<PAGE>

                  GENERAL RELEASE OF CLAIMS AND AGREEMENT

    1.        This General Release of Claims and Agreement (hereinafter, the
"Agreement") is entered into by and among the following parties (the "Parties"):

         a.   E. Lynn Caswell ("Employee"); and

         b.   Monarch Bancorp and Monarch Bank (collectively, "Employer").

                                   RECITALS

    2.        Employee has been employed by Monarch Bank as its President and
Chief Executive Officer.  In addition, Employee is the Vice Chairman of Monarch
Bancorp, and is a Director on the Boards of Directors of Monarch Bancorp and
Monarch Bank.  Differences have arisen between Employer and Employee such that
they agree that it is in their mutual best interest to sever their relationship
amicably on the terms set forth herein.

    NOW, THEREFORE, in consideration of the following terms, covenants,
conditions, and promises, and in order to compromise and settle forever all
existing and potential disputes between and among the Parties hereto, the
Parties agree to enter into this Agreement as set forth herein effective as of
February 1, 1997 (the "effective date").


<PAGE>
                                      
                                  AGREEMENT
PAYMENT TO EMPLOYEE

    3.        Upon execution and delivery of a fully executed original of this
Agreement, including all exhibits hereto, and the letters of resignation
attached hereto, to counsel for Employer, and upon the date that Employee's
releases herein become final and irrevocable, Employer agrees to pay Employee
the sum set forth in Exhibit A to this Agreement (the "Payment Sum").  Except as
otherwise expressly set forth in Exhibit A, the Payment Sum shall be paid when
this Agreement and the releases contained herein (including the Age
Discrimination release) are final and irrevocable with respect to the seven day
waiting period.

    4.        The Payment Sum shall constitute taxable income, and Employer 
shall withhold the usual and customary amounts at the levels required by law. 
Employer shall account to Employee for any such withholding, and shall be 
responsible to ensure that any amounts withheld are sent to the appropriate 
government agencies (such as the Internal Revenue Service).

    5.        The Payment Sum shall be in consideration for all of the claims
released herein, and shall serve as a substitute for all of the consideration
that otherwise would be owed to Employee under his employment contract with
Employer.  The Payment sum set forth in this Agreement shall be and constitutes
full, complete, unconditional, and immediate substitution for any 


                                       -2-


<PAGE>

and all rights, claims, demands, and causes of action whatsoever that 
heretofore existed or may be claimed to exist by Employee against the 
Employer Releasees (as defined below), as to all Claims (as defined below) 
that Employee might have against the Employer Releasees.

                                       -3-

<PAGE>

RELEASE OF CLAIMS

    1.        Excepting only the obligations imposed by this Agreement,
Employee hereby releases and forever discharges Employer, and further releases
and forever discharges Employer's past, present, and future successors, assigns,
parent and subsidiary corporations, divisions, affiliates, partners, joint
venturers, shareholders, predecessors, successors, officers, directors,
employees, agents, representatives, attorneys, insurers, and the predecessors,
successors, and assigns of each of them (all of whom are collectively referred
to as the "Employer Releasees"), from any and all rights actions, claims,
demands, costs, contracts, allegations, liabilities, obligations, damages, and
causes of action, of every kind and nature, whether known, suspected, or
unknown, whether in law or in equity, which Employee had or now has or may claim
to have had or now have or may have the right to assert on his own behalf or on
behalf of another, by reason of any matter or thing whatsoever from the
beginning of time up to and including the date of this Agreement (hereinafter
referred to collectively as the "Claims").

    2.        The Claims set forth above specifically include, but are not 
limited to, any and all existing and/or potential claims, demands, 
obligations, and/or causes of action for compensatory and/or exemplary 
damages and/or other relief. The Claims also include, but are not limited to, 
any action related 

