<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                  FORM 10-QSB/A

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

For the quarterly period ended March 31, 2002

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from                    to
                              -------------------    ---------------------------

                        Commission file number 000-33455

                         ALLIANCE BANCSHARES CALIFORNIA
             ------------------------------------------------------
             (Exact name of Registrant as specified in its charter)

              California                                 91-2124567
--------------------------------------------------------------------------------
     (State or other jurisdiction             (I.R.S. Employer Identification
   of incorporation or organization)                      Number)

          100 Corporate Pointe
         Culver City, California                           90230
--------------------------------------------------------------------------------
(Address of principal executive offices)                 (Zip Code)

                                 (310) 410-9281
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

                 ----------------------------------------------
                 (Former name, former address and former fiscal
                       year, if changed, since last year)

     Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports); and (2) has been subject to such filing requirements for the past 90
days. YES X NO
          -

APPLICABLE ONLY TO CORPORATE ISSUERS:

State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.

              4,538,679 shares of Common Stock as of April 30, 2002

<PAGE>

                         ALLIANCE BANCSHARES CALIFORNIA

                        QUARTERLY REPORT ON FORM 10-QSB/A
                                       FOR
                        THE QUARTER ENDED MARCH 31, 2002

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                       Page No.
                                                                                       --------
<S>        <C>                                                                           <C>
Part I.    Financial Information

           Item 1.  Financial Statements

                    Consolidated Statements of Financial Condition
                    March 31, 2002 and December 31, 2001............................      3

                    Consolidated Statements of Operations
                    Three months ended March 31, 2002 and 2001......................      4

                    Consolidated Statements of Cash Flows
                    Three months ended March 31, 2002 and 2001......................      5

                    Notes to Consolidated Financial Statements......................      6

           Item 2.  Management's Discussion and Analysis or Plan of Operation.......      9

Part II.   Other Information

           Item 6.  Exhibits and Reports on Form 8-K ...............................     22

Signatures..........................................................................    S-1

Exhibit Index
</TABLE>

<PAGE>


PART I. ITEM 1. FINANCIAL STATEMENTS

                 CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

<TABLE>
<CAPTION>
                                                           March 31,    December 31,
                                                             2002           2001
                                                         ------------   ------------
                                                          (Unaudited)
<S>                                                      <C>            <C>
Assets

Cash and due from banks                                  $  5,826,600   $  4,672,900
Federal funds sold                                          9,630,000      9,420,000
                                                         ------------   ------------
         Total cash and cash equivalents                   15,456,600     14,092,900
Time deposits with other financial institutions             4,833,800      5,423,700
Securities held to maturity                                 5,271,000      6,232,700
Loans, net                                                129,032,600    112,158,300
Equipment and leasehold improvements, net                     482,300        499,300
Accrued interest receivable and other assets                2,545,800      2,079,500
                                                         ------------   ------------
         Total assets                                    $157,622,100   $140,486,400
                                                         ============   ============

Liabilities and Shareholders' Equity

Deposits:
   Demand                                                $ 29,090,600   $ 28,593,100
   Savings and money market                                33,312,100     33,485,200
   Time                                                    74,270,400     58,606,500
                                                         ------------   ------------
         Total deposits                                   136,673,100    120,684,800
                                                         ------------   ------------
Accrued interest payable and other liabilities                786,800        850,500
FHLB advances                                               5,000,000      5,000,000
Subordinated optional convertible debentures                2,500,000      2,500,000
Capital note                                                2,000,000      1,000,000
                                                         ------------   ------------
         Total liabilities                                146,959,900    130,035,300
                                                         ------------   ------------
Commitments and contingencies                                      --             --
Shareholders' equity:
   Serial preferred stock, no par value:
     Authorized - 1,000,000 shares
     Outstanding - none                                            --             --
   Common stock, no par value:
     Authorized - 10,000,000 shares
     Outstanding - 4,506,679 shares at March 31, 2002;
        4,505,079 shares at December 31, 2001               3,442,300      3,439,100
   Undivided profits                                        7,219,900      7,012,000
                                                         ------------   ------------
         Total shareholders' equity                        10,662,200     10,451,100
                                                         ------------   ------------
         Total liabilities and shareholders' equity      $157,622,100   $140,486,400
                                                         ============   ============
</TABLE>

The accompanying notes are an integral part of these statements.

                                       3

<PAGE>

Part I. Item 1. (continued)

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                   Three Months Ended March 31,
                                                                   ----------------------------
                                                                        2002         2001
                                                                     -----------------------
<S>                                                                  <C>          <C>
Interest income:
     Interest and fees on loans                                      $2,598,100   $2,796,200
     Interest on time deposits with other financial institutions         58,700       54,900
     Interest on securities held to maturity                             79,300      135,800
     Interest on federal funds sold                                      52,200      152,400
                                                                     ----------   ----------
         Total interest income                                        2,788,300    3,139,300
                                                                     ----------   ----------
Interest expense:
     Interest on deposits                                               867,400    1,252,500
     Interest on FHLB advances                                           51,500           --
     Interest on subordinated optional convertible debentures            50,500       50,500
     Interest on capital note                                            17,900           --
                                                                     ----------   ----------
         Total interest expense                                         987,300    1,303,000
                                                                     ----------   ----------
         Net interest income before provision for credit losses       1,801,000    1,836,300
Provision for credit losses                                             100,000       75,000
                                                                     ----------   ----------
         Net interest income                                          1,701,000    1,761,300
Non-interest income                                                     339,100      276,400
Non-interest expenses:
     Salaries and related benefits                                      862,400      727,500
     Occupancy and equipment expenses                                   202,600      178,000
     Other operating expenses                                           587,000      480,700
                                                                     ----------   ----------
         Total non-interest expense                                   1,652,000    1,386,200
                                                                     ----------   ----------
Earnings before income tax expense                                      388,100      651,500
Income tax expense                                                      180,200      231,000
                                                                     ----------   ----------
         Net earnings                                                $  207,900   $  420,500
                                                                     ==========   ==========
Earnings per common share:
     Basic earnings per share                                        $     0.05   $     0.09
     Diluted earnings per share                                      $     0.04   $     0.08
</TABLE>

The accompanying notes are an integral part of these statements.

