HUMBOLDT BANCORP, 424B1, 2000-02-11

HUMBOLDT BANCORP
424B1, 2000-02-11
SAVINGS INSTITUTION, FEDERALLY CHARTERED

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<PAGE> 1

Filed Pursuant to Rule 424(b)(1)
Registration No. 333-90923
PROSPECTUS

LOGO
320,000 Shares Minimum
640,000 Shares Maximum

Common Stock

We are offering a minimum of 320,000 shares of our common stock, and a
maximum of 640,000 shares of our common stock. The price per share is $12.50.
Prior to this offering, there has been a limited public market for our shares of
common stock. The offering price may not reflect the market price of our shares
after this offering. Our shares have been approved for listing on the NASDAQ
National Market under the symbol "HBEK" upon notice of issuance. Currently, our
shares are quoted on the OTC Bulletin Board. The last reported sale price for
our common stock, on February 7, 2000, was $15.50 per share.

This is a "best efforts" offering by us, and it will be terminated upon the
sale of a total of $8 million in shares or March 24, 2000, whichever occurs
first. We have the right to extend the offering for an additional 15 days until
April 8, 2000. However, we reserve the right to terminate the offering at any
time after the sale of the minimum offering amount of $4 million in shares.
Subscriptions are binding on subscribers and may not be revoked by subscribers
without our consent. Pending closing, proceeds will be held in an
interest-bearing account with our escrow agent, Pacific Coast Banker's Bank.

<TABLE>
<CAPTION>
PROCEEDS TO
UNDERWRITING HUMBOLDT BEFORE
PRICE TO PUBLIC COMMISSIONS OFFERING EXPENSES
--------------- ------------ -----------------
<S> <C> <C> <C>
Per Share.................................. $ 12.50 None $ 12.50
Total Minimum.............................. $4,000,000 None $4,000,000
Total Maximum.............................. $8,000,000 None $8,000,000
</TABLE>

This offering will be made on our behalf by our directors and executive
officers, to whom no commission or other compensation will be paid on account of
such activity.

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

THIS INVESTMENT INVOLVES RISKS. PLEASE REFER TO "RISK FACTORS" COMMENCING
ON PAGE 9.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

PLEASE NOTE THAT THESE SHARES ARE NOT SAVINGS OR DEPOSIT ACCOUNTS OR OTHER
OBLIGATIONS OF ANY BANK OR NONBANK SUBSIDIARY OF ANY OF THE PARTIES, AND THE
SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK
INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.

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

February 8, 2000
<PAGE> 2

[Humboldt Logo]
[Map of Northern California]
[Location of subsidiaries and their branch offices]
<PAGE> 3

YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
WHICH IS SET FORTH IN THIS PROSPECTUS. WE ARE OFFERING TO SELL SHARES OF COMMON
STOCK AND SEEKING OFFERS TO BUY SHARES OF COMMON STOCK ONLY IN JURISDICTIONS
WHERE OFFERS AND SALES ARE PERMITTED. THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS ACCURATE ONLY AS OF THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE
TIME OF DELIVERY OF THE PROSPECTUS OR OF ANY SALE OF COMMON STOCK.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS SUMMARY.......................................... 3
SUMMARY CONSOLIDATED FINANCIAL DATA......................... 6
RISK FACTORS................................................ 9
USE OF PROCEEDS............................................. 13
CAPITALIZATION.............................................. 13
MARKET PRICES............................................... 14
DIVIDEND POLICY............................................. 14
PRO FORMA FINANCIAL STATEMENTS.............................. 15
REGULATORY CAPITAL AND LEVERAGE RATIO....................... 22
HUMBOLDT BANCORP SELECTED FINANCIAL DATA.................... 23
HUMBOLDT BANCORP MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............. 25
BUSINESS OF HUMBOLDT BANCORP................................ 54
SUPERVISION AND REGULATION OF HUMBOLDT BANCORP, HUMBOLDT
BANK AND CAPITOL VALLEY BANK.............................. 70
MANAGEMENT OF HUMBOLDT BANCORP.............................. 80
HUMBOLDT BANCORP EXECUTIVE COMPENSATION..................... 85
SECURITIES OWNERSHIP........................................ 89
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 91
PLAN OF DISTRIBUTION........................................ 91
DESCRIPTION OF CAPITAL STOCK................................ 93
EXPERTS..................................................... 93
LEGAL MATTERS............................................... 94
WHERE YOU CAN FIND MORE INFORMATION......................... 94
INDEX TO FINANCIAL STATEMENTS............................... F-1
</TABLE>
<PAGE> 4

PROSPECTUS SUMMARY

You should read the following summary together with the more detailed
information and the financial statements appearing elsewhere in this Prospectus.
This Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this Prospectus.
Except as otherwise specifically noted herein, all of the information in this
Prospectus assumes that the merger with Global Bancorp will have taken place.

HUMBOLDT BANCORP

Humboldt Bancorp is a California corporation that owns two banks and part
of a leasing company. One of our banks is Humboldt Bank, a California community
bank headquartered in Eureka, California, with nine branch offices located in
Humboldt, Trinity and Mendocino, California counties. Our other bank is Capitol
Valley Bank, which opened for business on March 3, 1999, as a California
community bank with one main branch in Roseville, California. We also own 50% of
Bancorp Financial Services, Inc., located in Sacramento, California. Bancorp
Financial Services makes consumer automobile loans and commercial equipment
leases of less than $100,000 to small businesses.

We have entered into a merger agreement with Global Bancorp. Global Bancorp
is a California bank holding company that owns Capitol Thrift & Loan
Association, a California industrial loan company. Capitol Thrift has 10
branches located throughout California. Global Bancorp's main office is 1424
Second Street, Napa, California 94559. Under the merger agreement, Capitol
Thrift will become our wholly-owned subsidiary. The acquisition is subject to
several conditions, including approval of the merger by the shareholders of
Global Bancorp, regulatory approval, and completion of this public offering.
While it is expected that approval of the shareholders of Global Bancorp will
have been obtained prior to completion of this offering, bank regulatory
approval may not yet have been received. This offering is not contingent upon
the merger with Capitol Thrift. See "Risk Factors."

Over the past 10 years, we have grown through branch acquisitions and the
opening of a new community bank. Some of the highlights of our growth and
expansion include opening a new branch in 1991, branch purchases in 1993, 1995,
1997 and 1999, and the formation of Bancorp Financial Services in 1997. Assuming
the merger of Global Bancorp is completed, as of September 30, 1999, we will
have pro forma assets of $537.1 million. Based on our unaudited, consolidated
financials, our net income for the year ended December 31, 1999, was $4.6
million, and our total assets as of December 31, 1999, were $424.0 million.
Based on Global Bancorp's unaudited, consolidated financials, Global Bancorp's
net income for the year ended December 31, 1999, was $1.3 million, and Global
Bancorp's total assets as of December 31, 1999, was $116.6 million.

Our main office is located at 701 Fifth Street, Eureka, California 95501,
and our telephone number is (707) 445-3233.

BUSINESS STRATEGY

Our business strategy is to:

- Develop a banking presence primarily in high-growth areas of Northern
California through the acquisition of strongly performing, well-regarded
community banks;
<PAGE> 5

- Operate acquired banks as separate subsidiaries to retain their boards of
directors and the goodwill of the communities they serve;

- Consolidate operations of acquired banks which serve overlapping market
areas;

- Form community banks in areas of Northern California that may have lost
their independent community banks through consolidation, merger,
acquisition and regulatory action;

- Cross-sell services from and within our constituent banks;

- Continue to acquire branch offices, per historical precedent, to
complement general growth and strategic objectives, and provide
additional sources of deposits;

- Improve our efficiency ratio by combining functions such as financial
administration, data processing, insurance, employee benefits and
contracts for services;

- Increase higher yielding earning assets through prudent but aggressive
management of our constituent banks' loan-to-deposit ratio;

- Continue to develop non-interest income sources such as Merchant Bankcard
activities, which over the past five years has developed into an area of
financial and strategic importance for us;

- Develop and expand the activities and associated business lines through
Bancorp Financial Services; and

- Take advantage of the combined size and diversity of our constituent
banks to access capital at lower costs.

We believe that banking customers value doing business with locally managed
institutions that can provide full-service commercial banking relationships,
understand customers' financial needs, and have the flexibility to customize
products and services to meet those needs. We also believe that banks are better
able to build successful customer relationships by affiliating with a holding
company that provides cost effective administrative support services while
promoting bank autonomy and individualized service.
<PAGE> 6

THE OFFERING

Common stock outstanding prior to the
offering................................ 5,253,704 shares(1)

Common stock offered by Humboldt Bancorp
Minimum............................... 320,000 shares
Maximum............................... 640,000 shares

Common Stock to be outstanding after
this Offering
Minimum............................... 5,573,704 shares
Maximum............................... 5,893,704 shares

Use of proceeds................. To acquire and capitalize Capitol Thrift, as
well as pay expenses associated with the
offering. If our acquisition of Capitol
Thrift is not consummated, to pay off debt of
$1.3 million, and for working capital and
other general corporate purposes. For a more
detailed discussion of how we expect to use
these proceeds, please refer to "Use of
Proceeds" on page 13.
- -------------------------
(1) Based on the number of shares outstanding as of February 8, 2000. This
number does not include options to purchase 954,786 shares of common stock
and warrants to purchase 99,000 shares of common stock.
<PAGE> 7

SUMMARY CONSOLIDATED FINANCIAL DATA

The summary consolidated financial data presented below should be read in
conjunction with the more detailed Consolidated Financial Statements and Notes
for us and Global Bancorp appearing elsewhere in this document and the
information set forth under "Management's Discussion and Analysis of Financial
Condition and Results of Operations" for us. The table on page 8 summarizes the
pro forma financial information as if the merger with Global Bancorp, and the
CalFed branch acquisitions had occurred at the beginning of each period
presented.

Operational efficiencies or additional expenses that might have occurred as
a result of the merger are not considered. In addition, this pro forma
information is not necessarily indicative of the results that would have been
realized had the merger been completed at the beginning of the periods
presented.

COMPARATIVE HISTORICAL FINANCIAL
DATA FOR HUMBOLDT BANCORP
(UNAUDITED)

<TABLE>
<CAPTION>
AS OF AND FOR THE
NINE MONTHS ENDED
AS OF AND FOR THE YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------------- ------------------------
1994(1) 1995(1) 1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ---------- ---------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income................... $ 11,163 $ 15,241 $ 16,562 $ 20,053 $ 23,504 $ 17,789 $ 17,844
Interest expense.................. 3,540 5,244 5,549 7,024 7,742 5,855 5,635
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income............. 7,623 9,997 11,013 13,029 15,762 11,934 12,209
Provision for loan and lease
losses.......................... 783 792 533 773 2,124 1,541 697
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after
provision for loan and lease
losses.......................... 6,840 9,205 10,480 12,256 13,638 10,393 11,512
Non-interest income............... 1,463 3,509 5,747 8,109 12,473 8,609 13,792
Non-interest expense.............. 6,240 9,149 11,325 15,496 19,578 14,471 20,577
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before provision for
income taxes.................. 2,063 3,565 4,902 4,869 6,533 4,531 4,727
Provision for income taxes........ 762 1,363 1,926 1,611 2,517 1,720 1,537
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income...................... $ 1,301 $ 2,202 $ 2,976 $ 3,258 $ 4,016 $ 2,811 $ 3,190
========== ========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA (at period end):
Investment securities............. $ 37,258 $ 53,875 $ 39,933 $ 80,180 $ 77,802 $ 79,347 $ 106,210
Total net loans and leases........ $ 92,462 $ 115,117 $ 142,824 $ 157,512 $ 186,038 $ 180,846 $ 203,098
Total assets...................... $ 152,863 $ 193,912 $ 214,738 $ 284,087 $ 319,975 $ 312,944 $ 419,167
Total deposits.................... $ 137,624 $ 174,526 $ 192,576 $ 255,186 $ 283,967 $ 277,285 $ 375,815
Total stockholders' equity........ $ 13,569 $ 16,934 $ 19,600 $ 23,554 $ 27,848 $ 26,571 $ 32,816
PER SHARE DATA(2):
Net income
Basic........................... $ 0.33 $ 0.48 $ 0.64 $ 0.69 $ 0.82 $ 0.58 $ 0.64
Diluted......................... $ 0.31 $ 0.45 $ 0.58 $ 0.61 $ 0.75 $ 0.52 $ 0.58
Book value end of period.......... $ 2.94 $ 3.65 $ 4.18 $ 4.94 $ 5.66 $ 5.43 $ 6.32
Weighted average shares
outstanding Basic............... 3,971,000 4,624,000 4,637,000 4,756,000 4,876,000 4,863,000 4,992,000
Diluted......................... 4,135,000 4,913,000 5,135,000 5,325,000 5,379,000 5,372,000 5,475,000
Actual.......................... 4,622,000 4,636,000 4,694,000 4,769,000 4,917,000 4,892,000 5,193,000
</TABLE>

- -------------------------
(1) Represents financial data for Humboldt Bank. Humboldt Bancorp completed its
reorganization as a holding company on January 2, 1996.

(2) All share and share data reflects retroactive restatement for 10% stock
dividends in 1994, 1995, 1996, 1997, 1998, and 2000, and a five-for-two
stock split in 1999.
<PAGE> 8

COMPARATIVE HISTORICAL FINANCIAL
DATA FOR GLOBAL BANCORP
(UNAUDITED)

<TABLE>
<CAPTION>
AS OF AND FOR THE
NINE MONTHS ENDED
AS OF AND FOR THE YEARS ENDED DECEMBER 31, SEPTEMBER 30,
-------------------------------------------------------- --------------------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income................... $ 8,776 $ 9,115 $ 10,793 $ 11,996 $ 12,953 $ 9,681 $ 8,723
Interest expense.................. 3,119 4,592 5,628 6,469 6,843 5,178 4,293
-------- -------- -------- -------- -------- -------- --------
Net interest income............. 5,657 4,523 5,165 5,527 6,110 4,503 4,430
Provision for credit losses....... (287) (63) 151 416 226 57 479
-------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for loan losses....... 5,944 4,586 5,014 5,111 5,884 4,446 3,951
Non-interest income............... 538 478 464 494 1,302 633 733
Non-interest expense.............. 4,787 5,042 4,158 4,624 5,473 3,860 3,369
-------- -------- -------- -------- -------- -------- --------
Income before provision for
income taxes.................. 1,695 22 1,320 981 1,713 1,219 1,315
Provision for income taxes........ 694 9 501 349 658 499 363
-------- -------- -------- -------- -------- -------- --------
Net income...................... $ 1,001 $ 13 $ 819 $ 632 $ 1,055 $ 720 $ 952
======== ======== ======== ======== ======== ======== ========
BALANCE SHEET DATA (at period end):
Investment securities............. $ 2,368 $ 693 $ 4,537 $ 13,634 $ 15,153 $ 16,230 $ 6,013
Total assets...................... $ 85,571 $ 98,517 $116,646 $129,964 $124,772 $135,752 $117,660
Total net loans and leases........ $ 73,727 $ 78,155 $ 92,897 $101,167 $ 97,480 $108,724 $ 98,284
Total deposits.................... $ 75,933 $ 89,146 $106,395 $118,179 $112,639 $123,732 $105,287
Total stockholders' equity........ $ 8,905 $ 8,800 $ 9,482 $ 9,988 $ 10,828 $ 10,587 $ 11,780
PER SHARE DATA:
Net income
Basic........................... $ 1.53 $ 0.02 $ 1.25 $ 0.96 $ 1.57 $ 1.07 $ 1.40
Diluted......................... $ 1.47 $ 0.02 $ 1.19 $ 0.92 $ 1.52 $ 1.04 $ 1.37
Book value end of period.......... $ 13.56 $ 13.40 $ 14.44 $ 14.89 $ 16.14 $ 15.78 $ 16.85
Weighted average shares
outstanding
Basic........................... 656,600 656,600 656,600 660,163 670,850 670,850 680,267
Diluted......................... 681,212 684,784 686,749 688,994 693,428 679,462 683,120
Actual.......................... 656,600 656,600 656,600 670,850 670,850 670,850 669,100
</TABLE>
<PAGE> 9

PRO FORMA FINANCIAL DATA
BASED ON THE PURCHASE METHOD OF ACCOUNTING
HUMBOLDT BANCORP AND GLOBAL BANCORP(1)
(UNAUDITED)

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1998 SEPTEMBER 30, 1999
----------------- ------------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C>
SUMMARY OF EARNINGS:
Net interest income............................... $ 20,621 $ 15,703
Provision for loan and lease losses............... (2,350) (1,176)
Non-interest income............................... 13,935 14,645
Non-interest expense.............................. (25,572) (24,261)
Provision for income taxes........................ (2,446) (1,378)
-------- --------
Net income..................................... $ 4,188 $ 3,533
======== ========

FINANCIAL POSITION:
Total assets...................................... $514,576 $537,596
Total net loans and leases........................ $287,018 $304,882
Total deposits.................................... $468,767 $481,102
Total stockholders' equity........................ $ 31,848 $ 36,816

PER SHARE DATA:
Net income -- basic............................... $ 0.81 $ 0.67
Net income -- diluted............................. $ 0.73 $ 0.61
Book value........................................ $ 6.08 $ 6.68

SELECTED FINANCIAL RATIOS:
Return on average assets.......................... 0.82% 0.88%
Return on average shareholders' equity............ 14.41% 13.93%
</TABLE>

- -------------------------
(1) The above pro forma information is based on the assumption and conditions as
set forth in the more detailed Pro Forma Financial Statements on page 15.
<PAGE> 10

RISK FACTORS

In addition to the other information we provide in this prospectus, you
should carefully consider the following risks before deciding whether to invest
in our common stock. These are not the only risks we face. Some risks are not
yet known to us and there are others we do not currently believe are material
but could later turn out to be so. All of these could impair our business,
operating results or financial condition. In evaluating the risks of investing
in us, you should also evaluate the other information set forth in this
prospectus, including our financial statements.

THE ACQUISITION OF CAPITOL THRIFT IS NOT GUARANTEED AND THIS OFFERING IS NOT
DEPENDENT ON SUCH ACQUISITION

We have entered into a merger agreement to acquire Capitol Thrift which is
subject to a number of conditions, including state and federal regulatory
approval. While we intend to complete the acquisition of Capitol Thrift, no
assurance can be given that it will be consummated and this offering is not
conditioned upon the acquisition of Capitol Thrift.

WE WILL NEED TO INTEGRATE AND OPERATE THE BUSINESS OF CAPITOL THRIFT & LOAN

While we have experience in managing growth through branch acquisitions,
Capitol Thrift represents our first major banking venture into areas of
California other than Humboldt, Trinity, Mendocino and Placer Counties. Capitol
Thrift also represents our first venture into acquiring a California industrial
thrift and loan institution. Unlike Humboldt Bank and Capitol Valley Bank,
Capitol Thrift almost exclusively relies on net income generated from loan
interest income. We may experience:

- problems integrating Capitol Thrift as our separate subsidiary;

- unexpected employee departures;

- computer hardware or software problems and coordination; or

- the failure to maintain and improve customer service.

CAPITOL THRIFT IS UNDER AN AGREEMENT WITH THE FDIC AND CALIFORNIA DEPARTMENT OF
FINANCIAL INSTITUTIONS

Capitol Thrift is subject to an agreement with the FDIC and California
Department of Financial Institutions dated August 23, 1998. The agreement
requires that Capitol Thrift:

- develop a plan for the reduction of all classified assets;

- develop specific strategies for the reduction of other real estate owned;

- develop a plan to increase its Tier 1 capital.

Although we believe that we have the business experience to address these
issues, no assurance can be given that either the FDIC or California Department
of Financial Institutions will not impose additional restrictions on Capitol
Thrift's operations.

ADVERSE PERFORMANCE OF CAPITOL THRIFT'S LOAN PORTFOLIO AND OUR FUTURE
PERFORMANCE

Making loans is the principal business of Capitol Thrift. Its operations
and performance rely almost solely on generating loan interest income rather
than other income and fees. Also, Capitol
<PAGE> 11

Thrift's existing loan portfolios differ to some extent in the types of
borrowers, industries and credits represented by Humboldt Bank's and Capitol
Valley Bank's loan portfolios.

Our performance and prospects after the merger will be largely dependent on
the performance of our combined loan portfolios with Capitol Thrift, and
ultimately on the financial condition of their respective borrowers and other
customers. Our failure to effectively manage the combined loan portfolio could
have a material adverse effect on our business, financial condition and results
of operations after the merger. Any decrease in loan customers could adversely
effect our shareholders' return on equity and cause us to lose some of the
anticipated benefit of the Capitol Thrift acquisition. For information about our
loan portfolio, see "Humboldt Bancorp Management's Discussion and Analysis of
Financial Condition and Results of Operation -- Loans."

DEPENDENCE ON NON-TRADITIONAL BANKING INCOME FOR GROWTH

Because of limited growth in the Humboldt-Eureka area, a substantial
portion of our revenue is derived from non-traditional banking focused on fees
on accounts, for services, leasing activity, and merchant bankcard processing.
Although we intend to diversify our growth in other geographical areas through
the acquisition of Capitol Thrift and operations of Capitol Valley Bank,
increased competition within the banking industry could reduce fees on deposits
and for services. With respect to merchant bankcard processing, we have focused
our marketing to first-time merchants and small to medium-sized merchants in the
retail, telephone, mail order and Internet commerce industries. Because these
merchants are located outside our geographic location, they require more effort
to monitor in the event the merchants experience a problem. See "Business of
Humboldt Bancorp -- Merchant Bankcard."

RECENT CHANGES MADE BY VISA WILL ADVERSELY AFFECT OUR MERCHANT BANKCARD
OPERATIONS

During November 1999, VISA adopted several rules in order to reduce risks
in high risk merchant bankcard programs. Although Humboldt Bank does not believe
that it operates a high risk merchant bankcard program, these new rules will
adversely affect our operations. We are seeking a waiver from VISA. No assurance
can be given that the waiver will be granted. See "Business of Humboldt
Bancorp -- Merchant Bankcard."

OUR STOCK OPTION PLAN CONTAINS AN ANTIDILUTION PROVISION

Our stock option plan for directors, officers and employees contains a
provision which grants additional options to the option holder in the event we
issue additional shares, such as in this offering. The additional options that
may be granted will have an exercise price equal to the fair market value at the
time of grant. As a result of this provision, option holders will have the right
to maintain their ownership interest in us. Further, because of these options,
this may have the effect of impairing the price of our common stock or our
ability to raise additional capital at a higher price due to the potential
dilutive effect to new investors.

OUR ACQUISITIONS AND GROWTH MAY STRAIN OUR PERSONNEL AND SYSTEMS

We have grown substantially through branch acquisition activity, new bank
and branch openings, the introduction of new product lines, and sustained
increases in loans and deposits. Rapid growth has at times put high demands on
our management and personnel, and has required increased expenditures for new
employees, enhanced training, office space, and technology upgrades.
<PAGE> 12

WE FACE STRONG COMPETITION

In recent years, competition for bank customers, the source of deposits and
loans, has greatly intensified. This competition includes:

- large national and super-regional banks which have well-established
branches and significant market share in many of the communities we
serve;

- finance companies, investment banking and brokerage firms, and insurance
companies that offer bank-like products;

- credit unions, which can offer highly competitive rates on loans and
deposits because they receive tax advantages not available to commercial
banks;

- government-assisted farm credit programs that offer competitive
agricultural loans;

- other community banks, including start-up banks, that can compete with us
for customers who desire a high degree of personal service;

- technology-based financial institutions including large national and
super-regional banks offering on-line deposit, bill payment, and mortgage
loan application services; and

- other financial institutions offering merchant bankcard processing
services.

Other existing single or multi-branch community banks, or new community
bank start-ups, have marketing strategies similar to ours. These other community
banks can open new branches in the communities we serve and compete directly for
customers who want the high level of service community banks offer. Other
community banks also compete for the same management personnel and the same
potential acquisition and merger candidates in Northern California.

Historically, insurance companies, brokerage firms, credit unions, and
other non-bank competitors have less regulation than banks and can be more
flexible in the products and services they offer. Under the recently enacted
Financial Services Act of 1999, most separations between banks, brokerage firms,
and insurance companies are eliminated, which is likely to increase competition.
See "Supervision and Regulation of Humboldt Bancorp, Humboldt Bank and Capitol
Valley Bank -- Recent Legislation."

DETERIORATION OF LOCAL ECONOMIC CONDITIONS COULD HURT OUR PROFITABILITY

Our operations are primarily located in Northern California and are
concentrated in Eureka and surrounding areas, and, to a lesser extent,
Roseville, California. As a result of this geographic concentration, our
financial results depend largely upon economic conditions in these areas.
Adverse local economic conditions in Northern California, and in particular,
Eureka, may have a material adverse effect on our financial condition and
results of operations.

GOVERNMENT REGULATION AND LEGISLATION COULD HURT OUR BUSINESS AND PROSPECTS

We have extensive state and federal regulation, supervision and legislation
which govern almost all aspects of our respective operations including:

- the capital we must maintain;

- the kinds of activities we can engage in;

- the kinds and amounts of investments we can make;

- the location of our offices.
<PAGE> 13

Bank regulation can hinder our ability to operate with financial services
companies that are not regulated or are less regulated. This regulation is
primarily intended for the protection of consumers, depositors, and deposit
insurance funds and not for the protection of Humboldt Bancorp shareholders. See
"Regulation of Humboldt Bancorp, Humboldt Bank, Capitol Valley Bank."

LOSS OF KEY EMPLOYEES COULD HURT OUR PERFORMANCE

The loss of the services of a key employee, or the failure to attract and
retain other qualified persons, could have a material adverse effect on our
business, financial condition and results of operations. We are heavily
dependent on the services of Theodore S. Mason, our President and Chief
Executive Officer, and on several other key executives, including Messrs.
Ziegler, Dalby, and Musante, who have been instrumental in our growth. The
operation and performance of Capitol Thrift is heavily dependent on the services
of Mr. Robert F. Kelly, President and Chief Executive Officer, and Mr. Leighton
Monroe, Jr., Chief Financial Officer, of Capitol Thrift. We intend to enter into
employment arrangements with Mr. Robert F. Kelly and Mr. Leighton Monroe, Jr.
for the continuation of their services for Capitol Thrift operations.

Our rapid growth has placed significant demands on Mr. Mason's time, who
until July 15, 1999, served as President and Chief Executive Officer of both
Humboldt Bancorp and Humboldt Bank and Chairman of the Board of Capitol Valley
Bank. As of December 31, 1999, Mr. Mason serves as President and Chief Executive
Officer of Humboldt Bancorp, Mr. Paul Ziegler serves as Executive Vice President
of Humboldt Bancorp, Mr. John Dalby serves as President and Chief Executive
Officer of Humboldt Bank, and Mr. Musante serves as Vice President and Manager
of the Merchant Bankcard Department of Humboldt Bank.

We may need to recruit additional senior level executives as our growth
continues. However, the market for qualified persons is competitive and they may
be unwilling to relocate to Eureka, a non-metropolitan city.

LIMITED TRADING MARKET FOR HUMBOLDT BANCORP COMMON STOCK AND PRICE VOLATILITY
COULD MAKE IT DIFFICULT TO SELL SHARES AFTER THE OFFERING

Our common stock has been approved for listing on the NASDAQ National
Market upon notice of issuance. We expect to begin trading of our common stock
on the NASDAQ National Market upon the close of this offering. Our common stock
is currently quoted on the OTC Bulletin Board. There is limited trading in our
common stock. We do not know if an active trading market for our common stock
will develop on the NASDAQ National Market.

Given the limited trading history of our common stock on the OTC Bulletin
Board and our inability to predict at what price level our common stock will
trade in the future, the price of our common stock may fluctuate widely,
depending on many factors that may have little to do with operating results or
intrinsic worth, and you may encounter delay in selling your shares. For
information about the trading history of Humboldt Bancorp's common stock, see
"Market Prices."
<PAGE> 14

USE OF PROCEEDS

The net proceeds to be received by us from the sale of our shares of common
stock, based upon an assumed offering price of $12.50 per share, are estimated
to be $3.7 million if the minimum number of shares are sold, and $7.7 million if
the maximum number of shares are sold, after deducting the estimated offering
expenses.

We expect to use the net proceeds of this offering to fund our acquisition
of Global Bancorp and expenses related to this offering. If the acquisition of
Capitol Thrift is not consummated, net proceeds from this offering will be used
to pay approximately $1.3 million in debt and the balance will be used for
working capital. The $1.3 million in debt is due in 2004 and bears interest at
prime plus three-fourths percent. Pending such uses, the net proceeds will be
invested in government securities and other short-term, investment-grade,
interest-bearing instruments.

CAPITALIZATION

The following table sets forth, as of September 30, 1999, (i) our
consolidated capitalization ("Actual"); (ii) our consolidated capitalization on
an as adjusted basis giving effect to this offering and the application of the
net proceeds therefrom ("As Adjusted"); and (iii) our consolidated
capitalization on a pro forma adjusted basis giving effect to the Global Bancorp
merger, the minimum offering of $4 million, and the application of net proceeds
therefrom ("Pro Forma As Adjusted"). See "Use of Proceeds." This table should be
read in conjunction with our historical and pro forma financial statements
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
--------------------------------
AS PRO FORMA
ACTUAL ADJUSTED AS ADJUSTED
------- -------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, less current maturities..................... $ 4,638 $ 6,110 $10,748
Stockholders' equity:
Common stock, $.001 par value per share, 50,000,000 shares
authorized; 5,193,497 shares issued and outstanding,
actual; and 5,513,497 shares issued and outstanding, as
adjusted(1)(2)......................................... 27,768 4,000 31,768
Additional paid-in capital................................ 298 -- 298
Retained earnings......................................... 4,670 -- 4,670
Accumulated other comprehensive income.................... 80 -- 80
------- ------- -------
Total stockholders' equity........................ 32,816 4,000 36,816
------- ------- -------
Total capitalization.............................. $37,454 $10,110 $47,564
======= ======= =======
</TABLE>

- -------------------------
(1) Does not include 45,002 shares (49,502 shares post-dividend) outstanding
that are subject to contingencies. See "Pro Forma Financial
Statements -- Footnote F."

(2) Takes into account a 10% stock dividend declared on January 11, 2000,
payable on February 7, 2000.
<PAGE> 15

MARKET PRICES

Humboldt Bancorp's common stock has been approved for listing on the NASDAQ
National Market under the symbol HBEK upon notice of issuance. Humboldt Bancorp
intends to begin trading its common stock on the NASDAQ National Market upon the
close of this offering. Humboldt Bancorp's common stock is currently quoted on
the OTC Bulletin Board as disclosed below.

We have been informed by market makers of the high and low bid price for
our common stock during the last two fiscal years and for the first nine months
of the current fiscal year as follows. No assurances can be given, however, that
these high and low bid prices reflected the actual market value of our common
stock. The high and low bids have been adjusted to give effect to all stock
dividends and splits. In addition, the prices indicated reflect inter-dealer
prices, without retail mark-up, mark down or commission and may not represent
actual transactions.

<TABLE>
<CAPTION>
YEAR NUMBER OF TRADES HIGH BID LOW BID
---- ---------------- -------- -------
<S> <C> <C> <C>
1997
First Quarter 5 $ 8.35 $ 7.70
Second Quarter 8 $10.55 $ 8.35
Third Quarter 23 $11.25 $10.00
Fourth Quarter 15 $11.35 $10.55
1998
First Quarter 15 $11.45 $10.20
Second Quarter 18 $11.80 $ 9.10
Third Quarter 7 $11.35 $ 9.80
Fourth Quarter 16 $11.25 $ 8.75
1999
First Quarter 16 $10.80 $ 8.75
Second Quarter 19 $11.60 $ 8.75
Third Quarter 29 $14.65 $10.90
Fourth Quarter 31 $14.90 $11.35
</TABLE>

As of December 31, 1999, our shares of common stock were held by
approximately 680 shareholders, not including those held in street name by
several brokerage firms. As of December 31, 1999, a total of 1,053,786 shares of
our common stock underlie outstanding options and warrants as adjusted to
reflect a 10% stock dividend payable on February 7, 2000.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our common stock.
Following the offering, we do not intend to pay cash dividends in the near
future. We intend to retain all earnings to support our planned growth. In
addition, California and federal banking laws and regulations place restrictions
on the payment of dividends by a bank to its shareholders. See "Supervision and
Regulation -- Dividends." Any future dividends will be at the discretion of our
board of directors, subject to a number of factors, including our results of
operations, general business conditions, capital requirements, general financial
condition, and other factors deemed relevant by our board of directors.
Traditionally, we have declared stock dividends. We distributed a 10% stock
dividend on the common stock on May 30, 1996, 1997, 1998, and February 7, 2000.
In addition, effective June 30, 1999, we completed a 5-for-2 stock split.
<PAGE> 16

PRO FORMA FINANCIAL STATEMENTS

This document contains in addition to historical information,
"forward-looking statements." These statements are based on management's beliefs
and assumptions, and on information currently available to management.
Forward-looking statements include statements in which words such as "expect,"
anticipate," "intend," "plan," "believe," "estimate," "consider," or similar
expressions are used. Forward-looking statements are not guarantees of future
performance. They involve risks, uncertainties and assumptions, including those
described below. Many of the factors that will determine results are beyond our
ability to control or predict. You are cautioned not to put undue reliance on
any forward-looking statements. Therefore, the information set forth in this
document should be carefully considered when evaluating the business prospects
of Humboldt Bancorp.

We will account for the merger with Global Bancorp using the purchase
method of accounting. The purchase method accounts for a business combination
such as the merger as the acquisition of one business by another. We will record
at its cost the acquired assets of Global Bancorp and Capital Thrift less the
liabilities assumed. The difference between the cost of the acquisition and the
fair value of the net assets acquired will be recorded as goodwill. The reported
income of Humboldt Bancorp will include the operations of Capitol Thrift after
acquisition, based on the cost to Humboldt Bancorp.

The purchase price to acquire Global Bancorp will consist of a cash payment
of approximately $11.8 million due at the merger date and a contingent payment
in the form of a Humboldt Bancorp promissory note of approximately $4.7 million
due on January 30, 2002, or 60 days from the occurrence of a material adverse
effect with respect to Humboldt Bancorp, but in no event earlier than January
31, 2001. The amount of the note may be decreased or increased based on events
identified in the merger agreement. Since the amount to be paid is contingent
upon future events, the Humboldt Bancorp note will not be recorded as part of
the purchase price until the contingencies are resolved and the consideration
paid. As a result, the fair value of the net assets acquired exceeds the
recorded purchase price in the following pro forma financial statements.
Accordingly, the cost of non-current assets acquired are adjusted downward to
zero and the excess is recorded as a deferred credit for negative goodwill. When
the consideration is paid, the additional cost will first be applied against the
deferred credit for negative goodwill with the excess, if any, used to restore
premises and equipment to fair value. The remaining excess, if any, will be
recorded as goodwill.

The Statement of Income table that follows contains information which is
calculated by using "weighted average shares." The weighted average shares
calculation takes into consideration both the number of shares outstanding and
common share equivalents and the length of time the shares and equivalents were
outstanding during the period. The weighted average shares calculation is then
used to calculate basic and diluted earnings per share. At the election of
Global Bancorp stockholders, up to $2,000,000 of the contingent payment under
the Humboldt Bancorp promissory note may be paid in Humboldt Bancorp common
stock. The number of shares issued under this provision, if any, will reduce
Humboldt Bancorp's basic and fully diluted earnings per share. However, because
Global Bancorp stockholders may not make this effective until January 30, 2002,
any shares that may be received by the election have not been included in the
calculation. Further, the following calculations take into consideration a 10%
stock dividend payable on February 7, 2000.

The following pro forma financial information combines the historical
financial information of us and Global Bancorp, as if the merger and the CalFed
branch acquisitions, had occurred at the beginning of each period presented
under the assumptions and adjustments in the accompanying notes to the pro forma
financial information. The pro forma financial information does not take into
consideration operational efficiencies or additional expenses that might have
occurred as a result of combining the institutions. The following tables show
our pro forma consolidated condensed balance
<PAGE> 17

sheets following the foregoing transactions as of September 30, 1999 and our pro
forma consolidated condensed income statements following the foregoing
transactions for the nine-month period ended September 30, 1999, and the year
ended December 31, 1998.

The pro forma financial information further assumes the issuance of 320,000
shares at $12.50 per share as a result of the minimum offering. Our pro forma
financial information is not necessarily indicative of the financial position or
results of operations following the transactions as it may be in the future or
as it might have been had the transactions been affected on the assumed dates.

The pro forma financial information should be read in conjunction with the
historical financial statements of Humboldt Bancorp and Global Bancorp and the
notes related thereto, presented elsewhere in this document.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE> 18

PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1999
(UNAUDITED)

<TABLE>
<CAPTION>
HISTORICAL
-------------------
HUMBOLDT GLOBAL AS PRO FORMA PRO FORMA
BANCORP BANCORP ADJUSTED ADJUSTMENTS AS ADJUSTED
-------- -------- -------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and due from banks.......... $ 25,421 $ 248 $ $ $ 25,669
Federal funds sold............... 56,145 8,001 4,000B (11,080)A(1) 63,176
6,110C
Investment securities
available-for-sale............ 106,210 6,448 112,658
Loans and leases, net of
allowance for loan and lease
losses and unearned income.... 203,098 98,284 3,500A(3) 304,882
Premises and equipment, net...... 9,421 622 (622)A(4) 9,421
Accrued interest and other
assets........................ 18,872 4,057 45F (1,184)A(4) 21,790
-------- -------- ------- -------- --------
Total assets................ $419,167 $117,660 $10,155 $ (9,386) $537,596
======== ======== ======= ======== ========
LIABILITIES
Deposits
Non-interest-bearing.......... $118,267 $ -- $ $ $118,267
Interest-bearing.............. 257,548 105,287 362,835
-------- -------- --------
Total deposits.............. 375,815 105,287 481,102
Accrued interest and other
liabilities................... 5,898 593 45F 2,394A(4) 8,930
Borrowed Funds................... 4,638 -- 6,110C 10,748
-------- -------- ------- -------- --------
Total liabilities........... 386,351 105,880 6,155 2,394 500,780
STOCKHOLDERS' EQUITY
Common Stock..................... 28,066 8,090 4,000B (8,090)A(2) 32,066
Retained earnings................ 4,670 3,687 (3,687)A(2) 4,670
Accumulated other comprehensive
income........................ 80 3 (3)A(2) 80
-------- -------- ------- -------- --------
Total stockholders'
equity................... 32,816 11,780 4,000 (11,780) 36,816
-------- -------- ------- -------- --------
Total liabilities and
stockholders' equity..... $419,167 $117,660 $10,155 $ (9,386) $537,596
======== ======== ======= ======== ========
</TABLE>
<PAGE> 19

PRO FORMA CONSOLIDATED STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1999
(UNAUDITED)

<TABLE>
<CAPTION>
HISTORICAL
------------------
HUMBOLDT GLOBAL AS PRO FORMA PRO FORMA
BANCORP BANCORP ADJUSTED ADJUSTMENTS AS ADJUSTED
-------- ------- -------- ----------- -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and
leases..................... $14,136 $8,001 $ (37)D $(375)A(4) $ 21,725
Interest on investments....... 3,708 722 2,270E 6,700
------- ------ ------ ----- ----------
Total interest income...... 17,844 8,723 2,233 (375) 28,425
------- ------ ------ ----- ----------
INTEREST EXPENSE
Interest on deposits.......... 5,410 4,293 2,287E 11,990
Interest on long-term debt.... 225 -- 507C 732
------- ------ ------ ----- ----------
Total interest expense..... 5,635 4,293 2,794 -- 12,722
------- ------ ------ ----- ----------
Net interest income........ 12,209 4,430 (561) (375) 15,703
PROVISION FOR LOAN AND LEASE
LOSSES........................ 697 479 -- 1,176
------- ------ ------ ----- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN AND LEASE
LOSSES........................ 11,512 3,951 (561) (375) 14,527
------- ------ ------ ----- ----------
NON-INTEREST INCOME
Service charges and fees...... 13,443 455 120A(5) 14,018
Net gain on sale of loans..... 349 278 627
------- ------ ------ ----- ----------
Total non-interest
income................... 13,792 733 -- 120 14,645
------- ------ ------ ----- ----------
NON-INTEREST EXPENSE
Salaries and employee
benefits................... 8,659 1,522 10,181
Net occupancy and equipment... 2,092 361 115E (93)A(5) 2,475
Other expenses................ 9,826 1,486 293E 11,605
17F
------- ------ ------ ----- ----------
Total non-interest
expense.................. 20,577 3,369 425 (93) 24,261
------- ------ ------ ----- ----------
INCOME BEFORE INCOME TAXES...... 4,727 1,315 (986) (162) 4,911
PROVISION FOR INCOME TAXES...... 1,537 363 (406)G (116)E 1,378
------- ------ ------ ----- ----------
NET INCOME...................... $ 3,190 $ 952 $ (580) $ (46) $ 3,533
======= ====== ====== ===== ==========
NET INCOME PER SHARE OF
COMMON STOCK
Basic......................... $ 0.67
==========
Diluted....................... $ 0.61
==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
Basic......................... 5,311,000
==========
Diluted....................... 5,794,000
==========
</TABLE>
<PAGE> 20

PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)

<TABLE>
<CAPTION>
HISTORICAL
------------------
HUMBOLDT GLOBAL AS PRO FORMA PRO FORMA
BANCORP BANCORP ADJUSTED ADJUSTMENTS AS ADJUSTED
-------- ------- -------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and
leases...................... $18,762 $11,721 $ (49)D (50$0)A(3) $ 29,934
Interest on investments........ 4,742 1,232 3,466E 9,440
------- ------- ------- ----- ----------
Total interest income....... 23,504 12,953 3,417 (500) 39,374
------- ------- ------- ----- ----------
INTEREST EXPENSE
Interest on deposits........... 7,565 6,843 3,492E 17,900
Interest on long-term debt..... 177 -- 676C 853
------- ------- ------- ----- ----------
Total interest expense...... 7,742 6,843 4,168 -- 18,753
------- ------- ------- ----- ----------
Net interest income......... 15,762 6,110 (751) (500) 20,621
PROVISION FOR LOAN AND LEASE
LOSSES......................... 2,124 226 2,350
------- ------- ------- ----- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN AND LEASE
LOSSES......................... 13,638 5,884 (751) (500) 18,271
------- ------- ------- ----- ----------
NON-INTEREST INCOME
Service charges and fees....... 11,828 826 160A(4) 12,814
Net gain on sale of loans...... 645 476 1,121
------- ------- ------- ----- ----------
Total non-interest income... 12,473 1,302 -- 160 13,935
------- ------- ------- ----- ----------
NON-INTEREST EXPENSE
Salaries and employee
benefits.................... 9,151 2,023 11,174
Net occupancy and equipment.... 2,711 440 176E (124)A(4) 3,203
Loss on sale and provision for
losses on real property held
for sale.................... -- 1,224 1,224
Other expenses................. 7,716 1,786 447E 9,971
-- 22F --
------- ------- ------- ----- ----------
Total non-interest
expense................... 19,578 5,473 645 (124) 25,572
------- ------- ------- ----- ----------
INCOME BEFORE INCOME TAXES....... 6,533 1,713 (1,396) (216) 6,634
PROVISION FOR INCOME TAXES....... 2,517 658 (574)G (155)E 2,446
------- ------- ------- ----- ----------
NET INCOME....................... $ 4,016 $ 1,055 $ (822) $ (61) $ 4,188
======= ======= ======= ===== ==========
NET INCOME PER SHARE OF
COMMON STOCK
Basic.......................... $ 0.81
==========
Diluted........................ $ 0.73
==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
Basic.......................... 5,197,000
==========
Diluted........................ 5,699,000
==========
</TABLE>
<PAGE> 21

NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

A THE MERGER OF HUMBOLDT BANCORP AND GLOBAL BANCORP.

Humboldt Bancorp will acquire Global Bancorp's outstanding common stock for
approximately $16,500,000 payable in cash and a Humboldt Bancorp promissory
note. The merger is treated as a single transaction in the consolidated
financial statements. The promissory note is due January 30, 2002, and the
amount payable may be decreased or increased based on events identified in the
merger agreement. Since the amount to be paid is contingent upon future events,
generally accepted accounting principles require that this promissory note be
recorded when the contingencies are resolved and the consideration is paid.
Accordingly, the purchase accounting adjustments to record the acquisition are
summarized below (dollars in thousands):

<TABLE>
<S> <C>
Purchase price to be paid in cash at merger date............ $ 11,080(1)
Less historical net assets acquired......................... (11,780)(2)
--------
Discount to allocate........................................ (700)
========
Adjustments to the historical net assets acquired
Loans and leases.......................................... $ 3,500(3)
Premises and equipment.................................... (622)(4)
Accrued interest and other assets......................... (1,184)(4)
Deferred credit for negative goodwill..................... (2,394)(4)
--------
Allocated discount.......................................... $ (700)
========
</TABLE>

- -------------------------
(1) Cash portion of price to be paid for Global Bancorp, as of September 30,
1999, as adjusted pursuant to the terms of merger agreement.

(2) Acquisition of all of the outstanding shares of Global Bancorp's common
stock results in recording Global Bancorp's assets and liabilities on the
books of Humboldt Bancorp and subsidiaries and the elimination of Global
Bancorp's stockholders' equity.

(3) To adjust the carrying value of loans at Global Bancorp to estimated fair
value. This amount will be recognized as an adjustment to yield over the
estimated life of the related loans. The carrying value of all other assets
and liabilities approximates estimated fair value.

(4) In this proforma, the fair value of the net assets acquired exceeds the
purchase price. Accordingly, the cost of noncurrent assets acquired, in the
case of premises and equipment, are adjusted downward to zero and the excess
is recorded as a deferred credit for negative goodwill. A deferred tax
liability of $1,184,000 is recorded and netted against deferred tax assets
as a result of the tax effect of the reduction in premises and equipment and
other adjustments. Depreciation expense related to the reduction of premises
and equipment to zero has been eliminated from the pro forma statements. The
deferred credit for negative goodwill will be amortized using the
straight-line method over 15 years. When the contingencies related to the
promissory note are resolved and the additional consideration is paid, the
additional cost will first be applied against the deferred credit for
negative goodwill with the excess, if any, used to restore premises and
equipment to fair value. The remaining excess, if any, will be recorded as
goodwill and amortized using the straight-line method over 15 years.
<PAGE> 22

B HUMBOLDT BANCORP STOCK OFFERING.

In this proforma, it is assumed the acquisition of Global Bancorp will be
consummated concurrent with the sale of a minimum of 320,000 shares of Humboldt
Bancorp common stock at a price of $12.50 per share.

C BORROWINGS.

Humboldt Bancorp intends on acquiring additional capital of approximately
$6.1 million if only the minimum offering has sold, or $2.1 million if the
maximum offering has sold, through financings by the issuance of trust preferred
securities or other Tier 1-type securities at an estimated rate of 11.07% per
annum.

D ADJUSTMENT TO REFLECT ACQUISITION OF GLOBAL BANCORP.

The proforma statements of income are adjusted to recognize the estimated
decrease in earnings from the net funds used to acquire Global Bancorp at an
estimated average rate earned on federal funds sold of 5.0%.

E HUMBOLDT BANK ACQUISITION OF CALFED BRANCHES.

In August 1999, Humboldt Bank acquired the deposits of two branch offices
of CalFed Bank. The premium paid to acquire the deposits of approximately
$2,384,000 was allocated to core deposit intangible asset. The estimated runoff
of these deposits will result in amortization of the balance of the core deposit
intangible asset on an accelerated basis over a period of ten years. Adjustments
were also made to the pro forma statements of income to estimate the additional
interest income, interest expense and depreciation expense that would result
from this transaction using an estimated average interest rate earned on federal
funds sold of approximately 5.0%, an average rate paid on deposits of
approximately 4.9% and depreciation computed using the straight-line method over
the estimated lives of the premises and equipment acquired.

