UNITED STATES
                       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, 2005
                                                -----------------

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

                           Commission File No. 0-31525

                            AMERICAN RIVER BANKSHARES
    -------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                 California                               68-0352144
       ----------------------------------         ------------------------
       (State or other jurisdiction of            (IRS Employer ID Number)
       incorporation or organization)

         3100 Zinfandel Drive, Rancho Cordova, California        95670
         ------------------------------------------------      ----------
           (Address of principal executive offices)            (Zip code)

                                 (916) 851-0123
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

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

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

                   Title of Class: Common Stock, no par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as
defined in Rule 405 of the Securities Act.
Yes [ ]  No [X]

Indicate by check mark if the registrant is not required to file reports
pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ]  No [X]

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 filers pursuant to Item 405
of Regulation S-K 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. [X]

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]    Accelerated filer [X]   Non-accelerated filer [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes [ ] No [X]

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant's most recently completed second fiscal
quarter: $105,826,000.
<PAGE>

Number of shares outstanding of each of the registrant's classes of common
stock, as of March 7, 2006:

            No par value Common Stock - 5,614,576 shares outstanding.


                       DOCUMENTS INCORPORATED BY REFERENCE

The following documents are incorporated by reference into this Form 10-K: Part
III, Items 10 through 14 from Registrant's definitive proxy statement for the
2006 annual meeting of shareholders.

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<PAGE>

                            AMERICAN RIVER BANKSHARES

                                    INDEX TO
                           ANNUAL REPORT ON FORM 10-K
                        FOR YEAR ENDED DECEMBER 31, 2005



Part I.                                                                     Page
    Item 1.    Business                                                       4
    Item 1A.   Risk Factors                                                  16
    Item 1B.   Unresolved Staff Comments                                     18
    Item 2.    Properties                                                    18
    Item 3.    Legal Proceedings                                             19
    Item 4.    Submission of Matters to a Vote of Security Holders           19

Part II.

   Item 5.     Market for the Registrant's Common Equity, Related
               Stockholder Matters and Issuer Purchases of
               Equity Securities                                             20
   Item 6.     Selected Financial Data                                       22
   Item 7.     Management's Discussion and Analysis of Financial
               Condition and Results of Operations                           23
   Item 7A.    Quantitative and Qualitative Disclosures About Market Risk    44
   Item 8.     Financial Statements and Supplementary Data                   45
   Item 9.     Changes in and Disagreements with Accountants on Accounting
               and Financial Disclosure                                      84
   Item 9A.    Controls and Procedures                                       84
   Item 9B.    Other Information                                             86

Part III.

   Item 10.    Directors and Executive Officers of the Registrant            86
   Item 11.    Executive Compensation                                        86
   Item 12.    Security Ownership of Certain Beneficial Owners and
               Management and Related Stockholder Matters                    86
   Item 13.    Certain Relationships and Related Transactions                86
   Item 14.    Principal Accounting Fees and Services                        86

Part IV.

   Item 15.    Exhibits and Financial Statement Schedules                    87

Signatures                                                                   91

Exhibit Index                                                                93
    23.1       Consent of Independent Registered Accounting Firm             94
    31.1       Certifications of Chief Executive Officer pursuant to
               Section 302 of the Sarbanes-Oxley Act of 2002                 95
    31.2       Certifications of the Chief Financial Officer pursuant
               to Section 302 of the Sarbanes-Oxley Act of 2002              96
    32.1       Certifications of Chief Executive Officer and Chief
               Financial Officer pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002                                    97

                                       3
<PAGE>

PART I

Item 1. Business.

Cautionary Statements Regarding 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" within the meaning of Section 21E
of the Securities Exchange Act of 1934, as amended, and Section 27A of the
Securities Act of 1933, as amended. Such forward-looking statements may contain
words related to future projections including, but not limited to, words such as
"believe," "expect," "anticipate," "intend," "may," "will," "should," "could,"
"would," and variations of those words and similar words that are subject to
risks, uncertainties and other factors that could cause actual results to differ
materially from those projected. Factors that could cause or contribute to such
differences include, but are not limited to, the following: (1) variances in the
actual versus projected growth in assets; (2) return on assets; (3) loan and
lease losses; (4) expenses; (5) changes in the interest rate environment
including interest rates charged on loans, earned on securities investments and
paid on deposits; (6) competition effects; (7) fee and other noninterest income
earned; (8) general economic conditions nationally, regionally, and in the
operating market areas of the Company and its subsidiaries; (9) changes in the
regulatory environment; (10) changes in business conditions and inflation; (11)
changes in securities markets; (12) data processing problems; (13) a decline in
real estate values in the Company's operating market areas; (14) the effects of
terrorism, the threat of terrorism or the impact of the current military
conflict in Iraq and the conduct of the war on terrorism by the United States
and its allies, as well as other factors. The factors set forth under "Item 1A -
Risk Factors" in this report and other cautionary statements and information set
forth in this report should be carefully considered and understood as being
applicable to all related forward-looking statements contained in this report,
when evaluating the business prospects of the Company and its subsidiaries.

         Forward-looking statements are not guarantees of performance. By their
nature, they involve risks, uncertainties and assumptions. The future results
and shareholder values may differ significantly from those expressed in these
forward-looking statements. You are cautioned not to put undue reliance on any
forward-looking statement. Any such statement speaks only as of the date of this
report, and in the case of any documents that may be incorporated by reference,
as of the date of those documents. We do not undertake any obligation to update
or release any revisions to any forward-looking statements, to report any new
information, future event or other circumstances after the date of this report
or to reflect the occurrence of unanticipated events, except as required by law.
However, your attention is directed to any further disclosures made on related
subjects in our subsequent reports filed with the Securities and Exchange
Commission on Forms 10-K, 10-Q and 8-K.

Introduction

         American River Bankshares (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 in 1995. 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 3100 Zinfandel Drive, Suite 450,
Rancho Cordova, California 95670 and its telephone number is (916) 851-0123.

         The Company owns 100% of the issued and outstanding common shares of
its banking subsidiary, American River Bank, and American River Financial, a
California corporation which has been inactive since its incorporation in 2003.

         American River Bank was incorporated and commenced business in Fair
Oaks, California, in 1983 and thereafter moved its headquarters to Sacramento,
California in 1985. American River Bank operates five full service offices and
one convenience office in Sacramento and Placer Counties including the head
office located at 1545 River Park Drive, Suite 107, Sacramento, and branch
offices located at 520 Capitol Mall, Suite 100, Sacramento, 9750 Business Park
Drive, Sacramento, 10123 Fair Oaks Boulevard, Fair Oaks and 2240 Douglas
Boulevard, Roseville, and the convenience office (limited service office)
located at 3100 Zinfandel Drive, Suite 450, Rancho Cordova, and three full
service offices in Sonoma County located at 412 Center Street, Healdsburg, 8733
Lakewood Drive, Windsor, and 50 Santa Rosa Avenue, Suite 100, Santa Rosa,
operated under the name "North Coast Bank, a division of American River Bank."

                                       4
<PAGE>

North Coast Bank was incorporated and commenced business in 1990 as Windsor Oaks
National Bank in Windsor, California. In 1997, the name was changed to North
Coast Bank. In 2000, North Coast Bank was acquired by the Company as a separate
bank subsidiary. Effective December 31, 2003, North Coast Bank was merged with
and into American River Bank.

         On December 3, 2004, the Company acquired Bank of Amador located in
Jackson, California. Bank of Amador was merged with and into American River Bank
and now operates three full service banking offices as "Bank of Amador, a
division of American River Bank" within its primary service area of Amador
County, in the cities of Jackson, Pioneer and Ione.

         American River Bank's deposits are insured by the Federal Deposit
Insurance Corporation up to applicable legal limits. American River Bank does
not offer trust services or international banking services and does not plan to
do so in the near future. American River Bank's primary business is serving the
commercial banking needs of small to mid-sized businesses within those counties
listed above. American River Bank accepts checking and savings deposits, offers
money market deposit accounts and certificates of deposit, makes secured and
unsecured commercial, secured real estate, and other installment and term loans
and offers other customary banking services. American River Bank also conducts
lease financing for most types of business equipment, from computer software to
heavy earth-moving equipment.

         American River Bank owns 100% of two inactive companies, ARBCO and
American River Mortgage. ARBCO was formed in 1984 to conduct real estate
development and has been inactive since 1995. American River Mortgage has been
inactive since its formation in 1994.

         During 2005, the Company conducted no significant activities other than
holding the shares of its subsidiaries. However, it is authorized, with the
prior approval of the Board of Governors of the Federal Reserve System (the
"Board of Governors"), the Company's principal regulator, to engage in a variety
of activities which are deemed closely related to the business of banking.

         The common stock of the Company is registered under the Securities
Exchange Act of 1934, as amended, and is listed and traded on the Nasdaq
National Market under the symbol "AMRB."

         At December 31, 2005, the Company had consolidated assets of $613
million, deposits of $501 million and shareholders' equity of $63 million.

General

         The Company is a community-oriented bank holding company headquartered
in Sacramento, California. The principal communities served are located in
Sacramento, Placer, Yolo, El Dorado, Sonoma, and Amador counties. The Company
generates most of its revenue by providing a wide range of products and services
to small and middle-market businesses and individuals. The Company's principal
source of revenue comes from interest income. Interest income is derived from:
(i) interest and fees on loans and leases; (ii) interest on investments
(principally government securities); and (iii) interest on Federal funds sold
(funds loaned on a short-term basis to other banks). For the year ended December
31, 2005, these sources comprised 79.9%, 19.8%, and 0.3%, respectively, of the
Company's interest income.

           American River Bank's deposits are not received from a single
depositor or group of affiliated depositors, the loss of any one of which would
have a materially adverse effect on the business of the Company. A material
portion of American River Bank's deposits are not concentrated within a single
industry or group of related industries.

           As of December 31, 2005 and December 31, 2004, American River Bank
held $11,500,000 in certificates of deposit for the State of California. In
connection with these deposits, American River Bank is generally required to
pledge securities to secure such deposits, except for the first $100,000, which
are insured by the FDIC.

           American River Bank competes with approximately 35 other banking or
savings institutions in Sacramento County and 27 in Placer County. American
River Bank's market share of FDIC insured deposits in the service areas of
Sacramento County and Placer County was approximately 1.4% and 1.4%,
respectively (based upon the most recent information made available by the FDIC
through June 30, 2005). North Coast Bank, a division of American River Bank,

                                       5
<PAGE>

competes with approximately 22 other banking or savings institutions in its
service areas and its market share of FDIC insured deposits in the service area
of Sonoma County was approximately .7% (based upon the most recent information
made available by the FDIC through June 30, 2005). Bank of Amador, a division of
American River Bank competes with approximately 7 other banking or savings
institutions in its service areas and its market share of FDIC insured deposits
in the service area of Amador County was approximately 17.7% (based upon the
most recent information made available by the FDIC through June 30, 2005).

Employees

         At December 31, 2005, the Company and its subsidiaries employed 122
persons on a full-time equivalent basis. The Company believes its employee
relations are good.

Website Access

         The Company maintains a website where certain information about the
Company is posted. Through the website, its annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments
thereto, as well as Section 16 Reports and amendments thereto, are available as
soon as reasonably practicable after such material is electronically filed with
or furnished to the SEC. These reports are free of charge and can be accessed
through the address www.amrb.com by selecting the SEC Filings link located at
that address. Once you have selected the SEC Filings link you will have the
option to access the Section 16 Reports or the Reports filed by the Company by
selecting the appropriate link.


Regulation and Supervision

General

         The common stock of the Company 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. The
Company is also 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 (the "SEC").

         American River Bank is licensed by the California Commissioner of
Financial Institutions, its deposits are insured by the FDIC up to the
applicable legal limits, and it has chosen not to become a member of the Federal
Reserve System. Consequently, American River Bank is subject to the supervision
of, and is regularly examined by, the California Commissioner of Financial
Institutions and the FDIC. The supervision and regulation includes comprehensive
reviews of all major aspects of American River Bank's business and condition,
including its capital ratios, allowance for possible loan and lease losses and
other factors. However, no inference should be drawn that such authorities have
approved any such factors. American River Bankshares and American River Bank are
required to file reports with the Board of Governors, the California
Commissioner of Financial Institutions, and the FDIC and provide the additional
information that the Board of Governors, California Commissioner of Financial
Institutions, and FDIC may require.

         American River Bankshares 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. The Company 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, the Company would own or control more than
5% of the voting shares of such bank. The Bank Holding Company Act prohibits the
Company 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.

         The Company, and any subsidiaries which it may acquire or organize, are
deemed to be "affiliates" 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 American River Bank to affiliates, and (b) on investments by American
River Bank in affiliates' stock as collateral for loans to any borrower. The
Company and its subsidiaries are also subject to certain restrictions with
respect to engaging in the underwriting, public sale and distribution of
securities.

                                       6
<PAGE>

         In addition, regulations of the Board of Governors under the Federal
Reserve Act require that reserves be maintained by American River Bank in
conjunction with any liability of the Company under any obligation (promissory
note, acknowledgement 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
American River Bank for use in its banking business, or to maintain the
availability of such funds.

Capital Standards

         The Board of Governors and the FDIC 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, American River Bankshares and
American River Bank are required to maintain capital equal to at least 8.0% of
its assets and commitments to extend 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 and lease 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 the 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 intangible assets 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 FDIC 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, 2005, American River Bankshares and American River Bank
were in compliance with the risk-weighted capital and leverage ratio guidelines.

Prompt Corrective Action

         The Board of Governors and the FDIC 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 FDIC Improvement Act of
1991 ("FDICIA"). The regulations establish five capital categories with the

                                       7
<PAGE>

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%.

         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) limitations 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.

                                       8
<PAGE>

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 state bank from
engaging as a principal in any activity that is impermissible for a national
bank, absent FDIC determination that the activity would not pose a significant
risk to the Bank Insurance Fund, and that the bank is, and will continue to be,
within applicable capital standards.

         The Federal Financial Institution Examination Counsel ("FFIEC")
utilizes the Uniform Financial Institutions Rating System ("UFIRS") commonly
referred to as "CAMELS" to classify and evaluate the soundness of financial
institutions. Bank examiners use the CAMELS measurements to evaluate capital
adequacy, asset quality, management, earnings, liquidity and sensitivity to
market risk. Effective January 1, 2005, bank holding companies such as the
Company, were subject to evaluation and examination under a revised bank holding
company rating system. The so-called BOPEC rating system implemented in 1979 was
primarily focused on financial condition, consolidated capital and consolidated
earnings. The new rating system reflects the change toward analysis of risk
management (as reflected in bank examination under the CAMELS measurements), in
addition to financial factors and the potential impact of nondepository
subsidiaries upon depository institution subsidiaries.

         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. American
River Bank has a 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 its subsidiaries. The payment of cash
dividends and/or management fees by American River Bank is subject to
restrictions set forth in the California Financial Code, as well as restrictions
established by the FDIC. See Item 5. "Market for Registrant's Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities" for more
information regarding cash dividends.

Competition

Competitive Data

         American River Bank. At June 30, 2005, based on the most recent "Data
Book Summary of Deposits in FDIC Insured Commercial and Savings Banks" report at
that date, the competing commercial and savings banks had 164 offices in the
cities of Fair Oaks, Rancho Cordova, Roseville and Sacramento, California, where
American River Bank has its 6 Sacramento area offices, 56 offices in the cities
of Healdsburg, Santa Rosa and Windsor, California, where American River Bank has
its 3 Sonoma County offices, and 4 offices in the cities of Jackson, Pioneer and

                                       9
<PAGE>

Ione, California, where American River Bank has its 3 Amador County offices.
Additionally, American River Bank competes with thrifts and, to a lesser extent,
credit unions, finance companies and other financial service providers for
deposit and loan customers.

         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 American River Bank is not authorized nor prepared to
offer currently. American River 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 American River Bank's
legal lending limits, American River Bank has offered, and intends to offer in
the future, such loans on a participating basis with its correspondent banks and
with other community banks, retaining the portion of such loans which is within
its lending limits. As of December 31, 2005, American River Bank's aggregate
legal lending limits to a single borrower and such borrower's related parties
were $10,298,000 on an unsecured basis and $17,164,000 on a fully secured basis
based on capital and allowable reserves of $68,656,000.

         American River Bank's business is concentrated in its service area,
which primarily encompasses Sacramento County, South Western Placer County,
Sonoma County, and Amador County. The economy of American River Bank's service
area is dependent upon government, manufacturing, tourism, retail sales,
agriculture, population growth and smaller service oriented businesses.

         Based upon the most recent "Data Book Summary of Deposits in FDIC
Insured Commercial and Savings Banks" report dated June 30, 2005, there were 206
operating commercial and savings bank offices in Sacramento County with total
deposits of $18,586,086,000. This was an increase of $1,896,610,000 over the
June 30, 2004 balances. American River Bank held a total of $267,353,000 in
deposits, representing approximately 1.4% of total commercial and savings banks
deposits in Sacramento County as of June 30, 2005.

         Based upon the most recent "Data Book Summary of Deposits in FDIC
Insured Commercial and Savings Banks" report dated June 30, 2005, there were 98
operating commercial and savings bank offices in Placer County with total
deposits of $5,113,151,000. This was an increase of $726,999,000 over the June
30, 2004 balances. American River Bank held a total of $71,353,000 in deposits,
representing approximately 1.4% of total commercial and savings banks deposits
in Placer County as of June 30, 2005.

         Based upon the most recent "Data Book Summary of Deposits in FDIC
Insured Commercial and Savings Banks" report dated June 30, 2005, there were 123
operating commercial and savings bank offices in Sonoma County with total
deposits of $8,789,733,000. This was an increase of $397,392,000 over the June
30, 2004 balances. American River Bank held a total of $61,589,000 in deposits,
representing approximately 0.7% of total commercial and savings banks deposits
in Sonoma County as of June 30, 2005.

         Based upon the most recent "Data Book Summary of Deposits in FDIC
Insured Commercial and Savings Banks" report dated June 30, 2005, there were 13
operating commercial and savings bank offices in Amador County with total
deposits of $627,759,000. This was an increase of $33,612,000 over the June 30,
2004 balances. American River Bank held a total of $110,937,000 in deposits,
representing approximately 17.7% of total commercial and savings banks deposits
in Amador County as of June 30, 2005.

         In 1996, pursuant to Congressional mandate, the FDIC reduced bank
deposit insurance assessment rates to a range from $0 to $0.27 per $100 of
deposits, dependent upon a bank's risk. In 2005, Congress adopted the Federal
Deposit Insurance Reform Act of 2005. The FDIC has not yet released final
regulations, but it is anticipated that the final regulations, when released,
will include, among other matters, increased premium assessments. Based upon the
current risk-based assessment rate schedule, American River Bank's current
capital ratios and levels of deposits, American River Bank does not anticipate a
significant increase in operating expenses due to changes in the assessment rate
applicable to it during 2006 from that in 2005. The Company currently believes
that changes, if any, will occur in the fourth quarter and, that such changes
are not anticipated to have a material impact on the results of operations for
the Company in 2006.

General Competitive Factors

         In order to compete with the major financial institutions in their
primary service areas, American River Bank uses to the fullest extent possible
the flexibility which is accorded by their community banks 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

                                       10
<PAGE>

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.

         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.

         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 revenues.

         The interest rate differentials of a bank, and therefore their
revenues, 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 American River Bank is not
predictable.

Impact of Legislative and Regulatory Proposals

         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 Board of
Governors, have taken steps to increase the types of activities in which bank
holding companies can engage, and to make it easier to engage in such
activities.

         In 1999, the Gramm-Leach-Bliley Act (the "GLB Act") was signed into
law. The GLB 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 GLB Act repealed Section 20 of Glass-Steagall which
prohibited banks from affiliating with securities firms. Bank holding companies
that can qualify as "financial holding companies" can now 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 GLB 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 GLB Act.

         Prior to the GLB 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 GLB Act removed these restrictions

                                       11
<PAGE>

and substantially eliminated 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 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 GLB 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 GLB 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 the 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 American River Bankshares or American River Bank have
determined whether or when they may seek to acquire and exercise powers or
activities under the GLB Act, and the extent to which competition will change
among financial institutions affected by the GLB Act has not yet become clear.

         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 American River 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 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 created 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 American River Bank are not currently aware of any
account relationships between American River 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. Certain surveillance provisions of the

                                       12
<PAGE>

Patriot Act were scheduled to expire on December 31, 2005, and actions to
restrict the use of the Patriot Act surveillance provisions have been filed by
the ACLU and other organizations. Congress recently extended the expiration date
to permit the evaluation of changes to the Patriot Act. It is not clear whether
the provisions that were scheduled to expire will expire, or be replaced or
superseded by alternative provisions. The effects which the Patriot Act and any
additional legislation enacted by Congress may have upon financial institutions
is uncertain; however, such legislation could increase compliance costs and
thereby potentially may have an adverse effect upon the Company's results of
operations.

         Certain legislative and regulatory proposals that could affect American
River Bankshares and American River 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 American River Bankshares or American River Bank to
increased regulation, disclosure and reporting requirements, competition, and
costs of doing business.

         On July 30, 2002, President George W. Bush signed into law the
Sarbanes-Oxley Act of 2002 (the "Act") which responds to recent issues in
corporate governance and accountability. Among other matters, key provisions of
the Act and rules promulgated by the SEC pursuant to the Act include the
following:

     o   Expanded oversight of the accounting profession by creating a new
         independent public company oversight board to be monitored by the SEC.
     o   Revised rules on auditor independence to restrict the nature of
         non-audit services provided to audit clients and to require such
         services to be pre-approved by the audit committee.
     o   Improved corporate responsibility through mandatory listing standards
         relating to audit committees, certifications of periodic reports by
         the CEO and CFO and making issuer interference with an audit a crime.
     o   Enhanced financial disclosures, including periodic reviews for largest
         issuers and real time disclosure of material company information.
     o   Enhanced criminal penalties for a broad array of white collar crimes
         and increases in the statute of limitations for securities fraud
         lawsuits.
     o   Disclosure of whether a company has adopted a code of ethics that
         applies to the company's principal executive officer, principal
         financial officer, principal accounting officer or controller, or
         persons performing similar functions, and disclosure of any amendments
         or waivers to such code of ethics. The disclosure obligation became
         effective for fiscal years ending on or after July 15, 2003. The
         ethics code must contain written standards that are reasonably
         designed to deter wrongdoing and to promote:

          o    Honest and ethical conduct, including the ethical handling of
               actual or apparent conflicts of interest between personal and
               professional relationships;
          o    Full, fair, accurate, timely, and understandable disclosure in
               reports and documents that a registrant files with, or submits
               to, the Securities and Exchange Commission and in other public
               communications made by the registrant;
          o    Compliance with applicable governmental laws, rules and
               regulations;
          o    The prompt internal reporting to an appropriate person or persons
               identified in the code of violations of the code; and
          o    Accountability for adherence to the code.

     o   Disclosure of whether a company's audit committee of its board of
         directors has a member of the audit committee who qualifies as an
         "audit committee financial expert." The disclosure obligation became
         effective for fiscal years ending on or after July 15, 2003. To
         qualify as an "audit committee financial expert," a person must have:

          o    An understanding of generally accepted accounting principles and
               financial statements;
          o    The ability to assess the general application of such principles
               in connection with the accounting for estimates, accruals and
               reserves;

                                       13
<PAGE>

          o    Experience preparing, auditing, analyzing or evaluating financial
               statements that present a breadth and level of complexity of
               accounting issues that are generally comparable to the breadth
               and complexity of issues that can reasonably be expected to be
               raised by the registrant's financial statements, or experience
               actively supervising one or more persons engaged in such
               activities;
          o    An understanding of internal controls and procedures for
               financial reporting; and
          o    An understanding of audit committee functions.

                A person must have acquired the above listed attributes to be
     deemed to qualify as an "audit committee financial expert" through any one
     or more of the following:

          o    Education and experience as a principal financial officer,
               principal accounting officer, controller, public accountant or
               auditor or experience in one or more positions that involve the
               performance of similar functions;
          o    Experience actively supervising a principal financial officer,
               principal accounting officer, controller, public accountant,
               auditor or person performing similar functions;
          o    Experience overseeing or assessing the performance of companies
               or public accountants with respect to the preparation, auditing
               or evaluation of financial statements; or
          o    Other relevant experience.

                The rule contains a specific safe harbor provision to clarify
     that the designation of a person as an "audit committee financial expert"
     does not cause that person to be deemed to be an "expert" for any purpose
     under Section 11 of the Securities Act of 1933, as amended, or impose on
     such person any duties, obligations or liability greater than the duties,
     obligations and liability imposed on such person as a member of the audit
     committee and the board of directors, absent such designation. Such a
     designation also does not affect the duties, obligations or liability of
     any other member of the audit committee or board of directors.

     o   A prohibition on insider trading during pension plan black-out periods.
     o   Disclosure of off-balance sheet transactions.
     o   A prohibition on personal loans to directors and officers.
     o   Conditions on the use of non-GAAP (generally accepted accounting
         principles) financial measures.
     o   Standards on professional conduct for attorneys requiring attorneys
         having an attorney-client relationship with a company, among other
         matters, to report "up the ladder" to the audit committee, another
         board committee or the entire board of directors certain material
         violations.
     o   Expedited filing requirements for Form 4 reports of changes in
         beneficial ownership of securities reducing the filing deadline to
         within 2 business days of the date a transaction triggers an
         obligation to report.
     o   Accelerated filing requirements for Forms 10-K and 10-Q by public
         companies which qualify as "accelerated filers" to a phased-in
         reduction of the filing deadline for Form 10-K reports and Form 10-Q
         reports.
     o   Disclosure concerning website access to reports on Forms 10-K, 10-Q
         and 8-K, and any amendments to those reports, by "accelerated filers"
         as soon as reasonably practicable after such reports and material are
         filed with or furnished to the Securities and Exchange Commission.
     o   Rules requiring national securities exchanges and national securities
         associations to prohibit the listing of any security whose issuer does
         not meet audit committee standards established pursuant to the Act
         including:

          o    Independence standards for members;
          o    Responsibility for selecting and overseeing the issuer's
               independent accountant;
          o    Responsibility for handling complaints regarding the issuer's
               accounting practices;
          o    Authority to engage advisers; and
          o    Funding requirements for the independent auditor and outside
               advisers engaged by the audit committee.

         On November 4, 2003, the Securities and Exchange Commission adopted
changes to the standards for the listing of issuer securities by the New York
Stock Exchange and Nasdaq Stock Market. The revised standards for listing
conform to and supplement Rule 10A-3 under the Securities Exchange Act of 1934,
as amended, which the Securities and Exchange Commission adopted in April 2003
pursuant to the Act.

         The Company's securities are listed on the Nasdaq Stock Market.
Consequently, in addition to the rules promulgated by the Securities and
Exchange Commission pursuant to the Act, the Company must also comply with
revised listing standards applicable to Nasdaq listed companies. Generally,

                                       14
<PAGE>

listed companies were required to comply with the revised listing standards by
the first annual meeting of shareholders following January 15, 2004. The revised
Nasdaq listing standards applicable to the Company include the following:

     o   A majority of directors of a listed company must be "independent",
         which excludes:

          o    Any director who is, or at any time in the past three years was,
               employed by a listed company, its parent or a subsidiary;
          o    Any director or any family member who received payments in excess
               of $60,000 in the current year or prior three years from a listed
               company, its parent or a subsidiary;
          o    Any director whose family member is employed or during the last
               three years was employed as an executive officer of a listed
               company, its parent or a subsidiary;
          o    Any director or any family member who is a partner, controlling
               shareholder or executive officer of an organization to which a
               listed company made payments or from which a listed company
               received payments, for services or property, in the current year
               or prior three years in excess of the greater of $200,000 or 5%
               of the recipient's consolidated gross revenues in the year of
               payment;
          o    Any director or any family member who is employed as an executive
               officer of another organization where during the current year or
               prior three years an executive officer of a listed company served
               on the compensation committee of such organization; and
          o    Any director or any family member who is a partner of the outside
               auditor of a listed company or was a partner or employee of the
               listed company's auditor and worked on the company's audit in the
               prior three years.

     o   Independent directors of a listed company must meet alone in executive
         sessions at least two times annually.
     o   Listed companies must certify adoption of a resolution or written
         charter dealing with nominations of directors and select nominees for
         election as directors either by determination of a majority of
         independent directors or by a nominating committee consisting solely of
         independent directors, with certain exceptions.
     o   Compensation of a listed company's chief executive officer must be
         determined either by a majority of independent directors or by a
         compensation committee consisting solely of independent directors, with
         certain exceptions.
     o   The audit committee of a listed company, subject to certain exceptions,
         must comply with requirements that include:

          o    The committee be comprised of at least three independent
               directors who have not participated in the preparation of
               financial statements for the company, its parent or subsidiaries
               during the last three years;
          o    Each director must be able to read and understand financial
               statements;
          o    At least one director must meet the "financial sophistication"
               criteria which the company must certify;
          o    The committee must adopt a written charter; and
          o    The committee is responsible for the review and approval of all
               related-party transactions, except those approved by another
               board committee comprised of independent directors.

     o   The adoption or amendment of any equity compensation arrangement after
         June 30, 2003, such as a stock option plan, requires shareholder
         approval, subject to certain exemptions.
     o   A code of conduct had to be adopted by May 4, 2004 that (i) complies
         with the code of ethics requirements of the Act and the Nasdaq
         Marketplace Rules; (ii) covers all directors, officers and employees;
         (iii) includes an enforcement mechanism; and (iv) permits only the
         board of directors to grant waivers from or changes to the code of
         conduct affecting directors and executive officers and requires prompt
         disclosure thereof on a Form 8-K filing with the Securities and
         Exchange Commission.