                                       4

<PAGE>

Part I. Item 1. (continued)

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                          Three Months Ended March 31,
                                                                          ----------------------------
                                                                               2002          2001
                                                                           ------------   -----------
<S>                                                                        <C>            <C>
Cash Flows from Operating Activities:
     Net earnings                                                          $    207,900   $   420,500
     Adjustments to reconcile net earnings to net cash provided (used)
          by operating activities:
              Net amortization (accretion) of discounts and premiums on
                   securities held to maturity                                      300        (8,900)
              Depreciation and amortization                                      55,100        45,700
              Provision for credit losses                                       100,000        75,000
              (Increase) decrease in accrued interest receivable
                   and other assets                                            (466,300)        8,300
              Increase (decrease) in accrued interest payable
                   and other liabilities                                        (63,700)       18,700
                                                                           ------------   -----------
                   Net cash provided (used) by operating activities            (166,700)      559,300
                                                                           ------------   -----------
Cash Flows from Investing Activities:
     Net (increase) decrease in:
          Time deposits with other financial institutions                       589,900    (1,788,100)
          Loans                                                             (16,974,300)   (2,616,800)
     Purchase of equipment and leasehold improvements                           (38,100)      (43,500)
     Purchase of securities held to maturity                                 (2,038,600)         (900)
     Proceeds from maturities of securities held to maturity                  3,000,000     1,000,000
                                                                           ------------   -----------
                   Net cash used by investing activities                    (15,461,100)   (3,449,300)
                                                                           ------------   -----------
Cash Flows from Financing Activities:
     Net increase (decrease) in:
          Demand deposits                                                       497,500      (497,600)
          Savings deposits                                                     (173,100)    4,759,500
          Time deposits                                                      15,663,900    (2,120,800)
     Proceeds from stock options exercised                                        3,200         1,500
     Proceeds from issuance of capital note                                   1,000,000            --
     Proceeds from issuance of subordinated debentures                               --            --
     Proceeds from issuance of FHLB advance                                          --            --
                                                                           ------------   -----------
                   Net cash provided by financing activities                 16,991,500     2,142,600
                                                                           ------------   -----------
Net increase (decrease) in cash and cash equivalents                          1,363,700      (747,400)
Cash and cash equivalents, beginning of year                                 14,092,900    16,139,600
                                                                           ------------   -----------
Cash and cash equivalents, end of year                                     $ 15,456,600   $15,392,200
                                                                           ============   ===========
Supplemental disclosure of cash flow information
   Cash paid during the year for:
          Interest                                                         $    908,300   $ 1,311,300
          Income taxes                                                          135,000            --
</TABLE>

The accompanying notes are an integral part of these statements.

                                       5

<PAGE>

                           Part I. Item 1. (continued)

                  ALLIANCE BANCSHARES CALIFORNIA AND SUBSIDIARY
                   Notes to Consolidated Financial Statements
                                   (Unaudited)

1.   Nature of Business and Significant Accounting Policies

     Organization

     The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-QSB and, therefore, do
not include all footnotes as would be necessary for a fair presentation of
financial position, results of operations and changes in cash flows in
conformity with generally accepted accounting principles. However, these interim
financial statements reflect all adjustments (consisting of normal recurring
adjustments and accruals) which, in the opinion of the management, are necessary
for a fair presentation of the results for the interim periods presented. These
unaudited condensed consolidated financial statements have been prepared in
accordance with generally accepted accounting principles on a basis consistent
with, and should be read in conjunction with the Company's audited financial
statements as of and for the year ended December 31, 2001 and the notes thereto
included in the Company's Form 10-KSB filed under the Securities Act of 1934.

     The financial position at March 31, 2002, and the results of operations for
the three month period ended March 31, 2002, are not necessarily indicative of
the results of operations that may be expected for any other interim period or
for the full year ending December 31, 2002.

     The consolidated financial statements include the accounts of Alliance
Bancshares California (the "Bancshares"), its wholly owned subsidiary Alliance
Bank (the "Bank") and Lexib Realcorp, a wholly owned subsidiary of the Bank.
Bancshares is a bank holding company which was incorporated in February 2000 in
the State of California. The Bank is a California-chartered bank which commenced
operations in 1980. The Bank's deposit accounts are insured by the Federal
Deposit Insurance Corporation up to the maximum amount and under the terms
allowed by federal regulations. References in these Notes to the "Company" refer
to Bancshares and its consolidated subsidiaries.

     On November 30, 2001, the Company acquired the Bank by means of a merger
which resulted in the Bank becoming a wholly owned subsidiary of the Company and
the Bank's shareholders became shareholders of the Company, owning the same
number and percentage of Company shares as they had owned in the Bank. Prior to
the December 1, 2001 acquisition, the Company only had nominal assets and had
not conducted any business.

     Use of Estimates

     The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets, liabilities, and
contingencies 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.

     Income Per Share

     Basic income per share for each of the periods presented was computed by
dividing the net income by the weighted average number of shares of common stock
outstanding during each such period. The weighted average numbers of shares used
in the basic earnings per share computations for the three month periods ended
March 31, 2002 and 2001 were 4,506,070 and 4,504,279, respectively. The weighted
average numbers of shares used in the

                                       6

<PAGE>

diluted earnings per share computations for the three months ended March 31,
2002 and 2001 were 5,957,737 and 5,981,422, respectively.

     Basic and diluted earnings per share for the years ended March 31, 2002
and 2001 are computed as follows:

                                               Net                      Per
2002                                        Earnings     Shares     Share Amount
----------------------------------------   ---------    ---------  -------------
Net Earnings                                $207,900
                                           ---------
Basic earnings per share:
   Net earnings available to common
       shareholders                          207,900    4,506,070      $0.05
   Effect of conversion of subordinated
       debentures                             29,300    1,250,000
   Effect of conversion of options and
       warrants                                           201,667
Diluted earnings per share:
                                           ---------    ---------
   Net earnings available to common
       shareholders                         $237,200    5,957,737       $0.04
                                           =========    =========


                                               Net                      Per
2002                                        Earnings     Shares     Share Amount
----------------------------------------   ---------    ---------  -------------
Net Earnings                                $420,500
                                           ---------
Basic earnings per share:
   Net earnings available to common
       shareholders                         $420,500    4,504,279       $0.09
   Effect of conversion of subordinated
       debentures                             29,300    1,250,000
   Effect of conversion of options and
       warrants                                           227,143
Diluted earnings per share:
                                           ---------    ---------
   Net earnings available to common
       shareholders                         $449,800    5,981,422       $0.08
                                           =========    =========

Recent Accounting Pronouncements

SFAS 140:

     Effective April 1, 2001, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 140, "Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities" ("SFAS 140"). SFAS 140
revises the standards for accounting for securitizations and other transfers of
financial assets and collateral and requires certain additional disclosures.
Adoption of SFAS 140 did not have a material impact to the Company's
consolidated financial statements.

