31, 2001. The Bank plans to convert back to its previous
         accounting and related application systems by March 31, 2002.

                                      -47-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE I - DEPOSITS

         The aggregate amount of jumbo time certificates, each with a minimum
         denomination of $100,000, was $45,899,030 and $51,561,395 at December
         31, 2001 and 2000, respectively.

         At December 31, 2001, the scheduled maturities of time certificates are
         as follows:

            2002                           $ 88,255,549
            2003                              6,435,097
            2004                              7,072,903
            2005                                 85,322
                                           ------------

                                           $101,848,871

NOTE J - COMMITMENTS AND CONTINGENCIES

         The Bank leases a portion of its facilities and equipment under
         noncancellable leases expiring at various dates through 2009. Some of
         the operating leases provide that the Bank pay taxes, maintenance,
         insurance and other occupancy expense applicable to leased premises.
         Generally, the leases provide for renewal for various periods at
         stipulated rates.

         The minimum rental commitments under the operating leases are as
         follows:

            Year ending December 31,
            ------------------------

                   2002                            $   358,613
                   2003                                312,407
                   2004                                169,484
                   2005                                171,835
                   Thereafter                          294,938
                                                   -----------

                                                   $ 1,307,277
                                                   ===========

         Total rent expense for all operating leases was $414,462, $315,510 and
         $270,849, in 2001, 2000 and 1999, respectively.

         The Bank is engaged in various lawsuits either as plaintiff or
         defendant in the ordinary course of business and in the opinion of
         management, based upon the advice of counsel, the ultimate outcome of
         these lawsuits will not have a material effect of the Bank's financial
         statements.


NOTE K - BANK SAVINGS PLAN

         The Bank maintains a salary deferral 401(k) plan covering substantially
         all employees known as the First National Bank Savings Plan (the Plan).
         The Plan allows employees to make contributions to the Plan up to a
         maximum allowed by law and the Bank's contribution is discretionary.
         The Plan expense for the years ended December 31, 2001, 2000 and 1999
         was $524,250, $750,000 and $374,490, respectively.

                                      -48-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE L - SALARY CONTINUATION AND DEFERRED COMPENSATION PLANS

         The Bank maintains a Salary Continuation Plan and Deferred Compensation
         Plan for certain Bank officers. Officers participating in the Salary
         Continuation Plan are entitled to receive a monthly payment for a
         period of fifteen to twenty years upon retirement. The Salary
         Continuation Plan expense for the years ended December 31, 2001, 2000
         and 1999 was $215,904, $220,977, and $316,412, respectively.

         The Deferred Compensation Plan allows eligible officers to defer
         annually their compensation up to a maximum 80% of their base salary
         and 100% of their cash bonus. The officer will be entitled to receive
         distribution upon reaching a specified age, passage of at least five
         years or termination of employment.


NOTE M - INCOME TAXES

         The provision for income taxes for the years ended December 31,
         consists of the following:

                                2001           2000            1999
                            -----------    -----------     -----------
                                          (as adjusted)
         Current
            Federal         $ 1,640,080    $ 2,704,592     $ 2,663,890
            State               396,137        582,039         690,389
         Deferred
            Federal             351,679       (368,667)       (542,145)
            State                80,344          3,657          74,778
                            -----------    -----------     -----------

                            $ 2,468,240    $ 2,921,621     $ 2,886,912
                            ===========    ===========     ===========

         The reasons for the differences between the statutory federal income
         tax rates and the effective tax rates are summarized as follows:

                                                 2001     2000     1999
                                                -----    -----    -----
                                                     (as adjusted)
         Statutory rates                         34.0%    34.0%    34.0%
         Increase (decrease) resulting from:
            Effect of tax-exempt income          (6.1)%   (4.7)%   (6.4)%
            State income taxes                    4.4%     4.2%     6.2%
            Tax refund                             --%    (3.9)%   (1.2)%
            Other, net                           (0.3)%   (0.6)%    3.0%
                                                -----    -----    -----

         Effective rate                          32.0%    29.0%    35.6%
                                                =====    =====    =====

                                      -49-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE M - INCOME TAXES (continued)

         The tax effect of temporary differences giving rise to the Bank's net
         deferred tax asset is as follows:

<TABLE>
<CAPTION>
                                                                     December 31,
                                                               -----------------------
                                                                  2001         2000
                                                               ----------   ----------

<S>                                                            <C>          <C>
            Deferred tax assets
               Allowance for loan losses                       $1,436,205   $1,218,294

               Capitalized interest on buildings                   38,203       37,108
               Various accruals                                   888,263      883,253
                                                               ----------   ----------
               Total deferred tax assets                        2,362,671    2,138,655
            Deferred tax liabilities
               State income taxes                                 289,623      157,853
               Unrealized appreciation of available-for-sale
                  securities                                      351,180      105,757
               Low-Income Housing Investment Credits              392,038           --
               Depreciation                                       282,005      395,197
                                                               ----------   ----------
               Total deferred tax liabilities                   1,314,846      658,807
                                                               ----------   ----------

            Net deferred tax asset                             $1,047,825   $1,479,848
                                                               ==========   ==========
</TABLE>


         There was no valuation allowance necessary at December 31, 2001 or
         December 31, 2000.


NOTE N - FINANCIAL INSTRUMENTS

         The Bank is a party to financial instruments with off-balance-sheet
         risk in the normal course of business to meet the financing needs of
         its customers. These financial instruments include commitments to
         extend credit in the form of loans or through standby letters of
         credit. These instruments involve, to varying degrees, elements of
         credit and interest-rate risk in excess of the amount recognized in the
         balance sheet.

         The Bank's exposure to credit loss is represented by the contractual
         amount of those instruments and is usually limited to amounts funded or
         drawn. The contract or notional amounts of these agreements, which are
         not included in the balance sheets, are an indicator of the Bank's
         credit exposure. Commitments to extend credit generally carry variable
         interest rates and are subject to the same credit standards used in the
         lending process for on-balance-sheet instruments. Additionally, the
         Bank periodically reassesses the customer's creditworthiness through
         ongoing credit reviews. The Bank generally requires collateral or other
         security to support commitments to extend credit.

                                                             Contract
                                                              Amount
                                                           December 31,
                                                               2001
                                                           -----------

            Financial instruments whose contract amounts
               represent credit risk:
                  Undisbursed loan commitments             $34,871,600
                  Lines of credit                           27,231,807
                  MasterCard line                            3,143,920
                  Standby letters of credit                  2,736,088
                                                           -----------
                                                           $67,983,415
                                                           ===========

                                      -50-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE N - FINANCIAL INSTRUMENTS (continued)

         Commitments to extend credit are agreements to lend to a customer as
         long as there is no violation of any condition established in the
         contract. Commitments generally have fixed expiration dates or other
         termination clauses and may require payment of a fee. Since many of the
         commitments are expected to expire without being drawn upon, the total
         commitment amounts do not necessarily represent future cash
         requirements. The Bank evaluates each customer's creditworthiness on a
         case-by-case basis. The amount of collateral obtained, if deemed
         necessary by the Bank upon extension of credit, is based on
         management's credit evaluation. Collateral held varies but may include
         accounts receivable, inventory, property, plant and equipment, and
         income-producing commercial and residential properties.

         Equity reserve and unused credit card lines are additional commitments
         to extend credit. Many of these customers are not expected to draw down
         their total lines of credit, and therefore, the total contract amount
         of these lines does not necessarily represent future cash requirements.

         Standby letters of credit are conditional commitments issued by the
         Bank to guarantee the performance of a customer to a third party. The
         credit risk involved in issuing letters of credit is essentially the
         same as that involved in extending loan facilities to customers.

         The following table provides summary information on the estimated fair
         value of financial instruments at December 31, 2001:

<TABLE>
<CAPTION>
                                                                    Carrying
                                                                     Amount       Fair Value
                                                                  ------------   ------------
<S>                                                               <C>            <C>
            Financial assets
               Cash and cash equivalents                          $ 22,493,099   $ 22,493,099
               Securities available for sale                        65,310,919     65,310,919
               Loans, net                                          288,067,144    287,250,149

            Financial liabilities
               Deposits                                            344,079,326    343,996,484
               Federal funds purchased                               2,100,000      2,100,000

            Off-balance-sheet liabilities
               Undisbursed loan commitments, lines of credit,
                  Mastercard line and standby letters of credit             --        829,593
</TABLE>

                                      -51-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE N - FINANCIAL INSTRUMENTS (continued)

         The following table provides summary information on the estimated fair
         value of financial instruments at December 31, 2000:

<TABLE>
<CAPTION>
                                                                    Carrying
                                                                     Amount       Fair Value
                                                                  ------------   ------------
<S>                                                               <C>            <C>
            Financial assets
               Cash and cash equivalents                          $ 41,752,702   $ 41,752,702
               Securities available for sale                        87,241,009     87,241,009
               Loans, net                                          229,668,543    228,919,748

            Financial liabilities
               Deposits                                            330,456,974    330,316,219

            Off-balance-sheet liabilities
               Undisbursed loan commitments, lines of credit,
                  Mastercard line and standby letters of credit             --        844,654
</TABLE>


         The carrying amounts include $1,958,593 of nonaccrual loans (loans that
         are not accruing interest) at December 31, 2001 only. Management has
         determined that primarily because of the uncertainty of predicting an
         observable market interest rate excessive amounts of time and money
         would be incurred to estimate the fair values of non-performing assets.
         As such, these assets are recorded at their carrying amount in the
         estimated fair value columns. The following aggregate information is
         provided at December 31, about the contractual provisions of these
         assets:

                                             2001             2000
                                        -------------    -------------

            Aggregate carrying amount   $   1,958,593    $   1,209,914
            Effective rate                       8.07%           11.10%
            Average term to maturity        32 months          matured


NOTE O - SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK

         Most of the Bank's business activity is with customers located within
         San Mateo and San Francisco counties. Generally, the loans are secured
         by assets of the borrowers. The loans are expected to be repaid from
         cash flows or proceeds from the sale of selected assets of the
         borrowers. The Bank does not have significant concentrations of loans
         to any one industry.

         The distribution of commitments to extend credit approximates the
         distribution of loans outstanding. Commercial and standby letters of
         credit were granted primarily to commercial borrowers.

         The contractual amounts of credit-related financial instruments such as
         commitments to extend credit, credit-card arrangements, and letters of
         credit represent the amounts of potential accounting loss should the
         contract be fully drawn upon, the customer default, and the value of
         any existing collateral become worthless.

                                      -52-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE P - REGULATORY MATTERS

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

         Quantitative measures established by regulation to ensure capital
         adequacy require the Bank to maintain minimum amounts and ratios (set
         forth in the table below) of total and Tier I capital (as defined in
         the regulations) to risk-weighted assets (as defined), and of Tier I
         capital (as defined) to average assets (as defined). Management
         believes, as of December 31, 2001 and 2000, that the Bank meets all
         capital adequacy requirements to which it is subject.

         As of December 31, 2001, the most recent notification from the OCC
         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, and
         Tier I leverage ratios as set forth in the following table. There are
         no conditions or events since that notification that management
         believes have changed the institution's category.

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

<TABLE>
<CAPTION>
                                                                                         To be well
                                                                                      capitalized under
                                                                  For capital         prompt corrective
                                                Actual         adequacy purposes:     action provisions:
                                           ----------------   --------------------   --------------------
                                            Amount    Ratio    Amount        Ratio    Amount        Ratio
                                           -------   ------   -------       ------   -------       ------
<S>                                        <C>       <C>      <C>            <C>     <C>           <C>
         As of December 31, 2001:
            Total risk-based capital
               (to Risk Weighted Assets)   $49,444   13.98%   $28,271   >    8.0%    $35,339   >   10.0%
                                                                        -                      -

            Tier I capital (to Risk
               Weighted Assets)            $45,901   12.98%   $14,136   >    4.0%    $21,204   >    6.0%
                                                                        -                      -

            Tier I capital (to Average
               Assets)                     $45,901   11.41%   $16,019   >    4.0%    $20,024   >    5.0%
                                                                        -                      -
</TABLE>


<TABLE>
<CAPTION>
                                                                                         To be well
                                                                                      capitalized under
                                                                  For capital         prompt corrective
                                                Actual         adequacy purposes:     action provisions:
                                           ----------------   --------------------   --------------------
                                            Amount    Ratio    Amount        Ratio    Amount        Ratio
                                           -------   ------   -------       ------   -------       ------
<S>                                        <C>       <C>      <C>            <C>     <C>           <C>
         As of December 31, 2000:                  (as adjusted)(as adjusted)
            Total risk-based capital
               (to Risk Weighted Assets)   $46,236   15.67%   $23,867   >    8.0%    $29,833   >   10.0%
            Tier I capital (to Risk
               Weighted Assets)            $42,904   14.54%   $11,993   >    4.0%    $17,900   >    6.0%
            Tier I capital (to Average
               Assets)                     $42,904   11.28%   $15,191   >    4.0%    $18,988   >    5.0%
</TABLE>

                                      -53-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE Q - STOCK OPTION PLAN

         In 1997, the Bank adopted an incentive employee stock option plan. The
         plan allows the Bank to grant options to employees of up to 231,525
         shares, which includes effect of stock dividends, of common stock.
         Options currently outstanding become exercisable in one to five years
         from the grant date, based on a vesting schedule of 20% per year and
         expire 10 years after the grant date. The options exercise price is the
         fair value of the options at the grant date. Had compensation cost for
         the plan been determined based on the fair value of the options at the
         grant dates consistent with the method of SFAS 123, the Bank's net
         earnings and earnings per share would have been reduced to the pro
         forma amounts indicated below.

