##### Table of Contents

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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-QSB



(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, 2005



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 jurisdictionof incorporation or organization) |  | (I.R.S. Employer IdentificationNumber)



|                                            |  |           
|------------------------------------------- |  | ----------
|100 Corporate PointeCulver 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.



5,898,679
shares of Common Stock as of April 30, 2005



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##### Table of Contents



ALLIANCE BANCSHARES
CALIFORNIA



QUARTERLY REPORT ON FORM 10-QSB

FOR

THE QUARTER
ENDED MARCH 31, 2005



TABLE OF CONTENTS



|           |  |                       |  |                                                                                           |  |         
|---------- |  | --------------------- |  | ----------------------------------------------------------------------------------------- |  | --------
|           |  |                       |  |                                                                                           |  | Page No.
|Part I.    |  | Financial Information |  |                                                                                          
|           |  |                       | 
|           |  | Item 1.               |  | Financial Statements                                                                      |  |         
|           |  |                       | 
|           |  |                       |  | Consolidated Statements of Financial Condition At March 31, 2005 and December 31, 2004    |  | 3       
|           |  |                       | 
|           |  |                       |  | Consolidated Statements of Operations For the three months ended March 31, 2005 and 2004  |  | 4       
|           |  |                       | 
|           |  |                       |  | Consolidated Statements of Cash Flows For the three months ended March 31, 2005 and 2004  |  | 5       
|           |  |                       | 
|           |  |                       |  | Consolidated Statements of Shareholders Equity For the three months ended March 31, 2005 |  | 6       
|           |  |                       | 
|           |  |                       |  | Notes to Consolidated Financial Statements                                                |  | 7       
|           |  |                       | 
|           |  | Item 2.               |  | Managements Discussion and Analysis or Plan of Operation                                 |  | 10      
|           |  |                       | 
|           |  | Item 3.               |  | Controls and Procedures                                                                   |  | 24      
|           |  |                      
|Part II.   |  | Other Information     |  |                                                                                          
|           |  |                       | 
|           |  | Item 6.               |  | Exhibits and Reports on Form 8-K                                                          |  | 25      
|           |  |                       | 
|Signatures |  |                       |  |                                                                                           |  | 26      



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PART I. FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------



CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION



|                                                                                                               |  |               |             |                  |   |            
|-------------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | ---------------- | - | -----------
|                                                                                                               |  | March 31,2005 |             | December 31,2004
|                                                                                                               |  | (Unaudited)   |             |                 
|Assets                                                                                                         |  |               |             |                  |   |            
|Cash and due from banks                                                                                        |  | $             | 16,526,600  |                  | $ | 10,692,600 
|Federal funds sold                                                                                             |  |               | 4,210,000   |                  |   | 8,895,000  
|                                                                                                               |  |               |             |                  |   |            
|Total cash and cash equivalents                                                                                |  |               | 20,736,600  |                  |   | 19,587,600 
|                                                                                                               |  |               |             |                  |   |            
|Time deposits with other financial institutions                                                                |  |               | 5,211,800   |                  |   | 5,018,000  
|Securities held to maturity, fair market value $69,716,600 at March 31, 2005; $72,933,200 at December 31, 2004 |  |               | 70,705,800  |                  |   | 72,782,800 
|Loans held for sale                                                                                            |  |               | 1,195,000   |                  |   | 3,211,200  
|Loans, net of the allowance for loan losses of $3,877,800 at March 31, 2005; $3,477,900 at December 31, 2004   |  |               | 360,915,900 |                  |   | 298,656,400
|Equipment and leasehold improvements, net                                                                      |  |               | 3,451,000   |                  |   | 3,001,900  
|Accrued interest receivable and other assets                                                                   |  |               | 8,767,600   |                  |   | 7,578,000  
|                                                                                                               |  |               |             |                  |   |            
|Total assets                                                                                                   |  | $             | 470,983,700 |                  | $ | 409,835,900
|                                                                                                               |  |               |             |                  |   |            
|Liabilities and Shareholders Equity                                                                           |  |               |             |                  |   |            
|Deposits:                                                                                                      |  |               |             |                  |   |            
|Noninterest bearing demand                                                                                     |  | $             | 109,471,700 |                  | $ | 88,187,000 
|Interest bearing:                                                                                              |  |               |             |                  |   |            
|Demand                                                                                                         |  |               | 6,123,700   |                  |   | 5,362,200  
|Savings and money market                                                                                       |  |               | 170,081,300 |                  |   | 146,255,600
|Certificates of deposit                                                                                        |  |               | 94,980,700  |                  |   | 64,988,100 
|                                                                                                               |  |               |             |                  |   |            
|Total deposits                                                                                                 |  |               | 380,657,400 |                  |   | 304,792,900
|                                                                                                               |  |               |             |                  |   |            
|Accrued interest payable and other liabilities                                                                 |  |               | 2,112,500   |                  |   | 2,298,600  
|Federal funds purchased                                                                                        |  |               | 4,000,000   |                  |   |           
|FHLB advances                                                                                                  |  |               | 37,000,000  |                  |   | 67,000,000 
|Junior subordinated debentures                                                                                 |  |               | 17,527,000  |                  |   | 7,217,000  
|                                                                                                               |  |               |             |                  |   |            
|Total liabilities                                                                                              |  |               | 441,296,900 |                  |   | 381,308,500
|                                                                                                               |  |               |             |                  |   |            
|Commitments and contingencies                                                                                  |  |               |            |                  |   |           
|Shareholders equity:                                                                                          |  |               |             |                  |   |            
|Serial preferred stock, no par value:                                                                          |  |               |             |                  |   |            
|Authorized  20,000,000 shares                                                                                 |  |               |             |                  |   |            
|7% Series A Non-Cumulative Convertible Non-Voting:                                                             |  |               |             |                  |   |            
|Authorized and outstanding  733,050 shares at March 31, 2005 and December 31, 2004                            |  |               | 7,697,000   |                  |   | 7,697,000  
|Common stock, no par value:                                                                                    |  |               |             |                  |   |            
|Authorized - 20,000,000 shares                                                                                 |  |               |             |                  |   |            
|Outstanding  5,898,679 shares at March 31, 2005 and 5,867,679 shares at December 31, 2004                     |  |               | 6,155,400   |                  |   | 6,090,800  
|Undivided profits                                                                                              |  |               | 15,834,400  |                  |   | 14,739,600 
|                                                                                                               |  |               |             |                  |   |            
|Total shareholders equity                                                                                     |  |               | 29,686,800  |                  |   | 28,527,400 
|                                                                                                               |  |               |             |                  |   |            
|Total liabilities and shareholders equity                                                                     |  | $             | 470,983,700 |                  | $ | 409,835,900
|                                                                                                               |  |               |             |                  |   |            



The
accompanying notes are an integral part of these statements.



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Part I.
Item 1. (continued)



CONSOLIDATED STATEMENTS OF OPERATIONS



(Unaudited)