SFAS 143:

     In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". SFAS No. 143 addresses the recognition and measurement
of obligation associated with the retirement of tangible long-lived assets. SFAS
No. 143 applies to legal obligations associated with the retirement of
long-lived assets resulting from the acquisition, construction, development or
the normal operation of a long-lived asset. SFAS No. 143 required that the fair
value of an asset retirement obligation be recognized as a liability in the
period in which it is incurred. The asset retirement obligation is to be
capitalized as part of the carrying amount of the long-lived asset and the
expense is to be recognized over the useful life of the long-lived asset. SFAS
NO. 143 is effective January 1, 2003, with early adoption permitted. The Company
plans to adopt SFAS No. 143 effective January 1, 2003, and does not expect the
adoption of the statement to have a material effect on the financial statements.

2.   Commitments and Contingencies

     The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit, standby
letters of credit and financial guarantees. Those instruments involve, to
varying degrees, elements of credit and interest rate risk in excess of the
amount recognized in the balance sheets. The Company's exposure to credit loss
in the event of non-performance by the other party to the financial instrument
for commitments to extend credit, standby letters of credit and financial
guarantees written is represented by the contractual notional amount of those
instruments. The Company uses the same credit policies in making commitments and
conditional obligations as it does for on-balance-sheet instruments.

<TABLE>
<CAPTION>
                                                                       Contractual or
Financial instruments whose contract amounts represent credit risk:   notional amount
-------------------------------------------------------------------   ---------------
<S>                                                                     <C>
     Commitments to extend credit                                       $50,493,000
     Standby letters of credit and financial guarantees written             453,000
</TABLE>

                                       7

<PAGE>

     Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since some of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained, if
deemed necessary by the Company upon extension of credit, is based on
management's credit evaluation of the counterparty. Collateral held varies, but
may include assignment of deposits and assignment of real estate interests.
Standby letters of credit and financial guarantees written are conditional
commitments issued by the Company to guarantee the performance of a customer to
a first party. Those guarantees are primarily issued to support public and
private borrowing arrangements. All standby letters of credit will mature at
various dates through 2003. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan facilities to
customers. The Company holds certificates of deposit and other collateral of at
least 100% of the notional amount as support for letters of credit for which
collateral is deemed necessary.

     The Company is subject to various claims and lawsuits which arise primarily
in the ordinary course of business. No material losses are anticipated with
respect to these matters.

                                       8

<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Background

     The following discussion presents information about our consolidated
results of operations, financial condition, liquidity and capital resources.
Substantially all of our operations are conducted by the Bank and the Bank
accounts for substantially all of our revenues and expenses. This information
should be read in conjunction with the Company's quarterly unaudited
consolidated financial statements, and the notes thereto, contained elsewhere in
this Report.

References in this Form 10-QSB to the "Company," "we" or "us" refer to Alliance
California Bancshares ("Bancshares") and its consolidated subsidiaries,
including Alliance Bank ("Bank").

Forward-Looking Information

The statements contained herein that are not historical facts are
forward-looking statements based on management's current expectations and
beliefs concerning future developments and their potential effects on the
Company. These forward-looking statements involve risks and uncertainties,
including the risks and uncertainties described herein under the caption
"Factors Which May Affect Future Operating Results." There can be no assurance
that future developments affecting the Company will be the same as those
anticipated by management, and actual results may differ from those projected in
the forward-looking statements. Statements regarding policies and procedures are
not intended, and should not be interpreted to mean, that such policies and
procedures will not be amended, modified or repealed at any time in the future.

Overview

     We recorded net earnings of $207,900 ($0.05 basic and $0.04 diluted
earnings per share) for the first quarter of 2002 as compared to net earnings of
$420,500 ($0.09 basic and $0.08 diluted earnings per share) for the first
quarter of 2001. The decrease in net earnings in 2002 was due primarily to an
increase in general and administrative expenses related primarily to expansion
of our operations and lower net interest margins.

     We continued to grow during the year, with assets increasing from $140.5
million at December 31, 2001 to $157.6 million at March 31, 2002. Net loans
continue to constitute the largest portion (approximately 82%) of our interest
earning assets, and grew from $112.2 million at December 31, 2001 to $129.0
million at March 31, 2002. The growth of the loan portfolio is significant
because not only does it represent the greatest concentration of our assets, it
is also the highest yielding of our assets. Our growth was funded principally by
an $11.6 million increase in time deposits obtained through our money desk.

     Set forth below are certain key financial performance ratios for the
periods indicated:

                                                             Three months ended
                                                                 March 31,
                                                             ------------------
                                                                2002    2001
                                                             ------------------
Return on average assets (1)                                    0.56%    1.37%
Return on average shareholders' equity (1)                      7.90%   18.52%
Net yield on average interest earning assets                    5.08%    6.17%
Earnings per common share:
     Basic earnings per share                                  $0.05   $ 0.09
     Diluted earnings per share                                $0.04   $ 0.08

----------
(1)  Annualized

                                       9

<PAGE>

       RESULTS OF OPERATIONS - Three Months Ended March 31, 2002 and 2001

Net Interest Income

     Interest income decreased from $3,139,300 for first quarter of 2001 to
$2,788,300 for the first quarter of 2002 and interest expense decreased from
$1,303,000 for the first quarter of 2001 to $987,300 in the first quarter of
2002. These decreases were due to declines in the weighted average yield earned
and rates paid on these assets and liabilities, as the average amounts of
interest earning assets and interest bearing liabilities increased from 2001 to
2002. The decrease in weighted average yield and rates was due to declining
market interest rates.