<TABLE>
<CAPTION>
                                                               2001            2000            1999
                                                           -----------     -----------     -----------
                                                                          (as adjusted)
<S>                                        <C>             <C>             <C>             <C>
            Net earnings                   As reported     $ 5,236,692     $ 7,127,860     $ 5,217,164
                                           Pro forma       $ 5,229,361     $ 7,122,250     $ 5,210,157

            Basic earnings per share       As reported     $      2.37     $      3.07     $      2.25
                                           Pro forma       $      2.36     $      3.07     $      2.25

            Diluted earnings per share     As reported     $      2.36     $      3.07     $      2.25
                                           Pro forma       $      2.36     $      3.06     $      2.25
</TABLE>

         The fair value of each option granted is estimated on the date of grant
         using the fair value method with the following weighted-average
         assumptions used for grants in 2001; dividend yield of 9 percent for
         the year; risk-free interest rate of 5.4 percent; expected volatility
         of 6.8 percent and expected life of 10 years. The assumptions used for
         grants in 2000; dividend yield of 10 percent for the year; risk-free
         interest rate of 6.1 percent; expected volatility of 11 percent, and
         expected life of 10 years. The assumptions used for grants in 1999;
         dividend yield of 9 percent for the year; risk-free interest rate of
         6.5 percent; expected volatility of 5 percent, and expected life of 10
         years.

                                      -54-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE Q - STOCK OPTION PLAN (continued)

         A summary of the status of the Bank's fixed stock option plan as of
         December 31, 2001, 2000 and 1999 is presented below:

                                                                        Weighted
                                                                        Average
                                                                        Exercise
                                                             Shares      Price
                                                             ------    ---------

            Outstanding January 1, 1999                      23,152    $   27.51

            Granted (weighted average fair value of $.42)    24,311    $   22.92
                                                             ------

            Outstanding at December 31, 1999                 47,463    $   25.26

            Granted (weighted average fair value of $.82)    33,074    $   22.73

            Exercised                                           (22)   $   24.13

            Expired/forfeited                               (10,305)   $   24.95
                                                             ------

            Outstanding at December 31, 2000                 70,210    $   24.09

            Granted (weighted average fair value of $.49)    32,776    $   23.86

            Expired/forfeited                                (3,343)   $   24.68
                                                             ------

            Outstanding at December 31, 2001                 99,643    $   24.06
                                                             ======

            Options exercisable at December 31, 2001         27,809    $   24.72

            Options exercisable at December 31, 2000         13,951    $   25.26

            Options exercisable at December 31, 1999          4,631    $   27.58


         The following information applies to options outstanding at December
         31, 2001:

            Range of exercise prices                 $ 22.92-27.51

            Options outstanding                           99,643
            Weighted-average remaining
               contractual life (years)                      8.2

                                      -55-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE R - QUARTERLY DATA (UNAUDITED) (IN THOUSANDS)

                                               Quarterly
                                 -------------------------------------    Annual
     2001                         First    Second     Third    Fourth     Total
                                 -------   -------   -------   -------   -------

     Interest income             $ 8,052   $ 8,119   $ 7,928   $ 6,745   $30,844
     Interest expense              2,292     2,239     1,945     1,459     7,935
                                 -------   -------   -------   -------   -------
     Net interest income           5,760     5,880     5,983     5,286    22,909
     Provision for loan losses        75        75        75        75       300
                                 -------   -------   -------   -------   -------
     Net interest income,
        after provision for
        loan losses                5,685     5,805     5,908     5,211    22,609
     Non-interest income             847       712       750       698     3,007
     Non-interest expense          4,239     4,505     4,346     4,821    17,911
                                 -------   -------   -------   -------   -------
     Income before
        income taxes               2,293     2,012     2,312     1,088     7,705
     Provision for
        income taxes                 734       644       740       350     2,468
                                 -------   -------   -------   -------   -------

     Net Earnings                $ 1,559   $ 1,368   $ 1,572   $   738   $ 5,237
                                 =======   =======   =======   =======   =======

     Basic Earnings
        Per Share                $  0.70   $  0.62   $  0.71   $  0.34   $  2.37
     Diluted Earnings
        Per Share                $  0.70   $  0.62   $  0.71   $  0.33   $  2.36


<TABLE>
<CAPTION>
                                               Quarterly
                                 -------------------------------------    Annual
     2000                         First    Second     Third    Fourth     Total
                                 -------   -------   -------   -------   -------
                                                                      (as adjusted)
<S>                              <C>       <C>       <C>       <C>       <C>
     Interest income             $ 7,260   $ 7,456   $ 7,935   $ 8,211   $30,862
     Interest expense              1,886     1,903     2,127     2,276     8,192
                                 -------   -------   -------   -------   -------
     Net interest income           5,374     5,553     5,808     5,935    22,670
     Provision for loan losses        87        96        96       146       425
                                 -------   -------   -------   -------   -------
     Net interest income,
        after provision for
        loan losses                5,287     5,457     5,712     5,789    22,245
     Non-interest income           1,377       754       861       789     3,781
     Non-interest expense          3,723     3,831     3,868     4,555    15,977
                                 -------   -------   -------   -------   -------
     Income before
        income taxes               2,941     2,380     2,705     2,023    10,049
     Provision for
        income taxes                 941       762       866       353     2,922
                                 -------   -------   -------   -------   -------

     Net Earnings                $ 2,000   $ 1,618   $ 1,839   $ 1,670   $ 7,127
                                 =======   =======   =======   =======   =======

     Basic Earnings
        Per Share                $  0.86   $  0.70   $  0.79   $  0.72   $  3.07
     Diluted Earnings
        Per Share                $  0.86   $  0.70   $  0.79   $  0.72   $  3.07
</TABLE>

                                      -56-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE S - SIGNIFICANT FOURTH QUARTER ADJUSTMENTS

         During the fourth quarter of 2001, the Bank entered into a Separation
         Agreement with one of its former officers. The terms of the Separation
         Agreement provide for salary continuation payments and health benefits
         for eighteen months commencing November 1, 2001. The Bank recognized a
         change to earnings of $280,000 for the year ended December 31, 2001 for
         the former officer's Separation Agreement. The Separation Agreement
         also provided that the former officer is entitled to receive the early
         termination benefit as provided for in the Bank Salary Continuation
         Plan and Deferred Compensation Plan. The amount of the vested accrued
         liability for the former officer under this plan as of December 31,
         2001 was $360,167.

         During the fourth quarter of 2001, the Bank recorded an adjustment to
         reduce interest income for deferred loan fee amortization of $164,549.


NOTE T - RECENT ACCOUNTING PROUNOUNCEMENTS

         SFAS No. 141, "Business Combinations"
         -------------------------------------

         In June 2001, the Financial Accounting Standards Board (FASB) issued
         SFAS 141, Business Combinations. SFAS 141 requires all business
         combinations initiated after June 30, 2001 to use the purchase method
         of accounting. Intangible assets acquired in a business combination
         must be recorded separately from goodwill if they meet the explicit
         criteria in SFAS 141.

         SFAS No. 142, "Goodwill and Other Intangible Assets"
         ----------------------------------------------------

         In June 2001, the FASB issued SFAS 142, Goodwill and Other Intangible
         Assets. Under SFAS 142, goodwill and those intangible assets that have
         indefinite lives are not amortized. but are tested for impairment
         annually and whenever there is an impairment indicator. In certain
         circumstances, goodwill impairment testing need not be done annually.
         All acquired goodwill must be assigned to reporting units for purposes
         of impairment testing. The Bank must adopt SFAS 142 as of January 1,
         2002.

         SFAS 143, "Accounting for Asset Retirement Obligations"
         -------------------------------------------------------

         In 2001, the FASB issued SFAS 143, Accounting for Asset Retirement
         Obligations. SFAS 143 applies to all entities that have legal
         obligations associated with the retirement of a tangible long-lived
         asset. SFAS 143 requires that a liability for an asset retirement
         obligation be recognized if the obligation meets the definition of a
         liability in FASB Concepts Statement 6, Elements of Financial
         Statements, and if the amount of the liability can be reasonably
         estimated. When a retirement obligation is initially recognized, the
         asset retirement cost is capitalized by increasing the carrying amount
         of the related long-lived asset by an amount equal to the liability.
         The initial recording of the obligation should be at fair market value.
         The Bank must adopt SFAS 143 as of January 1, 2003, but earlier
         application is allowed.

                                      -57-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


NOTE T - RECENT ACCOUNTING PROUNOUNCEMENTS (continued)

         SFAS No. 144, "Accounting for the Impairment or Disposal of Long Lived
         ----------------------------------------------------------------------
         Assets"
         -------

         In 2001, the FASB issued SFAS 144, Accounting for the Impairment or
         Disposal of Long-Lived Assets. SFAS 144 supersedes SFAS 121, Accounting
         for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
         Disposed of, as well as the provisions of Opinion 30, Reporting the
         Results of Operations - Reporting the Effects of Disposal of a Segment
         of a Business, and Extraordinary, Unusual and Infrequently Occurring
         Events and Transactions, that address the disposal of a business. SFAS
         144 also amends ARB 51, Consolidated Financial Statements, to eliminate
         the exception to consolidate a subsidiary for which control is likely
         to be temporary. SFAS 144 carries over the recognition and measurement
         provisions of SFAS 121, but differs from SFAS 121 in that it provides
         guidance is estimating future cash flows to test recoverability. SFAS
         144 also includes criteria that have to be met for an entity to
         classify a long-lived asset or asset group as held for sale, and
         extends the presentation of discontinued operations permitted by
         Opinion 30 to include disposals of a component of an entity. The Bank
         must adopt SFAS 144 as of January 1, 2002, except for the disposal
         provisions, which are immediately effective.

         SOP 01-6, "Accounting by Certain Entities (Including Entities With
         ------------------------------------------------------------------
         Trade Receivables) That Lend to or Finance the Activities of Others"
         --------------------------------------------------------------------

         SOP 01-6 applies to any entity that lends to or finances the activities
         of others. SOP 01-6 clarifies that the accounting and financial
         reporting practices for lending and financing activities should be the
         same regardless of the type of entity engaging in those activities. SOP
         01-6 also provides for the resolution of accounting differences among
         various financial institutions for similar transactions. The Bank must
         adopt SOP 01-6 as of January 1, 2002.

         The Bank does not expect that the adoption of these recent accounting
         pronouncements to have a material effect on the Bank's financial
         statements.


NOTE U - PLAN OF REORGANIZATION

         The board of directors of the Bank has authorized a plan of
         reorganization under which the Bank would become a wholly-owned
         subsidiary of a newly formed California corporation, FNB Bancorp. In
         the plan of reorganization, each share of the Bank will be converted
         into one share of FNB Bancorp common stock on a share-for-share basis.
         The Bank common stock is currently quoted on the OTC Bulletin Board
         under the symbol "FNBD.OB". The parties to the plan of reorganization
         intends to file an application for listing of FNB Bancorp stock on the
         NASDAQ national market to be effective on or as soon as practicable
         following the effective date of the reorganization. A special meeting
         of the shareholders of the Bank will be held on February 27, 2002 to
         consider and vote on a proposal to approve the plan of reorganization.

                                      -58-
<PAGE>
ITEM 9.  Changes in and Disagreements with Accountants on Accounting and
-------  ---------------------------------------------------------------
         Financial Disclosure
         --------------------

         There has been no change in the independent accountants engaged to
audit the financial statements of FNB Bancorp and First National Bank during the
last two fiscal years ended December 31, 2001. There have been no disagreements
with such independent accountants during the last two fiscal years ended
December 31, 2001, on any matter of accounting principles, financial statement
disclosure, or auditing or procedure.

                                    PART III


ITEM 10. Directors and Executive Officers of the Registrant
-------- --------------------------------------------------

         The information required by Item 10 of Form 10-K is incorporated by
reference to the information contained in the Company's Proxy Statement for the
2002 Annual Meeting of Shareholders which will be filed pursuant to Regulation
14A.


ITEM 11. Executive Compensation
-------- ----------------------

         The information required by Item 11 of Form 10-K is incorporated by
reference to the information contained in the Company's Proxy Statement for the
2002 Annual Meeting of Shareholders which will be filed pursuant to Regulation
14A.


ITEM 12. Security Ownership of Certain Beneficial Owners and Management
-------- --------------------------------------------------------------

         The information required by Item 12 of Form 10-K is incorporated by
reference to the information contained in the Company's Proxy Statement for the
2002 Annual Meeting of Shareholders which will be filed pursuant to Regulation
14A.


ITEM 13. Certain Relationships and Related Transactions
-------- ----------------------------------------------

         The information required by Item 13 of Form 10-K is incorporated by
reference to the information contained in the Company's Proxy Statement for the
2002 Annual Meeting of Shareholders which will be filed pursuant to Regulation
14A.

                                      -59-
<PAGE>

                                     PART IV


ITEM 14. Exhibits, Financial Statements Schedules, and Reports on Form 8-K
-------- -----------------------------------------------------------------

(a)(1)   Financial Statements. Listed and included in Part II, Item 8.

(2)      Financial Statement Schedules. Not applicable.

(3)      Exhibits.


         Exhibit
          Number                        Document Description
         -------    ------------------------------------------------------------

         **2.1      Agreement and Plan of Reorganization between the Registrant
                    and First National Bank of Northern California, dated as of
                    November 1, 2001 (included as Annex A to the proxy
                    statement/prospectus).

         **3.1      Articles of Incorporation of FNB Bancorp.

         **3.2      Bylaws of FNB Bancorp.

         **4.1      Specimen of the Registrant's common stock certificate.

         **10.1     Lease agreement dated April 24, 1995, as amended, for Eureka
                    Square Branch Office of First National Bank of Northern
                    California at Eureka Square Shopping Center, Pacifica,
                    California.