F HUMBOLDT BANCORP ACQUISITION OF SILVERADO MERGER CORPORATION.

In September 1999, Humboldt Bancorp acquired all of the outstanding shares
of Silverado Merger Corporation for 45,002 shares (49,502 shares post-dividend)
of Humboldt Bancorp restricted common stock and warrants to purchase up to
90,000 shares (99,000 shares post-dividend) of Humboldt Bancorp stock for $12.00
($10.91 post-dividend) per share. Humboldt Bancorp has the right to repurchase
the 45,002 shares (49,502 shares post-dividend) of common stock for $1.00 ($.91
post-dividend) each, and the warrants to purchase up to 90,000 shares (99,000
shares post-dividend) of common stock for $12.00 ($10.91 post-dividend) per
share cannot become exercisable, in the event Capitol Valley Bank fails to
achieve certain business objectives by December 31, 2001. Until the
contingencies related to the issuance of the restricted stock and warrants are
resolved, the amount recorded for this transaction will be a liability of
$45,002 and the stock and warrants issued will not be included in per share
information. The fair value as of the merger date of the stock and warrants
issued to the Silverado Merger Corporation stockholders will be recorded as an
additional cost of the acquisition if all the requirements of the acquisition
agreement are achieved. Otherwise, the 45,002 shares (49,502 shares post
dividend) of restricted stock will be repurchased for $1.00 ($.91 post dividend)
per share and the warrants will expire.

G INCOME TAX EFFECT.

These amounts represent the estimated tax effect of the transactions
described in preceding Notes computed at an incremental combined federal and
state tax rate of 41.15%. Amortization of the deferred credit for negative
goodwill described in Note A is not taxable.
<PAGE> 23

REGULATORY CAPITAL AND LEVERAGE RATIO

The following table illustrates the actual regulatory capital and leverage
ratios of Humboldt Bancorp and Global Bancorp and the pro forma regulatory
capital and leverage ratios of Humboldt Bancorp, as of September 30, 1999. The
pro forma ratios are stated after giving effect to this offering and the
acquisitions, assuming $4.0 million in net proceeds is raised in this public
offering, all of which is held in cash or cash equivalent investments, and $6.1
million is issued in trust preferred securities or other Tier 1-type securities
at an estimated rate of 11.07%. Please refer to "Unaudited Pro Forma Combined
Financial Data" and the assumptions set forth therein.

<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1999
------------------------------------------
TIER 1 TOTAL
LEVERAGE RISK-BASED RISK-BASED
RATIO CAPITAL RATIO CAPITAL RATIO
-------- ------------- -------------
<S> <C> <C> <C>
Humboldt Bancorp........................... 8.17% 11.11% 12.33%
Global Bancorp............................. 9.66% 11.87% 13.12%
Pro forma for Humboldt Bancorp after the
offering and merger...................... 8.18% 10.83% 12.08%
Minimum regulatory capital for a holding
company(1)............................... 4.00% 4.00% 8.00%
</TABLE>

- -------------------------
(1) Pursuant to regulations of the Federal Reserve board. Please refer to
"Supervision and Regulation -- Capital Standards."
<PAGE> 24

HUMBOLDT BANCORP SELECTED FINANCIAL DATA

The following table sets forth selected financial data of Humboldt Bancorp
(on a consolidated basis) as of and for the years ended December 31, 1994, 1995,
1996, 1997 and 1998, and as of and for the nine months ended September 30, 1998
and 1999, and should be read in conjunction with Management's Discussion and
Analysis and with the financial statements presented elsewhere.

<TABLE>
<CAPTION>
AS OF AND FOR THE
AS OF AND FOR THE NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
-------------------------------------------------------------- -----------------------
1994(1) 1995(1) 1996 1997 1998 1998 1999
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Interest income.................... $ 11,163 $ 15,241 $ 16,562 $ 20,053 $ 23,504 $ 17,789 $ 17,844
Interest expense................... 3,540 5,244 5,549 7,024 7,742 5,855 5,635
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income.............. 7,623 9,997 11,013 13,029 15,762 11,934 12,209
Provision for loan and lease
losses........................... 783 792 533 773 2,124 1,541 697
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income after provision
for loan and lease losses........ 6,840 9,205 10,480 12,256 13,638 10,393 11,512
Non-interest income................ 1,463 3,509 5,747 8,109 12,473 8,609 13,792
Non-interest expense............... 6,240 9,149 11,325 15,496 19,578 14,471 20,577
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before provision for
income taxes................... 2,063 3,565 4,902 4,869 6,533 4,531 4,727
Provision for income taxes......... 762 1,363 1,926 1,611 2,517 1,720 1,537
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income....................... $ 1,301 $ 2,202 $ 2,976 $ 3,258 $ 4,016 $ 2,811 $ 3,190
========== ========== ========== ========== ========== ========== ==========
BALANCE SHEET DATA
Investment securities.............. $ 37,258 $ 53,875 $ 39,933 $ 80,180 $ 77,802 $ 79,347 $ 106,210
Total net loans and leases......... $ 92,462 $ 115,117 $ 142,824 $ 157,512 $ 186,038 $ 180,846 $ 203,098
Total assets....................... $ 152,863 $ 193,912 $ 214,738 $ 284,087 $ 319,975 $ 312,944 $ 419,167
Total deposits..................... $ 137,624 $ 174,526 $ 192,576 $ 255,186 $ 283,967 $ 277,285 $ 375,815
Total shareholders' equity......... $ 13,569 $ 16,934 $ 19,600 $ 23,554 $ 27,848 $ 26,571 $ 32,816
PER SHARE DATA(2)
Net income
Basic............................ $ 0.33 $ 0.48 $ 0.64 $ 0.69 $ 0.82 $ 0.58 $ 0.64
Diluted.......................... $ 0.31 $ 0.45 $ 0.58 $ 0.61 $ 0.75 $ 0.52 $ 0.58
Book value......................... $ 2.94 $ 3.65 $ 4.18 $ 4.94 $ 5.66 $ 5.43 $ 6.32
Weighted average shares outstanding
Basic............................ 3,971,000 4,624,000 4,637,000 4,756,000 4,876,000 4,863,000 4,992,000
Diluted.......................... 4,135,000 4,913,000 5,135,000 5,325,000 5,379,000 5,372,000 5,475,000
Actual........................... 4,622,000 4,636,000 4,694,000 4,769,000 4,917,000 4,892,000 5,193,000
SELECTED RATIOS(3)
Return on average assets........... 0.93% 1.22% 1.48% 1.30% 1.32% 1.26% 1.24%
Return on average equity........... 12.08% 14.57% 16.96% 14.50% 16.02% 15.09% 14.26%
Total loans to deposits............ 67.18% 65.96% 74.17% 61.72% 65.51% 65.22% 54.04%
Net interest margin................ 6.01% 6.07% 5.98% 5.85% 5.94% 5.50% 6.07%
Efficiency ratio(4)................ 68.68% 67.74% 67.57% 73.31% 69.34% 70.44% 79.14%
ASSET QUALITY RATIOS
Reserve for loan and lease losses
to:
Ending total loans and leases.... 1.42% 1.60% 1.48% 1.48% 1.62% 1.51% 1.58%
Nonperforming assets............. 260.98% 195.60% 351.80% 128.02% 420.22% 336.85% 289.97%
Nonperforming assets to ending
total assets................... 0.33% 0.49% 0.28% 0.65% 0.23% 0.26% 0.27%
Net loan and lease charge-offs
(recoveries) to average loans and
leases........................... 0.34% 0.25% 0.19% 0.36% 0.82% 0.66% 0.26%
Reserve/nonperforming loans........ 260.98% 195.60% 569.23% 139.14% 553.44% 336.85% 289.97%
CAPITAL RATIOS
Average stockholders' equity to
average assets................... 7.50% 8.40% 8.85% 8.48% 8.35% 8.34% 8.73%
Tier 1 capital ratio(5)............ 12.52% 11.37% 11.35% 10.79% 10.41% 10.82% 11.11%
Total risk-based capital
ratio(6)......................... 13.78% 12.62% 12.60% 12.02% 11.66% 12.04% 12.33%
</TABLE>
<PAGE> 25

- -------------------------
(1) Represents financial data for Humboldt Bank. Humboldt Bancorp completed its
reorganization as a holding company on January 2, 1996.

(2) Per share data reflects retroactive restatement for 10% stock dividends in
1994, 1995, 1996, 1997, 1998, and 2000, and a five-for-two stock split in
1999. The per share data does not reflect the 45,002 shares of Humboldt
Bancorp restricted common stock subject to contingencies. See "Pro Forma
Financial Statements -- Footnote F."

(3) Annualized, when appropriate.

(4) Efficiency ratio is non-interest expense divided by the sum of net interest
income plus non-interest income.

(5) Tier I capital divided by risk-weighted assets.

(6) Total capital divided by risk-weighted assets.

(7) Tier I capital divided by average assets.

(8) Including head office.
<PAGE> 26

HUMBOLDT BANCORP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management's discussion and analysis of financial condition
and results of operations contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of the factors
described in the section entitled "Risk Factors" and elsewhere in this document.

General

Humboldt Bancorp's results of operations are primarily dependent upon the
results of operations of Humboldt Bank and Capitol Valley Bank and, to a lesser
extent, Bancorp Financial Services. Humboldt Bank and Capitol Valley Bank
conduct general commercial banking business, such as gathering deposits from the
general public and applying those funds to the origination of loans for
commercial, consumer and residential purposes. Bancorp Financial Services makes
consumer automobile loans and commercial equipment leases of less than $100,000
to small businesses. Reference to Humboldt Bancorp in this section constitutes
reference to Humboldt Bank and Capitol Valley Bank. Reference to Humboldt Bank
is a reference to just Humboldt Bank and reference to Capitol Valley Bank is a
reference to just Capitol Valley Bank.

Humboldt Bancorp's profitability depends on net interest income, which is
the difference between (i) interest income generated by interest-earning assets
(i.e., loans and investments) and (ii) interest expense incurred on
interest-bearing liabilities (i.e., customer deposits and borrowed funds). Net
interest income is affected by the difference ("interest rate spread") between
rates of interest earned on interest-earning assets and rates of interest paid
on interest-bearing liabilities, as well as the relative amounts of
interest-earning assets and interest-bearing liabilities. If the total of
interest-earning assets approximates or exceeds the total of interest-bearing
liabilities, any positive interest rate spread will generate net interest
income. Financial institutions have traditionally used interest rate spreads as
a measure of net interest income. Another indication of an institution's net
interest income is its "net yield on interest-earning assets" or "net interest
margin," which is net interest income divided by average interest-earning
assets.

Because of the limited loan growth in the Humboldt-Trinity, California
area, a substantial part of our revenues are also derived from non-interest
income. Non-interest income consists primarily of fees generated by the Merchant
Bankcard and Issuing Bankcard (Credit Card) Departments and lease residuals and
rentals generated by the Lease Finance Department. During the year ended
December 31, 1994, Humboldt Bank began to emphasize the growth in such fees and
other income. For the years ended December 31, 1998, 1997 and 1996, fees and
other income were $9.7 million, $6.9 million and $4.3 million, respectively. Of
this growth, most can be attributed to Humboldt Bank's Merchant Bankcard
processing fees. During the first nine months ended September 30, 1999, Humboldt
Bank continued to reduce its Issuing Bankcard (Credit Card) activities. This
planned reduction in credit card receivables was initiated in early 1997 due to
increased competition in all credit card issuing markets and a noticeable trend
of increased charge-offs in connection with credit card receivables. The focus
of the Issuing Bankcard (Credit Card) Department is now issuance of credit cards
to Humboldt Bank customers.

Although Humboldt Bancorp intends to diversify its growth of traditional
banking through the establishment of Capitol Valley Bank and acquisition of
Capitol Thrift, Humboldt Bancorp will continue to emphasize revenues from
non-interest income sources. For example, during 1997 Humboldt Bancorp, along
with Tehama Bancorp, formed Bancorp Financial Services. Bancorp
<PAGE> 27

Financial Services makes consumer automobile loans and commercial equipment
leases, of less than $100,000, to small businesses. Humboldt Bank's Lease
Finance Department operations, on the other hand, consist principally of the
leasing of point-of-sale terminals, printers for credit card vouchers and
related equipment. Humboldt Bancorp accounts for its investment in Bancorp
Financial Services using the equity method in which only Humboldt Bancorp's net
investment in Bancorp Financial Services is accounted for on Humboldt Bancorp's
financial statements rather than Bancorp Financial Services' financial
statements being consolidated with Humboldt Bancorp's financial statements.
Therefore, the following discussion does not include a detailed description of
Bancorp Financial Services' operations. See "Business of Humboldt
Bancorp -- Bancorp Financial Services."

Humboldt Bancorp's profitability is also affected by such factors as the
level of non-interest expenses, the provision for loan losses, and the effective
tax rate. Non-interest expenses consist of salaries and benefits, fixed assets
(occupancy related expenses), and Merchant Bankcard expenses.

Management's discussion and analysis of earnings and related financial data
are presented herein to assist investors in understanding the consolidated
financial condition and results of operations of Humboldt Bancorp and Humboldt
Bank for the fiscal years ended December 31, 1998, 1997 and 1996, and of
Humboldt Bancorp, Humboldt Bank and Capitol Valley Bank for the nine months
ended September 30, 1999. This discussion should be read in conjunction with the
consolidated financial statements and related footnotes presented elsewhere
herein.

Summary of Operations

For the nine months ended September 30, 1999, net income was $3.2 million,
an increase of 14.3% over net income of $2.8 million earned during the nine
months ended September 30, 1998. Diluted earnings per share were $0.58 and $0.52
for the nine months ended September 30, 1999, and September 30, 1998,
respectively. Annualized return on average assets was 1.2% for the nine months
ended September 30, 1999, compared with 1.3% for the comparable nine months in
1998. For the first nine months of 1999 annualized return on average equity was
14.3%, compared with 15.1% during the first nine months of 1998. The increase in
earnings for the nine months ended September 30, 1999, versus the comparable
period in 1998 can be attributed to growth in earning assets, fee income growth,
and increased customer activity in our Merchant Bankcard product.

Humboldt Bancorp reported net income of $4.0 million for the year ended
December 31, 1998, compared to $3.3 million for the year ended December 31,
1997. The increase in net income is attributable to an increase of $2.8 million
or 21.5% in net interest income and an increase in other non-interest income of
$4.4 million or 54.3%. These increases were offset by an increase in provision
for loan losses of $1.3 million or 162.5%, an increase in other non interest
expense of $4.1 million or 26.5% and an increase in provision for income taxes
of $906,000 or 56.2%. The increase in net interest income is attributable to the
substantial increase in earning assets and a slight increase in the net interest
yield. The increase in non-interest income is primarily attributable to
substantial increases in the Lease Finance, Merchant Bankcard, and Issuing
Bankcard (Credit Card) Departments' income and to increases in service charges
on deposit accounts. These increases were offset in part by a decrease in gains
on sale of loans and investments. The increase in non-interest expense is
primarily attributable to increases in salaries and employee benefits and
Merchant Bankcard expenses. These increases can be attributed to the continued
growth of Humboldt Bank and Humboldt Bancorp. These increases were offset in
part by a decrease in Issuing Bankcard (Credit Card) Department expenses. The
increase in provision for loan losses is attributable to an increase in loans
originated by Humboldt Bank, and an increase in charge-offs in the Issuing
Bankcard (Credit Card) Department and Lease Finance Department.
<PAGE> 28

Humboldt Bancorp reported net income of $3.3 million for the year ended
December 31, 1997, compared to $3.0 million for the year ended December 31,
1996. The increase in net income is attributable to an increase of $2.0 million
or 18.2% in net interest income, and an increase in other non-interest income of
$2.4 million or 42.1%. These increases were offset by an increase in provision
for loan losses of $240,000 or 45.0% from 1996, an increase in other
non-interest expense of $4.2 million or 37.2%, and a decrease in provision for
income taxes of $315,000 or 16.4%. The increase in net interest income is
attributable to the substantial increase in earning assets offset by a slight
decrease in net interest yield. The increase in non-interest income is
attributable to substantial increases in the Merchant Bankcard and Issuing
Bankcard (Credit Card) Departments' income, to increases in service charges on
deposit accounts, and increased lease residuals and rentals in the Lease Finance
Department. These increases were offset in part by a decrease in gains on sale
of loans and investments. The increase in other non-interest expense is
attributable to increases in salaries and employee benefits, fixed asset
expenses, professional service expense, Issuing Bankcard (Credit Card)
Department and Merchant Bankcard Department expenses. These increases were
offset in part by a decrease in Federal Deposit Insurance Corporation expense
and data processing expense. The increase in provision for loan losses is
attributable to an increase in loans originated, and a recognition of Humboldt
Bank's potential credit risk in the Issuing Bankcard (Credit Card) Department.
Although pre-tax income increased, the provision for income taxes decreased as a
result of Humboldt Bancorp taking advantage of some deferred tax benefits.

Results of Operations

Net Interest Income

Net interest income represents the excess of interest income and loan fees
earned by Humboldt Bancorp on its earning assets over the interest expense paid
on its interest bearing liabilities and other borrowed money. Net interest
income as a percentage of average interest-earning assets is referred to as net
interest margin. The levels of interest-earning assets and interest-bearing
liabilities as well as changes in interest rates affect the level of net
interest income. During periods of rapidly changing interest rates, Humboldt
Bancorp's earnings can be significantly affected because interest rates on a
substantial amount of the earning assets are tied to prime and therefore tend to
change immediately, whereas interest rates on liabilities have a tendency to
change more slowly, and normally only upon the maturity of the liability.
<PAGE> 29

Average Balances and Average Rates Earned and Paid

The following table shows unaudited average balances and interest income or
interest expense, with the resulting average yield or rates by category of
earning assets or interest-bearing liabilities.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998
--------------------------------- ---------------------------------
INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME YIELDS OR AVERAGE INCOME YIELDS OR
BALANCE OR EXPENSE RATE BALANCE OR EXPENSE RATE
-------- ---------- --------- -------- ---------- ---------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans and leases............. $151,695 $15,961 10.52% $175,173 $18,762 10.71%
Investment securities:
Taxable securities......... 46,989 2,783 5.92 63,494 3,317 5.22
Nontaxable securities(2)... 10,396 569 5.47 13,682 739 5.40
Interest-earning balances due
from banks................. 2,164 128 5.91 3,502 174 4.97
Federal funds sold........... 11,311 612 5.41 9,504 512 5.39
-------- ------- ----- -------- ------- -----
Total interest-earning
assets(3).............. 222,555 20,053 9.01 265,355 23,504 8.86
Cash and due from banks........ 12,679 20,157
Premises and equipment, net.... 5,860 7,120
Loan and lease loss
allowance.................... (2,312) (2,626)
Other assets................... 12,313 14,509
-------- --------
Total assets............. $251,095 $304,515
======== ========
Interest-bearing liabilities:
Interest-bearing checking and
savings accounts........... $ 66,153 1,516 2.29% $ 72,594 1,439 1.98%
Time deposit and IRA
accounts................... 100,072 5,457 5.45 114,633 6,126 5.34
Borrowed funds............... 828 51 6.16 3,003 177 5.89
-------- ------- ----- -------- ------- -----
Total interest-bearing
liabilities............ 167,053 7,024 4.20 190,230 7,742 4.07
Non-interest-bearing
deposits..................... 59,050 83,965
Other liabilities.............. 3,694 4,883
-------- --------
Total liabilities........ 229,797 279,078
Stockholders' equity........... 21,298 25,437
-------- --------
Total liabilities and
stockholders' equity... $251,095 $304,515
======== ========
Net interest income............ $13,029 $15,762
======= =======
Net interest spread............ 4.81% 4.79%
===== =====
Average yield on average
earning assets(2)............ 9.01% 8.86%
===== =====
Interest expense to average
earning assets(1)............ 3.16% 2.92%
===== =====
Net interest margin(4)......... 5.85% 5.94%
===== =====

<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1999(1)
---------------------------------
INTEREST AVERAGE
AVERAGE INCOME YIELDS OR
BALANCE OR EXPENSE RATE
-------- ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest-earning assets:
Loans and leases............. $198,561 $14,136 9.52%
Investment securities:
Taxable securities......... 59,137 2,308 5.22
Nontaxable securities(2)... 15,813 631 5.34
Interest-earning balances due
from banks................. 2,263 73 4.31
Federal funds sold........... 21,198 696 4.39
-------- ------- ----
Total interest-earning
assets(3).............. 296,972 17,844 8.03
Cash and due from banks........ 25,302
Premises and equipment, net.... 8,544
Loan and lease loss
allowance.................... (3,166)
Other assets................... 15,027
--------
Total assets............. $342,679
========
Interest-bearing liabilities:
Interest-bearing checking and
savings accounts........... $ 75,546 955 1.69%
Time deposit and IRA
accounts................... 123,112 4,445 4.83
Borrowed funds............... 4,487 235 7.00
-------- ------- ----
Total interest-bearing
liabilities............ 203,145 5,635 3.71
Non-interest-bearing
deposits..................... 103,433
Other liabilities.............. 6,196
--------
Total liabilities........ 312,774
Stockholders' equity........... 29,905
--------
Total liabilities and
stockholders' equity... $342,679
========
Net interest income............ $12,209
=======
Net interest spread............ 4.33%
====
Average yield on average
earning assets(2)............ 8.03%
====
Interest expense to average
earning assets(1)............ 2.54%
====
Net interest margin(4)......... 5.50%
====
</TABLE>

- -------------------------
(1) Average yields and rates for the nine months ended September 30, 1999, have
been annualized.

(2) Tax-exempt income has not been adjusted to its tax-equivalent basis.

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

(4) Net interest margin is computed by dividing net interest income by total
average earning assets.
<PAGE> 30

Analysis of Changes in Interest Differential

The following table shows the unaudited dollar amount of the increase
(decrease) in Humboldt Bancorp's net interest income and expense and attributes
such dollar amounts to changes in volume as well as changes in rates. Rate and
volume variances have been allocated proportionally between rate and volume
changes.

<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1997 DECEMBER 31, 1998 SEPTEMBER 30, 1999
OVER 1996 OVER 1997 OVER SEPTEMBER 30, 1998
--------------------------- ---------------------------- --------------------------
INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO INCREASE (DECREASE) DUE TO
--------------------------- ---------------------------- --------------------------
VOLUME RATE TOTAL VOLUME RATE TOTAL VOLUME RATE TOTAL
------- ----- ------- ------- ------ ------- ------ ------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income attributable to:
Loans and leases............... $1,842 $346 $2,188 $2,451 $ 350 $2,801 $2,171 $(2,035) $ 136
Investment securities.......... 976 10 986 1,220 (516) 704 (103) (197) (300)
Balance due from banks......... 63 16 79 13 33 46 (47) (12) (59)
Federal funds sold............. 213 25 238 (98) (2) (100) 454 (176) 278
------ ---- ------ ------ ----- ------ ------ ------- -----
Total increase (decrease).... 3,094 397 3,491 3,586 (135) 3,451 2,475 (2,420) 55
------ ---- ------ ------ ----- ------ ------ ------- -----
Interest expense attributable to:
Now and Super Now.............. 29 (2) 27 28 (11) 17 13 (36) (23)
Savings........................ 73 (29) 44 19 -- 19 14 (3) 11
Money market................... 114 87 201 88 (201) (113) (8) (146) (154)
Time deposits.................. 1,106 95 1,201 795 (126) 669 335 (522) (187)
Borrowed funds................. 2 -- 2 174 (48) 126 85 48 133
------ ---- ------ ------ ----- ------ ------ ------- -----
Total increase (decrease).... 1,324 151 1,475 1,104 (386) 718 439 (659) (220)
------ ---- ------ ------ ----- ------ ------ ------- -----
Total change in net
interest................... $1,770 $246 $2,016 $2,482 $ 251 $2,733 $2,036 $(1,761) $ 275
====== ==== ====== ====== ===== ====== ====== ======= =====
</TABLE>

Net interest income for the nine months ended September 30, 1999, was $12.2
million, an increase of $275,000 over the corresponding period in 1998. The
increase in net interest income is attributable to a increase of $55,000 in
income earned from interest-earning assets and a decrease of $220,000 in expense
from interest-bearing liabilities. Interest expense decreased 5.1% to $5.6
million for the nine months ended September 30, 1999, compared to $5.9 million
for the corresponding period in 1998. The decrease in interest expense was
primarily a result of falling interest rates.

Total interest-earning assets averaged $297.0 million for the nine months
ended September 30, 1999, compared to $265.4 million at year end December 31,
1998. Most of the increase was due to an increase in loans. An increase in
federal funds was offset by a decrease in investment securities. The average
yield on interest-earning assets on certain types of investments decreased to
8.0% during the first nine months of 1999, compared to 8.9% at year end December
31, 1998.

Interest-bearing liabilities averaged $203.1 million during the first nine
months of 1999 compared to $190.2 million at year end December 31, 1998. The
average cost of these liabilities decreased in the first nine months of 1999 to
3.7% from 4.1% at year end December 31, 1998. The average cost of
interest-bearing liabilities decreased primarily as a result of declining
interest rates in 1999. Although further competitive pressure is expected in
expanding deposit relationships, management, as a matter of policy, does not
seek to attract high-priced, brokered deposits. In the near-term, management
does not anticipate Humboldt Bancorp's net interest margins will be
significantly impacted by competitive pressure for deposit accounts, although
there can be no assurance that this will not occur.

Net interest income for the year ended 1998 totaled $15.8 million compared
with $13.0 million for the year ended 1997. The increase in net interest income
was attributable to a significant increase in earning assets and a slight
increase in net interest yield. The yield on loans increased by 0.2%, over the
same period in 1997 and the cost of funds decreased 0.1%. The reference rate
used to price a
<PAGE> 31

significant portion of the loan portfolio was 7.75% at December 31, 1998 and
8.25% at September 30, 1999, and 8.50% at December 31, 1997. Loans comprised
66.9% of average earning assets at September 30, 1999, 66.0% at December 31,
1998, and 68.2% at December 31, 1997.

Loan fees included in net interest income were $690,000 for the nine months
ended September 30, 1999, $1.4 million for the year ended December 31, 1998, and
$729,000 for the year ended December 31, 1997.

Provision for Loan and Lease Losses

A reserve for loan and lease losses is maintained at a level that
management of Humboldt Bancorp considers adequate for losses that can be
reasonably anticipated. The reserve is increased by a charge to operating
expenses referred to as a provision for loan and lease losses, and is reduced by
the net loan that is charged-off. See "-- Loan Losses and Recoveries" for a
discussion of reserves and net loan charge-offs and a table summarizing the
changes in the reserve for loan and lease losses. The provision for loan and
lease losses does not contain charges related to the activities of the Merchant
Bankcard Department since merchant bankcard accounts are not reflected as loans,
and Merchant Bankcard Department's reserves do not constitute loan reserves.

For the nine months ended September 30, 1999, management charged $697,000
to Humboldt Bancorp's provision for loan and lease losses compared to $1.5
million for the nine months ended September 30, 1998. This was a 53.5% decrease
from the prior year. The decrease in the provision for loan and lease losses was
directly related to a decline in anticipated credit card charge-offs. Credit
card charge-offs for the nine months ended September 30, 1999, were $402,000
compared to $768,000 for the same period ended September 30, 1998.

For the years ended December 31, 1998, 1997 and 1996, management charged
$2.1 million, $773,000, and $533,000, respectively, to Humboldt Bancorp's
provision for loan and lease losses. The ratio of the reserve for loan and lease
losses to total loans and leases at December 31, 1998, 1997, and 1996, equaled
1.7%, 1.5%, and 1.5%, respectively. The increase in the provision from 1997 to
1998 is attributable to an increase in loans originated, an increase in credit
card charge-offs, and an increase in charge-offs in the Lease Finance
Department. The increase in the provision from 1996 to 1997 was due to an
increase in loans originated and to an increase in credit card charge-offs.
<PAGE> 32

Non-Interest Income

The following table sets forth components of Humboldt Bancorp's
non-interest income:

<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------- ----------------
1996 1997 1998 1998 1999
------ ------ ------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Fees and other income:
Merchant Bankcard services................ $2,508 $3,906 $ 6,177 $4,106 $ 9,175
Lease Finance Department (residuals and
rentals)............................... 752 1,306 1,575 1,379 1,177
Issuing Bankcard (Credit Card) services... 169 778 1,019 793 317
Fees for customer services................ 287 291 346 96 244
Earnings on life insurance................ 142 195 106 80 114
Loan and lease servicing fees............. 370 346 87 82 216
Other..................................... 57 89 421 279 487
------ ------ ------- ------ -------
Total fees and other income............ 4,285 6,911 9,731 6,815 11,730
Service charges on deposit accounts......... 709 1,300 2,097 1,543 1,806
Net gain (loss) on sale of loans............ 75 (204) 645 251 349
Net investment securities gains (losses).... 678 102 -- -- (93)
------ ------ ------- ------ -------
Total non-interest income.............. $5,747 $8,109 $12,473 $8,609 $13,792
====== ====== ======= ====== =======
</TABLE>

Non-interest income is primarily derived from Merchant Bankcard fees,
services charges on deposit accounts, Lease Finance Department lease residuals
and rentals, and Issuing Bankcard (Credit Card) fees. During the past three
fiscal years, Humboldt Bank's Merchant Bankcard Department has increased in
importance to Humboldt Bank's revenues. Humboldt Bank offers merchant bankcard
services to a variety of merchants located throughout the United States,
including first time merchants and small to medium-sized merchants in the
retail, telephone, mail order and Internet commerce industries. In general,
merchant bankcard services involve collecting funds for, and crediting the
accounts of, merchants for sales of merchandise and services to credit card
customers. For its services, Humboldt Bank receives a service fee and other
processing fees. Also, at September 30, 1999, and as of December 31, 1998, 1997,
and 1996, Humboldt Bank held merchant reserves primarily in non-interest bearing
accounts of $56.8 million, $47.0 million, $33.0 million, and $21.3 million,
respectively. See "Business of Humboldt Bancorp -- Merchant Bankcard."

During 1996, Humboldt Bank actively pursued credit card income through
nationwide secured and unsecured credit card programs. In early 1997, this
strategy was abandoned due to a perceived increase in credit risk and extreme
competition from major credit card issuers. Currently, management estimates that
at present levels of credit card receivables, Humboldt Bank makes a modest
monthly profit net of service expenses and write-offs. Therefore, while Humboldt
Bank intends to continue credit card lending to its customer base, there are no
further plans to solicit credit card business beyond its market areas.

Non-interest income increased $5.2 million, or 60.5% for the nine-month
period ended September 30, 1999, compared to the nine months ended September 30,
1998. The principal reason for this increase was income generated by Merchant
Bankcard operations. During the first nine months of 1999, Merchant Bankcard
operations generated $9.2 million in income compared to $4.1 million for the
same period in 1998. The increase was also the result of increasing deposit
volumes and related service charges. The remainder of the increase in
non-interest income for the
<PAGE> 33

nine months ended September 30, 1999, compared to the same period in 1998, is
primarily attributable to service charges and fees for loan and lease servicing
fees.

Non-interest income for 1998 totaled $12.5 million, an increase of $4.4
million or 54.3% from $8.1 million earned in 1997. The increases for the year
ended 1998, compared to the year ended 1997, are attributable primarily to the
activities of the Merchant Bankcard, and to a lesser extent, the activities of
the Lease Finance and Issuing Bankcard (Credit Card) Departments, plus an
increase in service charges on deposit accounts. The increase in gain on sale of
loans is attributable in part to selling some portfolio loans at a gain. The
decrease in gain on sale of investments is attributable to fact that no
investments were sold in 1998. Service charges on deposit accounts increased
$797,000 or 61.3%, fees and other income increased $2.8 million or 40.6%, and
all other non-interest income increased $747,000 or 732.4%.

Non-interest income for the year ended 1997 totaled $8.1 million, an
increase of $2.4 million or 42.1% from $5.7 million earned for the year ended
1996. The increases are attributable primarily to the activities of the Merchant
Bankcard, Lease Finance, and Issuing Bankcard (Credit Card) Departments, plus an
increase in service charges on deposit accounts. Service charges on deposit
accounts increased $591,000 or 83.4%, fees and other income increased $2.6
million or 60.5%, net investment securities gain/loss decreased by $576,000 or
85.0%, and gain on sale of loans decreased by $279,000 or 372.0% from the prior
year. The decrease in gain on sale of loans is attributable in part to selling
some portfolio loans at a loss. The decrease in gain on sale of investments is
attributable to selling more investments in 1996 to fund loans than in 1997.

Non-Interest Expense

Non-interest expenses consist principally of employees' salaries and
benefits, Merchant Bankcard expenses, and fixed asset (occupancy and equipment)
expenses. Non-interest expense increased $6.1 million, or 42.1%, to $20.6
million for the nine months ended September 30, 1999, compared to $14.5 million
in the corresponding period of 1998. This was due to an increase in Merchant
Bankcard operation expense of $2.0 million, as well as increases in other key
operating costs such as salary and benefits, primarily relating to the increase
in personnel. Humboldt Bancorp's investments in new and expanded technology to
support internal services, to ensure Year 2000 compliance, and to provide
additional technology-based products for Humboldt Bancorp's customers, also
resulted in expense increases.

Non-interest expense for the year ended 1998 totaled $19.6 million, an
increase of $4.1 million or 26.5% from the year ended 1997. Salaries and
employee benefits represented the single largest component of non-interest
expense: $9.2 million or 46.7% in 1998 and $6.8 million or 43.9% in 1997. Full
time equivalent employees numbered 250, 209 and 175 on December 31, 1998, 1997,
and 1996, respectively. Non-interest expense for the year ended 1997 totaled
$15.5 million, an increase of $4.2 million or 37.2% from the year ended 1996.
Salaries and employee benefits represented the single largest component of
non-interest expense: $6.8 million or 43.9% in 1997, and $5.6 million or 49.4%
in 1996.

Fixed assets expense increased $245,000 or 9.9% to $2.7 million for the
year ended 1998. This increase can be attributed to increased maintenance and
repairs on older equipment, and increased rental expense, partially offset by
increased rental income. Fixed assets expense increased $674,000 or 37.6% to
$2.5 million in 1997. This increase can be in part attributable to depreciation
expense related to the purchase of an in-house computer system, a local area
network and a wide area network as well as the purchase of furniture and
fixtures and leasehold improvements at the Garberville Branch, the Merchant
Bankcard and Issuing Bankcard (Credit Card) Departments at 605 K Street, Eureka,
California, the Cashiers Department at 555 H Street, Eureka, California, and
<PAGE> 34

increased maintenance and repairs on older equipment. Humboldt Bancorp's fixed
assets expense is anticipated to increase in 1999 and 2000 due to the planned
opening of a new headquarters; a new branch; the commencement of operations at
the Capitol Thrift branches; and the acquisition of the two former CalFed
branches located in Ukiah and Eureka.

Other expenses (excluding salaries and employee benefits and fixed assets),
increased $1.5 million or 24.2% in 1998 from 1997, and $2.3 million or 59.0% in
1997 from 1996, primarily due to the Merchant Bankcard program in 1998 and the
Issuing Bankcard (Credit Card) program in 1997.

The following table summarizes the significant components and percentages
of non-interest expense for the years ended December 31, 1996, 1997, 1998 and
the nine months ended September 30, 1998 and 1999:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------------------------ -----------------------------------
1996 1997 1998 1998 1999
---------------- ---------------- ---------------- ---------------- ----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Salaries and employee
benefits.................... $ 5,592 49.38% $ 6,806 43.92% $ 9,151 46.74% $ 6,763 46.73% $ 8,764 42.59%
Net occupancy and equipment
expense..................... 1,792 15.82 2,466 15.91 2,711 13.85 1,962 13.55 2,092 10.17
Merchant Bankcard
expenses(1)................. 434 3.83 822 5.30 2,665 13.61 1,759 12.16 5,087 24.72
Professional services......... 693 6.12 1,342 8.66 1,123 5.74 951 6.57 984 4.78
Issuing Bankcard expenses..... 170 1.50 1,021 6.59 346 1.77 263 1.82 202 0.98
Stationery, supplies and
postage..................... 542 4.79 887 5.72 884 4.52 755 5.22 788 3.83
Intangible expense............ 372 3.28 426 2.75 372 1.90 279 1.93 264 1.28
FDIC and other insurance...... 480 4.24 164 1.06 186 0.95 142 0.98 160 0.78
Advertising expenses.......... 235 2.08 265 1.71 247 1.26 202 1.40 337 1.64
Business development.......... 129 1.14 242 1.56 249 1.27 214 1.48 253 1.23
Telephone and travel.......... 424 3.74 478 3.08 598 3.05 453 3.13 572 2.78
Data processing/ATM expense... 199 1.76 170 1.10 324 1.65 164 1.13 198 0.96
Other expenses................ 263 2.32 407 2.64 722 3.69 564 3.90 876 4.26
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total expenses.............. $11,325 100.00% $15,496 100.00% $19,578 100.00% $14,471 100.00% $20,577 100.00%
======= ====== ======= ====== ======= ====== ======= ====== ======= ======
</TABLE>

- -------------------------
(1) Merchant Bankcard expenses include merchant and proprietary related expenses
only. Salaries and employee benefits are included in salary and employee
benefits above.

Provision for Income Taxes

The provision for income taxes for the nine month period ended September
30, 1999, was $1.5 million representing an effective tax rate of 34.1%, compared
to $1.7 million, or 38.6% for the nine-month period ended September 30, 1998.

The provision for income taxes totaled $2.5 million for the year ended
1998, an increase of $906,000 or 56.2% from the year ended 1997, and in 1997
totaled $1.6 million, a decrease of $315,000 or 16.4% from 1996. The increase in
1998 and the decrease in 1997 in provision for income taxes was the result of
increased pre-tax income partially offset by Humboldt Bancorp taking advantage
of some deferred tax benefits. The 1998 effective tax rate of 38.5% and the 1997
effective tax rate of 33.1% on reported income was below the expected statutory
federal rate of 34.0% and the state franchise tax rate of 7.1% (net of the
federal benefit) principally because of exemptions for Enterprise Zone loans for
state tax purposes, exemptions for municipal obligations for federal purposes,
keyperson insurance, and other permanent differences.
<PAGE> 35

Investments

Humboldt Bancorp invests excess funds in a variety of instruments in order
to meet liquidity and profitability goals. A portion of available funds is
invested in liquid investments including overnight federal funds. The balance is
invested in investment securities including U.S. Treasury and Agency securities
such as CMOs, tax-exempt municipal bonds, corporate bonds, and Federal Home Loan
Bank and Federal National Mortgage Corporation stock.

At September 30, 1999, Humboldt Bancorp's portfolio of investment
securities market value totaled $106.2 million, an increase of $28.4 million
compared to its December 31, 1998, securities portfolio of $77.8 million,
representing an increase of 36.5% from the prior year-end.

The following table provides the book value of Humboldt Bancorp's portfolio
of investment securities as of December 31, 1996, 1997 and 1998, and September
30, 1999:

<TABLE>
<CAPTION>
AS OF
DECEMBER 31, AS OF
--------------------------- SEPTEMBER 30,
1996 1997 1998 1999
------- ------- ------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Investments available-for-sale:
U.S. Treasury and agencies...................... $ 4,058 $ 2,996 $ 3,000 $ 2,566
CMOs issued by U.S. agencies.................... 23,331 62,433 56,682 83,030
Obligations of political subdivisions........... 10,172 12,190 16,227 16,953
Corporate debt and other securities............. 1,755 1,286 1,062 3,505
------- ------- ------- --------
Total investment securities.................. $39,316 $78,905 $76,971 $106,054
======= ======= ======= ========
</TABLE>
<PAGE> 36

Investment securities at the dates indicated consisted of the following:

<TABLE>
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, 1997 DECEMBER 31, 1998 SEPTEMBER 30, 1999
---------------------------- ---------------------------- -----------------------------
APPROX. APPROX. APPROX.
AMORTIZED MARKET % AMORTIZED MARKET % AMORTIZED MARKET %
COST VALUE YIELD* COST VALUE YIELD* COST VALUE YIELD*
--------- ------- ------ --------- ------- ------ --------- -------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and agencies:
Three months or less........... $ -- $ -- --% $ 999 $ 1,000 6.04% $ 1,007 $ 1,006 4.63%
Three to twelve months......... -- -- -- 2,001 2,013 6.20 -- -- --
One to three years............. 2,996 3,007 6.15 -- -- -- 1,559 1,555 5.07
CMO issued by U.S. agencies:
Three months or less........... 769 771 9.00 1,398 1,348 9.08 624 624 6.69
Three to twelve months......... 8,960 9,048 8.08 11,384 11,384 4.16 13,609 13,660 7.30
One to three years............. 19,020 19,200 6.58 35,821 35,780 4.80 49,400 49,458 5.92
Three to five years............ 32,545 32,935 6.09 6,019 6,019 4.21 12,461 12,447 4.91
Five to fifteen years.......... 1,140 1,160 6.14 2,060 2,083 4.60 6,936 6,850 5.62
Obligations of political
subdivisions:
Three months or less........... -- -- -- 280 286 7.50 -- -- --
Three to twelve months......... 102 104 7.99 -- -- -- -- -- --
One to three years............. 283 292 7.45 235 243 7.75 487 500 9.07
Three to five years............ 1,179 1,226 8.07 1,238 1,281 8.20 601 637 8.10
Five to fifteen years.......... 6,016 6,381 7.82 8,324 8,920 7.75 11,181 11,302 7.31
Over fifteen years............. 4,610 4,768 7.67 6,150 6,380 7.06 4,684 4,645 7.02
Corporate debt and other
securities:
Three months or less........... 664 664 8.35 1,062 1,065 6.22 965 965 5.04
Three to twelve months......... 175 178 8.35 -- -- -- 627 627 5.96
Over fifteen years............. 446 446 6.00 -- -- -- 1,913 1,913 7.71
------- ------- ---- ------- ------- ---- -------- -------- ----
Total securities............. $78,905 $80,180 6.28% $76,971 $77,802 5.38% $106,054 $106,189 6.19%
======= ======= ==== ======= ======= ==== ======== ======== ====
</TABLE>

- -------------------------
* Weighted average yield is stated on a federal tax-equivalent basis of 34%, and
has been annualized, where appropriate.

At September 30, 1999, the book value of the following issuers' securities
exceeded ten percent of Humboldt Bancorp's capital.

<TABLE>
<CAPTION>
ISSUER BOOK VALUE MARKET VALUE
------ ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
FRMAC CMO's.......................................... $22,565,172 $22,512,214
FNMA CMO's........................................... $28,305,153 $28,323,708
GNMA CMO's........................................... $10,386,214 $10,302,239
FHLMC CMO's.......................................... $ 5,286,503 $ 5,370,873
SLMA CMO's........................................... $ 8,948,551 $ 8,971,884
</TABLE>

Humboldt Bancorp does not own securities of a single issuer whose aggregate
book value is in excess of its total equity.

Loans

Humboldt Bancorp concentrates its lending activities in real estate,
commercial, lease financed, credit card and consumer loans, made primarily to
individuals and businesses located in Northern California.

At September 30, 1999, Humboldt Bancorp had total net loans outstanding of
$203.1 million. This represented 54.0% of total consolidated deposits and 48.5%
of total consolidated assets of Humboldt Bancorp. At December 31, 1998, Humboldt
Bancorp had total net loans outstanding of
<PAGE> 37

$186.0 million. This represented 65.5% of total consolidated deposits and 58.1%
of total consolidated assets of Humboldt Bancorp. At December 31, 1997, Humboldt
Bancorp had total net loans outstanding of $157.5 million. This represented
61.7% of total consolidated deposits and 55.4% of total consolidated assets.

Types of Loans. The table below shows the composition of loan or type of
borrower at the dates indicated:

<TABLE>
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, 1994 DECEMBER 31, 1995 DECEMBER 31, 1996
-------------------- --------------------- ---------------------
TYPE OF LOAN AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
------------ ------- ---------- -------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Real estate-secured loans:
Construction................ $15,273 16.52% $ 15,874 13.79% $ 21,205 14.85%
Residential................. 16,514 17.86 23,036 20.01 31,519 22.07
Commercial and
agricultural............. 42,314 45.76 54,879 47.67 61,030 42.73
------- ------ -------- ------ -------- ------
Total real estate
loans.................. 74,101 80.14 93,789 81.47 113,754 79.65
Commercial.................... 13,950 15.09 16,284 14.15 20,559 14.39
Lease financing............... 4,226 4.57 3,974 3.45 3,168 2.22
Credit card and related
accounts.................... 618 0.67 1,203 1.05 2,021 1.42
Consumer...................... 1,389 1.50 2,192 1.90 2,508 1.76
Other......................... 91 0.10 159 0.14 3,725 2.60
------- ------ -------- ------ -------- ------
Total loans and leases... 94,375 102.07 117,601 102.16 145,735 102.04
Less:
Deferred loan fees.......... (582) (0.63) (616) (0.54) (765) (0.54)
Allowance for loan losses... (1,331) (1.44) (1,868) (1.62) (2,146) (1.50)
------- ------ -------- ------ -------- ------
Loans and lease
receivable, net........ $92,462 100.00% $115,117 100.00% $142,824 100.00%
======= ====== ======== ====== ======== ======
</TABLE>

<TABLE>
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, 1997 DECEMBER 31, 1998 SEPTEMBER 30, 1999
--------------------- --------------------- ---------------------
TYPE OF LOAN AMOUNT PERCENTAGE AMOUNT PERCENTAGE AMOUNT PERCENTAGE
------------ -------- ---------- -------- ---------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Real estate-secured loans:
Construction............... $ 20,165 12.80% $ 20,667 11.11% $ 22,997 11.32%
Residential................ 27,253 17.30 35,226 18.93 42,518 20.93
Commercial and
agricultural............ 65,772 41.76 80,197 43.11 91,842 45.23
-------- ------ -------- ------ -------- ------
Total real estate
loans................. 113,190 71.86 136,090 73.15 157,357 77.48
Commercial................... 28,091 17.83 33,981 18.27 35,523 17.49
Lease financing.............. 8,732 5.55 9,867 5.30 7,518 3.70
Credit card and related
accounts................... 7,062 4.48 5,672 3.05 3,563 1.75
Consumer..................... 2,440 1.55 2,110 1.13 1,930 0.95
Other........................ 1,177 0.75 2,097 1.13 1,301 0.64
-------- ------ -------- ------ -------- ------
Total loans and
leases................ 160,692 102.02 189,817 102.03 207,192 102.01
Less:
Deferred loan fees......... (809) (0.51) (724) (0.39) (855) (0.42)
Allowance for loan
losses.................. (2,371) (1.51) (3,055) (1.64) (3,239) (1.59)
-------- ------ -------- ------ -------- ------
Loans and lease
receivable, net....... $157,512 100.00% $186,038 100.00% $203,098 100.00%
======== ====== ======== ====== ======== ======
</TABLE>
<PAGE> 38

At September 30, 1999, and December 31, 1998, 1997, and 1996 Humboldt
Bancorp had no concentration of loans which exceeded 10% of total loans not
otherwise identified by the categories set forth above.

Real Estate -- Construction

Humboldt Bancorp makes loans to finance the construction of residential and
commercial properties and to finance land acquisition and development.
Construction and development loans are obtained principally through
solicitations by Humboldt Bancorp and through continued business from builders
and developers who have previously borrowed from Humboldt Bancorp. When the
total amount of a loan would otherwise exceed Humboldt Bancorp's legal lending
limit, Humboldt Bancorp sells participation interests to other financial
institutions to facilitate the extension of credit.

As of September 30, 1999, the breakdown of construction loans was as
follows:

<TABLE>
<S> <C>
Owner-Occupied Single Family Construction.................. $10,350,000
Owner-Occupied Commercial Construction..................... $10,247,000
Speculation Construction................................... $ 750,000
Acquisition/Development.................................... $ 1,650,000
</TABLE>

Humboldt Bancorp's owner-occupied single family construction loans
typically have a maturity of up to nine months and are secured by deeds of trust
and usually do not exceed 80% of the appraised value of the home to be built.
All owner-occupied single family construction borrowers have been pre-qualified
for long-term loans using Fannie Mae underwriting guidelines.