     Net interest income before provision for credit losses decreased slightly
to $1,801,000 for the first quarter of 2002 from $1,836,300 for the first
quarter of 2001. This was due primarily to a decrease in the net yield on
interest earning assets, or net interest margin, from 6.34% in 2001 to 5.08% in
2002. This decrease reflected declining market interest rates initiated by the
FRB, resulting in the weighted average prime rate decreasing from 8.63% for the
first quarter of 2001 to 4.75% for the first quarter of 2002. Because loans
represented in excess of 80% of our interest-earning assets, and because a
substantial portion of our loans bear interest at rates tied to the prime rate,
the weighted average yield on our interest earning assets decreased 2.69% from
10.55% for the first quarter of 2001 to 7.86% for the first quarter of 2002. By
comparison, the weighted average rate paid on our interest bearing liabilities
decreased only 1.90%, as our time deposits, which have terms ranging from one
day to three years, adjust rates only upon maturity. Net interest income was
positively affected in the first quarter of 2002 by an increase in average
interest earning assets from $119,067,000 for the first quarter of 2001 to
$141,883,000 for the first quarter of 2002.

     The following table presents the weighted average yield on each specified
category of interest earning assets, the weighted average rate paid on each
specified category of interest bearing liabilities, and the resulting interest
rate spread and net yield on interest earning assets for the periods indicated.

                                       10

<PAGE>

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

                        ANALYSIS OF NET INTEREST INCOME

<TABLE>
<CAPTION>
                                                              Three Months Ended March 31,
                                     ------------------------------------------------------------------------
                                                    2002                                 2001
                                     ------------------------------------------------------------------------
                                                              Weighted                               Weighted
                                                               Average                               Average
                                                                Rates                                Rates
                                       Average    Interest     Earned/     Average       Interest     Earned/
                                       Balance    Inc./Exp.     Paid       Balance       Inc./Exp.    Paid
                                     ----------   ---------   --------   ------------   ----------   --------
<S>                                  <C>          <C>         <C>        <C>            <C>            <C>
Interest earning assets:
  Time deposits                    $  5,254,900  $   58,700      4.47%   $  3,798,100   $   54,900      5.78%
  Securities                          5,179,300      79,300      6.12%      8,615,100      135,800      6.31%
  Loans                             119,472,700   2,598,100      8.70%     95,870,700    2,796,200     11.67%
  Federal funds sold                 11,976,300      52,200      1.74%     10,783,100      152,400      5.64%
                                   ------------  ----------               ------------   ----------
Total interest-earning assets       141,883,200   2,788,300      7.86%    119,067,000    3,139,300     10.55%
Non-interest-earning assets           6,136,600                             5,227,800
                                   ------------                          ------------
Total assets                       $148,019,800                          $124,294,800
                                   ============                          ============

Interest bearing liabilities:
   Interest-bearing deposits       $  2,714,400       4,300      0.63%   $  2,904,600       13,700      1.89%
   Savings and money market
      deposits                       34,167,300     141,500      1.66%     34,362,700      370,700      4.32%
   Time deposits                     67,087,200     721,600      4.30%     55,170,600      868,100      6.29%
   FHLB advances                      5,000,000      51,500      4.12%             --           --        --
   Subordinated debentures            2,500,000      50,500      8.08%      2,500,000       50,500      8.08%
   Capital note                       1,200,000      17,900      5.97%             --           --        --
                                   ------------  ----------              ------------   ----------
Total interest-bearing liabilities  112,668,900     987,300      3.51%     94,937,900    1,303,000      5.49%
                                                 ----------                             ----------
Non-interest bearing liabilities     24,777,100                            20,334,400
                                   ------------                          ------------
  Total liabilities                 137,446,000                           115,272,300
  Shareholders' equity               10,573,800                             9,022,500
                                   ------------                          ------------
  Total liabilities and
     shareholders' equity          $148,019,800                          $124,294,800
                                   ============                          ============
Net interest income                              $1,801,000                             $1,836,300
                                                 ==========                             ==========
Interest rate spread                                             4.35%                                  5.06%
Net interest margin                                              5.08%                                  6.17%
</TABLE>
--------------------------------------------------------------------------------

     As described below under "Asset Liability Management," our balance sheet
was in a positive gap position at March 31, 2002. This implies that our earnings
would increase in the short-term if interest rates rise and would decline in the
short-term if interest rates were to fall.

Provision for Loan Losses

     We charged $100,000 and $75,000 to the allowance for loan and lease losses
("ALLL") in the first quarter of 2002 and 2001, respectively. These provisions
were based on our policies and procedures established for the ALLL.

     The credit quality of our loans will be influenced by underlying trends in
the economic cycle, particularly in Southern California, and other factors which
are beyond management's control. Accordingly, no assurance can be given that we
will not sustain loan losses that in any particular period are sizable in
relation to the ALLL. Additionally, subsequent evaluation of the loan portfolio,
in light of factors then prevailing, by us and our regulators may indicate a
requirement for increases in the ALLL through changes to the provision for loan
losses.

                                       11

<PAGE>

Non-Interest Income

     Non-interest income includes primarily service charges on deposit accounts
and net gains on sales of loans. Non-interest income increased 22.7% from the
first quarter of 2001 to the first quarter of 2002. This increase was due
primarily to an increase in service charges.

Non-Interest Expense

     Salary and related expense increased by 18.5% between the first quarter of
2001 and the first quarter of 2002 due primarily to an increase in the number of
employees, particularly in the lending department. At the end of the first
quarter of 2002, the Company employed 42 full time employees, compared with 35
employees at the end of the first quarter of 2001.

     Occupancy and equipment expense increased by 13.8% from the first quarter
of 2001 to the first quarter of 2002 due to increased rent expense and the
depreciation cost of computer equipment. Rent expense is scheduled to increase
further in August 2002 (or the date we take possession, whichever is later) from
rent under a 60-month lease entered into in December 2001 for our new Orange
County Regional Office in Irvine, California. The additional rent from this
office in 2002, net of rent savings from termination of the lease for our
existing Orange County offices, will be approximately $16,000 per month.

     Other operating expenses increased 22.1% from the first quarter of 2001 to
the first quarter of 2002 due in part to increases in advertising and marketing
expenses, loan costs and data processing fees. Additional advertising and
marketing expenses were incurred for customer appreciation functions and
marketing brochures. In general, loan costs and data processing fees can be
expected to increase as we grow because they are largely transaction driven.

