Related Party Transactions and Outside Related Director Information

Northern Empire Bancshares (NREB)

4/13/2006 Proxy Information

The firm of Keegan & Coppin Company, Inc. of which James B. Keegan, Jr. a director and member of the Executive Compensation Committee, is a partner, has acted and may in the future act as leasing agent in transactions for leased premises of the Bank. Real estate commissions and referral fees have been paid by the lessor of Bank facilities to Keegan & Coppin Company, Inc. in the amount of $8,000 in 2005, $32,000 in 2004 and $145,000 in 2003. Keegan & Coppin Company, Inc. has also acted as a contractor for the BankÕs leasehold improvements which totaled $266,000 in 2005, $420,000 in 2004, of which $245,000 was paid by the lesser and $175,000 was paid by the Bank for the construction of the leasehold improvements. There were no construction services performed in 2003. Real estate commissions and referral fees paid to Keegan & Coppin Company, Inc. were in the amounts customarily paid in the real estate industry for those areas. Construction contracts are awarded using a bidding process.

The Corporation and the Bank have, and expect to have in the future, transactions in the ordinary course of business with directors, officers and their associates. The transactions involving loans have been and will be entered into with such persons in the ordinary course of business, on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons, and on terms not involving more than the normal risk of collectibility or representing other unfavorable features. At December 31, 2005, loans by the Bank to directors, officers and their associates totaled approximately $12,643,000, constituting 1.1% of total loans, 13.1% of the BankÕs shareholdersÕ equity and 11.8% of the consolidated shareholdersÕ equity of the Corporation. Loans to insiders, such as officers, directors, and certain other persons are subject to the limitations and requirements of the Financial Institutions Regulatory and Interest Rate Control Act of 1978 and regulations thereunder.

Deposits held by directors and officers totaled $23,939,000 and $15,961,000 at December 31, 2005 and 2004, respectively.

During 2004, the Bank implemented a special loan program to assist employees (not available to executive officers and directors) in financing their primary residence at competitive terms. As of December 31, 2005 and 2004 the Bank had $9,503,000 and $5,680,000 outstanding to employees at interest rates ranging from 3.88% to 4.50% and 3.25% to 5.25% under this special loan program. Other types of loans, such as construction financing and consumer loan, have been provided to employees in the normal course of business. There were no such loans outstanding as of December 31, 2005. At December 31, 2004 loans outstanding to employees totaled $5,994,000 at rates ranging from 3.25% to 10.25%.