         **10.2     Lease agreement dated June 8, 1999, as amended, for Linda
                    Mar Branch Office of First National Bank of Northern
                    California at Linda Mar Shopping Center, Pacifica,
                    California.

         **10.3     Lease agreement dated August 21, 1996, as amended, for
                    Flower Mart Branch Office of First National Bank of Northern
                    California at 640 Brannon Street, Suite 102, San Francisco,
                    California.

         **10.4     Sublease agreement dated February 10, 1997, for San Mateo
                    Branch Office of First National Bank of Northern California
                    at 491 El Camino Real, Suite B, San Mateo, California.

         **10.5     Lease Agreement dated April 13, 2000, for the Business
                    Banking Division of First National Bank of Northern
                    California at 520 South El Camino Real, Suite 430, San
                    Mateo, California.

         **10.6     First National Bank of Northern California 1997 Stock Option
                    Plan.*

         **10.7     Form of Nonstatutory Stock Option Agreement under the First
                    National Bank of Northern California 1997 Stock Option
                    Plan.*

         **10.8(a)  Form of Incentive Stock Option Agreement under the First
                    National Bank of Northern California 1997 Stock Option
                    Plan.*

         **10.8(b)  Form of Incentive Stock Option Agreement (Standard
                    Provisions Under the First National Bank of Northern
                    California 1997 Stock Option Plan.*

         **10.9     First National Bank Profit Sharing and 401(k) Plan dated
                    August 26, 1969.*

         **10.10    First National Bank Deferred Compensation Plan dated
                    November 1, 1997.*

         **10.11    Salary Continuation Agreement between First National Bank of
                    Northern California and Michael R. Wyman, dated December 20,
                    1996.*

         **10.12    Salary Continuation Agreement between First National Bank of
                    Northern California and Paul B. Hogan, dated December 20,
                    1996.*

         **10.13    Salary Continuation Agreement between First National Bank of
                    Northern California and James B. Ramsey, dated December 23,
                    1999.*

                                      -60-
<PAGE>

         **10.14    Form of Management Continuity Agreement signed on July 20,
                    2000, between First National Bank of Northern California and
                    Jim D. Black, Charles R. Key and Anthony J. Clifford.*

         **10.15    Business Loan Agreement, dated August 15, 2001, between FNB
                    Bancorp, as Borrower, and Pacific Coast Bankers' Bank, as
                    Lender, with Promissory Note and related Loan Documents.

         **10.16    Communications Site Lease Agreement as amended dated March
                    30, 1999, between First National Bank of Northern
                    California, as Lessor and Nextel of California, Inc. as
                    Lessee, with respect to Redwood City Branch Office.

         **10.17    Note secured by Deed of Trust dated November 26, 1991, and
                    Modification Agreement dated September 1, 1999, between
                    First National Bank of Northern California, as borrower, and
                    Bertha Donati and Julio Donati, as lenders, with respect to
                    the Colma Branch Office of First National Bank of Northern
                    California.

         **10.18    Separation Agreement between First National Bank of Northern
                    California and Paul B. Hogan, dated December 5, 2001.*

         10.19      First Amendment to Separation Agreement between First
                    National Bank of Northern California and Paul B. Hogan,
                    dated March 22, 2002.*

         21.1       The Registrant has one subsidiary, First National Bank of
                    Northern California.

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

         *        Denotes management contracts, compensatory plans or
                  arrangements.

         **       Incorporated by reference to registrant's Registration
                  Statement on Form S-4 (No. 333-74954) filed with the
                  Commission on December 12, 2001.

         (b)      Reports on Form 8-K: No reports on Fom 8-K were filed during
                  the last quarter of 2001.

         An Annual Report for the fiscal year ended December 31, 2001, and
Notice of Annual Meeting and Proxy Statement for the Company's 2002 Annual
Meeting will be mailed to security holders subsequent to the date of filing this
Report. Copies of said materials will be furnished to the Commission in
accordance with the Commission's Rules and Regulations.



                                   SIGNATURES

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

                                           FNB BANCORP

Dated: March 25, 2002                  By: /s/ MICHAEL R. WYMAN
                                           -------------------------------------
                                           Michael R. Wyman
                                           Chairman and Chief Executive Officer
                                           (Principal Executive Officer)

                                      -61-
<PAGE>

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


<TABLE>
<CAPTION>
          Signature                                Title                            Date
          ---------                                -----                            ----

<S>                                 <C>                                        <C>
/s/ MICHAEL R. WYMAN                Director, Chairman and Chief               March 25, 2002
------------------------------      Executive Officer (Principal
Michael R. Wyman                    Executive Officer) and Director


/s/ JAMES B. RAMSEY                 Senior Vice President and Chief            March 25, 2002
------------------------------      Financial Officer (Principal Financial
James B. Ramsey                     Officer and Principal
                                    Accounting Officer)


/s/ THOMAS C. MCGRAW                Director, President  and Chief             March 25, 2002
------------------------------      Operating Officer, Secretary
Thomas C. McGraw


/s/ NEIL J. VANNUCCI                Director                                   March 25, 2002
------------------------------
Neil J. Vannucci


/s/ EDWARD J. WATSON                Director                                   March 25, 2002
------------------------------
Edward J. Watson


/s/ DANIEL J. MODENA                Director                                   March 25, 2002
------------------------------
Daniel J. Modena


/s/ LISA ANGELOT                    Director                                   March 25, 2002
------------------------------
Lisa Angelot
</TABLE>

                                      -62-
<PAGE>

                                  EXHIBIT INDEX


Exhibit
Number                              Description                             Page
-------       -------------------------------------------------------       ----

10.19         First Amendment to Separation Agreement between First          64
              National Bank of Northern California and Paul B. Hogan,
              dated March 22, 64 2002.

                                      -63-
<PAGE>
<TABLE>
<CAPTION>

                                                                     Rate Sensitivity Assets/Liabilities
                                                                           As of December 31, 2001

                                              Three         Over Three     Over One         Over           Not
                                              Months        to Twelve    Year Through       Five          Rate-
(Dollars in thousands)                        or Less         Months      Five Years        Years        Sensitive        Total
                                            -----------    -----------    -----------    -----------    -----------    -----------
<S>                                         <C>            <C>            <C>            <C>            <C>            <C>
Interest earnings assets:
  Securities                                $     8,277    $     6,613    $    31,028    $    19,393    $        --    $    65,311
  Loans                                         140,447         85,309         51,846         10,465             --        288,067
                                            -----------    -----------    -----------    -----------    -----------    -----------
    Total interest earning assets               148,724         91,922         82,874         29,858             --        353,378
                                            -----------    -----------    -----------    -----------    -----------    -----------
Cash and due from banks                              --             --             --             --         22,493         22,493
Other assets                                         --             --             --             --         21,517         21,517
                                            -----------    -----------    -----------    -----------    -----------    -----------
    Total assets                            $   148,724    $    91,922    $    82,874    $    30,476    $    44,010    $   397,388
                                            ===========    ===========    ===========    ===========    ===========    ===========

Interest bearing liabilities:
  Demand, interest bearing                  $    55,357    $        --    $        --    $        --    $        --    $    55,357
  Savings and money market                       98,891             --             --             --             --         98,891
  Time deposits                                  49,961         38,158         13,729             --             --        101,848
  Fed funds purchased and
    other borrowed money                          2,100             --            153             --             --          2,253
                                            -----------    -----------    -----------    -----------    -----------    -----------
    Total interest bearing liabilities          206,309         38,158         13,882             --             --        258,349
                                            -----------    -----------    -----------    -----------    -----------    -----------
Noninterest demand deposits                          --             --             --             --         87,983         87,983
Other liabilities                                    --             --             --             --          4,533          4,533
Shareholders' equity                                 --             --             --             --         46,523         46,523
                                            -----------    -----------    -----------    -----------    -----------    -----------
    Total liabilities and
       shareholders' equity                 $   206,309    $    38,158    $    13,882    $        --    $   139,039    $   397,388
                                            ===========    ===========    ===========    ===========    ===========    ===========
Interest rate sensitivity GAP               ($   57,585)   $    53,764    $    68,992    $    29,858    ($   95,029)   $         0
                                            ===========    ===========    ===========    ===========    ===========    ===========
Cumulative int rate sensitivity GAP         ($   57,585)   ($    3,821)   $    65,171    $    95,029    $        --    $        --
Cumulative int rate sensitivity GAP ratio        -38.72%         -1.59%         20.14%         26.89%            --             --
</TABLE>


Effect Of Changing Prices

         The results of operations and financial conditions presented in this
report are based on historical cost information and are not adjusted for the
effects of inflation.

         Since the assets and liabilities of banks are primarily monetary in
nature(payable in fixed, determinable amounts), the performance of the Bank is
affected more by changes in interest rates than by inflation. Interest rates
generally increase as the rate of inflation increases, but the magnitude of the
change in rates may not be the same.

         The effect of inflation on banks is normally not as significant as its
influence on those businesses that have large investments in plant and
inventories. During periods of high inflation, there are normally corresponding
increases in the money supply, and banks will normally experience above average
growth in assets, loans and deposits. Also, increases in the price of goods and
services will result in increased operating expenses.

                                      -30-

<PAGE>


         The following table includes key ratios, including returns on average
assets and equity, which show the effect of the significant series of interest
rate adjustments throughout 2001 and the effects of noninterest income and
expenses.

<TABLE>
<CAPTION>

                                                              Return on Equity and Assets
                                             Key Financial Ratios(ratios are computed on average balances)

                                                                Year Ended December 31,
                                                      2001               2000               1999
                                                   ----------         ----------         ----------
<S>                                                  <C>                <C>                <C>
             Return on average assets                 1.34%              1.88%              1.53%

             Return on average equity                11.77%             16.58%             13.99%

             Dividend payout ratio                   43.38%             37.50%             38.55%

             Average equity to assets ratio          11.41%             11.31%             10.96%
</TABLE>


                                      -31-
<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
-------  ----------------------------------------------------------


Interest Rate Risk

         Closely related to the concept of liquidity is the concept of interest
rate sensitivity (i.e., the extent to which assets and liabilities are sensitive
to changes in interest rates). Interest rate sensitivity is often measured by
the extent to which mismatches or "gaps" occur in the repricing of assets and
liabilities within a given time period. Gap analysis is utilized to quantify
such mismatches. A "positive" gap results when the amount of earning assets
repricing within a given time period exceeds the amount of interest-bearing
liabilities repricing within that time period. A "negative" gap results when the
amount of interest-bearing liabilities repricing within a given time period
exceeds the amount of earning assets repricing within such time period.

         In general, a financial institution with a positive gap in relevant
time periods will benefit from an increase in market interest rates and will
experience erosion in net interest income if such rates fall. Likewise, a
financial institution with a negative gap in relevant time periods will normally
benefit from a decrease in market interest rates and will be adversely affected
by an increase in rates. By maintaining a balanced interest rate sensitivity
position, where interest rate sensitive assets roughly equal interest sensitive
liabilities in relevant time periods, interest rate risk can be limited.

         As a financial institution, the Company's potential interest rate
volatility is a primary component of its market risk. Fluctuations in interest
rates will ultimately impact the level of income and expense recorded on a large
portion of the Company's assets and liabilities, and the market value of all
interest-earning assets, other than those that possess a short term to maturity.
Based upon the nature of the Company's operations, the Company is not subject to
foreign currency exchange or commodity price risk. The Company does not own any
trading assets and does not have any hedging transactions in place, such as
interest rate swaps and caps.

         The Company's Board of Directors has adopted an Asset/Liability Policy
designed to stabilize net interest income and preserve capital over a broad
range of interest rate movements. This policy outlines guidelines and ratios
dealing with, among others, liquidity, volatile liability dependence, investment
portfolio composition, loan portfolio composition, loan-to-deposit ratio and gap
analysis ratio. The Company's performance as compared to Asset/Liability Policy
is monitored by its Board of Directors. In addition, to effectively administer
the Asset/Liability Policy and to monitor exposure to fluctuations in interest
rates, the Company maintains an Asset/Liability Committee, consisting of the
Chief Executive Officer, Chief Financial Officer, Chief Lending Officer, Branch
Administrator, and Comptroller. This committee meets monthly to review the
Company's lending and deposit-gathering activities, to review competitive
interest rates, to develop strategies to implement the Asset/Liability Policy
and to respond to market conditions.

         The Company monitors and controls interest rate risk through a variety
of techniques, including use of traditional interest rate sensitivity analysis
(also known as "gap analysis") and an interest rate risk management model. With
the interest rate risk management model, the Company projects future net
interest income, and then estimates the effect of various changes in interest
rates and balance sheet growth rates on that projected net interest income. The
Company also uses the interest rate risk management model to calculate the
change in net portfolio value over a range of interest rate change scenarios.
Traditional gap analysis involves arranging the Company's interest-earning
assets and interest-bearing liabilities by repricing periods and then computing
the difference (or "interest rate sensitivity gap") between the assets and
liabilities that are estimated to reprice during each time period and
cumulatively through the end of each time period.

         Both interest rate sensitivity modeling and gap analysis are done at a
specific point in time and involve a variety of significant estimates and
assumptions. Interest rate sensitivity modeling requires, among other things,
estimates of how much and when yields and costs on individual categories of
interest-earning assets and interest-bearing liabilities will respond to general
changes in market rates, future cash flows and discount rates.

         Gap analysis requires estimates as to when individual categories of
interest-sensitive assets and liabilities will reprice, and assumes that assets
and liabilities assigned to the same repricing period will reprice at the same

                                      -32-
<PAGE>

time and in the same amount. Gap analysis does not account for the fact that
repricing of assets and liabilities is discretionary and subject to competitive
and other pressures.