                               FINANCIAL CONDITION

Regulatory Capital

     At March 31, 2002, Bancshares and Bank's Tier 1 capital, which is comprised
of shareholders' equity as modified by certain regulatory adjustments, were
$10.7 million and $12.6 million, respectively. Our regulatory capital increased
during the first quarter of 2002 as a result of net earnings and, in the case of
the Bank, from a $1.0 million capital contribution by Bancshares using the
proceeds of its credit facility. At March 31, 2002, Bancshares and the Bank were
each "well capitalized" as defined under applicable regulations. The following
table sets forth the regulatory standards for well capitalized and adequately
capitalized institutions and the capital ratios for Bancshares and the Bank as
of the date indicated.

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

                               REGULATORY CAPITAL
                                At March 31, 2002
                             (dollars in thousands)

<TABLE>
<CAPTION>
                                                       To Be Adequately     To Be Well
                                         Actual          Capitalized        Capitalized
                                    ----------------   ----------------   ----------------
                                     Amount   Ratio      Amount   Ratio   Amount     Ratio
                                    -------   ------    -------   -----   -------   ------
<S>                                 <C>       <C>       <C>       <C>     <C>       <C>
Bancshares
Total Capital (to risk-weighted
assets)                             $14,876   10.90%    $10,915   >=8.0%  $13,644   >=10.0%
Tier 1 Capital (to risk-weighted
   assets)                          $10,662    7.81%    $ 5,458   >=4.0%  $ 8,186    >=6.0%
Tier 1 Capital (to average assets)  $10,662    7.20%    $ 5,921   >=4.0%  $ 7,401    >=5.0%

Bank
Total Capital (to risk-weighted
   assets)                          $16,813   12.32%    $10,915   >=8.0%  $13,644   >=10.0%
Tier 1 Capital (to risk-weighted
   assets)                          $12,599    9.23%    $ 5,458   >=4.0%  $ 8,186    >=6.0%
Tier 1 Capital (to average assets)  $12,599    8.51%    $ 5,921   >=4.0%  $ 7,401    >=5.0%
</TABLE>

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

                                       12

<PAGE>

Liquidity

     Our objective in managing our liquidity is to maintain cash flow adequate
to fund our operations and meet obligations and other commitments on a timely
and cost effective basis. We manage to this objective through the selection of
asset and liability maturity mixes. Our liquidity position is enhanced by our
ability to raise additional funds as needed through available borrowings or
accessing deposits nationwide through our money desk.

     Deposits provide most of our funds. This relatively stable and low-cost
source of funds has, along with shareholders' equity, provided 94% and 98% of
funding for average total assets during the first quarter of 2002 and the year
of 2001, respectively. This reduction was directly attributable to the increased
volume of loans receivable, which outpaced the growth in deposits, and required
an increase in borrowed funds.

     Secondary sources of liquidity include borrowing arrangements with the FRB
and the FHLB. Borrowings from the FRB are short-term and must be collateralized
by pledged securities. As a member of the FHLB system, the Bank may obtain
advances from the FHLB pursuant to various credit programs offered from time to
time. Credit limitations are based on the assessment by the FHLB of the Bank's
creditworthiness, including an adequate level of net worth, reasonable prospects
of future earnings, sources of funds sufficient to meet the scheduled interest
payments, lack of financial or managerial deficiencies and other factors. Such
advances may be obtained pursuant to several different credit programs, and each
program has its own rate, commitment fees and range of maturities. Funds
borrowed from the FHLB must be collateralized either by pledged securities or by
assignment of notes and may be for terms of a few days to several years. As of
March 31, 2002, we had $5,000,000 outstanding FHLB advances and had no
outstanding borrowings from the FRB.

     We also have liquidity as a net seller of overnight funds at a level that
will cushion any unexpected increase in demand for funds or decrease in funds
deposited. During the first quarter of 2002, we had an average balance of $12.0
million in overnight funds sold representing 8.1% of total average assets.

Asset Liability Management

     Based on our business, market risk is primarily limited to interest rate
risk which is the impact that changes in interest rates would have on future
earnings. Our Investment Committee manages interest rate risk, including
interest rate sensitivity and the repricing characteristics of assets and
liabilities. The principal objective of our asset/liability management is to
maximize net interest income within acceptable levels of risk established by
policy. Interest rate risk is measured using financial modeling techniques,
including stress tests, to measure the impact of changes in interest rates on
future earnings. Net interest income, the primary source of earnings, is
affected by interest rate movements. Changes in interest rates have lesser
impact the more that assets and liabilities reprice in approximately equivalent
amounts at basically the same time intervals. Imbalances in these repricing
opportunities at any point in time constitute interest sensitivity gaps, which
is the difference between interest sensitive assets and interest sensitive
liabilities. These static measurements do not reflect the results of any
projected activity and are best used as early indicators of potential interest
rate exposures.

     An asset sensitive gap means an excess of interest sensitive assets over
interest sensitive liabilities, whereas a liability sensitive gap means an
excess of interest sensitive liabilities over interest sensitive assets. In a
changing rate environment, a mismatched gap position generally indicates that
changes in the income from interest earning assets will not be completely
proportionate to changes in the cost of interest bearing liabilities, resulting
in net interest income volatility. This risk can be reduced by various
strategies, including the administration of liability costs and the reinvestment
of asset maturities.

                                       13

<PAGE>

     The following table sets forth the distribution of our rate-sensitive
assets and liabilities at the date indicated:

<TABLE>
<CAPTION>
                                                      Over Three     Over One
                                           Three       Through         Year          Over          Non-
                                           Months      Twelve        Through         Five        Interest
                                          Or Less      Months       Five Years       Years        Bearing          Total
                                        -----------   -----------   -----------   -----------   ------------   ------------
<S>                                     <C>           <C>           <C>           <C>           <C>            <C>
Assets
------
Federal Funds Sold                      $ 9,630,000   $        --   $        --   $        --   $         --   $  9,630,000
Interest-bearing deposits with other
   financial institutions                 1,980,200       792,000     1,776,300       285,300             --      4,833,800
Securities held to maturity                      --     1,000,000     4,021,000       250,000             --      5,271,000
Loans, gross                             64,055,500    37,055,000    20,668,000     9,354,000             --    131,132,500
Non-interest earning assets                      --            --            --            --      6,754,800      6,754,800
                                        -----------   -----------   -----------   -----------   ------------   ------------
    Total assets                        $75,665,700   $38,847,000   $26,465,300   $ 9,889,300   $  6,754,800   $157,622,100
                                        ===========   ===========   ===========   ===========   ============   ============