Humboldt Bancorp also makes loans to developers, primarily in its service
area, for the purpose of acquiring unimproved land and developing such land.
These loans typically have a maturity of 12 to 24 months; have a floating rate
tied to prime rate; usually do not exceed 75% of the appraised value; are
secured by a first deed of trust and, in the case of corporations, are
personally guaranteed. Loan commitment and origination fees of 1% to 2% are
usually charged.

All commercial construction loans are underwritten using the estimated cash
flow the secured real property would provide in the event of a default by the
borrower. A debt coverage ratio of 1.25:1 is required. In all cases, Humboldt
Bancorp pre-approves a long-term loan to pay off the construction loan.

Risks associated with real estate construction loans are generally
considered higher than risks associated with other forms of lending. Loan funds
are advanced upon the security of the project under construction, which is more
difficult to value prior to the completion of construction. Should a default
occur which results in foreclosure, Humboldt Bancorp could be adversely affected
in that it would have to control the project and attempt either to arrange for
completion of construction or to dispose of the unfinished project.

Humboldt Bancorp's underwriting criteria is designed to evaluate and
minimize the risk of each construction loan. A wide variety of factors are
carefully considered before originating a construction loan, including the
availability of permanent financing to the borrower (which may be provided by
Humboldt Bancorp at market rates); the reputation of the borrower and the
contractor; independent valuations and reviews of cost estimates;
preconstruction sale information and cash flow projections of the borrower. At
the time of Humboldt Bancorp's origination of a construction loan to a builder,
the builder often has a signed contract with a purchaser for the sale of the
to-be-constructed house, which, by assuring the builder of a repayment source,
lessens Humboldt Bancorp's underwriting risks on the construction loan. To
reduce the risks inherent in construction lending, Humboldt Bancorp limits the
number of properties which can be constructed on a "speculative" or unsold basis
by a
<PAGE> 39

builder at any one time to 2 to 4 houses and requires the borrower or its
principals personally to guarantee repayment of the loan. Moreover, Humboldt
Bancorp controls certain of the risks associated with construction lending by
requiring builders to submit itemized bills to Humboldt Bancorp, whereupon
Humboldt Bancorp disburses the builder's loan funds directly to the contractor
and subcontractors, rather than to the builder. For a contractor meeting
specific criteria, loan funds may be disbursed directly to the contractor.

Real Estate -- Owner-Occupied, Single-Family Residential

Humboldt Bancorp historically has been and continues to be an originator of
owner-occupied, single-family, residential real estate loans in its market area.
These residential loans as a percentage of total net loans outstanding were
20.9% at September 30, 1999, 18.9% at December 31, 1998, 17.3% at December 31,
1997, and 22.1% at December 31, 1996. The decrease in residential real estate
loans in 1998 and 1997 is attributable to the sale of portfolio loans. The
higher volume of residential real estate loans in 1999 is attributable to lower
rates at the beginning of 1999. Humboldt Bancorp also offers FHA and VA mortgage
loans in its market area, which are underwritten and closed by a correspondent
lender.

Humboldt Bancorp originates owner-occupied, single-family, residential
fixed-rate mortgage loans at competitive interest rates within its market area.
Generally, Humboldt Bancorp sells these loans in the secondary market. While
there were $.7 million of loans held for sale at September 30, 1999, there were
fixed-rate loans of $7.7 million for sale at December 31, 1998, $48,000 for sale
at December 31, 1997, and $63,000 for sale at December 31, 1996. These balances
are included in Real Estate -- Residential totals in the table above.

Humboldt Bancorp also offers adjustable-rate residential mortgage loans.
The adjustable-rate loans currently offered by Humboldt Bancorp have interest
rates which adjust every one, three or five years from the closing date of the
loan or on an annual basis commencing after an initial fixed-rate period of one,
three or five years in accordance with a designated index.

The retention of adjustable-rate loans in Humboldt Bancorp's portfolio
helps reduce Humboldt Bancorp's exposure to increases or decreases in prevailing
market interest rates. However, there are unquantifiable credit risks resulting
from potential increases in costs to borrowers in the event of upward repricing
of adjustable-rate loans. However, there can be no assurance that yields on
Humboldt Bancorp's adjustable-rate loans will fully adjust to compensate for
increases in Humboldt Bancorp's cost of funds.

Humboldt Bancorp evaluates both the borrower's ability to make principal
and interest payments and the value of the property that will secure the loan.
Humboldt Bancorp originates residential mortgage loans with loan-to-value ratios
of up to 95%. On any mortgage loan exceeding an 80% loan-to-value ratio at the
time of origination, however, Humboldt Bancorp requires private mortgage
insurance in an amount intended to reduce Humboldt Bancorp's exposure to 80% of
the appraised value of the underlying collateral.

Residential mortgage loan originations come from a number of sources,
including solicitations by Humboldt Bancorp, referrals by builders and real
estate brokers, existing borrowers and depositors, and walk-in customers. Loan
applications are accepted at all of Humboldt Bancorp's offices.

At September 30, 1999, Humboldt Bancorp had approximately $14.1 million in
owner-occupied home equity line of credit loans, representing approximately
6.94% of its net loan portfolio. Humboldt Bancorp's home equity lines of credit
have adjustable interest rates tied to the prime interest rate plus a margin.
Home equity lines of credit are secured by liens against owner-occupied,
residential real
<PAGE> 40

property. Home equity loans are generally limited so that the amount of such
loans, along with any senior indebtedness, does not exceed 80% of the value of
the real estate security.

Real Estate -- Commercial and Agricultural

Humboldt Bancorp's commercial real estate loan portfolio includes loans
secured by small apartment buildings, strip shopping centers, small office
buildings, farms and other business properties, generally located within
Humboldt Bancorp's primary market areas. Commercial and agricultural loans as a
percentage of total net loans outstanding were 45.2% at September 30, 1999,
43.1% at December 31, 1998, 41.8% at December 31, 1997, and 42.7% at December
31, 1996. Commercial and agricultural loans are secured by both commercial and
non-owner occupied property. The breakdown by type of property securing these
loans is as follows:

<TABLE>
<S> <C>
Commercial property......................................... 79%
Multi-family property....................................... 4%
Single-family residential non-owner occupied property....... 2%
Equity line of credit....................................... 15%
</TABLE>

Permanent commercial real estate loans have a maximum term of 10 years,
with 25-year amortization schedules being the norm. Interest rates on permanent
loans generally either adjust (subject, in some cases, to specified interest
rate caps) at 1- to 5-year intervals to specified spreads over the related
index. Commercial real estate loans are generally written in amounts up to 70%
of the appraised value of the property or sale price.

Commercial real estate loans generally present a higher level of risk than
loans secured by owner-occupied, single family residences. This greater risk is
due to several factors, including the concentration of principal in a limited
number of loans and borrowers, the effects of general economic conditions on
income-producing properties and the increased difficulty of evaluating and
monitoring these types of loans. Furthermore, the repayment of loans secured by
commercial real estate is typically dependent upon the successful operation of
the related real estate project.

Humboldt Bancorp entered into a number of SBA guaranteed loans and has
loans where SBA has a subordinate lien position. These loans are eligible for
sale on the secondary market. Humboldt Bancorp chose to sell SBA guaranteed
loans in 1998 but did not choose to sell these types of loans in 1997 or 1996.
Several SBA loans were sold in 1999.

Business Loans

Humboldt Bancorp's commercial loans consist of (i) loans secured by
commercial real estate and (ii) business loans which are not secured by real
estate or if secured by real estate, the principal source of repayment is
expected to be business income. Business loans as a percentage of total net
loans outstanding were 17.5% at September 30, 1999, 18.3% at December 31, 1998,
17.8% at December 31, 1997, and 14.4% at December 31, 1996. Business loans
include revolving lines of credit, working capital loans, equipment financing,
letters of credit and inventory financing.

In recent years, Humboldt Bancorp has emphasized business lending. Humboldt
Bancorp originates business loans to small and medium sized businesses in its
market area. Humboldt Bancorp's business borrowers are generally small
businesses engaged in manufacturing, distribution or retailing, or professionals
in healthcare, accounting and law. Business loans are generally made to finance
the purchase of inventory, new or used equipment or commercial vehicles and for
short-term working capital. Such loans generally are secured by equipment and
inventory, but unsecured loans
<PAGE> 41

may be granted. Business loans generally are made for terms of 5 years or less.
Generally, business loans are made in amounts ranging between $50,000 and
$300,000.

Humboldt Bancorp underwrites its business loans on the basis of the
borrower's cash flow and ability to service the debt from earnings rather than
on the basis of underlying collateral value, and Humboldt Bancorp seeks to
structure such loans to have more than one source of repayment. For loans with
maturities exceeding one year, Humboldt Bancorp requires that borrowers and
guarantors provide updated financial information at least annually throughout
the term of the loan.

Humboldt Bancorp's business loans may be structured as short-term loans,
term loans or as lines of credit. Short-term business loans are for periods of
12 months or less and are generally self-liquidating from asset conversion
cycles. Business term loans are generally made to finance the purchase of assets
and have maturities of five years or less. Business lines of credit are
typically made for the purpose of providing short-term working capital and are
usually approved with a term of 12 months and are reviewed at that time to see
if extension is warranted. Humboldt Bancorp also offers standby letters of
credit for its business borrowers.

Business loans are often larger and may involve greater risk than other
types of lending. Because payments on such loans are often dependent on
successful operation of the business involved, repayment of such loans may be
subject to a greater extent to adverse conditions in the economy. Humboldt
Bancorp seeks to minimize these risks through its underwriting guidelines, which
require that the loan be supported by adequate cash flow of the borrower,
profitability of the business, collateral and personal guarantees of the
individuals in the business. In addition, Humboldt Bancorp limits this type of
lending to its market area and to borrowers with which it has prior experience
or who are otherwise well known to Humboldt Bancorp.

Lease Financing Loans

Humboldt Bancorp makes lease financing loans to finance small ticket
leases, such as leases of credit card processing software, terminals, swipe
machines and related webpages. The dollar amount of each lease is under $2,500
and the term is approximately three to five years. Lease financing loans were
$7.5 million or 3.7% of total net loans outstanding at September 30, 1999, $9.9
million or 5.3% of total net loans outstanding at December 31, 1998, $8.7
million or 5.5% of total net loans outstanding at December 31, 1997, and $3.2
million or 2.2% of total net loans outstanding at December 31, 1996. The
increase in Humboldt Bancorp's lease financing loans in 1998 and 1997 was mostly
attributable to an increase in credit card equipment and leases acquired from
Humboldt Bancorp's joint venture subsidiary, Bancorp Financial Services. The
decrease in Humboldt Bancorp's lease financing loans in 1999 was caused by a
planned reduction in leases purchased from Bancorp Financial Services. However,
Humboldt Bancorp may continue in the future to purchase leases from Bancorp
Financial Services.

Credit Card and Related Accounts

Humboldt Bank offers credit card loans through its participation as a
Principal Member of Visa. Management believes that providing credit card
services helps Humboldt Bank remain competitive by offering customers an
additional service.

During 1996, Humboldt Bank began to actively pursue credit card income
through nationwide secured and unsecured credit card programs. In early 1997,
this strategy was abandoned due to a perceived increase in credit risk and
extreme competition from major credit card issuers. Currently, management
estimates that at present levels of credit card receivables, Humboldt Bank makes
a modest monthly profit net of service expenses and write-offs. Therefore, while
Humboldt Bank
<PAGE> 42

intends to continue credit card lending to its customer base, there are no
further plans to solicit credit card business beyond its market areas. Credit
card loans were $3.6 million at September 30, 1999, $5.7 million at December 31,
1998, $7.1 million at December 31, 1997, and $2.0 million at December 31, 1996.
Credit card loans as a percentage of total net loans outstanding were 1.8% at
September 30, 1999, 3.1% at December 31, 1998, 4.5% at December 31, 1997, and
1.4% at December 31, 1996. The rate currently charged by Humboldt Bank on its
credit card loans ranges from 13.9% to 19.8%, and Humboldt Bank is permitted to
change the interest rate on 30 days notice. Processing of bills and payments is
contracted to an outside service. At September 30, 1999, Humboldt Bank had a
commitment to fund an aggregate of $9.5 million of credit card loans, which
represented the aggregate credit limit on credit cards.

Consumer Loans

The consumer loans originated by Humboldt Bancorp include automobile loans
and miscellaneous other consumer loans, including unsecured loans. Consumer
loans as a percentage of total net loans outstanding were 1.0% at September 30,
1999, 1.1% at December 31, 1998, 1.6% at December 31, 1997, and 1.7% at December
31, 1996. Humboldt Bancorp has recently centralized its consumer loan process,
and plans to continue to expand this type of loan within its market area.

Loan Servicing

Humboldt Bank sells the majority of the mortgages and some of the Small
Business Administration loans it originates to institutional investors. However,
it retains the servicing on these loans in order to generate ongoing revenues.
Humboldt Bank's servicing portfolio in which it has sold ownership but retains
the servicing was $158.0 million and $144.5 million at September 30, 1999, and
December 31, 1998, respectively.

Loan servicing includes (i) collecting and remitting loan payments, (ii)
accounting for principal and interest, (iii) holding escrow and impound funds
for payment of taxes and insurance, (iv) making inspections as required of the
mortgage premises, (v) collecting amounts from delinquent mortgages, (vi)
supervising foreclosures in the event of unremedied defaults, and (vii)
generally administering the loans for investors to whom they have been sold.

Humboldt Bank's fees for servicing mortgage loans range generally from
.250% to .375% per annum on the declining principal balances of the loans. The
average service fee collected by Humboldt Bank was .250% for the nine months
ended September 30, 1999, and .250% for the year ended December 31, 1998.
Servicing fees are collected and retained by Humboldt Bank out of monthly
mortgage payments. Humboldt Bank's servicing portfolio can be reduced by normal
amortization and prepayment or liquidation of outstanding loans. Approximately
90% of the loans serviced by Humboldt Bank have outstanding balances of greater
than $100,000, and approximately 10% are adjustable rate mortgages.

Humboldt Bank accounts for revenue from the sale of loans where servicing
is retained in conformity with the requirements of Statements of Financial
Accounting Standards No. 65 and the Financial Accounting Standards Board
Emerging Issues Task Force Issue No. 88-11. Gains and losses are recognized at
the time of sale by comparing sales price with carrying value. A premium results
when the interest rate on the loan, adjusted for a normal service fee, exceeds
the pass-through yield to the buyer.

In general, the value of Humboldt Bank's loan servicing portfolio may be
adversely affected as mortgage interest rates decline and loan prepayments
increase. This would also decrease income generated from Humboldt Bank's loan
servicing portfolio. This negative effect on Humboldt Bank's
<PAGE> 43

income attributable to existing servicing may be offset somewhat by a rise in
origination and servicing income attributable to new loan originations, which
historically have increased in periods of low mortgage interest rates.

The following table sets forth the dollar amount of Humboldt Bank's
mortgage loan servicing portfolio. Although Humboldt Bank intends to continue to
increase its servicing portfolio, increases will depend on market conditions and
the availability of capital.

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1999
-------------- --------------
<S> <C> <C>
Mortgage Loan Servicing Portfolio:
Loans originated by Humboldt Bank and sold............. $142.1 Million $158.0 Million
Loans originated by Humboldt Bank but awaiting
funding............................................. $ 7.7 Million $ .7 Million
</TABLE>

Humboldt Bank also services a portfolio of SBA loans which is anticipated
to increase during 1999. As of September 30, 1999, SBA Loans originated and
serviced by Humboldt Bank were $2.9 million, and as of December 31, 1998, were
$2.4 million.

For the most part, the Small Business Administration loans are tied to the
prime rate and as a result there are no early payoffs as a result of declining
rates such as with real estate loans.

Maturities of Loans and Leases. The following table shows the maturity
distribution of Humboldt Bancorp's loan portfolio with principal balances of
loans indicated by both fixed and floating rate categories.

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998 AS OF SEPTEMBER 30, 1999
----------------------------------------------------- -----------------------------------------------------
DUE IN ONE DUE AFTER ONE DUE IN ONE DUE AFTER ONE
YEAR OR YEAR THROUGH DUE AFTER YEAR OR YEAR THROUGH DUE AFTER
LESS FIVE YEARS FIVE YEARS TOTAL LOANS LESS FIVE YEARS FIVE YEARS TOTAL LOANS
---------- ------------- ---------- ----------- ---------- ------------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate........... $14,114 $34,153 $31,795 $ 80,062 $11,261 $32,472 $34,420 $ 78,153
Variable rate........ 81,327 26,388 2,040 109,755 86,844 37,180 5,015 129,039
------- ------- ------- -------- ------- ------- ------- --------
Total loans........ $95,441 $60,541 $33,835 $189,817 $98,105 $69,652 $39,435 $207,192
======= ======= ======= ======== ======= ======= ======= ========
</TABLE>

Humboldt Bancorp's renewal policy is that all maturing loans are reviewed
on a case-by-case basis, new financial statements are requested from the
borrower and an in-depth credit analysis is performed after which the loan may
be extended, renewed, restructured or demand made for payment in full depending
upon the circumstances.

Loan Losses and Recoveries

Humboldt Bancorp maintains a reserve for loan and lease losses at a level
that management of Humboldt Bancorp considers adequate for losses that can be
reasonably anticipated. Humboldt Bancorp's reserve for loan and lease losses was
$3.2 million and $2.8 million at September 30, 1999 and 1998, respectively.
Humboldt Bancorp's reserve for loan and lease losses was $3.1, $2.4, $2.1, $1.9,
and $1.3 million at December 31, 1998, 1997, 1996, 1995 and 1994, respectively.

The Issuing Bankcard (Credit Card) Department's reserve also constitutes a
portion of Humboldt Bancorp's reserves. The Issuing Bankcard (Credit Card)
Department was established in 1996. The Issuing Bankcard (Credit Card)
Department's reserve at September 30, 1999 was $200,000 or 6.3% of total
reserves, and at September 30, 1998 was $300,000 or 10.7%, of total reserves.
The Issuing Bankcard (Credit Card) Department's reserve at December 31, 1996 was
$100,000 or 4.8%, at December 31, 1997 was $300,000 or 12.5%, and at December
31, 1998 was $300,000 or 9.7%, of total reserves. The increase in Issuing
Bankcard (Credit Card) Department's
<PAGE> 44

reserves from 1996 to 1998 both as to amount and as a percentage of total
reserves is attributable to the Issuing Bankcard (Credit Card) Department's
increase in the number of credit card accounts. Since early 1997, Humboldt Bank
has focused on its customer base for issuing Humboldt Bank credit cards.
Accordingly, reserves for the Issuing Bankcard (Credit Card) Department at
September 30, 1999 have decreased from reserves at September 30, 1998 and
December 31, 1998.

The Merchant Bankcard's Department's reserves are separately accounted for
as a liability of Humboldt Bank on its financial statement since there are no
loans associated with such reserves. See "-- Provision for Loan and Lease
Losses," and "Business of Humboldt Bancorp -- Merchant Bankcard."

The adequacy of the reserve for loan losses is measured in the context of
several key ratios and factors discussed below. The reserve is increased by a
charge to operating expenses and is reduced by net charge-offs which are loans
actually removed from the consolidated balance sheet after netting out
recoveries on previously charged-off assets. Humboldt Bancorp's policy is to
charge-off loans when, in management's opinion, the loan or a portion thereof is
deemed uncollectible, although concerted efforts are made to maximize recovery.
Humboldt Bancorp's historical net loan losses or recoveries stem from Humboldt
Bancorp's underwriting and collection practices, and the quality of the loan
portfolio.

During the first nine months of 1999, loan charge-offs net of recoveries
were $513,000, compared to $1,133,000 during the nine months ended September 30,
1998, a 54.7% decrease in loan charge-offs net of recoveries. This decrease is
directly related to the planned reduction in credit card receivables through the
sale of certain credit card portfolios and the cessation of new credit card
issuing programs. Charge-offs recorded for the nine months ended September 30,
1999 were consistent with Humboldt Bancorp's historical experience in view of
the growth in its loan portfolio. Management expects its current loan
underwriting, oversight and collection policies to promote high quality loans
and limit loan losses. These policies include aggressive action to limit credit
losses by lowering lending authorities, when and if appropriate. As part of
these policies, Humboldt Bancorp has hired additional staff to support credit
administration functions. Therefore, management believes its charge-off and
recovery experience for the year 2000 will be comparable to that of prior years.

For the years ending December 31, 1998, 1997, 1996, 1995 and 1994, loan
charge-offs net of recoveries were $1.4 million, $548,000, $255,000, $255,000
and $310,000, respectively. These amounts represented 0.8%, 0.4%, 0.2%, 0.3%,
and 0.3%, respectively, of average loans outstanding. The increase from 1997 to
1998 is attributable to credit cards, lease and real estate. The increase from
1996 to 1997 is attributable to credit cards.
<PAGE> 45

The following table summarizes the changes in the reserve for loan and
lease losses for the periods shown:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------------------------- -------------------
1994 1995 1996 1997 1998 1998 1999
------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Reserve for loan and lease losses balance,
beginning of period...................... $ 858 $ 1,331 $ 1,868 $ 2,146 $ 2,371 $ 2,371 $ 3,055
------- -------- -------- -------- -------- -------- --------
Loans and leases charged off:
Real estate.............................. -- -- (46) -- (141) (130) (67)
Commercial............................... -- (11) (122) (193) (191) (161) (216)
Consumer................................. (20) (23) (29) (11) (25) (8) (29)
Lease financing.......................... (363) (254) (132) (124) (316) (211) (108)
Credit card and related accounts......... -- -- -- (475) (956) (768) (402)
Other.................................... -- (30) (45) (7) (5) -- --
------- -------- -------- -------- -------- -------- --------
Total loans and leases charged off..... (383) (318) (374) (810) (1,634) (1,278) (822)
Recoveries:
Real estate.............................. -- -- -- -- -- -- 98
Commercial............................... 7 9 78 129 54 54 7
Consumer................................. 4 4 5 9 8 6 5
Lease financing.......................... 62 49 34 34 24 12 9
Credit card and related accounts......... -- -- -- 87 105 73 190
Other.................................... -- 1 2 3 3 -- --
------- -------- -------- -------- -------- -------- --------
Total recoveries....................... 73 63 119 262 194 145 309
------- -------- -------- -------- -------- -------- --------
Net (charge-offs) recoveries............... (310) (255) (255) (548) (1,440) (1,133) (513)
Provision charged to operations............ 783 792 533 773 2,124 1,541 697
------- -------- -------- -------- -------- -------- --------
Reserve for loan and lease losses balance,
end of period............................ $ 1,331 $ 1,868 $ 2,146 $ 2,371 $ 3,055 $ 2,779 $ 3,239
======= ======== ======== ======== ======== ======== ========
Loans and leases outstanding at end of
period, net of unearned interest
income................................... $93,793 $116,985 $144,970 $159,883 $189,093 $183,625 $206,337
======= ======== ======== ======== ======== ======== ========
Average loans and leases outstanding for
the period............................... $89,977 $102,931 $134,617 $151,695 $175,173 $171,067 $197,779
======= ======== ======== ======== ======== ======== ========
Ratio of net loans and leases charged off
(recovered) to average loans and leases
outstanding.............................. 0.34% 0.25% 0.19% 0.36% 0.82% 0.89% 0.35%
Ratio of reserve for loan and lease losses
to loans and leases at end of period..... 1.42% 1.60% 1.48% 1.48% 1.62% 1.51% 1.57%
</TABLE>

The adequacy of the reserve for loan losses is measured in the context of
several key ratios and factors including: (1) the ratio of the reserve to total
outstanding loans; (2) the ratio of total nonperforming loans to total loans;
and, (3) the ratio of net charge-offs (recoveries) to average loans outstanding.
Additional factors considered in establishing an appropriate reserve include a
careful assessment of the financial condition of the borrower; a realistic
determination of the value and adequacy of underlying collateral; the condition
of the local economy and the condition of the specific industry of the borrower;
comprehensive analysis of the levels and trends of loan categories; and a review
of delinquent and classified loans. Management's evaluation is based on a system
whereby each loan is "graded" at the time of origination, extension or renewal.
Each grade is assessed a risk factor, which is calculated to assess the adequacy
of the allowance for loan losses. Further, management considers other factors
including changes in the nature and volume of the loan portfolio, overall
portfolio quality, loan concentrations, trends in the level of delinquent and
classified loans, specific problem loans and commitments, and current and
anticipated economic conditions.

Since 1994, Humboldt Bancorp's ratio of the reserve for loan losses to
total loans has ranged from 1.4% to 1.6%. The amounts provided by these ratios
have been sufficient to fund Humboldt
<PAGE> 46

Bancorp's charge-offs, which have not been historically significant, and to
provide for potential losses as the loan portfolio has grown. From 1994 through
September 30, 1999, nonperforming loans to total loans have ranged from a low of
0.3% to a high of 1.1%. For the five years ended December 31, 1998, net
charge-offs ranged from .2% to .8% of average loans.

On a monthly basis, management considers the factors that follow in
establishing Humboldt Bancorp's Allowance for Loan and Lease Losses (ALLL). The
results are reported to the board of directors on a quarterly basis.

- Management considers whether there have been any significant changes in
Humboldt Bancorp's policies and procedures, including underwriting
standards and collections, charge-offs, and recovery practices.

- Management keeps abreast of the local economic and business conditions
through the board of directors and various organizations.

- Management considers any major changes regarding the lending officers and
staff.

- Humboldt Bancorp obtains quarterly outside credit reviews for loan
write-ups and grade changes.

- The Loan Review/Compliance Department reviews a sampling of loans not
covered by the quarterly outside review and reports to the Chief Credit
Officer on a monthly basis.

- Management prepares concentration reports in which loans are segregated
to better manage the portfolios.

- On a limited basis, Humboldt Bancorp will extend the maturity of a loan
if it is awaiting current customer financial statements or for valid
reasons. Renewals and extensions are not granted for the sole purpose of
keeping a loan current.

- On a regular basis, management compares Humboldt Bancorp loan portfolios
to its peer group in various categories.

Non-Performing Assets

Humboldt Bancorp's policy is to recognize interest income on an accrual
basis unless the full collectibility of principal and interest is uncertain.
Loans that are delinquent 90 days or more, unless well secured and in the
process of collection, are placed on nonaccrual status on a cash basis and
previously accrued but uncollected interest is reversed against income.
Thereafter, income is recognized only as it is collected in cash. Collectibility
is determined by considering the borrower's financial condition, cash flow,
quality of management, the existence of collateral or guarantees and the state
of the local economy.
<PAGE> 47

The following table provides information with respect to all non-performing
assets.

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF
----------------------------------------------- SEPTEMBER 30,
1994 1995 1996 1997 1998 1999
------- ------- ------- ------- ------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Loans on nonaccrual status.............. $ 74 $ 619 $ 218 $ 838 $ 311 $ 955
Loans -- leases past due -- greater than
90 days............................... 363 261 159 843 241 161
Restructured loans...................... 73 75 -- 23 -- --
------- ------- ------- ------- ------- -------
Total nonperforming loans............. 510 955 377 1,704 552 1,116
Other real estate owned................. -- -- 233 148 175 --
------- ------- ------- ------- ------- -------
Total nonperforming assets............ $ 510 $ 955 $ 610 $ 1,852 $ 727 $ 1,116
======= ======= ======= ======= ======= =======
Allowance for loan losses............... $ 1,331 $ 1,868 $ 2,146 $ 2,371 $ 3,055 $ 3,239
Ratio of total nonperforming assets to
total assets.......................... 0.33% 0.49% 0.28% 0.65% 0.23% 0.27%
Ratio of total nonperforming loans to
total loans........................... 0.54% 0.81% 0.26% 1.06% 0.29% 0.54%
Ratio of allowance for loan losses to
total non-performing assets........... 260.98% 195.60% 351.80% 128.02% 420.22% 290.23%
</TABLE>

The increase in non-performing assets at September 30, 1999, compared to
December 31, 1998, is primarily due to an increase in loans on non-accrual
status and restructured loans offset by a decrease in loans and leases past due
90 days or more.

The decrease in non-performing assets at December 31, 1998, compared to
December 31, 1997, is primarily due to decreases in loans on non-accrual status,
restructured loans and in loans and leases past due 90 days or more offset by a
small increase in other real estate owned.

The increase in non-performing assets at December 31, 1997, compared to
December 31, 1996, is primarily due to increases in loans on non-accrual status,
restructured loans and in loans and leases past due 90 days or more offset by an
increase in other real estate owned.

The table below shows the gross interest income that would have been
recorded at September 30, 1999, and December 31, 1998, if these loans had been
current in accordance with their original terms and had been outstanding
throughout the period or since origination if new for part of the period; and
the amount of interest that was included in net income for the period. There
were no restructured loans 90 days past due at December 31, 1998, or at
September 30, 1999.

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1998 SEPTEMBER 30, 1999
------------------- -------------------
GROSS INTEREST GROSS INTEREST
INCOME EARNED INCOME EARNED
------- -------- ------- --------
<S> <C> <C> <C> <C>
Non-accrual loans............................... $56,269 $19,789 $42,458 $8,026
Other real estate owned......................... $15,300 $ -- $ 8,641 $ --
</TABLE>

Potential Problem Loans

At September 30, 1999 and December 31, 1998, there were no loans or other
interest bearing assets classified for regulatory purposes as loss, doubtful,
substandard or special mention that (i) represent or resulted from trends or
uncertainties which management anticipates could have a material impact on
future operating results, liquidity or capital resources, or (ii) represented
material
<PAGE> 48

credits or assets about which management had information that would cause
serious doubt as to the ability of the borrower to comply with the repayment
terms.

Deposits

The following table sets forth the average balances of Humboldt Bancorp's
interest-bearing deposits, interest expense, and average rates paid for the
periods indicated:
<TABLE>
<CAPTION>

YEAR ENDED DECEMBER 31, 1997 YEAR ENDED DECEMBER 31, 1998
---------------------------------------- ----------------------------------------
AVERAGE INTEREST AVERAGE AVERAGE INTEREST AVERAGE
ACTUAL BALANCE EXPENSE RATE ACTUAL BALANCE EXPENSE RATE
-------- -------- -------- ------- -------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Non-interest-bearing
deposits............... $ 70,767 $ 59,050 $ -- --% $ 96,884 $ 83,965 $ -- 0.00%
Interest-bearing
accounts:
Interest-bearing
checking............. 52,003 46,177 1,157 2.51 49,615 51,609 1,061 2.06
Savings................ 21,952 19,976 359 1.80 21,635 20,985 378 1.80
Time deposits.......... 110,464 100,072 5,457 5.45 115,833 114,633 6,126 5.34
-------- -------- ------ ---- -------- -------- ------ ----
Total
interest-bearing
accounts........... 184,419 166,225 6,973 4.19 187,083 187,227 7,565 4.04
-------- -------- ------ ---- -------- -------- ------ ----
Total deposits....... $255,186 $225,275 $6,973 3.10% $283,967 $271,192 $7,565 2.79%
======== ======== ====== ==== ======== ======== ====== ====

<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1999
----------------------------------------
AVERAGE INTEREST AVERAGE
ACTUAL BALANCE EXPENSE RATE
-------- -------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Non-interest-bearing
deposits............... $118,267 $103,433 $ -- --%
Interest-bearing
accounts:
Interest-bearing
checking............. 58,822 53,563 663 1.65
Savings................ 33,256 21,983 292 1.78
Time deposits.......... 165,470 123,112 4,445 4.83
-------- -------- ------ ----
Total
interest-bearing
accounts........... 257,548 198,658 5,400 3.63
-------- -------- ------ ----
Total deposits....... $375,815 $302,091 $5,400 2.39%
======== ======== ====== ====
</TABLE>

Total deposits increased from the year ended December 31, 1998, to the nine
months ended September 30, 1999, by $91.8 million, or 32.3%. The primary reason
for this increase is the purchase of two CalFed branches, with deposits totaling
$72.2 million. Management attributes the remaining increase to Humboldt
Bancorp's ongoing marketing efforts. Changes occurred in the four deposit
categories: non-interest-bearing deposits increased by 22.1%, interest-bearing
demand deposits increased by 18.5%, savings accounts increased by 54.2%, and
time deposits increased by 42.9%.

At December 31, 1998, total deposits were $284.0 million, an increase of
$28.8 million or 11.3% from total deposits of $255.2 million at December 31,
1997. Total deposits were $255.2 million, an increase of $62.6 million or 32.5%
from total deposits of $192.6 million at December 31, 1996. Deposit growth in
1998 was due primarily to internal growth and not as a result of acquisitions.
The growth in 1997 was the result of both internal growth and the acquisition of
the Garberville office.

Non-interest-bearing demand deposits continued to be a significant portion
of Humboldt Bancorp's deposit base. To the extent Humboldt Bancorp can fund
operations with these deposits, net interest spread, which is the difference
between interest income and interest expense, will improve. At September 30,
1999, non-interest bearing demand deposits accounted for 31.5% of total
deposits, down slightly from 34.1% as of December 31, 1998. In general, the
growth in non-interest-bearing demand accounts has been primarily from
acquisitions and our Merchant Bankcard operations. Merchant reserves are a
source of funds and are held in the event the merchant's customer returns a
purchased item and is charged-back with the return. See "Business of Humboldt
Bancorp -- Merchant Bankcard."

Interest-bearing deposits consist of money market, savings, and time
certificate accounts. Interest-bearing account balances tend to grow or decline
as Humboldt Bancorp adjusts its pricing and product strategies based on market
conditions, including competing deposit products. At September 30, 1999, total
interest-bearing deposit accounts were $257.5 million, an increase of $70.4
million, or 37.6%, from December 31, 1998. Interest-bearing demand accounts
increased $2.7 million, or 1.5%, from December 31, 1997 to 1998, and $42.3
million, or 29.7%, from 1996 to 1997.
<PAGE> 49

At September 30, 1999, time certificates of deposits in excess of $100,000
totaled $57.7 million, or 15.4% of total outstanding deposits, compared to $
46.4 million, or 16.3%, of total outstanding deposits at December 31, 1998,
$40.6 million, or 15.9%, of total outstanding deposits at December 31, 1997, and
$26.4 million, or 13.7%, of total outstanding deposits at December 31, 1996.
Humboldt Bancorp has never had brokered deposits and does not intend to seek
these deposits. All public-entity time certificates of deposit are from local
government agencies located in Humboldt and Trinity Counties.

The majority of certificates of deposit in denominations of $100,000 or
more in the past have tended to mature in less than one year, however,
management can give no assurance that this trend will continue in the future.

The following table sets forth, by time remaining to maturity, all time
certificates of deposit accounts outstanding at September 30, 1999.

<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1999
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Three months or less................................ $ 57,469
Over three through twelve months.................... 81,392
Over one year to three years........................ 24,803
Over three years.................................... 1,806
--------
Total............................................. $165,470
========
</TABLE>

Short-Term Borrowings

The following table sets forth certain information with respect to Humboldt
Bancorp's short-term borrowings as of December 31, 1996, 1997, and 1998, and
September 30, 1999.

<TABLE>
<CAPTION>
AS OF
DECEMBER 31, AS OF
------------------------- SEPTEMBER 30,
1996 1997 1998 1999
----- ------ ------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Amount outstanding at end of period............. $ 775 $1,761 $3,402 $4,638
Weighted average interest rate at end of
period........................................ 6.19% 6.18% 6.13% 6.80%
Maximum amount outstanding at any month-end and
during the year............................... $ 786 $1,774 $3,457 $4,688
Average amount outstanding during the period.... $ 784 $ 845 $3,003 $4,487
Average weighted interest rate during the
period........................................ 6.19% 6.19% 6.15% 7.00%
</TABLE>

Shareholders' Equity

Shareholders' equity increased $5.0 million during the first nine months of
1999. Shareholders' equity at September 30, 1999, was $32.8 million compared to
$27.8 million at December 31, 1998. This is an increase of $4.2 million or 17.8%
compared with $23.6 million at December 31, 1997, which was an increase of $4.0
million or 20.4% compared with the $19.6 million at December 31, 1996.

The increase in the nine months ended September 30, 1999 reflects net
income and comprehensive income of $2.8 million, $300,000 in exercised stock
options, and $1.9 million in stock purchases.
<PAGE> 50

Asset-Liability Management and Interest Rate Sensitivity

The operating income and net income of Humboldt Bancorp depend to a
substantial extent on "rate differentials," i.e., the difference between the
income Humboldt Bancorp receives from loans, securities and other earning
assets, and the interest expense it pays on deposits and other liabilities.
Interest income and interest expense are affected by general economic conditions
and by competition in the marketplace. Humboldt Bancorp's interest and pricing
strategies are driven by its asset-liability management analysis and by local
market conditions.

Humboldt Bancorp seeks to manage its assets and liabilities to generate a
stable level of earnings in response to changing interest rates and to manage
its interest rate risk. Humboldt Bancorp further strives to serve its
communities and customers through deployment of its resources on a corporate-
wide basis so that qualified loan demands may be funded wherever necessary in
its branch banking system. Asset/liability management involves managing the
relationship between interest rate sensitive assets and interest rate sensitive
liabilities.

The interest rate sensitivity of Humboldt Bancorp is measured over time and
is based on Humboldt Bancorp's ability to reprice its assets and liabilities.
The opportunity to reprice assets in the same dollar amounts and at the same
time as liabilities would minimize interest rate risk in any interest rate
environment. The difference between the amount of assets and liabilities
repriced at the same time is referred to as the "gap." This gap represents the
risk, or opportunity, in repricing. In general, if more assets than liabilities
are repriced at a given time in a rising rate environment, net interest income
would improve, and in a declining rate environment, net interest income would
deteriorate. If more liabilities than assets were repriced under the same
conditions, the opposite results would prevail. Humboldt Bancorp is asset
sensitive and its near term performance could be enhanced by rising rates and
negatively affected by falling rates due mainly to the significant amount of
earning assets tied to prime.

Interest Rate Risk. The table below shows the potential change in NIM
(before taxes) if rates change as of September 30, 1999. NIM is the "net
interest margin" which is the spread or difference between interest-earning
assets and interest-paying liabilities. Humboldt Bancorp's NIM tends to increase
if rates rise, and tends to decline if rates fall. The cause of this exposure is
due to Humboldt Bancorp's concentration of short-term and rate sensitive loans
as of September 30, 1999.

Economic Risk. Humboldt Bancorp also measures the potential change in the
net present value of Humboldt Bancorp's net existing assets and liabilities if
rates change (the "economic value of equity" or "EVE"). The table below also
shows the EVE. The EVE is determined by valuing Humboldt Bancorp assets and
liabilities as of September 30, 1999, using a present value cash flow
calculation as if Humboldt Bancorp is liquidated. The EVE declines when rates
increase because there are more fixed rate assets than liabilities. However,
Humboldt Bancorp's NIM earnings would also increase as rates increased (from the
interest rate risk) and this benefit would offset the decline in EVE.

<TABLE>
<CAPTION>
% CHANGE IN NIM
CHANGE IN NIM TO
(IN THOUSANDS SHAREHOLDER EQUITY
CHANGE IN INTEREST RATES PRE-TAX) (PRE-TAX) % OF EVE
------------------------ -------------- ------------------ --------
<S> <C> <C> <C>
+2%................................ $ 660 2.3% (9)%
+1%................................ $ 346 1.2% (5)%
- -1%................................ $(375) (1.3)% 5%
- -2%................................ $(783) (2.7)% 9%
</TABLE>
<PAGE> 51

The following table sets forth the repricing opportunities for the assets
and liabilities of Humboldt Bancorp at September 30, 1999. Assets and
liabilities are classified by the earliest possible repricing date or maturity,
whichever comes first.

<TABLE>
<CAPTION>
REPRICING IN
------------------------------------------------------------------
LESS THREE ONE FIVE YEARS
THAN THROUGH THROUGH THREE THROUGH OVER NON-
THREE TWELVE THREE THROUGH FIFTEEN FIFTEEN INTEREST
MONTHS MONTHS YEARS FIVE YEARS YEARS YEARS BEARING TOTAL
-------- -------- ------- ---------- ---------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Net Loans......................... $ 81,522 $ 15,642 $27,358 $42,292 $25,211 $ 14,312 $ -- $206,337
Investment Securities............. 1,630 14,287 51,513 13,083 20,065 4,645 -- 105,223
Federal Funds Sold................ 56,145 -- -- -- -- -- -- 56,145
FHLB Stock........................ -- -- -- -- -- -- 987 987
Interest-bearing deposits with
banks........................... 20 -- -- -- -- -- -- 20
Non-interest earning assets....... -- -- -- -- -- -- 50,455 50,455
-------- -------- ------- ------- ------- -------- -------- --------
Total Assets.................... $139,317 $ 29,929 $78,871 $55,375 $45,276 $ 18,957 $ 51,442 $419,167
======== ======== ======= ======= ======= ======== ======== ========
Liabilities:
Non-interest-bearing deposits..... $ -- $ -- $ -- $ -- $ -- $ -- $118,267 $118,267
Interest-bearing deposits......... 149,547 81,392 24,803 1,806 -- -- -- 257,548
Borrowings........................ 22 69 1,502 3,045 -- -- -- 4,638
Other liabilities................. -- -- -- -- -- -- 5,898 5,898
Stockholders' equity................ -- -- -- -- -- -- 32,816 32,816
-------- -------- ------- ------- ------- -------- -------- --------
Total liabilities and
stockholders' equity.......... $149,569 $ 81,461 $26,305 $ 4,851 $ -- $ -- $156,981 $419,167
======== ======== ======= ======= ======= ======== ======== ========
Interest rate sensitivity gap....... $(10,252) $(51,532) $52,566 $50,524 $45,276 $ 18,957
Cumulative interest rate sensitivity
gap............................... $(10,252) $(61,784) $(9,218) $41,306 $86,582 $105,539
</TABLE>

The net cumulative Gap position is slightly negative in three years or less
since more liabilities than assets appear to reprice during that time frame.
However, this exposure to increasing rates is mitigated by deposit rates which
are not expected to reprice rapidly in an increasing rate environment and a
higher than normal level of short-term cash (not included in rate sensitive
assets). Historically, Humboldt Bancorp's asset rates change more quickly than
deposit rates, and management feels Humboldt Bancorp's asset yields will change
more than cost of funds when rates change.

Although the cumulative Gap position appears slightly negative as of
September 30, 1999, management believes that Humboldt Bancorp is somewhat asset
sensitive and has relatively low interest rate risk. The net interest margin
should increase slightly when rates increase, and shrink somewhat when rates
fall. This interest rate risk is driven by concentration of rate sensitive
variable rate and short-term commercial loans, one of Humboldt Bancorp's major
business lines. Humboldt Bancorp does have a significant amount of fixed rate
loans to offset the impact from repricing of short-term loans. However, there
can be no assurance that fluctuations in interest rates will not have a material
adverse impact on Humboldt Bancorp.

Liquidity

Humboldt Bancorp's liquidity is primarily a reflection of Humboldt
Bancorp's ability to acquire funds to meet loan demand and deposit withdrawals
and to service other liabilities as they come due. Humboldt Bancorp has adopted
policies to maintain a relatively liquid position to enable it to respond to
changes in the financial environment and ensure sufficient funds are available
to meet those needs. Generally, Humboldt Bancorp's major sources of liquidity
are customer deposits, sales and maturities of investment securities, the use of
federal funds markets, and net cash provided by operating activities. Scheduled
loan repayments are a relatively stable source of funds, while deposit inflows
and unscheduled loan prepayments, which are influenced by general interest rate
levels, interest rates
<PAGE> 52

available on other investments, competition, economic conditions, and other
factors, are not. Liquid asset balances include cash, amounts due from other
banks, federal funds sold, and securities available-for-sale. To augment
liquidity, Humboldt Bancorp has a Federal Funds borrowing arrangement with two
correspondent banks totaling $10.5 million.

Additionally, Humboldt Bancorp is a member of the Federal Home Loan Bank
and through membership has the ability to pledge qualifying collateral for short
term (up to six months) and long-term (up to five years) borrowings. Management
may use this facility to fund loan advances by pledging single-family
residential mortgages and/or commercial real estate loans as qualifying
collateral.

The following table sets forth certain information with respect to Humboldt
Bancorp's liquidity as of December 31, 1996, 1997 and 1998, and September 30,
1999.

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, NINE MONTHS ENDED
------------------------------ SEPTEMBER 30,
1996 1997 1998 1999
------- -------- ------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Cash and due from banks............... $10,247 $ 21,442 $28,626 $ 25,401
Federal funds sold.................... 6,570 3,520 2,250 56,145
Interest earning deposits............. 20 3,020 3,020 20
Unpledged securities.................. 39,933 80,180 57,994 78,403
------- -------- ------- --------
Total liquid assets............ $56,770 $108,162 $91,890 $159,969
======= ======== ======= ========
Liquid ratios(1)
Liquid assets to:
Ending assets.................... 26.4% 38.1% 28.7% 38.2%
Ending deposits(2)............... 29.5% 42.4% 32.4% 42.6%
</TABLE>

- -------------------------
(1) Liquid assets include cash and due from banks, federal funds sold,
interest-bearing deposits and market value of available-for-sale securities
less book value of pledged securities.

(2) Less pledged public deposits.

The liquidity ratios reflect merchant reserves held primarily in
non-interest bearing accounts to fund charge-backs to Humboldt Bank's Merchant
Bankcard Department's merchants and the pledging of investments for selected
deposits and current VISA and MasterCard pledging requirements.

The increase in liquidity at September 30, 1999, compared to December 31,
1998, is mainly attributable to deposits acquired from the CalFed branch
purchase acquisitions. The decrease in liquidity at December 31, 1998, compared
to December 31, 1997, is mainly attributable to the pledging of investments for
Visa and MasterCard pledging requirements. The increase in liquidity at December
31, 1997, compared to December 31, 1996, is attributable to a substantial
increase in deposits.

The analysis of liquidity also includes a review of the changes that appear
in the consolidated statements of cash flows for the first nine months of 1999.
The statement of cash flows includes operating, investing, and financing
categories. Operating activities include net income of $3.2 million, which is
adjusted for noncash items and increases or decreases in cash due to changes in
certain assets and liabilities. Investing activities consist primarily of both
proceeds from and purchases of securities, and the impact of the net growth in
loans. Financing activities present the cash flows associated with deposit
accounts.
<PAGE> 53

Part of Humboldt Bancorp's normal lending activity involves making
commitments to extend credit. One risk associated with the loan commitments is
the demand on Humboldt Bancorp's liquidity that would result if a significant
portion of the commitments were unexpectedly funded at one time. Humboldt
Bancorp assesses the likelihood of projected funding requirements by reviewing
historical patterns, current and forecasted economic conditions and individual
client funding needs. At September 30, 1999, Humboldt Bancorp had $65.4 million
in undisbursed commitments compared to $59.7 million at December 31, 1998, $47.2
million at December 31, 1997, and $38.5 million at December 31, 1996. Further,
management maintains unpledged U.S. Government securities that are available to
secure additional borrowings in the form of reverse repurchase agreements. At
September 30, 1999, no U.S. Government Treasuries or Agencies at market value
were available for reverse repurchase agreements. However, Humboldt Bancorp had
U.S. Government Agency CMO's at market value of approximately $57.8 million
which were unpledged. Management believes that this provides Humboldt Bancorp
with the necessary liquid assets to satisfy funding requirements in the unlikely
event of substantially higher than projected customer funding requirements.

Humboldt Bank Plaza

On June 30, 1998, Humboldt Bank purchased from an unaffiliated party
approximately 29 acres of property located at 2500 Fifth Street, Eureka, CA
95501. The property was purchased as a site for the future Humboldt Bank Plaza
at a cost of approximately $2.9 million. At December 31, 1999, the property
contained a building and a trailer park. The trailer park holds a lease which
expires December 31, 2000, and which obligates it to pay monthly rent of
$166.66, plus 12.5% of its gross rental income and 0.5% of its additional
revenues.