         The effect of the Act upon the Company is uncertain; however, the
Company has incurred and it is anticipated that it will continue to incur
increased costs to comply with the Act and the rules and regulations promulgated
pursuant to the Act by the Securities and Exchange Commission, Nasdaq and other
regulatory agencies having jurisdiction over the Company or the issuance and
listing of its securities. The Company does not currently anticipate, however,
that compliance with the Act and such rules and regulations will have a material
adverse effect upon its financial position or results of its operations or its
cash flows.

                                       15
<PAGE>

         On September 28, 2002, California Governor Gray Davis signed into law
the California Corporate Disclosure Act (the "CCD Act"), which became effective
January 1, 2003. The CCD Act requires publicly traded corporations incorporated
or qualified to do business in California to disclose information about their
past history, auditors, directors and officers. The CCD Act requires the Company
to disclose:

          o    The name of the a company's independent auditor and a description
               of services, if any, performed for the company during the
               previous 24 months;
          o    The annual compensation paid to each director and executive
               officer, including stock or stock options not otherwise available
               to other company employees;
          o    A description of any loans made to a director at a "preferential"
               loan rate during the previous 24 months, including the amount and
               terms of the loans;
          o    Whether any bankruptcy was filed by a company or any of its
               directors or executive officers within the previous 10 years;
          o    Whether any director or executive officer of a company has been
               convicted of fraud during the previous 10 years; and
          o    Whether a company violated any federal securities laws or any
               securities or banking provisions of California law during the
               previous 10 years for which the company was found liable or fined
               more than $10,000.

         The Company does not currently anticipate that compliance with the CCD
Act will have a material adverse effect upon its financial position or results
of its operations or its cash flows.

         The Check Clearing for the 21st Century Act (commonly referred to as
"Check 21") was signed into law in 2003 and became effective on October 28,
2004. The law facilitates check truncation by creating a new negotiable
instrument called a "substitute check" which permits banks to truncate original
checks, to process check information electronically and to deliver "substitute
checks" to banks that want to continue receiving paper checks. Check 21 is
intended to reduce the dependence of the check payment system on physical
transportation networks (which can be disrupted by terrorist attacks of the type
which occurred on September 11, 2001) and to streamline the collection and
return process. The law does not require banks to accept checks in electronic
form nor does it require banks to use the new authority granted by the Act to
create "substitute checks." The Company does not currently anticipate that
compliance with the Act will have a material effect upon its financial position
or results of its operations or its cash flows.

         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 American River Bankshares or
American River Bank.

Item 1A. Risk Factors.

         The Company and its subsidiary, American River Bank, conduct business
in an environment that includes certain risks described below which could have a
material adverse effect on the Company's business, results of operations,
financial condition, future prospects and stock price. You are also referred to
the matters described under the heading "Cautionary Statements Regarding
Forward-Looking Statements," for additional information regarding factors that
may affect the Company's business.

     o   American River Bankshares' business is subject to interest rate risk,
         and variations in interest rates may negatively affect its financial
         performance.

         Changes in the interest rate environment may reduce the Company's net
interest income. It is expected that the Company will continue to realize income
from the differential or "spread" between the interest earned on loans,
securities and other interest-earning assets, and interest paid on deposits,
borrowings and other interest-bearing liabilities. Net interest spreads are
affected by the difference between the maturities and repricing characteristics
of interest-earning assets and interest-bearing liabilities. In addition, loan
volume and yields are affected by market interest rates on loans, and rising
interest rates generally are associated with a lower volume of loan
originations. We cannot assure you that we can minimize the Company's interest
rate risk. In addition, an increase in the general level of interest rates may
adversely affect the ability of certain borrowers to pay the interest on and
principal of their obligations. Accordingly, changes in levels of market
interest rates could materially and adversely affect the Company's net interest
spread, asset quality, loan origination volume and overall profitability.

                                       16
<PAGE>

     o   American River Bankshares' subsidiary, American River Bank, faces
         strong competition from financial service companies and other companies
         that offer banking services, which can hurt American River Bankshares'
         business.

         The Company's subsidiary, American River Bank, conducts banking
operations principally in Northern California. Increased competition in American
River Bank's market may result in reduced loans and deposits. Ultimately, it may
not be able to compete successfully against current and future competitors. Many
competitors offer the banking services that are offered by American River Bank
in its service area. These competitors include national and super-regional
banks, finance companies, investment banking and brokerage firms, credit unions,
government-assisted farm credit programs, other community banks and
technology-oriented financial institutions offering online services. In
particular, American River Bank's competitors include several major financial
companies whose greater resources may afford them a marketplace advantage by
enabling them to maintain numerous banking locations and mount extensive
promotional and advertising campaigns. Additionally, banks and other financial
institutions with larger capitalization and financial intermediaries not subject
to bank regulatory restrictions have larger lending limits and are thereby able
to serve the credit needs of larger customers. Areas of competition include
interest rates for loans and deposits, efforts to obtain deposits, and range and
quality of products and services provided, including new technology-driven
products and services. Technological innovation continues to contribute to
greater competition in domestic and international financial services markets as
technological advances, such as Internet-based banking services that cross
traditional geographic bounds, enable more companies to provide financial
services. If American River Bank is unable to attract and retain banking
customers, it may be unable to continue its loan growth and level of deposits,
which may adversely affect its and the Company's results of operations,
financial condition and future prospects.

     o   Changes in economic conditions could result in an economic downturn in
         Northern California which could adversely affect American River
         Bankshares' business.

         The Company's business is directly affected by factors such as
economic, political and market conditions, broad trends in industry and finance,
legislative and regulatory changes, changes in government monetary and fiscal
policies and inflation, all of which are beyond the Company's control. A
deterioration in economic conditions locally, regionally or nationally including
as the result of terrorist activities within and outside California could result
in an economic downturn in Northern California and trigger the following
consequences, any of which could adversely affect the Company's business:

         o    loan delinquencies and defaults may increase;
         o    problem assets and foreclosures may increase;
         o    demand for the Company's products and services may decline;
         o    low cost or non-interest bearing deposits may decrease; and
         o    collateral for loans may decline in value, in turn reducing
              customers' borrowing power, and reducing the value of assets and
              collateral as sources of repayment of existing loans.

     o   American River Bankshares has a concentration risk in real estate
         related loans.

         At December 31, 2005, approximately 71.5% of the Company's loan and
lease portfolio consisted of real estate related loans. Substantially all of the
Company's real property collateral is located in its operating markets in
Northern California. A substantial decline in real estate values in the
Company's primary market areas could occur as a result of an economic downturn,
or other events including natural disasters such as earthquakes, fires, and
floods. Such a decline in values could have an adverse impact on the Company by
limiting repayment of defaulted loans through sale of the real estate collateral
and by likely increasing the number of defaulted loans to the extent that the
financial condition of its borrowers is adversely affected by such a decline in
values. Those events could necessitate a significant increase in the provision
for loan and lease losses which could adversely affect the Company's results of
operations, financial condition, and future prospects.

                                       17
<PAGE>

     o   American River Bankshares is subject to extensive regulation, which
         could adversely affect its business.

         The Company's operations are subject to extensive regulation by state
and local governmental authorities and are subject to various laws and judicial
and administrative decisions imposing requirements and restrictions on part or
all of its operations. The Company believes that it is in substantial compliance
in all material respects with laws, rules and regulations applicable to the
conduct of its business. Because the Company's business is highly regulated, the
laws, rules and regulations applicable to it are subject to regular modification
and change. There can be no assurance that these laws, rules and regulations, or
any other laws, rules or regulations, will not be adopted in the future, which
could make compliance much more difficult or expensive, restrict the Company's
ability to originate, broker or sell loans, further limit or restrict the amount
of commissions, interest or other charges earned on loans originated or sold by
the Company, or otherwise adversely affect the Company's results of operations,
financial condition, or future prospects.

     o   American River Bank's allowance for loan and lease losses may not be
         adequate to cover actual losses.

         Like all financial institutions, American River Bank maintains an
allowance for loan and lease losses to provide for loan defaults and
non-performance, but its allowance for loan and lease losses may not be adequate
to cover actual loan and lease losses. In addition, future provisions for loan
and lease losses could materially and adversely affect American River Bank's and
therefore the Company's operating results. American River Bank's allowance for
loan and lease losses is based on prior experience, as well as an evaluation of
the risks in the current portfolio. The amount of future losses is susceptible
to changes in economic, operating and other conditions, including changes in
interest rates that may be beyond American River Bank's control, and these
losses may exceed current estimates. Federal regulatory agencies, as an integral
part of their examination process, review American River Bank's loans and leases
and allowance for loan and lease losses. Although we believe that American River
Bank's allowance for loan and lease losses is adequate to cover current losses,
we cannot assure you that it will not further increase the allowance for loan
and lease losses or that regulators will not require it to increase this
allowance. Either of these occurrences could materially and adversely affect the
Company's earnings.

Item 1B. Unresolved Staff Comments.

         None.

Item 2.  Properties.

         The Company and American River Bank lease ten and own two of their
respective premises. The Company's headquarters is located at 3100 Zinfandel
Drive, Suite 450, Rancho Cordova, California. The office space is located in a
six-story office building. The location also houses a convenience office of
American River Bank that performs limited branch related transactions and
business development. The lease is 91 months expiring on May 6, 2013. The
premises consist of 7,378 square feet on the fourth floor. The space is leased
from PGOCC, LLC.

         American River Bank's head office is located at 1545 River Park Drive,
Suite 107, Sacramento, California, in a modern, five floor building which has
offstreet parking for its clients. American River Bank leases premises in the
building from EOP-Point West, L.L.C. The lease term is ten years and expires on
March 31, 2010. The premises consist of 9,498 square feet on the ground floor.

         American River Bank leases premises at 9750 Business Park Drive,
Sacramento, California. The office space is leased from Bradshaw Plaza Group,
which is owned in part by Charles D. Fite, a director of the Company. The lease
term is seven years and expires on November 30, 2006. The premises consist of
4,590 square feet on the ground floor.

         American River Bank leases premises at 10123 Fair Oaks Boulevard, Fair
Oaks, California. The office space is leased from Marjorie Taylor, a former
director of the Company. The lease term is 12 years and expires on March 1,
2009. The premises consist of 2,380 square feet on the ground floor.

                                       18
<PAGE>

         American River Bank leases premises at 2240 Douglas Boulevard,
Roseville, California. The office space is leased from Twin Tree Land Company.
The lease term is 10 years and expires on December 18, 2006. The premises
consist of 3,790 square feet on the ground floor.

         American River Bank leases premises at 520 Capitol Mall, Sacramento,
California. The office space is leased from 520 Capitol Mall, Inc. The lease
term is 10 years and expires on June 1, 2014. The premises consist of 4,010
square feet on the ground floor.

         North Coast Bank, a division of American River Bank, leases premises at
8733 Lakewood Drive, Windsor, California. The office space is leased from R. and
R. Partners. The two-year lease expired on December 31, 2005, management
negotiated a one-year extension expiring on December 31, 2006. The premises
consist of 2,200 square feet on the ground floor.

         North Coast Bank, a division of American River Bank, owns premises at
412 Center Street, Healdsburg, California. The premises were purchased June 1,
1993. The purchase price for the land and building was $343,849. The building
consists of 2,620 square feet. The land consists of 10,835 square feet.

         North Coast Bank, a division of American River Bank, leases premises at
50 Santa Rosa Avenue, Santa Rosa, California. The office space is leased from
HSG Trust. The lease term is ten (10) years and expires on January 31, 2009. The
premises consist of 7,072 square feet on the ground floor.

         Bank of Amador, a division of American River Bank, leases premises at
422 Sutter Street, Jackson, California. The office space is leased from the
United States Postal Service. The lease term is five (5) years and expires on
May 31, 2006. The premises consist of 6,400 square feet on the ground floor and
second floor.

         Bank of Amador, a division of American River Bank, leases land at 26675
Tiger Creek Road, Pioneer, California. The Company owns the 2,460 square foot
modular building and leases the land from Soaring Eagle Inc. The land lease term
is five (5) years and expires on May 31, 2007.

         Bank of Amador, a division of American River Bank, owns premises at 66
Main Street, Ione, California. The premises were purchased April 1, 1995. The
purchase price for the land and building was $167,500. The building consists of
2,576 square feet. The land consists of 9,700 square feet.

         Bank of Amador, a division of American River Bank, leases the parking
lot at 276 North Main Street, Jackson, California. The parking lot is leased
from Wilhelmina Petkovich. The lease term is three (3) years and expires on
December 31, 2007.

         The leases on the premises located at 1545 River Park Drive, 9750
Business Park Drive, 2240 Douglas Boulevard, 50 Santa Rosa Avenue, and 3100
Zinfandel Drive, contain options to extend for five years.

          Included in the above are two facilities leased from current or former
directors of the Company at terms and conditions which management believes are
consistent with the commercial lease market.

         The foregoing summary descriptions of leased premises are qualified in
their entirety by reference to the lease agreements listed as exhibits in Part
IV, Item 15 of this report.


Item 3.  Legal Proceedings.

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

         From time to time, the Company and/or its subsidiaries 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 its subsidiaries 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 or its subsidiaries, taken as a whole.


Item 4.  Submission of Matters to a Vote of Security Holders.

         There were no matters submitted to a vote of the shareholders during
the fourth quarter of 2005.

                                       19
<PAGE>

PART II

Item 5.  Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities.

Market Information

         The Company's common stock began trading on the NASDAQ National Stock
Market ("NASDAQ") under the symbol "AMRB" on October 26, 2000. The following
table shows the high and the low prices for the common stock, for each quarter,
as reported by NASDAQ. The prices have been adjusted to reflect 5% stock
dividends declared in 2005 and in 2004.

                   ===================================================
                     2005                        High          Low
                   ---------------------------------------------------
                   First quarter                $22.38       $19.85
                   Second quarter                22.62        19.76
                   Third quarter                 23.10        19.91
                   Fourth quarter                22.89        21.05

                     2004                        High          Low
                   ---------------------------------------------------
                   First quarter                $19.05       $17.24
                   Second quarter                20.18        18.03
                   Third quarter                 21.21        17.69
                   Fourth quarter                21.77        19.41
                   ===================================================

         The closing price for the Company's common stock on March 7, 2006 was
$27.31.

Holders

         As of March 3, 2006, there were approximately 2,823 shareholders of
record of the Company's common stock.

Dividends

         The Company has paid quarterly cash dividends on its common stock since
the first quarter of 2004; prior to that, the Company paid cash dividends twice
a year since 1992. It is currently the intention of the Board of Directors of
the Company to continue payment of cash dividends on a quarterly basis. In 2005
and 2004, the Company declared cash dividends in the amount of $.54 and $.42,
respectively, per common share. The amounts have been adjusted to reflect 5%
stock dividends declared in 2005 and in 2004. There is no assurance, however,
that any dividends will be paid in the future since they are subject to
regulatory restrictions, and dependent upon earnings, financial condition and
capital requirements of the Company and its subsidiaries.

         The California General Corporation Law (the "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 Corporation Law further provides that, in the event that
sufficient retained earnings are not available for the proposed distribution, a
corporation may nevertheless make a distribution to its shareholders if it meets
two conditions, which generally stated are as follows: (1) the corporation's
assets equal at least 1-1/4 times its liabilities; and (2) the corporation's
current assets equal at least its current liabilities or, if the average of the
corporation's earnings before taxes on income and before interest expenses for
the two preceding fiscal years was less than the average of the corporation's
interest expenses for such fiscal years, then the corporation's current assets
must equal at least 1-1/4 times its current liabilities.

         The Board of Governors 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 Board of Governors' policy is that a bank holding company should
not continue its existing rate of cash dividends on its common stock unless its

                                       20
<PAGE>

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.

         The payment of cash dividends by American River Bank is subject to
restrictions set forth in the California Financial Code (the "Financial Code").
The Financial Code provides that a bank may not make a cash distribution to its
shareholders in excess of the lesser of (a) the bank's retained earnings; or (b)
the bank's net income for its last three fiscal years, less the amount of any
distributions made by the bank or by any majority-owned subsidiary of the bank
to the shareholders of the bank during such period. However, a bank may, with
the approval of the Commissioner, make a distribution to its shareholders in an
amount not exceeding the greater of (a) its retained earnings; (b) its net
income for its last fiscal year; or (c) its net income for its current fiscal
year. In the event that the Commissioner determines that the shareholders'
equity of a bank is inadequate or that the making of a distribution by the bank
would be unsafe or unsound, the Commissioner may order the bank to refrain from
making a proposed distribution.

         The FDIC may also restrict the payment of dividends by a subsidiary
bank if such payment would be deemed unsafe or unsound or if after the payment
of such dividends, the bank would be included in one of the "undercapitalized"
categories for capital adequacy purposes pursuant to the Federal Deposit
Insurance Corporation Improvement Act of 1991.

         As of December 31, 2005, American River Bank had $2.2 million in
retained earnings available for dividend payments to the Company, which in turn
could be paid out to shareholders of the Company.

Stock Repurchases

         On September 20, 2001, the Board of Directors of the Company authorized
a stock repurchase program which calls for the repurchase of up to five percent
(5%) annually of the Company's outstanding shares of common stock. Each year the
Company may repurchase up to 5% of the shares outstanding (adjusted for stock
splits or stock dividends). The 198,698 shares reported in the table as shares
that may be repurchased under the plan represent shares eligible for the
calendar year 2005. The repurchases are to be made from time to time in the open
market as conditions allow and will be structured to comply with Commission Rule
10b-18. Management reports monthly to the Board of Directors on the status of
the repurchase program. The Board of Directors has reserved the right to
suspend, terminate, modify or cancel this repurchase program at any time for any
reason. The following table lists shares repurchased during the quarter and the
maximum amount available to repurchase under the repurchase plan.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
          Period                  (a)                (b)                     (c)                            (d)
                             Total Number        Average Price       Total Number of Shares         Maximum Number (or
                             of Shares (or       Paid Per Share     (or Units) Purchased as     Approximate Dollar Value) of
                                 Units)           (or Unit)            Part of Publicly          Shares (or Units) That May
                               Purchased                              Announced Plans or        Yet Be Purchased Under the
                                                                           Programs                 Plans or Programs
----------------------------------------------------------------------------------------------------------------------------
<S>                              <C>               <C>                      <C>                       <C>
         Month #1
     October 1 through           11,970            $ 22.00                  11,970                    226,313 shares
     October 31, 2005
         Month #2
    November 1 through           18,375            $ 21.84                  18,375                    207,938 shares
    November 30, 2005
         Month #3
    December 1 through            9,240            $ 22.08                   9,240                    198,698 shares
    December 31, 2005
----------------------------------------------------------------------------------------------------------------------------
          Total                  39,585            $ 21.94                  39,585
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

         During 2005, the Company repurchased 80,325 shares; during 2004, the
Company repurchased 10,253 shares; during 2003, the Company repurchased 1,654
shares and in 2002, the Company repurchased 72,353 shares under the repurchase
plan.

                                       21
<PAGE>

Item 6.  Selected Financial Data.

FINANCIAL SUMMARY-The following table presents certain consolidated financial
information concerning the business of the Company and its subsidiaries. This
information should be read in conjunction with the Consolidated Financial
Statements, the notes thereto, and Management's Discussion and Analysis included
in this report. All per share data has been retroactively restated to reflect
stock dividends and stock splits. In December 2004 the Company completed a
merger with Bank of Amador. The merger transaction was accounted for using the
pooling method of accounting and accordingly the results of their operations are
included in the table below.

As of and for the Years Ended December 31,
(In thousands, except per share amounts and ratios)

<TABLE>
<CAPTION>
                                                   2005          2004          2003          2002          2001
STATEMENT OF OPERATIONS DATA
<S>                                            <C>           <C>           <C>           <C>           <C>
Net interest income                            $   26,462    $   19,418    $   16,866    $   15,073    $   14,577
Provision for loan and lease losses                   322           895           946           644           791
Other income                                        2,329         2,395         2,253         2,323         2,365
Other expenses                                     13,493        11,713        10,372         9,389         9,502
Income before income taxes                         14,976         9,205         7,801         7,363         6,649
Income taxes                                        5,792         3,378         3,060         2,904         2,612
Net income                                     $    9,184    $    5,827    $    4,741    $    4,459    $    4,037
Earnings per share - basic                     $     1.63    $     1.24    $     1.08    $     1.02    $     0.92
Earnings per share - diluted                         1.60          1.18          1.00          0.95          0.86
Cash dividends per share                             0.54          0.42          0.27          0.21          0.16

Book value per share                                11.20         10.57          7.93          7.31          6.39
Tangible book value per share                        7.98          7.29          7.92          7.29          6.37

BALANCE SHEET DATA:

Balance sheet totals-end of period:
   Assets                                      $  612,763    $  586,666    $  397,393    $  342,563    $  286,559
   Loans and leases, net                          365,571       352,467       262,464       229,008       195,026
   Deposits                                       500,706       475,387       322,507       275,796       254,888
   Shareholders' equity                            62,746        58,990        35,457        31,726        27,942
Average balance sheet amounts:
   Assets                                      $  596,670    $  439,012    $  363,175    $  309,574    $  279,049
   Loans and leases                               360,319       277,647       248,342       209,133       202,624
   Earning assets                                 537,031       400,265       333,800       280,623       255,904
   Deposits                                       494,905       357,420       279,883       263,323       246,960
   Shareholders' equity                            60,641        39,163        33,461        29,509        26,316

SELECTED RATIOS:

For the year:
    Return on average equity                        15.14%        14.88%        14.17%        15.11%        15.34%
    Return on average assets                         1.54%         1.33%         1.31%         1.44%         1.45%
    Efficiency ratio *                              45.16%        53.12%        53.73%        53.43%        55.37%
    Net interest margin *                            4.98%         4.90%         5.10%         5.43%         5.76%
    Net chargeoffs to average loans & leases         0.04%         0.08%         0.08%         0.03%         0.31%
At December 31:
    Average equity to average assets                10.16%         8.92%         9.21%         9.53%         9.43%
    Leverage capital ratio                           7.66%         8.35%         8.96%         8.93%         9.49%
    Allowance for loan and leases losses to
     total loans and leases                          1.53%         1.54%         1.48%         1.38%         1.32%
</TABLE>

* fully taxable equivalent

                                       22
<PAGE>

Item 7.  Management's Discussion and Analysis of Financial Condition and Results
of Operations.

         The following is American River Bankshares management's discussion and
analysis of the significant changes in income and expense accounts for the years
ended December 31, 2005, 2004, and 2003.

Cautionary Statements Regarding 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" within the meaning of Section 21E
of the Securities Exchange Act of 1934, as amended, and Section 27A of the
Securities Act of 1933, as amended. Such forward-looking statements may contain
words related to future projections including, but not limited to, words such as
"believe," "expect," "anticipate," "intend," "may," "will," "should," "could,"
"would," and variations of those words and similar words that are subject to
risks, uncertainties and other factors that could cause actual results to differ
materially from those projected. Factors that could cause or contribute to such
differences include, but are not limited to, the following: (1) variances in the
actual versus projected growth in assets; (2) return on assets; (3) loan and
lease losses; (4) expenses; (5) changes in the interest rate environment
including interest rates charged on loans, earned on securities investments and
paid on deposits; (6) competition effects; (7) fee and other noninterest income
earned; (8) general economic conditions nationally, regionally, and in the
operating market areas of the Company and its subsidiaries; (9) changes in the
regulatory environment; (10) changes in business conditions and inflation; (11)
changes in securities markets; (12) data processing problems; (13) a decline in
real estate values in the Company's operating market areas; (14) the effects of
terrorism, the threat of terrorism or the impact of the current military
conflict in Iraq and the conduct of the war on terrorism by the United States
and its allies, as well as other factors. The factors set forth under "Item 1A -
Risk Factors" in this report and other cautionary statements and information set
forth in this report should be carefully considered and understood as being
applicable to all related forward-looking statements contained in this report,
when evaluating the business prospects of the Company and its subsidiaries.

         Forward-looking statements are not guarantees of performance. By their
nature, they involve risks, uncertainties and assumptions. The future results
and shareholder values may differ significantly from those expressed in these
forward-looking statements. You are cautioned not to put undue reliance on any
forward-looking statement. Any such statement speaks only as of the date of this
report, and in the case of any documents that may be incorporated by reference,
as of the date of those documents. We do not undertake any obligation to update
or release any revisions to any forward-looking statements, to report any new
information, future event or other circumstances after the date of this report
or to reflect the occurrence of unanticipated events, except as required by law.
However, your attention is directed to any further disclosures made on related
subjects in our subsequent reports filed with the Securities and Exchange
Commission on Forms 10-K, 10-Q and 8-K.

Critical Accounting Policies

General

         The Company's financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America
("GAAP"). The financial information contained within our statements is, to a
significant extent, financial information that is based on measures of the
financial effects of transactions and events that have already occurred. We use
historical loss data, peer group experience and the economic environment as
factors, among others, in determining the inherent loss that may be present in
our loan and lease portfolio. Actual losses could differ significantly from the
historical factors that we use. Other estimates that we use are related to the
expected useful lives of our depreciable assets. In addition, GAAP itself may
change from one previously acceptable method to another method. Although the
economics of our transactions would be the same, the timing of events that would
impact our transactions could change.

Allowance for Loan and Lease Losses

         The allowance for loan and lease losses is an estimate of the credit
loss risk in our loan and lease portfolio. The allowance is based on two basic
principles of accounting: (1) Statement of Financial Accounting Standards
("SFAS") No. 5 "Accounting for Contingencies," which requires that losses be
accrued when they are probable of occurring and estimable; and (2) SFAS No. 114,

                                       23
<PAGE>

"Accounting by Creditors for Impairment of a Loan," which requires that losses
be accrued based on the differences between the value of collateral, present
value of future cash flows or values that are observable in the secondary market
and the loan balance.

         The allowance for loan and lease losses is determined based upon
estimates that can and do change when the actual risk or loss events occur. The
analysis of the allowance uses an historical loss view as an indicator of future
losses and as a result could differ from the loss incurred in the future.
However, since our analysis of risk and loss potential is updated regularly, the
errors that might otherwise occur are mitigated. The use of factors and ranges
is inherently subjective and our actual losses could be greater or less than the
estimates. The Company's goal is to maintain an allowance for loan and lease
losses that is between the lower and upper ranges as described above. If the
allowance for loan and lease losses falls below the lower range of adequate
reserves (by reason of loan and lease growth, actual losses, the effect of
changes in risk ratings, or some combination of these factors), the Company has
a strategy for supplementing the allowance for loan and lease losses, over the
short term, so that it would again fall within the lower and upper acceptable
ranges. For further information regarding our allowance for loan and lease
losses, see "Allowance for Loan and Lease Losses Activity" discussion later in
this Item 7.

Stock-Based Compensation

         The Company accounts for its stock-based compensation under the
recognition and measurement principles of Accounting Principles Board ("APB")
Opinion No. 25, Accounting for Stock Issued to Employees, and related
interpretations. Since the Company's stock option plan provides for the issuance
of options at a price of no less than the fair market value at the date of the
grant, no compensation expense is recognized in the financial statements unless
the options are modified after the grant date.

         In December 2004, the Financial Accounting Standards Board issued
Statement Number 123 (revised 2004) ("FAS 123 (R)"), Share-Based Payments. FAS
123 (R) requires all entities to recognize compensation expense in an amount
equal to the fair value of share-based payments such as stock options granted to
employees. The Company is required to apply FAS 123 (R) on a modified
prospective method, beginning on January 1, 2006. Under this method, the Company
is required to record compensation expense (as previous awards continue to vest)
for the unvested portion of previously granted awards that remain outstanding at
the date of adoption. Management believes that the effect of FAS 123 (R) will be
consistent with its pro forma disclosures included in Note 2 to the Consolidated
Financial Statements in Item 8 - Financial Statements and Supplementary Data.
The fair value of each option is estimated on the date of grant and amortized
over the service period using an option pricing model. Critical assumptions that
affect the estimated fair value of each option include expected stock price
volatility, dividend yields, option life and forfeiture rates and the risk-free
interest rate.

Goodwill

         Business combinations involving the Company's acquisition of the equity
interests or net assets of another enterprise or the assumption of net
liabilities in an acquisition of branches constituting a business may give rise
to goodwill. Goodwill represents the excess of the cost of an acquired entity
over the net of the amounts assigned to assets acquired and liabilities assumed
in transactions accounted for under the purchase method of accounting. The value
of goodwill is ultimately derived from the Company's ability to generate net
earnings after the acquisition. A decline in net earnings could be indicative of
a decline in the fair value of goodwill and result in impairment. For that
reason, goodwill is assessed for impairment at a reporting unit level at least
annually following the year of acquisition. The Company performed an evaluation
of the goodwill, recorded as a result of the Bank of Amador acquisition, during
the fourth quarter of 2005 and determined that there was no impairment. While
the Company believes all assumptions utilized in its assessment of goodwill for
impairment are reasonable and appropriate, changes in earnings, the effective
tax rate, historical earnings multiples and the cost of capital could all cause
different results for the calculation of the present value of future cash flows.

Overview

         The Company recorded its 88th consecutive profitable quarter for the
quarter ended December 31, 2005. Net income in 2005 increased 57.6% to
$9,184,000 versus $5,827,000 in 2004. Diluted earnings per share for 2005 and
2004 were $1.60 and $1.18, respectively. For 2005, the Company realized a return
on average equity of 15.14% and a return on average assets of 1.54%, as compared
to 14.88% and 1.33% for 2004. During December of 2004, the Company completed a

                                       24
<PAGE>

merger with Bank of Amador, therefore, 2005 includes the first full year of
results from Bank of Amador.

         Net income for 2004 was $1,086,000 (22.9%) higher than the $4,741,000
recorded in 2003. Diluted earnings per share in 2003 were $1.00, return on
average assets was 1.31% and return on average equity was 14.17%. All share and
per share data for 2005, 2004 and 2003 have been adjusted for a three-for-two
stock split distributed on October 31, 2003 and 5 percent stock dividends
distributed on December 23, 2005 and January 28, 2005.