                                    -4-

<PAGE>

in any way to Employee's employment and/or separation, such as (by way of 
example only) assertions of wrongful termination, breach of contract 
INCLUDING EMPLOYEE'S WRITTEN EMPLOYMENT CONTRACT WITH EMPLOYER, breach of the 
implied covenant of good faith and fair dealing, unpaid or improper bonuses, 
violation of public policy, fraud, misrepresentation, accounting, intentional 
and negligent infliction of emotional distress, lost pensions, conspiracy to 
terminate wrongfully, unpaid commissions, unpaid or improper severance or 
vacation pay, Workers' Compensation, any violation of any statute including 
those in the California Labor Code, invasion of privacy, defamation, and 
discrimination based on race color, national origin, sex, religion, age, 
and/or handicap, all under federal, state, and local law.  The Claims also 
include, but are not limited to, any claim of entitlement to any stock 
options not already issued to Employee as of the date this Agreement is 
executed.  The Claims also include, but are not limited to, any claims, 
demands, contracts, or causes of action related in any way to Employee's 
status as a Director on Employer's Boards of Directors, or as Vice Chairman 
of Monarch Bancorp.

    3.        Employee expressly waives any right or claim of right to assert
hereafter that any claim, demand, obligation, and/or cause of action has been,
for any reason whatever, omitted from the terms of this Agreement, and further
expressly waives any right or claim of right that he may have under the law of
any jurisdiction that releases such as those herein given to not apply to
unknown or unstated claims.  It is the express intent of the Parties to this
Agreement that Employee waives 


                                     -5-

<PAGE>


any and all claims that he has or may have against any of the Employer 
Releasees,  including any which are presently unknown, unsuspected, 
unanticipated, or undisclosed.  EMPLOYEE EXPRESSLY WAIVES ANY AND ALL RIGHTS 
UNDER SECTION 1542 OF THE CIVIL CODE OF THE STATE OF CALIFORNIA, WHICH 
PROVIDES AS FOLLOWS:

           "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
           DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF 
           EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY 
           AFFECTED HIS SETTLEMENT WITH THE DEBTOR."

Employee further expressly waives the provisions of any statute or court
decision of any jurisdiction which is comparable to Section 1542 of the Civil
Code of California and which Employee may claim applies to any of the Claims
released herein.  Thus, notwithstanding the provisions of Section 1542, and for
the purposes of implementing a full and complete release and discharge of all
claims, Employee expressly acknowledges that this Agreement is intended to, and
does, include in its effect, without limitation, all of the Claims, including
those which he does not know or suspect to exist in his favor at the time of

                                     -6-

<PAGE>

execution hereof, and that this Agreement contemplates and effects 
extinguishment of all of the Claim.

    1.        There is a risk that subsequent to the execution of this
Agreement, Employee will incur or discover damage or loss that he deems in some
way attributable to one or more Employer Releasee but which is unknown and
unanticipated by him or his counsel at the time this Agreement is signed. 
Employee acknowledges and assumes such risks, including that damages presently
known may become progressive, greater or more serious than is now known,
suspected, or anticipated.

    2.        THE RELEASE SET FORTH IN THIS SECTION OF THE AGREEMENT BY 
EMPLOYEE IS INTENDED TO BE CONSTRUED AS BROADLY AS POSSIBLE SO AS TO RELEASE 
EVERYTHING THAT IT IS POSSIBLE TO RELEASE.  IT IS THE PARTIES' INTENT THAT 
THE DEFINITION OF CLAIMS BE DEFINED AS BROADLY AND WIDELY AS IT IS POSSIBLE 
TO DEFINE SO AS TO OBTAIN THE MAXIMUM RELEASE THAT CAN BE OBTAINED OVER 
EVERYTHING POSSIBLE TO RELEASE.

    3.        Notwithstanding the release language set forth above, Employee 
does not release any claim he might have for Workers' Compensation arising 
from any physical injury he sustains as a result of any work done by him in 
his capacity as Vice Chairman of Monarch Bancorp after the effective date of 
this Agreement to the extent that such physical injury would be otherwise 
compensable under the Workers' Compensation statutes.

                                     -7-

<PAGE>

    4.        In the event that Employee files any action in any court or 
tribunal seeking recovery of a Claim that has been released as against any 
Employer Releasee, then Employee shall promptly tender back to Employer the 
Payment Sum set forth herein, with interest at the legal rate, with an offer 
to rescind this Agreement.  Employer shall have ten business days to accept 
or reject the offer of rescission.  If the offer is accepted, Employer shall 
keep the money tendered, and this Agreement shall be deemed rescinded.  If 
the offer is rejected, then the tendered sum shall be placed in an escrow 
account pending the resolution of the action, and may be drawn upon at the 
conclusion of the action to pay any judgment in favor of any Employer 
Releasee (including a judgment based on recovery of costs and attorneys 
fees).  If Employee fails to make such a tender, Employee agrees that that 
failure will itself bar his action.