Humboldt Bank is working with an architect and a construction company on
plans to renovate the building and the parking lot so that all of Humboldt
Bancorp's and Humboldt Bank's administrative offices and departments will be
located at the facility. Further, 20,090 square feet of the Plaza will be leased
to the District Attorney's Family Support Division, a Humboldt County agency.
During the initial year of the lease to the agency, monthly lease income will be
$27,121.

Humboldt Bancorp is internally financing the cost of the acquisition and
the renovation. Although the final budget has not been completed or approved,
the estimated cost to renovate the building to house the administrative offices
and departments is between $3.3 million and $3.9 million. Humboldt Bancorp
believes it will save approximately $135,000 per year in lease expenses and
become more efficient by housing all administrative offices in one building. In
addition, Humboldt Bancorp expects to sell its current property at 6th & G
Streets, Eureka, California.

Financial Condition

<TABLE>
<CAPTION>
INCREASE (DECREASE) NINE MONTHS INCREASE
YEAR ENDED DECEMBER 31, --------------------- ENDED (DECREASE)
------------------------------ 1997 OVER 1998 OVER SEPTEMBER 30, 12/31/98 -
1996 1997 1998 1996 1997 1999 9/30/99
-------- -------- -------- --------- --------- ------------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Assets......................... $214,738 $284,087 $319,975 $69,349 $35,888 $419,167 $99,192
Liabilities.................... $195,138 $260,533 $292,127 $65,395 $31,594 $386,351 $94,224
Shareholders' Equity........... $ 19,600 $ 23,554 $ 27,848 $ 3,954 $ 4,294 $ 32,816 $ 4,968
</TABLE>

Capital Resources

The Federal Reserve Board and the Federal Deposit Insurance Corporation
have established minimum requirements for capital adequacy for bank holding
companies and member banks. The
<PAGE> 54

requirements address both risk-based capital and leveraged capital. The
regulatory agencies may establish higher minimum requirements if, for example, a
corporation has previously received special attention or has a high
susceptibility to interest rate risk.

The following reflects Humboldt Bancorp's various capital ratios at
September 30, 1999, and December 31, 1998, as compared to regulatory minimums:

<TABLE>
<CAPTION>
MINIMUM MINIMUM WELL
DECEMBER 31, SEPTEMBER 30, CAPITAL CAPITALIZED
1998 1999 REQUIREMENT REQUIREMENT
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Tier I capital.................. 11.75% 11.11% 4.0% 6.0%
Total risk-based capital........ 13.00% 12.33% 8.0% 10.0%
Leverage ratio.................. 8.12% 8.17% 4.0% 5.0%
</TABLE>

No regulatory agency has advised Humboldt Bancorp that it is deficient with
respect to the Tier 1 leverage-ratio. Management is unaware of any current
recommendations by regulatory authorities, which if implemented, would have a
material adverse impact on future operating results, liquidity or capital
resources.

Effects of Inflation

Assets and liabilities of financial institutions are principally monetary
in nature. Accordingly, interest rates, which generally move with the rate of
inflation, have a potentially significant effect on Humboldt Bancorp's net
interest income. Humboldt Bancorp attempts to limit inflation's impact of rates
and net income margins through a continuing asset/liability management program.

Year 2000 Issue

The Year 2000 problem arises when computer programs have been written
having two digits rather than four to define the applicable year. As a result,
date-sensitive software and/or hardware may recognize a date having 00 as the
year 1900 rather than the year 2000. This could result in a system failure or
other disruption of operations and impede normal business activities.

The total cost associated with required modifications to become Year 2000
compliant is not expected to be material to Humboldt Bancorp's financial
position. The estimated total cost of the Year 2000 project is approximately
$500,000. A minimal amount, other than time of the committee members, has been
expended on the Year 2000 project as of September 1999. Humboldt Bancorp is also
expensing and reserving $10,000 a month for possible loan losses caused by Year
2000 problems. This reserve was approximately $220,000 at December 31, 1999.

We have completed all phases of our Year 2000 compliance project and as of
the date of this prospectus, we have not encountered any material Year 2000
problems.

Impact of Recent Accounting Pronouncements

In June 1998, the FASB issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments and for hedging activities. This
new standard is effective for 2000 and is not expected to have a material impact
on the financial statements of Humboldt Bancorp.

In October 1998, the FASB issued SFAS No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of Mortgage Loans
Held for Sale by a Mortgage Banking Enterprise." SFAS No. 134 amends SFAS No.
65, "Accounting for Certain Mortgage Banking
<PAGE> 55

Activities," which establishes accounting and reporting standards for selected
activities of mortgage banking enterprises and other enterprises that conduct
operations that are substantially similar. SFAS No. 134 requires that after the
securitization of mortgage loans held for sale, the resulting mortgage-backed
securities and other retained interests should be classified in accordance with
SFAS No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," based on its ability and intent to sell or hold these investments.
This new standard is effective for 1999 and is not expected to have a material
impact on the financial statements of Humboldt Bancorp.

BUSINESS OF HUMBOLDT BANCORP

Introduction

Humboldt Bancorp is a multi-bank holding company with two bank
subsidiaries, Humboldt Bank and Capitol Valley Bank. In addition, Humboldt
Bancorp owns a 50% interest in Bancorp Financial Services, a leasing
corporation. Reference to Humboldt Bancorp in this section constitutes reference
to Humboldt Bank, and Capitol Valley Bank. Reference to Humboldt Bank is a
reference to just Humboldt Bank and reference to Capitol Valley Bank is a
reference to just Capitol Valley Bank.

Humboldt Bancorp was incorporated under the laws of the state of California
on January 23, 1995. Humboldt Bancorp initially was organized for the purpose of
becoming the holding company for Humboldt Bank. On January 2, 1996, the plan of
reorganization was effected and shares of Humboldt Bancorp common stock were
issued to the shareholders of Humboldt Bank in exchange for their Humboldt Bank
common stock. Humboldt Bank was incorporated as a California state-licensed bank
on March 13, 1989, and began its operations in the Eureka/Humboldt area of
California on September 13, 1989. Capitol Valley Bank was incorporated as a
California state-licensed bank on December 17, 1998, and began its operations in
Roseville, California on March 3, 1999.

In addition to its main branch located in Eureka, California, Humboldt Bank
has nine branches located in Humboldt, Trinity and Mendocino counties. Capitol
Valley Bank has one main branch office located in Roseville, California, 20
miles from downtown Sacramento. Bancorp Financial Services, a California
corporation, is jointly owned by Humboldt Bancorp and Tehama Bancorp and makes
automobile loans to consumers and commercial equipment leases of less than
$100,000 to small businesses. Bancorp Financial Services markets its automobile
products principally in California but its equipment lease products nationally.

As of September 30, 1999, Humboldt Bancorp had total assets of $419.2
million, total deposits of $375.8 million, and shareholders' equity of $32.8
million. Humboldt Bancorp's net income for the nine months ended September 30,
1999, and the year ended December 31, 1998, was $3.2 million and $4.0 million
which was Humboldt Bancorp's ninth consecutive year of increasingly higher net
income. For the year ended December 31, 1998, Humboldt Bancorp's return on
average assets was 1.2% and return on average equity was 16.0%. Since the year
ended December 31, 1994, Humboldt Bancorp has increased annual earnings by an
average of 34.3% per year and increased return on average assets from 0.9% in
1994 to 1.2% in 1998. During the same period, Humboldt Bancorp has achieved a
return on average equity greater than 14.5% in each year while maintaining high
asset quality.

From its origins as a one-branch bank in Eureka, California, Humboldt
Bancorp has grown primarily through acquiring branches, opening new branches,
creating Capitol Valley Bank, and expansion of new business lines. Humboldt Bank
opened its first office in 1989 in Eureka, California, and acquired its next
branch in 1991 in Fortuna, California. Humboldt Bank then acquired five of its
branches from U.S. Bank: Arcata and McKinleyville in 1993, and Loleta,
Weaverville and Willow
<PAGE> 56

Creek in 1995. In 1997, Humboldt Bancorp acquired its Garberville branch from
First Nationwide Bank. On August 27, 1999, Humboldt Bank completed the
acquisition of two branches of CalFed located in Eureka and Ukiah. Management
believes the branch acquisitions have strengthened Humboldt Bank's market
position by increasing our presence in our primary region of Humboldt and
Trinity counties. Humboldt Bancorp plans to open a new branch in Eureka in the
second quarter of 2000.

In order to strengthen its market position in Capitol Valley Bank's market
area of Roseville, California, in September, 1999, Humboldt Bancorp acquired the
stock and services of the key executives of Silverado Merger Corporation, which
was Silverado Bank, a bank in organization in Roseville, California. Silverado
was in the process of raising the necessary capital to open as a commercial
banking institution. In addition, on June 22, 1999, Humboldt Bancorp entered
into a merger agreement to acquire Global Bancorp, parent company of Capitol
Thrift and Loan, a California industrial loan corporation. Capitol Thrift has 10
branches located through California and focuses primarily on consumer mortgage
and commercial real estate lending. The acquisition of Global Bancorp is subject
to several conditions, including approval of the merger by the shareholders of
Global Bancorp, regulatory approval, and the sale of common stock through this
offering.

Management of Humboldt Bancorp has historically searched for and developed
non-traditional business lines for the company. An example of this is Humboldt's
Bancorp's 50% joint venture, Bancorp Financial Services, formed in 1996. In
addition to making automobile loans and commercial equipment leases, Bancorp
Financial Services acquires leases and contracts which are then packaged as
asset-backed securities for placement in the public securities market. Another
example is Humboldt Bank's merchant bankcard services business line. These
services involve collecting funds for, and crediting the accounts of, merchants
for sales of merchandise and services to credit card customers. This department,
including ATM activities, has grown significantly since 1993, and now is staffed
by 86 employees and has total revenue of $10.2 million for the nine-month period
ended September 30, 1999.

Business Strategy

Continue to Seek Strategic Acquisitions. We intend to explore the
acquisition of other community banks and branches of larger banks in the
California market, to develop a banking presence in high-growth areas of
Northern California. We believe that the consolidation in the banking industry,
along with increased regulatory burdens, and concerns about technology and
marketing, could likely lead the owners of community banks to explore the
possibility of sale or combination with a broader-based holding company such as
Humboldt Bancorp. We intend to operate acquired banks as separate subsidiaries
to retain their boards of directors and the goodwill of the communities they
serve. In addition, we intend to form community banks in areas of Northern
California that may have lost their independent community banks through
consolidation, merger, or acquisition. We believe that such opportunities are
available and our ability to consummate such acquisitions will be enhanced by
completion of this public offering and the creation of a more active public
market for Humboldt Bancorp's common stock.

Increase Efficiency of Operations. Humboldt Bancorp intends to commence an
in-depth, company-wide study of methods to reduce costs and increase revenues as
soon as feasible after the merger with Global Bancorp. Given our recent
acquisitions, and the introduction of several new products and services, we
believe there is an opportunity to reduce redundant costs within Humboldt
Bancorp, as well as introduce existing products and services into our recently
acquired operations. We intend to consolidate the operations of our acquired
banks, combining such functions as financial administration, data processing,
insurance, employee benefits and human resources support, and
<PAGE> 57

contracts for services. We are also in the process of renovating approximately
70,000 sq. ft. of office space for the consolidation of a majority of the
organization's administrative offices and functions. Additional plans for this
facility include the creation of a call center, which will provide bookkeeping
and service support to our customers and various subsidiaries.

Increase Earning Assets. With the CalFed branch acquisitions, which
primarily include deposits with only a nominal amount of loans, Humboldt Bancorp
will have a 56.2% loan-to-deposit ratio. Our goal is to increase earning assets
in order to raise the loan-to-deposit ratio to approximately 80% by July 1,
2001. If this were to happen, we would expect our profitability to increase as
higher yielding loans replace investment securities on our balance sheet. No
assurance, however, can be given that we will meet this goal. One of our
strategies to increase earning assets is the acquisition of Capitol Thrift.
Capitol Thrift's branch network extends from central to southern California, and
its primary focus is on loan products, rather than deposit products. We expect
this emphasis to complement Humboldt Bancorp's current deposit products and
marketing focus. We will also develop and expand the leasing activities and
associated business lines through Bancorp Financial Services.

Aggressively and Prudently Increase Market Share in Greater
Sacramento/Roseville. Humboldt Bancorp's subsidiary, Capitol Valley Bank, opened
in March 1999 in the Sacramento suburb of Roseville, California. Roseville was
selected for our expansion into central California because it is one of the
fastest growing regions in California. Employers such as Hewlett Packard and
Oracle have created numerous jobs in the Roseville area over the past 10 years.
Subsequently, in September 1999 Humboldt Bancorp, through Capitol Valley Bank,
acquired Silverado Merger Corporation, which under the name of Silverado Bank
(In organization) had been raising capital in anticipation of opening a
community bank in Roseville. The acquisition of Silverado not only removes a
potential competitor from the marketplace, but more importantly, we believe it
significantly increases our market presence and depth in the
Sacramento/Roseville market.

Capitalize on Humboldt Bank's Market Position. Humboldt Bank currently
holds the largest share of FDIC-insured deposits in Humboldt County at 25.2%. It
also holds 28.2% of FDIC-insured deposits in Trinity County. Our goal is to
increase our market share position by opening new branches and increasing our
current operations in the region. Current plans are underway to open an
additional branch in the Henderson Center business area of Eureka. The
additional branch should increase market share and provide an additional
convenient location to serve Humboldt Bank's current customer base. Humboldt
Bank's new President, John Dalby, intends to continue Humboldt Bank's strong
sales culture in order to aggressively pursue new loan business and cross-sell
additional bank services while strictly adhering to our prudent and proven loan
approval process.

Expand non-lending, and fee-based activities. We will continue to develop
non-interest sources such as Merchant Bankcard activities, which has developed
into an area of financial and strategic importance for us. We intend to expand
the proprietary merchants portfolio, which produces greater profits and allows
us more control over merchant accounts than portfolios initiated by independent
servicing and marketing organizations. We also intend to expand our Internet
delivery system, allowing us to aggressively identify and market our services to
smaller merchants. We intend to continue our ATM funding programs, which
constitute another important source of fee-based income to the organization. We
will develop our insurance and investment programs as yet another source of
non-interest income, and expand our electronic banking services to complement
delivery of both traditional banking services and newer offerings, such as
online cash management, bill payment and stock quotes and trading.
<PAGE> 58

Pending Acquisition of Global Bancorp

Our most recent proposed acquisition-based expansion is our pending merger
of Global Bancorp. On June 22, 1999, we and Global Bancorp entered into an
Agreement and Plan of Reorganization, as subsequently amended and restated. We
will acquire Global for approximately $16.5 million consisting of $11.8 million
in cash and the balance consisting of a $4.7 million promissory note subject to
adjustment. We intend to fund the $11.8 million cash portion of the acquisition
of Global Bancorp through the funds raised by this offering, with the balance
from borrowings on other interest-bearing securities.

Global Bancorp is a California corporation organized on September 18, 1980,
to act as a holding company for thrift and loan companies and to engage in other
financial activities. Global Bancorp conducts business through its wholly-owned
thrift and loan company subsidiary, Capitol Thrift, a California corporation
licensed under the California Industrial Loan Law. Capitol Thrift conducts a
general consumer and commercial finance business from 10 branches located
throughout the State of California. Capitol Thrift's primary source of revenue
is providing commercial and single-family, residential real estate loans to
customers who are predominantly small and middle-market businesses and
individuals. Capitol Thrift does not provide general commercial banking services
such as demand checking accounts, lines of credit, safe deposit boxes and wire
transfer. Capitol Thrift funds its lending activities by issuing thrift
certificates and investment certificates.

Global Bancorp and Capitol Thrift have their head offices located at 1424
Second Street, Napa, California 94559. Capitol Thrift's deposits are insured up
to $100,000 by the Federal Deposit Insurance Corporation. At September 30, 1999,
Global had 47 full-time employees and 4 part-time employees. As of September 30,
1999, Global Bancorp had total assets of $117.7 million, total deposits of
$105.3 million and shareholders' equity of $11.8 million. Global Bancorp's net
income for the nine months ended September 30, 1999, and the year ended December
31, 1998, was $952,000 and $1.1 million. Net income for the nine months ended
September 30, 1999, included $297,000 from the proceeds of a life insurance
policy insuring the life of a former officer. For the year ended December 31,
1998, Global Bancorp's return on average assets was .78% and return on average
equity was 9.96% per year.

Capitol Thrift intends to close the San Jose branch prior to March 31,
2000. Additional plans call for the consolidation of several other branches,
leaving Capitol Thrift with seven operating branches prior to the end of the
second quarter of 2000. Prior to the acquisition of Global Bancorp by Humboldt
Bancorp, Capitol Thrift will sell up to $43 million of loans to Humboldt Bank,
thereby improving Humboldt Bank's loan-to-deposit ratio with higher yielding
assets, which in turn may be more easily replenished through Capitol Thrift's
loan generating capabilities. This also allows Humboldt Bank to more rapidly and
effectively deploy the approximately $70 million in deposits realized as part of
the August 1999 purchase of the Eureka and Ukiah CalFed branches.

We expect to complete the acquisition of Global Bancorp during the first
quarter of year 2000. Closing is conditioned on, among other things, approval
from state and federal regulatory authorities. The acquisition is also subject
to the satisfaction and accuracy of certain representations and warranties made
by the parties, the absence of litigation challenging the acquisition, the
absence of any adverse change in the operations and deposits of Capitol Thrift,
and the affirmative vote of a majority of all shares of Global Bancorp common
stock entitled to be cast by Global Bancorp shareholders. The directors and
executive officers of Global Bancorp have agreed not to solicit offers for any
transaction that would interfere with the acquisition. Under a termination fee
provision, we could be liable to Global Bancorp, and Global Bancorp could be
liable to us, for a termination fee if either party fails to complete the
acquisition for certain specified reasons, including an intentional
<PAGE> 59

breach of various pre-closing obligations. The termination fee ranges from
$250,000 to a maximum of $350,000 depending on the nature of the breach.

In 1996 and 1997, Capitol Thrift experienced an increase in loss on real
property held for sale (RPHFS) and expenses related thereto. A majority of the
losses related to loans made prior to June 1992, at which time credit
underwriting policies were strengthened. As a result of these increases, in
August 1998, Capitol Thrift entered into an agreement with the FDIC and the CDFI
pursuant to which management and the Capitol Thrift Board of Directors agreed to
reduce the level of classified assets as outlined in the agreement, develop and
implement a plan with specific strategies for reducing RPHFS, classified and
non-performing loans, and revise the methodology for calculating the allowance
for losses on loans. In addition, Capitol Thrift is required to maintain certain
leverage ratios. Capitol Thrift management believes that Capitol Thrift has
complied in most material respects with the provisions of the agreement and are
actively working on completing the process of complying with all other aspects.

Proposed Private Placement -- Trust Preferred Securities

In order to raise capital to assist in the acquisition of Global Bancorp
and to increase its regulatory capital, Humboldt Bancorp intends to raise up to
$5 million through the private placement of trust preferred securities.
Concurrent with this offering, Humboldt Bancorp intends to sell the trust
preferred securities through a placement agent to institutional investors. No
assurances can be given that Humboldt Bancorp will be successful in placing the
trust preferred securities. In the event Humboldt Bancorp is not successful in
placing the trust preferred securities, it will seek some other type of Tier 1
capital securities to finance the Global Bancorp acquisition.

Trust preferred securities are a hybrid form of security which is
considered debt, with interest paid deductible for income tax purposes, but is
also considered Tier 1 capital for bank regulatory purposes. Humboldt Bancorp
intends to form a trust which will issue the preferred securities to
institutional investors. Proceeds received from the sale of the preferred
securities will be used by the trust to purchase subordinated debentures from
Humboldt Bancorp. In general, the interest paid on the preferred securities will
be equal to the interest paid on the subordinated debentures, and Humboldt
Bancorp will guarantee the repayment of the preferred securities by the trust.

Trust preferred securities do not convert into common stock and, therefore,
will not be dilutive to the shareholders of Humboldt Bancorp. However, interest
on the trust preferred securities must be paid ahead of dividends, if any, to
holders of Humboldt Bancorp common stock and may restrict the ability of
Humboldt Bancorp to declare dividends on its common stock. Further, the trust
preferred securities will have a liquidation preference to the Humboldt Bancorp
common stock.

Banking Services

To retain existing customers and attract new customers, Humboldt Bank
offers a broad range of services, including automated teller machines, credit
card and merchant bankcard services, ACH services, and daily courier services.
In addition, Humboldt Bank maintains close relationships with its customers by
providing direct access to senior management during and after normal business
hours, rapid response to customer requests, and specialized market area
knowledge of the communities in Northern California.

Lending Activities

Humboldt Bancorp concentrates its lending activities in real estate,
commercial, lease financing, credit card and consumer loans, made almost
exclusively to individuals and businesses primarily in
<PAGE> 60

Northern California. Humboldt Bancorp has no foreign loans. The net loan and
lease portfolio as of September 30, 1999, and December 31, 1998, totaled $203.1
million and $186.0 million which represented 54.0% and 65.5% of total deposits
and 48.5% and 58.1% of total assets. Humboldt Bancorp also generates fee income
by servicing mortgage loans. See "Loan Servicing" below.

Real Estate Loans and Real Estate Banking Operations

Real Estate -- Construction

Humboldt Bancorp makes loans to finance the construction of residential and
commercial properties and to finance land acquisition and development. At
September 30, 1999 and December 31, 1998, Humboldt Bancorp had outstanding real
estate-secured construction loans totaling $23.0 and $20.7 million, representing
11.3% and 11.1% of Humboldt Bancorp's net loan portfolio. The concentration in
the construction loan portfolio has been on owner-occupied single family
construction loans.

Loans to developers for the purpose of acquiring unimproved land and
developing such land into improved 1-to-4 residential lots typically have a
maturity of 12 to 24 months; have a floating rate tied to the prime rate;
usually do not exceed 75% of the appraised value; are secured by a first deed of
trust and requires the borrower or its principals personally to guarantee
repayment of the loan. To also reduce the risks inherent in construction
lending, Humboldt Bancorp limits the number of properties which can be
constructed on a "speculative" or unsold basis by a builder at any one time to 2
to 4 houses.

Commercial construction loans are underwritten using the actual or
estimated cash flow the secured real property would provide to an investor in
the event of a default by the borrower. A debt coverage ratio of 1.25:1 and a
maximum loan to value of 70% is required in most cases.

Real Estate -- Owner-Occupied, Single-Family Residential

Humboldt Bancorp also originates owner-occupied, single-family, residential
real estate loans in its market area. At September 30, 1999 and December 31,
1998, Humboldt Bancorp had outstanding owner-occupied, single-family,
residential real estate loans totaled $42.5 and $35.2 million. Humboldt Bancorp
originates fixed-rate mortgage loans and adjustable-rate residential mortgage
loans. Fixed-rate mortgages are at competitive rates and adjustable-rate loans
currently offered by Humboldt Bancorp have interest rates which adjust every
one, three or five years from the closing date of the loan or on an annual basis
commencing after an initial fixed-rate period of one, three or five years in
accordance with a designated index, plus a stipulated margin. Humboldt Bancorp
originates residential mortgage loans with loan-to-value ratios of up to 95%. On
any mortgage loan exceeding an 80% loan-to-value ratio at the time of
origination, however, Humboldt Bancorp requires private mortgage insurance in an
amount intended to reduce Humboldt Bancorp's exposure to 80% of the appraised
value of the underlying collateral. Also, at September 30, 1999, Humboldt
Bancorp had approximately $14.1 million in home equity line of credit loans,
representing approximately 6.9% of its gross loan portfolio. Humboldt Bancorp's
home equity lines of credit have adjustable interest rates tied to the prime
interest rate plus a margin.

Generally, Humboldt Bancorp sells its owner-occupied, single-family,
residential fixed-rate loans to institutional investors in the secondary market,
but retains the servicing of such loans. There were $.7 million real estate
loans pending sale at September 30, 1999.
<PAGE> 61

Real Estate -- Commercial and Agricultural

In order to enhance the yield on and decrease the average term to maturity
of its assets, Humboldt Bancorp originates permanent loans secured by commercial
real estate. Humboldt Bancorp's commercial real estate loan portfolio includes
loans secured by small apartment buildings, strip shopping centers, small office
buildings, farms and other business properties, generally located within
Humboldt Bancorp's primary market area. Real estate commercial and agricultural
loans are secured by both commercial and single-family property. At September
30, 1999 and December 31, 1998, Humboldt Bancorp had outstanding real estate
secured commercial and agricultural loans totaling $91.8 million and $80.2
million.

Business Loans

Humboldt Bancorp's commercial loans consist of (i) loans secured by
commercial real estate and (ii) business loans which are not secured by real
estate or if secured by real estate, the principal source of repayment is
expected to be business income. For a discussion of Humboldt Bancorp's loans
secured by commercial real estate lending see "-- Real Estate -- Commercial and
Agricultural." Business loans include revolving lines of credit, working capital
loans, equipment financing, letters of credit and inventory financing. At
September 30, 1999, and December 31, 1998, Humboldt Bancorp had business loans
totaling $35.5 million and $34.0 million, representing 17.5% and 18.3% of
Humboldt Bancorp's net loan portfolio.

Typically, business loans are floating rate obligations and are made for
terms of 5 years or less, depending on the purpose of the loan and the
collateral. No single business customer accounted for more than 2.3% of total
net loans at September 30, 1999.

Lease Financing Loans

Humboldt Bancorp makes lease financing loans to finance credit card swipe
machines and other small ticket leases. The dollar amount of each lease usually
ranges from under $2,000 to $5,000 and the term is approximately three to five
years. At September 30, 1999, and December 31, 1998, Humboldt Bancorp had
outstanding lease financing loans totaling $7.5 and $9.9 million, representing
3.7% and 5.3% of Humboldt Bancorp's net loan portfolio.

Credit Card and Related Service

Humboldt Bank offers credit card accounts through its participation as a
principal member of Visa. Management believes that providing credit card
services to its customers helps Humboldt Bank remain competitive by offering an
additional service. Currently Humboldt Bank does not actively solicit credit
card business beyond its customer base and market area. At September 30, 1999,
and December 31, 1998, credit card loans totaled $3.6 and $5.7 million, or 1.8%
and 3.1% of Humboldt Bancorp's net loan portfolio.

Consumer Loans

The consumer loans originated by Humboldt Bancorp include automobile loans
and miscellaneous other consumer loans, including unsecured loans. Consumer
lending affords Humboldt Bancorp the opportunity to earn yields higher than
those obtainable on single-family residential lending. At September 30, 1999,
and December 31, 1998, consumer loans totaled $1.9 and $2.1 million, or .9% and
1.1% of Humboldt Bancorp's net loan portfolio.
<PAGE> 62

Other Loans

At September 30, 1999 and December 31, 1998, Humboldt Bancorp had
outstanding other loans totaling $1.3 million and $2.1 million. These loans
consist mainly of overdrafts of less than 30 days' duration and state and
political loans.

Loan Servicing

Humboldt Bank sells the majority of its mortgage and all of its Small
Business Administration loans it originates to institutional investors. However,
it retains the servicing on these loans in order to generate ongoing revenues.
Humboldt Bank's servicing portfolio in which it has sold ownership but retains
the servicing was $158.0 and $144.5 million at September 30, 1999 and December
31, 1998, respectively.

Savings and Deposit Activities

Humboldt Bancorp offers customary banking services including personal and
business checking, savings accounts, time certificates of deposit, IRA, and
Keogh accounts. Most of Humboldt Bancorp's deposits are obtained from commercial
businesses, professionals, and individuals with high income or net worth. In
addition, Merchant Bankcard reserves are held primarily in non-interest bearing
accounts. See "-- Merchant Bankcard."

The following table sets forth certain information with respect to Humboldt
Bancorp's savings and deposit activities as of December 31, 1998, and September
30, 1999.

<TABLE>
<CAPTION>
DECEMBER 31, 1998 SEPTEMBER 30, 1999
--------------------- ---------------------
NUMBER OF AVERAGE NUMBER OF AVERAGE
ACCOUNTS BALANCE ACCOUNTS BALANCE
--------- -------- --------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Demand deposit accounts................... 11,973 $ 10,022 15,510 $ 9,432
Savings and money market.................. 17,508 2,795 16,949 3,779
Time certificates in excess of $100,000... 252 180,803 371 155,424
Time certificates less than $100,000...... 3,566 19,483 5,550 19,425
------ -------- ------ --------
Totals.................................. 33,299 $ 8,528 38,380 $ 9,792
====== ======== ====== ========
</TABLE>

Humboldt Bancorp has not obtained any deposits through deposit brokers and
has no present intention of using brokered deposits as a source of funding.

Merchant Bankcard

In 1993, Humboldt Bank established a merchant draft processing operation
("Merchant Bankcard"). Since that time the operation has grown steadily both in
volume and scope of activities. In general, Merchant Bankcard services involve
collecting funds for, and crediting the accounts of, merchants for sales of
merchandise and services to credit and debit card customers. The Merchant
Bankcard department specializes in providing processing for first time merchants
and small-to medium-sized merchants in the retail, telephone, mail order and
Internet commerce industries. While these merchants vary in size, a typical
merchant customer generates approximately $40,000 in annual credit card charge
volume. Humboldt Bank believes that there is a market for providing Merchant
Bankcard services to these merchants that are often overlooked by larger banks.
For the nine months ended September 30, 1999, no one merchant accounted for more
than 2% of Merchant Bankcard's
<PAGE> 63

total gross processing volume. At September 30, 1999, the Merchant Bankcard
department provided processing services to approximately 64,000 merchants.

The transaction processing industry provides merchants with credit and
debit card processing services. The industry has grown rapidly in recent years
as a result of wider merchant acceptance and rapid technological advances within
the bankcard industry.

Humboldt Bank markets its Merchant Bankcard services through independent
service and marketing organizations ("ISOs"). In most cases, the ISOs solicit
merchant accounts and perform the service and collection function while Humboldt
Bank provides the accounting and credit function. For these functions, Humboldt
Bank receives an average processing fee of approximately 0.15%. As of September
30, 1999, the three ISOs engaged by Humboldt Bank, as described above,
represented 59,315 merchant accounts. Further, those three ISOs represented
$2,040.0 million of total Merchant Bankcard gross processing volume for the nine
months ended September 30, 1999. These three contracts expire in 2000, 2002, and
2004. During the fourth quarter of 1999, two additional ISOs signed contracts
for this service with Humboldt Bank.

In 1997, Humboldt Bank began an additional unit within the Merchant
Bankcard department where all servicing aspects of the relationship with the
merchant are performed by Humboldt Bank, although Humboldt Bank still relies on
independent sales organizations for solicitation of merchants. Humboldt Bank
categorizes these types of accounts as proprietary accounts ("Proprietary"). For
these additional services, Humboldt Bank is able to retain more income from the
service and processing fees paid than when an ISO is involved. For example,
Humboldt Bank receives a service fee of approximately 4% of the gross processing
volume. For the nine months ended September 30, 1999, Proprietary accounts
represented $143.8 million of total Merchant Bankcard gross volume and 4,835
merchant accounts at period end. The Proprietary accounts segment of Humboldt
Bank's merchant processing portfolio is growing much more rapidly than the ISO
segment. For example, for the nine months ended September 30, 1999 net revenues
for the Proprietary account segment have grown 150.0% relative to the same time
period in 1998, while net revenues for the ISO segment have grown 9.5% relative
to the same time period in 1998.

Humboldt Bancorp intends to continue to expand the Proprietary account
segment of its business. The rapid acceptance of the Internet as a method to
transact commerce has led to an increase in the number of smaller Internet-based
merchants. Humboldt Bank believes its processing services are well suited to
these lower volume merchants. In order to attract these Internet-based
merchants, as well as other merchants who have access to the Internet, Humboldt
Bank has hired an individual with extensive Internet-related marketing
experience to lead its efforts in this arena. In addition, Humboldt Bank has
entered into several key relationships with web site providers and gateway
services that cater to business services for merchants for the purpose of
advertising Humboldt Bank's merchant bankcard services. In addition, Humboldt
Bank accepts applications for merchant processing services at its Merchant
Bankcard web site, www.merchant.humboldtbank.com.

Many of the merchants processing through the Merchant Bankcard department
accept consumers' credit card numbers over the telephone. There are no signed
drafts and the entire process is handled electronically. Since consumers find
these transactions easier to dispute than transactions involving signed drafts,
the charge-back rates for services provided over the telephone and through the
Internet are generally higher. Further, because most of the merchants are
located outside the Humboldt-Eureka, California area, they require more Humboldt
Bank personnel to follow and monitor their accounts. Humboldt Bank views its
risk management and fraud avoidance practices as integral to its operations and
overall success because of Humboldt Bank's potential liability for merchant
fraud, charge backs and other losses. While the first time and small to medium
sized merchants may be potentially lucrative to Humboldt Bank, these accounts
are perceived high risk
<PAGE> 64

because of lack of business experience and higher monitoring costs. For ISO
accounts, risk is mitigated by requiring merchant reserves and by ISO reserves
and guarantees. For the Proprietary account segment, risk management and fraud
control occur initially at the application stage when merchant applications are
reviewed against certain criteria to determine acceptance or denial.
Furthermore, Humboldt Bank addresses these risks by actively monitoring all
merchants on a daily basis, employing an aggressive fraud control team,
requiring personal guarantees for nearly all merchants and holding reserve
deposits for certain merchants. These deposits are primarily non-interest
bearing and totaled $55.5 million at September 30, 1999.

In the event a consumer is dissatisfied with the merchandise or service, in
general, a merchant must accept a charge-back for a period of 120 days. The
merchant's checking account is debited with the charge-back if sufficient funds
exist; otherwise, the merchant's reserve funds are debited. If a merchant's
reserves are insufficient to fund the charge-back and an ISO is involved,
Humboldt Bank looks to the applicable and available guarantee, if any, of the
ISO. If the merchant's reserve is exhausted and either (i) an ISO is involved
but no guarantee is applicable or available, or (ii) no ISO is involved,
Humboldt Bank uses its internal reserves to fund the charge-back.

A summary of the Merchant Bankcard Department's merchant bankcard
activities for the nine months ended September 30, 1999, and the years ended
December 31, 1996, 1997 and 1998 is set forth below:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
-------------------------------------- SEPTEMBER 30,
1996 1997 1998 1999
---------- ---------- ---------- -------------
(DOLLARS IN THOUSANDS EXCEPT FOR NUMBER OF ACCOUNTS)
<S> <C> <C> <C> <C>
Number of Accounts:
ISO....................... 23,806 32,694 59,595 59,315
Proprietary............... 15 412 2,754 4,835
---------- ---------- ---------- ----------
Total.................. 23,821 33,106 62,349 64,150
========== ========== ========== ==========
Gross Processing Volume:
ISO....................... $1,148,999 $1,419,355 $2,100,500 $2,041,227
Proprietary............... 1 8,645 71,500 143,773
---------- ---------- ---------- ----------
Total.................. $1,149,000 $1,428,000 $2,172,000 $2,185,000
========== ========== ========== ==========
Net Processing Revenue:
ISO....................... $ -- $ 3,229 $ 3,026 $ 2,172
Proprietary............... -- 9 178 2,084
---------- ---------- ---------- ----------
Total.................. $ -- $ 3,238 $ 3,204 $ 4,256
========== ========== ========== ==========
</TABLE>
<PAGE> 65

A summary of the Merchant Bankcard Department's reserves for the nine
months ended September 30, 1999, and the years ended December 31, 1996, 1997 and
1998, is set forth below:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED DECEMBER 31, ENDED
----------------------------- SEPTEMBER 30,
1996 1997 1998 1999
------- ------- ------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Merchant's Reserves:
ISO.............................. $21,267 $32,957 $45,088 $50,210
Proprietary...................... -- 82 1,881 5,244
------- ------- ------- -------
Total......................... $21,267 $33,039 $46,969 $55,454
======= ======= ======= =======
Internal Reserves:
ISO.............................. $ 582 $ 680 $ 920 $ 1,030
Proprietary...................... -- 3 34 308
------- ------- ------- -------
Total......................... $ 582 $ 683 $ 954 $ 1,338
======= ======= ======= =======
</TABLE>

A summary of the Merchant Bankcard Department's losses for the nine months
ended September 30, 1999, and for the years ended December 31, 1996, 1997 and
1998, in connection with merchant bankcard services involving an ISO, and for
losses in connection with its own merchant bankcard services when an ISO was not
involved, is set forth below:

<TABLE>
<CAPTION>
FOR NINE
MONTHS
FOR YEARS ENDED DECEMBER 31, ENDED
----------------------------- SEPTEMBER 30,
1996 1997 1998 1999
------- ------- ------- -------------
<S> <C> <C> <C> <C>
ISO Servicing Loss................. $29,250 $14,682 $ -- $ --
Proprietary Loss................... $ -- $ -- $17,829 $1,315
</TABLE>

Merchant bankcard processing services are highly regulated by credit card
associations such as VISA. In order to participate in the credit card programs,
Humboldt Bank must comply with the credit card association's rules and
regulations which may change from time to time. During November 1999, VISA
adopted several rule changes to reduce risks in high risk merchant bankcard
programs and these rule changes affect Humboldt Bank's Merchant Bankcard
business. These changes include a requirement, enacted in December 1999, which
requires a processor's reported fraud ratios be no greater than three times the
national average. At September 30, 1999 (the most recent period available from
VISA) Humboldt Bank's overall fraud ratio was above the VISA requirement.
However, only one of Humboldt Bank's ISO portfolios is above this requirement,
and Humboldt Bank expects the entire portfolio to be in compliance with this
requirement by March of 2000. Humboldt Bank's fraud ratio in its Proprietary
account portfolio was 1.48 times the national average for VISA transactions at
September 30, 1999.

Other VISA changes announced in November of 1999 included the requirement
that total processing volume in certain high-risk categories (as defined by
VISA) be less than 20% of total processing volume. At June 30, 1999 (the most
recent information available from VISA) Humboldt Bank's total VISA transactions
within these certain high-risk categories were 15.7% of VISA total processing
volume. Although these merchants are categorized as high-risk, Humboldt Bank has
taken precautions such as requiring higher deposits, daily monitoring and
aggressive fraud control, and to date has not seen extraordinary losses in these
categories.
<PAGE> 66

Other changes VISA announced in November 1999 include a requirement that
weekly VISA volumes be less than 20% of an institution's tangible equity
capital, and a requirement that aggregate charge-backs for the previous six
months be less than 5% of the institution's tangible equity capital. At June 30,
1999, (the most recent information available from VISA) Humboldt Bank's weekly
VISA volume was 162% of tangible equity capital, and aggregate charge-backs for
the previous six months were 54% of tangible equity capital.

Merchant Bankcard participants, such as Humboldt Bank, must comply with
these new VISA rules by filing a compliance plan with VISA by February 12, 2000.
At this time, Humboldt Bank does not believe that it will be able to submit a
plan that is in full compliance with the VISA requirements. Humboldt Bank
intends to seek a waiver of these requirements from VISA. However, should VISA
not grant Humboldt Bank a waiver, Humboldt Bank would need to significantly
restructure the Merchant Bankcard Department which would adversely affect
Merchant Bankcard revenues. Initially, Humboldt Bank would focus on the higher
margin processing of its Proprietary portfolio. In addition, Humboldt Bank could
form a consortium of financial institutions in order to meet VISA's capital
requirement and continue to process for the higher volume ISOs.

ATM Funding

In 1996, Humboldt Bank began its automated teller machine ("ATM") funding
activities by sponsoring several non-bank companies that place and service ATMs
in various public places such as restaurants, stores, and gas stations. ATM
networks such as Star, Plus and Cirrus require a placement company to be
sponsored by a chartered financial institution. Humboldt Bank sponsors these
companies, and provides cash for their ATMs. Humboldt Bank contracts with bonded
money carriers and correspondent vault centers throughout the nation to provide
a ready amount of cash when these placement companies require. Humboldt Bank
earns a fee for each sponsored transaction and a fee for the cash advanced.

For the nine months ended September 30, 1999, and for the years ended
December 31, 1998 and December 31, 1997, ATM funding was $11.1 million, $13.9
million and $10.2 million, respectively. Losses related to the ATM funding
activities for the nine months ended September 30, 1999, and for the years ended
December 31, 1998 and December 31, 1997 were $0, $3,340 and $0, respectively.

Capitol Valley Bank

In March 1999, Humboldt Bancorp contributed capital totaling $4.5 million
to form Capitol Valley Bank. Capitol Valley Bank is located in Roseville,
California, and opened for business March 3, 1999. Humboldt Bancorp believes
that the Sacramento-Roseville, California market represents an attractive
location to do business for a community bank. The Sacramento-Roseville region's
infrastructure contains a major airport, deep-water port, transcontinental
railroad, and an interstate freeway system. Roseville is located approximately
20 miles northeast of downtown Sacramento. The city of Roseville is an important
link along the Interstate 80 corridor linking Sacramento and Auburn, California,
and Reno, Nevada. Capitol Valley Bank will focus primarily on products and
services for individuals, professionals and small and middle-size businesses.

In September 1999, Humboldt Bancorp entered into an agreement to acquire
all the outstanding shares of Silverado Merger Corporation which was Silverado
Bank, a bank in organization, which had yet to raise the necessary capital to
open as a commercial banking institution, for 45,002 shares (49,502 shares
post-dividend) of Humboldt Bancorp common stock and warrants to purchase up to
90,000 shares (99,000 shares post-dividend) of Humboldt Bancorp common stock at
$12.00 ($10.91 post-dividend) per share. In the event Capitol Valley Bank fails
to achieve certain business objectives such as developing new business accounts,
(i) Humboldt Bancorp has the right to repurchase the
<PAGE> 67

45,002 shares (49,502 shares post-dividend) of common stock for $1.00 each, and
(ii) the warrants to purchase up to 90,000 shares (99,000 shares post-dividend)
of common stock for $12.00 ($10.91 post-dividend) per share cannot be exercised.
As part of the acquisition, Capitol Valley Bank hired Silverado Merger
Corporation's president, and entered into non-competition agreements with the
shareholders of Silverado Merger Corporation prohibiting them from participating
in any financial institution within 30 miles of Capitol Valley Bank until
December 31, 2002. In addition, Capitol Valley Bank's board was expanded to
include three to five new directors consisting of some of the prior directors of
Silverado Merger Corporation. Finally, as part of the acquisition agreement,
some shareholders and supporters of Silverado Merger Corporation purchased $1.6
million of Humboldt Bancorp's restricted common stock at $12.00 ($10.91
post-dividend) per share pursuant to a private placement.

Silverado Merger Corporation has no operations, and all of its obligations
and liabilities were extinguished prior to consummation of the merger.
Therefore, Silverado Merger Corporation's financial statements are immaterial.
Humboldt Bancorp acquired Silverado Merger Corporation to expand Capitol Valley
Bank's presence in the Sacramento-Roseville, California area through business
associates and contacts of the former directors and organizers of Silverado
Merger Corporation.

As of September 30, 1999, Capitol Valley Bank had total assets of $12.4
million, total loans of $3.9 million, and total deposits of $9.1 million.

Bancorp Financial Services

During 1996, Humboldt Bank entered into a joint venture with Tehama Bank,
Red Bluff, California, to organize and share equally in a subsidiary leasing
company, Bancorp Financial Services. Bancorp Financial Services was organized as
a California corporation on November 25, 1996, and Humboldt Bank and Tehama Bank
each contributed $2.0 million towards its capitalization as of January 2, 1997.
Subsequently during 1998, Humboldt Bank and Tehama Bank each contributed their
interests in Bancorp Financial Services to their respective holding companies,
Humboldt Bancorp and Tehama Bancorp. Bancorp Financial Services makes consumer
automobile loans and commercial equipment leases, of less than $100,000, to
small businesses.

In addition to making leases and loans, Bancorp Financial Services buys and
services commercial equipment lease contracts throughout the United States
directly from lessors, brokers, finance companies, banks and thrifts nationwide.
Bancorp Financial Services also buys and services consumer automobile contracts
primarily in Northern California. While it maintains its own portfolio of
contracts, the majority of acquired leases are sold to its wholly-owned
subsidiary, BFS Funding Corporation, which packages the leases as asset-backed
securities for placement in the public market on a non-recourse basis. Bancorp
Financial Services retains the servicing and management of all leases it
acquires regardless of their subsequent sale. Likewise, Bancorp Financial
Services acquires consumer automobile contracts from dealers throughout Northern
California and similarly repackages and sells the payment streams to
institutional investors in the financial marketplace while retaining the
servicing. In addition to service fees, Bancorp Financial Services generates
income through spreads on its lease portfolio, loan portfolio, gains on sales,
and ongoing fees and charges.

Previously, Humboldt Bank purchased leases from Bancorp Financial Services.
It is not anticipated that Humboldt Bank will acquire leases from Bancorp
Financial Services in the future. In addition, Humboldt Bank has extended credit
to Bancorp Financial Services. See "Certain Relationships and Related
Transactions."

The Bancorp Financial Services board of directors consists of seven members
including Bancorp Financial Services' Chief Executive Officer, Kevin D.
Cochrane, and three members representing
<PAGE> 68

each of Humboldt Bancorp and Tehama Bancorp. Humboldt Bancorp has elected
Theodore S. Mason, Lawrence Francesconi, and Gary L. Evans to the board of
directors of Bancorp Financial Services.

Humboldt Bancorp accounts for its investment in Bancorp Financial Services
using the equity method. For the nine months ended September 30, 1999, and the
years ended December 31, 1998 and 1997, Humboldt Bancorp recognized revenue of
$300,000, $259,000, and $22,000, respectively.

Acquisition of California Federal Branches

On August 27, 1999, Humboldt Bank completed the acquisition of two branches
located at 959 Myrtle Avenue, Eureka, CA 95501, and 607 South State Street,
Ukiah, CA 95482, from CalFed. Under the terms of the purchase agreement,
Humboldt Bank acquired all of the fixed assets relating to CalFed's Eureka and
Ukiah branch offices. Humboldt Bank primarily acquired the two CalFed branches
for access to their deposits. The purchase price for the two branches was equal
to approximately 3.25% of the aggregate deposits acquired by Humboldt Bank.
Total deposits acquired by Humboldt Bank were approximately $72.2 million and
loans acquired were approximately $0.1 million.

Human Resources

At September 30, 1999, Humboldt Bancorp employed a total of 320 full-time
equivalent employees, consisting of 103 salaried persons and 217 hourly persons,
respectively. None of Humboldt Bancorp's employees are represented by a
collective bargaining group. Management considers its relations with its
employees to be excellent.

Competition

Humboldt Bancorp's primary market area consists of Humboldt and Trinity
counties and nearby communities of adjacent counties. Humboldt Bancorp has
recently entered into the Placer county market with the opening of Capitol
Valley Bank in Roseville, California.

Humboldt Bancorp actively competes for all types of deposits and loans with
other banks and financial institutions located in its service area, including
credit unions which are able to offset more favorable savings rates and loan
rates due primarily to favorable tax treatment. In California generally, major
banks and local regional banks dominate the commercial banking industry. By
virtue of their larger capital bases, such institutions have substantially
greater lending limits than those of Humboldt Bancorp, as well as more
locations, more products and services, greater economies of scale and greater
ability to make investments in technology for the delivery of financial
services.

An independent bank's principal competitors for deposits and loans are
other banks, particularly major banks, savings and loan associations, credit
unions, thrift and loans, mortgage brokerage companies and insurance companies.
Increased deregulation of financial institutions has increased competition.
Other institutions, such as mutual funds, brokerage houses, credit card
companies and even retail establishments have offered new investment vehicles,
such as money-market funds, that also compete with banks. The direction of
federal legislation in recent years favors competition between different types
of financial institutions and encourages new entrants into the financial
services market, and it is anticipated that this trend will continue.