         The following table sets forth the estimated maturity/repricing
structure of the Company's interest-bearing assets and interest-bearing
liabilities at December 31, 2001. Except as stated below, the amounts of assets
or liabilities shown which reprice or mature during a particular period were
determined in accordance with the contractual terms of each asset or liability.
The majority of interest-bearing demands deposits and savings deposits are
assumed to be "core" deposits, or deposits that will remain at the Company
regardless of market interest rates. The table does not assume any prepayment of
fixed-rate loans.
<TABLE>
<CAPTION>

                                                         RATE SENSITIVE GAP
                                                              ANALYSIS
                                                      As of December 31, 2001

                                                       Maturing or repricing
                                ----------------------------------------------------------------
(Dollars in thousands)           Three       Over Three     Over One        Over         Rate
                                 Months       To Twelve      Through        Five       Sensitive
                                 Or Less       Months       Five Years      Years        Total
                                ---------     ---------     ---------     ---------    ---------
<S>                             <C>           <C>           <C>           <C>          <C>
Interest earning assets
Securities                      $   8,277     $   6,613     $  31,028     $  19,393    $  65,311
Loans                             140,447        85,309        51,846        10,465      288,067
                                ---------     ---------     ---------     ---------    ---------
Total int earning assets          148,724        91,922        82,874        29,858      353,378
                                ---------     ---------     ---------     ---------    ---------

Interest bearing liabilities:
Demand, interest bearing        $  55,357     $      --     $      --     $      --    $  55,357
Savings & money market             98,891            --            --            --       98,891
Time deposits                      49,961        38,158        13,729            --      101,848
Fed funds purchased and
  other borrowed money              2,100            --           153            --        2,253
                                ---------     ---------     ---------     ---------    ---------
Total int bearing liabilities     206,309        38,158        13,882            --      258,349
                                ---------     ---------     ---------     ---------    ---------

Int rate sensitivity GAP        $ (57,585)    $  53,764     $  68,992     $  29,858    $  95,029
                                =========     =========     =========     =========    =========
Cumulative interest rate
   sensitivity GAP              $ (57,585)    $  (3,821)    $  65,171    $  95,029
Cumulative interest rate
   Sensitivity GAP ratio           (38.72%)       (1.59%)       20.14%       26.89%
</TABLE>

                                      -33-
<PAGE>


         Changes in estimates and assumptions made for interest rate sensitivity
modeling and gap analysis could have a significant impact on projected results
and conclusions. Therefore, these techniques may not accurately reflect the
impact of general interest rate movements on the Company's net interest income
or net portfolio value.

         Because of the limitations in the gap analysis discussed above, members
of the Company's Asset/Liability Management Committee believe that the interest
sensitivity modeling more accurately reflects the effects and exposure to
changes in interest rates. Net interest income simulation considers the relative
sensitivities of the balance sheet, including the effects of interest rate caps
on adjustable rate mortgages and the relatively stable aspects of core deposits.
As such, net interest income simulation is designed to address the probability
of interest rate changes and behavioral response of the balance sheet to those
changes. Market Value of Portfolio Equity represents the fair value of the net
present value of assets, liabilities and off-balance sheet items. The starting
point (or "base case") for the following table is an estimate of the Company's
net portfolio value at December 31, 2001 (using current discount rates, and an
estimate of net interest income for 2002 assuming that both interest rates and
the Company's interest-sensitive assets and liabilities remain at December 31,
2001 levels. The "rate shock" information in the table shows estimates of net
portfolio value at December 31, 2001 and net interest income for 2001 assuming
fluctuations or "rate shocks" of minus 100 and 200 basis points and plus 100 and
200 basis points. Rate shocks assume that current interest rates change
immediately. The information set forth in the following table is based on
significant estimates and assumptions, and constitutes a forward-looking
statement within the meaning of that term set forth in Rule 173 of the
Securities Act of 1933 and Rule 3-6 of the Securities Exchange Act of 1934.

<TABLE>
<CAPTION>

                                                      Market Risk in Securities
(Amounts in thousands)                                   Interest Rate Shock
                                                        At December 31, 2001
Available for Sale securities
                                        Rates Decline                          Rates Increase
                                        -------------                          --------------
<S>                                  <C>         <C>          <C>          <C>           <C>
Rate change                            (2%)        (1%)       Current        + 1%          + 2%

Unrealized gain (loss)               $3,741      $2,297       $   853      ($  779)      ($2,766)

Change from current                  $2,888      $1,444                    ($1,632)      ($3,619)





                                                  Market Risk on Net Interest Income
(Amounts in thousands)                                  At December 31, 2001

                                        Rates Decline                          Rates Increase
                                        -------------                          --------------
Rate change                            (2%)        (1%)       Current        + 1%          + 2%

Change in net interest income       ($  654)    ($  327)      $22,909       $  261        $  456
</TABLE>

                                      -34-
<PAGE>


ITEM 8.  Financial Statements and Supplementary Data
-------  -------------------------------------------


INDEX TO FINANCIAL STATEMENTS                                              Page
                                                                           ----

Report of Independent Certified Public Accountants......................    36

Balance Sheets, December 31, 2001 and 2000..............................    37

Statements of Earnings for the years ended December 31, 2001,
2000 and 1999...........................................................    38

Statement of Stockholders' Equity and Comprehensive Income for the
years ended December 31, 2001, 2000 and 1999............................    39

Statements of Cash Flows for the years ended December 31, 2001,
2000 and 1999...........................................................    40

Notes to Financial Statements...........................................    41



         All schedules have been omitted since the required information is not
present in amounts sufficient to require submission of the schedule or because
the information required is included in the Financial Statements or notes
thereto.


                                      -35-
<PAGE>


               Report Of Independent Certified Public Accountants




Board of Directors
First National Bank of Northern California



We have audited the accompanying balance sheets of First National Bank of
Northern California (a National Banking Association) as of December 31, 2001 and
2000, and the related statements of earnings, stockholders' equity and
comprehensive income and cash flows for each of the three years in the period
ended December 31, 2001. These financial statements are the responsibility of
the Bank's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of First National Bank of Northern
California as of December 31, 2001 and 2000, and the results of its operations
and its cash flows for each of the three years in the period ended December 31,
2001, in conformity with accounting principles generally accepted in the United
States of America.


/s/ GRANT THORNTON LLP
-----------------------------

San Francisco, California
January 31, 2002


                                      -36-
<PAGE>

                   First National Bank of Northern California

                                 BALANCE SHEETS

                                  December 31,



                                     ASSETS
<TABLE>
<CAPTION>

                                                               2001           2000
                                                          ------------   ------------
                                                                         (as adjusted)
<S>                                                       <C>            <C>
Cash and due from banks                                   $ 22,493,099   $ 22,712,702
Federal funds sold                                                  --     19,040,000
                                                          ------------   ------------

       Cash and cash equivalents                            22,493,099     41,752,702

Securities available-for-sale                               65,310,919     87,241,009

Loans, net                                                 288,067,144    229,668,543

Bank premises, equipment and leasehold improvements         11,654,532     11,040,132

Accrued interest receivable and other assets                 9,862,084      9,399,416
                                                          ------------   ------------

                                                          $397,387,778   $379,101,802
                                                          ============   ============

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Deposits
  Demand, noninterest bearing                             $ 87,982,573   $ 89,493,429
  Demand, interest bearing                                  55,357,111     48,840,453
  Savings                                                   98,890,771     88,681,533
  Time                                                     101,848,871    103,441,559
                                                          ------------   ------------

       Total deposits                                      344,079,326    330,456,974

Federal funds purchased                                      2,100,000             --
Accrued expenses and other liabilities                       4,685,862      5,516,824
                                                          ------------   ------------

       Total liabilities                                   350,865,188    335,973,798

Commitments and contingencies                                       --             --

Stockholders' equity
  Common stock, $1.25 par value, authorized 10,000,000
     shares; issued and outstanding 2,318,849 shares in
     2001 and 2,208,658 shares in 2000                       2,898,561      2,760,823
  Additional paid-in capital                                20,496,723     17,810,267
  Retained earnings                                         22,546,095     22,405,755
  Accumulated other comprehensive income                       581,211        151,159
                                                          ------------   ------------

       Total stockholders' equity                           46,522,590     43,128,004
                                                          ------------   ------------

                                                          $397,387,778   $379,101,802
                                                          ============   ============
</TABLE>


See accompanying notes to financial statements.

                                      -37-
<PAGE>

                               First National Bank of Northern California

                                         STATEMENTS OF EARNINGS

                                         Year ended December 31,

<TABLE>
<CAPTION>

                                                                 2001           2000            1999
                                                             ------------   ------------    ------------

                                                                           (as adjusted)
<S>                                                          <C>            <C>             <C>
Interest income
  Interest and fees on loans                                 $ 26,024,139   $ 25,811,471    $ 23,542,577
  Interest and dividends on securities                          2,759,851      2,957,290       2,046,493
  Interest on tax-exempt securities                             1,448,895      1,426,724       1,517,210
  Federal funds sold                                              610,701        666,648         480,137
                                                             ------------   ------------    ------------
     Total interest income                                     30,843,586     30,862,133      27,586,417

Interest expense
  Interest on deposits and other                                7,934,658      8,191,525       6,998,861
                                                             ------------   ------------    ------------

       Net interest income                                     22,908,928     22,670,608      20,587,556

Provision for loan losses                                         300,000        425,000         750,000
                                                             ------------   ------------    ------------

       Net interest income after provision for loan losses     22,608,928     22,245,608      19,837,556

Noninterest income
  Service charges                                               1,656,668      1,661,721       1,771,878
  Credit card fees                                                912,708        974,645         761,460
  Gain on sale of bank premises, equipment and
     leasehold improvements                                           336        700,802          11,756
  Gain (loss) on sales of securities                               58,281         (1,425)       (116,651)
  Other                                                           379,366        444,817         356,740
                                                             ------------   ------------    ------------
       Total noninterest income                                 3,007,359      3,780,560       2,785,183

Noninterest expense
  Salaries and employee benefits                               10,531,645      9,453,202       8,588,182
  Occupancy expense                                             1,289,689      1,122,541       1,092,511
  Equipment expense                                             1,736,155      1,452,979       1,419,335
  Advertising expense                                             384,060        427,868         412,891
  Data processing expense                                         329,970        360,038         310,194
  Professional fees                                               731,099        467,723         422,866
  Director expense                                                150,000        132,000         120,000
  Surety insurance                                                303,309        308,873         243,813
  Telephone, postage, supplies                                  1,014,153        972,700         788,904
  Bankcard expenses                                               734,768        692,869         592,637
  Other                                                           706,507        585,894         527,330
                                                             ------------   ------------    ------------
       Total noninterest expense                               17,911,355     15,976,687      14,518,663
                                                             ------------   ------------    ------------

       Earnings before income tax expense                       7,704,932     10,049,481       8,104,076

Income tax expense                                              2,468,240      2,921,621       2,886,912
                                                             ------------   ------------    ------------

       NET EARNINGS                                          $  5,236,692   $  7,127,860    $  5,217,164
                                                             ============   ============    ============

Earnings per share data:
  Basic                                                      $       2.37   $       3.07    $       2.25
                                                             ============   ============    ============
  Diluted                                                    $       2.36   $       3.07    $       2.25
                                                             ============   ============    ============

Weighted average shares outstanding:
  Basic weighted average shares outstanding                     2,214,092      2,319,077       2,319,068
                                                             ============   ============    ============
     Diluted weighted average shares outstanding                2,219,606      2,320,770       2,319,068
                                                             ============   ============    ============
</TABLE>

See accompanying notes to financial statements.

                                      -38-

<PAGE>
<TABLE>
<CAPTION>

                                            First National Bank of Northern California

                                    STATEMENT OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME

                                                Three years ended December 31, 2001

                                                                                                       Accumulated
                                                     Common Stock          Additional                     Other
                                Comprehensive --------------------------    Paid-in       Retained    Comprehensive
                                   Income        Shares        Amount       Capital       Earnings        Income          Total
                                ------------  ------------  ------------  ------------  ------------   ------------   ------------
<S>                             <C>              <C>        <C>           <C>           <C>            <C>            <C>
Balance at January 1, 1999                       2,003,759  $  2,504,699  $ 12,289,893  $ 20,520,524   $    445,624   $ 35,760,740

Comprehensive income:
  Net earnings                  $  5,217,164            --            --            --     5,217,164             --      5,217,164
  Other comprehensive income:
     Unrealized loss on
       securities, net
       of tax of $1,006,783
       and net of
       reclassification
       adjustments                (1,460,589)           --            --            --            --     (1,460,589)    (1,460,589)
                                ------------
  Comprehensive income          $ 11,654,532
                                ============

Cash dividends of $.10 per
  share quarterly                                       --            --            --      (801,504)            --       (801,504)
Cash dividends of $.60 per
  share                                                 --            --            --    (1,202,255)            --     (1,202,255)
Stock dividend of 5%                                99,935       124,919     2,673,261    (2,798,180)            --             --
Cash on fractional share
  related to stock dividend                             --            --            --        (6,919)            --         (6,919)
                                              ------------  ------------  ------------  ------------   ------------   ------------

Balance at December 31, 1999                     2,103,694     2,629,618    14,963,154    20,928,830     (1,014,965)    37,506,637

Comprehensive income:
  Net earnings (as adjusted)    $  7,127,860            --            --            --     7,127,860             --      7,127,860
  Other comprehensive income:
     Unrealized gain on
       securities, net of tax
       of $815,483 and net of
       reclassification
       adjustments                 1,166,124            --            --            --            --      1,166,124      1,166,124
                                ------------
     Comprehensive income       $  8,293,984
                                ============

Cash dividends of $.12 per
   share quarterly                                      --            --            --    (1,009,773)            --     (1,009,773)
Cash dividends of $.75 per
   share                                                --            --            --    (1,656,494)            --     (1,656,494)
Stock dividend of 5%                               104,943       131,179     2,846,579    (2,977,758)            --             --
Cash on fractional shares
  related to stock dividend                             --            --            --        (6,910)            --         (6,910)
Stock options exercised                                 21            26           534            --             --            560
                                              ------------  ------------  ------------  ------------   ------------   ------------

Balance at December 31, 2000                     2,208,658     2,760,823    17,810,267    22,405,755        151,159     43,128,004

Comprehensive income:
  Net earnings                  $  5,236,692            --            --            --     5,236,692             --      5,236,692
  Other comprehensive income:
     Unrealized gain on
       securities, net of tax
       of $166,414 and net of
       reclassification
       adjustments                   430,052            --            --            --            --        430,052        430,052
                                ------------
     Comprehensive income       $  5,666,744
                                ============

Cash dividends of $.12 per
  share quarterly                                       --            --            --    (1,060,156)            --     (1,060,156)
Cash dividends of $.52 per
  share                                                 --            --            --    (1,205,801)            --     (1,205,801)
Stock dividend of 5%                               110,191       137,738     2,686,456    (2,824,194)            --             --
Cash on fractional shares
  related to stock dividend                             --            --            --        (6,201)            --         (6,201)
                                              ------------  ------------  ------------  ------------   ------------   ------------

Balance at December 31, 2001                     2,318,849  $  2,898,561  $ 20,496,723  $ 22,546,095   $    581,211   $ 46,522,590
                                              ============  ============  ============  ============   ============   ============
</TABLE>
See accompanying notes to financial statements.