    5.        Employee shall acknowledge and sign the letter attached hereto as
Exhibit B, and the separate Release attached hereto as Exhibit C, which further
release any rights he might have under the Age Discrimination in Employment Act
of 1967, as amended.

    6.        Employee will sign and deliver to Employer the letters of 
resignation attached hereto as Exhibit D.  Those letters shall become 
effective immediately upon delivery, and Employee will be deemed to have 
resigned his employment and

                                     -8-

<PAGE>


directorships at that time, with the exception of his position as Vice Chairman
of Monarch Bancorp, which resignation shall be delivered and effective on demand
at any time on or after August 1, 1997 on one day's notice served upon Employee
or his counsel Ronald Van Wert by personal delivery, facsimile, or mail (which
notice may be sent at any time on or after July 31, 1997).  In the event that
the requested resignation is not forthcoming within one day of the notice,
Employer may immediately terminate Employee's position as Vice Chairman.  Thus,
Employee shall have no right to, or expectation of, a continued position as Vice
Chairman of Monarch Bancorp at any time on or after August 1, 1997.  Further,
nothing herein shall limit Employer's right to remove Employee from his position
as Vice Chairman of Monarch Bancorp prior to August 1, 1997 for cause.

    7.        Employer hereby releases Employee from any and all known rights,
actions, claims, demands, costs, contracts, allegations, liabilities,
obligations, damages, and causes of action, of every kind and nature, whether in
law or in equity, which Employer had or now has or may claim to have had or now
have or may have the right to assert on its own behalf or on behalf of another,
from the beginning of time up to and including the effective date of this
Agreement.  For purposes of this Paragraph, a claim is "known" to the Employer
if the facts underlying that claim are actually known by any director of 


                                     -9-

<PAGE>

Monarch Bancorp, Monarch Bank, or Western Bank as of the effective date of this
Agreement.  Employer further releases Employee from any rights, actions, claims,
demands, costs, contracts, allegations, liabilities, obligations, damages, and
causes of action, of every kind and nature, whether in law or in equity, which
Employer had or now has or may claim to have had or now have or may have the
right to assert on its own behalf or on behalf of another, from the beginning of
time up to and including the effective date of this Agreement relating to loans
approved by Employee in the regular course of business in which no
misrepresentations or omissions were made by Employee relating to such loan.

    8.        Employer agrees to indemnify Employee and hold him harmless 
from all claims against him by a third party arising out of or relating to 
his actions as an officer or director of Employer to the extent required by 
the Corporations Code and state banking laws.  This indemnity shall include 
attorneys fees and costs reasonably incurred by Employee in defense of any 
such action.  This indemnity obligation, including the obligation to 
reimburse Employee for any reasonable attorneys fees incurred, shall be 
conditioned upon Employee's tender to Employer of any such claim within two 
weeks of the time Employee learns of the claim, and Employee's reasonable 
cooperation with Employer in the defense of the claim.  Moreover, Employer's 
obligation to 

                                     -10-

<PAGE>

indemnify Employee for attorneys fees incurred shall be conditioned upon 
Employer's approval of Employee's counsel, such approval not to be 
unreasonably withheld.

WARRANTIES AND REPRESENTATIONS

    1.        Employee has made such investigation of any and all facts
relevant to this Agreement as he deems necessary or advisable.  In executing
this Agreement, Employee is not relying upon any statement, representation, or
promise made to him by Employer or Employer's counsel, agent, employee, or
representative other than as set forth in this Agreement.  Employee expressly
waives any right he might have to conduct any additional discovery or inquiry
with regard to any of the existing or potential Claims released by him herein.

    2.        The Parties to this Agreement each warrant and represent to the 
other that none of them has heretofore assigned or transferred, or purported 
to assign or transfer, to any person not a party hereto any released Claim or 
any part apportioned thereof, and each agrees to indemnify and hold harmless 
the others from and against any claim based upon, in connection with, or 
arising out of, any such assignment or transfer or purported or claimed 
assignment or transfer.