Table One below provides a summary of the components of net income for the years
indicated:

Table One:  Components of Net Income
--------------------------------------------------------------------------------

       For the twelve months ended:

(In thousands, except percentages)       2005           2004           2003
                                      ----------     ----------     ----------

Net interest income*                  $   26,767     $   19,602     $   17,035
Provision for loan and lease losses         (322)          (895)          (946)
Noninterest income                         2,329          2,395          2,253
Noninterest expense                      (13,493)       (11,713)       (10,372)
Provision for income taxes                (5,792)        (3,378)        (3,060)
Tax equivalent adjustment                   (305)          (184)          (169)
                                      ----------     ----------     ----------

Net income                            $    9,184     $    5,827     $    4,741
                                      ==========     ==========     ==========

================================================================================
Average total assets                  $  596,670     $  439,012     $  363,175
Net income as a percentage
  of average total assets                   1.54%          1.33%          1.31%
--------------------------------------------------------------------------------

* Fully taxable equivalent basis (FTE)

During 2005, total assets of the Company increased $26,097,000 (4.4%) to a total
of $612,763,000 at year-end. At December 31, 2005, net loans totaled
$365,571,000, up $13,104,000 (3.7%) from the ending balances on December 31,
2004. Deposit growth for the year was 5.3% resulting in ending deposit balances
of $500,706,000. The Company ended 2005 with a Tier 1 capital ratio of 10.6% and
a total risk-based capital ratio of 11.9%.

Results of Operations

Net Interest Income and Net Interest Margin

         Net interest income represents the excess of interest and fees earned
on interest earning assets (loans, securities, federal funds sold and
investments in time deposits) over the interest paid on deposits and borrowed
funds. Net interest margin is net interest income expressed as a percentage of
average earning assets.

         The Company's fully taxable equivalent net interest margin was 4.98% in
2005 and 4.90% in 2004. The fully taxable equivalent net interest margin in
dollars was up $7,165,000 (36.6%) in 2005 over 2004.

         The fully taxable equivalent interest income component increased from
$22,820,000 in 2004 to $33,518,000 in 2005, representing a 46.9% increase. The
increase in the fully taxable equivalent interest income for 2005 compared to
the same period in 2004 is broken down by rate (up $3,036,000) and volume (up
$7,662,000). The rate increase can be attributed to increases implemented by the
Company during 2004 and 2005 in response to the Federal Reserve Board (the
"FRB") increases in the Federal funds and Discount rates. Increases by the FRB
have resulted in thirteen 25 basis point increases since June 2004. The overall
increasing interest rate environment over the past year and a half has resulted
in a 54 basis point increase in the yield on average earning assets from 5.70%
for 2004 to 6.24% for 2005. The volume increase was the result of a 34.2%
increase in average earning assets. Average loan balances were up $82,672,000
(29.8%) in 2005 over the balances in 2004, while average investment securities
balances were up $53,499,000 (46.7%). The increase in average loans and

                                       25
<PAGE>

investments is the result of the Bank of Amador acquisition which was completed
in December 2004, and a concentrated focus on business lending, the demand for
commercial real estate and the effects of a favorable local market.

         The fully taxable equivalent interest income component increased from
$19,937,000 in 2003 to $22,820,000 in 2004, representing a 14.5% increase. The
increase in the fully taxable equivalent interest income for 2004 compared to
the same period in 2003 is broken down by rate (down $562,000) and volume (up
$3,445,000). The rate decrease can be attributed to decreases implemented by the
Company during 2001 and 2002 in response to the Federal Reserve Board (the
"FRB") decreases in the Federal funds and Discount rates. Recent increases by
the FRB have resulted in five 25 basis point increases since June 2004; however,
these recent increases have had only a minor effect. The overall lower interest
rate environment over the past three years has resulted in a 27 basis point drop
in the yield on average earning assets from 5.97% for 2003 to 5.70% for 2004.
The volume increase was the result of a 19.9% increase in average earning
assets. Average loan balances were up $29,305,000 (11.8%) in 2004 over the
balances in 2003, while average investment securities balances were up
$39,566,000 (52.7%). The increase in average loans is the result of a
concentrated focus on business lending, the demand for commercial real estate
and the effects of a favorable local market. The increase in investment
securities is primarily due to the Company investing its excess funds in
investment securities. The excess funds were created by an increase in deposit
balances and other borrowings. The Bank of Amador acquisition was completed in
December 2004 and had a minimal impact on the average balances during 2004.

         Interest expense increased $3,533,000 (109.8%) in 2005 compared to
2004. The average balances on interest bearing liabilities were $91,680,000
(32.5%) higher in 2005 versus 2004. The higher balances accounted for a
$1,028,000 increase in interest expense. The higher balances were due to the
Bank of Amador acquisition and internal growth of average interest bearing
deposits. The increase in rates paid on interest bearing liabilities resulted in
an increase of $2,505,000 in interest expense. The rates paid on interest
bearing liabilities increased 67 basis points on a year-over-year basis and was
a result of the higher interest rate environment over the past year and a half;

         Interest expense increased $316,000 (10.9%) in 2004 compared to 2003.
The average balances on interest bearing liabilities were $45,734,000 (19.4%)
higher in 2004 versus 2003. The higher balances accounted for a $452,000
increase in interest expense. The higher balances were due to internal growth of
average interest bearing deposits ($33,991,000) and an increase in other
borrowings ($11,743,000). The decrease in rates paid on interest bearing
liabilities partially offset the increased expense due to the volume growth. The
decrease in rates paid on interest bearing liabilities was a result of the lower
interest rate environment over the past three years. Although rates increased
over the last few months of 2004, the rates paid on interest bearing liabilities
decreased nine basis points on a year-over-year basis and accounted for a
decrease in interest expense of $136,000 for the period.

         Table Two, Analysis of Net Interest Margin on Earning Assets, and Table
Three, Analysis of Volume and Rate Changes on Net Interest Income and Expenses,
are provided to enable the reader to understand the components and past trends
of the Company's interest income and expenses. Table Two provides an analysis of
net interest margin on earning assets setting forth average assets, liabilities
and shareholders' equity; interest income earned and interest expense paid and
average rates earned and paid; and the net interest margin on earning assets.
Table Three sets forth a summary of the changes in interest income and interest
expense from changes in average asset and liability balances (volume) and
changes in average interest rates.

                                       26
<PAGE>

<TABLE>
<CAPTION>
Table Two:  Analysis of Net Interest Margin on Earning Assets
-----------------------------------------------------------------------------------------------------------------------------------

Year Ended December 31,                 2005                                2004                                 2003
                          --------------------------------    --------------------------------    ---------------------------------

(Taxable Equivalent Basis)   Avg                    Avg          Avg                    Avg          Avg                     Avg
(In thousands, except      Balance    Interest     Yield       Balance    Interest     Yield       Balance     Interest     Yield
  percentages)            ---------   ---------  ---------    ---------   ---------  ---------    ---------    ---------  ---------
<S>                       <C>         <C>             <C>     <C>         <C>             <C>     <C>          <C>             <C>
Assets:
Earning assets
  Loans and leases (1)    $ 360,319   $  26,536       7.36%   $ 277,647   $  18,115       6.52%   $ 248,342    $  16,744       6.74%
  Taxable investment
     securities             141,855       5,436       3.83%     101,728       3,751       3.69%      64,159        2,312       3.60%
  Tax-exempt investment
     securities (2)          25,705       1,228       4.78%      12,324         713       5.79%      10,519          637       6.06%
  Corporate stock               559          40       7.16%         568          40       7.04%         376           28       7.45%
  Federal funds sold          2,826          90       3.18%       2,711          67       2.47%       5,595           48       0.86%
  Investments in time
     deposits                 5,767         188       3.26%       5,287         134       2.53%       4,809          168       3.49%
                          ---------   ---------               ---------   ---------               ---------    ---------
Total earning assets        537,031      33,518       6.24%     400,265      22,820       5.70%     333,800       19,937       5.97%
                                      ---------                           ---------                            ---------
Cash & due from banks        29,566                              30,263                              24,914
Other assets                 35,760                              12,836                               7,993
Allowance for loan &
   lease losses              (5,687)                             (4,352)                             (3,532)
                          ---------                           ---------                           ---------
                          $ 596,670                           $ 439,012                           $ 363,175
                          =========                           =========                           =========

Liabilities & Shareholders' Equity:
Interest bearing liabilities:

  NOW & MMDA              $ 185,634       2,247       1.21%   $ 146,041       1,099       0.75%   $ 120,772          912       0.76%
  Savings                    39,102         150       0.38%      24,527          56       0.23%      16,714           35       0.21%
  Time deposits             113,719       3,249       2.86%      72,987       1,356       1.86%      72,078        1,443       2.00%
  Other borrowings           35,003       1,105       3.16%      38,223         707       1.85%      26,480          512       1.93%
                          ---------   ---------               ---------   ---------               ---------    ---------
Total interest bearing
  liabilities               373,458       6,751       1.81%     281,778       3,218       1.14%     236,044        2,902       1.23%
                                      ---------                           ---------                            ---------
Demand deposits             156,450                             113,865                              90,685
Other liabilities             6,121                               4,206                               2,985
                          ---------                           ---------                           ---------
Total liabilities           536,029                             399,849                             329,714
Shareholders' equity         60,641                              39,163                              33,461
                          ---------                           ---------                           ---------
                          $ 596,670                           $ 439,012                           $ 363,175
                          =========                           =========                           =========
Net interest income &
   margin (3)                         $  26,767       4.98%               $  19,602       4.90%                $  17,035       5.10%
                                      =========  =========                =========  =========                 =========  =========
</TABLE>

(1)  Loan and lease interest includes loan and lease fees of $1,091,000,
     $741,000 and $814,000 in 2005, 2004 and 2003, respectively.
(2)  Includes taxable-equivalent adjustments that primarily relate to income on
     certain securities that is exempt from federal income taxes. The effective
     federal statutory tax rate was 34% for the periods presented.
(3)  Net interest margin is computed by dividing net interest income by total
     average earning assets.

                                       27
<PAGE>

<TABLE>
<CAPTION>
Table Three:  Analysis of Volume and Rate Changes on Net Interest Income and Expenses
----------------------------------------------------------------------------------------------
Year ended December 31, 2005 over 2004 (dollars in thousands)
Increase (decrease) due to change in:

Interest-earning assets:                                  Volume       Rate (4)     Net Change
                                                        ----------    ----------    ----------
<S>                                                     <C>           <C>           <C>
   Net loans and leases (1)(2)                          $    5,394    $    3,027    $    8,421
   Taxable investment securities                             1,480           205         1,685
   Tax-exempt investment securities (3)                        774          (259)          515
   Corporate stock                                              (1)            1            --
   Federal funds sold & other                                    3            20            23
   Investment in time deposits                                  12            42            54
                                                        ----------    ----------    ----------
     Total                                                   7,662         3,036        10,698
                                                        ----------    ----------    ----------

Interest-bearing liabilities:
   Demand deposits                                             298           850         1,148
   Savings deposits                                             33            61            94
   Time deposits                                               757         1,136         1,893
   Other borrowings                                            (60)          458           398
                                                        ----------    ----------    ----------
     Total                                                   1,028         2,505         3,533
                                                        ----------    ----------    ----------
Interest differential                                   $    6,634    $      531    $    7,165
                                                        ==========    ==========    ==========

Year Ended December 31, 2004 over 2003 (in thousands)
Increase (decrease) due to change in:

Interest-earning assets:                                  Volume       Rate (4)     Net Change
                                                        ----------    ----------    ----------
   Net loans and leases (1)(2)                          $    1,976    $     (605)   $    1,371
   Taxable investment securities                             1,354            85         1,439
   Tax-exempt investment securities (3)                        109           (33)           76
   Corporate stock                                              14            (2)           12
   Federal funds sold & other                                  (25)           44            19
   Investment in time deposits                                  17           (51)          (34)
                                                        ----------    ----------    ----------
     Total                                                   3,445          (562)        2,883
                                                        ----------    ----------    ----------

Interest-bearing liabilities:
   Demand deposits                                             191            (4)          187
   Savings deposits                                             16             5            21
   Time deposits                                                18          (105)          (87)
   Other borrowings                                            227           (32)          195
                                                        ----------    ----------    ----------
     Total                                                     452          (136)          316
                                                        ----------    ----------    ----------
Interest differential                                   $    2,993    $     (426)   $    2,567
                                                        ==========    ==========    ==========
</TABLE>

(1)  The average balance of non-accruing loans and leases is immaterial as a
     percentage of total loans and leases and, as such, has been included in net
     loans and leases.
(2)  Loan and lease fees of $1,091,000, $741,000 and $814,000 for the years
     ended December 31, 2005, 2004 and 2003, respectively, have been included in
     the interest income computation.
(3)  Includes taxable-equivalent adjustments that primarily relate to income on
     certain securities that is exempt from federal income taxes. The effective
     federal statutory tax rate was 34% for the periods presented.
(4)  The rate/volume variance has been included in the rate variance.

Provision for Loan and Lease Losses

         The Company provided $322,000 for loan and lease losses in 2005 as
compared to $895,000 for 2004. Net loan charge-offs for 2005 were $139,000 as
compared to $209,000 in 2004. In 2005, net loan charge-offs as a percentage of
average loans outstanding were .04% compared to .08% in 2004. In 2003, the
Company provided $946,000 for loan and lease losses and net charge-offs were
$194,000. For further information please see "Allowance for Loan and Lease
Losses Activity."

                                       28
<PAGE>

Service Charges and Fees and Other Income

         Table Four below provides a summary of the components of noninterest
income for the periods indicated (dollars in thousands):

<TABLE>
<CAPTION>
Table Four:  Components of Noninterest Income
---------------------------------------------------------------------------------------------
                                                                Year Ended December 31,
                                                         ------------------------------------
                                                            2005         2004         2003
                                                         ----------   ----------   ----------
<S>                                                      <C>          <C>          <C>
         Service charges on deposit accounts             $      672   $      551   $      534
         Gain on life insurance death benefit                    --          553           --
         Accounts receivable servicing fees                     356          316          247
         Merchant fee income                                    509          393          357
         Fees from lease brokerage services                      --            9          381
         Income from residential lending division               283          187          366
         Gain on sale of available-for-sale securities           48           --           33
         Other                                                  461          386          335
                                                         ----------   ----------   ----------

                                                         $    2,329   $    2,395   $    2,253
                                                         ==========   ==========   ==========
</TABLE>

         Noninterest income was down $66,000 (2.8%) to $2,329,000 in 2005 from
the 2004 level. A portion of this decrease represents the tax-free net proceeds
from a life insurance policy ($553,000) the Company received in June of 2004 as
a result of the death of a former executive officer. Without the life insurance
proceeds received in 2004, noninterest income for 2005 would have shown an
increase of $487,000. The increase in noninterest income can be attributed to
increases in fees from service charges (up $121,000 or 22.0%), increases in fees
from merchant income (up $116,000 or 29.5%), and an increase in residential
lending fee income (up $96,000 or 51.3%). The increase in service charges and
merchant fee income is the direct result of an increased number of deposit and
merchant accounts, many of which can be attributed to the Bank of Amador
acquisition completed in December 2004.

         Noninterest income was up $142,000 (6.3%) to $2,395,000 in 2004 from
the 2003 level. Much of this increase ($553,000) represents the tax-free net
proceeds from a life insurance policy the Company received in June of 2004 as a
result of the death of a former executive officer. Without the life insurance
proceeds, noninterest income would have shown a decrease of $411,000. The
decrease in noninterest income can be attributed to decreases in fees from lease
brokerage services (down $372,000 or 97.6%) and a decrease in residential
lending fee income (down $179,000 or 48.9%). The decrease in lease brokerage
services resulted from the majority of originated leases being recorded during
2004 on the books of the Company as opposed to receiving fee income for
brokering the leases to outside funding sources. In addition, overall lease
volume decreased (from $5,940,000 in 2003 to $4,967,000 in 2004) as a result of
the change from a nationwide lessor to a lessor that does business in California
counties located near American River Bank branch locations. The residential
lending division experienced a decrease in loan volume as a result of a slight
increase in mortgage rates, which caused the number of refinances to decrease.

Salaries and Benefits

         Salaries and benefits, which include commissions, were $6,958,000 (up
$910,000 or 15.0%) for 2005 as compared to $6,048,000 in 2004. The increase is
primarily the result of salaries, taxes and benefits paid to the employees of
the three new offices added as a result of the Bank of Amador acquisition which
was completed in December 2004 ($742,000) and cost of living raises, higher
salary costs to retain key employees in a competitive market, and overall higher
health care related costs. At the end of 2005, the full-time equivalent staff
was 122, down 1 from the 123 at the end of 2004.

         Salaries and benefits, which include commissions, were $6,048,000 (down
$185,000 or 3.0%) for 2004 as compared to $6,223,000 in 2003. The decrease is
primarily the result of lower incentive accruals ($156,000 or 18.5%) and lower
commissions paid in the Residential Lending Division. The lower incentive
accrual relates to an adjustment in the incentive program by reducing the
overall percentage available to employees. The decreased commissions in the
Residential Lending Division are directly related to the drop in fees generated.
At the end of 2004, the full-time equivalent staff was 123, up 22 from the 101

                                       29
<PAGE>

at the end of 2003. Much of the increase in the number of employees came as a
result of the acquisition of Bank of Amador in December 2004 and did not have a
material impact on overall salary and benefit expense for 2004.

Occupancy, Furniture and Equipment

         Occupancy expense increased $276,000 (29.0%) during 2005 to $1,229,000,
up from $953,000 in 2004. The majority of the increase relates to the three new
offices added in Amador County ($152,000), the cost associated for a full year
related to the 2004 opening of a new banking office in Downtown Sacramento
($38,000) located at 520 Capitol Mall, Suite 100, Sacramento, CA 95814, expenses
related to the 2005 opening of a new Company headquarters ($36,000) located at
3100 Zinfandel Drive, Suite 450, Rancho Cordova, CA 95670, and annual rent
increases on the Company's leased facilities. Furniture and equipment expense
was $918,000 in 2005 compared to $752,000 in 2004, representing a $166,000
(22.1%) increase. The increase in furniture and equipment expense relates to the
three new offices added in Amador County ($166,000).

         Occupancy expense increased $136,000 (16.6%) during 2004 to $953,000,
up from $817,000 in 2003. The majority of the increase relates to the cost
associated with the new banking office in Downtown Sacramento ($114,000) located
at 520 Capitol Mall, Suite 100, Sacramento, CA 95814 and annual rent increases
on the Company's leased facilities. Furniture and equipment expense was $752,000
in 2004 compared to $653,000 in 2003, representing a $99,000 (15.2%) increase.
The majority of the increase in furniture and equipment expense relates to the
new banking office ($51,000) and higher maintenance and repair costs associated
with technology related equipment ($44,000).

Other Expenses

         Other expenses were $4,388,000 (up $466,000 or 11.9%) for 2005 as
compared to $3,922,000 for 2004. The 2004 expense included a donation of
$503,000 to establish the American River Bankshares Foundation (the
"Foundation"). Donations made to the Foundation in 2005 were $455,000 less than
in 2004. The actual increase in other expenses of $466,000 and the overall lower
donation to the Foundation of $455,000 added together represent an increase in
other expenses of $921,000. This increase can be attributed to the December 2004
acquisition of Bank of Amador and the resulting three new Amador County offices
($935,000 increase). Included in the $935,000 increase is $322,000 related to
amortization of the core deposit intangible associated with the acquisition. The
overhead efficiency ratio on a taxable equivalent basis for 2005 was 45.2% as
compared to 53.1% in 2004.

         Other expenses were $3,960,000 (up $1,291,000 or 48.4%) for 2004 as
compared to $2,669,000 for 2003. Professional fees increased $143,000 (42.7%)
from $335,000 during 2003 to $478,000 in 2004. Professional fees, which includes
accounting, legal and other professional services, was up primarily due to
retainer fees paid to a deposit gathering relationship established in 2004
($172,000). Donations were $527,000 (up $501,000) for 2004 compared to $26,000
in 2003. The increase in donations results from the Company's decision to create
and fund the Foundation ($503,000). Directors expense increased from $353,000
(up $165,000 or 46.7%) in 2003 to $518,000 in 2004. The increase in Directors
expense relates to higher amounts accrued under the Gross-Up Plan (the "Plan").
The Plan compensates for the tax effects of the exercise of nonstatutory stock
options. The Plan named certain non-employee Directors as participants and
applies only to those options granted on August 25, 1995. The Plan encourages
participating optionees to retain shares acquired through the exercise of
nonstatutory stock options by the Company paying to the participating optionee
an amount equal to the taxable income resulting from an exercise of a
nonstatutory stock option multiplied by the Company's effective tax rate,
subject to the optionee's agreement to hold the shares acquired for a minimum of
one (1) year. Other operating expenses increased from $939,000 in 2003 (up
$217,000 or 22.1%) to $1,156,000 in 2004. These increases related to the benefit
payments related to the death of a former Company executive ($82,000), and
normal expenses related to the overall growth of the Company. The overhead
efficiency ratio on a taxable equivalent basis for 2004 was 53.1% as compared to
53.7% in 2003.

Provision for Taxes

         The effective tax rate on income was 38.7%, 36.7% and 39.2% in 2005,
2004 and 2003, respectively. The effective tax rate was greater than the federal
statutory tax rate due to state tax expense (net of federal tax effect) of
$1,033,000, $589,000 and $538,000 in these years. Tax-exempt income of $896,000,
$533,000 and $454,000 from investment securities in these years helped to reduce
the effective tax rate. The 2004 effective tax rate was further reduced by tax
exempt income of $553,000 from the proceeds from a life insurance policy.

                                       30
<PAGE>

Balance Sheet Analysis

         The Company's total assets were $612,763,000 at December 31, 2005 as
compared to $586,666,000 at December 31, 2004, representing an increase of
$26,097,000 (4.4%). The average balances of total assets during 2005 were
$596,670,000 which represents an increase of $157,658,000 (35.9%) over the
December 31, 2004 total of $439,012,000. Approximately $134,000,000 of the
increase is attributable to the Bank of Amador acquisition in December 2004.

Investment Securities

         The Company classifies its investment securities as trading, held to
maturity or available for sale. The Company's intent is to hold all securities
classified as held to maturity until maturity and management believes that it
has the ability to do so. Securities available for sale may be sold to implement
asset/liability management strategies and in response to changes in interest
rates, prepayment rates and similar factors. Table Five below summarizes the
values of the Company's investment securities held on December 31 of the years
indicated.

<TABLE>
<CAPTION>
Table Five: Investment Securities Composition
-------------------------------------------------------------------------------------
(dollars in thousands)

Available-for-sale (at fair value)                   2005         2004         2003
-------------------------------------------------------------------------------------
<S>                                              <C>          <C>          <C>
Debt securities:
   U.S. Government agencies                      $   49,119   $   46,701   $   21,450
   Mortgage-backed securities                        33,326       40,359       26,757
   Obligations of states and political
      subdivisions                                   37,106       27,240       12,061
   Corporate debt securities                          1,014        1,114          787
   Commercial paper                                                             1,000
Equity securities:
   Corporate stock                                      624          627          631
-------------------------------------------------------------------------------------
Total available-for-sale investment securities   $  124,189   $  116,041   $   62,686
=====================================================================================
Held-to-maturity (at amortized cost)
-------------------------------------------------------------------------------------
Debt securities:
   Mortgage-backed securities                    $   45,012   $   41,203   $   26,960
   Obligations of states and political
      subdivisions                                                                200
-------------------------------------------------------------------------------------
Total held-to-maturity investment securities     $   45,012   $   41,203   $   27,160
=====================================================================================
</TABLE>

See Table Fifteen for a breakdown of the investment securities by maturity and
the corresponding weighted average yields.

Loans and Leases

         The Company concentrates its lending activities in the following
principal areas: 1) commercial; 2) commercial real estate; 3) multi-family real
estate; 4) real estate construction (both commercial and residential); 5)
residential real estate; 6) lease financing receivable; 7) agriculture; and 8)
consumer loans. At December 31, 2005, these categories accounted for
approximately 21%, 42%, 1%, 28%, 1%, 2%, 2% and 3%, respectively, of the
Company's loan portfolio. This mix was relatively unchanged compared to 19%,
46%, 1%, 25%, 1%, 3%, 2% and 3% at December 31, 2004. Continuing economic
activity in the Company's market area, new borrowers developed through the
Company's marketing efforts, and credit extensions expanded to existing
borrowers resulted in the Company originating over $215 million in new loans;
however, higher than normal loan and lease paydowns and payoffs resulted in net
increases in balances for commercial ($11,107,000 or 16.6%), multi-family real
estate ($1,107,000 or 41.6%), real estate construction ($12,886,000 or 14.3%),
and consumer loans ($2,483,000 or 26.4%). Despite the new borrowers, the Company
experienced a decrease in commercial real estate ($11,763,000 or 7.1%),
residential real estate ($556,000 or 10.6%), lease financing receivable
($2,027,000 or 20.3%), and agriculture ($123,000 or 1.5%) as a result of
paydowns. Table Six below summarizes the composition of the loan and lease
portfolio for the past five years as of December 31.

                                       31
<PAGE>

<TABLE>
<CAPTION>
Table Six: Loan and Lease Portfolio Composition
-----------------------------------------------------------------------------------------------
                                                         December 31,
                             ------------------------------------------------------------------
(dollars in thousands)           2005          2004          2003          2002          2001
-----------------------------------------------------------------------------------------------
<S>                          <C>           <C>           <C>           <C>           <C>
Commercial                   $   77,971    $   66,864    $   57,346    $   49,231    $   43,619
Real estate:
   Commercial                   154,500       166,263       142,249       119,977        99,355
   Multi-family                   3,767         2,660         5,301         7,573           803
   Construction                 103,048        90,162        37,434        32,385        30,821
   Residential                    4,680         5,236         1,508         1,661         3,119
Lease financing receivable        7,967         9,994         9,276         6,766         2,499
Agriculture                       8,129         8,252         8,027         8,824        10,251
Consumer                         11,900         9,417         5,950         6,371         7,598
-----------------------------------------------------------------------------------------------
                                371,962       358,848       267,091       232,788       198,065
Deferred loan fees, net            (712)         (885)         (678)         (583)         (425)
Allowance for loan and
    Lease losses                 (5,679)       (5,496)       (3,949)       (3,197)       (2,614)
-----------------------------------------------------------------------------------------------
Total net loans and leases   $  365,571    $  352,467    $  262,464    $  229,008    $  195,026
===============================================================================================
</TABLE>

         A significant portion of the Company's loans and leases are direct
loans and leases made to individuals and local businesses. The Company relies
substantially on local promotional activity and personal contacts by American
River Bank officers, directors and employees to compete with other financial
institutions. The Company makes loans and leases to borrowers whose applications
include a sound purpose and a viable primary repayment source, generally
supported by a secondary source of repayment.

         Commercial loans consist of credit lines for operating needs, loans for
equipment purchases, working capital, and various other business loan products.
Consumer loans include a range of traditional consumer loan products such as
personal lines of credit and loans to finance purchases of autos, boats,
recreational vehicles, mobile homes and various other consumer items.
Construction loans are generally comprised of commitments to customers within
the Company's service area for construction of commercial properties,
multi-family properties and custom and semi-custom single-family residences.
Other real estate loans consist primarily of loans secured by first trust deeds
on commercial and residential properties typically with maturities from 3 to 10
years and original loan to value ratios generally from 65% to 75%. Agriculture
loans consist primarily of vineyard loans and development loans to plant
vineyards. In general, except in the case of loans under SBA programs or Farm
Services Agency guarantees, the Company does not make long-term mortgage loans;
however, American River Bank has a residential lending division to assist
customers in securing most forms of longer term single-family mortgage
financing. American River Bank acts as a broker between American River Bank's
customers and the loan wholesalers. American River Bank receives an origination
fee for loans closed.

         Average net loans and leases in 2005 were $360,319,000 which represents
an increase of $82,672,000 (29.8%) over the average in 2004. Average net loans
and leases in 2004 were $277,647,000 which represents an increase of $29,305,000
(11.8%) over the average in 2003. Loan growth in 2005 and 2004 resulted from a
favorable economy in the Company's market area, new borrowers developed through
the Company's marketing efforts and credit extensions expanded to existing
borrowers. Additionally the average loan growth in 2005 increased in part do to
the addition of the Bank of Amador loans at the end of 2004.

Risk Elements

         The Company assesses and manages credit risk on an ongoing basis
through a total credit culture that emphasizes excellent credit quality,
extensive internal monitoring and established formal lending policies.
Additionally, the Company contracts with an outside loan review consultant to
periodically review the existing loan and lease portfolio. Management believes
its ability to identify and assess risk and return characteristics of the
Company's loan and lease portfolio is critical for profitability and growth.
Management strives to continue its emphasis on credit quality in the loan and
lease approval process, active credit administration and regular monitoring.
With this in mind, management has designed and implemented a comprehensive loan
and lease review and grading system that functions to continually assess the
credit risk inherent in the loan and lease portfolio.

                                       32
<PAGE>

         Ultimately, underlying trends in economic and business cycles may
influence credit quality. American River Bank's business is concentrated in the
Sacramento Metropolitan Statistical Area, which is a diversified economy, but
with a large State of California government presence and employment base, in
Sonoma County, through North Coast Bank, a division of American River Bank,
whose business is focused on businesses within the three communities in which it
has offices (Santa Rosa, Windsor, and Healdsburg) and in Amador County, through
Bank of Amador, a division of American River Bank, whose business is focused on
businesses and consumers within the three communities in which it has offices
(Jackson, Pioneer, and Ione) as well as a diversified residential construction
loan business in numerous Northern California counties. The economy of Sonoma
County is diversified with professional services, manufacturing, agriculture and
real estate investment and construction, while the economy of Amador County is
reliant upon government, services, retail trade, manufacturing industries and
Indian gaming.