|                                                            |  |                              |           |      |   |          
|----------------------------------------------------------- |  | ---------------------------- | --------- | ---- | - | ---------
|                                                            |  | Three Months Ended March 31,
|                                                            |  | 2005                         |           | 2004
|Interest Income:                                            |  |                              |           |      |   |          
|Interest and fees on loans                                  |  | $                            | 6,123,800 |      | $ | 3,553,000
|Interest on time deposits with other financial institutions |  |                              | 27,900    |      |   | 18,900   
|Interest on securities held to maturity                     |  |                              | 697,200   |      |   | 332,900  
|Interest on federal funds sold                              |  |                              | 55,800    |      |   | 77,700   
|                                                            |  |                              |           |      |   |          
|Total interest income                                       |  |                              | 6,904,700 |      |   | 3,982,500
|                                                            |  |                              |           |      |   |          
|Interest Expense:                                           |  |                              |           |      |   |          
|Interest on deposits                                        |  |                              | 1,537,600 |      |   | 732,300  
|Interest on FHLB advances                                   |  |                              | 314,900   |      |   | 224,500  
|Interest on subordinated debentures                         |  |                              |          |      |   | 51,000   
|Interest on junior subordinated debentures                  |  |                              | 168,200   |      |   | 82,800   
|                                                            |  |                              |           |      |   |          
|Total interest expense                                      |  |                              | 2,020,700 |      |   | 1,090,600
|                                                            |  |                              |           |      |   |          
|Net interest income before provision for loan losses        |  |                              | 4,884,000 |      |   | 2,891,900
|Provision for Loan Losses                                   |  |                              | 375,000   |      |   | 450,000  
|                                                            |  |                              |           |      |   |          
|Net interest income                                         |  |                              | 4,509,000 |      |   | 2,441,900
|Non-Interest Income                                         |  |                              | 798,400   |      |   | 932,400  
|Non-Interest Expense:                                       |  |                              |           |      |   |          
|Salaries and related benefits                               |  |                              | 1,682,200 |      |   | 1,252,500
|Occupancy and equipment expenses                            |  |                              | 492,800   |      |   | 313,100  
|Professional fees                                           |  |                              | 199,100   |      |   | 101,500  
|Data processing                                             |  |                              | 166,400   |      |   | 143,700  
|Other operating expense                                     |  |                              | 699,700   |      |   | 553,100  
|                                                            |  |                              |           |      |   |          
|Total non-interest expense                                  |  |                              | 3,240,200 |      |   | 2,363,900
|                                                            |  |                              |           |      |   |          
|Earnings Before Income Tax Expense                          |  |                              | 2,067,200 |      |   | 1,010,400
|Income tax expense                                          |  |                              | 837,700   |      |   | 405,000  
|                                                            |  |                              |           |      |   |          
|Net Earnings                                                |  | $                            | 1,229,500 |      | $ | 605,400  
|                                                            |  |                              |           |      |   |          
|Earnings per Common Share:                                  |  |                              |           |      |   |          
|Basic earnings per share                                    |  | $                            | 0.19      |      | $ | 0.13     
|Diluted earnings per share                                  |  | $                            | 0.18      |      | $ | 0.10     



The
accompanying notes are an integral part of these statements.



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Part I.
Item 1. (continued)



CONSOLIDATED STATEMENTS OF CASH FLOWS



(Unaudited)



|                                                                                    |  |                              |             |   |      |   |             |  
|----------------------------------------------------------------------------------- |  | ---------------------------- | ----------- | - | ---- | - | ----------- | -
|                                                                                    |  | Three months ended March 31, |            
|                                                                                    |  | 2005                         |             |   | 2004 |  
|Cash Flows from Operating Activities:                                               |  |                              |             |   |      |   |             |  
|Net earnings                                                                        |  | $                            | 1,229,500   |   |      | $ | 605,400     |  
|Adjustments to reconcile net earnings to net cash provided by operating activities: |  |                              |             |   |      |   |             |  
|Net amortization of discounts and premiums on securities held to maturity           |  |                              | 199,900     |   |      |   | 71,100      |  
|Depreciation and amortization                                                       |  |                              | 174,100     |   |      |   | 88,800      |  
|Provision for loan losses                                                           |  |                              | 375,000     |   |      |   | 450,000     |  
|Net gains on sales of loans held for sale                                           |  |                              | (171,000    | ) |      |   | (152,000    | )
|Proceeds from sales of loans held for sale                                          |  |                              | 5,839,500   |   |      |   | 4,224,500   |  
|Originations of loans held for sale                                                 |  |                              | (3,652,300  | ) |      |   | (2,478,500  | )
|(Increase) in accrued interest receivable and other assets                          |  |                              | (879,600    | ) |      |   | (528,900    | )
|Decrease in accrued interest payable and other liabilities                          |  |                              | (186,100    | ) |      |   | (336,200    | )
|                                                                                    |  |                              |             |   |      |   |             |  
|Net cash provided by operating activities                                           |  |                              | 2,929,000   |   |      |   | 1,944,200   |  
|                                                                                    |  |                              |             |   |      |   |             |  
|Cash Flows from Investing Activities:                                               |  |                              |             |   |      |   |             |  
|Net (increase) in:                                                                  |  |                              |             |   |      |   |             |  
|Time deposits with other financial institutions                                     |  |                              | (193,800    | ) |      |   | (438,000    | )
|Loans                                                                               |  |                              | (62,634,500 | ) |      |   | (10,843,200 | )
|Purchase of equipment and leasehold improvements                                    |  |                              | (623,200    | ) |      |   | (152,700    | )
|Purchase of FHLB stock                                                              |  |                              |            |   |      |   | (33,200     | )
|Purchase of securities held to maturity                                             |  |                              |            |   |      |   | (6,205,100  | )
|Proceeds from maturities of securities held to maturity                             |  |                              | 1,877,100   |   |      |   | 4,525,100   |  
|Investment in statutory trust                                                       |  |                              | (310,000    | ) |      |   |            |  
|                                                                                    |  |                              |             |   |      |   |             |  
|Net cash used in investing activities                                               |  |                              | (61,884,400 | ) |      |   | (13,147,100 | )
|                                                                                    |  |                              |             |   |      |   |             |  
|Cash Flows from Financing Activities:                                               |  |                              |             |   |      |   |             |  
|Net increase (decrease) in:                                                         |  |                              |             |   |      |   |             |  
|Demand deposits                                                                     |  |                              | 21,284,700  |   |      |   | 861,700     |  
|Interest bearing demand deposits                                                    |  |                              | 761,500     |   |      |   | 753,300     |  
|Savings and money market deposits                                                   |  |                              | 23,825,700  |   |      |   | 15,807,600  |  
|Certificates of deposit                                                             |  |                              | 29,992,600  |   |      |   | (10,564,200 | )
|Increase in federal funds purchased                                                 |  |                              | 4,000,000   |   |      |   |            |  
|Proceeds from issuance of junior subordinated debentures                            |  |                              | 10,310,000  |   |      |   |             |  
|Payments on FHLB advances                                                           |  |                              | (30,000,000 | ) |      |   |            |  
|Proceeds from issuance of preferred stock                                           |  |                              |            |   |      |   | 7,697,000   |  
|Proceeds from stock options exercised                                               |  |                              | 64,600      |   |      |   |            |  
|Dividends paid on preferred stock                                                   |  |                              | (134,700    | ) |      |   |            |  
|                                                                                    |  |                              |             |   |      |   |             |  
|Net cash provided by financing activities                                           |  |                              | 60,104,400  |   |      |   | 14,555,400  |  
|                                                                                    |  |                              |             |   |      |   |             |  
|Net increase (decrease) in cash and cash equivalents                                |  |                              | 1,149,000   |   |      |   | 3,352,500   |  
|Cash and cash equivalents, beginning of period                                      |  |                              | 19,587,600  |   |      |   | 35,839,000  |  
|                                                                                    |  |                              |             |   |      |   |             |  
|Cash and cash equivalents, end of period                                            |  | $                            | 20,736,600  |   |      | $ | 39,191,500  |  
|                                                                                    |  |                              |             |   |      |   |             |  
|Supplemental disclosure of cash flow information                                    |  |                              |             |   |      |   |             |  
|Cash paid during the period for:                                                    |  |                              |             |   |      |   |             |  
|Interest                                                                            |  | $                            | 1,883,500   |   |      | $ | 946,900     |  
|Income taxes                                                                        |  |                              | 765,000     |   |      |   | 560,000     |  



The
accompanying notes are an integral part of these statements.



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##### Table of Contents



CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY



(Unaudited)



For the
Three Months Ended March 31, 2005



|                                  |  |                 |  |              |           |                 |           |        |   |                  |  |   |            |   |  |   |            |  
|--------------------------------- |  | --------------- |  | ------------ | --------- | --------------- | --------- | ------ | - | ---------------- |  | - | ---------- | - |  | - | ---------- | -
|                                  |  | Preferred Stock |  | Common Stock |           |                 |           |        |   |                 
|                                  |  | Number ofShares |  | Amount       |           | Number ofShares |           | Amount |   | UndividedProfits |  |   | Total      |  
|Balance, December 31, 2004        |  | 733,050         |  |              | 7,697,000 |                 | 5,867,679 |        |   | 6,090,800        |  |   | 14,739,600 |   |  |   | 28,527,400 |  
|Stock options exercised           |  |                |  |              |          |                 | 31,000    |        |   | 64,600           |  |   |           |   |  |   | 64,600     |  
|Dividends paid on preferred stock |  |                |  |              |          |                 |          |        |   |                 |  |   | (134,700   | ) |  |   | (134,700   | )
|Net earnings                      |  |                |  |              |          |                 |          |        |   |                 |  |   | 1,229,500  |   |  |   | 1,229,500  |  
|                                  |  |                 |  |              |           |                 |           |        |   |                  |  |   |            |   |  |   |            |  
|Balance, March 31, 2005           |  | 733,050         |  | $            | 7,697,000 |                 | 5,898,679 |        | $ | 6,155,400        |  | $ | 15,834,400 |   |  | $ | 29,686,800 |  
|                                  |  |                 |  |              |           |                 |           |        |   |                  |  |   |            |   |  |   |            |  



The
accompanying notes are an integral part of these statements.