Humboldt Bancorp's strategy for meeting competition has been to maintain a
sound capital base and liquidity position, employ experienced management, and
concentrate on particular segments of the market, particularly businesses and
professionals, by offering customers a degree of personal
<PAGE> 69

attention that, in the opinion of management, is not generally available through
Humboldt Bancorp's larger competitors. Humboldt Bancorp relies upon specialized
services, responsive handling of customer needs, local promotional activity, and
personal contacts by its officers, directors and staff, compared with large
multi-branch banks that compete primarily on interest rates and location of
branches. The acquisition of Capitol Thrift will increase Humboldt Bancorp's
loan portfolio and the continuation of Capitol Thrift's industrial loan charter
will provide favorable lending terms so as to assist Humboldt Bancorp to compete
with institutions for more loans. No assurance can be given that Humboldt
Bancorp will be able to compete successfully for more loans. Also, no assurance
can be given that, because of customer loyalty, available products and services
or other reasons, customers in Humboldt Bancorp's branches will not withdraw
their business and establish a banking relationship with other competitors.

Historically, insurance companies, brokerage firms, credit unions and other
non-bank competitors have less regulation than banks and can be more flexible in
the products and services they offer. The Financial Services Modernization Act
of 1999 eliminates most of the separations between banks, brokerage firms and
insurance companies by permitting securities firms and insurers to buy banks and
for banks to underwrite securities and insurance. Generally speaking, the Act is
likely to increase competition for community banks such as Humboldt Bank,
Capitol Valley Bank and Capitol Thrift, but may also cause consolidations and
mergers with larger competitors and resources. The Act may also increase
cross-border consolidations and mergers.
<PAGE> 70

Properties

The following table sets forth information about Humboldt Bancorp's
subsidiaries offices as of December 31, 1999.

<TABLE>
<CAPTION>
OCCUPIED
LOCATION TYPE OF OFFICE OWNED/LEASE SIZE SINCE
-------- -------------- ----------- ------ --------
<S> <C> <C> <C> <C>
Humboldt Bank
701 Fifth Street, Eureka.... Administrative/Main Branch Owned 19,800 1989
1063 G Street, Arcata....... Branch Owned 4,660 1993
1360 Main Street, Fortuna... Branch Owned 5,770 1991
2095 Central Avenue,
McKinleyville............. Branch Owned 2,500 1993
612 G Street, Eureka........ Administrative Owned 15,000 1994
358 Main Street, Loleta..... Branch Owned 2,400 1995
39171 Highway 299,
Willow Creek.............. Branch Owned 5,715 1995
409 Main Street,
Weaverville............... Branch Owned 2,112 1995
605 K Street, Eureka........ Administrative Lease 10,000 1996
915 Redwood Drive,
Garberville............... Branch Lease 3,100 1997
555 H Street, Eureka........ Administrative Lease 1,945 1997
710 Fifth Street, Eureka.... Administrative Lease 1,100 1997
539 G Street, Eureka........ Administrative Lease 1,000 1998
2830 G Street, Eureka....... Administrative Lease 1,000 1998
2851/2861 E Street, Eureka
(Henderson Center)........ Branch Purchase 2,500 1999 Owned)
(Under
Construction
2440 Fifth Street, Eureka... Land for Humboldt Bancorp Owned 70,000 1999
Plaza
607 South State Street,
Ukiah..................... Branch Owned 4,500 1999
959 Myrtle Avenue, Eureka... Branch Lease 3,500 1999
1001 Searles Street,
Eureka.................... Administrative Lease 3,450 1999
Capitol Valley Bank
1601 Douglas Boulevard,
Roseville................. Main Branch Lease 3,955 1998
</TABLE>

Rental expense for all leases of premises was for the nine months ended
September 30, 1999, $257,000, and for the years ended December 31, 1998, 1997,
and 1996, $269,000, $128,000, and $94,000, respectively. Rental income from all
properties owned and leased was for the nine months ended September 30, 1999,
and for the years ended December 31, 1998, 1997, and 1996, $228,000, $177,000,
$65,000, and $69,000, respectively.

Legal Proceedings

On December 7, 1998, the case of Freeman, et al. v. Citibank (South
Dakota), N.A., et al., Civil Action No. CV-98-RRA-3029-S, was filed in the
United States District Court, Northern District of Alabama, Northern Division.
This case is a purported class action brought on behalf of Mr. Freeman and
others similarly situated (VISA credit cardholders issued by Citibank (South
<PAGE> 71

Dakota), hereinafter "Citibank"), against Citibank and VISA International
(hereinafter "VISA") to (i) enjoin the collection of debts charged to Citibank
VISA cards for gambling at Internet casino websites; (ii) have Internet casino
gambling declared unlawful; and (iii) recover all payments including principal,
interest and penalties received by Citibank and VISA related to such debts. Mr.
Freeman is alleging that Citibank and VISA were facilitating, participating in
and profiting from gambling by allowing Mr. Freeman to use his Citibank VISA
card to purchase "e-cash" at a website owned and operated by a provider of such
"virtual" commodity (hereinafter the "Merchant Provider"), which he accessed
from an on-line casino operation. Mr. Freeman proceeded to play the game of
blackjack with his e-cash and lost $30. The action alleges violation of the
federal Wire Act and the federal Racketeering Influenced and Corrupt
Organizations Act ("RICO"). Mr. Freeman is seeking treble damages pursuant to
RICO, punitive damages and attorney's fees, in addition to compensatory damages
and declaratory relief. Citibank has pending a motion to compel arbitration in
the case; the plaintiff has moved to consolidate this action with others which
have been filed against VISA across the country. Neither motion has been heard
by the court to date.

Humboldt Bank is not a defendant in the Freeman case. However, Humboldt
Bank provides merchant processing for the Merchant Provider used by Mr. Freeman,
and on April 21, 1999, Citibank sent a letter to Humboldt Bank seeking indemnity
for the Freeman action pursuant to VISA regulations. Humboldt Bank and Citibank
have had preliminary discussions regarding this matter, but Humboldt Bank at
this time has neither acknowledged nor disputed the applicability of the VISA
regulation cited by Citibank. The Freeman action is in its preliminary stages
and the outcome at this time cannot be determined. A similar lawsuit in a United
States District Court in Wisconsin (not involving Humboldt Bank insofar as is
known) was recently dismissed; however, that decision is not binding on the
Freeman Court. Until the Freeman action is ultimately determined, any potential
action against Humboldt Bank by Citibank would be premature. In the event it is
ultimately determined that Humboldt Bank is obligated to indemnify Citibank,
Humboldt Bank intends to seek indemnity against both the Merchant Provider and
the company which through its independent marketing efforts presented the
Merchant Provider's application for merchant services to Humboldt Bank.

On January 20, 1998, Shinergy Diversified, Inc. filed suit (Shinergy
Diversified, Inc. et al. v. Electronic Card Systems, Inc., Humboldt Bank, Inc.
et al., Los Angeles Superior Court Case No. BC 184 522) against Humboldt Bank
and creditcards.com, formerly known as Electronic Card Systems, Inc. The
complaint alleges fraud, conversion and intentional infliction of mental
distress. Shinergy alleged that its credit card processing by Electronic Card
Systems, Inc. and Humboldt Bank was not carried out as represented. In addition,
Shinergy alleged that a document that would have allowed Electronic Card
Systems, Inc. and Humboldt Bank to do certain things in connection with the
credit card processing for Shinergy was forged. The complaint seeks lost profits
of approximately $200,000 plus other damages, damages for emotional distress and
punitive damages.

We are also involved in other litigation, the outcome of which, we believe,
will not have a material effect on our operations or financial condition.

SUPERVISION AND REGULATION OF HUMBOLDT BANCORP,
HUMBOLDT BANK AND CAPITOL VALLEY BANK

We and our subsidiaries, Humboldt Bank and Capitol Valley Bank, are
extensively regulated under both federal and state laws and regulations. These
laws and regulations are primarily intended to protect depositors, not
shareholders. The following information describes statutory or regulatory
provisions affecting us; however, it is qualified in its entirety by reference
to the particular statutory and regulatory provisions at issue.
<PAGE> 72

We are a registered bank holding company under the Bank Holding Company
Act, regulated, supervised and examined by the Federal Reserve Bank. We must
file with the Federal Reserve Bank an annual report and additional reports as
the Federal Reserve Board may require. We are also periodically examined by the
Federal Reserve Board. Humboldt Bank and Capitol Valley Bank, as California
state-licensed banks, are also regulated, supervised, and periodically examined
by the California Department of Financial Institutions and the Federal Deposit
Insurance Corporation. Humboldt Bank's and Capitol Valley Bank's deposits are
each insured by the Federal Deposit Insurance Corporation to the maximum amount
permitted by law, which is currently $100,000 per depositor in most cases. For
this protection, Humboldt Bank and Capitol Valley Bank pay a semi-annual
assessment and the rules and regulations of the Federal Deposit Insurance
Corporation pertaining to deposit insurance and other matters apply.

The regulations of the Federal Reserve Board, the Federal Deposit Insurance
Corporation, and the California Department of Financial Institutions govern most
aspects of Humboldt Bancorp's, Humboldt Bank's and Capitol Valley Bank's
businesses and operations, including, but not limited to, the scope of its
business, investments, reserves against deposits, the nature and amount of any
collateral for loans, the time of availability of deposited funds, the issuance
of securities, the payment of dividends, bank expansion and bank activities,
including real estate development and insurance activities, and the making of
periodic reports. Various consumer laws and regulations also apply to Humboldt
Bank and Capitol Valley Bank. The Federal Reserve Board, the Federal Deposit
Insurance Corporation, and the California Department of Financial Institutions
have broad enforcement powers over depository institutions, including the power
to prohibit a bank from engaging in business practices which are considered to
be unsafe or unsound, to impose substantial fines and other civil and criminal
penalties, to terminate deposit insurance, and to appoint a conservator or
receiver under a variety of circumstances. The Federal Reserve Board also has
broad enforcement powers over bank holding companies, including the power to
impose substantial fines and other civil and criminal penalties.

Humboldt Bank and Capitol Valley Bank are subject to detailed, complex and
sometimes overlapping federal and state statutes and regulations in their
routine banking operations. These statutes and regulations include but are not
limited to state usury and consumer credit laws, the Federal Truth-in-Lending
Act and Regulation Z, the Federal Equal Credit Opportunity Act and Regulation B,
the Fair Credit Reporting Act, the Truth in Savings Act and the Community
Reinvestment Act.

Humboldt Bank and Capitol Valley Bank are subject to Federal Reserve Board
regulations that require depository institutions to maintain reserves against
their transaction accounts (principally NOW and regular checking accounts).
Humboldt Bank and Capitol Valley Bank are in compliance with this requirement.
Because required reserves are commonly maintained in the form of vault cash or
in a non-interest-bearing account (or pass-through account) at a Federal Reserve
Bank, the effect of the reserve requirement is to reduce an institution's
earning assets.

Regulation of Bank Holding Companies

Our activities are subject to extensive regulation by the Federal Reserve
Board. The Bank Holding Company Act requires us to obtain the prior approval of
the Federal Reserve Board before (i) directly or indirectly acquiring ownership
or control of any voting shares of another bank or bank holding company if,
after such acquisition, we would own or control more than 5% of the shares of
the other bank or bank holding company (unless the acquiring company already
owns or controls a majority of such shares); (ii) acquiring all or substantially
all of the assets of another bank or bank holding company; or (iii) merging or
consolidating with another bank holding company. The Federal
<PAGE> 73

Reserve Board will not approve any acquisition, merger or consolidation that
would have a substantially anticompetitive result, unless the anticompetitive
effects of the proposed transaction are clearly outweighed by a greater public
interest in meeting the convenience and needs of the community to be served. The
Federal Reserve Board also considers capital adequacy and other financial and
managerial factors in its review of acquisitions and mergers.

With certain exceptions, the Bank Holding Company Act also prohibits us
from acquiring or retaining direct or indirect ownership or control of more than
5% of the voting shares of any company that is not a bank or bank holding
company, or from engaging directly or indirectly in activities other than those
of banking, managing or controlling banks, or providing services for its
subsidiaries. The principal exceptions to these prohibitions involve certain
non-bank activities that, by statute or by Federal Reserve Board regulation or
order, have been determined to be activities closely related to the business of
banking or of managing or controlling banks. In making this determination, the
Federal Reserve Board considers whether the performance of such activities by a
bank holding company can be expected to produce benefits to the public, such as
greater convenience, increased competition or gains in efficiency in resources,
that will outweigh the risks of possible adverse effects such as decreased or
unfair competition, conflicts of interest or unsound banking practices.

Some of the activities determined by Federal Reserve Board regulation to be
incidental to the business of banking are: making or servicing loans or certain
types of leases; engaging in certain insurance and discount brokerage
activities; performing certain data processing services; acting in certain
circumstances as a fiduciary or investment or financial advisor; and making
investments in certain corporations or projects designed primarily to promote
community welfare.

It is Federal Reserve Board policy that bank holding companies serve as a
source of strength for their subsidiary banking institutions. The Federal
Reserve Board considers the adequacy of a bank holding company's capital on
essentially the same risk-adjusted basis as capital adequacy is determined by
the FDIC at the bank subsidiary level. In general, bank holding companies are
required to maintain a minimum ratio of total capital to risk-weighted assets of
8% and Tier 1 capital (consisting principally of shareholders' equity) of at
least 4%. Bank holding companies are also subject to a leverage ratio
requirement. The minimum required leverage ratio for the highest rated companies
is 3%. The minimum required leverage ratio for all other bank holding companies
is 4% or higher. See "Capital Adequacy Guidelines."

Subsidiary banks of ours are subject to restrictions imposed by the Federal
Reserve Act on extensions of credit to us or our subsidiaries, on investments in
their securities and on the use of their securities as collateral for loans to
any borrower. These regulations and restrictions could limit our ability to
obtain funds from Humboldt Bank and Capitol Valley Bank for our cash needs,
including funds for payment of dividends, interest and operating expenses.
Further, under the Bank Holding Company Act and regulations of the Federal
Reserve Board, we and our subsidiaries are prohibited from engaging in certain
tie-in arrangements in connection with any extension of credit, lease or sale of
property or furnishing of services. For example, Humboldt Bank and Capitol
Valley Bank generally may not require a customer to obtain other services from
the banks or us as a condition to an extension of credit to the customer, and
may not require that customer to promise not to obtain other services from a
competitor.

Prior approval of the Commissioner of the Department of Financial
Institutions is necessary to acquire control of a California-chartered bank.
<PAGE> 74

Federal Deposit Insurance

The FDIC insures deposits of federally insured banks, savings banks and
savings associations and safeguards the safety and soundness of the banking
industry. Two separate insurance funds are maintained and administered by the
FDIC. In general, bank deposits are insured through the Bank Insurance Fund.

Deposits in savings associations are insured through the Savings
Association Insurance Fund. SAIF members may merger with a bank as long as the
bank continues to pay the SAIF insurance assessments on the deposits acquired.
Humboldt Bank continues to pay SAIF insurance assessments on deposits acquired
from CalFed and HomeFed branch acquisitions. The Economic Growth and Regulatory
Paperwork Reduction Act as part of the Omnibus Appropriations Bill provided for
the recapitalization of SAIF requiring a one time assessment, payable on
November 30, 1996, of approximately 65 basis points per $100 of deposits of SAIF
insured deposits and for years 1997 through 1999, payment of interest on
Financing Corporation ("FICO") bonds that were issued to help pay for the clean
up of the savings and loan industry. Banks will pay approximately 1.3 cents per
$100 of deposits for this special assessment from 1997 through 1999, and after
the Year 2000, banks will pay approximately 2.4 cents per $100 of deposits until
the FICO bonds mature in 2017 through 2019.

As FDIC member institutions, deposits in Humboldt Bank and Capitol Valley
Bank are insured to a maximum of $100,000 per depositor. The banks are required
to pay quarterly deposit insurance premium assessments to the FDIC. In general
terms, each institution is assessed insurance premiums according to how much
risk to the insurance fund the institution represents. Well-capitalized
institutions with few supervisory concerns are assessed lower premiums than
other institutions. Currently, insurance fund assessments range from zero for
well-capitalized institutions to 0.27% of deposits for institutions that are not
(with a statutory minimum of $2,000 paid by all institutions). Capitol Valley
Bank's current assessment rate is the statutory minimum of $2,000 annually.
Humboldt Bank's current assessment rate is 0.017% annually ($73,813).

The FDIC may terminate the deposit insurance of any insured depository
institution if the FDIC determines that the institution has engaged or is
engaging in unsafe or unsound practices, is in an unsafe or unsound condition to
continue operations or has violated any applicable law, regulation, order or any
condition imposed in writing by, or written agreement with, the FDIC. The FDIC
may also suspend deposit insurance temporarily during the hearing process for a
permanent termination of insurance if the institution has no tangible capital.

Interstate Banking and Branching

On September 28, 1995, Assembly Bill 1482 (known as the Caldera, Weggel and
Killea California Interstate Banking and Branching Act of 1995 and referred to
herein as "CIBBA") was enacted which allows for early interstate branching in
California. Under the federally enacted Riegle-Neal Interstate Banking and
Branching Efficiency Act of 1994 ("IBBEA"), discussed in more detail below,
individual states could "opt-out" of the federal law that would allow banks on
an interstate basis to engage in interstate branching by merging out-of-state
banks with host state banks after June 1, 1997. In addition under IBBEA,
individual states could also "opt-in" and allow out-of-state banks to merge with
host state banks prior to June 1, 1997. The host state is allowed under IBBEA to
impose nondiscriminatory conditions on the resulting depository institution
until June 1, 1997. California, in enacting CIBBA, authorizes out-of-state banks
to enter California by the acquisitions of or mergers with California banks that
have been in existence for at least five years.
<PAGE> 75

Section 3824 of the California Financial Code ("Section 3824") as added by
CIBBA provides for the election of California to "opt-in" under IBBEA allowing
interstate bank merger transactions prior to July 1, 1997, of an out-of-state
bank with a California bank that has been in existence for at least five years.
The early "opt in" has the reciprocal effect of allowing California banks to
merge with out-of-state banks where the states of out-of-state banks have also
"opted in" under IBBEA. The five year age limitation is not required when the
California bank is in danger of failing or in other emergency situations.

Under IBBEA, California may also allow interstate branching through the
acquisition of a branch in California without the acquisition of an entire
California bank. Section 3824 provides an express prohibition against interstate
branching through the acquisition of a branch in California without the
acquisition of the entire California bank. IBBEA also has a provision allowing
states to "opt-in" with respect to permitting interstate branching through the
establishment of de novo or new branches by out-of-state banks. Section 3824
provides that California expressly prohibits interstate branching through the
establishment of de novo branches of out-of-state banks in California, or in
other words, California did not "opt-in" this aspect of IBBEA. CIBBA also amends
the California Financial Code to include agency provisions to allow California
banks to establish affiliated insured depository institution agencies
out-of-state as allowed under IBBEA.

Other provisions of CIBBA amend the intrastate branching laws, govern the
use of shared ATM's, and amend intrastate branch acquisition and bank merger
laws. Another banking bill enacted in California in 1995 was Senate Bill 855
(known as the State Bank Parity Act and is referred to herein as the "SBPA").
SBPA went into effect on January 1, 1996, and its purpose is to allow a
California state bank to be on a level playing field with a national bank by the
elimination of various disparities, provision of California Department of
Financial Institutions' authority to implement changes in California banking law
to parallel changes in national banking law including closer conformance of
California's version of Regulation O to the Federal Reserve Board's version of
Regulation O, and provision of other changes including allowance to repurchase
stock with the prior written consent of the California Department of Financial
Institutions.

The laws governing interstate banking and interstate bank mergers provide
that transactions which result in the bank holding company or bank controlling
or holding in excess of 10% of total deposits nationwide or 30% of total
deposits statewide, will not be permitted except under specified conditions.
However, any state may waive the 30% provision for that state. In addition, a
state may impose a cap of less than 30% of the total amount of deposits held by
a bank holding company or bank provided the cap is not discriminatory to
out-of-state bank holding companies or banks.

Impact of Economic Conditions and Monetary Policies

The earnings and growth of Humboldt Bank and Capitol Valley Bank are and
will be affected by general economic conditions, both domestic and
international, and by the monetary and fiscal policies of the United States
Government and its agencies, particularly the Federal Reserve Board. One
function of the Federal Reserve Board is to regulate the money supply and the
national supply of bank credit in order to mitigate recessionary and
inflationary pressures. Among the instruments of monetary policy used to
implement these objects are open market transactions in United States Government
securities, changes in the discount rate on member bank borrowings, and changes
in reserve requirements held by depository institutions. The monetary policies
of the Federal Reserve Board have had a significant effect on the operating
results of commercial banks in the past and are expected to continue to do so in
the future. However, the effect of these policies on the future business and
earnings of Humboldt Bank and Capitol Valley Bank cannot be accurately
predicted.
<PAGE> 76

Risk Management

Beginning in 1996, Federal Reserve Board examiners were instructed to
assign a formal supervisory rating to the adequacy of an institution's risk
management processes, including its internal controls. The five ratios are
strong, satisfactory, fair, marginal, and unsatisfactory. The specific rating of
risk management and internal controls will be given significant weight when
evaluating management a bank (CAMELS) and bank holding company (BOPEC) rating
systems.

Capital Adequacy Guidelines

The Federal Reserve Board and the FDIC employ similar risk-based capital
guidelines in their examination and regulation of bank holding companies and
financial institutions. If capital falls below the minimum levels established by
the guidelines, the bank holding company, bank or savings bank may be denied
approval to acquire or establish additional banks or non-bank businesses or to
open new facilities. Failure to satisfy applicable capital guidelines could
subject a banking institution to a variety of enforcement actions by federal
regulatory authorities, including the termination of deposit insurance by the
FDIC and a prohibition on the acceptance of "brokered deposits."

In the calculation of risk-based capital, assets and off-balance sheet
items are assigned to broad risk categories, each with an assigned weighting
(0%, 20%, 50% and 100%). Most loans are assigned to the 100% risk category,
except for first mortgage loans fully secured by residential property, which
carry a 50% rating. Most investment securities are assigned to the 20% category,
except for municipal or state revenue bonds, which have a 50% risk-weight, and
direct obligations of or obligations guaranteed by the United States Treasury or
United States Government agencies, which have a 0% risk-weight. Off-balance
sheet items are also taken into account in the calculation of risk-based
capital, with each class of off-balance sheet item being converted to a balance
sheet equivalent according to established "conversion factors." From these
computations, the total of risk-weighted assets is derived. Risk-based capital
ratios therefore state capital as a percentage of total risk-weighted assets and
off-balance sheet items. The ratios established by guideline are minimums only.

Current risk-based capital guidelines require all bank holding companies
and banks to maintain a minimum risk-based total capital ratio equal to 8% and a
Tier 1 capital ratio of 4%. Intangibles other than readily marketable mortgage
servicing rights are generally deducted from capital. Tier 1 capital includes
common shareholders' equity, qualifying perpetual preferred stock (within limits
and subject to certain conditions, particularly if the preferred stock is
cumulative preferred stock), and minority interests in equity accounts of
consolidated subsidiaries, less intangibles. Tier 2 capital includes: (i) the
allowance for loan losses up to 1.25% of risk-weighted assets; (ii) any
qualifying perpetual preferred stock exceeding the amount includable in Tier 1
capital; (iii) hybrid capital instruments; (iv) perpetual debt; (v) mandatory
convertible securities and (vi) subordinated debt and intermediate term
preferred stock of up to 50% of Tier 1 capital. Total capital is the sum of Tier
1 and Tier 2 capital, less reciprocal holdings of other banking organizations
and capital instruments. At December 31, 1998, and September 30, 1999, Humboldt
Bancorp's general loan loss reserve was 1.4% and 1.2%, respectively, of
risk-weighted assets and thus all of the general loan loss reserve was eligible
for inclusion in Tier 2 capital subject to 1.25% restriction. At September 30,
1999, and December 31, 1998, Humboldt Bank's and Capitol Valley Bank's general
loss reserve was 1.3% and 1.4%, and 0.8% and 0.0%, respectively.

Humboldt Bancorp's Tier 1 risk-based capital ratio at September 30, 1999,
and December 31, 1998, was 11.11% and 11.75%, respectively. At September 30,
1999, and December 31, 1998, Humboldt Bank's and Capitol Valley Bank's Tier 1
risk-based capital ratio was 9.11% and 10.41%, and 63.29% and 0.0%,
respectively.
<PAGE> 77

The FDIC has added a market risk component to the capital requirements of
nonmember banks. The market risk component could require additional capital for
general or specific market risk of trading portfolios of debt and equity
securities and other investments or assets. The FDIC's evaluation of an
institution's capital adequacy takes account of a variety of the factors as
well, including interest rate risks to which the institution is subject, the
level and quality of an institution's earnings, loan and investment portfolio
characteristics and risks, risks arising from the conduct of nontraditional
activities and a variety of other factors. Accordingly, the FDIC's final
supervisory judgment concerning an institution's capital adequacy could differ
significantly from the conclusions that might be drawn from the absolute level
of an institution's risk-based capital ratios. Therefore, institutions generally
are expected to maintain risk-based capital ratios that exceed the minimum
ratios discussed above. This is particularly true for institutions contemplating
significant expansion plans and institutions that are subject to high or
inordinate levels of risk. Moreover, although the FDIC does not impose explicit
capital requirements on holding companies of institutions regulated by the
Federal Reserve Bank, the FDIC can take account of the degree of leverage and
risks at the holding company level. If the FDIC determines that the holding
company (or another affiliate of the institution regulated by the FDIC) has an
excessive degree of leverage or is subject to inordinate risks, the FDIC may
require the subsidiary institution(s) to maintain additional capital or the FDIC
may impose limitations on the subsidiary institution's ability to support its
weaker affiliates or holding company. Humboldt Bancorp's risk-based capital
ratio at September 30, 1999, and at December 31, 1998, was 12.33% and 13.00%,
respectively. Humboldt Bank's and Capitol Valley Bank's risk-based capital ratio
at September 30, 1999, and at December 31, 1998, was 10.35% and 11.66%, and
64.12% and 0.0%, respectively.

The Federal Reserve Board and the FDIC have also established a minimum
leverage ratio of 3%. However, for bank holding companies and financial
institutions seeking to expand and for all but the most highly rated banks and
bank holding companies, the Federal Reserve Board and the FDIC expect an
additional cushion of at least 100 to 200 basis points. The leverage ratio
represents Tier 1 capital as a percentage of total assets, less intangibles.
Humboldt Bancorp's leverage ratio at September 30, 1999 and December 31, 1998,
was 8.17% and 8.12%. At September 30, 1999 and December 31, 1998, Humboldt
Bank's and Capitol Valley Bank's leverage ratios were 6.69% and 7.23%, and
40.85% and 0.0%, respectively. At September 30, 1999, and at December 31, 1998,
we and our bank subsidiaries were in compliance with all regulatory capital
requirements.

In order to resolve the problems of undercapitalized institutions and to
prevent a recurrence of the banking crisis of the 1980s and early 1990s, the
Federal Deposit Insurance Corporation Improvement Act of 1991 established a
system known as "prompt corrective action." Under the prompt corrective action
provisions and implementing regulations, every institution is classified into
one of five categories, depending on (i) its total risk-based capital ratio,
Tier 1 risk-based capital ratio and leverage ratio and (ii) certain subjective
factors. The categories are: "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized." A financial institution's operations can be significantly
affected by its capital classification. For example, an institution that is not
"well capitalized" generally is prohibited from accepting brokered deposits and
offering interest rates on deposits higher than the prevailing rate in its
market, and the holding company of any undercapitalized institution must
guarantee, in part, certain aspects of the institution's capital plan. Financial
institution regulatory agencies generally are required to appoint a receiver or
conservator shortly after an institution enters the category of weakest
capitalization. The Federal Deposit Insurance Corporation Improvement Act of
1991 also authorizes the regulatory agencies to reclassify an institution from
one category into a lower category if the institution is in an unsafe or unsound
condition or engaging in an unsafe or unsound practice. Undercapitalized
institutions are required to take certain specified actions in order to increase
their capital or otherwise decrease the risks to the federal deposit insurance
funds.
<PAGE> 78

The following table illustrates the capital and prompt corrective action
guidelines applicable to Humboldt Bank and Capitol Valley Bank, as well as their
total risk-based capital ratios, Tier 1 capital ratios and leverage ratios as of
September 30, 1999.

<TABLE>
<CAPTION>
MINIMUM
MINIMUM NECESSARY TO
HUMBOLDT CAPITOL VALLEY NECESSARY TO BE BE ADEQUATELY
AT SEPTEMBER 30, 1999 BANK BANK WELL CAPITALIZED CAPITALIZED
--------------------- -------- -------------- ---------------- -------------
<S> <C> <C> <C> <C>
Total Risk-Based Capital
Ratio......................... 10.35% 64.12% 10.0% 8.0%
Tier 1 Risk-Based Capital
Ratio......................... 9.11% 63.29% 6.0% 4.0%
Leverage Ratio.................. 6.69% 40.85% 5.0% 4.0%
</TABLE>

In connection with Humboldt Bancorp's organization of Capitol Valley Bank,
Humboldt Bank has committed to the FDIC that it will remain "well capitalized"
and that it will maintain minimum Tier 1 leverage capital ratios of at least
6.5% for the initial 12 months of operation of Capitol Valley Bank, 6.8% for the
next 12 months, and 7.2% for the third 12-month period. During 1999, Humboldt
Bancorp contributed approximately $1.7 million to Humboldt Bank and is expected
to contribute an additional $1 million in the first quarter of 2000.

Limits on Dividends and Other Payments

Our ability to obtain funds for the payment of dividends and for other cash
requirements is dependent on the amount of dividends that may be declared by
Humboldt Bank and Capitol Valley Bank. California bank law provides that
dividends may be paid from the lesser of retained earnings or net income of the
bank for its last three years. Further, a California-chartered bank may not
declare a dividend without the approval of the California Department of
Financial Institutions if the total of dividends and distributions declared in a
calendar year does not exceed the greater of the bank's retained earnings or net
income for its last fiscal year or its current fiscal year. State-chartered
banks' ability to pay dividends may be affected by capital adequacy guidelines
of their primary federal bank regulatory agency as well. See "Capital Adequacy
Guidelines." Moreover, regulatory authorities are authorized to prohibit banks
and bank holding companies from paying dividends if payment of dividends would
constitute an unsafe and unsound banking practice.

The Federal Reserve Board's policy statement governing payment of cash
dividends provides that we should not pay cash dividends on common stock unless
(i) our net income for the past year is sufficient to fully fund the proposed
dividends and (ii) our prospective rate of earnings retention is consistent with
our capital needs, asset quality and overall financial condition.

Transactions with Affiliates

Humboldt Bank and Capitol Valley Bank are required to comply with Sections
23A and 23B of the Federal Reserve Act (pertaining to transactions with
affiliates). An affiliate of a bank is any company or entity that controls, is
controlled by or is under common control with the bank. Generally, Sections 23A
and 23B of the Federal Reserve Act (i) limit the extent to which a bank or its
subsidiaries may engage in "covered transactions" with any one affiliate to an
amount equal to 10% of such institution's capital and surplus, limiting the
aggregate of covered transactions with all affiliates to 20% of capital and
surplus, and (ii) require that all such transactions be on terms substantially
the same, or at least as favorable to the institution or subsidiary, as those
provided to a non-affiliate. The term "covered transaction" includes making
loans, purchasing assets, issuing a guarantee and other similar types of
transactions.
<PAGE> 79

Humboldt Bank's and Capitol Valley Bank's authority to extend credit to
executive officers, directors and greater than 10% shareholders, as well as
entities such persons control, is subject to Sections 22(g) and 22(h) of the
Federal Reserve Act and Regulation O of the Federal Reserve Board. Among other
things, these laws require insider loans to be made on terms substantially
similar to those offered to unaffiliated individuals, place limits on the amount
of loans a bank may make to such persons based, in part, on the bank's capital
position, and require certain approval procedures to be followed. Under Section
22(h), loans to an executive officer, director, or greater than 10% shareholder
(a "principal shareholder") of a bank, and certain affiliated entities of
either, together with all other outstanding loans to such persons and affiliated
entities, may not exceed the bank's loans-to-one-borrower limit, which in
general terms is 15% of tangible capital but can be higher in certain
circumstances. Section 22(h) also prohibits loans in excess of the greater of 5%
of capital or $25,000 to directors, executive officers and principal
shareholders, and their respective affiliates, unless the loans are approved in
advance by a majority of the board of directors, with any "interested" director
not participating in the voting. A violation of these restrictions could result
in the assessment of substantial civil monetary penalties, the imposition of a
cease-and-desist order or other regulatory sanctions. Recent regulations now
permit executive officers and directors to receive the same terms through
benefit or compensation plans that are available to other employees, as long as
the director or executive officer is not given preferential treatment compared
to the other participating employees.

Community Reinvestment Act

Under the Community Reinvestment Act of 1977 and implementing regulations
of the banking agencies, a financial institution has a continuing and
affirmative obligation (consistent with safe and sound operation) to meet the
credit needs of its entire community, including low- and moderate-income
neighborhoods. The CRA does not establish specific lending requirements or
programs for financial institutions, nor does it limit an institution's
discretion to develop the types of products and services that the institution
believes are best suited to its particular community. The CRA requires that bank
regulatory agencies conduct regular CRA examinations and provide written
evaluations of institutions' CRA performance. The CRA also requires that an
institution's CRA performance rating be made public. CRA performance evaluations
are based on a four-tiered rating system: Outstanding, Satisfactory, Needs to
Improve and Substantial Noncompliance.

At the most recent CRA examination of Humboldt Bank, concluded July 27,
1998, Humboldt Bank received a CRA performance rating of "satisfactory."
Although CRA examinations occur on a regular basis, CRA performance evaluations
are used principally in the evaluation of regulatory applications submitted by
an institution. CRA performance evaluations are considered in evaluating
applications for such things as mergers, acquisitions and applications to open
branches. Over the twenty years that the CRA has existed, and particularly in
the last few years, institutions have faced increasingly difficult regulatory
obstacles and public interest group objections in connection with their
regulatory applications, including institutions that have received the highest
possible CRA ratings.

The Financial Services Modernization Act of 1999 revises the CRA by
reducing the frequency of examinations for smaller banks, those with assets of
less than $250 million, and by requiring disclosure by community groups as to
the amount of funds received from lenders and the manner those community groups
used those funds. These revisions are not expected to significantly impact the
application of CRA to Humboldt Bancorp.

Federal Home Loan Bank

The Federal Home Loan Bank of San Francisco serves as credit source for
Humboldt Bank and for Capitol Valley Bank. As members of the Federal Home Loan
Bank, Humboldt Bank and Capitol
<PAGE> 80

Valley Bank are required to maintain an investment in the capital stock of the
FHLB in an amount calculated by reference to the member institution's assets and
the amount of loans, or "advances," from the FHLB. Humboldt Bank is in
compliance with this requirement, with an investment in FHLB of stock of
$953,000 at September 30, 1999. Capitol Valley Bank, while currently a member,
was not a member at September 30, 1999.

Humboldt Bank obtains funds from the Federal Home Loan Bank of San
Francisco pursuant to an "Agreement for Advances and Security Agreement." At
origination or renewal of a loan or advance, the Federal Home Loan Bank of San
Francisco is required to obtain and maintain a security interest in one or more
of the following kinds of collateral: fully disbursed, whole mortgage loans on
improved residential property or securities representing a whole interest in
such loans; securities issued, insured or guaranteed by the United States
Government or an agency thereof; deposits in any FHLB; or other real
estate-related collateral (up to 30% of the member's capital) acceptable to the
FHLB, if the collateral has a readily ascertainable value and the FHLB can
perfect its security interest. As of September 30, 1999, Humboldt Bank had $3.7
million in investment securities and $2.3 million in loans which are
collectively pledged as collateral for the FHLB advances.

State Banking Regulation

As California-chartered institutions, Humboldt Bank and Capitol Valley Bank
are subject to regular examination by the California Department of Financial
Institutions. State banking regulation affects the internal organization of
Humboldt Bank and Capitol Valley Bank as well as their savings, mortgage
lending, investment and other activities. State banking regulation may contain
limitations on an institution's activities that are in addition to limitations
imposed under federal banking law. State banking regulation also contains many
provisions that are consistent with federal banking law, such as provisions of
California banking law limiting loans by either of Humboldt Bank or Capitol
Valley Bank to any one borrower to 15.0% of unimpaired capital and surplus, plus
10.0% of unimpaired capital and surplus if the additional amount is fully
secured by certain forms of "readily marketable collateral."

The California Department of Financial Institutions may initiate
supervisory measures or formal enforcement actions, and if the grounds provided
by law exist, the California Department of Financial Institutions may place a
California-chartered financial institution in conservatorship or receivership.
Whenever the Superintendent of the Division considers it necessary or
appropriate, the Superintendent may also examine the affairs of any holding
company or any affiliate of a California-chartered financial institution.

FIRREA and Cross-Guarantees

Under the Financial Institutions Reform, Recovery, and Enforcement Act of
1989 ("FIRREA"), a depository institution insured by the FDIC can be held liable
for any loss incurred by, or reasonably expected to be incurred by, the FDIC in
connection with (i) the default of a commonly controlled FDIC-insured depository
institution or (ii) any assistance provided by the FDIC to a commonly
FDIC-insured depository institution in danger of default (the "Cross
Guarantee"). "Default" is defined generally as the appointment of a conservator
or receiver, and "in danger of default" is defined generally as the existence of
certain conditions indicating either that there is no reasonable prospect that
the institution will be able to meet the demands of its depositors or pay its
obligations in the absence of regulatory assistance, or that its capital has
been depleted and there is no reasonable prospect that it will be replenished in
the absence of regulatory assistance. The Cross Guarantee thus enables the FDIC
to assess a holding company's healthy BIF members for the losses of any of such
holding company's failed BIF members. Cross Guarantee liabilities are generally
<PAGE> 81

superior in priority to obligations of the depository institution to its
shareholders due solely to their status as shareholders and obligations to other
affiliates. This law applies to Humboldt Bank and Capitol Valley Bank.

Recent Legislation

Potentially significant changes have been enacted recently by Congress are
discussed below.

The Financial Services Modernization Act of 1999 substantially eliminates
most of the separations between banks, brokerage firms, and insurers enacted by
the Glass-Steagall Act of 1933. The reform legislation permits securities firms
and insurers to buy banks and banks to underwrite insurance and securities.
States retain regulatory authority over insurers. The Treasury Department's
Office of the Comptroller of the Currency has authority to regulate bank
subsidiaries that underwrite securities and the Federal Reserve has authority
over bank affiliates for activities such as insurance underwriting and
real-estate development.

In 1997, California adopted the Environmental Responsibility Acceptance Act
(the "Act") (Cal. Civil Code Sections 850-855) to facilitate the notification of
government agencies and potentially responsible parties (for example, for
cleanup) of the existence of contamination and the cleanup or other remediation
of contamination by the potentially responsible parties. The Act requires, among
other things, that owners of sites who have actual awareness of a release of a
hazardous material that exceeds a specified notification threshold to take all
reasonable steps to identify the potentially responsible parties and to send a
notice of potential liability to the parties and the appropriate oversight
agency.

During 1996, new federal legislation amended the Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA") and the
underground storage tank provisions of the Resource Conservation and Recovery
Act to provide lenders and fiduciaries with greater protections from
environmental liability. In June 1997, the U.S. Environmental Protection Agency
("EPA") issued its official policy with regard to the liability of lenders under
CERCLA as a result of the enactment of the Asset Conservation, Lender Liability
and Deposit Insurance Protection Act of 1996. Although numerous exceptions
exist, California law provides that a lender acting in the capacity of a lender
will not be liable under any state or local statute, regulation or ordinance,
other than the California Hazardous Waste Control Law, to undertake a cleanup,
pay damages, penalties or fines, or forfeit property as a result of the release
of hazardous materials at or from the property.

Future Legislation and Regulations

From time to time, legislation is enacted which has the effect of
increasing the cost of doing business, limiting or expanding permissible
activities, or affecting the competitive balance between banks and other
financial institutions. Proposals to change the laws and regulations governing
the operations and taxation of banks and other financial institutions are
frequently made in Congress, in the California legislature, and by various bank
regulatory agencies. No prediction can be made as to the likelihood of any major
changes or the impact legislative changes might have on Humboldt Bancorp.

MANAGEMENT OF HUMBOLDT BANCORP

The board of directors of Humboldt Bancorp consists of 13 directors. All of
the directors of Humboldt Bancorp then in office immediately prior to the
completion of the merger will continue to serve as directors of Humboldt
Bancorp.
<PAGE> 82

Board of Directors

Each of the directors has been elected to serve for the ensuing year and
until his or her successor is elected and qualified at the annual stockholder
meeting of Humboldt Bancorp for the year 2000. As of December 31, 1999, the
directors, their ages, and their principal occupations during the past five
years are:

<TABLE>
<S> <C> <C>
Ronald F. Angell..................... 57 Attorney and Partner with the firm of Roberts, Hill,
Bragg, Angell & Perlman. Board member since 1989.
Marguerite Dalianes.................. 56 Former owner, Dalianes Worldwide Travel Service, since
1975. Board member since 1992.
Gary L. Evans........................ 57 Certified Public Accountant associated with the firm
of Aalfs, Evans & Company since 1976. Board member
since 1989.
Lawrence Francesconi................. 68 Retired. From 1952 to 1992, owner of Redwood Bootery,
retail shoe store. Board member since 1991. Chairman
of the Board since March 1999.
Clayton R. Janssen................... 74 Attorney and Partner with the firm of Janssen, Malloy,
Needham, Morrison & Koshkin LLP. Board member since
1993.
James O. Johnson..................... 71 Owner, Jim Johnson General Contractor and Property
Manager. Board member since 1997.
Theodore S. Mason.................... 57 President and Chief Executive Officer of Humboldt
Bancorp since 1996 and of Humboldt Bank from 1989
until July 15, 1999. Board member since 1989.
John C. McBeth....................... 53 President, O & M Industries, mechanical contractors,
since 1964. Board member since 1991.
Jerry L. Thomas...................... 54 President and Director of Special Projects, Eureka
Fisheries, Inc. Board member since 1998.
Edythe E. Vaissade................... 61 Retired. From 1989 to 1997, Vice President, Humboldt
Bank. Board member since 1998.
Thomas W. Weborg..................... 57 President/Chief Executive Officer of Cucina Holdings,
Inc. Board member since November, 1999.
John R. Winzler...................... 69 Consulting Engineer and Chairman of the Board of
Winzler & Kelly. Board member since 1989.
Michael L. Renner.................... 46 President, L&M Renner, Inc. Board member since 1996.
</TABLE>
<PAGE> 83

Executive Officers

As of December 31, 1999, the following are the names of the executive
officers and significant employees of Humboldt Bancorp and its subsidiaries, and
information concerning each of them:

<TABLE>
<CAPTION>
OFFICER NAME AGE POSITION BIOGRAPHICAL SKETCH
------------ --- -------- -------------------
<S> <C> <C> <C>
Theodore S. Mason.... 57 President & Chief Mr. Mason has been President and Chief
Executive Officer of Executive Officer of the Bank/Bancorp
Humboldt Bancorp since its inception in 1989. From 1984
to 1989, he was an area manager for the
Bank of America in the North Coast
area, headquartered in Eureka. He also
served as manager for Bank of America's
Eureka Main office for approx. five
years and has been in banking for over
30 years. Mr. Mason is a graduate of
the University of San Francisco.
Paul A. Ziegler...... 41 Executive Vice Mr. Ziegler joined Bank/Bancorp as the
President of Vice President & Chief Administrative
Humboldt Bancorp Officer in January 1994. Prior to
joining Humboldt Bank Mr. Ziegler
worked at U.S. Bank of California in
Eureka, California from 1988 to 1993 as
their Senior Vice President and Area
Manager. Mr. Ziegler started his
banking career locally with Bank of
Loleta, last serving in 1988 as their
Senior Vice President/Chief Financial
Officer. Mr. Ziegler is a graduate of
the University of Southern California.
Alan J. Smyth........ 66 Senior Vice Mr. Smyth has been the Senior Vice
President, Cashier President/Cashier for the Bank/Bancorp
and Chief Financial since September 1989. From 1981 to
Officer of Humboldt 1985, Mr. Smyth was the Vice President
Bancorp and Cashier for Great Valley Bank and
from 1985 to 1989 was the Senior Vice
President and Cashier for Redding Bank
of Commerce. Mr. Smyth graduated from
California Lutheran University in 1974.
Ronald V. Barkley.... 63 Senior Vice Mr. Barkley has been the Senior Vice
President and Loan President/Chief Credit Officer of the
Administrator of Bank/ Bancorp since June 1989. From
Humboldt Bancorp 1984 to 1989 he served as Vice
President/Manager of the Real
Estate/SBA Departments of North Valley
Bank in Redding, California. From 1982
to 1984 Mr. Barkley served as the
President/CEO of Redding Savings and
Loan Association in Redding,
California. Mr. Barkley spent 15 years
in various management positions with
Crocker National Bank. Mr. Barkley
graduated from Pacific Coast School of
Banking in 1980.
</TABLE>
<PAGE> 84

<TABLE>
<CAPTION>
OFFICER NAME AGE POSITION BIOGRAPHICAL SKETCH
------------ --- -------- -------------------
<S> <C> <C> <C>
John E. Dalby........ 41 President and Chief Mr. Dalby joined Humboldt Bank in
Executive Officer of October 1991 as Vice President and
Humboldt Bank Manager of the Bank's Fortuna Branch
and served in that capacity until March
of 1993 when he accepted the position
of Vice President and Manager of the
Eureka Main Office. Mr. Dalby was
promoted to his current position as the
President and C.E.O. of Humboldt Bank
in July of 1999. Prior to his
employment with Humboldt Bank Mr. Dalby
worked for Bank of America from
November 1983 to January 1987 and again
from July 1990 to October 1991; he was
also employed by Centennial Bank in
Springfield, Oregon from January 1987
to February 1989. Mr. Dalby attended
the University of Oregon and Northwest
Christian College, both in Eugene,
Oregon and holds a B.S. Degree in
Business Administration -- Finance
(1982).
Richard L. 54 President and Chief Prior to his appointment as the
Whitsell........... Executive Officer of President & C.E.O. of Capitol Valley
Capitol Valley Bank, Bank, Mr. Whitsell served as the Vice
Roseville, President and Branch Administrator for
California Humboldt Bank since 1997. From 1994
through May 1997 he was Vice President
& Branch Manager for the Bank's Arcata
Office. From January 1992 through May
1996 he was Senior Vice President and
Branch Administrator for U.S. Bank in
Reno, Nevada. Prior to that he was
Senior Vice President and Branch
Administrator for Bank of America in
Reno, Nevada for approximately two
years and has been in banking for over
27 years. Mr. Whitsell holds a Bachelor
of Science degree from Sacramento State
and a Masters (equivalent) from
University of Virginia.
Kenneth J. Musante... 34 Vice President and Vice President and Manager of Humboldt
Manager of the Bank's Merchant Bankcard Department
Merchant Bankcard since 1993. Mr. Musante was previously
Department of employed by Wells Fargo as a Technical
Humboldt Bank Support Officer and Manager at their
Business Banking Division in Walnut
Creek, California from August 1992
until his employment with Humboldt
Bank. Additionally, Mr. Musante holds a
Bachelor of Science degree from the
University of California, Davis.
</TABLE>
<PAGE> 85

Compensation of Directors

Directors of Humboldt Bancorp who are also employees of Humboldt Bancorp or
its subsidiaries do not receive compensation for their service on Humboldt
Bancorp's Board of Directors. During 1998, for the period January through May,
non-employee directors of Humboldt Bancorp received a fee of $400 per board
meeting attended and $200 per board meeting not attended; Loan Committee members
received $150 per meeting attended; and all other committee members received
$100 per meeting attended. Since June 1998, non-employee directors of Humboldt
Bancorp received a fee of $700 per board meeting attended, $200 per board
meeting not attended, $450 per special board meeting attended, and $200 per
meeting for all committee meetings attended.