         The Company has significant extensions of credit and commitments to
extend credit that are secured by real estate. The ultimate repayment of these
loans is generally dependent on personal or business cash flows or the sale or
refinancing of the real estate. The Company monitors the effects of current and
expected market conditions and other factors on the collectability of real
estate loans. The more significant factors management considers involve the
following: lease rate and terms, absorption and sale rates; real estate values
and rates of return; operating expenses; inflation; and sufficiency of repayment
sources independent of the real estate including, in some instances, personal
guarantees.

         In extending credit and commitments to borrowers, the Company generally
requires collateral and/or guarantees as security. The repayment of such loans
is expected to come from cash flow or from proceeds from the sale of selected
assets of the borrowers. The Company's requirement for collateral and/or
guarantees is determined on a case-by-case basis in connection with management's
evaluation of the creditworthiness of the borrower. Collateral held varies but
may include accounts receivable, inventory, property, plant and equipment,
income-producing properties, residences and other real property. The Company
secures its collateral by perfecting its security interest in business assets,
obtaining deeds of trust, or outright possession among other means.

         In management's judgment, a concentration exists in real estate loans
which represented approximately 71.5% of the Company's loan and lease portfolio
at December 31, 2005, down from 73.7% at December 31, 2004. Although management
believes this concentration to have no more than the normal risk of
collectability, a substantial decline in the economy in general, or a decline in
real estate values in the Company's primary market areas in particular, could
have an adverse impact on the collectability of these loans and require an
increase in the provision for loan and lease losses which could adversely affect
the Company's future prospects, results of operations, profitability and stock
price. Management believes that its lending policies and underwriting standards
will tend to minimize losses in an economic downturn, however, there is no
assurance that losses will not occur under such circumstances. The Company's
loan policies and underwriting standards include, but are not limited to, the
following: (1) maintaining a thorough understanding of the Company's service
area and originating a significant majority of its loans within that area, (2)
maintaining a thorough understanding of borrowers' knowledge, capacity, and
market position in their field of expertise, (3) basing real estate loan
approvals not only on market demand for the project, but also on the borrowers'
capacity to support the project financially in the event it does not perform to
expectations (whether sale or income performance), and (4) maintaining
conforming and prudent loan to value and loan to cost ratios based on
independent outside appraisals and ongoing inspection and analysis by the
Company's lending officers.

Nonaccrual, Past Due and Restructured Loans and Leases

         Management generally places loans and leases on nonaccrual status when
they become 90 days past due, unless the loan or lease is well secured and in
the process of collection. Loans and leases are charged off when, in the opinion
of management, collection appears unlikely.

         The recorded investments in loans and leases that were considered to be
impaired totaled $91,000 and $247,000 at December 31, 2005 and 2004,
respectively. The related allowance for losses for these loans and leases at
December 31, 2005 and December 31, 2004 was $24,000 and $62,000, respectively.
Management believes that the allowance allocations are adequate for the inherent
risk of those loans and leases. The average recorded investment in impaired
loans and leases for the years ended December 31, 2005, 2004 and 2003 was
$271,000, $124,000 and $148,000, respectively.

         Interest due but excluded from interest income on nonaccrual loans and
leases was not material during 2005, 2004 and 2003. In 2005, 2004 and 2003,
interest income recognized from payments received on nonaccrual loans and leases
was also not material.

                                       33
<PAGE>

         Table Seven below sets forth nonaccrual loans and leases and loans and
leases past due 90 days or more as of year-end for the past five years.

<TABLE>
<CAPTION>
Table Seven:  Non-Performing Loans and Leases
-------------------------------------------------------------------------------------------------------------
                                                                        December 31,
                                               --------------------------------------------------------------
(dollars in thousands)                            2005         2004         2003         2002         2001
-------------------------------------------------------------------------------------------------------------
<S>                                            <C>          <C>          <C>          <C>          <C>
Past due 90 days or more and still accruing:
   Commercial                                  $       24   $       --   $        2   $        2   $       --
   Real estate                                         --           --           --           --           --
   Lease financing receivable                          --           11           --           --           --
   Consumer and other                                  --           --           --           --           --
-------------------------------------------------------------------------------------------------------------
Nonaccrual:
   Commercial                                          --           52           --           42          534
   Real estate                                         15          113           --          160          314
   Lease financing receivable                          52           71          179           --           --
   Consumer and other                                  --           --           --            2            8
-------------------------------------------------------------------------------------------------------------
Total non-performing loans and leases          $       91   $      247   $      181   $      206   $      856
=============================================================================================================
</TABLE>

         There were no loan or lease concentrations in excess of 10% of total
loans and leases not otherwise disclosed as a category of loans and leases as of
December 31, 2005. Management is not aware of any potential problem loans or
leases, which were accruing and current at December 31, 2004 or 2005, where
serious doubt exists as to the ability of the borrower to comply with the
present repayment terms.

Allowance for Loan and Lease Losses Activity

         The Company maintains an allowance for loan and lease losses ("ALLL")
to cover probable losses inherent in the loan and lease portfolio, which is
based upon management's estimated range of those losses. The ALLL is established
through a provision for loan and lease losses and is increased by provisions
charged against current earnings and recoveries and reduced by charge-offs.
Actual losses for loans and leases can vary significantly from this estimate.
The methodology and assumptions used to calculate the allowance are continually
reviewed as to their appropriateness given the most recent losses realized and
other factors that influence the estimation process. The model assumptions and
resulting allowance level are adjusted accordingly as these factors change.

         The adequacy of the ALLL and the level of the related provision for
loan and lease losses is determined based on management's judgment after
consideration of numerous factors including but not limited to: (i) local and
regional economic conditions, (ii) borrowers' financial condition, (iii) loan
impairment and the related level of expected charge-offs, (iv) evaluation of
industry trends, (v) industry and other concentrations, (vi) loans and leases
which are contractually current as to payment terms but demonstrate a higher
degree of risk as identified by management, (vii) continuing evaluations of the
performing loan portfolio, (viii) ongoing review and evaluation of problem loans
identified as having loss potential, (ix) quarterly review by the Board of
Directors, and (x) assessments by banking regulators and other third parties.
Management and the Board of Directors evaluate the ALLL and determine its
appropriate level considering objective and subjective measures, such as
knowledge of the borrowers' business, valuation of collateral, the determination
of impaired loans or leases and exposure to potential losses.

         The Company establishes general reserves in accordance with Statement
of Accounting Standards ("SFAS") No. 5., Accounting for Contingencies, and
specific reserves in accordance with SFAS No. 114, Accounting by Creditors for
Impairment of a Loan. The ALLL is maintained by categories of the loan and lease
portfolio based on loan type and loan rating; however, the entire allowance is
available to cover actual loan and lease losses. While management uses available
information to recognize possible losses on loans and leases, future additions
to the allowance may be necessary, based on changes in economic conditions and
other matters. In addition, various regulatory agencies, as an integral part of
their examination process, periodically review the Company's ALLL. Such agencies
may require the Company to provide additions to the allowance based on their
judgment of information available to them at the time of their examination.

         The adequacy of the ALLL is determined based on three components.
First, is the dollar weighted risk rating of the loan portfolio, including all
outstanding loans and leases. Every extension of credit has been assigned a risk
rating based upon a comprehensive definition intended to measure the inherent
risk of lending money. Each rating has an assigned risk factor expressed as a

                                       34
<PAGE>

reserve percentage. Second, established specific reserves consistent with SFAS
No. 114 "Accounting by Creditors for Impairment of a Loan" are assigned to
individually impaired loans. These are estimated potential losses associated
with specific borrowers based upon estimated cash flows or collateral value and
events affecting the risk rating. Third, the Company maintains a reserve for
qualitative factors that may affect the portfolio as a whole, such as those
factors described above, including a reserve for model imprecision consistent
with SFAS No. 5 "Accounting for Contingencies".

         The allowance for loan and lease losses totaled $5,679,000 or 1.53% of
total loans and leases at December 31, 2005, $5,496,000 or 1.54% of total loans
and leases at December 31, 2004, and $3,949,000 or 1.48% at December 31, 2003.

         Table Eight below summarizes, for the periods indicated, the activity
in the allowance for loan and lease losses.

<TABLE>
<CAPTION>
Table Eight: Allowance for Loan and Lease Losses
--------------------------------------------------------------------------------------------------------
(in thousands, except for
percentages)                                               Year Ended December 31,
                                      ------------------------------------------------------------------
                                         2005          2004          2003          2002          2001
--------------------------------------------------------------------------------------------------------
<S>                                   <C>           <C>           <C>           <C>           <C>
Average loans and leases
outstanding                           $  360,319    $  277,647    $  248,342    $  209,133    $  202,624
--------------------------------------------------------------------------------------------------------

Allowance for loan & lease
losses at beginning of period         $    5,496    $    3,949    $    3,197    $    2,614    $    2,454

Loans and leases charged off:
   Commercial                                 72            --            13            44           556
   Real estate                                --            --            --            59            85
   Consumer                                   --             1             8            48            13
   Lease financing receivable                134           268           333            --            57
--------------------------------------------------------------------------------------------------------
Total                                        206           269           354           151           711
--------------------------------------------------------------------------------------------------------
Recoveries of loans and leases
previously charged off:
   Commercial                                  9            57           113             1             9
   Real estate                                --            --            47            85            --
   Consumer                                    2             3            --             4            --
   Lease financing receivable                 56            --            --            --            71
--------------------------------------------------------------------------------------------------------
Total                                         67            60           160            90            80
--------------------------------------------------------------------------------------------------------
Net loans and leases charged off             139           209           194            61           631
Allowance acquired in merger                  --           861            --            --            --
Additions to allowance charged
  to operating expenses                      322           895           946           644           791
--------------------------------------------------------------------------------------------------------
Allowance for loan and
  lease losses at end of period       $    5,679    $    5,496    $    3,949    $    3,197    $    2,614

Ratio of net charge-offs to average
  loans and leases outstanding               .04%          .08%          .08%          .03%          .31%

Provision for loan and lease losses
  to average loans and leases
  outstanding                                .09%          .32%          .38%          .31%          .39%

Allowance for loan and lease losses
  to loans and leases, net of
  deferred fees, at end of period           1.53%         1.54%         1.48%         1.38%         1.32%
</TABLE>

         It is the policy of management to maintain the allowance for loan and
lease losses at a level adequate for known and inherent risks in the portfolio.
Our methodology incorporates a variety of risk considerations, both quantitative
and qualitative, in establishing an allowance for loan and lease losses that
management believes is appropriate at each reporting date. Based on information
currently available to analyze inherent credit risk, including economic factors,
overall credit quality, historical delinquencies and a history of actual

                                       35
<PAGE>

charge-offs, management believes that the provision for loan and lease losses
and the allowance for loan and lease losses are prudent and adequate.
Adjustments may be made based on differences from estimated loan and lease
growth, the types of loans constituting this growth, changes in risk ratings
within the portfolio, and general economic conditions. However, no prediction of
the ultimate level of loans and leases charged off in future periods can be made
with any certainty.

         As part of its loan review process, management has allocated the
overall allowance based on specific identified problem loans and leases,
qualitative factors, uncertainty inherent in the estimation process and
historical loss data. A risk exists that future losses cannot be precisely
quantified or attributed to particular loans or leases or classes of loans and
leases. Management continues to evaluate the loan and lease portfolio and
assesses current economic conditions that will affect management's conclusion as
to future allowance levels. Table Nine below summarizes the allocation of the
allowance for loan and lease losses for the five years ended December 31, 2005.
The allocation presented should not be interpreted as an indication that charges
to the allowance for loan and lease losses will be incurred in these amounts or
proportions, or that the portion of the allowance allocated to each loan and
lease category represents the total amounts available for charge-offs that may
occur within these categories.

<TABLE>
<CAPTION>
Table Nine:  Allowance for Loan and Lease Losses by Loan Category
----------------------------------------------------------------------------------------------------------------
(in thousands,
except percentages)                December 31, 2005          December 31, 2004         December 31, 2003
----------------------------------------------------------------------------------------------------------------
                                         Percent of loans           Percent of loans           Percent of loans
                                         in each category           in each category           in each category
                                Amount   to total loans    Amount   to total loans    Amount   to total loans
----------------------------------------------------------------------------------------------------------------
<S>                          <C>               <C>      <C>               <C>      <C>               <C>
Commercial                   $    1,056         21.0%   $    1,028         18.6%   $      865         21.5%
Real estate                       3,948         71.5%        3,825         73.7%        2,579         69.8%
Agriculture                         213          2.2%          110          2.3%          201          3.0%
Consumer                            246          3.2%          220          2.6%           91          2.2%
Lease financing receivable          216          2.1%          313          2.8%          213          3.5%
----------------------------------------------------------------------------------------------------------------
Total allocated              $    5,679        100.0%   $    5,496        100.0%   $    3,949        100.0%
----------------------------------------------------------------------------------------------------------------

<CAPTION>

                                  December 31, 2002          December 31, 2001
------------------------------------------------------------------------------------
                                         Percent of loans           Percent of loans
                                         in each category           in each category
                               Amount    to total loans   Amount    to total loans
------------------------------------------------------------------------------------
<S>                          <C>               <C>      <C>               <C>
Commercial                   $      660         21.1%   $      923         22.0%
Real estate                       2,173         69.5%        1,288         67.7%
Agriculture                         116          3.8%          147          5.3%
Consumer                            152          2.9%          206          3.8%
Lease financing receivable           96          2.7%           50          1.2%
------------------------------------------------------------------------------------
Total allocated              $    3,197        100.0%   $    2,614        100.0%
------------------------------------------------------------------------------------
</TABLE>

Other Real Estate

         At December 31, 2005 and 2004, the Company did not have any Other Real
Estate properties.

Deposits

         At December 31, 2005, total deposits were $500,706,000 representing an
increase of $25,319,000 (5.3%) over the December 31, 2004 balance of
$475,387,000. The Company's deposit growth plan for 2005 was to concentrate its
efforts on increasing noninterest-bearing demand, interest-bearing money market
and NOW accounts, and savings accounts. However, due to the competitive rate
environment, interest-bearing money market and NOW accounts and savings accounts
decreased slightly, but noninterest-bearing demand increased 14.4% in 2005.
During 2004, deposits increased $152,880,000 (47.4%) from the total of
$322,507,000 at December 31, 2003, of which $114,255,000 of the increase can be
attributed to the Bank of Amador acquisition completed in December 2004.

                                       36
<PAGE>

Other Borrowed Funds

         Other borrowings outstanding as of December 31, 2005 consist of
advances (both long-term and short-term) from the Federal Home Loan Bank (the
"FHLB") and an overnight borrowing from a correspondent bank. The following
table summarizes these borrowings (dollars in thousands):

<TABLE>
<CAPTION>
                                                     2005                       2004                       2003
                                           -----------------------------------------------------------------------------

                                             Amount         Rate        Amount         Rate        Amount         Rate
                                           -----------------------------------------------------------------------------
<S>                                        <C>                <C>     <C>                <C>     <C>                <C>
         Short-term borrowings:

             FHLB advances                 $   39,386         3.73%   $   24,457         1.85%   $   25,054         1.41%
             Advances from correspondent
                 banks                             --           --            --           --         9,600         1.44%
                                           -----------------------------------------------------------------------------

         Total short-term borrowings       $   39,386         3.73%   $   24,457         1.85%   $   34,654         1.41%
                                           -----------------------------------------------------------------------------

         Long-term borrowings:

             FHLB advances                 $    4,270         4.10%   $    9,832         3.15%   $    1,888         6.13%
                                           -----------------------------------------------------------------------------

         Total long-term borrowings        $    4,270         4.10%   $    9,832         3.15%   $    1,888         6.13%
                                           -----------------------------------------------------------------------------
</TABLE>

         The maximum amount of short-term borrowings at any month-end during
2005, 2004 and 2003, was $39,386,000, $40,855,000, and $38,100,000,
respectively. The FHLB advances are collateralized by loans and securities
pledged to the FHLB. The following is a breakdown of rates and maturities on
FHLB advances (dollars in thousands):


                                           Short Term           Long Term

                Amount                     $   39,386           $    4,270
                Maturity                       2006                 2007
                Average rates                  3.73%                4.10%

         The Company has also been issued a total of $2,000,000 in letters of
credit by the FHLB which have been pledged to secure Local Agency Deposits. The
letters of credit act as a guarantee of payment to certain third parties in
accordance with specified terms and conditions. The letters of credit were not
drawn upon in 2005 or 2004 and management does not expect to draw upon these
lines in the future.


Capital Resources

         The current and projected capital position of the Company and the
impact of capital plans and long-term strategies is reviewed regularly by
management. The Company's capital position represents the level of capital
available to support continuing operations and expansion.

         On September 20, 2001, the Company announced a plan to repurchase, as
conditions warrant, up to 5% annually of the Company's common stock. Each year
the Company may repurchase up to 5% of the shares outstanding (adjusted for
stock splits or stock dividends). The repurchases are to be made from time to
time in the open market as conditions allow and will be structured to comply
with Commission Rule 10b-18. Management reports monthly to the Board of
Directors on the status of the repurchase program. The Board of Directors has
reserved the right to suspend, terminate, modify or cancel this repurchase
program at any time for any reason. During 2005, the Company repurchased 80,325
shares; during 2004, the Company repurchased 10,253 shares; during 2003, the
Company repurchased 1,654 shares and in 2002, the Company repurchased 72,353
shares under the repurchase plan. See "Stock Repurchases" under Item 5 on page
21 for more information regarding the stock repurchase plan.

                                       37
<PAGE>

         The Company and American River Bank are subject to certain regulatory
capital requirements administered by the Board of Governors of the Federal
Reserve System and the Federal Deposit Insurance Corporation. Failure to meet
these 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 Company's consolidated financial statements.
Under capital adequacy guidelines and the regulatory framework for prompt
corrective action, banks must meet specific capital guidelines that involve
quantitative measures of their assets, liabilities and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Company's and
American River Bank's capital amounts and classification are also subject to
qualitative judgments by the regulators about components, risk weightings and
other factors. At December 31, 2005, shareholders' equity was $62,746,000,
representing an increase of $3,756,000 (6.4%) from $58,990,000 at December 31,
2004. This increase was attributable principally to the retention of earnings
after the payment of cash dividends. In 2004, shareholders' equity increased
$23.5 million (66.4%) from 2003 due in part to the Bank of Amador acquisition.
The ratio of total risk-based capital to risk adjusted assets was 11.9% at
December 31, 2005 compared to 10.9% at December 31, 2004. Tier 1 risk-based
capital to risk-adjusted assets was 10.6% at December 31, 2005 and 9.6% at
December 31, 2004.

         Table Ten below lists the Company's actual capital ratios at December
31, 2005 and 2004 as well as the minimum capital ratios for capital adequacy.

<TABLE>
<CAPTION>
Table Ten:  Capital Ratios
----------------------------------------------------------------------------------------
                                            At December 31,         Minimum Regulatory
Capital to Risk-Adjusted Assets           2005           2004       Capital Requirements
----------------------------------------------------------------------------------------
<S>                                       <C>            <C>                <C>
Leverage ratio                             7.7%           8.4%              4.00%

Tier 1 Risk-Based Capital                 10.6%           9.6%              4.00%

Total Risk-Based Capital                  11.9%          10.9%              8.00%
</TABLE>

         Capital ratios are reviewed on a regular basis to ensure that capital
exceeds the prescribed regulatory minimums and is adequate to meet future needs.
American River Bank's ratios are in excess of the regulatory definition of "well
capitalized."

         Management believes that the Company's capital is adequate to support
current operations and anticipated growth, cash dividends and future capital
requirements of the Company and its subsidiaries.

Market Risk Management

         Overview. Market risk is the risk of loss from adverse changes in
market prices and rates. The Company's market risk arises primarily from
interest rate risk inherent in its loan and deposit functions. The goal for
managing the assets and liabilities of the Company is to maximize shareholder
value and earnings while maintaining a high quality balance sheet without
exposing the Company to undue interest rate risk. The Board of Directors has
overall responsibility for the interest rate risk management policies. The
Company has a Risk Management Committee that establishes and monitors guidelines
to control the sensitivity of earnings to changes in interest rates.

         Asset/Liability Management. Activities involved in asset/liability
management include, but are not limited to, lending, accepting and placing
deposits and investing in securities. Interest rate risk is the primary market
risk associated with asset/liability management. Sensitivity of earnings to
interest rate changes arises when yields on assets change in a different time
period or in a different amount from that of interest costs on liabilities. To
mitigate interest rate risk, the structure of the consolidated balance sheet is
managed with the goal that movements of interest rates on assets and liabilities
are correlated and contribute to earnings even in periods of volatile interest
rates. The asset/liability management policy sets limits on the acceptable
amount of variance in net interest margin and market value of equity under
changing interest environments. The Company uses simulation models to forecast
earnings, net interest margin and market value of equity.

         Simulation of earnings is the primary tool used to measure the
sensitivity of earnings to interest rate changes. Using computer-modeling
techniques, the Company is able to estimate the potential impact of changing
interest rates on earnings. A balance sheet forecast is prepared quarterly using
inputs of actual loans and leases, securities and interest bearing liabilities

                                       38
<PAGE>

(i.e. deposits/borrowings) positions as the beginning base. The forecast balance
sheet is processed against three interest rate scenarios. The scenarios include
a 200 basis point rising rate forecast, a flat rate forecast and a 200 basis
point falling rate forecast which take place within a one year time frame. The
net interest income is measured during the year assuming a gradual change in
rates over the twelve-month horizon. The simulation modeling indicated below
attempts to estimate changes in the Company's net interest income utilizing a
forecast balance sheet projected from year-end balances.

         Table Eleven below summarizes the effect on net interest income (NII)
of a +/-200 basis point change in interest rates as measured against a constant
rate (no change) scenario.

Table Eleven:  Interest Rate Risk Simulation of Net Interest as of
December 31, 2005
--------------------------------------------------------------------------------
  (dollars in thousands)                                      $ Change in NII
                                                                from Current
                                                              12 Month Horizon
                                                              ----------------
             Variation from a constant rate scenario
                 +200bp                                           $    707
                 -200bp                                           $ (1,184)

The simulations of earnings do not incorporate any management actions, which
might moderate the negative consequences of interest rate deviations. Therefore,
they do not reflect likely actual results, but serve as reasonable estimates of
interest rate risk.

Interest Rate Sensitivity Analysis

         Interest rate sensitivity is a function of the repricing
characteristics of the portfolio of assets and liabilities. These repricing
characteristics are the time frames within which the interest-bearing assets and
liabilities are subject to change in interest rates either at replacement,
repricing or maturity. Interest rate sensitivity management focuses on the
maturity of assets and liabilities and their repricing during periods of changes
in market interest rates. Interest rate sensitivity is measured as the
difference between the volumes of assets and liabilities in the current
portfolio that are subject to repricing at various time horizons. The
differences are known as interest sensitivity gaps.

         A positive cumulative gap may be equated to an asset sensitive
position. An asset sensitive position in a rising interest rate environment will
cause a bank's interest rate margin to expand. This results as floating or
variable rate loans reprice more rapidly than fixed rate certificates of deposit
that reprice as they mature over time. Conversely, a declining interest rate
environment will cause the opposite effect. A negative cumulative gap may be
equated to a liability sensitive position. A liability sensitive position in a
rising interest rate environment will cause a bank's interest rate margin to
contract, while a declining interest rate environment will have the opposite
effect.

         As reflected in Table Twelve below, at December 31, 2005, the
cumulative gap through the one-year time horizon indicates a slightly liability
sensitive position.

                                       39
<PAGE>

<TABLE>
<CAPTION>
Table Twelve:  Interest Rate Sensitivity
December 31, 2005
-------------------------------------------------------------------------------------------------------------
Assets and Liabilities
  which mature or reprice within (days):
                                                                                        Non-
   (dollars in thousands)         0-90        91-180        181-365      Over 365     repricing      Total
-------------------------------------------------------------------------------------------------------------
<S>                            <C>          <C>           <C>           <C>          <C>           <C>
Assets:
   Investments                 $   11,502   $   12,307    $   18,562    $  135,532   $       --    $  177,903
   Loans and leases               188,144       26,505        29,379       121,543           --       365,571
   Other assets                        --           --            --            --       69,289        67,289
-------------------------------------------------------------------------------------------------------------
     Total assets              $  199,646   $   38,812    $   47,941    $  257,075   $   69,289    $  612,763
=============================================================================================================
Liabilities:
   Noninterest bearing         $       --   $       --    $       --    $       --   $  164,397    $  164,397
   Interest bearing:
     NOW Accounts                  23,183        9,273         6,953         6,955           --        46,364
     Money market                  66,720       26,688        20,019        20,016           --       133,443
     Savings                       18,855        7,542         3,771         7,543           --        37,711
     Time certificates             48,617       24,831        23,981        21,362           --       118,791
   Short-term borrowings           22,840        5,515        11,031            --           --        39,386
   Long-term borrowings                --           --            --         4,270           --         4,270
   Other liabilities                   --           --            --            --        5,655         5,655
   Shareholders' equity                --           --            --            --       62,746        62,746
-------------------------------------------------------------------------------------------------------------
   Total liabilities
    and shareholders' equity   $  180,215   $   73,849    $   65,755    $   60,146   $  232,798    $  612,763
=============================================================================================================
Interest rate
   sensitivity gap             $   19,431   $  (35,037)   $  (17,814)   $  196,929   $ (163,509)
Cumulative interest
   rate sensitivity gap        $   19,431   $  (15,606)   $  (33,420)   $  163,509           --
</TABLE>

Inflation

         The impact of inflation on a financial institution differs
significantly from that exerted on manufacturing, or other commercial concerns,
primarily because its assets and liabilities are largely monetary. In general,
inflation primarily affects the Company through its effect on market rates of
interest, which affects the Company's ability to attract loan customers.
Inflation affects the growth of total assets by increasing the level of loan
demand, and potentially adversely affects capital adequacy because loan growth
in inflationary periods can increase at rates higher than the rate that capital
grows through retention of earnings which may be generated in the future. In
addition to its effects on interest rates, inflation increases overall operating
expenses. Inflation has not had a material effect upon the results of operations
of the Company during the years ended December 31, 2005, 2004 and 2003.

Liquidity

         Liquidity management refers to the Company's ability to provide funds
on an ongoing basis to meet fluctuations in deposit levels as well as the credit
needs and requirements of its clients. Both assets and liabilities contribute to
the Company's liquidity position. Federal funds lines, short-term investments
and securities, and loan and lease repayments contribute to liquidity, along
with deposit increases, while loan and lease funding and deposit withdrawals
decrease liquidity. The Company assesses the likelihood of projected funding
requirements by reviewing historical funding patterns, current and forecasted
economic conditions and individual client funding needs. Commitments to fund
loans and outstanding standby letters of credit at December 31, 2005 were
approximately $137,802,000 and $3,393,000, respectively. Such loan commitments
relate primarily to revolving lines of credit and other commercial loans and to
real estate construction loans. Since some of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements.

                                       40
<PAGE>

         The Company's sources of liquidity consist of cash and due from
correspondent banks, overnight funds sold to correspondent banks, unpledged
marketable investments and loans held for sale. On December 31, 2005,
consolidated liquid assets totaled $99.2 million or 16.2% of total assets
compared to $96.4 million or 16.4% of total assets on December 31, 2004. In
addition to liquid assets, the Company maintains short-term lines of credit in
the amount of $48,000,000 with correspondent banks. At December 31, 2005, the
Company had $48,000,000 available under these credit lines. Additionally, the
American River Bank is a member of the FHLB. At December 31, 2005, American
River Bank could have arranged for up to $49,196,000 in secured borrowings from
the FHLB. These borrowings are secured by pledged mortgage loans and investment
securities. At December 31, 2005, the Company had $3,534,000 available under
these secured borrowing arrangements. American River Bank also has informal
agreements with various other banks to sell participations in loans, if
necessary. The Company serves primarily a business and professional customer
base and, as such, its deposit base is susceptible to economic fluctuations.
Accordingly, management strives to maintain a balanced position of liquid assets
to volatile and cyclical deposits.

         Liquidity is also affected by portfolio maturities and the effect of
interest rate fluctuations on the marketability of both assets and liabilities.
The Company can sell any of its unpledged securities held in the
available-for-sale category to meet liquidity needs. These securities are also
available to pledge as collateral for borrowings if the need should arise.
American River Bank has established a master repurchase agreement with a
correspondent bank to enable such transactions. American River Bank can also
pledge securities to borrow from the FRB and the FHLB.

         The principal cash requirements of the Company are for expenses
incurred in the support of administration and operations. For nonbanking
functions, the Company is dependent upon the payment of cash dividends from its
subsidiaries to service its commitments. The Company expects that the cash
dividends paid by American River Bank to the Company will be sufficient to meet
this payment schedule. The maturity distribution of certificates of deposit is
set forth in Table Thirteen below for the periods presented. These deposits are
generally more rate sensitive than other deposits and, therefore, are more
likely to be withdrawn to obtain higher yields elsewhere if available.

Table Thirteen:  Certificates of Deposit Maturities
December 31, 2005
--------------------------------------------------------------------------------
(dollars in thousands)                     Less than $100,000     Over $100,000
--------------------------------------------------------------------------------
 Three months or less                           $ 15,470             $ 33,147
 Over three months through six months             11,248               13,583
 Over six months through twelve months            12,148               11,833
 Over twelve months                               10,862               10,500
--------------------------------------------------------------------------------
 Total                                          $ 49,728             $ 69,063
================================================================================

         Loan and lease demand also affects the Company's liquidity position.
Table Fourteen below presents the maturities of loans and leases for the period
indicated.