Liabilities and Stockholders' Equity:
------------------------------------
Demand deposits                         $        --   $        --   $        --   $        --   $ 29,090,600   $ 29,090,600
Savings and money market accounts        33,312,100            --            --            --             --     33,312,100
Time deposits                            17,263,400    35,459,000    21,548,000            --             --     74,270,400
FHLB advance                                     --            --     5,000,000            --             --      5,000,000
Subordinated optional convertible
   debenture                                     --            --     2,500,000            --             --      2,500,000
Capital note                                     --            --     1,111,100       888,900             --      2,000,000
Accrued interest payable and other
   liabilities                                   --            --            --            --        786,800        786,800
Stockholders' equity                             --            --            --            --     10,662,200     10,662,200
                                        -----------   -----------   -----------   -----------   ------------   ------------
Total liabilities and Stockholders
   equity                               $50,575,500   $35,459,000   $30,159,100   $   888,900   $ 40,539,600   $157,622,100
                                        -----------   -----------   -----------   -----------   ------------   ------------
Interest rate sensitivity gap           $25,090,200   $ 3,388,000   $(3,693,800)  $ 9,000,400   $(33,784,800)  $         --
                                        ===========   ===========   ===========   ===========   ============   ============

Cumulative interest rate Sensitivity
   gap                                  $25,090,200   $28,478,200   $24,784,400   $33,784,800   $         --   $         --
                                        ===========   ===========   ===========   ===========   ============   ============
Cumulative % of rate sensitive assets
   in maturity period                          48.0%         72.7%         89.4%         95.7%        100.00%
                                        ===========    ==========   ===========   ===========   ============

Rate sensitive assets to rate
   Sensitive liabilities                       1.50          1.10          0.88         11.13           0.17
                                        ===========   ===========   ===========   ===========   ============
Cumulative ratio                               1.50          1.33          1.21          1.28           1.00
                                        ===========   ===========   ===========   ===========   ============
</TABLE>

     At March 31, 2002, our rate sensitive balance sheet was shown to be in a
positive gap position. This implies that our net interest margin would increase
in the short-term if interest rates rise and would decline in the short-term if
interest rates were to fall. And, during the quarter ended March 31, 2002, our
net interest margin was lower than in the same quarter of 2001, due to a decline
in prevailing market rates of interest. However, as noted above, the extent to
which our net interest margin will be impacted by changes in prevailing
interests rates will depend on a number of factors, including how quickly rate
sensitive assets and liabilities react to interest rate changes.

Investments in Time Deposits and Securities

                                       14

<PAGE>

     The following table provides certain information regarding our time
deposits and investment securities at the dates indicated.

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------

                                   TIME DEPOSITS AND INVESTMENT SECURITIES

                                                At March 31, 2002         At December 31, 2001
                                          --------------------------   --------------------------
                                                          Weighted                    Weighted
                                          Book Value   Average Yield   Book Value   Average Yield
                                          ----------   -------------   ----------   -------------
<S>                                       <C>               <C>        <C>               <C>
Time deposits maturing:
   One year or less                       $2,772,200        3.89%      $4,334,700        4.61%
   After one year                          2,061,600        4.93%       1,089,000        6.67%
                                          ----------                   ----------
Total time deposits                       $4,833,800                   $5,423,700
                                          ==========                   ==========

Investment securities maturing:
   One year or less                       $1,000,000        6.26%      $2,996,300        6.45%
   After one year but within five years    3,021,000        5.03%       2,986,400        5.81%
   After five years                        1,250,000        5.34%         250,000        6.82%
                                          ----------                   ----------
Total investment securities               $5,271,000                   $6,232,700
                                          ==========                   ==========

-------------------------------------------------------------------------------------------------
</TABLE>

     Our present strategy is to stagger the maturities of our time deposit
investments and investment securities to meet our overall liquidity
requirements. The average duration of these investments at March 31, 2002 was
x.xx years compared with 1.04 years at December 31, 2001. At March 31, 2002, we
classified all our investment securities as held to maturity as we intend to
hold the securities to maturity.

Loans

     Our present lending strategy is to attract small to mid-sized business
borrowers by offering a variety of commercial loan products and a full range of
banking services coupled with highly personalized service. We offer secured and
unsecured commercial term loans and lines of credit, construction loans for
individual and tract single family homes and for commercial and multifamily
properties, accounts receivable and equipment loans, SBA loans and home equity
lines of credit. We often tailor our loan products to meet the specific needs of
our borrowers. Our primary lending area includes all six Southern California
counties: Los Angeles, Orange, Riverside, San Diego, San Bernardino and Ventura.

                                       15

<PAGE>

     The following table sets forth the composition of our loan portfolio at the
dates indicated:

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------

                             LOAN PORTFOLIO COMPOSITION

                                         At March 31, 2002         At December 31, 2001
                                     -------------------------   -------------------------
                                        Amount      Percent of      Amount      Percent of
                                      Outstanding      Total      Outstanding      Total
                                     ------------   ----------   ------------   ----------
<S>                                  <C>              <C>        <C>              <C>
Commercial loans                     $ 46,608,300      35.3%     $ 35,793,600      31.1%
Construction loans                     34,233,500      25.9        33,386,200      29.0
Real estate loans                      45,251,700      34.3        38,597,600      33.6
Other loans                             5,906,600       4.5         7,232,000       6.3
                                     ------------     -----      ------------     -----
                                      132,000,100     100.0%      115,009,400     100.0%
                                                      =====                       =====
Less - Deferred loan fees                (598,600)                   (424,600)
Less - Allowance for credit losses     (2,368,900)                 (2,426,500)
                                     ------------                ------------
Net loans                            $129,032,600                $112,158,300
                                     ============                ============

------------------------------------------------------------------------------------------
</TABLE>

Non-Performing Assets and Impaired Loans

     Non-performing assets consist of non-performing loans and other real estate
owned. Non-performing loans are (i) loans which have been placed on non-accrual
status; (ii) loans which are contractually past due 90 days or more with respect
to principal or interest, and have not been restructured or placed on
non-accrual status, and are accruing interest as described below; and (iii)
troubled debt restructurings ("TDRs"). Other real estate owned consists of real
properties securing loans of which we have taken title in partial or complete
satisfaction of the loan. The following table sets forth information about
non-performing assets at the dates indicated:

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

                              NON-PERFORMING ASSETS

                                          March 31, 2002   December 31, 2001
                                          --------------   -----------------
Non-accrual loans                            $867,000           $848,000
Accruing loans past due 90 days or more            --             55,700
Troubled debt restructurings                       --                 --
Other real estate owned                            --                 --
                                             --------           --------
    Total                                    $867,000           $903,700
                                             ========           ========

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

     Non-accrual loans at March 31, 2002 decreased to $867,000 from $848,000 at
December 31, 2001. Interest income of $500 and $54,600 was recorded for these
loans in the first quarter of 2002 and for the year ended December 31, 2001,
respectively; the additional interest income that would have been recorded from
non-accrual loans, if the loans had not been on non-accrual status, was $23,900
and $38,000 for the first quarter of 2002 and for the year ended December 31,
2001, respectively. Interest payments received on non-accrual loans are applied
to principal unless there is no doubt as to ultimate full repayment of
principal, in which case, the interest payment is recognized as interest income.
Interest income not recognized on non-accrual loans reduced the net yield on
earning assets less than 0.1% for the first quarter of 2002 and 2001.

                                       16

<PAGE>

Impaired Loans

     An impaired loan is a loan which management determines is probable that we
will be unable to collect all principal and interest amounts due according to
the contractual terms of the loan agreement. Impaired loans can include
non-performing loans, although not all impaired loans will be non-performing
loans.

     We determine impaired loans by a periodic evaluation on an individual loan
basis. At March 31, 2002 and December 31, 2001, we had classified $848,000 and
$899,000, respectively, of our loans as impaired for which no related specific
reserve was provided. In the quarter ended March 31, 2002, we collected no
payments on impaired loans.

Changes in Allowance for Loan Losses

     The following table presents an analysis of changes in the allowance for
credit losses during the periods indicated:

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

        CHANGES IN ALLOWANCES FOR CREDIT LOSSES

                                 Quarter Ended March 31,
                                 -----------------------
                                    2002         2001
                                 ----------   ----------
Balance at beginning of period   $2,426,500   $2,023,400

Charge-offs                        (164,100)          --
Recoveries                            6,500        8,300
                                 ----------   ----------
Net charge-offs                    (157,600)       8,300

Additional provisions               100,000       75,000
                                 ----------   ----------
Balance at end of period         $2,368,500   $2,106,700
                                 ==========   ==========

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

Off-Balance Sheet Credit Commitments and Contingent Obligations

     Commitments to extend credit are agreements to lend to a customer as long
as there is no violation of any condition in the loan contract. Commitments
generally have fixed expiration dates or other termination clauses and may
require payment of a fee. Since we expect some commitments to expire without
being drawn upon, the total commitment amounts do not necessarily represent
future loans. At March 31, 2002, we had undisbursed loan commitments of $50.5
million.

     Standby letters of credit and financial guarantees are conditional
commitments issued to secure the financial performance of a customer to a third
party. These are issued primarily to support public and private borrowing
arrangements. The credit risk involved in issuing a letter of credit for a
customer is essentially the same as that involved in extending a loan to that
customer. We hold certificates of deposit and other collateral of at least 100%
of

                                       17

<PAGE>

the notional amount as support for letters of credit for which we deem
collateral to be necessary. At March 31, 2002, we had outstanding standby
letters of credit with a potential $0.5 million of obligations. These standby
letters of credit will mature in 2003.

Deposits

     Total deposits increased from $120.7 million at December 31, 2001 to $136.7
million at March 31, 2002. This increase was primarily due to a $15.7 million
increase in time deposits generated by our money desk which were used to fund
the growth in our loan portfolio.

     We solicit deposits through a money desk which attracts primarily time
deposits nationwide by telephone. These deposits typically are placed with
institutional investors and bear interest at the high end of national rates for
time deposits with comparable maturities. We sometimes deal with a broker or
other intermediary which places the deposits with a number of institutions. We
limit the amount of money desk deposits that are scheduled to mature in any one
calendar month and limit the amount of funds purchased from one intermediary to
manage the risk of excessive dependence on any single deposit or depositor. In
addition, we have historically maintained an appropriate level of liquidity
specifically to counter any concurrent deposit reduction that might occur. As of
March 31, 2002, money desk deposits were $56.9 million representing 42% of total
deposits, as compared to $39.9 million at December 31, 2001 representing 33% of
total deposits.

     Under Federal Deposit Insurance Corporation rules, banks that are not
well-capitalized may not be able to accept deposit funds obtained directly or
indirectly by or through any deposit broker. The failure of the Bank to remain
"well capitalized" could result in it not being able to accept deposits through
deposit brokers, which might have a material adverse affect on us. At March 31,
2002, approximately 38% of our money desk deposits (approximately $22 million)
were from deposit brokers.

Borrowed Funds

     Borrowed funds increased $1,000,000 during the first quarter of 2002 due to
an additional advance obtained by Bancshares under its $3,000,000 credit
facility through Pacific Coast Bankers' Bank. This facility bears interest at a
rate of prime plus 1% (5.75% at March 31, 2002). As of March 31, 2002,
$2,000,000 million was outstanding under this credit facility. Bancshares has
contributed advances under this to the Bank as Tier 1 Capital. Bancshares
presently intends to borrow the remaining $1 million available under the
facility in 2002.

                FACTORS WHICH MAY AFFECT FUTURE OPERATING RESULTS

We face risk from changes in interest rates.

     The success of our business depends, to a large extent, on our net interest
income. Changes in market interest rates can affect our net interest income by
affecting the spread between our interest-earning assets and interest-bearing
liabilities. This may be due to the different maturities of our interest-earning
assets and interest-bearing liabilities, as well as an increase in the general
level of interest rates. Changes in market interest rates also affect, among
other things:

     .    Our ability to originate loans;

     .    The ability of our borrowers to make payments on their loans;

                                       18

<PAGE>

     .    The value of our interest-earning assets and our ability to realize
          gains from the sale of these assets;

     .    The average life of our interest-earning assets;

     .    Our ability to generate deposits instead of other available funding
          alternatives; and

     .    Our ability to access the wholesale funding market.

     Interest rates are highly sensitive to many factors, including governmental
monetary policies, domestic and international economic and political conditions
and other factors beyond our control.

We face risk from possible declines in the quality of our assets.