                                      -39-
<PAGE>
<TABLE>
<CAPTION>

                                    First National Bank of Northern California

                                             STATEMENTS OF CASH FLOWS

                                             Year ended December 31,

                                                                         2001            2000            1999
                                                                     ------------    ------------    ------------

                                                                                     (as adjusted)
<S>                                                                  <C>             <C>             <C>
Cash flows from operating activities
  Net earnings                                                       $  5,236,692    $  7,127,860    $  5,217,164
  Adjustments to reconcile net earnings to net cash provided by
     operating activities
       Depreciation and amortization                                    1,558,565       1,169,113       1,104,814
       (Gain) loss on sale of securities                                  (58,281)          1,425         116,651
       Gain on sale of bank premises, equipment and
          leasehold improvements                                             (336)       (700,802)        (11,756)
       Provision for loan losses                                          300,000         425,000         750,000
       Deferred taxes                                                    (432,023)       (365,010)       (467,367)
       Changes in assets and liabilities
          Accrued interest receivable and other assets                   (280,415)     (2,005,482)       (763,885)
          Accrued expenses and other liabilities                         (683,372)      1,623,434       1,019,462
                                                                     ------------    ------------    ------------

          Total adjustments                                               404,138         147,678       1,747,919
                                                                     ------------    ------------    ------------

          Net cash provided by operating activities                     5,640,830       7,275,538       6,965,083

Cash flows from investing activities
  Proceeds from matured securities available-for-sale                  22,140,000      16,290,135      34,438,373
  Purchases of securities available-for-sale                          (23,784,135)    (30,892,695)    (26,920,000)
  Proceeds from sale of securities available for sale                  24,235,810              --              --
  Proceeds from matured securities held-to-maturity                            --              --         142,777
  Net (increase) decrease in loans                                    (58,698,601)      6,968,462     (33,927,549)
  Proceeds from sales of bank premises, equipment
     and leasehold improvements                                             8,356       1,005,604          35,730
  Purchases of bank premises, equipment and leasehold improvements     (2,180,985)     (1,415,368)       (595,465)
                                                                     ------------    ------------    ------------

          Net cash used in investing activities                       (38,279,555)     (8,043,862)    (26,826,134)
                                                                     ------------    ------------    ------------

Cash flows from financing activities
  Net increase  in demand and savings deposits                         15,215,040      35,392,894       8,460,522
  Net (decrease) increase in time deposits                             (1,592,688)    (10,297,199)     16,311,649
  Net increase (decrease) in federal funds purchased                    2,100,000              --      (1,000,000)
  Proceeds from exercise of stock options                                      --             560              --
  Dividends paid                                                       (2,272,158)     (2,673,177)     (2,010,678)
  Payments on capital note payable                                        (71,072)        (75,943)        (65,888)
                                                                     ------------    ------------    ------------

          Net cash provided by financing activities                    13,379,122      22,347,135      21,695,605
                                                                     ------------    ------------    ------------

          NET (DECREASE) INCREASE IN CASH AND
            CASH EQUIVALENTS                                          (19,259,603)     21,578,811       1,834,554

Cash and cash equivalents at beginning of year                         41,752,702      20,173,891      18,339,337
                                                                     ------------    ------------    ------------

Cash and cash equivalents at end of year                             $ 22,493,099    $ 41,752,702    $ 20,173,891
                                                                     ============    ============    ============

Additional cash flow information
  Interest paid                                                      $  8,098,924    $  7,831,528    $  7,004,664
  Income taxes paid                                                  $  2,931,844    $  3,926,812    $  2,638,000
</TABLE>

See accompanying notes to financial statements.

                                      -40-
<PAGE>

                   First National Bank of Northern California

                          NOTES TO FINANCIAL STATEMENTS

                        December 31, 2001, 2000 and 1999



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      First National Bank of Northern California (the Bank) provides traditional
      banking services in San Mateo and San Francisco counties. The accounting
      and reporting policies of the Bank conform with accounting principles
      generally accepted in the United States of America and with prevailing
      practices within the banking industry. The following is a summary of the
      significant accounting policies.

      Cash and Cash Equivalents
      -------------------------

      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. Included in cash and cash equivalents are amounts
      restricted for the Federal Reserve requirement of approximately
      $10,573,000 and $9,663,000 in 2001 and 2000, respectively. (See Note C).

      Securities Available-for-Sale
      -----------------------------

      Available-for-sale securities consist of bonds, notes, debentures, and
      certain equity securities not classified as held-to-maturity securities.
      Available-for-sale securities are recorded at fair value. Unrealized
      holding gains and losses, net of tax, on available-for-sale securities are
      reported as a net amount in accumulated other comprehensive income until
      realized. Gains and losses on sales of available-for-sale securities are
      determined using the specific identification method.

      Loans
      -----

      Loans that management has the intent and ability to hold for the
      foreseeable future or until maturity or pay-off are reported at their
      outstanding principal adjusted for the allowance for loan losses and any
      deferred fees or costs on originated loans and unamortized premiums or
      discounts on purchased loans.

      A loan is identified as impaired when it is probable that interest and
      principal will not be collected according to the contractual terms of the
      loan agreement. The accrual of interest on impaired loans is discontinued
      when, in management's opinion, the borrower may be unable to meet payments
      as they become due. When interest accrual is discontinued, all unpaid
      accrued interest is reversed. Interest income is subsequently recognized
      only to the extent cash payments are received.

      The allowance for loan losses is increased by charges to earnings and
      decreased by charge-offs (net of recoveries). Management evaluates the
      adequacy of the Bank's allowance periodically, but at least quarterly,
      based on the Bank's past loan loss experience, known and inherent risks in
      the portfolio, adverse situations that may affect the borrower's ability
      to repay, the estimated value of any underlying collateral, and current
      economic conditions.

      Depreciation and Amortization
      -----------------------------

      Depreciation is provided by the straight-line and double declining balance
      methods in amounts sufficient to relate the cost of depreciable assets to
      operations over their estimated service lives ranging from 3 to 31 years.
      Leasehold improvements are amortized over the lives of the respective
      leases or the service lives of the improvements, whichever is shorter.

      Interest and Fees on Loans
      --------------------------

      Interest is accrued monthly, as earned, on all loans. Management does not
      recognize interest income on loans if collection of the interest is deemed
      doubtful. Interest income is recognized using a method that provides a
      level yield on principal amounts outstanding.

      Loan origination fees and direct loan origination costs are deferred and
      amortized as a yield adjustment over the contractual life of the related
      loan.

                                      -41-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Transfers and Servicing of Financial Assets
      -------------------------------------------

      A transfer of financial assets is accounted for as a sale when control is
      surrendered over the assets transferred.

      Servicing rights and other retained interests in the assets sold are
      recorded by allocating the previous recorded investment between the asset
      sold and the interest retained based on their relative fair values, at the
      date of transfer.

      Cash Dividends
      --------------

      Payment of dividends is subject to certain restrictions under the National
      Banking Laws. The payment of cash dividends in any calendar year is
      generally limited to the Bank's net earnings for the current and two
      preceding years.

      Income Taxes
      ------------

      Deferred income taxes are recognized for tax consequences of temporary
      differences by applying current tax rates to differences between income
      taxes are accounted for under the assets and liabilities method the
      financial reporting and the tax basis of existing assets and liabilities.
      Deferred tax assets and liabilities are reflected at currently enacted
      income tax rates applicable to the period in which the deferred tax assets
      or liabilities are expected to be realized or settled. As changes in tax
      laws or rates are enacted, deferred tax assets and liabilities are
      adjusted through the provision for income taxes.

      Stock Option Plan
      -----------------

      Statement of Financial Standards (SFAS) No. 123, Accounting for Stock
      Based Compensation, encourages all entities to adopt a fair value based
      method of accounting for employee stock compensation plans, where by
      compensation cost is measured at the grant date based on the fair value of
      the award and is recognized over the service period, which is usually the
      vesting period. However, the Standard also allows an entity to continue to
      measure compensation cost for those plans using the intrinsic value based
      method of accounting prescribed by Accounting Principles Board Opinion No.
      25, Accounting for Stock Issued to Employees, whereby compensation cost is
      the excess, if any, of the quoted market price of the stock at the grant
      date (or other measurement date) over the amount an employee must pay to
      acquire the stock. Stock options issued under the Bank's stock option plan
      have no intrinsic value at the grant date, and under Opinion No. 25 no
      compensation cost is recognized for them. The Bank has elected to continue
      with the accounting methodology in Opinion No. 25 and, as a result, has
      provided pro forma disclosures of net income and earnings per share and
      other disclosures, as if the fair value based method of accounting had
      been applied.


                                      -42-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Earnings Per Share
      ------------------

      Earnings per common share (EPS) is computed based on the weighted average
      number of common shares outstanding during the period. Basic EPS excludes
      dilution and is computed by dividing net earnings by the weighted average
      of common shares outstanding. Diluted EPS reflects the potential dilution
      that could occur if securities or other contracts to issue common stock
      were exercised or converted into common stock. Retroactive recognition has
      been given for all periods presented for the issuance of stock dividends.

      Earnings per share have been computed based on the following:
<TABLE>
<CAPTION>

                                                                  Year Ended December 31,
                                                                       (in thousands)
                                                              --------------------------------
                                                                2001        2000        1999
                                                              --------    --------    --------
                                                                        (as adjusted)
<S>                                                           <C>         <C>         <C>
            Net earnings                                      $  5,237    $  7,128    $  5,217
                                                              ========    ========    ========

            Average number of shares outstanding                 2,214       2,319       2,319
            Effect of dilutive options                               6           2          --
                                                              --------    --------    --------
            Average number of shares outstanding
               Used to calculate diluted earnings per share      2,220       2,321       2,319
                                                              ========    ========    ========
</TABLE>

      Options to purchase 18,811 shares of common stock were not included in the
      computation of diluted EPS because the options' exercise price was greater
      than the average market price of the common shares. The options, which
      expire on May 13, 2008, were still outstanding at December 31, 2001.

      Use of Estimates
      ----------------

      In preparing financial statements in conformity with generally accepted
      accounting principles, management is required to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      the disclosure of contingent assets and liabilities at the date of the
      financial statements and revenue and expenses during the reporting period.
      Actual results could differ from those estimates.

      Fair Values of Financial Instruments
      ------------------------------------

      The notes to financial statements include various estimated fair value
      information as of December 31, 2001 and 2000. Such information, which
      pertains to the Bank's financial instruments, does not purport to
      represent the aggregate net fair value of the Bank. Further, the fair
      value estimates are based on various assumptions, methodologies and
      subjective considerations, which vary widely among different financial
      institutions and which are subject to change. The following methods and
      assumptions were used by the Bank.

      Cash and cash equivalents: The carrying amounts reported in the balance
      sheet for cash and short-term instruments approximate those assets' fair
      values.

      Securities: Fair values for securities are based on quoted market prices,
      where available. If quoted market prices are not available, fair values
      are based on quoted market prices of comparable instruments.

                                      -43-

<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999



NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

      Loans: Fair values for variable-rate loans that reprice frequently and
      have no significant change in credit risk are based on carrying values.
      The fair values for other loans are estimated using discounted cash flow
      analyses, using interest rates currently being offered for loans with
      similar terms to borrowers of similar credit quality.

      Off-balance-sheet instruments: Fair values for the Bank's
      off-balance-sheet lending commitments are based on fees currently charged
      to enter into similar agreements, taking into account the remaining terms
      of the agreements and the credit standing of the counterparties.

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

      Federal Funds Purchased. The carrying amount of federal funds purchased
      approximates their fair values.

      Reclassifications
      -----------------

      Certain prior year information has been reclassified to conform to current
      year presentation.