Table Fourteen:  Loan and Lease Maturities (Gross Loans and Leases)
--------------------------------------------------------------------------------
December 31, 2005
--------------------------------------------------------------------------------
                          One year  One year through     Over
(dollars in thousands)    or less      five years     five years       Total
--------------------------------------------------------------------------------
  Commercial           $     46,631   $     24,410   $      6,930   $     77,971
  Real estate               102,693         60,814        102,488        265,995
  Agriculture                 1,001          1,354          5,774          8,129
  Consumer                    1,362          3,032          7,506         11,900
  Leases                        402          7,464            101          7,967
--------------------------------------------------------------------------------
  Total                $    152,089   $     97,074   $    122,799   $    371,962
================================================================================

         Loans and leases shown above with maturities greater than one year
include $169,383,000 of floating interest rate loans and $50,490,000 of fixed
rate loans and leases.

                                       41
<PAGE>

         The carrying amount, maturity distribution and weighted average yield
of the Company's investment securities available-for-sale and held-to-maturity
portfolios are presented in Table Fifteen below. The yields on tax-exempt
obligations have been computed on a tax equivalent basis.

<TABLE>
<CAPTION>
Table Fifteen:  Securities Maturities and Weighted Average Yields
December 31, 2005, 2004 and 2003
-------------------------------------------------------------------------------------------------------------------------------
(Taxable Equivalent Basis)
                                                            2005                       2004                       2003
                                                  -----------------------------------------------------------------------------
                                                                 Weighted                   Weighted                   Weighted
                                                   Carrying      Average      Carrying      Average      Carrying      Average
(dollars in thousands)                              Amount        Yield        Amount        Yield        Amount        Yield
-------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>                <C>     <C>                <C>     <C>                <C>
Available-for-sale securities:
U.S. Treasury and agency securities
     Maturing within 1 year                       $   21,012         3.37%   $    7,055         3.88%   $    3,573         3.70%
     Maturing after 1 year but within 5 years         28,107         3.70%       39,645         3.41%       17,877         3.75%
State & political subdivisions
     Maturing within 1 year                               --           --         1,105         4.83%          452         6.17%
     Maturing after 1 year but within 5 years         15,426         4.43%        6,574         4.30%          967         5.69%
     Maturing after 5 years but within 10 years       17,386         6.39%       17,393         6.16%        6,188         7.18%
     Maturing after 10 years                           4,294         6.37%        2,168         6.83%        4,454         7.44%
Government sponsored mortgage-backed securities       36,326         4.30%       40,359         4.30%       26,757         4.47%
Other
     Maturing within 1 year                               --           --         1,115         2.23%        1,514         1.84%
     Maturing after 1 year but within 5 years          1,014         4.67%           --           --           273         3.94%
     Non maturing                                        624         6.18%          627         6.63%          631         6.64%
-------------------------------------------------------------------------------------------------------------------------------
Total investment securities                       $  124,189         4.40%   $  116,041         4.32%   $   62,686         4.55%
===============================================================================================================================

Held-to-maturity securities:
State & political subdivisions
     Maturing within 1 year                       $       --           --    $       --           --    $      200         6.77%

Government sponsored mortgage-backed securities       45,012         4.37%       41,203         4.16%       26,960         4.06%
-------------------------------------------------------------------------------------------------------------------------------
Total investment securities                       $   45,012         4.37%   $   41,203         4.16%   $   27,160         4.08%
===============================================================================================================================
</TABLE>

         The carrying values of available-for-sale securities include net
unrealized (losses) gains of ($1,279,000), $880,000 and $1,430,000 at December
31, 2005, 2004 and 2003, respectively. The carrying values of held-to-maturity
securities do not include unrealized gains or losses, however, the net
unrealized (losses) gains at December 31, 2005, 2004 and 2003 were ($354,000),
$125,000 and $56,000, respectively. Table 15 does not include FHLB or FRB Stock,
which do not have stated maturity dates or readily available market values. The
balance in FHLB and FRB Stock at December 31, 2005, 2004 and 2003 was
$2,608,000, $2,158,000 and $1,546,000, respectively.

Off-Balance Sheet Arrangements

         The Company is a party to financial instruments with off-balance-sheet
risk in the normal course of business in order to meet the financing needs of
its customers and to reduce its exposure to fluctuations in interest rates.
These financial instruments consist of commitments to extend credit and letters
of credit. These instruments involve, to varying degrees, elements of credit and
interest rate risk in excess of the amount recognized on the balance sheet.

                                       42
<PAGE>

         The Company's exposure to credit loss in the event of nonperformance by
the other party for commitments to extend credit and letters of credit is
represented by the contractual amount of those instruments. The Company uses the
same credit policies in making commitments and letters of credit as it does for
loans included on the consolidated balance sheet. The following financial
instruments represent off-balance-sheet credit:

<TABLE>
<CAPTION>
                                                                        December 31,
                                                                  -----------------------
                                                                     2005         2004
                                                                  ----------   ----------
<S>                                                               <C>          <C>
Commitments to extend credit (dollars in thousands):

         Revolving lines of credit secured by
              1-4 family residences                               $   16,845   $    2,328
         Commercial real estate, construction and land
              development commitments secured by real estate          55,313       66,066
         Other unused commitments, principally commercial loans       65,644       57,019
                                                                  ----------   ----------
                                                                  $  137,802   $  125,413
                                                                  ==========   ==========

Letters of credit                                                 $    3,393   $    2,788
                                                                  ==========   ==========
</TABLE>

         As of December 31, 2005, commitments to extend credit and letters of
credit were the only financial instruments with off-balance sheet risk. The
Company has not entered into any contracts for financial derivative instruments
such as futures, swaps, options or similar instruments. Real estate commitments
are generally secured by property with a loan-to-value ratio of 65% to 75%. In
addition, the majority of the Company's commitments have variable interest
rates.

         Certain financial institutions have elected to use special purpose
vehicles ("SPV") to dispose of problem assets. The SPV is typically a subsidiary
company with an asset and liability structure and legal status that makes its
obligations secure even if the parent corporation goes bankrupt. Under certain
circumstances, these financial institutions may exclude the problem assets from
their reported impaired and non-performing assets. The Company does not use
those vehicles or any other structures to dispose of problem assets.

Contractual Obligations


         The Company leases certain facilities at which it conducts its
operations. Future minimum lease commitments under non-cancelable operating
leases are noted in Table Sixteen below. Table Sixteen below presents certain of
the Company's contractual obligations as of December 31, 2005. Included in the
table are amounts payable under the Company's Deferred Compensation and Deferred
Fees Plans and are listed in the "other" category. These amounts represented
$1,147,000 and are anticipated to be primarily payable at least five years in
the future.

<TABLE>
<CAPTION>
Table Sixteen: Contractual Obligations
--------------------------------------
(dollars in thousands)                                              Payments due by period
                                               --------------------------------------------------------------
                                                             Less than                            More than 5
                                                  Total       1 year      1-3 years    3-5 years     years
                                               --------------------------------------------------------------
<S>                                            <C>          <C>          <C>          <C>          <C>
Long-Term Debt                                 $    4,270   $       --   $    4,270   $       --   $       --
Capital Lease Obligations                              --           --           --           --           --
Operating Leases                                    4,037          860        1,382          922          873
Purchase Obligations                                   --           --           --           --           --
Other Long-Term Liabilities Reflected on the
    Company's Balance Sheet under GAAP              1,147           --           --           --        1,147
-------------------------------------------------------------------------------------------------------------

Total                                          $    9,454   $      860   $    5,652   $      922   $    2,020
=============================================================================================================
</TABLE>

Accounting Pronouncements

         In March 2004, the Financial Accounting Standards Board (the "FASB")
and Emerging Issues Task Force (the "EITF") reached consensus on several issues
being addressed in EITF Issue No. 03-1, The Meaning of Other-Than-Temporary
Impairment and Its Application to Certain Investments. The consensus provides
guidance for evaluating whether an investment is other-than-temporarily impaired

                                       43
<PAGE>

and was effective for other-than-temporary impairment evaluations made in
reporting periods beginning after June 15, 2004. The disclosure provisions of
EITF Issue No. 03-1 continue to be effective for the Company's consolidated
financial statements for the year ended December 31, 2005.

         On November 3, 2005, the FASB issued FASB Staff Position ("FSP") Nos.
FAS 115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments. This FSP addresses the determination as to
when an investment is considered impaired, whether that impairment is other than
temporary, and the measurement of an impairment loss. This FSP also includes
accounting considerations subsequent to the recognition of an
other-than-temporary impairment and requires certain disclosures about
unrealized losses that have not been recognized as other-than-temporary
impairments. This FSP nullifies certain requirements of EITF Issue No. 03-1, and
supersedes EITF Topic No. D-44, Recognition of Other-Than-Temporary Impairment
upon the Planned Sale of a Security Whose Cost Exceeds Fair Value. The guidance
in this FSP amends FASB Statement No. 115, Accounting for Certain Investments in
Debt and Equity Securities. The FSP is effective for reporting periods beginning
after December 15, 2005. The Company does not anticipate any material impact to
its financial condition or results of operations as a result of the adoption of
this guidance.

         In December 2004, the FASB issued Statement No. 123 (revised 2004)
("FAS 123 (R)"), Share-Based Payments. FAS 123 (R) requires all entities to
recognize compensation expense in an amount equal to the fair value of
share-based payments such as stock options granted to employees. The Company may
elect to adopt FAS 123 (R) using a modified prospective method or modified
retrospective method. Under the modified retrospective method, the Company would
restate previously issued financial statements, basing the compensation expense
on that previously reported in their pro forma disclosures required by FAS 123.
The modified prospective method would require the Company to record compensation
expense for the unvested portion of previously granted awards that remain
outstanding at the date of adoption as these awards continue to vest. FAS 123
(R) is effective January 1, 2006. Management has elected to use the modified
prospective method and has completed its evaluation of the effect of FAS 123
(R), and does not expect it to have a material impact on its financial position
or results of operations.

         On June 7, 2005, the FASB issued Statement No. 154 ("FAS 154"),
Accounting Changes and Error Corrections - a replacement of Accounting
Principles Board (APB) Opinion No. 20, Accounting Changes, and SFAS No. 3,
Reporting Accounting Changes in Interim Financial Statements. Under the
provisions of FAS 154, voluntary changes in accounting principles are applied
retrospectively to prior periods' financial statements unless it would be
impractical to do so. FAS 154 supersedes APB Opinion No. 20, which required that
most voluntary changes in accounting principles be recognized by including in
the current period's net income the cumulative effect of the change. FAS 154
also makes a distinction between "retrospective application" of a change in
accounting principle and the "restatement" of financial statements to reflect
the correction of an error. The provisions of FAS 154 are effective for
accounting changes made in fiscal years beginning after December 15, 2005.
Management of the Company does not expect the adoption of this standard to have
a material impact on its financial position or results of operations.

Other Matters

         Effects of Terrorism. The terrorist actions on September 11, 2001 and
thereafter and the current military conflict in Iraq have had significant
adverse effects upon the United States economy. Whether the terrorist activities
in the future and the actions of the United States and its allies in combating
terrorism on a worldwide basis will adversely impact the Company and the extent
of such impact is uncertain. Such economic deterioration could adversely affect
the Company's future results of operations by, among other matters, reducing the
demand for loans and other products and services offered by the Company,
increasing nonperforming loans and the amounts reserved for loan and lease
losses, and causing a decline in the Company's stock price.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

The information required by Item 7A of Form 10-K is contained in the "Market
Risk Management" section of Item 7-"Management's Discussion and Analysis of
Financial Condition and Results of Operations" on pages 38-40.

                                       44
<PAGE>

Item 8.  Financial Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                                                                           Page

Report of Independent Registered Public Accounting Firm                    46

Consolidated Balance Sheet, December 31, 2005 and 2004                     47

Consolidated Statement of Income for the Years Ended
   December 31, 2005, 2004 and 2003                                        48

Consolidated Statement of Changes in Shareholders' Equity
   for the Years Ended December 31, 2005, 2004 and 2003                    49

Consolidated Statement of Cash Flows for the Years Ended
   December 31, 2005, 2004 and 2003                                        50-51

Notes to Consolidated Financial Statements                                 52-82

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 Consolidated Financial Statements or
notes thereto.

                                       45
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             -------------------------------------------------------



The Shareholders and Board of Directors
American River Bankshares

         We have audited the accompanying consolidated balance sheet of American
River Bankshares and subsidiaries (the "Company") as of December 31, 2005 and
2004 and the related consolidated statements of income, changes in shareholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 2005. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

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

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
American River Bankshares and subsidiaries as of December 31, 2005 and 2004, and
the consolidated results of their operations and their consolidated cash flows
for each of the years in the three-year period ended December 31, 2005, in
conformity with accounting principles generally accepted in the United States of
America.

         We have also audited in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the effectiveness of the
Company's internal control over financial reporting as of December 31, 2005,
based on criteria established in Internal Control - Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated March 8, 2006 expressed an unqualified opinion on management's
assessment of the effectiveness of the Company's internal control over financial
reporting and an unqualified opinion on the effectiveness of the Company's
internal control over financial reporting.




                                             /s/ Perry-Smith LLP



Sacramento, California
March 8, 2006

                                       46
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                           December 31, 2005 and 2004
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                    2005          2004
                                                                 ----------    ----------
                            ASSETS
<S>                                                              <C>           <C>
Cash and due from banks                                          $   34,825    $   28,115
Federal funds sold                                                    1,250         7,000
                                                                 ----------    ----------

       Total cash and cash equivalents                               36,075        35,115

Interest-bearing deposits in banks                                    4,844         5,939
Investment securities (Notes 5 and 10):
   Available for sale, at fair value                                124,189       116,041
   Held to maturity, at amortized cost (fair value of $44,658
     and $41,328 at December 31, 2005 and 2004, respectively)        45,012        41,203
Loans and leases, less allowance for loan and lease losses of
   $5,679 in 2005 and $5,496 in 2004 (Notes 6, 10, 12 and 17)       365,571       352,467
Premises and equipment, net (Note 7)                                  2,090         1,876
Federal Home Loan Bank stock                                          2,608         2,158
Accounts receivable servicing receivables, net (Note 8)               2,000         2,409
Goodwill (Notes 3 and 4)                                             16,321        16,146
Intangible assets (Notes 3 and 4)                                     1,831         2,183
Accrued interest receivable and other assets (Notes 11 and 16)       12,222        11,129
                                                                 ----------    ----------

                                                                 $  612,763    $  586,666
                                                                 ==========    ==========

                        LIABILITIES AND
                     SHAREHOLDERS' EQUITY

Deposits:
   Noninterest bearing                                           $  164,397    $  143,710
   Interest bearing (Note 9)                                        336,309       331,677
                                                                 ----------    ----------

       Total deposits                                               500,706       475,387

Short-term borrowings (Note 10)                                      39,386        24,457
Long-term borrowings (Note 10)                                        4,270         9,832
Accrued interest payable and other liabilities (Note 16)              5,655        18,000
                                                                 ----------    ----------

       Total liabilities                                            550,017       527,676
                                                                 ----------    ----------

Commitments and contingencies (Note 12)

Shareholders' equity (Notes 13 and 14):
   Common stock - no par value; 20,000,000 shares authorized;
     issued and outstanding - 5,604,479 shares in 2005 and
     5,314,732 shares in 2004                                        47,474        42,557
   Retained earnings                                                 16,029        15,878
   Accumulated other comprehensive (loss) income, net of taxes
     (Notes 5 and 18)                                                  (757)          555
                                                                 ----------    ----------

       Total shareholders' equity                                    62,746        58,990
                                                                 ----------    ----------

                                                                 $  612,763    $  586,666
                                                                 ==========    ==========
</TABLE>

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

                                       47
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                        CONSOLIDATED STATEMENT OF INCOME

              For the Years Ended December 31, 2005, 2004 and 2003
                  (Dollars in thousands, except per share data)

<TABLE>
<CAPTION>
                                                                 2005         2004         2003
                                                              ----------   ----------   ----------
<S>                                                           <C>          <C>          <C>
Interest income:
   Interest and fees on loans and leases                      $   26,536   $   18,115   $   16,744
   Interest on Federal funds sold                                     90           67           48
   Interest on deposits in banks                                     188          134          168
   Interest and dividends on investment securities:
     Taxable                                                       5,436        3,751        2,312
     Exempt from Federal income taxes                                931          537          475
     Dividends                                                        32           32           21
                                                              ----------   ----------   ----------

         Total interest income                                    33,213       22,636       19,768
                                                              ----------   ----------   ----------

Interest expense:
   Interest on deposits (Note 9)                                   5,646        2,511        2,390
   Interest on borrowings (Note 10)                                1,105          707          512
                                                              ----------   ----------   ----------

         Total interest expense                                    6,751        3,218        2,902
                                                              ----------   ----------   ----------

         Net interest income                                      26,462       19,418       16,866

Provision for loan and lease losses (Note 6)                         322          895          946
                                                              ----------   ----------   ----------

         Net interest income after provision for loan
           and lease losses                                       26,140       18,523       15,920
                                                              ----------   ----------   ----------

Noninterest income:
   Service charges                                                   672          551          534
   Gain on sale of available-for-sale investment securities
     (Note 5)                                                         48                        33
   Other income (Note 15)                                          1,609        1,844        1,686
                                                              ----------   ----------   ----------

         Total noninterest income                                  2,329        2,395        2,253
                                                              ----------   ----------   ----------

Noninterest expense:
   Salaries and employee benefits (Notes 6 and 16)                 6,958        6,048        6,233
   Occupancy (Notes 7 and 12)                                      1,229          953          817
   Furniture and equipment (Notes 7 and 12)                          918          752          653
   Loss on sale of available-for-sale investment securities
     (Note 5)                                                                      38
   Other expense (Note 15)                                         4,388        3,922        2,669
                                                              ----------   ----------   ----------

         Total noninterest expense                                13,493       11,713       10,372
                                                              ----------   ----------   ----------

         Income before provision for income taxes                 14,976        9,205        7,801

Provision for income taxes (Note 11)                               5,792        3,378        3,060
                                                              ----------   ----------   ----------

         Net income                                           $    9,184   $    5,827   $    4,741
                                                              ==========   ==========   ==========

Basic earnings per share (Note 13)                            $     1.63   $     1.24   $     1.08
                                                              ==========   ==========   ==========

Diluted earnings per share (Note 13)                          $     1.60   $     1.18   $     1.00
                                                              ==========   ==========   ==========

Cash dividends per share of issued and outstanding common
   stock, adjusted for stock dividends                        $     0.54   $     0.42   $     0.27
                                                              ==========   ==========   ==========
</TABLE>

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

                                       48
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

              For the Years Ended December 31, 2005, 2004 and 2003
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                                              Accum-
                                                                                              ulated
                                                                                               Other
                                                                                              Compre-
                                                                                              hensive
                                                                                              Income/        Total         Total
                                                        Common Stock                           (Loss)        Share-        Compre-
                                                   ------------------------     Retained      (Net of       holders'       hensive
                                                     Shares        Amount       Earnings       Taxes)        Equity        Income
                                                   ----------    ----------    ----------    ----------    ----------    ----------
<S>                                                 <C>          <C>           <C>           <C>           <C>           <C>
Balance, January 1, 2003                            3,938,883    $   16,064    $   14,358    $    1,304    $   31,726

Comprehensive income (Note 18):
   Net income                                                                       4,741                       4,741    $    4,741
   Other comprehensive loss, net of tax:
     Net change in unrealized gains on available-
       for-sale investment securities                                                              (440)         (440)         (440)
                                                                                                                         ----------
         Total comprehensive income                                                                                      $    4,301
                                                                                                                         ==========

Cash dividend ($.27 per share)                                                     (1,192)                     (1,192)
Fractional shares redeemed                               (225)                         (7)                         (7)
Stock options exercised                               135,704           653                                       653
Retirement of common stock (Note 13)                  (19,102)          (24)                                      (24)
                                                   ----------    ----------    ----------    ----------    ----------

Balance, December 31, 2003                          4,055,260        16,693        17,900           864        35,457

Comprehensive income (Note 18):
   Net income                                                                       5,827                       5,827    $    5,827
   Other comprehensive loss, net of tax:
     Net change in unrealized gains on available-
       for-sale investment securities                                                              (309)         (309)         (309)
                                                                                                                         ----------
         Total comprehensive income                                                                                      $    5,518
                                                                                                                         ==========

Stock issued in acquisition (Note 3)                  775,548        18,284                                    18,284
Cash dividend ($.42 per share)                                                     (2,044)                     (2,044)
5% stock dividend                                     252,392         5,805        (5,805)
Stock options exercised                               263,446         1,959                                     1,959
Retirement of common stock (Note 13)                  (31,914)         (184)                                     (184)
                                                   ----------    ----------    ----------    ----------    ----------

Balance, December 31, 2004                          5,314,732        42,557        15,878           555        58,990

Comprehensive income (Note 18):
   Net income                                                                       9,184                       9,184    $    9,184
   Other comprehensive loss, net of tax:
     Net change in unrealized gains on available-
       for-sale investment securities                                                            (1,312)       (1,312)       (1,312)
                                                                                                                         ----------
         Total comprehensive income                                                                                      $    7,872
                                                                                                                         ==========

Cash dividend ($.54 per share)                                                     (3,012)                     (3,012)
Fractional shares redeemed                                 (1)          (32)                                      (32)
5% stock dividend                                     266,801         6,021        (6,021)
Stock options exercised                               113,309           945                                       945
Retirement of common stock (Note 13)                  (90,362)       (2,017)                                   (2,017)
                                                   ----------    ----------    ----------    ----------    ----------

Balance, December 31, 2005                          5,604,479    $   47,474    $   16,029    $     (757)   $   62,746
                                                   ==========    ==========    ==========    ==========    ==========
</TABLE>

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

                                       49
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF CASH FLOWS

              For the Years Ended December 31, 2005, 2004 and 2003
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                        2005          2004          2003
                                                                     ----------    ----------    ----------
<S>                                                                  <C>           <C>           <C>
Cash flows from operating activities:
   Net income                                                        $    9,184    $    5,827    $    4,741
   Adjustments to reconcile net income to net cash (used in)
     provided by operating activities:
       Provision for loan and lease losses                                  322           895           946
       (Decrease) increase in deferred loan and lease origination
         fees, net                                                         (173)          (79)           95
       Depreciation and amortization                                      1,014           575           484
       Amortization of investment security premiums
         and discounts, net                                               1,099         1,249           936
       Provision for accounts receivable servicing receivable
         allowance for losses                                                35                           1
       (Gain) loss on sale of available-for-sale investment
         securities                                                         (48)           38           (33)
       Gain on life insurance death benefit                                              (553)
       Increase in cash surrender value of life insurance policies         (178)          (69)          (27)
       Provision for deferred income taxes                                 (422)          (82)         (474)
       Decrease (increase) in accrued interest receivable and
         other assets                                                       179        (1,136)         (389)
       (Decrease) increase in accrued interest payable and
         other liabilities                                              (12,604)        1,920           331
                                                                     ----------    ----------    ----------

           Net cash (used in) provided by operating activities           (1,592)        8,585         6,611
                                                                     ----------    ----------    ----------

Cash flows from investing activities:
   Cash acquired in acquisition                                                        26,294
   Proceeds from the sale of available-for-sale investment
       securities                                                         6,964         5,019         6,274
   Proceeds from called available-for-sale investment
     securities                                                             280
   Proceeds from matured available-for-sale investment
     securities                                                          20,180         5,435         6,840
   Proceeds from matured held-to-maturity investment
     securities                                                                           200         1,125
   Purchases of available-for-sale investment securities                (41,596)      (50,875)      (24,015)
   Purchases of held-to-maturity investment securities                  (16,901)      (23,737)      (25,432)
   Proceeds from principal repayments for available-for-sale
     mortgage-backed securities                                           3,411         8,507         8,911
   Proceeds from principal repayments for held-to-maturity
     mortgage-backed securities                                          12,495         8,758         8,890
   Net decrease (increase) in interest-bearing deposits in banks          1,095        (1,189)        1,288
   Net increase in loans and leases                                     (13,242)      (12,064)      (34,491)
   Net decrease (increase) in accounts receivable servicing
     receivables                                                            374          (631)         (383)
   Death benefit from life insurance policy                                             1,236
   Purchases of equipment                                                  (886)         (704)         (320)
   Net (increase) decrease in FHLB and FRB stock                           (450)         (612)           16
   Purchase of life insurance policies                                                               (1,614)
                                                                     ----------    ----------    ----------

           Net cash used in investing activities                        (28,276)      (34,363)      (52,911)
                                                                     ----------    ----------    ----------
</TABLE>

                                   (Continued)

                                       50
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                      CONSOLIDATED STATEMENT OF CASH FLOWS
                                   (Continued)
              For the Years Ended December 31, 2005, 2004 and 2003
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                   2005          2004          2003
                                                                ----------    ----------    ----------
<S>                                                             <C>           <C>           <C>
Cash flows from financing activities:
   Net increase in demand, interest-bearing and savings
     deposits                                                   $   12,722    $   37,341    $   47,477
   Net increase (decrease) in time deposits                         12,597        (3,697)         (766)
   Repayment of long-term debt                                      (5,562)          (53)          (50)
   Increase (decrease) in other borrowings                          14,929        (2,200)        4,050
   Exercise of stock options                                           945         1,959           653
   Cash paid to repurchase common stock                             (2,017)         (184)          (24)
   Payment of cash dividends                                        (2,754)       (2,070)       (1,135)
   Cash paid for fractional shares in connection with stock
     dividends and stock splits                                        (32)                         (7)
                                                                ----------    ----------    ----------

           Net cash provided by financing activities                30,828        31,096        50,198
                                                                ----------    ----------    ----------

           Increase in cash and cash equivalents                       960         5,318         3,898

Cash and cash equivalents at beginning of year                      35,115        29,797        25,899
                                                                ----------    ----------    ----------

Cash and cash equivalents at end of year                        $   36,075    $   35,115    $   29,797
                                                                ==========    ==========    ==========

Supplemental disclosure of cash flow information:
  Cash paid during the year for:
     Interest expense                                           $    6,509    $    3,149    $    2,980
     Income taxes                                               $    5,990    $    1,765    $    3,242

Non-cash investing activities:
   Net change in unrealized gain on available-for-sale
     investment securities                                      $   (2,159)   $     (550)   $     (719)

Non-cash financing activities:
   Dividends declared and unpaid                                $      841    $      582    $      608
   Adjustments to goodwill                                      $      238

Supplemental schedule related to acquisition (Notes 3 and 4):
   Deposits                                                                   $  119,236
   Other liabilities                                                                 489
   Payable to Bank of Amador shareholders                                         12,730
   Interest bearing deposits in banks                                               (100)
   Available-for-sale investment securities                                      (22,542)
   Loans, net                                                                    (78,737)
   Premise and equipment                                                            (226)
   Intangible assets                                                             (18,296)
   Other assets                                                                   (4,544)
   Stock issued                                                                   18,284
                                                                              ----------

       Cash acquired                                                          $   26,294
                                                                              ==========
</TABLE>

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

                                       51
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.       THE BUSINESS OF THE COMPANY

         American River Bankshares (the "Company") was incorporated under the
         laws of the State of California in 1995 under the name of American
         River Holdings and changed its name in 2004 to American River
         Bankshares. 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. As a community
         oriented bank holding company, the principal communities served are
         located in Sacramento, Placer, Yolo, El Dorado, Amador, and Sonoma
         counties.

         The Company owns 100% of the issued and outstanding common shares of
         its banking subsidiary, American River Bank (ARB). ARB was incorporated
         in 1983. ARB accepts checking and savings deposits, offers money market
         deposit accounts and certificates of deposit, makes secured and
         unsecured commercial, secured real estate, and other installment and
         term loans and offers other customary banking services. ARB operates
         five banking offices in Sacramento and Placer counties, three banking
         offices in Sonoma County under the name North Coast Bank (NCB), a
         division of ARB, and three banking offices in Amador County under the
         name Bank of Amador, a division of ARB.

         On December 3, 2004, the Company acquired Bank of Amador located in
         Jackson, California (more fully described in Note 3). Bank of Amador
         was merged with and into American River Bank and now operates as Bank
         of Amador, a division of American River Bank. The merger transaction
         was accounted under the purchase method of accounting and accordingly
         the results of their operations have been included in the consolidated
         financial statements since the date of acquisition.

         The Company also owns one inactive subsidiary, American River
         Financial.

         The deposits of ARB are insured by the Federal Deposit Insurance
         Corporation (the "FDIC") up to applicable legal limits. ARB does not
         offer trust services or international banking services and does not
         plan to do so in the near future.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         General
         -------

         The accounting and reporting policies of the Company and its
         subsidiaries conform with accounting principles generally accepted in
         the United States of America and prevailing practices within the
         financial services industry.

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

         Certain reclassifications have been made to prior years' balances to
         conform to classifications used in 2005.

         Principles of Consolidation
         ---------------------------

         The consolidated financial statements include the accounts of the
         Company and its wholly-owned subsidiaries. All material intercompany
         transactions and accounts have been eliminated in consolidation.

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

         The preparation of consolidated financial statements in conformity with
         accounting principles generally accepted in the United States of
         America requires management to make estimates and assumptions. These
         estimates and assumptions affect the reported amounts of assets and
         liabilities at the date of the consolidated financial statements and
         the reported amounts of revenues and expenses during the reporting
         period. Actual results could differ from these estimates.

                                       52
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

         For the purpose of the statement of cash flows, cash and due from banks
         and Federal funds sold are considered to be cash equivalents.
         Generally, Federal funds are sold for one-day periods.