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Part I. Item 1. (continued)



ALLIANCE BANCSHARES CALIFORNIA AND SUBSIDIARIES

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 accounting principles generally accepted in the United States of America. 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 consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America 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, 2004 and the notes thereto included in the Companys Form 10-KSB filed under the Securities Exchange Act of 1934.



The results of operations for the three months ended March 31, 2005 are not necessarily indicative of the results of
operations that may be expected for any other interim period or for the year ending December 31, 2005.



The consolidated financial statements include the accounts of Alliance Bancshares California (Bancshares), its wholly owned subsidiary
Alliance Bank (the Bank) and Lexib Realcorp, an inactive 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 that 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. Bancshares has two other wholly owned subsidiaries, Alliance Bancshares California Capital Trust I (the Trust I) and Alliance Bancshares California Capital Trust
II (the Trust II), which it formed in 2002 and 2005, respectively, to issue trust preferred securities. FIN 46 and FASB interpretation No. 46R do not allow the consolidation of the Trusts into the Companys consolidated financial
statements. As a result, the accompanying consolidated statements of financial condition include the investment in the Trusts of $527,000 in other assets.



Use of Estimates



The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America 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.



Earnings
Per Share



Basic earnings per share for each of the
periods presented was computed by dividing net earnings 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
quarter ended March 31, 2005 were 5,886,301 and for the quarter ended March 31, 2004 were 4,567,679. The weighted average numbers of shares used in the diluted earnings per share computations for the quarter ended March 31, 2005 were 6,887,915 and
for the quarter ended March 31, 2004 were 6,130,816.



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Basic and diluted earnings per share for the quarters ended March 31, 2005 and 2004 are computed as
follows:



|                                                   |  |              |           |   |        |           |                 |   |     
|-------------------------------------------------- |  | ------------ | --------- | - | ------ | --------- | --------------- | - | ----
|Three Months Ended March 31, 2005                  |  | Net Earnings |           |   | Shares |           | Per ShareAmount
|Net earnings                                       |  | $            | 1,229,500 |   |        |           |                 |   |     
|                                                   |  |              |           |   |        |           |                 |   |     
|Basic earnings per share:                          |  |              |           |   |        |           |                 |   |     
|Net earnings                                       |  | $            | 1,229,500 |   |        |           |                 |   |     
|Cash dividends paid on convertible preferred stock |  |              | (134,700  | ) |        |           |                 |   |     
|                                                   |  |              |           |   |        |           |                 |   |     
|Net earnings available to common shareholders      |  |              | 1,094,800 |   |        | 5,886,301 |                 | $ | 0.19
|Preferred stock dividend                           |  |              | 134,700   |   |        |           |                 |   |     
|Effect of exercise of options and warrants         |  |              |          |   |        | 268,564   |                 |   |     
|Effect of conversion of preferred stock            |  |              |          |   |        | 733,050   |                 |   |     
|                                                   |  |              |           |   |        |           |                 |   |     
|Diluted earnings per share:                        |  |              |           |   |        |           |                 |   |     
|Net earnings available to common shareholders      |  | $            | 1,229,500 |   |        | 6,887,915 |                 | $ | 0.18
|                                                   |  |              |           |   |        |           |                 |   |     
|                                                   |  |              |          
|Three Months Ended March 31, 2004                  |  | Net Earnings |           |   | Shares |           | Per ShareAmount
|Net earnings                                       |  | $            | 605,400   |   |        |           |                 |   |     
|                                                   |  |              |           |   |        |           |                 |   |     
|Basic earnings per share:                          |  |              |           |   |        |           |                 |   |     
|Net earnings available to common shareholders      |  | $            | 605,400   |   |        | 4,567,679 |                 | $ | 0.13
|Effect of conversion of subordinated debentures    |  |              | 28,900    |   |        | 1,250,000 |                 |   |     
|Effect of exercise of options and warrants         |  |              |          |   |        | 305,082   |                 |   |     
|Effect of conversion of preferred stock            |  |              |          |   |        | 8,055     |                 |   |     
|                                                   |  |              |           |   |        |           |                 |   |     
|Diluted earnings per share:                        |  |              |           |   |        |           |                 |   |     
|Net earnings available to common shareholders      |  | $            | 634,300   |   |        | 6,130,816 |                 | $ | 0.10
|                                                   |  |              |           |   |        |           |                 |   |     



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Equity Compensation Plans



The Company accounts for stock-based awards to employees and directors using the intrinsic value method, in accordance with
APB Opinion No. 25, Accounting for Stock Issued to Employees. Accordingly, no compensation expense has been recognized in the consolidated financial statements for employee and director stock arrangements. However, the required pro forma
disclosures of the effects of all options granted on or after January 1, 1995, have been provided in accordance with Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. SFAS
123 requires pro forma disclosures of net earnings and earnings per share as if the fair value based method of accounting for stock-based awards had been applied. Under the fair value based method, compensation cost is recorded based on the value of
the award at the grant date and is recognized over the service period. Had compensation cost for the Plan been determined based upon the fair value of the options at the grant dates consistent with the method of SFAS 123, the Companys net
earnings per share would have been reduced to the pro forma amounts indicated below:



|                                                                                                                       |  |                             |           |   |      |   |         |  
|---------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | --------- | - | ---- | - | ------- | -
|                                                                                                                       |  | Three Months endedMarch 31, |          
|                                                                                                                       |  | 2005                        |           |   | 2004 |  
|Net earnings, as reported                                                                                              |  | $                           | 1,229,500 |   |      | $ | 605,400 |  
|Less  Cash dividend on non-cumulative preferred stock                                                                 |  |                             | (134,700  | ) |      |   |        |  
|Less  Total stock-based compensation expense determined under fair value method for all qualifying awards, net of tax |  |                             | (55,600   | ) |      |   | (22,300 | )
|                                                                                                                       |  |                             |           |   |      |   |         |  
|Pro forma net earnings                                                                                                 |  | $                           | 1,039,200 |   |      | $ | 583,100 |  
|                                                                                                                       |  |                             |           |   |      |   |         |  
|Earnings per share:                                                                                                    |  |                             |           |   |      |   |         |  
|Basic:                                                                                                                 |  |                             |           |   |      |   |         |  
|As reported                                                                                                            |  | $                           | 0.19      |   |      | $ | 0.13    |  
|Pro forma                                                                                                              |  | $                           | 0.18      |   |      | $ | 0.13    |  
|Diluted:                                                                                                               |  |                             |           |   |      |   |         |  
|As reported                                                                                                            |  | $                           | 0.18      |   |      | $ | 0.10    |  
|Pro forma                                                                                                              |  | $                           | 0.17      |   |      | $ | 0.10    |  



The Companys
1996 Combined Incentive and Non-Qualified Stock Option Plan (the Plan) provides for the issuance of up to 800,000 shares of the Companys common stock upon exercise of incentive and non-qualified options. The Plan provides that each
option must have an exercise price not less than the fair market value of the stock at the date of grant and have a term not to exceed ten years (five years with respect to options granted to employees holding 10% or more of the voting stock of the
Company). Options vest in various increments of not less frequently than 20% per year.



|2. | Allowance for Loan Losses
|-- | -------------------------



See Changes in Allowance for Loan Losses below for discussion regarding changes in the Allowance for Loan Losses.



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##### Table of Contents

|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 our unaudited consolidated financial statements, and the
notes thereto, contained elsewhere in this Report.



References
in this report to the Company, we or us refer to Alliance Bancshares California (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 $1.2 million ($0.19 basic and $0.18 diluted
earnings per share) for the first quarter of 2005 as compared to $0.6 million ($0.13 basic and $0.10 diluted earnings per share) for the first quarter of 2004. The increase in net earnings was primarily due to a $2.0 million increase in net interest
income offset by a $0.9 million increase in non-interest expenses.



We continued to grow, with total assets increasing from $409.8 million at December 31, 2004 to $471.0 million at March 31, 2005. Net loans grew from $301.9 million at December 31, 2004 to $362.1 million at March 31, 2005. Deposits grew from
$304.8 million at December 31, 2004 to $380.7 million at March 31, 2005. In the first quarter of 2005, Bancshares enhanced shareholders equity through the issuance of $10,310,000 of junior subordinated debentures to Alliance Bancshares
California Capital Trust II, a Delaware business trust that we formed for the exclusive purpose of issuing trust preferred securities to provide additional regulatory capital (see Regulatory Capital).