NOTE B - PRIOR PERIOD ADJUSTMENT

      The net earnings for the year ended December 31, 2000 have been adjusted
      to record an income tax refund receivable of $341,770. The impact of the
      adjustment for the year ended December 31, 2000 is as follows:

                                  As Previously
                                     Reported      Adjustment     As Adjusted
                                  -------------   -----------    -------------

      Income tax expense          $   3,263,391   $  (341,770)   $   2,921,621
      Net earnings                    6,786,090       341,770        7,127,860
      Earnings per share:
           Basic                  $        2.93   $      0.14    $        3.07
        Diluted                   $        2.92   $      0.15    $        3.07


NOTE C - RESTRICTED CASH BALANCE

      Cash and due from banks include balances with the Federal Reserve Bank
      (the "FRB"). The Bank is required to maintain specified minimum average
      balances with the FRB, based primarily upon the Bank's deposit balances.
      As of December 31, 2001 and 2000, the Bank maintained deposits in excess
      of the FRB reserve requirement.

                                      -44-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999



NOTE D - SECURITIES

      The amortized cost and fair value of securities available-for-sale are as
      follows:
<TABLE>
<CAPTION>

                                                       Gross           Gross
                                       Amortized     Unrealized      Unrealized         Fair
                                         Cost          Gains           Losses           Value
                                     ------------   ------------    ------------    ------------
<S>                                  <C>            <C>             <C>             <C>
      December 31, 2001
         U.S. Treasury Bonds         $  1,000,000   $     28,700    $         --    $  1,028,700
         Obligations of other U.S
           Government Agencies         26,993,571        387,829              --      27,381,400
         Obligations of states and
           political subdivisions      29,118,869        395,532         (53,059)     29,461,342
         Corporate debt                 5,049,080         96,860          (2,541)      5,143,399
         Other securities               2,296,078             --              --       2,296,078
                                     ------------   ------------    ------------    ------------

                                     $ 64,457,598   $    908,921    $    (55,600)   $ 65,310,919
                                     ============   ============    ============    ============


                                                       Gross           Gross
                                       Amortized     Unrealized      Unrealized         Fair
                                         Cost          Gains           Losses           Value
                                     ------------   ------------    ------------    ------------

      December 31, 2000
         U.S. Treasury Bonds         $  3,996,411   $     21,083    $       (145)   $  4,017,349
         Obligations of other U.S.
           Government Agencies         44,690,245        420,152         (70,057)     45,040,340
         Obligations of states and
           political subdivisions      36,650,628        199,522        (313,700)     36,536,450
         Other securities               1,646,870             --              --       1,646,870
                                     ------------   ------------    ------------    ------------

                                     $ 86,984,154   $    640,757    $   (383,902)   $ 87,241,009
                                     ============   ============    ============    ============
</TABLE>

      The amortized cost and fair value of debt securities at December 31, 2001,
      by contractual maturity, are shown below. 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.
<TABLE>
<CAPTION>

                                                                Amortized
                                                                   Cost             Fair Value
                                                             ----------------     ---------------
<S>                                                          <C>                  <C>
       Available-for-sale
         Due in one year or less                             $     14,691,531     $    14,889,563
         Due after one year through five years                     33,650,419          34,215,710
         Due after five years through ten years                    12,506,579          12,597,634
         Due after ten years                                        3,609,069           3,608,012
                                                             ----------------     ---------------

                                                             $     64,457,598     $    65,310,919
                                                             ================     ===============
</TABLE>

      For the years ended December 31, 2001, 2000, and 1999, gross realized
      gains amounted to $284,383, $19,897 and $11,691, respectively. For the
      years ended December 31, 2001, 2000, and 1999, gross realized losses
      amounted to $226,102, $21,322 and $128,342, respectively. The tax benefit
      (provision) applicable to these net realized gains and losses amounted to
      ($16,319), $470 and $41,994, respectively in 2001, 2000, and 1999.

                                      -45-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999


Note D - SECURITIES (continued)

      At December 31, 2001 and 2000, securities with an amortized cost and fair
      value of $42,840,191 and $42,960,774 and $39,454,662 and $39,614,400,
      respectively, were pledged as collateral for public deposits and for other
      purposes as required by law.

      As of December 31, 2001 and 2000, the Bank had investments in Federal
      Reserve Bank stock classified as other assets in the accompanying balance
      sheets of $617,150. These investments in Federal Reserve Bank stock are
      carried at cost, and evaluated periodically for impairment.



NOTE E - LOANS

      Loans are summarized as follows at December 31:

                                                2001                 2000
                                          ----------------     ---------------

           Commercial                     $     58,894,997     $    52,453,783
           Real estate                         180,963,944         115,774,816
           Construction                         28,761,207          40,020,718
           Installment                          24,840,817          25,987,516
                                          ----------------     ---------------
                                               293,460,965         234,236,833
           Allowance for loan losses            (3,543,025)         (3,331,918)
           Net deferred loan fees               (1,850,796)         (1,236,372)
                                          ----------------     ---------------

                                          $    288,067,144     $   229,668,543
                                          ================     ===============

      The Bank had total impaired loans of $1,958,593 and $1,209,914 at December
      31, 2001 and 2000, respectively. The allowance for loan losses, which
      relate to all impaired loans, was $224,698 and $57,712 as of December 31,
      2001 and 2000 respectively. There were no impaired loans without a
      valuation allowance as of December 31, 2001 and 2000. The average recorded
      investment in impaired loans during 2001, 2000 and 1999 was $1,963,484,
      $1,197,177 and $1,259,820, respectively. Interest income on impaired loans
      of $31,622, $0 and $696,984 was recognized for cash payments received in
      2001, 2000 and 1999, respectively.



NOTE F - ALLOWANCE FOR LOAN LOSSES

      Changes in the allowance for loan losses are summarized as follows at
      December 31:

<TABLE>
<CAPTION>
                                               2001           2000           1999
                                           -----------    -----------    -----------

<S>                                        <C>            <C>            <C>
          Balance, beginning of year       $ 3,331,918    $ 2,920,294    $ 2,223,756
          Loans charged off                    (94,010)       (22,727)       (65,996)
          Recoveries                             5,117          9,351         12,534
                                           -----------    -----------    -----------
            Net loans charged off              (88,893)       (13,376)       (53,462)
          Provision for loan losses            300,000        425,000        750,000
                                           -----------    -----------    -----------

                    Balance, end of year   $ 3,543,025    $ 3,331,918    $ 2,920,294
                                           ===========    ===========    ===========
</TABLE>

                                      -46-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999



NOTE G - RELATED PARTY TRANSACTIONS

      In the ordinary course of business, the Bank made loans and advances under
      lines of credit to directors, officers, and their related interests. The
      Bank's policies require that all such loans be made at substantially the
      same terms as those prevailing at the time for comparable transactions
      with unrelated parties and do not involve more than normal risk or
      unfavorable features. The following is the activities of loans to such
      parties in 2001:


           Balance, beginning of year                  $      3,758,044
           Additions                                          2,021,435
           Repayments                                          (242,233)
                                                       ----------------

           Balance, end of year                        $      5,537,246
                                                       ================


NOTE H - BANK PREMISES, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

      Bank premises, equipment and leasehold improvements are stated at cost,
      less accumulated depreciation and amortization, and are summarized as
      follows at December 31:

<TABLE>
<CAPTION>
                                                          2001             2000
                                                      ------------    ------------

<S>                                                   <C>             <C>
          Buildings                                   $  6,704,954    $  6,703,431
          Equipment                                      5,992,319       7,244,108
          Leasehold improvements                           545,980         202,326
                                                      ------------    ------------
                                                        13,243,253      14,149,865
          Accumulated depreciation and amortization     (5,576,424)     (7,097,436)
                                                      ------------    ------------
                                                         7,666,829       7,052,429
          Land                                           3,987,703       3,987,703
                                                      ------------    ------------

                                                      $ 11,654,532    $ 11,040,132
                                                      ============    ============
</TABLE>


      During 2001, the Bank purchased computer hardware and software equipment
      to convert its accounting system and related application systems. Because
      of difficulties encountered upon conversion and lack of functionality of
      the new software equipment the Bank evaluated these assets for impairment.
      No impairment loss was recognized. The Bank however revised its estimate
      of useful life on the software. Depreciation expense on the software with
      an original purchase price of approximately $675,000 was approximately
      $336,000 for the year ended December 31, 2001. The Bank plans to convert
      back to its previous accounting and related application systems by March
      31, 2002.

                                      -47-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999



NOTE I - DEPOSITS

      The aggregate amount of jumbo time certificates, each with a minimum
      denomination of $100,000, was $45,899,030 and $51,561,395 at December 31,
      2001 and 2000, respectively.

      At December 31, 2001, the scheduled maturities of time certificates are as
      follows:

                2002                                    $   88,255,549
                2003                                         6,435,097
                2004                                         7,072,903
                2005                                            85,322
                                                        --------------

                                                        $  101,848,871
                                                        ==============


NOTE J - COMMITMENTS AND CONTINGENCIES

      The Bank leases a portion of its facilities and equipment under
      noncancellable leases expiring at various dates through 2009. Some of the
      operating leases provide that the Bank pay taxes, maintenance, insurance
      and other occupancy expense applicable to leased premises. Generally, the
      leases provide for renewal for various periods at stipulated rates.

      The minimum rental commitments under the operating leases are as follows:

           Year ending December 31,
           ------------------------

                2002                                    $      358,613
                2003                                           312,407
                2004                                           169,484
                2005                                           171,835
                Thereafter                                     294,938
                                                        --------------

                                                        $    1,307,277
                                                        ==============

      Total rent expense for all operating leases was $414,462, $315,510 and
      $270,849, in 2001, 2000 and 1999, respectively.

      The Bank is engaged in various lawsuits either as plaintiff or defendant
      in the ordinary course of business and in the opinion of management, based
      upon the advice of counsel, the ultimate outcome of these lawsuits will
      not have a material effect of the Bank's financial statements.



NOTE K - BANK SAVINGS PLAN

      The Bank maintains a salary deferral 401(k) plan covering substantially
      all employees known as the First National Bank Savings Plan (the Plan).
      The Plan allows employees to make contributions to the Plan up to a
      maximum allowed by law and the Bank's contribution is discretionary. The
      Plan expense for the years ended December 31, 2001, 2000 and 1999 was
      $524,250, $750,000 and $374,490, respectively.

                                      -48-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999



NOTE L - SALARY CONTINUATION AND DEFERRED COMPENSATION PLANS

      The Bank maintains a Salary Continuation Plan and Deferred Compensation
      Plan for certain Bank officers. Officers participating in the Salary
      Continuation Plan are entitled to receive a monthly payment for a period
      of fifteen to twenty years upon retirement. The Salary Continuation Plan
      expense for the years ended December 31, 2001, 2000 and 1999 was $215,904,
      $220,977, and $316,412, respectively.

      The Deferred Compensation Plan allows eligible officers to defer annually
      their compensation up to a maximum 80% of their base salary and 100% of
      their cash bonus. The officer will be entitled to receive distribution
      upon reaching a specified age, passage of at least five years or
      termination of employment.



NOTE M - INCOME TAXES

      The provision for income taxes for the years ended December 31, consists
      of the following:

                                     2001          2000           1999
                                 -----------   -----------    -----------
                                              (as adjusted)
          Current
             Federal             $ 1,640,080   $ 2,704,592    $ 2,663,890
             State                   396,137       582,039        690,389
          Deferred
             Federal                 351,679      (368,667)      (542,145)
             State                    80,344         3,657         74,778
                                 -----------   -----------    -----------

                                 $ 2,468,240   $ 2,921,621    $ 2,886,912
                                 ===========   ===========    ===========

      The reasons for the differences between the statutory federal income tax
      rates and the effective tax rates are summarized as follows:
<TABLE>
<CAPTION>

                                                   2001            2000            1999
                                               -----------     -----------     -----------
                                                                (as adjusted)
<S>                                                   <C>             <C>             <C>
      Statutory rates                                 34.0%           34.0%           34.0%
      Increase (decrease) resulting from:
        Effect of tax-exempt income                   (6.1)%          (4.7)%          (6.4)%
        State income taxes                             4.4%            4.2%            6.2%
        Tax refund                                      --%           (3.9)%          (1.2)%
        Other, net                                    (0.3)%          (0.6)%           3.0%
                                               -----------     -----------     -----------

      Effective rate                                  32.0%           29.0%           35.6%
                                               ===========     ===========     ===========
</TABLE>


                                      -49-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999



NOTE M - INCOME TAXES (continued)

      The tax effect of temporary differences giving rise to the Bank's net
      deferred tax asset is as follows:
<TABLE>
<CAPTION>

                                                                  December 31,
                                                            -----------------------
                                                               2001         2000
                                                            ----------   ----------
<S>                                                         <C>          <C>
          Deferred tax assets
            Allowance for loan losses                       $1,436,205   $1,218,294

            Capitalized interest on buildings                   38,203       37,108
            Various accruals                                   888,263      883,253
                                                            ----------   ----------
            Total deferred tax assets                        2,362,671    2,138,655
          Deferred tax liabilities
            State income taxes                                 289,623      157,853
            Unrealized appreciation of available-for-sale
               securities                                      351,180      105,757
            Low-Income Housing Investment Credits              392,038           --
            Depreciation                                       282,005      395,197
                                                            ----------   ----------
            Total deferred tax liabilities                   1,314,846      658,807
                                                            ----------   ----------

          Net deferred tax asset                            $1,047,825   $1,479,848
                                                            ==========   ==========
</TABLE>


      There was no valuation allowance necessary at December 31, 2001 or
      December 31, 2000.



NOTE N - FINANCIAL INSTRUMENTS

      The Bank is a party to financial instruments with off-balance-sheet risk
      in the normal course of business to meet the financing needs of its
      customers. These financial instruments include commitments to extend
      credit in the form of loans or through standby letters of credit. These
      instruments involve, to varying degrees, elements of credit and
      interest-rate risk in excess of the amount recognized in the balance
      sheet.