         Investment Securities
         ---------------------

         Investments are classified into the following categories:

                  o   Available-for-sale securities, reported at fair value,
                      with unrealized gains and losses excluded from earnings
                      and reported, net of taxes, as accumulated other
                      comprehensive income (loss) within shareholders' equity.

                  o   Held-to-maturity securities, which management has the
                      positive intent and ability to hold, reported at amortized
                      cost, adjusted for the accretion of discounts and
                      amortization of premiums.

         Management determines the appropriate classification of its investments
         at the time of purchase and may only change the classification in
         certain limited circumstances. All transfers between categories are
         accounted for at fair value.

         Gains or losses on the sale of investment securities are computed on
         the specific identification method. Interest earned on investment
         securities is reported in interest income, net of applicable
         adjustments for accretion of discounts and amortization of premiums. In
         addition, unrealized losses that are other than temporary are
         recognized in earnings for all investments.

         Investment securities are evaluated for impairment on at least a
         quarterly basis and more frequently when economic or market conditions
         warrant such an evaluation to determine whether a decline in their
         value is other than temporary. Management utilizes criteria such as the
         magnitude and duration of the decline and the intent and ability of the
         Company to retain its investment in the securities for a period of time
         sufficient to allow for an anticipated recovery in fair value, in
         addition to the reasons underlying the decline, to determine whether
         the loss in value is other than temporary. The term "other than
         temporary" is not intended to indicate that the decline is permanent,
         but indicates that the prospects for a near-term recovery of value is
         not necessarily favorable, or that there is a lack of evidence to
         support a realizable value equal to or greater than the carrying value
         of the investment. Once a decline in value is determined to be other
         than temporary, the value of the security is reduced and a
         corresponding charge to earnings is recognized.

         Federal Reserve Bank and Federal Home Loan Bank Stock
         -----------------------------------------------------

         Investments in Federal Reserve Bank (FRB) and Federal Home Loan Bank
         (FHLB) stock are carried at cost and are redeemable at par with certain
         restrictions. Members of the FRB are required to purchase restricted
         stock in the FRB. Investments in FHLB are required to participate in
         FHLB programs. The FRB stock was surrendered in 2004 when the Company
         discontinued its membership in the FRB.

         Loans and Leases
         ----------------

         Loans and leases are reported at the principal amounts outstanding,
         adjusted for unearned income, deferred loan origination fees and costs,
         purchase premiums and discounts, write-downs and the allowance for loan
         and lease losses. Loan and lease origination fees, net of certain
         deferred origination costs, and purchase premiums and discounts are
         recognized as an adjustment to the yield of the related loans and
         leases.

                                       53
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Loans and Leases (Continued)
         ----------------

         The accrual of interest on loans and leases is discontinued when, in
         the opinion of management, there is an indication that the borrower may
         be unable to meet payments as they become due. Upon such
         discontinuance, all unpaid accrued interest is reversed against current
         income unless the loan or lease is in the process of collection.
         Interest received on nonaccrual loans and leases is either applied
         against principal or reported as interest income, according to
         management's judgment as to the collectibility of principal. Generally,
         loans and leases are restored to accrual status when the obligation is
         brought current and has performed in accordance with the contractual
         terms for a reasonable period of time and the ultimate collectibility
         of the total contractual principal and interest is no longer in doubt.

         Direct financing leases are carried net of unearned income. Income from
         leases is recognized by a method that approximates a level yield on the
         outstanding net investment in the lease.

         Loan Sales and Servicing
         ------------------------

         Included in the portfolio are Small Business Administration (SBA) loans
         and Farmer Mac guaranteed loans that may be sold in the secondary
         market. Loans held for sale are carried at the lower of cost or market
         value. Market value is determined by the specific identification method
         as of the balance sheet date or the date that the purchasers have
         committed to purchase the loans. At the time the loan is sold, the
         related right to service the loan is either retained, with the Company
         earning future servicing income, or released in exchange for a one-time
         servicing-released premium. A portion of this premium may be required
         to be refunded if the borrower defaults or the loan prepays within
         ninety days of the settlement date. There were no sales of loans
         subject to these recourse provisions at December 31, 2005, 2004 and
         2003. Loans subsequently transferred to the loan portfolio are
         transferred at the lower of cost or market value at the date of
         transfer. Any difference between the carrying amount of the loan and
         its outstanding principal balance is recognized as an adjustment to
         yield by the interest method. There were no loans held for sale at
         December 31, 2005 and 2004.

         SBA and Farmer Mac loans with unpaid balances of $1,609,000 and
         $2,640,000 were being serviced for others as of December 31, 2005 and
         2004, respectively. The Company also serviced loans that are
         participated with other financial institutions totaling $20,911,000 and
         $12,329,000 as of December 31, 2005 and 2004, respectively.

         Servicing rights acquired through 1) a purchase or 2) the origination
         of loans which are sold or securitized with servicing rights retained
         are recognized as separate assets or liabilities. Servicing assets or
         liabilities are recorded at the difference between the contractual
         servicing fees and adequate compensation for performing the servicing,
         and are subsequently amortized in proportion to and over the period of
         the related net servicing income or expense. Servicing assets are
         periodically evaluated for impairment. Servicing assets were not
         considered material for disclosure purposes.

         Allowance for Loan and Lease Losses
         -----------------------------------

         The allowance for loan and lease losses is maintained to provide for
         possible losses related to impaired loans and leases and other possible
         losses on loans and leases identified by management as doubtful,
         substandard and special mention, as well as losses that can be expected
         to occur in the normal course of business related to currently
         performing loans and leases. The determination of the allowance is
         based on estimates made by management, to include consideration of the
         character of the loan and lease portfolio including concentrations,
         types of lending, specifically identified problem loans and leases,
         inherent risk of loss in the portfolio taken as a whole and economic
         conditions in the Company's service areas.

                                       54
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Allowance for Loan and Lease Losses (Continued)
         -----------------------------------

         Commercial and real estate loans and leases determined to be impaired
         or classified are individually evaluated by management for specific
         risk of loss. In addition, reserve factors are assigned to currently
         performing loans and leases based on management's assessment of the
         following for each identified loan and lease type: (1) inherent credit
         risk and (2) historical losses. Management's risk assessment includes
         its own portfolio characteristics and performance, the loss experience
         of peer banks, and other economic conditions and factors. These
         estimates are particularly susceptible to changes in the economic
         environment and market conditions.

         The Company's Loan Committee reviews the adequacy of the allowance for
         loan and lease losses at least quarterly, to include consideration of
         the relative risks in the portfolio and current economic conditions.
         The allowance is adjusted based on that review if, in the judgment of
         the Loan Committee and management, changes are warranted.

         The allowance is established through a provision for loan and lease
         losses which is charged to expense. Additions to the allowance are
         expected to maintain the adequacy of the total allowance after credit
         losses and loan and lease growth. The allowance for loan and lease
         losses at December 31, 2005 and 2004, respectively, reflect
         management's estimate of possible losses in the portfolio.

         Other Real Estate
         -----------------

         Other real estate includes real estate acquired in full or partial
         settlement of loan obligations. When property is acquired, any excess
         of the recorded investment in the loan balance and accrued interest
         income over the estimated fair market value of the property less
         estimated selling costs is charged against the allowance for loan and
         lease losses. A valuation allowance for losses on other real estate is
         maintained to provide for temporary declines in value. The allowance is
         established through a provision for losses on other real estate which
         is included in other expenses. Subsequent gains or losses on sales or
         writedowns resulting from permanent impairments are recorded in other
         income or expense as incurred. There was no other real estate held by
         the Company at December 31, 2005 and 2004.

         Premises and Equipment
         ----------------------

         Premises and equipment are carried at cost. Depreciation is determined
         using the straight-line method over the estimated useful lives of the
         related assets. The useful life of the building and improvements is
         forty years. The useful lives of furniture, fixtures and equipment are
         estimated to be three to ten years. Leasehold improvements are
         amortized over the life of the asset or the term of the related lease,
         whichever is shorter. When assets are sold or otherwise disposed of,
         the cost and related accumulated depreciation or amortization are
         removed from the accounts, and any resulting gain or loss is recognized
         in income for the period. The cost of maintenance and repairs is
         charged to expense as incurred. Impairment of long-lived assets is
         evaluated by management based upon an event or changes in circumstances
         surrounding the underlying assets which indicate long-lived assets may
         be impaired.

         Goodwill and Intangible Assets
         ------------------------------

         Business combinations involving the Company's acquisition of equity
         interests or net assets of another enterprise or the assumption of net
         liabilities in an acquisition of branches constituting a business may
         give rise to goodwill. Goodwill represents the excess of the cost of an
         acquired entity over the net of the amounts assigned to assets acquired
         and liabilities assumed in transactions accounted for under the
         purchase method of accounting. The value of goodwill is ultimately
         derived from the Company's ability to generate net earnings after the
         acquisition and is not deductible for tax purposes. A decline in net
         earnings could be indicative of a decline in the fair value of goodwill
         and result in impairment. For that reason, goodwill is assessed for
         impairment at least annually.

                                       55
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Goodwill and Intangible Assets (Continued)
         ------------------------------

         Intangible assets are comprised of core deposit intangibles which
         represent the estimated fair value of the long-term deposit
         relationships that were assumed when the Company acquired Bank of
         Amador. Core deposit intangibles are amortized using a method that
         approximates the expected run-off of the deposit base, which, in this
         case, is eight years.

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

         The Company files its income taxes on a consolidated basis with its
         subsidiaries. The allocation of income tax expense (benefit) represents
         each entity's proportionate share of the consolidated provision for
         income taxes.

         The Company accounts for income taxes using the balance sheet method,
         under which deferred tax assets and liabilities are recognized for the
         tax consequences of temporary differences between the reported amounts
         of assets and liabilities and their tax bases. Deferred tax assets and
         liabilities are adjusted for the effects of changes in tax laws and
         rates on the date of enactment. On the consolidated balance sheet, net
         deferred tax assets are included in accrued interest receivable and
         other assets.

         Comprehensive Income
         --------------------

         Comprehensive income is reported in addition to net income for all
         periods presented. Comprehensive income is a more inclusive financial
         reporting methodology that includes disclosure of other comprehensive
         income (loss) that historically has not been recognized in the
         calculation of net income. Unrealized gains and losses on the Company's
         available-for-sale investment securities are included in other
         comprehensive income (loss), adjusted for realized gains or losses
         included in net income. Total comprehensive income and the components
         of accumulated other comprehensive income (loss) are presented in the
         consolidated statement of changes in shareholders' equity.

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

         Basic earnings per share (EPS), which excludes dilution, is computed by
         dividing income available to common shareholders by the
         weighted-average number of common shares outstanding for the period.
         Diluted EPS reflects the potential dilution that could occur if
         securities or other contracts to issue common stock, such as stock
         options, result in the issuance of common stock which shares in the
         earnings of the Company. The treasury stock method has been applied to
         determine the dilutive effect of stock options in computing diluted
         EPS. EPS is retroactively adjusted for stock splits and stock dividends
         for all periods presented.

         Stock-Based Compensation
         ------------------------

         At December 31, 2005, the Company has two stock-based compensation
         plans, which are described more fully in Note 13. The Company accounts
         for these plans under the recognition and measurement principles of APB
         Opinion No. 25, Accounting for Stock Issued to Employees, and related
         Interpretations. Generally, stock-based compensation cost is not
         reflected in net income, as all options granted under these plans had
         an exercise price equal to the market value of the underlying common
         stock on the date of grant.

                                       56
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Stock-Based Compensation (Continued)
         ------------------------

         Pro forma adjustments to the Company's consolidated net income and
         earnings per share are disclosed during the years in which the options
         become vested. The following table illustrates the effect on net income
         and earnings per share if the Company had applied the fair value
         recognition provisions of FASB Statement No. 123, Accounting for
         Stock-Based Compensation, to stock-based compensation.

<TABLE>
<CAPTION>
                                                                      Year Ended December 31,
                                                              --------------------------------------
                                                                 2005          2004          2003
                                                              ----------    ----------    ----------
                                                                   (Dollars in thousands, except
                                                                          per share data)
<S>                                                           <C>           <C>           <C>
         Net income, as reported                              $    9,184    $    5,827    $    4,741
         Add: Stock-based compensation expense included in
           reported net income, net of tax effect                                                 20
         Deduct: Total stock-based compensation expense
           determined under the fair value based method for
           all awards, net of related tax effects                    (88)          (68)         (150)
                                                              ----------    ----------    ----------

         Pro forma net income                                 $    9,096    $    5,759    $    4,611
                                                              ==========    ==========    ==========

         Basic earnings per share - as reported               $     1.63    $     1.24    $     1.08
         Basic earnings per share - pro forma                 $     1.62    $     1.22    $     1.05

         Diluted earnings per share - as reported             $     1.60    $     1.18    $     1.00
         Diluted earnings per share - pro forma               $     1.59    $     1.17    $     0.97

         Weighted average fair value of options granted
           during the year                                    $     6.22    $     4.69    $     3.17

         The fair value of each option is estimated on the date of grant using
         an option-pricing model.
<CAPTION>

                                                              2005              2004               2003
                                                          -------------     -------------     -------------
<S>                                                       <C>                  <C>            <C>
         Dividend yield                                   2.27% to 2.71%        2.15%         1.74% to 1.88%
         Expected volatility                              30.3% to 31.4%        22.0%         19.4% to 19.6%
         Risk-free interest rate                          3.96% to 4.08%        4.01%         2.91% to 3.52%
         Expected option life                                 7 years          7 years            7 years
</TABLE>

         Impact of New Financial Accounting Standards
         --------------------------------------------

         Other-Than-Temporary Impairment

         In March 2004, the Financial Accounting Standards Board (FASB) and
         Emerging Issues Task Force (EITF) reached consensus on several issues
         being addressed in EITF Issue No. 03-1, The Meaning of
         Other-Than-Temporary Impairment and Its Application to Certain
         Investments. The consensus provides guidance for evaluating whether an
         investment is other-than-temporarily impaired and was effective for
         other-than-temporary impairment evaluations made in reporting periods
         beginning after June 15, 2004. The disclosure provisions of EITF Issue
         No. 03-1 continue to be effective for the Company's consolidated
         financial statements for the year ended December 31, 2005.

                                       57
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

         Impact of New Financial Accounting Standards (Continued)
         --------------------------------------------

         Other-Than-Temporary Impairment (Continued)

         On November 3, 2005, the FASB issued FASB Staff Position (FSP) Nos. FAS
         115-1 and FAS 124-1, The Meaning of Other-Than-Temporary Impairment and
         Its Application to Certain Investments. This FSP addresses the
         determination as to when an investment is considered impaired, whether
         that impairment is other than temporary, and the measurement of an
         impairment loss. This FSP also includes accounting considerations
         subsequent to the recognition of an other-than-temporary impairment and
         requires certain disclosures about unrealized losses that have not been
         recognized as other-than-temporary impairments. This FSP nullifies
         certain requirements of EITF Issue No. 03-1, and supersedes EITF Topic
         No. D-44, Recognition of Other-Than-Temporary Impairment upon the
         Planned Sale of a Security Whose Cost Exceeds Fair Value. The guidance
         in this FSP amends FASB Statement No. 115, Accounting for Certain
         Investments in Debt and Equity Securities. The FSP is effective for
         reporting periods beginning after December 15, 2005. The Company does
         not anticipate any material impact to its financial condition or
         results of operations as a result of the adoption of this guidance.

         Share-Based Payments

         In December 2004, the FASB issued Statement No. 123 (revised 2004) (FAS
         123 (R)), Share-Based Payments. FAS 123 (R) requires all entities to
         recognize compensation expense in an amount equal to the fair value of
         share-based payments such as stock options granted to employees. The
         Company may elect to adopt FAS 123 (R) using a modified prospective
         method or modified retrospective method. Under the modified
         retrospective method, the Company would restate previously issued
         financial statements, basing the compensation expense on that
         previously reported in their pro forma disclosures required by FAS 123.
         The modified prospective method would require the Company to record
         compensation expense for the unvested portion of previously granted
         awards that remain outstanding at the date of adoption as these awards
         continue to vest. FAS 123 (R) is effective for the first fiscal year
         beginning after June 15, 2005, effectively January 1, 2006 for the
         Company. Management has elected to use the modified prospective method
         and has completed its evaluation of the effect of FAS 123 (R), and does
         not expect it to have a material impact on its financial position or
         results of operations.

         Accounting Changes and Error Corrections

         On June 7, 2005, the FASB issued Statement No. 154 (FAS 154),
         Accounting Changes and Error Corrections - a replacement of Accounting
         Principles Board (APB) Opinion No. 20, Accounting Changes, and SFAS No.
         3, Reporting Accounting Changes in Interim Financial Statements. Under
         the provisions of FAS 154, voluntary changes in accounting principles
         are applied retrospectively to prior periods' financial statements
         unless it would be impractical to do so. FAS 154 supersedes APB Opinion
         No. 20, which required that most voluntary changes in accounting
         principles be recognized by including in the current period's net
         income the cumulative effect of the change. FAS 154 also makes a
         distinction between "retrospective application" of a change in
         accounting principle and the "restatement" of financial statements to
         reflect the correction of an error. The provisions of FAS 154 are
         effective for accounting changes made in fiscal years beginning after
         December 15, 2005. Management of the Company does not expect the
         adoption of this standard to have a material impact on its financial
         position or results of operations.

                                       58
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


3.       MERGER TRANSACTION WITH BANK OF AMADOR

         On December 3, 2004, the Company completed an acquisition of Bank of
         Amador (BNKA) through a merger and tax-free reorganization. The Company
         acquired BNKA and merged BNKA with and into ARB. The acquisition was
         completed because the Board of Directors and management of both
         organizations believed the combination would be in the best interests
         of shareholders of the Company and BNKA and that the combined companies
         could offer a broader array of services and products than each could
         offer on its own. Total consideration paid BNKA shareholders was
         determined through extensive negotiations supported by internal
         modeling, which management believed would result in earnings per share
         accretion to the Company's shareholders in 2005. These factors
         contributed to the purchase price which resulted in the recognition of
         goodwill.

         The following table summarizes the terms of the acquisition (dollars in
         thousands):

         Shares of common stock issued                                   775,548
         Value of common stock issued                             $       18,284
         Cash paid to Bank of Amador shareholders                 $       12,730
         Total consideration paid                                 $       31,014

         During 2005, goodwill was increased $238,000 representing the final
         adjustments to the initial allocation of the purchase price.

         The following supplemental pro forma information discloses selected
         financial information for the periods indicated as though the merger
         had been completed at the beginning of each year presented (dollars in
         thousands, except per share data):

                                                         Year Ended December 31,
                                                        -----------------------

                                                           2004         2003
                                                        ----------   ----------

         Earnings as reported:
           Revenue                                      $   25,031   $   22,021
           Net income                                   $    5,827   $    4,741
           Basic EPS                                    $     1.30   $     1.13
           Diluted EPS                                  $     1.24   $     1.05
         Pro forma merger adjustments:
           Revenue                                      $    6,905   $    7,043
           Net income                                   $    1,584   $    1,817
         Pro forma earnings after merger adjustments:
           Revenue                                      $   31,936   $   29,064
           Net income                                   $    7,411   $    6,558
           Basic EPS                                    $     1.42   $     1.32
           Diluted EPS                                  $     1.37   $     1.24

         Pro forma net income for the year ended December 31, 2004 excludes
         nonrecurring charges of approximately $2,086,000 on an after-tax basis,
         representing merger-related expenses and the cost of retiring
         outstanding stock options.

                                       59
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


3.       MERGER TRANSACTION WITH BANK OF AMADOR (Continued)

         The estimated fair value of assets acquired and liabilities assumed are
         as follows (dollars in thousands):

         Cash and cash equivalents                                   $   26,294
         Interest-bearing deposits in banks                                 100
         Available-for-sale investment securities                        22,542
         Gross loans                                                     79,598
         Allowance for loan and lease losses                               (861)
         Premises and equipment                                             226
         Core deposit intangible                                          2,213
         Goodwill                                                        16,083
         Other assets                                                     4,544
                                                                     ----------

                Total assets acquired                                   150,739
                                                                     ----------

         Deposits                                                       119,236
         Other liabilities                                                  489
                                                                     ----------

                Total liabilities assumed                               119,725
                                                                     ----------

         Purchase price                                              $   31,014
                                                                     ==========

4.       GOODWILL AND OTHER INTANGIBLE ASSETS

         At December 31, 2005 and 2004, goodwill totaled $16,321,000 and
         $16,146,000, respectively. Goodwill is evaluated annually for
         impairment under the provisions of SFAS No. 142, Goodwill and Other
         Intangible Assets, and the Company determined that no impairment
         recognition was required for the years ended December 31, 2005 and
         2004. Goodwill is not deductible for tax purposes.

         Other intangible assets are comprised of core deposit intangibles
         totaling $1,831,000 and $2,183,000 at December 31, 2005 and 2004,
         respectively. Amortization included in other expense totaled $352,000
         and $30,000 for the years ended December 31, 2005 and 2004,
         respectively. The remaining balance will be amortized over 6.9 years.
         Amortization expense for the next five years is estimated as follows
         (dollars in thousands):

                         Year Ending
                         December 31,
                         -------------

                             2006                             $       330
                             2007                                     308
                             2008                                     286
                             2009                                     264
                             2010                                     242

                                       60
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


5.       INVESTMENT SECURITIES

         The amortized cost and estimated fair value of investment securities at
         December 31, 2005 and 2004 consisted of the following (dollars in
         thousands):

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

<TABLE>
<CAPTION>
                                                                  2005
                                        -----------------------------------------------------------
                                                          Gross           Gross         Estimated
                                         Amortized      Unrealized      Unrealized        Fair
                                            Cost          Gains           Losses          Value
                                        ------------   ------------    ------------    ------------
<S>                                     <C>            <C>             <C>             <C>
         Debt securities:
           U.S. Government agencies     $     49,860                   $       (741)   $     49,119
           Mortgage-backed securities         37,065   $         31            (770)         36,326
           Obligations of states and
              political subdivisions          36,942            486            (322)         37,106
           Corporate debt securities           1,017                             (3)          1,014
         Equity securities:
           Corporate stock                       584             52             (12)            624
                                        ------------   ------------    ------------    ------------

                                        $    125,468   $        569    $     (1,848)   $    124,189
                                        ============   ============    ============    ============


                                                                  2004
                                        -----------------------------------------------------------
                                                          Gross           Gross         Estimated
                                         Amortized      Unrealized      Unrealized        Fair
                                            Cost          Gains           Losses          Value
                                        ------------   ------------    ------------    ------------
         Debt securities:
           U.S. Government agencies     $     46,610   $        181    $        (90)   $     46,701
           Mortgage-backed securities         40,309            137             (87)         40,359
           Obligations of states and
              political subdivisions          26,541            744             (45)         27,240
           Corporate debt securities           1,115              1              (2)          1,114
         Equity securities:
           Corporate stock                       586             62             (21)            627
                                        ------------   ------------    ------------    ------------

                                        $    115,161   $      1,125    $       (245)   $    116,041
                                        ============   ============    ============    ============
</TABLE>

         Net unrealized losses on available-for-sale investment securities
         totaling $1,279,000 were recorded, net of $522,000 in tax benefits, as
         accumulated other comprehensive loss within shareholders' equity at
         December 31, 2005. Proceeds and gross realized gains from the sale of
         available-for-sale investment securities for the year ended December
         31, 2005 totaled $6,964,000 and $48,000, respectively. There were no
         transfers of available-for-sale investment securities during the year
         ended December 31, 2005.

         Net unrealized gains on available-for-sale investment securities
         totaling $880,000 were recorded, net of $325,000 in tax liabilities, as
         accumulated other comprehensive income within shareholders' equity at
         December 31, 2004. Proceeds and gross realized losses from the sale of
         available-for-sale investment securities for the year ended December
         31, 2004 totaled $5,019,000 and ($38,000), respectively. There were no
         transfers of available-for-sale investment securities during the year
         ended December 31, 2004 and 2003.

                                       61
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


5.       INVESTMENT SECURITIES (Continued)

         Held-to-Maturity
         ----------------
<TABLE>
<CAPTION>

                                                                       2005
                                             -----------------------------------------------------------
                                                               Gross           Gross         Estimated
                                              Amortized      Unrealized      Unrealized        Fair
                                                 Cost          Gains           Losses          Value
                                             ------------   ------------    ------------    ------------
<S>                                          <C>            <C>             <C>             <C>
         Debt securities:
           Mortgage-backed securities        $     45,012   $         60    $       (414)   $     44,658
                                             ============   ============    ============    ============


                                                                       2004
                                             -----------------------------------------------------------
                                                               Gross           Gross         Estimated
                                              Amortized      Unrealized      Unrealized        Fair
                                                 Cost          Gains           Losses          Value
                                             ------------   ------------    ------------    ------------

         Debt securities:
           Mortgage-backed securities        $     41,203   $        216    $        (91)   $     41,328
                                             ============   ============    ============    ============

         There were no sales or transfers of held-to-maturity investment
         securities for the years ended December 31, 2005, 2004 and 2003.

         The amortized cost and estimated fair value of investment securities at
         December 31, 2005 by contractual maturity are shown below (dollars in
         thousands).

<CAPTION>
                                                 Available-for-Sale        Held-to-Maturity
                                              -----------------------   -----------------------
                                                           Estimated                 Estimated
                                               Amortized     Fair        Amortized     Fair
                                                 Cost        Value         Cost        Value
                                              ----------   ----------   ----------   ----------
<S>                                           <C>          <C>          <C>          <C>
         Within one year                      $   21,165   $   21,012
         After one year through five years        45,306       44,547
         After five years through ten years       17,066       17,386
         After ten years                           4,282        4,294
                                              ----------   ----------

                                                  87,819       87,239

         Investment securities not due at
           a single maturity date:
              Mortgage-backed securities          37,065       36,326   $   45,012   $   44,658
              Corporate stock                        584          624
                                              ----------   ----------   ----------   ----------

                                              $  125,468   $  124,189   $   45,012   $   44,658
                                              ==========   ==========   ==========   ==========
</TABLE>

         Expected maturities will differ from contractual maturities because the
         issuers of the securities may have the right to call or prepay
         obligations with or without call or prepayment penalties.

         Investment securities with amortized costs totaling $57,898,000 and
         $57,481,000 and estimated fair values totaling $56,901,000 and
         $57,599,000 were pledged to secure treasury tax and loan accounts,
         State Treasury funds on deposit, public agency and bankruptcy trustee
         deposits and borrowing arrangements (see Note 10) at December 31, 2005
         and 2004, respectively.

                                       62
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


5.       INVESTMENT SECURITIES (Continued)

         Investment securities with unrealized losses at December 31, 2005 are
         summarized and classified according to the duration of the loss period
         as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                        Less than 12 Months             12 Months or More                     Total
                                   ----------------------------    ----------------------------    ----------------------------
                                      Fair          Unrealized        Fair          Unrealized        Fair          Unrealized
                                      Value           Losses          Value           Losses          Value           Losses
                                   ------------    ------------    ------------    ------------    ------------    ------------
<S>                                <C>             <C>             <C>             <C>             <C>             <C>
         Available-for-Sale
         ------------------

         Debt securities:
           U.S. Government
              agencies             $     29,344    $       (368)   $     19,775    $       (373)   $     49,119    $       (741)
           Mortgage-backed
              securities                 16,779            (374)         16,619            (396)         33,398            (770)
           Obligations of states
              and political sub-
              divisions                  18,083            (212)          6,370            (110)         24,453            (322)
           Corporate debt
              securities                  1,014              (3)                                          1,014              (3)
           Corporate stock                                                  238             (12)            238             (12)
                                   ------------    ------------    ------------    ------------    ------------    ------------

                                   $     65,220    $       (957)   $     43,002    $       (891)   $    108,222    $     (1,848)
                                   ============    ============    ============    ============    ============    ============

         Held-to-Maturity
         ----------------

         Debt securities:
           Mortgage-backed
              securities           $     30,753    $       (344)   $      3,130    $        (70)   $     33,883    $       (414)
                                   ============    ============    ============    ============    ============    ============
</TABLE>

         At December 31, 2005, the Company held 245 investment securities of
         which 101 were in a loss position for less than twelve months and 52
         were in a loss position and had been in a loss position for twelve
         months or more. Management periodically evaluates each investment
         security in a loss position for other-than-temporary impairment,
         relying primarily on industry analyst reports and observation of market
         conditions and interest rate fluctuations. Management believes it will
         be able to collect all amounts due according to the contractual terms
         of the underlying investment securities and that the noted decline in
         fair value is considered temporary and due only to interest rate
         fluctuations.

                                       63
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


6.       LOANS AND LEASES

         Outstanding loans and leases are summarized as follows (dollars in
         thousands):

<TABLE>
<CAPTION>
                                                               December 31,
                                                         ------------------------
                                                            2005          2004
                                                         ----------    ----------
<S>                                                      <C>           <C>
         Real estate - commercial                        $  154,500    $  166,263
         Real estate - construction                         103,048        90,162
         Real estate - multi-family                           3,767         2,660
         Real estate - residential                            4,680         5,236
         Commercial                                          77,971        66,864
         Lease financing receivable                           7,967         9,994
         Agriculture                                          8,129         8,252
         Consumer                                            11,900         9,417
                                                         ----------    ----------

                                                            371,962       358,848

         Deferred loan and lease origination fees, net         (712)         (885)
         Allowance for loan and lease losses                 (5,679)       (5,496)
                                                         ----------    ----------

                                                         $  365,571    $  352,467
                                                         ==========    ==========
</TABLE>

         Certain loans have been pledged to secure borrowing arrangements (see
         Note 10).