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



|                                                 |  |                             |      |   |      |   |      |  
|------------------------------------------------ |  | --------------------------- | ---- | - | ---- | - | ---- | -
|                                                 |  | Three months endedMarch 31, |     
|                                                 |  | 2005                        |      |   | 2004 |  
|Return on average assets (1)                     |  |                             | 1.12 | % |      |   | 0.82 | %
|Return on average shareholders equity (1)       |  |                             | 15.6 | % |      |   | 16.4 | %
|Net yield on average interest earning assets (1) |  |                             | 4.80 | % |      |   | 4.18 | %
|Earnings per common share:                       |  |                             |      |   |      |   |      |  
|Basic earnings per share                         |  | $                           | 0.19 |   |      | $ | 0.13 |  
|Diluted earnings per share                       |  | $                           | 0.18 |   |      | $ | 0.10 |  

---

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



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##### Table of Contents



RESULTS OF OPERATIONS
 Three months ended March 31, 2005 and 2004



Net Interest Income



Net interest income before provision for loan losses
increased to $4.9 million for the quarter ended March 31, 2005 from $2.9 million for the quarter ended March 31, 2004. This was due to an increase in interest income of $2.9 million while interest expense increased only $0.9 million. The increase in
interest income was due to $135.6 million increase in average interest earning assets as well as a 1.02% increase in the weighted average yield earned on those assets from 5.75% for the quarter ended March 31, 2004 to 6.77% for the quarter ended
March 31, 2005. The $0.9 million increase in interest expense was due to a $102.2 million increase in average interest bearing liabilities as well as a 0.53% increase in the weighted average rates paid on those liabilities from 2.09% for the quarter
ended March 31, 2004 to 2.62% for the quarter ended March 31, 2005.



The increase in average interest earning assets and average interest bearing liabilities is a result of the Companys growth through the addition of two new regional offices in 2004, the significant growth in all types of loans and
favorable economic conditions. Average loans increased 59.1% to $327.5 million during the first quarter of 2005 from $205.9 million during the first quarter of 2004. Average investment securities increased 95.2% to $71.8 million from $36.8 million
primarily in collateralized mortgage obligations and mortgage backed securities as the Company relied more on available borrowings at the FHLB rather than federal funds sold for liquidity needs. Average interest bearing deposits increased 47.3% to
$248.3 million during the first quarter of 2005 compared to $168.5 million during the first quarter of 2004.



The weighted average yield on interest earning assets and weighted average cost of interest bearing liabilities increased as a result of increasing market
interest rates. During the second half of 2004 and the first quarter of 2005 the Federal Reserve Board increased the federal funds rate seven times totaling 1.75%. This resulted in the weighted average prime rate increasing from 4.00% during the
first quarter of 2004 to 5.44% during the first quarter of 2005. Approximately 72% of our loans bear interest at adjustable rates tied to the prime rate.



Our interest rate spread increased from 3.66% during the first quarter of 2004 to 4.14% during the first quarter of 2005, and our net interest margin
increased from 4.18% during the first quarter of 2004 to 4.80% during the first quarter of 2005. These increases were due to: i) loans, our highest yielding assets, constituting 79.1% of our average interest earning assets in the first quarter of
2005 compared to 74.0% in the first quarter of 2004; (ii) the fact that interest rates on our transactional accounts (primarily saving and money market accounts) had reached floors during declining market rates prior to 2004, and we were not
required to increase rates on these accounts to the same extent as increases in the federal funds and prime rates during the past year; (iii) the average cost of FHLB advances decreasing from 2.82% to 2.56% while average FHLB advances constituted a
slightly higher percentage our interest bearing liabilities; and (iv) a $33.5 million increase in net average interest earning assets funded by a $41.4 million increase in average non-interest bearing demand deposits.



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##### Table of Contents

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 interest margin for the periods indicated.



ANALYSIS OF NET INTEREST INCOME



|                                           |  |                              |             |                   |      |                                 |  |      |                |  |                   |             |                                 |   |           |  |      |  
|------------------------------------------ |  | ---------------------------- | ----------- | ----------------- | ---- | ------------------------------- |  | ---- | -------------- |  | ----------------- | ----------- | ------------------------------- | - | --------- |  | ---- | -
|                                           |  | Three months ended March 31, |            
|                                           |  | 2005                         |             |                   | 2004 |                                
|                                           |  | AverageBalance               |             | InterestInc./Exp. |      | WeightedAverageRatesEarned/Paid |  |      | AverageBalance |  | InterestInc./Exp. |             | WeightedAverageRatesEarned/Paid |  
|Interest earning assets:                   |  |                              |             |                   |      |                                 |  |      |                |  |                   |             |                                 |   |           |  |      |  
|Federal funds sold                         |  | $                            | 8,808,100   |                   | $    | 55,800                          |  | 2.57 | %              |  | $                 | 31,614,900  |                                 | $ | 77,700    |  | 0.99 | %
|Time deposits                              |  |                              | 5,794,900   |                   |      | 27,900                          |  | 1.95 | %              |  |                   | 4,044,200   |                                 |   | 18,900    |  | 1.88 | %
|Securities                                 |  |                              | 71,778,100  |                   |      | 697,200                         |  | 3.94 | %              |  |                   | 36,766,600  |                                 |   | 332,900   |  | 3.64 | %
|Loans                                      |  |                              | 327,501,500 |                   |      | 6,123,800                       |  | 7.58 | %              |  |                   | 205,905,600 |                                 |   | 3,553,000 |  | 6.94 | %
|                                           |  |                              |             |                   |      |                                 |  |      |                |  |                   |             |                                 |   |           |  |      |  
|Total interest-earning assets              |  |                              | 413,882,600 |                   |      | 6,904,700                       |  | 6.77 | %              |  |                   | 278,331,300 |                                 |   | 3,982,500 |  | 5.75 | %
|                                           |  |                              |             |                   |      |                                 |  |      |                |  |                   |             |                                 |   |           |  |      |  
|Non-interest-earning assets                |  |                              | 31,433,100  |                   |      |                                 |  |      |                |  |                   | 17,552,500  |                                 |   |           |  |      |  
|                                           |  |                              |             |                   |      |                                 |  |      |                |  |                   |             |                                 |   |           |  |      |  
|Total assets                               |  | $                            | 445,315,700 |                   |      |                                 |  |      |                |  | $                 | 295,883,800 |                                 |   |           |  |      |  
|                                           |  |                              |             |                   |      |                                 |  |      |                |  |                   |             |                                 |   |           |  |      |  
|Interest bearing liabilities:              |  |                              |             |                   |      |                                 |  |      |                |  |                   |             |                                 |   |           |  |      |  
|Interest-bearing demand deposits           |  | $                            | 5,326,800   |                   |      | 15,700                          |  | 1.20 | %              |  | $                 | 4,728,300   |                                 |   | 8,400     |  | 0.71 | %
|Savings and money market deposits          |  |                              | 159,139,700 |                   |      | 876,100                         |  | 2.23 | %              |  |                   | 105,103,600 |                                 |   | 420,400   |  | 1.61 | %
|Certificates of deposit                    |  |                              | 83,810,300  |                   |      | 645,800                         |  | 3.13 | %              |  |                   | 58,676,800  |                                 |   | 303,500   |  | 2.08 | %
|FHLB advances                              |  |                              | 49,938,800  |                   |      | 314,900                         |  | 2.56 | %              |  |                   | 32,000,000  |                                 |   | 224,500   |  | 2.82 | %
|Subordinated debentures                    |  |                              |            |                   |      |                                |  |     |                |  |                   | 2,500,000   |                                 |   | 51,000    |  | 8.20 | %
|Junior subordinated debentures             |  |                              | 14,018,000  |                   |      | 168,200                         |  | 4.87 | %              |  |                   | 7,217,000   |                                 |   | 82,800    |  | 4.61 | %
|                                           |  |                              |             |                   |      |                                 |  |      |                |  |                   |             |                                 |   |           |  |      |  
|Total interest-bearing liabilities         |  |                              | 312,233,600 |                   |      | 2,020,700                       |  | 2.62 | %              |  |                   | 210,225,700 |                                 |   | 1,090,600 |  | 2.09 | %
|                                           |  |                              |             |                   |      |                                 |  |      |                |  |                   |             |                                 |   |           |  |      |  
|Non-interest bearing liabilities           |  |                              | 101,131,100 |                   |      |                                 |  |      |                |  |                   | 70,829,100  |                                 |   |           |  |      |  
|                                           |  |                              |             |                   |      |                                 |  |      |                |  |                   |             |                                 |   |           |  |      |  
|Total liabilities                          |  |                              | 413,364,700 |                   |      |                                 |  |      |                |  |                   | 281,054,800 |                                 |   |           |  |      |  
|Shareholders equity                       |  |                              | 31,951,000  |                   |      |                                 |  |      |                |  |                   | 14,829,000  |                                 |   |           |  |      |  
|                                           |  |                              |             |                   |      |                                 |  |      |                |  |                   |             |                                 |   |           |  |      |  
|Total liabilities and shareholders equity |  | $                            | 445,315,700 |                   |      |                                 |  |      |                |  | $                 | 295,883,800 |                                 |   |           |  |      |  
|                                           |  |                              |             |                   |      |                                 |  |      |                |  |                   |             |                                 |   |           |  |      |  
|Net interest income                        |  |                              |             |                   | $    | 4,884,000                       |  |      |                |  |                   |             |                                 | $ | 2,891,900 |  |      |  
|                                           |  |                              |             |                   |      |                                 |  |      |                |  |                   |             |                                 |   |           |  |      |  
|Interest rate spread                       |  |                              |             |                   |      |                                 |  | 4.14 | %              |  |                   |             |                                 |   |           |  | 3.66 | %
|Net interest margin                        |  |                              |             |                   |      |                                 |  | 4.80 | %              |  |                   |             |                                 |   |           |  | 4.18 | %