      The Bank's exposure to credit loss is represented by the contractual
      amount of those instruments and is usually limited to amounts funded or
      drawn. The contract or notional amounts of these agreements, which are not
      included in the balance sheets, are an indicator of the Bank's credit
      exposure. Commitments to extend credit generally carry variable interest
      rates and are subject to the same credit standards used in the lending
      process for on-balance-sheet instruments. Additionally, the Bank
      periodically reassesses the customer's creditworthiness through ongoing
      credit reviews. The Bank generally requires collateral or other security
      to support commitments to extend credit.

                                                                 Contract
                                                                  Amount
                                                               December 31,
                                                                   2001
                                                              --------------
           Financial instruments whose contract amounts
             represent credit risk:
                Undisbursed loan commitments                  $   34,871,600
                Lines of credit                                   27,231,807
                MasterCard line                                    3,143,920
                Standby letters of credit                          2,736,088
                                                              --------------
                                                              $   67,983,415
                                                              ==============

                                      -50-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999



NOTE N - FINANCIAL INSTRUMENTS (continued)

      Commitments to extend credit are agreements to lend to a customer as long
      as there is no violation of any condition established in the contract.
      Commitments generally have fixed expiration dates or other termination
      clauses and may require payment of a fee. Since many of the commitments
      are expected to expire without being drawn upon, the total commitment
      amounts do not necessarily represent future cash requirements. The Bank
      evaluates each customer's creditworthiness on a case-by-case basis. The
      amount of collateral obtained, if deemed necessary by the Bank upon
      extension of credit, is based on management's credit evaluation.
      Collateral held varies but may include accounts receivable, inventory,
      property, plant and equipment, and income-producing commercial and
      residential properties.

      Equity reserve and unused credit card lines are additional commitments to
      extend credit. Many of these customers are not expected to draw down their
      total lines of credit, and therefore, the total contract amount of these
      lines does not necessarily represent future cash requirements.

      Standby letters of credit are conditional commitments issued by the Bank
      to guarantee the performance of a customer to a third party. The credit
      risk involved in issuing letters of credit is essentially the same as that
      involved in extending loan facilities to customers.

      The following table provides summary information on the estimated fair
      value of financial instruments at December 31, 2001:
<TABLE>
<CAPTION>

                                                                 Carrying
                                                                  Amount       Fair Value
                                                               ------------   ------------
<S>                                                            <C>            <C>
          Financial assets
             Cash and cash equivalents                         $ 22,493,099   $ 22,493,099
             Securities available for sale                       65,310,919     65,310,919
             Loans, net                                         288,067,144    287,250,149

          Financial liabilities
             Deposits                                           344,079,326    343,996,484
             Federal funds purchased                              2,100,000      2,100,000

          Off-balance-sheet liabilities
             Undisbursed loan commitments, lines of credit,
               Mastercard line and standby letters of credit             --        829,593
</TABLE>

                                      -51-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999



NOTE N - FINANCIAL INSTRUMENTS (continued)

      The following table provides summary information on the estimated fair
      value of financial instruments at December 31, 2000:
<TABLE>
<CAPTION>

                                                                 Carrying
                                                                  Amount       Fair Value
                                                               ------------   ------------
<S>                                                            <C>            <C>
          Financial assets
             Cash and cash equivalents                         $ 41,752,702   $ 41,752,702
             Securities available for sale                       87,241,009     87,241,009
             Loans, net                                         229,668,543    228,919,748

          Financial liabilities
             Deposits                                           330,456,974    330,316,219

          Off-balance-sheet liabilities
             Undisbursed loan commitments, lines of credit,
               Mastercard line and standby letters of credit             --        844,654
</TABLE>


      The carrying amounts include $1,958,593 of nonaccrual loans (loans that
      are not accruing interest) at December 31, 2001 only. Management has
      determined that primarily because of the uncertainty of predicting an
      observable market interest rate excessive amounts of time and money would
      be incurred to estimate the fair values of non-performing assets. As such,
      these assets are recorded at their carrying amount in the estimated fair
      value columns. The following aggregate information is provided at December
      31, about the contractual provisions of these assets:

                                                   2001               2000
                                              --------------     -------------

          Aggregate carrying amount           $    1,958,593     $   1,209,914
          Effective rate                                8.07%            11.10%
          Average term to maturity                 32 months           matured



NOTE O - SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK

      Most of the Bank's business activity is with customers located within San
      Mateo and San Francisco counties. Generally, the loans are secured by
      assets of the borrowers. The loans are expected to be repaid from cash
      flows or proceeds from the sale of selected assets of the borrowers. The
      Bank does not have significant concentrations of loans to any one
      industry.

      The distribution of commitments to extend credit approximates the
      distribution of loans outstanding. Commercial and standby letters of
      credit were granted primarily to commercial borrowers.

      The contractual amounts of credit-related financial instruments such as
      commitments to extend credit, credit-card arrangements, and letters of
      credit represent the amounts of potential accounting loss should the
      contract be fully drawn upon, the customer default, and the value of any
      existing collateral become worthless.

                                      -52-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999



NOTE P - REGULATORY MATTERS

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

      Quantitative measures established by regulation to ensure capital adequacy
      require the Bank to maintain minimum amounts and ratios (set forth in the
      table below) of total and Tier I capital (as defined in the regulations)
      to risk-weighted assets (as defined), and of Tier I capital (as defined)
      to average assets (as defined). Management believes, as of December 31,
      2001 and 2000, that the Bank meets all capital adequacy requirements to
      which it is subject.

      As of December 31, 2001, the most recent notification from the OCC
      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, and Tier I
      leverage ratios as set forth in the following table. There are no
      conditions or events since that notification that management believes have
      changed the institution's category.

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

<TABLE>
<CAPTION>

                                                                                                               To be well
                                                                                                            capitalized under
                                                                                 For capital                prompt corrective
                                                      Actual                  adequacy purposes:            action provisions:
                                            --------------------------   ---------------------------   ---------------------------
                                                Amount        Ratio         Amount          Ratio         Amount          Ratio
                                            ------------   -----------   ------------    -----------   ------------    -----------
<S>                                           <C>                <C>       <C>         <C>       <C>     <C>         <C>      <C>
        As of December 31, 2001:
           Total risk-based capital
             (to Risk Weighted Assets)        $  49,444          13.98%    $  28,271   >         8.0%    $  35,339   >        10.0%
                                                                                       -                             -
           Tier I capital (to Risk
             Weighted Assets)                 $  45,901          12.98%    $  14,136   >         4.0%    $  21,204   >         6.0%
                                                                                       -                             -
           Tier I capital (to Average
             Assets)                          $  45,901          11.41%    $  16,019   >         4.0%    $  20,024   >         5.0%
                                                                                       -                             -
</TABLE>

<TABLE>
<CAPTION>

                                                                                                               To be well
                                                                                                            capitalized under
                                                                                 For capital                prompt corrective
                                                      Actual                  adequacy purposes:            action provisions:
                                            --------------------------   ---------------------------   ---------------------------
                                                Amount        Ratio         Amount          Ratio         Amount          Ratio
                                            ------------   -----------   ------------    -----------   ------------    -----------
<S>                                           <C>                <C>       <C>         <C>       <C>     <C>         <C>      <C>
        As of December 31, 2000:            (as adjusted) (as adjusted)
           Total risk-based capital
             (to Risk Weighted Assets)        $   46,236         15.67%    $   23,867  >         8.0%    $   29,833  >        10.0%
           Tier I capital (to Risk
             Weighted Assets)                 $   42,904         14.54%    $   11,993  >         4.0%    $   17,900  >         6.0%
           Tier I capital (to Average
             Assets)                          $   42,904         11.28%    $   15,191  >         4.0%    $   18,988  >         5.0%
</TABLE>

                                      -53-

<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999



NOTE Q - STOCK OPTION PLAN

      In 1997, the Bank adopted an incentive employee stock option plan. The
      plan allows the Bank to grant options to employees of up to 231,525
      shares, which includes effect of stock dividends, of common stock. Options
      currently outstanding become exercisable in one to five years from the
      grant date, based on a vesting schedule of 20% per year and expire 10
      years after the grant date. The options exercise price is the fair value
      of the options at the grant date. Had compensation cost for the plan been
      determined based on the fair value of the options at the grant dates
      consistent with the method of SFAS 123, the Bank's net earnings and
      earnings per share would have been reduced to the pro forma amounts
      indicated below.

<TABLE>
<CAPTION>

                                                                   2001             2000             1999
                                                               ------------     ------------     ------------
                                                                               (as adjusted)
<S>                                        <C>                 <C>              <C>              <C>
           Net earnings                    As reported         $  5,236,692     $  7,127,860     $  5,217,164
                                           Pro forma           $  5,229,361     $  7,122,250     $  5,210,157

           Basic earnings per share        As reported         $       2.37     $       3.07     $       2.25
                                           Pro forma           $       2.36     $       3.07     $       2.25

           Diluted earnings per share      As reported         $       2.36     $       3.07     $       2.25
                                           Pro forma           $       2.36     $       3.06     $       2.25
</TABLE>

      The fair value of each option granted is estimated on the date of grant
      using the fair value method with the following weighted-average
      assumptions used for grants in 2001; dividend yield of 9 percent for the
      year; risk-free interest rate of 5.4 percent; expected volatility of 6.8
      percent and expected life of 10 years. The assumptions used for grants in
      2000; dividend yield of 10 percent for the year; risk-free interest rate
      of 6.1 percent; expected volatility of 11 percent, and expected life of 10
      years. The assumptions used for grants in 1999; dividend yield of 9
      percent for the year; risk-free interest rate of 6.5 percent; expected
      volatility of 5 percent, and expected life of 10 years.

                                      -54-

<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999



NOTE Q - STOCK OPTION PLAN (continued)

      A summary of the status of the Bank's fixed stock option plan as of
      December 31, 2001, 2000 and 1999 is presented below:
<TABLE>
<CAPTION>

                                                                         Weighted
                                                                         Average
                                                                         Exercise
                                                            Shares        Price
                                                          ----------    ----------
<S>                                                          <C>        <C>
          Outstanding January 1, 1999                         23,152    $    27.51

          Granted (weighted average fair value of $.42)       24,311    $    22.92
                                                          ----------

          Outstanding at December 31, 1999                    47,463    $    25.26

          Granted (weighted average fair value of $.82)       33,074    $    22.73

          Exercised                                              (22)   $    24.13

          Expired/forfeited                                  (10,305)   $    24.95
                                                          ----------

          Outstanding at December 31, 2000                    70,210    $    24.09

          Granted (weighted average fair value of $.49)       32,776    $    23.86

          Expired/forfeited                                   (3,343)   $    24.68
                                                          ----------

          Outstanding at December 31, 2001                    99,643    $    24.06
                                                          ==========

          Options exercisable at December 31, 2001            27,809    $    24.72

          Options exercisable at December 31, 2000            13,951    $    25.26

          Options exercisable at December 31, 1999             4,631    $    27.58
</TABLE>


      The following information applies to options outstanding at December 31,
      2001:

                                         Range of exercise prices  $ 22.92-27.51

          Options outstanding                             99,643
          Weighted-average remaining
             contractual life (years)                        8.2

                                      -55-

<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999



NOTE R - QUARTERLY DATA (UNAUDITED) (in thousands)

<TABLE>
<CAPTION>

                                                   Quarterly
                                  --------------------------------------------     Annual
      2001                         First       Second      Third       Fourth      Total
                                  --------    --------    --------    --------    --------
<S>                               <C>         <C>         <C>         <C>         <C>
      Interest income             $  8,052    $  8,119    $  7,928    $  6,745    $ 30,844
      Interest expense               2,292       2,239       1,945       1,459       7,935
                                  --------    --------    --------    --------    --------
      Net interest income            5,760       5,880       5,983       5,286      22,909
      Provision for loan losses         75          75          75          75         300
                                  --------    --------    --------    --------    --------
      Net interest income,
        after provision for
        loan losses                  5,685       5,805       5,908       5,211      22,609
      Non-interest income              847         712         750         698       3,007
      Non-interest expense           4,239       4,505       4,346       4,821      17,911
                                  --------    --------    --------    --------    --------
      Income before
        income taxes                 2,293       2,012       2,312       1,088       7,705
      Provision for
        income taxes                   734         644         740         350       2,468
                                  --------    --------    --------    --------    --------

      Net Earnings                $  1,559    $  1,368    $  1,572    $    738    $  5,237
                                  ========    ========    ========    ========    ========

      Basic Earnings
        Per Share                 $   0.70    $   0.62    $   0.71    $   0.34    $   2.37
      Diluted Earnings
        Per Share                 $   0.70    $   0.62    $   0.71    $   0.33    $   2.36
</TABLE>

<TABLE>
<CAPTION>

                                                   Quarterly
                                  --------------------------------------------     Annual
      2000                         First       Second      Third       Fourth      Total
                                  --------    --------    --------    --------    --------
                                                                                (as adjusted)
<S>                               <C>         <C>         <C>         <C>         <C>
      Interest income             $  7,260    $  7,456    $  7,935    $  8,211    $ 30,862
      Interest expense               1,886       1,903       2,127       2,276       8,192
                                  --------    --------    --------    --------    --------
      Net interest income            5,374       5,553       5,808       5,935      22,670
      Provision for loan losses         87          96          96         146         425
                                  --------    --------    --------    --------    --------
      Net interest income,
        after provision for
        loan losses                  5,287       5,457       5,712       5,789      22,245
      Non-interest income            1,377         754         861         789       3,781
      Non-interest expense           3,723       3,831       3,868       4,555      15,977
                                  --------    --------    --------    --------    --------
      Income before
        income taxes                 2,941       2,380       2,705       2,023      10,049
      Provision for
        income taxes                   941         762         866         353       2,922
                                  --------    --------    --------    --------    --------

      Net Earnings                $  2,000    $  1,618    $  1,839    $  1,670    $  7,127
                                  ========    ========    ========    ========    ========

      Basic Earnings
        Per Share                 $   0.86    $   0.70    $   0.79    $   0.72    $   3.07
      Diluted Earnings
        Per Share                 $   0.86    $   0.70    $   0.79    $   0.72    $   3.07
</TABLE>

                                      -56-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999



NOTE S - SIGNIFICANT FOURTH QUARTER ADJUSTMENTS

      During the fourth quarter of 2001, the Bank entered into a Separation
      Agreement with one of its former officers. The terms of the Separation
      Agreement provide for salary continuation payments and health benefits for
      eighteen months commencing November 1, 2001. The Bank recognized a change
      to earnings of $280,000 for the year ended December 31, 2001 for the
      former officer's Separation Agreement. The Separation Agreement also
      provided that the former officer is entitled to receive the early
      termination benefit as provided for in the Bank Salary Continuation Plan
      and Deferred Compensation Plan. The amount of the vested accrued liability
      for the former officer under this plan as of December 31, 2001 was
      $360,167.