After the merger, the directors of Humboldt Bancorp will receive fees in
amounts which are substantially similar to those presently paid to the
directors.

Limitation of Liability and Indemnification

The Articles of Incorporation and Bylaws of Humboldt Bancorp provide for
indemnification of agents including directors, officers and employees, to the
maximum extent allowed by California law including the use of an indemnity
agreement. Humboldt Bancorp Articles further provide for the elimination of
director liability for monetary damages to the maximum extent allowed by
California law. The indemnification law of the state of California generally
allows indemnification in matters not involving the right of the corporation, to
an agent of the corporation if that person acted in good faith and in a manner
that person reasonably believed to be in the best interests of the corporation,
and in the case of a criminal matter, had no reasonable cause to believe the
conduct of that person was unlawful. California law, with respect to matters
involving the right of a corporation, allows indemnification of an agent of the
corporation, if the agent acted in good faith, in a manner that person believed
to be in the best interests of the corporation and its shareholders; provided
that there will be no indemnification for:

- amounts paid in settling or otherwise disposing of a pending action
without court approval;

- expenses incurred in defending a pending action which is settled or
otherwise disposed of without court approval;

- matters in which the agent will be determined to be liable to the
corporation unless and only to the extent that the court in which the
proceeding is or was pending will determine that the agent is entitled to
be indemnified; or

- other matters specified in the California General Corporation Law.

Humboldt Bancorp's Articles and Bylaws provide that Humboldt Bancorp will
to the maximum extent permitted by law have the power to indemnify its
directors, officers and employees. Humboldt Bancorp's Bylaws also provide that
Humboldt Bancorp will have the power to purchase and maintain insurance covering
its directors, officers and employees against any liability asserted against any
of them and incurred by any of them, whether or not Humboldt Bancorp would have
the power to indemnify them for those liabilities under the provisions of
applicable law or the provisions of Humboldt Bancorp's Bylaws.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling Humboldt
Bancorp, Humboldt Bancorp has been informed that in the opinion of the SEC,
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
<PAGE> 86

HUMBOLDT BANCORP
EXECUTIVE COMPENSATION

As to Humboldt Bancorp's Chief Executive Officer and each other executive
officer of Humboldt Bancorp and Humboldt Bank who received total compensation in
excess of $100,000 in 1998 (the "named executive officers"), the following table
sets forth all cash and non-cash compensation (including bonuses, other annual
compensation, deferred compensation, and options granted) received from Humboldt
Bancorp and Humboldt Bank for services performed in all capacities during the
last three years.

Summary Compensation

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------
OTHER LONG TERM COMPENSATION
ANNUAL -------------------------
COMPENSATION DEFERRED OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) (2) COMPENSATION(3) GRANTED
--------------------------- ---- -------- -------- ------------ --------------- -------
<S> <C> <C> <C> <C> <C> <C>
Theodore S. Mason.............. 1998 $125,000 $58,809 $2,434 $150,000 5,500
President and Chief 1997 $125,000 $45,990 $1,782 $125,000 6,050
Executive Officer 1996 $105,000 $70,906 $1,658 $100,000 6,655
Alan J. Smyth.................. 1998 $ 85,000 $12,932 $3,704 $ 90,000 0
Senior Vice President and 1997 $ 85,000 $ 1,865 $2,107 $ 75,000 5,775
Chief Financial Officer 1996 $ 70,000 $68,017 $2,331 $ 50,000 3,327
Ronald V. Barkley.............. 1998 $ 85,000 $35,550 $2,279 $ 45,000 0
Senior Vice President and 1997 $ 85,000 $34,991 $1,882 $ 60,000 5,775
Loan Administrator 1996 $ 70,000 $12,926 $2,250 $ 45,000 3,327
Paul A. Ziegler................ 1998 $ 77,000 $51,340 $ 738 $ -- 0
Executive Vice President 1997 $ 77,000 $25,825 $ 554 $ -- 14,025
1996 $ 70,000 $24,600 $ 631 $ -- 3,327
</TABLE>

- -------------------------
(1) Includes amounts paid to Messrs. Mason, Smyth, Barkley, and Ziegler as
provided by Humboldt Bank's Incentive Bonus Plan.

(2) Includes amounts imputed to Messrs. Mason, Smyth, Barkley, and Ziegler as
income for tax purposes as provided by Humboldt Bank's automobile program
and Humboldt Bank's life insurance program.

(3) Includes amounts of salary or bonus deferred by Messrs. Mason, Smyth, and
Barkley as provided by Humboldt Bank's Deferred Compensation Plan. The
amounts in this column are not included in the Salary and Bonus columns.

Employment Contracts

Humboldt Bank entered into an employment agreement with Mr. Mason on May 1,
1989, whereby Mr. Mason agreed to serve as Humboldt Bank's President and Chief
Executive Officer. The term of this agreement was extended on December 10, 1996,
to January 1, 2001. The agreement has been revised to refer to Humboldt Bancorp
effective July 15, 1999 and has been extended to January 1, 2002. Under the
terms of the agreement, Mr. Mason is entitled to receive a base salary of
$125,000 per year and an incentive bonus based on a percentage ranging from 4%
to 2.5% of Humboldt Bancorp's pre-tax net profits as provided by an Incentive
Bonus Plan. During his term of
<PAGE> 87

employment, Mr. Mason may be reimbursed for travel, meals, entertainment
expenses, service to charitable organizations, and membership in selected
committees and other organizations. In addition, he is eligible for typical
employee benefits including paid vacation, sick leave, medical insurance, and
the use of an automobile owned by Humboldt Bank.

Humboldt Bank entered into an employment agreement with Mr. Smyth on August
19, 1989, whereby Mr. Smyth agreed to serve as Humboldt Bank's Senior Vice
President, Chief Financial Officer and Cashier. Mr. Smyth's employment agreement
was for an initial three years to be automatically renewed for successive
one-year terms. Mr. Smyth's current annual salary is $85,000 per annum. In
addition, Mr. Smyth is entitled to a percentage of Humboldt Bank's pre-tax
profits ranging from 2% to .5%.

Humboldt Bank entered into an employment agreement with Mr. Barkley on June
1, 1989, whereby Mr. Barkley agreed to serve as Humboldt Bank's Senior Vice
President and Senior Loan Officer. Mr. Barkley's employment agreement was for an
initial two years to be automatically renewed for successive one-year terms. Mr.
Barkley's current annual salary is $85,000 per annum. In addition, Mr. Barkley
is entitled to a percentage of Humboldt Bancorp's pre-tax profits ranging from
2% to .5%.

Benefit Plans

Retirement Plan: Currently, Humboldt Bank has a defined contribution
retirement plan covering substantially all of Humboldt Bank's employees.
Management is in the process of adopting the plan as a Humboldt Bancorp Plan for
which Humboldt Bank and Capitol Valley Bank will sign on as sponsors. Bank
contributions to the plan are made at the discretion of the Board of Directors
in an amount not to exceed the maximum amount deductible under the profit
sharing plan rules of the Internal Revenue Service. Employees may elect to have
a portion of their compensation contributed to the plan in conformity with the
requirements of Section 401(k) of the Internal Revenue Code. Salaries and
employee benefits expense includes Bank contributions to the plan of $189,000
during 1998, $134,000 during 1997 and $98,000 during 1996.

Director Fee Plan: Humboldt Bancorp has adopted the Humboldt Bank Director
Fee Plan (the "Fee Plan"). The Fee Plan permits each director of Humboldt
Bancorp to elect to receive his/her director's fees in the form of Humboldt
Bancorp common stock, cash, or a combination of Humboldt Bancorp common stock
and cash, and to elect to defer the receipt of any of the foregoing until the
end of his/her term as a Bank director. If deferral is elected, the amount of
the director's fees will be credited to an account on behalf of the director.
However, this crediting will constitute a mere promise on the part of Humboldt
Bank and Humboldt Bancorp to pay/distribute on this account. The account is
otherwise unsecured and unfunded, and creditors of Humboldt Bank and Humboldt
Bancorp with general claims may assert a right to the account. The Fee Plan
provides for the issuance of up to 40,000 shares of Humboldt Bancorp common
stock. The amount of director fees deferred in 1998 was $58,000, in 1997 was
$43,000, and in 1996 was $20,000. At December 31, 1998, the liability for
amounts due under this plan totaled $110,000 or approximately 4,800 shares of
stock.

Employee Stock Bonus Plan: Currently, Humboldt Bank has an Employee Stock
Bonus Plan, which is funded annually at the sole discretion of the Board of
Directors. Management is in the process of adopting the plan as a Humboldt
Bancorp Plan for which Humboldt Bank would be a sponsor. Capitol Valley Bank
would not initially become a sponsor. Funds are invested in Humboldt Bancorp
common stock, when available, which is purchased at the current market price on
behalf of all employees except the executive officers of Humboldt Bancorp. The
compensation cost recognized for 1998, 1997, and 1996 was $20,000 each year.
<PAGE> 88

Post-Employment Benefit Plans and Life Insurance Policies: Humboldt Bancorp
and Humboldt Bank have entered into Officer Salary Continuation Agreements and
Deferred Compensation Agreements with key executive officers. The Officer Salary
Continuation Agreements provide for payments in the event of retirement, death,
disability or change in control. The Deferred Compensation Agreements allow the
employees to defer a portion of current compensation in exchange for Humboldt
Bancorp's and Humboldt Bank's commitment to pay a deferred benefit at
retirement. Deferred compensation is vested as to the amounts deferred. If death
occurs prior to or during retirement, Humboldt Bancorp will pay the employee's
beneficiary or estate the benefits set forth in the agreement. Both the Officer
Salary Continuation Agreements and the Deferred Compensation Agreements are
unfunded although, as discussed below, Humboldt Bancorp has purchased life
insurance policies in connection with the implementation.

The Officer Salary Continuation Agreements provide that upon retirement, or
death prior to retirement, the following executive officers will be entitled to
the following benefits: Theodore S. Mason -- $50,000 per year for 15 years; Alan
J. Smyth -- $40,000 per year for 10 years; Ronald V. Barkley -- $40,000 per year
for 10 years; Paul A. Ziegler -- $75,481 for 15 years; Kenneth J.
Musante -- $78,542 per year for 15 years. In the event of disability, these
employees will be entitled to the following amounts payable over the same period
unless otherwise noted: Theodore S. Mason -- $387,739, Alan J.
Smyth -- $252,237, Ronald V. Barkley -- $252,237, Paul A. Ziegler -- $17,638 in
a lump sum or as otherwise agreed to, and Kenneth J. Musante -- $112,653 in a
lump sum or as otherwise agreed to. Salary continuation benefits may also be
paid if termination is without cause or due to a change in control of Humboldt
Bancorp. Otherwise, no benefits are paid upon termination.

The Officer Salary Continuation Agreements define a change in control as:

as that event that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A under the 1934 Act or in response to
any other form or report to the regulatory agencies or governmental
authorities having jurisdiction over Humboldt Bank or any stock exchange on
which Humboldt Bank or Humboldt Bancorp shares are listed which requires
the reporting of a change in control;

any merger, consolidation or reorganization of Humboldt Bank or Humboldt
Bancorp in which Humboldt Bank or Humboldt Bancorp does not survive;

any sale, lease exchange, mortgage, pledge, transfer or other disposition
of any assets of Humboldt Bank or Humboldt Bancorp having an aggregate fair
market value of 50% of the total value of the assets of Humboldt Bank or
Humboldt Bancorp, reflected in the most recent balance sheet of Humboldt
Bank or Humboldt Bancorp;

any person as defined in the 1934 Act is or becomes the beneficial owner,
directly or indirectly, of Humboldt Bancorp securities representing 25% or
more of the combined voting power of Humboldt Bancorp's then outstanding
securities;

in any one-year period, individuals who at the beginning of such period
constitute the Board of Directors of Humboldt Bank or Humboldt Bancorp
cease for any reason to constitute at least a majority thereof, unless the
election, or the nomination for election by Humboldt Bancorp's
shareholders, of each new director is approved by a vote of at least 3/4 of
the directors then still in office who were directors at the beginning of
the period; or

a majority of the members of the Board of Directors of Humboldt Bank or
Humboldt Bancorp in office prior to the happening of any event determines
in their sole discretion that as a result of such event there has been a
change in control.
<PAGE> 89

In the event of a change of control the executive officers named below will be
entitled to full vesting of their benefits under the Officer Salary Continuation
Agreements, and if an executive officer in connection with the change of control
is terminated without cause, he shall be entitled to the fully vested payments.
The fully vested payments are as follows: Theodore S. Mason -- $387,739, Alan J.
Smyth -- $252,237, Ronald V. Barkley -- $252,237, Paul A. Ziegler -- $17,638,
and Kenneth J. Musante -- $146,665.

Humboldt Bank has purchased single premium life insurance policies in
connection with the implementation of these salary continuation and deferred
compensation plans. The policies provide protection against the adverse
financial effects from their death and provide income to offset expenses
associated with the plans. The specified employees are insured under the
policies, but Humboldt Bank or Humboldt Bancorp is the owner and beneficiary. At
December 31, 1998, 1997, and 1996, the cash surrender value of these policies
totaled approximately $4,943,000, $4,810,000 and $4,583,000, respectively.

At December 31, 1998, 1997, and 1996, liabilities recorded for the
estimated present value of future salary continuation and deferred compensation
benefits totaled approximately $2,038,000, $1,451,000, and $932,000,
respectively. In the event of death or under other selected circumstances,
Humboldt Bank or Humboldt Bancorp is contingently liable to make future payments
greater than the amounts recorded as liabilities. Based on present
circumstances, Humboldt Bank does not consider it probable that this contingent
liability will be incurred or that in the event of death, a liability would be
material after consideration of life insurance benefits.

Stock Option Plan: Humboldt Bancorp has a stock option plan under which
incentive and non-statutory stock options, as defined under the Internal Revenue
Code, may be granted. Options representing 414,777 shares of Humboldt Bancorp's
issued and outstanding no par value common stock may be granted under the
Humboldt Bancorp stock option plan by the Board of Directors or a committee of
the board, to directors, officers, and key, full-time employees at an exercise
price not less than the fair market value of the shares on the date of grant. As
of December 31, 1998, 183,862 options were outstanding under the Humboldt
Bancorp Stock Option Plan. Options cannot have an exercise period of longer than
ten years. Incentive stock options have vesting schedules of three years, and
non-statutory stock options vest immediately. In addition, as of December 31,
1998, 710,697 options are outstanding as a result of Humboldt Bancorp's
assumption of Humboldt Bank options granted prior to the reorganization.

The Stock Option Plan contains an antidilution provision in the event of a
private or public offering of Humboldt Bancorp common stock. Under the current
antidilution provision, certain holders of outstanding options will be granted
additional options to purchase shares of Humboldt Bancorp common stock based on
the number of shares issued in the merger, and the public offering. Additional
options will be granted to a current employee, officer or director who holds
options so as to maintain an optionee's proportionate interest in Humboldt
Bancorp by reason of his or her unexercised portions of options as before the
issuance. However, the total number may not exceed that available for grant
under the Humboldt Bancorp Stock Option Plan and the former Humboldt Bank Stock
Option Plan.

The exercise for such additional options shall be the fair market value of
the Humboldt Bancorp common stock on the date of the additional grant, except
that in the event of an incentive stock option, the exercise price shall be 110%
if the optionee is an employee owning more than 10% of the total combined voting
power of all classes of stock of Humboldt Bancorp.
<PAGE> 90

The following tables set forth the number of options granted to Humboldt
Bancorp's executive officers during 1998 and the number and value of unexercised
options held by these executive officers as of the end of 1998.

OPTION GRANTS AND EXERCISES BY
EXECUTIVE OFFICER IN 1998

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS GRANTED ANNUAL RATES OF STOCK
OPTIONS TO EMPLOYEES EXERCISE PRICE EXPIRATION PRICE APPRECIATION FOR
NAME GRANTED IN 1998 PER SHARE DATE OPTION TERM 5%/10%
---- ------- --------------- -------------- ----------- ----------------------
<S> <C> <C> <C> <C> <C>
Theodore S. Mason.... 5,500 100.0% $10.73 May 9, 2008 $96,129 / $153,069
</TABLE>

AGGREGATED OPTION EXERCISES IN 1998

<TABLE>
<CAPTION>
NUMBER OF
UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED
YEAR-END IN-THE-MONEY
SHARES ACQUIRED ON VALUE (EXERCISABLE/ (EXERCISABLE/
NAME EXERCISE REALIZED UNEXERCISABLE) UNEXERCISABLE)
---- ------------------ -------- ---------------------- --------------------
<S> <C> <C> <C> <C>
Theodore S. Mason........ 16,910 $99,938 139,441 / 5,684 $512,208 / $53,849
Alan J. Smyth............ 3,023 $16,234 68,218 / 2,841 $248,558 / $27,410
Ronald V. Barkley........ 3,000 $16,140 79,611 / 2,841 $273,053 / $27,410
Paul A. Ziegler.......... -- -- 31,711 / 8,341 $209,538 / $87,910
</TABLE>

Compensation Committee Interlocks and Insider Participation

The Personnel Committee is composed of Ronald F. Angell (Chairman), Mike
Renner, Marguerite Dalianes, Larry Francesconi, John R. Winzler and Theodore
Mason. Mr. Mason is president of Humboldt Bancorp and was president of Humboldt
Bank. Ms. Dalianes is a former owner of Dalianes Worldwide Travel Service, which
during 1998 provided travel services in the amount of $73,461 to Humboldt
Bancorp and its subsidiaries.

SECURITIES OWNERSHIP

Principal Shareholders and Share Ownership of Management and Directors

The following table sets forth, as of December 31, 1999, the number and
percentage of shares of Humboldt Bancorp's outstanding common stock before and
after the offering, which are beneficially owned, directly or indirectly, by:

- each shareholder who owns more than 5% of the outstanding shares;

- each of Humboldt Bancorp's directors;

- Humboldt Bancorp's named executive officers; and

- all of Humboldt Bancorp's directors and executive officers as a group.
<PAGE> 91

The shares "beneficially owned" are determined under Securities and Exchange
Commission rules, and do not necessarily indicate ownership for any other
purpose. In general, beneficial ownership includes shares over which the
indicated person has sole or shared voting or investment power and shares which
he/she has the right to acquire within 60 days of December 31, 1999. Unless
otherwise indicated, the persons listed have sole voting and investment power
over the shares beneficially owned. Management is not aware of any arrangements
which may, at a subsequent date, result in a change of control of Humboldt
Bancorp.

<TABLE>
<CAPTION>
PRIOR TO THE OFFERING AFTER THE OFFERING
----------------------------------------- ------------------------------------------------------------
SHARES SHARES MINIMUM MAXIMUM
BENEFICIALLY BENEFICIALLY OFFERING OFFERING
NAME OWNED(1)(2) OPTIONS(3)(4) PERCENTAGE OWNED(1)(2) OPTIONS(3)(4) PERCENTAGE(5) PERCENTAGE(6)
---- ------------ ------------- ---------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Francis and Dorothy
Dutra................... 273,725 1,453 5.26% 273,725 1,453 4.94% 4.66%
1964 South Maru Road
Arcata, California 95521
Ronald F. Angell.......... 106,412 37,011 2.04% 108,847 39,446 1.97% 1.89%
Marguerite Dalianes....... 58,424 36,857 1.12% 60,849 39,282 1.10% 1.07%
Gary L. Evans............. 112,580 67,407 2.16% 117,015 71,842 2.11% 2.06%
Lawrence Francesconi...... 84,751 31,382 1.63% 86,816 33,447 1.57% 1.51%
Clayton R. Janssen........ 68,028 14,390 1.31% 68,975 15,337 1.25% 1.19%
James O. Johnson.......... 23,082 7,114 * 23,550 7,582 * *
John McBeth............... 124,596 7,114 2.39% 125,064 7,582 2.26% 2.14%
Michael Renner............ 54,965 10,579 1.06% 55,661 11,275 1.01% *
John R. Winzler........... 134,028 52,164 2.58% 137,460 55,596 2.48% 2.39%
Jerry L. Thomas........... 14,476 4,250 * 14,756 4,530 * *
Edythe E. Vaissade........ 97,134 73,383 1.87% 101,962 78,211 1.84% 1.81%
Theodore S. Mason......... 192,440 157,646 3.70% 202,813 168,019 3.66% 3.61%
Alan J. Smyth............. 98,835 78,054 1.90% 103,971 83,190 1.88% 1.85%
Ronald V. Barkley......... 78,717 78,217 1.51% 83,863 83,363 1.51% 1.51%
Paul A. Ziegler........... 33,083 33,083 * 35,260 35,260 * *
Thomas W. Weborg.......... 10,266 1,100 * 10,338 1,172 * *
All Directors and
Executive Officers (16
Persons)................ 1,565,542 691,204 30.08% 1,610,925 736,587 29.09% 28.12%
</TABLE>

- -------------------------
* Less than 1%.

(1) We have determined beneficial ownership in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that person,
shares of common stock subject to options or warrants held by that person
that are currently exercisable within 60 days of December 31, 1999, are
deemed outstanding. Such shares, however, are not deemed outstanding for the
purpose of computing the percentage ownership of each other person. Except
as indicated in the footnote to this table and pursuant to applicable
community property laws, each shareholder named in the table has sole voting
power and investment power with respect to the shares set forth opposite
such shareholder's name.

(2) Reflects an increase in the number of shares of common stock as a result of
the 10% stock dividend declared on January 11, 2000, payable on February 7,
2000.

(3) Represents options that may be exercised within sixty days. The number of
shares of common stock subject to options are included in the Shares
Beneficially Owned column.

(4) Reflects an increase in the number of options as a result of the
antidilution provision in the Stock Option Plan and the 10% stock dividend
declared on January 11, 2000, payable on February 7, 2000.

(5) The percentage calculated is based on the minimum offering number of shares
and an increase in the number of options as a result of the antidilution
provisions in the Stock Option Plan.

(6) The percentage calculated is based on the maximum offering number of shares
and reflects an increase in the number of options as a result of the
antidilution provision in the Stock Option Plan.
<PAGE> 92

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We have entered into a $3.8 million line of credit with Bancorp Financial
Services, in which we own a 50% interest. The line of credit expires May 2,
2000, and bears interest at the prime rate published in the Wall Street Journal
plus 0.25% (currently 8.50%) per annum. During the years ended December 31, 1998
and 1997, the maximum amount outstanding under the line of credit was $3.0
million and $2.0 million. Further, during the year ended December 31, 1998 and
1997, Humboldt Bank purchased $2.0 million and $6.8 million in leases generated
by Bancorp Financial Services.

Some of the Humboldt Bancorp's directors and executive officers and their
immediate families, as well as the companies with which they may have interest
in, have had loans with Humboldt Bank in the ordinary course of the Bank's
business. In addition, Humboldt Bank expects to have loans with these persons in
the future. In management's opinion, all these loans and commitments to lend
were made in the ordinary course of business, were made in compliance with
applicable laws on substantially the same terms, including interest rates and
collateral, as those prevailing for comparable transactions with other persons
of similar creditworthiness and, in the opinion of management, did not involve
more than a normal risk of collectibility or present other unfavorable features.
The outstanding balance under extensions of credit by Humboldt Bank to directors
and executive officers of Humboldt Bancorp and Humboldt Bank and to the
companies that these directors and executive officers may have an interest was
$6,451,000, $6,218,000 and $3,624,000 as of December 31, 1998, 1997 and 1996,
respectively.

We have, and in the future will, enter into transactions with our directors
or companies in which they may have an interest. During the year ended December
31, 1998, 1997 and 1996 no transaction exceeded $60,000, except we engaged the
services of Dalianes Worldwide Travel Service, which was formerly owned by
Marguerite Dalianes, one of our directors. Fees paid by us to Dalianes Worldwide
Travel Service for the year ended December 31, 1998 amounted to $73,461.

PLAN OF DISTRIBUTION

The common stock is being offered and sold through the efforts of our
directors and executive officers. Their activities in connection with this
offering will be in addition to their other duties, and they will not receive
any additional compensation, commission, or other remuneration for such
activities.

OFFERING

If we do not terminate the offering earlier, the offering of our common
stock will continue until 640,000 shares ($8 million) are sold, or March 24,
2000, whichever first occurs, subject to the sale of at least $4 million of
shares, the minimum offering. We have the right to extend the offering period
for an additional 15 days until April 8, 2000.

The purchaser must complete and execute an application to purchase common
stock, as set forth in the subscription agreement. The minimum investment is 100
shares at $12.50 per share ($1,250) unless we, in our sole discretion, waive
this requirement in a particular case such as the purchase of common stock by
our employees, and agree to accept a subscription for a lesser number of shares.
The maximum purchase for any person or household is 40,000 shares at $12.50 per
share ($500,000), unless we, in our sole discretion, waive this requirement in a
particular case and agree to accept a subscription for a larger number of
shares. Any subscriptions will be promptly returned to the subscriber with
interest, if for any reason the offering is withdrawn.
<PAGE> 93

Unless all of the shares are earlier sold or the offering is earlier
terminated by us, subscriptions to purchase shares will be received until 5:00
p.m., Eureka, California time, on March 24, 2000, unless extended for an
additional 15 days until April 8, 2000. We reserve the right to terminate the
offering at any time.

Upon acceptance by us, subscriptions will be binding on and may not be
revoked by subscribers except with our consent. In addition, we reserve the
right to cancel accepted subscriptions at any time and for any reason until the
proceeds of this offering are released from escrow, and we reserve the right to
reject any subscription, or a portion of any subscription, in our sole
discretion. We may, in our sole discretion, allocate shares among subscribers in
the event of an over-subscription for the shares. In determining which
subscriptions to accept, we may take into account any factors we consider
relevant, including the order in which subscriptions are received, a
subscriber's potential to do business with, or to direct customers to, Humboldt
Bank, Capitol Valley Bank or Capital Thrift. If we reject any subscription, or
accept a subscription but in our discretion subsequently elect to cancel all or
part of that subscription, we will refund promptly the amount remitted that
corresponds to the share offering price multiplied by the number of shares as to
which the subscription is rejected or canceled.

ESCROW ARRANGEMENTS

Commencing on the date of this prospectus, all funds received in payment of
subscriptions of common stock will be placed in escrow with Pacific Coast
Banker's Bank, until March 24, 2000, or a maximum of $8 million in the sale of
shares is received. We have the right to execute the offering for an additional
15 days. If we receive $4 million prior to the expiration date, we may have a
closing. If a minimum of $4 million is received and a closing occurs prior to
the expiration date, we may continue to offer our shares subject to the raising
of the maximum amount of $8 million. In that event, we may have more than one
closing. Certificates representing shares duly subscribed and paid for will be
issued by our transfer agent promptly after each closing. Escrowed funds may be
invested in bank certificates of deposit, short-term governmental obligations,
federally insured bank accounts, and other similar investments. We do not intend
to invest the subscription proceeds held in escrow in instruments that would
mature after the expiration date of the offering.

Pacific Coast Banker's Bank's sole role in this offering is that of escrow
holder. Pacific Coast Banker's Bank has not reviewed this prospectus and makes
no representation as to the nature of this offering or its compliance or lack
thereof with any applicable state or federal laws, rules, or regulations. We
have agreed to pay the escrow fees should the offering fail to reach the impound
amount.

HOW TO SUBSCRIBE

Each prospective investor who desires to purchase shares of common stock
should:

1. Complete, date, and execute the Application for Subscription and
substitute Form W-9 which have been delivered with this Prospectus;

2. Make a check, bank draft, or money order payable to "Pacific Coast
Banker's Bank fbo Humboldt Bancorp" in the amount of $12.50 times the
number of shares subscribed for, which minimum purchase is 100 shares; and
<PAGE> 94

3. Deliver the completed Application for Subscription and check to the
escrow agent at the following address:

Pacific Coast Banker's Bank
340 Pine Street, Suite 401
San Francisco, California 94104
Attn: Tracy Holcomb
(415) 399-1900
(415) 788-7227 facsimile

Subscribers should retain a copy of the completed Application for
Subscription for their records. The subscription price is due and payable when
the Application for Subscription is delivered.

DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 50,000,000 shares of common stock,
no par value. No shares of preferred stock are authorized. As of December 31,
1999, we had 4,776,095 shares (5,253,704 shares post-dividend) of common stock
outstanding.

Common Stock

The holders of our common stock are entitled to one vote, in person or by
proxy, per share on any matter requiring shareholder action. Holders of common
stock are entitled to dividends when, as, and if declared by the board of
directors from funds legally available therefor subject to certain restrictions
on payment of dividends imposed by the California Corporations Code and other
applicable regulatory limitations. The holders of common stock have no
preemptive or other subscription rights and there are no redemption, sinking
fund, or conversion privileges applicable to the common stock. Upon our
liquidation, dissolution, or winding up, holders of common stock are entitled to
share ratably in all assets remaining after payment of liabilities.

Transfer Agent

The transfer agent and registrar for our common stock is Illinois Stock
Transfer.

EXPERTS

The financial statements of Humboldt Bancorp and subsidiary as at December
31, 1998, and for each of the three years in the period then ended included in
this document have been audited by Richardson & Company, independent auditors,
as stated in their report appearing herein and have been so included in reliance
upon the report given upon their authority as experts in accounting and
auditing.

The consolidated balance sheet of Global Bancorp and subsidiary as at
December 31, 1998, and the related consolidated statements of earnings,
stockholders' equity, and cash flows for the year then ended included in this
document have been audited by Grant Thornton LLP, independent auditors, as
stated in their report appearing herein and have been so included in reliance
upon the report given upon their authority as experts in accounting and
auditing.

The consolidated financial statements of Global Bancorp and Subsidiary as
of December 31, 1997, and for each of the two years in the period ended December
31, 1997, included in this document have been so included in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in accounting and auditing.
<PAGE> 95

LEGAL MATTERS

The validity of the common stock offered by Humboldt Bancorp is being
passed upon by Bartel Eng Linn & Schroder, a Law Corporation, Sacramento,
California.

WHERE YOU CAN FIND MORE INFORMATION

Humboldt Bancorp has filed a registration statement on Form S-1 to register
with the Commission the common stock to be issued to shareholders in the
offering. This document is a part of that Registration Statement. As allowed by
the Commission's rules, this document does not contain all of the information
you can find in the registration statement or the documents provided as in the
exhibits to the registration statement.

Humboldt Bancorp files annual, quarterly and special reports, proxy
statements and other information with the Commission. You may read and copy any
reports, statements and other information filed by Humboldt Bancorp at the
Commission's public reference rooms in Washington, D.C., New York, New York, and
Chicago, Illinois. Please call the Commission at 1-800-SEC-0330 for further
information on the public reference rooms. You will also be able to obtain the
Commission filings from commercial document retrieval services and at the
Commission's web site at http://www.sec.gov.
<PAGE> 96

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
HUMBOLDT BANCORP AND SUBSIDIARY
Independent Auditor's Report................................ F-2
Consolidated Balance Sheets, December 31, 1997 and 1998, and
September 30, 1999 (unaudited)............................ F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1996, 1997 and 1998, and for the Nine Month
Periods Ended September 30, 1998 and 1999 (unaudited)..... F-4
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended December 31, 1996, 1997 and 1998, and
for the Nine Month Period Ended September 30, 1999
(unaudited)............................................... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1997 and 1998, and for the Nine Month
Periods Ended September 30, 1998 and 1999 (unaudited)..... F-6
Notes to Consolidated Financial Statements.................. F-7
GLOBAL BANCORP AND SUBSIDIARY
Report of Independent Accountants........................... F-35
Report of Independent Certified Public Accountants.......... F-36
Consolidated Balance Sheets, December 31, 1997 and 1998, and
September 30, 1999 (unaudited)............................ F-37
Consolidated Statements of Earnings for the Years Ended
December 31, 1996, 1997 and 1998, and for the Nine Month
Periods Ended September 30, 1998 and 1999 (unaudited)..... F-38
Consolidated Statement of Stockholders' Equity for the Years
Ended December 31, 1996, 1997 and 1998, and for the Nine
Month Period Ended September 30, 1999 (unaudited)......... F-39
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996, 1997 and 1998, and for the Nine Month
Periods Ended September 30, 1998 and 1999 (unaudited)..... F-40
Notes to Financial Statements............................... F-41
</TABLE>

F-1
<PAGE> 97

INDEPENDENT AUDITOR'S REPORT

Board of Directors
Humboldt Bancorp and Subsidiary
Eureka, California

We have audited the accompanying consolidated balance sheets of Humboldt
Bancorp (Bancorp) and Subsidiary as of December 31, 1997 and 1998, and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for the years ended December 31, 1996, 1997 and 1998. These
financial statements are the responsibility of the Bancorp's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Humboldt
Bancorp and Subsidiary at December 31, 1997 and 1998, and the consolidated
results of their operations and their consolidated cash flows for the years
ended December 31, 1996, 1997 and 1998, in conformity with generally accepted
accounting principles.

Richardson & Company
Sacramento, California
January 15, 1999, except
for Note Y, as to which
the date is January 14, 2000

F-2
<PAGE> 98

HUMBOLDT BANCORP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1997 1998 1999
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and due from banks................................ $ 21,442 $ 28,626 $ 25,401
Interest-bearing deposits in other banks............... 3,020 3,020 20
Federal funds sold..................................... 3,520 2,250 56,145
Investment securities, at fair value................... 80,180 77,802 106,210
Loans held for sale.................................... 48 7,677 719
Loans and lease financing receivables, net of allowance
for loan and lease losses and deferred loan fees.... 157,464 178,361 202,379
Premises and equipment, net............................ 5,635 7,950 9,421
Accrued interest receivable and other assets........... 12,778 14,289 18,872
-------- -------- --------
Total Assets...................................... $284,087 $319,975 $419,167
======== ======== ========
LIABILITIES
Deposits
Noninterest-bearing................................. $ 70,767 $ 96,884 $118,267
Interest-bearing.................................... 184,419 187,083 257,548
-------- -------- --------
Total Deposits.................................... 255,186 283,967 375,815
Accrued interest payable and other liabilities......... 3,586 4,758 5,898
Long-term debt......................................... 1,761 3,402 4,638
-------- -------- --------
Total Liabilities................................. 260,533 292,127 386,351
Commitments and contingencies (see accompanying notes)
STOCKHOLDERS' EQUITY
Common stock, no par value; 50,000,000 shares
authorized with 1,576,542, 1,787,954 and 4,721,361
(unaudited) shares issued and outstanding in 1997,
1998 and 1999, respectively......................... 20,495 25,580 27,768
Additional paid-in capital............................. 114 297 297
Retained earnings...................................... 2,200 1,485 4,671
Accumulated other comprehensive income................. 745 486 80
-------- -------- --------
Total Stockholders' Equity........................ 23,554 27,848 32,816
-------- -------- --------
Total Liabilities and Stockholders' Equity........ $284,087 $319,975 $419,167
======== ======== ========
</TABLE>

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

F-3
<PAGE> 99

HUMBOLDT BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------- -----------------
1996 1997 1998 1998 1999
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME
Interest and fees on loans and leases....... $13,773 $15,961 $18,762 $13,998 $14,136
Interest and dividends on investment
securities:
Taxable.................................. 1,687 2,700 3,239 2,665 2,271
Exempt from Federal income tax........... 577 569 739 525 631
Dividends................................ 102 83 78 48 37
Interest on federal funds sold.............. 374 612 512 421 696
Interest on deposits in other banks......... 49 128 174 132 73
------- ------- ------- ------- -------
Total Interest Income.................. 16,562 20,053 23,504 17,789 17,844
INTEREST EXPENSE
Interest on deposits........................ 5,501 6,973 7,565 5,735 5,410
Interest on long-term debt and other
borrowings............................... 48 51 177 120 225
------- ------- ------- ------- -------
Total Interest Expense................. 5,549 7,024 7,742 5,855 5,635
------- ------- ------- ------- -------
NET INTEREST INCOME........................... 11,013 13,029 15,762 11,934 12,209
Provision for loan and lease losses......... 533 773 2,124 1,541 697
------- ------- ------- ------- -------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
AND LEASE LOSSES............................ 10,480 12,256 13,638 10,393 11,512
OTHER INCOME
Fees and other income....................... 4,285 6,911 9,731 6,815 11,731
Service charges on deposit accounts......... 709 1,300 2,097 1,543 1,805
Net gain (loss) on sale of loans............ 75 (204) 645 251 349
Net investment securities gains (losses).... 678 102 (93)
------- ------- ------- ------- -------
Total Other Income..................... 5,747 8,109 12,473 8,609 13,792
OTHER EXPENSES
Salaries and employee benefits.............. 5,592 6,806 9,151 6,763 8,659
Net occupancy and equipment expense......... 1,792 2,466 2,711 1,962 2,092
Other expenses.............................. 3,941 6,224 7,716 5,746 9,826
------- ------- ------- ------- -------
Total Other Expenses................... 11,325 15,496 19,578 14,471 20,577
------- ------- ------- ------- -------
Income Before Income Taxes.................. 4,902 4,869 6,533 4,531 4,727
Provision for income taxes.................. 1,926 1,611 2,517 1,720 1,537
------- ------- ------- ------- -------
Net Income.................................... $ 2,976 $ 3,258 $ 4,016 $ 2,811 $ 3,190
======= ======= ======= ======= =======
Net Income Per Share.......................... $ 0.65 $ 0.68 $ 0.83 $ 0.58 $ 0.64
======= ======= ======= ======= =======
Net Income Per Share -- Assuming Dilution..... $ 0.58 $ 0.61 $ 0.75 $ 0.53 $ 0.58
======= ======= ======= ======= =======
</TABLE>

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

F-4
<PAGE> 100

HUMBOLDT BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK ADDITIONAL OTHER
COMPREHENSIVE ------------------- PAID-IN RETAINED COMPREHENSIVE
INCOME SHARES AMOUNT CAPITAL EARNINGS INCOME TOTAL
------------- --------- ------- ---------- -------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1996........... 1,266,509 $14,852 $ 1,268 $ 815 $16,935
10% stock dividend................... 126,346 2,179 (2,179)
Fractional shares purchased.......... (5) (5)
Stock options exercised.............. 17,912 148 148
Comprehensive income:
Net income......................... $2,976 2,976 2,976
Other comprehensive loss, net of
tax:
Unrealized holding losses on
securities available-for-sale
arising during the year, net of
taxes of $323.................. (454) (454) (454)
------ --------- ------- ---- ------- ----- -------
Total comprehensive income........... $2,522
======
BALANCE AT DECEMBER 31, 1996......... 1,410,767 17,179 2,060 361 19,600
10% stock dividend................... 143,110 3,113 (3,113)
Fractional shares purchased.......... (5) (5)
Stock options exercised and related
tax benefit........................ 22,665 203 $114 317
Comprehensive income:
Net income......................... $3,258 3,258 3,258
Other comprehensive income, net of
tax:
Unrealized holding gains on
securities available-for-sale
arising during the year, net of
taxes of $274.................. 384 384 384
------ --------- ------- ---- ------- ----- -------
Total comprehensive income........... $3,642
======
BALANCE AT DECEMBER 31, 1997......... 1,576,542 20,495 114 2,200 745 23,554
10% stock dividend................... 160,110 4,723 (4,723)
Fractional shares purchased.......... (8) (8)
Stock options exercised and related
tax benefit........................ 51,302 362 183 545
Comprehensive income:
Net income......................... $4,016 4,016 4,016
Other comprehensive loss, net of
tax:
Unrealized holding losses on
securities available-for-sale
arising during the year, net of
taxes of $185.................. (259) (259) (259)
------ --------- ------- ---- ------- ----- -------
Total comprehensive income........... $3,757
======
BALANCE AT DECEMBER 31, 1998......... 1,787,954 25,580 297 1,485 486 27,848
5 for 2 stock split (unaudited)...... 2,681,817
Fractional shares purchased
(unaudited)........................ (4) (4)
Sale of common stock (unaudited)..... 153,652 1,844 1,844
Stock options exercised
(unaudited)........................ 97,938 344 344
Comprehensive income:
Net income (unaudited)............. $3,190 3,190 3,190
Other comprehensive loss, net of
tax:
Unrealized holding losses on
securities available-for-sale
arising during the year, net of
taxes of $290 (unaudited)...... (406) (406) (406)
------ --------- ------- ---- ------- ----- -------
Total comprehensive income
(unaudited)........................ $2,784
======
BALANCE AT SEPTEMBER 30, 1999
(UNAUDITED)........................ 4,721,361 $27,768 $297 $ 4,671 $ 80 $32,816
========= ======= ==== ======= ===== =======
</TABLE>

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

F-5
<PAGE> 101

HUMBOLDT BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------ --------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................ $ 2,976 $ 3,258 $ 4,016 $ 2,811 $ 3,190
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for loan and lease losses..................... 533 773 2,124 1,541 697
Depreciation............................................ 1,041 1,565 1,586 1,131 1,115
(Gain) loss on sale of investments...................... (678) (102) 93
Amortization and other.................................. 916 1,390 1,517 1,182 977
Equity in income of subsidiary.......................... (22) (259) (160) (300)
Decrease (increase) in loans held for sale.............. 1,817 15 (7,629) (3,190) 6,958
Increase in interest receivable and other assets........ (520) (1,422) (734) (906) (728)
Increase in interest payable and other liabilities...... 122 1,913 1,355 2,079 1,142
-------- -------- -------- -------- ---------
Net Cash Provided by Operating Activities............. 6,207 7,368 1,976 4,488 13,144
INVESTING ACTIVITIES
Net decrease (increase) in interest-bearing deposits with
banks................................................... 1,100 (3,000) 3,000
Net (increase) decrease in federal funds sold............. (1,100) 3,050 1,270 (5,860) (53,895)
Proceeds from maturities and sales of investment
securities
available-for-sale...................................... 33,235 22,261 28,169 20,968 27,920
Purchases of investment securities
available-for-sale...................................... (19,935) (62,711) (27,967) (21,501) (57,939)
Net increase in loans and leases.......................... (30,289) (15,491) (23,370) (21,860) (24,715)
Purchases of premises and equipment....................... (2,096) (1,100) (3,901) (3,762) (2,586)
Investment in partnership/subsidiary...................... (2,000) (91) (92) (1,242)
Proceeds from the sale of OREO............................ 139 322 148 175
Premium paid on deposits purchased........................ (1,040) (2,355)
Purchases of life insurance policies...................... (2,337)
-------- -------- -------- -------- ---------
Net Cash Used by Investing Activities................. (21,422) (59,892) (25,568) (31,959) (111,637)
FINANCING ACTIVITIES
Net increase in deposit accounts.......................... $ 18,050 $ 62,535 $ 28,781 $ 22,099 $ 91,848
Net proceeds from long-term debt and notes payable........ 22 1,000 1,700 1,700 1,300
Payments on long-term debt and notes payable.............. (34) (14) (59) (38) (64)
Proceeds from issuance of common stock.................... 148 203 362 297 2,188
Fractional shares purchased............................... (5) (5) (8) (8) (4)
-------- -------- -------- -------- ---------
Net Cash Provided by Financing Activities............. 18,181 63,719 30,776 24,050 95,268
-------- -------- -------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND DUE FROM BANKS.......... 2,966 11,195 7,184 (3,421) (3,225)
Cash and due from banks at beginning of period............ 7,281 10,247 21,442 21,442 28,626
-------- -------- -------- -------- ---------
Cash and Due from Banks at End of Period.............. $ 10,247 $ 21,442 $ 28,626 $ 18,021 $ 25,401
======== ======== ======== ======== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest expense........................................ $ 5,535 $ 6,940 $ 7,755 $ 5,937 $ 5,435
Income taxes............................................ $ 2,666 $ 1,809 $ 2,830 $ 1,905 $ 1,835
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
Stock dividend............................................ $ 2,179 $ 3,113 $ 4,723 $ 4,723
Net change in unrealized gains on securities
available-for-sale...................................... $ (777) $ 658 $ (444) $ (141) $ (696)
Net change in deferred income taxes on unrealized gains on
securities available-for-sale........................... $ 323 $ (274) $ 185 $ 59 $ 290
Deposit liabilities assumed in exchange for assets
acquired in connection with purchase of branches........ $ 75 $ 72,105
Loans transferred to OREO................................. $ 233 $ 54 $ 349 $ 175
</TABLE>

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

F-6
<PAGE> 102

HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998

NOTE A -- SIGNIFICANT ACCOUNTING POLICIES

Business: Humboldt Bancorp, formed in 1995, is a bank holding company whose
principal activity is the ownership and management of its wholly-owned
subsidiary, Humboldt Bank. The Bank was incorporated on March 13, 1989 and
opened for business on September 13, 1989. The Bank operates under a California
state charter and is subject to regulation, supervision and regular examination
by the Department of Financial Institutions and the Federal Deposit Insurance
Corporation. The regulations of these agencies govern most aspects of the Bank's
business. The accounting and reporting policies of the Bank conform with
generally accepted accounting principles and general practices within the
banking industry.

Principles of Consolidation: The consolidated financial statements include
the accounts of the Bancorp and its wholly-owned subsidiary, the Bank. All
material intercompany accounts and transactions have been eliminated.

Nature of Operations: The Bank is locally owned and operated and its
primary service area is the communities of Northern California. The Bank's
business is primarily focused on servicing the banking needs of individuals
living and working in the Bank's primary service areas and local businesses,
including retail, professional and real estate related enterprises in those
service areas. The Bank offers a broad range of services to individuals and
businesses with an emphasis upon efficiency and personalized attention. The Bank
provides a full line of consumer services, and also offers specialized services
to small businesses, middle market companies, and professional firms, such as
courier services and appointment banking. The Bank offers personal and business
checking and savings accounts (including individual interest-bearing negotiable
orders of withdrawal ("NOW") accounts and/or accounts combining checking and
savings accounts with automatic transfers), IRA and Keogh accounts, time
certificates of deposit and direct deposit of social security, pension and
payroll checks. It also makes available commercial, construction, accounts
receivable, inventory, automobile, home improvement, real estate, office
equipment, leasehold improvement, lease receivable financing and other consumer
loans (including overdraft protection lines of credit), drafts and standby
letters of credit, credit card activities to both individuals (including both
secured and unsecured credit cards) and merchants and travelers' checks (issued
by an independent entity).

Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

Investment Securities: Securities are classified as held-to-maturity if the
Bank has both the intent and ability to hold those debt securities to maturity
regardless of changes in market conditions, liquidity needs or changes in
general economic conditions. These securities are carried at cost adjusted for
amortization of premium and accretion of discount, computed by the interest
method over their contractual lives.

Securities are classified as available-for-sale if the Bank intends to hold
those debt securities for an indefinite period of time, but not necessarily to
maturity. Any decision to sell a security classified as available-for-sale would
be based on various factors, including significant movements in interest

F-7
<PAGE> 103
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
rates, changes in the maturity mix of the Bank's assets and liabilities,
liquidity needs, regulatory capital considerations and other similar factors.
Securities available-for-sale are carried at fair value. Unrealized holding
gains or losses are reported as increases or decreases in stockholders' equity,
net of the related deferred tax effect. Realized gains or losses, determined on
the basis of the cost of specific securities sold, are included in earnings.

Loans and Leases Held for Sale: The Bank sells mortgage loans, the
guaranteed portion of Small Business Administration (SBA)-guaranteed loans and
loan participations (with servicing retained) for cash proceeds equal to the
principal amount of loans, participation or leases with yield rates to the
investor based upon the current market rate. In accordance with Statement of
Financial Standards (SFAS) No. 125, Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities, the Bank records an asset
representing the right to service loans for others when it sells a loan and
retains the servicing rights. The total cost of originating or purchasing the
loans is allocated between the loan and the servicing rights, based on their
relative fair values. Fair value is estimated by discounting estimated future
cash flows from the servicing assets using discount rates that approximate
current market rates and using current expected future prepayment rates. The
servicing rights are amortized in proportion to, and over the period of,
estimated net servicing income, assuming prepayments.

SFAS No. 125 also required the assessment of all capitalized servicing
rights for impairment based on current fair value of those rights. For purposes
of evaluating and measuring impairment, the Bank stratifies servicing rights
based on the type and interest rates of the underlying loans. Impairment is
measured as the amount by which the servicing rights for a stratum exceed their
fair value.