         The components of the Company's leases receivable are summarized as
         follows (dollars in thousands):

                                                              December 31,
                                                       ------------------------
                                                          2005          2004
                                                       ----------    ----------

         Future lease payments receivable              $    8,470    $   10,709
         Residual interests                                   275           276
         Unearned income                                     (778)         (991)
                                                       ----------    ----------

                Net lease financing receivable         $    7,967    $    9,994
                                                       ==========    ==========

         Future lease payments receivable are as follows (dollars in thousands):

                         Year Ending
                         December 31,
                         ------------

                             2006                                   $     3,810
                             2007                                         2,495
                             2008                                         1,500
                             2009                                           521
                             2010                                           142
                          Thereafter                                          2
                                                                    -----------

                               Total lease payments receivable      $     8,470
                                                                    ===========

                                       64
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


6.       LOANS AND LEASES (Continued)

         Changes in the allowance for loan and lease losses were as follows
         (dollars in thousands):

<TABLE>
<CAPTION>
                                                   Year Ended December 31,
                                           --------------------------------------
                                              2005          2004          2003
                                           ----------    ----------    ----------
<S>                                        <C>           <C>           <C>
         Balance, beginning of year        $    5,496    $    3,949    $    3,197
         Allowance acquired                                     861
         Provision charged to operations          322           895           946
         Losses charged to allowance             (206)         (269)         (354)
         Recoveries                                67            60           160
                                           ----------    ----------    ----------

                Balance, end of year       $    5,679    $    5,496    $    3,949
                                           ==========    ==========    ==========
</TABLE>

         At December 31, 2005 and 2004, nonaccrual loans and leases totaled
         $67,000 and $236,000, respectively. Interest foregone on nonaccrual
         loans for the years ended December 31, 2005, 2004 and 2003 was not
         material.

         The recorded investment in loans and leases that were considered to be
         impaired totaled $91,000 and $247,000 at December 31, 2005 and 2004,
         respectively. The related allowance for loan and lease losses for these
         loans and leases as determined under loan impairment standards at
         December 31, 2005 and 2004 was $24,000 and $62,000, respectively. The
         average recorded investment in impaired loans and leases for the years
         ended December 31, 2005, 2004 and 2003 was $271,000, $124,000 and
         $148,000, respectively. Interest income recognized on impaired loans
         and leases using a cash-basis method for the years ended December 31,
         2005, 2004 and 2003 was not material.

         Salaries and employee benefits totaling $1,395,000, $706,000 and
         $570,000 have been deferred as loan and lease origination costs for the
         years ended December 31, 2005, 2004 and 2003, respectively.

7.       PREMISES AND EQUIPMENT

         Premises and equipment consisted of the following (dollars in
         thousands):

                                                              December 31,
                                                       ------------------------
                                                          2005          2004
                                                       ----------    ----------

         Land                                          $      206    $      206
         Building and improvements                            779           597
         Furniture, fixtures and equipment                  6,023         5,378
         Leasehold improvements                             1,133         1,123
                                                       ----------    ----------

                                                            8,141         7,304
              Less accumulated depreciation
                and amortization                           (6,051)       (5,428)
                                                       ----------    ----------

                                                       $    2,090    $    1,876
                                                       ==========    ==========

         Depreciation and amortization included in occupancy and furniture and
         equipment expense totaled $672,000, $562,000 and $480,000 for the years
         ended December 31, 2005, 2004 and 2003, respectively.

                                       65
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


8.       ACCOUNTS RECEIVABLE SERVICING RECEIVABLES

         The Company purchases existing accounts receivable on a discounted
         basis from selected merchants and assumes the related billing and
         collection responsibilities on a recourse basis. Accounts receivable
         servicing fees included in other income totaled $356,000, $316,000 and
         $247,000 for the years ended December 31, 2005, 2004 and 2003,
         respectively. The valuation allowance for these receivables is not
         significant.

9.       INTEREST-BEARING DEPOSITS

         Interest-bearing deposits consisted of the following (dollars in
         thousands):

                                                               December 31,
                                                         -----------------------
                                                            2005         2004
                                                         ----------   ----------

         Savings                                         $   37,711   $   38,957
         Money market                                       133,443      139,373
         NOW accounts                                        46,364       47,052
         Time, $100,000 or more                              69,063       57,037
         Other time                                          49,728       49,258
                                                         ----------   ----------

                                                         $  336,309   $  331,677
                                                         ==========   ==========

         Aggregate annual maturities of time deposits are as follows (dollars in
         thousands):

                         Year Ending
                         December 31,
                         ------------

                             2006                                $      97,429
                             2007                                       11,659
                             2008                                        5,558
                             2009                                        2,322
                             2010                                        1,816
                          Thereafter                                         7
                                                                 -------------

                                                                 $     118,791
                                                                 =============

         Interest expense recognized on interest-bearing deposits consisted of
         the following (dollars in thousands):

                                                    Year Ended December 31,
                                            ------------------------------------
                                               2005         2004         2003
                                            ----------   ----------   ----------

         Savings                            $      150   $       56   $       35
         Money market                            2,164        1,057          884
         NOW accounts                               83           43           28
         Time, $100,000 or more                  1,620          836          743
         Other time                              1,629          519          700
                                            ----------   ----------   ----------

                                            $    5,646   $    2,511   $    2,390
                                            ==========   ==========   ==========

                                       66
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


10.      BORROWING ARRANGEMENTS

         The Company has a total of $48,000,000 in unsecured short-term
         borrowing arrangements to purchase Federal funds with four of its
         correspondent banks. There were no advances under the borrowing
         arrangements as of December 31, 2005 and 2004.

         In addition, the Company has a line of credit available with the
         Federal Home Loan Bank which is secured by pledged mortgage loans (see
         Note 6) and investment securities (see Note 5). Borrowings may include
         overnight advances as well as loans with a term of up to thirty years.
         Advances totaling $43,656,000 were outstanding from the Federal Home
         Loan Bank at December 31, 2005, bearing fixed interest rates ranging
         from 2.10% to 6.13% and maturing between January 3, 2006 and December
         31, 2007. Advances totaling $34,289,000 were outstanding from the
         Federal Home Loan Bank at December 31, 2004, bearing fixed interest
         rates ranging from 1.29% to 6.13% and maturing between January 24, 2005
         and December 21, 2007. Amounts available under the borrowing
         arrangement with the Federal Home Loan Bank at December 31, 2005 and
         2004 totaled $3,534,000 and $16,071,000, respectively.

         The following table summarizes these borrowings (in thousands):

<TABLE>
<CAPTION>
                                                               December 31,
                                            --------------------------------------------------
                                                     2005                       2004
                                            -----------------------    -----------------------
                                                          Weighted                   Weighted
                                                          Average                    Average
                                              Amount        Rate         Amount        Rate
                                            ----------   ----------    ----------   ----------
<S>                                         <C>                <C>     <C>                <C>
         Short-term portion of borrowings   $   39,386         3.73%   $   24,457         1.85%
         Long-term borrowings                    4,270         4.10%        9,832         3.15%
                                            ----------                 ----------

         FHLB advances                      $   43,656         3.76%   $   34,289         2.22%
                                            ==========                 ==========
</TABLE>

         Future minimum principal payments on outstanding borrowings are as
         follows (dollars in thousands):

                       Year Ending
                       December 31,
                       ------------

                           2006                                 $      39,386
                           2007                                         4,270
                                                                -------------

                                                                $      43,656
                                                                =============

         The Company has also been issued $2,000,000 in letters of credit by the
         Federal Home Loan Bank which have been pledged to secure Local Agency
         Deposits. The letters of credit act as a guarantee of payment to
         certain third parties in accordance with specified terms and
         conditions. The letters of credit were not drawn upon in 2005 and
         management does not expect to draw upon these lines in the future.

                                       67
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


11.      INCOME TAXES

         The provision for income taxes for the years ended December 31, 2005,
         2004, and 2003 consisted of the following (dollars in thousands):

<TABLE>
<CAPTION>
                                                  Federal         State            Total
                                               ------------    ------------    ------------

         2005
         ----
<S>                                            <C>             <C>             <C>
         Current                               $      4,706    $      1,508    $      6,214
         Deferred                                      (481)             59            (422)
                                               ------------    ------------    ------------

                  Provision for income taxes   $      4,225    $      1,567    $      5,792
                                               ============    ============    ============

         2004
         ----

         Current                               $      2,504    $        956    $      3,460
         Deferred                                       (25)            (57)            (82)
                                               ------------    ------------    ------------

                  Provision for income taxes   $      2,479    $        899    $      3,378
                                               ============    ============    ============

         2003
         ----

         Current                               $      2,566    $        968    $      3,534
         Deferred                                      (332)           (142)           (474)
                                               ------------    ------------    ------------

                  Provision for income taxes   $      2,234    $        826    $      3,060
                                               ============    ============    ============

         Deferred tax assets (liabilities) consisted of the following (dollars
         in thousands):
<CAPTION>

                                                                                December 31,
                                                                         ------------------------
                                                                            2005          2004
                                                                         ----------    ----------
<S>                                                                      <C>           <C>
         Deferred tax assets:
           Allowance for loan and lease losses                           $    2,382    $    2,295
           Future benefit of State tax deduction                                506           214
           Deferred compensation                                                517           484
           Unrealized losses on available-for-sale investment
              securities                                                        522
           Other                                                                167            10
                                                                         ----------    ----------

                Total deferred tax assets                                     4,094         3,003
                                                                         ----------    ----------

         Deferred tax liabilities:
           Core deposit intangible                                             (819)         (970)
           Investment market to market                                         (165)         (192)
           Future liability of State deferred tax assets                       (133)         (115)
           Deferred loan costs                                                 (430)
           Unrealized gain on available-for-sale investment securities                       (325)
           Federal Home Loan Bank stock dividends                              (122)          (88)
           Other                                                                (10)         (167)
                                                                         ----------    ----------

                Total deferred tax liabilities                               (1,679)       (1,857)
                                                                         ----------    ----------

                Net deferred tax assets                                  $    2,415    $    1,146
                                                                         ==========    ==========
</TABLE>

                                       68
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


11.      INCOME TAXES (Continued)

         The provision for income taxes differs from amounts computed by
         applying the statutory Federal income tax rate of 34% to income before
         income taxes. The significant items comprising these differences
         consisted of the following:

<TABLE>
<CAPTION>
                                                                  Year Ended December 31,
                                                          ------------------------------------
                                                             2005         2004         2003
                                                          ----------   ----------   ----------
<S>                                                             <C>          <C>          <C>
         Federal income tax statutory rate                      34.0 %       34.0 %       34.0 %
         State franchise tax, net of Federal tax effect          6.9 %        6.4 %        6.9 %
         Tax benefit of interest on obligations of
           states and political subdivisions                    (2.1)%       (2.0)%       (2.1)%
         Tax-exempt income from life insurance
           policies                                             (0.4)%       (2.2)%
         Other                                                   0.3 %        0.5 %        0.4 %
                                                          ----------   ----------   ----------

                Effective tax rate                              38.7 %       36.7 %       39.2 %
                                                          ==========   ==========   ==========
</TABLE>

12.      COMMITMENTS AND CONTINGENCIES

         Leases
         ------

         The Company leases branch facilities, administrative offices and
         various equipment under noncancelable operating leases which expire on
         various dates through the year 2014. Certain of the leases have five
         year renewal options. Two of the branch facilities are leased from
         current or former members of the Company's Board of Directors (see Note
         17).

         Future minimum lease payments are as follows (dollars in thousands):

                       Year Ending
                       December 31,
                       ------------

                           2006                                  $         860
                           2007                                            689
                           2008                                            693
                           2009                                            556
                           2010                                            366
                        Thereafter                                         873
                                                                 -------------

                                                                 $       4,037
                                                                 =============

         Rental expense included in occupancy, furniture and equipment expense
         totaled $887,000, $718,000 $600,000 for the years ended December 31,
         2005, 2004 and 2003, respectively.

         Financial Instruments With Off-Balance-Sheet Risk
         -------------------------------------------------

         The Company is a party to financial instruments with off-balance-sheet
         risk in the normal course of business in order to meet the financing
         needs of its customers and to reduce its exposure to fluctuations in
         interest rates. These financial instruments consist of commitments to
         extend credit and standby letters of credit. These instruments involve,
         to varying degrees, elements of credit and interest rate risk in excess
         of the amount recognized on the balance sheet.

                                       69
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


12.      COMMITMENTS AND CONTINGENCIES (Continued)

         Financial Instruments With Off-Balance-Sheet Risk (Continued)
         -------------------------------------------------

         The Company's exposure to credit loss in the event of nonperformance by
         the other party for commitments to extend credit and standby letters of
         credit is represented by the contractual amount of those instruments.
         The Company uses the same credit policies in making commitments and
         standby letters of credit as it does for loans included on the
         consolidated balance sheet.

         The following financial instruments represent off-balance-sheet credit
         risk (dollars in thousands):

<TABLE>
<CAPTION>
                                                                              December 31,
                                                                        -----------------------
                                                                           2005         2004
                                                                        ----------   ----------
<S>                                                                     <C>          <C>
         Commitments to extend credit:
           Revolving lines of credit secured by 1-4 family residences   $   16,845   $    2,328
           Commercial real estate, construction and land
              development commitments secured by real estate                55,313       66,066
           Other unused commitments, principally commercial loans           65,644       57,019
                                                                        ----------   ----------

                                                                        $  137,802   $  125,413
                                                                        ==========   ==========

         Standby letters of credit                                      $    3,393   $    2,788
                                                                        ==========   ==========
</TABLE>

         Real estate commitments are generally secured by property with a
         loan-to-value ratio of 65% to 75%. In addition, the majority of the
         Company's commitments have variable interest rates.

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

         Standby letters of credit are conditional commitments issued to
         guarantee the performance or financial obligation of a client to a
         third party. The credit risk involved in issuing letters of credit is
         essentially the same as that involved in extending loans to clients.
         The fair value of the liability related to these standby letters of
         credit, which represents the fees received for issuing the guarantees,
         was not significant at December 31, 2005 and 2004. The Company
         recognizes these fees as revenue over the term of the commitment or
         when the commitment is used.

         Significant Concentrations of Credit Risk
         -----------------------------------------

         The Company grants real estate mortgage, real estate construction,
         commercial, agricultural and consumer loans to clients throughout
         Sacramento, Placer, Yolo, Amador, El Dorado, Sonoma, Napa, Marin and
         Mendocino counties.

         In management's judgment, a concentration exists in real estate-related
         loans which represented approximately 72% and 74% of the Company's loan
         portfolio at December 31, 2005 and 2004, respectively. Although
         management believes such concentrations to have no more than the normal
         risk of collectibility, a substantial decline in the economy in
         general, or a decline in real estate values in the Company's primary
         market areas in particular, could have an adverse impact on
         collectibility of these loans. However, personal and business income
         represent the primary source of repayment for a majority of these
         loans.

                                       70
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


12.      COMMITMENTS AND CONTINGENCIES (Continued)

         Correspondent Banking Agreements
         --------------------------------

         The Company maintains funds on deposit with other federally insured
         financial institutions under correspondent banking agreements.
         Uninsured deposits totaled $20,623,000 at December 31, 2005.

         Contingencies
         -------------

         The Company is subject to legal proceedings and claims which arise in
         the ordinary course of business. In the opinion of management, the
         amount of ultimate liability with respect to such actions will not
         materially affect the consolidated financial position or results of
         operations of the Company.

13.      SHAREHOLDERS' EQUITY

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

         A reconciliation of the numerators and denominators of the basic and
         diluted earnings per share computations is as follows (dollars and
         shares in thousands, except per share data):

<TABLE>
<CAPTION>
                                                            Weighted
                                                             Average
                                                            Number of
                                                Net          Shares        Per-Share
               For the Year Ended              Income      Outstanding       Amount
         ---------------------------------  ------------   ------------   ------------
<S>                                         <C>                   <C>     <C>
         December 31, 2005
         -----------------

         Basic earnings per share           $      9,184          5,620   $       1.63
                                                                          ============

         Effect of dilutive stock options                           114
                                            ------------   ------------

         Diluted earnings per share         $      9,184          5,734   $       1.60
                                            ============   ============   ============

         December 31, 2004
         -----------------

         Basic earnings per share           $      5,827          4,716   $       1.24
                                                                          ============

         Effect of dilutive stock options                           215
                                            ------------   ------------

         Diluted earnings per share         $      5,827          4,931   $       1.18
                                            ============   ============   ============

         December 31, 2003
         -----------------

         Basic earnings per share           $      4,741          4,398   $       1.08
                                                                          ============

         Effect of dilutive stock options                           362
                                            ------------   ------------

         Diluted earnings per share         $      4,741          4,760   $       1.00
                                            ============   ============   ============
</TABLE>

                                       71
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


13.      SHAREHOLDERS' EQUITY (Continued)

         Stock Option Plans
         ------------------

         In 2000 and 1995, the Board of Directors adopted stock option plans
         under which options may be granted to employees and directors under
         incentive and nonstatutory agreements. At December 31, 2005, grants
         outstanding combined with shares available for future grants totaled
         649,629 shares under these plans. The plans require that the option
         price may not be less than the fair market value of the stock at the
         date the option is granted. The purchase price of exercised options is
         payable in full in cash or shares of the Company's common stock owned
         by the optionee at the time the option is exercised. The options expire
         on dates determined by the Board of Directors, but not later than ten
         years from the date of grant. Options vest ratably over a five year
         period. Outstanding options under the 1995 plan are exercisable until
         their expiration; however, no new options will be granted under this
         plan.

         A summary of the combined activity within the plans follows:

<TABLE>
<CAPTION>
                                            2005                           2004                           2003
                                ----------------------------   ----------------------------   ----------------------------

                                                  Weighted                       Weighted                       Weighted
                                                  Average                        Average                        Average
                                                  Exercise                       Exercise                       Exercise
                                   Shares          Price          Shares          Price          Shares          Price
                                ------------    ------------   ------------    ------------   ------------    ------------
<S>                                 <C>         <C>                <C>         <C>                <C>         <C>
         Options outstanding,
           beginning of year         359,748    $       8.98        605,704    $       5.80        688,742    $       4.51

           Options granted            65,458    $      21.05         69,850    $      19.43         68,430    $      13.52
           Options exercised        (118,975)   $       4.00       (290,449)   $       4.08       (149,614)   $       3.96
           Options canceled          (15,296)   $      17.77        (25,358)   $      15.00         (1,854)   $       4.74
                                ------------                   ------------                   ------------

         Options outstanding,
           end of year               290,935    $      13.25        359,748    $       8.98        605,704    $       5.80
                                ============                   ============                   ============

         Options exercisable,
           end of year               159,444    $       8.43        257,478    $       5.70        533,397    $       4.76
                                ============                   ============                   ============

         A summary of options outstanding at December 31, 2005 follows:
<CAPTION>

                                            Number of             Weighted           Number of
                                             Options              Average             Options
                                           Outstanding           Remaining           Exercisable
                                           December 31,          Contractual         December 31,
         Range of Exercise Prices              2005                 Life                2005
         ------------------------        ----------------     ----------------     ----------------
<S>                                                <C>               <C>                     <C>
         $     3.03                                 9,806             .8 years                9,806
         $     4.74                                15,593            4.0 years               15,593
         $     5.02                                11,245            2.7 years               11,245
         $     5.57                                21,703            1.4 years               21,703
         $     8.03                                14,943            3.9 years               14,943
         $     8.21                                15,074            3.0 years               15,074
         $     8.85                                43,404            2.7 years               43,404
         $    13.51                                40,248            7.4 years               16,099
         $    14.65                                   801            7.5 years                  320
         $    19.43                                56,281            8.4 years               11,257
         $    20.96                                25,256            9.1 years
         $    21.11                                36,581            9.7 years
                                         ----------------                          ----------------

                                                  290,935                                   159,444
                                         ================                          ================
</TABLE>

                                       72
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


13.      SHAREHOLDERS' EQUITY (Continued)

         Common Stock Repurchase Program
         -------------------------------

         During 1997, the Board of Directors authorized the annual repurchase of
         up to five percent of the Company's common stock. Repurchases are
         generally made in the open market at market prices.

         Stock Dividend
         --------------

         The Board of Directors declared 5% stock dividends on November 16, 2005
         and December 16, 2004. All per share and stock option data included in
         the consolidated financial statements have been retroactively restated
         to reflect the stock dividends.

         Stock Split
         -----------

         On September 17, 2003, the Board of Directors declared a three-for-two
         stock split, payable on October 31, 2003 to shareholders of record on
         October 17, 2003. All per share, shares outstanding and stock option
         data in the consolidated financial statements have been retroactively
         restated to reflect the stock split.

14.      REGULATORY MATTERS

         Dividends
         ---------

         Upon declaration by the Board of Directors of the Company, all
         shareholders of record will be entitled to receive dividends. The
         California Financial Code restricts the total dividend payment of any
         state banking association in any calendar year to the lesser of (1) the
         bank's retained earnings or (2) the bank's net income for its last
         three fiscal years, less distributions made to shareholders during the
         same three-year period. At December 31, 2005, the subsidiaries had
         $2,209,000 in retained earnings available for dividend payments to the
         Company.

         Regulatory Capital
         ------------------

         The Company and its banking subsidiary are subject to certain
         regulatory capital requirements administered by the Board of Governors
         of the Federal Reserve System and the FDIC. Failure to meet these
         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 Company's
         consolidated financial statements. Under capital adequacy guidelines
         and the regulatory framework for prompt corrective action, the banking
         subsidiaries must meet specific capital guidelines that involve
         quantitative measures of their assets, liabilities and certain
         off-balance-sheet items as calculated under regulatory accounting
         practices. The Company's and its banking subsidiary'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 Company and its banking subsidiary to maintain
         minimum amounts and ratios of total and Tier 1 capital to risk-weighted
         assets and of Tier 1 capital to average assets. Each of these
         components is defined in the regulations. Management believes that the
         Company and its banking subsidiary met all their capital adequacy
         requirements as of December 31, 2005 and 2004.

                                       73
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


14.      REGULATORY MATTERS (Continued)

         Regulatory Capital (Continued)
         ------------------

         In addition, the most recent notifications from the FDIC categorized
         ARB as well capitalized under the regulatory framework for prompt
         corrective action. To be categorized as well capitalized, ARB must
         maintain minimum total risk-based, Tier 1 risk-based and Tier 1
         leverage ratios as set forth below. There are no conditions or events
         since those notifications that management believes have changed the
         categories.

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

                                                                            2005                      2004
                                                                  -----------------------    -----------------------

                                                                    Amount       Ratio         Amount       Ratio
                                                                  ----------   ----------    ----------   ----------
                                                                                (dollars in thousands)
         Leverage Ratio
         --------------
<S>                                                               <C>                <C>     <C>                <C>
         American River Bankshares and Subsidiaries               $   45,471          7.7%   $   40,106          8.4%
         Minimum regulatory requirement                           $   23,746          4.0%   $   19,222          4.0%

         American River Bank                                      $   45,602          7.7%   $   42,191          8.8%
         Minimum requirement for "Well-Capitalized" institution   $   29,626          5.0%   $   23,986          5.0%
         Minimum regulatory requirement                           $   23,701          4.0%   $   19,189          4.0%

         Tier 1 Risk-Based Capital Ratio
         -------------------------------

         American River Bankshares and Subsidiaries               $   45,471         10.6%   $   40,106          9.6%
         Minimum regulatory requirement                           $   17,165          4.0%   $   16,631          4.0%

         American River Bank                                      $   45,602         10.7%   $   42,191         10.2%
         Minimum requirement for "Well-Capitalized" institution   $   25,680          6.0%   $   24,898          6.0%
         Minimum regulatory requirement                           $   17,120          4.0%   $   16,599          4.0%

         Total Risk-Based Capital Ratio
         ------------------------------

         American River Bankshares and Subsidiaries               $   50,839         11.9%   $   45,307         10.9%
         Minimum regulatory requirement                           $   34,330          8.0%   $   33,263          8.0%

         American River Bank                                      $   50,956         11.9%   $   47,382         11.4%
         Minimum requirement for "Well-Capitalized" institution   $   42,800         10.0%   $   41,497         10.0%
         Minimum regulatory requirement                           $   34,240          8.0%   $   33,198          8.0%

15.      OTHER NONINTEREST INCOME AND EXPENSE

         Other noninterest income consisted of the following (dollars in
         thousands):
<CAPTION>

                                                              Year Ended December 31,
                                                       ------------------------------------
                                                          2005         2004         2003
                                                       ----------   ----------   ----------
<S>                                                    <C>          <C>          <C>
         Gain on life insurance death benefit                       $      553
         Accounts receivable servicing fees (Note 8)   $      356          316   $      247
         Merchant fee income                                  509          393          357
         Income from residential lending division             283          187          366
         Fees from lease brokerage services                                  9          381
         Other                                                461          386          335
                                                       ----------   ----------   ----------

                                                       $    1,609   $    1,844   $    1,686
                                                       ==========   ==========   ==========
</TABLE>

                                       74
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


15.      OTHER NONINTEREST INCOME AND EXPENSE (Continued)

         Other noninterest expense consisted of the following (dollars in
         thousands):

<TABLE>
<CAPTION>
                                                            Year Ended December 31,
                                                    ------------------------------------
                                                       2005         2004         2003
                                                    ----------   ----------   ----------
<S>                                                 <C>          <C>          <C>
         Professional fees                          $      732   $      478   $      335
         Outsourced item processing                        489          383          361
         Telephone and postage                             439          280          275
         Advertising and promotion                         331          288          198
         Donations                                          82          527           26
         Stationery and supplies                           303          262          175
         Directors' compensation                           429          518          353
         Amortization of intangible assets                 352           30            7
         Other operating expenses                        1,231        1,156          939
                                                    ----------   ----------   ----------

                                                    $    4,388   $    3,922   $    2,669
                                                    ==========   ==========   ==========
</TABLE>

16.      EMPLOYEE BENEFIT PLANS

         American River Bankshares 401(k) Plan
         -------------------------------------

         The American River Bankshares 401(k) Plan commenced January 1, 1993 and
         is available to all employees. Under the plan, the Company will match
         100% of each participants' contribution up to 3% of annual compensation
         plus 50% of the next 2% of annual compensation. Employer Safe Harbor
         matching contributions (made after January 1, 2004) are 100% vested
         upon entering the plan. Employer contributions made prior to January 1,
         2004 vest at a rate of 20% per year over a five year period. Employer
         contributions totaled $220,000, $169,000 and $116,000 for the years
         ended December 31, 2005, 2004 and 2003, respectively.

         Employee Stock Purchase Plan
         ----------------------------

         The Company contracts with an administrator for an Employee Stock
         Purchase Plan which allows employees to purchase the Company's stock at
         fair market value as of the date of purchase. The Company bears all
         costs of administering the Plan, including broker's fees, commissions,
         postage and other costs actually incurred.

         American River Bankshares Deferred Compensation Plan
         ----------------------------------------------------

         The Company has established a Deferred Compensation Plan for certain
         members of the management team and a Deferred Fee Agreement for
         Non-Employee Directors for the purpose of providing the opportunity for
         participants to defer compensation. Participants of the management
         team, who are selected by a Committee designated by the Board of
         Directors, may elect to defer annually a minimum of $5,000 or a maximum
         of eighty percent of their base salary and all of their cash bonus.
         Directors may also elect to defer up to one hundred percent of their
         monthly fees. The Company bears all administration costs and funds the
         interest earned on participant deferrals at a rate based on U.S.
         Government Treasury rates. Deferred compensation, including interest
         earned, totaled $1,147,000, $851,000 and $615,000 at December 31, 2005,
         2004 and 2003, respectively.

                                       75
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


16.      EMPLOYEE BENEFIT PLANS (Continued)

         Salary Continuation Plan
         ------------------------

         The Company has agreements to provide certain current executives, or
         their designated beneficiaries, with annual benefits for up to 15 years
         after retirement or death. These benefits are substantially equivalent
         to those available under life insurance policies purchased by the
         Company on the lives of the executives. The Company accrues for these
         future benefits from the effective date of the agreements until the
         executives' expected final payment dates in a systematic and rational
         manner. At the balance sheet date, the amount of accrued benefits
         approximates the then present value of the benefits expected to be
         provided at retirement. The expense recognized under this plan totaled
         $115,000, $29,000 and $42,000 for the years ended December 31, 2005,
         2004 and 2003, respectively.

         Under these plans, the Company invested in single premium life
         insurance policies with cash surrender values totaling $5,073,000 and
         $4,895,000 at December 31, 2005 and 2004, respectively. On the
         consolidated balance sheet, the cash surrender value of life insurance
         policies is included in accrued interest receivable and other assets.
         Income on these policies, net of expense, totaled approximately
         $179,000, $69,000 and $27,000 for the years ended December 31, 2005,
         2004 and 2003, respectively.

17.      RELATED PARTY TRANSACTIONS

         During the normal course of business, the Company enters into
         transactions with related parties, including Directors and affiliates.
         These transactions include borrowings from the Company with
         substantially the same terms, including rates and collateral, as loans
         to unrelated parties. The following is a summary of the aggregate
         activity involving related party borrowers during 2005 (dollars in
         thousands):

         Balance, January 1, 2005                                    $     7,048

              Disbursements                                                  170
              Amounts repaid                                                 242
                                                                     -----------

         Balance, December 31, 2005                                  $     6,976
                                                                     ===========

         Undisbursed commitments to related parties,
              December 31, 2005                                      $        31
                                                                     ===========

         The Company also leases two branch facilities from current and former
         members of the Company's Board of Directors. Rental payments to the
         Directors totaled $115,000, $112,000 and $109,000 for the years ended
         December 31, 2005, 2004 and 2003, respectively.