      During the fourth quarter of 2001, the Bank recorded an adjustment to
      reduce interest income for deferred loan fee amortization of $164,549.



NOTE T - RECENT ACCOUNTING PROUNOUNCEMENTS

      SFAS No. 141, "Business Combinations"
      -------------------------------------

      In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
      141, Business Combinations. SFAS 141 requires all business combinations
      initiated after June 30, 2001 to use the purchase method of accounting.
      Intangible assets acquired in a business combination must be recorded
      separately from goodwill if they meet the explicit criteria in SFAS 141.

      SFAS No. 142, "Goodwill and Other Intangible Assets"In June 2001, the FASB
      issued SFAS 142, Goodwill and Other Intangible Assets. Under SFAS 142,
      goodwill and those intangible assets that have indefinite lives are not
      amortized. but are tested for impairment annually and whenever there is an
      impairment indicator. In certain circumstances, goodwill impairment
      testing need not be done annually. All acquired goodwill must be assigned
      to reporting units for purposes of impairment testing. The Bank must adopt
      SFAS 142 as of January 1, 2002.

      SFAS 143, "Accounting for Asset Retirement Obligations"
      -------------------------------------------------------

      In 2001, the FASB issued SFAS 143, Accounting for Asset Retirement
      Obligations. SFAS 143 applies to all entities that have legal obligations
      associated with the retirement of a tangible long-lived asset. SFAS 143
      requires that a liability for an asset retirement obligation be recognized
      if the obligation meets the definition of a liability in FASB Concepts
      Statement 6, Elements of Financial Statements, and if the amount of the
      liability can be reasonably estimated. When a retirement obligation is
      initially recognized, the asset retirement cost is capitalized by
      increasing the carrying amount of the related long-lived asset by an
      amount equal to the liability. The initial recording of the obligation
      should be at fair market value. The Bank must adopt SFAS 143 as of January
      1, 2003, but earlier application is allowed.

                                      -57-
<PAGE>

                   First National Bank of Northern California

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                        December 31, 2001, 2000 and 1999



NOTE T - RECENT ACCOUNTING PROUNOUNCEMENTS (continued)

      SFAS No. 144, "Accounting for the Impairment or Disposal of Long Lived
      Assets"

      In 2001, the FASB issued SFAS 144, Accounting for the Impairment or
      Disposal of Long-Lived Assets. SFAS 144 supersedes SFAS 121, Accounting
      for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
      Disposed of, as well as the provisions of Opinion 30, Reporting the
      Results of Operations - Reporting the Effects of Disposal of a Segment of
      a Business, and Extraordinary, Unusual and Infrequently Occurring Events
      and Transactions, that address the disposal of a business. SFAS 144 also
      amends ARB 51, Consolidated Financial Statements, to eliminate the
      exception to consolidate a subsidiary for which control is likely to be
      temporary. SFAS 144 carries over the recognition and measurement
      provisions of SFAS 121, but differs from SFAS 121 in that it provides
      guidance is estimating future cash flows to test recoverability. SFAS 144
      also includes criteria that have to be met for an entity to classify a
      long-lived asset or asset group as held for sale, and extends the
      presentation of discontinued operations permitted by Opinion 30 to include
      disposals of a component of an entity. The Bank must adopt SFAS 144 as of
      January 1, 2002, except for the disposal provisions, which are immediately
      effective.

      SOP 01-6, "Accounting by Certain Entities (Including Entities With Trade
      Receivables) That Lend to or Finance the Activities of Others"

      SOP 01-6 applies to any entity that lends to or finances the activities of
      others. SOP 01-6 clarifies that the accounting and financial reporting
      practices for lending and financing activities should be the same
      regardless of the type of entity engaging in those activities. SOP 01-6
      also provides for the resolution of accounting differences among various
      financial institutions for similar transactions. The Bank must adopt SOP
      01-6 as of January 1, 2002.

      The Bank does not expect that the adoption of these recent accounting
      pronouncements to have a material effect on the Bank's financial
      statements.



NOTE U - PLAN OF REORGANIZATION

      The board of directors of the Bank has authorized a plan of reorganization
      under which the Bank would become a wholly-owned subsidiary of a newly
      formed California corporation, FNB Bancorp. In the plan of reorganization,
      each share of the Bank will be converted into one share of FNB Bancorp
      common stock on a share-for-share basis. The Bank common stock is
      currently quoted on the OTC Bulletin Board under the symbol "FNBD.OB". The
      parties to the plan of reorganization intends to file an application for
      listing of FNB Bancorp stock on the NASDAQ national market to be effective
      on or as soon as practicable following the effective date of the
      reorganization. A special meeting of the shareholders of the Bank will be
      held on February 27, 2002 to consider and vote on a proposal to approve
      the plan of reorganization.

                                      -58-
<PAGE>

                                    PART III


ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------   --------------------------------------------------

           The information required by Item 10 of Form 10-K is incorporated by
reference to the information contained in the Company's Proxy Statement for the
2002 Annual Meeting of Shareholders which will be filed pursuant to Regulation
14A.


ITEM 11.   EXECUTIVE COMPENSATION
--------   ----------------------

           The information required by Item 11 of Form 10-K is incorporated by
reference to the information contained in the Company's Proxy Statement for the
2002 Annual Meeting of Shareholders which will be filed pursuant to Regulation
14A.


ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------   --------------------------------------------------------------

           The information required by Item 12 of Form 10-K is incorporated by
reference to the information contained in the Company's Proxy Statement for the
2002 Annual Meeting of Shareholders which will be filed pursuant to Regulation
14A.


ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
--------   ----------------------------------------------

           The information required by Item 13 of Form 10-K is incorporated by
reference to the information contained in the Company's Proxy Statement for the
2002 Annual Meeting of Shareholders which will be filed pursuant to Regulation
14A.

                                      -59-
<PAGE>

                                     PART IV


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


(a)(1)     Financial Statements. Listed and included in Part II, Item 8.

(2)        Financial Statement Schedules.  Not applicable.

(3)        Exhibits.


            Exhibit
            Number                      Document Description
           ----------   --------------------------------------------------------

               **2.1      Agreement and Plan of Reorganization between the
                          Registrant and First National Bank of Northern
                          California, dated as of November 1, 2001 (included as
                          Annex A to the proxy statement/prospectus).

               **3.1      Articles of Incorporation of FNB Bancorp.

               **3.2      Bylaws of FNB Bancorp.

               **4.1      Specimen of the Registrant's common stock certificate.

              **10.1      Lease agreement dated April 24, 1995, as amended, for
                          Eureka Square Branch Office of First National Bank of
                          Northern California at Eureka Square Shopping Center,
                          Pacifica, California.

              **10.2      Lease agreement dated June 8, 1999, as amended, for
                          Linda Mar Branch Office of First National Bank of
                          Northern California at Linda Mar Shopping Center,
                          Pacifica, California.

              **10.3      Lease agreement dated August 21, 1996, as amended, for
                          Flower Mart Branch Office of First National Bank of
                          Northern California at 640 Brannon Street, Suite 102,
                          San Francisco, California.

              **10.4      Sublease agreement dated February 10, 1997, for San
                          Mateo Branch Office of First National Bank of Northern
                          California at 491 El Camino Real, Suite B, San Mateo,
                          California.

              **10.5      Lease Agreement dated April 13, 2000, for the Business
                          Banking Division of First National Bank of Northern
                          California at 520 South El Camino Real, Suite 430, San
                          Mateo, California.

              **10.6      First National Bank of Northern California 1997 Stock
                          Option Plan.*

              **10.7      Form of Nonstatutory Stock Option Agreement under the
                          First National Bank of Northern California 1997 Stock
                          Option Plan.*

              **10.8(a)   Form of Incentive Stock Option Agreement under the
                          First National Bank of Northern California 1997 Stock
                          Option Plan.*

              **10.8(b)   Form of Incentive Stock Option Agreement (Standard
                          Provisions Under the First National Bank of Northern
                          California 1997 Stock Option Plan.*

              **10.9      First National Bank Profit Sharing and 401(k) Plan
                          dated August 26, 1969.*

              **10.10     First National Bank Deferred Compensation Plan dated
                          November 1, 1997.*

              **10.11     Salary Continuation Agreement between First National
                          Bank of Northern California and Michael R. Wyman,
                          dated December 20, 1996.*

              **10.12     Salary Continuation Agreement between First National
                          Bank of Northern California and Paul B. Hogan, dated
                          December 20, 1996.*

              **10.13     Salary Continuation Agreement between First National
                          Bank of Northern California and James B. Ramsey, dated
                          December 23, 1999.*

                                      -60-
<PAGE>

              **10.14     Form of Management Continuity Agreement signed on July
                          20, 2000, between First National Bank of Northern
                          California and Jim D. Black, Charles R. Key and
                          Anthony J. Clifford.*

              **10.15     Business Loan Agreement, dated August 15, 2001,
                          between FNB Bancorp, as Borrower, and Pacific Coast
                          Bankers' Bank, as Lender, with Promissory Note and
                          related Loan Documents.

              **10.16     Communications Site Lease Agreement as amended dated
                          March 30, 1999, between First National Bank of
                          Northern California, as Lessor and Nextel of
                          California, Inc. as Lessee, with respect to Redwood
                          City Branch Office.

              **10.17     Note secured by Deed of Trust dated November 26, 1991,
                          and Modification Agreement dated September 1, 1999,
                          between First National Bank of Northern California, as
                          borrower, and Bertha Donati and Julio Donati, as
                          lenders, with respect to the Colma Branch Office of
                          First National Bank of Northern California.

              **10.18     Separation Agreement between First National Bank of
                          Northern California and Paul B. Hogan, dated December
                          5, 2001.*

                10.19     First Amendment to Separation Agreement between First
                          National Bank of Northern California and Paul B.
                          Hogan, dated March 22, 2002.*

                 21.1     The Registrant has one subsidiary, First National Bank
                          of Northern California.

           -----------------------
      *  Denotes management contracts, compensatory plans or arrangements.

      ** Incorporated by reference to registrant's Registration Statement on
         Form S-4 (No. 333-74954) filed with the Commission on December 12,
         2001.

(b)   Reports on Form 8-K:   No reports on Fom 8-K were filed during the last
quarter of 2001.

         An Annual Report for the fiscal year ended December 31, 2001, and
Notice of Annual Meeting and Proxy Statement for the Company's 2002 Annual
Meeting will be mailed to security holders subsequent to the date of filing this
Report. Copies of said materials will be furnished to the Commission in
accordance with the Commission's Rules and Regulations.


                                   SIGNATURES


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

                                       FNB BANCORP



Dated:  March 25, 2002                 By: /s/ MICHAEL R. WYMAN
                                           -------------------------------------
                                           Michael R. Wyman
                                           Chairman and Chief Executive Officer
                                           (Principal Executive Officer)


                                      -61-
<PAGE>

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

<TABLE>
<CAPTION>

           Signature                             Title                                    Date
           ---------                             -----                                    ----
<S>                                <C>                                               <C>
/s/ MICHAEL R. WYMAN               Director, Chairman and Chief Executive            March 25, 2002
----------------------------       Officer (Principal Executive Officer) and
Michael R. Wyman                   Director


/s/ JAMES B. RAMSEY                Senior Vice President and Chief Financial         March 25, 2002
----------------------------       Officer (Principal Financial Officer and
James B. Ramsey                    Principal Accounting Officer)


/s/ THOMAS C. MCGRAW               Director, President and Chief Operating           March 25, 2002
----------------------------       Officer, Secretary
Thomas C. McGraw


/s/ NEIL J. VANNUCCI               Director                                          March 25, 2002
----------------------------
Neil J. Vannucci


/s/ EDWARD J. WATSON               Director                                          March 25, 2002
----------------------------
Edward J. Watson


/s/ DANIEL J. MODENA               Director                                          March 25, 2002
----------------------------
Daniel J. Modena


/s/ LISA ANGELOT                   Director                                          March 25, 2002
----------------------------
Lisa Angelot
</TABLE>

                                      -62-
<PAGE>

                                  EXHIBIT INDEX



    Exhibit
    Number                         Description                              Page
  -----------        ------------------------------------------------       ----

     10.19           First Amendment to Separation Agreement between         64
                     First National Bank of Northern California and
                     Paul B. Hogan, dated March 22, 2002.


                                      -63-