|Note: | Interest income on loans includes loan fees.
|----- | --------------------------------------------



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##### Table of Contents

Provision for Loan Losses



We made a $0.4 million provision for the allowance for loan losses (Allowance) for the quarter ended March 31,
2005 as compared to a provision of $0.5 million for the comparable period of 2004.



We assess the adequacy of the Allowance each calendar quarter. Classified loans (loans assigned point values of 7  10) are assigned specific reserve percentages based on point value. Loans that are not
classified (loans assigned risk point values of less than 7) are subdivided into pools of similar loans by loan type and are assigned reserve percentages based on the loan type. We determine the reserve percentage by first examining actual loss
history for each type of loan, then adjust that percentage by several factors including changes in lending policies; changes in national and local economic conditions; changes in experience, ability and depth of lending management and staff; changes
in trend of past due and classified loans; changes in external factors such as competition and legal and regulatory requirements; and other relevant factors. Reserve estimates are totaled and any shortage is charged to current period operations and
credited to the Allowance.



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 will be sizable in relation to the Allowance. Additionally, subsequent evaluation of the loan portfolio by us and by our regulators, in light of factors then prevailing, may require increases in the Allowance through changes to
the provision for loan losses.



Non-Interest Income



Non-interest income primarily includes service charges on deposit accounts,
net gains on sales of loans and loan broker fees for referring loans to other lenders. Non-interest income decreased by 14% for the quarter ended March 31, 2005 as compared to the same period in 2004 primarily due to a $100,000 settlement received
from a vendor during the first quarter of 2004.



The amount of
gains from sales of loans and loan broker fees in any period is dependent upon the number of loans we can originate, which in turn depends upon market conditions, interest rates, borrower and investor demand, and the availability SBA loan programs.
Thus, these gains and fees can vary substantially from period to period, and gains and fees in any period are not indicative of gains and fees to be expected in any subsequent period.



Non-Interest Expense



Salaries and related benefits increased from $1.3 million for the quarter ended March 31, 2004 to $1.7 million for the quarter ended March 31, 2005 or
34%. This increase was due primarily to an increase in the number of employees in all locations and departments due to the growth of the Company as well as additions of the new San Fernando Valley and Media Center Regional Offices. The increase in
the size and profitability of the Company also resulted in an increase in incentive and bonus accruals for 2005. At March 31, 2005, the Company employed 81 full-time employees, compared with 61 full-time employees at March 31, 2004.



Occupancy and equipment expenses increased by 57% from the quarter ended
March 31, 2004 to the quarter ended March 31, 2005. This increase was due to increased rent expense, the amortization of leasehold improvements and the depreciation of office furniture and equipment primarily at the new San Fernando Valley and Media
Center Regional Offices.



Other professional fees increased
96%, from the quarter ended March 31, 2004 to the quarter ended March 31, 2005 due to the increase in accounting and auditing expenses.



Data processing expenses increased 16%, from the quarter ended March 31, 2004 to the quarter ended March 31, 2005 consistent with our growth in assets and
the number of customers.



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##### Table of Contents



FINANCIAL CONDITION



Regulatory Capital



At March 31, 2005, Bancshares and the Banks Tier 1 capital,
which is comprised of shareholders equity as modified by certain regulatory adjustments, was $37.1 million and $46.3 million, respectively. Our regulatory capital increased since December 31, 2004 as a result of net earnings as well as
proceeds from the issuance of $10,310,000 of junior subordinated debentures of which $10 million was down streamed into the Bank. Alliance Bancshares California Capital Trust II, a Delaware business trust, was formed for the exclusive purpose of
issuing trust preferred securities to provide additional regulatory capital. At March 31, 2005, Bancshares and the Bank met all applicable regulatory capital requirements and the Bank was 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

March 31, 2005

(dollars in thousands)



|                                         |  |        |        |       |                             |   |        |                       |        |  |       |        |  |       |        |  |        |  
|---------------------------------------- |  | ------ | ------ | ----- | --------------------------- | - | ------ | --------------------- | ------ |  | ----- | ------ |  | ----- | ------ |  | ------ | -
|                                         |  | Actual |        |       | To Be AdequatelyCapitalized |   |        | To Be WellCapitalized |       
|                                         |  | Amount |        | Ratio |                             |   | Amount |                       | Ratio  |  |       | Amount |  | Ratio |       
|Bancshares                               |  |        |        |       |                             |   |        |                       |        |  |       |        |  |       |        |  |        |  
|Total Capital (to risk-weighted assets)  |  | $      | 51,092 |       | 12.4                        | % |        | $                     | 32,834 |  | >=8.0 | %      |  |       | N/A    |  | N/A    |  
|Tier 1 Capital (to risk-weighted assets) |  | $      | 37,109 |       | 9.0                         | % |        | $                     | 16,417 |  | >=4.0 | %      |  |       | N/A    |  | N/A    |  
|Tier 1 Capital (to average assets)       |  | $      | 37,109 |       | 8.4                         | % |        | $                     | 22,266 |  | >=4.0 | %      |  |       | N/A    |  | N/A    |  
|                                         |  |        |        |       |                             |  
|Bank                                     |  |        |        |       |                             |   |        |                       |        |  |       |        |  |       |        |  |        |  
|Total Capital (to risk-weighted assets)  |  | $      | 50,143 |       | 12.2                        | % |        | $                     | 32,779 |  | >=8.0 | %      |  | $     | 40,973 |  | >=10.0 | %
|Tier 1 Capital (to risk-weighted assets) |  | $      | 46,265 |       | 10.5                        | % |        | $                     | 16,389 |  | >=4.0 | %      |  | $     | 24,584 |  | >=6.0  | %
|Tier 1 Capital (to average assets)       |  | $      | 46,265 |       | 11.3                        | % |        | $                     | 17,585 |  | >=4.0 | %      |  | $     | 21,981 |  | >=5.0  | %



Liquidity and Cash Flow



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 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 85% of our
funding as a percentage of average total assets during the three months ended March 31, 2005 and 2004.



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 or loans. 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 one day to several years. As of March 31, 2005, we had $37.0 million outstanding FHLB advances and had no outstanding borrowings from the FRB.



We also have liquidity as a net seller of overnight funds. During the three months ended March 31, 2005, we had an average
balance of $8.8 million in overnight funds sold representing 3% of total average assets.



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##### Table of Contents

One individual controls a number of entities which have deposit accounts with the Company. These accounts
had a balance of $39.4 million at March 31, 2005 and an average balance of $43.3 million for the first three months of 2005. Approximately 64% of these accounts are non-interest bearing demand deposits. Some of these entities also have loans from
the Company. We monitor this relationship closely, and while we have no reason to believe the individual presently intends to close or materially reduce the deposits in the accounts, should he do so we have adequate liquidity to fund the deposit
withdrawals. However, a rapid withdrawal of these deposits would reduce our net interest income as we would have to replace these non-interest bearing demand deposits with interest bearing deposits or other borrowings.