A premium over the adjusted carrying value is received upon the sale of the
guaranteed portion of an SBA loan. The Bank's investment in an SBA loan is
allocated among the sold and retained portions of the loan based on the relative
fair value of each portion at the time of loan origination, adjusted for
payments and other activities. Because the portion retained does not carry an
SBA guarantee, part of the gain recognized on the sold portion of the loan may
be deferred and amortized as a yield enhancement on the retained portion in
order to obtain a market equivalent yield.

Loans and leases held for sale are recorded at the lower of cost or market
determined on an aggregate basis.

Loans and Lease Financing Receivables: Loans and leases are stated at the
amount of unpaid principal, less the allowance for losses, net deferred loan
fees and costs and unearned income. Interest on loans is accrued and credited to
income based on the principal amount outstanding. Unearned income on installment
loans is recognized as income over the term of the loans using a method that
approximates the interest method.

The Bank's leasing operations consist principally of the leasing of
point-of-sale terminals, printers for credit card vouchers and related
equipment. The Bank also has purchased small equipment leases from Bancorp
Financial Services, a subsidiary of the Bancorp. All of the Bank's leases are
classified and accounted for as direct financing leases. Under the direct
financing method of accounting for leases, the total net rentals receivable
under the lease contracts, net of unearned income, are recorded

F-8
<PAGE> 104
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
as a net investment in direct financing leases, and the unearned income is
recognized each month as it is earned so as to produce a constant periodic rate
of return on the unrecovered investment.

Loan origination fees and certain direct origination and acquisition costs
are capitalized and recognized as an adjustment of the yield on the related loan
or lease. Amortization is discontinued when the loan or lease is placed on
nonaccrual status.

Beginning in 1997, credit card origination costs were deferred and netted
against the related credit card fee, if any, and the net amount was amortized on
a straight-line basis over the initial privilege period. Fees received and
marketing costs incurred in connection with unsuccessful efforts to create
credit card relationships were recorded as revenue and expense when the
refundable period expired. Amounts paid to third-party direct marketing
specialists related to successful efforts to create credit card relationships
were deferred and netted against related fees and all other amounts are recorded
as expenses in the period the services were performed. Annual service fees are
deferred and amortized over the credit card privilege period.

Allowance for Loan and Lease Losses: The allowance is maintained at a level
which, in the opinion of management, is adequate to absorb probable losses
inherent in the loan, including credit card receivables, and lease portfolios.
Credit losses related to off-balance-sheet instruments are included in the
allowance for loan and lease losses except if the loss meets the criteria for
accrual under Statement of Financial Accounting Standard No. 5, in which case
the amount is accrued and reported separately as a liability. Management
determines the adequacy of the allowance based upon reviews of individual loans,
recent loss experience, current economic conditions, the risk characteristics of
the various categories of loans and leases and other pertinent factors. The
allowance is based on estimates, and ultimate losses may vary from the current
estimates. These estimates are reviewed quarterly and, as adjustments become
necessary, they are reported in earnings in the periods in which they become
known. Loans and leases deemed uncollectible are charged to the allowance.
Credit card receivables are charged to the allowance when they become 120 days
past due. Provisions for losses and recoveries on loans and leases previously
charged off are added to the allowance.

Commercial loans are considered impaired, based on current information and
events, if it is probable that the Bank will be unable to collect the scheduled
payments of principal or interest when due according to the contractual terms of
the loan agreement. Allowances on impaired loans are established based on the
present value of expected future cash flows discounted at the loans effective
interest rate or for collateral-dependent loans, on the fair value of the
collateral. Cash receipts on impaired loans are used to reduce principal.

Income Recognition on Impaired and Nonaccrual Loans and Leases: Loans and
leases, including impaired loans and leases, are generally classified as
nonaccrual if they are past due as to maturity or payment of principal or
interest for a period of more than 90 days, unless such loans and leases are
well-secured and in the process of collection. If a loan or lease or a portion
of a loan or lease is classified as doubtful or is partially charged off, the
loan or lease is classified as nonaccrual. Loans that are on a current payment
status or past due less than 90 days may also be classified as nonaccrual if
repayment in full of principal and/or interest is in doubt.

F-9
<PAGE> 105
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Loans and leases may be returned to accrual status when all principal and
interest amounts contractually due (including arrearages) are reasonably assured
of repayment within an acceptable period of time, and there is a sustained
period of repayment performance by the borrower, in accordance with the
contractual terms of interest and principal.

While a loan or lease is classified as nonaccrual and the future
collectibility of the recorded balance is doubtful, collections of interest and
principal are generally applied as a reduction to principal outstanding. When
the future collectibility of the recorded balance is expected, interest income
may be recognized on a cash basis.

In the case where a nonaccrual loan or lease had been partially charged
off, recognition of interest on a cash basis is limited to that which would have
been recognized on the recorded balance at the contractual interest rate. Cash
interest receipts in excess of that amount are recorded as recoveries to the
allowance for loan and lease losses until prior charge-offs have been fully
recovered.

Premises and Equipment: Premises and equipment are stated at cost, less
accumulated depreciation. The provision for depreciation is computed by the
straight-line method over the estimated useful lives of the related assets.

Foreclosed Real Estate: Foreclosed real estate includes both formally
foreclosed property and in-substance foreclosed property. In-substance
foreclosed properties are those properties for which the Bank has taken physical
possession, regardless of whether formal foreclosure proceedings have taken
place. At the time of foreclosure, foreclosed real estate is recorded at the
lower of the carrying amount or fair value less cost to sell, which becomes the
property's new basis. Any write-downs based on the asset's fair value at date of
acquisition are charged to the allowance for loan losses. After foreclosure,
valuations are periodically performed by management and the real estate is
carried at the lower of their new cost basis or fair value minus estimated costs
to sell. Revenue and expenses from operations and subsequent adjustments to the
carrying amount of the property are included in income (loss) on foreclosed real
estate.

Intangible Assets: The premiums paid to acquire the deposits of the
McKinleyville, Arcata, Weaverville, Willow Creek, Loleta and Garberville
branches were allocated to core deposit intangibles based on the results of
valuation studies performed to determine the fair value of the deposit base
acquired. Core deposit intangibles are being amortized over the estimated
remaining life of the related deposits.

Investment in Unconsolidated Subsidiary: The Bank, along with another bank,
formed a California corporation, Bancorp Financial Services, Inc. for the
purpose of operating an equipment leasing company. In January 1997, the Bank
contributed capital totaling $2,000,000 for a 50% interest in this corporation.
The investment is accounted for using the equity method. During 1998, this
investment was transferred to the Bancorp.

Income Taxes: Provisions for income taxes are based on amounts reported in
the statements of operations (after exclusion of non-taxable income such as
interest on state and municipal loans and securities) and include deferred taxes
on temporary differences in the recognition of income and expense for tax and
financial statement purposes. Deferred taxes are computed using the asset and
liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences

F-10
<PAGE> 106
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE A -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
attributable to differences between the financial statement carrying amounts of
assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Deferred tax assets are recognized for deductible temporary
differences and tax credit carryforwards, and then a valuation allowance is
established to reduce that deferred tax asset if it is "more likely than not"
that the related tax benefits will not be realized.

Advertising: Advertising costs are charged to operations in the year
incurred.

Net Income Per Share: Net income per share is computed by dividing net
income by the weighted average number of common shares outstanding during the
period, after giving retroactive effect to stock dividends. Net income per
share -- assuming dilution is computed similar to net income per share except
that the denominator is increased to include the number of additional common
shares that would have been outstanding if the dilutive potential common shares
had been issued. Included in the denominator is the dilutive effect of stock
options computed under the treasury method.

Off-Balance-Sheet Financial Instruments: In the ordinary course of business
the Bank has entered into off-balance-sheet financial instruments consisting of
commitments to extend credit, commitments under credit card arrangements and
standby letters of credit. Such financial instruments are recorded in the
financial statements when they become payable.

Cash and Cash Equivalents: For the purpose of presentation in the Statement
of Cash Flows, cash and cash equivalents are defined as those amounts included
in the balance sheet caption "Cash and due from banks."

Unaudited Interim Financial Data: The interim financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management all adjustments,
including normal recurring accruals necessary for fair presentation of results
of operations for the interim periods included herein, have been made. The
results of operations for the six months ended June 30, 1999, are not
necessarily indicative of results to be anticipated for the year ending December
31, 1999.

Recently Issued Accounting Standards: In June 1998, Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities" (Statement No. 133), was issued. Statement No. 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, by requiring that an entity
recognize those items as assets or liabilities in the statement of financial
position and measure them at fair value. This statement is effective for
financial statements issued for all quarters of all fiscal years beginning after
June 15, 2000. The Bancorp has not made an assessment of the potential impact of
adopting Statement No. 133 at this time.

F-11
<PAGE> 107
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE B -- RESTRICTIONS ON CASH AND DUE FROM BANKS AND INTEREST-BEARING DEPOSITS
IN OTHER BANKS

Cash and due from banks include amounts the Bank is required to maintain to
meet certain average reserve and compensating balance requirements of the
Federal Reserve. The total requirements at December 31, 1997 and 1998 were
$6,060,000 and $10,936,000, respectively.

Interest-bearing deposits in other banks totaling $3,000,000 were pledged
to MasterCard International as of December 31, 1997 and 1998 to secure the full
performance of all of the Bank's payment obligations to MasterCard in connection
with the Bank's MasterCard membership.

NOTE C -- INVESTMENT SECURITIES

The amortized cost of investment securities and their approximate fair
values at December 31 were as follows (dollars in thousands):

<TABLE>
<CAPTION>
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- -------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997:
Available-for-Sale
U.S. Government and agency securities..... $ 2,996 $ 11 $ 3,007
Municipal securities...................... 12,190 581 12,771
Collateralized mortgage obligations issued
by U.S. government agencies............ 62,433 698 $ 17 63,114
Equity securities......................... 1,286 2 1,288
------- ------ ---- -------
Total available-for-sale............... $78,905 $1,292 $ 17 $80,180
======= ====== ==== =======
DECEMBER 31, 1998:
Available-for-Sale
U.S. Government and agency securities..... $ 3,000 $ 13 $ 3,013
Municipal securities...................... 16,227 890 $ 7 17,110
Collateralized mortgage obligations issued
by U.S. government agencies............ 56,682 286 353 56,615
Equity securities......................... 1,062 2 1,064
------- ------ ---- -------
Total available-for-sale............... $76,971 $1,191 $360 $77,802
======= ====== ==== =======
</TABLE>

F-12
<PAGE> 108
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE C -- INVESTMENT SECURITIES (CONTINUED)
The maturities of investment securities at December 31, 1998 were as
follows (dollars in thousands):

<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
--------- -------
<S> <C> <C>
Amounts maturing in:
3 months or less......................................... $ 2,677 $ 2,444
Over three months through twelve months.................. 13,385 12,835
After one year through three years....................... 36,056 36,822
After three years through five years..................... 7,257 7,299
After five years through fifteen years................... 10,384 10,958
After fifteen years...................................... 6,150 6,380
Equity securities........................................ 1,062 1,064
------- -------
$76,971 $77,802
======= =======
</TABLE>

The amortized cost and fair value of collateralized mortgage obligations
are presented by average life in the preceding table. Expected maturities differ
from contractual maturities because borrowers may have the right to call or
prepay obligations without call or prepayment penalties.

Proceeds from sales of investment securities available-for-sale during
1996, 1997 and 1998 were $27,766,000, $12,418,000, and $445,550, respectively.
Gross gains and losses on those sales were $683,000 and $5,000 in 1996 and
$108,000 and $6,000 in 1997, respectively. There were no gains or losses on the
investment securities sold in 1998.

Investment securities with an amortized cost of approximately $2,002,000
and $3,000,000 and an approximate market value of $2,009,000 and $3,013,000 at
December 31, 1997 and 1998, respectively, were pledged to meet the requirements
of the Federal Reserve and the U. S. Department of Justice. In addition,
investment securities with an amortized cost of approximately $5,084,000 and
$4,878,000 and an approximate market value of $5,173,000 and $4,804,000 at
December 31, 1997 and 1998, respectively, were pledged to secure public funds
and other deposits. Furthermore, investment securities with an amortized cost of
approximately $5,289,000 and an approximate market value of $5,224,000 at
December 31, 1998 were pledged as collateral for an advance from the Federal
Home Loan Bank. In addition, investment securities with an amortized cost of
approximately $2,179,000 and $10,188,000 and an approximate market value of
$2,182,000 and $10,229,000 at December 31, 1997 and 1998, respectively, were
pledged to Visa and Mastercard to secure the full performance of all of the
Bank's payment obligations to Visa and Mastercard in connection with the Bank's
Visa and Mastercard membership.

F-13
<PAGE> 109
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE D -- LOANS AND LEASE FINANCING RECEIVABLES, NET

The components of loans and lease financing receivables in the balance
sheets were as follows at December 31 (dollars in thousands):

<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Real estate -- construction and land development.......... $ 20,165 $ 20,667
Real estate -- commercial and agricultural................ 65,772 80,197
Real estate -- family and multifamily residential......... 27,205 27,549
Commercial, industrial and agricultural................... 28,766 35,493
Lease financing receivables, net of unearned income of
$1,395,000 and $1,896,000 in 1997 and 1998,
respectively............................................ 8,732 9,867
Credit card receivables................................... 7,062 5,672
Consumer loans, net of unearned income of $15,000 and
$1,000
in 1997 and 1998, respectively.......................... 2,440 2,110
Other..................................................... 502 585
-------- --------
160,644 182,140
Deferred loan fees........................................ (809) (724)
Allowance for loan and lease losses....................... (2,371) (3,055)
-------- --------
$157,464 $178,361
======== ========
</TABLE>

The maturity and repricing distribution of the loan and lease portfolio at
December 31, 1997 and 1998, follows (dollars in thousands):

<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Three months or less...................................... $ 76,777 $ 71,990
Over three months to twelve months........................ 10,904 15,463
Over one year to three years.............................. 24,119 28,428
Over three years to five years............................ 16,517 32,113
Over five years to fifteen years.......................... 22,186 21,979
Over fifteen years........................................ 9,303 11,856
-------- --------
159,806 181,829
Nonaccrual loans.......................................... 838 311
-------- --------
$160,644 $182,140
======== ========
</TABLE>

At December 31, 1997 and 1998 approximately $2,449,000 and $1,348,000,
respectively, of the Bank's credit card receivables were secured by savings
accounts.

At December 31, 1997, the recorded investment in loans for which impairment
has been recognized in accordance with Statement No. 114 totaled $748,000, with
a corresponding valuation allowance of $166,000. At December 31, 1998, the
recorded investment in loans for which impairment has been recognized totaled
$338,000, with a corresponding valuation allowance of $126,000. For the years
ended December 31, 1996, 1997 and 1998, the average recorded investment in
impaired loans was approximately $247,000, $156,000 and $515,000, respectively.
In 1996 and 1997, the Bank recognized $2,000 and $5,000, respectively of
interest on impaired loans (during the portion of the year that they were
impaired), all of which was recognized on the cash basis. In 1998
F-14
<PAGE> 110
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE D -- LOANS AND LEASE FINANCING RECEIVABLES, NET (CONTINUED)
the Bank recognized $41,000 of interest on impaired loans (during the portion of
the year that they were impaired), of which $21,000 was related to impaired
loans for which interest income was recognized on the cash basis.

In addition, at December 31, 1996, 1997 and 1998, the Bank had other
nonaccrual loans of approximately $218,000, $97,000 and $246,000 for which
impairment had not been recognized. If interest on these loans had been
recognized at the original interest rates, interest income would have increased
approximately $12,000 in 1996, $5,000 in 1997 and $16,000 in 1998. The Bank has
no commitments to loan additional funds to the borrowers of impaired or
nonaccrual loans.

The Bank receives fees for servicing retained on loans and leases sold.
Loans and leases being serviced by the Bank for others were as follows at
December 31 (dollars in thousands):

<TABLE>
<CAPTION>
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Loans.......................................... $101,355 $123,232 $144,531
Lease financing receivables.................... 3,078 701 2
Credit cards................................... 904
-------- -------- --------
$104,433 $124,837 $144,533
======== ======== ========
</TABLE>

An analysis of the changes in the allowance for loan and lease losses is as
follows for the years ended December 31 (dollars in thousands):

<TABLE>
<CAPTION>
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Beginning balance.................................... $1,868 $2,146 $2,371
Provision for loan and lease losses................ 533 773 2,124
Credit cards charged off........................... (475) (956)
Leases charged off................................. (132) (124) (316)
Loans charged off.................................. (242) (211) (362)
Credit card recoveries............................. 87 105
Lease recoveries................................... 34 34 24
Loan recoveries.................................... 85 141 65
------ ------ ------
Ending balance....................................... $2,146 $2,371 $3,055
====== ====== ======
</TABLE>

F-15
<PAGE> 111
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE E -- PREMISES AND EQUIPMENT

Components of premises and equipment included the following at December 31
(dollars in thousands):

<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Land........................................................ $ 1,042 $ 1,962
Buildings and improvements.................................. 3,269 5,168
Furniture, fixtures and equipment........................... 3,656 3,007
Leasehold improvements...................................... 9 203
------- -------
7,976 10,340
Accumulated depreciation.................................... (2,341) (2,390)
------- -------
$ 5,635 $ 7,950
======= =======
</TABLE>

NOTE F -- INVESTMENT IN UNCONSOLIDATED EQUIPMENT LEASING SUBSIDIARY

The following information summarizes the activity of the unconsolidated
equipment leasing subsidiary from inception in January 1997 through November 30,
1997 and for the twelve months ended November 30, 1998 (in thousands):

<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Balance sheet
Assets.................................................... $11,794 $21,323
======= =======
Liabilities............................................... $ 7,750 $16,761
Equity.................................................... 4,044 4,562
------- -------
$11,794 $21,323
======= =======
Income statement
Revenues.................................................. $ 1,018 $ 3,055
Expenses.................................................. 974 2,537
------- -------
Net income............................................. 44 518
X50% X50%
------- -------
Bancorp's share of net income............................... $ 22 $ 259
======= =======
</TABLE>

NOTE G -- TRANSFERS OF FINANCIAL ASSETS

During the year ended December 31, 1998, the Bank recorded $739,000 of
servicing rights related to loans originated and sold. Amortization of the
servicing rights was $141,000 for the year ended December 31, 1998. The
estimated fair value of the servicing assets aggregated $598,000 at December 31,
1998. A valuation allowance is recorded where the fair value is below the
carrying amount of the servicing assets. No valuation allowance was needed at
December 31, 1998.

F-16
<PAGE> 112
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE H -- INTEREST-BEARING DEPOSITS

Interest-bearing deposits consisted of the following at December 31
(dollars in thousands):

<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Negotiable order of withdrawal (NOW).............. $ 21,575 $ 22,314
Savings and money market.......................... 52,380 48,936
Time, $100,000 and over........................... 40,643 46,355
Other time........................................ 69,821 69,478
-------- --------
$184,419 $187,083
======== ========
</TABLE>

Interest expense on these deposits for the years ended December 31 is as
follows (dollars in thousands):

<TABLE>
<CAPTION>
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
NOW.......................................... $ 162 $ 190 $ 207
Savings and money market..................... 1,082 1,327 1,232
Time, $100,000 and over...................... 1,245 1,803 2,412
Other time................................... 3,012 3,653 3,714
------ ------ ------
$5,501 $6,973 $7,565
====== ====== ======
</TABLE>

The maturities of time deposits at December 31, 1998 are as follows
(dollars in thousands):

<TABLE>
<S> <C>
Three months or less........................................ $ 47,015
Over three months through twelve months..................... 57,522
Over one year through three years........................... 9,491
Over three years............................................ 1,805
--------
$115,833
========
</TABLE>

NOTE I -- LINE OF CREDIT

The Bank has uncommitted federal funds lines of credit agreements with two
financial institutions. The maximum borrowings available under the lines totaled
$10,500,000. Availability of this line is subject to federal funds balances
available for loan and continued borrower eligibility. The line is intended to
support short-term liquidity, and cannot be used for more than ten consecutive
business days or more than twelve times during a given thirty day period. At
December 31, 1998 there were no borrowings outstanding under the agreements.

NOTE J -- LONG-TERM DEBT

The Bank has three advances totaling $3,402,000 from the Federal Home Loan
Bank (FHLB) at December 31, 1998. The first advance totaling $747,000 is due in
monthly installments of principal and interest, at 6.19%, of approximately
$5,000 through February 15, 2004. The second advance of $1,000,000 is due at
maturity on December 31, 2007. Interest is due semi-annually at 6.18%. The third
advance totaling $1,655,000 is due in monthly installments of principal and
interest, at 6.08%, of approximately $14,000 through April 8, 2013. Investment
securities with an amortized

F-17
<PAGE> 113
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE J -- LONG-TERM DEBT (CONTINUED)
cost of $5,289,000 and approximate fair value of $5,224,000 at December 31,
1998, were held as collateral for these three advances. The Bank also had loans
with an approximate principal balance of $1,991,000 at December 31, 1998 pledged
as collateral for these advances.

Scheduled principal repayments of long-term debt, assuming no changes in
their terms, for the five years ending December 31, 2003 are as follows (dollars
in thousands):

NOTE K -- FEES AND OTHER INCOME

Fees and other income consisted of the following for the years ended
December 31 (dollars in thousands):

<TABLE>
<CAPTION>
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Merchant credit card processing fees................. $2,508 $3,906 $6,177
Lease residuals and rentals.......................... 752 1,306 1,575
Credit card program fees............................. 169 778 1,019
Fees for customer services........................... 287 291 346
Earnings on life insurance........................... 142 195 106
Loan and lease servicing fees........................ 370 346 87
Other (none exceeding 1% of revenues)................ 57 89 421
------ ------ ------
$4,285 $6,911 $9,731
====== ====== ======
</TABLE>

F-18
<PAGE> 114
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE L -- OTHER EXPENSES

Other expenses consisted of the following for the years ended December 31
(dollars in thousands):

<TABLE>
<CAPTION>
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Merchant credit card program......................... $ 434 $ 822 $2,665
Professional and other outside services.............. 693 1,342 1,122
Stationery, supplies and postage..................... 542 887 884
Telephone and travel................................. 424 478 598
Amortization of core deposit intangible.............. 372 426 372
Credit card program.................................. 170 1,021 346
Data processing and ATM fees......................... 199 170 324
Development.......................................... 129 242 249
Advertising.......................................... 235 265 247
FDIC and other insurance............................. 480 164 186
Other (none exceeding 1% of revenues)................ 263 407 723
------ ------ ------
$3,941 $6,224 $7,716
====== ====== ======
</TABLE>

NOTE M -- INCOME TAXES

The components of income tax expense included in the statements of
operations were as follows for the years ended December 31 (dollars in
thousands):

<TABLE>
<CAPTION>
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Currently payable
Federal............................................ $1,757 $1,707 $2,104
State.............................................. 624 602 735
------ ------ ------
2,381 2,309 2,839
Deferred tax benefit
Federal............................................ (324) (606) (394)
State.............................................. (131) (206) (111)
------ ------ ------
(455) (812) (505)
Tax benefit of exercised stock options recorded as
additional paid in capital......................... 114 183
------ ------ ------
Net provision for income taxes....................... $1,926 $1,611 $2,517
====== ====== ======
</TABLE>

F-19
<PAGE> 115
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE M -- INCOME TAXES (CONTINUED)
A reconciliation of income taxes computed at the federal statutory rate of
34% and the provision for income taxes for the years ended December 31 are as
follows (dollars in thousands):

<TABLE>
<CAPTION>
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Income tax at Federal statutory rate.................. $1,667 $1,655 $2,221
State franchise tax, less federal income tax
benefit.......................................... 366 348 467
Interest on municipal obligations exempt from
Federal tax...................................... (193) (176) (227)
Nonstatutory stock option expense................... (91)
Interest on enterprise zone loans exempt from State
tax.............................................. (58) (52) (38)
Life insurance earnings and expenses................ (20) (93) (55)
Deferred tax asset valuation allowance change....... 252 (99) 122
Other differences................................... 3 28 27
------ ------ ------
Provision for income taxes............................ $1,926 $1,611 $2,517
====== ====== ======
</TABLE>

The tax effects of temporary differences that give rise to the components
of the net deferred tax asset recorded as an other asset as of December 31 were
as follows (dollars in thousands):

<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Deferred tax assets:
Allowance for loan and lease losses....................... $ 795 $ 944
Nonqualified benefit plans................................ 681 984
Deferred loan fees........................................ 333 295
State franchise taxes..................................... 205 249
Depreciation.............................................. 397 525
Merchant Bankcard program................................. 280 379
Core deposit intangible amortization...................... 115 186
Deferred credit card fees................................. 110 84
Other..................................................... 53 88
------ ------
Total deferred tax assets.............................. 2,969 3,734
Valuation allowance for deferred tax assets............... (319) (441)
------ ------
Deferred tax assets recognized......................... 2,650 3,293
Deferred tax liabilities:
Unrealized securities holding gains....................... 530 346
Equity in income of subsidiaries.......................... 8 116
FHLB stock dividends...................................... 33 49
Other..................................................... 25 40
------ ------
Total deferred tax liabilities......................... 596 551
------ ------
Net deferred tax asset................................. $2,054 $2,742
====== ======
</TABLE>

Amounts presented for the tax effects of temporary differences are based
upon estimates and assumptions and could vary from amounts ultimately reflected
on the Bank's tax returns. Accordingly, the variances from amounts reported for
prior years are primarily the result of adjustments to

F-20
<PAGE> 116
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE M -- INCOME TAXES (CONTINUED)
conform to the tax returns as filed. A valuation allowance has been established
to reduce deferred tax assets to the amount that is more likely than not to be
realized.

Income taxes payable were $199,000 and $207,000 at December 31, 1997 and
1998, respectively. The income tax expense related to net investment securities
gains was $281,000 and $42,000 during 1996 and 1997, respectively. There were no
net investment gains during 1998.

NOTE N -- EARNINGS PER SHARE

The following is a computation of basic and diluted earnings per share for
the years ended December 31 (dollars in thousands except per share amounts):

<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Basic:
Net income...................................... $ 2,976 $ 3,258 $ 4,016
========== ========== ==========
Weighted-average common shares outstanding...... 4,636,858 4,755,971 4,876,531
========== ========== ==========
Earnings per share.............................. $ 0.65 $ 0.68 $ 0.83
========== ========== ==========
Diluted:
Net income...................................... $ 2,976 $ 3,258 $ 4,016
========== ========== ==========
Weighted-average common shares outstanding........ 4,636,858 4,755,971 4,876,531
Net effect of dilutive stock options -- based on
the treasury stock method using average market
price........................................... 498,275 568,882 502,038
---------- ---------- ----------
Weighted-average common shares outstanding and
common stock equivalents........................ 5,135,133 5,324,853 5,378,569
========== ========== ==========
Earnings per share -- assuming dilution........... $ 0.58 $ 0.61 $ 0.75
========== ========== ==========
</TABLE>

Options to purchase 30,250 shares of common stock at $10.25 per share were
outstanding at December 31, 1997 but were not included in the computation of
diluted EPS because the options' exercise price was greater than the average
market price of the common shares. All options outstanding at December 31, 1996
and 1998 were included in the computation of diluted EPS.

NOTE O -- BENEFIT PLANS

Retirement Plan: The Bank has a defined contribution retirement plan
covering substantially all of the Bank's employees. Bank contributions to the
plan are made at the discretion of the Board of Directors in an amount not to
exceed the maximum amount deductible under the profit sharing plan rules of the
Internal Revenue Service. Employees may elect to have a portion of their
compensation contributed to the plan in conformity with the requirements of
Section 401(k) of the Internal Revenue Code. Salaries and employee benefits
expense includes Bank contributions to the plan of $98,000 during 1996, $134,000
during 1997 and $189,000 during 1998.

Director Fee Plan: The Bancorp has adopted the Humboldt Bank Director Fee
Plan (the "Fee Plan"). The Fee Plan permits each Bank director to elect to
receive his/her director's fees in the

F-21
<PAGE> 117
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE O -- BENEFIT PLANS (CONTINUED)
form of Bancorp common stock, cash, or a combination of Bancorp common stock and
cash, and to elect to defer the receipt of any of the foregoing until the end of
his/her term as a Bank director. If deferral is elected, the amount of the
director's fees shall be credited to an account on behalf of the director,
however, such crediting shall constitute a mere promise on the part of the Bank
and Bancorp to pay/distribute on this account. The account is otherwise
unsecured, unfunded and subject to the general claims of creditors of the Bank
and Bancorp. The Fee Plan provides for the issuance of up to 110,000 shares of
Bancorp common stock. The amount of such fees deferred in 1997 and 1998 totaled
$43,000 and $58,000, respectively. At December 31, 1997 and 1998, the liability
for amounts due under this plan totaled $63,000 and $110,000, respectively, or
approximately 7,500 and 12,000 shares of stock.

Employee Stock Bonus Plan: The Bancorp has an Employee Stock Bonus Plan
which is funded annually at the sole discretion of the Board of Directors. Funds
are invested in Bancorp stock, when available, and is purchased at the current
market price on behalf of all employees except the executive officers of the
Bank. The compensation cost recognized for 1996, 1997 and 1998 was $20,000 each
year.

NOTE P -- STOCK OPTION PLAN

At December 31, 1998, the Bancorp has a stock-based compensation plan
consisting of a fixed stock option plan which is described below. The Bancorp
applies Accounting Principles Board Opinion No. 25 and related Interpretations
in accounting for its plan. Accordingly, no compensation cost has been
recognized for its stock option plan. Had compensation cost for the Bancorp's
stock option plan been determined based on the fair value at the grant dates for
awards under this plan consistent with the method of SFAS No. 123, the Bancorp's
net income and net income per share would have been adjusted to the pro forma
amounts indicated below (dollars in thousands except per share amounts):

<TABLE>
<CAPTION>
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Net income
As reported......................................... $2,976 $3,258 $4,016
Pro forma........................................... 2,946 3,194 3,716
Net income per share
As reported......................................... 0.65 0.68 0.83
Pro forma........................................... 0.64 0.67 0.76
Net income per share -- assuming dilution
As reported......................................... 0.58 0.61 0.75
Pro forma........................................... 0.57 0.60 0.69
</TABLE>

The Bancorp has a stock option plan under which incentive and nonstatutory
stock options, as defined under the Internal Revenue Code, may be granted.
Options representing 456,255 shares of the Bancorp's no par value common stock
may be granted under the plan by the Board of Directors to directors, officers
and key, full-time employees at an exercise price not less than the fair market
value of the shares on the date of grant. In addition, 781,767 options are
outstanding that were granted by Humboldt Bank prior to the formation of the
Bancorp. Options may have an exercise

F-22
<PAGE> 118
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE P -- STOCK OPTION PLAN (CONTINUED)
period of not longer than 10 years and the options are subject to a graded
vesting schedule of 33% per year for incentive stock options. Nonstatutory stock
options vest immediately.

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1996, 1997 and 1998, respectively; dividend yield
of zero for all years; expected volatility of 9.40 percent for 1996, 10.69 for
1997 and 1998; risk-free interest rates of 5.54 percent and 6.29 percent for
1996, 5.85 percent and 6.48 percent for 1997 and 5.95 percent for 1998 for the
incentive options; risk-free interest rates of 5.85 percent and 6.65 percent for
1996, 5.86 percent and 6.87 percent for 1997 and 5.94 percent and 5.02 percent
for 1998 for the nonstatutory options; and expected lives of 10 years for the
incentive options for all years and 5 years for the nonstatutory options granted
in 1996 and 10 years for nonstatutory options granted in 1997 and 1998.

A summary of stock option activity, adjusted to give effect to stock
dividends and the 1999 stock split (unaudited) follows:

<TABLE>
<CAPTION>
INCENTIVE STOCK OPTIONS
------------------------------------------------------------------------------
1996 1997 1998
------------------------ ------------------------ ------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES
-------------- ------- -------------- ------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
Shares under option at
beginning of year..... $2.65 478,024 $2.79 519,301 $3.75 612,328
Options granted......... 4.37 42,086 8.68 100,278 9.75 6,050
Options exercised....... 3.40 (4,276) 2.01 (85,624)
Options expired......... 3.47 (809) 4.08 (2,975) 8.31 (1,322)
------- ------- -------
Shares under option at
end of year........... 2.79 519,301 3.75 612,328 4.08 531,432
======= ======= =======
Options exercisable at
end of year........... 444,433 479,677 446,815
Weighted-average fair
value of options
granted during the
year.................. 2.56 4.45 4.36
</TABLE>

F-23
<PAGE> 119
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE P -- STOCK OPTION PLAN (CONTINUED)

<TABLE>
<CAPTION>
NONSTATUTORY STOCK OPTIONS
------------------------------------------------------------------------------
1996 1997 1998
------------------------ ------------------------ ------------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES
-------------- ------- -------------- ------- -------------- -------
<S> <C> <C> <C> <C> <C> <C>
Shares under option at
beginning of year..... $2.92 514,553 $3.27 521,177 $3.84 483,320
Options granted......... 5.31 66,217 10.15 33,275 9.29 30,800
Options exercised....... 2.49 (59,593) 2.65 (71,132) 2.91 (61,536)
------- ------- -------
Shares under option at
end of year........... 3.27 521,177 3.84 483,320 4.34 452,584
======= ======= =======
Options exercisable at
end of year........... 376,318 416,966 452,584
Weighted-average fair
value of options
granted during the
year.................. 1.76 4.99 3.80
</TABLE>

The following table summarizes information about fixed stock options
outstanding at December 31, 1998:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED-AVERAGE ------------------------------
NUMBER REMAINING WEIGHTED-AVERAGE NUMBER WEIGHTED-AVERAGE
RANGE OF EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
------------------------ ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$1.95 to $3.23.............. 430,441 3.4 years $2.52 430,441 $2.52
$3.47 to $6.54.............. 422,197 6.2 years 4.15 384,450 3.98
$9.09 to $10.25............. 131,378 9.2 years 9.83 84,508 9.80
------- -------
$1.95 to $10.25............. 984,016 6.4 years 4.20 899,399 3.83
======= =======
</TABLE>

NOTE Q -- RELATED PARTY TRANSACTIONS

The Bank has entered into transactions with its directors, executive
officers and their affiliates and a subsidiary of the Bank (related parties).
The following is a summary of the aggregate activity involving related party
borrowers at December 31, 1997 and 1998 (dollars in thousands):

<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Loans outstanding at beginning of year...................... $ 3,624 $ 6,218
Loan disbursements.......................................... 4,693 2,095
Loan repayments............................................. (2,099) (1,862)
------- -------
Loans outstanding at end of year.......................... $ 6,218 $ 6,451
======= =======
</TABLE>

At December 31, 1997 and 1998, commitments to related parties of
approximately $1,245,000 and $605,000 were undisbursed.

F-24
<PAGE> 120
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE Q -- RELATED PARTY TRANSACTIONS (CONTINUED)
Deposits received from directors and officers totaled $2,013,000 and
$1,531,000 at December 31, 1997 and 1998, respectively.

The Bank made payments totaling $23,000 in 1996, $50,000 in 1997 and
$73,000 in 1998 to a travel business owned by a director. Payments under
contracts with directors' companies for premises remodeling, repair and
engineering services totaled $17,000 in 1996, $14,800 in 1997 and $32,000 in
1998. The Bank purchased computer equipment and office furniture from businesses
owned by members of executive officers' immediate families totaling $5,700 in
1996, $17,000 in 1997 and $20,000 in 1998. The Bank paid fees for payroll
services and other miscellaneous expenses totaling $7,000 in 1996, $11,000 in
1997 and $4,000 in 1998 to a business with which a director is associated. In
1997, the Bank entered into a long term lease for a branch office with a company
owned by a director. Payments on the lease during 1997 and 1998 totaled $13,000
and $31,000.

During 1997, the Bancorp purchased leases that were originated by its
subsidiary, Bancorp Financial Services. These outstanding lease receivable
balances, net of unearned interest, totaled $5,588,000 and $5,403,000 at
December 31, 1997 and 1998, respectively.

NOTE R -- COMMITMENTS AND CONTINGENT LIABILITIES

Postemployment Benefit Plans and Life Insurance Policies: The Bank has
purchased single premium life insurance policies in connection with the
implementation of salary continuation and deferred compensation plans for
certain key employees. The policies provide protection against the adverse
financial effects from the death of a key employee and provide income to offset
expenses associated with the plans. The specified employees are insured under
the policies, but the Bank is the owner and beneficiary. At December 31, 1997
and 1998, the cash surrender value of these policies totaled approximately
$4,810,000 and $4,943,000, respectively.

The plans are unfunded and provide for the Bank to pay the employees
specified amounts for specified periods after retirement and allow the employees
to defer a portion of current compensation in exchange for the Bank's commitment
to pay a deferred benefit at retirement. If death occurs prior to or during
retirement, the Bank will pay the employee's beneficiary or estate the benefits
set forth in the plans.

At December 31, 1997 and 1998, liabilities recorded for the estimated
present value of future salary continuation and deferred compensation benefits
totaled approximately $1,451,000 and $2,038,000, respectively. Salary
continuation benefits may be paid if termination is without cause or due to a
change in control of the Bank. Otherwise no benefits are paid upon termination.
Deferred compensation is vested as to the amounts deferred. In the event of
death or under certain other circumstances, the Bank is contingently liable to
make future payments greater than the amounts recorded as liabilities. Based on
present circumstances, the Bank does not consider it probable that such a
contingent liability will be incurred or that in the event of death, such a
liability would be material after consideration of life insurance benefits.

Lease Commitments: The Bank leases five sites under noncancelable operating
leases expiring in August 1999, September 1999, February 2006, September 2007
and October 2008. The lease expiring August 1999 includes an option to extend
the lease for an additional term of one year. The lease

F-25
<PAGE> 121
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE R -- COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
expiring in February 2006 requires adjustments to the base rent after two years
for changing price indices with a maximum annual increase of five percent and
includes an option to renew for two consecutive five-year terms. The lease
expiring September 2007 is renewable for two consecutive five-year periods and
requires adjustment every September 1 based on changing price indices but not
less than 2% nor more than 10%. The lease expiring October 2008 requires annual
adjustments to the base rent every November 3 of the greater of 2% or the
percentage increases in the Consumer Price Index and includes an option to
extend the term of the lease for three consecutive five-year terms.

As of December 31, 1998, future minimum lease payments under noncancelable
operating leases are as follows (dollars in thousands):

<TABLE>
<CAPTION>
LEASE
COMMITMENT
----------
<S> <C>
Year ended December 31:
1999...................................................... $ 182
2000...................................................... 171
2001...................................................... 173
2002...................................................... 176
2003...................................................... 178
Thereafter................................................ 710
------
Total minimum lease commitments........................ $1,590
======
</TABLE>

Rent expense for the years ended December 31, 1996, 1997 and 1998 totaled
$94,000, $128,000 and $269,000, respectively. Sublease rental income was $14,000
in 1996 and $4,000 in 1997.

Financial Instruments with Off-Balance-Sheet Risk: The Bank's financial
statements do not reflect various commitments and contingent liabilities which
arise in the normal course of business and which involve elements of credit
risk, interest rate risk and liquidity risk. These commitments and contingent
liabilities are commitments to extend credit, credit card arrangements and
standby letters of credit. A summary of the Bank's commitments and contingent
liabilities at December 31, is as follows (dollar in thousands):

<TABLE>
<CAPTION>
CONTRACTUAL AMOUNTS
--------------------
1997 1998
-------- --------
<S> <C> <C>
Commitments to extend credit........................ $32,616 $42,200
Credit card arrangements............................ 10,695 12,299
Standby letters of credit........................... 3,927 5,240
</TABLE>

Commitments to extend credit, credit card arrangements and standby letters
of credit all include exposure to some credit loss in the event of
nonperformance of the customer. The Bank's credit policies and procedures for
credit commitments and financial guarantees are the same as those for extension
of credit that are recorded on the balance sheet. Because these instruments have
fixed maturity dates, and because many of them expire without being drawn upon,
they do not generally present any significant liquidity risk to the Bank.

F-26
<PAGE> 122
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE R -- COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. The Bank evaluates each customer's credit
worthiness on a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Bank upon extension of credit, is based on management's credit
evaluation of the customer. Collateral held varies but may include accounts
receivable, inventory, property, plant, and equipment, certificates of deposits
and income-producing commercial properties. At December 31, 1997 and 1998,
approximately $1,484,000 and $1,300,000, respectively, of the Bank's undisbursed
credit card commitments were secured by deposit accounts.

Standby letters of credit are conditional commitments issued by the Bank to
guarantee the performance of a customer to a third party. Those guarantees are
primarily issued to support public and private borrowing arrangements. All
letters of credit are short-term guarantees with no guarantees extending more
than two years. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending facilities to customers. The
Bank holds assigned deposit accounts as collateral supporting those commitments
for which collateral is deemed necessary. The extent of collateral held for
those commitments at December 31, 1997 and 1998 varies from zero to 100%; the
average amount collateralized is approximately 37% in 1997 and 92% in 1998. None
of these letters of credit were utilized during 1997 or 1998.

The Bank has not incurred any losses on its commitments in 1996, 1997 or
1998.

Merchant Credit and Debit Card Sales Processing: The Bank processes the
settlement of credit and debit card sales for merchants located throughout the
continental United States, Alaska, Hawaii and Puerto Rico. The process involves
collecting funds from the card issuing bank and crediting the merchant accounts
in exchange for a merchant discount and other processing fees. The more
significant areas of risk associated with this process includes the risk that
funds due from the card issuing bank will be uncollectible, that significant
fines may be assessed for violations of VISA or MasterCard rules or that the
merchant will be unable to absorb chargebacks, deliver products due to
insolvency or may commit fraud. To protect the Bank from losses, merchant
deposits of $46,935,000 at December 31, 1998 have been established by
withholding a percentage of merchant processing volume. In addition, the Bank
has accrued a liability to cover losses, if any, in excess of the merchant
reserves of $680,000 and $954,000 at December 31, 1997 and 1998, respectively.
No losses were incurred in 1996 or 1997. The Bank has incurred approximately
$28,000 in losses during 1998. The Bank processed approximately $1.5 billion and
$2.5 billion of credit and debit card sales for merchants during 1997 and 1998,
respectively.

Legal Proceedings: The Bancorp is a party to claims and legal proceedings
arising in the ordinary course of business. After taking into consideration
information furnished by legal counsel to the Bancorp as to the current status
of various claims and proceedings to which the Bancorp is a party, management is
of the opinion that the ultimate aggregate liability represented thereby, if
any, will not have a material adverse effect on the financial position or
results of operations of the Bancorp.

F-27
<PAGE> 123
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE S -- CONCENTRATIONS OF CREDIT RISK

Most of the Bank's business activity is with customers located within the
State of California, primarily in Northern California except for the merchant
credit card debit card sales processing as discussed in Note R. The economy of
the Bank's primary service area is heavily dependent on the area's major
industries which are timber, commercial fishing, agriculture and tourism.
General economic conditions or natural disasters affecting the primary service
area or its major industries could affect the ability of customers to repay
loans and the value of real property used as collateral.

In addition to the types of loans as set forth in Note D, the Bank has
concentrations in out-of-area participation loans, motel loans and construction
loans. The distribution of commitments to extend credit approximates the
distribution of loans outstanding. Standby letters of credit were granted
primarily to commercial borrowers. The Bank, as a matter of policy, does not
extend credit to any single borrower or group of related borrowers on a secured
basis in excess of 25% of its unimpaired capital (shareholders' equity plus the
allowance for loan and lease losses) and on an unsecured basis in excess of 15%
of its unimpaired capital.

The Bank places its cash investments primarily in financial instruments
backed by the U.S. Government and its agencies or by high quality financial
institutions or corporations. At December 31, 1997 and 1998, approximately 15%
and 9%, respectively, of the Bank's net worth was invested in federal funds sold
to a New York bank. In addition, at December 31, 1998, the Bank had deposits in
federally insured banks in excess of federally insured limits by $3,851,000.

NOTE T -- REGULATORY MATTERS

Banking regulations limit the amount of cash dividends that may be paid
without prior approval of the Bank's regulatory agency. Cash dividends are
limited to the lesser of retained earnings, if any, or net income for the last
three years, net of the amount of any other distributions made to shareholders
during such periods. As of December 31, 1998, $8,043,000 was available for cash
dividend distribution without prior approval.

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

Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the table
below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to average
assets (as defined). Management believes, as of December 31, 1998, that the Bank
meets all capital adequacy requirements to which it is subject.

F-28
<PAGE> 124
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE T -- REGULATORY MATTERS (CONTINUED)
As of December 31, 1998, the most recent notification from the Federal
Deposit Insurance Corporation (FDIC) categorized the Bank as well capitalized
under the regulatory framework for prompt corrective action. To be categorized
as well capitalized the Bank must maintain minimum total risk-based, Tier I
risk-based, Tier I leverage ratios as set forth in the table. There are no
conditions or events since that notification that management believes have
changed the institution's category. The Bank's actual capital amounts and ratios
are also presented in the table.

<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
--------------- ------------------ ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ----- --------- ------ --------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997:
Total Capital (to Risk Weighted
Assets)........................ $23,118 12.02% $$15,381 $8.0% $$19,226 $10.0%
Tier I Capital (to Risk Weighted
Assets)........................ $20,747 10.79% $$ 7,690 $4.0% $$11,536 $ 6.0%
Tier I Capital (to Average
Assets)........................ $20,747 7.38% $$11,238 $4.0% $$14,047 $ 5.0%
As of December 31, 1998:
Total Capital (to Risk Weighted
Assets)........................ $25,683 11.66% $$17,617 $8.0% $$22,022 $10.0%
Tier I Capital (to Risk Weighted
Assets)........................ $22,931 10.41% $$ 8,809 $4.0% $$13,213 $ 6.0%
Tier I Capital (to Average
Assets)........................ $22,931 7.23% $$12,690 $4.0% $$15,863 $ 5.0%
</TABLE>

F-29
<PAGE> 125
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE U -- CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

Condensed balance sheets as of December 31, 1997 and 1998 and the related
condensed statements of operations and cash flows for the three years in the
period ended December 31, 1998 for Humboldt Bancorp (parent company only) are
presented as follows (dollars in thousands):

CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
ASSETS
Cash...................................................... $ 504 $ 805
Other assets.............................................. 13 197
Investment in subsidiaries................................ 22,292 26,443
------- -------
$22,809 $27,445
======= =======
LIABILITIES
Other liabilities......................................... $ 83

STOCKHOLDERS' EQUITY
Common stock.............................................. $20,495 25,580
Additional paid-in capital................................ 114 297
Retained earnings......................................... 2,200 1,485
------- -------
$22,809 $27,445
------- -------
</TABLE>

CONDENSED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Dividends from subsidiaries.......................... $2,085
Other income......................................... $ 1 $ 2 3
Expenses............................................. (20) (24) (87)
------ ------ ------
(Loss) income before taxes........................... (19) (22) 2,001
Tax (expense) benefit................................ (3) 106 (51)
------ ------ ------
(Loss) income before equity in income of
subsidiaries....................................... (22) 84 1,950
Equity in undistributed income of subsidiaries....... 2,998 3,174 2,066
------ ------ ------
Net income......................................... $2,976 $3,258 $4,016
====== ====== ======
</TABLE>

F-30
<PAGE> 126
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE U -- CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Operating activities:
Net income.............................................. $ 2,976 $ 3,258 $ 4,016
Adjustments to reconcile net income to net cash (used)
provided by operating activities:
Dividends from subsidiaries.......................... (2,085)
Equity in undistributed income of subsidiaries....... (2,998) (3,174) (2,066)
Amortization......................................... 4 4 4
Increase in other assets............................. (21) (188)
Increase in other liabilities........................ 83
------- ------- -------
Net cash (used) provided by operating activities... (39) 88 (236)
Investing activities:
Reimbursement from subsidiary........................... 114 183
------- ------- -------
Net cash provided by investing activities.......... 114 183
Financing activities:
Proceeds from note payable.............................. 22
Payments on note payable................................ (22)
Cash paid for fractional shares......................... (5) (5) (8)
Proceeds from issuance of common stock.................. 148 203 362
------- ------- -------
Net cash provided by financing activities.......... 143 198 354
------- ------- -------
Net increase in cash............................... 104 400 301
Cash at beginning of year.......................... 104 504
------- ------- -------
Cash at end of year................................ $ 104 $ 504 $ 805
======= ======= =======
</TABLE>

NOTE V -- FAIR VALUES OF FINANCIAL INSTRUMENTS

Statement of Financial Accounting Standards No. 107, Disclosures about Fair
Value of Financial Instruments, requires disclosure of fair value information
about financial instruments, whether or not recognized in the balance sheet. In
cases where quoted market prices are not available, fair values are based on
estimates using present value or other valuation techniques. Those techniques
are significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. In that regard, the derived fair value
estimates cannot be substantiated by comparison to independent markets and, in
many cases, could not be realized in immediate settlement of the instruments.
Statement No. 107 excludes certain financial instruments and all nonfinancial
instruments from its disclosure requirements. Accordingly, the aggregate fair
value amounts presented do not represent the underlying value of the Bancorp as
a whole.