     Our financial condition depends significantly on the quality of our assets.
While we have developed and implemented underwriting policies and procedures to
guide us in the making of loans, compliance with these policies and procedures
in making loans does not guarantee repayment of the loans. If the level of our
non-performing assets rises, our results of operations and financial condition
will be affected. A borrower's ability to pay its loan in accordance with its
terms can be adversely affected by a number of factors, such as a decrease in
the borrower's revenues and cash flows due to adverse changes in economic
conditions or a decline in the demand for the borrower's products and/or
services.

Our allowances for credit losses may be inadequate.

     We establish allowances for credit losses against each segment of our loan
portfolio. At March 31, 2002, our allowance for credit losses equaled 1.80% of
loans. Although we believed that we had established adequate allowances for
credit losses as of March 31, 2002, the credit quality or our assets is affected
by many factors beyond our control, including local and national economic
conditions, and the possible existence of facts which are not known to us which
adversely affect the likelihood of repayment of various loans in our loan
portfolio and realization of the collateral upon a default. Accordingly, we can
give no assurance that we will not sustain loan losses materially in excess of
the allowance for credit losses. In addition, the FDIC and California Department
of Financial Institutions, as an integral part of their examination process,
periodically review our allowance for credit losses and could require additional
provisions for credit losses. Material future additions to the allowance for
credit losses may also be necessary due to increases in the size and changes in
the composition of our loan portfolio. Increases in our provisions for credit
losses would adversely affect our results of operations.

A significant portion of our deposits are higher-cost, less stable deposits
obtained through our money desk.

     Deposits obtained through deposit brokers or a money desk are typically
more interest rate-sensitive than branch deposits. Accordingly, they typically
are higher cost and less stable to the insured institution than deposits through
branches.

     We attract deposits telephonically nationwide through a money desk. As of
March 31, 2002, money desk deposits were $56.9 million representing 42% of total
deposits, as compared to $39.9 million at December 31, 2001 representing 33% of
total deposits.

     Under the FDIA, banks that are not well-capitalized may not accept deposit
funds obtained directly or indirectly by or through any deposit broker. The
failure of the Bank to remain "well capitalized" might prevent us from accepting
deposits from deposit brokers, which might have a material adverse affect on the
Bank and its financial condition. At March 31, 2002, approximately 38% of our
money desk deposits (approximately $22 million) have been from deposit brokers.

                                       19

<PAGE>

Economic conditions may worsen.

     Our business is strongly influenced by economic conditions in our market
area (principally, Southern California) as well as regional and national
economic conditions. During the past several years economic conditions in these
areas have been favorable. Should the economic condition in these areas
deteriorate, the financial condition of our borrowers could weaken, which could
lead to higher levels of loan defaults or a decline in the value of collateral
for our loans. In addition, an unfavorable economy could reduce the demand for
our loans and other products and services.

     Because a significant amount of the loans we make are to borrowers in
California, our operations could suffer as a result of local recession or
natural disasters in California.

     At March 31, 2002, approximately 63% of our loans outstanding were
collateralized by real estate located in California. Because of this
concentration in California, our financial position and results of operations
have been and are expected to continue to be influenced by general trends in the
California economy and its real estate market. Real estate market declines may
adversely affect the values of the properties collateralizing loans. If the
principal balances of our loans, together with any primary financing on the
mortgaged properties, equal or exceed the value of the mortgaged properties, we
could incur higher losses on sales of properties collateralizing foreclosed
loans. In addition, California historically has been vulnerable to certain
natural disaster risks, such as earthquakes and erosion-caused mudslides, which
are not typically covered by the standard hazard insurance policies maintained
by borrowers. Uninsured disasters may adversely impact our ability to recover
losses on properties affected by such disasters and adversely impact our results
of operations.

Our business is very competitive.

     There is intense competition in Southern California and elsewhere in the
United States for banking customers. We experience competition for deposits from
many sources, including credit unions, insurance companies and money market and
other mutual funds, as well as other commercial banks and savings institutions.
We compete for loans and deposits primarily with other commercial banks,
mortgage companies, commercial finance companies and savings institutions. In
recent years out-of-state financial institutions have entered the California
market, which has also increased competition. Many of our competitors have
greater financial strength, marketing capability and name recognition than we
do, and operate on a statewide or nationwide basis. In addition, recent
developments in technology and mass marketing have permitted larger companies to
market loans more aggressively to our small business customers. Such advantages
may give our competitors opportunities to realize greater efficiencies and
economies of scale than we can. We can provide no assurance that we will be able
to compete effectively against our competition.

A significant portion of our loan portfolio consists of construction loans to
developers for tract projects and single homes for resale to unidentified
buyers.

     At March 31, 2002, we had outstanding construction loans to developers for
tract projects and single homes for sale to unidentified buyers totaling $21.5
million, representing 16.2% of our loan portfolio, and additional commitments
for these projects in the amount of $20.7 million. These types of loans
generally have greater risks than loans on completed homes, multifamily and
commercial properties. A construction loan generally does not cover the full
amount of the construction costs, so the borrower must have adequate funds to
pay for the balance of the project. Price increases, delays and unanticipated
difficulties can materially increase these costs. Further, even if completed,
there is no assurance that the borrower will be able to sell the project on a
timely or profitable basis, as these are closely related to real estate market
conditions, which can fluctuate substantially between the start and completion
of the project. If the borrower defaults prior to completion of the project, the
value of the project will likely be less than the outstanding loan, and we could
be required to complete construction with our own funds to minimize losses on
the project.

                                       20

<PAGE>

Our business is heavily regulated.

     Both Bancshares, as a bank holding company, and Bank, as a
California-chartered FDIC-insured bank, are subject to significant governmental
supervision and regulation, which is intended primarily for the protection of
depositors. Statutes and regulations affecting us may be changed at any time,
and the interpretation of these statutes and regulations by examining
authorities also may change. We cannot assure you that future changes in
applicable statutes and regulations or in their interpretation will not
adversely affect our business.

                                       21

<PAGE>

PART II OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

     (a)  Exhibits.

          None

     (b)  Reports on Form 8-K:

          None

                                       22

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

DATE: May 28, 2002                          ALLIANCE BANCSHARES CALIFORNIA


                                            By: /s/ DANIEL L. ERICKSON
                                                --------------------------------
                                                Daniel L. Erickson
                                                Executive Vice President and
                                                Chief Financial Officer

                                       S-1