Cash Flow from Operating Activities



Net cash provided by operating activities for the three months ended March
31, 2005 increased by $0.7 million as compared to the same period in 2004 primarily due to an increase in the amount of SBA loans sold in the period.



Cash Flow from Investing Activities



Net cash used in investing activities for the three months ended March 31, 2005 increased by $48.4 million as compared to the same period in 2004
primarily due to the increase in loans.



Cash Flows from
Financing Activities



Net cash provided by financing
activities for the three months ended March 31, 2005 increased by $45.5 million as compared to the same period in 2004 primarily due to a net increase in deposits, fed funds purchased and junior subordinated debentures offset by payments on FHLB
advances.



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 Asset Liability 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.



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##### Table of Contents

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



RATE SENSITIVITY

March 31, 2005



|                                                    |  |                    |             |   |                               |    |            |                                |  |    |               |   |  |       |             |   |  |   |             |  
|--------------------------------------------------- |  | ------------------ | ----------- | - | ----------------------------- | -- | ---------- | ------------------------------ |  | -- | ------------- | - |  | ----- | ----------- | - |  | - | ----------- | -
|                                                    |  | ThreeMonthsOr Less |             |   | Over ThreeThroughTwelveMonths |    |            | Over OneYearThrough Five Years |  |    | OverFiveYears |   |  | Total |            
|Assets                                              |  |                    |             |   |                               |    |            |                                |  |    |               |   |  |       |             |   |  |   |             |  
|Federal funds sold                                  |  | $                  | 4,210,000   |   |                               | $  |           |                                |  | $  |              |   |  | $     |            |   |  | $ | 4,210,000   |  
|Time deposits with other financial institutions     |  |                    | 1,745,800   |   |                               |    | 1,684,000  |                                |  |    | 1,782,000     |   |  |       |            |   |  |   | 5,211,800   |  
|Securities held to maturity                         |  |                    |            |   |                               |    | 2,025,500  |                                |  |    | 30,203,000    |   |  |       | 38,477,300  |   |  |   | 70,705,800  |  
|Loans, gross                                        |  |                    | 269,888,700 |   |                               |    | 10,645,000 |                                |  |    | 25,924,000    |   |  |       | 59,531,000  |   |  |   | 365,988,700 |  
|                                                    |  |                    |             |   |                               |    |            |                                |  |    |               |   |  |       |             |   |  |   |             |  
|Total rate-sensitive assets                         |  | $                  | 275,844,500 |   |                               | $  | 14,354,500 |                                |  | $  | 57,909,000    |   |  | $     | 98,008,300  |   |  | $ | 446,116,300 |  
|                                                    |  |                    |             |   |                               |    |            |                                |  |    |               |   |  |       |             |   |  |   |             |  
|                                                    |  |                    |             |   |                              
|Liabilities:                                        |  |                    |             |   |                               |    |            |                                |  |    |               |   |  |       |             |   |  |   |             |  
|Interest bearing demand deposits                    |  | $                  | 6,123,700   |   |                               | $  |           |                                |  | $  |              |   |  | $     |            |   |  | $ | 6,123,700   |  
|Savings and money market                            |  |                    | 170,081,300 |   |                               |    |           |                                |  |    |              |   |  |       |            |   |  |   | 170,081,300 |  
|Certificates of deposit                             |  |                    | 14,254,000  |   |                               |    | 26,917,000 |                                |  |    | 53,809,700    |   |  |       |            |   |  |   | 94,980,700  |  
|Fed funds sold                                      |  |                    | 4,000,000   |   |                               |    |           |                                |  |    |              |   |  |       |            |   |  |   | 4,000,000   |  
|FHLB advances                                       |  |                    | 7,000,000   |   |                               |    | 15,000,000 |                                |  |    | 15,000,000    |   |  |       |            |   |  |   | 37,000,000  |  
|Junior subordinated debentures                      |  |                    | 17,527,000  |   |                               |    |           |                                |  |    |              |   |  |       |            |   |  |   | 17,527,000  |  
|                                                    |  |                    |             |   |                               |    |            |                                |  |    |               |   |  |       |             |   |  |   |             |  
|Total rate sensitive liabilities                    |  | $                  | 218,986,000 |   |                               | $  | 41,917,000 |                                |  | $  | 68,809,700    |   |  | $     |            |   |  | $ | 329,712,700 |  
|                                                    |  |                    |             |   |                               |    |            |                                |  |    |               |   |  |       |             |   |  |   |             |  
|Interval Gaps:                                      |  |                    |             |   |                               |    |            |                                |  |    |               |   |  |       |             |   |  |   |             |  
|Interest rate sensitivity gap                       |  | $                  | 56,858,500  |   |                               | ($ | 27,562,500 | )                              |  | ($ | 10,900,700    | ) |  | $     | 98,008,300  |   |  | $ | 116,403,600 |  
|                                                    |  |                    |             |   |                               |    |            |                                |  |    |               |   |  |       |             |   |  |   |             |  
|Rate sensitive assets to rate sensitive liabilities |  |                    | 126.0       | % |                               |    | 34.2       | %                              |  |    | 84.2          | % |  |       | N/A         |   |  |   | 135.3       | %
|                                                    |  |                    |             |   |                               |    |            |                                |  |    |               |   |  |       |             |   |  |   |             |  
|Cumulative Gaps:                                    |  |                    |             |   |                               |    |            |                                |  |    |               |   |  |       |             |   |  |   |             |  
|Cumulative interest rate sensitivity gap            |  | $                  | 56,858,500  |   |                               | $  | 29,296,000 |                                |  | $  | 18,395,300    |   |  | $     | 116,403,600 |   |  | $ | 116,403,600 |  
|                                                    |  |                    |             |   |                               |    |            |                                |  |    |               |   |  |       |             |   |  |   |             |  
|Rate sensitive assets to rate sensitive liabilities |  |                    | 126.0       | % |                               |    | 111.2      | %                              |  |    | 105.6         | % |  |       | 135.3       | % |  |   | 135.3       | %
|                                                    |  |                    |             |   |                               |    |            |                                |  |    |               |   |  |       |             |   |  |   |             |  
|% of rate sensitive assets in period                |  |                    | 61.8        | % |                               |    | 65.1       | %                              |  |    | 78.0          | % |  |       | 100.0       | % |  |   | N/A         |  
|                                                    |  |                    |             |   |                               |    |            |                                |  |    |               |   |  |       |             |   |  |   |             |  



Investments in Time Deposits and
Securities



The following table provides certain
information regarding our investments in time deposits with other financial institutions at the dates indicated:



TIME DEPOSIT INVESTMENTS



|                                       |  |                |           |                      |                   |   |            |   |                      |  |      |  
|-------------------------------------- |  | -------------- | --------- | -------------------- | ----------------- | - | ---------- | - | -------------------- |  | ---- | -
|                                       |  | March 31, 2005 |           |                      | December 31, 2004 |  
|                                       |  | Book Value     |           | WeightedAverageYield |                   |   | Book Value |   | WeightedAverageYield | 
|Time deposits maturing:                |  |                |           |                      |                   |   |            |   |                      |  |      |  
|Three months or less                   |  | $              | 1,745,800 |                      | 2.11              | % |            | $ | 1,450,000            |  | 2.03 | %
|After three months but within one year |  |                | 1,684,000 |                      | 2.52              | % |            |   | 2,479,000            |  | 2.39 | %
|After one year but within five years   |  |                | 1,782,000 |                      | 3.08              | % |            |   | 1,089,000            |  | 2.75 | %
|                                       |  |                |           |                      |                   |   |            |   |                      |  |      |  
|Total time deposits                    |  | $              | 5,211,800 |                      | 2.57              | % |            | $ | 5,018,000            |  | 2.36 | %
|                                       |  |                |           |                      |                   |   |            |   |                      |  |      |  



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##### Table of Contents

The following table provides certain information regarding our investment securities at the dates
indicated. Expected maturities will differ from contractual maturities, particularly with respect to collateralized mortgage obligations and mortgage backed securities, because borrowers may have the right to call or prepay obligations with or
without call or prepayment penalties. We had no tax-exempt securities during the quarters ended March 31, 2005 or 2004.