F-31
<PAGE> 127
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE V -- FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Bancorp's financial instruments are as
follows at December 31 (dollars in thousands):

<TABLE>
<CAPTION>
1997 1998
--------------------- ---------------------
ESTIMATED ESTIMATED
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks.................. $ 21,442 $ 21,442 $ 28,626 $ 28,626
Interest-bearing deposits in other
banks................................. 3,020 3,020 3,020 3,020
Federal funds sold....................... 3,520 3,520 2,250 2,250
Investment securities.................... 80,180 80,180 77,802 77,802
Loans and leases held for sale........... 48 48 7,677 7,731
Loans and lease financing receivables,
net................................... 157,464 157,085 178,361 178,386
Accrued interest receivable.............. 1,699 1,699 1,779 1,779
Cash surrender value of life insurance... 4,810 4,810 4,943 4,943
Financial liabilities:
Deposits................................. 255,186 255,204 283,967 283,997
Accrued interest payable................. 319 319 306 306
Long-term debt........................... 1,761 1,761 3,402 3,402
</TABLE>

The carrying amounts in the preceding table are included in the balance
sheet under the applicable captions.

The following methods and assumptions were used by the Bancorp in
estimating its fair value disclosures for financial instruments:

Cash and due from banks, interest-bearing deposits in other banks and
federal funds sold: The carrying amount is a reasonable estimate of fair
value.

Investment securities: Fair values for investment securities are based on
quoted market prices, where available. If quoted market prices are not
available, fair values are based on quoted market prices of comparable
instruments. The carrying amount of accrued interest receivable
approximates its fair value.

Loans and leases held for sale: Fair values for loans and leases held for
sale are based on quoted market prices or dealer quotes. If a quoted price
is not available, fair value is estimated using quoted market prices for
similar loans or leases.

Loans and lease financing receivables, net: For variable-rate loans that
reprice frequently and fixed rate loans that mature in the near future,
with no significant change in credit risk, fair values are based on
carrying amounts. The fair values for other fixed rate loans are estimated
using discounted cash flow analysis, based on interest rates currently
being offered for loans with similar terms to borrowers of similar credit
quality. The Bank's lease portfolio has relatively high fixed rates that
usually do not fluctuate with market changes and, therefore, the carrying
amount is a reasonable estimate of the fair value. Loan and lease fair
value estimates include judgments regarding future expected loss experience
and risk characteristics and are adjusted for the

F-32
<PAGE> 128
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE V -- FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
allowance for loan and lease losses. The carrying amount of accrued
interest receivable approximates its fair value.

Cash surrender value of life insurance: The carrying amount approximates
its fair value.

Deposits: The fair values disclosed for demand deposits (for example,
interest-bearing checking accounts and passbook accounts) are, by
definition, equal to the amount payable on demand at the reporting date
(that is, their carrying amounts). The fair values for certificates of
deposit are estimated using a discounted cash flow calculation that applies
interest rates currently being offered on certificates to a schedule of
aggregated contractual maturities on such time deposits. The carrying
amount of accrued interest payable approximates fair value.

Long-term debt: The fair value of long-term debt is estimated using a
discounted cash flow calculation that applies interest rates currently
being offered on similar debt instruments.

Off-balance sheet instruments: Off-balance sheet commitments consist of
commitments to extend credit, credit card arrangements and standby letters
of credit. The contract or notional amounts of the Bank's financial
instruments with off-balance-sheet risk are disclosed in Note R. Estimating
the fair value of these financial instruments is not considered practicable
due to the immateriality of the amounts of fees collected, which are used
as a basis for calculating the fair value, on such instruments.

NOTE W -- SUBSEQUENT EVENTS

The Bancorp has filed an application with its regulators to obtain approval
to form a wholly-owned subsidiary bank in Roseville, California and expects to
provide $4.5 million of initial capital. Organization costs related to the
formation of this subsidiary totaled $188,251 through December 31, 1998.

The Bank is in the process of negotiating the sale of approximately
$1,047,000 of its secured credit card portfolio.

NOTE X -- OPERATING SEGMENTS

Reportable operating segments are generally defined as components of an
enterprise for which discrete financial information is available, whose
operating results are regularly reviewed by the organization's decision makers
and whose revenue from external customers is 10 percent or more of total
revenue. The Bancorp has two reportable segments under this definition, retail
banking and credit card operations. The retail banking segment provides
traditional banking services such as checking, savings, IRA and Keogh accounts,
time certificates of deposit, loans, and lease financings. The credit card
segment processes the settlement of credit and debit card sales for merchants
and issues and maintains credit card accounts for its customers. The accounting
policies of the segments are the same as those described in the summary of
significant accounting policies. Each segment receives an allocation of
administrative expenses. The Bancorp evaluates performance based on profit or
loss from operations before income taxes. The Bancorp's reportable segments are
strategic business units that provide different services that are carried out by
separate departments. Included in the

F-33
<PAGE> 129
HUMBOLDT BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE X -- OPERATING SEGMENTS (CONTINUED)
retail banking segment are all other operations of the Bancorp, which include an
investment in an equipment leasing company.

The following table includes segment profit, including certain revenues and
expenses, and segment assets as of and for the year ended December 31, 1998 (in
thousands):

<TABLE>
<CAPTION>
RETAIL CREDIT CARD
BANKING OPERATIONS TOTAL
-------- ----------- --------
<S> <C> <C> <C>
Revenue from external customers............... $ 3,524 $ 8,304 $ 11,828
Interest revenue.............................. 22,339 1,165 23,504
Interest expense.............................. 7,593 149 7,742
Depreciation and amortization................. 2,886 217 3,103
Segment profit, before taxes.................. 4,444 2,089 6,533
Other significant non-cash items:
Additions to reserves for potential
losses................................... 1,240 1,183 2,423
Segment assets................................ 262,301 57,674 319,975
Investment in equity method investees......... 2,281 2,281
</TABLE>

The segment information for prior fiscal years is not available.

NOTE Y -- SUBSEQUENT STOCK SPLIT AND STOCK DIVIDEND TRANSACTIONS (UNAUDITED)

The Bancorp approved and completed a 5 for 2 stock split during 1999 and
approved a 10% stock dividend during January 2000. All per share amounts
contained herein reflect the effect of these transactions.

F-34
<PAGE> 130

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Global Bancorp and Subsidiary

In our opinion, the consolidated balance sheet as of December 31, 1997 and
the related consolidated statements of earnings, of cash flows and of changes in
stockholders' equity for each of the two years in the period ended December 31,
1997 present fairly, in all material respects, the financial position, results
of operations and cash flows of Global Bancorp and Subsidiary at December 31,
1997 and for each of the two years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above. We have not audited the consolidated financial statements of Global
Bancorp and Subsidiary for any period subsequent to December 31, 1997.

PRICEWATERHOUSECOOPERS LLP

San Francisco, California
March 6, 1998

F-35
<PAGE> 131

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors and Stockholders
Global Bancorp and Subsidiary

We have audited the accompanying consolidated balance sheet of Global
Bancorp and Subsidiary (the Company) as of December 31, 1998 and the related
consolidated statements of earnings, stockholders' equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Global Bancorp
and Subsidiary as of December 31, 1998, and the consolidated results of their
operations and their consolidated cash flows for the year then ended, in
conformity with generally accepted accounting principles.

GRANT THORNTON LLP

Sacramento, California
February 12, 1999

F-36
<PAGE> 132

GLOBAL BANCORP AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- SEPTEMBER 30,
1997 1998 1999
-------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Cash and due from banks............................... $ 1,841 $ 93 $ 248
Short-term certificates of deposit.................... 297 -- --
Federal funds sold.................................... 4,000 5,500 8,001
-------- -------- --------
Cash and cash equivalents........................... 6,138 5,593 8,249
Securities available-for-sale......................... 12,149 15,153 6,013
Securities held-to-maturity........................... 1,485 -- --
Federal Home Loan Bank stock.......................... 400 418 435
Loans, net............................................ 101,167 97,480 98,284
Property and equipment, net........................... 519 593 622
Real property held for sale, net...................... 5,628 3,104 2,407
Other assets.......................................... 2,477 2,431 1,650
-------- -------- --------
$129,963 $124,772 $117,660
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Investment and savings certificates................... $118,179 $112,639 $105,287
Other liabilities..................................... 1,796 1,305 593
-------- -------- --------
Total liabilities................................ 119,975 113,944 105,880
-------- -------- --------
Stockholders' equity:
Preferred stock -- no par value; authorized 600,000
shares, no shares issued......................... -- -- --
Common stock -- no par value; 1,200,000 shares
authorized; issued and outstanding: 670,850 at
December 31, 1997 and 1998 and 699,100 at
September 30, 1999............................... 7,831 7,831 8,090
Accumulated other comprehensive income, net of
tax.............................................. 18 58 3
Retained earnings................................... 2,139 2,939 3,687
-------- -------- --------
Total stockholders' equity....................... 9,988 10,828 11,780
-------- -------- --------
$129,963 $124,772 $117,660
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these statements.

F-37
<PAGE> 133

GLOBAL BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- -------------------------
1996 1997 1998 1998 1999
------- ------- ------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
INTEREST INCOME:
Loans..................................... $10,202 $10,849 $11,721 $8,786 $8,001
Investment securities..................... 237 649 925 650 470
Federal funds sold........................ 354 498 307 245 252
------- ------- ------- ------ ------
Total interest income................ 10,793 11,996 12,953 9,681 8,723
Interest expense on investment and savings
certificates.............................. 5,628 6,469 6,843 5,178 4,293
------- ------- ------- ------ ------
Net interest income..................... 5,165 5,527 6,110 4,503 4,430
Provision for losses on loans............... 151 416 226 57 479
------- ------- ------- ------ ------
Net interest income after provision for
losses on loans...................... 5,014 5,111 5,884 4,446 3,951
------- ------- ------- ------ ------
OTHER OPERATING INCOME:
Late charges.............................. 85 113 102 78 62
Gain on sales of loans.................... -- -- 476 -- --
Pass through points....................... 109 178 281 167 278
Loan documentation and underwriting
expense................................. (181) (173) (146) (123) (132)
Officers' life insurance proceeds......... -- -- -- -- 297
Rental income............................. 153 39 72 56 24
Proceeds from legal settlement............ -- -- 170 -- --
Miscellaneous income, net................. 298 337 347 455 204
------- ------- ------- ------ ------
464 494 1,302 633 733
------- ------- ------- ------ ------
OTHER OPERATING EXPENSES:
Salaries and employee benefits............ 2,034 2,078 2,023 1,487 1,522
Occupancy................................. 425 427 440 326 361
Loss/(gain) on sale and provision for
losses on real property held for sale... 190 564 1,224 734 185
Expenses on real property held for sale... 190 141 272 191 214
Federal and state payroll taxes........... 168 171 167 130 125
Telephone expense......................... 153 138 139 104 102
Repairs and maintenance................... 136 138 152 117 97
Group insurance........................... 138 143 130 98 97
Other..................................... 724 824 926 673 666
------- ------- ------- ------ ------
4,158 4,624 5,473 3,860 3,369
------- ------- ------- ------ ------
Income before income taxes.................. 1,320 981 1,713 1,219 1,315
Provision for income taxes.................. 501 349 658 499 363
------- ------- ------- ------ ------
Net income.............................. $ 819 $ 632 $ 1,055 $ 720 $ 952
======= ======= ======= ====== ======
PER COMMON SHARE:
Net income per common share............... $ 1.25 $ 0.96 $ 1.57 $ 1.07 $ 1.40
======= ======= ======= ====== ======
Net income per common share assuming
dilution................................ $ 1.19 $ 0.92 $ 1.52 $ 1.04 $ 1.37
======= ======= ======= ====== ======
</TABLE>

The accompanying notes are an integral part of these statements.

F-38
<PAGE> 134

GLOBAL BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK OTHER
--------------- RETAINED COMPREHENSIVE COMPREHENSIVE
SHARES AMOUNT EARNINGS INCOME INCOME TOTAL
------ ------ -------- ------------- ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996....... 657 $7,712 $1,089 $ -- $ 8,801
Dividends paid ($0.21 per
share)......................... -- -- (138) -- (138)
Net income..................... -- -- 819 -- 819
--- ------ ------ ---- -------
Balance at December 31, 1996..... 657 7,712 1,770 -- 9,482
Proceeds from exercise of stock
options........................ 14 119 -- -- 119
Dividends paid ($0.40 per
share)......................... -- -- (263) -- (263)
Comprehensive income.............
Other comprehensive income, net
of tax of $13,200...........
Unrealized gain on
securities................ -- -- -- $ 18 18 18
Net income..................... -- -- 632 632 -- 632
--- ------ ------ ------ ---- -------
Comprehensive income............. $ 650
======
Balance at December 31, 1997..... 671 7,831 2,139 18 9,988
Dividends paid ($0.38 per
share)......................... -- -- (255) -- (255)
Comprehensive income.............
Other comprehensive income, net
of tax of $27,700...........
Unrealized gain on
securities................ -- -- -- $ 40 40 40
Net income..................... -- -- 1,055 1,055 -- 1,055
--- ------ ------ ------ ---- -------
Comprehensive income............. $1,095
======
Balance at December 31, 1998..... 671 7,831 2,939 58 10,828
Dividends paid ($0.30 per
share)......................... -- -- (204) -- (204)
Proceeds from stock issuance..... 28 259 -- -- 259
Comprehensive income.............
Other comprehensive income, net
of tax of $38,300...........
Unrealized loss on
securities................ -- -- -- $ (55) (55) (55)
Net income..................... -- -- 952 952 -- 952
--- ------ ------ ------ ---- -------
Comprehensive income............. $ 897
======
Balance at September 30, 1999.... 699 $8,090 $3,687 $ 3 $11,780
=== ====== ====== ==== =======
</TABLE>

The accompanying notes are an integral part of this statement.

F-39
<PAGE> 135

GLOBAL BANCORP AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------- -------------------------
1996 1997 1998 1998 1999
-------- -------- ------ ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................... $ 819 $ 632 $1,055 $ 720 $ 952
Adjustments to reconcile net income to net cash
provided by operating activities:
Deferred income taxes........................ (4) (406) (59) (17) 440
Depreciation and amortization................ 146 139 128 136 152
Deferred loan fees, net...................... 269 297 (176) 90 (272)
Provision for loan losses.................... 151 416 226 57 479
Proceeds from sales of loans................. -- -- 10,052 -- --
Gain on sales of loans....................... -- -- (476) -- --
Loss/(gain) on sale and provision for losses
on real property held for sale............ 190 564 1,224 734 185
Change in:
Other assets.............................. 277 (252) 76 (15) 380
Other liabilities......................... 198 1,025 (491) (363) (712)
-------- -------- ------ -------- -------
Net cash provided by operating
activities............................ 2,046 2,415 11,559 1,342 1,604
-------- -------- ------ -------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan originations, net of repayments........... (16,380) (12,041) (5,643) (7,696) (1,097)
Expenditures for property and equipment, net... (86) (78) (202) (190) (134)
Maturities of investment securities:
Held-to-maturity, net of purchases........... (891) 99 1,485 297 --
Available-for-sale, net of purchases......... (2,954) (9,176) (2,937) (3,062) 9,000
Purchase of Federal Home Loan Bank stock..... -- (400) (18) (12) (17)
Proceeds from sales of real property held for
sale...................................... 889 407 1,006 564 597
-------- -------- ------ -------- -------
Net cash (used in) provided by investing
activities............................ (19,422) (21,189) (6,309) (10,099) 8,349
-------- -------- ------ -------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in investment and
savings certificates......................... 17,249 11,785 (5,540) 5,552 (7,352)
Proceeds from exercise of stock options........ -- 119 -- -- 259
Dividends paid................................. (138) (264) (255) (195) (204)
-------- -------- ------ -------- -------
Net cash (used in) provided by financing
activities............................ 17,111 11,640 (5,795) 5,357 (7,297)
-------- -------- ------ -------- -------
Net change in cash and cash equivalents.......... (265) (7,134) (545) (3,400) 2,656
Cash and cash equivalents at beginning of
period......................................... 13,537 13,272 6,138 6,138 5,593
-------- -------- ------ -------- -------
Cash and cash equivalents at end of period....... $ 13,272 $ 6,138 $5,593 $ 2,738 $ 8,249
======== ======== ====== ======== =======
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid.................................. $ 5,631 $ 6,459 $6,865 $ 5,179 $ 4,293
Income taxes paid.............................. $ 292 $ 882 $ 595 $ 325 $ --
</TABLE>

NON-CASH INVESTING ACTIVITIES:

During 1996, 1997 and 1998, the Company converted loans in the amount of
$2,892,000, $4,287,000 and $1,650,000, respectively, to real property
held-for-sale.

During 1996, 1997 and 1998, the Company issued loans in the amount of
$3,137,000, $1,131,000 and $1,945,000, respectively, to facilitate the sale
of real property held-for-sale.

During 1997, the Company recognized an increase in the unrealized gain on
available-for-sale securities of $32,000. As a result, the deferred tax
asset was reduced by $13,000 and equity was increased by $19,000.

During 1998, the Company recognized an increase in the unrealized gain on
available-for-sale securities of $67,400. As a result, the deferred tax
asset was reduced by $27,700 and equity was increased by $40,000.

The accompanying notes are an integral part of these statements.

F-40
<PAGE> 136

GLOBAL BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1997 AND 1998

NOTE A -- ORGANIZATION

The consolidated financial statements of Global Bancorp (the Company)
include the accounts of its wholly owned subsidiary, Capitol Thrift and Loan
Association (Capitol). All significant intercompany accounts and transactions
have been eliminated in consolidation.

Capitol primarily operates 11 branches in the state of California.
Capitol's primary source of revenue is providing commercial and multifamily real
estate loans to customers, who are predominantly small and middle-market
businesses and individuals. Capitol conducts a consumer and commercial finance
business under the California Industrial Loan Law and insures its deposits
through the Federal Deposit Insurance Corporation (FDIC).

NOTE B -- SUMMARY OF ACCOUNTING POLICIES

1. Use of estimates in the preparation of financial statements

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

2. Cash and cash equivalents

Cash and cash equivalents consist of cash and due from banks, certificates
of deposit, and federal funds sold with original maturities of three months or
less. Substantially all cash, due from banks, and federal funds sold are held in
one financial institution, First USA Bank, which exceeds existing deposit
insurance coverage. The Company complies with Regulation F, Interbank
Liabilities, which requires that the Company monitor several financial ratios of
any financial institution with which it has more than a 25% exposure of its
cash, due from banks, and federal funds sold deposited in one financial
institution.

3. Securities

The Company classifies securities as either trading, held-to-maturity or
available-for-sale as follows:

Held-to-Maturity: Debt securities that management has the positive intent
and ability to hold until maturity are classified as held-to-maturity and are
carried at their remaining unpaid principal balance, net of unamortized premiums
or unaccreted discounts. Premiums are amortized and discounts are accreted using
the level interest yield method over the estimated remaining term of the
underlying security.

Trading Securities: Debt and equity securities that are bought and held
principally for the purposes of selling them in the near term are classified as
trading securities and reported at market value, with unrealized gains and
losses included in earnings.

F-41
<PAGE> 137
GLOBAL BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE B -- SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
Available-for-Sale: Debt and equity securities that will be held for
indefinite periods of time, including securities that may be sold in response to
changes in market interest or prepayment rates, needs for liquidity and changes
in the availability of and the yield of alternative investments are classified
as available-for-sale. These assets are carried at estimated fair value. Fair
value is determined using published quotes as of the close of business.
Unrealized gains and losses are excluded from earnings and reported in other
comprehensive income, net of income taxes.

4. Loans

Loans are stated at the principal amount outstanding less unearned income.
Interest on loans, other than discounted loans, is computed on the loan balance
outstanding. Interest on discounted loans is recognized as income over the terms
of the loans by a method that approximates the interest method.

Interest accruals on loans are generally reversed and discontinued when the
payment of interest or principal is 90 days past due. Interest on loans well
secured and in the process of collection are not reversed.

Nonrefundable loan origination fees, net of related costs, are deferred and
amortized using the interest method over the term of the loan.

5. Allowance for losses on loans

A loan is considered impaired, based on current information and events, if
it is probable that the Company will be unable to collect the scheduled payments
of principal and interest when due according to the contractual terms of the
loan agreement. The allowance for losses on impaired loans is to be measured
under one of three methods. Because almost all of the Company's loans are
collateral dependent, the calculation of the allowance on impaired loans is
generally based on fair value of collateral.

These estimates are reviewed periodically and, as adjustments become
necessary, they are reported in earnings in the periods in which they become
known. When a loan or portion of a loan is determined to be uncollectible, the
portion deemed uncollectible is charged against the allowance and subsequent
recoveries, if any, are credited to the allowance.

The allowance for loan losses is based on estimates and is maintained at a
level considered adequate to provide for losses that can be reasonably
anticipated. The allowance is increased by provisions charged to income and
reduced by net charge-offs. In evaluating the adequacy of the allowance, the
Company performs credit reviews of the loan portfolio which consider the
borrower's ability to repay, the value of any underlying collateral, the
seriousness of the loan's delinquency status and other factors which affect the
collectibility of the loan. A specific amount of loss is then determined as a
result of this evaluation process. For those loans that are not subject to this
loan by loan analyses, management provides additional allowances for the
inherent risk in the portfolio based on the criteria of Statement of Financial
Accounting Standards (SFAS) No. 5, Accounting for Contingencies.

F-42
<PAGE> 138
GLOBAL BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE B -- SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
6. Property and equipment

Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation is computed on the straight-line method over the
estimated useful lives of the assets. Leasehold improvements are amortized on
the straight-line method over the lesser of the lease terms or estimated useful
lives of the assets. Estimated useful lives of assets are as follows:

<TABLE>
<S> <C>
Building.................................................... 35 years
Equipment................................................... 3 - 5 years
Leasehold improvements...................................... 4 - 5 years
</TABLE>

7. Real property held for sale (RPHFS)

Real property held for sale is comprised of real estate acquired in
settlement of loans and is recorded at fair value at the time of foreclosure
which becomes its new cost basis. Subsequently, real property held for sale is
carried at the lower of cost or fair value minus estimated selling costs.
Operating results from real property held for sale including rental income,
expenses incurred to maintain property are included in operating income and
expense. Included in real property held for sale is an allowance for losses.

The Company in some instances makes loans to facilitate the sales of real
property held for sale. Management reviews all sales for which it is the lending
institution for compliance with sales treatment under provisions established by
Statement of Financial Accounting Standards (SFAS) No. 66 "Accounting for Sales
of Real Estate".

8. Income taxes

The Company and its subsidiary file a consolidated federal income tax
return and a combined California franchise tax return. Deferred income taxes
reflect the estimated future tax effects of temporary differences between the
amount of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws and regulations.

9. Income per common share

Net income per common share is stated in accordance with SFAS No. 128
"Earnings per Share." Net income per common share is computed by dividing net
income available to common shareholders by the weighted average number of common
shares outstanding during the year. Net income per common share assuming
dilution is computed by dividing net income available to common shareholders by
the weighted average number of common shares and common equivalent shares
outstanding including dilutive stock options. The computation of common stock
equivalent shares is based on the weighted average market price of the Company's
common stock throughout the period.

In 1996, the numerator and denominator were $819,489 and 656,600 for the
net income per share calculation and $819,489 and 686,749 for the net income per
share assuming dilution

F-43
<PAGE> 139
GLOBAL BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE B -- SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
calculation. There were 30,149 common equivalent shares from the assumed
conversion of stock options in 1996.

In 1997, the numerator and denominator were $632,358 and 660,163 for the
net income per share calculation and $632,358 and 688,994 for the net income per
share assuming dilution calculation. There were 28,832 common equivalent shares
from the assumed conversion of stock options in 1997.

In 1998, the numerator and denominator were $1,054,971 and 670,850 for the
net income per common share and were $1,054,971 and 693,428 for net income per
common share assuming dilution calculations for 1998. There were 22,578 common
equivalent shares from the assumed conversion of stock options in 1998.

10. Statement of Financial Accounting Standards No. 130

The Company adopted SFAS No. 130, "Reporting Comprehensive Income" as of
January 1, 1998. SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. Comprehensive income is defined as "the change in equity
of a business enterprise during a period from transactions and other events and
circumstances from non-owner sources. It includes all changes in equity during a
period except those resulting from investments by owners and distributions to
owners."

11. Statement of Financial Accounting Standards No. 133

In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." This
Statement standardizes the accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, by requiring that
any entity recognize those items as assets or liabilities in the statement of
financial position and measure them at fair value. In June 1999, the FASB issued
SFAS No. 137, which defers the effective date of SFAS No. 133. The Company will
adopt SFAS No. 133 as of July 1, 2000 and has made no assessment of the
potential impact of adopting SFAS No. 133 at this time.

12. Reclassifications

Certain 1997 balances have been reclassified to conform with the 1998
presentation.

13. Unaudited interim financial data

The interim financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management all adjustments, including normal recurring
accruals necessary for fair presentation of results of operations for the
interim periods included herein, have

F-44
<PAGE> 140
GLOBAL BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE B -- SUMMARY OF ACCOUNTING POLICIES (CONTINUED)
been made. The results of operations for the nine months ended September 30,
1999, are not necessarily indicative of results to be anticipated for the year
ending December 31, 1999.

NOTE C -- INVESTMENT SECURITIES

At December 31, 1997 and 1998, the amortized cost and estimated fair values
of investment securities by type are shown below (in thousands):

<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
Available-for-sale securities:
U.S. Treasury securities....................... $12,117 $32 $-- $12,149
======= === == =======
Held-to-maturity securities:
Certificates of deposit........................ $ 1,485 $ 2 $-- $ 1,487
======= === == =======
</TABLE>

<TABLE>
<CAPTION>
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
DECEMBER 31, 1998
Available-for-sale securities:
U.S. Treasury securities....................... $15,054 $99 $-- $15,153
======= === == =======
</TABLE>

Scheduled maturities of securities as of December 31, 1998 were as follows
(in thousands):

<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
--------- ----------
<S> <C> <C>
Within one year............................................. $12,059 $12,128
After one year through five years........................... 2,995 3,025
------- -------
Total..................................................... $15,054 $15,153
======= =======
</TABLE>

F-45
<PAGE> 141
GLOBAL BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE D -- LOANS AND ALLOWANCE FOR LOSSES ON LOANS

Loans consisted of the following at December 31 (in thousands):

<TABLE>
<CAPTION>
1997 1998
-------- -------
<S> <C> <C>
Commercial real estate..................................... $ 82,123 $78,149
Real estate 1 - 4 family first mortgage.................... 13,009 15,819
Real estate 1 - 4 junior lien mortgage..................... 7,509 5,236
Consumer................................................... 895 590
-------- -------
103,536 99,794
Less:
Discounts on loans....................................... (15) --
Deferred loan fees....................................... (1,293) (1,132)
Allowance for losses on loans............................ (1,061) (1,182)
-------- -------
$101,167 $97,480
======== =======
</TABLE>

During 1998, the Company sold a block of mortgage loans and the related
servicing rights. The principal balance and related accrued interest totaled
$9,576,000 at date of sale. The Company recognized a gain on the sale of
$476,000.

The recorded investments in loans for which impairment has been recognized
totaled $3,872,000 and $5,143,000 with corresponding valuation allowances of
$-0- and $100,000 at December 31, 1997 and 1998, respectively. The average
recorded investment in impaired loans was approximately $4,568,000 and
$4,507,000 for the years ended December 31, 1997 and 1998, respectively. The
Company did not recognize any interest on impaired loans during the portion of
the year that they were impaired.

Loans on non-accrual status totaled $3,872,000 and $5,143,000 at December
31, 1997 and 1998, respectively. If interest on non-accrual loans had been
accrued, such income would have approximated $232,000 for 1997 and $170,000 for
1998. Loans over ninety days past due on which interest continues to be accrued
totaled $281,000 and $-0- at December 31, 1997 and 1998, respectively, as such
loans are well secured and in the process of collection. Interest accrued on
such loans was $25,000 and $-0- at December 31, 1997 and 1998, respectively.

Loans restructured to reflect the current rate of interest charged by the
Company totaled $932,000 and $744,000 as of December 31, 1997 and 1998,
respectively. Interest income that would have been received under the
contractual agreements for restructured loans is as follows for the years ended
December 31 (in thousands):

<TABLE>
<CAPTION>
1996 1997 1998
----- ----- ----
<S> <C> <C> <C>
Estimated interest that would have been recognized
under original terms................................. $ 255 $ 133 $ 95
Actual interest recognized............................. (188) (103) (68)
----- ----- ----
Net interest foregone.................................. $ 67 $ 30 $ 27
===== ===== ====
</TABLE>

F-46
<PAGE> 142
GLOBAL BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE D -- LOANS AND ALLOWANCE FOR LOSSES ON LOANS (CONTINUED)
Most of the Company's business activity is with customers located within
California. Real estate loans are generally secured by first or second deeds of
trust on real property. Credit evaluation of lending is based on an evaluation
of collateral, the borrower's financial strength, and other pertinent factors.

A summary of activity in the allowance for losses on loans is as follows
for the years ended December 31 (in thousands):

<TABLE>
<CAPTION>
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Balance at beginning of year......................... $1,147 $1,112 $1,061
Provision for losses on loans........................ 151 416 226
Charge-offs.......................................... (214) (480) (167)
Recoveries........................................... 28 13 63
------ ------ ------
Balance at end of year............................... $1,112 $1,061 $1,183
====== ====== ======
</TABLE>

NOTE E -- ALLOWANCE FOR LOSSES ON REAL PROPERTY HELD FOR SALE (RPHFS)

The following summarizes the activity in the allowance for losses on real
property held for sale for the years ended December 31 (in thousands):

<TABLE>
<CAPTION>
1996 1997 1998
------ ------ -------
<S> <C> <C> <C>
Real property held for sale at end of the year...... $4,140 $6,788 $ 4,152
------ ------ -------
Allowance at beginning of the year.................. 1,061 599 1,160
Provision for loss on RPHFS......................... -- 695 1,313
Charge-offs......................................... (462) (134) (1,425)
------ ------ -------
Allowance at end of year............................ 599 1,160 1,048
------ ------ -------
Real property held for sale at end of the year,
net............................................... $3,541 $5,628 $ 3,104
====== ====== =======
</TABLE>

NOTE F -- PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31 (in
thousands):

<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Land........................................................ $ 85 $ 85
Building.................................................... 376 376
Equipment................................................... 496 663
Leasehold improvements...................................... 244 244
------ ------
1,201 1,368
Less accumulated depreciation............................... (682) (775)
------ ------
$ 519 $ 593
====== ======
</TABLE>

F-47
<PAGE> 143
GLOBAL BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE F -- PROPERTY AND EQUIPMENT (CONTINUED)
Depreciation charged to occupancy and general and administrative expense
was $146,000, $139,000 and $128,000 in 1996, 1997 and 1998, respectively. In
1997, fully depreciated assets of $2,297,788 were written off.

NOTE G -- INVESTMENT AND SAVINGS CERTIFICATES

The following summarizes investment and savings certificates outstanding by
interest rate at December 31 (in thousands):

<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Investment certificates
Below 4.00%............................................. $ 234 $ 1,997
4.00 - 5.00............................................. 774 9,731
5.01 - 6.00............................................. 77,657 59,246
6.01 - 7.00............................................. 15,954 13,609
7.01 - 8.00............................................. 1,321 1,063
8.01 - 9.00............................................. 423 99
Over 9.00%.............................................. 452 --
-------- --------
96,815 85,745
-------- --------
Savings certificates
Below 4.00%............................................. 6,098 5,003
4.00 - 5.00............................................. 5,575 7,662
5.01 - 6.00............................................. 9,234 13,710
Over 6.00%.............................................. 457 519
-------- --------
21,364 26,894
-------- --------
Total investment and savings certificates............ $118,179 $112,639
======== ========
</TABLE>

Investment certificates are issued for terms which range from 30 days to 60
months.

The maturity of investment certificates at December 31, 1998 is as follows
(in thousands):

<TABLE>
<S> <C>
1999................................................... $65,758
2000................................................... 8,669
2001................................................... 5,409
2002................................................... 2,001
2003 and thereafter.................................... 3,908
-------
$85,745
=======
</TABLE>

NOTE H -- LEASE COMMITMENTS

The Company leases premises and equipment used in the operations of the
business. The leases have remaining terms ranging from one to four years and
expire at various dates through 2002. The leases usually require the Company to
pay maintenance, insurance, taxes, and certain other expenses in addition to
stated rentals. Certain of the leases contain renewal options and rent
escalation clauses.

F-48
<PAGE> 144
GLOBAL BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE H -- LEASE COMMITMENTS (CONTINUED)
Future minimum rental payments for noncancelable operating leases with
initial or remaining terms of one year or more consist of the following as of
December 31, 1998 (in thousands):

Total rental expense for all operating leases amounted to $299,000,
$242,000 and $258,000 in 1996, 1997 and 1998, respectively.

NOTE I -- INCOME TAXES

The following is a summary of the components of the provision for income
taxes (in thousands):

<TABLE>
<CAPTION>
1996
-------------------------
FEDERAL STATE TOTAL
------- ----- -----
<S> <C> <C> <C>
Current................................................. $386 $119 $505
Deferred................................................ (17) 13 (4)
---- ---- ----
Total................................................. $369 $132 $501
==== ==== ====
</TABLE>

<TABLE>
<CAPTION>
1997
-------------------------
FEDERAL STATE TOTAL
------- ----- -----
<S> <C> <C> <C>
Current................................................ $ 576 $179 $ 755
Deferred............................................... (309) (97) (406)
----- ---- -----
Total................................................ $ 267 $ 82 $ 349
===== ==== =====
</TABLE>

<TABLE>
<CAPTION>
1998
-------------------------
FEDERAL STATE TOTAL
------- ----- -----
<S> <C> <C> <C>
Current................................................. $542 $175 $717
Deferred................................................ (56) (3) (59)
---- ---- ----
Total................................................. $486 $172 $658
==== ==== ====
</TABLE>

F-49
<PAGE> 145
GLOBAL BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE I -- INCOME TAXES (CONTINUED)
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at December 31
are presented below (in thousands):

<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Deferred tax assets:
Book provision for losses in excess of tax................ $ 351 $ 391
Book allowance for real property held for sale in excess
of tax................................................. 477 432
Book depreciation in excess of tax........................ 55 60
Deferred compensation..................................... 232 282
State franchise taxes..................................... 61 66
------ ------
Deferred tax asset..................................... 1,176 1,231
Deferred tax liabilities:
Book deferred loan costs in excess of tax................. (270) (266)
Other comprehensive income................................ -- (41)
------ ------
Net deferred tax asset................................. $ 906 $ 924
====== ======
</TABLE>

Management believes a valuation allowance is not needed to reduce the
deferred tax asset because there is no material portion of the deferred tax
asset that will not be realized through sufficient taxable income within the
carryback and carryforward periods.

The actual income tax expense for 1996, 1997 and 1998 differs from the
"expected" tax expense for those years (computed by applying the U.S. Federal
corporate income tax rate of 34% to taxable income) as follows (in thousands):

<TABLE>
<CAPTION>
1996 1997 1998
---- ---- ----
<S> <C> <C> <C>
Expected tax at statutory rate........................... $449 $334 $583
State taxes, net of Federal benefit...................... 98 73 123
Officers life insurance premiums......................... 3 (1) (3)
Other.................................................... (49) (57) (45)
---- ---- ----
$501 $349 $658
==== ==== ====
</TABLE>

NOTE J -- STOCK OPTION PLAN

In May 1991, the Company adopted a stock option plan which reserved 50,000
shares of common stock to be granted at an exercise price of greater than or
equal to the market value of the shares on the date of grant. Stock options vest
when granted and expire ten years from the date of

F-50
<PAGE> 146
GLOBAL BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE J -- STOCK OPTION PLAN (CONTINUED)
grant. Changes in stock options for the years ended December 31, 1996, 1997 and
1998, are summarized as follows:

<TABLE>
<CAPTION>
NUMBER OF PRICE RANGE
OPTIONS PER OPTION
--------- --------------
<S> <C> <C>
Outstanding at January 1, 1996....................... 50,000 $8.00 - $10.00
Granted............................................ -- --
Exercised (50,000 exercisable)..................... -- $8.00 - $10.00
------ --------------
Outstanding at January 1, 1997....................... 50,000 $8.00 - $10.00
Granted............................................ -- --
Exercised (35,750 exercisable)..................... 14,250 $8.00 - $10.00
------ --------------
Outstanding at December 31, 1997..................... 35,750 $8.00 - $10.00
Granted............................................ -- --
Exercised (35,750 exercisable)..................... -- --
------ --------------
Outstanding at December 31, 1998..................... 35,750 $8.00 - $11.00
====== ==============
</TABLE>

NOTE K -- REGULATORY MATTERS

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

F-51
<PAGE> 147
GLOBAL BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE K -- REGULATORY MATTERS (CONTINUED)
Quantitative measures established by regulation to ensure capital adequacy
require the Company and Capitol to maintain minimum amounts and ratios (set
forth in the table below) of total and Tier I capital (as defined in the
regulations) to risk-weighted assets (as defined), and of Tier I capital (as
defined) to average assets (as defined). Management believes, as of December 31,
1998, that Capitol meets all capital adequacy requirements to which it is
subject.

<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES: ACTION PROVISIONS:
------------------ ------------------ -------------------
AMOUNT AMOUNT AMOUNT
(IN 000'S) RATIO (IN 000'S) RATIO (IN 000'S) RATIO
---------- ----- ---------- ----- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1997
THE COMPANY:
Total capital (to Risk Weighted
Assets)....................... $11,031 10.34% $8,533 $ 8.0%
Tier I capital (to Risk Weighted
Assets)....................... $ 9,970 9.35% $4,266 $ 4.0%
Tier I capital (to Average
Assets)....................... $ 9,970 7.54% $5,291 $ 4.0%
CAPITOL:
Total capital (to Risk Weighted
Assets)....................... $11,030 10.34% $8,531 $ 8.0% $10,663 $ 10.0%
Tier I capital (to Risk Weighted
Assets)....................... $ 9,969 9.35% $4,265 $ 4.0% $ 6,398 $ 6.0%
Tier I capital (to Average
Assets)....................... $ 9,969 7.54% $5,290 $ 4.0% $ 6,613 $ 5.0%

As of December 31, 1998
THE COMPANY:
Total capital (to Risk Weighted
Assets)....................... $11,953 12.16% $7,865 $ 8.0%
Tier I capital (to Risk Weighted
Assets)....................... $10,770 10.96% $3,932 $ 4.0%
Tier I capital (to Average
Assets)....................... $10,770 8.04% $5,361 $ 4.0%
CAPITOL:
Total capital (to Risk Weighted
Assets)....................... $11,919 12.13% $7,862 $ 8.0% $ 9,827 $ 10.0%
Tier I capital (to Risk Weighted
Assets)....................... $10,736 10.93% $3,931 $ 4.0% $ 5,896 $ 6.0%
Tier I capital (to Average
Assets)....................... $10,736 8.01% $5,306 $ 4.0% $ 6,632 $ 5.0%
</TABLE>

As of December 31, 1998, Capitol was categorized as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as
well-capitalized, Capitol must maintain minimum total risk-based, Tier I
risk-based, Tier I leverage ratio as set forth in the above table, and not
subject to a capital directive. On August 23,1998 Capitol entered into an
agreement with the FDIC and the California Department of Financial Institutions
(CDFI). Management and the Board

F-52
<PAGE> 148
GLOBAL BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE K -- REGULATORY MATTERS (CONTINUED)
of Directors agreed to reduce the level of classified assets as outlined in the
agreement, develop and implement a plan with specific strategies for reducing
RPHFS, classified and non performing loans and revise the methodology for
calculating an adequate allowance for losses on loans. The FDIC and CDFI has
required that within 90 and 150 days of the agreement, Capitol maintain a Tier I
capital (to Average Assets) of 7.75% and 8.0%, respectively. Management believes
that they have complied with the provisions of the agreement.

In addition to the FDIC guidelines above, Capitol is subject to the
provisions of the California Industrial Loan Law. Regulatory requirements
include limits on the size and type of loans which may be made, the amount of
thrift balances which may be raised, and the amount of dividends that may be
paid. Under the California Industrial Loan Law, Capitol may issue thrift
certificates of up to a maximum of eighteen times stockholder's equity. At
December 31, 1998, based on the amount of thrift certificates outstanding,
Capitol had a ratio of thrift certificates to stockholder's equity of
approximately 11 to 1.

NOTE L -- DEFERRED COMPENSATION

In 1991, the Company implemented a deferred compensation plan for a select
group of officers. The officers have elected to defer a portion of their
compensation until they reach normal retirement age, at which time they will
become eligible for benefits under the plan. Deferred compensation plan expense
was approximately $47,000 in 1998, $44,000 in 1997 and $41,000 in 1996.

In 1991, the Company implemented a retirement plan for the former President
which provides for ten annual payments of $60,000. The President vested in the
retirement plan upon completion of service in September 1997. Retirement plan
expense was approximately $29,000 in 1998, $66,000 in 1997, and $69,000 in 1996.

NOTE M -- FAIR VALUES OF FINANCIAL INSTRUMENTS

Fair value estimates are determined as of a specific date in time utilizing
quoted market prices, where available, or various assumptions and estimates. As
the assumptions underlying these estimates change, the fair value of the
financial instruments will change. The use of assumptions and various valuation
techniques, as well as the absence of secondary markets for certain financial
instruments, will likely reduce the comparability of fair value disclosures
between financial institutions. Additionally, the Company has not disclosed
highly subjective values of other nonfinancial instruments. Accordingly, the
aggregate fair value amounts presented do not represent and should not be
construed to represent the full underlying value of the Company.

The methods and assumptions used to estimate the fair value of each class
of financial instruments are as follows:

Cash and Cash Equivalents:

The carrying value of cash and cash equivalents approximates fair
value due to the relatively short-term nature of these instruments.

F-53
<PAGE> 149
GLOBAL BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE M -- FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
Securities:

Fair value of investment securities is based on quoted market prices.
If quoted market prices are not available, fair values are based on quoted
market prices of comparable instruments.

Loans:

In order to determine the fair values for loans, the loan portfolio
was segmented based on loan type, credit quality, and repricing
characteristics. For certain variable rate loans with no significant credit
concerns and frequent repricings, estimated fair values are based on the
carrying values. The fair values of other loans are estimated using
discounted cash flow analyses. The discount rates used in these analyses
are generally based on origination rates for similar loans of comparable
credit quality.

Investment and Savings Certificates:

The fair values for investment and savings certificates, subject to
immediate withdrawal are equal to the amount payable on demand at the
reporting date (i.e., their carrying amount on the balance sheet). Fair
values for fixed rate investment and savings certificates are estimated by
discounting future cash flows using interest rates currently offered on
time deposits with similar remaining maturities.

Accrued Interest:

The carrying value of accrued interest receivable and accrued interest
payable approximates fair value due to the relatively short-term nature of these
instruments.

The following table provides summary information on the fair value of
financial instruments at December 31, 1997 (in thousands):

<TABLE>
<CAPTION>
ESTIMATED
CARRYING FAIR
AMOUNT VALUE
--------- ---------
<S> <C> <C>
FINANCIAL ASSETS:
Cash and cash equivalents............................. $ 6,138 $ 6,138
Securities available-for-sale......................... 12,117 12,149
Securities held-to-maturity........................... 1,485 1,487
Loans................................................. 101,167 102,824
Accrued interest receivable........................... 834 834

FINANCIAL LIABILITIES:
Investment and savings certificates................... (118,179) (118,820)
Accrued interest payable.............................. (22) (22)
</TABLE>

F-54
<PAGE> 150
GLOBAL BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE M -- FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The following table provides summary information on the fair value of
financial instruments at December 31, 1998 (in thousands):

<TABLE>
<CAPTION>
ESTIMATED
CARRYING FAIR
AMOUNT VALUE
--------- ---------
<S> <C> <C>
FINANCIAL ASSETS:
Cash and cash equivalents............................. $ 5,593 $ 5,593
Securities available-for-sale......................... 15,153 15,153
Loans................................................. 99,794 101,660
Accrued interest receivable........................... 930 930

FINANCIAL LIABILITIES:
Investment and savings certificates................... (112,639) (113,575)
Accrued interest payable.............................. -- --
</TABLE>

NOTE N -- PARENT COMPANY ONLY CONDENSED FINANCIAL DATA

The condensed financial statements of Global Bancorp (parent company only)
as of December 31, 1998 and 1997, and for each of the three years in the period
ended December 31, 1998 are presented below:

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1998
------ -------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash........................................................ $ 27 $ 41
Investment in subsidiary.................................... 9,970 10,736
------ -------
$9,997 $10,777
====== =======

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accrued expenses and other liabilities.................... $ 27 $ 7
Stockholders' equity........................................ 9,970 10,770
------ -------
$9,997 $10,777
====== =======
</TABLE>

F-55
<PAGE> 151
GLOBAL BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

NOTE N -- PARENT COMPANY ONLY CONDENSED FINANCIAL DATA (CONTINUED)
STATEMENTS OF EARNINGS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1996 1997 1998
----- ----- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Income
Miscellaneous income...................................... $ 21 $ 25 $ 10
Expenses
General and administrative............................. 16 19 91
---- ---- ------
Earnings (loss) before income taxes and equity in
earnings of subsidiary.............................. 5 6 (81)
Income tax (expense) benefit.............................. (2) (4) 33
---- ---- ------
3 2 (48)
Equity in earnings of Capitol Thrift and Loan
Association............................................ 816 630 1,103
---- ---- ------
Net Earnings.............................................. $819 $632 $1,055
==== ==== ======
</TABLE>

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1996 1997 1998
----- ----- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Increase (decrease) in cash and cash equivalents
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings.............................................. $ 819 $ 632 $ 1,055
Adjustment to reconcile net earnings to net cash provided
by operating activities
Increase (decrease) in accrued expenses and other
liabilities.......................................... 1 (5) (20)
Cash dividends from subsidiary......................... 138 251 337
Undistributed earnings of subsidiary................... (816) (630) (1,103)
----- ----- -------
Net cash provided by operating activities.............. 142 248 269
----- ----- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in subsidiary.................................. -- (100) --
----- ----- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid............................................ (138) (263) (255)
Proceeds from exercise of stock options................... -- 119 --
----- ----- -------
Net cash used in financing activities.................. (138) (144) (255)
----- ----- -------
Net increase in cash and cash equivalents................... 4 4 14
Cash and cash equivalents at beginning of year.............. 19 23 27
----- ----- -------
Cash and cash equivalents at end of year.................... $ 23 $ 27 $ 41
===== ===== =======
</TABLE>

F-56
<PAGE> 152
GLOBAL BANCORP AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996, 1997 AND 1998

LOGO