18.      OTHER COMPREHENSIVE LOSS

         At December 31, 2005, 2004 and 2003, the Company had other
         comprehensive loss as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                           Tax
                                                             Before       Benefit        After
                                                              Tax        (Expense)        Tax
                                                           ----------    ----------    ----------

         For the Year Ended December 31, 2005
         ------------------------------------
<S>                                                        <C>           <C>           <C>
         Other comprehensive loss:
           Unrealized holding losses                       $   (2,111)   $      827    $   (1,284)
           Less reclassification adjustment for realized
              gains included in net income                         48           (20)           28
                                                           ----------    ----------    ----------

                                                           $   (2,159)   $      847    $   (1,312)
                                                           ==========    ==========    ==========
</TABLE>

                                       76
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


18.      OTHER COMPREHENSIVE LOSS (Continued)

<TABLE>
<CAPTION>
                                                                             Tax
                                                             Before         Benefit         After
                                                              Tax          (Expense)         Tax
                                                           -----------    -----------    -----------
<S>                                                        <C>            <C>            <C>
         For the Year Ended December 31, 2004
         ------------------------------------

         Other comprehensive loss:
           Unrealized holding losses                       $      (588)   $       256    $      (332)
           Less reclassification adjustment for realized
              losses included in net income                        (38)            15            (23)
                                                           -----------    -----------    -----------

                                                           $      (550)   $       241    $      (309)
                                                           ===========    ===========    ===========
         For the Year Ended December 31, 2003
         ------------------------------------

         Other comprehensive loss:
           Unrealized holding losses                       $      (686)   $       266    $      (420)
           Less reclassification adjustment for realized
              gains included in net income                          33            (13)            20
                                                           -----------    -----------    -----------

                                                           $      (719)   $       279    $      (440)
                                                           ===========    ===========    ===========
</TABLE>

19.      DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

         Estimated fair values are disclosed for financial instruments for which
         it is practicable to estimate fair value. These estimates are made at a
         specific point in time based on relevant market data and information
         about the financial instruments. These estimates do not reflect any
         premium or discount that could result from offering the Company's
         entire holdings of a particular financial instrument for sale at one
         time, nor do they attempt to estimate the value of anticipated future
         business related to the instruments. In addition, the tax ramifications
         related to the realization of unrealized gains and losses can have a
         significant effect on fair value estimates and have not been considered
         in any of these estimates.

         Because no market exists for a significant portion of the Company's
         financial instruments, fair value estimates are based on judgments
         regarding current economic conditions, risk characteristics of various
         financial instruments and other factors. These estimates are subjective
         in nature and involve uncertainties and matters of significant judgment
         and therefore cannot be determined with precision. Changes in
         assumptions could significantly affect the fair values presented.

         The following methods and assumptions were used by the Company to
         estimate the fair value of its financial instruments at December 31,
         2005 and 2004:

         Cash and cash equivalents: For cash and cash equivalents, the carrying
         amount is estimated to be fair value.

         Interest-bearing deposits in banks: The fair values of interest-bearing
         deposits in banks are estimated by discounting their future cash flows
         using rates at each reporting date for instruments with similar
         remaining maturities offered by comparable financial institutions.

         Investment securities: For investment securities, fair values are based
         on quoted market prices, where available. If quoted market prices are
         not available, fair values are estimated using quoted market prices for
         similar securities and indications of value provided by brokers.

                                       77
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


19.      DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

         Loans and leases: For variable-rate loans and leases that reprice
         frequently with no significant change in credit risk, fair values are
         based on carrying values. The fair values for other loans and leases
         are estimated using discounted cash flow analyses, using interest rates
         being offered at each reporting date for loans and leases with similar
         terms to borrowers of comparable creditworthiness. The carrying amount
         of accrued interest receivable approximates its fair value.

         FHLB stock: The carrying amount of FHLB stock approximates its fair
         value. This investment is carried at cost and is redeemable at par with
         certain restrictions.

         Accounts receivable servicing receivables: The carrying amount of
         accounts receivable servicing receivables approximates their fair value
         because of the relatively short period of time between the origination
         of the receivables and their expected collection.

         Cash surrender value of life insurance policies: The fair value of life
         insurance policies are based on cash surrender values at each reporting
         date as provided by insurers.

         Deposits: The fair values for demand deposits are, by definition, equal
         to the amount payable on demand at the reporting date represented by
         their carrying amount. Fair values for fixed-rate certificates of
         deposit are estimated using a discounted cash flow analysis using
         interest rates offered at each reporting date for certificates with
         similar remaining maturities. The carrying amount of accrued interest
         payable approximates its fair value.

         Short-term and long-term borrowings: The fair value of short-term
         borrowings is estimated to be the carrying amount. The fair value of
         long-term borrowings is estimated using a discounted cash flow analysis
         using interest rates currently available for similar debt instruments.

         Commitments to extend credit: The fair value of commitments are based
         on fees currently charged to enter into similar agreements, net of
         origination fees. These fees were not material at December 31, 2005 and
         2004.

         The carrying amounts and estimated fair values of the Company's
         financial instruments are as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                   December 31, 2005        December 31, 2004
                                                -----------------------   -----------------------
                                                             Estimated                 Estimated
                                                 Carrying      Fair        Carrying      Fair
                                                  Amount       Value        Amount       Value
                                                ----------   ----------   ----------   ----------
<S>                                             <C>          <C>          <C>          <C>
         Financial assets:
           Cash and due from banks              $   34,825   $   34,825   $   28,115   $   28,115
           Federal Funds sold                        1,250        1,250        7,000        7,000
           Interest-bearing deposits in banks        4,844        4,823        5,939        5,901
           Investment securities                   169,201      168,847      157,244      157,369
           Loans and leases                        365,571      364,589      352,467      352,768
           FHLB stock                                2,608        2,608        2,158        2,158
           Accounts receivable servicing
              receivables                            2,000        2,000        2,409        2,409
           Accrued interest receivable               2,925        2,925        2,504        2,504
           Cash surrender value of life
              insurance policies                     5,073        5,073        4,895        4,895
</TABLE>

                                       78
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


19.      DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

<TABLE>
<CAPTION>
                                         December 31, 2005         December 31, 2004
                                      -----------------------   -----------------------
                                                   Estimated                 Estimated
                                       Carrying      Fair        Carrying      Fair
                                        Amount       Value        Amount       Value
                                      ----------   ----------   ----------   ----------
<S>                                   <C>          <C>          <C>          <C>
         Financial liabilities:
           Deposits                   $  500,706   $  500,906   $  475,387   $  476,139
           Short-term borrowings          39,386       39,386       24,457       24,457
           Long-term debt                  4,270        3,423        9,832       10,223
           Accrued interest payable          795          795          553          553
</TABLE>

                                       79
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


20.      PARENT ONLY CONDENSED FINANCIAL STATEMENTS

                             CONDENSED BALANCE SHEET

                           December 31, 2005 and 2004
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                                               2005          2004
                                                            ----------    ----------

                                 ASSETS
<S>                                                         <C>           <C>
         Cash and due from banks                            $      316    $    2,654
         Investment in subsidiaries                             62,997        61,075
         Dividends receivable from subsidiaries                    842         9,985
         Other assets                                              973           822
                                                            ----------    ----------

                                                            $   65,128    $   74,536
                                                            ==========    ==========

                             LIABILITIES AND
                          SHAREHOLDERS' EQUITY

         Liabilities:
           Dividends payable to shareholders                $      841    $      582
           Other liabilities                                     1,541        14,964
                                                            ----------    ----------

                Total liabilities                                2,382        15,546
                                                            ----------    ----------

         Shareholders' equity:
           Common stock                                         47,474        42,557
           Retained earnings                                    16,029        15,878
           Accumulated other comprehensive (loss) income,
              net of taxes                                        (757)          555
                                                            ----------    ----------

                Total shareholders' equity                      62,746        58,990
                                                            ----------    ----------

                                                            $   65,128    $   74,536
                                                            ==========    ==========
</TABLE>

                                       80
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


20.      PARENT ONLY CONDENSED FINANCIAL STATEMENTS (Continued)

                          CONDENSED STATEMENT OF INCOME

              For the Years Ended December 31, 2005, 2004 and 2003
                             (Dollars in thousands)


<TABLE>
<CAPTION>
                                                                  2005         2004          2003
                                                               ----------   ----------    ----------
<S>                                                            <C>          <C>           <C>
         Income:
           Dividends declared by subsidiaries -
              eliminated in consolidation                      $    6,522   $   12,035    $      950
           Management fee from subsidiaries - eliminated
              in consolidation                                      2,760        2,193         1,781
           Other income                                                19           20            10
                                                               ----------   ----------    ----------

                Total income                                        9,301       14,248         2,741
                                                               ----------   ----------    ----------

         Expenses:
           Salaries and employee benefits                           2,338        2,042         2,104
           Professional fees                                          225          107            93
           Directors' compensation                                    339          433           274
           Donations                                                               503
           Other expenses                                             611          524           454
                                                               ----------   ----------    ----------

                Total expenses                                      3,513        3,609         2,925
                                                               ----------   ----------    ----------

                Income (loss) before equity in undistributed
                  income of subsidiaries                            5,788       10,639          (184)

         Equity in undistributed (distributed) income of
           subsidiaries                                             3,107       (5,355)        4,487
                                                               ----------   ----------    ----------

                Income before income taxes                          8,895        5,284         4,303

         Income tax benefit                                           289          543           438
                                                               ----------   ----------    ----------

                Net income                                     $    9,184   $    5,827    $    4,741
                                                               ==========   ==========    ==========
</TABLE>

                                       81
<PAGE>

                   AMERICAN RIVER BANKSHARES AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Continued)


20.      PARENT ONLY CONDENSED FINANCIAL STATEMENTS (Continued)

                      CONSOLIDATED STATEMENT OF CASH FLOWS

              For the Years Ended December 31, 2005, 2004 and 2003
                             (Dollars in thousands)

<TABLE>
<CAPTION>
                                                                 2005          2004          2003
                                                              ----------    ----------    ----------
<S>                                                           <C>           <C>           <C>
         Cash flows from operating activities:
           Net income                                         $    9,184    $    5,827    $    4,741
           Adjustments to reconcile net income to net
              cash provided by operating activities:
                Undistributed (distributed) earnings of
                  subsidiaries                                    (8,895)        5,355        (4,487)
                Decrease (increase) in dividends receivable
                  from subsidiaries                                5,780        (9,635)
                Decrease (increase) in other assets                9,225          (149)          (47)
                (Decrease) increase in other liabilities            (692)        1,149           366
                                                              ----------    ----------    ----------

                  Net cash provided by operating activities       14,602         2,547           573
                                                              ----------    ----------    ----------

         Cash flows from investing activities:
           Cash paid to Bank of Amador shareholders              (12,730)
           Purchase of equipment                                    (353)
                                                              ----------    ----------    ----------

                  Net cash used in investing activities          (13,083)
                                                              ----------    ----------    ----------

         Cash flows from financing activities:
           Cash dividends paid                                    (2,753)       (2,070)       (1,135)
           Exercise of stock options                                 945         1,959           653
           Cash paid to repurchase common stock                   (2,017)         (184)          (24)
           Cash paid for fractional shares in connection
              with stock dividends and stock splits                  (32)                         (7)
                                                              ----------    ----------    ----------

                  Net cash used in financing activities           (3,857)         (295)         (513)
                                                              ----------    ----------    ----------

                  Net (decrease) increase in cash and cash
                    equivalents                                   (2,338)        2,252            60

         Cash and cash equivalents at beginning of year            2,654           402           342
                                                              ----------    ----------    ----------

         Cash and cash equivalents at end of year             $      316    $    2,654    $      402
                                                              ==========    ==========    ==========


         Non-cash investing activities:
           Payable to Bank of Amador shareholders                           $   12,730
           Common stock issued in acquisition                               $   18,284

         Non-cash financing activities:
           Dividends declared and unpaid                      $      841    $      582    $      608
</TABLE>

                                       82
<PAGE>

<TABLE>
<CAPTION>
Selected Quarterly Information (Unaudited)
-----------------------------------------------------------------------------------------------
(In thousands, except per share and price range of common stock)
-----------------------------------------------------------------------------------------------

                                        March 31,      June 30,     September 30,  December 31,
-----------------------------------------------------------------------------------------------
           2005
<S>                                   <C>            <C>            <C>            <C>
Interest income                       $      7,674   $      8,011   $      8,562   $      8,966
Net interest income                          6,315          6,439          6,753          6,955
Provision for loan and lease losses            217             55             --             50
Noninterest income                             581            584            594            570
Noninterest expense                          3,328          3,403          3,464          3,298
Income before taxes                          3,351          3,565          3,883          4,177
Net income                                   2,051          2,190          2,376          2,567
-----------------------------------------------------------------------------------------------

Basic earnings per share              $        .37   $        .39   $        .42   $        .46
Diluted earnings per share                     .36            .38            .41            .45
Cash dividends per share                      .119           .124           .143           .150
-----------------------------------------------------------------------------------------------
Price range, common stock             $21.05-22.89   $19.91-23.10   $19.76-22.62   $19.85-22.38
===============================================================================================

           2004

Interest income                       $      5,113   $      5,356   $      5,672   $      6,495
Net interest income                          4,422          4,638          4,869          5,489
Provision for loan and lease losses            198            231            266            200
Noninterest income                             429          1,022            441            503
Noninterest expense                          2,749          3,463          2,814          2,687
Income before taxes                          1,904          1,966          2,230          3,105
Net income                                   1,160          1,427          1,339          1,901
-----------------------------------------------------------------------------------------------

Basic earnings per share              $        .26   $        .31   $        .29   $        .38
Diluted earnings per share                     .24            .30            .28            .37
Cash dividends per share                      .105           .105           .105           .105
-----------------------------------------------------------------------------------------------
Price range, common stock             $17.24-19.05   $18.03-20.18   $17.69-21.21   $19.41-21.77
===============================================================================================
</TABLE>

The earnings per share and price range have been adjusted for 5% stock dividends
in 2005 and 2004.

                                       83
<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 the Company and its subsidiaries during the
last two fiscal years ended December 31, 2005. There have been no disagreements
with such independent accountants during the last two fiscal years ended
December 31, 2005, on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.

Item 9A. Controls and Procedures.

Effectiveness of Disclosure Controls and Procedures

         The Company, under the supervision and with the participation of its
management, including the Chief Executive Officer and the Chief Financial
Officer, evaluated the effectiveness of the design and operation of the
Company's "disclosure controls and procedures" (as defined in Rule 13a-15(e) and
15d-15(e) under the Securities Exchange Act of 1934, as amended) as of December
31, 2005. Based on that evaluation, the Chief Executive Officer and the Chief
Financial Officer concluded that the Company's disclosure controls and
procedures are effective in timely making known to them material information
relating to the Company and the Company's consolidated subsidiaries required to
be disclosed in the Company's reports filed or submitted under the Exchange Act.

         During the quarter ended December 31, 2005, there have been no changes
in the Company's internal controls over financial reporting that have materially
affected, or are reasonably likely to materially affect, these controls.

Report of Management on Internal Control Over Financial Reporting

         Management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting for the Company
(as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of
1934, as amended).

         The Company's management, including the Chief Executive Officer and
Chief Financial Officer, has assessed the effectiveness of the Company's
internal control over financial reporting as of December 31, 2005. In making
this assessment, management used the criteria applicable to the Company as set
forth by the Committee of Sponsoring Organizations of the Treadway Commission in
Internal Control--Integrated Framework. Based upon such assessment, management
believes that, as of December 31, 2005, the Company's internal control over
financial reporting is effective based upon those criteria.

         Perry-Smith LLP, the registered public accounting firm that audited the
Company's consolidated financial statements included in this Annual Report under
Item 8, "Financial Statements and Supplementary Data," has issued a report with
respect to management's assessment of the effectiveness of the Company's
internal control over financial reporting. The report of Perry-Smith LLP is set
forth immediately below.

                                       84
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
                  ON INTERNAL CONTROL OVER FINANCIAL REPORTING
--------------------------------------------------------------------------------

To the Board of Directors
American River Bankshares

         We have audited management's assessment, included in the accompanying
Report of Management on Internal Control Over Financial Reporting, that American
River Bankshares and subsidiaries (the "Company") maintained effective internal
control over financial reporting as of December 31, 2005, based on criteria
established in Internal Control--Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission ("the COSO criteria"). The
Company's management is responsible for maintaining effective internal control
over financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express an opinion on
management's assessment and an opinion on the effectiveness of the company's
internal control over financial reporting based on our audit.

         We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects. Our audit included obtaining an understanding of internal
control over financial reporting, evaluating management's assessment, testing
and evaluating the design and operating effectiveness of internal control, and
performing such other procedures as we considered necessary in the
circumstances. We believe that our audit provides a reasonable basis for our
opinion.

         A company's internal control over financial reporting is a process
designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. A company's internal
control over financial reporting includes those policies and procedures that (1)
pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and dispositions of the assets of the company;
(2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's
assets that could have a material effect on the financial statements.

         Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

         In our opinion, management's assessment that American River Bankshares
and subsidiaries maintained effective internal control over financial reporting
as of December 31, 2005, is fairly stated, in all material respects, based on
the COSO criteria. Also in our opinion, American River Bankshares and
subsidiaries maintained, in all material respects, effective internal control
over financial reporting as of December 31, 2005, based on the COSO criteria.

         We have also audited, in accordance with the standards of the Public
Company Accounting Oversight Board (United States), the consolidated balance
sheet of American River Bankshares and subsidiaries as of December 31, 2005 and
2004, and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for each of the years in the three-year
period ended December 31, 2005 and our report dated March 8, 2006 expressed an
unqualified opinion thereon.

                                            /s/ Perry-Smith LLP
                                            ------------------------------------

Sacramento, California
March 8, 2006

                                       85
<PAGE>

Item 9B. Other Information.

         None.


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
2006 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
2006 Annual Meeting of Shareholders which will be filed pursuant to Regulation
14A.

Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.

         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
2006 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
2006 Annual Meeting of Shareholders which will be filed pursuant to Regulation
14A.

Item 14. Principal Accounting Fees and Services.

         The information required by Item 14 of Form 10-K is incorporated by
reference to the information contained in the Company's Proxy Statement for the
2006 Annual Meeting of Shareholders which will be filed pursuant to Regulation
14A.

                                       86
<PAGE>

PART IV

Item 15.  Exhibits and Financial Statement Schedules.

   (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 and Merger by and
                     among the Registrant, ARH Interim National Bank and North
                     Coast Bank, N.A., dated as of March 1, 2000 (included as
                     Annex A). **

           (2.2)     Agreement and Plan of Reorganization and Merger by and
                     among the Registrant, American River Bank and Bank of
                     Amador, dated as of July 8, 2004 (included as Annex A). ***

           (3.1)     Articles of Incorporation, as amended, incorporated by
                     reference from Exhibit 3.1 to the Registrant's Quarterly
                     Report on Form 10-Q for the period ended June 30, 2004,
                     filed with the Commission on August 11, 2004.

           (3.2)     Bylaws, as amended, incorporated by reference from Exhibit
                     3.2 to the Registrant's Quarterly Report on Form 10-Q for
                     the period ended June 30, 2004, filed with the Commission
                     on August 11, 2004.

           (4.1)     Specimen of the Registrant's common stock certificate,
                     incorporated by reference from Exhibit 4.1 to the
                     Registrant's Quarterly Report on Form 10-Q for the period
                     ended June 30, 2004, filed with the Commission on August
                     11, 2004.

           (10.1)    Lease agreement between American River Bank and Spieker
                     Properties, L.P., a California limited partnership, dated
                     April 1, 2000, related to 1545 River Park Drive, Suite 107,
                     Sacramento, California. **

           (10.2)    Lease agreement and addendum between American River Bank
                     and Bradshaw Plaza Group each dated January 31, 2000,
                     related to 9750 Business Park Drive, Sacramento,
                     California. **

           (10.3)    Lease agreement between American River Bank and Marjorie G.
                     Taylor dated April 5, 1984, and addendum dated July 16,
                     1997, related to 10123 Fair Oaks Boulevard, Fair Oaks,
                     California. **

           (10.4)    Lease agreement between American River Bank and Sandalwood
                     Land Company dated August 28, 1996, related to 2240 Douglas
                     Boulevard, Suite 100, Roseville, California. **

           *(10.5)   Registrant's 1995 Stock Option Plan. **

           *(10.6)   Form of Nonqualified Stock Option Agreement under the 1995
                     Stock Option Plan. **

           *(10.7)   Form of Incentive Stock Option Agreement under the 1995
                     Stock Option Plan. **

           *(10.8)   Registrant's Stock Option Gross-Up Plan and Agreement, as
                     amended, dated May 20, 1998. **

                                       87
<PAGE>

           *(10.9)   Registrant's Deferred Compensation Plan dated May 1,
                     1998.**

          *(10.10)   Registrant's Deferred Fee Plan dated April 1, 1998. **

          *(10.11)   American River Bank Employee Severance Policy dated March
                     18, 1998. **

          *(10.12)   First Amendment dated December 20, 2000, to the
                     Registrant's Deferred Compensation Plan dated May 1, 1998,
                     incorporated by reference from Exhibit 10.22 to the
                     Registrant's Annual Report on Form 10-K for the period
                     ended December 31, 2000, filed with the Commission on April
                     2, 2001.

          *(10.13)   Amendment No. 1 to the Registrant's Incentive Compensation
                     Plan, incorporated by reference from Exhibit 10.23 to the
                     Registrant's Quarterly Report on Form 10-Q for the period
                     ended June 30, 2001, filed with the Commission on August
                     14, 2001.

           (10.14)   Lease agreement and addendum between North Coast Bank, N.A.
                     and Rosario LLC, each dated September 1, 1998, related to
                     50 Santa Rosa Avenue, Santa Rosa, California. **

           (10.15)   Lease agreement between American River Bank and 520 Capitol
                     Mall, Inc., dated August 19, 2003, related to 520 Capitol
                     Mall, Suite 100, Sacramento, California, incorporated by
                     reference from Exhibit 10.29 to the Registrant's Form 10-Q
                     for the period ended September 30, 2003, filed with the
                     Commission on November 7, 2003.

          *(10.16)   Employment Agreement between Registrant and David T. Taber
                     dated August 22, 2003, incorporated by reference from
                     Exhibit 10.30 to the Registrant's Form 10-Q for the period
                     ended September 30, 2003, filed with the Commission on
                     November 7, 2003.

           (10.17)   Lease agreement between R & R Partners, a California
                     General Partnership and North Coast Bank, N.A., dated July
                     1, 2003, related to 8733 Lakewood Drive, Suite A, Windsor,
                     California, incorporated by reference from Exhibit 10.32 to
                     the Company's Form 10-Q for the period ended September 30,
                     2003, filed with the Commission on November 7, 2003.

          *(10.18)   Salary Continuation Agreement between American River Bank
                     and Mitchell A. Derenzo dated August 22, 2003, incorporated
                     by reference from Exhibit 10.33 to the Company's Form 10-Q
                     for the period ended September 30, 2003, filed with the
                     Commission on November 7, 2003.

          *(10.19)   Salary Continuation Agreement between the Registrant and
                     David T. Taber dated August 22, 2003, incorporated by
                     reference from Exhibit 10.34 to the Company's Form 10-Q for
                     the period ended September 30, 2003, filed with the
                     Commission on November 7, 2003.

          *(10.20)   Salary Continuation Agreement between American River Bank
                     and Douglas E. Tow dated August 22, 2003, incorporated by
                     reference from Exhibit 10.35 to the Company's Form 10-Q for
                     the period ended September 30, 2003, filed with the
                     Commission on November 7, 2003.

          *(10.21)   Registrant's 2000 Stock Option Plan with forms of
                     Nonqualified Stock Option Agreement and Incentive Stock
                     Option Agreement. **

           (10.22)   First Amendment dated April 21, 2004, to the lease
                     agreement between American River Bank and 520 Capitol Mall,
                     Inc. dated August 19, 2003, related to 520 Capitol Mall,
                     Suite 100 Sacramento, California, incorporated by reference
                     from Exhibit 10.37 to the Registrant's Quarterly Report on
                     Form 10-Q for the period ended June 30, 2004, filed with
                     the Commission on August 11, 2004.

                                       88
<PAGE>

          *(10.23)   Registrant's 401(k) Plan dated September 20, 2004,
                     incorporated by reference from Exhibit 10.38 to the
                     Registrant's Quarterly Report on Form 10-Q for the period
                     ended September 30, 2004, filed with the Commission on
                     November 12, 2004.

           (10.24)   Agreement between Bank of Amador and the United States
                     Postal Service, dated April 24, 2001, related to 424 Sutter
                     Street, Jackson, California. ***

           (10.25)   Ground lease agreement between Bank of Amador and the James
                     B. Newman and Helen M. Newman, dated June 1, 1992, related
                     to 26675 Tiger Creek Road, Pioneer, California. ***

          *(10.26)   Salary Continuation Agreement between Bank of Amador and
                     Larry D. Standing dated April 1, 2004, and related
                     Endorsement Split Dollar Agreement dated April 1, 2004. ***

          *(10.27)   Amended and Restated Director Retirement Agreement dated as
                     of August 1, 2003, between Bank of Amador and Larry D.
                     Standing. ***

          *(10.28)   Employment Agreement between Registrant and Larry D.
                     Standing dated December 3, 2004. ***

           (10.29)   Item Processing Agreement between American River Bank and
                     Fidelity Information Services, Inc., dated April 22, 2005,
                     incorporated by reference from Exhibit 99.1 to the
                     Registrant's Report on Form 8-K, filed with the Commission
                     on April 27, 2005.

           (10.30)   Lease agreement between Registrant and One Capital Center,
                     a California limited partnership, dated May 17, 2005,
                     related to 3100 Zinfandel Drive, Rancho Cordova,
                     California, incorporated by reference from Exhibit 99.1 to
                     the Registrant's Report on Form 8-K, filed with the
                     Commission on May 18, 2005.

           (10.31)   Managed Services Agreement between American River
                     Bankshares and ProNet Solutions, Inc., dated September 8,
                     2005, incorporated by reference from Exhibit 99.1 to the
                     Registrant's Report on Form 8-K, filed with the Commission
                     on September 9, 2005.

          *(10.32)   American River Bankshares 2005 Executive Incentive Plan,
                     incorporated by reference from Exhibit 99.1 to the
                     Registrant's Report on Form 8-K, filed with the Commission
                     on October 27, 2005.

           (10.33)   First Amendment to Commercial Lease Agreement between R. &
                     R. Partners, and North Coast Bank, a division of American
                     River Bank, dated January 2, 2006, related to 8733 Lakewood
                     Drive, Suite A, Windsor, California, incorporated by
                     reference from Exhibit 99.1 to the Registrant's Report on
                     Form 8-K, filed with the Commission on January 3, 2006.

           (14.1)    Registrant's Code of Ethics, incorporated by reference from
                     Exhibit 14.1 to the Registrant's Annual Report on Form 10-K
                     for the period ended December 31, 2003, filed with the
                     Commission on March 19, 2004.

           (21.1)    The Registrant's only subsidiaries are American River Bank
                     and American River Financial.

           (23.1)    Consent of Perry-Smith LLP.

           (31.1)    Certifications of Chief Executive Officer pursuant to
                     Section 302 of the Sarbanes-Oxley Act of 2002.

                                       89
<PAGE>

           (31.2)    Certifications of Chief Financial Officer pursuant to
                     Section 302 of the Sarbanes-Oxley Act of 2002.

           (32.1)    Certification of Registrant by its Chief Executive Officer
                     and Chief Financial Officer pursuant to Section 906 of the
                     Sarbanes-Oxley Act of 2002.

                     *Denotes management contracts, compensatory plans or
                     arrangements.

                     **Incorporated by reference to Registrant's Registration
                     Statement on Form S-4 (No. 333-36326) filed with the
                     Commission on May 5, 2000.

                     ***Incorporated by reference to Registrant's Registration
                     Statement on Form S-4 (No. 333-119085) filed with the
                     Commission on September 17, 2004.

         An Annual Report for the fiscal year ended December 31, 2005 and Notice
of Annual Meeting and Proxy Statement for the Company's 2006 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.

                                       90
<PAGE>

                                   SIGNATURES



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

                                           AMERICAN RIVER BANKSHARES



March 7, 2006                              By: /s/ DAVID T. TABER
-------------                                  ---------------------------------
                                               David T. Taber
                                               Chief Executive Officer
                                               (Principal Executive Officer)


March 7, 2006                              By: /s/ MITCHELL A. DERENZO
-------------                                  ---------------------------------
                                               Mitchell A. Derenzo
                                               Chief Financial Officer
                                               (Principal Financial and
                                                  Accounting Officer)

                                       91
<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.

        Signature                      Title                         Date

/s/ CHARLES D. FITE              Director, Chairman                 3/07/06
--------------------------
Charles D. Fite


/s/ ROGER J. TAYLOR              Director, Vice Chairman            3/06/06
--------------------------
Roger J. Taylor


/s/ AMADOR S. BUSTOS             Director                           3/08/06
--------------------------
Amador S. Bustos


/s/ ROBERT J. FOX                Director                           3/08/06
--------------------------
Amador S. Bustos


/s/ WILLIAM A. ROBOTHAM          Director                           3/08/06
--------------------------
William A. Robotham


/s/ DAVID T. TABER               Director                           3/08/06
--------------------------
David T. Taber


/s/ STEPHEN H. WAKS              Director                           3/07/06
--------------------------
Stephen H. Waks


/s/ MICHAEL A. ZIEGLER           Director                           3/07/06
--------------------------
Michael A. Ziegler

                                       92
<PAGE>

                                  EXHIBIT INDEX



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

      23.1          Consent of Perry-Smith LLP                               94

      31.1          Certifications of Chief Executive Officer pursuant
                    to Section 302 of the Sarbanes-Oxley Act of 2002         95

      31.2          Certifications of Chief Financial Officer pursuant
                    to Section 302 of the Sarbanes-Oxley Act of 2002         96

      32.1          Certification of American River Bankshares Chief
                    Executive Officer and Chief Financial Officer
                    pursuant to Section 906 of the Sarbanes-Oxley Act
                    of 2002                                                  97

                                       93