INVESTMENT SECURITIES



|                                                                   |  |                |            |                      |                   |   |            |   |                      |  |      |  
|------------------------------------------------------------------ |  | -------------- | ---------- | -------------------- | ----------------- | - | ---------- | - | -------------------- |  | ---- | -
|                                                                   |  | March 31, 2005 |            |                      | December 31, 2004 |  
|                                                                   |  | Book Value     |            | WeightedAverageYield |                   |   | Book Value |   | WeightedAverageYield | 
|Investment securities maturing:                                    |  |                |            |                      |                   |   |            |   |                      |  |      |  
|Within one year                                                    |  | $              | 2,025,500  |                      | 5.24              | % |            | $ | 503,800              |  | 6.17 | %
|After one year but within five years                               |  |                | 30,203,000 |                      | 3.57              | % |            |   | 31,750,200           |  | 3.63 | %
|Collateralized mortgage obligations and mortgage backed securities |  |                | 38,477,300 |                      | 4.50              | % |            |   | 40,528,800           |  | 4.08 | %
|                                                                   |  |                |            |                      |                   |   |            |   |                      |  |      |  
|Total investment securities                                        |  | $              | 70,705,800 |                      | 4.13              | % |            | $ | 72,782,800           |  | 3.90 | %
|                                                                   |  |                |            |                      |                   |   |            |   |                      |  |      |  



Our present strategy
is to stagger the maturities of our time deposit investments and investment securities to meet our overall liquidity requirements. At March 31, 2005, 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 and real estate loan products and a full range of other 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 seven Southern California counties: Los Angeles, Orange, Riverside, San Diego, San Bernardino, Ventura and Santa Barbara.



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



LOAN PORTFOLIO COMPOSITION



|                                 |  |                   |             |   |                   |       |   |                   |   |             |                 |  |       |  
|-------------------------------- |  | ----------------- | ----------- | - | ----------------- | ----- | - | ----------------- | - | ----------- | --------------- |  | ----- | -
|                                 |  | March 31, 2005    |             |   | December 31, 2004 |      
|                                 |  | AmountOutstanding |             |   | Percent ofTotal   |       |   | AmountOutstanding |   |             | Percent ofTotal | 
|Commercial loans                 |  | $                 | 86,271,900  |   |                   | 23.5  | % |                   | $ | 81,115,000  |                 |  | 26.7  | %
|Construction loans               |  |                   | 110,461,200 |   |                   | 30.1  |   |                   |   | 82,152,900  |                 |  | 27.1  |  
|Real estate loans                |  |                   | 153,069,300 |   |                   | 41.8  |   |                   |   | 123,851,800 |                 |  | 40.8  |  
|Other loans                      |  |                   | 16,661,700  |   |                   | 4.6   |   |                   |   | 16,360,600  |                 |  | 5.4   |  
|                                 |  |                   |             |   |                   |       |   |                   |   |             |                 |  |       |  
|                                 |  |                   | 366,464,100 |   |                   | 100.0 | % |                   |   | 303,480,300 |                 |  | 100.0 | %
|                                 |  |                   |             |   |                   |       |   |                   |   |             |                 |  |       |  
|Less  Deferred loan fees        |  |                   | (1,670,400  | ) |                   |       |   |                   |   | (1,346,000  | )               |  |       |  
|Less  Allowance for loan losses |  |                   | (3,877,800  | ) |                   |       |   |                   |   | (3,477,900  | )               |  |       |  
|                                 |  |                   |             |   |                   |       |   |                   |   |             |                 |  |       |  
|Net loans                        |  | $                 | 360,915,900 |   |                   |       |   |                   | $ | 298,656,400 |                 |  |       |  
|                                 |  |                   |             |   |                   |       |   |                   |   |             |                 |  |       |  



Our strategy has been
to diversify the construction loan portfolio and limit our level of these loans, particularly the more speculative types, as a percentage of total assets and Tier 1 capital. At March 31, 2005, our portfolio remains within the limits established by
the Company. The increases in the construction loan portfolio since December 31, 2004 have occurred primarily in the area of residential non-owner occupied over $1.0 million, residential subdivision under $1.0 million and residential subdivision
over $1.0 million.



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Non-Performing Assets



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 on 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 31,2005 |         | December 31,2004
|Non-accrual loans                       |  | $             |        |                  | $ |       
|Accruing loans past due 90 days or more |  |               |        |                  |   |       
|Troubled debt restructuring             |  |               | 580,400 |                  |   | 637,800
|Other real estate owned                 |  |               |        |                  |   |       
|                                        |  |               |         |                  |   |        
|Balance at end of period                |  | $             | 580,400 |                  | $ | 637,800
|                                        |  |               |         |                  |   |        



Nonperforming assets
remained relatively unchanged from December 31, 2004 to March 31, 2005. The troubled debt restructuring loan at both dates represents a commercial line of credit secured by all of the borrowers assets. Since we have granted concessions to the
borrower that we would not otherwise consider, this loan has been classified as a troubled debt restructuring effective March 31, 2004. We continue to closely monitor the loan and the collateral, and it is possible that in the future we may further
downgrade the loan, resulting in material charges to the allowance for loan losses.



Cash collections on non-performing loans totaled $70,000 during the three months ended March 31, 2005 of which $57,400 was applied to principal and $12,600 was recorded as interest income. 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. There were no non-accrual loans during the quarter ended March
31, 2005. Interest income not recognized on non-accrual loans reduced the net yield on earning assets less than 0.1% for the three month periods ended March 31, 2004.



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, 2005 and December 31, 2004, we had classified $10.1 million
and $5.4 million, respectively, of our loans as impaired for which a $0.5 million reserve and $0.1 million reserve, respectively, were assigned. In the three months ended March 31, 2005, we collected $3.4 million on impaired loans.



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##### Table of Contents

Changes in Allowance for Loan Losses



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



CHANGES IN ALLOWANCES FOR LOAN LOSSES



|                               |  |                              |           |      |   |           |  
|------------------------------ |  | ---------------------------- | --------- | ---- | - | --------- | -
|                               |  | Three months ended March 31, |          
|                               |  | 2005                         |           | 2004 |  
|Balance at beginning of period |  | $                            | 3,477,900 |      | $ | 3,030,700 |  
|Charge-offs                    |  |                              |          |      |   | (440,900  | )
|Recoveries                     |  |                              | 24,900    |      |   | 24,000    |  
|                               |  |                              |           |      |   |           |  
|Net charge-offs                |  |                              | 24,900    |      |   | (416,900  | )
|Additional provisions          |  |                              | 375,000   |      |   | 450,000   |  
|                               |  |                              |           |      |   |           |  
|Balance at end of period       |  | $                            | 3,877,800 |      | $ | 3,063,800 |  
|                               |  |                              |           |      |   |           |  



Off-Balance Sheet Credit
Commitments and Contingent Obligations



Commitments to
extend credit are agreements to lend to a customer as long as there is not a 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, 2005, we had undisbursed loan commitments of $152.7 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 the notional amount as support for letters of credit for which we deem collateral to be necessary.
At March 31, 2005, we had outstanding standby letters of credit with a potential $4.1 million of obligations. These standby letters of credit will mature at various dates through 2006.



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



Deposits



Total deposits increased from $304.8
million at December 31, 2004 to $380.7 million at March 31, 2005. This increase was primarily due to a $21.3 million increase in noninterest bearing demand deposits, a $23.8 million increase in savings and money market deposits and a $30.0 million
increase in certificates of deposit. These increases in deposits resulted from additional emphasis on core deposits as well as a Company-wide incentive compensation program for deposit growth, which we used to fund the increase in our loan and
investment portfolios and to increase our liquidity. In addition, through our money desk, we obtained $28.4 million of additional certificates of deposit to fund our loan growth.



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##### Table of Contents

The following table sets forth information concerning the amount of deposits from various sources at the
dates indicated:



SOURCE OF DEPOSITS



|           |  |                |             |                 |                   |   |            |   |                 |  |       |  
|---------- |  | -------------- | ----------- | --------------- | ----------------- | - | ---------- | - | --------------- |  | ----- | -
|           |  | March 31, 2005 |             |                 | December 31, 2004 |  
|           |  | Book Value     |             | Percent ofTotal |                   |   | Book Value |   | Percent ofTotal | 
|Branches   |  | $              | 302,469,300 |                 | 79.5              | % |            | $ | 254,481,300     |  | 83.5  | %
|Money desk |  |                | 38,168,100  |                 | 10.0              |   |            |   | 9,719,200       |  | 3.2   |  
|Brokered   |  |                | 40,020,000  |                 | 10.5              |   |            |   | 40,592,400      |  | 13.3  |  
|           |  |                |             |                 |                   |   |            |   |                 |  |       |  
|Total      |  | $              | 380,657,400 |                 | 100.0             | % |            | $ | 304,792,900     |  | 100.0 | %
|           |  |                |             |                 |                   |   |            |   |                 |  |       |  



One individual
controls a number of entities which have deposit accounts with the Company. These accounts had a balance of $39.4 million at March 31, 2005 and an average balance of $43.3 million for the first three months of 2004. Approximately 64% of these
accounts are non-interest bearing demand deposits. Some of these entities also have loans from the Company.