    3.        Employee represents that he has not, directly or indirectly, on 
his own behalf or on behalf of any other entity, 

                                     -11-

<PAGE>


filed any charges or complaints or initiated any action against Employer or 
any other Employer Releasee.

    4.        Each Party covenants and agrees to indemnify, defend, and hold
harmless the other Party (and Employee so covenants and agrees with respect to
the Employer Releasees), from and against any and all loss, cost, damage, or
expense, including, without limitation, attorneys' fees, arising out of any
breach of this Agreement by any Party or the fact that any representation made
herein by any Party was not true when made.

CONFIDENTIALITY

    1.        Employee shall maintain as confidential, and not disclose to any
person except as required by law, any confidential information (including, but
not limited to, any trade secrets) learned by Employee during the course of his
employment, in accordance with Employee's employment contract.  Employee agrees
not to disclose any confidential information to any third party under any
circumstances except as required by law.  All of the provisions of Employee's
employment contract with Employer concerning confidential information and its
use, as well as any restrictions therein that would apply to Employee in the
event of a termination without cause pursuant to the terms of the employment
contract shall remain in force and shall be binding on Employee.  Employee shall
return to Employer with the 


                                     -12-

<PAGE>


executed copy of this Agreement the original and all copies in his possession 
of any documents created by Employer or any of Employer's employees or agents 
for any business purpose, whether the document is confidential or not.  This 
provision shall not apply to Employee's own personal employment records (such 
as payroll stubs, the employment agreement, and the like).

    2.        If asked about his separation from Employer at any time after 
Employee has resigned as Vice Chairman of Monarch Bancorp, Employee shall 
state only that he has retired or resigned, or that he has accepted 
employment elsewhere.  Prior to Employee's resignation as Vice Chairman of 
Monarch Bancorp, Employee and Employer shall state that Employee has moved to 
a full time position with the holding company.  Employer shall use its best 
efforts to advise its personnel department and its senior management of the 
requirements of this Paragraph. Notwithstanding anything in this Agreement to 
the contrary, neither Employer nor Employee shall be precluded from making 
any necessary disclosures to any government agency, or complying with legal 
process.

INTEGRATION CLAUSE

    1.        This Agreement represents and contains the entire agreement and
understanding among the Parties hereto with respect to the subject matter of
this Agreement, and supersedes any and 


                                     -13-

<PAGE>


all prior oral and written agreements and understandings, and no 
representation, warranty, condition, understanding, or agreement of any kind 
with respect to the subject matter hereof shall be relied upon by the Parties 
unless incorporated herein, PROVIDED THAT the provisions of the employment 
contract referred to in Paragraph 21 above shall remain in force. This 
Agreement may not be amended or modified except by an agreement in writing 
signed by the Party against whom the enforcement of any modification or 
amendment is sought.

FEES AND EXPENSES

    1.        In the event any Party should bring any action to enforce any
provision of this Agreement, or in the event any Party brings any action arising
out of or relating to this Agreement, the prevailing Party shall, in addition to
any other relief, be entitled to reasonable attorneys' fees, expenses, and
costs.  Should the Employer be the prevailing Party, and should there have been
a tender as set forth above, the Employer may recover said fees, expenses, and
costs from the tendered amount, but the Employer's recovery shall not be limited
to the tendered amount.


                                     -14-

<PAGE>


OTHER PROVISIONS

    1.        In entering into this Agreement, the Parties represent that they
have relied on the legal advice of their attorneys, who are the attorneys of
their own choice.  The Parties further represent that the terms of this
Agreement have been completely read and explained to them by their attorneys,
and that those terms are fully understood and voluntarily accepted by them.

    2.        This Agreement shall be binding upon the Parties, and upon their
heirs, administrators, representatives, executors, successors, and assigns, and
shall inure to the benefit of the Parties and Employer Releasees and to their
heirs, administrators, representatives, executors, successors, and assigns.

    3.        Employee understands and agrees that he waives any right to future
employment, or to seek future employment, with Employer or any entity known by
Employee to be affiliated by ownership with Employer, and agrees not to seek
such employment in the future.  Notwithstanding the foregoing, nothing in this
Paragraph shall preclude Employee from accepting employment with Employer or any
entity affiliated by ownership with Employer where the employing organization
initiated the employment negotiations and has offered Employee employment.


                                     -15-

<PAGE>

    4.        This Agreement shall be governed by and interpreted and 
construed in accordance with the laws of the State of California, and any 
suit brought arising from or relating to this Agreement shall be brought only 
in Orange County.

    5.        The language of all parts of this Agreement shall in all cases be
construed as a whole, according to its fair meaning and not strictly for or
against any of the Parties.  Each Party and counsel for each Party have reviewed
this Agreement and accordingly, the Parties agree that the rule of construction
that any ambiguities are to be resolved against the drafting Party shall not be
employed in the interpretation of this Agreement.  In the event that one or more
of the provisions or portions of this Agreement are determined to be illegal or
unenforceable (except for the release by Employee and the payment provisions),
the remainder of this Agreement shall not be affected thereby, and each
remaining provision or portion thereof shall continue to be valid and effective
and shall be enforceable to the fullest extent permitted by law.

    6.        This Agreement may be pleaded as a full and complete defense 
to, and may be used as the basis for an injunction against, any action, suit, 
or other proceeding instituted, prosecuted, or attempted in breach of this 
Agreement, except for an action based upon a breach of this Agreement.

                                     -16-

<PAGE>

    7.        The warranties and representations contained in this Agreement 
are deemed to and shall survive the execution hereof by the Parties. 

    8.        This Agreement may be executed in any number of counterparts, 
each of which shall be deemed to be an original, and all of which together 
shall be deemed one and the same instrument.



    Dated:___________________         ____________________________
                                       E. Lynn Caswell


    Dated:___________________         ____________________________
                                      on behalf of Monarch Bancorp


    Dated:__________________          ____________________________
                                      on behalf of Monarch Bank



                                     -17-

<PAGE>
                                      
                                  EXHIBIT A

    1.   The Payment Sum is $347,600.  $167,400 represents compensation for
salaries, benefits, bonuses, insurance, and auto allowances foregone.  $180,000
is to compensate Employee for option rights foregone.  However, the undivided
total of $347,600 also represents compensation and consideration for the release
provisions set forth in the Agreement.

    2.   Employer agrees to provide Employee at its expense office space,
furniture, files, telephone service, and secretarial assistance during the six
month period from the effective date of this Agreement through and including
July 31, 1997.  in addition, Employer will provide reasonable access to all
necessary stationary and supplies, copying and facsimile facilities and other
reasonable office needs of Employee during this period.  Employer is to provide
Employee and his dependents medical and dental insurance for the six month
period from the effective date of this Agreement through and including July 31,
1997 at the same levels generally provided by Employer to its executive
officers.


                                     -18-

<PAGE>

                                     EXHIBIT D

February 1, 1997


The Board of Directors
Monarch Bank
30000 Town Center Drive
Laguna Niguel, Calif. 92677

Dear Members of the Board:

I hereby tender my resignation as Chairman of the Board and Director, President,
and Chief Executive Officer of Monarch Bank effective immediately.

I wish to take this opportunity to thank all those particular members of the
Board with whom I have served for these past many years for their assistance,
support and contributions during our association.  I wish them, the Bank and the
Company continued success in the future.

Sincerely,




E. Lynn Caswell
Chairman, President and
Chief Executive Officer


<PAGE>

February 1, 1997


The Board of Directors
Monarch Bancorp
30000 Town Center Drive
Laguna Niguel, Calif. 92677

Dear Members of the Board:

I hereby tender my resignation as a Director of Monarch Bancorp effective
immediately.

I wish the Company continued success in the future.

Sincerely,




E. Lynn Caswell


<PAGE>


The Board of Directors
Monarch Bancorp
30000 Town Center Drive
Laguna Niguel, Calif. 92677

Dear Members of the Board:

I hereby tender my resignation as Vice Chairman of Monarch Bancorp effective
immediately.

I wish the Company continued success in the future.

Sincerely,




E. Lynn Caswell