Our money desk attracts primarily certificates of deposit from institutional investors nationwide by telephone. We also engage brokers to place
certificates of deposit for their customers. During 2005, the certificates of deposit obtained through our money desk or deposit brokers generally had maturities ranging from one to two years. We limit the amount of money desk and broker deposits
that are scheduled to mature in any one calendar month. In addition, we have historically maintained an appropriate level of liquidity specifically to counter any concurrent deposit reduction that might occur.



In recent years, the interest rates on certificates of deposit obtained
through our money desk or deposit brokers generally have been lower than the interest rates then offered to local customers for certificates of deposit with comparable maturities. We believe this is due to the highly competitive nature of Southern
California market for deposits and, in particular, the difficulty smaller banks with one or few branch offices have in competing for deposits with larger banks, savings associations and credit unions with multiple offices.



Banks that are not well capitalized under the FDIC prompt
corrective action rules may not accept brokered deposits without the prior approval of the FDIC. In addition, we believe that if we are not well capitalized, we will have greater difficulty obtaining certificates of deposit through our
money desk and may have to pay higher interest rates to continue to attract those deposits. Accordingly, the failure of the Bank to remain well capitalized could have a material adverse affect on us.



Borrowed Funds



At March 31, 2005, we had $37.0 million in advances from the FHLB which were collateralized by certain qualifying loans with
a carrying value of $55.2 million and investment securities with a carrying value of $54.9 million. The advances mature on various dates from 2005 through 2010. Advances totaling $15.0 million bear interest at a weighted average fixed rate of 2.53%
and advances totaling $22.0 million bear interest at a rate of the prime lending rate less an average of 2.81% (the borrowing rate was 2.94% at March 31, 2005). Interest is payable quarterly or semi-annually with principal and any accrued interest
due at maturity.



In October 2002, Bancshares issued $7,217,000
of junior subordinated debentures to Alliance Bancshares California Capital Trust I, a Delaware business trust that was formed for the exclusive purpose of issuing trust preferred securities to provide additional regulatory capital. This capital has
a relatively low cost as interest payments on the debentures are deductible for income tax purposes. The Trust purchased the debentures with the proceeds of the sale of its common trust securities to Bancshares for $217,000 and trust preferred
securities for $7,000,000. The subordinated debentures and trust preferred securities have generally identical terms, including that they mature in 2032, are redeemable at the Companys option commencing October 2007 at par, and require
quarterly distributions/interest payments at a rate which adjusts quarterly at the three-month LIBOR rate plus 3.45% (the rate was 6.24% at March 31, 2005).



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In February 2005, Bancshares issued $10,310,000 of junior subordinated debentures to Alliance Bancshares
California Capital Trust II, a Delaware business trust that was formed for the exclusive purpose of issuing trust preferred securities to provide additional regulatory capital. The Trust purchased the debentures with the proceeds of the sale of its
common trust securities to Bancshares for $310,000 and trust preferred securities for $10,000,000. The subordinated debentures and trust preferred securities have generally identical terms, including that they mature in 2035, are redeemable at the
Companys option commencing February 2010 at par, and require quarterly distributions/interest payments at a rate which adjusts quarterly at the three-month LIBOR rate plus 1.90% (the rate was 4.81% at March 31, 2005). Bancshares has
unconditionally guaranteed distributions on, and payments on liquidation and redemption of, both issues of the trust preferred securities.



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;
| | - |  | -------------------------------------------------------------



| |  |  | 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 loan losses may be inadequate.



We establish allowances for loan losses against each segment of our loan
portfolio. At March 31, 2005, our allowance for loan losses equaled 1.1% of loans. Although we believed that we had established adequate allowances for loan losses as of March 31, 2005, the credit quality of 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 loan losses. In addition, the FDIC and California Department of Financial Institutions, as an integral
part of their examination process, periodically review our allowance for loan losses and could require additional provisions for loan losses. Material future additions to the allowance for loan 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 loan losses would adversely affect our results of operations.



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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, large budget deficits and an uncertain economy. 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.



At March 31, 2005, a significant number of our loans 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 sale to unidentified buyers.



At March 31, 2005, we had outstanding construction loans to developers for tract projects and single homes for sale to unidentified buyers totaling
$64.9 million, representing 17.7% of our loan portfolio, and additional commitments for these projects in the amount of $68.0 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.



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, regulation and legislation, which is intended primarily to maintain a safe and sound banking system, to protect depositors and the
FDIC insurance fund, and to facilitate the conduct of sound monetary policy, and are not intended to protect bank and bank holding company shareholders. Statutes, regulations and regulatory policies 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, regulations, legislation and policies or in their interpretation will not materially
adversely affect our business.



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SBA loan programs may be modified or discontinued.



In recent years we have generated significant income from fees and interest on SBA loans and gains on sales of participation
interests in SBA loans. Congress or the SBA may discontinue or modify these programs at any time. Such discontinuation or modification could have a material adverse affect on our results of operations depending on our level SBA lending at the time.



One individual controls a large amount of deposits.



One individual controls a number of entities which have deposit accounts
with us. These accounts had a balance of $39.4 million at March 31, 2005 and an average balance of $43.3 million for 2004. Most of these deposits can be withdrawn upon demand without penalty. Some of these entities also have loans from the Company.
We monitor this relationship closely, and while we have no reason to believe the individual presently intends to close or materially reduce the deposits in the accounts, should he do so we have adequate liquidity to fund the deposit withdrawals.
However, a rapid withdrawal of these deposits would reduce our net interest income as we would have to replace these non-interest bearing demand deposits with interest bearing deposits or other borrowings.



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|ITEM 3. | CONTROLS AND PROCEDURES
|------- | -----------------------



The Company maintains disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) that are designed to assure that information required
to be disclosed in its Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, and that such information is accumulated and communicated
to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.



In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed
and operated, can provide reasonable assurance only of achieving the desired control objectives, and management necessarily is required to apply its judgment in weighting the costs and benefits of possible new or different controls and procedures.
Limitations are inherent in all control systems, so no evaluation of controls can provide absolute assurance that all control issues and any fraud within the company have been detected.



As required by Exchange Act Rule 13a-15(b), as of the end of the period covered by this report the Company, under the
supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the Companys disclosure controls and procedures. Based on this evaluation, our Chief Executive Officer and Chief
Financial Officer concluded that the Companys disclosure controls and procedures were effective as of that date.



There was no change in the Companys internal control over financial reporting during the Companys most recently completed fiscal quarters that
has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.



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PART II OTHER INFORMATION



|ITEM 6. | EXHIBITS AND REPORTS ON FORM 8-K
|------- | --------------------------------



|       |  |                                                                                                                                                                                                                        
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.11a |  | Indenture dated February 18, 2005                                                                                                                                                                                      
|       | 
|10.11b |  | Guarantee Agreement dated February 18, 2005                                                                                                                                                                            
|       | 
|10.11c |  | Amended and Restated Declaration of Trust dated February 18, 2005                                                                                                                                                      
|       | 
|31.1   |  | Section 302 CEO Certification                                                                                                                                                                                          
|       | 
|31.2   |  | Section 302 CFO Certification                                                                                                                                                                                          
|       | 
|32.1   |  | Certificate by Curtis S. Reis, President and Chief Executive Officer of the Company dated May 16, 2005 pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the
Sarbanes-Oxley Act of 2002.                   
|       | 
|32.2   |  | Certificate by Daniel L. Erickson, Executive Vice President and Chief Financial Officer of the Company dated May 16, 2005 pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906
of the Sarbanes-Oxley Act of 2002.



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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 16, 2005 |  |  |  | ALLIANCE BANCSHARES CALIFORNIA
|                   |  |  |  |                               
|                   |  |  |  |                                |  | By: |  | /s/ Daniel L. Erickson                                                
|                   |  |  |  |                                |  |     |  | Daniel L. Erickson Executive Vice President andChief Financial Officer



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